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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
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TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
-------------------
BORDEN, INC.
(Name of Subject Company)
-------------------
BORDEN ACQUISITION CORP.
WHITEHALL ASSOCIATES, L.P.
KKR PARTNERS II, L.P.
(Bidders)
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COMMON STOCK, PAR VALUE $.625 PER SHARE
(Title of Class of Securities)
-------------------
099599102
(CUSIP Number of Class of Securities)
-------------------
HENRY R. KRAVIS
KOHLBERG KRAVIS ROBERTS & CO.
9 WEST 57TH STREET, SUITE 4200
NEW YORK, NEW YORK 10019
(212) 750-8300
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
-------------------
COPY TO:
CHARLES I. COGUT, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
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CALCULATION OF FILING FEE
[CAPTION]
<TABLE>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
<S> <C>
$2,039,182,515.56.................................... $407,836.50
</TABLE>
* Pursuant to Rule 0-11(a)(4) and (d) under the Securities Exchange Act of 1934,
the transaction value is equal to the maximum number of shares of the common
stock of Borden, Inc. ("Borden") to be received by the Bidder in the exchange
offer described herein (148,981,371) multiplied by the average of the high and
low prices of a share of Borden common stock as reported on the New York Stock
Exchange Composite Tape on November 17, 1994 ($13.6875).
<TABLE>
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X Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify
the filing with which the offsetting fee was previously paid. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of filing.
</TABLE>
Amount Previously Paid: $410,234.82
Form or Registration No.: Registration No. 33-55767
Filing Party: RJR Nabisco Holdings Corp.
Date Filed: October 5, 1994
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<PAGE>
EXCHANGE OFFER
This Tender Offer Statement on Schedule 14D-1 relates to the offer by Borden
Acquisition Corp., a New Jersey corporation (the "Purchaser"), a subsidiary of
Whitehall Associates, L.P. (the "Partnership"), an affiliate of Kohlberg Kravis
Roberts & Co., L.P. ("KKR"), upon the terms and subject to the conditions set
forth in the Offering Circular/Prospectus dated November 22, 1994 (the "Offering
Circular/Prospectus"), a copy of which is attached hereto as Exhibit 11(a)(1),
and in the related Letter of Transmittal (collectively, the "Exchange Offer"), a
copy of which is attached hereto as Exhibit 11(a)(2), to exchange shares of
common stock, par value $.01 per share (the "Holdings Common Stock"), of RJR
Nabisco Holdings Corp., a Delaware corporation ("Holdings"), owned by the
Purchaser or its affiliates for all outstanding shares (the "Borden Shares") of
common stock, par value $.625 per share (collectively, the "Borden Common
Stock"), and the associated Preferred Stock Purchase Rights (the "Rights"), of
Borden, Inc., a New Jersey corporation ("Borden"), not already owned by the
Purchaser or its affiliates. Each Borden Share accepted by the Purchaser in
accordance with the Exchange Offer shall be exchanged for that number of fully
paid and nonassessable shares of Holdings Common Stock equal to the Exchange
Ratio. The term "Exchange Ratio" means the quotient (rounded to the nearest
1/100,000) obtained by dividing (i) $14.25 by (ii) the average of the average of
the high and low sales prices of the Holdings Common Stock as reported on the
New York Stock Exchange Composite Tape on each of the ten full consecutive
trading days ending immediately prior to the ten business day period ending on
the date of expiration of the Exchange Offer, including any extension thereof,
provided that the Exchange Ratio shall not be less than 1.78125 or greater than
2.375. The Purchaser will announce the exact Exchange Ratio with respect to each
Borden Share that is to be exchanged for shares of Holdings Common Stock in the
Exchange Offer by 9:00 A.M., New York City time, on the first business day of
the ten business day period ending on the Expiration Date (as defined in the
Offering Circular/Prospectus). The Purchaser will make such announcement by
issuing a press release to the Dow Jones News Service. During the ten business
day period ending on the Expiration Date, holders of Borden Shares will be able
to obtain the exact Exchange Ratio with respect to each Borden Share that is to
be exchanged for shares of Holdings Common Stock in the Exchange Offer from the
Information Agent or the Dealer Manager for the Exchange Offer at their
respective telephone numbers appearing on the back cover of the Offering
Circular/Prospectus. Unless the context requires otherwise, all references
herein to "Borden Shares" shall be deemed to refer also to the associated
Rights issued pursuant to the Rights Agreement, dated as of January 28, 1986,
as amended, (the "Rights Agreement"), between Borden and The Bank of New York,
as Rights Agent (the "Rights Agent"), and all references to "Rights" shall be
deemed to include all benefits that may inure to the shareholders of Borden or
to holders of the Rights pursuant to the Rights Agreement, unless and until
the Rights are redeemed by Borden in accordance with the Merger Agreement
(as defined in the Offering Circular/Prospectus). Unless otherwise indicated,
all capitalized terms used but not defined herein shall have the meanings
assigned to them in the Offering Circular/Prospectus.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Borden, Inc. and its principal
executive offices are located at 180 East Broad Street, Columbus, Ohio 43215.
(b) The exact title of the securities being sought is common stock, par
value $.625 per share, and the associated Rights, of Borden. The information set
forth on the cover page and under the captions "The Exchange Offer" and
"Description of Borden Capital Stock and Rights" of the Offering
Circular/Prospectus is incorporated herein by reference.
(c) The information set forth under the caption "Summary--Comparative Market
Prices and Dividends" of the Offering Circular/Prospectus is incorporated herein
by reference.
1
<PAGE>
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This statement is being filed by the Purchaser and the
Partnership, which is a Delaware limited partnership, and KKR Partners II, L.P.,
a Delaware limited partnership (together with the Partnership, the "Common Stock
Partnerships"), which will, prior to the consummation of the Exchange Offer,
hold shares of common stock of the Purchaser. The information set forth under
the captions "Summary--The Purchaser and the Common Stock Partnerships" and "The
Purchaser and the Common Stock Partnerships" in, and in Schedule I to, the
Offering Circular/Prospectus is incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser nor the Common
Stock Partnerships, nor, to the best of their knowledge, any of their respective
executive officers and directors listed in Schedule I to the Offering
Circular/Prospectus has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding any such person was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth on the cover page and under the captions
"Summary," "The Exchange Offer," "Description of Merger Agreement and
Conditional Purchase/Option Agreement" and "Description of Borden Capital Stock
and Rights" of the Offering Circular/Prospectus is incorporated herein by
reference. Except as set forth under such captions of the Offering
Circular/Prospectus, since January 1, 1991, there have been no transactions
which would be required to be disclosed under this Item 3(a) between either the
Purchaser or the Common Stock Partnerships or, to the best of their knowledge,
any of the persons listed in Schedule I to the Offering Circular/Prospectus and
Borden or any of its executive officers, directors or affiliates.
(b) The information set forth on the cover page and under the captions
"Summary," "The Exchange Offer," "Description of Merger Agreement and
Conditional Purchase/Option Agreement" and "Description of Borden Capital Stock
and Rights" of the Offering Circular/Prospectus is incorporated herein by
reference. Except as set forth under such captions of the Offering
Circular/Prospectus, since January 1, 1991, there have been no contacts,
negotiations or transactions which would be required to be disclosed under this
Item 3(b) between either the Purchaser or the Common Stock Partnerships or any
of their respective subsidiaries or, to the best of their knowledge, any of the
persons listed in Schedule I to the Offering Circular/Prospectus and Borden or
its affiliates concerning a merger, consolidation or acquisition, a tender offer
or other acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The consideration to be provided to Borden's shareholders
pursuant to the Exchange Offer will be shares of Holdings Common Stock currently
owned by the Common Stock Partnerships. The information set forth on the cover
page and under the caption "The Exchange Offer--Fees and Expenses of the
Exchange Offer and Source of Funds" of the Offering Circular/Prospectus is
incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF EXCHANGE OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth under the captions "The Exchange Offer"
and "Description of Merger Agreement and Conditional Purchase/Option Agreement"
of the Offering Circular/Prospectus is incorporated herein by reference.
2
<PAGE>
(f) and (g) The information set forth under the captions "Significant
Considerations--Information Concerning the Transactions--Possible Loss of Stock
Exchange Listing of Borden Common Stock" and "--Possible Termination of
Registration Under the Exchange Act" of the Offering Circular/Prospectus is
incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The Purchaser and the Partnership beneficially own 28,138,000 shares
of the common stock, par value $.625 per share, of Borden pursuant to the
Conditional Purchase/Stock Option Agreement, dated as of September 23, 1994, by
and among the Partnership, the Purchaser and Borden. The information set forth
under the caption "Description of Merger Agreement and Conditional
Purchase/Option Agreement" is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth on the cover page and under the captions
"Summary," "The Exchange Offer," "Description of Merger Agreement and
Conditional Purchase/Option Agreement" and "Description of Borden Capital Stock
and Rights" of the Offering Circular/Prospectus is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under the caption "The Exchange Offer--Fees and
Expenses of the Exchange Offer and Source of Funds" of the Offering
Circular/Prospectus is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b) and (c) The information set forth under the captions "The Exchange
Offer--Certain Conditions of the Exchange Offer" and "--Certain Regulatory
Approvals and Legal Matters" of the Offering Circular/Prospectus is incorporated
herein by reference.
(d) The information set forth under the caption "Significant
Considerations--Information Concerning the Transactions--Possible Loss of Status
as 'Margin Securities' " of the Offering Circular/Prospectus is incorporated
herein by reference.
(e) The information set forth under the caption "The Exchange Offer--Pending
Litigation" of the Offering Circular/Prospectus is incorporated herein by
reference.
(f) The information set forth in the Offering Circular/Prospectus and the
Letter of Transmittal is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
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11(a)(1) Offering Circular/Prospectus dated November 22, 1994.
11(a)(2) Letter of Transmittal.
11(a)(3) Notice of Guaranteed Delivery.
11(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
11(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks and Other
Nominees.
11(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
</TABLE>
3
<PAGE>
<TABLE>
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11(a)(7) Summary Advertisement as published on November 22, 1994.
11(a)(8) Joint Press Release issued by KKR and Borden on November 22, 1994.
11(b) None.
11(c)(1) Agreement and Plan of Merger, dated as of September 23, 1994, among the
Partnership, the Purchaser and Borden.
11(c)(2) Conditional Purchase/Stock Option Agreement, dated as of September 23, 1994, by
and among the Partnership, the Purchaser and Borden.
11(c)(3) Form of Amendment, dated as of November 15, 1994, among the Partnership, the
Purchaser and Borden.
11(c)(4) Dealer Manager Agreement dated November 22, 1994 among the Purchaser, Holdings
and Morgan Stanley & Co. Incorporated.
11(d) None.
11(e) Provided in Exhibit 11(a)(1).
11(f) None.
11(g)(1) Complaint, Mushala v. Greeniaus, et al., C.A. No. 13738, dated September 13,
1994.
11(g)(2) Complaint, Leffler v. Greeniaus, et al., C.A. No. 13751, dated September 16,
1994.
11(g)(3) Complaint, Schreiber, et al., v. Greeniaus, et al., C.A. No. 13749, dated
September 16, 1994.
11(g)(4) Complaint, Malloy v. Greeniaus, et al., C.A. No. 13748, dated September 16,
1994.
11(g)(5) Complaint, Schwartz v. Greeniaus, et al., C.A. No. 13758, dated September 21,
1994.
11(g)(6) Complaint, Alessi v. Greeniaus, et al., C.A. No. 13750, dated September 16,
1994.
11(g)(7) Complaint, Debora v. Greeniaus, et al., C.A. No. 13755, dated September 20,
1994.
11(g)(8) Shareholder's Derivative Complaint, Shingala v. Harper, et al., C.A. No. 13739,
dated September 13, 1994.
11(g)(9) Complaint, Kahn v. Kohlberg Kravis Roberts & Co., et al., C.A. No. 13767, dated
September 26, 1994.
11(g)(10) Order of Consolidation, In Re RJR Nabisco Holdings Corp. Shareholders
Litigation, C.A. No. 13738, dated October 25, 1994.
11(g)(11) Class Action Complaint, Kohnstamm v. Borden, Inc., et al., C-257-94, dated
September 12, 1994.
11(g)(12) Class Action Complaint, Lubin, et al., v. Borden, Inc., et al., dated September
12, 1994.
11(g)(13) Class Action Complaint, Weiss, et al., v. Borden, Inc., et al., dated September
12, 1994.
11(g)(14) Class Action Complaint, Stepak v. Borden, Inc., et al., dated September 16,
1994.
11(g)(15) Class Action Complaint, Strougo, et al., v. Borden, Inc., et al., dated
September 18, 1994.
11(g)(16) Class Action Complaint, Krim v. Borden, Inc., et al., dated September 13, 1994.
11(g)(17) Class Action Complaint, Peterson, et al., v. Borden Inc., et al., dated
September 16, 1994.
11(g)(18) Class Action Complaint, Marcus. v. Borden, Inc., et al., dated September 22,
1994.
11(g)(19) Class Action Complaint, Dwyer v. Borden, Inc., et al., dated September 23, 1994.
11(g)(20) Class Action Complaint, Pittman Neurosurgical P.A. v. Borden, Inc., et al.,
dated September 29, 1994.
11(g)(21) Class Action Complaint, Hartman v. Borden, Inc., et al., 94-CV-H09-6306, dated
September 12, 1994.
11(g)(22) Class Action Complaint, Jaroslawicz, et al. v. Borden, Inc., et al.,
94-CV-H09-6654, dated September 22, 1994.
</TABLE>
4
<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.
BORDEN ACQUISITION CORP.
By: /s/ SCOTT M. STUART
..................................
Name: Scott M. Stuart
Title: Vice President
WHITEHALL ASSOCIATES, L.P.
By: KKR Associates, a limited
partnership, its General Partner
By: /s/ HENRY R. KRAVIS
..................................
Name: Henry R. Kravis
Title: General Partner
KKR PARTNERS II, L.P.
By: KKR Associates, a limited
partnership, its General Partner
By: /s/ HENRY R. KRAVIS
..................................
Name: Henry R. Kravis
Title: General Partner
Date: November 22, 1994
5
EXHIBIT 11(a)(1)
OFFERING CIRCULAR/PROSPECTUS
Exchange Offer for
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Borden, Inc.
By Exchanging for Each Such Share
A Number of Shares of Common Stock of
RJR Nabisco Holdings Corp.
Based on the Exchange Ratio Described Below
by
Borden Acquisition Corp.
a corporation formed at the direction of
Kohlberg Kravis Roberts & Co.
-------------------
THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, DECEMBER 20, 1994,
UNLESS THE EXCHANGE OFFER IS EXTENDED.
-------------------
Borden Acquisition Corp., a New Jersey corporation (the "Purchaser"), a
subsidiary of Whitehall Associates, L.P. (the "Partnership"), an affiliate of
Kohlberg Kravis Roberts & Co., L.P. ("KKR"), hereby offers, upon the terms and
subject to the conditions set forth herein and in the related Letter of
Transmittal (collectively, the "Exchange Offer"), to exchange shares of common
stock, par value $.01 per share (the "Holdings Common Stock"), of RJR Nabisco
Holdings Corp., a Delaware corporation ("Holdings"), owned by the Purchaser or
its affiliates for all outstanding shares (the "Borden Shares") of common stock,
par value $.625 per share (collectively, the "Borden Common Stock"), and the
associated Preferred Stock Purchase Rights (the "Rights"), of Borden, Inc., a
New Jersey corporation ("Borden"), not already owned by the Purchaser or its
affiliates. Each Borden Share accepted by the Purchaser in accordance with the
Exchange Offer shall be exchanged for that number of fully paid and
nonassessable shares of Holdings Common Stock equal to the Exchange Ratio. The
term "Exchange Ratio" means the quotient (rounded to the nearest 1/100,000)
obtained by dividing (i) $14.25 by (ii) the average of the average of the high
and low sales prices of the Holdings Common Stock as reported on the New York
Stock Exchange (the "NYSE") Composite Tape on each of the ten full consecutive
trading days ending immediately prior to the ten business day period ending on
the date of expiration of the Exchange Offer, including any extension thereof
(the "Valuation Period"), provided that the Exchange Ratio shall not be less
than 1.78125 or greater than 2.375. In addition to the shares of Holdings Common
Stock to be exchanged in the Exchange Offer for shares of Borden Common Stock,
this Offering Circular/Prospectus also relates to up to 200,000 shares of
Holdings Common Stock that may be sold by the Exchange Agent in respect of
aggregated fractional shares that otherwise would be received by Borden
shareholders in the Exchange Offer. See "The Exchange Offer-- Terms of the
Exchange Offer; Expiration Date." All of the shares of Holdings Common Stock
offered hereby are currently owned by the Purchaser and its affiliates. As a
result of such ownership, prior to the consummation of the Exchange Offer, the
Partnership may be deemed to control Holdings for purposes of the Securities Act
of 1933, as amended.
The Exchange Offer is conditioned upon, among other things, there being
validly tendered and not properly withdrawn prior to the expiration of the
Exchange Offer a number of Borden Shares which, when added to any Borden Shares
previously acquired by the Partnership or the Purchaser (other than any of the
28,138,000 shares of Borden Common Stock subject to the Option (as hereinafter
defined)), represents more than 41% of the Borden Shares outstanding on a fully
diluted basis (other than dilution due to the Rights) (the "Minimum Condition").
The Exchange Offer is also subject to other terms and conditions, which Borden
shareholders should carefully consider. As of the date hereof, except for shares
of Borden Common Stock that may be acquired upon exercise of the Option, the
Partnership and the Purchaser do not beneficially own any Borden Shares. See
"The Exchange Offer--Certain Conditions of the Exchange Offer" and "Description
of Merger Agreement and Conditional Purchase/Option Agreement."
The Board of Directors of Borden, with seven members voting in favor and one
member (Borden's chief executive officer) abstaining, has, among other things,
(1) determined that the Merger Agreement and the Conditional Purchase/Option
Agreement (each as hereinafter defined) and the transactions contemplated
thereby, including the Exchange Offer and the merger of the Purchaser with
Borden (such merger is hereinafter called the "Merger" and, collectively with
the other transactions contemplated by the Merger Agreement and the Conditional
Purchase/Option Agreement, the "Transactions"), taken together, are fair to the
shareholders of Borden, and resolved to recommend that holders of Borden Shares
accept the Exchange Offer, tender their Borden Shares to the Purchaser in the
Exchange Offer and, if required by applicable law, approve and adopt the Merger
Agreement, and (2) approved the Merger Agreement, the Conditional
Purchase/Option Agreement and the Transactions. See "The Exchange Offer--Borden
Background and Reasons for the Proposed Transactions."
The reported last sale price of the Holdings Common Stock on November 21,
1994 on the NYSE Composite Tape was $6 1/2 per share. The reported last sale
price of the Borden Common Stock on November 21, 1994 on the NYSE Composite Tape
was $13 3/4 per share. On September 9, 1994, the last full trading day prior to
the public announcement of the execution of the letter of intent with respect to
the Transactions (as defined herein), the closing sale price, as reported on the
NYSE Composite Tape, was $7 for the Holdings Common Stock and $11 7/8 for
the Borden Common Stock. Borden shareholders should obtain a current quote for
the Holdings Common Stock and the Borden Common Stock.
(continued on next page)
-------------------
SEE "SIGNIFICANT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY HOLDERS OF BORDEN SHARES IN CONNECTION WITH
THEIR CONSIDERATION OF THE EXCHANGE OFFER.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
The Dealer Manager for the Exchange Offer is:
MORGAN STANLEY & CO.
Incorporated
November 22, 1994
<PAGE>
(continued from prior page)
The Purchaser, the Partnership and Borden have entered into an Agreement and
Plan of Merger dated as of September 23, 1994, as amended as of November 15,
1994 (the "Merger Agreement") pursuant to which, among other things, following
the consummation of the Exchange Offer, subject to certain conditions, the
Purchaser will be merged with Borden in the Merger. If, following the Exchange
Offer and exercise of the Option, the Purchaser and its affiliates own more than
90% of the outstanding Borden Shares, the Purchaser will take all necessary or
appropriate action, without further action by the Board of Directors or
shareholders of Borden, to merge the Purchaser with Borden as soon as
practicable. If, following the Exchange Offer and exercise of the Option,
approval of Borden's shareholders is required by applicable law in order to
consummate the Merger, provided that the Minimum Condition is satisfied without
being reduced or waived, Borden will submit the Merger to Borden's shareholders
for approval. If the Merger is submitted to Borden's shareholders for approval,
the Merger will require the approval of the holders of not less than 66 2/3% of
the outstanding Borden Shares, including the Borden Shares owned by the
Purchaser and its affiliates. In the event the Merger is consummated, holders of
Borden Shares will receive the same number of shares of Holdings Common Stock
for each Borden Share as are exchanged for each Borden Share in the Exchange
Offer. This Offering Circular/Prospectus, as amended or supplemented from time
to time, also relates to shares of Holdings Common Stock that may be issued in
connection with the consummation of the Merger, unless the Merger is submitted
to Borden's shareholders for approval, in which case the Purchaser will solicit
proxies from Borden shareholders pursuant to separate proxy materials in
compliance with Section 14(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
This Offering Circular/Prospectus does not constitute a solicitation of a
proxy, consent or authorization for or with respect to any special meeting or
other meeting of Borden shareholders who do not tender their Borden Shares or
any action in lieu thereof. Any such solicitation will be made only pursuant to
separate proxy materials in compliance with Section 14(a) of the Exchange Act.
Pursuant to a Conditional Purchase/Stock Option Agreement dated as of
September 23, 1994 (the "Conditional Purchase/Option Agreement"), Borden has
granted to the Purchaser (or its designee, which designee shall be the
Partnership or a wholly owned direct or indirect subsidiary of the Partnership
and which may, in any such case, act for itself and/or as agent for the
Partnership or KKR Partners II, L.P. (together with the Partnership, the "Common
Stock Partnerships"), as the case may be) a right (the "Option") to purchase up
to 28,138,000 shares of Borden Common Stock (the "Option Shares") (approximately
19.9% of the outstanding Borden Shares as of the date hereof) in exchange for
the number of shares of Holdings Common Stock (rounded to the nearest 1/100,000)
obtained by dividing (i) $11.00 by (ii) the average of the average of the high
and low sales prices of the Holdings Common Stock as reported on the NYSE
Composite Tape on each of the ten consecutive trading days immediately preceding
the second trading day prior to the date of notice of exercise of the Option
(or, if exercise of the Option is required as described below, the date of
exercise), as adjusted in certain events, for each share of Borden Common Stock.
Subject to applicable law, if the Purchaser (or the Partnership or a wholly
owned direct or indirect subsidiary of the Partnership) acquires more than 41%
(but not more than 50%) of the outstanding Borden Shares in the Exchange Offer,
the Option must be exercised to the extent necessary so that, following such
exercise, the Purchaser will own more than 50% of the outstanding Borden Shares.
If the Purchaser shall have exercised the Option in whole or in part prior to
the expiration of the Exchange Offer, the Purchaser may not waive or reduce the
Minimum Condition. In addition, if the Purchaser has not exercised the Option
prior to the expiration of the Exchange Offer, it will not be entitled to
exercise the Option thereafter if it waives or otherwise reduces the Minimum
Condition and accepts fewer than 41% of the Borden Shares for exchange in the
Exchange Offer. See "The Exchange Offer--Purpose of the Exchange Offer; the
Merger" and "Description of Merger Agreement and Conditional Purchase/Option
Agreement."
Unless the context requires otherwise, all references in this Offering
Circular/Prospectus to "Borden Shares" shall be deemed to refer also to the
associated Rights issued pursuant to the Rights Agreement, dated as of January
28, 1986, as amended (the "Rights Agreement"), between Borden and The Bank of
New York, as Rights Agent (the "Rights Agent"), and all references to "Rights"
shall be deemed to include all benefits that may inure to the shareholders of
Borden or to holders of the Rights pursuant to the Rights Agreement, unless and
until the Rights are redeemed by Borden in accordance with the Merger Agreement.
(continued on next page)
ii
<PAGE>
(continued from prior page)
-------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Borden Shares (and Rights if applicable) should either (1) complete and sign the
Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile) and any other required documents to the Exchange
Agent (as defined herein), and either deliver the certificates representing the
tendered Borden Shares ("Share Certificates") and, if separate, certificates
representing the tendered Rights ("Rights Certificates"), and any other required
documents to the Exchange Agent or tender such Borden Shares (and Rights if
applicable) pursuant to the procedure for book-entry transfer described herein
or (2) request such shareholder's broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for such shareholder. Shareholders
having Borden Shares (and Rights if applicable) registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if they
desire to tender Borden Shares (and Rights if applicable) so registered. Unless
and until the Rights are redeemed in accordance with the Merger Agreement,
holders of Borden Shares will be required to tender the Rights associated with
such Borden Shares in order to effect a valid tender of such Borden Shares.
A shareholder who desires to tender Borden Shares (and Rights if applicable)
and whose Share Certificates (and Rights Certificates if applicable) are not
immediately available, or who cannot comply with the procedure for book-entry
transfer on a timely basis, may tender such Borden Shares (and Rights if
applicable) by following the procedures for guaranteed delivery described
herein.
-------------------
Questions and requests for assistance may be directed to Morgan Stanley & Co.
Incorporated (the "Dealer Manager") or to D.F. King & Co., Inc. (the
"Information Agent"), at their respective addresses and telephone numbers set
forth on the back cover of this Offering Circular/Prospectus. Additional copies
of this Offering Circular/Prospectus, a Letter of Transmittal and a Notice of
Guaranteed Delivery may also be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
OFFERING CIRCULAR/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMMON
STOCK PARTNERSHIPS, THE PURCHASER OR ANY AFFILIATE THEREOF, BY HOLDINGS OR
BORDEN OR BY THE DEALER MANAGER. THIS OFFERING CIRCULAR/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS OFFERING
CIRCULAR/PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. NO ACTION HAS BEEN OR WILL BE TAKEN
IN ANY JURISDICTION BY THE COMMON STOCK PARTNERSHIPS, THE PURCHASER OR ANY
AFFILIATE THEREOF, HOLDINGS OR BORDEN OR BY THE DEALER MANAGER THAT WOULD PERMIT
A PUBLIC OFFERING OF THE SECURITIES OFFERED HEREBY OR POSSESSION OR DISTRIBUTION
OF THIS OFFERING CIRCULAR/PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT
PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE
POSSESSION THIS OFFERING CIRCULAR/PROSPECTUS COMES ARE REQUIRED BY THE COMMON
STOCK PARTNERSHIPS, THE PURCHASER AND THEIR AFFILIATES, HOLDINGS AND BORDEN AND
BY THE DEALER MANAGER TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS
AS TO THE OFFERING OF THE SECURITIES OFFERED HEREBY AND THE DISTRIBUTION OF THIS
OFFERING CIRCULAR/PROSPECTUS.
-------------------
The Exchange Offer is not being made to (nor will tenders be accepted from
or on behalf of) holders of Borden Shares in any jurisdiction (including Japan)
in which the making of the Exchange Offer or the acceptance thereof would not be
in compliance with the laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Exchange Offer to be made on
behalf of the Purchaser by a licensed broker or dealer, the Exchange Offer shall
be deemed to be made on behalf of the Purchaser by the Dealer Manager or one or
more registered brokers or dealers that are licensed under the laws of such
jurisdiction.
-------------------
TABLE OF CONTENTS
PAGE
----
Available Information................. 3
Incorporation of Certain Documents by
Reference............................. 3
Significant Considerations............ 5
Information Concerning Holdings..... 5
Information Concerning the
Transactions.......................... 9
Summary............................... 13
The Exchange Offer.................... 34
Purchaser Background................ 34
Purpose of the Exchange Offer; the
Merger................................ 35
Borden Background and Reasons for
the Proposed Transactions......... 36
Opinions of Borden Financial
Advisors.............................. 49
Other Information Concerning Borden
Financial Advisors.................... 58
Terms of the Exchange Offer;
Expiration Date................... 59
Exchange of Shares of Borden Common
Stock................................. 60
Procedure for Tendering Shares of
Borden Common Stock................... 62
Withdrawal Rights................... 65
Extension of Tender Period;
Termination; Amendment................ 66
Certain Conditions of the Exchange
Offer................................. 67
Material Tax Consequences........... 70
Fees and Expenses of the Exchange
Offer and Source of Funds............. 71
PAGE
----
Certain Regulatory Approvals and
Legal Matters..................... 72
Pending Litigation.................. 77
Description of Merger Agreement and
Conditional Purchase/Option
Agreement............................. 79
Merger Agreement.................... 79
Conditional Purchase/Option
Agreement............................. 95
RJR Nabisco Holdings Corp............. 99
RJR Nabisco Holdings Corp. Selected
Historical Consolidated Financial
Data.................................. 102
RJR Nabisco Holdings Corp. Selected
Pro Forma Consolidated Financial
Data.................................. 104
Security Ownership of Certain
Beneficial Owners and Management.... 110
Borden, Inc........................... 112
Borden, Inc. Selected Historical
Consolidated Financial Data........... 113
The Purchaser and the Common Stock
Partnerships.......................... 115
Description of Holdings Capital
Stock................................. 115
Common Stock........................ 115
Preferred Stock..................... 116
Contractual Restrictions and
Policies on Payment of
Dividends............................. 118
Certain Statutory and By-law
Provisions............................ 121
Description of Borden Capital Stock
and Rights.......................... 123
Comparison of Rights of Holders of
Borden and Holdings Common Stock...... 124
Legal Matters......................... 127
Experts............................... 128
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AVAILABLE INFORMATION
Holdings and Borden are subject to the informational requirements of the
Exchange Act and in accordance therewith file reports, proxy statements and
other information with the Commission. The reports, proxy statements and other
information filed by Holdings and Borden with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and should be
available at the Commission's Regional Offices at 7 World Trade Center, 13th
Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, material filed by
Holdings and Borden can be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
Holdings has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Holdings Common Stock to be offered in the Transactions. The Purchaser will be
filing a Tender Offer Statement on Schedule 14D-1 (together with any amendments
thereto, the "Schedule 14D-1") with the Commission in connection with the
Exchange Offer. This Offering Circular/Prospectus does not contain all the
information set forth in the Registration Statement or the Schedule 14D-1 and
the exhibits thereto. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements contained in this
Offering Circular/Prospectus or in any document incorporated in this Offering
Circular/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein include the material terms of such
contracts or other documents but are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or the Schedule 14D-1 or such other
document, each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Holdings (File No.
1-10215) pursuant to the Exchange Act are incorporated by reference in this
Offering Circular/Prospectus:
1. Holdings' Annual Report on Form 10-K for the year ended December 31,
1993 (which incorporates by reference certain information from Holdings'
Proxy Statement relating to the 1994 Annual Meeting of Shareholders);
2. Holdings' Quarterly Reports on Form 10-Q for the three months ended
March 31, 1994, the six months ended June 30, 1994 and the nine months ended
September 30, 1994;
3. Holdings' Current Report on Form 8-K/A filed April 27, 1994; and
4. The Consolidated Financial Statements of Holdings as of December 31,
1993 and 1992 and for each of the years in the three year period ended
December 31, 1993 and the related notes thereto, and Management's Discussion
and Analysis of Financial Condition and Results of Operations, included in
the Registration Statement on Form S-3 (Registration No. 33-52381), at the
time such Registration Statement was declared effective by the Commission.
The following documents filed with the Commission by Borden (File No. 1-71)
pursuant to the Exchange Act are incorporated by reference in this Offering
Circular/Prospectus:
1. Borden's Annual Report on Form 10-K for the year ended December 31,
1993 (which incorporates by reference certain information from Borden's
Proxy Statement relating to the 1994 Annual Meeting of Shareholders and
Borden's 1993 Annual Report to Shareholders);
2. Borden's Quarterly Reports on Form 10-Q for the three months ended
March 31, 1994, the six months ended June 30, 1994 (as amended by the Form
10-Q/A (Amendment No. 1)) and the
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<PAGE>
nine months ended September 30, 1994 (as amended by the Form 10-Q/A
(Amendment No. 1)); and
3. Borden's Current Reports on Form 8-K dated January 5, 1994, March 21,
1994, September 11, 1994 and September 12, 1994, and its two Current Reports
on Form 8-K, each dated October 5, 1994.
All documents and reports filed by Holdings and Borden pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Offering
Circular/Prospectus and prior to the completion of the Transactions (including
Borden's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to be filed pursuant to Rules 14d-9 and 14e-2 under the Exchange Act)
shall be deemed to be incorporated by reference in this Offering
Circular/Prospectus and to be a part hereof from the dates of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Offering Circular/Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Offering Circular/Prospectus.
THIS OFFERING CIRCULAR/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS OFFERING CIRCULAR/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, IN THE CASE OF DOCUMENTS RELATING TO HOLDINGS, TO RJR
NABISCO, INC., 1301 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019 (TELEPHONE
NUMBER (212) 258-5600), ATTENTION: INVESTOR RELATIONS DEPARTMENT; OR, IN THE
CASE OF DOCUMENTS RELATING TO BORDEN, TO BORDEN, INC., 180 EAST BROAD STREET,
COLUMBUS, OHIO 43215 (TELEPHONE NUMBER (614) 225-3395), ATTENTION: DOCUMENTS
MAILING DEPT. IN ORDER TO ENSURE TIMELY DELIVERY OF DOCUMENTS, ANY REQUEST
SHOULD BE MADE NO LATER THAN FIVE DAYS PRIOR TO THE EXPIRATION DATE (AS
HEREINAFTER DEFINED), AS IT MAY BE EXTENDED FROM TIME TO TIME.
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<PAGE>
The Registration Statement is being filed by Holdings at the request of the
Partnership pursuant to the terms of a Registration Rights Agreement between
Holdings and the Partnership dated as of July 15, 1990 and a Registration Rights
Agreement among Holdings, certain affiliates of KKR and others dated as of
February 9, 1989 (collectively, the "Registration Rights Agreements"). All
information contained or incorporated by reference in this Offering
Circular/Prospectus relating to KKR, the Common Stock Partnerships, the
Purchaser and the Transactions has been supplied by the Purchaser, all such
information relating to Holdings has been supplied by Holdings and all such
information relating to Borden has been supplied by Borden. Although Holdings
does not have any knowledge that would indicate that any of the information
which has been furnished by others is inaccurate or untrue in any material
respect, no assurance can be given that facts or events of which it is unaware
exist that may affect the significance or accuracy of the information furnished.
FOR A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE OR INCORPORATED BY
REFERENCE IN THIS OFFERING CIRCULAR/PROSPECTUS, INCLUDING A SUMMARY OF THE
TRANSACTIONS AND CERTAIN INFORMATION CONCERNING HOLDINGS AND BORDEN, SEE
"SUMMARY" BEGINNING ON PAGE 13 HEREOF. AS USED HEREIN, "HOLDINGS" MEANS RJR
NABISCO HOLDINGS CORP. AND ITS CONSOLIDATED SUBSIDIARIES, UNLESS THE CONTEXT
OTHERWISE REQUIRES.
SIGNIFICANT CONSIDERATIONS
Holders of Borden Common Stock should carefully consider the following
factors in connection with their consideration of the Exchange Offer.
INFORMATION CONCERNING HOLDINGS
Tobacco-Related Considerations
General. R.J. Reynolds Tobacco Company ("RJRT"), an operating subsidiary of
Holdings owned through RJR Nabisco, Inc. ("RJRN"), is the second largest
cigarette manufacturer in the United States, and in the year ended December 31,
1993, RJRT's domestic tobacco business comprised approximately 33% of Holdings'
net sales and approximately 42% of Holdings' operating income from continuing
operations before corporate expenses, amortization of trademarks and goodwill
and restructuring expense. Domestic cigarette industry retail unit sales have
declined in the last three calendar years at an average rate of approximately
2.5% per year. Holdings believes that the decline is due to a number of factors,
including manufacturers' price increases in recent years, excise tax increases,
asserted adverse health effects of smoking, diminishing social acceptance of
smoking and governmental and private restrictions on smoking. For many years,
the advertising, sale and use of cigarettes has been under attack by government
and health officials in the United States and in other countries, principally
due to claims that cigarette smoking is harmful to health. This attack has
resulted in a number of substantial restrictions on the marketing, advertising
and use of cigarettes, diminishing social acceptability of smoking and
activities by anti-smoking groups designed to inhibit cigarette sales, the form
and content of cigarette advertising and the testing and introduction of new
cigarette products. Together with substantial increases in state and federal
excise taxes on cigarettes, this attack has had and will likely continue to have
an adverse effect on cigarette sales.
Possible Legislative and Regulatory Activities. The Clinton Administration
and members of Congress have introduced bills in Congress that would
significantly increase the federal excise tax on cigarettes, eliminate the
income tax deductibility of a portion of the cost of tobacco advertising, ban
smoking in public buildings and workplaces, add additional health warnings on
cigarette packaging and advertising and further restrict the marketing of
tobacco products.
In January 1993, the U.S. Environmental Protection Agency released a report
on the respiratory effects of environmental tobacco smoke ("ETS") which
concludes that ETS is a known human lung carcinogen in adults; and in children
causes increased respiratory tract disease and middle ear disorders and
increases the severity and frequency of asthma. In September 1991, the U.S.
Occupational Safety and Health Administration ("OSHA") issued a Request for
Information relating to indoor air quality, including ETS, in occupational
settings. In March 1994, OSHA announced proposed regulations that
5
<PAGE>
would restrict smoking in the workplace to designated smoking rooms that are
separately exhausted to the outside. Although RJRT cannot predict the form of
any regulations that may be finally adopted by OSHA, if the proposed regulations
are adopted, RJRT expects that many employers who have not already done so will
prohibit smoking in the workplace rather than make expenditures necessary to
establish designated smoking areas to accommodate smokers. Because many
employers currently do not permit smoking in the workplace, RJRT cannot predict
the effect of any regulations that may be adopted, but incremental restrictions
on smokers could have an adverse effect on cigarette sales and RJRT.
During February 1994, the Commissioner of the U.S. Food and Drug
Administration (the "FDA"), which historically has refrained from asserting
jurisdiction over most cigarette products, stated that he intended to cause the
FDA to work with the U.S. Congress to resolve the regulatory status of
cigarettes under the Food, Drug and Cosmetic Act. During the second quarter of
1994, hearings were held in this regard, and RJRT, along with other members of
the United States cigarette industry, were asked to provide voluntarily certain
documents and other information to Congress. RJRT is unable to predict the
outcome of any Congressional deliberations or the likelihood that the FDA will
assert jurisdiction over cigarettes in some manner. Were the FDA to assert
jurisdiction in a manner that materially restricts the availability of
cigarettes to consumers, it would likely have a significant adverse effect on
RJRT and Holdings.
In addition, in June 1994, legislation was introduced in the U.S. Senate
which would authorize the Attorney General of the United States to seek to
recover from tobacco product manufacturers funds paid out in the form of
Medicaid and Medicare payments to treat illnesses allegedly related to the use
of tobacco products. It is not possible to predict whether such legislation will
be enacted or any resulting effect thereof on RJRT.
It is not possible to determine what additional federal, state or local
legislation or regulations relating to smoking or cigarettes will be enacted or
to predict any resulting effect thereof on RJRT, R.J. Reynolds Tobacco
International, Inc. ("Tobacco International"), another operating subsidiary of
Holdings owned through RJRN, or the cigarette industry generally but such
legislation or regulations could have an adverse effect on RJRT, Tobacco
International or the cigarette industry generally.
Tobacco-Related Litigation. Various legal actions, proceedings and claims
are pending or may be instituted against RJRT or its affiliates or indemnitees,
including those claiming that lung cancer and other diseases have resulted from
the use of or exposure to RJRT's tobacco products. The plaintiffs in these
actions seek recovery on a variety of legal theories, including strict liability
in tort, design defect, negligence, breach of warranty, failure to warn, fraud,
misrepresentation, unfair trade practices, conspiracy, unjust enrichment,
indemnity and common law public nuisance. Seven of these cases purport to be
class actions brought on behalf of thousands of claimants. Purported classes
include individuals claiming to be addicted to cigarettes, flight attendants
alleging personal injury from exposure to ETS in their workplace and parents
claiming that Joe Camel advertising constitutes an unfair trade practice. In one
such case, a Florida state court judge granted plaintiffs' motion to certify a
class. Defendants will appeal that ruling to the Florida District Court of
Appeals. In addition, three states, acting through their attorneys general, have
sued RJRT (and in two cases, RJRN) and other industry members on various
theories to recoup expenses incurred by the states in the treatment of diseases
purportedly associated with cigarette smoking and to enjoin certain marketing
practices. A fourth state has enacted legislation which would facilitate the
filing of such an action in that state. Litigation is subject to many
uncertainties, and it is possible that some of the legal actions, proceedings or
claims could be decided against RJRT or its affiliates or indemnitees.
Determinations of liability or adverse rulings against other cigarette
manufacturers that are defendants in similar actions, even if such rulings are
not final, could adversely affect the litigation against RJRT and its affiliates
or indemnitees and increase the number of such claims. Although it is impossible
to predict the outcome of such events or their effect on RJRT, a significant
increase in litigation activities could have an adverse effect on RJRT. RJRT
believes that it has a number of valid defenses to any such actions, and intends
to defend vigorously all such actions. Holdings believes that the ultimate
outcome of all pending tobacco litigation matters should not have a material
adverse effect on the financial position of Holdings; however, it is possible
that the results of operations or cash flows of Holdings in particular quarterly
or
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<PAGE>
annual periods or the financial condition of Holdings could be materially
affected by the ultimate outcome of certain pending litigation matters. For an
additional discussion of legislation and litigation relating to the cigarette
industry and RJRT, see Holdings' Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 under "Business--Tobacco--Legislation and other Matters
Affecting the Cigarette Industry" and "--Litigation Affecting the Cigarette
Industry" and Holdings' Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994 under Note 7 to Holdings' Consolidated Condensed
Financial Statements for the period ended September 30, 1994 and "Legal
Proceedings--Tobacco Related Litigation," both of which are incorporated herein
by reference.
Impact of Competitive Activity
RJRT's largest U.S. competitor announced competitive initiatives in April
1993 that ultimately resulted in significant changes in the U.S. cigarette
market. These competitive actions and responses by RJRT and other competitors
effectively lowered the retail price of full price cigarette brands and raised
the price of the most highly discounted brands in the second half of 1993. This
resulted in a market comprised of a full price tier and a lower price tier of
products (as opposed to the three or more tiers that had previously existed) and
in smaller relative price differences between brands in different tiers.
The costs of responding to these competitive initiatives and the decrease in
list prices for full price cigarette brands of approximately 40 cents per pack
were primarily responsible for a sharp decline in RJRT's 1993 operating company
contribution, since improved net prices of approximately 12 cents per pack
(including the price increase referenced below) in the most highly discounted
brands did not and are not expected to offset the current lower margins on full
price brands. Notwithstanding these lower margins, full price brands remain more
profitable than lower price brands, which consist of certain national brands
designed to have a lower price and of private label brands for retailers and
distributors. The private label brands are generally the least profitable of
RJRT's brands, but are important to facilitate RJRT's service to wholesale and
retail customers.
Although RJRT's full price volume as a percentage of total volume declined
to 56% in 1993 from 65% in 1992, lower retail prices on full price brands since
the third quarter of 1993 have resulted in an increase in full price volume to
59% in the first nine months of 1994. The increased full price volume occurred
despite significantly reduced promotional expenses on full price brands during
this period.
During the fourth quarter of 1993, RJRT increased the list price of its
brands by 4 cents per pack, which was generally matched by other competitors and
reflected increased stability in the marketplace during the latter part of 1993.
This stability has continued into 1994 and, together with operating cost
reductions and favorable product mix shifts, has improved margins, although 1994
profit margins remain below first quarter 1993 levels. However, RJRT is unable
to predict whether pricing stability and profit margin improvements are
sustainable.
The effect of a law requiring U.S. manufacturers to use at least 75%
American-grown tobacco in their cigarettes produced after 1993 has increased
RJRT's raw material costs for all brands, with a larger effect on costs for
lower price brands since these brands historically have contained a higher
percentage of lower cost foreign-grown tobacco than full price brands. The cost
increase is more than offset by higher revenues for lower price brands resulting
from the fourth quarter price increase referenced above. The same result has
occurred for full price brands. For additional information, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Tobacco--1993 Competitive Activity" and "Business--Other Matters--Competition"
in Holdings' Annual Report on Form 10-K for the fiscal year ended December 31,
1993 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Tobacco" in Holdings' Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1994, each of which is incorporated
herein by reference.
Leverage and Debt Service
Holdings, together with its subsidiaries, had, at September 30, 1994, a
ratio of consolidated total debt to total stockholders' equity of 1.0-to-1. On a
pro forma basis, after giving effect to the proposed initial public offering of
shares of Nabisco Holdings Corp. ("Nabisco") and related transactions, which
will result in a reduction of consolidated total debt, Holdings' ratio of
consolidated total debt to total
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stockholders' equity at September 30, 1994 would be 0.9 to 1. See "RJR Nabisco
Holdings Corp. Selected Pro Forma Consolidated Financial Data."
Although Holdings has significantly reduced its consolidated indebtedness
and improved its consolidated debt-to-equity ratios since the Acquisition, the
indebtedness and debt-to-equity ratio of Holdings and its subsidiaries continue
to have the effect, generally, of restricting the flexibility of Holdings and
its subsidiaries in responding to changing business and economic conditions
insofar as they affect the financial condition and financing requirements of
Holdings and its subsidiaries. Moreover, the Credit Agreement dated as of
December 19, 1991 (as amended from time to time, the "1991 Credit Agreement")
and the Credit Agreement dated as of April 5, 1993 (as amended from time to
time, the "1993 Credit Agreement" and, together with the 1991 Credit Agreement,
the "Credit Agreements") and the terms governing certain other indebtedness
impose significant operating and financial restrictions on Holdings and its
subsidiaries. These restrictions limit the ability of Holdings and its
subsidiaries to incur indebtedness, pay dividends, engage in transactions with
stockholders and affiliates, create liens, sell certain assets and certain
subsidiaries' stock, engage in certain mergers or consolidations and make
investments in unrestricted subsidiaries. RJRN has called certain issues of debt
securities for redemption. See "Description of Capital Stock--Contractual
Restrictions and Policies on Payment of Dividends."
Limitations on Dividends
Although Holdings pays dividends on its outstanding preferred stock, it has
not yet paid a dividend on Holdings Common Stock. In connection with the
initiative recently announced by Holdings (see "RJR Nabisco Holdings
Corp.--Recent Developments"), Holdings has indicated that it anticipates, upon
completion of the proposed initial public offering of common stock of Nabisco,
commencing payment of a quarterly cash dividend on the Holdings Common Stock of
$.075 per share or $.30 per share on an annualized basis. Holdings has also
adopted a policy, which will become effective upon completion of the proposed
Nabisco initial public offering, under which Holdings would limit the aggregate
amount of cash dividends paid on its capital stock prior to December 31, 1998.
The policy would also preclude a dividend or distribution to its shareholders of
the shares of capital stock of a subsidiary until December 31, 1996 and would
set forth certain intentions of Holdings with respect to such a dividend or
distribution prior to December 31, 1998. The timing, amount and form of
dividends on Holdings Common Stock will depend, among other things, upon the
effect of applicable restrictions and policies on the payment of dividends
referred to above, Holdings' results of operations, financial condition, cash
requirements, prospects and other factors deemed relevant by its board of
directors. No assurance can be given that the proposed initial public offering
of Nabisco Common Stock will be consummated. See "Description of Holdings
Capital Stock--Contractual Restrictions and Policies on Payment of Dividends."
Holding Company Structure
Holdings' cash flow and consequent ability to meet its obligations under its
indebtedness and to pay future dividends on the Holdings Common Stock, if any,
and preferred stock are substantially dependent upon the earnings and cash flow
available after debt service of RJRN and the availability of such earnings and
cash flows to Holdings by way of dividends, distributions, loans and other
advances. Holdings Common Stock is junior in right of payment to all existing
and future liabilities, obligations (whether or not for borrowed money) and
preferred stock of Holdings, and is structurally subordinate to all existing and
future liabilities and obligations (whether or not for borrowed money) of RJRN
and its subsidiaries. As of September 30, 1994, total current liabilities and
long-term debt of Holdings' subsidiaries were approximately $14.6 billion.
KKR Ownership
As of October 31, 1994, an aggregate of approximately 44.79% (or 32.29% on a
fully diluted basis) of the total voting power of Holdings was held by the
Common Stock Partnerships. After giving effect to the mandatory conversion of
Holdings Series A Preferred Stock on November 15, 1994, and assuming all
outstanding options for Borden Common Stock are exercised, all of Borden's
Series B Preferred Stock is converted to Borden Common Stock and Borden Shares
equal to the Minimum Condition are exchanged in the Exchange Offer at the
minimum and maximum Exchange Ratios, respectively, an
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<PAGE>
aggregate of approximately 31.98% to 29.39% (25.98% to 23.88% on a fully diluted
basis) of the total voting power of Holdings will be held or controlled by the
Common Stock Partnerships. The total voting power of Holdings held or controlled
by the Common Stock Partnerships will decrease to an aggregate of approximately
20.81% to 14.49% (16.90% to 11.77% on a fully diluted basis) if 100% of the
Borden Shares are exchanged. In addition, seven of Holdings' sixteen directors
are partners or executives of KKR.
Potential Conflicts of Interest
As a result of the ownership of a significant percentage of the total voting
power of Holdings by the Common Stock Partnerships and having partners or
executives of KKR as board members of Holdings as described under "--KKR
Ownership" above, it is possible that conflicts or potential conflicts of
interest may arise between the Common Stock Partnerships and KKR on the one hand
and Holdings on the other. Holdings believes that any such conflicts or
potential conflicts which may arise will be resolved in compliance with Delaware
law, which provides, among other things, that each director has a fiduciary duty
to act in the best interests of the corporation.
For information concerning the decision by Holdings not to pursue a
transaction with Borden, see "RJR Nabsico Holdings Corp.--Recent Developments"
and "The Exchange Offer--Purchaser Background."
Significant Increase in Shares Available for Trading
Of the 1,148,477,506 shares of Holdings Common Stock outstanding as of
October 31, 1994, approximately 580 million are held by persons that are not
affiliates or management of Holdings and are freely tradeable. After giving
effect to the mandatory conversion of Holdings' Series A Preferred Stock on
November 15, 1994 and assuming Borden Shares equal to the Minimum Condition are
exchanged in the Exchange Offer at the minimum and maximum Exchange Ratios,
respectively, an aggregate of up to an additional approximately 109 million to
145 million shares of Holdings Common Stock will be freely tradeable (265
million to 354 million shares if all of the Borden Shares are exchanged). In
addition, if the Purchaser or the Common Stock Partnerships increase their
equity investment in Borden through a transfer to Borden of additional shares of
Holdings Common Stock (including as a result of an exercise of the Option), the
number of shares of Holdings Common Stock that are freely tradeable may be
increased significantly over time if Borden exercises its rights to register and
to sell shares so received in a public offering. Based on the $6 1/2 per share
closing price of Holdings Common Stock on November 21, 1994, an additional
approximately 47.6 million shares of Holdings Common Stock could become freely
tradeable following exercise of the Option in full. Holdings is unable to
predict the effect that the increase in freely tradeable shares of Holdings
Common Stock will have on the market value of such shares, although such
increase may cause temporary volatility or decline in the market price of the
Holdings Common Stock unrelated to the operating performance of Holdings. See
"--Information Concerning the Transactions--Possible Volatility of Market Price
of Holdings Common Stock Following the Exchange Offer."
INFORMATION CONCERNING THE TRANSACTIONS
Inability to Participate in Future Borden Earnings or Divestitures
Shareholders whose Borden Shares are exchanged for shares of Holdings Common
Stock in the Exchange Offer or the Merger will not be entitled to participate as
shareholders in any future growth of Borden's business or earnings, in any
future dividends that may be declared by the Board of Directors of Borden or in
the proceeds of any future divestitures of subsidiaries or businesses conducted
by Borden.
Lack of Dissenters' Rights
Holders of Borden Common Stock will not be entitled to dissenters' rights
under New Jersey law in connection with the Exchange Offer or the Merger, and
the Purchaser does not intend to accord dissenters' rights to holders of Borden
Common Stock.
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Exclusion of the Effects of Future Tobacco Developments from Opinions of
Borden's Financial Advisors
In connection with the Borden board's fiduciary duties to Borden's
shareholders, the board considered the opinions of its financial advisors. The
Borden board recognized that such opinions specifically excluded the effects of
future developments in Holdings' tobacco business in light of such advisors'
statements, contained in their opinions, that they "are not in a position to
make an independent evaluation" of such matters, because such an evaluation
would involve an assessment of legal, legislative and regulatory contingencies
that is beyond the area of their professional expertise. Following a review
of due diligence with respect to these matters which included discussions with
Borden's management and advisors, the Borden board considered that the impact
on Holdings from litigation (including pending and future matters as well as
class action litigation), legislation (pending and future) and governmental
regulation (present and future) involving tobacco products was unknowable and,
therefore, not capable of being determined by any expert (including the
financial advisors), although the board did not seek additional expert
opinions regarding tobacco liability. Consequently, the Borden board accepted
the financial advisors' statements that they could not independently evaluate
such matters and determined that it was acceptable for the financial advisors
to exclude such issues from the opinions. For additional information regarding
tobacco-related considerations, including disclosures with respect to possible
legislative and regulatory developments, and tobacco-related litigation,
see "Significant Considerations--Information Concerning
Holdings--Tobacco-Related Considerations." For further information concerning
the Borden board's consideration of tobacco-related considerations, including
the fact that the Borden board considered that the impact of such matters could
be devastating with respect to the value of Holdings Common Stock, see "The
Exchange Offer--Borden Background and Reasons for the Proposed
Transactions--Reasons for the Exchange Offer and Merger; Recommendation of the
Borden Board of Directors."
Possible Volatility of Market Price of Holdings Common Stock Following the
Exchange Offer
Assuming Borden Shares equal to the Minimum Condition are exchanged in the
Exchange Offer at the minimum and maximum Exchange Ratios, respectively, an
aggregate of up to an additional approximately 109 million to 145 million shares
of Holdings Common Stock will be freely tradeable (265 million to 354 million
shares if all of the Borden Shares are exchanged in the Exchange Offer or
pursuant to the Merger). As a result of the increase in the number of freely
tradeable shares of Holdings Common Stock following the consummation of the
Exchange Offer, the market price of Holdings Common Stock may experience
temporary volatility or decline unrelated to the operating performance of
Holdings.
Possible Adverse Effect on Market for Shares of Borden Common Stock
If the Merger is not immediately consummated upon completion of the Exchange
Offer, the exchange of Borden Shares pursuant to the Exchange Offer will reduce
the number of Borden Shares that might otherwise trade publicly and is likely to
reduce the number of holders of Borden Shares, which could adversely affect the
liquidity and market value of the remaining Borden Shares held by shareholders
other than the Purchaser. The Purchaser cannot predict whether the reduction in
the number of Borden Shares that might otherwise trade publicly would have an
adverse or beneficial effect on the market price for or marketability of the
Borden Shares. If the Merger is consummated, all trading of Borden Common Stock
will cease and there will no longer be a market for shares of Borden Common
Stock.
Possible Loss of Stock Exchange Listing of Borden Common Stock
According to the NYSE's published guidelines, the NYSE would consider
delisting the Borden Shares if, among other things, the number of publicly held
Borden Shares (excluding Borden Shares held by officers, directors, their
immediate families and other concentrated holdings of 10% or more) were less
than 600,000, there were fewer than 1,200 holders of at least 100 Borden Shares
or the aggregate market value of the publicly held Borden Shares was less than
$5 million.
As of November 15, 1994, there were approximately 37,946 holders of record
of Borden Shares. Approximately 37,946 holders held in the aggregate
approximately 141,814,967 shares of Borden Common Stock (excluding 53,168,407
shares held in treasury). Because of the large number of shares of Borden Common
Stock held in the names of brokers and nominees, the Purchaser is unable to
estimate the number of beneficial owners of 100 or more shares or the aggregate
number of shares of Borden Common Stock they own. If, upon the completion of the
Exchange Offer (and if the Merger is not immediately thereafter consummated),
the shares of Borden Common Stock no longer meet the
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requirements of the NYSE for continued listing and the listing of shares of
Borden Common Stock is discontinued, the market for the shares of Borden Common
Stock would be adversely affected.
The Borden Common Stock also may be delisted from foreign exchanges on which
it is listed, subject to applicable requirements of such exchanges.
The extent of the public market for the shares of Borden Common Stock and
availability of quotations would depend upon such factors as the number of
holders and/or the aggregate market value of the publicly held shares of Borden
Common Stock at such time, the interest in maintaining a market in the shares of
Borden Common Stock on the part of securities firms, the possible termination of
registration of the shares of Borden Common Stock under the Exchange Act (see
"--Possible Termination of Registration Under the Exchange Act") and other
factors.
Possible Loss of Status as "Margin Securities"
The shares of Borden Common Stock are currently "margin securities" under
the regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such shares of Borden Common
Stock. In the event that the shares of Borden Common Stock are no longer listed
on the NYSE upon completion of the Exchange Offer, depending upon factors such
as the number of holders of the shares of Borden Common Stock and the number and
market value of publicly held shares of Borden Common Stock, such shares might
no longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations, in which event the shares of Borden Common Stock may
no longer be used as collateral for loans by brokers. In addition, if
registration of the shares of Borden Common Stock under the Exchange Act is
terminated upon completion of the Exchange Offer, the shares of Borden Common
Stock will no longer constitute "margin securities." There can be no assurance
that, in the future, shares of Borden Common Stock will continue to constitute
"margin securities" and be available as collateral for loans made by brokers;
however, if the Merger is consummated, shares of Borden Common Stock will in any
event no longer constitute "margin securities."
Possible Termination of Registration Under the Exchange Act
The shares of Borden Common Stock are currently registered under the
Exchange Act. Such registration may be terminated upon application of Borden to
the Commission if the shares of Borden Common Stock are not listed on a national
securities exchange and there are fewer than 300 holders of record. Termination
of the registration of the shares of Borden Common Stock under the Exchange Act
would substantially reduce the information required to be furnished by Borden to
holders of shares of Borden Common Stock and to the Commission and would make
certain of the provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy or
information statement in connection with shareholder action and the related
requirement of an annual report to shareholders and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the shares of Borden Common Stock. Furthermore,
"affiliates" of Borden and persons holding "restricted securities" of Borden
Common Stock may be deprived of the ability to dispose of such securities
pursuant to Rule 144 promulgated under the Securities Act. If registration of
the shares of Borden Common Stock under the Exchange Act were terminated, the
shares of Borden Common Stock would no longer be "margin securities" or eligible
for listing or reporting on the Nasdaq National Market. The Purchaser does not
currently intend to seek to terminate registration of the shares of Borden
Common Stock.
Effects of Inability to Consummate the Merger
Pursuant to the Merger Agreement, among other things, following the
consummation of the Exchange Offer, subject to certain conditions, the Purchaser
will be merged with Borden. If, following the Exchange Offer and exercise of the
Option, approval of Borden's shareholders is required by applicable law in order
to consummate the Merger of the Purchaser with Borden, provided that the Minimum
Condition is satisfied without being reduced or waived, Borden will submit the
Merger to Borden's shareholders for approval. If the Merger is submitted to
Borden's shareholders for approval, the Merger will require the approval of the
holders of not less than 66 2/3% of the outstanding Borden
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Shares, including the Borden Shares owned by the Purchaser and its affiliates.
There can be no assurance that the required vote of Borden shareholders will be
obtained or that the Merger will be consummated.
If the Merger is consummated, shareholders of Borden who elected not to
tender their Borden Shares in the Exchange Offer will receive upon consummation
of such Merger the same number of shares of Holdings Common Stock in exchange
for each of their Borden Shares as they would have received in the Exchange
Offer.
If, following the consummation of the Exchange Offer, the Merger is not
consummated, KKR Associates, which is the general partner of the Common Stock
Partnerships, indirectly will control the number of Borden Shares acquired by
the Purchaser pursuant to the Exchange Offer and upon exercise of the Option.
Under the Merger Agreement and the Conditional Purchase/Option Agreement,
following the acceptance for exchange of the Borden Shares to be exchanged
pursuant to the Exchange Offer and/or the purchase of the Option Shares in
accordance with the Conditional Purchase/Option Agreement, and from time to time
thereafter, subject to applicable law, Borden has agreed to take all actions
necessary to cause the Applicable Percentage of directors (and of members of
each committee of the Board of Directors) (rounded in each case to the next
highest director or member) of Borden selected by the Partnership to consist of
persons designated or elected by the Partnership (whether, at the election of
Borden, by means of increasing the size of the board of directors or seeking the
resignation of directors and causing the Partnership's designees to be elected);
provided that, if the Purchaser has acquired at least 28,138,000 Borden Shares,
the Applicable Percentage will not be less than 33 1/3%. As a result of its
ownership of such Borden Shares and right to designate nominees for election to
Borden's Board of Directors, KKR Associates, an affiliate of KKR, indirectly
will be able to influence decisions of the shareholders and such Board. This
concentration of influence in one shareholder may adversely affect the market
value of the Borden Common Stock.
To the extent KKR controls more than 50% of the outstanding Borden Shares
following the consummation of the Exchange Offer and exercise of the Option, but
the Merger is not consummated, Borden shareholders other than those affiliated
with KKR will lack sufficient voting power to elect directors or to cause other
actions to be taken which require majority approval.
Exchange Offer Conditions Related to Indebtedness
The Exchange Offer is conditioned upon, among other things, the obtaining of
all consents and waivers on terms satisfactory to the Partnership necessary in
order that the consummation of the transactions contemplated by the Merger
Agreement and the Conditional Purchase/Option Agreement not constitute events
giving rise to events of default or other rights permitting debt to become due
prior to maturity.
The Exchange Offer is also conditioned upon Borden having refinanced, or
received commitments for refinancing or indications satisfactory to the
Partnership from lenders that it will be able to refinance, in each case on
market terms reasonably acceptable to the Partnership, the principal bank credit
facilities of Borden and T.M.I. Associates, L.P., subject to certain
limitations.
In the event such consents, waivers or refinancing commitments are not
obtained, the Purchaser will have the right not to accept for exchange, exchange
or deliver shares of Holdings Common Stock for, subject to Rule 14e-1(c) under
the Exchange Act, any Borden Shares tendered and may terminate or (subject to
the terms of the Merger Agreement) amend the Exchange Offer or may postpone the
acceptance for exchange of the Borden Shares tendered. No assurance can be given
that such consents, waivers or refinancing commitments will be obtained.
Further, if the Purchaser were to waive the condition to the Exchange Offer that
the aforementioned consents and waivers be obtained, some or all of such
indebtedness or other obligations could become payable prior to their
maturities. See "The Exchange Offer--Terms of the Exchange Offer; Expiration
Date" and "--Certain Conditions of the Exchange Offer."
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SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Offering Circular/Prospectus. Reference is
made to, and this Summary is qualified in its entirety by, the more detailed
information contained or incorporated by reference in this Offering
Circular/Prospectus. Unless otherwise defined herein, capitalized terms used in
this Summary have the respective meanings ascribed to them elsewhere in this
Offering Circular/Prospectus.
-------------------
FOR A DISCUSSION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE CONSIDERED BY
BORDEN SHAREHOLDERS IN CONNECTION WITH THEIR CONSIDERATION OF THE EXCHANGE
OFFER, INCLUDING CERTAIN FACTORS RELATING TO AN INVESTMENT IN HOLDINGS AND THE
TRANSACTIONS, SEE "SIGNIFICANT CONSIDERATIONS."
RJR NABISCO HOLDINGS CORP.
The operating subsidiaries of Holdings owned through RJRN comprise one of
the largest tobacco and food companies in the world. In the United States, the
tobacco business is conducted by RJRT, the second largest manufacturer of
cigarettes, and the packaged foods business is conducted by Nabisco, the largest
manufacturer and marketer of cookies and crackers. Tobacco operations outside
the United States are conducted by Tobacco International and food operations
outside the United States and Canada are conducted by Nabisco International,
Inc. ("Nabisco International"), a subsidiary of Nabisco. Together, RJRT's and
Tobacco International's tobacco products are sold around the world under a
variety of brand names. Food products are sold in the United States, Canada,
Latin America and certain other international markets.
Domestic Tobacco. RJRT's largest selling cigarette brands in the United
States include WINSTON, DORAL, SALEM, CAMEL, MONARCH and VANTAGE. RJRT's other
cigarette brands, including BEST VALUE, MORE, NOW, STERLING, MAGNA and CENTURY,
are marketed to meet a variety of smoker preferences. All RJRT brands are
marketed in a variety of styles. A primary long-term objective of RJRT is to
increase earnings and cash flow through selective marketing investments in its
key brands and continual improvements in its cost structure and operating
efficiency. Marketing programs for full-price brands are designed to build brand
awareness and add value to the brands in order to retain current adult smokers
and attract adult smokers of competitive brands. RJRT believes it is essential
to compete in all segments of the cigarette market, and accordingly offers a
range of lower-priced brands intended to appeal to more cost-conscious adult
smokers. Based on data collected for RJRT by an independent market research
firm, RJRT had an overall share of retail consumer cigarette sales during 1993
of 29.8%, an increase of approximately one share point from 1992.
International Tobacco. Tobacco International operates in over 160 markets
around the world and is the second largest of two international cigarette
producers that have significant positions in the American Blend segment of the
international tobacco market. Tobacco International markets over 55 brands of
which WINSTON, CAMEL and SALEM, all American Blend cigarettes, are its
international leaders. Tobacco International has strong brand presence in
Western Europe and is well established in its other key markets in the Middle
East/Africa, Asia and Canada. Tobacco International is aggressively pursuing
development opportunities in Eastern Europe and the former Soviet Union.
Nabisco. Nabisco's domestic operations represent one of the largest packaged
food businesses in the world. Through its domestic divisions, Nabisco
manufactures and markets cookies, crackers, snack foods, hard and bite-size
candy, gum, nuts, hot cereals, margarine, pet foods, dry-mix dessert products
and other grocery products under established and well-known trademarks,
including OREO, CHIPS AHOY!, NEWTONS, SNACKWELL'S, RITZ, PREMIUM, LIFE SAVERS,
PLANTERS, A.1, GREY POUPON, MILK-BONE, ORTEGA, CREAM OF WHEAT, FLEISCHMANN'S and
BLUE BONNET. Nabisco Biscuit Company ("Nabisco Biscuit") is the largest
manufacturer and
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marketer in the United States cookie and cracker industry with nine of the top
ten selling brands, each of which had annual sales of over $100 million in 1993.
Overall, in 1993, Nabisco Biscuit had a 37% share of the domestic cookie
industry sales and a 55% share of the domestic cracker industry sales, in the
aggregate more than three times the share of its closest competitor. In 1992,
Nabisco Biscuit became the leading manufacturer and marketer of no fat/reduced
fat cookies and crackers with the introduction of the SNACKWELL'S line. In 1993,
the SNACKWELL'S brand recorded net sales of $186 million, which made SNACKWELL'S
the sixth largest cookie/cracker brand in the United States. Based on 1993 net
sales, LIFE SAVERS is the largest selling hard roll candy in the United States,
with an approximately 25.4% share of the hard roll candy category, and PLANTERS
nuts are the clear leader in the packaged nut category, with a market share of
more than five times that of its nearest competitor.
Nabisco International is also a leading producer of powdered dessert and
drink mixes, biscuits, baking powder and other grocery items, industrial yeast
and bakery ingredients in many of the 17 Latin American countries in which it
has operations. Nabisco International has significantly increased its presence
in Europe through the acquisition of Royal Brands S.A. in Spain and Royal Brands
Portugal.
RJRN was acquired in 1989 by an indirect, wholly owned subsidiary of
Holdings (the "Acquisition") at the direction of KKR. Prior to the Acquisition,
RJRN was a publicly held corporation. See "Significant Considerations--KKR
Ownership."
The principal executive office of Holdings is located at 1301 Avenue of
Americas, New York, New York 10019; its telephone number is (212) 258-5600.
RECENT DEVELOPMENTS
Nabisco Initial Public Offering and Related Transactions. On October 28,
1994, Nabisco filed a registration statement with the Commission for the initial
public offering of 45 million shares of its Class A Common Stock (51.75 million
shares if the underwriters' over-allotment options are exercised in full). For
purposes of the filing, the initial offering price was estimated to be between
$23 and $26 per share. Upon completion of the proposed public offering, Holdings
would beneficially own 100% of Nabisco's outstanding Class B Common Stock, which
would represent approximately 82.6% of the economic interest in Nabisco (80.5%
if the underwriters' over-allotment options are exercised in full). Holders of
Class A Common Stock of Nabisco generally would have identical rights to holders
of Class B Common Stock except that holders of Class A Common Stock would be
entitled to one vote per share while holders of Class B Common Stock would be
entitled to ten votes per share on all matters submitted to a vote of
stockholders. The registration statement has not become effective and there can
be no assurance that such offering will be consummated.
The initial public offering of shares of Nabisco is part of a broader
proposed initiative of Holdings designed to reduce consolidated debt of Holdings
by approximately $1 billion and establish a separately traded common stock for
Nabisco. After completion of the proposed public offering, Holdings anticipates
commencing a quarterly cash dividend on its common stock of $.075 per share or
$.30 per share on an annualized basis. The proposed transactions are subject to
the approval of lenders under RJRN's bank credit facilities.
At the time of the proposed public offering, Nabisco is expected to have
approximately $4.2 billion of intercompany debt and approximately $1.3 billion
of borrowings under a short-term bank credit agreement. The net proceeds of the
proposed public offering will be used by Nabisco to repay a portion of the
borrowings under its bank facility.
As part of the initiative, RJRN has called for redemption several issues of
debt securities, including $1.5 billion of 10 1/2% Senior Notes due 1998,
approximately $374 million of 8 3/8% Sinking Fund Debentures due 2017, $100
million of 13 1/2% Subordinated Debentures due 2001 and approximately $25
million of 7 3/8% Sinking Fund Debentures due 2001, all of which are redeemable
with various
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redemption premiums. RJRN expects to fund these redemptions with borrowings
under its existing credit facilities, proceeds from Holdings' Series C Preferred
Stock offering completed on May 6, 1994 and internally generated cash flow. See
"RJR Nabisco Holdings Corp. Selected Pro Forma Consolidated Financial Data."
Upon completion of the proposed public offering of Nabisco, RJRN may seek to
restructure approximately $6 billion of its domestic publicly held debt which
currently limits the ability of Nabisco to incur long-term debt other than
intercompany debt. The restructuring, which would require consent of public
debtholders and lenders under bank facilities, may include one or more offers to
exchange Nabisco debt securities for a portion of such debt. The goal of the
exchange offers would be to permit Nabisco to establish long-term borrowing
capacity independent of its parent and to reduce its intercompany debt. No
assurance can be given that RJRN will seek to restructure its debt or that any
such restructuring will be consummated.
The Board of Directors of Holdings has adopted certain policies that would
become effective upon the closing of the Nabisco initial public offering. One
policy would provide that Holdings would limit, until December 31, 1998, the
aggregate amount of cash dividends on its capital stock. Under this policy,
during that period Holdings would not pay any extraordinary cash dividends and
would limit the amount of its cash dividends, cash distributions and repurchases
for cash of capital stock and subordinated debt to an amount equal to the sum of
$500 million plus (i) 65% of Holdings' cumulative consolidated net income before
extraordinary gains or losses and restructuring charges and (ii) net cash
proceeds of up to $250 million in any year from the sale of capital stock of
Holdings or its subsidiaries (other than proceeds from the Nabisco initial
public offering) to the extent used to repay, purchase or redeem debt or
preferred stock. Another policy would provide that Holdings would not declare a
dividend or distribution to its stockholders of the shares of capital stock of a
subsidiary before December 31, 1996. Another policy sets forth the intention of
Holdings that it would not make such a distribution prior to December 31, 1998
if that distribution would cause the ratings of the senior indebtedness of RJRN
to be reduced from investment grade to non-investment grade or if, after giving
effect to such distribution, any publicly held senior indebtedness of the
distributed company would not be rated investment grade. There is no assurance
that any such distribution will take place. Additional policies provide that an
amount equal to the net cash proceeds from any issuance and sale of equity by
Holdings or from any sale outside the ordinary course of business of material
assets owned or used by subsidiaries in the tobacco business, in each case
before December 31, 1998, would be used either to repay, purchase or redeem
consolidated indebtedness or to acquire properties, assets or businesses to be
used in existing or new lines of business and that an amount equal to the net
cash proceeds of any secondary sale of shares of Nabisco before December 31,
1998 would be used to repay, purchase or redeem consolidated debt. No assurance
can be given that Holdings will issue or sell any equity or sell any material
assets outside the ordinary course of business.
Termination of Agreement in Principle Relating to Borden. On October 25,
1994, Holdings and KKR concluded that they were unable to reach a definitive
agreement for the transaction contemplated by their agreement in principle for
Holdings to acquire a minority interest in Borden, as had been previously
announced on September 12, 1994. The September 12, 1994 announcement indicated
that, following KKR's successful acquisition of Borden, Holdings would issue to
Borden approximately $500 million of newly issued common shares of Holdings for
newly issued shares of Borden common stock representing a 20% pro forma interest
in Borden and a warrant to acquire an additional 10% pro forma interest in
Borden. The inability to reach agreement resulted from various complexities
affecting the transaction, including certain accounting issues. In particular,
because Holdings would have been required to account for its investment in
Borden using the equity method (thereby being required to reflect a portion of
Borden's potentially low or volatile earnings in its financial statements) and
to amortize a substantial amount of goodwill resulting from the transaction, the
proposed transaction would likely have had a dilutive effect on Holdings'
near-term earnings. Attempts to resolve these issues by restructuring the
transaction were unsuccessful. Holdings could in the future explore a basis on
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which it or its Nabisco subsidiary may acquire a minority equity interest in
Borden in exchange for common stock of Holdings. However, Holdings is not
currently engaged in any such negotiations, and there is no assurance that
Holdings will seek to pursue any such negotiations or that any such negotiations
will be successful.
BORDEN, INC.
Borden is engaged primarily in manufacturing, processing, purchasing and
distributing a broad range of products through three operating divisions: North
American Foods, International Foods and Packaging and Industrial Products. North
American Foods is comprised of niche grocery, pasta and sauce, and dairy
products, while International Foods includes international milk powder, European
bakery products and several European grocery and pasta businesses. Packaging and
Industrial Products includes primarily wallcoverings, adhesives and resins, and
plastic films and packaging.
Borden was incorporated in New Jersey on April 24, 1899 as the successor to
a business founded in 1857. Borden's principal executive offices are located at
180 East Broad Street, Columbus, Ohio 43215 (telephone number 614-225-4000).
THE PURCHASER AND THE COMMON STOCK PARTNERSHIPS
The Purchaser, a New Jersey corporation and a subsidiary of the Partnership,
was organized in connection with the Transactions and has not carried on any
activities to date other than those incident to its formation and the
Transactions. Prior to the consummation of the Exchange Offer, KKR Partners II,
L.P. will become a holder of shares of common stock of the Purchaser. Each of
the Common Stock Partnerships is a Delaware limited partnership, whose general
partner is KKR Associates, an affiliate of KKR. The principal assets of each of
the Common Stock Partnerships consist of investments in various entities,
including investments in Holdings Common Stock. The principal offices of the
Purchaser and the Common Stock Partnerships are located at 9 West 57th Street,
New York, New York 10019; telephone number (212) 750-8300. The name,
citizenship, business address, principal occupation or employment, and five year
employment history of each of the directors and executive officers of the
Purchaser and of KKR Associates, the general partner of each of the Common Stock
Partnerships, and certain other information, are set forth in Schedule I to this
Offering Circular/Prospectus.
The Purchaser has reserved the right to transfer or assign, in whole or from
time to time in part, to one or more affiliates, the right to exchange all or
any portion of the Borden Shares tendered pursuant to the Exchange Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations pursuant to the Exchange Offer and will in no way prejudice the
rights of tendering shareholders to exchange for Borden Shares validly tendered
and accepted for exchange pursuant to the Exchange Offer. According to the
Merger Agreement, it is presently contemplated that the right of the Purchaser
to exchange for shares of Borden Common Stock pursuant to the Exchange Offer and
the right of the Purchaser to exercise the Option will be assigned to the
Partnership or to a direct or indirect wholly owned subsidiary of the
Partnership, which may, in any such case, act for itself and/or as agent for one
or both of the Common Stock Partnerships, as the case may be.
For information concerning beneficial ownership of Holdings Common Stock by
affiliates of the Purchaser, see "Security Ownership of Certain Beneficial
Owners and Management."
THE EXCHANGE OFFER, THE MERGER AND RELATED TRANSACTIONS
The Purchaser, the Partnership and Borden have entered into the Merger
Agreement and the Conditional Purchase/Option Agreement, which provide for the
consummation of the Transactions, upon the terms and subject to the conditions
thereof. The Board of Directors of Borden, with seven members voting in favor
and one member (Borden's chief executive officer) abstaining, has, among
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other things, (1) determined that the Merger Agreement and the Conditional
Purchase/Option Agreement and the Transactions, including the Exchange Offer and
the Merger, taken together, are fair to the shareholders of Borden, and resolved
to recommend that holders of Borden Shares accept the Exchange Offer, tender
their Borden Shares to the Purchaser in the Exchange Offer and, if required by
applicable law, approve and adopt the Merger Agreement, and (2) approved the
Merger Agreement, the Conditional Purchase/Option Agreement and the
Transactions. See "The Exchange Offer--Borden Background and Reasons for the
Proposed Transactions" and "Description of Merger Agreement and Conditional
Purchase/Option Agreement." As of November 15, 1994, members of Borden's Board
of Directors and Borden's executive officers owned less than 1% of the
outstanding Borden Shares. To Borden's knowledge, all of the directors of Borden
intend to tender their Borden Shares pursuant to the Exchange Offer or vote
their Borden Shares in favor of approval and adoption of the Merger Agreement
at the shareholders' meeting in respect thereof, if any. To Borden's knowledge,
all of Borden's executive officers intend to tender their Borden Shares pursuant
to the Exchange Offer, other than those Borden Shares, if any, held by such
persons which, if tendered, could cause such persons to incur liability under
the provisions of Section 16(b) of the Exchange Act. However, none of these
persons has committed to tender their Borden Shares pursuant to the Exchange
Offer, and there can be no assurance that they will do so.
In the Exchange Offer, each Borden Share accepted by the Purchaser in
accordance with the Exchange Offer shall be converted into the right to receive
from the Purchaser that number of fully paid and nonassessable shares of
Holdings Common Stock equal to the Exchange Ratio, which is the quotient
(rounded to the nearest 1/100,000) obtained by dividing (i) $14.25 by (ii) the
average of the average of the high and low sales prices of the Holdings Common
Stock as reported on the NYSE Composite Tape during the Valuation Period,
provided that the Exchange Ratio shall not be less than 1.78125 or greater than
2.375.
If the Merger is consummated, holders of Borden Shares will receive the same
number of shares of Holdings Common Stock for each Borden Share as are exchanged
for each Borden Share in the Exchange Offer.
The Exchange Offer is being made by the Purchaser for the purpose of
acquiring 100% of the outstanding Borden Shares. If, following the Exchange
Offer and exercise of the Option, the Purchaser and its affiliates own more than
90% of the outstanding Borden Shares, the Purchaser will take all necessary or
appropriate action, without further action by the Board of Directors or
shareholders of Borden, to consummate the Merger of the Purchaser with Borden as
soon as practicable. If, following the Exchange Offer and exercise of the
Option, approval of Borden's shareholders is required by applicable law in order
to consummate the Merger, provided that the Minimum Condition is satisfied
without being reduced or waived, Borden will submit the Merger to the Borden
shareholders for approval. If the Merger is required to be submitted to Borden's
shareholders for approval, the Merger will require the approval of the holders
of not less than 66 2/3% of the outstanding Borden Shares, including the Borden
Shares owned by the Purchaser and its affiliates.
For a discussion of Borden's reasons for entering into the Merger Agreement,
see "The Exchange Offer--Borden Background and Reasons for the Proposed
Transactions."
THIS OFFERING CIRCULAR/PROSPECTUS DOES NOT CONSTITUTE A SOLICITATION OF A
PROXY, CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO ANY SPECIAL MEETING OR
OTHER MEETING OF BORDEN SHAREHOLDERS WHO DO NOT TENDER THEIR BORDEN SHARES OR
ANY ACTION IN LIEU THEREOF. ANY SUCH SOLICITATION WILL BE MADE ONLY PURSUANT TO
SEPARATE PROXY MATERIALS IN COMPLIANCE WITH SECTION 14(A) OF THE EXCHANGE ACT.
EXCHANGE OFFER
Terms of the Exchange Offer; Expiration Date. Upon the terms and subject to
the conditions of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser hereby offers to exchange shares of Holdings
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Common Stock for all outstanding Borden Shares at the Exchange Ratio, provided
that such Borden Shares are validly tendered on or prior to the Expiration Date
and not properly withdrawn as described under "The Exchange Offer--Withdrawal
Rights." The term "Expiration Date" means 12:00 Midnight, New York City time, on
Tuesday, December 20, 1994, unless the Purchaser shall have extended the period
of time for which the Exchange Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Exchange
Offer, as so extended by the Purchaser, shall expire.
The Purchaser will announce the exact Exchange Ratio with respect to each
Borden Share that is to be exchanged for shares of Holdings Common Stock in the
Exchange Offer by 9:00 A.M., New York City time, on the first business day of
the ten business day period ending on the Expiration Date. The Purchaser will
make such announcement by issuing a press release to the Dow Jones News Service.
During the ten business day period ending on the Expiration Date, holders of
Borden Shares will be able to obtain the exact Exchange Ratio with respect to
each Borden Share that is to be exchanged for shares of Holdings Common Stock in
the Exchange Offer from the Information Agent or the Dealer Manager for the
Exchange Offer at their respective telephone numbers appearing on the back cover
of this Offering Circular/Prospectus.
The Exchange Offer is subject to, among other things, the Minimum Condition.
The Exchange Offer is also subject to other material terms and conditions, which
Borden shareholders should carefully consider. The Purchaser has reserved the
right (but shall not be obligated) to waive any or all of the conditions,
provided, however, that if the Purchaser shall have exercised the Option in
whole or in part prior to the termination of the Exchange Offer, the Purchaser
shall not be permitted to waive the Minimum Condition. See "Significant
Considerations--Information Concerning the Transactions-- Exchange Offer
Conditions Related to Indebtedness," "The Exchange Offer--Certain Conditions of
the Exchange Offer" and "Description of Merger Agreement and Conditional
Purchase/Option Agreement."
Exchange of Shares of Borden Common Stock. Upon the terms and subject to the
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for exchange, and will exchange for shares of Holdings
Common Stock, all Borden Shares validly tendered and not properly withdrawn on
or prior to the Expiration Date promptly after the later to occur of (i) the
Expiration Date and (ii) the satisfaction or waiver of the conditions of the
Exchange Offer set forth under "The Exchange Offer-- Certain Conditions of the
Exchange Offer." See "The Exchange Offer--Exchange of Shares of Borden Common
Stock" and "--Withdrawal Rights."
In all cases, exchange of Borden Shares tendered and accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of (i) Share Certificates (and Rights Certificates if applicable)
for Borden Shares, or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Borden Shares into the Exchange Agent's account at
The Depository Trust Company, the Midwest Securities Trust Company or the
Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth under "The Exchange Offer--Procedure for Tendering Shares
of Borden Common Stock," (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message (as defined below) in connection with a
book-entry transfer, and (iii) any other documents required by the Letter of
Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Borden Shares which are the subject of such
Book-Entry Confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that the Purchaser may
enforce such agreement against such participant.
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Unless and until the Rights are redeemed in accordance with the Merger
Agreement, holders of Borden Shares will be required to tender the Rights
associated with such Borden Shares in order to effect a valid tender of such
Borden Shares. As of the date hereof, the Rights trade together with the Borden
Shares and a tender of the Borden Shares will be deemed to be a tender of the
associated Rights. If separate Rights Certificates are issued, tendering
shareholders will then be required to tender both Share Certificates and Rights
Certificates in order to effect a valid tender.
If any tendered Borden Shares are not accepted for exchange for any reason
or if Share Certificates (and Rights Certificates if applicable) are submitted
for more Borden Shares than are tendered, Share Certificates (and Rights
Certificates if applicable) for Borden Shares evidencing un-exchanged or un-
tendered Borden Shares will be returned, without expense to the tendering
shareholder (or, in the case of Borden Shares tendered by book-entry transfer
into the Exchange Agent's account at a Book-Entry Transfer Facility pursuant to
the procedures described under "The Exchange Offer--Procedure for Tendering
Shares of Borden Common Stock--Book-Entry Transfer," such Borden Shares will be
credited to an account maintained at such Book-Entry Transfer Facility), in each
case with the related Rights Certificates (if applicable), promptly following
the expiration, termination or withdrawal of the Exchange Offer.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to shareholders pursuant to the Exchange Offer, such increased
consideration will be given to all shareholders whose Borden Shares are
exchanged pursuant to the Exchange Offer, whether or not such Borden Shares were
tendered or accepted for exchange prior to such increase in consideration.
Procedure for Tendering Shares of Borden Common Stock. Except as set forth
below, in order for Borden Shares (and Rights if applicable) to be validly
tendered pursuant to the Exchange Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in connection with a
book-entry delivery of Borden Shares (and Rights if applicable) and any other
documents required by the Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the back cover of this
Offering Circular/Prospectus on or prior to the Expiration Date and either (i)
the Share Certificates (and Rights Certificates if applicable) evidencing
tendered Borden Shares (and Rights if applicable) must be received by the
Exchange Agent at such address or such Borden Shares (and Rights if applicable)
must be tendered pursuant to the procedure for book-entry transfer and a
Book-Entry Confirmation must be received by the Exchange Agent, in each case on
or prior to the Expiration Date, or (ii) the guaranteed delivery procedures must
be complied with.
THE METHOD OF DELIVERY OF BORDEN SHARES (AND RIGHTS IF APPLICABLE), AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Withdrawal Rights. Tenders of Borden Shares (and Rights if applicable) made
pursuant to the Exchange Offer are irrevocable, except that Borden Shares (and
Rights if applicable) tendered pursuant to the Exchange Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless theretofore accepted
for exchange by the Purchaser pursuant to the Exchange Offer, may also be
withdrawn at any time after January 20, 1995. If the Purchaser extends the
Exchange Offer, is delayed in its acceptance for exchange of or exchange for
Borden Shares or is unable to exchange Borden Shares validly tendered pursuant
to the Exchange Offer for any reason, then, without prejudice to the Purchaser's
rights under the Exchange Offer, the Exchange Agent may nevertheless, on behalf
of the Purchaser, retain tendered Borden Shares (and Rights if applicable), and
such Borden Shares (and Rights if applicable) may not be withdrawn except to the
extent that tendering shareholders are entitled to withdrawal rights as
described below. Any such delay will be by an extension of the Exchange Offer to
the extent required by law.
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For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent
at one of its addresses set forth on the back cover of this Offering
Circular/Prospectus. Any notice of withdrawal must specify the name of the
person who tendered the Borden Shares (and Rights if applicable) to be
withdrawn, the number of Borden Shares (and Rights if applicable) to be
withdrawn and the name of the registered holder, if different from that of the
person who tendered such Borden Shares (and Rights if applicable). If Share
Certificates (or Rights Certificates if applicable) for Borden Shares (and
Rights if applicable) to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Exchange Agent and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Borden Shares (and Rights if
applicable) have been tendered for the account of an Eligible Institution. If
Borden Shares (and Rights if applicable) have been tendered pursuant to the
procedure for book-entry transfer as described under "The Exchange
Offer--Procedure for Tendering Shares of Borden Common Stock--Book-Entry
Transfer," any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Borden Shares (and Rights if applicable), in which case a notice of withdrawal
will be effective if delivered to the Exchange Agent by any method of delivery
described in the first sentence of this paragraph.
Any Borden Shares (and Rights if applicable) properly withdrawn will
thereafter be deemed not to have been validly tendered for purposes of the
Exchange Offer. However, withdrawn Borden Shares (and Rights if applicable) may
be re-tendered at any time on or prior to the Expiration Date by following one
of the procedures described under "The Exchange Offer--Procedure for Tendering
Shares of Borden Common Stock."
Extension of Tender Period; Termination; Amendment. The Purchaser expressly
reserves the right, in its sole discretion, at any time and from time to time,
to extend the period during which the Exchange Offer is open for any reason,
including the occurrence of any of the conditions specified under "The Exchange
Offer--Certain Conditions of the Exchange Offer," by giving oral or written
notice of such extension to the Exchange Agent. During any such extension, all
Borden Shares (and Rights if applicable) previously tendered and not properly
withdrawn will remain subject to the Exchange Offer, subject to the rights of a
tendering shareholder to withdraw such shareholder's Borden Shares (and Rights
if applicable). Pursuant to the Merger Agreement, the Purchaser has agreed that,
upon the request of Borden (and without limiting the number of times that the
Purchaser may extend the Exchange Offer, or the total number of days for which
the Exchange Offer may be extended), the Purchaser will extend the Exchange
Offer, one or more times, for an aggregate of not more than twenty business
days. See "The Exchange Offer--Withdrawal Rights" and "Description of Merger
Agreement and Conditional Purchase/Option Agreement."
The Purchaser acknowledges (i) that Rule 14e-1(c) under the Exchange Act
requires the Purchaser to pay the consideration offered or return the Borden
Shares (and Rights if applicable) tendered promptly after the termination or
withdrawal of the Exchange Offer and (ii) that the Purchaser may not delay
acceptance for exchange of, or exchange for (except as provided in clause (i) of
the succeeding sentence), any Borden Shares upon the occurrence of any of the
conditions specified under "The Exchange Offer--Certain Conditions of the
Exchange Offer" without extending the period of time during which the Exchange
Offer is open. Subject to the foregoing and any other applicable regulations of
the Commission, the Purchaser also reserves the right, in its sole discretion,
at any time or from time to time to (i) delay acceptance for exchange of or,
regardless of whether such Borden Shares were theretofore accepted for exchange,
exchange for any Borden Shares pending receipt of any regulatory approvals
specified under "The Exchange Offer--Certain Regulatory Approvals and Legal
Matters," (ii) terminate the Exchange Offer (whether or not any Borden Shares
have theretofore been accepted for exchange) if any of the conditions referred
to under "The Exchange Offer--Certain Conditions of the Exchange Offer" has not
been satisfied or upon the occurrence of any of the conditions specified
thereunder and (iii) waive any condition or otherwise amend the Exchange Offer
in any respect, in each case, by giving oral or written notice of such delay,
termination, waiver or amendment to the Exchange Agent and by making a public
announcement thereof.
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Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, and such announcement
in the case of an extension will be made no later than 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Purchaser may choose to make any public
announcement, except as provided by applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that material changes be promptly
disseminated to holders of Borden Shares), the Purchaser shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
Merger. Pursuant to the Merger Agreement, if approval of Borden's
shareholders is required by applicable law in order to consummate the Merger,
provided that the Minimum Condition is satisfied without being reduced or
waived, following the acceptance for exchange of Borden Shares pursuant to the
Exchange Offer, Borden, acting through its Board of Directors, will, in
accordance with applicable law, as soon as practicable following the expiration
or termination of the Exchange Offer, duly call, give notice of, convene and,
subject to the right of the parties to delay a special meeting under certain
circumstances described in the Merger Agreement, hold a special meeting of its
shareholders (the "Borden Shareholders' Meeting") for the purpose of considering
and taking action upon the Merger Agreement and the Merger and to obtain the
necessary approval by its shareholders of the Merger Agreement and the
transactions contemplated thereby, including the Merger.
Under the Merger Agreement, in the event that the Partnership and the
Purchaser, or any other direct or indirect subsidiary of the Partnership
acquires at least 90% of the outstanding Borden Shares, the parties have agreed
to take all necessary or appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Exchange Offer
without a meeting of shareholders of Borden, in accordance with applicable
provisions of the New Jersey Business Corporation Act (the "NJBCA").
By virtue of the Merger and without any further action on the part of the
holder of any shares of Borden Common Stock or any shares of capital stock of
the Purchaser, each issued and outstanding share of Borden Common Stock (other
than shares owned by Borden or any subsidiary of Borden or the Partnership, the
Purchaser or any other subsidiary of the Partnership) will be converted into the
right to receive a number of fully paid and nonassessable shares of Holdings
Common Stock equal to the number of fully paid and nonassessable shares of
Holdings Common Stock that were delivered by the Purchaser with respect to each
share of Borden Common Stock that was validly tendered and not properly
withdrawn and accepted for exchange pursuant to the terms of the Exchange Offer.
Representations and Warranties. The Merger Agreement contains certain
representations and warranties of Borden, the Partnership and the Purchaser. See
"Description of Merger Agreement and Conditional Purchaser/Option Agreement."
Covenants Regarding Conduct of Business. Except as contemplated by the
Merger Agreement, during the period from the date of the Merger Agreement to the
date on which a majority of the Board of Directors of Borden consists of
designees or representatives of the Partnership, Borden, with respect to itself
and each of its subsidiaries, has agreed in the Merger Agreement to conduct its
operations according to its ordinary course of business consistent with past
practice and to use its best efforts to preserve intact its business
organization, to keep available the services of its current officers and
employees and to preserve existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relationships with it to the end that its goodwill and ongoing businesses will
be unimpaired at the date on which a majority of the Board of Directors of
Borden consists of designees or representatives of the Partnership.
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No Solicitation. Under the Merger Agreement, except with respect to
divestitures in accordance with Borden's January 1994 restructuring plan, Borden
has agreed that neither it nor any of its subsidiaries will, nor will it or any
of its subsidiaries authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of its subsidiaries to, (a) solicit,
initiate, encourage (including by way of furnishing information), or take any
other action to facilitate, any inquiry or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any acquisition or
purchase of a substantial amount of assets of, or any equity interest in, Borden
or any of its subsidiaries or any tender offer (including a self tender offer)
or exchange offer, merger, consolidation, business combination, sale of
substantially all assets, sale of securities, recapitalization, liquidation,
dissolution or similar transaction involving Borden or any of its subsidiaries
(other than the transactions contemplated by the Merger Agreement or the
Conditional Purchase/Option Agreement) or any other transaction the consummation
of which would or could reasonably be expected to impede, interfere with,
prevent or materially delay the Merger or the exercise of the Option or which
would or could reasonably be expected to materially dilute the benefits to the
Purchaser of the transactions contemplated by the Merger Agreement
(collectively, "Transaction Proposals") or agree to or endorse any Transaction
Proposal or (b) enter into or participate in any discussions or negotiations
regarding any of the foregoing, or furnish to any other person any information
with respect to its business, properties or assets or any of the foregoing, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing; provided, however, that the foregoing clauses will not prohibit
Borden from (i) furnishing information pursuant to an appropriate
confidentiality letter concerning Borden and its businesses, properties or
assets to a third party who has made a Transaction Proposal, (ii) engaging in
discussions or negotiations with such a third party who has made a Transaction
Proposal or (iii) following receipt of a Transaction Proposal, taking and
disclosing to its shareholders a position contemplated by Rule 14e-2(a) under
the Exchange Act or changing the Recommendations, but in each case referred to
in the foregoing clauses (i) through (iii) only after the Board of Directors of
Borden concludes in good faith that such action is necessary or appropriate in
order for the Board of Directors of Borden to act in a manner which is
consistent with its fiduciary obligations under applicable law. If the Board of
Directors of Borden receives a Transaction Proposal, then Borden has agreed
promptly to inform the Partnership of the terms and conditions of such proposal
and the identity of the person making it and to keep the Partnership generally
informed with reasonable promptness of any steps it is taking pursuant to the
foregoing with respect to such Transaction Proposal.
Cooperation and Best Efforts. Pursuant to the Merger Agreement, subject to
certain conditions and limitations described therein, the parties have agreed to
cooperate with each other and to use their respective best efforts to take
appropriate actions so that the transactions contemplated by the Merger
Agreement and the Conditional Purchase/Option Agreement may be consummated.
In addition, in the Merger Agreement, Borden and the Partnership have agreed
that, as promptly as practicable, they will file notification and report forms
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") and make any
other necessary filings with the applicable governmental entities related to the
transactions contemplated by the Merger Agreement, including the Exchange Offer
and the Merger, and the Conditional Purchase/Option Agreement and will use their
best efforts to respond as promptly as practicable to all inquiries received
from the FTC or the Antitrust Division or such other governmental entities for
additional information or documentation. Provided that following receipt of such
approvals the Purchaser (or one of its affiliates) acquires at least 28,138,000
Borden Shares pursuant to the Exchange Offer and/or the Option, Borden has
agreed to make any and all divestitures or undertakings required by the FTC, the
Antitrust Division or any other applicable government entity in connection with
the Transactions, which divestitures in each case shall be reasonably acceptable
to the Partnership and the Purchaser. See "Certain Regulatory Approvals and
Legal Matters" for a discussion of, among
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other things, the current status of filings by the Partnership and Borden under
the HSR Act and related matters.
Redemption of Rights. Pursuant to the Merger Agreement, Borden has agreed to
redeem all outstanding Rights at a redemption price of one and two-thirds cents
per Right effective immediately prior to the acceptance for exchange of any
Borden Shares pursuant to the Exchange Offer, provided that the Minimum
Condition is satisfied in the Exchange Offer. In accordance with the Merger
Agreement, Borden has amended the Rights Agreement so that none of the execution
or the delivery of the Merger Agreement or the Conditional Purchase/Option
Agreement, or both such agreements taken together, or commencement of the
Exchange Offer or the acceptance of Borden Shares for exchange pursuant to the
Exchange Offer, or the consummation of the transactions contemplated by the
Conditional Purchase/Option Agreement will, among other things, trigger the
exercisability of the Rights, the separation of the Rights from the stock
certificates to which they are attached or any other provisions of the Rights
Agreement. Borden has agreed, under certain circumstances, to take other
specified actions with respect to the Rights. See "Description of Merger
Agreement and Conditional Purchase/Option Agreement."
Conditions to Each Party's Obligations to Effect the Merger. The Merger
Agreement provides that the respective obligation of each party to effect the
Merger is subject to certain conditions, including, among other things, the
consummation of the Exchange Offer and the truth and correctness as of the
effective date of the Merger of certain representations and warranties of the
parties to the Merger Agreement with respect to material adverse changes in
their business, financial condition or results of operations. See "Description
of Merger Agreement and Conditional Purchase/Option Agreement."
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time, notwithstanding approval
thereof by the shareholders of Borden, but prior to the effective time of the
Merger: (a) by mutual written consent of the Partnership, the Purchaser and
Borden; (b) by the Partnership or Borden if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the United
States or any country or economic region in which either Borden or the
Partnership, directly or indirectly, has material assets or operations, shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; (c) by
the Partnership if due to an occurrence or circumstance which would result in a
failure to satisfy any of the conditions to the Exchange Offer the Purchaser
shall have terminated the Exchange Offer, unless such termination shall have
been caused by or resulted from the failure of the Partnership or the Purchaser
to perform in any material respect their material covenants and agreements
contained in the Merger Agreement; (d) by the Partnership if Borden shall have
modified or amended in any respect materially adverse to the Partnership or the
Purchaser or withdrawn its approval or recommendation of the Exchange Offer, the
Merger or the Merger Agreement, subject to certain exceptions; (e) by the
Partnership if Borden shall have (i) entered into any definitive agreement to
effect the transaction contemplated by a Transaction Proposal, (ii) recommended
any Transaction Proposal from a person other than the Partnership or the
Purchaser or any of its affiliates or (iii) resolved to do any of the foregoing;
(f) by the Partnership if certain alternative acquisitions shall have occurred;
(g) by Borden if (i) due to an occurrence or circumstance that would result in a
failure to satisfy any of the conditions of the Exchange Offer the Purchaser
shall have terminated the Exchange Offer, subject to certain exceptions; (h) by
the Partnership or Borden if, without fault of the terminating party, the
effective time of the Merger shall not have occurred on or before June 30, 1995
(provided, that the right to terminate the Merger Agreement under this clause
(h) shall not be available to any party whose failure to fulfill any obligation
under the Merger Agreement has been the cause of, or results in, the failure of
the Merger to have been consummated within such period); (i) by Borden if on or
after December 15, 1994, the termination date of a waiver granted to Borden of
certain provisions relating to changes in control of Borden under the credit
agreement dated
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as of August 16, 1994 among Borden and the banks' party thereto shall not then
extend past December 15, 1994 and certain other events shall occur as a result
thereof; or (j) by the Partnership or Borden if any required approval of the
shareholders of Borden shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of shareholders
or at any adjournment thereof. See "Description of Merger Agreement and
Conditional Purchase/Option Agreement."
Certain Required Payments. Pursuant to the Merger Agreement, Borden has
agreed to make certain payments to the Partnership and the Purchaser in respect
of expenses (in the aggregate amount of up to $15 million) and fees (in the
aggregate amount of up to $30 million), including upon certain termination
events with respect to the Merger Agreement.
CERTAIN PROVISIONS OF THE CONDITIONAL PURCHASE/OPTION AGREEMENT
Pursuant to the Conditional Purchase/Option Agreement, Borden has granted to
the Purchaser the irrevocable Option to purchase up to 28,138,000 Option Shares
(or approximately 19.9% of the outstanding Borden Shares as of the date hereof),
on the terms and subject to the conditions set forth therein.
Exercise of Option. Under the Conditional Purchase/Option Agreement, the
Option may be exercised by the Purchaser (or its designee, which designee must
be the Partnership or a direct or indirect wholly owned subsidiary of the
Partnership and which may, in any such case, act for itself and/or as agent for
one or both of the Common Stock Partnerships, as the case may be), in whole or
in part, at any time, or from time to time, during the period beginning on the
date of the Conditional Purchase/Option Agreement and ending on the Option
Expiration Date (as defined below), provided that if the Purchaser (or its
designee) has not exercised the Option in whole or in part prior to the
expiration of the Exchange Offer, it will not be entitled to exercise the Option
thereafter if it waives or otherwise reduces the Minimum Condition and accepts
fewer than 41% of the outstanding Borden Shares for payment in the Exchange
Offer. The term "Option Expiration Date" means the first to occur of the
effective time of the Merger and March 21, 1995 (unless the Purchaser has
theretofore sent a written notice of its intention to exercise the Option).
Conversion of Option. The Conditional Purchase/Option Agreement provides
that, upon the Conversion Date (as defined below), if any, the Option will be
converted in part from an irrevocable option to purchase the Borden Shares into
an obligation on the part of the Purchaser (or its designee, which designee must
be the Partnership or a direct or indirect wholly owned subsidiary of the
Partnership and which may, in any such case, act for itself and/or as agent for
one or both of the Common Stock Partnerships, as the case may be) to exercise
the Option to acquire, and of the Partnership to cause the Purchaser to take
such action, subject to applicable law (the "Mandatory Purchase"), on the terms
and subject to the conditions set forth in the Conditional Purchase/Option
Agreement, such number of Borden Shares which, when added to the number of
Borden Shares purchased in the Exchange Offer (together with any Borden Shares
previously purchased pursuant to the Option) will result in the Purchaser
beneficially owning more than 50% of the outstanding shares of Borden Common
Stock (the "Mandatory Purchase Shares"). Borden Shares subject to the Option in
excess of the number of Mandatory Purchase Shares will continue to be subject to
purchase at the option of the Purchaser. The term "Conversion Date" means the
date, if any, on which the Purchaser or the Partnership or a direct or indirect
wholly owned subsidiary of the Partnership acquires more than 41%, but less than
50%, of the outstanding shares of Borden Common Stock pursuant to the Exchange
Offer.
Payments. The Conditional Purchase/Option Agreement provides that, in the
event the Purchaser exercises the Option, the Purchaser (or, at the Purchaser's
option, its designee) will deliver to Borden, such number of shares (rounded to
the nearest whole share) of Holdings Common Stock as will equal the product of
the Option Exchange Ratio (as defined below) and the number of Borden Shares
24
<PAGE>
purchased pursuant to the exercise of the Option. The term "Option Exchange
Ratio" means the quotient (rounded to the nearest 1/100,000) obtained by
dividing (i) $11.00 (the "Option Purchase Price") by (ii) the average of the
average of the high and low prices of Holdings Common Stock as reported on the
NYSE Composite Tape on each of the ten consecutive trading days immediately
preceding the second trading day prior to (x) the date of notice of exercise in
the case of an Option Purchase or (y) the date of exercise in the case of a
Mandatory Purchase, subject to adjustment under certain circumstances.
BOARD REPRESENTATION
The Merger Agreement and the Conditional Purchase/Option Agreement provide
that, if requested by the Partnership, Borden will, following the acceptance for
exchange of the Borden Shares to be exchanged pursuant to the Exchange Offer
and/or the purchase of the Option Shares in accordance with the Conditional
Purchase/Option Agreement, and from time to time thereafter, take all actions
necessary to cause the Applicable Percentage (as defined below) of directors
(and of members of each committee of the Board of Directors) (rounded in each
case to the next highest director or member) of Borden selected by the
Partnership to consist of persons designated or elected by the Partnership
(whether, at the election of Borden, by means of increasing the size of the
Borden Board of Directors or seeking the resignation of directors and causing
the Partnership's designees to be elected). The term "Applicable Percentage"
means the ratio of (i) the total voting power of all Borden Shares accepted for
exchange pursuant to the Exchange Offer and/or purchased in accordance with the
Conditional Purchase/Option Agreement to (ii) the total voting power of the
outstanding voting securities of Borden, rounded to the nearest whole number and
expressed as a percentage; provided that, if the Purchaser has acquired at least
28,138,000 Borden Shares, the Applicable Percentage will not be less than 33
1/3%.
DISSENTERS' RIGHTS
Holders of Borden Common Stock will not be entitled to dissenters' rights
under New Jersey law in connection with the Exchange Offer or the Merger, and
the Purchaser does not intend to accord dissenters' rights to holders of Borden
Common Stock.
MATERIAL TAX CONSEQUENCES
The receipt of shares of Holdings Common Stock pursuant to the Exchange
Offer or the Merger will result in the recognition of gain or loss for federal
income tax purposes by a Borden shareholder in an amount equal to the difference
between the fair market value of the consideration received (including cash
received in lieu of fractional shares) and such shareholder's adjusted tax basis
in the Borden Shares exchanged and may also have tax consequences under
applicable state, local, foreign or other tax laws. See "The Exchange
Offer--Material Tax Consequences."
FEES AND EXPENSES OF THE EXCHANGE OFFER
Morgan Stanley & Co. Incorporated ("Morgan Stanley") is acting as the
Purchaser's financial advisor in connection with the proposed acquisition of
Borden Common Stock and as Dealer Manager for the Exchange Offer. The Purchaser
has retained D.F. King & Co., Inc. to act as the Information Agent and First
Chicago Trust Company of New York to act as the Exchange Agent in connection
with the Exchange Offer.
Morgan Stanley, the Information Agent and the Exchange Agent each will
receive compensation for their respective services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities in connection therewith, including certain liabilities under
the federal securities laws. The aggregate amount of the fees and expenses of
the Dealer Manager, the
25
<PAGE>
Information Agent and the Exchange Agent is estimated to be up to approximately
$8.25 million. See "The Exchange Offer--Fees and Expenses of the Exchange Offer
and Source of Funds."
CERTAIN REGULATORY APPROVALS AND LEGAL MATTERS
Except as set forth in "The Exchange Offer--Certain Regulatory Approvals and
Legal Matters," neither the Purchaser nor the Partnership is aware of any
licenses or other regulatory permits that appear to be material to the business
of Borden and its subsidiaries, taken as a whole, that might be adversely
affected by the Purchaser's acquisition of Borden Shares (and the indirect
acquisition of the stock of Borden's subsidiaries) as contemplated herein, or of
any filings, approvals or other actions by or with any domestic (federal or
state), foreign or supranational governmental authority or administrative or
regulatory agency that would be required prior to the acquisition of Borden
Shares (or the indirect acquisition of the stock of Borden's subsidiaries) by
the Purchaser pursuant to the Exchange Offer as contemplated herein. Should any
such approval or other action be required, it is the Purchaser's present
intention to seek such approval or action. The Purchaser does not presently
intend, however, to delay the exchange of Borden Shares tendered pursuant to the
Exchange Offer pending the receipt of any such approval or the taking of any
such action (subject to the Purchaser's right to delay or decline to exchange
Borden Shares if any of the conditions described under "The Exchange
Offer--Certain Conditions of the Exchange Offer" shall have occurred). There can
be no assurance that any such approval or other action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the business of Borden, the Partnership or the Purchaser or that
certain parts of the businesses of Borden, the Partnership or the Purchaser
might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or other action or in
the event that such approval was not obtained or such other action was not
taken, any of which could cause the Purchaser to elect to terminate the Exchange
Offer without the exchange of the Borden Shares thereunder.
26
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
The Holdings Common Stock and the Borden Common Stock are listed and
principally traded on the NYSE (Symbols: RN and BN, respectively). The following
tables set forth the high and low sales prices per share of the Holdings Common
Stock as reported on the NYSE Composite Tape and the high and low sales prices
per share of the Borden Common Stock and cash dividends paid by Borden for each
period indicated. See "Borden, Inc.--Recent Developments." Holdings has not paid
dividends on the Holdings Common Stock. See "RJR Nabisco Holdings Corp.--Recent
Developments" and "Description of Holdings Capital Stock." The fiscal year for
each company ends on December 31 of each year. On September 9, 1994, the last
full trading day prior to the public announcement of the execution of the letter
of intent with respect to the Transactions, the closing sale price per share, as
reported on the NYSE Composite Tape, was $7 for the Holdings Common Stock and
$11 7/8 for the Borden Common Stock. Recent closing sale prices for shares of
Holdings Common Stock and Borden Common Stock are set forth on the cover page of
this Offering Circular/Prospectus.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE HOLDINGS COMMON
STOCK AND THE BORDEN COMMON STOCK.
HOLDINGS COMMON STOCK
<TABLE>
<CAPTION>
SALES PRICE
-------------------------------
FISCAL YEAR HIGH LOW
- --------------------------------------------------------------- ------------- ------------
<S> <C> <C>
1992
First Quarter................................................ $ 11 3/4 $ 8 3/4
Second Quarter............................................... 10 3/8 8 3/8
Third Quarter................................................ 9 7/8 8
Fourth Quarter............................................... 9 1/4 7 7/8
1993
First Quarter................................................ $ 9 1/4 $ 7 5/8
Second Quarter............................................... 8 1/8 5 1/8
Third Quarter................................................ 5 7/8 4 1/2
Fourth Quarter............................................... 7 3/8 4 3/8
1994
First Quarter................................................ $ 8 1/8 $ 5 5/8
Second Quarter............................................... 7 5 1/2
Third Quarter................................................ 7 1/8 5 5/8
Fourth Quarter (through November 21, 1994)................... 7 1/4 6 1/2
</TABLE>
BORDEN COMMON STOCK
<TABLE>
<CAPTION>
SALES PRICE
-------------------------------- CASH
FISCAL YEAR HIGH LOW DIVIDEND
- --------------------------------------------------- ------------- ------------- --------
<S> <C> <C> <C>
1992
First Quarter.................................... $ 34 7/8 $ 31 3/8 $ .285
Second Quarter................................... 34 3/4 29 1/2 .300
Third Quarter.................................... 31 1/8 26 1/4 .300
Fourth Quarter................................... 29 1/2 26 1/4 .300
1993
First Quarter.................................... $ 29 1/8 $ 24 1/4 $ .300
Second Quarter................................... 27 17 5/8 .300
Third Quarter.................................... 19 5/8 14 3/4 .150
Fourth Quarter................................... 19 5/8 14 3/8 .150
1994
First Quarter.................................... $ 18 3/8 $ 13 1/8 $ .075
Second Quarter................................... 13 7/8 11 7/8 .075
Third Quarter.................................... 14 1/4 11 .075
Fourth Quarter (through November 21, 1994)....... 13 7/8 13 3/8 .010
</TABLE>
27
<PAGE>
COMPARISON OF CERTAIN HISTORICAL PER SHARE DATA
The following table shows comparative historical per share data for Holdings
and Borden. The information presented below should be read in conjunction with
the historical consolidated financial statements and notes thereto, which appear
elsewhere or are incorporated by reference in this Offering Circular/Prospectus.
See "RJR Nabisco Holdings Corp. Selected Historical Consolidated Financial Data"
and "Borden, Inc. Selected Historical Consolidated Financial Data."
<TABLE>
<CAPTION>
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1994 DECEMBER 31, 1993
------------------ -----------------
<S> <C> <C>
HOLDINGS
Book value per common share after conversion Series A
Preferred Stock and Series C Preferred Stock
(at end of period)...................................... $ 5.94 $5.77
Cash dividends declared per common share.................. -- --
Income (loss) from continuing operations
per common and common equivalent share.................. .33 (.05)
BORDEN
Book value per common share
(at end of period)...................................... $ .99 $1.74
Cash dividends paid per
common share............................................ .225 .90
(Loss) income from continuing
operations.............................................. .80 (.40)
</TABLE>
28
<PAGE>
RJR NABISCO HOLDINGS CORP.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below as of September 30,
1994 and for the nine months ended September 30, 1994 and 1993 were derived from
Holdings Consolidated Condensed Financial Statements incorporated herein by
reference. The summary consolidated financial data presented below as of
December 31, 1993 and 1992 and for each of the years in the three-year period
ended December 31, 1993 for Holdings were derived from the historical
consolidated financial statements of Holdings and notes thereto (the "Holdings
Consolidated Financial Statements"), incorporated herein by reference, which
have been audited by Deloitte & Touche LLP, independent auditors. In addition,
the summary consolidated financial data as of December 31, 1991, 1990 and 1989,
for the year ended December 31, 1990 and for the period from February 9, 1989
through December 31, 1989 for Holdings and for the period from January 1, 1989
through February 8, 1989 for RJRN were derived from the consolidated financial
statements of Holdings and RJRN as of December 31, 1991, 1990 and 1989, for the
year ended December 31, 1990 and for each of the periods within the one-year
period ended December 31, 1989, not presented or incorporated herein by
reference, which have been audited by Deloitte & Touche LLP, independent
auditors. The data should be read in conjunction with the Holdings Consolidated
Financial Statements and the historical consolidated condensed financial
statements of Holdings and notes thereto (the "Holdings Consolidated Condensed
Financial Statements") incorporated herein by reference.
<TABLE><CAPTION>
HOLDINGS RJRN
------------------------------------------------------------------------ ----------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
FOR THE YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLIONS EXCEPT PER ----------------- -----------------------------------------------------------------
SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------------------------
2/9 TO 12/31 1/1 TO 2/8
------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales......................... $11,322 $11,053 $15,104 $15,734 $14,989 $13,879 $ 12,114 $ 650
------- ------- ------- ------- ------- ------- ------ -----
Cost of products sold............. 5,079 4,709 6,640 6,326 6,088 5,652 5,241 332
Selling, advertising,
administrative and
general expenses................ 3,789 4,182 5,731 5,788 5,358 4,801 4,276 295
Amortization of trademarks and
goodwill........................... 469 466 625 616 609 608 557 10
Restructuring expense............. -- -- 730 106 -- -- -- --
------- ------- ------- ------- ------- ------- ------ -----
Operating income(1)............. 1,985 1,696 1,378 2,898 2,934 2,818 2,040 13
Interest and debt expense......... (828) (910) (1,209) (1,449) (2,217) (3,176) (3,340) (44)
Change in control costs........... -- -- -- -- -- -- -- (247)
Other income (expense), net....... (81) (4) (58) 7 (69) (44) 169 15
------- ------- ------- ------- ------- ------- ------ -----
Income (loss) from continuing
operations before income
taxes.............................. 1,076 782 111 1,456 648 (402) (1,131) (263)
Provision (benefit) for income
taxes.............................. 474 356 114 680 280 60 (156) (66)
------- ------- ------- ------- ------- ------- ------ -----
Income (loss) from continuing
operations......................... 602 426 (3) 776 368 (462) (975) (197)
Income (loss) from operations of
discontinued businesses, net of
income taxes(2).................... -- -- -- -- -- -- (1) 24
Extraordinary item--(loss) gain on
early extinguishments of debt,
net of income
taxes........................... (145) (110) (142) (477) -- 33 -- --
------- ------- ------- ------- ------- ------- ------ -----
Net income (loss)................. 457 316 (145) 299 368 (429) (976) (173)
Preferred stock dividends......... 98 33 68 31 173 50 -- 4
------- ------- ------- ------- ------- ------- ------ -----
Net income (loss) applicable to
common stock....................... $ 359 $ 283 $ (213) $ 268 $ 195 $ (479) $ (976) $ (177)
------- ------- ------- ------- ------- ------- ------ -----
------- ------- ------- ------- ------- ------- ------ -----
PER SHARE DATA
Income (loss) from continuing
operations
per common and common equivalent
share.............................. $ .33 $ .29 $ (.05) $ .55 $ .22 $ (1.19) $ (3.21) $ (.89)
Dividends per share of Series A
Preferred Stock(3).............. 2.51 2.51 3.34 3.34 .49 -- -- --
Dividends per share of Series C
Preferred Stock(3).............. 2.44 -- -- -- -- -- -- --
BALANCE SHEET DATA
(AT END OF PERIODS)
Working capital................... $ 358 -- $ 202 $ 730 $ 165 $(1,089) $ 106 --
Total assets...................... 31,851 -- 31,295 32,041 32,131 32,915 36,412 --
Total debt........................ 11,205 -- 12,448 14,218 14,531 18,918 25,159 --
Redeemable preferred stock(4)..... -- -- -- -- -- 1,795 -- --
Stockholders' equity(5)........... 10,957 -- 9,070 8,376 8,419 2,494 1,237 --
Book value per common share after
conversion of Series A Preferred
Stock and Series C Preferred
Stock.............................. 5.94 -- 5.77 -- -- -- -- --
</TABLE>
(Footnotes on following page)
29
<PAGE>
(Footnotes for preceding page)
- ------------
(1) The 1992 amount includes a gain of $98 million on the sale of the
ready-to-eat cold cereal business.
(2) The 1989 amount for Holdings includes $237 million of interest expense
allocated to discontinued operations.
(3) On November 8, 1991, Holdings issued 52,500,000 shares of Series A Preferred
Stock and sold 210,000,000 Series A Depositary Shares. On May 6, 1994,
Holdings issued 26,675,000 shares of Series C Preferred Stock and sold
266,750,000 Series C Depositary Shares. Because Series A Preferred Stock and
Series C Preferred Stock mandatorily convert into Holdings Common Stock,
dividends on such shares are reported similar to common equity dividends.
(4) On December 16, 1991, an amendment to the Amended and Restated Certificate
of Incorporation of Holdings was filed which deleted the provisions
providing for the mandatory redemption of the redeemable preferred stock of
Holdings on November 1, 2015. Accordingly, such securities were presented as
a component of Holdings' stockholders' equity as of December 31, 1992 and
1991. Such securities were redeemed on December 6, 1993.
(5) Holdings' stockholders' equity at September 30, 1994 and December 31 of each
year from 1993 to 1989 includes non-cash expenses related to accumulated
trademark and goodwill amortization of $3.484 billion, $3.015 billion,
$2.390 billion, $1.774 billion, $1.165 billion and $557 million,
respectively.
See Notes to Holdings Consolidated Financial Statements and Holdings
Consolidated Condensed Financial Statements incorporated herein by reference.
30
<PAGE>
RJR NABISCO HOLDINGS CORP.
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
The following tables present summary pro forma consolidated financial data
of Holdings derived from the pro forma consolidated condensed financial
statements of Holdings and notes thereto (the "Holdings Pro Forma Financial
Statements") set forth herein. The data should be read in conjunction with the
Holdings Consolidated Financial Statements, the Holdings Consolidated Condensed
Financial Statements and other financial information set forth or incorporated
by reference herein. NABISCO HAS FILED A REGISTRATION STATEMENT WITH THE
COMMISSION WITH RESPECT TO A PROPOSED INITIAL PUBLIC OFFERING OF 45,000,000
SHARES OF ITS CLASS A COMMON STOCK, BUT SUCH REGISTRATION STATEMENT HAS NOT BEEN
DECLARED EFFECTIVE BY THE COMMISSION. NO ASSURANCE CAN BE GIVEN THAT SUCH
OFFERING WILL BE CONSUMMATED.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
1994 FOR THE YEAR ENDED
------------------- DECEMBER 31,
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1993
------------------
<S> <C> <C>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA(1)
Net sales................................................ $11,322 $ 15,104
Cost of products sold.................................... 5,079 6,640
Selling, advertising, administrative and general
expenses................................................. 3,789 5,731
Amortization of trademarks and goodwill.................. 469 625
Restructuring expense.................................... -- 730
------- -------
Operating income....................................... 1,985 1,378
Interest and debt expense................................ (716) (1,048)
Other income (expense), net.............................. (81) (58)
------- -------
Income before income taxes............................. 1,188 272
Provision for income taxes............................... 513 170
------- -------
Income before minority interest in income of Nabisco... 675 102
Minority interest in income of Nabisco................... (32) (29)
------- -------
Net income(2).......................................... 643 73
Less preferred stock dividends........................... 98 68
------- -------
Net income applicable to Common Stock.................. $ 545 $ 5
------- -------
------- -------
PER SHARE DATA
Net income per common and common equivalent(2)........... $ .36 $ .00
Dividends per share of Common Stock...................... .225 .30
Dividends per share of Series A Preferred Stock.......... 2.505 3.34
Dividends per share of Series C Preferred Stock.......... 2.438 --
<CAPTION>
SEPTEMBER 30, 1994
------------------
<S> <C> <C>
PRO FORMA CONSOLIDATED BALANCE SHEET DATA(3)
Working capital................................................................ $ 108
Total assets................................................................... 31,439
Total debt..................................................................... 10,018
Stockholders' equity........................................................... 11,227
Book value per common share after conversion of Series A Preferred Stock and
Series C Preferred Stock....................................................... 6.06
</TABLE>
- ------------
(1) Gives effect to the following transactions and events as if they occurred as
of January 1, 1993: (i) borrowings of $1.3 billion under the Nabisco Credit
Agreement (as hereafter defined) and the application of funds provided
through such borrowings to repay a portion of the borrowings under the 1991
Credit Agreement; (ii) the sale and issuance of 45,000,000 shares of Nabisco
Class A Common Stock in the Nabisco Common Stock Offerings (as hereafter
defined), the resulting reduction in Holdings' proportionate interest in
Nabisco and the application of the estimated net proceeds of approximately
$1,047 million (assuming an initial public offering price of $24.50 per
share) therefrom to repay a portion of the borrowings under the Nabisco
Credit Agreement; (iii) the assumed payment of quarterly dividends on
Holdings' Common Stock of $.075 per share and the increased level of net
indebtedness assumed to be outstanding had such dividend payments been made;
(iv) the redemption of $1.5 billion of the 10 1/2% Senior Notes dues 1998,
approximately $374 million of the 8 3/8% Debentures due 2017, $100 million
of the 13 1/2% Subordinated Debentures due 2001 and approximately $25
million of the 7 3/8% Debentures due 2001 through borrowings under the 1991
Credit Agreement and proceeds from Holdings' Series C Preferred Stock
offering completed on May 6, 1994; and (v) the tax effect of the foregoing.
(2) Excludes extraordinary items related to the loss on early extinguishments of
debt, net of income taxes, for the nine months ended September 30, 1994 and
the year ended December 31, 1993 of $145 million and $142 million,
respectively.
(3) Gives effect to the pro forma transactions and events described in clauses
(i), (ii), and (iv) of Note (1) above as if they occurred on September 30,
1994.
31
<PAGE>
BORDEN, INC.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below for the nine months
ended September 30, 1994 and 1993 were derived from unaudited quarterly
consolidated financial statements contained in Borden's Quarterly Report on Form
10-Q at and for the nine months ended September 30, 1994 and incorporated herein
by reference. The summary consolidated financial data presented below for each
of the years in the three-year period ended December 31, 1993 for Borden were
derived from the consolidated financial statements contained in Borden's Annual
Report on Form 10-K for the year ended December 31, 1993 and incorporated by
reference herein, which have been audited by Price Waterhouse LLP, independent
accountants. The unaudited quarterly consolidated financial statements include
all adjustments which are, in the opinion of Borden management, necessary for a
fair statement of the interim results. Results for interim periods are not
necessarily indicative of results to be expected for the full year. The data
below should be read in conjunction with the audited consolidated financial
statements and unaudited quarterly consolidated condensed financial statements
of Borden, and the related notes thereto, incorporated by reference herein.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Net sales.................................. $ 4,082 $ 4,037 $ 5,506 $ 5,872 $ 5,924 $ 6,273 $ 6,391
COST AND EXPENSES
Cost of goods sold......................... 3,075 2,967 4,078 4,302 4,269 4,644 4,859
Marketing, general and administrative
expenses.................................... 859 803 1,224 1,163 1,024 1,020 902
Restructuring charges(1)................... (40) -- 115 298 67 -- 463
Interest expense........................... 92 93 125 116 167 156 129
Equity in income of affiliates............. (9) (10) (16) (19) (24) (23) (17)
Minority interest.......................... 29 30 41 40 3 3 1
Other (income) and expense, net............ 104 29 23 (4) (13) 12 11
Income taxes............................... 27 42 (27) 14 151 169 76
-------- -------- -------- -------- -------- -------- --------
4,137 3,954 5,563 5,910 5,644 5,981 6,424
-------- -------- -------- -------- -------- -------- --------
EARNINGS
(Loss) income from continuing operations... (55) 83 (57) (38) 280 292 (33)
Discontinued operations:(1)(2)
(Loss) income from operations............ -- (46) (66) (86) 15 28 16
Loss on disposal......................... (59) -- (490) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
(Loss) income before extraordinary item and
cumulative effect of accounting
changes..................................... (114) 36 (613) (124) 295 320 (17)
Extraordinary loss on early retirement of
debt........................................ -- -- -- (11) -- -- --
Cumulative effect of change in accounting
for:
Postemployment benefits.................. -- (18) (18) -- -- -- --
Postretirement benefits other than
pensions.................................... -- -- -- (189) -- -- --
Income taxes............................. -- -- -- (40) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net (loss) income.......................... $ (114) $ 18 $ (631) $ (364) $ 295 $ 320 $ (17)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
SHARE DATA
(Loss) income from continuing operations... $ (.39) $ .59 $ (.40) $ (.27) $ 1.90 $ 1.97 $ (0.22)
Discontinued operations:
(Loss) income from operations............ -- (.33) (.47) (.60) .10 0.19 0.11
Loss on disposal......................... (.41) -- (3.47) -- -- -- --
-------- -------- -------- -------- --------
(Loss) income before extraordinary item and
cumulative effect of accounting
changes..................................... (.80) .26 (4.34) (.87) 2.00 2.16 (0.11)
Extraordinary loss on early retirement of
debt........................................ -- -- -- (.07) -- -- --
Cumulative effect of change in accounting
for:
Postemployment benefits.................. -- (.13) (.13) -- -- -- --
Postretirement benefits other than
pensions.................................... -- -- -- (1.32) -- -- --
Income taxes............................. -- -- -- (.28) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net (loss) income per common share......... $ (.80) $ .13 $ (4.47) $ (2.54) $ 2.00 $ 2.16 $ (0.11)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Cash dividends paid per common share....... $ .23 $ .75 $ .90 $ 1.185 $ 1.12 $ 1.035 $ 0.90
Average number of common shares outstanding
during the period........................ 141.5 140.9 141.0 143.4 147.6 147.9 148.2
</TABLE>
(Footnotes on following page)
32
<PAGE>
<TABLE>
<CAPTION>
AT
SEPTEMBER 30, AT DECEMBER 31,
---------------- ----------------------------------------------
1994 1993 1992 1991 1990 1989
---------------- ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Current assets....................................... $1,370 $1,290 $1,928 $1,921 $2,026 $2,011
Investments and other assets......................... 561 443 352 319 237 160
Property and equipment............................... 1,321 1,337 1,788 1,904 1,707 1,441
Intangibles.......................................... 762 802 1,178 1,317 1,314 1,213
Total assets......................................... 4,014 3,872 5,246 5,461 5,284 4,825
Current liabilities.................................. 1,418 1,372 1,808 1,414 1,847 1,466
Long-term debt....................................... 1,416 1,241 1,330 1,346 1,340 1,441
Other liabilities (including long-term debt)......... 2,457 2,254 2,312 2,072 1,595 1,670
Shareholders' equity................................. 140 246 1,126 1,975 1,842 1,689
Book value per common share.......................... .99 1.74 8.01 13.39 12.50 11.41
</TABLE>
- ------------
(1) 1993 includes a pretax charge of $752.3 million for business divestitures
and restructuring. 1992, 1991 and 1989 include pretax restructuring charges
of $377.2 million, $71.6 million and $570.7 million, respectively. The nine
months ended September 30, 1994 includes a pretax credit of $50.1 million
for reversal of prior restructuring charges.
(2) Financial data for the years prior to 1993 were restated in 1993 to reflect
discontinued operations.
See Notes to Borden's Consolidated Financial Statements and Borden's Unaudited
Quarterly
Consolidated Financial Statements incorporated herein by reference.
33
<PAGE>
THE EXCHANGE OFFER
PURCHASER BACKGROUND
In early 1993, representatives of KKR met with Anthony S. D'Amato, then
chairman and chief executive officer of Borden, Lawrence O. Doza, then vice
president and chief financial officer of Borden, and a representative of one of
Borden's financial advisors to discuss KKR's interest in exploring a possible
transaction involving KKR and Borden. Following that meeting, Mr. D'Amato
advised KKR's representatives that Borden preferred not to pursue a transaction
with KKR at that time. Thereafter, although no formal discussions were held,
KKR's interest in a possible transaction with Borden continued, especially when
Borden's analysis of possible restructuring alternatives became known to KKR in
the late summer of 1993. Borden continued to maintain that it was not interested
in a transaction with any third parties, including KKR.
In December 1993, Lazard Freres & Co., financial advisor to the Borden Board
of Directors, initiated contact with KKR regarding a possible transaction with
KKR. KKR, in turn, brought the possibility of a transaction with Borden to the
attention of senior executives of Holdings. Holdings thereafter had several
investigatory meetings with Borden's advisors in New York City, but no formal
due diligence was conducted at Borden's headquarters in Columbus, Ohio.
Following such meetings and further analysis by Holdings of a possible
transaction with Borden, Holdings decided that it would not pursue a transaction
with Borden. Among other things, Holdings believed that, in light of its own
indebtedness, Borden's debt levels precluded the acquisition of all of Borden.
Additionally, Holdings determined that its strategic interest was in
substantially less than all of Borden's businesses.
Investigatory discussions between representatives of KKR and Borden resumed
in February 1994 and occurred sporadically thereafter. In April 1994, KKR
indicated to Borden's representatives that it might be willing to assist Borden
in connection with Borden's restructuring efforts, although Borden did not
express interest in such assistance at that time. In July and August, KKR again
initiated contact with Borden's advisors to reiterate KKR's continuing interest
in exploring an investment in Borden. In early August 1994, KKR discussed with
Borden's advisors its possible interest in an investment in Borden using
securities owned by partnerships controlled by KKR. Lazard Freres & Co.
indicated to KKR Borden's willingness to pursue discussions and, shortly
thereafter, KKR and Borden signed a confidentiality agreement and KKR began to
receive certain due diligence information concerning Borden.
Following its initial review of this information, KKR indicated an interest
in pursuing more complete due diligence. KKR was advised that, if it planned to
make a proposal to Borden regarding a transaction, it should be prepared to do
so by September 7, 1994, when Borden's Board of Directors was scheduled to meet
to consider its management's proposed new restructuring plan, which Borden was
to consider as an alternative to a transaction with KKR. This plan would have
involved the sale of Borden's dairy business, sale of profitable non-food
businesses and a cut in Borden's quarterly dividend to $.01 per share. On August
25 and 26, 1994, representatives of KKR and representatives of Borden held due
diligence meetings in Columbus, Ohio. Charles M. Harper, Chairman of the Board
and Chief Executive Officer of Holdings, and H. John Greeniaus, Chairman of the
Board and Chief Executive Officer of Nabisco Foods Group, attended the meetings
on August 25, 1994 at the request of KKR.
On Friday, September 2, 1994, KKR made an oral proposal to acquire a 75%
interest in Borden for consideration valued at $13.50 per Borden Share, based on
an exchange of Holdings Common Stock for Borden Common Stock. Negotiations
continued over the next several days, particularly with regard to KKR's
willingness to pursue an acquisition of the entire company. KKR's revised
proposal for all of Borden was presented to Borden's Board of Directors on
September 7, 1994, following meetings between representatives of KKR and the
Chairman of the Board and the Chief Executive Officer of Borden. Discussions and
negotiations continued between representatives of KKR and Borden and, on
September 11, 1994, the Partnership and Borden signed a letter of intent with
respect to the Transactions based on a value of $14.25 per Borden Share.
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Following the signing of the letter of intent on September 11, 1994, KKR and
Borden, and their representatives, negotiated the Merger Agreement and
Conditional Purchase/Option Agreement, which were executed on September 23,
1994, following approval by Borden's Board of Directors.
As of November 15, 1994, the Purchaser, the Partnership and Borden entered
into an amendment to the Merger Agreement (the "Amendment") changing the
definition of the term "Valuation Period."
PURPOSE OF THE EXCHANGE OFFER; THE MERGER
The Exchange Offer is being made by the Purchaser for the purpose of
acquiring 100% of the outstanding Borden Shares. If, following the Exchange
Offer and exercise of the Option, the Purchaser and its affiliates own more than
90% of the outstanding Borden Shares, the Purchaser will take all necessary or
appropriate action, without further action by the Board of Directors or
shareholders of Borden, to consummate the Merger of the Purchaser with Borden as
soon as practicable. If, following the Exchange Offer and exercise of the
Option, approval of Borden's shareholders is required by applicable law in order
to consummate the Merger, provided that the Minimum Condition is satisfied
without being reduced or waived, Borden will submit the Merger to Borden's
shareholders for approval. If the Merger is submitted to Borden's shareholders
for approval, the Merger will require the approval of the holders of not less
than 66 2/3% of the outstanding Borden Shares, including the Borden Shares owned
by the Purchaser and its affiliates. In the event the Merger is consummated,
holders of Borden Shares will receive the same number of shares of Holdings
Common Stock for each Borden Share as are exchanged for each Borden Share in the
Exchange Offer.
The Registration Statement is being filed by Holdings pursuant to the terms
of the Registration Rights Agreement.
This Offering Circular/Prospectus also relates to shares of Holdings Common
Stock that may be issued in connection with the consummation of the Merger,
unless the Merger is submitted to Borden's shareholders for approval, in which
case the Purchaser will solicit proxies from Borden shareholders pursuant to
separate proxy materials in compliance with Section 14(a) of the Exchange Act.
The Exchange Offer is subject, among other things, to the Minimum Condition.
Except as described below, the Minimum Condition, and the other conditions to
the Exchange Offer, may be waived by the Purchaser in whole or in part, in its
sole discretion. However, the Minimum Condition may not be waived if the Option
has been exercised in whole or in part prior to the Expiration Date. In
addition, if the Purchaser acquires more than 41% (but not more than 50%) of the
outstanding Borden Shares in the Exchange Offer, the Purchaser must exercise the
Option to the extent necessary so that, following such exercise, the Purchaser
will own more than 50% of the outstanding Borden Shares. In the event the Merger
is not consummated, the Purchaser will control the number of Borden Shares
acquired by the Purchaser pursuant to the Exchange Offer and upon exercise of
the Option. Under the Merger Agreement and the Conditional Purchase/Option
Agreement, following the acceptance for exchange of the Borden Shares to be
exchanged pursuant to the Exchange Offer and/or the purchase of the Option
Shares in accordance with the Conditional Purchase/Option Agreement, and from
time to time thereafter, subject to applicable law, Borden has agreed to take
all actions necessary to cause the Applicable Percentage of directors (and of
members of each committee of the Board of Directors) (rounded in each case to
the next highest director or member) of Borden selected by the Partnership to
consist of persons designated or elected by the Partnership (whether, at the
election of Borden, by means of increasing the size of the board of directors or
seeking the resignation of directors and causing the Partnership's designees to
be elected); provided that, if the Purchaser has acquired at least 28,138,000
Borden Shares, the Applicable Percentage will not be less than 33 1/3%. As a
result of its ownership of such Borden Shares and right to designate nominees
for election to Borden's Board of Directors, the Purchaser will be able
significantly to influence decisions of the shareholders and such
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Board. See "Significant Considerations," "The Exchange Offer--Certain Conditions
of the Exchange Offer" and "Description of Merger Agreement and Conditional
Purchase/Option Agreement."
THIS OFFERING CIRCULAR/PROSPECTUS DOES NOT CONSTITUTE A SOLICITATION OF A
PROXY, CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO ANY SPECIAL MEETING OR
OTHER MEETING OF BORDEN SHAREHOLDERS WHO DO NOT TENDER THEIR BORDEN SHARES OR
ANY ACTION IN LIEU THEREOF. ANY SUCH SOLICITATION WILL BE MADE ONLY PURSUANT TO
SEPARATE PROXY MATERIALS IN COMPLIANCE WITH SECTION 14(A) OF THE EXCHANGE ACT.
See "Description of Merger Agreement and Conditional Purchase/Option
Agreement" for a description of certain fees that are or may be payable to KKR
in connection with the Transactions.
BORDEN BACKGROUND AND REASONS FOR THE PROPOSED TRANSACTIONS
Borden Background
The decision by the Borden board of directors to enter into the Merger
Agreement reflected, in part, an assessment of the risks and potential benefits
of ongoing restructuring efforts against the risks and benefits of a transaction
that would offer all shareholders the opportunity to receive a premium for their
Borden Shares payable in Holdings Common Stock. A significant factor in the
Borden board's deliberation was the history of Borden's prior restructuring
efforts. Set forth below is a summary of the events that led to the Borden
board's decision.
1992 Restructuring Plan. In October 1992, Borden announced its third
restructuring program since 1989 (the "1992 Restructuring Plan"). The 1992
Restructuring Plan was aimed at integrating the numerous acquisitions Borden had
made, reducing costs and reversing a downward trend in earnings. In conjunction
with the 1992 Restructuring Plan, Borden established a restructuring reserve of
$642 million (pre-tax) charged against third quarter 1992 results, which reduced
Borden's 1992 year end shareholders' equity to $1.13 billion, down from $1.69
billion in 1989, before the successive restructurings began.
The 1992 Restructuring Plan did not achieve the anticipated results.
Borden's first quarter 1993 net income was $27.2 million and earnings per share
was $.20, a 43% decline in net income from the same period in 1992 (excluding
charges in 1993 and 1992 for accounting changes). Sales in the first quarter of
1993 fell 7.2% to $1.30 billion, from $1.40 billion in the same period of 1992.
In the second quarter of 1993, earnings per share declined 76.4% to $.13 from
$.55 in the second quarter of 1992. Net income of $18.5 million was down 76.7%
from $79.3 million in the second quarter of 1992. Sales were $1.35 billion, down
6% from $1.44 billion in the second quarter of 1992.
In early 1993, at the initiation of KKR, representatives of KKR met with
Anthony S. D'Amato, then Chairman and Chief Executive Officer of Borden,
Lawrence O. Doza, then Vice President and Chief Financial Officer of Borden, and
a representative of Borden's financial advisor, First Boston to discuss a
possible transaction involving KKR and Borden. After discussion, Mr. D'Amato
advised KKR's representatives that Borden did not wish to pursue a transaction
with KKR at that time.
Development of 1993 Restructuring Plan. In 1993, Borden began to develop
alternatives to the 1992 Restructuring Plan. In addition, in June 1993, Borden
hired Ervin R. Shames as President and Chief Operating Officer. Mr. Shames
joined Borden with 22 years of experience in the food business, including
positions as President and Chief Executive Officer of General Foods USA and
President of Kraft USA. On July 28, 1993, Borden announced that it was reviewing
its portfolio of businesses to identify those it would retain and those it would
not, and was reducing the quarterly cash dividend on the Borden Shares to $.15
per share from $.30 per share.
During the fall of 1993, Borden accelerated the review of its portfolio of
businesses and its strategic alternatives. Booz Allen & Hamilton Inc. ("Booz
Allen"), a business consulting firm, was asked to assess the existing businesses
and their long-term potential and to recommend which businesses to retain and
which to divest. In September 1993, First Boston was retained by Borden to
provide financial advice
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with respect to this program. In October 1993, the Borden board engaged Lazard
Freres to act as financial advisor to the Borden board with regard to the
consideration of strategic alternatives. The Borden board also engaged Wachtell,
Lipton, Rosen & Katz, which had previously advised Borden in special situations,
as special counsel.
Borden's third quarter 1993 results showed a net loss of $9.4 million, or
$.07 per share, versus a net loss in the third quarter of 1992 of $1.8 million,
or $.01 per share before the charge for the 1992 Restructuring Plan. Sales in
the third quarter of 1993 fell to $1.39 billion from $1.53 billion in the
comparable period of 1992. Nearly all of the principal businesses of Borden
posted substantial declines versus prior year performance.
In November 1993, Borden management with the assistance of Booz Allen
presented to the Borden board a plan (the "1993 Restructuring Plan") for
restructuring the portfolio of Borden's businesses. The 1993 Restructuring Plan
provided for major divestitures, including the sale of Borden's North American
snacks business, its seafood business, its jams and jellies business and certain
other businesses and products representing, in the aggregate, annual revenues of
approximately $1.25 billion, or nearly 20% of projected 1993 sales of $6.75
billion. The 1993 Restructuring Plan also aimed at improving Borden's domestic
dairy business, largely through volume recovery and cost reduction, and
contemplated retention of nearly all of the non-food businesses. The 1993
Restructuring Plan envisioned cost reductions phased in over two years, reaching
an annualized savings rate of $100 million by the end of 1995. These savings
were to be achieved through a combination of divestitures and productivity
gains.
Under the 1993 Restructuring Plan, which was reviewed by Booz Allen,
management projected 1994 earnings per share at the upper end of the $.75 to
$1.00 per share range of estimates by securities analysts, and set performance
targets for annual earnings per share growth in 1995 and 1996 of at least double
the food industry average, sales growth of 6% annually and an increase in return
on investment from a range of 5% to 6% in 1994 to 12% in 1996. Further, the 1993
Restructuring Plan contemplated a further reduction in Borden's quarterly cash
dividend from $.15 per share to $.075 per share, and a $752.3 million pre-tax
restructuring charge against 1993 fourth quarter earnings of which approximately
$637.4 million was for business divestitures and $114.9 million was for
organizational restructuring.
Evaluation of 1993 Restructuring Plan and Possible Sale of Borden. In
reviewing the proposed 1993 Restructuring Plan, the Borden board considered that
continued poor performance would reduce financial flexibility (which, in turn,
could limit Borden's ability to raise capital at attractive rates and to pursue
strategic growth opportunities); that the 1993 Restructuring Plan was premised
on significant turnarounds within a year or slightly longer in Borden's dairy
and pasta business and improvements in almost all of Borden's other divisions;
that many of the asset sales included in the 1993 Restructuring Plan would be
difficult and time-consuming to consummate; that Borden's quarterly dividend
payout might not be sustainable even at the reduced rate contemplated; and that
a number of key management positions were held by new managers, making it
difficult to assess the likelihood of success of the 1993 Restructuring Plan.
The Borden board also took into consideration the fact that Borden was highly
leveraged and exposed to liquidity risk by virtue of its relatively high ratio
of short-term debt (particularly commercial paper) to total debt in the event of
rating agency downgrades, and that the 1993 Restructuring Plan would leave
Borden with debt coverages less favorable than the median for investment grade
companies and without tangible net worth.
After weighing these risks and considering that previous restructuring
efforts had not achieved targeted results and after receiving two unsolicited
inquiries regarding the sale of Borden, one from KKR and one from another party,
the Borden board determined to instruct Lazard Freres to make contacts with a
selected group of companies considered to be potential buyers of Borden. The
potential buyers contacted by Lazard Freres consisted primarily of industrial
buyers, rather than financial buyers, because Lazard Freres believed that a
leveraged buyout did not appear to be feasible given Borden's operating
performance and high debt levels. Lazard Freres, however, did contact KKR
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because of its prior indication of interest in Borden and its ownership interest
in Holdings. KKR, in turn, brought the possibility of a transaction with Borden
to the attention of Holdings. The other party that had previously contacted
Borden was also contacted by Lazard Freres.
In response to Lazard Freres' solicitations, only Holdings and one other
company expressed interest in obtaining information about Borden. Both Holdings
and the other potential buyer (the "Potential Buyer") entered into
confidentiality agreements with Borden and commenced due diligence. Holdings,
however, after preliminary meetings, declined to pursue its interest. Holdings
indicated that, due to the then-current trading price of the Borden Shares,
Holdings' own indebtedness and the debt levels of Borden, Holdings was unwilling
to proceed with an acquisition of Borden. In addition, Holdings said that it had
determined that its strategic interest was in substantially less than all of
Borden's businesses.
At a Borden board meeting held on December 9, 1993, Lazard Freres indicated
that the Potential Buyer appeared to be interested in acquiring all of Borden.
At the board meeting, management recommended that Borden proceed with the 1993
Restructuring Plan it had previously recommended. The Borden board, however,
determined that, given the risks inherent in the 1993 Restructuring Plan, talks
with the Potential Buyer should continue, and the decision as to whether to
implement the 1993 Restructuring Plan was postponed. That same day, the Borden
board accepted the resignation of Anthony S. D'Amato, as Chairman and Chief
Executive Officer of Borden, and appointed Frank J. Tasco, a director of Borden
and retired Chairman and Chief Executive Officer of Marsh & McLennan Companies,
Inc., as Chairman of the Board of Borden and Ervin R. Shames, as Chief Executive
Officer of Borden.
On December 21, 1993 the Potential Buyer indicated that it would not be
interested in pursuing an acquisition of the entire company but that it would be
willing to explore the acquisition of just Borden's Packaging and Industrial
Products Division ("PIP") and a concurrent investment in the remaining food
company. However, the indicated price levels from the Potential Buyer's proposal
would not have generated proceeds sufficient to reduce Borden's debt to a level
appropriate to the remaining food business. Thus, the Borden board rejected this
suggestion in part because it was advised that such a divestiture would leave
Borden undercapitalized. The Borden board then instructed Borden's management to
prepare the 1993 Restructuring Plan for final approval.
1993 Restructuring Plan Adopted; Goals Set. On January 4, 1994, the Borden
board formally approved the 1993 Restructuring Plan. Over the previous months,
the Borden board had received from management and Booz Allen an extensive review
of Borden's 50 distinct domestic and international businesses. Borden announced
that, with the help of its financial advisors, the Borden board had evaluated a
full range of alternatives for Borden, including sale or merger, and that Borden
was not aware of any third party expressing interest in proposing such
transactions. The Borden board also reviewed the alternative of liquidation and
concluded that adverse tax consequences and the uncertainties involved in the
sale of Borden in parts rendered this alternative unattractive.
In announcing the 1993 Restructuring Plan, Borden stated that it had set
financial goals, including earnings per share for 1994 at the upper end of the
$.75 to $1.00 range of analysts' estimates, cash flow of $400 million to $450
million after capital expenditures and including divestiture proceeds,
substantially all of which was intended to be applied to debt repayment, and
cost reductions reaching an annualized rate of $70 million to $85 million by the
end of the year.
As a result of the write-off related to the implementation of the 1993
Restructuring Plan, Borden's shareholders' equity as of December 31, 1993 was
reduced to $245.9 million.
Progress Under the 1993 Restructuring Plan. Following the adoption of the
1993 Restructuring Plan, the Borden board, with the assistance of its financial
advisors and management, closely monitored its implementation and the associated
divestitures. In its 1993 Annual Report to Shareholders which was issued in late
March 1994, Borden acknowledged that the success of the 1993 Restructuring Plan
depended on multiple divestitures at anticipated prices, sharply reduced costs
throughout Borden, a
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reversal of the weak sales and income performance of Borden's pasta business and
a turnaround of Borden's domestic dairy operations, which, based on early 1994
results, would be a significant challenge.
Borden's first quarter 1994 earnings per share were $.04 and net income was
$5.8 million. In its announcement of first quarter results, Borden also stated
that its earnings projections for 1994 were then "in line" with the current
range of analyst projections of $.70 to $.95 per share, as opposed to the
January 1994 earnings per share target at the "upper end" of the $.75 to $1.00
range.
In June 1994, the Borden board and management became increasingly concerned
about Borden's progress in achieving the cost reductions and earnings
improvements targeted under the 1993 Restructuring Plan. The Borden board and
management were particularly concerned that the failure to achieve significant
progress by that time would make it difficult to reach the targets for 1994 and
subsequent years.
Further Restructuring Contemplated in Light of Six-Month Results. On July
26, 1994, management advised the Borden board that it would begin to explore
possible modifications to the 1993 Restructuring Plan which might involve the
sale or closure of all or part of the dairy operations and other businesses. The
board determined that the alternative of a sale of the company should also be
explored again. The board was advised that the only parties that had contacted
Borden since January 1994 were KKR and Japonica Partners ("Japonica").
On May 24, 1994, Japonica wrote to Mr. Tasco stating that Japonica was
interested in an equity investment in Borden as a "proactive white knight." In
response, the Borden board authorized Lazard Freres to contact Japonica to
investigate, on behalf of the Borden board, Japonica's interest in Borden and
its capacity to effectuate a transaction involving Borden.
On June 13, 1994, Mr. Tasco wrote to Japonica, advising them that Lazard
Freres was acting as Borden's financial advisor and was authorized to represent
Borden in discussions with third parties. Subsequently, a representative of
Japonica contacted Lazard Freres, but did not propose any transaction and did
not provide any evidence of Japonica's source of funds for any transaction,
despite Lazard Freres' repeated inquiries. (Japonica, in letters to Mr. Tasco,
disputed the foregoing characterization of its contacts with Lazard Freres
although it never stated that it had proposed a transaction or provided evidence
of its financial resources.)
Accordingly, on July 16, 1994, Mr. Tasco wrote to Japonica explaining that
in light of the serious challenges facing Borden, it was disinclined to pursue
discussions with a party who was unable or unwilling to make substantive
proposals or to provide any evidence of its financial capacity. At no point
during any of its contacts with Borden or its advisors did Japonica make any
substantive proposal or provide evidence of its ability to finance any
transaction with respect to Borden. The discussion herein of Borden's written
correspondence with Japonica is qualified by reference to the full texts of such
correspondence which are included as exhibits to the Schedule 14D-9, which is
incorporated herein by reference.
Pursuant to its decision to explore the alternative of a sale of Borden, the
Borden board, at its July 26, 1994 meeting, instructed Lazard Freres to respond
to KKR's prior contacts. Based on the advice of Lazard Freres and given the
publicity concerning Borden's efforts to find a buyer in late 1993 and the lack
of inquiries, the Borden board determined that it was reasonable to conclude
that no other bidder was interested.
On July 27, 1994, Borden announced that for the second quarter of 1994, it
had net income of $11.1 million or $.08 per share compared with income from
continuing operations of $30.5 million, or $.22 per share, in the same period of
1993. Net sales rose 1.3% to $1.37 billion from $1.35 billion in the second
quarter of 1993. The six-month results included continuing losses in Borden's
dairy business that were considerable. Borden stated that it was moving more
slowly than it had hoped in achieving the goals of the 1993 Restructuring Plan.
Borden further stated that each of Borden's businesses must
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contribute to Borden's objectives by virtue of market position, growth
prospects, profit potential or some combination of those objectives. In light of
this, Borden further stated that it was reviewing progress to date and planned
to take any corrective measure that might become necessary. Borden announced
that, given its results in the first half of 1994, it was clear that its earlier
expectation of earnings for the year would not be realized, and did not give a
further earnings forecast.
The results for the first half of 1994 also caused the Borden board and
management to focus on the liquidity of Borden. In connection with the 1993
Restructuring Plan, Borden obtained an amendment to its only financial covenant
which was contained in the TMI credit agreement, a covenant related to the net
worth of Borden. The amendment required achievement of financial ratios that
would be met under the goals of the 1993 Restructuring Plan. The Borden board
and management were particularly concerned about the level of Borden's
short-term liabilities, including the commercial paper used to finance
operations. The Borden board was advised that, if earnings continued below the
amounts forecasted in the 1993 Restructuring Plan and Borden undertook a further
restructuring, its debt ratings could be lowered and its ability to issue
commercial paper could be limited. In early July 1994, Borden sought to increase
its $520 million credit facilities on terms which were substantially the same
terms as existed previously for a majority of the facilities. Due in part to the
five-year term of the proposed facility and the existence of other Borden credit
facilities with terms more favorable to the lenders, these efforts met
resistance in the marketplace. Later in July 1994, Borden determined to pursue a
larger bridge facility that would consolidate Borden's bank lines and backstop
its commercial paper. Accordingly, Borden obtained $1.4 billion, 2 1/2 year
financing facilities in August 1994 from a group of banks led by Citibank, N.A.
and Credit Suisse.
Proposed 1994 Restructuring Plan. At a special meeting of the Borden board
on August 16, 1994, management presented further analysis of the alternatives
available to Borden. First Boston provided a financial analysis for each such
alternative and management recommended a plan to further reconfigure Borden (the
"Proposed 1994 Restructuring Plan"). The Proposed 1994 Restructuring Plan
provided for the divestiture of the dairy business (excluding cheese), Borden's
largest business, which was depleting Borden's earnings and cash. Management
advised the Borden board that, in its view, Borden did not have the time or the
resources to turn the dairy business around. While the sale of the dairy
business would improve cash flow, it was expected to generate a substantial
writeoff without meaningful debt reduction. Management also recommended the
additional sale of two profitable businesses from the PIP division,
Wallcoverings and Packaging Resources, principally in order to generate cash to
reduce debt.
The Proposed 1994 Restructuring Plan also called for realigning Borden into
two operating divisions: Consumer Packaged Products and Worldwide Adhesives and
Resins, and significantly reducing costs in Borden's continuing operations by
substantial personnel reductions and other programs. As part of the Proposed
1994 Restructuring Plan, Borden management also recommended that the Borden
board reduce the quarterly cash dividend on the Borden Shares to $.01 per share.
The Borden board was advised that adoption of the Proposed 1994 Restructuring
Plan would require a significant charge of approximately $500 million
(after-tax) in the third quarter of 1994, resulting in substantial negative
shareholders' equity. In addition, the Borden board was advised that in the
third quarter of 1994, Borden would likely incur additional pre-tax charges of
approximately $95 million as a result of less than estimated proceeds from the
divestiture of discontinued operations pursuant to the 1993 Restructuring Plan
and could possibly incur certain other balance sheet adjustments of up to $100
million. Management had projected that Borden's 1994 earnings per share would be
$.50 without a restructuring, and earnings per share under the Proposed 1994
Restructuring Plan were projected to be $.47 for 1994, $.75 for 1995, $0.84 for
1996, $1.10 for 1997 and $1.21 for 1998. The Proposed 1994 Restructuring Plan
called for a reduction in Borden's debt level from $2.287 billion in 1994 to
$1.659 billion in 1996 and $1.294 billion in 1998. After presentation by
management and Borden's financial advisors, the Borden board authorized
management to finalize the details of the Proposed 1994 Restructuring Plan with
a view to its formal approval and announcement in early September 1994.
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Developing the KKR Proposal. On August 3, 1994, KKR signed a confidentiality
agreement (the "Confidentiality Agreement") and began to receive certain
nonpublic information concerning Borden, specifically Borden's then current
"base case" projections for 1994 showing earnings per share of $.50 and net
income from continuing operations of $71 million. The Confidentiality Agreement
contained certain provisions that would prohibit KKR from making an unsolicited
tender offer for Borden's stock. On the same day, KKR proposed exploring a
transaction, the consideration for which would be securities owned by
partnerships controlled by KKR. Following the Borden board meeting of August 16,
1994, KKR communicated to Lazard Freres that it would be interested in pursuing
a transaction with Borden in which it would pay a "meaningful" premium to
Borden's trading price using Holdings Common Stock as currency. At a special
meeting of the Borden board on August 18, 1994, management conveyed this to the
board. Management explained that KKR would require "due diligence" meetings with
the senior management of Borden before it would be in a position to formalize a
proposal. Management further indicated that KKR would be willing to make a
decision prior to the September 7, 1994 Borden board meeting at which the board
intended to take final action on the Proposed 1994 Restructuring Plan.
During the course of the Borden board's deliberations concerning continuing
discussions with KKR, Mr. Shames expressed his view that the Proposed 1994
Restructuring Plan was achievable and should be pursued by Borden. He said that
implementation of the Proposed 1994 Restructuring Plan would make Borden more
saleable if the board chose to sell Borden in the future. He said that he
believed that it was imperative to commence implementing the Proposed 1994
Restructuring Plan without additional delays. Cognizant that Borden's prior
restructuring plans had fallen short of their goals and that further
restructuring efforts posed significant risks, the Borden board determined that
it was in the best interests of Borden and its shareholders to continue
discussions with KKR prior to acting on the Proposed 1994 Restructuring Plan.
The Borden board, therefore, directed management, with the assistance of Lazard
Freres and First Boston, to proceed with KKR to determine whether KKR would make
a proposal that would provide a premium for all shareholders. At the same time,
Borden management was instructed to prepare to implement the Proposed 1994
Restructuring Plan on September 7, 1994, as had been contemplated, so that there
would be no delay in the event that an acceptable proposal from KKR did not
materialize.
On August 22, 1994, Lazard Freres met with KKR. KKR expressed interest in
meeting with management to conduct due diligence and indicated that it would be
ready to make a definitive proposal by September 7, 1994. On August 25 and 26,
1994, Lazard Freres, First Boston and members of Borden senior management met
with KKR in Columbus, Ohio to conduct due diligence. On September 2, 1994, KKR
proposed an offer to acquire 75% of Borden through an exchange offer for
approximately 100 million Borden Shares, at $13.50 per share, and a conditional
purchase/stock option agreement wherein it would have the right to acquire
28,138,000 Borden Shares for $11 per share, with the consideration in both cases
to be paid in Holdings Common Stock valued at market. Over the course of the
next three days, management of Borden, Lazard Freres and First Boston negotiated
with KKR and Morgan Stanley & Co., KKR's investment banker, particularly with
respect to KKR's willingness to pursue an offer to acquire the entire company.
On September 7, 1994, the Borden board met to consider both management's
Proposed 1994 Restructuring Plan and the KKR proposal that had resulted from the
negotiations upon the understanding that these were the two viable alternatives
available to Borden. During the meeting, management again reviewed for the
directors the principal elements of the Proposed 1994 Restructuring Plan.
Management then summarized the KKR proposal. Responding to Borden's request for
an offer that could be made for all of the Borden Shares, KKR proposed to
acquire 100% of the Borden Shares at $13.50 per share, payable in Holdings
Common Stock, through an exchange offer for all of the Borden Shares followed by
a merger in which any Borden Shares remaining outstanding would receive the same
consideration that had been paid in the exchange offer. Under New Jersey law,
such a merger would require the affirmative vote of 66 2/3% of Borden's
outstanding shares. KKR's proposal was contingent
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upon Borden agreeing to enter into a conditional purchase/stock option agreement
for up to approximately 28,138,000 Borden Shares, payable in Holdings Common
Stock, at $11 per share. In addition, the KKR proposal contemplated certain fees
and reimbursements for KKR on terms to be negotiated. Finally, KKR proposed that
it would be entitled to representation on the Borden board proportionate to its
ownership, subject to a minimum of 40% representation if it acquired 28,138,000
Borden Shares (approximately 19.9% of the total then outstanding Borden Shares)
pursuant to the exercise of its option or otherwise. The proposal was contingent
on completion of due diligence, and the exchange offer would be contingent on
certain waivers being obtained under Borden's credit facilities. The proposal
was not otherwise subject to financing. Both the Borden board and its advisors
believed that KKR intended to keep current management, to offer management an
opportunity to obtain an equity interest in the surviving enterprise and to
restructure Borden. However, the Borden board was advised that KKR had no
substantive discussions of these matters, had made no commitments to management
and had made no decision with respect to the precise nature of its restructuring
plan. Borden management advised the Borden board that it understood that any
decisions by KKR would be made only after it had completed a thorough analysis
of Borden.
In reporting to the Borden board on the negotiations, Borden's
representatives indicated that they wished to ensure that, in the event of a
competing transaction proposal, KKR would not be able both to profit on the
conditional purchase/stock option agreement and to obtain a "topping" fee. KKR
had not yet agreed to that point. The representatives also reported to the
Borden board that Borden had requested that KKR provide some post-transaction
guarantee of the price level of the Holdings Common Stock that would be issued
to Borden's shareholders in the exchange offer. However, these representatives
indicated that it appeared that while KKR had stated that it would negotiate a
"collar" of approximately 10% around the trading price for Holdings Common Stock
at the time the transaction was announced to protect the value that Borden's
shareholders would receive in the exchange offer, KKR had refused to consider
any post-exchange offer guarantee of the trading value of Holdings Common Stock.
The representatives said that they would press for a wider collar on the
Holdings Common Stock price but that they did not believe that a
post-transaction guarantee would be achievable in the negotiations. The
representatives indicated that they were seeking to reduce as much as possible
the fees requested by KKR.
Although the Borden board thought that the $13.50 per share price then
offered was too low and that certain of the other terms proposed by KKR were not
acceptable, the board instructed Borden's negotiators to go back to KKR to seek
to improve the price and to seek to negotiate satisfactory arrangements with
respect to the other terms of the transaction. The Borden board took this action
in the belief that a satisfactory proposal could be elicited from KKR. The
Borden board considered that such a proposal would offer the shareholders of
Borden a premium for their Borden Shares in the form of a highly liquid
security, which presented its own risks and opportunities. At the same time, the
board noted that while the Proposed 1994 Restructuring Plan was designed to
improve Borden's operating results and reduce its debt, it nonetheless had
significantly lower earnings projections than previous restructuring plans and
that it entailed significant risks to the equity value of Borden. These risks
included, in particular, the consequences of having substantial negative net
worth, the possibility of a credit rating downgrade and, if results of
operations and divestiture proceeds were not realized as planned, the risk of
further deterioration in Borden's financial condition. The board also considered
the risk that the announcement of the Proposed 1994 Restructuring Plan would
have a negative effect on the trading price for the Borden Shares, thereby
implicitly increasing the premium inherent in a transaction with KKR. The board
took into account the fact that the previous restructuring attempts by Borden
had fallen short of their goals. The Borden board adjourned the meeting in order
to permit Borden's negotiators to proceed.
In negotiations on September 7 and 8, 1994, KKR indicated that it would be
willing to increase its offer price to $14.25 per Borden Share, and that the
collar would be approximately 13%, depending on the price of Holdings Common
Stock on the day that the transaction was announced. KKR also
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accepted Borden's position that KKR not profit as a result of exercising the
option in circumstances where KKR had received a "topping" fee, and agreed that
it would receive a 33 1/3% representation on the Board as a minimum if it
purchased 28,138,000 Borden Shares, or approximately 19.9% of the outstanding
Borden Shares, pursuant to exercise of the option. KKR insisted on the payment
of(1) a $20 million initial fee, (2) a $50 million topping fee, against which
the initial fee would be credited, and (3) expense reimbursement of up to $15
million. The September 7, 1994 Borden board meeting reconvened on September 9,
1994. Mr. Shames said that he believed that the Proposed 1994 Restructuring Plan
could be accomplished and was a better alternative for Borden. In that regard,
Mr. Shames stated he believed that it was the wrong time to sell Borden because
successfully pursuing the Proposed 1994 Restructuring Plan would result, over
time, in greater value for shareholders than that reflected in the KKR proposal.
Nonetheless, after careful consideration of all the factors before it, the
Borden board voted to authorize management to proceed to negotiate agreements
with KKR on the terms outlined, to complete Borden's due diligence investigation
of Holdings, and to permit KKR to complete its due diligence of Borden. Mr.
Shames abstained from the vote of the Borden board.
At a special meeting held by the Borden board on September 11, 1994, the
board authorized Borden to enter into an agreement-in-principle with the
Partnership. The Letter of Intent expressed the intent of the parties to
negotiate a definitive merger agreement on substantially the terms already
described to the board. KKR had also requested a condition in the merger
agreement dealing with the refinancing of Borden's debt because, as a result of
its due diligence and in anticipation of costs related to the proposed
transactions, KKR believed that Borden's bank credit facilities should be
increased to provide a cushion for working capital needs and their maturities
extended. It was agreed that this condition would be limited to terms to be set
forth in the merger agreement. The Letter of Intent also provided for the
payment of the $20 million Initial Fee to KKR (which was subsequently paid) and,
in consideration of the Letter of Intent and such Initial Fee, KKR agreed that,
if for any reason no merger agreement was entered into, KKR would be required to
purchase 28,138,000 Borden Shares for $11 per share, payable in Holdings Common
Stock, providing Borden with a saleable asset of over $300 million that could be
used to reduce debt or for other purposes. The Letter of Intent also provided
for the payment of the $50 million topping fee (reduced by the Initial Fee) in
the event that, during the pendency of the Letter of Intent, a third party made
a Transaction Proposal which was subsequently consummated.
The Letter of Intent was announced on September 12, 1994 and the parties
proceeded to negotiate definitive agreements. Following the announcement on
September 12, 1994 that Borden had entered into the Letter of Intent with the
Partnership, Japonica wrote again to Borden, reiterating its interest in acting
as a "proactive white knight." Borden responded with a letter to Japonica
indicating that the Borden board was prepared to explore all serious,
substantive proposals with a view to maximizing the value of the Borden Shares.
Borden noted that none of Japonica's communications had contained any actual
proposal, but it indicated that if Japonica had a proposal that it believed
would maximize shareholder value and that could be effected, Japonica should
contact Lazard Freres, who would arrange a meeting.
On September 15, 1994, Japonica wrote again to Borden demanding that Borden
forward to Japonica all material and information provided to other potential
bidders, including KKR. In response, Borden wrote to Japonica the next day
indicating once more that, although none of its communications had yet included
any concrete proposal or provided the information regarding financing that
Borden had requested, the Borden board remained willing to explore all serious
substantive proposals. In response to Japonica's request for information that
had been provided to other bidders, Borden enclosed a form of confidentiality
agreement, already executed by Borden, for Japonica's signature. The
confidentiality agreement did not contain any "stand-still" provisions. Japonica
has never executed and delivered the confidentiality agreement.
On September 19, 1994, Borden offered to meet with Japonica and to make
available to it certain senior members of management and Borden's legal and
financial advisors on the assumption that, in
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view of its persistence, Japonica must have believed that it had a proposal to
maximize shareholder value that could be effectuated. A meeting was arranged for
September 21, 1994. At the meeting, Japonica indicated that it did not wish to
sign the confidentiality agreement. Japonica presented a "Letter of Continuing
Interest" with regard to Borden and attached to it certain materials with
respect to its "Dynamic Tension(TM)" management philosophy. Although the "Letter
of Continuing Interest" contained various nonspecific suggestions with respect
to Borden, it did not contain, and upon questioning by representatives of Borden
and its advisors, Japonica did not make, any proposal for Borden. Japonica also
refused to provide any information with respect to its financing resources.
Borden indicated that it would consider any credible proposal that Japonica
chose to make, and, subject to execution of the confidentiality agreement,
provide appropriate confidential information.
On September 22, 1994, the Borden board convened to consider the Merger
Agreement and the Conditional Purchase/Option Agreement which had been
negotiated with KKR. For a description of the Merger Agreement and the
Conditional Purchase/Option Agreement, see "Description of Merger Agreement and
Conditional Purchase/Option Agreement." At the meeting, the Borden board
reviewed in detail the proposed terms of the transaction. The Borden board
received an updated report on Borden's results of operations and financial
condition. The Borden board also reviewed investor reaction to the announcement
of the Letter of Intent, the correspondence and meeting with Japonica, the due
diligence that had been performed on Holdings, the presentations of Lazard
Freres and First Boston and the fairness opinions delivered by Lazard Freres and
First Boston.
At the September 22, 1994 Borden board meeting, the Borden board, with Mr.
Shames abstaining, voted to approve the Merger Agreement and the Conditional
Purchase/Option Agreement and the transactions contemplated thereby, to
recommend to the shareholders of Borden that they accept the Exchange Offer,
that they tender their Borden Shares to the Purchaser and that, if required by
applicable law, they approve and adopt the Merger Agreement. Mr. Shames repeated
the views he expressed on September 9, 1994 and stated that he was also
abstaining because he felt a conflict arising from the issue of his future
involvement in Borden (although he stated that he had no agreements with KKR).
The Borden board further authorized a press release relating to the Merger
Agreement and the Conditional Purchase/Option Agreement, and a letter to be sent
to Japonica, following the execution of the Merger Agreement and the Conditional
Purchase/Option Agreement, indicating that Borden's agreements with the
Partnership do not preclude the Borden board's consideration of a proposal by
Japonica, and that the board is interested in obtaining the best possible
transaction for Borden's shareholders and should Japonica decide to make a
substantive proposal, the board is prepared to work with Japonica to that end.
The board indicated that if Japonica chose to submit a proposal, it should
specify the means and sources of financing. The letter noted that Japonica had
failed to provide information as to its ability to finance the type of
transactions it had referred to even though the board had been requesting that
information for several months.
After the Borden board meeting, Borden and KKR finalized the details of the
Merger Agreement and the Conditional Purchase/Option Agreement and on September
23, 1994, Borden, Purchaser and the Partnership entered into the Merger
Agreement and the Conditional Purchase/Option Agreement. The terms of the
transactions were announced in a joint press release issued on September 23,
1994.
Events Subsequent to Announcement of the KKR Transaction. Subsequent to the
announcement of the Merger Agreement, Japonica wrote to Mr. Tasco, on September
27, 1994, requesting, among other things, that Borden not sell any more assets.
On October 5, 1994, a representative of Japonica wrote to a representative of
Borden that Japonica "is currently working on a proposal which it anticipates
forwarding to Borden in a timely manner." On October 18, 1994, Japonica again
wrote to the Borden board stating that it was "in the process of preparing a
detailed proposal for Borden." To date, no such proposal has been received. An
additional party, who had expressed an interest in a possible transaction with
Borden following the September 23rd announcement and who, to Borden's
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knowledge, was not affiliated with Japonica, executed a confidentiality
agreement with Borden and met with representatives of Borden but, subsequently,
indicated it was only interested in transactions involving Borden's food
business or parts thereof. Borden has been approached by other parties following
the September 23rd announcement, but none have executed a confidentiality
agreement or made any proposal.
At the regularly-scheduled meeting of the Borden board on October 25, 1994,
management reported on the third quarter results of Borden and projections for
the remainder of the fiscal year. In the third quarter of 1994, Borden reported
a net loss of $130.5 million or $.92 per share, including pre-tax charges of
$181.2 million. This pretax charge includes an accrual of $52.2 million for the
transaction fees and expenses, of which $20 million has been paid to KKR to
date. Borden's management stated that Borden's dairy operations continued to
post a wide loss, that profits of its pasta products were falling short of
expectations, and that Borden's food businesses overall were progressing more
slowly than desired. In light of the above, management advised the Borden board
that it was revising its estimate for earnings per share for 1994 to $.38 per
share (before special charges), from the $.50 per share projection which had
been reported to the Borden board in August. The Borden board considered the
implications of Borden's performance and of the revised projections for the
transaction with KKR.
On October 28, 1994, Nabisco, a wholly owned subsidiary of Holdings, filed a
registration statement with the Commission for the proposed offering of between
17.4% and 19.5% of Nabisco's common equity. Borden and its advisors were
apprised of Nabisco's intentions immediately prior to the public announcement of
the filing of such registration statement.
On November 14, 1994, the Borden board met and approved an amendment to the
Merger Agreement changing the end of the Valuation Period for the Exchange Ratio
as a result of comments received from the Commission. The amendment to the
Merger Agreement provides that the ten day Valuation Period will now end
immediately prior to the tenth business day prior to the Expiration Date for the
Exchange Offer, instead of the two business days provided in the original Merger
Agreement. In connection with this amendment, the Board received confirmation
from Lazard Freres and First Boston that the change to the Merger Agreement did
not affect the opinions dated September 22, 1994 and delivered to the Borden
board. In addition, at this meeting, the Borden board reviewed with its advisors
progress on the transactions contemplated by the Merger Agreement and the
Conditional Purchase/Option Agreement, reviewed the Exchange Offer and the
Schedule 14D-9, reviewed events subsequent to the execution of the Merger
Agreement, including the proposed public offering by Nabisco and related
transactions and the effect of such announcement on the price of Holdings Common
Stock, and ratified its recommendation that Borden's shareholders accept the
Exchange Offer, tender their Borden Shares to the Purchaser under the Exchange
Offer, and, if required by applicable law, approve and adopt the Merger
Agreement and the transactions contemplated thereby.
Reasons For The Exchange Offer And Merger; Recommendation of the Borden
Board of Directors
The Borden board of directors has determined that the Merger Agreement and
the Conditional Purchase/Option Agreement and the transactions contemplated
thereby, including the Exchange Offer and Merger, taken together, are fair to
the shareholders of Borden and recommends that holders of Borden Shares accept
the Exchange Offer, tender their Borden Shares thereunder to the Purchaser and,
if required by applicable law, approve and adopt the Merger Agreement. This
determination and recommendation was made by the entire Borden board at its
meeting on September 22, 1994, with Mr. Shames, Borden's Chief Executive
Officer, abstaining.
As described above under "--Borden Background," the Borden board was
confronted with two realistic choices: to approve the Proposed 1994
Restructuring Plan or to authorize Borden to enter into the Merger Agreement.
The Borden board's decision to enter into the Merger Agreement was based, in
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large part, upon balancing the risks and opportunities of the Proposed 1994
Restructuring Plan recommended by management against the risks and benefits of
the Merger Agreement. On the one hand, the Borden board considered the Proposed
1994 Restructuring Plan to involve risk to the equity value of Borden in the
short run and, if the restructuring were to be unsuccessful, a substantial
future risk. On the other hand, although the Merger Agreement offers all
shareholders the opportunity to receive a premium for their Borden Shares,
because the form of consideration to be paid to shareholders is Holdings Common
Stock, the Borden board took into account the risk to the Holdings Common Stock
because of tobacco developments (including litigation, legislation and
governmental regulation) that the Borden board recognized were not determinable.
In balancing the two alternatives, the Borden board determined that the
transactions contemplated by the Merger Agreement were the less risky and
preferable alternative.
The recommendation by the Borden board that Borden's shareholders accept the
Exchange Offer and tender their Borden Shares is not, and should not be
considered to be, a recommendation that Borden's shareholders continue to own
or, alternatively, make a decision to sell the Holdings Common Stock acquired by
such holders as a result of the Exchange Offer or the Merger.
In its deliberations, the Borden board considered a number of factors
including, without limitation, the following which includes all of the factors
the Borden board considered material:
1. The Borden board's knowledge of the business, operations, properties,
assets, financial condition, operating results and prospects of Borden,
including, in particular, its close monitoring of the adoption and
implementation of the 1993 Restructuring Plan, and the failure of that plan
to attain its goals (see "--Borden Background" for a description of the 1993
Restructuring Plan);
2. The Borden board's knowledge and judgments as to the results of
Borden's restructurings in 1989, 1991 and 1992, and their failure to achieve
the anticipated results;
3. The Borden board's judgment as to the future prospects of Borden in
light of management's Proposed 1994 Restructuring Plan (see "--Borden
Background" for a description of the Proposed 1994 Restructuring Plan),
which the Borden board viewed as posing significant risks for the equity
value of Borden including that it would result in Borden having a
substantial negative net worth; that it would require the sale of some of
Borden's profitable businesses; that there were risks inherent in selling
such businesses and attendant uncertainties as to what prices could be
realized; and that the proposed restructuring would still leave Borden
highly leveraged with a significant amount of indebtedness even after
application of the proceeds from the sales of the businesses. The Borden
board considered that the projected earnings for Borden following
implementation of the proposed restructuring would not, based upon the
advice of Lazard Freres, even if such earnings projections were met, likely
result in an implied stock price on an undiscounted basis (calculated by
multiplying leading earnings per share amounts by assumed multiples)
exceeding $14.25 until 1997, using a multiple of 13, or until mid-1996,
using a multiple of 16;
4. The view expressed by Borden's Chief Executive Officer that the
Proposed 1994 Restructuring Plan could be accomplished and that it was a
better alternative for Borden (see "--Borden Background");
5. The oral and written presentations of First Boston and Lazard Freres
and the opinions of First Boston and Lazard Freres that, as of September 22,
1994, the consideration to be received by the shareholders of Borden (other
than KKR and its affiliates) in the Exchange Offer and the Merger is fair to
such shareholders from a financial point of view. These opinions were based
on drafts of the Merger Agreement and the Conditional Purchase/Option
Agreement and were subsequently reconfirmed in writing upon the financial
advisors' review of the definitive agreements. Such opinions, which are
subject to limitations, qualifications and assumptions, including those
relating to the absence of adverse future developments in Holdings' tobacco
business, are filed
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as exhibits to this Registration Statement and should be read in their
entirety (see "Available Information");
6. The terms and conditions of the Merger Agreement and the Conditional
Purchase/Option Agreement; the Borden board considered in particular the
"no-solicitation" provision of the Merger Agreement, the fees and expense
reimbursements payable to KKR (which could require payments of up to $65
million in the aggregate and which provisions were negotiated at arms'
length between the parties) and the termination provisions of the Merger
Agreement and concluded that the terms of the Merger Agreement and the
Conditional Purchase/Option Agreement would not preclude the Borden board
from considering alternative transaction proposals for Borden;
7. Possible alternatives to the Exchange Offer and the Merger, including
continuing to operate Borden as an independent public company, approving the
further restructuring proposed by Borden's management, or liquidating
Borden, as well as a range of potential values to Borden's shareholders
associated with such alternatives determined with the assistance of Borden's
financial advisors, the timing of effectuating such alternatives and the
likelihood of achieving those values;
8. Information concerning the business, financial condition and results
of operations of Holdings, including a discussion by Borden's management and
advisors regarding the due diligence investigation of Holdings undertaken on
the Borden board's behalf; in that connection the Borden board took into
account that the impact on Holdings from litigation (including pending and
future matters as well as class action litigation), legislation (pending and
future) and governmental regulation (present and future) involving tobacco
products was unknowable and could be devastating with respect to the value
of Holdings Common Stock;
9. The historical market prices of the Borden Shares and the Holdings
Common Stock;
10. The fact that the consideration to be received by Borden's
shareholders in the Exchange Offer and the Merger represented a premium over
the trading price of the Borden Shares prior to the announcement of the
Letter of Intent. In this regard, the Borden board considered the risk that
announcement of the Proposed 1994 Restructuring Plan might negatively impact
the trading price of the Borden Shares;
11. The fact that the consideration to be received by shareholders of
Borden in the Exchange Offer and the Merger will consist of equity
securities of Holdings, a widely followed, publicly traded company,
affording them a significant degree of liquidity should Borden's
shareholders determine to sell shares of Holdings Common Stock acquired in
the Exchange Offer or the Merger;
12. The fact that the Exchange Offer is for all of the outstanding
Borden Shares and holders of Borden Shares have the right to choose whether
or not to exchange their shares in the Exchange Offer;
13. The taxable nature of the transaction (as opposed to a transaction
that would be tax-free), recognizing that shareholders of Borden subject to
taxation whose basis in the Borden Shares was less than $14.25 would be
required to pay taxes even though they would receive no cash proceeds in the
transaction.
14. The correspondence from, and the results of, the discussions and the
meeting with Japonica and its representatives, the fact that no specific
transaction was proposed by Japonica, that Japonica would provide no
information with respect to its potential sources of financing and that the
Merger Agreement does not, in the Board's judgment, preclude consideration
by the Borden board of any proposal made by Japonica or any other party; and
15. The fact that the efforts to sell Borden in late 1993 were not
successful and that despite the public disclosure that Borden was
considering a number of alternatives for Borden, including the possible sale
or merger of Borden, no third party contacted Borden subsequent to such
announcement and prior to the execution of the Merger Agreement except the
Partnership and Japonica and only the Partnership made a proposal to acquire
Borden (see "--Borden Background").
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In reaching the conclusion that the holders of Borden Shares will receive
fair value in the Exchange Offer and the Merger in Holdings Common Stock,
Borden's board considered the opinions of its financial advisors which are filed
as exhibits to this Registration Statement (see "Available Information"), and
are further described under "--Opinions of Financial Advisors", its knowledge of
Borden's businesses and discussions with Borden's management and Borden's and
the board's financial advisors of their views concerning the businesses,
financial condition and prospects of Holdings. The Borden board, with the
assistance of Borden's financial advisors, also considered recent and current
market prices of Holdings Common Stock, on which the Exchange Ratio for the
Exchange Offer and the Merger was based. The Borden board recognized that if KKR
and its affiliates acquire more than 51% of Borden, the financial advisors would
be entitled to aggregate fees equal to $20,000,000 which the Borden board
believed to be reasonable for complex transactions of this type and appropriate
in light of the services provided by such financial advisors to the board and
Borden.
As noted in the second paragraph of "--Reasons for the Exchange Offer and
Recommendation of the Borden Board of Directors" and in paragraph 8 above, the
Borden board gave considerable weight to tobacco-related considerations in
weighing the risks and benefits of the Merger Agreement against the risks and
benefits of a fifth restructuring of Borden. As described in paragraph 8 above,
members of Borden's senior management and advisors undertook a due diligence
investigation of Holdings, including these matters, with members of Holdings'
senior management. The Borden board also reviewed the statements in Holdings'
recent public filings with respect to these matters. The Borden board was
advised that Holdings' disclosures with respect to these matters in due
diligence sessions with Borden's management and advisors were consistent with
the statements made in such public filings. Holdings advised Borden that its due
diligence access and investigation with respect to these matters was at least
equal to the access and investigation of any other third party that had
conducted due diligence of Holdings recently, including lenders and underwriters
of publicly issued securities. The Borden board determined that, following its
review of due diligence with respect to these matters as discussed above,
which included discussions with Borden's management and advisors, evaluation
of these matters was a matter of judgment and that the impact on Holdings from
litigation (including pending and future matters as well as class action
litigation), legislation (pending and future) and governmental regulation
(present and future) involving tobacco products was unknowable and, therefore,
not capable of being determined by any expert. Although the Borden board did
not seek additional expert opinions regarding tobacco liability,
for this reason, the Borden board accepted the opinions of its financial
advisors recognizing that such opinions specifically excluded the effects of
future developments in Holdings' tobacco business in light of such advisors'
statements, contained in their opinions, that they "are not in a position to
make an independent evaluation" of such matters. Given the nature of these
matters (see "Significant Considerations--Information Concerning
Holdings--Tobacco-Related Considerations"), the Borden board considered that
the impact of such matters could be devastating with respect to the value of
the Holdings Common Stock. On the other hand, the Borden board, as noted in
paragraph 9 above, considered the historical market prices of Holdings Common
Stock and noted that Holdings Common Stock is a liquid, well-followed security.
After considering all of the factors described in this section (including the
tobacco-related risks to Holdings Common Stock), the Borden board determined
to enter into the Merger Agreement.
Prior to the commencement of the Exchange Offer, the Borden board reviewed
developments since September 22, 1994, including Borden's financial performance,
contacts from third parties and Nabisco's proposed public offering, and ratified
the recommendation set forth above.
The foregoing discussion of the information and factors considered and given
weight by the Borden board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Exchange
Offer and the Merger, the Borden board did not find it practicable to and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of the
Borden board may have given different weights to different factors.
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OPINIONS OF BORDEN FINANCIAL ADVISORS
Opinion of Lazard Freres. Lazard Freres delivered its written opinion to the
Borden board that, as of September 22, 1994, the consideration to be received by
the shareholders of Borden (other than the Partnership, the Purchaser or any
other subsidiary of the Partnership) in the Exchange Offer and the Merger is
fair to such shareholders, from a financial point of view. The opinion of Lazard
Freres has not been, and is not anticipated to be, updated.
The full text of the written opinion of Lazard Freres, dated September 22,
1994, which sets forth the assumptions made, matters considered and the review
undertaken with regard to such opinion, is filed as an exhibit to the
Registration Statement. Lazard Freres' opinion is directed only to the fairness
of the consideration to be received by the shareholders of Borden (other than
the Partnership, the Purchaser or any other subsidiary of the Partnership) and
does not address any other terms of any transaction involving Borden, the
Partnership and its affiliates, including Holdings, or Borden's underlying
business decision to affect the transaction with the Partnership. Lazard Freres'
opinion was delivered for the information of the Borden board and does not
constitute a recommendation to any shareholder of Borden as to whether such
shareholder should tender Borden Shares in the Exchange Offer or as to how such
shareholder should vote at any meeting of Borden's shareholders called to
consider the Merger. The summary of the opinion of Lazard Freres set forth below
is qualified in its entirety by reference to the full text of the opinion.
Borden's shareholders are urged to read this opinion in its entirety.
In rendering its opinion, Lazard Freres, among other things, (i) reviewed
the terms and conditions of a draft of each of the Merger Agreement, the
Conditional Purchase/Option Agreement and the financial terms of the
transactions as set forth therein; (ii) analyzed historical business and
financial information relating to Borden and Holdings, including certain public
filings of each of Borden and Holdings; (iii) reviewed certain financial
forecasts and other data provided by Borden and each of Holdings and the
Partnership relating to the businesses of Borden and Holdings, respectively,
including the most recent business plan for Borden prepared by Borden's senior
management, the Proposed 1994 Restructuring Plan; (iv) conducted discussions
with members of the senior managements of Borden and each of Holdings and the
Partnership with respect to the businesses and prospects of Borden and Holdings,
respectively, and the strategic objectives of each; (v) reviewed public
information with respect to certain other companies in lines of businesses
believed by Lazard Freres to be generally comparable in whole or in part to the
businesses of Borden and Holdings, and reviewed the financial terms of certain
other business combinations that have recently been effected; (vi) reviewed the
historical stock prices and trading volumes of Borden Common Stock and Holdings
Common Stock; and (vii) conducted such other financial studies, analyses and
investigations as Lazard Freres deemed appropriate. The foregoing factors
represent all of the material factors considered by Lazard Freres.
In connection with its review, Lazard Freres relied upon the accuracy and
completeness of the financial and other information concerning Borden and
Holdings that had been received by Lazard Freres and did not assume any
responsibility for independent verification of such information or any
independent valuation or appraisal of any of the assets of Borden or Holdings,
nor did Lazard Freres receive any such appraisals. With respect to the financial
forecasts, Lazard Freres assumed that they had been reasonably prepared on the
bases reflecting the best currently available estimates and judgments of
management of Borden and Holdings as to the future financial performance of
Borden and Holdings, respectively. Lazard Freres assumed no responsibility for
and expressed no view as to such forecasts or the assumptions upon which they
were based. Lazard Freres' opinion stated that it was based on economic,
monetary, market and other conditions as in effect on, and information made
available to it as of, the date of the opinion.
In giving the opinion, Lazard Freres noted that it was not in a position to
make an independent evaluation of certain matters described below (which involve
an assessment of legal, legislative and regulatory contingencies that is beyond
the area of Lazard Freres' professional expertise) and thus, with the
concurrence of the Borden board, Lazard Freres assumed, for purposes of the
opinion, that no material adverse effect on Holdings or on
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the trading value of Holdings Common Stock would result from (x) the proposal,
enactment or adoption after September 22, 1994 of any laws or regulations
(including the imposition of additional taxes on the manufacture, sale or
distribution of tobacco products) by any federal, state, local or other
jurisdiction or any governmental or regulatory body or agency thereunder
relating to, arising out of, or otherwise affecting the tobacco industry,
including, without limitation, the manufacture, sale, distribution or use of
tobacco products, or (y) any judicial or administrative proceeding initiated or
decided after September 22, 1994, including any civil or criminal litigation or
arbitration, relating to, arising out of or otherwise involving or affecting
Holdings, the tobacco industry, or any other company engaged in said industry,
including, without limitation, the manufacture, sale, distribution or use of
tobacco products. Lazard Freres advised the Borden board that Lazard Freres was
not assuming any responsibility for or expressing any view with respect to the
matters described in the preceding sentence.
Lazard Freres assumed that the transactions described in the draft Merger
Agreement and draft Conditional Purchase/Option Agreement referred to above
would be identical in all material respects to the Merger Agreement and the
Conditional Purchase/Option Agreement, respectively, that the transactions would
be consummated on terms described in the draft Merger Agreement, without any
waiver of any terms or conditions by Borden and that obtaining the necessary
regulatory approvals for such transactions would not have an adverse affect on
Holdings or on the trading of the Holdings Common Stock. Lazard Freres has since
advised the Borden board that the changes incorporated in the Merger Agreement,
including the Amendment, and the Conditional Purchase/Option Agreement from the
drafts made available to Lazard Freres on which the opinion was based, would not
have affected Lazard Freres' ability to deliver its opinion set forth therein.
In its analyses, Lazard Freres did not consider the proposed public offering of
between 17.9% and 19.5% of Nabisco, since the proposed offering was not publicly
filed until October 28, 1994.
The following is a brief summary of the analyses performed by Lazard Freres
in connection with rendering its opinion as to the fairness of the consideration
to be received by the shareholders of Borden (other than the Partnership, the
Purchaser or any other subsidiary of the Partnership) from a financial point of
view and discussed with the Borden board at its meeting on September 22, 1994.
The financial analyses used by Lazard Freres in arriving at its opinion
included: (i) a "has-gets" comparison, which compared the various
characteristics, including dividend payments and earnings per share data, of a
Borden Share with the characteristics of shares of Holdings Common Stock to be
received in the Exchange Offer or the Merger at exchange ratios within the range
provided for in the Merger Agreement; (ii) valuation analyses, which consisted
of (w) discounting to the present value potential future trading values of
Borden Common Stock under the Proposed 1994 Restructuring Plan, (x) discounting
to the present value projected cash flow forecasted by Borden's management to be
derived under the Proposed 1994 Restructuring Plan, (y) discounting to the
present value potential proceeds that might have been obtained from
implementation of the Proposed 1994 Restructuring Plan for a period of time,
followed by the tax-free distribution to Borden's shareholders of its non-food
business segment and the tax-free disposition of Borden's food business segment
and (z) valuing the proceeds on an after-tax basis that might have been obtained
from divestitures of Borden's business units; (iii) comparable company trading
analyses, which consisted of comparing financial, market and operating
performances of selected publicly traded companies to business segments of
Borden; and (iv) comparable transaction analyses, which consisted of reviewing
financial aspects of selected acquisitions of assets or businesses comparable to
those of Borden.
The material portions of the foregoing analyses (which are all of the
material valuation methodologies performed by Lazard Freres) are summarized in
more detail below.
Has--Gets Comparison
Lazard Freres compared the various characteristics, including dividend
payments and earnings per share data, of a share of Borden Common Stock with the
characteristics of shares of Holdings Common Stock to be received in the
Exchange Offer or the Merger, assuming a price of Holdings Common Stock
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in the range of $6 to $8, which represents the exchange value of Holdings Common
Stock within the collar. Lazard Freres noted that Borden's shareholders would be
receiving a premium of 22.6% over the closing price of a share of Borden Common
Stock on September 9, 1994, and a premium of 19.2% over the average price of a
share of Borden Common Stock during the period from August 9, 1994 to September
9, 1994.
Lazard Freres also presented the Borden board with information concerning
the historical trading prices of the Borden Common Stock which indicated that
for part of the 12-month period preceding September 9, 1994, the Borden Common
Stock traded at market prices higher than $14.25, although in the six-month
period preceding September 9, 1994, the Borden Common Stock generally traded at
market prices less than $14.25.
Valuations of Alternative Scenarios
Lazard Freres also analyzed Borden's possible value under four alternative
scenarios. These scenarios included (i) a discounted present value analysis of
the potential future public market trading values of Borden Common Stock based
upon management's earnings per share forecast under the Proposed 1994
Restructuring Plan; (ii) a discounted unleveraged cash flow analysis based upon
unleveraged cash flow projected under the Proposed 1994 Restructuring Plan
through 1998 plus terminal values based on projected 1998 earnings before
interest, taxes and amortization ("EBITA") under the Plan; (iii) a valuation
analysis assuming that the Proposed 1994 Restructuring Plan is implemented
through December 31, 1995 and, on January 1, 1996, a tax-free distribution of
the non-food business segment to Borden's shareholders, as well as a tax-free
disposition of the food business segment, are consummated; and (iv) an after-tax
breakup analysis. These alternative valuation scenarios are described below.
Discounted Value--Proposed 1994 Restructuring Plan
Lazard Freres analyzed the potential future public market trading values of
Borden suggested by Borden management's earnings per share forecasts under the
Proposed 1994 Restructuring Plan, applying at the beginning of each year
multiples of 13 to 16 times the forecasted earnings per share for that year, and
discounting the result at a 13.7% annual discount rate. This analysis, which was
conducted for the 1995 through 1998 earnings per share forecast, generated per
share present values of potential future trading values ranging from $9.60 to
$13.61.
Unleveraged Discounted Cash Flow Analysis
Lazard Freres' unleveraged discounted cash flow analysis was based upon the
financial information for each of Borden's major business units forecast by
Borden management to be derived under the Proposed 1994 Restructuring Plan.
Lazard Freres calculated a range of the net present values of the projected
unleveraged free cash flows in the forecast, using various discount rates
reflecting a weighted average cost of capital in the range of 10% to 12%, of
$894 million to $932 million. Lazard Freres also calculated a range of terminal
values for Borden by multiplying projected EBITA for 1998 by a range of exit
multiples from 9.5 to 10.5 and discounting the result to present value using the
same discount rates. The net present value of projected free cash flow, when
combined with the terminal values, yielded a total enterprise value in the range
of $3.416 billion to $3.929 billion. In order to derive total equity value and
the equity value per share of Borden, Lazard Freres subtracted from the total
enterprise value the estimated net debt and other liabilities forecasted under
the Proposed 1994 Restructuring Plan at December 31, 1994 to yield a total
equity value range of $1.646 billion to $2.158 billion, or a per share equity
value in the range of $11.64 to $15.26.
1996 Tax-free Distribution/Sale
In analyzing the possible value of Borden assuming a tax-free distribution
of the non-food business segment and concurrent tax-free disposition of the food
business segment as of January 1, 1996, Lazard Freres established a range of
potential per share public trading values for the Borden's non-food
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business segment as of January 1, 1996, as well as a range of aggregate sales
valuations for each of Borden's food business segments. This analysis yielded a
value range per share, discounted to January 1, 1995, at a 13.7% annual discount
rate, of $10.40 to $15.09.
After-tax Breakup Analysis
Lazard Freres also analyzed Borden's possible value under an after-tax
breakup analysis, assuming that its businesses are sold in separate taxable
transactions. In determining such possible values, Lazard Freres deducted
potential tax payments from the reference valuation range for each of the
business units, assuming a tax rate of 38%. For purposes of this analysis,
Lazard Freres relied upon tax data (including as to basis) provided by Borden.
This analysis yielded a valuation range of $7.64 to $12.87 per share.
Comparable Company Trading Analysis
Lazard Freres selected other publicly traded companies whose lines of
business made them, in Lazard Freres' judgment, comparable to Borden (the
"Comparable Group"). Using publicly available financial data for historical
periods, as well as publicly available financial data estimates for 1994 and
1995, Lazard Freres determined the relationship for the companies in the
Comparable Group between their then current price per share and earnings per
share ("P/E Ratio"), as well as between aggregate valuation ("AV") and earnings
before interest, taxes, depreciation and amortization ("EBITDA") ("AV/EBITDA
Ratio"), EBITA ("AV/EBITA Ratio") and earnings before interest and taxes
("EBIT") ("AV/EBIT Ratio"). Lazard Freres also performed similar analyses for
Borden based upon the multiples implied by a transaction value estimated at
$14.25 per share in relation to the actual results through June 1994 (the "12
Month Actual Period"), and estimated results for the years ended 1994 and 1995
(the "1994 and 1995 Periods") forecasted under the Proposed 1994 Restructuring
Plan. These analyses generated an estimated 1994 and 1995 P/E Ratio for Borden
of 30.3 and 19.0, respectively, as compared to the average, median, high and low
1994 P/E Ratios for the Comparable Group of 16.1, 15.9, 17.7 and 14.6, and the
average, median, high and low 1995 P/E Ratios for the Comparable Group of 14.6,
14.3, 15.5 and 13.7. These analyses generated AV/EBITDA Ratios for Borden for
the 12 Month Actual Period and the 1994 and 1995 Periods of 13.2, 10.2 and 8.4,
respectively, as compared to the average, median, high and low AV/EBITDA Ratios
for the Comparable Group of 8.3, 8.4, 9.2 and 5.8 for the 12 Month Actual Period
of 8.0, 8.0, 9.0 and 7.2 for the 1994 Period and of 7.5, 7.4, 8.4 and 7.0 for
the 1995 Period. These analyses also generated AV/EBITDA Ratios for Borden for
the 12 Month Actual Period, and the 1994 and 1995 Periods, of 30.0, 13.1 and
10.5, respectively, as compared to the average, median, high and low AV/EBITA
Ratios for the Comparable Group of 10.3, 10.4, 11.3 and 7.6 for the 12 Month
Actual Period, of 9.8, 9.7, 10.7 and 8.9 for the 1994 Period, and of 9.2, 9.1,
9.7 and 8.7 for the 1995 Period. These analyses also generated AV/EBIT Ratios
for Borden for the 12 Month Actual Period, and the 1994 and 1995 Periods, of
41.0, 14.0 and 11.0, respectively, as compared to the average, median, high and
low AV/EBIT Ratios for the Comparable Group of 10.7, 10.9, 11.7 and 8.0 for the
12 Month Actual Period, of 10.1, 10.1, 10.9 and 9.3 for the 1994 Period, and of
9.5, 9.6, 10.1 and 9.0 for the 1995 Period. The Comparable Companies examined in
Lazard Freres' analysis included Campbell Soup Company; Conagra, Inc.; CPC
International Inc.; General Mills, Inc.; H.J. Heinz Company; Hershey Foods
Corporation; Kellogg Company; Pet Incorporated; The Quaker Oats Company; and
Ralston Purina Company.
Comparable Acquisition Analysis
Lazard Freres reviewed acquisitions of companies and businesses similar to
those of Borden over the past several years, and selected a number of those
acquisitions which it believed were most comparable to a transaction involving
the sale of Borden (the "Comparable Transactions"). Using publicly available
information, Lazard Freres determined for the Comparable Transactions the
relationship between the transaction price per target company share and the last
12 months earnings per target company share ("P/E Ratio") and book value per
target company share ("P/BV Ratio"), as well as between the aggregate target
company valuation and the last 12 months target company sales
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("AV/Sales Ratio"), EBITDA ("AV/EBITDA Ratio") and EBIT ("AV/EBIT Ratio").
Lazard Freres also noted the premium of the transaction price over the target
company price one month prior to the announcement of the transaction. Lazard
Freres also performed similar analyses for Borden based upon an acquisition at
$14.25 in relation to its actual results for the 12 months ended June 1994 and
its forecasted results for fiscal 1994 on a pro forma basis as forecasted by the
Proposed 1994 Restructuring Plan. These analyses generated an estimated P/E
Ratio for Borden of 30.3, for the 12 months ended June 1994 as compared to the
average, median, high and low P/E Ratios for the Comparable Transactions of
26.5, 25.9, 60.1 and 13.1, respectively. These analyses also generated a P/BV
Ratio for Borden of 7.8 for the 1994 fiscal year, on a pro forma basis, as
compared to the average, median, high and low P/BV Ratios for the Comparable
Transactions of 8.1, 5.2, 37.6 and 1.4, respectively. These analyses also
generated AV/Sales Ratios for Borden of 0.8 (actual to June 1994) and 1.1 (pro
forma 1994), as compared to the average, median, high and low AV/Sales Ratios
for the Comparable Transactions of 1.3, 1.1, 3.3 and 0.5, respectively. These
analyses also generated AV/EBITDA Ratios for Borden of 13.2 (actual to June
1994) and 10.2 (pro forma 1994), as compared to the average, median, high and
low AV/EBITDA Ratios for the Comparable Transactions of 9.8, 9.0, 17.5 and 6.1,
respectively. These analyses also generated AV/EBIT Ratios for Borden of
approximately 41.0 (actual to June 1994) and 14.0 (pro forma 1994), as compared
to the average, median, high and low AV/EBIT Ratios for the Comparable
Transactions of 13.8, 13.9, 20.9 and 7.9, respectively. Finally, this analysis
reflected a premium over trading price one month prior to announcement for
Borden of 17.5%, as compared to the average, median, high and low premium for
the Comparable Transactions of 63.4%, 57.9%, 131.9% and 18.5%, respectively. The
Comparable Transactions examined in Lazard Freres' analyses included: Sandoz
Ltd./Gerber Products Company; Specialty Foods Acquisition Corporation/North
American food business of Beledia N.V.; Tomkins plc/Ranks, Hovis, McDougall plc;
Campbell Soup Company/Arnotts Ltd.; The Phillip Morris Companies Inc./Freia
Marabou A/S; Nestle S.A./Source Perrier Company; The Phillip Morris Companies
Inc./Suchard; Conagra, Inc./Beatrice Companies, Inc.; KKR/RJR Nabisco, Inc.; The
Philip Morris Companies Inc./Kraft Inc.; Grand Metropolitan plc/The Pillsbury
Companies Inc.; Nestle S.A./Rowntree Company; KKR/Beatrice Companies, Inc.; The
Philip Morris Companies Inc./General Foods Corporation; R.J. Reynolds
Company/Nabisco, Inc.; and Nestle S.A./Carnation Company.
In arriving at its written opinion and in discussing its opinion with the
Borden board, Lazard Freres performed various financial analyses, portions of
which are summarized above. The summary set forth above does not purport to be a
complete description of Lazard Freres' analyses. Lazard Freres believes that its
analyses and the summaries set forth above must be considered as a whole and
that selecting portions of its analyses, without considering all analyses, could
create an incomplete view of the process underlying the opinion. In performing
its analyses, Lazard Freres made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of Borden or Holdings. Although, in connection with
the delivery of its opinion, Lazard Freres also analyzed Holdings, Lazard
Freres' opinion is not a valuation of Holdings and does not represent Lazard
Freres' view as to what the value of the shares of Holdings Common Stock will be
upon consummation of the Exchange Offer or the Merger. In giving its opinion as
to the fairness of the consideration to be received by the shareholders of
Borden, Lazard Freres derived a range of values for Borden Common Stock using
the valuation analyses described above and compared them with $14.25, the
trading value (determined pursuant to the Exchange Ratio at the time of the
delivery of Lazard Freres' opinion) of the shares of Holdings Common Stock to be
received as consideration in the Exchange Offer and the Merger. Lazard Freres
reviewed Holdings' public filings with the Commission, reviewed publicly
available analyst and other third party reports addressing Holdings and Holdings
Common Stock and held discussions with senior management of Holdings. Based
solely on the foregoing, Lazard Freres determined that it was not aware of any
material information relating to Holdings that was not publicly disclosed and
thus concluded that the trading value (at the time of the delivery of Lazard
Freres' opinion) of Holdings Common Stock, a liquid, well-followed security,
reflected the market's reasonable assessment of its value. Because of the large
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aggregate amount of shares of Holdings Common Stock being issued to shareholders
of Borden and other factors, such shares may trade at prices below those at
which they would trade initially on a fully distributed basis. In addition, as
described above, in its analyses, Lazard Freres assumed, with Borden's
concurrence, the absence of certain future adverse developments affecting
Holdings or the tobacco industry in general. See "Significant
Considerations--Exclusion of the Effects of Future Tobacco Developments from
Opinions of Borden's Financial Advisors." The analyses performed by Lazard
Freres are not necessarily indicative of actual values or actual future results,
which may be significantly more or less favorable than suggested by such
analyses. Additionally, analyses relating to the values of businesses do not
purport to be appraisals or to reflect actual market valuations or trading
ranges, which may vary significantly from amounts set forth above.
Opinion of First Boston. On September 22, 1994, First Boston delivered its
written opinion to the Borden board that, as of such date, the consideration to
be received by the shareholders of Borden, other than KKR and its affiliates, in
each of the Exchange Offer and the Merger was fair to such shareholders from a
financial point of view. The opinion of First Boston has not been, and is not
anticipated to be, updated. No limitations were imposed by the Borden board upon
First Boston with respect to the investigations made or the procedures followed
by it in rendering its opinion, except that First Boston was not requested to,
and did not, solicit third party offers to acquire all or any part of Borden or
participate in efforts other advisors may have made to solicit alternative
offers.
First Boston's opinion was directed only to the fairness of the
consideration to be received by the shareholders of Borden, other than KKR and
its affiliates, and did not address any other terms of any transaction involving
Borden and KKR and its affiliates or Borden's underlying business decision to
effect the transaction with the Partnership. First Boston's opinion was
delivered for the information of the Borden board and does not constitute a
recommendation to any Borden shareholder as to whether such shareholder should
tender Borden Shares into the Exchange Offer or how such shareholder should vote
at any meeting of Borden shareholders called to consider the Merger.
In arriving at its opinion, First Boston reviewed, among other things, the
Letter of Intent, the Merger Agreement and the Conditional Purchase/Option
Agreement, as well as certain publicly available business and financial
information relating to each of Borden and Holdings. First Boston also
considered certain financial and stock market data for each of Borden and
Holdings and compared that data with similar data for other publicly held
companies in businesses similar to those of Borden and Holdings, respectively,
and considered the financial terms of certain other business combinations that
have recently been effected. In addition, First Boston participated in
discussions with Borden's management and with management of Holdings and
representatives of KKR concerning the past and current operations, financial
condition and prospects of each of Borden and Holdings, respectively, and
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which it deemed
relevant. The foregoing factors represent all of the material factors considered
by First Boston.
In connection with its review, First Boston did not assume any
responsibility for independent verification of any of the foregoing information
and relied on its being complete and accurate in all material respects. With
respect to the financial forecasts, First Boston assumed that they had been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of each of Borden's and Holdings' managements as to the future
financial performance of Borden and Holdings, respectively, and First Boston's
opinion did not express any views as to such forecasts or the assumptions
underlying such forecasts. First Boston also did not assume any responsibility
for an independent evaluation or appraisal of the assets or liabilities of
Borden or Holdings, nor was First Boston furnished with any such appraisals.
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In giving its opinion First Boston also assumed, with Borden's consent, that
there will not be any material adverse effect on Holdings or on the trading
value of the Holdings Common Stock as a result of or relating to (x) the
proposal, enactment or adoption after September 22, 1994, of any laws or
regulations (including the imposition of additional taxes on the manufacture,
sale or distribution of tobacco products) by any federal, state, local or other
jurisdiction or any governmental or regulatory body or agency thereunder
relating to, arising out of, or otherwise affecting the tobacco industry,
including without limitation the manufacture, sale, distribution or use of
tobacco products, or (y) any judicial or administrative proceeding initiated or
decided after September 22, 1994, including any civil or criminal litigation or
arbitration relating to or arising out of or otherwise involving or affecting
Holdings, the tobacco industry, or any other company engaged in said industry,
including without limitation the manufacture, sale, distribution or use of
tobacco products. First Boston advised the Borden board that First Boston was
not in a position to make an independent evaluation of these matters (which
involve an assessment of legal, legislative and regulatory contingencies that
is beyond the area of First Boston's professional expertise) and assumed
no responsibility for and expressed no view with respect to these matters.
First Boston assumed that the transactions described in the draft Merger
Agreement and draft Conditional Purchase/Option Agreement referred to above
would be identical in all material respects to the Merger Agreement and the
Conditional Purchase/Option Agreement, respectively. First Boston also assumed
that the transactions contemplated by the Merger Agreement and the Conditional
Purchase/Option Agreement would be consummated on the anticipated terms,
without any waiver of terms or conditions by Borden and that obtaining necessary
regulatory consents will not have an adverse effect on Holdings or the trading
value of Holdings Common Stock. First Boston has since advised the Borden board
that the changes incorporated in the Merger Agreement, including the Amendment,
and the Conditional Purchase/Option Agreement from the drafts made available to
First Boston on which the opinion was based, would not have affected First
Boston's ability to deliver its opinion set forth herein.
The full text of the opinion of First Boston dated September 22, 1994, which
sets forth assumptions made, matters considered and limits on the review
undertaken, is filed as an exhibit to the Registration Statement. Borden
shareholders are urged to read this opinion in its entirety. The summary of the
opinion of First Boston set forth as an exhibit to the Registration Statement is
qualified in its entirety by reference to the full text of such opinion.
The generally accepted financial analyses First Boston used in reaching its
opinion included (i) discounted cash flow ("DCF") analyses, which consisted of
discounting to present value the projected future free cash flows and terminal
values of each of Borden's major business units on a business unit by business
unit basis, (ii) comparable company trading analyses, which consisted of
reviewing market statistics and financial and operating information in respect
of selected publicly traded companies considered for comparability to Borden's
major business units, (iii) comparable acquisition analyses, which consisted of
reviewing operating statistics and purchase price information with respect to
selected acquisitions of assets or businesses similar to those of Borden's major
business units and (iv) a disaggregation analysis in which First Boston
supplemented the other three analyses by taking into account tax costs related
to the disposition in the short term of Borden's major business units. The
material portions of these analyses (which are all of the material valuation
methodologies performed by First Boston) are summarized below. In its analyses,
First Boston did not consider the proposed public offering of between 17.9% and
19.5% of Nabisco, since the proposed offering was not publicly filed until
October 28, 1994. To derive an implied equity reference range for Borden as a
whole, First Boston used the analyses described in (i) through (iii) above for
each major business unit to obtain a reference range for each unit, totalled
these reference ranges, and then subtracted debt and minority interests, pension
underfunding and capitalized non-allocated administrative costs and added the
present value of the benefit of net operating losses and excess cash.
Discounted Cash Flow Analysis
First Boston's DCF analysis was based upon the four-year financial forecast
for each of Borden's major business units contained in management's financial
forecast, as well as a forecast for years five
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through nine prepared by First Boston with underlying assumptions similar to
management's projections for years one through four. First Boston also
calculated a range of terminal values for each business unit by multiplying
projected earnings for each business unit for 2004 by a range of exit multiples
(8.5x to 9.0x for Niche Grocery; 8.0x to 8.5x for Pasta and Packaging; 7.5x to
8.0x for International Foods Unit; 8.0x to 9.0x for Resin and Consumer
Adhesives; and 6.5x to 7.0x for Decorative Products) derived from comparable
companies and transactions. First Boston discounted the projected unleveraged
free cash flows in the forecast and the projected terminal values at a range of
discount rates for each business unit (12% to 13% for Niche Grocery, Pasta and
International Foods Unit; and 12% to 14% for Packaging, Resin, Decorative
Products and Consumer Adhesives) to arrive at an estimated present value range
for each of Borden's major business units. The hypothetical range of values for
each of the Borden's major business units derived from the DCF analysis ranged
from approximately $675 to $800 million for Niche Grocery; $800 to $1,050
million for Pasta; $750 to $900 million for International Foods Unit; $300 to
$375 million for Packaging; $800 to $1,000 million for Resin; $275 to $325
million for Decorative Products; and $140 to $180 million for Consumer
Adhesives.
Comparable Company Trading Analysis
For each of Borden's major business units, First Boston selected other
publicly traded companies whose market positions and capital structures made
them, in its judgment, most closely comparable to the relevant Borden unit.
Using publicly available financial and stock price data, First Boston determined
the relationship for these comparable companies between equity value (total
market value of outstanding equity securities) and net income and book value and
between capitalized value (equity value plus debt, preferred stock and minority
interest less cash and marketable securities) and sales, EBITDA and EBIT. First
Boston then derived a range of multiples of capitalized value as a multiple of
1994 and 1995 sales, EBITDA and EBIT (1.8x to 2.1x, 8.5x to 10.0x and 9.2x to
10.8x, respectively, for 1994, and 1.8x to 2.1x, 8.6x to 10.1x and 9.3x to
11.0x, respectively, for 1995, for Niche Grocery; 1.0x to 1.0x, 11.5x to 12.4x
and 19.1x to 20.5x, respectively, for 1994, and 0.9x to 1.0x, 7.0x to 7.5x and
9.8x to 10.5x, respectively, for 1995, for Pasta; 0.9x to 1.0x, 7.0x to 7.9x and
9.7x to 10.9x, respectively, for 1994, and 0.9x to 1.0x, 6.9x to 7.8x and 9.6x
to 10.8x, respectively, for 1995, for the International Foods Unit; 0.6x to
0.7x, 6.7x to 8.1x and 10.0x to 12.0x, respectively, for 1994, and 0.6x to 0.7x,
5.3x to 6.3x and 7.2x to 8.6x, respectively, for 1995, for Packaging; 1.1x to
1.2x, 7.1x to 8.0x and 8.3x to 9.3x, respectively, for 1994, and 1.1x to 1.2x,
7.0x to 7.9x and 8.3x to 9.3x, respectively, for 1995, for Resins; 0.6x to 0.7x,
6.0x to 7.2x and 8.3x to 9.9x, respectively, for 1994, and 0.5x to 0.6x, 5.0x to
6.0x and 6.4x to 7.7x, respectively, for 1995, for Decorative Products; and 1.3x
to 2.0x, 5.7x to 9.2x and 6.1x to 9.8x, respectively, for 1994, and 1.2x to
1.9x, 5.3x to 8.5x and 5.7x to 9.1x, respectively, for 1995, for Consumer
Adhesives) based on the high, average, median and low multiples among comparable
companies and applied these ranges to financial data for each of Borden's major
business units. The hypothetical range of values for each of Borden's major
business units derived from such analysis ranged from approximately $725 to $850
million for Niche Grocery; $755 to $810 million for Pasta; $800 to $900 million
for the International Foods Unit; $275 to $330 million for Packaging; $900 to
$1,010 million for Resins; $250 to $300 million for Decorative Products; and
$100 to $160 million for Consumer Adhesives. The comparable companies examined
in First Boston's analysis for each Borden unit included, among others: Niche
Grocery, Pasta and the International Foods Unit: Campbell Soup Company; CPC
International, Inc.; Flowers Industries; General Mills, Inc.; Hershey Foods
Corporation; H.J. Heinz Company; Interstate Bakeries Corporation; Kellogg
Company; Pet Incorporated; Ralston Continental Baking Group. Packaging Unit:
Bemis Company, Inc.; Sealed Air Corporation; Sonoco Products Company; Union Camp
Corporation; The Valspar Corporation. Decorative Products Unit: Armstrong World
Industries, Inc.; Collins & Aikman Group, Inc.; Premark International, Inc.;
Sherwin-Williams Company. Worldwide Resins Unit: Grow Group, Inc.; H.B. Fuller
Company; Lilly Industries, Inc.; Loctite Corporation. Consumer Adhesives Unit:
BIC Corporation; Duracell International, Inc.; First Brands Corporation;
Rubbermaid Incorporated.
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Comparable Acquisition Analysis
For each of the Borden's major business units, First Boston reviewed
acquisitions of companies in similar industries over the past several years.
First Boston then selected a number of those acquisitions which it believed were
most comparable to a hypothetical transaction involving the particular Borden
business unit. Using publicly available information, First Boston determined for
the comparable transactions the relationship between capitalized value (equity
value plus debt, preferred stock and minority interest less cash and marketable
securities) and sales, EBITDA and EBIT. First Boston then derived a range of
these multiples of estimated sale value as a multiple of 1994 sales, EBITDA and
EBIT (1.8x to 2.3x, 8.8x to 11.2x and 9.5x to 12.0x, respectively, for Niche
Grocery; 1.0x to 1.2x, 11.5x to 14.5x and 19.0x to 24.1x, respectively, for
Pasta; 0.9x to 1.1x, 7.5x to 9.2x and 10.3x to 12.7x, respectively, for
International Foods Unit; 0.7x to 0.9x, 7.3x to 9.2x and 10.9x to 13.7x,
respectively, for Packaging; 1.1x to 1.3x, 7.5x to 8.6x and 8.8x to 10.0x,
respectively, for Resins; 0.6x to 0.9x, 6.6x to 9.7x and 9.1x to 13.2x,
respectively, for Decorative Products; and 1.3x to 2.3x, 6.0x to 10.3x and 6.4x
to 11.0x, respectively, for Consumer Adhesives) and applied these ranges to
financial data for each Borden unit. The hypothetical range of values for each
of Borden's major business units derived from this analysis ranged from
approximately $750 to $950 million for Niche Grocery; $750 to $950 million for
Pasta; $850 to $1,050 million for International Foods Unit; $300 to $375 million
for Packaging; $950 to $1,080 million for Resins; $275 to $400 million for
Decorative Products; and $105 to $180 million for Consumer Adhesives. The
comparable acquiror/target transactions examined in First Boston's analysis for
each Borden unit included, among others: Niche Grocery, Pasta and the
International Foods Unit: Investor Group/Del Monte Foods; Sandoz AG/Gerber
Products; Doskocil Cos./Frozen Specialty Foods Unit (Int'l Multifood); Tomkins
PLC/Ranks Hovis McDougall; Campbell Soup Company/Arnotts Ltd. Packaging Unit:
Applied Extrusion/Technologies, Inc./Packaging Film Group (Hercules, Inc.);
Sonoco Products Company/Engraph, Inc. Decorative Products Unit: Arjo Wiggins
Appleton PLC/Gebrueder Buhl Papierfabrite; Coloroll Group PLC/Burlington; Wickes
Companies/Collins & Aikman Group, Inc. Worldwide Resins Unit: Scapa Group
PLC/Society des Adhesifs de Bellgrade; Laporte/Evode Group PLC. Consumer
Adhesives Unit: Orkem SA/Bostic Division (Black & Decker Corp.); Borden,
Inc./Jadow & Sons, Inc. (Krazy Glue).
Disaggregation Analysis
First Boston analyzed Borden's possible value assuming Borden was sold in
pieces in a tax efficient manner. In this analysis, First Boston added the
reference range for each business unit derived from the analyses described above
to arrive at an enterprise value for Borden. The hypothetical range of values
for each of Borden's major business units derived from such analysis ranged from
approximately $800 million to $900 million for Niche Grocery; $750 million to
$950 million for Pasta; $800 million to $900 million for International Foods
Unit; $290 million to $350 million for Packaging; $900 million to $1,050 million
for Resins; $250 million to $325 million for Decorative Products; $130 million
to $170 million for Consumer Adhesives; and $140 million to $295 million for
miscellaneous businesses. Using these ranges gives a range of enterprise values
of $4,060 million to $4,940 million for Borden. After subtracting debt ($2,287
million), pension underfunding ($97 million) and capitalized administrative
overhead costs ($257 million), and adding in the present value of the net
operating loss carryforwards (reduced by the amount used to offset the tax
liability incurred in the hypothetical disaggregation of the business units)
(from $34 million (corresponding to the upper end of the divested businesses'
value range) to $125 million (corresponding to the lower end of the divested
businesses' value range) depending on the proceeds of the hypothetical
divestitures) the range of equity values for Borden is $1,544 million to $2,333
million, or $10.92 to $16.50 per share of Borden Common Stock. This compares to
the approximately $14.25 (based upon the Exchange Ratio and the Valuation
Period) to be received for each Borden Share in the Exchange Offer. As noted
above, these per share calculations are derived from the ranges obtained in the
Discounted Cash Flow, Comparable Trading and Comparable Acquisition analyses
described above, but no per share calculations were presented to the Borden
board from the individual analyses. For purposes of this Disaggregation
analysis, First Boston relied upon tax data and calculations provided by Borden
and assumed the Packaging and Industrial Products Unit and
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the Dairy Unit were sold separately in taxable transactions and the balance of
the food segment was sold tax free or retained by Borden.
Although in connection with the delivery of its opinion First Boston also
analyzed Holdings, First Boston's opinion is not a valuation of Holdings and
does not represent First Boston's view as to what the value of the Holdings
Common Stock to be exchanged for Borden Shares actually will be when the
Exchange Offer or the Merger is consummated. In giving its opinion as to the
fairness of the consideration to be received by the shareholders of Borden,
First Boston derived a range of values for Borden Common Stock using the
valuation analyses described above and compared them with $14.25, the trading
value (determined pursuant to the Exchange Ratio at the time of the delivery of
First Boston's opinion) of the shares of Holdings Common Stock to be received as
consideration in the Exchange Offer and the Merger. First Boston reviewed
Holdings' public filings with the Commission, reviewed publicly available
analyst and other third party reports addressing Holdings and Holdings Common
Stock and held discussions with senior management of Holdings. Based solely on
the foregoing, First Boston determined that it was not aware of any material
information relating to Holdings that was not publicly disclosed and thus
concluded that the trading value (at the time of the delivery of First Boston's
opinion) of Holdings Common Stock, a liquid, well-followed security, reflected
the market's reasonable assessment of its value. As a result of the limitation
on the Exchange Ratio, such actual value could be higher or lower than $14.25
per share at such times depending on the value of Holdings Common Stock. Because
of the large aggregate amount of Holdings Common Stock being distributed to
shareholders of Borden in exchange for their Borden Shares and other factors,
such securities may trade initially at prices below those at which they would
trade on a fully distributed basis.
In arriving at its opinion dated September 22, 1994, First Boston performed
a variety of financial analyses, including those summarized above. The summary
set forth in this section does not purport to be a complete description of First
Boston's analyses. First Boston believes that its analyses and the summary set
forth above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or of the summary above, without
considering all factors and analyses, could create an incomplete view of the
processes underlying First Boston's opinion. In addition, First Boston may have
given various analyses more or less weight than other analyses, and may have
deemed various assumptions more or less probable than other assumptions, so that
the ranges of valuation resulting from any particular analysis described above
should not be taken to be First Boston's view of the actual value of Borden or
Holdings. First Boston's analyses depend upon numerous assumptions with respect
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Borden and
Holdings. As described above, in its analyses First Boston assumed, with
Borden's consent, the absence of future adverse developments affecting Holdings'
tobacco business. See "Significant Considerations--Exclusion of the Effects of
Future Tobacco Developments from Opinions of Borden's Financial Advisors."
First Boston's analyses are not necessarily indicative of actual values or
actual future results that might be achieved and are not and do not purport to
be appraisals or otherwise reflective of prices at which the business units
actually could be sold or prices at which securities actually would trade.
OTHER INFORMATION CONCERNING BORDEN FINANCIAL ADVISORS
Borden has retained Lazard Freres and First Boston as financial advisors in
connection with the Merger, the Exchange Offer and other matters arising in
connection therewith. Pursuant to an engagement letter agreement dated September
13, 1994, between Borden and Lazard Freres, Borden paid Lazard Freres (i) a fee
of $3 million on execution of the Merger Agreement and has agreed to pay (ii) an
additional fee of $7 million, in the event KKR and its affiliates acquire at
least 50.1% of the outstanding Borden Shares. Lazard Freres was originally
retained by Borden on October 11, 1993 to provide certain financial advisory
services to Borden and has earned fees aggregating $2.2 million for such
services. Borden has also agreed to reimburse Lazard Freres for its
out-of-pocket expenses, including reasonable fees and disbursements of counsel,
and to indemnify Lazard Freres and its
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partners, employees, agents, affiliates or controlling persons against certain
liabilities, including certain liabilities under the federal securities laws,
relating to or arising out of its engagement.
Lazard Freres is an internationally recognized investment banking firm and
regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions and for other purposes. The Borden
board selected Lazard Freres to act as its financial advisor with respect to
certain matters, including the transactions with the Partnership, on the basis
of Lazard Freres' qualifications, expertise and reputation in investment
banking, in general, and mergers and acquisitions specifically. From time to
time, in the past, Lazard Freres has represented KKR and received customary fees
therefore.
Pursuant to an engagement letter dated as of October 26, 1993, as amended on
September 22, 1994, between Borden and First Boston, Borden has agreed to pay
First Boston (i) a fee of $3,000,000 upon commencement of the Exchange Offer and
(ii) an additional fee of $7,000,000 in the event KKR and its affiliates acquire
at least 51% of the outstanding Borden Shares. First Boston has earned fees
aggregating $2.3 million for other services rendered pursuant to this engagement
letter. Borden has also agreed to reimburse First Boston for its out-of-pocket
expenses, including reasonable fees and disbursements of counsel. Borden has
also agreed to indemnify First Boston and its affiliates, their respective
directors, officers, partners, agents and employees and each person, if any,
controlling First Boston or any of its affiliates against certain liabilities,
including certain liabilities under the federal securities laws, relating to or
arising out of its engagement.
First Boston is an internationally recognized investment banking firm and
regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions and for other purposes. The Borden
board selected First Boston to act as its financial advisor on the basis of
First Boston's international reputation, Borden's prior relationship with First
Boston and First Boston's familiarity with Borden. In the past, First Boston has
provided investment banking services for Borden, Holdings and KKR for which
First Boston has received customary compensation. In the ordinary course of
First Boston's business, First Boston actively trades the debt and equity
securities of both Borden and Holdings for its own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities.
TERMS OF THE EXCHANGE OFFER; EXPIRATION DATE
Upon the terms and subject to the conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser hereby offers to
exchange shares of Holdings Common Stock for all outstanding Borden Shares at
the Exchange Ratio, provided that such Borden Shares are validly tendered on or
prior to the Expiration Date and not properly withdrawn as described under
"--Withdrawal Rights."
The Purchaser will announce the exact Exchange Ratio with respect to each
Borden Share that is to be exchanged for shares of Holdings Common Stock in the
Exchange Offer by 9:00 A.M., New York City time, on the first business day of
the ten business day period ending on the Expiration Date. The Purchaser will
make such announcement by issuing a press release to the Dow Jones News Service.
During the ten business day period ending on the Expiration Date, holders of
Borden Shares will be able to obtain the exact Exchange Ratio with respect to
each Borden Share that is to be exchanged for shares of Holdings Common Stock in
the Exchange Offer from the Information Agent or the Dealer Manager for the
Exchange Offer at their respective telephone numbers appearing on the back cover
of this Offering Circular/Prospectus.
Upon the terms and subject to the conditions of the Exchange Offer,
including without limitation the Minimum Condition, the Purchaser will exchange
all such Borden Shares for shares of Holdings Common Stock. Tendering
shareholders will not be obligated to pay any charges or expenses of the
Exchange Agent or any brokerage commissions. Except as set forth in the Letter
of Transmittal, transfer taxes on the exchange of Borden Shares pursuant to the
Exchange Offer will be paid by or on behalf of the Purchaser.
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No fractional shares of Holdings Common Stock will be distributed. The
Exchange Agent, acting as agent for record holders of Borden Shares otherwise
entitled to receive fractional shares of Holdings Common Stock, will aggregate
all fractional shares and sell them for the accounts of such shareholders. In
addition, the Exchange Agent has advised the Purchaser that, upon notice to the
Exchange Agent from the related record holder, the Exchange Agent will aggregate
fractional shares on behalf of any beneficial holder of Borden Shares for whose
account a broker, nominee or other intermediary does not effect such a sale.
Beneficial holders will have the opportunity to indicate on a form provided in
connection with the Exchange Offer their desire to have fractional shares sold
for their account, although no assurance can be given that a broker, nominee or
other intermediary will carry out such instruction. Whether or not a beneficial
holder so indicates, the Exchange Agent has advised the Purchaser that brokers,
nominees or other intermediaries customarily effect sales, including through
disbursing or exchange agents, of fractional shares otherwise held for the
account of a beneficial holder and distribute the proceeds of such sales to the
beneficial holder of such shares. Proceeds from sales of fractional shares will
be paid by the Exchange Agent based upon the average net selling price per share
of all such sales (following the deduction of applicable transaction costs of
third parties other than the Exchange Agent, Borden, the Purchaser or affiliates
of any of the foregoing). See "--Procedure for Tendering Shares of Borden Common
Stock--Backup Federal Tax Withholding."
The Exchange Offer is subject to certain conditions set forth under
"--Certain Conditions of the Exchange Offer," any of which may be waived by the
Purchaser, except that in the event the Purchaser exercises the Option in whole
or in part, then the Purchaser is not permitted to waive the Minimum Condition.
If any condition is not satisfied, the Purchaser may (i) terminate the Exchange
Offer and return all tendered Borden Shares to tendering shareholders, (ii)
extend the Exchange Offer and, subject to withdrawal rights as set forth under
"--Withdrawal Rights," retain all such Borden Shares until the expiration of the
Exchange Offer as so extended, (iii) waive such condition (other than, in
certain circumstances described herein, the Minimum Condition) and, subject to
any requirement to extend the period of time during which the Exchange Offer is
open, exchange all Borden Shares validly tendered for exchange on or prior to
the Expiration Date and not properly withdrawn, or (iv) subject to applicable
law, delay acceptance for exchange of or exchange for any Borden Shares until
satisfaction or waiver of such condition to the Exchange Offer even though the
Exchange Offer has expired. For a description of the Purchaser's right to extend
the period of time during which the Exchange Offer is open and to amend, delay
or terminate the Exchange Offer and for a description of withdrawal rights of
Borden's shareholders in such circumstances, see "--Extension of Tender Period;
Termination; Amendment" and "--Withdrawal Rights." The Purchaser's right to
delay acceptance for exchange of or exchange for Borden Shares tendered for
exchange pursuant to the Exchange Offer is subject to provisions of applicable
law, including, to the extent applicable, Rule 14e-1(c) promulgated under the
Exchange Act, which requires that the Purchaser pay the consideration offered or
return the Borden Shares deposited by or on behalf of Borden shareholders
promptly after the termination or withdrawal of the Exchange Offer. Pursuant to
the Merger Agreement, the Purchaser has agreed that, upon the request of Borden
(and without limiting the number of times that the Purchaser may extend the
Exchange Offer, or the total number of days for which the Exchange Offer may be
extended), the Purchaser will extend the Exchange Offer, one or more times, for
an aggregate of not more than twenty business days. See "Description of Merger
Agreement and Conditional Purchase/Option Agreement."
Following the effectiveness of the Registration Statement, this Offering
Circular/Prospectus and the related Letter of Transmittal will be mailed to
record holders of Borden Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
Borden shareholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Borden Shares.
EXCHANGE OF SHARES OF BORDEN COMMON STOCK
Upon the terms and subject to the conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms and
conditions of any such extension or amendment), the
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Purchaser will accept for exchange, and will exchange for shares of Holdings
Common Stock, all Borden Shares validly tendered and not properly withdrawn on
or prior to the Expiration Date promptly after the later to occur of (i) the
Expiration Date and (ii) the satisfaction or waiver of the conditions of the
Exchange Offer set forth under "--Certain Conditions of the Exchange Offer."
Subject to applicable rules of the Commission, which, under certain
circumstances, require extension of the Exchange Offer and related withdrawal
rights, the Purchaser expressly reserves the right to delay acceptance for
exchange of or exchange for Borden Shares pending receipt of regulatory
approvals referred to under "--Certain Regulatory Approvals and Legal Matters."
See "--Withdrawal Rights" and "--Extension of Tender Period; Termination
Amendment."
Unless and until the Rights are redeemed in accordance with the Merger
Agreement, holders of Borden Shares will be required to tender the Rights
associated with such Borden Shares in order to effect a valid tender of such
Borden Shares. As of the date hereof, the Rights trade together with the Borden
Shares and a tender of the Borden Shares will be deemed to be a tender of the
associated Rights. If separate Rights Certificates are issued, tendering
shareholders will then be required to tender both Share Certificates and Rights
Certificates in order to effect a valid tender. See "--Procedure for Tendering
Shares of Borden Common Stock."
In all cases, exchange of Borden Shares tendered and accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of (i) Share Certificates (and Rights Certificates if applicable)
for Borden Shares, or a Book-Entry Confirmation of a book-entry transfer of such
Borden Shares into the Exchange Agent's account at a Book-Entry Transfer
Facility pursuant to the procedures set forth under "--Procedure for Tendering
Shares of Borden Common Stock," (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
(iii) any other documents required by the Letter of Transmittal.
For purposes of the Exchange Offer, the Purchaser will be deemed to have
accepted for exchange Borden Shares validly tendered and not properly withdrawn
as, if and when the Purchaser gives oral or written notice to the Exchange Agent
of the Purchaser's acceptance for exchange of such Borden Shares pursuant to the
Exchange Offer. Upon the terms and subject to the conditions of the Exchange
Offer, exchange of Borden Shares accepted for exchange pursuant to the Exchange
Offer will be made by deposit of tendered Borden Shares with the Exchange Agent,
which will act as agent for the tendering shareholders for the purpose of
receiving shares of Holdings Common Stock from the Purchaser and transmitting
such shares of Holdings Common Stock to tendering shareholders. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID PURSUANT TO THE EXCHANGE OFFER, REGARDLESS
OF ANY DELAY IN MAKING SUCH EXCHANGE. If, for any reason whatsoever, acceptance
for exchange of or exchange for any Borden Shares tendered pursuant to the
Exchange Offer is delayed, or the Purchaser is unable to accept for exchange or
exchange for Borden Shares tendered pursuant to the Exchange Offer, then,
without prejudice to the Purchaser's rights set forth herein, the Exchange Agent
may, nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c) under
the Exchange Act, retain tendered Borden Shares and such Borden Shares may not
be withdrawn except to the extent that the tendering stockholder is entitled to
and duly exercises withdrawal rights as described under "--Withdrawal Rights."
If any tendered Borden Shares are not accepted for exchange for any reason
or if Share Certificates (and Rights Certificates if applicable) are submitted
for more Borden Shares than are tendered, Share Certificates (and Rights
Certificates if applicable) for Borden Shares evidencing un-exchanged or un-
tendered Borden Shares will be returned, without expense to the tendering
shareholder (or, in the case of Borden Shares tendered by book-entry transfer
into the Exchange Agent's account at a Book-Entry Transfer Facility pursuant to
the procedures described under "--Procedure for Tendering Shares of Borden
Common Stock--Book-Entry Transfer," such Borden Shares will be credited to an
account maintained at such Book-Entry Transfer Facility), in each case with the
related Rights Certificates (if applicable), promptly following the expiration,
termination or withdrawal of the Exchange Offer.
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If, prior to the Expiration Date, the Purchaser increases the consideration
offered to shareholders pursuant to the Exchange Offer, such increased
consideration will be given to all shareholders whose Borden Shares are
exchanged pursuant to the Exchange Offer, whether or not such Borden Shares were
tendered or accepted for exchange prior to such increase in consideration.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates, the right to exchange
all or any portion of the Borden Shares tendered pursuant to the Exchange Offer,
but any such transfer or assignment will not relieve the Purchaser of its
obligations under the Exchange Offer and will in no way prejudice the rights of
tendering shareholders to exchange for Borden Shares validly tendered and
accepted for exchange pursuant to the Exchange Offer. According to the Merger
Agreement, it is presently contemplated that the right of the Purchaser to
exchange for shares of Borden Common Stock pursuant to the Exchange Offer and
the right of the Purchaser to exercise the Option will be assigned to the
Partnership or to a direct or indirect wholly owned subsidiary of the
Partnership, which may, in any such case, act for itself and/or as agent for one
or both of the Common Stock Partnerships, as the case may be.
PROCEDURE FOR TENDERING SHARES OF BORDEN COMMON STOCK
Except as set forth below, in order for Borden Shares (and Rights if
applicable) to be validly tendered pursuant to the Exchange Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Borden Shares (and Rights if
applicable) and any other documents required by the Letter of Transmittal, must
be received by the Exchange Agent at one of its addresses set forth on the back
cover of this Offering Circular/Prospectus on or prior to the Expiration Date
and either (i) the Share Certificates (and Rights Certificates if applicable)
evidencing tendered Borden Shares (and Rights if applicable) must be received by
the Exchange Agent at such address or such Borden Shares (and Rights if
applicable) must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the Exchange
Agent, in each case on or prior to the Expiration Date, or (ii) the guaranteed
delivery procedures described below must be complied with.
Unless and until the Rights are redeemed in accordance with the Merger
Agreement, holders of Borden Shares will be required to tender the Rights
associated with such Borden Shares in order to effect a valid tender of such
Borden Shares. Accordingly, shareholders who sell their Rights separately from
their Borden Shares and do not otherwise acquire Rights may not be able to
satisfy the requirements of the Exchange Offer for a valid tender of Borden
Shares. If the Distribution Date (as defined in the Rights Agreement) has
occurred and Rights Certificates have been distributed to such holders prior to
the date of tender pursuant to the Exchange Offer, Rights Certificates
representing a number of Rights equal to the number of Borden Shares being
tendered must be delivered to the Exchange Agent in order for such Borden Shares
to be validly tendered. If the Distribution Date has occurred and Rights
Certificates have not been distributed prior to the time Borden Shares are
tendered pursuant to the Exchange Offer, Rights may be tendered prior to a
shareholder receiving Rights Certificates by use of the guaranteed delivery
procedures described below. A tender of Borden Shares without Rights
Certificates constitutes an agreement by the tendering shareholder to deliver
Rights Certificates representing a number of Rights equal to the number of
Borden Shares tendered pursuant to the Exchange Offer to the Exchange Agent
within five business days after the date such Rights Certificates are
distributed. Unless and until the Rights are redeemed in accordance with the
Merger Agreement, the Purchaser reserves the right to require that it receive
such Rights Certificates prior to accepting Borden Shares for exchange. In that
event, exchange for Borden Shares tendered and accepted for exchange pursuant to
the Exchange Offer will be made only after timely receipt by the Exchange Agent
of, among other things, Rights Certificates, if Rights Certificates have been
distributed to holders of Borden Shares. See "Description of Merger Agreement
and Conditional Purchase/Option Agreement."
THE METHOD OF DELIVERY OF BORDEN SHARES (AND RIGHTS IF APPLICABLE), AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
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Book-Entry Transfer
The Exchange Agent will make a request to establish accounts with respect to
the Borden Shares at the Book-Entry Transfer Facilities for purposes of the
Exchange Offer within two business days after the date of this Offering
Circular/Prospectus. Any financial institution that is a participant in the
system of any Book-Entry Transfer Facility may make book-entry delivery of
Borden Shares by causing such Book-Entry Transfer Facility to transfer such
Borden Shares into the Exchange Agent's account at such Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Borden Shares may be effected
through book-entry transfer at a Book-Entry Transfer Facility, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other documents required by the
Letter of Transmittal, must, in any case, be received by the Exchange Agent at
one of its addresses set forth on the back cover of this Offering
Circular/Prospectus prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with.
If Rights Certificates are issued, to the extent that the Rights become
eligible for book-entry transfer under procedures established by a particular
Book-Entry Transfer Facility, the Exchange Agent will make a request to
establish an account with respect to the Rights at such Book-Entry Transfer
Facility as soon as practicable. No assurance can be given, however, that
book-entry delivery of Rights will be available. If book-entry delivery of
Rights is available, the foregoing book-entry transfer procedure will also apply
to Rights. If book-entry delivery is not available and if separate Rights
Certificates have been issued, a tendering shareholder is not relieved of
delivery requirements hereunder and thus will be required to tender Rights by
means of actual delivery of Rights Certificates or pursuant to the guaranteed
delivery procedures set forth below.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
Signature Guarantees
Signatures on Letters of Transmittal must be guaranteed by a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., or by a commercial bank or trust
company having an office or correspondent in the United States (each of the
foregoing being referred to as an "Eligible Institution"), except in cases where
Borden Shares are tendered (i) by a registered holder of Borden Shares who has
not completed either the box labeled "Special Exchange Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instructions 1 and 5 of the Letter
of Transmittal.
If the Share Certificates (or the Rights Certificates if applicable) are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment in respect of fractional shares of Holdings Common
Stock is to be made, or Share Certificates (or Rights Certificates if
applicable) not accepted for exchange or not tendered are to be returned, to a
person other than the registered holder(s), the Share Certificates (or Rights
Certificates if applicable), as the case may be, must be endorsed or accompanied
by appropriate stock powers, in either case, signed exactly as the name(s) of
the registered holder(s) appear on such certificates, with the signature(s) on
such certificates or stock powers guaranteed as aforesaid. See Instructions 1
and 5 of the Letter of Transmittal.
If Share Certificates (and Rights Certificates if applicable) are forwarded
separately to the Exchange Agent, a properly completed and duly executed Letter
of Transmittal (or a facsimile thereof) must accompany each such delivery.
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Guaranteed Delivery
If a shareholder desires to tender Borden Shares (and Rights if applicable)
pursuant to the Exchange Offer and such shareholder's Share Certificates (or
Rights Certificates if applicable) are not immediately available or such
shareholder cannot deliver Share Certificates (or Rights Certificates if
applicable) and all other required documents to reach the Exchange Agent on or
prior to the Expiration Date, or such shareholder cannot complete the procedure
for delivery by book-entry transfer on a timely basis, such Borden Shares (and
Rights if applicable) may nevertheless be tendered, provided that all of the
following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates and Rights Certificates, as the case may be
(or a Book-Entry Confirmation), representing all tendered Borden Shares (and
Rights if applicable), in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message) and any other documents
required by the Letter of Transmittal are received by the Exchange Agent
within (A) in the case of Borden Shares, five NYSE trading days after the
date of execution of such Notice of Guaranteed Delivery, and (B) in the case
of Rights, a period ending on the later of (x) five NYSE trading days after
the date of execution of such Notice of Guaranteed Delivery and (y) five
business days after the date Rights Certificates are distributed to
shareholders of Borden (if applicable).
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Exchange Agent and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, exchange of Borden Shares
accepted for exchange pursuant to the Exchange Offer will in all cases be made
only after timely receipt by the Exchange Agent of Shares Certificates for, or
of Book-Entry Confirmation with respect to, such Borden Shares, and if the
Distribution Date has occurred, Rights Certificates for, or a Book-Entry
Confirmation, if available, with respect to, the associated Rights (unless the
Purchaser elects, in its sole discretion, to exchange such Borden Shares pending
receipt of the Rights Certificates for, or a Book-Entry Confirmation with
respect to, such Rights), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message), and
any other documents required by the Letter of Transmittal. Accordingly, exchange
of Borden Shares might not be made to all tendering shareholders at the same
time, and will depend upon when Share Certificates (or Rights Certificates if
applicable) or Book-Entry Confirmations of such Borden Shares (or Rights if
applicable) are received into the Exchange Agent's account at a Book-Entry
Transfer Facility.
If the Rights are redeemed by Borden in accordance with the Merger
Agreement, the guaranteed delivery procedure with respect to Rights Certificates
and the requirement for the tender of Rights will no longer apply.
Appointment as Proxy
By executing the Letter of Transmittal, a tendering shareholder irrevocably
appoints designees of the Purchaser, and each of them, as such shareholder's
attorneys-in-fact and proxies, with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such shareholder's
rights with respect to the Borden Shares (and Rights if applicable) tendered by
such shareholder and accepted for exchange by the Purchaser (and with respect to
any and all other Borden Shares (and
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Rights if applicable) or other securities issued or issuable in respect of such
Borden Shares (and Rights if applicable) on or after the date hereof). All such
powers of attorney and proxies shall be considered irrevocable and coupled with
an interest in the tendered Borden Shares (and Rights if applicable). Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts such Borden Shares for exchange. Upon such acceptance for exchange, all
prior powers of attorney and proxies given by such shareholder with respect to
such Borden Shares (and Rights if applicable) (and such other shares and
securities) will be revoked without further action, and no subsequent powers of
attorney and proxies may be given nor any subsequent written consents executed
(and, if given or executed, will not be deemed effective). The designees of the
Purchaser will be empowered to exercise all voting and other rights of such
shareholder as they in their sole discretion may deem proper at any annual or
special meeting of Borden's shareholders or any adjournment or postponement
thereof, by written consent in lieu of any such meeting or otherwise. The
Purchaser reserves the right to require that, in order for Borden Shares (and
Rights if applicable) to be deemed validly tendered, immediately upon the
Purchaser's exchange for such Borden Shares, the Purchaser must be able to
exercise full voting rights with respect to such Borden Shares (and Rights if
applicable) and other securities, including voting at any meeting of
shareholders.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Borden Shares (and Rights
if applicable) will be determined by the Purchaser, in its sole discretion,
which determination shall be final and binding on all parties. The Purchaser
reserves the absolute right to reject any and all tenders determined by it not
to be in proper form or the acceptance for exchange of which may, in the opinion
of its counsel, be unlawful. Except as otherwise described herein, the Purchaser
also reserves the absolute right to waive any of the conditions of the Exchange
Offer or any defect or irregularity in any tender of Borden Shares (and Rights
if applicable) of any particular shareholder whether or not similar defects or
irregularities are waived in the case of other shareholders. No tender of Borden
Shares (and Rights if applicable) will be deemed to have been validly made until
all defects and irregularities have been cured or waived. None of the Purchaser,
the Common Stock Partnerships, the Dealer Manager, the Exchange Agent, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. The Purchaser's interpretation of the
terms and conditions of the Exchange Offer (including the Letter of Transmittal
and the instructions thereto) will be final and binding.
Backup Federal Tax Withholding
UNDER THE FEDERAL INCOME TAX LAWS, THE EXCHANGE AGENT WILL BE REQUIRED TO
WITHHOLD 31 PERCENT OF THE AMOUNT OF ANY PAYMENTS MADE TO CERTAIN SHAREHOLDERS
PURSUANT TO THE EXCHANGE OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING, EACH SUCH SHAREHOLDER MUST PROVIDE THE EXCHANGE AGENT WITH SUCH
SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE
INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
Other Matters
The Purchaser's acceptance for exchange of Borden Shares tendered pursuant
to any of the procedures described above will constitute a binding agreement
between the tendering shareholder and the Purchaser upon the terms and subject
to the conditions of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of Borden Shares (and Rights if applicable) made pursuant to the
Exchange Offer are irrevocable, except that Borden Shares (and Rights if
applicable) tendered pursuant to the Exchange Offer may be withdrawn at any time
on or prior to the Expiration Date and, unless theretofore accepted
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for exchange by the Purchaser pursuant to the Exchange Offer, may also be
withdrawn at any time after January 20, 1995. If the Purchaser extends the
Exchange Offer, is delayed in its acceptance for exchange of or exchange for
Borden Shares or is unable to exchange Borden Shares validly tendered pursuant
to the Exchange Offer for any reason, then, without prejudice to the Purchaser's
rights under the Exchange Offer, the Exchange Agent may nevertheless, on behalf
of the Purchaser, retain tendered Borden Shares (and Rights if applicable), and
such Borden Shares (and Rights if applicable) may not be withdrawn except to
the extent that tendering shareholders are entitled to withdrawal rights as
described below. Any such delay will be by an extension of the Exchange Offer
to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent
at one of its addresses set forth on the back cover of this Offering
Circular/Prospectus. Any notice of withdrawal must specify the name of the
person who tendered the Borden Shares (and Rights if applicable) to be
withdrawn, the number of Borden Shares (and Rights if applicable) to be
withdrawn and the name of the registered holder, if different from that of the
person who tendered such Borden Shares (and Rights if applicable). If Share
Certificates (or Rights Certificates if applicable) for Borden Shares (and
Rights if applicable) to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Exchange Agent and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Borden Shares (and Rights if
applicable) have been tendered for the account of an Eligible Institution. If
Borden Shares (and Rights if applicable) have been tendered pursuant to the
procedure for book-entry transfer as described under "--Procedure for Tendering
Shares of Borden Common Stock--Book-Entry Transfer," any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Borden Shares (and Rights if
applicable), in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by any method of delivery described in the first sentence
of this paragraph.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Partnership, any of their affiliates or assigns, the Dealer
Manager, the Exchange Agent, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Borden Shares (and Rights if applicable) properly withdrawn will
thereafter be deemed not to have been validly tendered for purposes of the
Exchange Offer. However, withdrawn Borden Shares (and Rights if applicable) may
be re-tendered at any time on or prior to the Expiration Date by following one
of the procedures described under "--Procedure for Tendering Shares of Borden
Common Stock."
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period during which the Exchange Offer
is open for any reason, including the occurrence of any of the conditions
specified under "--Certain Conditions of the Exchange Offer," by giving oral or
written notice of such extension to the Exchange Agent. During any such
extension, all Borden Shares (and Rights if applicable) previously tendered and
not properly withdrawn will remain subject to the Exchange Offer, subject to the
rights of a tendering shareholder to withdraw such shareholder's Borden Shares
(and Rights if applicable). See "--Withdrawal Rights."
Pursuant to the Merger Agreement, the Purchaser has agreed that, upon the
request of Borden (and without limiting the number of times that the Purchaser
may extend the Exchange Offer, or the total number of days for which the
Exchange Offer may be extended), the Purchaser will extend the
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Exchange Offer, one or more times, for an aggregate of not more than twenty
business days. See "Description of Merger Agreement and Conditional
Purchase/Option Agreement."
The Purchaser acknowledges (i) that Rule 14e-1(c) under the Exchange Act
requires the Purchaser to pay the consideration offered or return the Borden
Shares (and Rights if applicable) tendered promptly after the termination or
withdrawal of the Exchange Offer and (ii) that the Purchaser may not delay
acceptance for exchange of, or exchange for (except as provided in clause (i) of
the succeeding sentence), any Borden Shares upon the occurrence of any of the
conditions specified under "--Certain Conditions of the Exchange Offer" without
extending the period of time during which the Exchange Offer is open. Subject to
the foregoing and any other applicable regulations of the Commission, the
Purchaser reserves the right, in its sole discretion, at any time or from time
to time to (i) delay acceptance for exchange of or, regardless of whether such
Borden Shares were theretofore accepted for exchange, exchange for any Borden
Shares pending receipt of any regulatory approvals specified under "--Certain
Regulatory Approvals and Legal Matters," (ii) terminate the Exchange Offer
(whether or not any Borden Shares have theretofore been accepted for exchange)
if any of the conditions referred to under "--Certain Conditions of the Exchange
Offer" has not been satisfied or upon the occurrence of any of the conditions
specified thereunder and (iii) waive any condition or otherwise amend the
Exchange Offer in any respect, in each case, by giving oral or written notice of
such delay, termination, waiver or amendment to the Exchange Agent and by making
a public announcement thereof.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, and such announcement
in the case of an extension will be made no later than 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Purchaser may choose to make any public
announcement, except as provided by applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that material changes be promptly
disseminated to holders of Borden Shares), the Purchaser shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Exchange Offer,
or if it waives a material condition of the Exchange Offer, the Purchaser will
extend the Exchange Offer to the extent required by Rules 14d-4(c) and 14d-6(d)
under the Exchange Act. The minimum period during which an offer must remain
open following material changes in the terms of the offer, other than a change
in price or a change in percentage of securities sought or a change in any
dealer's soliciting fee, will depend upon the facts and circumstances, including
the materiality, of the changes. With respect to a change in price or, subject
to certain limitations, a change in the percentage of securities sought or a
change in any dealer's soliciting fee, a minimum ten business day period from
the day of such change is generally required to allow for adequate dissemination
to shareholders. Accordingly, if prior to the Expiration Date, the Purchaser
decreases the number of Borden Shares being sought, increases or decreases the
consideration offered pursuant to the Exchange Offer or changes any dealer's
soliciting fee, and if the Exchange Offer is scheduled to expire at any time
earlier than the period ending on the tenth business day from the date that
notice of such increase, decrease or change is first published, sent or given to
shareholders, the Exchange Offer will be extended at least until the expiration
of such ten business day period. For purposes of the Exchange Offer, a "business
day" means any day other than a Saturday, Sunday or a federal holiday and
consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
CERTAIN CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Purchaser
shall not be required to accept for exchange, exchange or deliver any shares of
Holdings Common Stock for, subject to Rule 14e-1(c) under the Exchange Act, any
Borden Shares tendered and may terminate or (subject to the terms of the Merger
Agreement) amend the Exchange Offer or may postpone the acceptance for exchange
of the Borden Shares tendered, if immediately before acceptance for exchange of
any such
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Borden Shares (whether or not any Borden Shares have theretofore been accepted
for exchange pursuant to the Exchange Offer): (i) the Minimum Condition shall
not have been satisfied; (ii) any waiting period under the HSR Act applicable to
the purchase of Borden Shares pursuant to the Exchange Offer shall not have
expired or been terminated or the requisite approvals, authorizations or
consents required by the Investment Canada Act, Canada's Competition Act and the
European Community (see "--Certain Regulatory Approvals and Legal Matters")
shall not have been obtained; (iii) all consents and waivers on terms
satisfactory to the Partnership necessary in order that the consummation of the
transactions contemplated by the Merger Agreement and the Conditional
Purchase/Option Agreement not constitute (A) an event of default or an event
which with or without notice or the passage of time would constitute an event of
default under any indebtedness, partnership agreement or equityholders agreement
of Borden or any subsidiary (or Borden Chemicals and Plastics Limited
Partnership, Borden Chemicals and Plastics Operating Limited Partnership and
T.M. Investors Limited Partnership) ("Indebtedness"), including, without
limitation, Borden's Amended and Restated Credit Agreement dated as of August
16, 1994 with Citibank, N.A., as Administrative Agent, and T.M. Investors
Limited Partnership's Amended and Restated Credit Agreement dated as of August
16, 1994 with Citibank, N.A., as Administrative Agent, or (B) an event which
would individually or in combination with other events give rise to an
obligation on the part of Borden to repay or repurchase any Indebtedness,
partnership interest or equity interest, which event of default or other event
described in clause (A) or (B) above would give rise to, with or without notice
or the passage of time and taking into account any cross-acceleration or
cross-default provisions, the obligation to repay prior to maturity or the
acceleration of an aggregate of at least $25 million of Indebtedness or other
obligations shall not have been obtained; (iv) Borden shall not have refinanced,
or received commitments for refinancing or indications satisfactory to the
Partnership from lenders that it will be able to refinance, in each case on
market terms reasonably acceptable to the Partnership, the principal bank credit
facilities of Borden and T.M.I. Associates, L.P., provided that such refinancing
shall not be required to increase the available lines of credit under such
facilities except to meet the working capital and other reasonable needs of
Borden and its subsidiaries and shall principally be related to extending
maturities and renegotiating repayment schedules under such facilities as
appropriate to meet Borden's business plan as determined by the Partnership and
Borden; (v) the Registration Statement and any required post-effective amendment
thereto shall not have become effective under the Securities Act or shall be the
subject of any stop order or proceedings seeking a stop order, or any material
"blue sky" and other state securities laws applicable to the registration of the
Holdings Common Stock to be exchanged for Borden Common Stock shall not have
been complied with; or (vi) any of the following shall occur and remain in
effect and shall, in the reasonable judgment of the Purchaser in any such case,
make it inadvisable to proceed with the Exchange Offer or such acceptance for
exchange of any of the Borden Shares or to proceed with the Merger:
(a) (i) any representation or warranty of Borden in the Merger Agreement
shall have been untrue as of the date of the Merger Agreement and shall
continue to be untrue, which untrue representations or warranties, in the
aggregate, would have a Material Adverse Effect (as defined below) on
Borden; or there has been a breach by Borden of any covenant or agreement
set forth in the Merger Agreement or the Conditional Purchase/Option
Agreement having a Material Adverse Effect on Borden which has not been
cured; (ii) the SEC Documents (as defined below) filed by Borden with the
Commission since the date of the Merger Agreement did not comply in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the
Commission promulgated thereunder applicable to such SEC Documents, and the
SEC Documents (including any and all financial statements included therein),
except to the extent revised or superseded by a subsequent filing with the
Commission, as of such dates contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; or (iii) the
consolidated financial
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statements of Borden included in the SEC Documents filed since the date of
the Merger Agreement did not comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the Commission with respect thereto, were not prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the
Commission) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and did not fairly present
the consolidated financial position of Borden and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited quarterly statements, to normal year-end audit adjustments);
(b) there shall be any United States or foreign statute, rule,
regulation, decree, order or injunction promulgated, enacted, entered into
or enforced by any governmental entity, that (i) restrains or prohibits the
making or consummation of the Exchange Offer or the Merger or restrains or
prohibits the performance of the Merger Agreement or the Conditional
Purchase/Option Agreement, (ii) prohibits or materially limits the ownership
or operation by the Partnership or the Purchaser of all or any substantial
portion of the business or assets of Borden or any of its subsidiaries or
compels the Partnership or the Purchaser to dispose of or to hold separate
all or any substantial portion of the business or assets of Borden or any of
its subsidiaries, or imposes any material limitation on the ability of the
Partnership or the Purchaser to conduct such business or own such assets or
(iii) imposes material limitations on the ability of the Partnership or the
Purchaser (or any other affiliate of the Partnership or the Purchaser) to
acquire or hold or to exercise full rights of ownership of the Borden
Shares, including, but not limited to, the right to vote the Borden Shares
acquired by the Purchaser on all matters properly presented to the
shareholders of Borden; provided, however, that the Partnership and the
Purchaser shall have used their best efforts to have any such decree, order
or injunction vacated or reversed;
(c) any change shall have occurred since the date of the Merger
Agreement in the business, financial condition or results of operations of
Borden or any of its subsidiaries which has had, or would reasonably be
expected to have, a Material Adverse Effect with respect to Borden,
including, without limitation, the commencement in respect of, or by, Borden
of an involuntary, or voluntary, proceeding under any applicable bankruptcy
law, decree, order or any other case or proceeding adjudging Borden a
bankrupt or insolvent, or the condition of Borden is such that it is unable
to pay all of its liabilities as such liabilities mature or has unreasonably
small capital for conducting the business theretofore or proposed to be
conducted by it;
(d) there shall have occurred (and the adverse effect of such occurrence
shall, in the reasonable judgment of the Purchaser, be continuing) (i) any
general suspension of trading in, or limitation on prices for, securities on
any national securities exchange or in the over-the-counter market in the
United States, (ii) any extraordinary or material adverse change in United
States financial markets generally, including, without limitation, a decline
of at least 25% in either the Dow Jones Average of Industrial Stocks or the
Standard & Poor's 500 index from the date of the Merger Agreement, (iii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (iv) any limitation (whether or not
mandatory) by any governmental entity, on, or any other event that would
reasonably be expected to materially adversely affect, the extension of
credit by banks or other lending institutions, (v) a commencement of a war
or armed hostilities or other national or international calamity directly or
indirectly involving the United States (other than in Haiti) which would
reasonably be expected to have a Material Adverse Effect or materially
adversely affect (or materially delay) the consummation of the Exchange
Offer or (vi) in the case of any of the foregoing existing at the time of
commencement of the Exchange Offer, a material acceleration or worsening
thereof; or
(e) the Merger Agreement shall have been terminated in accordance with
its terms or the Exchange Offer shall have been amended or terminated with
the consent of Borden.
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The foregoing conditions are for the sole benefit of the Partnership and the
Purchaser and may be asserted by the Partnership or the Purchaser regardless of
the circumstances giving rise to any such condition and may be waived by the
Partnership or the Purchaser in whole or in part, provided, however, that if the
Purchaser shall have exercised the Option in whole or in part prior to the
termination of the Exchange Offer, the Purchaser shall not be permitted to waive
the Minimum Condition. The Partnership's or the Purchaser's failure at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
The term "Material Adverse Effect" means, when used in connection with any
person, any change or effect that either individually or in the aggregate with
all other such other changes or effects is materially adverse to the business,
financial condition or results of operations of such person and its subsidiaries
taken as a whole or adversely affects the ability of such person to consummate
the transactions contemplated by the Merger Agreement in any material respect.
The term "SEC Documents" means, with respect to any person, all reports,
schedules, forms, statements and other documents filed with the Commission by
such person since January 1, 1990, in each case including all exhibits and
schedules thereto and documents incorporated by reference therein.
MATERIAL TAX CONSEQUENCES
Certain Federal Income Tax Consequences. In the opinion of Simpson Thacher &
Bartlett, the following summary sets forth the material federal income tax
consequences of the Exchange Offer and the Merger to a Borden shareholder. The
tax treatment of each Borden shareholder will depend in part upon his particular
situation. The discussion below applies to a Borden shareholder that is, for
United States federal income tax purposes, a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source. Moreover, the discussion below deals only
with Borden Shares held as capital assets and does not deal with persons in
special tax situations, such as financial institutions, insurance companies,
broker-dealers, persons who are not citizens or residents of the United States,
shareholders who acquired their Borden Shares through the exercise of an
employee stock option or otherwise as compensation, and persons who received
payments in respect of options to acquire Borden Shares. ALL SHAREHOLDERS SHOULD
CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE
EXCHANGE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL AND FOREIGN TAX LAWS.
The receipt of shares of Holdings Common Stock pursuant to the Exchange
Offer or the Merger will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction under applicable state, local,
foreign or other tax laws. A Borden shareholder will recognize gain or loss for
federal income tax purposes in an amount equal to the difference between the
fair market value of the consideration received (including cash received in lieu
of fractional shares) and such shareholder's adjusted tax basis in the Borden
Shares. The fair market value of the Holdings Common Stock will be the mean
between the high and the low trading prices on the NYSE Composite Tape on the
date the Purchaser accepts such Borden Shares for exchange pursuant to the
Exchange Offer or the effective date of the Merger, as the case may be. For
federal income tax purposes, such gain or loss will be a capital gain or loss,
and a long-term capital gain or loss if such shareholder's holding period is
more than one year as of the date the Purchaser accepts such Borden Shares for
exchange pursuant to the Exchange Offer or the effective date of the Merger, as
the case may be. There are limitations on the deductibility of capital losses.
The exchange of Borden Shares for shares of Holdings Common Stock pursuant to
the Exchange Offer or the Merger may also have tax consequences under applicable
state, local, foreign or other tax laws.
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A Borden shareholder will have a tax basis in the shares of Holdings Common
Stock received pursuant to the Exchange Offer or the Proposed Merger equal to
the fair market value of such shares as of the date the Purchaser accepts such
Borden Shares for exchange pursuant to the Exchange Offer or the effective date
of the Merger, as the case may be, and a new holding period for such shares will
commence on the day after such date.
New York Real Estate Transfer Taxes. The New York State Real Property
Transfer Gains Tax, the New York State Real Estate Transfer Tax and the New York
City Real Property Transfer Tax (collectively, the "Real Estate Transfer Taxes")
are imposed on the transfer or acquisition, directly or indirectly, of
controlling interests in an entity which owns interests in real property located
in New York State or New York City, as the case may be. The Exchange Offer and
the Merger will result in the taxable transfer of controlling interests in
entities which own New York State or New York City real property for purposes of
the Real Estate Transfer Taxes. Although any Real Estate Transfer Taxes could be
imposed directly on the shareholders of Borden, Borden will complete and file
any necessary tax returns, and Borden will pay all Real Estate Transfer Taxes
that are imposed as a result of the Exchange Offer and the Merger. Upon receipt
of the consideration for either the Exchange Offer or the Merger, each
shareholder of Borden will be deemed to have agreed to be bound by the Real
Estate Transfer Tax returns filed by Borden.
FEES AND EXPENSES OF THE EXCHANGE OFFER AND SOURCE OF FUNDS
Morgan Stanley is acting as the Purchaser's financial advisor in connection
with the proposed acquisition of Borden Common Stock and as Dealer Manager for
the Exchange Offer. In connection with such services, the Purchaser has agreed
to pay to Morgan Stanley an advisory fee (based on the time and effort expended
by Morgan Stanley in connection with the transaction) estimated to be between
$200,000 and $300,000, a fee of $3 million payable upon commencement of the
Exchange Offer (against which the advisory fee will be credited) and a
successful transaction fee of up to $7.95 million (against which both the
advisory fee and the Exchange Offer commencement fee will be credited) based on
the aggregate value of the consideration exchanged for Borden Shares in the
transaction. The successful transaction fee will become payable in the event
that the Purchaser acquires more than 51% of the Borden Shares (pursuant to the
Exchange Offer, the Merger or otherwise). In addition, the Purchaser has agreed
to reimburse Morgan Stanley for its reasonable out-of-pocket expenses, including
fees and expenses of its legal counsel, in connection with the provision of its
financial advisory services to the Purchaser and the Exchange Offer, and has
agreed to indemnify Morgan Stanley against certain liabilities and expenses
relating to, arising out of or in connection with its engagement, including
certain liabilities under the federal securities laws.
The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and First Chicago Trust Company of New York to act as the Exchange Agent
in connection with the Exchange Offer. The Information Agent may contact holders
of shares of Borden Common Stock by mail, telephone, telex, telegraph and
personal interviews and may request brokers, dealers and other nominee
shareholders to forward materials relating to the Exchange Offer to beneficial
owners. The Information Agent and the Exchange Agent each will receive
reasonable and customary compensation for their respective services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities in connection therewith, including certain
liabilities under the federal securities laws. Neither the Information Agent nor
the Exchange Agent has been retained to make solicitations or recommendations in
their respective roles as Information Agent or Exchange Agent.
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person for soliciting tenders of shares of Borden Common Stock
pursuant to the Exchange Offer. Brokers, dealers, commercial banks and trust
companies will, upon request, be reimbursed by the Purchaser for reasonable and
necessary costs and expenses incurred by them in forwarding materials to their
customers.
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The consideration to be provided to Borden's shareholders pursuant to the
Exchange Offer and the Merger will be shares of Holdings Common Stock currently
owned by the Common Stock Partnerships. Certain fees and expenses of the
Partnership and the Purchaser in connection with the Transactions will be paid
by Borden pursuant to the Merger Agreement or by the Partnership and/or KKR,
from internally generated funds. See "Description of Merger Agreement and
Conditional Purchase/Option Agreement--Merger Agreement."
Pursuant to the Registration Rights Agreement, Holdings will pay certain
expenses incident to the registration of the Holdings Common Stock to be
exchanged for Borden Common Stock, including filing fees.
Pursuant to an Indemnification Agreement, each of Holdings, Borden and the
Partnership and the Purchaser have agreed to indemnify the other parties for
certain liabilities under the Securities Act and the Exchange Act with respect
to certain information furnished by such parties to the others in connection
with the preparation of the Registration Statement and this Offering
Circular/Prospectus.
CERTAIN REGULATORY APPROVALS AND LEGAL MATTERS
General
Except as set forth below, neither the Purchaser nor the Partnership is
aware of any governmental licenses or other regulatory permits that appear to be
material to the business of Borden and its subsidiaries, taken as a whole, that
might be adversely affected by the Purchaser's acquisition of Borden Shares (and
the indirect acquisition of the stock of Borden's subsidiaries) as contemplated
herein, or of any filings, approvals or other actions by or with any domestic
(federal or state), foreign or supranational governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of Borden Shares (or the indirect acquisition of the stock of
Borden's subsidiaries) by the Purchaser pursuant to the Exchange Offer as
contemplated herein. Should any such approval or other action be required, it is
the Purchaser's present intention to seek such approval or action. The Purchaser
does not presently intend, however, to delay the exchange of Borden Shares
tendered pursuant to the Exchange Offer pending the receipt of any such approval
or the taking of any such action (subject to the Purchaser's right to delay or
decline to exchange Borden Shares if any of the conditions described under
"--Certain Conditions of the Exchange Offer" shall have occurred). There can be
no assurance that any such approval or other action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the business of Borden, the Partnership or the Purchaser or that
certain parts of the businesses of Borden, the Partnership or the Purchaser
might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or other action or in
the event that such approval was not obtained or such other action was not
taken, any of which could cause the Purchaser to elect to terminate the Exchange
Offer without the exchange of the Borden Shares thereunder. In the Merger
Agreement, Borden has agreed to make any and all divestitures or undertakings
required by the FTC, the Antitrust Division or any other applicable governmental
entity in connection with the Transactions, which divestitures in each case
shall be reasonably acceptable to the Partnership and the Purchaser, provided
that certain conditions are met. See "Description of Merger Agreement and
Conditional Purchase/Option Agreement--Merger Agreement."
State Takeover Laws
A number of states (including New Jersey, where Borden is incorporated) have
adopted takeover laws and regulations which purport, to varying degrees, to be
applicable to attempts to acquire securities of corporations which are
incorporated in such states or which have, or whose business operations have
substantial economic effects in such states, or which have substantial assets,
security holders, principal executive offices or principal places of business
therein. However, in 1982, the Supreme Court of the United States, in Edgar v.
Mite Corp., invalidated on constitutional grounds the Illinois Business
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Takeovers Act, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult, and the reasoning in
such decision is likely to apply to certain other state takeover statutes. In
1987, however, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of
the United States held that the State of Indiana could, as a matter of corporate
law and, in particular, those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without the prior approval of the remaining
stockholders, provided that such laws were applicable only under certain
conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal
district court in Oklahoma ruled that the Oklahoma takeover statutes were
unconstitutional insofar as they applied to corporations incorporated outside of
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in Grand
Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
Under New Jersey law, a publicly-traded New Jersey corporation with its
principal executive offices or significant business operations located in New
Jersey is prohibited from consummating a business combination with an interested
shareholder for a period of five years unless the business combination is
approved by the board of directors prior to the date the shareholder became
interested. In addition, after the five-year period a New Jersey corporation may
not engage in a business combination with an interested shareholder unless
either (i) the business combination is approved by the board of directors prior
to the date the shareholder became an interested shareholder or (ii) the
business combination is approved by the holders of two-thirds of the voting
stock not held by the interested shareholder or (iii) subject to certain other
requirements, the consideration per share received in the business combination
is at least equal to the greater of (x) the highest price per share of the same
class paid by the interested shareholder in the five years prior to either the
announcement of the business combination or the date at which the interested
shareholder became such, whichever results in a higher price, and (y) the market
price on either the date the business combination is announced or on the date
the interested shareholder first became such, whichever is higher. New Jersey
law defines "interested shareholder" as a person beneficially owning 10% or more
of the outstanding voting stock of the corporation. Because Borden's Board of
Directors approved the Merger Agreement and the transactions contemplated
thereby prior to the Purchaser attaining the status of an "interested
shareholder," the Merger may be effected prior to the expiration of the five
year waiting period provided in the New Jersey business combination statutes.
See "Description of Merger Agreement and Conditional Purchase/Option
Agreement--Merger Agreement--Merger" for a discussion of certain limitations on
business combinations between the Partnership (and its affiliates) and Borden
under certain circumstances. See "Comparison of Rights of Holders of Borden and
Holdings Common Stock."
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Exchange Offer. The Purchaser
reserves the right to challenge the validity or applicability of any state law
allegedly applicable to the Exchange Offer and nothing in this Offering
Circular/Prospectus nor any action taken in connection herewith is intended as a
waiver of that right. In the event that any state takeover statute is found
applicable to the Exchange Offer, the Purchaser might be unable to accept for
exchange or exchange for Borden Shares tendered pursuant to the Exchange Offer
or be delayed in continuing or consummating the Exchange Offer. In such case,
the Purchaser may not be obligated to accept for exchange, or exchange for, any
Borden Shares tendered. See "--Certain Conditions of the Exchange Offer."
Antitrust
Under the HSR Act and the rules that have been promulgated thereunder by the
FTC, certain acquisition transactions may not be consummated unless certain
information has been furnished to the
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Antitrust Division and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Borden Shares pursuant to the Exchange Offer is
subject to such requirements.
The Partnership filed on September 19, 1994 with the FTC and the Antitrust
Division a Premerger Notification and Report Form in connection with the
exchange of Borden Shares pursuant to the Exchange Offer. Under the provisions
of the HSR Act applicable to the Exchange Offer, the exchange of Borden Shares
pursuant to the Exchange Offer was not permitted to be consummated until the
expiration of a 30-calendar day waiting period following the filing by the
Partnership. Accordingly, the waiting period under the HSR Act applicable to
such exchange of Borden Shares pursuant to the Exchange Offer was to expire at
11:59 P.M., New York City time, on October 19, 1994, unless extended by a
request from the FTC or the Antitrust Division for additional information or
documentary material prior to its expiration. On October 19, 1994, the FTC
requested additional information and documentary material from the Partnership
and the Partnership responded to such request on November 4, 1994. The waiting
period was terminated by the FTC effective at 11:59 P.M., New York City time, on
November 17, 1994.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Borden
Shares by the Purchaser pursuant to the Exchange Offer. At any time before or
after the exchange by the Purchaser of Borden Shares pursuant to the Exchange
Offer, the FTC and the Antitrust Division could, notwithstanding termination of
the waiting period, take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
exchange of Borden Shares pursuant to the Exchange Offer or seeking the
divestiture of Borden Shares acquired by the Purchaser or the divestiture of
substantial assets of Holdings, the Partnership, its subsidiaries or Borden.
Private parties and state attorneys general may also bring legal action under
federal or state antitrust laws under certain circumstances. Based upon an
examination of publicly available information relating to the businesses in
which Holdings, the Partnership and its subsidiaries and Borden and its
subsidiaries are engaged, the Partnership and the Purchaser believe that the
Exchange Offer will not violate the antitrust laws. Nevertheless, there can be
no assurance that a challenge to the Exchange Offer on antitrust grounds will
not be made or, if such a challenge is made, of the result. See "--Certain
Conditions of the Exchange Offer" for a discussion of certain conditions of the
Exchange Offer, including conditions with respect to litigation.
In the Merger Agreement, Borden has agreed to make any and all divestitures
or undertakings required by the FTC, the Antitrust Division or any other
applicable governmental entity in connection with the Transactions, which
divestitures in each case shall be reasonably acceptable to the Partnership and
the Purchaser, provided that certain conditions are met. See "Description of
Merger Agreement and Conditional Purchase/Option Agreement--Merger Agreement."
New Jersey Industrial Site Recovery Act
The New Jersey Industrial Site Recovery Act (formerly known as the
Environmental Cleanup Responsibility Act, or "ECRA") and the implementing
regulations thereunder (collectively "ISRA") subjects the "transfer" of an
"industrial establishment" in New Jersey to various requirements concerning the
identification of certain environmental matters and their remediation.
Requirements include the timely submission to the New Jersey Department of
Environmental Protection (the "NJDEP") of detailed information about
environmental matters at the industrial establishment. The NJDEP may also
require additional investigation of environmental conditions at the industrial
establishment, the development of an NJDEP-approved cleanup plan to address
environmental conditions, and the implementation of the plan, along with a
financial guarantee, such as a surety bond, self guarantee or a letter of
credit, of the implementation of the cleanup plan. Under specified conditions,
the NJDEP may defer actual implementation of the cleanup plan if the entity
acquiring control of the industrial establishment is certified to have the
financial ability to implement the plan.
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Under ISRA, the acquisition of a controlling stock interest in a company
which is the owner or operator of an industrial establishment is generally a
"transfer" subject to ISRA.
Borden has certain facilities located in New Jersey. If these facilities are
industrial establishments subject to ISRA, the acquisition of more than a
majority of the outstanding Borden Shares by the Purchaser pursuant to the
Exchange Offer may constitute a "transfer" subject to ISRA.
After consummation of the Exchange Offer and after the Purchaser has
reviewed the nature and extent of Borden's operations in New Jersey and
consulted with counsel, the Purchaser will determine whether any of Borden's
properties are establishments subject to ISRA and, if so, the Purchaser will
comply, or seek to cause Borden to comply, with ISRA in the time frame set forth
in ISRA. See "--Certain Conditions of the Exchange Offer."
Connecticut Environmental Transfer Law
The Connecticut Transfer Act, Conn. Gen. Stat. Sec.Sec.22a-134 et seq. (the
"CTA"), requires that prior to the transfer of ownership of an establishment
subject to the CTA, the transferor must submit a "Negative Declaration" to the
transferee stating (i) that there has been no spillage or discharge of hazardous
waste on the property or that any such spillage or discharge has been cleaned up
according to the procedures and requirements of the Connecticut Department of
Environmental Protection (the "CDEP") and (ii) that any hazardous waste
remaining on-site is being managed in accordance with all applicable
regulations. If the transferor cannot submit a "Negative Declaration," the
transferee or another party to the transfer must certify to the Commissioner of
the CDEP that such transferee or other party will contain or otherwise mitigate
the effects of any spillage or discharge in accordance with the procedures and
timetable approved by the Commissioner pursuant to an order or consent decree.
Borden operates certain facilities in Connecticut. The Purchaser will seek to
determine whether any of Borden's properties are establishments subject to the
CTA and, if so, the Purchaser will comply, or seek to cause Borden to comply,
with the CTA as promptly as practicable following consummation of the Exchange
Offer. See "--Certain Conditions of the Exchange Offer."
EEA Merger Regulation
Borden conducts substantial operations within the European Economic Area
("EEA") and certain of the individual member states of the EEA. Regulation (EEC)
No. 4064/89 (the "Merger Regulation") and Article 57 of the EEA Agreement
require that notices of concentrations with a "Community dimension" be provided
to the European Commission for review and approval for compatibility with the
common market prior to being put into effect. The Exchange Offer would be deemed
to have a "Community dimension" if the combined aggregate worldwide consolidated
annual revenues of both the Partnership and Borden exceed ECU 5 billion, if the
Community-wide annual revenues of each of the Partnership and Borden exceed ECU
250 million, and if both the Partnership and Borden do not receive more than
two-thirds of their respective Community-wide revenues from one and the same
member state. The Purchaser believes that the Exchange Offer may be considered
to have a "Community dimension." If the Exchange Offer falls within the Merger
Regulation, the European Commission, as opposed to individual member states, has
exclusive jurisdiction to review it, subject to certain exceptions. The
Purchaser filed the required notifications on October 24, 1994.
Under the Merger Regulation, a concentration that meets the foregoing
criteria requires the filing of a notification in a prescribed form with the
European Commission. As indicated above, this filing was made on October 24,
1994. Transactions subject to the filing requirements of the Merger Regulation
are suspended automatically until three weeks after receipt of the notification.
The European Commission may extend the suspension period for such period as it
finds necessary to make a final decision on the legality of the transaction. In
the case of a public bid, the bidder may acquire shares of the target company
during the suspension period, but may not vote such shares until after the end
of the period unless the European Commission grants permission to do so in order
to maintain the full value of the bidder's investment.
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The European Commission must decide whether to initiate proceedings within
one month after the receipt of the notification, subject to certain extensions
for holidays or if an individual member state has requested a referral of the
transaction (or part of it) to itself. If proceedings are initiated, the
European Commission must reach a decision in the proceedings within four months
of the commencement of the proceedings. If the European Commission fails to
reach a decision within either of these time periods the transaction will be
deemed to be compatible with the common market.
If the European Commission declares the Exchange Offer to be not compatible
with the common market, it may prevent the consummation of the transaction,
order a divestiture if the transaction has already been consummated or impose
conditions or other obligations. In the event that the transaction is found not
to be subject to the Merger Regulation, various national merger control regimes
of the member states of the EEA may apply, resulting in the possibility that
approvals may be necessary from the various national authorities.
There can be no assurance that a challenge to the Exchange Offer will not be
made pursuant to the Merger Regulation or, alternatively, pursuant to the merger
regulations of one or more of the various member states, or, if such a challenge
is made, what the outcome will be. See "--Certain Conditions of the Exchange
Offer."
Investment Canada Act
The Investment Canada Act (the "ICA") requires certain "non-Canadian"
persons (as defined in the ICA) that wish to acquire "control" (as defined in
the ICA) of a "Canadian business" (as defined in the ICA) to file either a
notification or an application for review with a Canadian governmental agency
known as Investment Canada. Whether such an acquisition is reviewable or only
requires notification depends on various factors, including the size of the
parties and the nature of the Canadian business being acquired. The Exchange
Offer and Merger only require notification under the ICA and the Purchaser
intends to submit a notice within the requisite time period. See "--Certain
Conditions of the Exchange Offer."
Canadian Pre-Merger Notification Requirements
Certain provisions of Canada's Competition Act require pre-notification to
the Director of Investigation and Research appointed under the Competition Act
(the "Canadian Director") of significant corporate transactions, such as the
acquisition of a large percentage of the stock of a public company which has
Canadian operations, or a merger or consolidation involving such an entity.
Pre-notification is generally required with respect to transactions in which the
parties to the transactions and their affiliates have assets in Canada, or
annual gross revenues from sales in, from or into Canada, in excess of Cdn. $400
million and which involve the direct or indirect acquisition of an operating
business, the value of the assets of which, or the gross revenues from sales in
or from Canada generated from these assets, exceed Cdn. $35 million per year.
For transactions subject to the notification requirements, notice must be given
seven or 21 days prior to the completion of the transaction depending on the
information provided to the Canadian Director. The Canadian Director may waive
the waiting period. After the applicable waiting period expires or is waived,
the transaction may be completed. If the Canadian Director determines that the
proposed transaction prevents or lessens, or is reasonably likely to prevent or
lessen, competition substantially in a definable market, the Canadian Director
may apply to the Competition Tribunal, a special purpose Canadian tribunal, to,
among other things, require the disposition of the Canadian assets acquired in
such transaction. The Purchaser has filed the required notice and has provided
information with respect to its proposed acquisition with the Canadian Director
and has observed the applicable waiting period. In addition, the Purchaser has
obtained from the Canadian Director a non-binding letter to the effect that,
based on available information, he would not have sufficient grounds on which to
apply to the Competition Tribunal for a review of the Exchange Offer or Merger
on the basis that it would prevent or lessen, or be likely to prevent or lessen,
competition substantially. See "--Certain Conditions of the Exchange Offer."
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Other Foreign Approvals
Borden also owns property and conducts business in a number of other foreign
countries and jurisdictions. In connection with the acquisition of the Borden
Shares pursuant to the Exchange Offer, the laws of certain of those foreign
countries and jurisdictions, including, without limitation, Australia, may
require the filing of information with, or the obtaining of the approval of,
governmental authorities in such countries and jurisdictions. The governments in
such countries and jurisdictions might attempt to impose additional conditions
on Borden's operations conducted in such countries and jurisdictions as a result
of the acquisition of the Borden Shares pursuant to the Exchange Offer. There
can be no assurance that the Purchaser will be able to cause Borden or its
subsidiaries to satisfy or comply with such laws or that compliance or
non-compliance will not have adverse consequences for Borden or any subsidiary
after purchase of the Borden Shares pursuant to the Exchange Offer.
PENDING LITIGATION
Litigation Against Holdings. Six putative class and derivative actions have
been filed by purported Holdings shareholders in the Court of Chancery of the
State of Delaware in and for New Castle County against the members of the
Holdings Board of Directors, KKR, and Holdings challenging the proposed
acquisition by Holdings of an interest in Borden. These actions, encaptioned
Mushala v. Greeniaus, et al., C.A. No. 13738; Leffler v. Greeniaus, et al., C.A.
No. 13751; Schreiber, et al., v. Greeniaus, et al., C.A. No. 13749; Malloy v.
Greeniaus, et al., C.A. No. 13748; Schwartz v. Greeniaus, et al., C.A. No.
13758; and Alessi v. Greeniaus, et al., C.A. No. 13750 (collectively, the "Class
and Derivative Complaints"), allege, among other things, that the "agreement for
[Holdings] to purchase a 20% stake in Borden is manifestly unfair" to Holdings'
shareholders and constitutes a breach of fiduciary duty in that (i) the price
paid by Holdings for its Borden stake is inflated because it includes a "control
premium" and (ii) the issuance of "new [Holdings] common stock will
substantially dilute the cash value and shareholdings of the non-controlling
public stockholders of [Holdings]." The Class and Derivative Complaints also
allege that the proposed acquisition of a stake in Borden "serves no corporate
interest of [Holdings], but rather serves to facilitate KKR's acquisition of
Borden while ensuring KKR's continued control of [Holdings]," and constitutes
corporate waste. The Class and Derivative Complaints seek preliminary and
permanent relief, including declaratory relief, a preliminary injunction,
rescission, damages and attorneys' fees.
An additional putative class and derivative action, encaptioned Debora v.
Greeniaus, et al., C.A. No. 13755, has also been brought in the Court of
Chancery of the State of Delaware in and for New Castle County by a purported
holder of Holdings' Series A Preferred Stock. The Debora action names the same
defendants and contains the same allegations and prayers for relief as the Class
and Derivative Complaints.
A putative shareholder's derivative complaint, encaptioned Shingala v.
Harper, et al., C.A. No. 13739, has been filed in the Court of Chancery of the
State of Delaware in and for New Castle County by a putative Holdings
shareholder against Borden, Holdings and members of the Board of Directors of
Holdings alleging that the proposed acquisition by Holdings of a stake in Borden
constitutes a breach of the fiduciary duty of loyalty of Holdings' Board of
Directors. The Shingala complaint alleges that the purpose of the Borden
transaction is "solely to benefit KKR," "serves no legitimate business purpose
of [Holdings]" and that Holdings "has been required to participate in the
transaction" due to "KKR's domination and effective control of the Holdings
Board." The Shingala complaint further alleges that the investment by Holdings
in Borden "makes it less likely that Holdings will be in position to restructure
itself to divide its tobacco and food operations" to the "detriment" of
Holdings, and that the price paid by Holdings for its Borden shares is inflated.
The Shingala complaint seeks an injunction of the Borden transaction, damages,
and attorneys' fees.
An additional putative shareholder's derivative complaint, encaptioned Kahn
v. Kohlberg Kravis Roberts & Co., et al., C.A. No. 13767, has also been filed in
the Court of Chancery of the State of
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Delaware in and for New Castle County by a purported holder of common stock and
depositary shares representing 1/4 share of Series A Preferred Stock of
Holdings. This action is against KKR, KKR Associates, Holdings and members of
the Holdings Board of Directors who are also directors of KKR and alleges, among
other things, breach of an investment banking services contract between KKR and
Holdings, breach of fiduciary duty and waste of corporate assets. The Kahn
complaint alleges that "the right to purchase Borden was a corporate
opportunity" belonging to Holdings and the "failure of KKR and the KKR directors
to offer the above described corporate opportunity to [Holdings] constitutes a
violation of fiduciary duty." The complaint further alleges that KKR was
required to acquire Borden for Holdings "[b]y reason of the Services Contract
and KKR's fiduciary duty to [Holdings] resulting therefrom and from KKR's
position as the Company's management, financial and investment adviser" and
therefore KKR violated "contractual and fiduciary duties" to Holdings by failing
to offer Borden to Holdings. The complaint seeks declaratory relief, an
accounting, damages, expenses and attorneys' fees.
On October 25, 1994, the Court of Chancery signed an order consolidating the
nine actions described above for all purposes.
Holdings believes that the ultimate outcome of the litigation described
above should not have a material adverse effect on Holdings' financial condition
or results of operations.
Litigation Against Borden. Twelve putative class actions have been filed by
purported Borden shareholders in New Jersey and Ohio state courts against
Borden, members of its Board and, in five of the New Jersey cases, KKR. These
actions, encaptioned Kohnstamm v. Borden, Inc., et al., C-257-94; Hartman v.
Borden, Inc., et al., 94-CV-H09-6306; Jaroslawicz v. Borden, Inc., et al.,
94-CV-H09-6654; Lubin, et al., v. Borden, Inc., et al., C-139-94; Weiss, et al.,
v. Borden, Inc., et al., C-138-94; Stepak v. Borden, Inc., et al., C-142-94;
Strougo, et al., v. Borden, Inc., et al.; Krim v. Borden, Inc., et al.,
C-141-94; Peterson, et al., v. Borden, Inc., et al., C-143-94; Marcus v. Borden,
Inc., et al., C-149-94; Dwyer v. Borden, Inc., et al., C-152-94; and Pittman
Neurosurgical P.A., et al. v. Borden, Inc., et al., C-158-94 (collectively, the
"Class Complaints"), allege, among other things, that Borden is being sold at
too low a price, and that Borden's directors have breached their fiduciary
duties by failing to "auction" Borden and by "locking up" a transaction that is
not in the best interests of shareholders. KKR is alleged to have aided and
abetted these breaches of fiduciary duty. The Class Complaints seek preliminary
and permanent relief, including a preliminary injunction, damages in an
unspecified amount and attorneys' fees.
On November 4, 1994, the Superior Court of the State of New Jersey in Mercer
County consolidated all pending New Jersey actions into one action in Mercer
County under Docket No. C-139-94. The Ohio cases, Hartman v. Borden, Inc., et
al., 94-CV-HO9-6306 and Jaroslawicz v. Borden, Inc., et al., 94 CV-H09-6654,
have been stayed pursuant to a court order pending resolution of the New Jersey
consolidated action.
Borden has also been named as a defendant in a putative shareholder
derivative action, encaptioned Shingala v. Harper, et al., C.A. No. 13739, filed
against Holdings in the Court of Chancery of the State of Delaware. See
"--Pending Litigation--Litigation Against Holdings."
Borden believes that the ultimate outcome of the litigation described above
should not have a material adverse effect on Borden's financial condition or
results of operations.
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DESCRIPTION OF MERGER AGREEMENT AND
CONDITIONAL PURCHASE/OPTION AGREEMENT
The following are summaries of certain provisions of the Merger Agreement
and the Conditional Purchase/Option Agreement, which are filed as exhibits to
the Registration Statement of which this Offering Circular/Prospectus is a part
and are incorporated herein by reference. Such summaries include the material
terms of such agreements but are not necessarily complete and are qualified in
their entirety by reference to such exhibits.
MERGER AGREEMENT
Exchange Offer. Pursuant to the Merger Agreement, on the terms and subject
to the conditions described herein under "--The Exchange Offer," the Partnership
and the Purchaser have agreed to commence the Exchange Offer as soon as
reasonably practicable following the effectiveness of the Registration Statement
of which this Offering Circular/Prospectus is a part. Without the written
consent of Borden, the Purchaser may not decrease the number of Borden Shares
being sought in the Exchange Offer, change the form of consideration payable in
the Exchange Offer (other than by adding consideration), add additional
conditions to the Exchange Offer or make any other change in the terms or
conditions of the Exchange Offer which is adverse to the holders of Borden
Shares, except that a waiver by the Purchaser of any condition in whole or in
part at any time and from time to time in its discretion will not be deemed to
be materially adverse to any holder of Borden Shares. If the Purchaser shall
have exercised the Option in whole or in part prior to the termination of the
Exchange Offer, the Purchaser may not waive the Minimum Condition. The Purchaser
has agreed with Borden that upon the request of Borden (and without limiting the
number of times that the Purchaser may extend the Exchange Offer, or the total
number of days for which the Exchange Offer may be extended), the Purchaser will
extend the Exchange Offer, one or more times, for an aggregate of not more than
twenty business days. See "The Exchange Offer--Certain Conditions of the
Exchange Offer."
In accordance with the Merger Agreement, Borden has approved of and
consented to the Exchange Offer and represented and warranted that (a) its Board
of Directors has (i) determined that the Merger Agreement and the Conditional
Purchase/Option Agreement and the transactions contemplated thereby, including
the Exchange Offer and the Merger, taken together, are fair to the shareholders
of Borden, and resolved to recommend that holders of Borden Shares (A) accept
the Exchange Offer, (B) tender their Borden Shares to the Purchaser, and (C) if
required by applicable law, approve and adopt the Merger Agreement and the
Merger (collectively, the "Recommendations") and (ii) approved the Merger
Agreement and the Conditional Purchase/Option Agreement and the transactions
contemplated thereby, and that such approval constitutes approval of the Merger
Agreement and the Conditional Purchase/Option Agreement and the transactions
contemplated thereby for purposes of Sections 14A:10A-4 and 14A:10A-5 of the
NJBCA and Article VIII of Borden's Restated Certificate of Incorporation (the
"Charter") (relating to the approval requirements for certain business
combinations) and renders inapplicable certain change in control provisions of
certain debt securities and loan documents of Borden and its subsidiaries and
(b) Borden's financial advisors have delivered to the Board of Directors of
Borden their respective written opinions to the effect that, as of September 22,
1994, the consideration to be received by holders of Borden Shares pursuant to
each of the Exchange Offer and the Merger was fair to such holders from a
financial point of view. Borden has agreed, subject to certain exceptions
described below under "--No Solicitation," not to change the Recommendations
unless the average of the average of the high and the low sales prices of the
Holdings Common Stock as reported on the NYSE Composite Tape for the Valuation
Period is less than the price per share that would yield an Exchange Ratio of
2.375 or less (without giving effect to the limitation regarding the minimum and
maximum Exchange Ratio pursuant to the definition thereof). Borden will not have
any right to terminate the Merger Agreement as a result of any such change in
the Recommendations and
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notwithstanding any such change in the Recommendations, Borden will continue to
be bound by its representations and warranties and covenants contained in the
Merger Agreement (except representations and warranties and covenants with
respect to the Recommendations), including, without limitation, those with
respect to the Rights Agreement, antitrust approvals and divestitures (provided
that following receipt of such approvals the Purchaser purchases at least
28,138,000 Borden Shares), Article VIII of the Charter and Sections 14A:10A-4
and 14A:10A-5 of the NJBCA.
According to the Merger Agreement, to the knowledge of Borden after due
inquiry, all the directors of Borden intend to tender their Borden Shares
pursuant to the Exchange Offer or to vote their Borden Shares in favor of
approval and adoption of the Merger and the Merger Agreement at the
shareholders' meeting in respect thereof, if any.
The Purchaser has reserved the right to transfer or assign, in whole or from
time to time in part, to one or more affiliates, the right to exchange all or
any portion of the Borden Shares tendered pursuant to the Exchange Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations pursuant to the Exchange Offer and will in no way prejudice the
rights of tendering shareholders to exchange for Borden Shares validly tendered
and accepted for exchange pursuant to the Exchange Offer. According to the
Merger Agreement, it is presently contemplated that the right of the Purchaser
to exchange for shares of Borden Common Stock pursuant to the Exchange Offer and
the right of the Purchaser to exercise the Option will be assigned to the
Partnership or to a direct or indirect wholly owned subsidiary of the
Partnership, which may, in any such case, act for itself and/or as agent for one
or both of the Common Stock Partnerships, as the case may be.
The Merger Agreement provides that, if requested by the Partnership, Borden
will, following the acceptance for exchange of the Borden Shares to be exchanged
pursuant to the Exchange Offer and/or the purchase of the Option Shares in
accordance with the Conditional Purchase/Option Agreement, and from time to time
thereafter, take all actions necessary to cause the Applicable Percentage of
directors (and of members of each committee of the Board of Directors) (rounded
in each case to the next highest director or member) of Borden selected by the
Partnership to consist of persons designated or elected by the Partnership
(whether, at the election of Borden, by means of increasing the size of the
board of directors or seeking the resignation of directors and causing the
Partnership's designees to be elected); provided that, if the Purchaser has
acquired at least 28,138,000 Borden Shares, the Applicable Percentage shall not
be less than 33 1/3%.
Following the election or appointment of the Partnership's designees as
described in the preceding paragraph and prior to the effective time of the
Merger, any amendment by Borden or termination by Borden of the Merger Agreement
or the Conditional Purchase/Option Agreement, extension by Borden for the
performance or waiver of the obligations, conditions or other acts of the
Partnership or the Purchaser or waiver by Borden of its rights under the Merger
Agreement or the Conditional Purchase/Option Agreement, will require the
concurrence of a majority of directors of Borden then in office who are not
affiliated with the Partnership or the Purchaser or selected by the Partnership
for appointment or election to the board of directors of Borden ("Independent
Borden Directors").
Merger. Pursuant to the Merger Agreement, if approval of Borden's
shareholders is required by applicable law in order to consummate the Merger,
provided that the Minimum Condition is satisfied without being reduced or
waived, following the acceptance for exchange of Borden Shares pursuant to the
Exchange Offer, Borden, acting through its Board of Directors, will, in
accordance with applicable law, as soon as practicable following the expiration
or termination of the Exchange Offer: duly call, give notice of, convene and,
subject to the right of the parties to delay a special meeting under certain
circumstances described in the Merger Agreement, hold the Borden Shareholders'
Meeting for the purpose of considering and taking action upon the Merger
Agreement and the Merger and use its best efforts to obtain the necessary
approval by its shareholders of the Merger Agreement and the transactions
contemplated thereby, including the Merger.
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In the Merger Agreement, Borden has agreed that (a) its obligations
described in the preceding paragraph (including, without limitation, the
obligation to submit the Merger Agreement and the Merger to a vote of Borden's
shareholders) will not be affected by the withdrawal or modification of the
Recommendations (but there shall be no obligation of the Board of Directors of
Borden to continue the Recommendation that shareholders approve and adopt the
Merger Agreement and the Merger) and (b) (i) if the Merger is not approved by
the shareholders of Borden following the acceptance for exchange of Borden
Shares pursuant to the Exchange Offer or the purchase of Borden Shares pursuant
to the Conditional Purchase/Option Agreement or (ii) if the Merger is not
submitted to the shareholders of Borden but the Purchaser has acquired at least
28,138,000 Borden Shares, the approval of the transactions contemplated by the
Merger Agreement, including the Exchange Offer and the Merger, by the Board of
Directors of Borden shall constitute, solely for the purposes of Sections
14A:10A-4 and 14A:10A-5 of the NJBCA and, to the extent that there are no
Continuing Directors (as defined in the Charter), Article VIII of the Charter,
an approval of any future "Business Combination" (as defined in Section
14A:10A-3 of the NJBCA and Article VIII of the Charter) between Borden and the
Partnership or any affiliate thereof, provided that (x) such "Business
Combination" is approved by a majority of the Independent Borden Directors and
(y) if appropriate, Borden shall have received the opinion of an investment
banking firm selected by the Independent Directors that such "Business
Combination" is fair to Borden's shareholders from a financial point of view (an
"Excepted Future Transaction").
At the Borden Shareholders' Meeting, each of the Partnership and the
Purchaser has agreed that it will vote, or cause to be voted, all Borden Shares
acquired in the Exchange Offer or otherwise beneficially owned by it or any of
its respective subsidiaries in favor of the approval and adoption of the Merger
Agreement and the transactions contemplated thereby, including the Merger.
Under the Merger Agreement, in the event that the Partnership and the
Purchaser, or any other direct or indirect subsidiary of the Partnership
acquires at least 90% of the outstanding Borden Shares, the parties have agreed
to take all necessary or appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Exchange Offer
without a meeting of shareholders of Borden, in accordance with applicable
provisions of the NJBCA.
Upon the effective time of the Merger, the Purchaser will be merged with and
into Borden, and Borden will continue as the surviving corporation in the Merger
under the name "Borden, Inc."
The directors of the Purchaser at the effective time of the Merger will be
the directors of the surviving corporation, each to hold office in accordance
with the restated certificate of incorporation and by-laws of the surviving
corporation and until the earlier of his or her resignation or removal or until
his or her successor is duly elected and qualified, as the case may be. The
officers of Borden at the effective time of the Merger will be the officers of
the surviving corporation, each to hold office in accordance with the restated
certificate of incorporation and by-laws of the surviving corporation and until
the earlier of his or her resignation or removal or until his or her successor
is duly appointed and qualified, as the case may be.
By virtue of the Merger and without any action on the part of the holder of
any shares of Borden Common Stock or any shares of capital stock of the
Purchaser: (a) each share of common stock of the Purchaser issued and
outstanding immediately prior to the effective time of the Merger will be
converted into a number of shares of common stock, par value $.01 per share, of
the surviving corporation equal to one one-thousandth of the total number of
outstanding shares of Borden Common Stock immediately prior to the Merger, which
will be all of the issued and outstanding capital stock of the surviving
corporation; (b) each share of Borden Common Stock that is owned by Borden or by
any subsidiary of Borden and each share of Borden Common Stock that is owned by
the Partnership, the Purchaser or any other subsidiary of the Partnership will
automatically be cancelled and retired and cease to exist, and no cash, Holdings
Common Stock or other consideration will be delivered or deliverable in exchange
therefor; and (c) each issued and outstanding share of Borden Common Stock
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will be converted into the right to receive a number of fully paid and
nonassessable shares of Holdings Common Stock equal to the number of fully paid
and nonassessable shares of Holdings Common Stock that were delivered by the
Purchaser with respect to each share of Borden Common Stock that was validly
tendered and not properly withdrawn and accepted for exchange pursuant to the
terms of the Exchange Offer.
The Merger Agreement provides that, as of the effective time of the Merger,
each holder of a then outstanding option to purchase Borden Common Stock (a
"Stock Option") shall receive with respect to each share subject to such Stock
Option an amount in cash equal to the excess, if any, of (i) the product of the
final Exchange Ratio and the average of the average of the high and the low
sales prices of the Holdings Common Stock as reported on each of the ten
consecutive trading days immediately preceding the effective time of the Merger
over (ii) the per share exercise price of such Stock Option, and Borden shall
cause the surrender and cancellation of each Stock Option (and any related stock
appreciation right) with respect to which a payment by Borden is made. Based
upon the closing stock price of $6 5/8 for the Holdings Common Stock on November
7, 1994, the estimated aggregate net payment to holders of Borden Stock Options
would be $2,722,928. With respect to Stock Options not so surrendered and
cancelled, such Stock Options shall, if not previously terminated or expired in
accordance with their terms, terminate upon the grantee leaving Borden except
upon such grantee's death, Disability (as defined for purposes of the plans
under which the Stock Options were granted) or retirement at or after age
sixty-five (or such earlier age as the Purchaser may expressly agree) and except
that, to the extent provided under any such existing Stock Option, if the
grantee is terminated by Borden without Cause (as defined for purposes of the
plans under which the Stock Options were granted) within two years following a
Change in Control (as defined for purposes of the plans under which the Stock
Options were granted) of Borden, the grantee shall have a period of ninety days
following such termination within which to exercise such Stock Option. No
employee who has been previously granted a Stock Option or stock appreciation
right will be approved for retirement for purposes of any plan or agreement
under which such Stock Option or right has been granted without the express
consent of the Purchaser. The Purchaser and Borden have agreed to continue to
discuss the manner in which outstanding Stock Options shall be treated after the
Merger is consummated. As of November 15, 1994, there were outstanding Stock
Options with respect to 7,121,373 Borden Shares. Of these, as of November 15,
1994, Stock Options with respect to 1,397,876 Borden Shares, with an average
exercise price of $12.31, were exercisable at prices of $14.25 or less.
Under the Merger Agreement, Borden has agreed to take all steps necessary so
that no participant in any employee plans, programs or arrangements of Borden
will have any right to acquire or receive any Borden Common Stock or other
equity interest in Borden on or after the effective time of the Merger other
than in connection with the exercise of Stock Options outstanding on the date of
the Merger Agreement which have not been cancelled as described in the preceding
paragraph. On or prior to the effective time of the Merger, Borden has agreed to
amend each of its (and cause the amendment of each of its affiliate's) qualified
defined contribution plans to eliminate any investment in Borden Common Stock
after such effective time. In addition, Borden has agreed to cause an amendment
of each of its employee plans, programs and arrangements pursuant to which an
employee may be entitled to receive Borden Common Stock (each a "Stock Plan") to
provide that any employee entitled to receive Borden Common Stock in respect of
previously deferred bonuses or compensation will receive instead cash equal to
the product of (i) the final Exchange Ratio multiplied by the average of the
average of the high and the low closing sales prices of the Holdings Common
Stock as reported on each of the ten consecutive trading days immediately
preceding the effective time of the Merger and (ii) the number of shares of
Borden Common Stock so deferred, plus interest equal to the rate otherwise
credited on deferred amounts under the applicable plans or, if no such rate is
credited, the prime rate established by Chemical Bank, from time to time on such
deferred bonuses or compensation from the effective time of the Merger to the
date of distribution.
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Pursuant to the Merger Agreement, subject to the terms of any Borden plan,
any merger consideration paid in respect of restricted shares of Borden Common
Stock held by any employee or former employee of Borden or any of its affiliates
will remain restricted and subject to the same terms and conditions imposed on
such restricted shares.
Exchange of Certificates and Exchange Procedures in the Merger. Pursuant to
the Merger Agreement, at or prior to the effective time, the Purchaser shall
deposit with or for the account of a bank or trust company designated by the
Partnership, which shall be reasonably satisfactory to Borden (the "Merger
Exchange Agent"), for the benefit of the holders of shares of Borden Common
Stock, for exchange, the consideration to be paid in the Merger in respect of
each Borden Share outstanding immediately prior to the effective time (other
than Borden Shares to be cancelled and retired in connection with the Merger).
As soon as reasonably practicable after the effective time of the Merger,
the Purchaser will instruct the Merger Exchange Agent to mail to each holder of
record immediately prior to the effective time (other than holders of Borden
Shares to be cancelled and retired in connection with the Merger) of a Share
Certificate or Share Certificates (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the Share
Certificates shall pass, only upon proper delivery of the Share Certificates to
the Merger Exchange Agent and shall be in such form and have such other
provisions as the Partnership or the Purchaser may reasonably specify) (the
"Merger Letter of Transmittal") and (ii) instructions for use in effecting the
surrender of the Share Certificates in exchange for Holdings Common Stock. Upon
surrender to the Merger Exchange Agent of Share Certificates, together with such
Merger Letter of Transmittal duly executed and any other required documents, and
acceptance thereof by the Merger Exchange Agent, each holder of a Share
Certificate shall be entitled to a certificate or certificates representing the
number of full shares of Holdings Common Stock into which the aggregate number
of shares of Borden Common Stock previously represented by such Share
Certificate surrendered shall have been converted pursuant to the Merger
Agreement. The Merger Exchange Agent shall accept such Share Certificates upon
compliance with such reasonable terms and conditions as the Merger Exchange
Agent may impose to effect an orderly exchange thereof in accordance with normal
exchange practices. After the effective time of the Merger, there shall be no
further transfer on the books and records of Borden or its transfer agent of
Share Certificates and if such Share Certificates are presented to Borden for
transfer, they shall be cancelled against delivery of certificates for Holdings
Common Stock as described herein. If any certificate for such Holdings Common
Stock is to be issued in a name other than that in which the Share Certificate
surrendered for exchange is registered, it shall be a condition of such exchange
that the Share Certificate so surrendered shall be properly endorsed, with
signature guaranteed, or otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Purchaser or its transfer agent
any transfer or other taxes required by reason of the issuance of certificates
for such Holdings Common Stock in a name other than that of the registered
holder of the Share Certificate surrendered, or establish to the satisfaction of
the Purchaser or its transfer agent that such tax has been paid or is not
applicable. Until surrendered as described herein, each Share Certificate shall
be deemed at any time after the effective time of the Merger to represent only
the right to receive upon such surrender the merger consideration.
No certificates or scrip representing fractional shares of Holdings Common
Stock shall be issued upon the surrender for exchange of Share Certificates, and
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Holdings; and notwithstanding any other provision
of the Merger Agreement, each holder of shares of Borden Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of Holdings Common Stock (after taking into account all
shares of Borden Common Stock delivered by such holder) shall receive, in lieu
thereof, a cash payment (without interest) representing such holder's
proportionate interest in the net proceeds from the sale by the Merger Exchange
Agent (following the
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deduction of applicable transaction costs of third parties other than the Merger
Exchange Agent, Borden, the Purchaser or affiliates of any of the foregoing), on
behalf of all such holders, of the shares (the "Excess Shares") of Holdings
Common Stock representing all such fractions. Such sale shall be made as soon as
practicable after the effective time.
No dividends or other distributions with respect to Holdings Common Stock
with a record date after the effective time of the Merger shall be paid to the
holder of any unsurrendered Share Certificate for shares of Borden Common Stock
with respect to the shares of Holdings Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder as
described above, until the surrender of such Share Certificate as described
herein. Subject to the effect of applicable laws, following surrender of any
such Share Certificate, there shall be delivered to the holder of such Share
Certificate a certificate representing whole shares of Holdings Common Stock
issued in exchange therefor and, without interest, (i) at the time of such
surrender or as promptly after the sale of the Excess Shares as practicable, the
amount of any cash payable in lieu of a fractional share of Holdings Common
Stock to which such holder is entitled as described herein and the amount of
dividends or other distributions with a record date after the effective time of
the Merger theretofore paid with respect to such whole shares of Holdings Common
Stock and (ii) at the appropriate payment date, the amount of dividends or other
distributions payable with respect to such whole shares of Holdings Common Stock
with a record date after the effective time of the Merger but prior to such
surrender and a payment date subsequent to such surrender. In no event shall the
persons entitled to receive such dividends or other distributions be entitled to
receive interest on such dividends or other distributions.
All shares of Holdings Common Stock delivered and cash paid upon the
surrender for exchange of Share Certificates which represented shares of Borden
Common Stock (including any cash paid in respect of fractional shares of
Holdings Common Stock) shall be deemed to have been delivered (and paid) in full
satisfaction of all rights pertaining to the shares of Borden Common Stock
theretofore represented by such Share Certificates, subject, however, to the
surviving corporation's obligation, with respect to shares of Borden Common
Stock, to pay any dividends or make any other distributions with a record date
prior to the effective time of the Merger which may have been declared or made
by Borden on such shares of Borden Common Stock prior to the date of the Merger
Agreement and which remain unpaid at the effective time of the Merger.
Any portion of the consideration in the Merger deposited with the Merger
Exchange Agent (the "Exchange Fund") which remains undistributed to the holders
of the certificates representing shares of Borden Common Stock for nine months
after the effective time of the Merger shall be delivered to the Partnership,
upon demand, and any holders of shares of Borden Common Stock who have not
theretofore complied with the foregoing exchange procedures shall thereafter
look only to the Partnership and only as general creditors thereof for payment
of their claim for Holdings Common Stock (or any security or consideration into
which Holdings Common Stock is converted) and any cash in lieu of fractional
shares of Holdings Common Stock and shall look only to the Partnership and only
as general creditors thereof for payment of any dividends or distributions with
respect to Holdings Common Stock to which such holders may be entitled.
None of the Partnership, the Purchaser, Holdings, Borden or the Merger
Exchange Agent shall be liable to any person in respect of any shares of
Holdings Common Stock (or dividends or distributions with respect thereto) or
cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Share Certificates
which represented shares of Borden Common Stock shall not have been surrendered
prior to five years after the effective time of the Merger (or immediately prior
to such earlier date on which any shares of Holdings Common Stock, any cash in
lieu of fractional shares of Holdings Common Stock or any dividends or
distributions with respect to Holdings Common Stock in respect of such Share
Certificate would otherwise escheat to
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or become the property of any governmental entity), any such shares, cash,
dividends or distributions in respect of such certificate shall, to the extent
permitted by applicable law, become the property of the Partnership, free and
clear of all claims or interest of any person previously entitled thereto.
The Merger Exchange Agent shall invest any cash included in the Exchange
Fund, as directed by the Partnership, on a daily basis. Any interest and other
income resulting from such investments shall be paid to the Partnership.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of Borden relating, with respect to Borden and
its subsidiaries, to, among other things, (a) organization, standing and similar
corporate matters; (b) certain subsidiaries; (c) Borden's capital structure; (d)
the authorization, execution, delivery, performance and enforceability of the
Merger Agreement, the Conditional Purchase/Option Agreement and related matters;
(e) documents filed by Borden with the Commission and the accuracy of
information contained therein; (f) the accuracy of information supplied by
Borden in connection with this Offering Circular/Prospectus and other documents
filed with the Commission in connection with the Exchange Offer and the Merger;
(g) the absence of certain changes or events since the date of the most recent
audited financial statements filed with the Commission, including material
adverse changes with respect to Borden; (h) benefit plans and other matters
relating to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and employment matters; (i) filing of tax returns and payment of
taxes; (j) the inapplicability of provisions of Borden's Charter and the NJBCA
relating to business combinations with interested stockholders and state
takeover or similar statutes, to the Merger Agreement, the Conditional
Purchase/Option Agreement and related agreements and transactions; (k)
environmental matters; (l) brokers' fees and expenses; (m) no material conflicts
with laws or agreements of Borden and its subsidiaries; (n) any required vote of
shareholders to approve the Merger Agreement, the Merger and the other
transactions contemplated thereby and the Conditional Purchase/Option Agreement
and the transactions contemplated thereby; (o) certain matters relating to the
Rights; and (p) certain resolutions of Borden's Board of Directors relating to
the declaration and payment of future dividends.
The Merger Agreement also contains customary representations and warranties
of the Purchaser and the Partnership relating to, among other things, (a)
organization, standing and similar corporate matters with respect to the
Purchaser and Holdings; (b) subsidiaries of the Purchaser and Holdings; (c) the
Purchaser's and Holdings' capital structures; (d) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement and the
Conditional Purchase/Option Agreement and related matters with respect to the
Purchaser, the Partnership and Holdings, as applicable; (e) documents filed by
Holdings with the Commission and the accuracy of information contained therein;
(f) the accuracy of information supplied by the Partnership or the Purchaser in
connection with this Offering Circular/Prospectus and other documents filed with
the Commission in connection with the Exchange Offer and the Merger; (g)
brokers' fees and expenses; (h) interim operations of the Purchaser; and (i) the
absence of certain changes or events since the most recent financial statements
filed with the Commission, including material adverse changes with respect to
Holdings.
In addition, the Merger Agreement contains representations of the
Partnership relating to, among other things, (a) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters; (b) the Partnership's good title to the Holdings Common Stock to be
transferred pursuant to the Merger Agreement and the Conditional Purchase/Option
Agreement, and the listing thereof on the NYSE; and (c) no material conflicts
with laws or agreements of the Partnership.
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Covenants Regarding Conduct of Business. Except as contemplated by the
Merger Agreement, during the period from the date of the Merger Agreement to the
date on which a majority of the Board of Directors of Borden consist of
designees or representatives of the Partnership, Borden, with respect to itself
and each of its subsidiaries, has agreed in the Merger Agreement to conduct its
operations according to its ordinary course of business consistent with past
practice and to use its best efforts to preserve intact its business
organization, to keep available the services of its current officers and
employees and to preserve existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relationships with it to the end that its goodwill and ongoing businesses will
be unimpaired at the date on which a majority of the Board of Directors of
Borden consist of designees or representatives of the Partnership. Without
limiting the generality of the foregoing, and except as otherwise contemplated
by the Merger Agreement, or as required by law or contract existing on the date
of the Merger Agreement, prior to the date on which a majority of the Board of
Directors of Borden consists of designees or representatives of the Partnership,
Borden has agreed that neither it nor any of its subsidiaries will, without the
prior written consent of the Partnership: (i) (x) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its capital
stock (except (A) certain dividends and distributions by subsidiaries of Borden
to their respective parents and (B) that Borden may continue the declaration and
payment of regular quarterly cash dividends not in excess of $.01 per share on
the shares of Borden Common Stock (with usual record and payment dates and in
accordance with its past dividend policy)), (y) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital stock or
(z) except for the redemption of the Rights and the outstanding Preferred
Stock-Series B of Borden, purchase, redeem or otherwise acquire any shares of
capital stock of Borden or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities; (ii) subject to certain exceptions, authorize for issuance, issue,
deliver, sell or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise), pledge or otherwise encumber any shares of its capital
stock or the capital stock of any of its subsidiaries, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible securities
or any other securities or equity equivalents; (iii) amend its certificate of
incorporation, by-laws or other comparable charter or organizational documents
or alter through merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of any subsidiary not
constituting an inactive subsidiary of Borden; (iv) acquire or agree to acquire
(x) by merging or consolidating with, or by purchasing a substantial portion of
the stock or assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof or (y) any assets that are material, individually or in the
aggregate, to Borden and its subsidiaries taken as a whole, except purchases of
inventory in the ordinary course of business consistent with past practice; (v)
sell, lease, license, mortgage or otherwise encumber or subject to any lien or
otherwise dispose of any of its properties or assets, except sales of (A)
inventory in the ordinary course of business consistent with past practice, (B)
properties or assets (x) with a value of less than $10 million individually but
not more than $25 million in the aggregate, (y) that are currently being
marketed or sold by Borden pursuant to Borden's January 1994 restructuring plan
(but for consideration not lower than certain specified prices to the extent
disclosed in writing to the Partnership) or (z) with respect to which a
definitive agreement has been entered into by Borden prior to September 12, 1994
(provided that no material modification or amendment shall be made to any such
agreements), (C) sales of accounts receivable in the ordinary course of
business, (D) certain sales and pledges of accounts receivable, or mortgages of
other property in connection with certain financings or refinancings outside the
United States and (E) in connection with certain capital expenditures otherwise
permitted by the Merger Agreement; (vi) except in the ordinary course of
business consistent with past practice and except for an increase of up to $300
million of the amount available or outstanding under a certain credit agreement
and the refinancing of certain industrial revenue bonds in an aggregate
outstanding principal amount of $40 million, subject to certain conditions, (y)
incur any indebtedness for borrowed money or guarantee any such indebtedness of
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another person (other than certain guarantees by Borden in favor of subsidiaries
or by any of its subsidiaries in favor of Borden), issue or sell any debt
securities or warrants or other rights to acquire any debt securities of Borden
or any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice or (z)
make any loans, advances or capital contributions to, or investments in, any
other person, other than to Borden or any direct or indirect wholly owned
subsidiary of Borden; (vii) expend funds for capital expenditures other than in
accordance with Borden's current capital expenditure plans; (viii) waive,
release, grant, or transfer any rights of value or modify or change in any
material respect any existing license, lease, contract or other document, other
than in the ordinary course of business consistent with past practice; (ix)
adopt a plan of complete or partial liquidation or resolutions providing for or
authorizing such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or reorganization; (x) enter into or amend any
material collective bargaining agreement, other than in the ordinary course of
business; (xi) change any accounting principle used by it, unless required by
the Commission or the Financial Accounting Standards Board; (xii) subject to
certain exceptions, make any tax election or settle or compromise any income tax
liability or file its 1994 federal income tax return prior to the last day
(including extensions) prescribed by law, in the case of any of the foregoing,
material to the business, financial condition or results of operations of Borden
and its subsidiaries taken as a whole; (xiii) settle or compromise any
litigation (whether or not commenced prior to the date of the Merger Agreement)
or settle, pay or compromise any claims not required to be paid, individually in
an amount in excess of $1 million and in the aggregate in an amount in excess of
$10 million, other than in consultation and cooperation with the Purchaser, and,
with respect to any such settlement, with the prior written consent of the
Purchaser; (xiv) take any action which would cause any debt securities of Borden
or any of its subsidiaries no longer to be listed on any national securities
exchange or registered pursuant to the Exchange Act, other than with respect to
any such debt securities that have become due as a result of the maturity
thereof; or (xv) authorize any of, or commit or agree to take any of, the
foregoing actions.
In the Merger Agreement, Borden has also agreed, subject to certain
exceptions, that neither it nor any of its subsidiaries will adopt or amend any
bonus, profit sharing, compensation, severance, termination, stock option, stock
appreciation right, pension, retirement, employment or other employee benefit
agreement, trust, plan or other arrangement for the benefit or welfare of any
director, officer or, except in the ordinary course of business consistent with
past practice with respect to employees of Borden or any of its subsidiaries,
increase in any manner the compensation or fringe benefits of any director,
officer or, except in the ordinary course of business consistent with past
practice with respect to employees of Borden or any of its subsidiaries, pay any
benefit not required by any existing agreement or place any assets in any trust
for the benefit of employees or directors of Borden or any of its subsidiaries,
other than contributions to the directors trust fund in the ordinary course of
business and consistent with past practice; provided, however, that
notwithstanding the foregoing, any amendments required to be made to the
provisions of any employee pension plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code in order to maintain such status may
be made.
Pursuant to the Merger Agreement, the Partnership and the Purchaser have
agreed that, during the period from the date of the Merger Agreement to the
effective time of the Merger, the Purchaser will not engage in any activities of
any nature except as provided in, or in connection with the transactions
contemplated by, the Merger Agreement.
No Solicitation. Under the Merger Agreement, except with respect to
divestitures in accordance with Borden's January 1994 restructuring plan, Borden
has agreed that neither it nor any of its subsidiaries will, nor will it or any
of its subsidiaries authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of its subsidiaries to, (a) solicit,
initiate, encourage (including by way of furnishing information), or take any
other action to facilitate, any Transaction Proposal or agree to or endorse any
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Transaction Proposal or (b) enter into or participate in any discussions or
negotiations regarding any of the foregoing, or furnish to any other person any
information with respect to its business, properties or assets or any of the
foregoing, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing; provided, however, that the foregoing clauses will not
prohibit Borden from (i) furnishing information pursuant to an appropriate
confidentiality letter concerning Borden and its businesses, properties or
assets to a third party who has made a Transaction Proposal, (ii) engaging in
discussions or negotiations with such a third party who has made a Transaction
Proposal or (iii) following receipt of a Transaction Proposal, taking and
disclosing to its shareholders a position contemplated by Rule 14e-2(a) under
the Exchange Act or changing the Recommendations, but in each case referred to
in the foregoing clauses (i) through (iii), only after the Board of Directors of
Borden concludes in good faith that such action is necessary or appropriate in
order for the Board of Directors of Borden to act in a manner which is
consistent with its fiduciary obligations under applicable law. If the Board of
Directors of Borden receives a Transaction Proposal, then Borden has agreed
promptly to inform the Partnership of the terms and conditions of such proposal
and the identity of the person making it and to keep the Partnership generally
informed with reasonable promptness of any steps it is taking pursuant to the
foregoing with respect to such Transaction Proposal.
Under the Merger Agreement, neither Borden nor any subsidiary will waive any
provision of any confidentiality or standstill or similar agreement to which it
is a party without the prior written consent of the Partnership, unless the
Board of Directors of Borden or such subsidiary concludes in good faith that
waiving such provision is necessary or appropriate in order for the Board of
Directors of Borden to act in a manner which is consistent with its fiduciary
obligations under applicable law.
Access to Information. Subject to applicable provisions regarding
confidentiality, each of Borden and the Partnership has agreed in the Merger
Agreement to, and to cause each of its subsidiaries to, afford to the other
parties and to their representatives reasonable access during normal business
hours during the period prior to the effective time of the Merger to all its
properties, books, contracts, commitments, personnel and records and, during
such period, to, and to cause each of its subsidiaries to, furnish as promptly
as practicable to the other parties and their respective representatives such
information concerning its business, properties, financial conditions,
operations and personnel as they may from time to time reasonably request. The
Partnership has also agreed to use its reasonable best efforts to make available
to Borden and to the officers, employees, counsel, financial advisors and other
representatives of Borden reasonable access during normal business hours during
the period prior to the effective time of the Merger to all the properties,
books, contracts, commitments, personnel and records of Holdings and, during
such period, the Partnership shall use its reasonable best efforts to furnish as
promptly as practicable to Borden such information concerning the business,
properties, financial conditions, operations and personnel of Holdings as the
Borden party may from time to time reasonably request.
Cooperation and Best Efforts. Pursuant to the Merger Agreement, subject to
certain conditions and limitations described therein, the parties have agreed to
cooperate with each other and to use their respective best efforts to take
actions appropriate so that the transactions contemplated by the Merger
Agreement and the Conditional Purchase/Option Agreement may be consummated.
Certain Antitrust Matters and Divestitures. In the Merger Agreement, Borden
and the Partnership have agreed, as promptly as practicable, to file
notification and report forms under the HSR Act with the FTC and the Antitrust
Division and to make any other necessary filings with the applicable
governmental entities related to the transactions contemplated by the Merger
Agreement, including the Transactions, and the Conditional Purchase/Option
Agreement and to use their best efforts to respond as promptly as practicable to
all inquiries received from the FTC or the Antitrust Division or such other
governmental entities for additional information or documentation. Provided that
following receipt of such approvals the Purchaser (or one of its affiliates)
acquires at least 28,138,000 Borden Shares pursuant to the Exchange Offer and/or
the Option, Borden has agreed to make any and all divestitures or undertakings
required by the FTC, the Antitrust Division or any other applicable governmental
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entity in connection with the Transactions, which divestitures in each case
shall be reasonably acceptable to the Partnership and the Purchaser.
Employee Benefits Matters. Pursuant to the Merger Agreement, prior to the
occurrence of a "Change in Control" as defined in the Supplemental Benefit Trust
Agreement between Borden and Wachovia Bank of North Carolina, N.A. (the "Trust
Agreement"), Borden has agreed to take all such action as may be necessary so
that no funding of the Trust created thereunder will occur as a result of the
transactions contemplated by the Merger Agreement. The Trust Agreement will be
amended prior to a Change in Control to permit the disposition of all Borden
Shares held thereunder. Borden may amend certain benefit plans that would have
been required to be funded pursuant to the terms of the Trust Agreement in a
manner which provides for a lump-sum distribution to, but does not result in the
constructive receipt of compensation by, a covered employee of his or her
deferred compensation thereunder in the event of the involuntary termination or
normal retirement (under Borden's Employees Retirement Income Plan) of such
employee.
Prior to the effective time of the Merger, the Purchaser will not request
that Borden cancel, and Borden will be under no obligation to cancel, certain
agreements ("Core Management Agreements") between Borden and certain executives
of Borden designated by Borden which provide for certain payments and benefits
in the event of certain terminations of employment.
The Purchaser (or its affiliate) has agreed to continue Borden's Non-Exempt
Associate Assistance Program and Exempt Associate Assistance Program, on terms
no less favorable than the terms in existence on the date of the Merger
Agreement, for the one-year period following the effective time of the Merger.
Pursuant to the Merger Agreement, Borden is required to maintain, for the
two-year period following the effective time of the Merger, employee plans and
programs which are substantially similar in the aggregate to those pension and
welfare plans maintained for employees of Borden generally.
Borden has agreed that neither it nor any of its affiliates will accelerate
the payment of any deferred award under any bonus plan or arrangement nor award
or pay any pro rata awards thereunder as a result, or in anticipation, of the
transactions contemplated by the Merger Agreement; provided that Borden may pay
the 1994 annual bonuses pursuant to its Management Incentive Plan or other
similar annual bonus plan in a manner which is consistent with past practice and
the achievement of goals set forth therein.
Borden also has agreed to ensure that no prohibited transaction (within the
meaning of Section 406 of ERISA or 4975 of the Internal Revenue Code) will occur
with respect to any Borden Plan as a result of the transactions contemplated by
the Merger Agreement.
With respect to any of certain employees of Borden, in lieu of any other
severance arrangement for such individual, Borden has agreed to pay such
employee in the event of that employee's termination by Borden after a "Change
in Control" without "Cause" (as those terms are defined in the Core Management
Agreements) a cash severance amount equal to twelve months of salary. The
special severance payments described herein will no longer be applicable when
twelve (eighteen for one employee) months have elapsed after the Change in
Control. For certain executives of Borden, such executive's letter of employment
will be modified so that a termination without Cause prior to the second
anniversary of a Change in Control (as defined in such letters) will include a
termination by the executive due to the occurrence of any one of the following
events without his advance consent: (i) the executive's office is relocated to a
different city; (ii) the executive's base salary is reduced or his bonus
opportunity is materially lower than other Borden executives of comparable rank;
(iii) there is a material diminution in the nature or scope of the authority or
responsibilities attached to the executive's position (and, for this purpose, a
diminution in nature or scope of authority or responsibilities will not be
deemed to occur simply because the company or business in which the executive is
engaged has changed in size or structure); or (iv) in the case of one executive,
the business (either separately or as part of a larger business unit) in which
the executive is engaged is sold or otherwise disposed of. The maximum payment
Borden would be required to pay to management described above as a result of the
transaction
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assuming all change in control payments on termination and other severance
payments are triggered (including those in the immediately preceding sentence)
is estimated to be approximately $31 million.
Indemnification and Insurance. Under the Merger Agreement, the certificate
of incorporation and by-laws of the surviving corporation in the Merger shall
contain provisions eliminating personal liability of directors and officers of
the surviving corporation and with respect to indemnification, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the effective time of the Merger in any manner that would adversely affect
the rights thereunder of individuals who at such time were directors, officers,
agents or employees of Borden.
In addition, pursuant to the Merger Agreement, the surviving corporation in
the Merger will maintain in effect for six years from the effective time of the
Merger policies of directors' and officers' liability insurance containing terms
and conditions which are not less advantageous than those policies maintained by
Borden at the date of the Merger Agreement, with respect to matters occurring
prior to the effective time of the Merger, to the extent available, and having
the maximum available coverage under the current policies of directors and
officers' liability insurance; provided that such surviving corporation will not
be required to spend in excess of a $3 million annual premium therefor; provided
further that if such surviving corporation would be required to spend in excess
of a $3 million premium per annum to obtain insurance having the maximum
available coverage under the current policies, such surviving corporation will
be required, subject to availability, to spend $3 million to maintain or procure
such insurance coverage, subject to its availability.
In furtherance of and not in limitation of the preceding paragraph, the
Partnership and the Purchaser have agreed that the officers and directors of
Borden that are defendants in all litigation commenced by shareholders of Borden
with respect to (x) the performance of their duties as such officers and/or
directors under federal or state law (including litigation under federal and
state securities laws) and (y) the Purchaser's offer or proposal to acquire
Borden, including, without limitation, any and all such litigation commenced on
or after September 11, 1994 (the "Subject Litigation"), will be entitled to be
represented, at the reasonable expense of Borden, in the Subject Litigation by
one counsel (and New Jersey counsel if appropriate and one local counsel in each
jurisdiction in which a case is pending) each of which such counsel will be
selected by a plurality of such director defendants; provided that neither
Borden nor the surviving corporation nor the Partnership shall be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld) and that a condition to the indemnification payments
provided as described above shall be that such director defendant not have
settled any Subject Litigation without the consent of the Partnership or the
surviving corporation; and provided further that the surviving corporation and
the Partnership shall have no obligation to any officer/director defendant when
and if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such officer/director defendant in the manner contemplated by the Merger
Agreement is prohibited by applicable law.
Redemption of Series B Preferred Stock. The Merger Agreement provides that,
if the Minimum Condition is satisfied without having been waived or lowered,
Borden will, promptly after consummation of the Exchange Offer, in the manner
and to the extent permitted by the Charter, redeem all of its outstanding shares
of Preferred Stock-Series B prior to any record date in connection with the
Proposed Merger at the amount provided for redemption in the Charter, and Borden
has agreed, subject to first obtaining required approvals under certain debt
instruments of Borden, promptly to commence taking all steps necessary to effect
such redemptions.
Redemption of Rights. Pursuant to the Merger Agreement, Borden has agreed to
redeem all outstanding Rights at a redemption price of one and two-thirds cents
per Right effective immediately prior to the acceptance for exchange of any
Borden Shares pursuant to the Exchange Offer, provided that the Minimum
Condition is satisfied in the Exchange Offer. In accordance with the Merger
Agreement, Borden has amended the Rights Agreement so that none of the execution
or the delivery of the Merger Agreement or the Conditional Purchase/Option
Agreement, or both such agreements taken
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together, or commencement of the Exchange Offer or the acceptance of Borden
Shares for exchange pursuant to the Exchange Offer, or the consummation of the
transactions contemplated by the
Conditional Purchase/Option Agreement will (i) trigger the exercisability of the
Rights, the separation of the Rights from the stock certificates to which they
are attached or any other provisions of the Rights Agreement, including causing
the Partnership and/or the Purchaser from becoming an Acquiring Person (as
defined in the Rights Agreement), the occurrence of a Distribution Date (as
defined in the Rights Agreement) or a Shares Acquisition Date (as defined in the
Rights Agreement) or (ii) trigger the right of the holders of the common units
of Borden Chemicals and Plastics Limited Partnership, pursuant to the Second
Amended and Restated Deposit Agreement dated February 16, 1993, to require
Borden to purchase the common units held by such holders. Borden and the
Partnership have also agreed in the Merger Agreement that, if Borden amends any
provision of the Rights Agreement in connection with a Transaction Proposal (or
with respect to any person) or if the application of the Rights Agreement or any
provision thereof is enjoined with respect to any person or Transaction Proposal
or if Borden agrees to redeem the Rights on terms more favorable than the terms
set forth with respect to the Partnership and the Purchaser in the Merger
Agreement (any of such events, a "Third Party Rights Amendment") in a manner
that makes such Third Party Rights Amendment less restrictive with respect to
such person, or in connection with such Transaction Proposal, or is otherwise
more favorable with respect to such person, or in connection with such
Transaction Proposal, than the Rights Agreement as then in effect with respect
to Parent and Purchaser, Borden will be deemed (if and to the extent possible
and without derogating the obligations of Borden pursuant to the next sentence),
without the necessity of any action by Borden or the Rights Agent, to have so
amended the Rights Agreement with respect to the Partnership and the Purchaser
to the same extent or to have agreed to redeem the Rights with respect to the
Partnership and the Purchaser on terms as favorable. Borden has agreed to notify
the Partnership promptly of any Third Party Rights Amendment and simultaneously
with the execution of the Third Party Rights Amendment to execute a written
amendment to the Rights Agreement with respect to the foregoing.
Conditions to Each Party's Obligations to Effect the Merger. The Merger
Agreement provides that the respective obligation of each party to effect the
Merger is subject to the following conditions: (i) if required by New Jersey law
or the Charter, the approval of Borden's shareholders shall have been obtained;
(ii) any waiting period applicable to the Merger under the HSR Act shall have
terminated or expired; (iii) Borden Shares shall have been purchased pursuant to
the Exchange Offer; (iv) the Registration Statement shall have become effective,
and any required post-effective amendment shall have become effective, under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and any material "blue sky" and other state securities
laws applicable to the registration of the Holdings Common Stock to be exchanged
for shares of Borden Common Stock shall have been complied with; and (v) no
statute, rule, regulation, executive order, decree, or injunction shall have
been enacted, entered, promulgated or enforced by any governmental entity which
prohibits the consummation of the Merger, whether temporary, preliminary or
permanent, provided, however, that the parties have agreed to use their best
efforts to have any such order, decree or injunction vacated.
Conditions to Obligation of Borden. Pursuant to the Merger Agreement, if
fewer than 66 2/3% of the Borden Shares outstanding on a fully diluted basis
(other than dilution due to the Rights) shall have been accepted for exchange in
the Exchange Offer, the obligation of Borden to effect the Merger is further
subject to the condition that the representation and warranty of the Purchaser
and the Partnership to the effect that, except as disclosed in documents filed
by Holdings with the Commission, since the date of the most recent audited
financial statements included in such documents, Holdings has conducted its
business only in the ordinary course consistent with past practice, and there is
not and has not been any change in the business, financial condition or results
of operations of Holdings or any of its subsidiaries which has had, or would
reasonably be expected to have, a Material Adverse Effect with respect to
Holdings shall be true and correct, as of the date of the Merger Agreement and
as of the closing date as though made on and as of the closing date.
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Conditions to Obligations of the Purchaser and the Partnership to Effect the
Merger. If fewer than 66 2/3% of the Borden Shares outstanding on a fully
diluted basis (other than dilution due to the Rights) shall have been accepted
for exchange in the Exchange Offer, the obligations of the Purchaser and the
Partnership to effect the Merger are further subject to the following
conditions: (i) the representation and warranty of Borden to the effect that,
except as disclosed in SEC Documents filed by Borden with the Commission, since
the date of the most recent audited financial statements included in such
documents, Borden has conducted its business only in the ordinary course
consistent with past practice, and there is not and has not been any change in
the business, financial condition or results of operations of Borden or any of
its subsidiaries which has had, or would reasonably be expected to have a
Material Adverse Effect with respect to Borden shall be true and correct, as of
the date of the Merger Agreement and as of the closing date as though made on
and as of the closing date; (ii) subject to certain exceptions, Borden shall
have performed in all material respects certain affirmative covenants required
to be performed by it under the Merger Agreement at or prior to the effective
date; and (iii) the representation and warranty referred to in clause (e) of the
first paragraph under "Representations and Warranties" above, applied mutatis
mutandis to the documents filed by Borden with the Commission since the date of
the Merger Agreement, shall be true and correct in all material respects as of
closing date as though made on and as of the closing date.
Notwithstanding the foregoing, the obligations of Borden or the Purchaser
and the Partnership under the Merger Agreement to effect the Merger are not
subject to the satisfaction or waiver of any of the conditions described in the
two preceding paragraphs to the extent that the failure of any such condition to
be satisfied is the result of any action approved by a majority of those
directors of Borden who are designees or representatives of the Partnership or
to the extent the same results from affirmative action taken by Borden with the
knowledge of its Board of Directors while a majority of the directors of Borden
consists of persons designated or elected by the Partnership.
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time, notwithstanding approval
thereof by the shareholders of Borden, but prior to the effective time of the
Merger: (a) by mutual written consent of the Partnership, the Purchaser and
Borden; (b) by the Partnership or Borden, if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the United
States or any country or economic region in which either Borden or the
Partnership, directly or indirectly, has material assets or operations, shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; (c) by
the Partnership if due to an occurrence or circumstance which would result in a
failure to satisfy any of the conditions to the Exchange Offer the Purchaser
shall have terminated the Exchange Offer, unless such termination shall have
been caused by or resulted from the failure of the Partnership or the Purchaser
to perform in any material respect their material covenants and agreements
contained in the Merger Agreement; (d) by the Partnership, if Borden shall have
modified or amended in any respect materially adverse to the Partnership or the
Purchaser or withdrawn its approval or recommendation of the Exchange Offer, the
Merger or the Merger Agreement, provided that any communication that advises
that Borden has received a Transaction Proposal or is engaging in certain
permitted activities with respect to a Transaction Proposal and that takes no
action or position with respect to the Exchange Offer, the Merger, the Merger
Agreement or any Transaction Proposal shall not be deemed to be a withdrawal,
modification or amendment of Borden's approval or recommendation of the Exchange
Offer, the Merger or the Merger Agreement and provided, further, that a
"stop-look-and-listen" communication with respect to the Exchange Offer, the
Merger or the Merger Agreement of the nature contemplated in Rule 14d-9(e) under
the Exchange Act made by Borden as a result of a Transaction Proposal (whether
or not a tender offer), without more, shall not be deemed to be a modification
or amendment of Borden's approval or recommendation of the Exchange Offer, the
Merger or the Merger Agreement that is materially adverse to the Partnership or
the Purchaser, if within 10 business days after the date of such communication
Borden shall have reaffirmed its recommendation of the Exchange Offer, the
Merger and the Merger Agreement; (e) by
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the Partnership if Borden shall have (i) entered into any definitive agreement
to effect the transaction contemplated by a Transaction Proposal, (ii)
recommended any Transaction Proposal from a person other than the Partnership or
the Purchaser or any of its affiliates or (iii) resolved to do any of the
foregoing; (f) by the Partnership, if any corporation (including Borden or any
of its subsidiaries), partnership, person, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act) other than the Partnership or any of its
subsidiaries (collectively, "Persons") shall have become the beneficial owner of
more than 35% of the outstanding Borden Shares (excluding any dilution due to
the Rights) (an "Alternative Acquisition"); (g) by Borden if (i) due to an
occurrence or circumstance that would result in a failure to satisfy any of the
conditions of the Exchange Offer the Purchaser shall have terminated the
Exchange Offer, unless such termination shall have been caused by or resulted
from the failure of Borden to perform in any material respect its material
covenants and agreements contained in the Merger Agreement or (ii) prior to the
exchange of Borden Shares pursuant to the Exchange Offer, any person shall have
made a bona fide Transaction Proposal (A) that the Board of Directors of Borden
determines in its good faith judgment is more favorable to Borden's shareholders
than the Exchange Offer and the Merger and (B) as a result of which the Board of
Directors concludes in good faith that termination of the Merger Agreement is
necessary or appropriate in order for the Board of Directors to act in a manner
which is consistent with its fiduciary obligations under applicable law,
provided that such termination under this clause (ii) shall not be effective
until payment of the full fee and expense reimbursement required as described
under "--Certain Required Payments" below; (h) by the Partnership or Borden if,
without fault of the terminating party, the effective time of the Merger shall
not have occurred on or before June 30, 1995 (provided, that the right to
terminate the Merger Agreement under this clause (h) shall not be available to
any party whose failure to fulfill any obligation under the Merger Agreement has
been the cause of, or results in, the failure of the Merger to have been
consummated within such period); (i) by Borden if (i) on or after December 15,
1994, the termination date of the waiver granted to Borden of certain provisions
relating to changes in control of the credit agreement dated as of August 16,
1994 among Borden and the banks' party thereto shall not then extend past
December 15, 1994 and (ii) Borden (A) shall have received written notice from
the administrative agent under such credit agreement that, as a result of the
applicability of such provisions, all amounts payable under the credit agreement
and the other related loan documents shall have become and be due and payable
(and provided that the Merger Agreement shall be deemed to be terminated without
any further action by any party immediately prior to the receipt by Borden of
such notice), (B) shall have been advised in writing by the administrative agent
that, as a result of such provisions, the required number of banks have
requested or consented to such action or (C) Borden shall reasonably believe
either such action referred to in (A) or (B) above to be imminent based on
communications with the administrative agent, any of the banks party to such
credit agreement or representatives thereof; or (j) by the Partnership or Borden
if any required approval of the shareholders of Borden shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of shareholders or at any adjournment thereof.
Amendment. Subject to the concurrence of a majority of the Independent
Borden Directors (following the election or appointment of the Partnership's
designees pursuant to the Merger Agreement and prior to the effective time of
the Merger), the Merger Agreement may be amended or supplemented at any time
before or after the date on which a majority of the board of directors of Borden
shall consist of designees or representatives of the Partnership but, after such
date, no amendment shall be made which decreases or increases the Exchange Ratio
or which adversely affects the rights of Borden's shareholders under the Merger
Agreement without the approval of Borden and Borden's shareholders. The Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties.
Extension; Waiver. Subject to the concurrence of a majority of the
Independent Borden Directors (following the election or appointment of the
Partnership's designees pursuant to the Merger Agreement and prior to the
effective time of the Merger), at any time prior to the effective time of the
Merger, the parties may (i) extend the time for the performance of any of the
obligations or other acts of the
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other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein of the other parties hereto or in any document,
certificate or writing delivered pursuant hereto or (iii) waive compliance by
the other parties hereto with any of the agreements or conditions contained
herein. Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to assert any of its rights under the
Merger Agreement shall not constitute a waiver of such rights.
Certain Required Payments. Pursuant to the Merger Agreement, Borden has
agreed promptly, but in no event later than two business days following written
notice thereof, together with related bills or receipts, to reimburse the Parent
and the Purchaser for all of their Expenses (as defined below) as incurred from
time to time in an aggregate amount of up to $15 million, against which
aggregate amount Expenses actually reimbursed (other than the fee in the amount
of $20 million (the "Initial Advisory Fee") reimbursed by Borden upon the
execution of a certain letter agreement dated September 11, 1994 between the
Parent and Borden (the "Letter Agreement")) may be credited. The term "Expenses"
includes all out-of-pocket expenses and fees including the fees and
disbursements of counsel, financial printers, experts, consultants and
accountants, as well as all fees and expenses payable to investment banking
firms and other financial institutions and their respective agents and counsel,
whether incurred prior to, on or after the date of the Merger Agreement,
incurred in connection with the transactions contemplated by the Merger
Agreement, the Letter Agreement and the Conditional Purchase/Option Agreement.
The parties have acknowledged that the reimbursement of the Initial Advisory Fee
shall not limit the reimbursement of any additional advisory fees paid by the
Parent or the Purchaser to non-affiliates of the Purchaser.
Under the Merger Agreement, if (i) (x) prior to termination of the Merger
Agreement, any Person shall have commenced, publicly proposed or communicated to
Borden a Transaction Proposal (a "Pre-Termination Transaction Proposal") (y) the
Merger Agreement is terminated and (z) on or prior to June 30, 1996, any Person
who commenced, publicly proposed or communicated to Borden a Pre-Termination
Transaction Proposal enters into any definitive agreement to effect the
transaction contemplated by such Transaction Proposal (whether or not related to
such Pre-Termination Transaction Proposal) or effects an Alternative
Acquisition; or (ii) prior to the purchase of Borden Shares pursuant to the
Exchange Offer, the Merger Agreement is terminated pursuant to clause (d) under
"--Termination" above (other than solely in the event that the average of the
closing sales prices of the Holdings Common Stock as reported on the NYSE
Composite Tape for the Valuation Period is less than the price per share that
would yield an Exchange Ratio of 2.375 or less without giving effect to any
minimum or maximum Exchange Ratio pursuant to the definition thereof) or (iii)
prior to the purchase of Borden Shares pursuant to the Exchange Offer, the
Merger Agreement is terminated pursuant to clause (e), (f) or clause (g)(ii)
under "--Termination" above, then in each case, Borden shall promptly, but in no
event later than one business day after the first of such events shall occur,
pay KKR a fee of $30 million in cash, which amount shall be payable in same day
funds. No more than $30 million in aggregate shall be payable to KKR and no fee
shall be payable to KKR pursuant to this provision if $30 million has been paid
to KKR as described in the succeeding paragraph.
If the Parent, together with any subsidiary or affiliate of the Parent
including the Purchaser, shall acquire beneficial ownership (in one or more
transactions) of a majority of the outstanding shares of Borden Common Stock,
then Borden shall promptly, but in no event later than one business day after
such event shall occur, pay KKR a fee of $30 million in cash, which amount shall
be payable in same day funds. No fee shall be payable to KKR pursuant to this
provision if $30 million has been paid to KKR as described in the preceding
paragraph.
If the fee of $30 million in cash required to be paid by Borden to KKR as
described in the two immediately preceding paragraphs (the "Transaction Fee") is
not paid within five business days after the events set forth above requiring
payment of the Transaction Fee occur, KKR, at its sole option, may demand (the
"Fee Demand") that Borden tender to KKR, immediately in satisfaction of the
Transaction Fee, such number of shares (rounded to the nearest whole share) of
(i) Borden Common Stock
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((A) if it is publicly traded and (B) which at the request of KKR shall be
issued in shares of treasury stock, if available) or (ii), at the sole option of
KKR if the Option shall have been exercised, and Borden shall at the time own
Holdings Common Stock that is not subject to any other call or exchange right,
Holdings Common Stock equal to (x) $30 million divided by (y) the Average Market
Price. The term "Average Market Price" means the average of the average of the
high and low prices of Borden Common Stock, or Holdings Common Stock, as the
case may be, as reported on the NYSE Composite Tape on each of the ten
consecutive trading days immediately preceding the second trading day prior to
the Fee Demand. Borden has acknowledged that it is obligated to pay the
Transaction Fee in cash and that such obligation is not derogated in any respect
by the existence of the option of KKR to seek satisfaction of such obligation by
means of the Fee Demand.
In addition to the foregoing, Borden has agreed in the Merger Agreement
promptly, but in no event later than two business days following written notice
thereof, together with related bills or receipts, to reimburse KKR, the Parent
and the Purchaser for all reasonable out-of-pocket costs, fees and expenses,
including, without limitation, the reasonable fees and disbursements of counsel
and the expenses of litigation, incurred in connection with collecting Expenses
and the Transaction Fee as a result of any willful breach by Borden of its
obligations described above.
Except as otherwise provided above, under the Merger Agreement, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with the transactions contemplated by the Merger Agreement and the Conditional
Purchase/Option Agreement will be paid by the party incurring such expenses
(including, in the case of Borden, the costs of printing the Schedule 14D-9 and
any other filings to be printed, and in each case all exhibits, amendments or
supplements thereto). Notwithstanding the foregoing, the costs and expenses of
preparing and distributing any proxy statement and obtaining and complying with
the antitrust requirements of any governmental entity will be paid by Borden.
No Recourse Provisions. Nothwithstanding anything that may be expressed or
implied in the Merger Agreement, no recourse under the Merger Agreement or the
Conditional Purchase/Option Agreement or any documents or instruments delivered
in connection therewith shall be had against any officer, agent or employee of
the Partnership or against any partner of the Partnership or any director,
officer, employee, partner, affiliate or assignee of any of the foregoing,
whether by the enforcement of any assessment or by any legal or equitable
proceeding, or by virtue of any statute, regulation or other applicable law, and
no personal liability whatsoever shall attach to, be imposed on or otherwise be
incurred by an officer, agent or employee of the Partnership or any partner of
the Partnership or any director, officer, employee, partner, affiliate or
assignee of any of the foregoing, as such for any obligations of the Partnership
under the Merger Agreement or any documents or instruments delivered in
connection with the Merger Agreement or the Conditional Purchase/Option
Agreement or for any claim based on, in respect of or by reason of such
obligations or their creation; provided, however, that the foregoing limitation
of liability shall in no way constitute a limitation on the rights of Borden to
enforce any remedies it may have against the undistributed assets of the
Partnership for the collection of any obligations or liabilities in connection
with the Merger Agreement or the Conditional Purchase/Option Agreement.
Dissenters' Rights. Holders of Borden Common Stock will not be entitled to
dissenters' rights under New Jersey law in connection with the Exchange Offer or
the Merger, and the Purchaser does not intend to accord dissenters' rights to
holders of Borden Common Stock unless required by applicable law.
CONDITIONAL PURCHASE/OPTION AGREEMENT
Pursuant to the Conditional Purchase/Option Agreement, Borden has granted to
the Purchaser the irrevocable Option to purchase up to 28,138,000 Option Shares
(or approximately 19.9% of the outstanding Borden Shares as of the date hereof),
on the terms and subject to the conditions set forth
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therein. At the time that the Option is exercised, Borden will designate whether
the Option Shares shall be newly issued shares or shares of treasury stock of
Borden.
Exercise of Option. Under the Conditional Purchase/Option Agreement, the
Option may be exercised by the Purchaser (or its designee, which designee must
be the Partnership or a direct or indirect wholly owned subsidiary of the
Partnership and which may, in any such case, act for itself and/or as agent for
one or both of the Common Stock Partnerships, as the case may be), in whole or
in part, at any time, or from time to time, during the period beginning on the
date of the Conditional Purchase/Option Agreement and ending on the Option
Expiration Date, provided that if the Purchaser (or its designee) has not
exercised the Option in whole or in part prior to the expiration of the Exchange
Offer, it will not be entitled to exercise the Option thereafter if it waives or
otherwise reduces the Minimum Condition and accepts fewer than 41% of the
outstanding Borden Shares for payment in the Exchange Offer.
Pursuant to the Conditional Purchase/Option Agreement, the purchase of
Borden Shares upon exercise of the Option will occur only if (i) such purchase
would not otherwise violate or cause the violation of, any applicable law or
regulations (including, the HSR Act, the Exchange Act and the rules and
regulations thereunder, or the rules of the NYSE) and (ii) no statute, rule,
regulation, decree, order or injunction shall have been promulgated, enacted,
entered into or enforced by any governmental agency or authority or court which
prohibits delivery of the Borden Shares, whether temporary, preliminary or
permanent (provided, however, that the parties shall have agreed to use their
best efforts to have any such order, decree or injunction vacated or reversed).
In the event a closing of such purchase is delayed as a result of clause (i) or
(ii) above, the Purchaser shall not be obligated to purchase any Borden Shares
after the date nine months following the date of its notice of exercise of the
Option.
Conversion of Option. The Conditional Purchase/Option Agreement provides
that, upon the Conversion Date, if any, the Option will be converted in part
from an irrevocable option to purchase the Borden Shares into an obligation on
the part of the Purchaser (or its designee, which designee must be the
Partnership or a direct or indirect wholly owned subsidiary of the Partnership
and which may, in any such case, act for itself and/or as agent for one or both
of the Common Stock Partnerships, as the case may be) to make the Mandatory
Purchase, on the terms and subject to the conditions set forth in the
Conditional Purchase/Option Agreement, of the Mandatory Purchase Shares. Borden
Shares subject to the Option in excess of the number of Mandatory Purchase
Shares will continue to be subject to purchase at the option of the Purchaser.
Payments. The Conditional Purchase/Option Agreement provides that, in the
event the Purchaser exercises the Option, the Purchaser (or, at the Purchaser's
option, its designee) will, at any closing or Mandatory Purchase closing, as the
case may be, deliver to Borden, such number of shares (rounded to the nearest
whole share) of Holdings Common Stock as will equal the product of the Option
Exchange Ratio and the number of Borden Shares purchased pursuant to the
exercise of the Option.
In the event that a payment is actually made to the Partnership pursuant to
the provisions of the Merger Agreement described in the second paragraph under
"--Merger Agreement--Certain Required Payments," the Option Purchase Price will
be adjusted upward (retroactively if necessary and net of any taxes or brokerage
fees paid in connection with the sale, tender or exchange of shares by Purchaser
or its designee, which designee must be the Partnership or a direct or indirect
wholly owned subsidiary of the Partnership) to reflect (i) with respect to any
Borden Shares sold, tendered, or exchanged in any third party transaction that
triggers a payment pursuant to such provisions of the Merger Agreement, the
price per share (subject to the calculation principles described in the next
succeeding sentence) actually paid to holders of Borden Common Stock as a result
of any such third party transaction and (ii) with respect to any Borden Shares
sold, tendered or exchanged to another party or parties by Purchaser (or its
designee) other than pursuant to such third party transaction, the price per
share (subject to the calculation principles set forth in the next succeeding
sentence) actually paid to Purchaser (or its designee) by such other party or
parties in consideration for such Borden
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Shares (the "Option Purchase Price Adjustment"). To the extent the "price per
share" referred to in the preceding sentence consists in whole or in part of
non-cash consideration, it will be based on the trading market value thereof or
if there is no trading market for such consideration, the fair market value as
determined by an independent investment banker jointly selected by the Purchaser
and Borden. The Option Purchase Price Adjustment shall be payable with respect
to shares actually sold, tendered or exchanged promptly following receipt of the
consideration therefor (and, if necessary, the valuation thereof), and the
Purchaser agrees promptly, but in no event later than two business days
following such event, to notify Borden of the receipt of such consideration. The
Partnership agrees promptly, but in no event later than two business days
following written notice thereof, together with related bills or receipts, to
reimburse Borden for all reasonable out-of-pocket costs, fees and expenses,
including, without limitation, the reasonable fees and disbursements of counsel
and the expenses of litigation, incurred in connection with collecting the
Option Purchase Price Adjustment as a result of any willful breach by the
Partnership of its obligations in connection with the Option Purchase Price
Adjustment.
Representations and Warranties of the Purchaser. The Conditional
Purchase/Option Agreement contains customary representations and warranties of
the Purchaser and the Partnership relating to, among other things: (a)
organization, standing and similar matters; (b) the authorization, execution,
delivery, performance and enforceability of the Conditional Purchase/Option
Agreement and related matters; (c) no material conflicts with laws or agreements
of the Purchaser, the Partnership and Holdings; (d) with respect to the
Purchaser only, distribution of the Borden Shares that would be acquired upon
exercise of the Option in compliance with the Securities Act; and (e) with
respect to the Partnership only, title to shares of Holdings Common Stock.
The Conditional Purchase/Option Agreement also contains customary
representations and warranties of Borden relating to, among other things: (a)
organization, standing and similar corporate matters; (b) the authorization,
execution, delivery, performance and enforceability of the Conditional
Purchase/Option Agreement and related matters; (c) no material conflicts with
laws or agreements of Borden or its subsidiaries; (d) certain resolutions of
Borden's Board of Directors; (e) certain amendments to the Rights Agreement in
connection with the Transactions; and (f) distribution of the shares of Holdings
Common Stock that would be acquired upon exercise of the Option in compliance
with the Securities Act.
Adjustment Upon Changes in Capitalization. Pursuant to the Conditional
Purchase/Option Agreement, in the event of any change in the number (or
conversion or exchange) of issued and outstanding shares of Borden Common Stock
by reason of any stock dividend, split-up, merger, recapitalization,
combination, exchange of shares, spin-off or other change in the corporate or
capital structure of Borden which could have the effect of diluting or otherwise
diminishing the Purchaser's rights under the Conditional Purchase/Option
Agreement (including any issuance of Borden Common Stock or other equity
security of Borden at a price below the fair value thereof), the number and kind
of Borden Shares or other securities subject to the Option and the Option
Exchange Ratio therefor will be appropriately adjusted so that the Purchaser
will receive upon exercise of the Option (or at the closing of the purchase upon
such exercise) the number and kind of shares or other securities or property
that the Purchaser would have received in respect of the Borden Shares that the
Purchaser is entitled to purchase upon exercise of the Option if the Option had
been exercised (or such closing had occurred) immediately prior to such event.
Registration Rights. The Conditional Purchase/Option Agreement provides
that, if the Option is exercised, Borden will extend to the Purchaser (or its
designee) registration rights with respect to the Option Shares on substantially
the same terms and subject to the same conditions as Holdings has extended to
the Partnership pursuant to the Registration Rights Agreement dated July 15,
1990 between Holdings and the Partnership (the "Registration Rights Agreement"),
a copy of which is on file with the Commission, except that only the first two
registrations of Registrable Securities (as defined in the Registration Rights
Agreement) will be at the expense of Borden.
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The Conditional Purchase/Option Agreement also provides that, if the Option
is exercised, then subject in all respects to the terms and conditions of the
Registration Rights Agreement, Borden will succeed with respect to the shares of
Holdings Common Stock acquired as a result of the exercise of the Option to the
rights and obligations of a subsequent Holder (as defined in the Registration
Rights Agreement) under such agreement, unless, in the written opinion of
counsel to Holdings, which opinion shall be delivered to Borden and shall be
reasonably satisfactory in form and substance to Borden and its counsel,
registration of the shares of Holdings Common Stock acquired as a result of the
exercise of the Option is not required to lawfully sell and distribute such
shares in the manner contemplated by Borden. By its execution of the Conditional
Purchase/Option Agreement, Borden has agreed to be bound by the terms of the
Registration Rights Agreement. If the Option is exercised, the Partnership and
Borden have agreed that Borden will be entitled to two registrations at the
expense of Holdings (or if Holdings refuses to bear such expenses, at the
expense of the Partnership or the Purchaser) of Registrable Securities and,
subject to the terms of the Registration Rights Agreement, such other
registrations at its own expense as it shall request.
Board of Directors. The Conditional Purchase/Option Agreement includes
provisions relating to the Purchaser's designation of persons as directors of
Borden following the exercise of the Option similar to those described with
respect to the Merger Agreement under "--Merger Agreement--Board of Directors"
above.
Amendments. The Conditional Purchase/Option Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties thereto.
Certain Antitrust Matters and Divestitures. In the Conditional
Purchase/Option Agreement, Borden has made certain agreements relating to
antitrust matters and divestitures similar to those described with respect to
the Merger Agreement under "--Merger Agreement--Certain Antitrust Matters and
Divestitures."
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RJR NABISCO HOLDINGS CORP.
The operating subsidiaries of Holdings owned through RJRN comprise one of
the largest tobacco and food companies in the world. In the United States, the
tobacco business is conducted by RJRT, the second largest manufacturer of
cigarettes, and the packaged foods business is conducted by Nabisco, the largest
manufacturer and marketer of cookies and crackers. Tobacco operations outside
the United States are conducted by Tobacco International and food operations
outside the United States and Canada are conducted by Nabisco International, a
subsidiary of Nabisco. Together, RJRT's and Tobacco International's tobacco
products are sold around the world under a variety of brand names. Food products
are sold in the United States, Canada, Latin America and certain other
international markets.
Domestic Tobacco. RJRT's largest selling cigarette brands in the United
States include WINSTON, DORAL, SALEM, CAMEL, MONARCH and VANTAGE. RJRT's other
cigarette brands, including BEST VALUE, MORE, NOW, STERLING, MAGNA and CENTURY,
are marketed to meet a variety of smoker preferences. All RJRT brands are
marketed in a variety of styles. A primary long-term objective of RJRT is to
increase earnings and cash flow through selective marketing investments in its
key brands and continual improvements in its cost structure and operating
efficiency. Marketing programs for full-price brands are designed to build brand
awareness and add value to the brands in order to retain current adult smokers
and attract adult smokers of competitive brands. RJRT believes it is essential
to compete in all segments of the cigarette market, and accordingly offers a
range of lower-priced brands intended to appeal to more cost-conscious adult
smokers. Based on data collected for RJRT by an independent market research
firm, RJRT had an overall share of retail consumer cigarette sales during 1993
of 29.8%, an increase of approximately one share point from 1992.
International Tobacco. Tobacco International operates in over 160 markets
around the world and is the second largest of two international cigarette
producers that have significant positions in the American Blend segment of the
international tobacco market. Tobacco International markets over 55 brands of
which WINSTON, CAMEL and SALEM, all American Blend cigarettes, are its
international leaders. Tobacco International has strong brand presence in
Western Europe and is well established in its other key markets in the Middle
East/Africa, Asia and Canada. Tobacco International is aggressively pursuing
development opportunities in Eastern Europe and the former Soviet Union.
Nabisco. Nabisco's domestic operations represent one of the largest packaged
food businesses in the world. Through its domestic divisions, Nabisco
manufactures and markets cookies, crackers, snack foods, hard and bite-size
candy, gum, nuts, hot cereals, margarine, pet foods, dry-mix dessert products
and other grocery products under established and well-known trademarks,
including OREO, CHIPS AHOY!, NEWTONS, SNACKWELL'S, RITZ, PREMIUM, LIFE SAVERS,
PLANTERS, A.1, GREY POUPON, MILK-BONE, ORTEGA, CREAM OF WHEAT, FLEISCHMANN'S and
BLUE BONNET. Nabisco Biscuit Company ("Nabisco Biscuit") is the largest
manufacturer and marketer in the United States cookie and cracker industry with
nine of the top ten selling brands, each of which had annual sales of over $100
million in 1993. Overall, in 1993, Nabisco Biscuit had a 37% share of the
domestic cookie industry sales and a 55% share of the domestic cracker industry
sales, in the aggregate more than three times the share of its closest
competitor. In 1992, Nabisco Biscuit became the leading manufacturer and
marketer of no fat/reduced fat cookies and crackers with the introduction of the
SNACKWELL'S line. In 1993, the SNACKWELL'S brand recorded net sales of $186
million, which made SNACKWELL'S the sixth largest cookie/cracker brand in the
United States. Based on 1993 net sales, LIFE SAVERS is the largest selling hard
roll candy in the United States, with an approximately 25.4% share of the hard
roll candy category, and PLANTERS nuts are the clear leader in the packaged nut
category, with a market share of more than five times that of its nearest
competitor.
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Nabisco International is a leading producer of powdered dessert and drink
mixes, biscuits, baking powder and other grocery items, industrial yeast and
bakery ingredients in many of the 17 Latin American countries in which it has
operations. Nabisco International has significantly increased its presence in
Europe through the acquisition of Royal Brands S.A. in Spain and Royal Brands
Portugal.
RJRN was acquired in 1989 by an indirect, wholly owned subsidiary of
Holdings in the Acquisition. Prior to the Acquisition, RJRN was a publicly held
corporation. See "Significant Considerations--KKR Ownership."
RECENT DEVELOPMENTS
Nabisco Initial Public Offering and Related Transactions. On October 28,
1994, Nabisco filed a registration statement with the Commission for the initial
public offering of 45 million shares of its Class A Common Stock (51.75 million
shares if the underwriters' over-allotment options are exercised in full). For
purposes of the filing, the initial offering price was estimated to be between
$23 and $26 per share. Upon completion of the proposed public offering, Holdings
would beneficially own 100% of Nabisco's outstanding Class B Common Stock, which
would represent approximately 82.6% of the economic interest in Nabisco (80.5%
if the underwriters' over-allotment options are exercised in full). Holders of
Class A Common Stock of Nabisco generally would have identical rights to holders
of Class B Common Stock except that holders of Class A Common Stock would be
entitled to one vote per share while holders of Class B Common Stock would be
entitled to ten votes per share on all matters submitted to a vote of
stockholders. The registration statement has not become effective and there can
be no assurance that such offering will be consummated.
The initial public offering of shares of Nabisco is part of a broader
proposed initiative of Holdings designed to reduce consolidated debt of Holdings
by approximately $1 billion and establish a separately traded common stock for
Nabisco. After completion of the proposed public offering, Holdings anticipates
commencing a quarterly cash dividend on its common stock of $.075 per share or
$.30 per share on an annualized basis. The proposed transactions are subject to
the approval of lenders under RJRN's bank credit facilities.
At the time of the proposed public offering, Nabisco is expected to have
approximately $4.2 billion of intercompany debt and approximately $1.3 billion
of borrowings under a short-term bank credit agreement. The net proceeds of the
proposed public offering will be used by Nabisco to repay a portion of the
borrowings under its bank facility.
As part of the initiative, RJRN has called for redemption several issues of
debt securities, including $1.5 billion of 10 1/2% Senior Notes due 1998,
approximately $374 million of 8 3/8% Sinking Fund Debentures due 2017, $100
million of 13 1/2% Subordinated Debentures due 2001 and approximately $25
million of 7 3/8% Sinking Fund Debentures due 2001, all of which are redeemable
with various redemption premiums. RJRN expects to fund these redemptions with
borrowings under its existing credit facilities, proceeds from Holdings' Series
C Preferred Stock offering completed on May 6, 1994 and internally generated
cash flow. See "Selected Pro Forma Consolidated Financial Data."
Upon completion of the proposed public offering of Nabisco, RJRN may seek to
restructure approximately $6 billion of its domestic publicly held debt which
currently limits the ability of Nabisco to incur long-term debt other than
intercompany debt. The restructuring, which would require consent of public
debtholders and lenders under bank facilities, may include one or more offers to
exchange Nabisco debt securities for a portion of such debt. The goal of the
exchange offers would be to permit Nabisco to establish long-term borrowing
capacity independent of its parent and to reduce its intercompany debt. No
assurance can be given that RJRN will seek to restructure its debt or that any
such restructuring will be consummated.
The Board of Directors of Holdings has adopted certain policies, which would
become effective upon the closing of the Nabisco initial public offering. One
policy would provide that Holdings would
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limit, until December 31, 1998, the aggregate amount of cash dividends on its
capital stock. Under this policy, during that period Holdings would not pay any
extraordinary cash dividends and would limit the amount of its cash dividends,
cash distributions and repurchases for cash of capital stock and subordinated
debt to an amount equal to the sum of $500 million plus (i) 65% of Holdings'
cumulative consolidated net income before extraordinary gains or losses and
restructuring charges and (ii) net cash proceeds of up to $250 million in any
year from the sale of capital stock of Holdings or its subsidiaries (other than
proceeds from the Nabisco initial public offering) to the extent used to repay,
purchase or redeem debt or preferred stock. Another policy would provide that
Holdings would not declare a dividend or distribution to its stockholders of the
shares of capital stock of a subsidiary before December 31, 1996. Another policy
sets forth the intention of Holdings that it would not make such a distribution
prior to December 31, 1998 if that distribution would cause the ratings of the
senior indebtedness of RJRN to be reduced from investment grade to
non-investment grade or if, after giving effect to such distribution, any
publicly held senior indebtedness of the distributed company would not be rated
investment grade. There is no assurance that any such distribution will take
place. Additional policies provide that an amount equal to the net cash proceeds
from any issuance and sale of equity by Holdings or from any sale outside the
ordinary course of business of material assets owned or used by subsidiaries in
the tobacco business, in each case before December 31, 1998, would be used
either to repay, purchase or redeem consolidated indebtedness or to acquire
properties, assets or businesses to be used in existing or new lines of business
and that an amount equal to the net cash proceeds of any secondary sale of
shares of Nabisco before December 31, 1998 would be used to repay, purchase or
redeem consolidated debt. No assurance can be given that Holdings will issue or
sell any equity or sell any material assets outside the ordinary course of
business.
Termination of Agreement in Principle Relating to Borden. On October 25,
1994, Holdings and KKR concluded that they were unable to reach a definitive
agreement for the transaction contemplated by their agreement in principle for
Holdings to acquire a minority interest in Borden, as had been previously
announced on September 12, 1994. The September 12, 1994 announcement indicated
that, following KKR's successful acquisition of Borden, Holdings would issue to
Borden approximately $500 million of newly issued common shares of Holdings for
newly issued shares of Borden common stock representing a 20% pro forma interest
in Borden and a warrant to acquire an additional 10% pro forma interest in
Borden. The inability to reach agreement resulted from various complexities
affecting the transaction, including certain accounting issues. In particular,
because Holdings would have been required to account for its investment in
Borden using the equity method (thereby being required to reflect a portion of
Borden's potentially low or volatile earnings in its financial statements) and
to amortize a substantial amount of goodwill resulting from the transaction, the
proposed transaction would likely have had a dilutive effect on Holdings'
near-term earnings. Attempts to resolve these issues by restructuring the
transaction were unsuccessful. Holdings could in the future explore a basis on
which it or its Nabisco subsidiary may acquire a minority equity interest in
Borden in exchange for common stock of Holdings. However, Holdings is not
currently engaged in any such negotiations, and there is no assurance that
Holdings will seek to pursue any such negotiations or that any such negotiations
will be successful.
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RJR NABISCO HOLDINGS CORP.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of September 30,
1994 and for the nine months ended September 30, 1994 and 1993 were derived from
the Holdings Consolidated Condensed Financial Statements incorporated herein by
reference. The selected consolidated financial data presented below as of
December 31, 1993 and 1992 and for each of the years in the three-year period
ended December 31, 1993 for Holdings were derived from the Holdings Consolidated
Financial Statements, incorporated herein by reference, which have been audited
by Deloitte & Touche LLP, independent auditors. In addition, the selected
consolidated financial data as of December 31, 1991, 1990 and 1989, for the year
ended December 31, 1990 and for the period from February 9, 1989 through
December 31, 1989 for Holdings and for the period from January 1, 1989 through
February 8, 1989 for RJRN were derived from the consolidated financial
statements of Holdings and RJRN as of December 31, 1991, 1990 and 1989, for the
year ended December 31, 1990 and for each of the periods within the one-year
period ended December 31, 1989, not presented or incorporated herein by
reference, which have been audited by Deloitte & Touche LLP, independent
auditors. The data should be read in conjunction with the Holdings Consolidated
Financial Statements and the Holdings Consolidated Condensed Financial
Statements incorporated herein by reference.
<TABLE><CAPTION>
HOLDINGS RJRN
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FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
FOR THE YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLIONS EXCEPT PER ----------------- -----------------------------------------------------------------
SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------------------------
2/9 TO 12/31 1/1 TO 2/8
------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales......................... $11,322 $11,053 $15,104 $15,734 $14,989 $13,879 $ 12,114 $ 650
------- ------- ------- ------- ------- ------- ------ ----------
Cost of products sold............. 5,079 4,709 6,640 6,326 6,088 5,652 5,241 332
Selling, advertising,
administrative and
general expenses................ 3,789 4,182 5,731 5,788 5,358 4,801 4,276 295
Amortization of trademarks and
goodwill........................... 469 466 625 616 609 608 557 10
Restructuring expense............. -- -- 730 106 -- -- -- --
------- ------- ------- ------- ------- ------- ------ ----------
Operating income(1)............. 1,985 1,696 1,378 2,898 2,934 2,818 2,040 13
Interest and debt expense......... (828) (910) (1,209) (1,449) (2,217) (3,176) (3,340) (44)
Change in control costs........... -- -- -- -- -- -- -- (247)
Other income (expense), net....... (81) (4) (58) 7 (69) (44) 169 15
------- ------- ------- ------- ------- ------- ------ ----------
Income (loss) from continuing
operations before income
taxes.............................. 1,076 782 111 1,456 648 (402) (1,131) (263)
Provision (benefit) for income
taxes.............................. 474 356 114 680 280 60 (156) (66)
------- ------- ------- ------- ------- ------- ------ ----------
Income (loss) from continuing
operations......................... 602 426 (3) 776 368 (462) (975) (197)
Income (loss) from operations of
discontinued businesses, net of
income taxes(2).................... -- -- -- -- -- -- (1) 24
Extraordinary item--(loss) gain on
early extinguishments of debt,
net of income
taxes........................... (145) (110) (142) (477) -- 33 -- --
------- ------- ------- ------- ------- ------- ------ ----------
Net income (loss)................. 457 316 (145) 299 368 (429) (976) (173)
Preferred stock dividends......... 98 33 68 31 173 50 -- 4
------- ------- ------- ------- ------- ------- ------ ----------
Net income (loss) applicable to
common stock....................... $ 359 $ 283 $ (213) $ 268 $ 195 $ (479) $ (976) $ (177)
------- ------- ------- ------- ------- ------- ------ ----------
------- ------- ------- ------- ------- ------- ------ ----------
PER SHARE DATA
Income (loss) from continuing
operations
per common and common equivalent
share.............................. $ .33 $ .29 $ (.05) $ .55 $ .22 $ (1.19) $ (3.21) $ (.89)
Dividends per share of Series A
Preferred Stock(3).............. 2.51 2.51 3.34 3.34 .49 -- -- --
Dividends per share of Series C
Preferred Stock(3).............. 2.44 -- -- -- -- -- -- --
BALANCE SHEET DATA
(AT END OF PERIODS)
Working capital................... 358 -- $ 202 $ 730 $ 165 $(1,089) $ 106 --
Total assets...................... 31,851 -- 31,295 32,041 32,131 32,915 36,412 --
Total debt........................ 11,205 -- 12,448 14,218 14,531 18,918 25,159 --
Redeemable preferred stock(4)..... -- -- -- -- -- 1,795 -- --
Stockholders' equity(5)........... 10,957 -- 9,070 8,376 8,419 2,494 1,237 --
Book value per common share after
conversion of Series A Preferred
Stock and Series C Preferred
Stock.............................. 5.94 -- 5.77 -- -- -- -- --
</TABLE>
(Footnotes on following page)
102
<PAGE>
(Footnotes for preceding page)
- ------------
(1) The 1992 amount includes a gain of $98 million on the sale of the
ready-to-eat cold cereal business.
(2) The 1989 amount for Holdings includes $237 million of interest expense
allocated to discontinued operations.
(3) On November 8, 1991, Holdings issued 52,500,000 shares of Series A Preferred
Stock and sold 210,000,000 Series A Depositary Shares. On May 6, 1994,
Holdings issued 26,675,000 shares of Series C Preferred Stock and sold
266,750,000 Series C Depositary Shares. Because Series A Preferred Stock and
Series C Preferred Stock mandatorily convert into Holdings Common Stock,
dividends on such shares are reported similar to common equity dividends.
(4) On December 16, 1991, an amendment to the Amended and Restated Certificate
of Incorporation of Holdings was filed which deleted the provisions
providing for the mandatory redemption of the redeemable preferred stock of
Holdings on November 1, 2015. Accordingly, such securities were presented as
a component of Holdings' stockholders' equity as of December 31, 1992 and
1991. Such securities were redeemed on December 6, 1993.
(5) Holdings' stockholders' equity at September 30, 1994 and December 31 of each
year from 1993 to 1989 includes non-cash expenses related to accumulated
trademark and goodwill amortization of $3.484 billion, $3.015 billion,
$2.390 billion, $1.774 billion, $1.165 billion and $.557 billion,
respectively.
See Notes to Holdings Consolidated Financial Statements and Holdings Unaudited
Quarterly Consolidated Condensed Financial Statements incorporated herein by
reference.
103
<PAGE>
RJR NABISCO HOLDINGS CORP.
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The Holdings Pro Forma Financial Statements reflect the effects of
adjustments to the historical results of operations and financial condition of
Holdings. The Holdings Pro Forma Financial Statements should be read in
conjunction with the Holdings Consolidated Financial Statements, the Holdings
Consolidated Condensed Financial Statements and other financial information set
forth or incorporated by reference herein.
The Holdings pro forma consolidated condensed statements of income excluding
extraordinary items related to the loss on early extinguishments of debt, net of
income taxes, give effect to the following transactions and events as if they
occurred as of January 1, 1993: (i) borrowings of $1.3 billion under the Nabisco
Credit Agreement and the application of funds provided through such borrowings
to repay a portion of the borrowings under the 1991 Credit Agreement; (ii) the
sale and issuance of 45,000,000 shares of Nabisco Class A Common Stock in the
Nabisco Common Stock Offerings, the resulting reduction in Holdings'
proportionate interest in Nabisco and the application of the estimated net
proceeds of approximately $1,047 million (assuming an initial public offering
price of $24.50 per share) therefrom to repay a portion of the borrowings under
the Nabisco Credit Agreement; (iii) the assumed payment of quarterly dividends
on Holdings' Common Stock of $.075 per share and the increased level of net
indebtedness assumed to be outstanding had such dividend payments been made;
(iv) the redemption of $1.5 billion of the 10 1/2% Senior Notes due 1998,
approximately $374 million of the 8 3/8% Debentures due 2017, $100 million of 13
1/2% Subordinated Debentures due 2001 and approximately $25 million of the 7
3/8% Debentures due 2001 through borrowings under the 1991 Credit Agreement and
proceeds from Holdings' Series C Preferred Stock offering completed on May 6,
1994; and (v) the tax effect of the foregoing. Holdings' pro forma consolidated
condensed balance sheet gives effect to the pro forma transactions and events
described in clauses (i), (ii) and (iv) above, as if they occurred on September
30, 1994.
Management believes the assumptions used provide a reasonable basis on which
to present the pro forma financial data. THE HOLDINGS PRO FORMA FINANCIAL
STATEMENTS ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE
CONSTRUED TO BE INDICATIVE OF HOLDINGS' RESULTS OF OPERATIONS OR FINANCIAL
POSITION HAD THE TRANSACTIONS AND EVENTS DESCRIBED ABOVE BEEN CONSUMMATED ON THE
DATES ASSUMED AND DO NOT PROJECT HOLDINGS' RESULTS OF OPERATIONS OR FINANCIAL
POSITION FOR ANY FUTURE DATE OR PERIOD. NABISCO HAS FILED A REGISTRATION
STATEMENT WITH THE COMMISSION WITH RESPECT TO A PROPOSED INITIAL PUBLIC OFFERING
OF 45,000,000 SHARES OF ITS CLASS A COMMON STOCK, BUT SUCH REGISTRATION
STATEMENT HAS NOT BEEN DECLARED EFFECTIVE BY THE COMMISSION. NO ASSURANCE CAN BE
GIVEN THAT SUCH OFFERING WILL BE CONSUMMATED.
104
<PAGE>
RJR NABISCO HOLDINGS CORP.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales....................................................... $ 11,322 $11,322
---------- ---------
Cost and expenses:
Cost of products sold.......................................... 5,079 5,079
Selling, advertising, administrative and general expenses...... 3,789 3,789
Amortization of trademarks and goodwill........................ 469 469
---------- ---------
Operating income............................................. 1,985 1,985
Interest and debt expense....................................... (828) $ 112(a) (716)
Other income (expense), net..................................... (81) (81)
---------- --- ---------
Income before income taxes................................... 1,076 112 1,188
Provision for income taxes...................................... 474 39(b) 513
---------- --- ---------
Income before minority interest in income of Nabisco......... 602 73 675
Minority interest in income of Nabisco.......................... -- (32)(c) (32)
---------- --- ---------
Net income................................................... 602 41 643
Less preferred stock dividends.................................. 98 98
---------- --- ---------
Net income applicable to Common Stock........................ $ 504 $ 41 $ 545
---------- --- ---------
---------- --- ---------
Per Share Data
Net income per common and common equivalent.................. $ .33 $ .36
Dividends per share of Common Stock.......................... -- .225
Dividends per share of Series A Preferred Stock.............. 2.505 2.505
Dividends per share of Series C Preferred Stock.............. 2.438 2.438
</TABLE>
See Notes to Pro Forma Consolidated Condensed Statements of Income.
105
<PAGE>
RJR NABISCO HOLDINGS CORP.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales....................................................... $ 15,104 $15,104
---------- ---------
Cost and expenses:
Cost of products sold.......................................... 6,640 6,640
Selling, advertising, administrative and general expenses...... 5,731 5,731
Amortization of trademarks and goodwill........................ 625 625
Restructuring expense.......................................... 730 730
---------- ---------
Operating income............................................. 1,378 1,378
Interest and debt expense....................................... (1,209) $ 161(a) (1,048)
Other income (expense), net..................................... (58) (58)
---------- --- ---------
Income before income taxes................................... 111 161 272
Provision for income taxes...................................... 114 56(b) 170
---------- --- ---------
Income (loss) before minority interest in income of
Nabisco......................................................... (3) 105 102
Minority interest in income of Nabisco.......................... -- (29)(c) (29)
---------- --- ---------
Net income (loss)............................................ (3) 76 73
Less preferred stock dividends.................................. 68 68
---------- --- ---------
Net income (loss) applicable to Common Stock................. $ (71) $ 76 $ 5
---------- --- ---------
---------- --- ---------
Per Share Data
Net income (loss) per common and common equivalent........... $ (.05) $ .00
Dividends per share of Common Stock.......................... -- .30
Dividends per share of Series A Preferred Stock.............. 3.34 3.34
</TABLE>
See Notes to Pro Forma Consolidated Condensed Statements of Income.
106
<PAGE>
RJR NABISCO HOLDINGS CORP.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
The following is a summary of the pro forma adjustments reflected in the Pro
Forma Consolidated Condensed Statements of Income:
(a) Adjust historical interest and debt expense, as applicable, based
upon (i) borrowings of $1.3 billion under the Nabisco Credit Agreement and
the application of funds provided through such borrowings to repay a portion
of the borrowings under the 1991 Credit Agreement; (ii) the sale and
issuance of 45,000,000 shares of Nabisco Class A Common Stock in the Nabisco
Common Stock Offerings, the resulting reduction in Holdings' proportionate
interest in Nabisco and the application of the estimated net proceeds of
approximately $1,047 million (assuming an initial public offering price of
$24.50 per share) therefrom to repay a portion of the borrowings under the
Nabisco Credit Agreement; (iii) the assumed payment of quarterly dividends
on Holdings' Common Stock of $.075 per share and the increased level of net
indebtedness assumed to be outstanding had such dividend payments been made;
(iv) the redemption of $1.5 billion of the 10 1/2% Senior Notes due 1998,
approximately $374 million of the 8 3/8% Debentures due 2017, $100 million
of 13 1/2% Subordinated Debentures due 2001 and approximately $25 million of
the 7 3/8% Debentures due 2001 through borrowings under the 1991 Credit
Agreement and proceeds from Holdings' Series C Preferred Stock offering
completed on May 6, 1994.
(b) Recognize income taxes on the pro forma adjustments at the U.S.
statutory rate of 35%.
(c) Record the reduction of Holdings' proportionate interest in Nabisco
resulting from the Nabisco Common Stock Offerings.
107
<PAGE>
RJR NABISCO HOLDINGS CORP.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS AFTER ADJUSTMENTS
---------- ----------- -----------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 647 $ (399) (a) $ 248
Accounts and notes receivable, net................... 1,107 1,107
Inventories.......................................... 2,504 2,504
Prepaid expenses and excise taxes.................... 414 414
---------- ----------- -------
TOTAL CURRENT ASSETS............................. 4,672 (399) 4,273
---------- ----------- -------
Property, plant and equipment, at cost................. 7,710 7,710
Less accumulated depreciation.......................... (2,281) (2,281)
---------- -------
Net property, plant and equipment.................... 5,429 5,429
---------- -------
Trademarks, net........................................ 8,573 8,573
Goodwill, net.......................................... 12,761 12,761
Other assets and deferred charges...................... 416 (13)(a) 403
---------- ----------- -------
$ 31,851 $ (412) $31,439
---------- ----------- -------
---------- ----------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable........................................ $ 229 $ 229
Accounts payable..................................... 469 469
Accrued liabilities.................................. 2,646 (83)(a) 2,563
Current maturities of long-term debt................. 613 613
Income taxes accrued................................. 357 $ (66)(a) 291
---------- ----------- -------
TOTAL CURRENT LIABILITIES........................ 4,314 (149) 4,165
---------- ----------- -------
Long-term debt (less current maturities)............... 10,363 (140)(a) 9,176
-- (b)
(1,300)(c)
253(c)
Other noncurrent liabilities........................... 2,534 654(c) 3,188
Deferred income taxes.................................. 3,683 3,683
Stockholders' equity:
ESOP convertible preferred stock..................... 247 247
Series A convertible preferred stock................. 2 2
Series B preferred stock............................. 1,250 1,250
Series C convertible preferred stock................. 3 3
Common Stock......................................... 11 11
Paid-in capital...................................... 10,214 393(c) 10,607
Retained earnings (accumulated deficit).............. (427) (123)(a) (550)
Receivable from ESOP................................. (190) (190)
Other stockholders' equity........................... (153) (153)
---------- ----------- -------
TOTAL STOCKHOLDERS' EQUITY....................... 10,957 270 11,227
---------- ----------- -------
$ 31,851 $ (412) $31,439
---------- ----------- -------
---------- ----------- -------
</TABLE>
See Notes to Pro Forma Consolidated Condensed Balance Sheet.
108
<PAGE>
RJR NABISCO HOLDINGS CORP.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
The following is a summary of the pro forma adjustments reflected in the Pro
Forma Consolidated Condensed Balance Sheet:
(a) The redemption of $1.5 billion of the 10 1/2% Senior Notes dues
1998, approximately $374 million of the 8 3/8% Debentures due 2017, $100
million of the 13 1/2% Subordinated Debentures due 2001 and approximately
$25 million of the 7 3/8% Debentures due 2001, including the payment of
accrued interest on such notes and debentures in the aggregate amount of $83
million, through borrowings under the 1991 Credit Agreement and proceeds
from Holdings' Series C Preferred Stock offering completed on May 6, 1994,
the write off of related unamortized financing costs of $13 million and the
resulting extraordinary loss of $123 million net of related income taxes of
$66 million. Because the income statement impact of such events will be
included in Holdings' consolidated statement of income within the twelve
months subsequent to September 30, 1994, such income statement impact was
not considered in the accompanying pro forma consolidated income statement.
(b) Borrowings of $1.3 billion under the Nabisco Credit Agreement and
the application of funds provided through such borrowings to repay a portion
of the borrowings under the 1991 Credit Agreement.
(c) The sale and issuance of 45,000,000 shares of Nabisco Class A Common
Stock in the Nabisco Common Stock Offerings, the resulting reduction in
Holdings' proportionate interest in Nabisco and the application of the
estimated net proceeds of approximately $1,047 million (assuming an initial
public offering price of $24.50 per share) therefrom to repay a portion of
the borrowings under the Nabisco Credit Agreement. Holdings' accounting
policy with respect to sales of stock by its subsidiaries is to recognize
any gains in paid-in capital if subsequent capital transactions are
contemplated that may affect the realization of such gains.
109
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Holdings Common Stock as of October 31, 1994 by (a) persons known
to Holdings to be the beneficial owners of more than five percent of the
outstanding Holdings Common Stock, (b) each director of Holdings, (c) each of
the five most highly compensated executive officers of Holdings during the 1993
fiscal year of Holdings, (d) one individual who served as Chief Executive
Officer of Holdings during the 1993 fiscal year of Holdings and (e) all
directors and executive officers of Holdings as a group. The following table
assumes: (i) the mandatory conversion of Holdings' Series A Preferred Stock on
November 15, 1994 (the "Mandatory Conversion"), (ii) all outstanding options for
Borden Common Stock are exercised, (iii) all outstanding shares of Borden's
Series B Preferred Stock are converted into Borden Common Stock and (iv) Borden
Shares equal to the Minimum Condition are exchanged in the Exchange Offer at an
Exchange Ratio of 1.78125 to 1. If 100% of the Borden Shares are exchanged at an
Exchange Ratio of 2.375 to 1, the Beneficial Ownership After Exchange Offer and
Mandatory Conversion for KKR Associates shown in the table below would be
202,935,479 shares and 14.94% (11.77% on a fully diluted basis), respectively.
Information concerning Borden shares and options outstanding is based on
information available on November 15, 1994. Except as otherwise noted, the
persons named in the table below have sole voting and investment power with
respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO EXCHANGE AFTER EXCHANGE OFFER
OFFER AND AND
NAME OF BENEFICIAL OWNER MANDATORY CONVERSION MANDATORY CONVERSION
- ------------------------------------------------- ---------------------- ----------------------
SHARES PERCENT SHARES PERCENT
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
KKR Associates(1)................................ 556,766,236 48.48% 447,963,276 32.98%
9 West 57th Street
New York, New York 10019
FMR Corp.(2)..................................... 120,887,980 10.21 120,883,980 8.90
82 Devonshire Street
Boston, Massachusetts 02109
John T. Chain, Jr.(3)............................ 40,000 * 40,000 *
John L. Clendenin................................ 2,266 * 2,266 *
Louis V. Gerstner, Jr.(4)........................ 2,114,213 .18 2,114,213 .16
James H. Greene, Jr.(1).......................... 27,301 * 27,301 *
H. John Greeniaus(3)............................. 2,234,093 .19 2,234,093 .16
Charles M. Harper(3)............................. 2,810,490 .24 2,810,490 .21
James W. Johnston(3)(5).......................... 2,174,455 .19 2,174,455 .16
Henry R. Kravis(1)............................... 289,189 * 289,189 *
John G. Medlin, Jr............................... 34,333 * 34,333 *
Paul E. Raether(1)............................... 94,185 * 94,185 *
Lawrence R. Ricciardi(4)(6)...................... 1,435,339 .12 1,435,339 .11
Rozanne L. Ridgway(3)............................ 30,000 * 30,000 *
Clifton S. Robbins(1)............................ 21,614 * 21,614 *
George R. Roberts(1)............................. 289,189 * 289,189 *
Scott M. Stuart(1)............................... 14,106 * 14,106 *
G. Richard Thoman(3)............................. -- -- -- --
Michael T. Tokarz(1)............................. 29,577 * 29,577 *
Karl M. von der Heyden(3)........................ 1,921,315 .17 1,921,315 .14
All directors and executive officers of Holdings
as a group (other than as set forth above in
relation to KKR Associates)(1)(3).............. 19,029,327 1.64% 19,029,327 1.39%
</TABLE>
- ------------
* Less than 0.1%.
(1) Shares of Holdings Common Stock shown as beneficially owned by KKR
Associates include shares owned of record by the limited partnerships of
which KKR Associates is the sole general partner and as to which it
possesses sole voting and investment power, including the Partnership and,
after giving effect to the Exchange Offer, any shares of Holdings Common
Stock held by Borden upon exercise of the Option and indirectly controlled
by KKR Associates. KKR Associates is a limited partnership of which Messrs.
Greene, Kravis, Raether, Roberts and Tokarz, all directors of Holdings, and
Saul A. Fox, Robert I. MacDonnell and Michael N. Michelson are the general
(Footnotes continued on following page)
110
<PAGE>
(Footnotes continued from preceding page)
partners. Such persons may be deemed to share beneficial ownership of the
shares shown as owned by KKR Associates. The foregoing persons disclaim
beneficial ownership of any such shares. Messrs. Robbins and Stuart, both
directors of Holdings, are limited partners of KKR Associates.
(2) According to the Schedule 13G dated October 7, 1994 jointly filed by FMR
Corp. and Edward C. Johnson 3d, Chairman of FMR Corp. and a member of a
controlling group with respect to FMR Corp., the 120,887,980 shares of
Holdings Common Stock shown as beneficially owned by FMR Corp. and Mr.
Johnson include (i) 112,056,000 shares (including 33,841,300 shares issuable
within 60 days upon the Mandatory Conversion) beneficially owned by Fidelity
Management & Research Company, a registered investment adviser and wholly
owned subsidiary of FMR Corp., as a result of acting as investment adviser
to several registered investment companies that own such shares (the
"Fidelity Funds") and (ii) 8,831,980 shares (including 1,914,500 shares
issuable within 60 days upon the Mandatory Conversion) beneficially owned by
Fidelity Management Trust Company, a bank and wholly owned subsidiary of FMR
Corp., as a result of serving as investment manager of institutional
accounts. The 8,938,950 shares of Series A Preferred Stock reflected in the
number of shares of Holdings Common Stock shown as beneficially owned
represented 17.02% of the outstanding Series A Preferred Stock as of October
31, 1994. According to the Schedule 13G, FMR Corp. and Mr. Johnson also
beneficially own 580,150 shares of Series C Preferred Stock as a result of
(i) the Fidelity Funds owning 4,383,100 Series C Depositary Shares and (ii)
such investment accounts owning 1,418,400 Series C Depositary Shares.
According to the Schedule 13G, (a) FMR Corp. and Mr. Johnson each has sole
investment power, but neither has sole voting power, over the shares owned
by the Fidelity Funds and (b) FMR Corp. has sole investment power over all
of, has sole voting power over certain of, and has no voting power over the
remainder of, the shares owned by the institutional accounts.
(3) For purposes of this table, a person or group of persons is deemed to be the
"beneficial owner" of any shares that such person has the right to acquire
within 60 days. For purposes of computing the percentage of outstanding
shares held by each person or group of persons named above on a given date,
any security that such person or persons has the right to acquire within 60
days is deemed to be outstanding, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. The
number of shares beneficially owned includes (i) 30,000 shares subject to
currently exercisable options granted to each of Mr. Chain and Ms. Ridgway;
2,187,500 shares subject to currently exercisable options granted to Mr.
Harper; 1,602,600 shares subject to currently exercisable options granted to
each of Messrs. Greeniaus and Johnston; 1,069,799 shares subject to
currently exercisable options granted to Mr. Ricciardi; and 11,918,850
shares subject to currently exercisable options granted to all directors and
executive officers as a group; and (ii) 768, 1,308, 1,317, 1,315, 1,315 and
19,486 shares of Holdings Common Stock currently issuable on conversion of a
like number of shares of ESOP Preferred Stock (as defined below) owned by,
respectively, Messrs. Harper, Greeniaus, Johnston, Ricciardi, von der Heyden
and all directors and executive officers as a group.
(4) The outstanding shares of Holdings Common Stock shown as beneficially owned
by Mr. Gerstner include 103,600 shares held in trust for the benefit of Mr.
Gerstner's children, as to which Mr. Gerstner disclaims beneficial
ownership.
(5) The outstanding shares of Holdings Common Stock shown as beneficially owned
by Mr. Johnston include 60,000 shares held in trust for the benefit of Mr.
Johnston's children, as to which Mr. Johnston disclaims beneficial
ownership.
(6) The outstanding shares of Holdings Common Stock shown as beneficially owned
by Mr. Ricciardi include 60,000 shares held in trust for the benefit of Mr.
Ricciardi's children, as to which Mr. Ricciardi disclaims beneficial
ownership.
As of October 31, 1994, Wachovia Bank of North Carolina, N.A. ("Wachovia"),
Box 3875, Trust Operations, Winston-Salem, North Carolina 27102, beneficially
owned 15,490,964 shares of ESOP Convertible Preferred Stock of Holdings ("ESOP
Preferred Stock"), representing 100% of the issued and outstanding ESOP
Preferred Stock. Wachovia holds such shares in its capacity as Trustee of the
RJRN Defined Contribution Master Trust. Under the terms of the Master Trust,
Wachovia is required to vote shares of ESOP Preferred Stock allocated to
participants' accounts in accordance with instructions received from such
participants and to vote allocated shares of ESOP Preferred Stock for which it
has not received instructions and unallocated shares in the same ratio as shares
with respect to which instructions have been received. Wachovia has no
investment power with respect to shares of ESOP Preferred Stock.
111
<PAGE>
BORDEN, INC.
Borden is engaged primarily in manufacturing, processing, purchasing and
distributing a broad range of products through three operating divisions: North
American Foods, International Foods and Packaging and Industrial Products. North
American Foods is comprised of niche grocery, pasta and sauce, and dairy
products, while International Foods includes international milk powder, European
bakery products and several European grocery and pasta businesses. Packaging and
Industrial Products includes primarily wallcoverings, adhesives and resins, and
plastic films and packaging.
112
<PAGE>
BORDEN, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the nine months
ended September 30, 1994 and 1993 were derived from unaudited quarterly
consolidated financial statements contained in Borden's Quarterly Report on Form
10-Q at and for the nine months ended September 30, 1994 and incorporated herein
by reference. The selected consolidated financial data presented below for each
of the years in the three-year period ended December 31, 1993 for Borden were
derived from the consolidated financial statements contained in Borden's Annual
Report on Form 10-K for the year ended December 31, 1993 and incorporated by
reference herein, which have been audited by Price Waterhouse LLP, independent
accountants. The unaudited quarterly consolidated financial statements include
all adjustments which are, in the opinion of Borden management, necessary for a
fair statement of the interim results. Results for interim periods are not
necessarily indicative of results to be expected for the full year. The data
below should be read in conjunction with the audited consolidated financial
statements and unaudited quarterly consolidated condensed financial statements
of Borden, and the related notes thereto, incorporated by reference herein.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
-------------------- ----------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Net sales........................................ $ 4,082 $ 4,037 $ 5,506 $ 5,872 $ 5,924 $ 6,273 $ 6,391
COST AND EXPENSES
Cost of goods sold............................... 3,075 2,967 4,078 4,302 4,269 4,644 4,859
Marketing, general and administrative expenses... 859 803 1,224 1,163 1,024 1,020 902
Restructuring charges(1)......................... (40) -- 115 298 67 -- 463
Interest expense................................. 92 93 125 116 167 156 129
Equity in income of affiliates................... (9) (10) (16) (19) (24) (23) (17)
Minority interest................................ 29 30 41 40 3 3 1
Other (income) and expense, net.................. 104 29 23 (4) (13) 12 11
Income taxes..................................... 27 42 (27) 14 151 169 76
-------- -------- -------- -------- -------- -------- --------
4,137 3,954 5,563 5,910 5,644 5,981 6,424
-------- -------- -------- -------- -------- -------- --------
EARNINGS
(Loss) income from continuing operations......... (55) 83 (57) (38) 280 292 (33)
Discontinued operations:(1)(2)
(Loss) income from operations.................. -- (46) (66) (86) 15 28 16
Loss on disposal............................... (59) -- (490) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
(Loss) income before extraordinary item and
cumulative effect of
accounting changes............................. (114) 36 (613) (124) 295 320 (17)
Extraordinary loss on early retirement of debt... -- -- -- (11) -- -- --
Cumulative effect of change in accounting for:
Postemployment benefits........................ -- (18) (18) -- -- -- --
Postretirement benefits other than pensions.... -- -- -- (189) -- -- --
Income taxes................................... -- -- -- (40) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net (loss) income................................ $ (114) $ 18 $ (631) $ (364) $ 295 $ 320 $ (17)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
SHARE DATA
(Loss) income from continuing operations......... $ (.39) $ .59 $ (.40) $ (.27) $ 1.90 $ 1.97 $ (0.22)
Discontinued operations:
(Loss) income from operations.................. -- (.33) (.47) (.60) .10 0.19 0.11
Loss on disposal............................... (.41) -- (3.47) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
(Loss) income before extraordinary item and
cumulative effect of
accounting changes............................. (.80) .26 (4.34) (.87) 2.00 2.16 (0.11)
Extraordinary loss on early retirement of debt... -- -- -- (.07) -- -- --
Cumulative effect of change in accounting for:
Postemployment benefits........................ -- (.13) (.13) -- -- -- --
Postretirement benefits other than pensions.... -- -- -- (1.32) -- -- --
Income taxes................................... -- -- -- (.28) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net (loss) income per common share............... $ (.80) $ .13 $ (4.47) $ (2.54) $ 2.00 $ 2.16 $ (0.11)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Cash dividends paid per common share............. $ .23 $ .75 $ .90 $ 1.185 $ 1.12 $ 1.035 $ 0.90
Average number of common shares outstanding
during the period................................. 141.5 140.9 141.0 143.4 147.6 147.9 148.2
</TABLE>
(Footnotes on following page)
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<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ----------------------------------------------
1994 1993 1992 1991 1990 1989
---------------- ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Current assets....................................... $1,370 $1,290 $1,928 $1,921 $2,026 $2,011
Investments and other assets......................... 561 443 352 319 237 160
Property and equipment............................... 1,321 1,337 1,788 1,904 1,707 1,441
Intangibles.......................................... 762 802 1,178 1,317 1,314 1,213
Total assets......................................... 4,014 3,872 5,246 5,461 5,284 4,825
Current liabilities.................................. 1,418 1,372 1,808 1,414 1,847 1,466
Long-term debt....................................... 1,416 1,241 1,330 1,346 1,340 1,441
Other liabilities (including long-term debt)......... 2,457 2,254 2,312 2,072 1,595 1,670
Shareholders' equity................................. 140 246 1,126 1,975 1,842 1,689
Book value per common share.......................... 0.99 1.74 8.01 13.39 12.50 11.41
</TABLE>
- ------------
(1) 1993 includes a pretax charge of $752.3 million for business divestitures
and restructuring. 1992, 1991 and 1989 include pretax restructuring charges
of $377.2 million, $71.6 million and $570.7 million, respectively. The nine
months ended September 30, 1994 includes a pretax credit of $50.1 million
for reversal of prior restructuring charges.
(2) Financial data for the years prior to 1993 were restated in 1993 to reflect
discontinued operations.
See Notes to Borden's Consolidated Financial Statements and Borden's Unaudited
Quarterly Consolidated Financial Statements incorporated herein by reference.
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THE PURCHASER AND THE COMMON STOCK PARTNERSHIPS
The Purchaser, a New Jersey corporation and a subsidiary of the Partnership,
was organized in connection with the Transactions and has not carried on any
activities to date other than those incident to its formation and the
Transactions. Prior to the consummation of the Exchange Offer, KKR Partners II,
L.P. will become a holder of shares of common stock of the Purchaser. Each of
the Common Stock Partnerships is a Delaware limited partnership, whose general
partner is KKR Associates, an affiliate of KKR. The principal assets of each of
the Common Stock Partnerships consist of investments in various entities,
including investments in Holdings. The name, business address, principal
occupation or employment, and five year employment history of each of the
directors and executive officers of the Purchaser and of KKR Associates, the
general partner of each of the Common Stock Partnerships, and certain other
information, are set forth in Schedule I to this Offering Circular/Prospectus.
DESCRIPTION OF HOLDINGS CAPITAL STOCK
The authorized capital stock of Holdings consists of 2,200,000,000 shares of
Holdings Common Stock and 150,000,000 shares of preferred stock, par value $.01
per share (the "Preferred Stock"). As of October 31, 1994, 1,148,477,506 shares
of Holdings Common Stock were outstanding. As of such date, 94,664,699 shares of
Preferred Stock were outstanding, of which 52,500,000 shares were Series A
Preferred Stock, 50,000 shares were Series B Cumulative Preferred Stock (the
"Series B Preferred Stock"), 26,675,000 shares were Series C Preferred
Conversion Stock (the "Series C Preferred Stock") and 15,490,964 shares were
ESOP Preferred Stock.
The following is a description of the terms of the capital stock of
Holdings. This description does not purport to be complete and is qualified in
its entirety by reference to Holdings' Amended and Restated Certificate of
Incorporation, as amended (the "Holdings Certificate of Incorporation"), which
has been incorporated by reference as an exhibit to the Registration Statement
of which this Offering Circular/Prospectus is a part and is incorporated by
reference herein. Holdings believes that the summaries of the Holdings
Certificate of Incorporation set forth below are accurate and complete summaries
of the material terms of such instruments.
COMMON STOCK
Each share of Holdings Common Stock is entitled to one vote at all meetings
of stockholders of Holdings for the election of directors of Holdings and on all
other matters. Dividends may be paid to the holders of Holdings Common Stock
when, as and if declared by the board of directors of Holdings out of funds
legally available therefor. The Holdings Common Stock has no preemptive or
similar rights. Holders of Holdings Common Stock are not liable to further call
or assessment. Upon liquidation, dissolution or winding up of the affairs of
Holdings, any assets remaining after provision for payment of creditors (and any
liquidation preference of any outstanding preferred stock) would be distributed
pro rata among holders of the Holdings Common Stock. Holdings has never paid any
cash dividends on shares of the Holdings Common Stock. The Credit Agreements
restrict cash dividends and other distributions on Holdings Common Stock. The
indenture relating to subordinated debentures (the "RJRN Subordinated
Debentures") of RJRN (the "RJRN Subordinated Debenture Indenture") and the
indenture relating to certain senior notes (the "Senior Notes") of RJRN (the
"Senior Note Indenture") restrict dividends or distributions to Holdings from
RJRN and its subsidiaries which could otherwise be used for the payment of cash
dividends on the Holdings Common Stock by Holdings. The timing, amount and form
of future dividends, if any, will depend, among other things, upon the effect of
applicable restrictions on the payment of dividends, results of operations,
financial condition, cash requirements, prospects and other factors deemed
relevant by the board of directors of Holdings. See "Certain Significant
Considerations--Holding Company Structure" and "Description of Holdings Capital
Stock--Contractual Restrictions on Payment of Dividends."
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<PAGE>
The Holdings Common Stock is listed on the NYSE.
First Chicago Trust Company of New York is the registrar and transfer agent
for the Holdings Common Stock.
PREFERRED STOCK
Series A Preferred Stock. Each share of Series A Preferred Stock was
entitled to receive, when, as and if declared by the board of directors of
Holdings, out of funds legally available therefor, cumulative cash dividends at
a rate of $3.34 per annum, payable quarterly in arrears. On November 15, 1994
each share of Series A Preferred Stock mandatorily converted into four shares of
Holdings Common Stock (the "Series A Common Equivalent Rate").
Holders of Series A Preferred Stock had the right, voting together with the
holders of Holdings Common Stock (and any other class of capital stock of
Holdings entitled to vote together with the Holdings Common Stock, including the
Series C Preferred Stock and ESOP Preferred Stock) as one class, to vote in the
election of directors and upon each other matter coming before any meeting of
the stockholders on the basis initially of one vote (equal to one-fourth of the
Series A Common Equivalent Rate) for each Series A Preferred Stock held;
provided that the holders of Series A Preferred Stock are not entitled to vote
on any increase or decrease in the number of authorized shares of any class or
classes of stock. In the event dividends on all series of Preferred Stock,
including the Series A Preferred Stock, were in arrears and unpaid for six
quarterly periods, the holders of Series A Preferred Stock, together with the
holders of all other outstanding series of Preferred Stock entitled to vote
thereon, were entitled to elect two additional directors to the board of
directors of Holdings until all cumulative dividends on all series of Preferred
Stock, have been paid or declared and set aside for payment; provided that such
directors may not have exceeded 25% of the total board of directors or be less
than one director. While such holders were entitled to elect two directors, they
were not entitled to participate with the holders of Holdings Common Stock in
the election of any other directors, but would have continued to vote with the
holders of Holdings Common Stock upon each other matter coming before any
meeting of the stockholders.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series A Preferred Stock were entitled to receive $40.50
per share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Holdings
Common Stock.
Series B Preferred Stock. Each share of Series B Preferred Stock is entitled
to receive, when, as and if declared by the board of directors of Holdings, out
of funds legally available therefor, cumulative preferential cash dividends at
the rate per annum of 9.25%, payable quarterly in arrears. On and after August
19, 1998, Holdings, at its option upon not less than 30 nor more than 60 days'
notice, may redeem shares of the Series B Preferred Stock, as a whole or in
part, at any time, at a redemption price equivalent to $25,000 per share, plus
accrued and unpaid dividends thereon to the date fixed for redemption, without
interest, to the extent Holdings will have funds legally available therefor.
The Series B Preferred Stock has no stated maturity and is not subject to
any sinking fund or mandatory redemption. The Series B Preferred Stock is not
convertible into, or exchangeable for, shares of any other class or series of
stock of Holdings.
The holders of the Series B Preferred Stock do not have any voting rights,
except as otherwise provided by law and under certain other limited
circumstances.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series B Preferred Stock will be entitled to receive
$25,000 per share, plus an amount equal to any accrued and unpaid dividends,
before any distribution is made on any class of junior securities, including
Holdings Common Stock.
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<PAGE>
Series C Preferred Stock. Each share of Series C Preferred Stock is entitled
to receive, when, as and if declared by the board of directors of Holdings, out
of funds legally available therefor, cumulative preferential cash dividends
accruing at a rate of $6.012 per annum, payable quarterly in arrears. Each share
of Series C Preferred Stock will mandatorily convert into ten shares of Holdings
Common Stock on May 15, 1997, subject to adjustment in certain events (the
"Series C Common Stock Equivalent"), plus accrued and unpaid dividends on the
Series C Preferred Stock until the date of conversion. In addition, each share
of Series C Preferred Stock may be redeemed by Holdings, in whole or in part, at
any time or from time to time prior to the mandatory conversion date at a
redemption price to be paid in shares of Holdings Common Stock (or following
certain circumstances, other consideration), plus accrued and unpaid dividends.
The optional redemption price declines from $112.286 per share by $.01656 per
share on each day following May 6, 1994 to $95.246 per share on March 15, 1997,
and is $94.25 thereafter (the "Call Price").
Immediately prior to a merger or consolidation of Holdings (other than a
merger or consolidation of Holdings with or into a wholly owned subsidiary of
Holdings) that results in the conversion or exchange of Holdings Common Stock
into other securities or property, outstanding Series C Preferred Stock may be
converted at the option of Holdings into (i) shares of Holdings Common Stock at
a rate equal to the Series C Common Stock Equivalent (currently ten shares for
each share of Series C Preferred Stock), in effect immediately prior to such
merger or consolidation, plus (ii) the right to receive an amount in cash (which
may, at the option of Holdings, be payable in shares of Holdings Common Stock)
equal to all accrued and unpaid dividends on such Series C Preferred Stock to
and including the Settlement Date, plus (iii) the right to receive an amount of
cash (which may, at the option of Holdings, be payable in shares of Holdings
Common Stock) initially equal to $18.036 per share, declining by $.01656 on each
day following May 6, 1994 to $.996 on March 15, 1997 and equal to zero
thereafter. The shares of Holdings Common Stock issuable under clause (i) above
will be reduced, if necessary, so that the value of the aggregate consideration
described in clauses (i) and (iii) above does not exceed the Call Price on the
Settlement Date. Alternatively, Holdings may cause the Series C Preferred Stock
to remain outstanding or convert into a substantially similar security of
Holdings or of the entity issuing the consideration in such merger or
consolidation. In that event, each holder of a share of Series C Preferred Stock
may elect to convert the Series C Preferred Stock into Holdings Common Stock at
a rate equal to the Series C Common Stock Equivalent immediately prior to the
merger or consolidation (provided that the number of shares of Holdings Common
Stock issuable will be reduced, if necessary, so that the value of such shares
does not exceed the Call Price on the Settlement Date), plus the right to
receive an amount of cash (which may, at the option of Holdings, be payable in
shares of Holdings Common Stock) equal to all accrued and unpaid dividends on
such Series C Preferred Stock to and including the Settlement Date.
If Holdings has recommended acceptance of (or has expressed no opinion and
is remaining neutral toward) a tender offer which would result in the ownership
by the bidder (or an affiliate of the bidder) of more than 50% of the then
outstanding Holdings Common Stock, then each holder of Series C Preferred Stock
will have the option to convert such shares, in whole (but not in part), into
Holdings Common Stock at the Series C Stock Equivalent in effect at the close of
business on the day prior to the date of expiration or termination of such
tender offer; provided that the number of shares of Holdings Common Stock
issuable upon such conversion will be reduced if necessary, so that the value of
such shares does not exceed the Call Price on such date.
If Holdings distributes to holders of Holdings Common Stock the capital
stock of a subsidiary representing all or substantially all of either of
Holdings' two present principal lines of business (the "Spinoff Company"),
Holdings will (subject to the final sentence of this paragraph) convert each
share of Series C Preferred Stock into one-half of a share of the existing
Series C Preferred Stock and one-half of a share of a substantially equivalent
security of the Spinoff Company. In such case, the conversion rate per share of
the new Series C Preferred Stock will be equal to a fraction, of which the
numerator will be the product of the market price of Holdings Common Stock prior
to the distribution
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<PAGE>
and the Series C Common Stock Equivalent and of which the denominator will be
the excess of the market price of Holdings Common Stock prior to the
distribution over the market value of a share of the Spinoff Company. The
conversion rate per share of the new security of the Spinoff Company will be
equal to a fraction, of which the numerator will be the product of the market
price of Holdings Common Stock prior to the distribution and the Series C Common
Stock Equivalent and of which the denominator will be the market value of a
share of the Spinoff Company. Alternatively, Holdings may elect to distribute to
each holder of Series C Preferred Stock the number of shares of capital stock of
the Spinoff Company that such holder would have been entitled to receive if the
Series C Preferred Stock had been converted to Holdings Common Stock immediately
prior to the distribution at the Series C Common Stock Equivalent then in
effect. In the event that either (a) the fair value of the shares of the Spinoff
Company distributed are greater than or equal to 95% of the market price of
Holdings Common Stock prior to the distribution or (b) the record date for the
distribution is fixed less than twenty-one trading days prior to such record
date, then Holdings must elect to distribute the shares of the Spinoff Company
to the holders of the shares of Series C Preferred Stock in accordance with the
preceding sentence.
The voting rights of the holders of Series C Preferred Stock are generally
consistent with those of the holders of Series A Preferred Stock prior to its
mandatory conversion on November 15, 1994.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series C Preferred Stock will be entitled to receive $60.50
per share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Holdings
Common Stock.
ESOP Preferred Stock. Each share of ESOP Preferred Stock is entitled to
receive, when, as and if declared by the board of directors of Holdings, out of
funds legally available therefor, cumulative cash dividends at a rate of 7.8125%
of stated value per annum ($1.25 per annum) at least until April 10, 1999,
payable semi-annually in arrears. Each share of ESOP Preferred Stock is
convertible into one share of Holdings Common Stock, subject to adjustment in
certain events. The ESOP Preferred Stock is redeemable at the option of
Holdings, in whole or in part, at any time on or after April 10, 1999, at an
initial optional redemption price of $16.25 per share, declining thereafter on
an annual basis in the amount of $.125 a year to $16 per share on April 10,
2001, plus accrued and unpaid dividends. Under certain other circumstances, the
ESOP Preferred Stock is subject to redemption at any time. Holders of ESOP
Preferred Stock have voting rights which are generally consistent with those of
the holders of the Series A Preferred Stock prior to its mandatory conversion on
November 15, 1994.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of ESOP Preferred Stock will be entitled to receive $16.00 per
share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Holdings
Common Stock.
CONTRACTUAL RESTRICTIONS AND POLICIES ON PAYMENT OF DIVIDENDS
Holdings is subject to various contractual restrictions on its ability to
pay dividends on its Preferred Stock and Holdings Common Stock.
Under the Credit Agreements, if no event of default exists thereunder in the
case of clauses (i), (iii) and (iv) below, Holdings may (i) declare and pay
regularly scheduled dividends on its preferred or preference stock outstanding
on December 9, 1991, in the case of the 1991 Credit Agreement, and April 5,
1993, in the case of the 1993 Credit Agreement, when and as scheduled at
dividend rates not exceeding those in effect on December 19, 1991, in the case
of the 1991 Credit Agreement, and April 5, 1993, in the case of the 1993 Credit
Agreement; (ii) issue shares of Holdings Common Stock upon the exercise of any
warrants or options or upon the conversion or redemption of any convertible or
redeemable preferred stock, and in connection with any such exercise, conversion
or redemption, Holdings may pay cash in lieu of issuing fractional shares of
Holdings Common Stock; (iii) repurchase shares of Holdings Common Stock (and/or
options or warrants in respect thereof) pursuant to and in
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<PAGE>
accordance with the terms of, management and/or employee stock plans; (iv)
declare and pay, or otherwise effect, any other cash dividend or other dividend
or distribution, or repurchase or redeem any capital stock, provided that the
aggregate amount of such dividends, distributions, repurchases and redemptions,
when added to all dividends, distributions, repurchases and redemptions, made in
accordance with this clause (iv) after December 9, 1991, in the case of the 1991
Credit Agreement, and January 1, 1992, in the case of the 1993 Credit Agreement,
will not exceed an amount equal to the sum of (x) 50% of the sum of (A)
consolidated net income of Holdings and its subsidiaries for the period (taken
as one accounting period) from January 1, 1992 to the last day of the last
fiscal quarter of Holdings then ended plus (B) all losses from debt retirement
deducted in determining consolidated net income of Holdings and its subsidiaries
for the period referred to in clause (A) above plus (y) the aggregate cash
proceeds (net of underwriting discounts and commissions) received by Holdings
after March 22, 1993, in the case of the 1991 Credit Agreement, and April 5,
1993, in the case of the 1993 Credit Agreement, from issuances of its equity
securities; (v) issue and exchange shares of any class or series of Holdings
common stock now or hereafter outstanding for shares of any other class or
series of Holdings common stock now or hereafter outstanding and (vi) in
connection with any reclassification of Holdings common stock and any exchange
permitted by clause (v) above, pay cash in lieu of issuing fractional shares of
any class or series of Holdings common stock.
RJRN and Holdings are seeking to amend the Credit Agreements to permit the
completion of the proposed Nabisco initial public offering and to allow Nabisco
Inc., Nabisco's immediate subsidiary, to obtain a $1.5 billion short-term credit
facility. In the amendments (the "Amendments") to the Credit Agreements proposed
by RJRN and Holdings, Holdings would be subject to new limits on its ability to
pay dividends on its Preferred Stock and Holdings Common Stock. Specifically, if
the proposed Amendments become effective, Holdings would be able to (i) issue
shares of Holdings Common Stock upon the exercise of any warrants or options or
upon the conversion or redemption of any convertible or redeemable preferred
stock and, in connection with any such exercise, conversion or redemption,
Holdings would be able to pay cash in lieu of issuing fractional shares of
Holdings Common Stock; (ii) if no event of default existed under the Credit
Agreements, repurchase Holdings Common Stock (and/or options or warrants in
respect thereof) pursuant to, and in accordance with the terms of, management
and/or employee stock plans; (iii) if no event of default existed under the
Credit Agreements, declare and pay, or otherwise effect, any other cash dividend
or other dividend or distribution, or repurchase or redeem any capital stock,
provided that the aggregate amount of such dividends, distributions, repurchases
and redemptions, when added to all dividends, distributions, repurchases and
redemptions made in accordance with this clause (iii) after the effective date
of the Amendments, would not exceed an amount equal to the sum of (x) $1 billion
plus (y) 50% of the sum of (A) consolidated net income of Holdings and its
subsidiaries for the period (taken as one accounting period) from January 1,
1995 to the last day of the last fiscal quarter of Holdings then ended plus (B)
all losses from debt retirement deducted in determining consolidated net income
of Holdings and its subsidiaries for the period referred to in clause (A) above
plus (z) the aggregate cash proceeds (net of underwriting discounts and
commissions) received by Holdings after the effective date of the Amendments
from issuances of its equity securities (provided that the aggregate amount of
such aggregate net cash proceeds received in any twelve-month period shall be
deemed not to exceed $250 million for purposes of this clause (iii)(z)), in each
case determined at the time of the declaration thereof, provided that such
dividend, distribution or redemption payment was paid within 45 days of the
making of such declaration; (iv) issue and exchange shares of any class or
series of its common stock now or hereafter outstanding for shares of any other
class or series of its common stock now or hereafter outstanding; and (v) in
connection with any reclassification of its common stock and any exchange
permitted by clause (v) above, pay cash in lieu of issuing fractional shares of
any class or series of its common stock. RJRN and Holdings anticipate that their
lenders will consent to the proposed amendments and to the establishment of a
short-term credit facility for Nabisco, Inc.
The Senior Note Indenture, under which $1.5 billion of 10 1/2% Senior Notes
due 1998 (the "Senior Notes") are outstanding, and the RJRN Subordinated
Debenture Indenture, under which $100 million
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<PAGE>
of 13 1/2% Subordinated Debentures due 2001 (the "Subordinated Debentures") are
outstanding, by containing restrictions on the payment of cash dividends or the
making of other distributions by RJRN to Holdings in excess of certain specified
amounts and for certain specified purposes, also effectively limit the payment
of dividends on the Holdings Common Stock or any Preferred Stock. Holdings has
called all of the Senior Notes and Subordinated Debentures for redemption on
November 30, 1994 and December 2, 1994, respectively.
In addition to the contractual restrictions referred to above, the Board of
Directors of Holdings has adopted a policy, which will become effective upon the
closing of the proposed Nabisco initial public offering, under which Holdings
would limit, until December 31, 1998, the aggregate amount of cash dividends on
its Capital Stock. Under this policy, Holdings:
(a) would not pay any extraordinary cash dividends;
(b) would not make any Restricted Payment if, after giving effect to such
Restricted Payment, the aggregate amount expended for all Restricted Payments
subsequent to December 31, 1994 exceeds the sum of (i) $500 million, plus (ii)
65% of Consolidated Net Income of Holdings on a cumulative basis subsequent to
December 31, 1994, plus (iii) aggregate cash proceeds of up to $250 million
received in any year subsequent to December 31, 1994 by Holdings or a Subsidiary
from the issuance and sale (other than to a Subsidiary) of Holdings' or such
Subsidiary's Capital Stock (or of other securities that are subsequently
converted into or exchanged for Holdings' or such Subsidiary's Capital Stock)
(other than proceeds from the initial public offering of Nabisco), it being
understood that any aggregate net cash proceeds from any issuance and sale of
any Capital Stock will be counted only up to the amount of any indebtedness or
preferred stock of Holdings or any Subsidiary that has been repaid, purchased,
redeemed or otherwise acquired for value by Holdings or any Subsidiary within
one year before or after such issuance and sale. If Holdings or a Subsidiary
repays, purchases, redeems or otherwise acquires for value indebtedness or
preferred stock of Holdings or a Subsidiary in exchange for Capital Stock of
Holdings or a Subsidiary, Holdings or such Subsidiary shall be deemed to have
received the net cash proceeds equal to the market value of the Capital Stock so
issued in exchange (such market value to be determined by Holdings' Board of
Directors, whose good faith determination shall be conclusive);
(c) will use an amount equal to the net cash proceeds received prior to
December 31, 1998 from (i) the issuance and sale by Holdings of any Capital
Stock (other than to a Subsidiary or current, future or former directors,
officers or employees of Holdings or any Subsidiary (or their estates or
beneficiaries under their estates) or (ii) any sale outside the ordinary course
of business of material assets owned or used by any of its Subsidiaries in the
tobacco business (other than to another Subsidiary) either to repay, purchase,
redeem or otherwise acquire for value indebtedness of Holdings or a Subsidiary
or to acquire properties, assets or businesses to be used in existing or new
lines of business of Holdings or its Subsidiaries; and
(d) will use an amount equal to the net cash proceeds received by Holdings
or RJRN prior to December 31, 1998 from the sale to third parties of shares of
common stock of Nabisco held by either of them to repay, purchase, redeem or
otherwise acquire for value indebtedness of Holdings or a Subsidiary.
The foregoing policy will not prevent the payment of a cash dividend within
90 days of its declaration if, at the time of declaration, such payment would
have complied with the foregoing policy or the purchase, redemption,
acquisition, cancellation or other retirement for value of Capital Stock,
options on Capital Stock, stock appreciation rights or similar securities held
by current, future or former directors, officers or employees of Holdings or any
Subsidiary or certain trusts or estates for their benefit.
Holdings has also adopted a policy, which will become effective upon the
closing of the proposed Nabisco initial public offering, to the effect that it
will not declare a dividend or distribution on its Capital Stock prior to
December 31, 1996 that is paid in Capital Stock of a Subsidiary owned by
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Holdings or a Subsidiary and that it is its intent not to make such a
distribution to its stockholders prior to December 31, 1998 if (a) such
distribution would cause the ratings of RJRN's publicly held senior indebtedness
to be reduced from investment grade to non-investment grade or (b) any publicly
held senior indebtedness of the distributed Subsidiary would, after giving
effect to such distribution, be rated non-investment grade.
For purposes of the foregoing policies:
"Capital Stock" means any and all shares, interests, participations or other
equivalents (however designated) of capital stock and any rights (other than
debt securities convertible into capital stock), warrants or options to acquire
such Capital Stock.
"Consolidated Net Income" of Holdings means, for any period, the aggregate
consolidated net income of Holdings and its Subsidiaries for such period,
determined on a consolidated basis in accordance with generally accepted
accounting principles as in effect from time to time, adjusted by excluding (to
the extent not otherwise excluded in calculating consolidated net income) any
net extraordinary gain or net extraordinary loss, as the case may be, and any
restructuring charges.
"Restricted Payment" means (i) any payment of any cash dividend or
distribution by Holdings on its Capital Stock, (ii) any purchase, redemption or
other acquisition for cash by Holdings of its Capital Stock (other than any such
purchase, redemption or acquisition for value in exchange for, or in an amount
equal to the proceeds of, an offering of Capital Stock of Holdings or any
Subsidiary or, in the case of Holdings' Series B Preferred Stock or any other
non-convertible preferred stock of Holdings outstanding from time to time, for
indebtedness of Holdings or any Subsidiary and (iii) any purchase, redemption or
other acquisition for cash by Holdings of any Subordinated Debt prior to any
scheduled maturity, scheduled repayment or scheduled sinking fund payment (other
than any such purchase, redemption or other acquisition for value in exchange
for, or in an amount equal to the proceeds of, an offering of Capital Stock or
Subordinated Debt of Holdings or any Subsidiary).
"Subordinated Debt" means any indebtedness of Holdings or any Subsidiary
which by its terms is expressly subordinated in right of payment to any other
indebtedness of Holdings or any Subsidiary, provided, however, that the term
Subordinated Debt shall not include any intercompany indebtedness.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by Holdings.
CERTAIN STATUTORY AND BY-LAW PROVISIONS
Holdings is currently, and following the consummation of the offering will
be, subject to the "business combination" statute of the Delaware General
Corporation Law (the "DGCL"). In general, Section 203 of the DGCL prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an "interested stockholder," unless
(a) prior to such date the board of directors of the corporation approved either
the "business combination" or the transaction which resulted in the stockholder
becoming an "interested stockholder," (b) upon consummation of the transaction
which resulted in the stockholder becoming an "interested stockholder," the
"interested stockholder" owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (i)
by persons who are directors and also officers and (ii) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (c) on or subsequent to such date the "business combination" is
approved by the board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested stockholder." A
"business combination" includes mergers, certain stock
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or asset sales and certain other transactions resulting in a financial benefit
to, or increase in voting power held by, the "interested stockholders." An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or if such person is an affiliate or associate of the
corporation within three years, did own) 15% or more of the corporation's voting
stock.
Holdings' By-laws establish an advance notice procedure for stockholders to
make nominations of candidates for election as directors, or to bring other
business before an annual meeting of stockholders of Holdings. The By-laws
provide that only persons who are nominated by, or at the direction of, the
board of directors of Holdings or any committee designated by the board of
directors of Holdings, or by a stockholder who has given timely written notice
to the Secretary of Holdings prior to the meeting at which directors are to be
elected, will be eligible for election as directors of Holdings. The By-laws
also provide that in order to properly submit any business to an annual meeting
of stockholders, a stockholder must give timely written notice to the Secretary
of Holdings of such stockholder's intention to bring such business before such
meeting. Generally, for notice of stockholder nominations or other business to
be made at an annual meeting to be timely under the By-laws, such notice must be
received by Holdings (i) not less than 120 days nor more than 150 days before
the first anniversary date of Holdings' proxy statement in connection with the
last annual meeting of stockholders or (ii) if no annual meeting was held in the
previous year or the date of the applicable annual meeting has been changed by
more than 30 days from the date contemplated at the time of the previous year's
proxy statement, not less than a reasonable time, as determined by the board of
directors of Holdings, prior to the date of the applicable annual meeting. Under
the By-laws, a stockholder's notice must also contain certain information
specified in the By-laws.
The provisions described above, together with certain terms of Holdings
outstanding Preferred Stock and its ability to issue additional Preferred Stock,
may have the effect of delaying stockholder actions with respect to certain
business combinations and the election of new members of the board of directors
of Holdings. As such, the provisions could have the effect of discouraging open
market purchases of Holdings Common Stock because they may be considered
disadvantageous by a stockholder who desires to participate in a business
combination or elect a new director.
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DESCRIPTION OF BORDEN CAPITAL STOCK AND RIGHTS
Borden has authorized 480,000,000 shares of Borden Common Stock, of which
141,814,967 shares were issued and outstanding as of November 15, 1994
(excluding 53,168,407 shares held in Borden's treasury). Borden has also
authorized 10,000,000 shares of Preferred Stock, without par value. Of these
10,000,000 Preferred Shares, 475,000 have been designated Preferred
Stock--Series A, none of which were issued or outstanding as of November 15,
1994. In addition, 688,700 shares of Preferred Stock have been designated
Preferred Stock--Series B, of which 6,822 were issued and outstanding as of
November 15, 1994. Each share of preferred series B stock has an involuntary
liquidating value of $28.88, bears an annual cumulative dividend of $1.32, is
convertible into 6.6 shares of Borden Common Stock and is redeemable at Borden's
option. At November 15, 1994, 45,031 shares of Borden Common Stock were reserved
for issuance upon conversion of the preferred series B stock. In addition,
2,400,000 shares of Preferred Stock have been designated Series C Junior
Participating Preferred Stock of Borden (the "Series C Stock"), none of which
were issued and outstanding as of November 15, 1994.
Under the Rights Agreement, each outstanding share of Borden Common Stock
has one Right, which entitles the shareholder to purchase, under certain
circumstances, one one-hundredth of a share of Series C Stock at a purchase
price of $175, subject to adjustment (the "Purchase Price").
The Rights Agreement provides that the Rights become exercisable on the
tenth day (calendar days in the case of clause (i) and business days in the case
of clause (ii)) (the "Distribution Date") following the earlier of: (i) the
acquisition by any person or group (an "Acquiring Person") of beneficial
ownership of 20% or more of the outstanding Borden Common Stock or (ii) the
commencement by any person or group of a tender offer which would result in such
person owning 20% or more of the outstanding Borden Common Stock. After the
acquisition by any Acquiring Person of 20% of the Borden Common Stock but before
such person has acquired 50% of the Borden Common Stock, Borden may exchange all
or part of the Rights at the rate of one share of Borden Common Stock per Right.
Subsequent to the date that the Rights become exercisable, the Rights will trade
separately from the Borden Common Stock. The percentage ownership required to
trigger a Distribution Date may be reduced by Borden to not less than the
greater of (i) the sum of 0.001% and the largest percentage of the outstanding
Borden Common Stock then known by Borden to be beneficially owned by any person
and (ii) 10%.
Under the Rights Agreement, the Rights are redeemable at a price of one and
two-thirds cents per Right by the vote of the Board of Directors of Borden, at
any time until the time when a person has acquired 20% or more of the
outstanding Borden Common Stock.
In the event that Borden were acquired in a merger or other business
combination transaction or more than 50% of its consolidated assets or earning
power were sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value of two times the Purchase Price of the Right.
In the event any person becomes an Acquiring Person, each holder of a Right
will thereafter have the right to purchase, upon payment of the Purchase Price,
such number of shares of Borden Common Stock having a market value equal to
twice the Purchase Price. The Acquiring Person will not be entitled to the
benefit of such right and Rights beneficially owned by such Acquiring Person
will thereafter be void.
In the event of any merger, consolidation or other transaction in which
shares of Borden Common Stock are exchanged, each share of the Series C Stock
will be entitled to receive 100 times the amount and type of consideration
received per share of Borden Common Stock.
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The Rights Agreement was amended as of September 11, 1994 and as of
September 23, 1994 to provide that (i) the letter agreement dated as of
September 11, 1994 between Borden and the Partnership pursuant to which the
Partnership stated its intent to enter into the Merger Agreement and
transactions contemplated thereby does not cause the Partnership or the
Purchaser to be the "Beneficial Owner" (as defined in the Rights Agreement) of
any Borden Shares or cause a Distribution Date to occur and (ii) none of the
execution or delivery of the Merger Agreement or the Conditional Purchase/Option
Agreement, or both such agreements taken together, or commencement of the
Exchange Offer, or the consummation of the transactions contemplated by the
Conditional Purchase/Option Agreement will trigger the exercisability of the
Rights, the separation of the Rights from the stock certificates to which they
are attached or any other provisions of the Rights Agreement, including causing
the Partnership and/or the Purchaser from becoming an Acquiring Person (as
defined in the Rights Agreement), the occurrence of the Distribution Date or a
Share Acquisition Date (as defined in the Rights Agreement).
COMPARISON OF RIGHTS OF HOLDERS
OF BORDEN AND HOLDINGS COMMON STOCK
The rights of shareholders of Borden are currently governed by applicable
New Jersey law, including the NJBCA, and by Borden's Charter and By-laws. If the
Merger is consummated, shareholders of Borden will become shareholders of
Holdings and their rights will be governed by applicable Delaware law, including
the DGCL, and by Holdings' Certificate of Incorporation and By-laws. Although it
is not practicable to compare all of the differences between the corporation
laws of Delaware and New Jersey and between the governing corporate documents of
Borden and Holdings, the following is a summary of the material differences
which may significantly affect the rights of Borden's shareholders.
Antitakeover Provisions
Both Delaware and New Jersey have enacted legislation which encourages a
potential acquiror of certain publicly-held corporations organized in the state
to negotiate with the board of directors and make it more difficult to effect an
acquisition not approved by the board. Under Delaware law, a publicly-held
corporation may be prohibited from consummating a business combination with an
"interested shareholder" for a period of three years after the shareholder
became interested unless (i) the business combination was approved by the board
of directors prior to the date the shareholder became interested, (ii) the
business combination was approved by the holders of 66 2/3% of the outstanding
voting other than shares held by the interested shareholder or (iii) upon
consummation of the transaction that resulted in the shareholder becoming an
interested shareholder, the interested shareholder owned at least 85% of the
corporation's voting stock. Under Delaware law, "beneficial ownership" of 15% or
more of the outstanding voting stock results in "interested shareholder" status.
Under New Jersey law, a publicly-traded New Jersey corporation with its
principal executive offices or significant business operations located in New
Jersey is prohibited from consummating a business combination with an interested
shareholder for a period of five years unless the business combination is
approved by the board of directors prior to the date the shareholder became
interested. In addition, after the five-year period, a New Jersey corporation
may not engage in a business combination with an interested shareholder unless
either (i) the business combination is approved by the board of directors prior
to the date the shareholder became an interested shareholder or (ii) the
business combination is approved by the holders of two-thirds of the voting
stock not held by the interested shareholder or (iii) subject to certain other
requirements, the consideration per share received in the business combination
is at least equal to the greater of (x) the highest price per share paid by the
interested shareholder in the five years prior to either the announcement of the
business combination or the date at which the interested shareholder became
such, whichever results in a higher price, and (y) the market price on either
the date the business combination is announced or on the date the
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interested shareholder first became such, whichever is higher. New Jersey law
defines "interested shareholder" as a person beneficially owning 10% or more of
the outstanding voting stock of the corporation.
Borden's Charter adds to the requirements of the NJBCA and provides that no
business combination with a "related person" (defined as a shareholder who
beneficially owns 20% or more of any class of capital stock of the corporation)
may occur unless (i) the business combination is approved by the affirmative
vote of at least 80% of the outstanding shares of capital stock entitled to vote
for directors, (ii) the business combination is approved by a majority of the
continuing directors (defined as a director who is not affiliated with any
"related person" and was a director prior to the time that the "related person"
crossed the threshold of 5% voting power of any class of capital stock) or (iii)
the consideration to be received per share in the business combination is at
least as high as the greater of the highest price per share of prior purchases
of Borden's capital stock by the "related person" and the average closing price
per share on the NYSE for the prior 200 trading days. See "The Exchange
Offer--Description of Merger Agreement and Conditional Purchase/Option
Agreement" for a discussion of certain agreements of Borden with respect to the
antitakeover provisions of the NJBCA and Borden's Charter in connection with the
Exchange Offer, the Merger and the Option.
Dissenters' or Appraisal Rights
Both the DGCL and the NJBCA give shareholders the right to dissent from
certain business acquisitions, dispositions and combinations and to demand and
receive cash payment of the fair value of their shares. These rights are known
as "appraisal rights" in Delaware and "dissenters' rights" in New Jersey.
Shareholders of a Delaware corporation generally have appraisal rights with
respect to a merger or consolidation. Unless the corporation's certificate of
incorporation provides otherwise, such appraisal rights generally are not
available (i) when the corporation is to be the surviving corporation and no
vote of its shareholders is required for the merger, except that appraisal
rights are available in certain short-form mergers under Section 253 of the DGCL
in which the parent corporation of a subsidiary more than 90% (but less than
100%) of the common stock of which is owned by the parent merges with such
subsidiary, or (ii) when the stock of the constituent corporation, on the record
date fixed to determine the shareholders entitled to receive notice of and vote
on the agreement of merger, is listed on a national securities exchange or held
of record by more than 2,000 shareholders, unless in the case of (i) or (ii)
above, such shareholders are required by the terms of the merger to accept
anything other than shares of stock of the surviving corporation, shares of
stock of another corporation that are so listed or held by such number of record
holders, cash in lieu of fractional shares of such stock, or any combination
thereof. Shareholders of a Delaware corporation do not have appraisal rights
with respect to the disposition of all or substantially all the assets of the
corporation unless the corporation's certificate of incorporation provides
otherwise.
Shareholders of a New Jersey corporation generally have dissenters' rights
with respect to a merger or consolidation as well as with respect to the
disposition of all or substantially all of the assets of the corporation. Such
dissenters' rights are not available to shareholders of a New Jersey corporation
(i) if the shares that they hold are a class or series that is listed on a
national securities exchange or is held of record by 1,000 or more shareholders
or (ii) if, pursuant to such disposition of assets, merger or consolidation,
they will receive stock or other securities so listed or held, cash, or a
combination of cash and such securities. A shareholder of a surviving
corporation in a merger will not have dissenters' rights if the vote of
shareholders of the corporation was not required for approval of the plan of
merger. Dissenters' rights are not available to holders of Borden Shares in the
Exchange Offer or the Merger. See "The Exchange Offer--Right to Dissent and
Appraisal Rights."
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Special Meetings of Shareholders
Under Delaware law, special meetings of shareholders may be called by the
board of directors of a corporation or by such person or persons as may be
authorized by the certificate of incorporation or by the by-laws of the
corporation. Holdings' By-laws permit the chairman of the board of directors or,
upon written request to the chairman or secretary, the holders of not less than
25% of the outstanding shares of Holdings Common Stock to call a special
meeting.
Under New Jersey law, special meetings of shareholders may be called by the
president or board of directors of a corporation or by such other officers,
directors or shareholders, as may be provided in the by-laws. The By-laws of
Borden permit the chairman, chief executive officer, president or a majority of
directors to call a special meeting. In addition, under New Jersey law, upon the
application of a holder or holders of not less than 10% of all the shares
entitled to vote at a meeting, a court for good cause shown may order a special
meeting to be called and held.
Action By Written Consent
The DGCL provides that, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at any annual or
special meeting of shareholders of a corporation may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, is signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Holdings' Certificate of Incorporation does not contain a
provision limiting the right to act by written consent.
Under the NJBCA, except as otherwise provided in a corporation's certificate
of incorporation, any action required or permitted to be taken at a meeting of
shareholders, other than the annual election of directors, may be taken without
a meeting upon (i) the written consent of shareholders who would have been
entitled to cast the minimum number of votes that would be necessary to
authorize such action at a meeting at which all shareholders entitled to vote
thereon were present and voting and (ii) ten or twenty days' (depending on the
circumstances) written notice to all non-consenting shareholders who would have
been entitled to notice of a meeting to vote on such action. Borden's Charter
does not contain a provision limiting the right to act by written consent.
Statutory Voting Requirements
The DGCL generally requires the approval of a majority of the outstanding
voting shares for merger, consolidation, sale of all or substantially all of the
corporation's assets, or an amendment to its certificate of incorporation unless
the corporation's certificate of incorporation provides for a higher voting
requirement. The NJBCA generally requires approval by a majority of votes cast
at a meeting of shareholders by those entitled to vote, unless the charter or
another provision of the NJBCA requires a greater plurality. Holdings'
Certificate of Incorporation does not contain any higher voting requirement.
Borden's Charter provides that the affirmative vote of two-thirds of all issued
and outstanding voting stock is required to adopt a plan of merger or
consolidation involving Borden. In addition, Borden's Charter provides that the
consent of 85% of all the issued and outstanding voting stock is required to
approve the lease or sale of all the property and assets of Borden.
The NJBCA permits a New Jersey corporation, without shareholder approval, to
sell all or substantially all of its assets if such sale is in the ordinary
course of the corporation's business. The DGCL contains no similar provision.
Limiting of Liability and Indemnification of Directors and Officers
Delaware law permits a corporation to indemnify its directors and officers
and limit the liability of its directors for monetary damages for breach of the
fiduciary duty of care as a director or officer except in certain circumstances.
New Jersey law permits a corporation to indemnify and limit the liability of
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both directors and officers under similar circumstances. Holdings' Certificate
of Incorporation and By-laws contain provisions limiting the liability of
directors and officers to the maximum extent permitted by the DGCL. Borden's
Charter and By-laws contain provisions indemnifying and limiting the liability
of directors and officers to the maximum extent permitted by the NJBCA.
Classified Board of Directors
Under Delaware law, a corporation may have a classified board of directors
providing for up to three classes of directors each having a term of up to three
years, and newly elected directors selected by the board of directors may serve
to the expiration of the term of the class to which they are named. Under New
Jersey law a corporation may have a classified board of directors, but no class
of directors shall hold office for a term shorter than one year or longer than
five years, and the term of at least one class shall expire in each year. In
addition, directors elected to the board of directors to fill newly created
directorships serve until the next annual meeting of shareholders. Neither
Holdings nor Borden has a classified board of directors.
Dividends
Delaware law permits corporations to pay dividends out of surplus or, in the
event there is no surplus and the aggregate capital of the corporation at least
equals the amount of capital of classes of capital stock having a preference on
distribution of assets, out of (i) net profits for the fiscal year in which the
dividend is declared or (ii) net profits for the preceding year.
Under New Jersey law, a dividend may not be paid if the corporation would be
unable to pay its debts as they become due in the usual course of business or if
the corporation's total assets would be less than its total liabilities. The
liquidation preference of capital stock having a preference on distribution of
assets is not "debt" for this purpose.
Shareholder Derivative Actions
Under New Jersey law, if the shareholder-plaintiffs in a shareholder
derivative action own less than 5% of the outstanding shares of any class of the
stock of the corporation on behalf of which such shareholders are bringing suit
(unless such shares have a fair market value in excess of $25,000), the
corporation may require the shareholder-plaintiffs to give security for the
reasonable expenses, including attorneys' fees of the corporation or any
defendants; moreover, shareholders found by a court of competent jurisdiction to
have instituted a derivative suit without reasonable cause may be required to
pay the reasonable expenses, including attorney's fees, of the defendants named
in such action.
No comparable provisions exist under the DGCL.
Loans to and Guarantees of Obligations of Officers and Employees
Under both Delaware and New Jersey law, a corporation may lend money to, or
guarantee of an obligation of, an officer, employee or director of a corporation
whenever in the judgment of the board of directors of the corporation such loan
or guarantee may reasonably be expected to benefit the corporation. Delaware law
also requires that loans or guarantees may be made for a director only if the
director is an officer or employee.
LEGAL MATTERS
The legality of the Holdings Common Stock being offered hereby is being
passed upon for Holdings by Jo-Ann Ford, Vice President, Assistant General
Counsel and Secretary of Holdings. Ms. Ford owns options to purchase shares of
Holdings Common Stock which represent less than 0.1% of the currently
outstanding shares of Holdings Common Stock.
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EXPERTS
The consolidated financial statements of Holdings as of December 31, 1993
and 1992 and for each of the years in the three year period ended December 31,
1993 incorporated in this Offering Circular/Prospectus by reference from (1)
Holdings' Registration Statement No. 33-52381 on Form S-3, at the time such
Registration Statement was declared effective and (2) Holdings' Annual Report on
Form 10-K for the year ended December 31, 1993 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Borden, Inc. incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 1993, have been so incorporated in reliance on the report (which
contains an explanatory paragraph relating to the restatement and
reclassification of the 1992 consolidated financial statements as described in
note 3 to the financial statements) of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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SCHEDULE I
CERTAIN INFORMATION REGARDING THE PURCHASER,
THE COMMON STOCK PARTNERSHIPS AND KKR ASSOCIATES
The following table sets forth the name, business address, age, principal
occupation or employment at the present time and during the last five years, the
name, principal business and address of any corporation or other organization in
which such occupation or employment is or was conducted and current
directorships of the executive officers and directors of the Purchaser and the
general partners of KKR Associates, all of whom are citizens of the United
States. KKR Associates is the general partner of each of the Common Stock
Partnerships. Except as otherwise noted, the address of each such corporation or
organization listed and the business addresses of such persons is the address of
KKR Associates, 9 West 57th Street, New York, New York 10019. Each person has
had the principal occupation or employment listed for more than the past five
years except as otherwise noted.
EXECUTIVE OFFICERS AND DIRECTORS OF THE PURCHASER
<TABLE>
<CAPTION>
NAME AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
BUSINESS ADDRESS AGE AND FIVE YEAR EMPLOYMENT HISTORY
- -------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Clifton S. Robbins.......................... 36 Director and President of the Purchaser and
executive of Kohlberg Kravis Roberts & Co., a
private investment firm ("KKR"). Member of the
Board of Directors of Flagstar Companies, Inc.,
Flagstar Corporation, IDEX Corporation, RJR
Nabisco Holdings Corp., RJR Nabisco, Inc. and
The Stop & Shop Companies, Inc.
Scott M. Stuart............................. 35 Director, Vice President and Treasurer of the
Purchaser and executive of KKR. Member of the
Board of Directors of Duracell International
Inc., RJR Nabisco Holdings Corp., RJR Nabisco,
Inc. and World Color Press, Inc.
Alexander Navab............................. 28 Director, Vice President and Secretary of the
Purchaser and, since June 1993, executive of
KKR; from September 1991 to June 1993, employee
of James D. Wolfensohn Incorporated, an
investment banking firm located at 599 Lexington
Avenue, New York, New York 10022.
</TABLE>
GENERAL PARTNERS OF KKR ASSOCIATES
<TABLE>
<CAPTION>
NAME AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
BUSINESS ADDRESS AGE AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Henry R. Kravis............................ 50 General Partner, KKR. Member of the Board of
Directors of American Re Corporation, AutoZone,
Inc., Duracell International Inc., Flagstar
Companies, Inc., Flagstar Corporation, IDEX
Corporation, K-III Communications Corp., Owens-
Illinois, Inc., Owens-Illinois Group, Inc., RJR
Nabisco Holdings Corp., RJR Nabisco, Inc.,
Safeway Inc., The Stop & Shop Companies, Inc.,
Union Texas Petroleum Holdings, Inc., Walter
Industries, Inc. and World Color Press, Inc.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
BUSINESS ADDRESS AGE AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
George R. Roberts.......................... 51 General Partner, KKR. Member of the Board of
2800 Sand Hill Road Directors of American Re Corporation, AutoZone,
Suite 200 Inc., Duracell International Inc., Flagstar
Menlo Park, CA 94025 Companies, Inc., Flagstar Corporation, IDEX
Corporation, K-III Communications Corp., Owens-
Illinois, Inc., Owens-Illinois Group, Inc., Red
Lion Properties, Inc., RJR Nabisco Holdings
Corp., RJR Nabisco, Inc., Safeway Inc., The Stop
& Shop Companies, Inc., Union Texas Petroleum
Holdings, Inc., Walter Industries, Inc. and
World Color Press, Inc.
Robert I. MacDonnell....................... 56 General Partner, KKR. Member of the Board of
2800 Sand Hill Road Directors of AutoZone, Inc., Owens-Illinois,
Suite 200 Inc., Owens-Illinois Group, Inc., Safeway Inc.
Menlo Park, CA 94025 and The Vons Companies, Inc.
Paul E. Raether............................ 48 General Partner, KKR. Member of the Board of
Directors of Duracell International Inc.,
Flagstar Companies, Inc., Flagstar Corporation,
Fred Meyer, Inc., IDEX Corporation, RJR Nabisco
Holdings Corp., RJR Nabisco, Inc., The Stop &
Shop Companies, Inc. and Walter Industries, Inc.
Michael W. Michelson....................... 43 General Partner, KKR. Member of the Board of
2800 Sand Hill Road Directors of AutoZone, Inc., Fred Meyer, Inc.,
Suite 200 Owens-Illinois, Inc., Owens-Illinois Group,
Menlo Park, CA 94025 Inc., Red Lion Properties, Inc. and Union Texas
Petroleum Holdings, Inc.
Saul A. Fox................................ 41 General Partner, KKR. Member of the Board of
2800 Sand Hill Road Directors of American Re Corporation, Fred
Suite 200 Meyer, Inc., Layne, Inc. and Union Texas
Menlo Park, CA 94025 Petroleum Holdings, Inc.
James H. Greene, Jr........................ 44 General Partner, KKR. Member of the Board of
2800 Sand Hill Road Directors of Owens-Illinois, Inc.,
Suite 200 Owens-Illinois Group, Inc., RJR Nabisco Holdings
Menlo Park, CA 94025 Corp., RJR Nabisco, Inc., Safeway Inc., The Stop
& Shop Companies, Inc., Union Texas Petroleum
Holdings, Inc. and The Vons Companies, Inc.
Michael T. Tokarz.......................... 45 General Partner, KKR. Member of the Board of
Directors of Flagstar Companies, Inc., Flagstar
Corporation, Homes Holdings Corporation, IDEX
Corporation, K-III Communications Corp., RJR
Nabisco Holdings Corp., RJR Nabisco, Inc.,
Safeway Inc. and Walter Industries, Inc.
</TABLE>
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Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Borden
Shares and/or Rights and any other required documents should be sent or
delivered by each shareholder of Borden or his broker, dealer, commercial bank,
trust company or other nominee to the Exchange Agent as follows:
The Exchange Agent for the Exchange Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
BY MAIL: BY HAND OR OVERNIGHT DELIVERY:
First Chicago Trust Company of New York First Chicago Trust Company of New York
Tenders & Exchanges Tenders & Exchanges
P.O. Box 2563--Suite 4660 14 Wall Street
Jersey City, New Jersey 07303-2563 Suite 4680--BOR, 8th Floor
New York, New York 10005
</TABLE>
Any questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and addresses
listed below. Additional copies of this Offering Circular/Prospectus, the Letter
of Transmittal and the Notice of Guaranteed Delivery may also be obtained from
the Information Agent. You may also contact your broker, dealer, commercial bank
or trust company for assistance concerning the Exchange Offer.
The Information Agent for the Exchange Offer is:
D.F. KING & CO., INC.
<TABLE>
<S> <C>
UNITED STATES EUROPE
77 Water Street Royex House, Aldermanbury Square
New York, New York 10005 London, England EC2V 7HR
1-800-829-6551 (Toll Free) (44) 71 600 5005 (Collect)
</TABLE>
The Dealer Manager for the Exchange Offer is:
MORGAN STANLEY & CO.
Incorporated
1251 Avenue of the Americas
New York, New York 10020
(212) 703-4774
EXHIBIT 11(a)(2)
Letter of Transmittal
To Tender Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Borden, Inc.
Pursuant to the Exchange Offer
by
Borden Acquisition Corp.
a corporation formed at the direction of
Kohlberg Kravis Roberts & Co.
------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, DECEMBER 20, 1994,
UNLESS THE EXCHANGE OFFER IS EXTENDED.
------------------
The Exchange Agent for the Exchange Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
BY MAIL: BY HAND OR OVERNIGHT DELIVERY:
First Chicago Trust Company of New York First Chicago Trust Company of New York
Tenders & Exchanges Tenders & Exchanges
P.O. Box 2563--Suite 4660 14 Wall Street
Jersey City, New Jersey 07303-2563 Suite 4680--BOR, 8th Floor
New York, New York 10005
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders, either (i) if
certificates for shares of Common Stock, par value $.625 per share ("Borden
Shares"), or the associated Preferred Stock Purchase Rights (the "Rights") are
to be forwarded herewith or (ii) unless an Agent's Message (as defined in the
Offering Circular/Prospectus dated November 22, 1994 (the "Offering
Circular/Prospectus")) is utilized, if tenders of Borden Shares are to be made
by book-entry transfer into the account of First Chicago Trust Company of New
York, as Exchange Agent (the "Exchange Agent"), at The Depository Trust Company
("DTC"), the Midwest Securities Trust Company ("MSTC") or the Philadelphia
Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and
collectively the "Book-Entry Transfer Facilities") pursuant to the procedures
described under "The Exchange Offer--Procedure for Tendering Shares of Borden
Common Stock--Book-Entry Transfer" in the Offering Circular/Prospectus.
Shareholders who tender Borden Shares (or Rights if applicable) by book-entry
transfer are referred to herein as "Book-Entry Shareholders."
The Merger Agreement (as defined in the Offering Circular/Prospectus)
provides that, immediately prior to consummation of the Exchange Offer, Borden,
Inc., a New Jersey corporation ("Borden"), will redeem the outstanding Rights
issued pursuant to the Rights Agreement, dated as of January 28, 1986, as
amended (the "Rights Agreement"), between Borden and The Bank of New York, as
Rights Agent, at a redemption price of one and two-thirds cents per Right.
Unless and until the Rights have been redeemed, holders of Borden Shares will be
required to tender one Right for each Borden Share tendered in order to effect a
valid tender of such Borden Share. If the Distribution Date (as defined in the
Offering Circular/Prospectus) has not occurred prior to the time Borden Shares
are tendered pursuant to the Exchange Offer, a tender of Borden Shares will also
constitute a tender of the associated Rights. See "The Exchange Offer--Procedure
for Tendering Shares of Borden Common Stock" in the Offering
Circular/Prospectus. If the Distribution Date has occurred, and certificates
representing Rights (the "Rights Certificates") have been distributed to holders
of Borden Shares, such holders of Borden Shares will be required to tender
Rights Certificates representing a number of Rights equal to the number of
Borden Shares being tendered in order to effect a valid tender of such Borden
Shares. If, in accordance with the Merger Agreement, the Rights are redeemed by
the Board of Directors of Borden prior to the consummation of the Exchange
Offer, tendering shareholders who are holders of record as of the applicable
record date will be entitled to receive and retain the redemption price of one
and two-thirds cents per Right in accordance with the Rights Agreement. Holders
of Borden Shares and Rights whose certificates for such Borden Shares (the
"Share Certificates") (and Rights Certificates if applicable) are not
immediately available or who cannot deliver their Share Certificates (or Rights
Certificates if applicable) and all other required documents to the Exchange
Agent prior to the Expiration Date (as defined in the Offering
Circular/Prospectus), or who cannot complete the procedure for book-entry
transfer on a timely basis, must tender their Borden Shares (and Rights if
applicable) according to the guaranteed delivery procedure set forth under "The
Exchange Offer--Procedure for Tendering Shares of Borden Common
Stock--Guaranteed Delivery" in the Offering Circular/Prospectus. See Instruction
2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF BORDEN SHARES TENDERED
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND BORDEN SHARE(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS TENDERED
NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
TOTAL NUMBER
OF BORDEN
SHARES NUMBER
SHARE REPRESENTED OF BORDEN
CERTIFICATE BY SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
Total Borden Shares...........
</TABLE>
* Need not be completed by Book-Entry Shareholders.
** Unless otherwise indicated, all Borden Shares represented by certificates
delivered to the Exchange Agent will be deemed to have been tendered. See
Instruction 4.
<TABLE>
<CAPTION>
DESCRIPTION OF RIGHTS TENDERED*
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS RIGHTS CERTIFICATE(S) AND RIGHTS TENDERED
NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
TOTAL NUMBER
OF RIGHTS
RIGHTS REPRESENTED NUMBER
CERTIFICATE BY RIGHTS OF RIGHTS
NUMBER(S)** CERTIFICATE(S)** TENDERED***
<S> <C> <C> <C>
Total Rights..................
</TABLE>
* Need not be completed if the Distribution Date has not occurred.
** Need not be completed by Book-Entry Shareholders.
*** Unless otherwise indicated, all Rights represented by certificates
delivered to the Exchange Agent will be deemed to have been tendered.
See Instruction 4.
<PAGE>
/ / CHECK HERE IF BORDEN SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER BORDEN SHARES BY BOOK-ENTRY
TRANSFER):
Name of Tendering Institution ___________________________________________
Check box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number __________________________Transaction Code Number __________
/ / CHECK HERE IF BORDEN SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s): _________________________________________
Window Ticket Number (if any): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution that Guaranteed Delivery: _____________________________
If delivered by Book-Entry Transfer check box of Book-Entry Transfer
Facility:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number __________________________Transaction Code Number __________
<PAGE>
/ / CHECK HERE IF RIGHTS ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER RIGHTS BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ___________________________________________
Check box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number __________________________Transaction Code Number __________
/ / CHECK HERE IF RIGHTS ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s): _________________________________________
Window Ticket Number (if any): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution that Guaranteed Delivery: _____________________________
If delivered by Book-Entry Transfer check box of Book-Entry Transfer
Facility:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number _________________________ Transaction Code Number __________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Borden Acquisition Corp., a New Jersey
corporation (the "Purchaser"), the above-described Borden Shares and (unless and
until redeemed by Borden) the associated Rights, for exchange for a number of
shares of Common Stock, par value $.01 per share (the "Holdings Common Stock"),
of RJR Nabisco Holdings Corp., a Delaware corporation ("Holdings"), equal to the
Exchange Ratio (as defined in the Offering Circular/Prospectus), upon the terms
and subject to the conditions set forth in the Offering Circular/Prospectus and
in this Letter of Transmittal (which together constitute the "Exchange Offer").
Unless the context requires otherwise, all references to Borden Shares shall be
deemed to refer also to the associated Rights. The undersigned understands that
the Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to exchange all or any
portion of the Borden Shares (or Rights if applicable) tendered pursuant to the
Exchange Offer, receipt of which is hereby acknowledged.
The undersigned understands that if the Distribution Date has occurred and
Rights Certificates have been distributed to holders of Borden Shares prior to
the date of tender of the Borden Shares and Rights tendered herewith, Rights
Certificates representing a number of Rights equal to the number of Borden
Shares being tendered herewith must be delivered to the Exchange Agent or, if
available, a Book-Entry Confirmation received with respect thereto, in order for
the Borden Shares tendered herewith to be validly tendered. If the Distribution
Date has occurred and Rights Certificates have not been distributed prior to the
time Borden Shares and Rights are tendered herewith, the undersigned agrees to
deliver Rights Certificates representing a number of Rights equal to the number
of Borden Shares tendered herewith to the Exchange Agent within five business
days after the date such Rights Certificates are distributed. A tender of Borden
Shares without Rights Certificates constitutes an agreement by the tendering
shareholder to deliver Rights Certificates representing a number of Rights equal
to the number of Borden Shares tendered pursuant to the Exchange Offer to the
Exchange Agent within five business days after the date such Rights Certificates
are distributed. The undersigned understands that if the Rights are not
redeemed, the Purchaser reserves the right to require that the Exchange Agent
receive such Rights Certificates prior to accepting Borden Shares for exchange.
In that event, exchange for Borden Shares tendered and accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of, among other things, Rights Certificates, if Rights
Certificates have been distributed to holders of Borden Shares.
Subject to, and effective upon, acceptance for exchange of the Borden Shares
(and Rights if applicable) tendered herewith in accordance with the terms of the
Exchange Offer, the undersigned hereby sells, assigns and transfers to, or upon
the order of, the Purchaser all right, title and interest in and to all of the
Borden Shares that are being tendered hereby and any and all dividends and
distribution, except for regular quarterly cash dividends in the amount of $.01
per Borden Share declared or paid with respect to the tendered Borden Shares on
or after November 22, 1994 and payable to the undersigned on a date prior to the
transfer to the name of the Purchaser or nominee or transferee of the Purchaser
on Borden's stock transfer records of the Borden Shares tendered herewith
(except that if the Rights are redeemed by Borden's Board of Directors in
accordance with the terms of the Rights Agreement, tendering shareholders who
are holders of record as of the applicable record date will be entitled to
receive and retain the redemption price of one and two-thirds cents per Right in
accordance with the Rights Agreement) (any such dividend or distribution, except
for those referred to in the immediately preceding clause, collectively, a
"Distribution"), and appoints the Exchange Agent the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Borden Shares (and
Rights if applicable) (and any Distribution) with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest) to (a) deliver such Share Certificates (and Rights Certificates if
applicable) (and any Distribution), or transfer ownership of such Borden Shares
(and Rights if applicable) (and any Distribution) on the account books
maintained by a Book-Entry Transfer Facility, together in either case with
appropriate evidences of transfer, to the Exchange Agent for the account of the
Purchaser, (b) present such Borden Shares (and Rights if applicable) (and any
Distribution) for transfer on the books of Borden and (c) receive all benefits
and otherwise exercise all rights of beneficial ownership of such Borden Shares
(and Rights if applicable) (and any Distribution), all in accordance with the
terms and subject to the conditions of the Exchange Offer.
<PAGE>
The undersigned irrevocably appoints designees of the Purchaser as such
shareholder's proxy, with full power of substitution, to the full extent of such
shareholder's rights with respect to the Borden Shares (and Rights if
applicable) tendered by such shareholder and accepted for exchange by the
Purchaser and with respect to any and all other Borden Shares or other
securities issued or issuable in respect of such Borden Shares on or after
November 22, 1994. Such appointment will be effective when, and only to the
extent that, the Purchaser accepts such Borden Shares for exchange. Upon such
acceptance for exchange, all prior proxies given by such shareholder with
respect to such Borden Shares (and Rights if applicable) (and such other shares
and securities) will be revoked without further action, and no subsequent
proxies may be given nor any subsequent written consents executed (and, if given
or executed, will not be deemed effective). The designees of the Purchaser will
be empowered to exercise all voting and other rights of such shareholder as they
in their sole discretion may deem proper at any annual or special meeting of
Borden's shareholders or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise. The Purchaser reserves the
right to require that, in order for Borden Shares (and Rights if applicable) to
be deemed validly tendered, immediately upon the Purchaser's exchange for such
Borden Shares (and Rights if applicable), the Purchaser must be able to exercise
full voting rights with respect to such Borden Shares (and Rights if
applicable).
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Borden Shares
(and Rights if applicable) tendered hereby (and any Distribution) and (b) when
the Borden Shares (and Rights if applicable) are accepted for exchange by the
Purchaser, the Purchaser will acquire good, marketable and unencumbered title to
the Borden Shares (and Rights if applicable) (and any Distribution), free and
clear of all liens, restrictions, charges and encumbrances, and the same will
not be subject to any adverse claim. The undersigned, upon request, will execute
and deliver any additional documents deemed by the Exchange Agent or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Borden Shares (and Rights if applicable) tendered hereby (and
any Distribution). In addition, the undersigned shall promptly remit and
transfer to the Exchange Agent for the account of the Purchaser any and all
Distributions in respect of the Borden Shares and Rights tendered hereby,
accompanied by appropriate documentation of transfer; and pending such
remittance or appropriate assurance thereof, the Purchaser will be, subject to
applicable law, entitled to all rights and privileges as owner of any such
Distribution and may withhold the entire exchange consideration or deduct
therefrom the amount or value thereof, as determined by the Purchaser in its
sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned.
Tenders of Borden Shares and Rights made pursuant to the Exchange Offer are
irrevocable, except that Borden Shares and Rights tendered pursuant to the
Exchange Offer may be withdrawn at any time on or prior to the Expiration Date
and, unless theretofore accepted for exchange by the Purchaser pursuant to the
Exchange Offer, may also be withdrawn at any time after January 20, 1995. See
"The Exchange Offer--Procedure for Tendering Shares of Borden Common
Stock--Withdrawal Rights" in the Offering Circular/Prospectus.
The undersigned understands that tenders of Borden Shares and Rights
pursuant to any of the procedures described under "The Exchange Offer--Procedure
for Tendering Shares of Borden Common Stock," and in the instructions hereto
will constitute a binding agreement between the undersigned and the Purchaser
upon the terms and subject to the conditions set forth in the Exchange Offer,
including the undersigned's representation that the undersigned owns the Borden
Shares and Rights being tendered.
Unless otherwise indicated herein under "Special Exchange Instructions,"
please (i) issue any check for any cash payment in lieu of a fractional share of
Holdings Common Stock, (ii) issue shares of Holdings Common Stock exchanged for
Borden Shares tendered pursuant hereto and/or (iii) issue or return any
certificate(s) for Borden Shares (and Rights if applicable) not tendered or not
accepted for exchange in the name(s) of the registered holder(s) appearing under
"Description of Borden Shares Tendered" and "Description of Rights Tendered,"
respectively. Similarly, unless otherwise indicated herein under "Special
Delivery Instructions," please mail any check for any cash payment in lieu of a
fractional share of Holdings Common Stock, the certificates for shares of
Holdings Common Stock exchanged for Borden Shares tendered pursuant hereto
and/or any certificate(s) for Borden Shares (and Rights if applicable) not
tendered or not accepted for exchange (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Borden Shares Tendered" and "Description of Rights Tendered,"
respectively. In the event that both the Special Delivery Instructions and the
Special Exchange Instructions are completed, please issue (i) any check for any
cash payment in lieu of a fractional share of Holdings Common Stock, (ii) the
shares of Holdings Common Stock exchanged for Borden Shares tendered pursuant
hereto and/or (iii) any certificate(s) for Borden Shares (and Rights if
applicable) not tendered or accepted for exchange in the name of, and deliver
such certificates to, the person or persons so indicated. Unless otherwise
indicated herein under "Special Exchange Instructions," please credit any Borden
Shares (and Rights if applicable) tendered herewith by book-entry transfer that
are not accepted for exchange by crediting the account at the Book-Entry
Transfer Facility designated above. The undersigned recognizes that the
Purchaser has no obligation, pursuant to the Special Exchange Instructions, to
transfer any Borden Shares (or Rights if applicable) from the name(s) of the
registered holder(s) thereof if the Purchaser does not accept for exchange any
of the Borden Shares (or Rights if applicable) so tendered.
<PAGE>
SPECIAL EXCHANGE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if (i) the check for any cash payment in lieu of a
fractional share of Holdings Common Stock, (ii) certificate(s) for Borden Shares
(and Rights if applicable) not tendered or not accepted for exchange and/or
(iii) the shares of Holdings Common Stock exchanged for Borden Shares tendered
pursuant hereto are to be issued in the name of someone other than the
undersigned or if Borden Shares (or Rights if applicable) tendered by book-entry
transfer which are not accepted for exchange are to be returned by credit to an
account maintained at a Book-Entry Transfer Facility.
Issue / / check / / certificates to:
Name............................................................................
(PLEASE PRINT)
Address.........................................................................
...............................................................................
(INCLUDE ZIP CODE)
...............................................................................
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
Credit Borden Shares (and Rights if applicable) tendered by book-entry transfer
that are not accepted for exchange to (Check one):
/ / DTC / / MSTC / / PDTC
...............................................................................
(DTC, MSTC or PDTC Account No.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if (i) the check for any cash payment in lieu of a
fractional share of Holdings Common Stock, (ii) certificate(s) for Borden Shares
(and Rights if applicable) not tendered or not accepted for exchange and/or
(iii) the shares of Holdings Common Stock exchanged for Borden Shares tendered
pursuant hereto accepted for exchange are to be sent to someone other than the
undersigned or to the undersigned at an address other than that shown above.
Mail / / check / / certificates to:
Name............................................................................
(PLEASE PRINT)
Address.........................................................................
...............................................................................
(INCLUDE ZIP CODE)
...............................................................................
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
<PAGE>
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE
SIGN SIGN
HERE HERE
X...................................................................
X...................................................................
(SIGNATURE(S) OF HOLDER(S))
Dated: ........................... , 19 ...........................
(Must be signed by the registered holder(s) exactly as name(s)
appear(s) on Share Certificate(s) or Rights Certificate(s)
or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative
capacity, please provide the following information and see
Instruction 5.)
Name(s).............................................................
....................................................................
(PLEASE PRINT)
Capacity (full title)...............................................
Address.............................................................
....................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number......................................
Tax Identification or
Social Security No..................................................
COMPLETE SUBSTITUTE FORM W-9 ON REVERSE
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature................................................
Name................................................................
Name of Firm........................................................
(PLEASE PRINT)
Address.............................................................
....................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number......................................
Dated: ........................... , 19 ...........................
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Borden Share(s) and/or Rights) of
Borden Shares and Rights tendered herewith, unless such holder(s) has completed
either the box entitled "Special Exchange Instructions" or the box entitled
"Special Delivery Instructions" above, or (b) if such Borden Share(s) and/or
Right(s) are tendered for the account of a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or by a commercial bank or trust company having an
office or correspondent in the United States (each of the foregoing being
referred to as an "Eligible Institution"). In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5 of this Letter of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
shareholders either if certificates are to be forwarded herewith or, unless an
Agent's Message is utilized, if tenders are to be made pursuant to the procedure
for tender by book-entry transfer set forth under "The Exchange Offer--Procedure
for Tendering Shares of Borden Common Stock--Book-Entry Transfer" in the
Offering Circular/Prospectus. Share Certificates, or timely confirmation (a
"Book-Entry Confirmation") of a book-entry transfer of such Borden Shares into
the Exchange Agent's account at a Book-Entry Transfer Facility, as well as this
Letter of Transmittal (or a facsimile hereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message in the
case of a book-entry delivery, and any other documents required by this Letter
of Transmittal, must be received by the Exchange Agent at one of its addresses
set forth herein prior to the Expiration Date and, unless and until the Rights
have been redeemed, Rights Certificates or timely confirmation of a book-entry
transfer of Rights into the Exchange Agent's account at a Book-Entry Transfer
Facility, if available (together with, if Rights are forwarded separately from
Borden Shares, a properly completed and duly executed Letter of Transmittal (or
a facsimile hereof), and any required signature guarantees, or an Agent's
Message in the case of a book-entry delivery, and any other documents required
by this Letter of Transmittal), must be received by the Exchange Agent at one of
its addresses set forth herein prior to the Expiration Date or, if later, within
five business days after the date such Rights Certificates are distributed.
Shareholders whose Share Certificates (or Rights Certificates if applicable) are
not immediately available (including Rights Certificates that have not yet been
distributed by Borden) or who cannot deliver their Share Certificates (or Rights
Certificates if applicable) and all other required documents to the Exchange
Agent prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Borden Shares
(and Rights if applicable) by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth
under "The Exchange Offer--Procedure for Tendering Shares of Borden Common
Stock--Guaranteed Delivery" in the Offering Circular/Prospectus. Pursuant to
such procedure: (i) such tender must be made by or through an Eligible
Institution; (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, must be
received by the Exchange Agent prior to the Expiration Date; (iii) the Share
Certificates (or a Book-Entry Confirmation) representing all tendered Borden
Shares, in proper form for transfer, in each case together with the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry delivery, an
Agent's Message) and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent within five New York Stock Exchange, Inc.
("NYSE") trading days after the date of execution of such Notice of Guaranteed
Delivery; and (iv) unless and until the Rights have been redeemed, the Rights
Certificates, if issued, representing the appropriate number of Rights or a Book
Entry Confirmation, if available, in each case together with a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof), any
required signature guarantees (or, in the case of a book-entry delivery, an
Agent's Message) and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent within five NYSE trading days after the
date of execution of such Notice of Guaranteed Delivery or, if later, five NYSE
trading days after Rights Certificates are distributed to shareholders, all as
provided in "The Exchange Offer--Procedure for Tendering Shares of Borden Common
Stock" in the Offering Circular/Prospectus. If Share Certificates and Rights
Certificates are forwarded separately to the Exchange Agent, a properly
completed and duly executed Letter of Transmittal must accompany each such
delivery.
<PAGE>
THE METHOD OF DELIVERY OF SHARE CERTIFICATES OR OF RIGHTS CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Borden Shares will be exchanged. All tendering shareholders, by
execution of this Letter of Transmittal (or a facsimile hereof), waive any right
to receive any notice of the acceptance of their Borden Shares (and Rights if
applicable) for exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Borden Shares and Rights and any other
required information should be listed on a separate signed schedule attached
hereto.
4. PARTIAL TENDERS. (Not Applicable to Book-Entry Shareholders) If fewer
than all the Borden Shares evidenced by any Share Certificate submitted are to
be tendered, fill in the number of Borden Shares which are to be tendered in the
box entitled "Number of Borden Shares Tendered." If fewer than all the Rights
evidenced by any Rights Certificates submitted are to be tendered, fill in the
number of Rights which are to be tendered in the box entitled "Number of Rights
Tendered." In such cases, new Share Certificates or Rights Certificates (if the
Rights have not been redeemed), as the case may be, for the Borden Shares or
Rights that were evidenced by your old Share Certificates or Rights
Certificates, but were not tendered by you, will be sent to you, unless
otherwise provided in the appropriate box on this Letter of Transmittal, as soon
as practicable after the Expiration Date. All Borden Shares represented by Share
Certificates and all Rights represented by Rights Certificates delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Borden
Shares and Rights tendered hereby, the signature(s) must correspond with the
name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Borden Shares and Rights tendered hereby are owned of record
by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any of the tendered Borden Shares and Rights are registered in different
names on several certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares and Rights listed and transmitted hereby, no endorsements of certificates
or separate stock powers are required unless shares of Holdings Common Stock are
to be issued or delivered to, payment in respect of fractional shares of
Holdings Common Stock is to be made to or certificates for Borden Shares or
Rights not tendered or not exchanged are to be issued in the name of a person
other than the registered holder(s). Signatures on such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificate(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
Unless and until the Rights have been redeemed, if Rights Certificates have
been distributed to holders of Borden Shares, such holders are required to
tender Rights Certificate(s) representing a number of Rights equal to the number
of Borden Shares tendered in order to effect a valid tender of such Borden
Shares. It is necessary that shareholders follow all signature requirements of
this Instruction 5 with respect to the Rights in order to tender such Rights.
<PAGE>
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Borden Shares (and Rights if
applicable) to it or its order pursuant to the Exchange Offer. If, however,
certificates for shares of Holdings Common Stock or payment of cash in lieu of
fractional shares of Holdings Common Stock is to be made to, or if certificates
for Borden Shares (and Rights if applicable) not tendered or accepted for
exchange are to be registered in the name of, any person other than the
registered holder(s), or if tendered certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered holder(s)
or such person) payable on account of the transfer to such person will be
deducted from the consideration to be received by such holder(s) (i.e., such
consideration will be reduced) unless satisfactory evidence of the payment of
such taxes or an exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If (i) a check is to be issued
in the name of, (ii) certificates for shares of Holdings Common Stock exchanged
for Borden Shares and Rights (if applicable) are not to be issued to, and/or
(iii) certificates for Borden Shares and Rights not tendered or not accepted for
exchange are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be returned
to a person other than the signer of this Letter of Transmittal or to an address
of the signer other than that shown in this Letter of Transmittal, the
appropriate boxes on this Letter of Transmittal must be completed. Book-Entry
Shareholders may request that Borden Shares and/or Rights not accepted for
exchange be credited to such account maintained at a Book-Entry Transfer
Facility as such Book-Entry Shareholder may designate under "Special Payment
Instructions." If no such instructions are given, such Borden Shares or Rights
not accepted for exchange will be returned by crediting the account at the
Book-Entry Transfer Facility designated above.
8. WAIVER OF CONDITIONS. The conditions of the Exchange Offer may be waived
by the Purchaser from time to time in accordance with, and subject to the
limitations described in, the Offering Circular/Prospectus.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. federal income
tax law, a shareholder whose tendered Borden Shares (or Rights if applicable)
are accepted for exchange is required to provide the Exchange Agent with such
shareholder's correct taxpayer identification number ("TIN") on Substitute Form
W-9 below. If the Exchange Agent is not provided with the correct TIN, the
Internal Revenue Service may subject the shareholder or other payee to a $50
penalty. In addition, payments that are made to such shareholder or other payee
with respect to Borden Shares (or Rights if applicable) exchanged pursuant to
the Exchange Offer may be subject to 31% backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the shareholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Exchange Agent. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any such payments made to the shareholder or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
shareholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent.
The shareholder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the record owner of the
Borden Shares and Rights or of the last transferee appearing on the transfers
attached to, or endorsed on, the Borden Shares and Rights. If the Borden Shares
or Rights are in more than one name or are not in the name of the actual owner,
consult the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional guidance on which number to
report.
<PAGE>
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offering Circular/Prospectus, this Letter of Transmittal and the
Notice of Guaranteed Delivery may also be obtained from the Information Agent or
from brokers, dealers, commercial banks or trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
Borden Shares (or Rights if applicable) has been lost, destroyed or stolen, the
shareholder should promptly notify the Exchange Agent. The shareholder will then
be instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE
AGENT PRIOR TO THE EXPIRATION DATE.
<PAGE>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
Part 1--PLEASE PROVIDE Social Security Number
YOUR TIN IN or Employer
SUBSTITUTE THE BOX AT THE RIGHT Identification Number
AND CERTIFY
BY SIGNING AND
Form W-9 DATING BELOW.
-------------------------
Part 2--Certification--Under penalties of perjury, I
certify that:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and
Department of the Treasury
Internal Revenue Service
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I
have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER ("TIN")
Certification Instructions--You must cross out
item (2) above if you have been notified by the
IRS that you are currently subject to backup
withholding because of under-reporting interest
or dividends on your tax return. However, if
after being notified by the IRS that you were
subject to backup withholding you received
another notification from the IRS that you are no
longer subject to backup withholding, do not
cross out such Item (2).
SIGN HERE SIGNATURE.......................... Part 3--
Awaiting TIN / /
DATE......................., 19 ...
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld,
but that such amounts will be refunded to me if I then provide a Taxpayer
Identification Number within sixty (60) days.
<TABLE>
<S> <C>
Signature....................................... Date................ , 19 ...
</TABLE>
<PAGE>
The Information Agent for the Exchange Offer is:
D.F. KING & CO., INC.
<TABLE>
<CAPTION>
UNITED STATES EUROPE
<S> <C>
77 Water Street Royex House, Aldermanbury Square
New York, New York 10005 London, England EC2V 7HR
1-800-829-6551 (Toll Free) (44) 71 600 5005 (Collect)
</TABLE>
The Dealer Manager for the Exchange Offer is:
MORGAN STANLEY & CO.
Incorporated
1251 Avenue of the Americas
New York, New York 10020
(212) 703-4774
November 22, 1994
EXHIBIT 11(a)(3)
Notice of Guaranteed Delivery
To Tender Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Borden, Inc.
As set forth under "The Exchange Offer--Procedure for Tendering Shares of
Borden Common Stock" in the Offering Circular/Prospectus described below, this
instrument or one substantially equivalent hereto must be used to accept the
Exchange Offer (as defined below) if certificates for Borden Shares (as defined
below) and the associated Preferred Stock Purchase Rights (the "Rights") are not
immediately available or the certificates for Borden Shares (or Rights if
applicable) and all other required documents cannot be delivered to the Exchange
Agent referred to below on or prior to the Expiration Date (as defined in the
Offering Circular/Prospectus described below) or if the procedure for delivery
by book-entry transfer cannot be completed on a timely basis. This instrument
may be delivered by hand or transmitted by facsimile transmission or mail to the
Exchange Agent referred to below.
The Exchange Agent for the Exchange Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT
DELIVERY:
First Chicago Trust Company (201) 222-4720 First Chicago Trust Company
of New York (201) 222-4721 of New York
Tenders & Exchanges Confirm by Telephone: Tenders & Exchanges
P.O. Box 2563--Suite 4660 (201) 222-4707 14 Wall Street
Jersey City, New Jersey Suite 4680--BOR, 8th Floor
07303-2563 New York, New York 10005
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to Borden Acquisition Corp., a New Jersey
corporation, upon the terms and subject to the conditions set forth in the
Offering Circular/Prospectus dated November 22, 1994 (the "Offering
Circular/Prospectus") and in the related Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which is hereby acknowledged, the
number of shares of Common Stock, par value $.625 per share (the "Borden
Shares"), and the number of Rights, indicated below, of Borden, Inc., a New
Jersey corporation, pursuant to the guaranteed delivery procedure set forth
under "The Exchange Offer--Procedure for Tendering Shares of Borden Common
Stock" in the Offering Circular/Prospectus.
<PAGE>
Signature(s) ...................................................................
Name(s) of Record Holders
...............................................................................
PLEASE TYPE OR PRINT
Number of Borden Shares and Rights..............................................
Certificate Nos. (If Available)
...............................................................................
...............................................................................
Dated.....................................................................19 ...
Address(es).....................................................................
...............................................................................
ZIP CODE
Area Code and Tel. No(s)........................................................
(Check one box if Borden Shares and Rights will be tendered by book-entry
transfer)
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number..................................................................
...............................................................................
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office, branch or agency in the
United States, (a) guarantees to deliver to the Exchange Agent either the
certificates evidencing all tendered Borden Shares, in proper form for transfer,
or to deliver Borden Shares pursuant to the procedure for book-entry transfer
into the Exchange Agent's account at The Depository Trust Company, the Midwest
Securities Trust Company or the Philadelphia Depository Trust Company (each a
"Book-Entry Transfer Facility"), in either case together with the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees or an Agent's Message (as defined in the
Offering Circular/Prospectus) in the case of a book-entry delivery, and any
other required documents, all within five New York Stock Exchange, Inc. ("NYSE")
trading days after the date hereof and (b) guarantees, if applicable, to deliver
certificates representing the Rights ("Rights Certificates") in proper form for
transfer, or, if available, to deliver such Rights pursuant to the procedure for
book-entry transfer into the Exchange Agent's account at a Book-Entry Transfer
Facility together with, if Rights are forwarded separately, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed with
any required signature guarantees or an Agent's Message in the case of a book-
entry delivery, if available, and any other required documents, all within five
NYSE trading days after the date hereof or, if later, five business days after
Rights Certificates are distributed to holders of Shares.
...............................................................................
NAME OF FIRM
...............................................................................
ADDRESS
...............................................................................
ZIP CODE
Area Code and Tel. No. .........................................................
...............................................................................
AUTHORIZED SIGNATURE
Name ...........................................................................
PLEASE TYPE OR PRINT
Title ..........................................................................
Dated.....................................................................19 ...
NOTE: DO NOT SEND CERTIFICATES FOR BORDEN SHARES OR RIGHTS WITH THIS NOTICE.
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
EXHIBIT 11(a)(4)
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1251 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 703-4000
Exchange Offer for
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Borden, Inc.
By Exchanging for Each Such Share
A Number of Shares of Common Stock
of
RJR Nabisco Holdings Corp.
Based on the Exchange Ratio Described Below
by
Borden Acquisition Corp.
a corporation formed at the direction of
Kohlberg Kravis Roberts & Co.
------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON TUESDAY, DECEMBER 20, 1994,
UNLESS THE EXCHANGE OFFER IS EXTENDED.
------------------
November 22, 1994
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Borden Acquisition Corp., a New Jersey corporation
(the "Purchaser"), to act as Dealer Manager in connection with the Purchaser's
offer to exchange for shares of Common Stock, par value $.01 per share
("Holdings Common Stock"), of RJR Nabisco Holdings Corp., a Delaware corporation
("Holdings"), equal to the Exchange Ratio (as defined in the Offering
Circular/Prospectus referred to below) all the outstanding shares of Common
Stock, par value $.625 per share (the "Borden Shares"), of Borden, Inc., a New
Jersey corporation ("Borden"), upon the terms and subject to the conditions set
forth in the Offering Circular/Prospectus, dated November 22, 1994 (the
"Offering Circular/Prospectus"), and in the related Letter of Transmittal (which
together constitute the "Exchange Offer") enclosed herewith. The Merger
Agreement (as defined in the Offering Circular/Prospectus) provides that Borden
will redeem the outstanding Preferred Stock Purchase Rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of January 28, 1986, as
amended, between Borden and The Bank of New York, as Rights Agent, at a
redemption price of one and two-thirds cents per Right immediately prior to
consummation of the Exchange Offer. Unless and until the Rights have been
redeemed, holders of Borden Shares will be required to tender one Right for each
Borden Share tendered in order to effect a valid tender of such Borden Share. If
the Distribution Date (as defined in the Offering Circular/Prospectus) has not
occurred prior to the time Borden Shares are tendered pursuant to the Exchange
Offer, a tender of Borden Shares will constitute a tender of the associated
Rights. If the Distribution Date has occurred and certificates representing
Rights ("Rights Certificates") have been distributed by Borden to holders of
Borden Shares, such holders of Borden Shares shall be required to tender Rights
Certificates representing a number of Rights equal to the number of Borden
Shares being tendered in order to effect a valid tender of such Borden Shares.
Holders of Borden Shares and Rights whose certificates for such Borden Shares
(the
<PAGE>
"Share Certificates") and, if applicable, Rights Certificates are not
immediately available or who cannot deliver their Share Certificates or, if
applicable, their Rights Certificates, and all other required documents to the
Exchange Agent (as defined below) prior to the Expiration Date (as defined in
the Offering Circular/Prospectus), or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Borden Shares and
Rights according to the guaranteed delivery procedures set forth under "The
Exchange Offer--Procedure for Tendering Shares of Borden Common
Stock--Guaranteed Delivery" in the Offering Circular/Prospectus. Unless the
context otherwise requires, all references to Borden Shares shall be deemed to
refer also to the associated Rights, unless and until redeemed by Borden.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Borden Shares registered in your name or in the name of
your nominee.
The Exchange Offer is conditioned upon, among other things, there being
validly tendered and not properly withdrawn prior to the expiration of the
Exchange Offer a number of Borden Shares which, when added to any Borden Shares
previously acquired by the Purchaser or Whitehall Associates, L.P. (other than
pursuant to the Option (as defined in the Offering Circular/Prospectus)),
represents more than 41% of the Borden Shares outstanding on a fully diluted
basis (other than dilution due to the Rights). The Exchange Offer is also
subject to other material terms and conditions, which Borden shareholders should
carefully consider. See "The Exchange Offer--Certain Conditions of the Exchange
Offer" and "Description of Merger Agreement and Conditional Purchase/Option
Agreement" in the Offering Circular/Prospectus.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offering Circular/Prospectus.
2. The Letter of Transmittal to tender Borden Shares (and Rights if
applicable) for your use and for the information of your clients. Facsimile
copies of the Letter of Transmittal may be used to tender Borden Shares (and
Rights if applicable).
3. The Notice of Guaranteed Delivery for Borden Shares (and Rights if
applicable) to be used to accept the Exchange Offer if Share Certificates
(or Rights Certificates if applicable) are not immediately available or if
such certificates and all other required documents cannot be delivered to
First Chicago Trust Company of New York (the "Exchange Agent") by the
Expiration Date or if the procedure for book-entry transfer cannot be
completed by the Expiration Date.
4. A printed form of letter which may be sent to your clients for whose
accounts you hold Borden Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Exchange Offer (including instructions concerning sales
of any fractional shares for such clients' respective accounts).
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
6. A return envelope addressed to First Chicago Trust Company of New
York, the Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, DECEMBER 20, 1994,
UNLESS THE EXCHANGE OFFER IS EXTENDED.
In order to take advantage of the Exchange Offer, (i) a duly executed and
properly completed Letter of Transmittal and any required signature guarantees,
or an Agent's Message (as defined in the Offering Circular/Prospectus) in
connection with a book-entry delivery of Borden Shares (or Rights if
applicable), and other required documents should be sent to the Exchange Agent,
and (ii) either Share
2
<PAGE>
Certificates representing the tendered Borden Shares (and, if applicable,
tendered Rights) should be delivered to the Exchange Agent, or such Borden
Shares (and, if applicable, tendered Rights) should be tendered by book-entry
transfer into the Exchange Agent's account maintained at one of the Book-Entry
Transfer Facilities (as described in the Offering Circular/Prospectus), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offering Circular/Prospectus.
Unless and until the Rights are redeemed by Borden, shareholders will be
required to tender one Right for each Borden Share tendered in order to effect a
valid tender of such Borden Share. If separate Rights Certificates are not
issued, a tender of Borden Shares will also constitute a tender of Rights. See
"The Exchange Offer--Procedure for Tendering Shares of Borden Common Stock" in
the Offering Circular/Prospectus for a discussion of procedures for tendering
Rights in the event that a Distribution Date occurs and Rights Certificates are
distributed to shareholders prior to the date of tender pursuant to the Exchange
Offer. If, in accordance with the Merger Agreement, the Rights are redeemed by
the Board of Directors prior to the consummation of the Exchange Offer,
tendering shareholders who are holders of record as of the applicable record
date will be entitled to receive and retain the redemption price of one and
two-thirds cents per Right in accordance with the Rights Agreement.
If holders of Borden Shares wish to tender, but it is impracticable for them
to forward their Share Certificates or, if applicable, Rights Certificates, or
other required documents on or prior to the Expiration Date or to comply with
the book-entry transfer procedures on a timely basis, a tender may be effected
by following the guaranteed delivery procedures specified under "The Exchange
Offer-- Procedure for Tendering Shares of Borden Common Stock--Guaranteed
Delivery" in the Offering Circular/Prospectus.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than Morgan Stanley & Co. Incorporated (the "Dealer
Manager"), the Exchange Agent and D.F. King & Co., Inc. (the "Information
Agent") (as described in the Offering Circular/Prospectus)) for soliciting
tenders of Borden Shares pursuant to the Exchange Offer. The Purchaser will,
however, upon request, reimburse you for customary clerical and mailing expenses
incurred by you in forwarding any of the enclosed materials to your clients. The
Purchaser will pay or cause to be paid any stock transfer taxes payable on the
transfer of Borden Shares to it, except as otherwise provided in Instruction 6
of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer should be
addressed to the Dealer Manager or the Information Agent, at their respective
addresses and telephone numbers set forth on the back cover of the Offering
Circular/Prospectus. Additional copies of the enclosed material may be obtained
from the Information Agent.
Very truly yours,
MORGAN STANLEY & CO.
Incorporated
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE DEALER MANAGER, BORDEN, THE
EXCHANGE AGENT OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
EXHIBIT 11(a)(5)
Exchange Offer for
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Borden, Inc.
by
Borden Acquisition Corp.
a corporation formed at the direction of
Kohlberg Kravis Roberts & Co.
------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, DECEMBER 20, 1994,
UNLESS THE EXCHANGE OFFER IS EXTENDED.
------------------
To Our Clients:
Enclosed for your consideration is an Offering Circular/Prospectus dated
November 22, 1994 (the "Offering Circular/Prospectus"), and the related Letter
of Transmittal relating to an offer by Borden Acquisition Corp., a New Jersey
corporation (the "Purchaser"), to exchange for shares of Common Stock, par value
$.01 per share ("Holdings Common Stock"), of RJR Nabisco Holdings Corp., a
Delaware corporation, equal to the Exchange Ratio (as defined below) all of the
outstanding shares of Common Stock, par value $.625 per share (the "Borden
Shares"), of Borden, Inc., a New Jersey corporation ("Borden"), and (unless and
until the outstanding Preferred Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement, dated as of January 28, 1986, as amended,
between Borden and The Bank of New York, as Rights Agent, are redeemed by
Borden) the associated Rights, upon the terms and subject to the conditions set
forth in the Offering Circular/Prospectus and the related Letter of Transmittal
(which together constitute the "Exchange Offer"). Unless the context requires
otherwise, all references to "Borden Shares" shall be deemed to refer also to
the associated Rights. We are the holder of record of Borden Shares held by us
for your account. A tender of such Borden Shares can be made only by us as the
holder of record and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Borden Shares held by us for your account.
The Merger Agreement (as defined in the Offering Circular/Prospectus)
provides that Borden will redeem the Rights at a redemption price of one and
two-thirds cents per Right immediately prior to consummation of the Exchange
Offer. Unless and until the Rights have been redeemed, if certificates
representing Rights (the "Rights Certificates") have been distributed to holders
of Borden Shares, such holders are required to tender Rights Certificate(s)
representing a number of Rights equal to the number of Borden Shares being
tendered in order to effect a valid tender of such Borden Shares. Until the
Distribution Date (as defined in the Offering Circular/Prospectus), the
surrender for transfer of any of the certificates representing Borden Shares
(the "Share Certificates") will also constitute the surrender for transfer of
the Rights associated with the Borden Shares represented by such Share
Certificates.
We request instructions as to whether you wish to have us tender on your
behalf any or all of such Borden Shares held by us for your account, pursuant to
the terms and subject to the conditions set forth in the Offering
Circular/Prospectus. Your instructions to tender Borden Shares held by us for
your account will also constitute a direction to us to tender a number of Rights
held by us for your account equal to the number of Borden Shares tendered. If,
in accordance with the Merger Agreement, the Rights are redeemed by the Board of
Directors of Borden prior to the consummation of the Exchange Offer, tendering
shareholders who are holders of record as of the applicable record date will be
entitled to receive and retain the redemption price of one and two-thirds cents
per Right in accordance with the Rights Agreement.
<PAGE>
Your attention is directed to the following:
1. The "Exchange Ratio" means the quotient (rounded to the nearest
1/100,000) obtained by dividing (i) $14.25 by (ii) the average of the
average of the high and low sales prices of the Holdings Common Stock as
reported on the New York Stock Exchange Composite Tape on each of the ten
full consecutive trading days ending immediately prior to the ten business
day period ending on the date of expiration of the Exchange Offer, provided
that the Exchange Ratio shall not be less than 1.78125 or greater than
2.375.
2. The Exchange Offer is made for all of the outstanding Borden Shares
(and Rights if applicable).
3. The Exchange Offer and withdrawal rights will expire at 12:00
Midnight, New York City time, on Tuesday, December 20, 1994, unless the
Exchange Offer is extended.
4. The Exchange Offer is conditioned upon, among other things, there
being validly tendered and not properly withdrawn prior to the expiration of
the Exchange Offer a number of Borden Shares which, when added to any Borden
Shares previously acquired by the Purchaser or Whitehall Associates, L.P.
(other than pursuant to the Option (as defined in the Offering
Circular/Prospectus)), represents more than 41% of the Borden Shares
outstanding on a fully diluted basis (other than dilution due to the
Rights). The Exchange Offer is also subject to other material terms and
conditions, which Borden shareholders should carefully consider. See "The
Exchange Offer--Certain Conditions of the Exchange Offer" and "Description
of Merger Agreement and Conditional Purchase/Option Agreement" in the
Offering Circular/Prospectus.
5. Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the exchange of Borden Shares pursuant
to the Exchange Offer.
The Exchange Offer is being made solely by the Offering Circular/Prospectus
and the related Letter of Transmittal and is being made to all holders of Borden
Shares. The Exchange Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Borden Shares in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Exchange Offer to be made by a
licensed broker or dealer, the Exchange Offer shall be deemed to be made on
behalf of the Purchaser by Morgan Stanley & Co. Incorporated or one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
If you wish to have us tender any or all of the Borden Shares held by us for
your account, please instruct us by completing, executing and returning to us
the instruction form contained in this letter. If you authorize a tender of your
Borden Shares, all such Borden Shares will be tendered unless otherwise
specified in such instruction form. Your instructions should be forwarded to us
in ample time to permit us to submit a tender on your behalf prior to the
expiration of the Exchange Offer.
If Borden Shares are accepted for exchange and exchanged for by the
Purchaser pursuant to the Exchange Offer, Borden shareholders will receive,
subject to the conditions of the Exchange Offer, the number of shares of
Holdings Common Stock equal to the Exchange Ratio per Borden Share. See "The
Exchange Offer--Withdrawal Rights" in the Offering Circular/Prospectus for the
procedures for withdrawing Borden Shares tendered pursuant to the Exchange
Offer.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER FOR
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
BORDEN, INC.
The undersigned acknowledge(s) receipt of your letter enclosing the Offering
Circular/Prospectus dated November 22, 1994 (the "Offering Circular/Prospectus")
and the related Letter of Transmittal pursuant to an offer by Borden Acquisition
Corp., a New Jersey corporation, to exchange for all outstanding shares of
Common Stock, par value $.625 per share (the "Borden Shares"), of Borden, Inc.,
a New Jersey corporation ("Borden"), and (unless and until redeemed by Borden)
the associated Preferred Stock Purchase Rights (the "Rights").
This will instruct you to tender the number of Borden Shares and Rights
indicated below (or, if no number is indicated below, all Borden Shares and
Rights) which are held by you for the account of the undersigned, upon the terms
and subject to the conditions set forth in the Offering Circular/Prospectus and
in the related Letter of Transmittal furnished to the undersigned.
Number of Borden Shares (and Rights) to be Tendered*
...................................................Borden Shares (and Rights)
Dated: ........................., 19 ..
/ / Please check the box if you would like any fractional shares sold for your
account either by the nominee, broker or other intermediary holding in
your name or, at their instruction, by the Exchange Agent. Any such sale
will only be effected if your broker, nominee or other intermediary either
makes such sale or so informs the Exchange Agent. In addition, the
Exchange Agent has advised that, whether or not you check the box,
brokers, nominees or other intermediaries customarily effect sales of
fractional shares otherwise held for the account of a beneficial holder
and distribute the proceeds of such sales to the beneficial holder of such
shares.
SIGN HERE
.............................................................................
.............................................................................
Signature(s)
.............................................................................
Please print name(s)
.............................................................................
Address
.............................................................................
Area Code and Telephone Number
.............................................................................
Tax Identification or Social Security Number
- ------------
* Unless otherwise indicated, it will be assumed that all of your Borden Shares
(and Rights) held by us for your account are to be tendered.
3
EXHIBIT 11(a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
- ------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State law
- ------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service.
To complete Substitute Form W-9 if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part I, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer identification
number within 60 days, backup withholding, if applicable, will begin and
continue until you furnish your taxpayer identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or any
political subdivision or instrumentality thereof.
. A foreign government or a political subdivision, agency or instrumentality
thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxypayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividends, and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR
THE INTERNAL REVENUE SERVICE
2
EXHIBIT 11(a)(7)
This announcement is neither an offer to exchange nor a
solicitation of an offer to exchange any securities. The Exchange
Offer is being made solely by the Offering Circular/Prospectus
dated November 22, 1994 and the related Letter of Transmittal and
is being made to all holders of shares of Common Stock of Borden,
Inc. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of securities in any
jurisdiction in which the making of the Exchange Offer or the
acceptance thereof would not be in compliance with the laws of
such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Exchange Offer to be made by a
licensed broker or dealer, the Exchange Offer shall be deemed to
be made on behalf of the Purchaser by Morgan Stanley & Co.
Incorporated or one or more registered brokers or dealers that
are licensed under the laws of such jurisdiction.
Notice of Exchange Offer for
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Borden, Inc.
by exchanging for each such share
a number of shares of common stock of
RJR Nabisco Holdings Corp.
based on the Exchange Ratio described below
by
Borden Acquisition Corp.
a corporation formed at the direction of
Kohlberg Kravis Roberts & Co.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, DECEMBER 20, 1994,
UNLESS THE EXCHANGE OFFER IS EXTENDED.
Borden Acquisition Corp., a New Jersey corporation (the
"Purchaser"), a subsidiary of Whitehall Associates, L.P. (the
"Partnership"), an affiliate of Kohlberg Kravis Roberts & Co.,
L.P., is offering, upon the terms and subject to the conditions
set forth in the Offering Circular/Prospectus dated November 22,
1994 (the "Offering Circular/Prospectus") and in the related
Letter of Transmittal (collectively, the "Exchange Offer"), to
exchange shares of common stock, par value $.01 per share (the
"Holdings Common Stock"), of RJR Nabisco Holdings Corp., a
Delaware corporation ("Holdings"), owned by the Purchaser or its
affiliates for all outstanding shares (the "Borden Shares") of
common stock, par value $.625 per share (the "Borden Common
Stock"), and the associated Preferred Stock Purchase Rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of
January 28, 1986, as amended (the "Rights Agreement"), between
Borden, Inc., a New Jersey corporation ("Borden"), and The Bank
of New York, as Rights Agent, of Borden not already owned by the
Purchaser or its affiliates. Each Borden Share accepted by the
Purchaser in accordance with the Exchange Offer shall be
exchanged for that number of fully paid and nonassessable shares
of Holdings Common Stock equal to the Exchange Ratio. The term
"Exchange Ratio" means the quotient (rounded to the nearest
1/100,000) obtained by dividing (i) $14.25 by (ii) the average of
the average of the high and low sales prices of the Holdings
Common Stock as reported on the New York Stock Exchange (the
"NYSE") Composite Tape on each of the ten full consecutive
trading days ending immediately prior to the ten business day
period ending on the date of expiration of the Exchange Offer;
provided that the Exchange Ratio shall not be less than 1.78125
or greater than 2.375. The Purchaser will announce the exact
Exchange Ratio with respect to each Borden Share that is to be
exchanged for shares of Holdings Common Stock in the Exchange
Offer by 9:00 A.M., New York City time, on the first business day
of the ten business day period ending on the Expiration Date (as
defined below). The Purchaser will make such announcement by
issuing a press release to the Dow Jones News Service. During the
ten business day period ending on the Expiration Date, holders of
Borden Shares will be able to obtain the exact Exchange Ratio
with respect to each Borden Share that is to be exchanged for
shares of Holdings Common Stock in the Exchange Offer from the
Information Agent or the Dealer Manager for the Exchange Offer at
<PAGE>
their respective telephone numbers appearing below and on the
back cover of the Offering Circular/Prospectus. Borden
shareholders should obtain a current quote for the Holdings
Common Stock and the Borden Common Stock. Unless the context
requires otherwise, all references to "Borden Shares" shall be
deemed to refer also to the associated Rights.
The term "Expiration Date" means 12:00 Midnight, New York City
time, on Tuesday, December 20, 1994, unless the Purchaser shall
have extended the period of time for which the Exchange Offer is
open, in which event the term "Expiration Date" shall mean the
latest time and date at which the Exchange Offer, as so extended
by the Purchaser, shall expire.
The Exchange Offer is conditioned upon, among other things, there
being validly tendered and not properly withdrawn prior to the
expiration of the Exchange Offer a number of Borden Shares which,
when added to any Borden Shares previously acquired by the
Partnership or the Purchaser (other than pursuant to the Option
(as defined below)), represents more than 41% of the Borden
Shares outstanding on a fully diluted basis (other than dilution
due to the Rights) (the "Minimum Condition"). The Exchange Offer
is also subject to other terms and conditions described in the
Offering Circular/Prospectus, which Borden shareholders should
carefully consider. Any of the conditions to the Exchange Offer
may be waived by the Purchaser, except that in the event the
Purchaser exercises the Option in whole or in part, then the
Purchaser is not permitted to waive the Minimum Condition. If any
condition is not satisfied, the Purchaser may (i) terminate the
Exchange Offer and return all tendered Borden Shares to tendering
shareholders, (ii) extend the Exchange Offer and, subject to
withdrawal rights of Borden shareholders, retain all such Borden
Shares until the expiration of the Exchange Offer as so extended,
(iii) waive such condition (other than, in certain circumstances
described in the Offering Circular/Prospectus, the Minimum
Condition) and, subject to any requirement to extend the period
of time during which the Exchange Offer is open, exchange all
Borden Shares validly tendered for exchange on or prior to the
Expiration Date and not properly withdrawn, or (iv) subject to
applicable law, delay acceptance for exchange of or exchange for
any Borden Shares until satisfaction or waiver of such condition
to the Exchange Offer even though the Exchange Offer has expired.
The Board of Directors of Borden, with seven members voting in
favor and one member (Borden's chief executive officer)
abstaining, has, among other things, (1) determined that the
Merger Agreement and the Conditional Purchase/Option Agreement
(each as defined below) and the transactions contemplated
thereby, including the Exchange Offer and the merger of the
Purchaser with and into Borden (the "Merger"), taken together,
are fair to the shareholders of Borden, and resolved to recommend
that holders of Borden Shares accept the Exchange Offer, tender
their Borden Shares to the Purchaser in the Exchange Offer and,
if required by applicable law, approve and adopt the Merger
Agreement, and (2) approved the Merger Agreement, the Conditional
Purchase/Option Agreement and the transactions contemplated
thereby. See "The Exchange Offer--Borden Background and Reasons
for the Proposed Transactions" in the Offering
Circular/Prospectus.
The Purchaser, the Partnership and Borden have entered into an
Agreement and Plan of Merger dated as of September 23, 1994, as
amended as of November 15, 1994 (the "Merger Agreement"),
pursuant to which, among other things, following the consummation
of the Exchange Offer, subject to certain conditions, the
Purchaser will be merged with and into Borden in the Merger. If,
following the Exchange Offer and exercise of the Option, the
Purchaser and its affiliates own more than 90% of the outstanding
Borden Shares, the Purchaser will take all necessary or
appropriate action, without further action by the Board of
Directors or shareholders of Borden, to merge the Purchaser with
Borden as soon as practicable. If, following the Exchange Offer
and exercise of the Option, approval of Borden's shareholders is
required by applicable law in order to consummate the Merger,
provided that the Minimum Condition is satisfied without being
reduced or waived, Borden will submit the Merger to Borden's
<PAGE>
shareholders for approval. If the Merger is submitted to Borden's
shareholders for approval, the Merger will require the approval
of the holders of not less than 662/3% of the outstanding Borden
Shares, including the Borden Shares owned by the Purchaser and
its affiliates. In the event the Merger is consummated, holders
of Borden Shares will receive the same number of shares of
Holdings Common Stock for each Borden Share as are exchanged for
each Borden Share in the Exchange Offer.
Pursuant to a Conditional Purchase/Stock Option Agreement dated
as of September 23, 1994, Borden has granted to the Purchaser (or
its designee), a right (the "Option") to purchase up to
28,138,000 shares of Borden Common Stock (approximately 19.9% of
the outstanding Borden Shares as of the date hereof) in exchange
for the number of shares of Holdings Common Stock (rounded to the
nearest 1/100,000) obtained by dividing (i) $11.00 by (ii) the
average of the average of the high and low sales prices of the
Holdings Common Stock as reported on the NYSE Composite Tape on
each of the ten consecutive trading days immediately preceding
the second trading day prior to the date of notice of exercise of
the Option (or, if exercise is required as described below, the
date of exercise), as adjusted in certain events, for each share
of Borden Common Stock. Subject to applicable law, if the
Purchaser (or the Partnership or a wholly owned direct or
indirect subsidiary of the Partnership) acquires more than 41%
(but not more than 50%) of the outstanding Borden Shares in the
Exchange Offer, the Option must be exercised to the extent
necessary so that, following such exercise, the Purchaser will
own more than 50% of the outstanding Borden Shares. If the
Purchaser shall have exercised the Option in whole or in part
prior to the expiration of the Exchange Offer, the Purchaser may
not waive or reduce the Minimum Condition. In addition, if the
Purchaser has not exercised the Option prior to the expiration of
the Exchange Offer, it will not be entitled to exercise the
Option thereafter if it waives or otherwise reduces the Minimum
Condition and accepts fewer than 41% of the Borden Shares for
exchange in the Exchange Offer.
For purposes of the Exchange Offer, the Purchaser will be deemed
to have accepted for exchange Borden Shares validly tendered and
not properly withdrawn as, if and when the Purchaser gives oral
or written notice to the Exchange Agent of the Purchaser's
acceptance for exchange of such Borden Shares pursuant to the
Exchange Offer. Upon the terms and subject to the conditions of
the Exchange Offer, exchange of Borden Shares accepted for
exchange pursuant to the Exchange Offer will be made by deposit
of tendered Borden Shares with the Exchange Agent, which will act
as agent for the tendering shareholders for the purpose of
receiving shares of Holdings Common Stock from the Purchaser and
transmitting such shares of Holdings Common Stock to tendering
shareholders. Under no circumstances will interest be paid
pursuant to the Exchange Offer, regardless of any delay in making
such exchange. In all cases, exchange of Borden Shares tendered
and accepted for exchange pursuant to the Exchange Offer will be
made only after timely receipt by the Exchange Agent of (i)
certificates representing the Borden Shares ("Share
Certificates") (and certificates representing the Rights ("Rights
Certificates") if applicable), or timely confirmation of a
book-entry transfer of such Borden Shares into the Exchange
Agent's account at a Book-Entry Transfer Facility (as defined in
the Offering Circular/Prospectus) pursuant to the procedures set
forth under "The Exchange Offer--Procedure for Tendering Shares of
Borden Common Stock" in the Offering Circular/Prospectus, (ii)
the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature
guarantees, or an Agent's Message (as defined in the Offering
Circular/Prospectus) in connection with a book-entry transfer,
and (iii) any other documents required by the Letter of
Transmittal.
The Purchaser expressly reserves the right, in its sole
discretion, at any time and from time to time, to extend the
period during which the Exchange Offer is open for any reason,
including the occurrence of any of the conditions specified under
"The Exchange Offer--Certain Conditions of the Exchange Offer" in
<PAGE>
the Offering Circular/Prospectus, by giving oral or written
notice of such extension to the Exchange Agent. During any such
extension, all Borden Shares (and Rights if applicable)
previously tendered and not properly withdrawn will remain
subject to the Exchange Offer, subject to the rights of a
tendering shareholder to withdraw such shareholder's Borden
Shares (and Rights if applicable). Pursuant to the Merger
Agreement, the Purchaser has agreed that, upon the request of
Borden (and without limiting the number of times that the
Purchaser may extend the Exchange Offer, or the total number of
days for which the Exchange Offer may be extended), the Purchaser
will extend the Exchange Offer, one or more times, for an
aggregate of not more than twenty business days. Any such
extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement
thereof, and such announcement in the case of an extension will
be made no later than 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Purchaser has reserved the right to transfer or assign, in
whole or from time to time in part, to one or more affiliates,
the right to exchange all or any portion of the Borden Shares
tendered pursuant to the Exchange Offer, but any such transfer or
assignment will not relieve the Purchaser of its obligations
pursuant to the Exchange Offer and will in no way prejudice the
rights of tendering shareholders to exchange for Borden Shares
validly tendered and accepted for exchange pursuant to the
Exchange Offer. Unless and until the Rights are redeemed in
accordance with the Merger Agreement, holders of Borden Shares
will be required to tender the Rights associated with such Borden
Shares in order to effect a valid tender of such Borden Shares.
If the Distribution Date (as defined in the Rights Agreement) has
occurred and Rights Certificates have been distributed to such
holders prior to the date of tender pursuant to the Exchange
Offer, Rights Certificates representing a number of Rights equal
to the number of Borden Shares being tendered must be delivered
to the Exchange Agent in order for such Borden Shares to be
validly tendered.
Tenders of Borden Shares (and Rights if applicable) made pursuant
to the Exchange Offer are irrevocable, except that Borden Shares
(and Rights if applicable) tendered pursuant to the Exchange
Offer may be withdrawn at any time on or prior to the Expiration
Date and, unless theretofore accepted for exchange by the
Purchaser pursuant to the Exchange Offer, may also be withdrawn
at any time after January 20, 1995. If the Purchaser extends the
Exchange Offer, is delayed in its acceptance for exchange of or
exchange for Borden Shares or is unable to exchange Borden Shares
validly tendered pursuant to the Exchange Offer for any reason,
then, without prejudice to the Purchaser's rights under the
Exchange Offer, the Exchange Agent may nevertheless, on behalf of
the Purchaser, retain tendered Borden Shares (and Rights if
applicable), and such Borden Shares (and Rights if applicable)
may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in
the Offering Circular/Prospectus. Any such delay will be by an
extension of the Exchange Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex
or facsimile transmission notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth
on the back cover of the Offering Circular/Prospectus. Any notice
of withdrawal must specify the name of the person who tendered
the Borden Shares (and Rights if applicable) to be withdrawn, the
number of Borden Shares (and Rights if applicable) to be
withdrawn and the name of the registered holder, if different
from that of the person who tendered such Borden Shares (and
Rights if applicable). If Share Certificates (or Rights
Certificates if applicable) for Borden Shares (and Rights if
applicable) to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, then, prior to the physical
release of such certificates, the serial numbers shown on such
certificates must be submitted to the Exchange Agent and the
signature(s) on the notice of withdrawal must be guaranteed by an
Eligible Institution unless such Borden Shares (or Rights if
<PAGE>
applicable) have been tendered for the account of an Eligible
Institution (as defined in the Offering Circular/Prospectus). If
Borden Shares (or Rights if applicable) have been tendered
pursuant to the procedure for book-entry transfer as described
under "The Exchange Offer--Procedure for Tendering Shares of
Borden Common Stock--Book-Entry Transfer" in the Offering
Circular/Prospectus, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Borden Shares (and
Rights if applicable), in which case a notice of withdrawal will
be effective if delivered to the Exchange Agent by any method of
delivery described in the first sentence of this paragraph. All
questions as to the form and validity (including time of receipt)
of any notice of withdrawal will be determined by the Purchaser,
in its sole discretion, whose determination will be final and
binding. Any Borden Shares (and Rights if applicable) properly
withdrawn will thereafter be deemed not to have been validly
tendered for purposes of the Exchange Offer. However, withdrawn
Borden Shares (and Rights if applicable) may be re-tendered at
any time on or prior to the Expiration Date by following one of
the procedures described under "The Exchange Offer--Procedure for
Tendering Shares of Borden Common Stock" in the Offering
Circular/Prospectus.
The information required to be disclosed by Rule 14d-6(e)(1)(vii)
of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, is contained in the Offering
Circular/Prospectus and is incorporated herein by reference.
The Offering Circular/Prospectus and the related Letter of
Transmittal and, if required, other relevant materials will be
mailed to record holders of Borden Shares and Rights whose names
appear on Borden's shareholder list and list of holders of
Rights, if applicable, and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the shareholder
list and list of holders of Rights, if applicable, or who are
listed as participants in a clearing agency's security position
listing for subsequent transmittal to beneficial owners of Borden
Shares.
The Offering Circular/Prospectus and the related Letter of
Transmittal contain important information which should be read
before any decision is made with respect to the Exchange Offer.
Questions and requests for copies of the Offering
Circular/Prospectus and the related Letter of Transmittal and all
other tender offer materials may be directed to the Information
Agent or the Dealer Manager as set forth below, and copies will
be furnished promptly at the Purchaser's expense. The Purchaser
will not pay any fees or commissions to any broker or dealer or
any other person (other than the Dealer Manager and the
Information Agent) for soliciting tenders of Borden Shares and
Rights pursuant to the Exchange Offer.
The Information Agent for the Exchange Offer is:
D.F. King & Co., Inc.
United States Europe
77 Water Street Royex House, Aldermanbury Square
New York, New York 10005 London, England EC2V 7HR
1-800-829-6551 (Toll Free) (44) 71 600 5005 (Collect)
The Dealer Manager for the Exchange Offer is:
LMN
1251 Avenue of the Americas
New York, New York 10020
(212) 703-4774
November 22, 1994
EXHIBIT 11(a)(8)
Contact:
For Borden: For KKR:
Nick Lammartino Ruth Pachman/Dawn Dover
Borden Josh Pekarsky
(614) 225-4485 Kekst and Company
(212) 593-2655
For Immediate Release
---------------------
KKR Commences Exchange Offer for Borden
NEW YORK, NY, and COLUMBUS, OHIO, November 22, 1994 -- Kohlberg
Kravis Roberts & Co. and Borden, Inc. (NYSE: BN) announced today
that KKR's affiliate, Borden Acquisition Corp., has commenced its
previously announced exchange offer for all outstanding shares of
common stock of Borden. In the exchange offer, each share of
Borden common stock will be exchanged for a number of shares of
common stock of RJR Nabisco Holdings Corp. (NYSE: RN) owned by a
KKR partnership having a value of approximately $14.25, based on
the average of the average of the high and low sales prices of
the RJR Nabisco common stock for each of the ten consecutive
trading days ending immediately prior to the ten business day
period ending on the expiration date of the exchange offer.
On September 23, 1994, Borden, Borden Acquisition and Whitehall
Associates, L.P., a KKR-affiliated partnership, signed a
definitive agreement providing for the acquisition of Borden by
Borden Acquisition. Also on that date, Borden granted to Borden
Acquisition an option to acquire 28,138,000 Borden shares at a
price of $11.00 per share, payable in shares of RJR Nabisco
common stock.
The offer is conditioned upon, among other things, there being
validly tendered and not properly withdrawn prior to the
expiration of the exchange offer a number of Borden shares which,
when added to any Borden shares previously acquired by Borden
Acquisition or its affiliates (other than pursuant to Borden
Acquisition's option), represents more than 41% of the Borden
shares outstanding on a fully diluted basis. The offer is also
subject to certain other conditions. If at least 41%, but not
more than 50%, of the Borden shares are acquired in the offer,
the option must be exercised to the extent necessary so that KKR
would own more than 50% of the Borden shares.
The exchange offer and withdrawal rights will expire at 12:00
midnight, New York City time, on Tuesday, December 20, 1994
unless extended.
Morgan Stanley & Co. Incorporated is the dealer manager for the
offer and D.F. King & Co., Inc. is the information agent.
<PAGE>
The announcement is neither an offer to exchange nor a
solicitation of an offer to exchange any securities. The
Exchange Offer is being made solely by the Offering
Circular/Prospectus dated November 22, 1994 and the related
Letter of Transmittal. The Exchange Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of
securities in any jurisdiction in which making of the Exchange
Offer or the acceptance thereof would not be in compliance with
the laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Exchange Offer to
be made by a licensed broker or dealer, the Exchange Offer shall
be deemed to be made on behalf of the Purchaser by Morgan Stanley
& Co. Incorporated or one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
# # #
EXHIBIT 11(c)(1)
CONFORMED COPY
____________________________________________________________
AGREEMENT AND PLAN OF MERGER
AMONG
WHITEHALL ASSOCIATES, L.P.,
BORDEN ACQUISITION CORP.
AND
BORDEN, INC.
DATED AS OF
SEPTEMBER 23, 1994
____________________________________________________________
<PAGE>
AGREEMENT
TABLE OF CONTENTS
-----------------
Page
ARTICLE 1
THE EXCHANGE OFFER . . . . . . . . . . . . . 3
Section 1.1 The Exchange Offer . . . . . . . . . . . . . . . . . . . . . 3
Section 1.2 Company Action . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.3 Board of Directors; Section 14(f) . . . . . . . . . . . . . 10
ARTICLE 2
PLAN OF MERGER . . . . . . . . . . . . . . 12
Section 2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . 13
Section 2.5 Restatement of Surviving Corporation's
Certificate of Incorporation and By-Laws . . . . . . . 14
Section 2.6 Directors . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.8 Preparation of Proxy Statement; Shareholder
Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.9 Merger Without Meeting of Shareholders . . . . . . . . . . . 17
ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS . . . . . . . . . 18
Section 3.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . 18
Section 3.2 Company Stock Options and Related Matters . . . . . . . . . 20
Section 3.3 Exchange of Certificates . . . . . . . . . . . . . . . . . . 22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 28
Section 4.1 Representations and Warranties of
the Company . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.2 Representations and Warranties of
Purchaser and Parent . . . . . . . . . . . . . . . . . . . . 52
Section 4.3 Representations and Warranties of Parent . . . . . . . . . . 65
ARTICLE 5
COVENANTS . . . . . . . . . . . . . . . 67
Section 5.1 Conduct of Business of the Company . . . . . . . . . . . . . 67
Section 5.2 Conduct of Business of Purchaser . . . . . . . . . . . . . . 74
Section 5.3 No Solicitation . . . . . . . . . . . . . . . . . . . . . . 74
Section 5.4 Access to Information . . . . . . . . . . . . . . . . . . . 76
-i-
<PAGE>
Page
----
Section 5.5 Notification . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 5.6 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 5.7 Certain Filings, Consents and Arrangements . . . . . . . . . 79
Section 5.8 Public Announcements . . . . . . . . . . . . . . . . . . . . 80
Section 5.9 Antitrust Filings and Divestitures . . . . . . . . . . . . . 80
Section 5.10 Employee Benefits . . . . . . . . . . . . . . . . . . . . . 81
Section 5.11 Indemnification and Insurance . . . . . . . . . . . . . . . 84
Section 5.12 Redemption of Series B Preferred Stock . . . . . . . . . . . 86
Section 5.13 Certain Agreements . . . . . . . . . . . . . . . . . . . . . 86
Section 5.14 Redemption of Rights. . . . . . . . . . . . . . . . . . . . 87
Section 5.15 Affiliates and Certain Stockholders. . . . . . . . . . . . . 88
Section 5.16 Proxy Solicitation For Shareholders' Meeting . . . . . . . . 89
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . 89
Section 6.1 Conditions to Each Party's Obligations
to Effect the Merger . . . . . . . . . . . . . . . . . . . . 89
Section 6.2 Conditions to Obligation of the Company . . . . . . . . . . 90
Section 6.3 Conditions to Obligations of Purchaser
and Parent to Effect the Merger . . . . . . . . . . . . . . 91
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER . . . . . . . . . . 92
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 97
Section 7.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 7.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . 97
ARTICLE 8
MISCELLANEOUS . . . . . . . . . . . . . . 98
Section 8.1 Non-Survival of Representations and Warranties . . . . . . . 98
Section 8.2 Entire Agreement; Assignment . . . . . . . . . . . . . . . . 98
Section 8.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 99
Section 8.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 8.5 Gains and Transfer Taxes . . . . . . . . . . . . . . . . . . 104
Section 8.6 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 104
Section 8.7 Parties in Interest . . . . . . . . . . . . . . . . . . . . 104
Section 8.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Section 8.9 Non-Recourse . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 8.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 107
Section 8.11 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 8.12 Descriptive Headings . . . . . . . . . . . . . . . . . . . . 108
Section 8.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 8.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . 108
-ii-
<PAGE>
Page
----
ANNEX A -- Conditions to the Offer
EXHIBIT A -- Restated Certificate of Incorporation of
Surviving Corporation
EXHIBIT B -- Affiliate Letter
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 23, 1994
AMONG BORDEN ACQUISITION CORP.,
A NEW JERSEY CORPORATION ("PURCHASER"),
WHITEHALL ASSOCIATES, L.P., A DELAWARE LIMITED
PARTNERSHIP ("PARENT"), AND BORDEN, INC.,
A NEW JERSEY CORPORATION (THE "COMPANY").
WHEREAS, Parent and the Company have entered into a letter agreement,
dated as of September 11, 1994, setting forth, among other things, the
intention of Parent and the Company to enter into this agreement and to
consummate the transactions contemplated hereby;
WHEREAS the respective Boards of Directors of Purchaser and the
Company have approved the acquisition of the Company by Purchaser;
WHEREAS, in furtherance thereof, it is proposed that Purchaser will
commence an exchange offer (the "Offer") to exchange shares of common stock,
par value $.01 per share ("Holdings Common Stock"), of RJR Nabisco Holdings
Corp., a Delaware Corporation ("Holdings"), owned by Parent for all of the
issued and outstanding shares of common stock, par value $.625 per share (the
"Common Stock"), of the Company (the "Shares") in accordance with the terms
provided herein;
WHEREAS, the Board of Directors of the Company has approved the
making of the Offer and recommended its acceptance by the Company's
stockholders;
WHEREAS, also in furtherance of such acquisition, the respective
Boards of Directors of Purchaser and the Company have determined that the
merger of Purchaser with and into the Company (the "Merger"), on the terms and
subject to the conditions set
<PAGE>
2
forth in this Agreement, would be fair to and in the best interests of their
respective shareholders, and such Boards of Directors have approved such
Merger;
WHEREAS, Parent and Purchaser are unwilling to enter into this
Agreement unless the Company, contemporaneously with the execution and delivery
of this Agreement, grants to Purchaser a right (the "Conditional Purchase
Right") to purchase up to 28,138,000 shares of Common Stock (or such other
number of Shares as is equal to 19.9% of the Company's outstanding Shares on
the date hereof) (the "Option Shares"), in exchange for the number of whole
shares of Holdings Common Stock as set forth in the Conditional Purchase/Stock
Option Agreement, dated as of the date hereof (the "Conditional Purchase/Stock
Option Agreement"), among Purchaser, Parent and the Company; and in order to
induce Parent and Purchaser to enter into this Agreement, the Company has
agreed to grant Purchaser the Conditional Purchase Right and to execute and
deliver the Conditional Purchase/Stock Option Agreement;
WHEREAS, it is presently contemplated that the right of Purchaser to
purchase shares of Common Stock pursuant to the Offer and the right of
Purchaser to exercise the Conditional Purchase Right granted in the Conditional
Purchase/Stock Option Agreement will be assigned to Parent (or a direct or
indirect wholly owned subsidiary of Parent);
WHEREAS, Purchaser, Parent and the Company desire to make certain
representations, warranties, covenants and
<PAGE>
3
agreements in connection with the Offer and the Merger and also to prescribe
various conditions to the Offer and the Merger; and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, Parent, Purchaser and the Company hereby
agree as follows:
ARTICLE 1
THE EXCHANGE OFFER
Section 1.1 The Exchange Offer. (a) Provided that (i) this
------------------
Agreement shall not have been terminated in accordance with Section 7.1 and
(ii) none of the events set forth in Annex A hereto shall have occurred or be
existing, Parent shall cause Purchaser to commence, and Purchaser shall
commence, the Offer as soon as reasonably practicable following the
effectiveness of a registration statement on Form S-4 relating to the Offer
(together with all amendments and supplements thereto, the "Form S-4") under
the Securities Act of 1933, as amended (the "Securities Act"). Each Share
accepted by Purchaser in accordance with the Offer shall be converted into the
right to receive from Purchaser that number of fully paid and nonassessable
shares of Holdings Common Stock equal to the Exchange Ratio. The "Exchange
Ratio" shall mean the quotient (rounded to the nearest 1/100,000) obtained by
dividing (i) $14.25 by (ii) the average of the average of the high and low
sales prices of Holdings Common Stock as reported on the New York Stock
Exchange Composite Tape on each of the ten consecutive
<PAGE>
4
trading days immediately preceding the second trading day prior to the date of
expiration of the Offer (the "Valuation Period"); provided that the Exchange
Ratio shall not be less than 1.78125 or greater than 2.375. The obligations of
Purchaser to consummate the Offer and to accept for exchange the Shares
tendered pursuant to the Offer shall be subject only to the conditions set
forth in Annex A hereto and, without the written consent of the Company,
Purchaser shall not decrease the number of Shares being sought in the Offer,
change the form of consideration payable in the Offer (other than by adding
consideration), add additional conditions to the Offer or make any other change
in the terms or conditions of the Offer which is adverse to the holders of
Shares, it being agreed that a waiver by Purchaser of any condition in whole or
in part at any time and from time to time in its discretion shall not be deemed
to be materially adverse to any holder of Shares; provided that if Purchaser
shall have exercised the Conditional Purchase Right in whole or in part prior
to the termination of the Offer, Purchaser shall not be permitted to waive the
Minimum Condition (as defined herein). Purchaser agrees that upon the request
of the Company (and without limiting the number of times that Purchaser may
extend the Offer, or the total number of days for which the Offer may be
extended), Purchaser shall extend the Offer, one or more times, for an
aggregate of not more than twenty business days.
The Offer shall be made by means of an offering circular/prospectus
and related letter of transmittal (the "Letter of Transmittal") (collectively,
the "Offering Circular").
<PAGE>
5
Purchaser expressly reserves the right to increase the number of shares of
Holdings Common Stock to be exchanged for each share of Common Stock in the
Offer. Upon the terms and subject to the conditions of the Offer, Purchaser
will accept (and Parent will cause Purchaser to accept) for exchange any and
all Shares which are validly tendered and not properly withdrawn on or prior to
the expiration of the Offer. Purchaser may, at any time, transfer or assign to
Parent or to one or more corporations directly or indirectly wholly owned by
Parent the right to purchase all or any portion of the Shares tendered pursuant
to the Offer, but any such transfer or assignment shall not relieve Purchaser
of its obligations under the Offer or materially prejudice the rights of
tendering shareholders to receive shares of Holdings Common Stock for Shares
validly tendered and not properly withdrawn and accepted for exchange. In the
event that Purchaser assigns the right to purchase all or any portion of the
Shares tendered pursuant to the Offer or an affiliate of Purchaser purchases
Shares under the Conditional Purchase/Stock Option Agreement, then for purposes
of any provision of this Agreement which is predicated upon Purchaser holding
or owning a specified number or percentage of Shares, the number of Shares held
or owned by Purchaser shall be deemed to include all Shares purchased by any
affiliate or affiliates pursuant to the transactions contemplated hereby or by
the Conditional Purchase/Stock Option Agreement.
(b) Promptly after the date hereof, in accordance with Rule 14d-2(e)
under the Securities Exchange Act of 1934, as
<PAGE>
6
amended (together with the rules and regulations thereunder, the "Exchange
Act"), Parent, pursuant to its Registration Rights Agreement with Holdings
dated July 15, 1990 (the "1990 Registration Rights Agreement") and, if
applicable, its Registration Rights Agreement with Holdings dated February 9,
1989 (the "1989 Registration Rights Agreement"), shall request that Holdings
promptly prepare and file with the Securities and Exchange Commission (the
"SEC") the Form S-4 covering the registration of the Holdings Common Stock to
be exchanged in the Offer and that will be issued in the Merger, as well as all
other information and exhibits required by law with respect to the registration
and offering of the Holdings Common Stock (the "Offering Materials"). Not
later than the date of commencement of the Offer (which shall be the date that
the definitive Offering Circular is first published, sent or given to
shareholders of the Company), Purchaser shall file with the SEC a Tender Offer
Statement on Schedule 14D-1 (together with all amendments and supplements
thereto, the "Schedule 14D-1") with respect to the Offer. The Schedule 14D-1
shall contain (included as an exhibit) or shall incorporate by reference the
Offering Circular (or portions thereof) and forms of the summary advertisement,
as well as all other information and exhibits required by law. Parent and
Purchaser each agrees promptly to correct any information in the Offering
Materials and the Schedule 14D-1 (together the "Offer Documents") that shall be
or have become false or misleading in any material respect and Parent and
Purchaser each further agrees to request Holdings to
<PAGE>
7
take all steps necessary to cause the Offer Documents as so corrected to be
filed with the SEC and disseminated to holders of Shares, in each case as and
to the extent required by applicable federal securities laws. The Company and
its counsel shall be given an opportunity to review each of the Offer Documents
prior to its being filed with the SEC. Parent and Purchaser agree to provide
the Company and its counsel in writing with any written comments Parent and
Purchaser or their respective counsel may receive from the SEC with respect to
the Offer Documents promptly after the receipt of such comments.
Section 1.2 Company Action. (a) The Company hereby approves of and
--------------
consents to the Offer and represents and warrants that (x) its Board of
Directors, at a meeting duly called and held, has (i) determined that this
Agreement and the Conditional Purchase/Stock Option Agreement and the
transactions contemplated hereby, including the Offer and the Merger, and
thereby, taken together, are fair to the shareholders of the Company, and has
resolved to recommend that holders of Shares (A) accept the Offer, (B) tender
their Shares thereunder to Purchaser and, if required by applicable law, and
(C) approve and adopt this Agreement and Plan of Merger (collectively, the
"Recommendations") and (ii) approved this Agreement and the Conditional
Purchase/Stock Option Agreement and the transactions contemplated hereby and
thereby, and that such approval constitutes approval of this Agreement and the
Conditional Purchase/Stock Option Agreement and the transactions contemplated
hereby and thereby for purposes of Sections 14A:10A-4 and
<PAGE>
8
14A:10A-5 of the New Jersey Business Corporation Act (the "NJBCA") and Article
VIII of the Company's Restated Certificate of Incorporation (the "Charter") and
renders inapplicable the "Change in Control" provisions of the 8-3/8% Sinking
Fund Debentures due 2016, the "Change in Control" provisions of the Medium Term
Notes, Series A, the "Change in Control" provisions of the 9-7/8% Notes due
1997, Paragraph 4.1 of the letter dated November 20, 1987 from the Company to
Wachovia Bank and Trust Company, N.A. with respect to a $20 million line of
credit for Borden Chemical & Plastics Operating Limited Partnership ("BCPO")
and Section 6.5 of the ESOP Loan Agreement dated as of February 6, 1989 between
the Company and First National Bank of Boston and (y) Lazard Freres and Co. and
CS First Boston Corporation have delivered to the Board of Directors of the
Company their respective written opinions to the effect that the consideration
to be received by holders of Shares pursuant to each of the Offer and the
Merger is fair to such holders from a financial point of view. The Company
hereby consents to the inclusion in the Offer Documents of the Recommendations,
provided that they have not theretofore been withdrawn as permitted pursuant to
Section 1.2(b) or 5.3 herein.
(b) The Company hereby agrees to file with the SEC contemporaneously
with the commencement of the Offer, and distribute contemporaneously with the
Offering Circular to its shareholders, a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing the
<PAGE>
9
Recommendations. The Company further agrees, subject to clause (iii) of the
proviso to the first sentence in Section 5.3, not to change the Recommendations
unless the average of the average of the high and the low sales prices of the
Holdings Common Stock as reported on the New York Stock Exchange Composite Tape
for the Valuation Period is less than the price per share that would yield an
Exchange Ratio of 2.375 or less without giving effect to the proviso in the
definition of Exchange Ratio. The Company will not have any right to terminate
this Agreement as a result of any such change in the Recommendations and
notwithstanding any such change in the Recommendations, the Company will
continue to be bound by its representations and warranties and covenants
contained herein (except representations and warranties and covenants with
respect to the Recommendations), including, without limitation, those with
respect to the Rights Agreement (as hereinafter defined), antitrust approvals
and divestitures (assuming that following receipt of such approvals Purchaser
purchases at least 28,138,000 Shares), Article VIII of the Charter and Sections
14A:10A-4 and 14A:10A-5 of the NJBCA. The Company, Parent and Purchaser each
agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 that shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. To the knowledge of the Company after due inquiry,
all the directors of
<PAGE>
10
the Company intend to tender their Shares pursuant to the Offer or to vote
their Shares in favor of approval and adoption of the Merger and this Agreement
at the shareholders' meeting referred to in Section 2.8. Parent and Purchaser
and their counsel shall be given an opportunity to review the Schedule 14D-9
prior to its being filed with the SEC.
(c) In connection with the Offer, if requested by Purchaser, the
Company shall promptly furnish Purchaser with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of shares of Common Stock as of a recent date
and shall furnish Purchaser with such information and assistance (including,
without limitation, updated lists of shareholders, mailing labels and lists of
securities positions) as Purchaser or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares.
Section 1.3 Board of Directors; Section 14(f). (a) If requested by
---------------------------------
Parent, the Company shall, following the acceptance for exchange of the Shares
to be exchanged pursuant to the Offer and/or the purchase of the Option Shares
in accordance with the Conditional Purchase/Stock Option Agreement, and from
time to time thereafter, take all actions necessary to cause the Applicable
Percentage (as defined below) of directors (and of members of each committee of
the Board of Directors) (rounded in each case to the next highest director or
member) of the Company selected by Parent to consist of persons designated or
elected by Parent (whether, at the election of the Company, by means of
<PAGE>
11
increasing the size of the board of directors or seeking the resignation of
directors and causing Parent's designees to be elected). The "Applicable
Percentage" means the ratio of (i) the total voting power of all Shares
accepted for exchange pursuant to the Offer and/or purchased in accordance with
the Conditional Purchase/Stock Option Agreement to (ii) the total voting power
of the outstanding voting securities of the Company, rounded to the nearest
whole number and expressed as a percentage; provided that if Purchaser has
acquired at least 28,138,000 Shares the Applicable Percentage shall not be less
than 33-1/3%.
(b) The Company's obligations to cause designees of Parent to be
elected or appointed to the Board of Directors of the Company shall be subject
to Section 14(f) of the Exchange Act, and Rule 14f-1 promulgated thereunder.
The Company shall promptly take all actions required pursuant to Section 14(f)
and Rule 14f-1 in order to fulfill its obligations under this Section 1.3, and
shall include in the Schedule 14D-9 such information with respect to the
Company and its officers and directors as is required under Section 14(f) and
Rule 14f-1. Parent and Purchaser will supply to the Company any information
with respect to any of them and their nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of Parent's designees
pursuant to this Section and prior to the Effective Time (as hereinafter
defined), any amendment by the Company or termination by the Company of this
Agreement or the Conditional Purchase/Stock Option Agreement, extension by the
Company for the
<PAGE>
12
performance or waiver of the obligations, conditions or other acts of Parent or
Purchaser or waiver by the Company of its rights hereunder or thereunder, will
require the concurrence of a majority of directors of the Company then in
office who are not affiliated with Parent or Purchaser or selected by Parent
for appointment or election to the board of directors of the Company in
accordance with Section 1.3(a) hereof (the "Independent Directors").
ARTICLE 2
PLAN OF MERGER
Section 2.1 The Merger. At the Effective Time (as defined herein)
----------
and on the terms and subject to the conditions set forth in this Agreement, and
in accordance with the NJBCA, Purchaser shall be merged with and into the
Company. Upon the Effective Time, the separate existence of Purchaser shall
cease, and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall continue under the name "Borden, Inc." The
manner and basis of converting the shares of Purchaser and the Company into
shares of the Surviving Corporation or into or of any other corporation or, in
whole or in part, into cash shall be as provided for in Article 3 of this
Agreement.
Section 2.2 Closing. Unless this Agreement shall have been
-------
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.1 and subject to the satisfaction or waiver of the
conditions set forth in Article 6, the closing of the Merger (the "Closing")
will take place at
<PAGE>
13
10:00 a.m. on the second Business Day after satisfaction of the conditions set
forth in Section 6.1 (or as soon as practicable thereafter following
satisfaction or waiver of the conditions set forth in Sections 6.2 and 6.3)
(the "Closing Date"), at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017, unless another date, time or place
is agreed to in writing by the parties hereto.
Section 2.3 Effective Time. As promptly as practicable following
--------------
the satisfaction or waiver of the conditions to the Merger set forth in Article
6, the parties shall file a certificate of merger or other appropriate
documents (in any such case, the "Certificate of Merger"), executed in
accordance with the relevant provisions of the NJBCA, and shall make all other
filings or recordings required under the NJBCA in connection with the Merger.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Secretary of State of the State of New Jersey, or at such
later time as is permissible in accordance with the NJBCA and as Purchaser and
the Company shall agree should be specified in the Certificate of Merger (the
time the Merger becomes effective being the "Effective Time").
Section 2.4 Effects of the Merger. The Merger shall have the
---------------------
effects set forth in Section 14A:10-6 of the NJBCA (or any successor
provision). Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers,
immunities, purposes and franchises of the Company and Purchaser shall vest in
the
<PAGE>
14
Surviving Corporation, and all debts, liabilities, obligations and duties of
the Company and Purchaser shall become debts, liabilities, obligations and
duties of the Surviving Corporation.
Section 2.5 Restatement of Surviving Corporation's Certificate of
-----------------------------------------------------
Incorporation and By-Laws. (a) The Charter, as in effect immediately prior to
- -------------------------
the Effective Time, shall be restated so as to read in its entirety in the form
set forth as Exhibit A hereto, and, as so restated, until thereafter and
further amended or restated as provided therein and under the NJBCA, it shall
be the restated certificate of incorporation of the Surviving Corporation.
(b) The By-laws of Purchaser as in effect at the Effective Time
shall be the By-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
Section 2.6 Directors. The directors of Purchaser at the Effective
---------
Time shall be the directors of the Surviving Corporation, each to hold office
in accordance with the Restated Certificate of Incorporation and By-laws of the
Surviving Corporation and until the earlier of his or her resignation or
<PAGE>
15
removal or until his or her successor is duly elected and qualified, as the
case may be.
Section 2.7 Officers. The officers of the Company at the Effective
--------
Time shall be the officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation and until the earlier of his or her resignation or removal or until
his or her respective successor is duly appointed and qualified, as the case
may be.
Section 2.8 Preparation of Proxy Statement; Shareholder Meeting.
---------------------------------------------------
(a) If approval of the Company's shareholders is required by applicable law in
order to consummate the Merger, provided that the Minimum Condition is
satisfied without being reduced or waived, following the acceptance for
exchange of Shares pursuant to the Offer, the Company, acting through its Board
of Directors, shall, in accordance with applicable law, as soon as practicable
following the expiration or termination of the Offer: (a) duly call, give
notice of, convene and, subject to Section 5.16, hold a special meeting of its
shareholders (the "Shareholders' Meeting") for the purpose of considering and
taking action upon this Agreement and the Merger and prepare and file with the
SEC a proxy statement (such proxy statement as amended or supplemented from
time to time, the "Proxy Statement"), and (b) use its best efforts (i) to
obtain and furnish the information required to be included by it in the Proxy
Statement and, after consultation with Parent and Purchaser, respond promptly
to any comments made by the SEC with respect to the Proxy Statement and any
preliminary version thereof and cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time following the expiration or
termination of the Offer and (ii) to obtain the necessary approval by its
shareholders of this Agreement and the transactions contemplated hereby,
including the Merger.
<PAGE>
16
(b) Subject to the Company's right, pursuant to Section 1.2(b)
hereof, to withdraw or modify the Recommendations, the Company shall include in
the Proxy Statement the recommendation of its Board of Directors that holders
of Shares vote in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby, including the Merger.
(c) Notwithstanding the other provisions of this Section 2.8, the
Company agrees that (i) its obligations pursuant to Section 2.8(a) hereof
(including, without limitation, the obligation to submit the Agreement and the
Merger to a vote of its shareholders) shall not be affected by the withdrawal
or modification of the Recommendations (but there shall be no obligation of the
Board of Directors of the Company to continue the Recommendation that
shareholders approve and adopt the Agreement and the Merger) and (ii) (A) if
the Merger is not approved by the shareholders of the Company following the
acceptance for exchange of Shares pursuant to the Offer or the purchase of
Shares pursuant to the Conditional Purchase/Stock Option Agreement or (B) if
the Merger is not submitted to the shareholders of the Company but Purchaser
has acquired at least 28,138,000 Shares, the approval of the transactions
contemplated by this Agreement, including the Offer and the Merger, by the
Board of Directors of the Company shall constitute, solely for the purposes of
Sections 14A:10A-4 and 14A:10A-5 of the NJBCA and, to the extent that there are
no Continuing Directors (as defined in the Charter), Article VIII of the
Charter, an approval of any future "Business Combination" (as defined in
Section
<PAGE>
17
14A:10A-3 of the NJBCA and Article VIII of the Charter) between the Company and
Parent or any affiliate thereof, provided that (x) such "Business Combination"
is approved by a majority of the Independent Directors and (y) if appropriate,
the Company shall have received the opinion of an investment banking firm
selected by the Independent Directors that such "Business Combination" is fair
to the Company's shareholders from a financial point of view (an "Excepted
Future Transaction").
(d) At the Shareholders' Meeting, each of Parent and Purchaser will
vote, or cause to be voted, all Shares acquired in the Offer or otherwise
beneficially owned by it or any of its respective subsidiaries in favor of the
approval and adoption of this Agreement and the transactions contemplated
hereby, including the Merger.
(e) The information provided and to be provided by Purchaser and the
Company, respectively, for use in the Proxy Statement shall, at the date it is
first mailed to shareholders of the Company and on the date of the
Shareholders' Meeting, be true and correct in all material respects and shall
not omit to state any material fact required to be stated therein or necessary
in order to make such information not misleading, and the Company and Purchaser
each agree to correct any information provided by it for use in the Proxy
Statement which shall have become false or misleading.
Section 2.9 Merger Without Meeting of Shareholders. Notwithstanding
--------------------------------------
the foregoing, in the event that Parent and Purchaser, or any other direct or
indirect subsidiary of Parent
<PAGE>
18
shall acquire at least 90% of the outstanding Shares, the parties hereto agree
to take all necessary or appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
meeting of shareholders of the Company, in accordance with Section 14A:10-5.1
of the NJBCA.
ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
Section 3.1 Effect on Capital Stock. At the Effective Time, by
-----------------------
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock or any shares of capital stock of Purchaser:
(a) Common Stock of Purchaser. Each share of common stock of
-------------------------
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into a number of shares of common stock, par value $.01 per share,
of the Surviving Corporation equal to one one-thousandth of the total number of
outstanding shares of Common Stock immediately prior to the Merger, which shall
be all of the issued and outstanding capital stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Purchaser-Owned or
-----------------------------------------------------
Parent-Owned Common Stock. Each share of Common Stock that is owned by the
- -------------------------
Company or by any subsidiary of the Company and each share of Common Stock that
is owned by Parent, Purchaser or any other subsidiary of Parent shall
automatically be cancelled and retired and shall cease to exist, and no cash,
Holdings Common
<PAGE>
19
Stock or other consideration shall be delivered or deliverable in exchange
therefor.
(c) Conversion of Common Stock. Except as otherwise provided
--------------------------
herein, each issued and outstanding share of Common Stock shall be converted
into the right to receive that number of fully paid and nonassessable shares of
Holdings Common Stock equal to the Final Exchange Ratio (as defined herein).
The aggregate amount of Holdings Common Stock which a holder of Common Stock is
entitled to receive with respect to each such share of Common Stock shall be
hereinafter referred to as the "Merger Consideration". The "Final Exchange
Ratio" shall equal that number of fully paid and nonassessable shares of
Holdings Common Stock that was delivered by the Purchaser with respect to each
share of Common Stock that was validly tendered and not properly withdrawn and
accepted for exchange pursuant to the terms of the Offer.
(d) Cancellation and Retirement of Common Stock. All shares of
-------------------------------------------
Common Stock (other than shares referred to in Section 3.1(b)) issued and
outstanding immediately prior to the Effective Time shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Common
Stock shall cease to have any rights with respect thereto, except the right to
receive, upon surrender of such certificate to the Exchange Agent (as defined
herein) and acceptance thereof in accordance with Section 3.3, the Merger
Consideration (and/or any
<PAGE>
20
cash in lieu of fractional shares of Holdings Common Stock to be issued or paid
in consideration therefor).
Section 3.2 Company Stock Options and Related Matters. (a) As
-----------------------------------------
of the Effective Time, each holder of a then outstanding option to purchase
Common Stock (an "Option") shall receive with respect to each share subject to
such Option an amount in cash equal to the excess, if any, of (i) the product
of the Final Exchange Ratio and the average of the average of the high and the
low sales prices of Holdings Common Stock as reported on each of the ten
consecutive trading days immediately preceding the Effective Time over (ii) the
per share exercise price of such Option, and the Company shall cause the
surrender and cancellation of each Option (and any related stock appreciation
right) with respect to which a payment by the Company is made. With respect to
Options not so surrendered and cancelled, such Options shall, if not previously
terminated or expired in accordance with their terms, terminate upon the
grantee leaving the Company except upon such grantee's death, Disability or
retirement at or after age sixty-five (or such earlier age as the Purchaser may
expressly agree) and except that, to the extent provided under any such
existing Option, if the grantee is terminated by the Company without Cause
within two years following a Change in Control of the Company, the grantee
shall have a period of ninety days following such termination within which to
exercise such Option. The terms Disability, Change in Control and Cause for
this purpose shall have the meanings set forth in the plans pursuant to which
the Options were granted.
<PAGE>
21
No employee who has been previously granted an Option or stock appreciation
right shall be approved for retirement for purposes of any plan or agreement
under which such Option or right has been granted without the express consent
of the Purchaser. The Purchaser and the Company agree to continue to discuss
the manner in which outstanding stock options shall be treated after the
Merger.
(b) In addition to the foregoing, the Company shall take all steps
necessary so that no participant in any employee plans, programs or
arrangements of the Company shall have any right to acquire or receive any
Common Stock or other equity interest in the Company on or after the Effective
Time other than in connection with the exercise of Options outstanding on the
date hereof which have not been cancelled pursuant to Section 3.2(a). On or
prior to the Effective Time, the Company shall amend each of its (and cause the
amendment of each of its affiliate's) qualified defined contribution plans to
eliminate any investment in Common Stock after the Effective Time.
(c) At or immediately prior to the Effective Time, the Company shall
cause an amendment of each of its employee plans, programs and arrangements
pursuant to which an employee may be entitled to receive Common Stock (each a
"Stock Plan") to provide that any employee entitled to receive Common Stock in
respect of previously deferred bonuses or compensation shall receive instead
cash equal to the product of (i) the Final Exchange Ratio multiplied by the
average of the average of the high and the low closing sales prices of Holdings
Common Stock as reported on each
<PAGE>
22
of the ten consecutive trading days immediately preceding the Effective Time
and (ii) the number of shares of Common Stock so deferred, plus interest equal
to the rate otherwise credited on deferred amounts under the applicable plans
or if no such rate is credited the prime rate established by Chemical Bank from
time to time on such deferred bonuses or compensation from the Effective Time
to the date of distribution.
(d) Subject to the terms of any Company Plan, any Merger
Consideration paid in respect of restricted shares of Common Stock held by any
employee or former employee of the Company or any of its affiliates shall
remain restricted and subject to the same terms and conditions imposed on such
restricted shares.
Section 3.3 Exchange of Certificates. (a) Exchange Agent. At or
------------------------ --------------
prior to the Effective Time, Purchaser shall deposit with or for the account of
a bank or trust company designated by Parent, which shall be reasonably
satisfactory to the Company (the "Exchange Agent"), for the benefit of the
holders of shares of Common Stock, for exchange in accordance with this Article
3, the Merger Consideration in respect of each Share outstanding immediately
prior to the Effective Time, except the shares of Common Stock referred to in
Section 3.1 (b) (the "Aggregate Merger Consideration").
(b) Exchange Procedures. As soon as reasonably practicable after
-------------------
the Effective Time, Purchaser will instruct the Exchange Agent to mail to each
holder of record immediately prior to the Effective Time (other than holders
referred to in Section
<PAGE>
23
3.1(b)) of a certificate or certificates which represented shares of Company
Stock (the "Certificates") (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange Agent
and shall be in such form and have such other provisions as Parent or Purchaser
may reasonably specify) (the "Merger Letter of Transmittal") and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for Holdings Common Stock. Upon surrender to the Exchange Agent of
Certificates, together with such Merger Letter of Transmittal duly executed and
any other required documents, and acceptance thereof by the Exchange Agent,
each holder of a Certificate shall be entitled to a certificate or certificates
representing the number of full shares of Holdings Common Stock into which the
aggregate number of shares of Common Stock previously represented by such
Certificate surrendered shall have been converted pursuant to this Agreement.
The Exchange Agent shall accept such Certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. After
the Effective Time, there shall be no further transfer on the books and records
of the Company or its transfer agent of Certificates and if such Certificates
are presented to the Company for transfer, they shall be cancelled against
delivery of certificates for Holdings Common Stock as herein provided. If any
certificate for such Holdings Common Stock is to be issued in
<PAGE>
24
a name other than that in which the Certificate surrendered for exchange is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer and that the person requesting such exchange shall
pay to Purchaser or its transfer agent any transfer or other taxes required by
reason of the issuance of certificates for such Holdings Common Stock in a name
other than that of the registered holder of the Certificate surrendered, or
establish to the satisfaction of Purchaser or its transfer agent that such tax
has been paid or is not applicable. Until surrendered as contemplated by this
Section 3.3(b), each Certificate (other than certificates referred to in
Section 3.1(b) shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration as contemplated by Section 3.1.
(c) No Fractional Shares. (i) No certificates or scrip
--------------------
representing fractional shares of Holdings Common Stock shall be issued upon
the surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a stockholder of
Holdings; and (ii) notwithstanding any other provision of this Agreement, each
holder of shares of Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Holdings
Common Stock (after taking into account all shares of Common Stock delivered by
such holder) shall receive, in lieu thereof, a cash payment (without interest)
<PAGE>
25
representing such holder's proportionate interest in the net proceeds from the
sale by the Exchange Agent (following the deduction of applicable transaction
costs of third parties other than the Exchange Agent, the Company, the
Purchaser or affiliates of any of the foregoing), on behalf of all such
holders, of the shares (the "Excess Shares") of Holdings Common Stock
representing all such fractions. Such sale shall be made as soon as
practicable after the Effective Time.
(d) Distributions with Respect to Unexchanged Shares. No dividends
------------------------------------------------
or other distributions with respect to Holdings Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate for shares of Common Stock with respect to the shares of Holdings
Common Stock represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 3.3(c), until the
surrender of such Certificate in accordance with this Article 3. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be delivered to the holder of such Certificate a certificate
representing whole shares of
<PAGE>
26
Holdings Common Stock issued in exchange therefor and, without interest, (i) at
the time of such surrender or as promptly after the sale of the Excess Shares
as practicable, the amount of any cash payable in lieu of a fractional share of
Holdings Common Stock to which such holder is entitled pursuant to Section
3.3(c) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Holdings Common Stock and (ii) at the appropriate payment date, the amount of
dividends or other distributions payable with respect to such whole shares of
Holdings Common Stock with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to such surrender. In no event
shall the persons entitled to receive such dividends or other distributions be
entitled to receive interest on such dividends or other distributions.
(e) No Further Ownership Rights in Common Stock. All shares of
-------------------------------------------
Holdings Common Stock delivered and cash paid upon the surrender for exchange
of Certificates which represented shares of Common Stock in accordance with the
terms of this Article 3 (including any cash paid pursuant to Section 3.3(d))
shall be deemed to have been delivered (and paid) in full satisfaction of all
rights pertaining to the shares of Common Stock theretofore represented by such
Certificates, subject, however, to the Surviving Corporation's obligation, with
respect to shares of Common Stock, to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by the Company on such shares of Common Stock prior to
the date of this Agreement and which remain unpaid at the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Merger
----------------------------
Consideration deposited with the Exchange Agent pursuant to this Article 3 (the
"Exchange Fund") which remains undistributed to the holders of the certificates
representing shares of Common Stock for nine months after the Effective Time
<PAGE>
27
shall be delivered to Parent, upon demand, and any holders of shares of Common
Stock who have not theretofore complied with this Article 3 shall thereafter
look only to Parent and only as general creditors thereof for payment of their
claim for Holdings Common Stock (or any security or consideration into which
Holdings Common Stock is converted) and any cash in lieu of fractional shares
of Holdings Common Stock and shall look only to Parent and only as general
creditors thereof for payment of any dividends or distributions with respect to
Holdings Common Stock to which such holders may be entitled.
(g) No Liability. None of Parent, Purchaser, Holdings, the Company
------------
or the Exchange Agent shall be liable to any person in respect of any shares of
Holdings Common Stock (or dividends or distributions with respect thereto) or
cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates
which represented shares of Common Stock shall not have been surrendered prior
to five years after the Effective Time (or immediately prior to such earlier
date on which any shares of Holdings Common Stock, any cash in lieu of
fractional shares of Holdings Common Stock or any dividends or distributions
with respect to Holdings Common Stock in respect of such Certificate would
otherwise escheat to or become the
<PAGE>
28
property of any Governmental Entity (as defined herein)), any such shares,
cash, dividends or distributions in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the Parent, free and
clear of all claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest
---------------------------
any cash included in the Exchange Fund, as directed by Parent, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to Parent.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants to Parent and Purchaser as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
------------------------------------------
and each of its Significant Subsidiaries (as defined herein) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate
or partnership power and authority to carry on its business as now being
conducted, except for failures which, in the aggregate, would not have a
Material Adverse Effect (as defined herein) with respect to the Company.
Each of the Company and each of its Significant Subsidiaries is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to
be so
<PAGE>
29
qualified or licensed (individually or in the aggregate) is not reasonably
likely to have a Material Adverse Effect with respect to the Company.
Complete and correct copies of the Charter and By-laws of the Company are
included within the SEC Documents (as defined herein).
(b) Subsidiaries. All the outstanding shares of capital stock of
------------
each of the significant subsidiaries (as defined in Rule 1-02 of
Regulation S-X of the SEC) of the Company, (the "Significant
Subsidiaries"; which term shall include T.M.I. Associates, L.P. ("TMI"))
which is a corporation have been validly issued and are fully paid and
nonassessable and all outstanding shares of capital stock of each
Significant Subsidiary owned (of record and beneficially)
<PAGE>
30
by the Company, by another Significant Subsidiary of the Company or by the
Company and another such Significant Subsidiary are owned, free and clear of
all pledges, claims, options, rights of first refusal, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"), except for such rights of first refusal, claims,
options, charges and encumbrances as would not in the aggregate have a Material
Adverse Effect with respect to the Company. Except as set forth in Section
4.1(b) of the disclosure schedule delivered to Parent by the Company at the
time of execution of this Agreement (the "Disclosure Schedule"), all ownership
interests of each Significant Subsidiary which is not a corporation and which
is held (of record and beneficially) by the Company, by another Significant
Subsidiary of the Company or by the Company and another such Significant
Subsidiary have been validly issued and are owned, free and clear of all Liens,
except for such rights of first refusal, claims, options, charges and
encumbrances as would not in the aggregate have a Material Adverse Effect with
respect to the Company.
(c) Capital Structure. The authorized capital stock of the Company
-----------------
consists of (i) 480,000,000 shares of Common Stock and (ii) 10,000,000
shares of preferred stock, without par value ("Preferred Stock"). As of
the date hereof, there are (i) 141,515,502 shares of Common Stock issued
and outstanding (including the shares of Common Stock held by the trust
created under the Supplemental Benefit Trust Agreement dated December 9,
1993); (ii) 53,465,136 shares of Common Stock held in the treasury of the
Company; (iii) 7,357,473 shares of Common Stock issuable upon exercise of
outstanding Options (of which 1,408,326 shares, with an average exercise
price of $12.31, are exercisable at prices of $14.25 or less);
(iv) 4,779,200 shares of Common Stock reserved for issuance upon
exercise of authorized but unissued Options; (v) 45,031 shares of Common
Stock reserved for issuance upon conversion of Preferred Stock designated
as Preferred Stock-Series B ("Series B Preferred Stock"), 45,031 shares of
which are issuable upon conversion of all outstanding shares of Series B
Preferred Stock; (vi) 6,000,000 shares of Common Stock reserved for
issuance upon
<PAGE>
31
exercise of the Company's Lynx Equity Units (the "Lynx
Equity Units"), 5,950,000 shares of which are issuable upon exercise of
all outstanding Lynx Equity Units; (vii) 475,000 shares of Preferred Stock
designated as Preferred Stock-Series A ("Series A Preferred Stock"), none
of which are issued or outstanding; (viii) 688,700 shares of Series B
Preferred Stock, of which 6,822 shares are issued and outstanding; and
(ix) 2,400,000 shares of Preferred Stock designated as Series C Junior
Participating Preferred Stock ("Series C Preferred Stock") reserved for
issuance upon the exercise of the rights (the "Rights") distributed to the
holders of shares of Common Stock pursuant to the Rights Agreement, dated
as of January 28, 1986 between the Company and The Bank of New York, as
Rights Agent (the "Rights Agreement"), as amended as of November 29, 1988,
May 22, 1991, September 11, 1994 and the date hereof, none of which are
issued or outstanding. Except as set forth above, no shares of capital
stock or other equity securities of the Company are issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of the
Company are, and all shares which may be issued pursuant to the Stock
Plans will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. Except for the
Series B Preferred Stock, the Rights and the Lynx Equity Units, there are
no outstanding bonds, debentures, notes or other indebtedness or other
securities of the Company having the right to vote (or convertible
<PAGE>
32
into, or exchangeable for, securities having the right to vote) on any
matters on which shareholders of the Company may vote. Except for the
Series B Preferred Stock, the Rights and the Lynx Equity Units, there are
no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company
or any of its Significant Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Significant Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other equity or voting securities of
the Company or of any of its Significant Subsidiaries or obligating the
Company or any of its Significant Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. The only outstanding indebtedness
for borrowed money of the Company and its subsidiaries having (x) a
principal amount of $25,000,000 or more and (y) a maturity of one year or
longer is listed on Section 4.1(c) of the Disclosure Schedule. Other than
the Lynx Equity Units, the Stock Options and the Rights there are no
outstanding contractual obligations, commitments, understandings or
arrangements of the Company or any of its Significant Subsidiaries to
repurchase, redeem or otherwise acquire or make any payment in respect of
any shares of capital stock of the Company or any of its Significant
Subsidiaries. Except with respect to the Lynx
<PAGE>
33
Equity Units, there are no agreements or arrangements to which the Company
or any of its subsidiaries is a party pursuant to which the Company is or
could be required to register shares of Common Stock or other securities
under the Securities Act.
(d) Authority; Noncontravention. The Company has the requisite
---------------------------
corporate power and authority to enter into this Agreement and the
Conditional Purchase/Stock Option Agreement, and, subject to the Company
Shareholder Approval (as defined herein) with respect to the Merger, to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Conditional
Purchase/Stock Option Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate and shareholder action on the part
of the Company, subject, in the case of the Merger, to the Company
Shareholder Approval. Each of this Agreement and the Conditional
Purchase/Stock Option Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms subject to
the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
<PAGE>
34
good faith and fair dealing. Except as set forth in Section 4.1(d) of the
Disclosure Schedule, the execution and delivery of this Agreement and the
Conditional Purchase/Stock Option Agreement do not, and the consummation
of the transactions contemplated by this Agreement and the Conditional
Purchase/Stock Option Agreement and compliance with the provisions hereof
and thereof will not, conflict with, or result in any breach or violation
of or default (with or without notice or lapse of time or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or a right to require the purchase or repurchase or give rise
to a loss of a material benefit under, or result in the creation of any
Lien upon, any of the properties, indebtedness or assets of the Company or
any of its Significant Subsidiaries under (i) the Charter or By-laws of
the Company or the comparable governing or organizational documents of any
of its Significant Subsidiaries, (ii) any loan or credit agreement (other
than the credit agreement dated August 16, 1994 between Citibank, N.A., as
administrative agent, and the Company and the credit agreement dated
August 16, 1994 between Citibank, N.A., as administrative agent, and T.M.
Investors Limited Partnership), note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license to
which the Company or any of its subsidiaries is a party or by which any of
their respective properties or assets is bound or (iii) except for the
governmental filings
<PAGE>
35
and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule, regulation or arbitration
award applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii)
and (iii) above, any such conflicts, breaches, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not
have a Material Adverse Effect with respect to the Company. No consent,
approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Federal, national, state or local
government or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of its
Significant Subsidiaries in connection with the execution and delivery of
this Agreement or the Conditional Purchase/Stock Option Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby or thereby, except for (i) the filing of a premerger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the
applicable requirements, if any, of any relevant foreign jurisdictions,
(ii) the filing with the SEC of (x) the Offer Documents and the Schedule
14D-9, (y) the Proxy Statement and (z) such reports under the Exchange Act
as may be required by law in connection with this Agreement, the
<PAGE>
36
Conditional Purchase/Stock Option Agreement and the transactions
contemplated hereby or thereby, (iii) the filing of the Certificate of
Merger with the Secretary of State of the State of New Jersey and
appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (iv) filings, consents and
approvals under Environmental Laws (as defined herein) of jurisdictions in
which the Company transacts business, (v) such reports or filings under
the securities laws of the various states or the securities laws of non-
U.S. jurisdictions in connection with the Offer and the Merger as may be
required by law in connection with this Agreement, the Conditional
Purchase/Stock Option Agreement and the transactions contemplated hereby
or thereby, and (vi) such other consents, approvals, orders,
authorizations, registrations, declarations, filings or notices as are set
forth in Section 4.1(d) of the Disclosure Schedule.
(e) SEC Documents. The Company has filed all required reports,
-------------
schedules, forms, statements and other documents with the SEC since
January 1, 1990, and the Company has delivered or made available to
Purchaser all reports, schedules, forms, statements and other documents
filed with the SEC since such date (collectively, and in each case
including all exhibits and schedules thereto and documents incorporated by
reference therein, the "SEC Documents"). As of their respective dates,
the SEC Documents complied in all material respects with the requirements
of the Securities
<PAGE>
37
Act or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such SEC Documents, and
none of the SEC Documents (including any and all financial statements
included therein), except to the extent revised or superseded by a
subsequent filing with the SEC, as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The consolidated financial statements of the Company included in all SEC
Documents filed since January 1, 1994 (the "SEC Financial Statements")
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments).
<PAGE>
38
(f) Information Supplied. Neither the Schedule 14D-9, nor any of
--------------------
the information supplied by the Company for inclusion in the Offer
Documents, shall, at the respective times such Schedule 14D-9, the Offer
Documents or any amendments or supplements thereto are filed with the SEC
or are first published, sent or given to shareholders, as the case may be,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. The Proxy Statement shall not, at the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to shareholders and at the time of the Shareholders Meeting and at
the Effective Time, be false or misleading with respect to any material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of
the circumstances under which they are made, not misleading or necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Shareholders Meeting which has become
false or misleading. The Schedule 14D-9 and the Proxy Statement and
information statement will comply in all material respects as to form with
the requirements of the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty (i) with respect to any
<PAGE>
39
information supplied by Parent, the Purchaser or Holdings or any of their
representatives which is contained in any of the Offer Documents, the
Schedule 14D-9 or the Proxy Statement or (ii) with respect to the Proxy
Statement, to the extent that (A) on the date the Proxy Statement is first
mailed to shareholders, a majority of the board of directors of the
Company shall have been designated or elected by Parent or (B) if on such
date of first mailing a majority of such board shall not have been
designated or elected by Parent, between the date the Proxy Statement is
first mailed to shareholders and at the time of the Shareholders Meeting
or at the Effective Time, a majority of the board of directors of the
Company shall have been designated or elected by Parent and subsequent to
such time the Proxy Statement shall have become false or misleading with
respect to any material fact.
(g) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
the SEC Documents or in Section 4.1(g) of the Disclosure Schedule, since
the date of the most recent audited financial statements included in such
SEC Documents, the Company has conducted its business only in the ordinary
course consistent with past practice, and there is not and has not been
any change in the business, financial condition or results of operations
of the Company or any of its subsidiaries which has had, or would
reasonably be expected to have, a Material Adverse Effect with respect to
the Company.
<PAGE>
(h) Benefit Plans. (i) Section 4.1(h) of the Disclosure Schedule
-------------
contains a true and complete list of each "employee benefit plan" (within
the meaning of section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), (including, without limitation,
multiemployer plans within the meaning of ERISA section 3(37)), stock
purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation
and all other employee benefit plans, agreements, programs, policies or
other arrangements, whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as a result of
the transactions contemplated by this Agreement, the Conditional
Purchase/Stock Option Agreement or otherwise), under which any employee or
former employee of the Company or any of its affiliates has any present or
future right to benefits or under which the Company or any of its
affiliates has any present or future liability. All such plans,
agreements, programs, policies and arrangements shall be collectively
referred to as the "Company Plans".
(ii) With respect to each Company Plan, the Company has
delivered to Purchaser a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the
extent applicable, any related trust agreement, annuity contract or other
funding instrument; except where the failure to deliver the
<PAGE>
41
documents as set forth above, individually or in combination with the
breach of any other representation contained herein, would not reasonably
be expected to have a Material Adverse Effect.
(iii) (1) Each Company Plan has been established and administered
in all material respects in accordance with its terms, and in compliance
with the applicable provisions of ERISA, the Internal Revenue Code of
1986, as amended (the "Code"), and other applicable laws, rules and
regulations; (2) each Company Plan which is intended to be qualified
within the meaning of Code section 401(a) is so qualified and has received
a favorable determination letter as to its qualification and nothing has
occurred, whether by action or failure to act, which would cause the loss
of such qualification.
(iv) Except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy)
individually or in combination with the breach of any other representation
contained herein, would not reasonably be expected to have a Material
Adverse Effect: (1) with respect to any Company Plan, no actions, suits
or claims (other than routine claims for benefits in the ordinary course)
are pending or threatened and the Company will promptly notify Purchaser
in writing of any pending or threatened claims arising between the date
hereof and the Effective Time; (2) no event has occurred and no condition
exists with respect to a Company Plan that would
<PAGE>
42
subject the Company or any of its affiliates, either directly or by reason
of their affiliation with any member of their respective Controlled Groups
(defined as any organization which is a member of a controlled group of
organizations within the meaning of Code section 414(b), (c), (m) or (o)),
to any tax, fine, penalty or other liability imposed by ERISA, the Code or
other applicable laws, rules and regulations; (3) for each Company Plan
with respect to which a Form 5500 has been filed, no material change has
occurred with respect to the matters covered by the most recent Form 5500
since the date thereof; (4) except as disclosed on Section 4.1(h) of the
Disclosure Schedule, each Company Plan may be amended or terminated
without obligation or liability (other than those obligations and
liabilities for which specific assets have been set aside in a trust or
other funding vehicle or reserved for on the Company's most recent audited
financial statements included in the Recent SEC Documents); (5) no Company
Plan has incurred any "accumulated funding deficiency" as such term is
defined in ERISA section 302 and Code section 412 (whether or not waived);
(6) no event or condition exists which could be deemed a reportable event
within the meaning of ERISA section 4043 which could result in a liability
to the Company, its affiliates or any member of their respective
Controlled Groups; and (7) neither the Company, any affiliate nor any
member of their respective Controlled
<PAGE>
43
Groups has engaged in a transaction which could subject any of them to
liability under ERISA section 4069.
(v) With respect to any multiemployer plan (within the meaning
of section 4001(a)(3) of ERISA) to which the Company, any affiliate or any
member of their respective Controlled Groups has any liability or
contributes (or has at any time contributed or had an obligation to
contribute): (1) neither the Company, its affiliates nor any member of
their respective Controlled Groups would be subject to withdrawal
liability in excess of $15,000,000 if, as of the Effective Time, the
Company, any affiliate or any member of their respective Controlled Groups
were to engage in a complete withdrawal (as defined in ERISA section 4203)
from any such multiemployer plan; (2) no such multiemployer plan is in
reorganization or insolvent (as those terms are defined in ERISA sections
4241 and 4245, respectively); and (3) neither the Company, any affiliate
nor any member of their respective Controlled Groups has engaged in a
transaction which could subject any of them to liability under ERISA
section 4212(c) which would reasonably be expected to have a Material
Adverse Effect.
(vi) Except as set forth in Section 4.1(h)(vi) of the Disclosure
Schedule, no Company Plan exists which could result in a payment of
$100,000 or more to any employee or former employee of the Company or any
affiliate of any money or other property or rights, or accelerate or
provide any other rights or benefits with a value in the aggregate of
<PAGE>
44
$100,000 or more to any such employee or former employee as a result of
the transactions contemplated by this Agreement or the Conditional
Purchase/Stock Option Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Code section 280G.
(i) Tax Matters. Except where the failure to do so would not have a
-----------
Material Adverse Effect on the Company, each of the Company and each of
its subsidiaries, and any consolidated, combined, unitary or aggregate
group for tax purposes of which the Company or any of its subsidiaries is
or has been a member has timely filed all material Tax Returns required to
be filed by it, has paid all Taxes shown thereon to be due and has
provided adequate reserves in its financial statements for any Taxes that
have not been paid, whether or not shown as being due on any returns.
Except as set forth in Section 4.1(i) of the Disclosure Schedule, (i) no
claim for unpaid Taxes has become a lien or encumbrance of any kind
against the property of the Company or any of its subsidiaries or is being
asserted against the Company or any of its subsidiaries, except for such
claims which have become a lien or encumbrance which would not have a
Material Adverse Effect; (ii) no audit of any Tax Return of the Company or
any of its subsidiaries is being conducted by a Tax authority, except for
such audits which would not have a Material Adverse Effect; and (iii) no
extension of the statute of limitations on the assessment of any Taxes has
been granted by the Company or any of its subsidiaries and
<PAGE>
45
is currently in effect, except for such extensions which would not have a
Material Adverse Effect. As used herein, "Taxes" shall mean any taxes of
any kind, including but not limited to those measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes,
customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any governmental authority, domestic or
foreign. Neither the Company nor any of its subsidiaries has made an
election under Section 341(f) of the Internal Revenue Code. As used
herein, "Tax Return" shall mean any return, report or statement required
to be filed with any governmental authority with respect to Taxes.
(j) Article VIII of the Company's Restated Certificate of
-----------------------------------------------------
Incorporation and Sections 14A:10A-4 and 14A:10A-5 of the NJBCA. With
---------------------------------------------------------------
respect to Article VIII of the Charter and Sections 14A:10A-4 and 104:10A-
5 of the NJBCA, the Merger, this Agreement, the Conditional Purchase/Stock
Option Agreement, the transactions contemplated hereby or thereby and any
Excepted Future Transactions have been approved by the Board of Directors
of the Company. No other state takeover statute or similar statute or
regulation of the State of New Jersey (and, to the knowledge of the
Company after due inquiry, of any other state or jurisdiction)
<PAGE>
46
applies or purports to apply to the Merger, this Agreement, the
Conditional Purchase/Stock Option Agreement or any of the other
transactions contemplated hereby or thereby and no provision of the
Charter (other than with respect to the Series C Preferred Stock which
will be redeemed pursuant to Section 5.15, subject to the conditions
therein) or By-laws of the Company or any governing instruments of its
Significant Subsidiaries would, directly or indirectly, restrict or impair
the ability of Purchaser to vote, or otherwise to exercise the rights and
receive the benefits of a shareholder with respect to, securities of the
Company or any of its subsidiaries that may be acquired or controlled by
Purchaser, Parent or any subsidiary of Parent or permit any shareholder to
acquire securities of the Company on a basis not available to Purchaser in
the event that Purchaser were to acquire securities of the Company.
(k) Environmental Matters. Except as set forth in Section 4.1(k) of
---------------------
the Disclosure Schedule or except to the extent that the inaccuracy of any
of the following (or the circumstances giving rise to such inaccuracy),
individually or in the aggregate, would not have a Material Adverse
Effect, in connection with any properties or facilities currently or
formerly owned, leased or used by the Company or any of its subsidiaries
and the current and former operations of the Company or any of its
subsidiaries:
(i) the Company or its subsidiaries hold, and are in compliance with
and have been in continuous compliance with
<PAGE>
47
for the last five (5) years, all Environmental Permits, and are otherwise
in compliance and have been in compliance for the last five (5) years with
all applicable Environmental Laws and there is no condition that would
reasonably be expected to prevent or materially interfere with compliance
by the Company and its subsidiaries with Environmental Laws in the future;
(ii) no modification, revocation, reissuance, alteration, transfer,
or amendment of the Environmental Permits, or any review by, or approval
of, any third party of the Environmental Permits is required in connection
with the execution or delivery of this Agreement or the Conditional
Purchase/Stock Option Agreement or the consummation by the Company of the
transactions contemplated hereby or thereby or the continuation of the
business of the Company or its subsidiaries following such consummation;
(iii) neither the Company nor any of its subsidiaries has received
any Environmental Claim, and neither the Company nor any of its
subsidiaries has knowledge of any threatened Environmental Claim;
(iv) the Company and its subsidiaries have not entered into, have
not agreed to, and are not subject to any judgment, decree, order or other
similar requirement of any governmental authority under any Environmental
Laws, including without limitation those relating to compliance with
Environmental Laws or to investigation, cleanup, remediation or removal of
Hazardous Substances;
<PAGE>
48
(v) There are no (A) underground or aboveground storage tanks,
(B) polychlorinated biphenyls, (C) asbestos or asbestos-containing
materials, (D) Hazardous Materials, (E) urea-formaldehyde insulation, (F)
sumps, (G) surface impoundments, (H) landfills or (I) sewer or septic
systems currently or formerly present at or about any of the properties or
facilities currently or formerly owned, leased or otherwise used by the
Company or any of its subsidiaries, that would reasonably be expected to
give rise to liability of the Company or any of its subsidiaries under any
Environmental Laws;
(vi) Hazardous Materials have not been generated, transported,
treated, stored, disposed of, released or threatened to be released at,
on, from or under any of the properties or facilities currently or
formerly owned, leased or otherwise used by the Company or any of its
subsidiaries, in violation of, or in a manner or to a location that would
reasonably be expected to give rise to liability of the Company or any of
its subsidiaries under, any Environmental Laws.
(vii) For purposes of this Agreement, the following terms shall have
the following meanings:
"Environmental Claim" means any written notice, claim, demand,
action, suit, complaint, proceeding or other communication by any
person to the Company or any of its subsidiaries alleging liability
or potential liability (including without limitation liability or
<PAGE>
49
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property
damage, personal injury, fines or penalties) arising out of, relating
to, based on or resulting from (i) the presence, discharge, emission,
release or threatened release of any Hazardous Materials at any
location, (ii) circumstances forming the basis of any violation or
alleged violation of any Environmental Laws or Environmental Permits,
or (iii) otherwise relating to obligations or liabilities under any
Environmental Law.
"Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations required under
Environmental Laws for the Company and its subsidiaries to conduct
their operations.
"Environmental Laws" means all applicable foreign, federal,
state and local statutes, rules, regulations, ordinances, orders,
decrees and common law relating in any manner to pollution or
protection of human health or the environment, to the extent and in
the form that such exist at the date hereof.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof) and petroleum products, asbestos and asbestos-
containing materials, pollutants, contaminants and all other
<PAGE>
50
materials and substances, including but not limited to
electromagnetic fields, regulated pursuant to any Environmental Laws
or that could result in liability under any Environmental Laws.
(l) Brokers. No broker, investment banker, financial advisor or
-------
other person, other than Lazard Freres and Co. and CS First Boston
Corporation, the fees and expenses of which will be paid by the Company
(pursuant to fee agreements, copies of which have been provided to
Purchaser), is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on
behalf of the Company.
(m) Compliance. Neither the Company nor any of its subsidiaries is
----------
in conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties are
bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or its or any of their
respective properties are bound or affected, except for any such
conflicts, defaults or violations which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
<PAGE>
51
(n) Required Company Vote. Assuming the Series B Preferred Stock is
---------------------
redeemed as provided in Section 5.12 the affirmative vote of two-thirds of
the shares of the Common Stock (the "Company Shareholder Approval") is the
only vote of the holders of any class or series of the Company's
securities necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby and the Conditional Purchase/Stock Option
Agreement and the transactions contemplated thereby.
(o) Rights Agreement. The Board of Directors of the Company, at a
----------------
meeting duly called and held, has resolved that the Rights shall be
redeemed immediately prior to the acceptance for payment of any of the
outstanding Shares pursuant to the Offer, provided that the Minimum
Condition has been satisfied. The Board of Directors of the Company has
amended the Rights Agreement, prior to the execution of this Agreement and
the Conditional Purchase/Stock Option Agreement, so that none of the
execution or the delivery of this Agreement or the Conditional
Purchase/Stock Option Agreement, or both such agreements taken together,
or commencement of the Offer or the acceptance of Shares for exchange
pursuant to the Offer, or the consummation of the transactions
contemplated by the Conditional Purchase/Stock Option Agreement will (i)
trigger the exercisability of the Rights (as defined in the Rights
Agreement), the separation of the Rights from the stock certificates to
which they are attached, or any other provisions of the Rights Agreement,
<PAGE>
52
including causing Parent and/or Purchaser from becoming an Acquiring
Person (as defined in the Rights Agreement), the occurrence of a
Distribution Date (as defined in the Rights Agreement) or a Shares
Acquisition Date (as defined in the Rights Agreement) or (ii) trigger the
right of the holders of the common units of Borden Chemicals and Plastics
Limited Partnership, pursuant to the Second Amended and Restated Deposit
Agreement dated February 16, 1993, to require the Company to purchase the
common units held by them.
(p) Dividends. The Board of Directors of the Company, at a meeting
---------
duly called and held, has resolved that, until resolved otherwise, the
Company will not declare, set aside or pay any dividends other than
quarterly dividends on the shares of Common Stock in excess of $0.01 per
share.
Section 4.2 Representations and Warranties of Purchaser and Parent.
------------------------------------------------------
Purchaser and Parent represent and warrant, jointly and severally, to the
Company as follows:
(a) Organization, Standing and Corporate Power. Each of Purchaser
------------------------------------------
and Holdings has been duly incorporated, is validly existing as a
corporation and in good standing under the laws of the jurisdiction in
which it is incorporated and has the corporate power and authority to own
its property and conduct its business as now being conducted. Each of
Purchaser and Holdings is duly qualified to transact business and is in
good standing as a foreign corporation in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires
such
<PAGE>
53
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a Material Adverse Effect with respect
to Purchaser or Holdings. Purchaser has delivered to the Company complete
and correct copies of its Certificate of Incorporation and By-laws.
Complete and correct copies of the Restated Certificate of Incorporation,
as amended, and By-Laws of Holdings are included within the Holdings SEC
Documents (as defined herein).
(b) Subsidiaries. Purchaser has no direct or indirect subsidiaries.
------------
Each of the Significant Subsidiaries (as defined in Rule 1-02 of
Regulation S-X of the SEC) of Holdings (which, including RJR Nabisco, Inc.
("RJRN"), R.J. Reynolds Tobacco Company ("RJRT"), R.J. Reynolds Tobacco
International, Inc. and Nabisco, Inc. ("NI") are collectively referred to
as the "Holdings Significant Subsidiaries") has been duly incorporated, is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, has the corporate power and authority to
own its property and to conduct its business and is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse
Effect with respect to Purchaser or Holdings. All of the outstanding
shares of capital stock of
<PAGE>
54
each Holdings Significant Subsidiary have been validly issued and are
fully paid and non-assessable and all outstanding shares of capital stock
of each Holdings Significant Subsidiary owned (of record and beneficially)
by Holdings, by another Holdings Significant Subsidiary or by Holdings and
another such Holdings Significant Subsidiary are owned free and clear of
all Liens, except for (i) such rights of first refusal, claims, options,
charges and encumbrances as would not in the aggregate have a Material
Adverse Effect with respect to Holdings and (ii) for shares of capital
stock of (x) RJRT and Nabisco Brands, Inc. that are pledged pursuant to
that certain RJRN Pledge Agreement dated May 13, 1992 made by RJRN in
favor of Manufacturers Hanover Trust Company, as collateral agent, and (y)
RJRN that are pledged pursuant to that certain Parent Pledge Agreement
dated as of February 2, 1989, amended and restated December 19, 1991,
between Holdings and Chemical Bank, as collateral agent.
(c) Capital Structure. The authorized capital stock of Holdings
-----------------
consists of (i) 2,200,000,000 shares of Holdings Common Stock and (ii)
150,000,000 shares of preferred stock, par value $.01 per share. As of
August 31, 1994, there were, (i) 1,147,681,192 shares of Holdings Common
Stock issued and outstanding, (ii) 114,206,576 shares of Holdings Common
Stock reserved for issuance pursuant to Holdings stock plans, (iii)
210,000,000 shares of Holdings Common Stock reserved for issuance upon
conversion of the Series A
<PAGE>
55
Conversion Preferred Stock, par value $.01 per share, of Holdings
("Holdings Series A Stock"), (iv) 15,617,453 shares of Holdings Common
Stock reserved for issuance upon conversion of the ESOP Convertible
Preferred Stock, par value $.01 per share, of Holdings (the "Holdings ESOP
Stock"), (v) 266,750,000 shares of Holdings Common Stock reserved for
issuance upon conversion of the Series C Conversion Preferred Stock, par
value $.01 per share, of Holdings (the "Holdings Series C Stock"), (vi) no
shares of Holdings Common Stock held by Holdings in its treasury or by its
subsidiaries, (vii) 52,500,000 shares of Holdings Series A Stock
outstanding, (viii) 50,000 shares of Series B Preferred Stock, par value
$.01 per share, of Holdings (the "Holdings Series B Stock") outstanding,
(ix) 15,490,964 shares of Holdings ESOP Stock outstanding and (x)
26,675,000 shares of Holdings Series C Stock outstanding. Except for the
Holdings Common Stock, the Holdings Series A Stock, the Holdings Series B
Stock, the Holdings Series C Stock and the Holdings ESOP Stock, no shares
of capital stock or other equity securities of Holdings are issued,
reserved for issuance or outstanding. All outstanding shares of capital
stock of Holdings are, and all shares which may be issued pursuant to
Holdings stock plans will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
There are no outstanding bonds, debentures, notes or other indebtedness of
Holdings having the right to vote (or convertible into, or
<PAGE>
56
exchangeable for, securities having the present right to vote) on any
matters on which stockholders of Holdings may vote. Except with respect
to preferred stock and options pursuant to Holdings stock plans referred
to above, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
to which Holdings is a party or by which it is bound obligating Holdings
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other equity or voting securities of
Holdings or obligating Holdings to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. Except with respect to certain shares of
Holdings Common Stock sold to employees of Holdings pursuant to stock
subscription agreements containing standard put and call rights upon the
occurrence of certain events, there are no outstanding contractual
obligations of Holdings to repurchase, redeem or otherwise acquire any
shares of capital stock of Holdings. The authorized capital stock of
Purchaser consists of 1000 shares of common stock, par value $.01 per
share, 100 shares of which have been validly issued, are fully paid and
nonassessable and are owned by Parent, free and clear of any Lien. Each
share of Holdings Common Stock to be delivered to shareholders of the
Company pursuant to the Offer or the Merger, or to the Company pursuant to
the Conditional Purchase/Stock Option Agreement,
<PAGE>
57
is a "Registrable Security," as defined in the 1990 Registration Rights
Agreement or, as applicable, the 1989 Registration Rights Agreement.
(d) Authority; Noncontravention. (i) Purchaser has the requisite
---------------------------
corporate power and authority, and Parent has full partnership authority,
to enter into this Agreement and the Conditional Purchase/Stock Option
Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Conditional
Purchase/Stock Option Agreement by Parent and Purchaser and the
consummation by Parent and Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action,
corporate or other, on the part of Parent and Purchaser. Each of this
Agreement and the Conditional Purchase/Stock Option Agreement has been
duly executed and delivered by Purchaser and Parent and constitutes a
valid and binding obligation of each of Purchaser and Parent, enforceable
against such party in accordance with its terms subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing. The execution and delivery of this Agreement and the
Conditional Purchase/Stock Option Agreement do not, and the consummation
of the transactions contemplated by
<PAGE>
58
this Agreement and the Conditional Purchase/Stock Option Agreement and
compliance with the provisions hereof and thereof will not, conflict with,
or result in any breach or violation of or default (with or without notice
or lapse of time or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or a right to require the
purchase or repurchase or give rise to a loss of a material benefit under,
or result in the creation of any Lien upon, any of the properties,
indebtedness or assets of Purchaser or any of the properties, indebtedness
or assets of Parent under (i) the certificate of incorporation or by-laws
of Purchaser or the comparable governing or organizational documents of
Parent, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license to which Purchaser or Parent is a party or by which
any of its properties or assets is bound or (iii) except for the
governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule,
regulation or arbitration award applicable to each of Purchaser or Parent
or their respective properties or assets, other than, in the case of
clauses (ii) and (iii) above, any such conflicts, breaches, violations,
defaults, rights, losses or Liens that individually or in the aggregate
would not have a Material Adverse Effect with respect to Purchaser or
Parent. No consent, approval, order or authorization of, or
<PAGE>
59
registration, declaration or filing with, or notice to, any Governmental
Entity is required by or with respect to Purchaser or Parent in connection
with the execution and delivery of this Agreement or the Conditional
Purchase/Stock Option Agreement by Purchaser and Parent or the
consummation by Purchaser and Parent of the transactions contemplated
hereby or thereby, except for (i) the filing with the SEC of (x) the Offer
Documents and the Schedule 14D-9, (y) the Proxy Statement and (z) such
reports or filings under the Exchange Act or under the securities laws of
the various states or the securities laws of non-U.S. jurisdictions in
connection with the offer and sale of the Holdings Common Stock as may be
required by law in connection with this Agreement, the Conditional
Purchase/Stock Option Agreement and the transactions contemplated hereby
or thereby, and (ii) with respect to Purchaser, except for (A) the filing
of a premerger notification and report form by Purchaser under the HSR Act
and the applicable requirements, if any, of any relevant foreign
jurisdictions, (B) the filing of the Certificate of Merger with the
Secretary of State of the State of New Jersey, (C) filings, consents and
approvals under Environmental Laws (as defined herein) of jurisdictions in
which the Company transacts business and (D) such other consents,
approvals, orders, authorizations, registrations, declarations, filings or
notices as may be required under the "takeover" laws of the various
states.
<PAGE>
60
(ii) The execution and delivery by Purchaser and Parent of this
Agreement and the Conditional Purchase/Stock Option Agreement do not, and
the consummation of the transactions contemplated by this Agreement and
the Conditional Purchase/Stock Option Agreement and compliance with the
provisions hereof and thereof will not, conflict with, or result in any
breach or violation of or default (with or without notice or lapse of time
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or a right to require the purchase or
repurchase or give rise to a loss of a material benefit under, or result
in the creation of any Lien upon, any of the properties, indebtedness or
assets of Holdings or any of the Holdings Significant Subsidiaries under
(i) the certificate of incorporation or by-laws of Holdings or any of the
Holdings Significant Subsidiaries, (ii) any loan or credit agreement
(other than Holdings' and RJRN's credit agreement dated as of April 5,
1993, as amended, and Holdings' and RJRN's credit agreement dated as of
December 1, 1991, as amended), note (other than Holdings' 10 1/2% Senior
Notes due 1998 and Holdings' 13 1/2% Subordinated Debentures due 2001),
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license to which Holdings or any of its
subsidiaries is a party or by which any of its properties or assets is
bound or (iii) except for the governmental filings and other matters
referred to in the following sentence, any judgment,
<PAGE>
61
order, decree, statute, law, ordinance, rule, regulation or arbitration
award applicable to Holdings or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii)
and (iii) above, any such conflicts, breaches, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not
have a Material Adverse Effect with respect to Holdings. No consent,
approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Governmental Entity is required by or with
respect to Holdings in connection with the execution and delivery of this
Agreement or the Conditional Purchase/Stock Option Agreement by Purchaser
and Parent or the consummation by Purchaser and Parent of the transactions
contemplated hereby or thereby, except for (i) the filing of a premerger
notification and report form by Purchaser under the HSR Act and the
applicable requirements, if any, of any relevant foreign jurisdictions and
(ii) the filing with the SEC of (x) the Form S-4, and (y) such reports or
filings under the Securities Act or Exchange Act or under the securities
laws of the various states or the securities laws of non-U.S.
jurisdictions in connection with the offer and sale of the Holdings Common
Stock as may be required by law in connection with this Agreement, the
Conditional Purchase/Stock Option Agreement and the transactions
contemplated hereby or thereby.
<PAGE>
62
(e) SEC Documents. Holdings has filed all required reports,
-------------
schedules, forms, statements and other documents with the SEC since
January 1, 1990, and Purchaser has delivered or made available to the
Company all reports, schedules, forms, statements and other documents
filed with the SEC since such date (collectively, and in each case
including all exhibits and schedules thereto and documents incorporated by
reference therein, the "Holdings SEC Documents"). As of their respective
dates, the Holdings SEC Documents complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Holdings SEC Documents, and none of the Holdings SEC
Documents (including any and all consolidated financial statements
included therein), except to the extent revised or superseded by a
subsequent filing with the SEC, as of such date contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The consolidated financial statements of Holdings included in such
Holdings SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles (except, in the
<PAGE>
63
case of unaudited consolidated quarterly statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Holdings and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited quarterly statements, to normal year-end audit adjustments).
(f) Information Supplied. Neither the Offer Documents, nor any of
--------------------
the information supplied by Parent or the Purchaser for inclusion in the
Schedule 14D-9, shall, at the respective times such Offer Documents or
Schedule 14D-9 (or any of the amendments or supplements thereto) are filed
with the SEC or are first published, sent or given to shareholders, as the
case may be, contain any untrue statement of a material fact or omit to
state any material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
information supplied by Purchaser concerning Purchaser and Parent for
inclusion in the Proxy Statement shall not contain any statement which, at
such time and in light of the circumstances under which it shall be made,
is false or misleading with respect to any material fact, or shall omit to
state a material fact required to be stated therein or necessary in order
to make the statements
<PAGE>
64
therein not false or misleading or necessary to correct any statement in
any earlier communication with respect to the solicitation of proxies for
the Shareholders Meeting which has become false or misleading.
Notwithstanding the foregoing, Purchaser makes no representation or
warranty with respect to any information supplied by the Company or any of
its representatives which is contained in any of the Offer Documents, the
Schedule 14D-9 or the Proxy Statement. The Offer Documents and, to the
extent that on the date the Proxy Statement is first mailed to
shareholders, at the time of the Shareholders Meeting or at the Effective
Time a majority of the board of directors of the Company shall have been
designated or elected by Parent, the Proxy Statement, will comply in all
material respects as to form with the requirements of the Exchange Act and
the rules and regulations thereunder.
(g) Brokers. No broker, investment banker, financial advisor or
-------
other person, other than Morgan Stanley & Co., the fees and expenses of
which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser or Parent.
(h) Interim Operations of Purchaser. Purchaser was incorporated on
-------------------------------
September 12, 1994, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
<PAGE>
65
(i) Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Holdings SEC Documents, since the date of the most recent audited financial
statements included in such Holdings SEC Documents, Holdings has conducted its
business only in the ordinary course consistent with past practice, and there
is not and has not been any change in the business, financial condition or
results of operations of Holdings or any of its subsidiaries which has had, or
would reasonably be expected to have, a Material Adverse Effect with respect to
Holdings.
Section 4.3 Representations and Warranties of Parent. Parent
----------------------------------------
represents and warrants to the Company as follows:
(a) Authority. Parent has all requisite power and authority to
---------
enter into this Agreement and to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by Parent
and the consummation by Parent of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of Parent
and no other proceedings are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly
executed and delivered by and constitutes a valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms.
(b) Title to Holdings Common Stock. Subject to any transfer of
------------------------------
shares to Purchaser (or its assignee) in connection with the transactions
contemplated by this
<PAGE>
66
Agreement and the Conditional Purchase/Stock Option Agreement, Parent has
good and valid title to the shares of Holdings Common Stock that will
serve as the Aggregate Merger Consideration, free and clear of all Liens.
The shares of Holdings Common Stock that will serve as the aggregate
Merger Consideration have been approved for listing on the New York Stock
Exchange, Inc.
(c) Noncontravention. The execution and delivery by Parent of, and
----------------
the performance by Parent of its obligations under, this Agreement will
not contravene any provision of applicable law or the governing documents
of Parent or any agreement or other instrument, including, without
limitation, the 1990 Registration Rights Agreement or, as applicable, the
1989 Registration Rights Agreement, binding upon Parent or any of its
subsidiaries or any judgment, order or decree of any Governmental Entity
having jurisdiction over Parent or any of its subsidiaries, except for
such contravention that would not, individually, or in the aggregate, have
a Material Adverse Effect with respect to Parent.
ARTICLE 5
COVENANTS
Section 5.1 Conduct of Business of the Company. Except as
----------------------------------
contemplated by this Agreement, during the period from the date of this
Agreement to the date on which a majority of the board of directors of the
Company shall consist of designees or representatives of Parent, the Company
and each subsidiary shall
<PAGE>
67
conduct its operations according to its ordinary course of business consistent
with past practice and shall use its best efforts to preserve intact its
business organization, to keep available the services of its current officers
and employees and to preserve existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relationships with it to the end that their goodwill and ongoing businesses
shall be unimpaired at the date on which a majority of the board of directors
of the Company shall consist of designees or representatives of Parent.
Without limiting the generality of the foregoing, and except as otherwise
contemplated by this Agreement, or as required by law or contract existing on
the date hereof, prior to the date on which a majority of the board of
directors of the Company shall consist of designees or representatives of
Parent, neither the Company nor any of its subsidiaries shall, without the
prior written consent of Parent:
(a) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock (except
(A) dividends and distributions by a direct or indirect wholly owned
subsidiary of the Company to its parent, (B) dividends and distributions
in the ordinary course of business by any other subsidiary to its parent
and (C) that the Company may continue the declaration and payment of
regular quarterly cash dividends not in excess of $0.01 per share on the
shares of Company Common Stock (with usual record and payment dates and in
accordance with its past dividend policy)), (y) split, combine or
reclassify any
<PAGE>
68
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (z), except for the redemption of the Rights and the
Series B Preferred Stock, purchase, redeem or otherwise acquire any shares
of capital stock of the Company or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(b) authorize for issuance, issue, deliver, sell or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber any shares of its capital stock
or the capital stock of any of its subsidiaries, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities or any other securities or equity equivalents (including
without limitation stock appreciation rights) (other than (x) upon
exercise of options outstanding on the date hereof, as in effect on the
date hereof or as amended pursuant hereto, (y) in connection with any
employment agreements between the Company or any of its subsidiaries and
the employees thereof, as in effect on the date hereof, and in each case
subject to the provisions of Section 3.2 or 5.10 hereof, or (z) sales of
capital stock of any wholly owned
<PAGE>
69
subsidiary of the Company to the Company or another wholly owned
subsidiary of the Company) provided, however, and not in limitation of the
foregoing, no additional equity securities or rights to purchase equity
securities will be granted after the date hereof;
(c) except as provided in Section 3.2 or 5.10 hereof, adopt or amend
any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, pension, retirement, employment or other
employee benefit agreement, trust, plan or other arrangement for the
benefit or welfare of any director, officer or, except in the ordinary
course of business consistent with past practice with respect to employees
of the Company or any of its subsidiaries increase in any manner the
compensation or fringe benefits of any director, officer or, except in the
ordinary course of business consistent with past practice with respect to
employees of the Company or any of its subsidiaries or pay any benefit not
required by any existing agreement or place any assets in any trust for
the benefit of employees or directors of the Company or any of its
subsidiaries, other than contributions to the directors trust fund created
pursuant to the Advisory Directors Plan Trust Agreement in the ordinary
course of business and consistent with past practice; provided, however,
-------- -------
that notwithstanding the foregoing, any amendments required to be made to
the provisions of any employee pension plan which is intended to be
qualified under Section 401(a) of the Code in order to maintain such
qualified status may be made;
<PAGE>
70
(d) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of any subsidiary not constituting an
inactive subsidiary of the Company;
(e) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or
(y) any assets that are material, individually or in the aggregate, to the
Company and its subsidiaries taken as a whole, except purchases of
inventory in the ordinary course of business consistent with past
practice;
(f) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets,
except sales of (i) inventory in the ordinary course of business
consistent with past practice, (ii) properties or assets (A) with a value
of less than $10,000,000 individually but not more than $25,000,000 in the
aggregate, (B) that are currently being marketed or sold by the Company
pursuant to the Company's January 1994 restructuring plan to the extent
set forth in Section 5.1(f) of the Disclosure Schedule or (C) with respect
to which a definitive agreement has been entered into by the Company prior
to September 12, 1994 (provided that no material
--------
<PAGE>
71
modification or amendment shall be made to any such agreements), (iii)
sales of accounts receivable in the ordinary course of business, (iv)
sales or pledges of accounts receivable, or mortgages of other property in
connection with certain financings or refinancings outside of the United
States, in an aggregate amount of such financings or refinancings not to
exceed $250 million, subject to the terms of any such refinanced debt not
becoming materially more restrictive to the Company and the Company paying
only market fees related thereto and (v) in connection with capital
expenditures permitted to be expended by the Company pursuant to Section
5.1(h);
(g) except in the ordinary course of business consistent with past
practice and except for (i) an increase in the amount of up to $300
million of the amount available or outstanding under the Amended and
Restated Credit Agreement dated as of August 16, 1994 between the Company
and Citibank, as amended and (ii) the refinancing of two issues of
industrial revenue bonds in an aggregate outstanding principal amount of
$40,000,000, subject in the case of (i) and (ii) to the terms of such
refinanced debt instruments not becoming materially more restrictive to
the Company and the Company paying only market fees related thereto, (y)
incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person (other than (A) guarantees by the Company
in favor of any of its wholly owned subsidiaries or by any of its
subsidiaries in
<PAGE>
72
favor of the Company or (B) guarantees of subsidiaries or, in the ordinary
course of business, 50% owned affiliates of the Company, in an aggregate
amount not exceeding $10,000,000, on market terms (including fees)), issue
or sell any debt securities or warrants or other rights to acquire any
debt securities of the Company or any of its subsidiaries, guarantee any
debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary
course of business consistent with past practice or (z) make any loans,
advances or capital contributions to, or investments in, any other person,
other than to the Company or any direct or indirect wholly owned
subsidiary of the Company;
(h) expend funds for capital expenditures other than in accordance
with the Company's current capital expenditure plans;
(i) waive, release, grant, or transfer any rights of value or modify
or change in any material respect any existing license, lease, contract or
other document, other than in the ordinary course of business consistent
with past practice;
(j) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation
<PAGE>
73
or a dissolution, merger, consolidation, restructuring, recapitalization
or reorganization;
(k) enter into or amend any material collective bargaining
agreement, other than in the ordinary course of business;
(l) change any accounting principle used by it, unless required by
the SEC or the Financial Accounting Standards Board;
(m) make any tax election or settle or compromise any income tax
liability or file the 1994 federal income tax return prior to the last day
(including extensions) prescribed by law, in the case of any of the
foregoing, material to the business, financial condition or results of
operations of the Company and its subsidiaries taken as a whole;
(n) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement) or settle, pay or compromise any
claims not required to be paid, individually in an amount in excess of
$1,000,000 and in the aggregate in an amount in excess of $10,000,000,
other than in consultation and cooperation with Purchaser, and, with
respect to any such settlement, with the prior written consent of
Purchaser;
(o) take any action which would cause any debt securities of the
Company or any of its subsidiaries to no longer be listed on any national
securities exchange or registered pursuant to Section 13 or 15(d) of the
Exchange
<PAGE>
74
Act, other than with respect to any such debt securities that have become
due as a result of the maturity thereof; or
(p) authorize any of, or commit or agree to take any of, the
foregoing actions.
Section 5.2 Conduct of Business of Purchaser. During the period
--------------------------------
from the date of this Agreement to the Effective Time, Purchaser shall not
engage in any activities of any nature except as provided in, or in connection
with the transactions contemplated by, this Agreement.
Section 5.3 No Solicitation. Except with respect to divestitures in
---------------
accordance with the Company's January 1994 restructuring plan, neither the
Company nor any of is subsidiaries shall, nor shall it or any of its
subsidiaries authorize or permit any of its officers, directors or employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, (a) solicit,
initiate, encourage (including by way of furnishing information), or take any
other action to facilitate, any inquiry or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any acquisition or
purchase of a substantial amount of assets of, or any equity interest in, the
Company or any of its subsidiaries or any tender offer (including a self tender
offer) or exchange offer, merger, consolidation, business combination, sale of
substantially all assets, sale of securities, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
subsidiaries (other than the transactions contemplated by
<PAGE>
75
this Agreement or the Conditional Purchase/Stock Option Agreement) or any other
transaction the consummation of which would or could reasonably be expected to
impede, interfere with, prevent or materially delay the Merger or the exercise
of the Conditional Purchase Right or which would or could reasonably be
expected to materially dilute the benefits to Purchaser of the transactions
contemplated hereby (collectively, "Transaction Proposals") or agree to or
endorse any Transaction Proposal or (b) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to any
other person any information with respect to its business, properties or assets
or any of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing; provided, however, that the
-------- -------
foregoing clauses (a) and (b) shall not prohibit the Company from (i)
furnishing information pursuant to an appropriate confidentiality letter
concerning the Company and its businesses, properties or assets to a third
party who has made a Transaction Proposal, (ii) engaging in discussions or
negotiations with such a third party who has made a Transaction Proposal or
(iii) following receipt of a Transaction Proposal, taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) under the Exchange Act or
changing the Recommendations, but in each case referred to in the foregoing
clauses (i) through (iii) only after the Board of Directors of the Company
concludes in good faith that such action is necessary or appropriate in order
for the Board of Directors
<PAGE>
76
of the Company to act in a manner which is consistent with its fiduciary
obligations under applicable law. If the Board of Directors of the Company
receives a Transaction Proposal, then the Company shall promptly inform Parent
of the terms and conditions of such proposal and the identity of the person
making it and shall keep Parent generally informed with reasonable promptness
of any steps it is taking pursuant to the proviso of the first sentence with
respect to such Transaction Proposal.
Section 5.4 Access to Information. (a) The Company shall, and
---------------------
shall cause each of its subsidiaries to, afford to Purchaser and Parent and to
the officers, employees, counsel, financial advisors, environmental consultants
and other representatives of Purchaser and Parent ("Parent Representatives")
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel
and records and, during such period, the Company shall, and shall cause each of
its subsidiaries to, furnish as promptly as practicable to Purchaser, Parent
and Parent Representatives such information concerning its business,
properties, financial conditions, operations and personnel as they may from
time to time reasonably request. Parent and Purchaser will hold, and will
cause the Parent Representatives to hold, any nonpublic information obtained
from the Company in confidence to the extent required by, and in accordance
with, the provisions of the letter dated August 1994, between Kohlberg Kravis
Roberts & Co. and the Company (the "Company Confidentiality Agreement"),
provided that
<PAGE>
77
Parent and Purchaser may disclose any such nonpublic information to lenders or
potential lenders who are advised of the confidentiality of such information to
the extent necessary to satisfy the condition set forth in clause (iv) of the
first paragraph of Annex A hereto. The Company and Parent hereby agree that
the terms and provisions of the Company Confidentiality Agreement, other than
with respect to the use of Evaluation Material (as defined in the Company
Confidentiality Agreement), shall be superseded by this Agreement.
(b) Parent shall use its reasonable best efforts to make available
to the Company and to the officers, employees, counsel, financial advisors and
other representatives of the Company reasonable access during normal business
hours during the period prior to the Effective Time to all the properties,
books, contracts, commitments, personnel and records of Holdings and, during
such period, Parent shall use its reasonable best efforts to furnish as
promptly as practicable to the Company such information concerning the
business, properties, financial conditions, operations and personnel of
Holdings as the Company party may from time to time reasonably request. The
Company will hold, and will cause its directors, officers, partners, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information obtained from Parent and Holdings
in confidence to the extent required by, and in accordance with, the provisions
of the letter dated September 11, 1994, between Holdings and the Company.
<PAGE>
78
(c) No investigation pursuant to this Section 5.4 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
Section 5.5 Notification. Each of the Company, Parent and Purchaser
------------
will, in the event of, or promptly after obtaining knowledge of the occurrence
(or non-occurrence) or threatened occurrence (or non-occurrence) of, any fact
or event which would cause or constitute a material breach of or failure of any
of the representations and warranties, covenants or conditions set forth herein
or, in the case of the Company, would constitute or result in a Material
Adverse Effect, give notice thereof to each other party hereto and will use its
reasonable efforts to prevent or promptly to remedy such breach or satisfy such
conditions; provided, however, that the delivery of, or failure to deliver, any
-------- -------
notice pursuant to this Section 5.5 shall not limit or otherwise affect any
remedies available hereunder.
Section 5.6 Best Efforts. Upon the terms and subject to the
------------
conditions herein provided, each of the parties hereto agrees (subject to the
last sentence of Section 5.9 and to Section 8.3(f)) to use its best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, and to
assist and cooperate with the other parties hereto in doing all things
necessary, proper or advisable under applicable laws and regulations to ensure
that the conditions set forth in Article 6 and Annex A are satisfied and to
consummate and make effective, in the most expeditious manner practicable, the
transactions
<PAGE>
79
contemplated by this Agreement and the Conditional Purchase/Stock Option
Agreement, including, without limitation, using its best efforts to obtain all
necessary waivers, consents and approvals, and effecting all necessary
registrations and filings in accordance with Section 5.7. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall take all such necessary action. The Company and
Parent and Purchaser will execute any additional instruments necessary to
consummate the transactions contemplated hereby.
Section 5.7 Certain Filings, Consents and Arrangements. Parent,
------------------------------------------
Purchaser and the Company will use their best efforts and cooperate with one
another (i) in promptly determining whether any filings are required to be made
or consents, approvals, permits or authorizations are required to be obtained
(or, which if not obtained, would result in an event of default, termination or
acceleration of any agreement) under any United States or foreign law or
regulation or from any Governmental Entity or third parties, including parties
to loan agreements, in connection with the transactions contemplated by this
Agreement, including the Offer and the Merger, and the Conditional
Purchase/Stock Option Agreement and (ii) subject to the last sentence of
Section 5.9 and to Section 8.3(f), in promptly making any such filings,
furnishing information required in connection therewith and in timely seeking
to obtain any such consents, approvals, permits or authorizations.
<PAGE>
80
Section 5.8 Public Announcements. The initial press release with
--------------------
respect to the transactions contemplated hereby shall be mutually satisfactory
to the parties hereto and thereafter, except as may be required by applicable
laws, court process or by obligations pursuant to any listing agreement with a
national securities exchange, no party shall issue any press release or make
any public filings relating to the transactions contemplated by this Agreement,
including the Offer and the Merger, and the Conditional Purchase/Stock Option
Agreement, without affording the Company, on the one hand, and Parent, on the
other hand, the opportunity to review and comment upon such release or filing.
Section 5.9 Antitrust Filings and Divestitures. The Company and
----------------------------------
Parent shall, as promptly as practicable, file notification and report forms
under the HSR Act with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
make any other necessary filings with the applicable Government Entities
related to the transactions contemplated by this Agreement, including the Offer
and the Merger, and the Conditional Purchase/Stock Option Agreement and shall
use their best efforts to respond as promptly as practicable to all inquiries
received from the FTC or the Antitrust Division or such other Governmental
Entities for additional information or documentation. Provided that following
receipt of such approvals Purchaser (or one of its affiliates) acquires at
least 28,138,000 Shares pursuant to the Offer and/or the Conditional
Purchase/Stock Option Agreement, the
<PAGE>
81
Company agrees to make any and all divestitures or undertakings required by the
FTC, the Antitrust Division or any other applicable Governmental Entity in
connection with the transactions contemplated by this Agreement and the
Conditional Purchase/Stock Option Agreement, which divestitures in each case
shall be reasonably acceptable to Parent and Purchaser.
Section 5.10 Employee Benefits.
-----------------
(a) Prior to the occurrence of a "Change in Control" as defined in
the Supplemental Benefit Trust Agreement between the Company and Wachovia Bank
of North Carolina, N.A. (the "Trust Agreement"), the Company shall take all
such action as may be necessary so that no funding of the Trust created
thereunder shall occur as a result of the transactions contemplated by this
Agreement. The Trust Agreement shall be amended prior to a Change in Control
to permit the disposition of all Common Shares it holds. The Company may amend
the plans listed in Section 5.10(a) of the Disclosure Schedule that would have
been required to be funded pursuant to the terms of the Trust Agreement in a
manner which provides for a lump-sum distribution to, but does not result in
the constructive receipt of compensation by, a covered employee of his or her
deferred compensation thereunder in the event of the involuntary termination or
normal retirement (under the Employees Retirement Income Plan) of such
employee.
(b) Prior to the Effective Time, Purchaser shall not request that
the Company cancel, and the Company shall be under no obligation to cancel, the
CORE Management Arrangements. For this purpose, "CORE Management Arrangements"
mean those
<PAGE>
82
agreements between the Company and the executives so designated by the Company
and disclosed in Section 5.10(b) of the Disclosure Schedule which provide for
certain payments and benefits in the event of certain terminations of
employment.
(c) The Purchaser (or its affiliate) shall continue the Company's
Non-Exempt Associate Assistance Program and Exempt Associate Assistance
Program, on terms no less favorable than the terms in existence on the date
hereof, for the one-year period following the Effective Time. The Company
shall maintain, for the two-year period following the Effective Time, employee
plans and programs which are substantially similar in the aggregate to those
pension and welfare plans maintained for employees of the Company generally.
(d) Neither the Company nor any of its affiliates shall accelerate
the payment of any deferred award under any bonus plan or arrangement nor award
or pay any pro rata awards thereunder as a result, or in anticipation, of the
transactions contemplated by this Agreement; provided that the Company may pay
the 1994 annual bonuses pursuant to its Management Incentive Plan or other
similar annual bonus plan in a manner which is consistent with past practice
and the achievement of goals set forth therein.
(e) The Company shall ensure that no prohibited transaction (within
the meaning of Section 406 of ERISA or 4975 of the Code) shall occur with
respect to any Company Plan as a result of the transactions contemplated by
this Agreement.
<PAGE>
83
(f) With respect to any of the eleven individuals listed in Section
5.10(f) of the Disclosure Schedule, in lieu of any other severance arrangement
for such individual, the Company shall pay such individual in the event of that
individual's termination by the Company after a "Change in Control" without
"Cause" (as those terms are defined in the Core Management Agreements referred
to in Section 5.10(b)) a cash severance amount equal to twelve months of
salary. The special severance payments set forth in this Section 5.10(f) shall
no longer be applicable when twelve (eighteen for that individual next to whose
name an asterisk appears in Section 5.10(f) of the Disclosure Schedule) months
have elapsed after the Change in Control. For any executive listed on Schedule
5.10(g), such executive's letter of employment shall be modified so that a
termination without cause prior to the second anniversary of a Change in
Control (as defined in such letters) shall include a termination by the
executive due to the occurrence of any one of the following events without his
advance consent:
i. the executive's office is relocated to a different city;
ii. the executive's base salary is reduced or executive's bonus
opportunity is materially lower than other Company executives of
comparable rank;
iii. there is a material diminution in the nature or scope of the
authority or responsibilities attached to the executive's
position. A diminution in nature or scope of authority or
responsibilities will not be deemed to occur simply because the
company or business in which the executive is engaged has
changed in size or structure; or
iv. in the case of the executive next to whose name a double
asterisk appears in Section 5.10(g) of the
<PAGE>
84
Disclosure Schedule, the business (either separately or as part
of a larger business unit) in which the executive is engaged is
sold or otherwise disposed of.
Section 5.11 Indemnification and Insurance. (a) The Certificate of
-----------------------------
Incorporation and By-laws of the Surviving Corporation shall contain provisions
identical with respect to elimination of personal liability and indemnification
to those set forth in Articles VI and VII of the Restated Certificate of
Incorporation set forth in Exhibit A hereto and Article X of the By-laws of the
Company, respectively, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, agents or employees of the
Company.
(b) Surviving Corporation shall maintain in effect for six years
from the Effective Time policies of directors' and officers' liability
insurance containing terms and conditions which are not less advantageous than
those policies maintained by the Company at the date hereof, with respect to
matters occurring prior to the Effective Time, to the extent available, and
having the maximum available coverage under the current policies of directors
and officers' liability insurance; provided that the Surviving Corporation
shall not be required to spend in excess of a $3,000,000 annual premium
therefor; provided further that if the Surviving Corporation would be required
to spend in excess of a $3,000,000 premium per annum to obtain insurance having
the maximum available coverage under the current policies, the
<PAGE>
85
Surviving Corporation will be required to spend $3,000,000 to maintain or
procure insurance coverage pursuant hereto, subject to availability of such (or
similar) coverage.
(c) In furtherance of and not in limitation of the preceding
paragraph, Parent and Purchaser agree that the officers and directors of the
Company that are defendants in all litigation commenced by shareholders of the
Company with respect to (x) the performance of their duties as such officers
and/or directors under federal or state law (including litigation under federal
and state securities laws) and (y) Purchaser's offer or proposal to acquire the
Company including, without limitation, any and all such litigation commenced on
or after the date of the Letter Agreement (as defined herein) (the "Subject
Litigation") shall be entitled to be represented, at the reasonable expense of
the Company, in the Subject Litigation by one counsel (and New Jersey counsel
if appropriate and one local counsel in each jurisdiction in which a case is
pending) each of which such counsel shall be selected by a plurality of such
director defendants; provided that neither the Company nor the Surviving
Corporation nor Parent shall be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld) and
that a condition to the indemnification payments provided in paragraph 5.11(a)
shall be that such officer/director defendant not have settled any Subject
Litigation without the consent of Parent or the Surviving Corporation; and
provided further that the Surviving Corporation and Parent shall have no
obligation hereunder to any
<PAGE>
86
officer/director defendant when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and non-
appealable, that indemnification of such officer/director defendant in the
manner contemplated hereby is prohibited by applicable law.
Section 5.12 Redemption of Series B Preferred Stock. Without
--------------------------------------
limiting the conditions to the Offer set forth in Annex A hereto and provided
that the Minimum Condition is satisfied without having been waived or lowered,
the Company will, promptly after consummation of the Offer, in the manner and
to the extent permitted by the Charter, redeem all of its outstanding shares of
Series B Preferred Stock prior to any record date in connection with the Merger
at the amount provided for redemption in the Charter, and the Company agrees,
subject to first obtaining any required approvals under its debt instruments or
other agreements to which the Company is subject, promptly to commence taking
all steps necessary to effect such redemptions.
Section 5.13 Certain Agreements. Neither the Company nor any
------------------
subsidiary will waive any provision of any confidentiality or standstill or
similar agreement to which it is a party without the prior written consent of
Parent, unless the board of directors of the Company or such subsidiary
concludes in good faith that waiving such provision is necessary or appropriate
in order for the Board of Directors of the Company to act in a manner which is
consistent with its fiduciary obligations under applicable law.
<PAGE>
87
Section 5.14 Redemption of Rights. The Company will redeem all
--------------------
outstanding Rights at a redemption price of one and two-thirds cents per Right
effective immediately prior to the acceptance for exchange of any Shares
pursuant to the Offer, provided that the Minimum Condition will be satisfied in
the Offer. The Company will amend the Rights Agreement in accordance with
Section 4.1(o) hereof prior to the acceptance for payment of any Shares
pursuant to the Offer if the Minimum Condition is waived to permit only such
purchase of Shares. The Company and Parent hereby agree that if the Company
amends any provision of the Rights Agreement in connection with a Transaction
Proposal or with respect to any Person (as defined in Section 7.1(f)) or if the
application of the Rights Agreement or any provision thereof is enjoined with
respect to any Person or Transaction Proposal or if the Company agrees to
redeem the Rights on terms more favorable than the terms set forth with respect
to Parent and Purchaser in this Agreement (any of such events, a "Third Party
Rights Amendment") in a manner that makes such Third Party Rights Amendment
less restrictive with respect to such Person, or in connection with such
Transaction Proposal, or is otherwise more favorable with respect to such
Person, or in connection with such Transaction Proposal, than the Rights
Agreement as then in effect with respect to Parent and Purchaser, the Company
shall be deemed (if and to the extent possible and without derogating the
obligations of the Company pursuant to the next sentence), without the
necessity of any action by the Company or the Rights Agent, to have so amended
the Rights Agreement with respect to
<PAGE>
88
Parent and Purchaser to the same extent or to have agreed to redeem the Rights
with respect to Parent and Purchaser on terms as favorable. The Company agrees
to notify Parent promptly of any Third Party Rights Amendment and
simultaneously with the execution of the Third Party Rights Amendment to
execute a written amendment to the Rights Agreement with respect to the
foregoing.
Section 5.15 Affiliates and Certain Stockholders. Prior to the
-----------------------------------
Closing Date, the Company shall deliver to Parent a letter identifying all
persons who are, at the time the Merger is submitted for approval to the
shareholders of the Company, "affiliates" of the Company for purposes of Rule
145 under the Securities Act. The Company shall use its reasonable best
efforts to cause each such person to deliver to Parent on or prior to the
Closing Date a written agreement substantially in the form attached as Exhibit
B hereto. Parent shall not be required to cause Holdings to maintain the
effectiveness of the Form S-4 or any other registration statement under the
Securities Act for the purposes of resale of Holdings Common Stock by such
affiliates and the certificates representing Holdings Common Stock received by
such affiliates in the Merger shall bear a customary legend regarding
applicable Securities Act restrictions and the provisions of this Section 5.15.
Section 5.16 Proxy Solicitation For Shareholders' Meeting. If
--------------------------------------------
approval of the Company's shareholders is required by applicable law in order
to consummate the Merger, the Company, Purchaser and Parent agree that, if the
Company or Parent is
<PAGE>
89
advised by its respective or joint proxy solicitors prior to the Shareholders'
Meeting that a vote in favor of the Merger is not likely to be obtained at the
Shareholders' Meeting, the Shareholders' Meeting shall, at the request of the
Independent Directors, be adjourned from time to time, provided that in no
event will the Shareholders' Meeting be required hereunder to be held more than
sixty days from the date that the Proxy Statement was first mailed to the
Company's shareholders, which sixty day period shall be extended by the number
of days, if any, that the Company or Parent is enjoined from soliciting proxies
for the Merger in connection with the Shareholders' Meeting or that the holding
of the Shareholders Meeting or the vote thereat is enjoined.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Merger. The respective obligation of each party to effect the Merger is
- ------
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) If required by New Jersey law or the Charter, the Company
Shareholder Approval shall have been obtained;
(b) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired;
(c) Shares shall have been purchased pursuant to the Offer;
(d) The Form S-4 shall have become effective, and any required post-
effective amendment shall have become
<PAGE>
90
effective, under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order, and any material "blue
sky" and other state securities laws applicable to the registration of the
Holdings Common Stock to be exchanged for Common Stock shall have been
complied with; and
(e) no statute, rule, regulation, executive order, decree, or
injunction shall have been enacted, entered, promulgated or enforced by
any Governmental Entity which prohibits the consummation of the Merger,
whether temporary, preliminary or permanent; provided, however, that the
-------- -------
parties hereto shall use their best efforts to have any such order, decree
or injunction vacated.
Section 6.2 Conditions to Obligation of the Company. If fewer than
---------------------------------------
66 2/3% of the Shares outstanding on a fully diluted basis (other than dilution
due to the Rights) shall have been accepted for exchange in the Offer, the
obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representation and warranty of Purchaser and Parent set
forth in Section 4.2(i) of this Agreement shall be true and correct, as of
the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date.
Section 6.3 Conditions to Obligations of Purchaser and Parent to
----------------------------------------------------
Effect the Merger. If fewer than 66 2/3% of the Shares
- -----------------
<PAGE>
91
outstanding on a fully diluted basis (other than dilution due to the Rights)
shall have been accepted for exchange in the Offer, the obligations of
Purchaser and Parent to effect the Merger are further subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representation and warranty of the Company set forth in
Section 4.1(g) of this Agreement shall be true and correct, as of the date
of this Agreement and as of the Closing Date as though made on and as of
the Closing Date;
(b) The Company shall have performed in all material respects the
affirmative covenants required to be performed by it under Sections 5.1
(except to the extent the same would not cause a Material Adverse Effect
with resect to the Company), 5.9, 5.12 and 5.14 of this Agreement at or
prior to the Closing Date;
(c) The representation and warranty of the Company set forth in
Section 4.1(e) of this Agreement, applied mutatis mutandis to the SEC
------- --------
Documents filed by the Company with the SEC since the date of the
Agreement, shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date.
Notwithstanding the foregoing, the obligations of the Company or Purchaser and
Parent to effect the Merger are not subject to the satisfaction or waiver of
any of the conditions set forth in this Section 6.2 or 6.3 to the extent that
the failure of any such condition to be satisfied is the result of any action
approved by a majority of those directors of the Company who are designees or
<PAGE>
92
representatives of Parent or to the extent the same results from affirmative
action taken by the Company with the knowledge of the board of directors while
a majority of the directors of the Company consists of persons designated or
elected by Parent.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination. This Agreement may be terminated and the
-----------
Merger contemplated hereby may be abandoned at any time, notwithstanding
approval thereof by the shareholders of the Company, but prior to the Effective
Time:
(a) by mutual written consent of Parent, Purchaser and the Company;
(b) by Parent or the Company, if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the
United States or any country or economic region in which either the
Company or Parent, directly or indirectly, has material assets or
operations, shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action shall have
become final and nonappealable;
(c) by Parent if due to an occurrence or circumstance which would
result in a failure to satisfy any of the conditions to the Offer set
forth in Annex A hereto Purchaser shall have terminated the Offer, unless
such termination shall have been caused by or resulted from the failure of
Parent or Purchaser to perform in any material
<PAGE>
93
respect their material covenants and agreements contained in this
Agreement.
(d) by Parent, if the Company shall have modified or amended in any
respect materially adverse to Parent or Purchaser or withdrawn its
approval or recommendation of the Offer, the Merger or this Agreement,
provided that any communication that advises that the Company has received
--------
a Transaction Proposal or is engaging in an activity permitted by clauses
(i) or (ii) of the proviso to the first sentence of Section 5.3 hereof
with respect to a Transaction Proposal and that takes no action or
position with respect to the Offer, the Merger, this Agreement or any
Transaction Proposal shall not be deemed to be a withdrawal, modification
or amendment of the Company's approval or recommendation of the Offer, the
Merger or this Agreement and provided, further, that a "stop-look-and-
-------- -------
listen" communication with respect to the Offer, the Merger or this
Agreement of the nature contemplated in Rule 14d-9(e) under the Exchange
Act made by the Company as a result of a Transaction Proposal (whether or
not a tender offer), without more, shall not be deemed to be a
modification or amendment of the Company's approval or recommendation of
the Offer, the Merger or this Agreement that is materially adverse to
Parent or Purchaser, if within 10 business days after the date of such
communication the Company shall have reaffirmed its recommendation of the
Offer, the Merger and this Agreement;
<PAGE>
94
(e) by Parent if the Company shall have (i) entered into any definitive
agreement to effect the transaction contemplated by a Transaction Proposal,
(ii) recommended any Transaction Proposal from a person other than Parent or
Purchaser or any of its affiliates or (iii) resolved to do any of the
foregoing;
(f) by Parent, if any corporation (including the Company or any of
its subsidiaries), partnership, person, other entity or group (as defined
in Section 13(d)(3) of the Exchange Act) other than Parent or any of its
subsidiaries (collectively, "Persons") shall have become the beneficial
owner of more than 35% of the outstanding Shares (excluding any dilution
due to the Rights)(an "Alternative Acquisition");
(g) by the Company if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions set forth in
Annex A hereto Purchaser shall have terminated the Offer, unless such
termination shall have been caused by or resulted from the failure of the
Company to perform in any material respect its material covenants and
agreements contained in this Agreement or (ii) prior to the purchase of
Shares pursuant to the Offer, any person shall have made a bona fide
Transaction Proposal (A) that the Board of Directors of the Company
determines in its good faith judgement is more favorable to the Company's
shareholders than the Offer and the Merger and (B) as a result of which
the Board of Directors concludes in good
<PAGE>
95
faith that termination of this Agreement is necessary or appropriate in
order for the Board of Directors to act in a manner which is consistent
with its fiduciary obligations under applicable law, provided that such
--------
termination under this clause (ii) shall not be effective until payment of
the full fee and expense reimbursement required by Section 8.3(b) hereof;
(h) by Parent or the Company if, without fault of the terminating
party, the Effective Time shall not have occurred on or before June 30,
1995 (provided, that the right to terminate this Agreement under this
--------
Section 7.1(h) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
results in, the failure of the Merger to have been consummated within such
period);
(i) by the Company if (i) on or after December 15, 1994, the
termination date of the waiver granted to the Company of the provisions of
Subsection 6.01(j)(iii) of the Credit Agreement dated as of August 16,
1994 among the Company and the banks party thereto (the "Credit
Agreement") shall not then extend past December 15, 1994 and (ii) the
Company (A) shall have received written notice from the Administrative
Agent (as defined in the Credit Agreement) pursuant to the terms of the
Credit Agreement that, as a result of the applicability of the provisions
of Subsection 6.01(j)(iii) of the Credit Agreement, all amounts payable
under the Credit Agreement and the other Loan Documents (as
<PAGE>
96
defined in the Credit Agreement) shall have become and be forthwith due
and payable (and provided that this Agreement shall be deemed to be
terminated hereby without any further action by any party immediately
prior to the receipt by the Company of such notice), (B) shall have been
advised in writing by the Administrative Agent that, as a result of the
provisions of Subsection 6.01(j)(iii) of the Credit Agreement, the
Required Banks (as defined in the Credit Agreement) have requested or
consented to such action or (C) the Company shall reasonably believe
either such action referred to in (A) or (B) above to be imminent based on
communications with the Administrative Agent, any of the banks party to
the Credit Agreement or representatives thereof; or
(j) by Parent or the Company if any required approval of the
shareholders of the Company shall not have been obtained by reason of the
failure to obtain the required vote upon a vote held at a duly held
meeting of shareholders or at any adjournment thereof.
Section 7.2 Effect of Termination. In the event of the termination
---------------------
and abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party or its directors, officers or shareholders, other than the provisions
of this Section 7.2, Section 1.3(a), Section 2.8(c), Section 4.1(j), the last
sentences of Sections 5.4(a) and (b), Section 5.14, Section 8.1 and Section
8.3. Nothing contained in this Section
<PAGE>
97
shall relieve any party from liability for any breach of the covenants or
agreements contained in this Agreement.
Section 7.3 Amendment. Subject to Section 1.3(c), this Agreement
---------
may be amended or supplemented at any time before or after the date on which a
majority of the board of directors of the Company shall consist of designees or
representatives of Parent but, after such date, no amendment shall be made
which decreases or increases the Final Exchange Ratio or which adversely
affects the rights of the Company's shareholders hereunder without the approval
of the Company and such shareholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties.
Section 7.4 Extension; Waiver. Subject to Section 1.3(c), at any
-----------------
time prior to the Effective Time, the parties may (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein of the other parties hereto or in any document, certificate or
writing delivered pursuant hereto or (iii) waive compliance by the other
parties hereto with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party hereto to assert any of its rights hereunder
shall not constitute a waiver of such rights.
<PAGE>
98
ARTICLE 8
MISCELLANEOUS
Section 8.1 Non-Survival of Representations and Warranties. Except
----------------------------------------------
for Section 2.8(c) and 4.1(j), the representations and warranties made herein
shall not survive beyond the Effective Time or a termination of this Agreement.
Section 8.2 Entire Agreement; Assignment. This Agreement and the
----------------------------
other agreements (other than the Letter Agreement (as defined below) which has
been superseded by this Agreement except to the extent the terms of the Letter
Agreement are expressly referred to herein) referred to herein (a) constitute
the entire agreement among the parties with respect to the subject matter
hereof and, except as provided herein, supersede all other prior agreements and
understandings, both written and oral, between the parties or any of them with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise, provided that Parent may assign its rights and obligations
or those of Purchaser, and Purchaser may assign its rights and obligations, to
Parent or to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent or Purchaser, as the case may be, of its
obligations hereunder if such assignee does not perform such obligations.
Section 8.3 Fees and Expenses. (a) The Company shall promptly, but
-----------------
in no event later than two business days following written notice thereof,
together with related bills or receipts, reimburse Parent and Purchaser for all
of their Expenses (as
<PAGE>
99
defined below) as incurred from time to time in an aggregate amount of up to
$15,000,000, against which aggregate amount Expenses actually reimbursed (other
than the fee in the amount of $20,000,000 (the "Initial Advisory Fee")
reimbursed by the Company upon the execution of that certain letter agreement
dated September 11, 1994 between Parent and the Company (the "Letter
Agreement")) under the Letter Agreement may be credited. For purposes of this
Section 8.3, "Expenses" shall include all out-of-pocket expenses and fees
including the fees and disbursements of counsel, financial printers, experts,
consultants and accountants, as well as all fees and expenses payable to
investment banking firms and other financial institutions and their respective
agents and counsel, whether incurred prior to, on or after the date hereof,
incurred in connection with the transactions contemplated by this Agreement,
the Letter Agreement and the Conditional Purchase/Stock Option Agreement. The
parties acknowledge that the reimbursement of the Initial Advisory Fee shall
not limit the reimbursement of any additional advisory fees paid by Parent or
Purchaser to non-affiliates of Purchaser.
(b) If (i) (x) prior to termination of this Agreement, any Person
shall have commenced, publicly proposed or communicated to the Company a
Transaction Proposal (a "Pre-Termination Transaction Proposal") (y) this
Agreement is terminated pursuant to Section 7.1 and (z) on or prior to June
30, 1996, any Person who commenced, publicly proposed or communicated to the
Company a Pre-Termination Transaction Proposal enters into any definitive
agreement to effect the
<PAGE>
100
transaction contemplated by such Transaction Proposal (whether or not related
to such Pre-Termination Transaction Proposal) or effects an Alternative
Acquisition; or (ii) prior to the purchase of Shares pursuant to the Offer,
this Agreement is terminated pursuant to Section 7.1(d) (other than solely in
the event that the average of the closing sales prices of the Holdings Common
Stock as reported on the New York Stock Exchange Composite Tape for the
Valuation Period is less than the price per share that would yield an Exchange
Ratio of 2.375 or less without giving effect to the proviso in the definition
of Exchange Ratio) or (iii) prior to the purchase of Shares pursuant to the
Offer, this Agreement is terminated pursuant to Section 7.1(e), 7.1(f) or
clause (ii) of Section 7.1(g); then in each case the Company shall promptly,
but in no event later than one business day after the first of such events
shall occur, pay Kohlberg Kravis Roberts & Co. ("KKR & Co.") a fee of
$30,000,000 in cash, which amount shall be payable in same day funds. No more
than $30,000,000 in aggregate shall be payable to KKR & Co. pursuant to this
Section 8.3(b), and no fee shall be payable to KKR & Co. pursuant to this
Section 8.3(b) if $30,000,000 has been paid to KKR & Co. pursuant to Section
8.3(c).
(c) If Parent, together with any subsidiary or affiliate of Parent
including Purchaser) shall acquire beneficial ownership (in one or more
transactions) of a majority of the outstanding shares of Common Stock, then the
Company shall promptly, but in no event later than one business day after such
event shall occur, pay KKR & Co. a fee of $30,000,000 in cash,
<PAGE>
which amount shall be payable in same day funds. No fee shall be payable to
KKR & Co. pursuant to this Section 8.3(c) if $30,000,000 has been paid to KKR
& Co. pursuant to Section 8.3(b).
(d) If the fee of $30,000,000 in cash required to be paid by the
Company to KKR & Co. pursuant to Section 8.3(b) or 8.3(c) hereof (the
"Transaction Fee") is not paid within five business days after the events set
forth in such Sections requiring payment of the Transaction Fee occur, KKR &
Co., at its sole option, may demand (the "Fee Demand") that the Company tender
to KKR & Co., immediately in satisfaction of the Transaction Fee, such number
of shares (rounded to the nearest whole share) of (i) Common Stock ((A) if it
is publicly traded and (B) which at the request of KKR & Co. shall be issued in
shares of treasury stock, if available) or (ii), at the sole option of KKR &
Co. if the Conditional Purchase Right shall have been exercised, and the
Company shall at the time own Holdings Common Stock that is not subject to any
other call or exchange right, Holdings Common Stock equal to (x) $30,000,000
divided by (y) the Average Market Price. For purposes of this Section 8.3(d)
"Average Market Price" shall mean the average of the average of the high and
low prices of Common Stock, or Holdings Common Stock, as the case may be, as
reported on the New York Stock Exchange Composite Tape on each of the ten
consecutive trading days immediately preceding the second trading day prior to
the Fee Demand. The Company acknowledges that it is obligated hereunder to pay
the Transaction Fee in cash and that such
<PAGE>
102
obligation is not derogated in any respect by the existence of the option of
KKR & Co. to seek satisfaction of such obligation by means of the Fee Demand.
(e) In addition to the other provisions of this Section 8.3, the
Company agrees promptly, but in no event later than two business days following
written notice thereof, together with related bills or receipts, to reimburse
KKR & Co., Parent and Purchaser for all reasonable out-of-pocket costs, fees
and expenses, including, without limitation, the reasonable fees and
disbursements of counsel and the expenses of litigation, incurred in connection
with collecting Expenses and the Transaction Fee as a result of any willful
breach by the Company of its obligations under Section 8.3.
(f) Except as otherwise provided in this Section 8.3, whether or not
the Merger is consummated, all costs and expenses incurred in connection with
the transactions contemplated by this Agreement and the Conditional
Purchase/Stock Option Agreement shall be paid by the party incurring such
expenses (including, in the case of the Company, the costs of printing the
Schedule 14D-9 and any other filings to be printed, and in each case all
exhibits, amendments or supplements thereto). Notwithstanding the foregoing,
the costs and expenses of preparing and distributing the Proxy Statement and
obtaining and complying with the antitrust requirements of any Governmental
Entity shall be paid by the Company.
Section 8.4 Definitions. For purposes of this Agreement:
-----------
<PAGE>
103
(a) an "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first person;
(b) "Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with any person, any change or effect that either
individually or in the aggregate with all other such changes or effects is
materially adverse to the business, financial condition or results of
operations of such person and its subsidiaries taken as a whole or
adversely effects the ability of such person to consummate the
transactions contemplated by this Agreement in any material respect;
(c) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
and
(d) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its board
of directors or other governing body (or, if there are no such voting
interests, more than 50% of the equity interests of which) are owned
directly or indirectly by such first person and includes, in addition,
with respect to the Company, BCPO and Borden Chemicals and Plastics
Limited Partnership ("BCPLP"). Notwithstanding anything to the contrary
contained herein,
<PAGE>
104
neither BCPO nor BCPLP shall be a "subsidiary" for the purposes of Article
V hereof.
Section 8.5 Gains and Transfer Taxes. Any liability with respect to
------------------------
the transfer of the property of the Company arising out of the New York State
Real Property Gains Tax, the New York State Real Estate Transfer Tax or the New
York City Real Property Transfer Tax shall be borne by the Company and
expressly shall not be the liability of the shareholders of the Company.
Section 8.6 Interpretation. When a reference is made in this
--------------
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
Section 8.7 Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto, and, with respect to
the provisions of Section 5.11 and 8.3, shall inure to the benefit of the
persons or entities benefitting from the provisions thereof who are intended to
be third-party beneficiaries thereof. Except as provided in the preceding
sentence, nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
<PAGE>
105
Section 8.8 Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by delivery, telegram
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered
to the respective parties at the following addresses:
If to Parent or Purchaser:
c/o Kohlberg Kravis Roberts & Co.
9 West 57th St.
New York, New York 10019
Attention: Clifton S. Robbins
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin
if to the Company:
180 East Broad Street
Columbus, Ohio 43215
Attention: Frank J. Tasco
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 8.9 Non-Recourse. Notwithstanding anything that may be
------------
expressed or implied in this Agreement, Parent
<PAGE>
106
covenants, agrees and acknowledges and the Company, by its acceptance of the
benefits of this Agreement, covenants, agrees and acknowledges that
notwithstanding that Parent is a partnership no recourse under this Agreement
or the Conditional Purchase/Stock Option Agreement or any documents or
instruments delivered in connection with this Agreement or the Conditional
Purchase/Stock Option Agreement shall be had against any officer, agent or
employee of Parent or against any partner of Parent or any director, officer,
employee, partner, affiliate or assignee of any of the foregoing, whether by
the enforcement of any assessment or by any legal or equitable proceeding, or
by virtue of any statute, regulation or other applicable law, it being
expressly agreed and acknowledged that no personal liability whatsoever shall
attach to, be imposed on or otherwise be incurred by an officer, agent or
employee of Parent or any partner of Parent or any director, officer, employee,
partner, affiliate or assignee of any of the foregoing, as such for any
obligations of Parent under the Agreement or any documents or instruments
delivered in connection with this Agreement or the Conditional Purchase/Stock
Option Agreement or for any claim based on, in respect of or by reason of such
obligations or their creation; provided, however, that the foregoing limitation
-------- -------
of liability shall in no way constitute a limitation on the rights of the
Company to enforce any remedies it may have against the undistributed assets of
Parent for the collection of any obligations or liabilities in connection with
this Agreement or the Conditional Purchase/Stock Option Agreement.
<PAGE>
107
Section 8.10 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New Jersey, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
Section 8.11 Enforcement. The parties agree that irreparable damage
-----------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New Jersey or the City of New York, this being in
addition to any other remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of (i) the United States District Court for the District
of New Jersey and the United States District Court for the Southern District of
New York in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement to the extent such courts would
have subject matter jurisdiction with respect to such dispute and (ii) the
courts of the State of New Jersey and the State of New York otherwise, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction or
venue by motion or other request for leave from any such court and (c) agrees
that it will not bring any action relating to this Agreement or any of the
transactions contemplated by this
<PAGE>
108
Agreement in any court other than such courts sitting in the State of
New Jersey or the State of New York.
Section 8.12 Descriptive Headings. The descriptive headings used
--------------------
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
Section 8.13 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 8.14 Severability. Whenever possible, each provision or
------------
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid,
<PAGE>
109
illegal or unenforceable provision or portion of any provision
had never been contained herein.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
WHITEHALL ASSOCIATES, L.P.
By: KKR Associates, a limited
partnership, its General
Partner
By: /s/ Henry Kravis
------------------------------
Title: General Partner
BORDEN ACQUISITION CORP.
By: /s/ Clifton S. Robbins
------------------------------
Name: Clifton S. Robbins
Title: President
BORDEN, INC.
By: /s/ Allan L. Miller
------------------------------
Name: Allan L. Miller
Title: Senior Vice President,
Chief Administrative
Officer and General
Counsel
<PAGE>
ANNEX A
-------
The capitalized terms used herein have the meanings set forth in the Agreement
and Plan of Merger (the "Agreement") to
which this Annex A is attached.
- ----------------------------------------------------------------
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not
be required to accept for exchange, exchange or deliver any shares of Holdings
Common Stock for, subject to Rule 14e-1(c) under the Exchange Act, any Shares
tendered and may terminate or (subject to the terms of the Merger Agreement)
amend the Offer or may postpone the acceptance for exchange of the Shares
tendered, if immediately before acceptance for exchange of any such Shares
(whether or not any Shares have theretofore been accepted for exchange pursuant
to the Offer): (i) there shall not have been validly tendered and not properly
withdrawn pursuant to the Offer a number of Shares which, when added to any
Shares previously acquired by Parent or Purchaser (other than pursuant to the
Conditional Purchase Right) represent more than 41% of the Shares outstanding
on a fully diluted basis (other than dilution due to the Rights) (the "Minimum
Condition"); (ii) any waiting period under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall not have expired or been
terminated or the requisite approvals, authorizations or consents required by
the Investment Canada Act, Canada's Competition Act and the European Community
shall not have been obtained; (iii) the obtaining of all consents and waivers
on terms satisfactory to Parent necessary in order that the consummation of the
transactions contemplated by the Agreement and the Conditional Purchase/Stock
Option Agreement not constitute (A) an event of default or an event which with
or without notice or the passage of time would constitute an event of default
under any indebtedness, partnership agreement or equityholders agreement of the
Company or any subsidiary (or Borden Chemicals and Plastics Limited
Partnership, Borden Chemicals and Plastics Operating Limited Partnership and
T.M. Investors Limited Partnership) ("Indebtedness"), including, without
limitation, the Company's Amended and Restated Credit Agreement dated as of
August 16, 1994 with Citibank, N.A. as Administrative Agent and T.M. Investors
Limited Partnership's Amended and Restated Credit Agreement dated as of
August 16, 1994 with Citibank, N.A. as Administrative Agent, or (B) an event
which would individually or in combination with other events give rise to an
obligation on the part of the Company to repay or repurchase any Indebtedness,
partnership interest or equity interest, which event of default or other event
described in clause (A) or (B) above would give rise to, with or without notice
or the passage of time and taking into account any cross-acceleration or cross-
default provisions, the obligation to repay prior to maturity or the
acceleration of an aggregate of at least $25 million of Indebtedness or other
obligations; (iv) the Company shall not have refinanced, or
<PAGE>
2
received commitments for refinancing or indications satisfactory to Parent from
lenders that it will be able to refinance, in each case on market terms
reasonably acceptable to Parent, the principal bank credit facilities of the
Company and TMI, provided that such refinancing shall not be required to
increase the available lines of credit under such facilities except to meet the
working capital and other reasonable needs of the Company and its subsidiaries
and shall principally be related to extending maturities and renegotiating
repayment schedules under such facilities as appropriate to meet the business
plan as determined by Parent and the Company; (v) the Form S-4 and any required
post-effective amendment shall not have become effective, under the Securities
Act and shall be the subject of any stop order or proceedings seeking a stop
order, and any material "blue sky" and other state securities laws applicable
to the registration of the Holdings Common Stock to be exchanged for Common
Stock shall not have been complied with; or (vi) any of the following shall
occur and remain in effect and shall, in the reasonable judgment of Purchaser
in any such case, make it inadvisable to proceed with the Offer or such
acceptance for exchange of any of the Shares or to proceed with the Merger:
(a) (i) any representation or warranty of the Company in the
Agreement shall have been untrue as of the date of the Agreement and shall
continue to be untrue, which untrue representations or warranties, in the
aggregate, would have a Material Adverse Effect on the Company; or there has
been a breach by the Company of any covenant or agreement set forth in the
Agreement or the Conditional Purchase/Stock Option Agreement having a Material
Adverse Effect on the Company which has not been cured; (ii) the SEC Documents
filed by the Company with the SEC since the date of the Agreement did not
comply in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and the SEC Documents
(including any and all financial statements included therein), except to the
extent revised or superseded by a subsequent filing with the SEC, as of such
dates contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; or (iii) the consolidated financial statements of the Company
included in the SEC Documents filed since the date of the Agreement did not
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were not prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited consolidated quarterly statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and did not
fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
<PAGE>
3
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited quarterly statements, to normal year-end audit adjustments).
(b) there shall be any United states or foreign statute, rule,
regulation, decree, order or injunction promulgated, enacted, entered into or
enforced by any Governmental Entity, that (i) restrains or prohibits the making
or consummation of the Offer or the Merger or restrains or prohibits the
performance of this Agreement or the Conditional Purchase/Stock Option
Agreement, (ii) prohibits or materially limits the ownership or operation by
Parent or Purchaser of all or any substantial portion of the business or assets
of the Company or any of its subsidiaries or compels Parent or Purchaser to
dispose of or to hold separate all or any substantial portion of the business
or assets of the Company or any of its subsidiaries, or imposes any material
limitation on the ability of Parent or Purchaser to conduct such business or
own such assets or (iii) imposes material limitations on the ability of Parent
or Purchaser (or any other affiliate of Parent or Purchaser) to acquire or hold
or to exercise full rights of ownership of the Shares, including, but not
limited to, the right to vote the Shares purchased by Purchaser on all matters
properly presented to the shareholders of the Company; provided, however, that
-------- -------
Parent and Purchaser shall have used their best efforts to have any such
decree, order or injunction vacated or reversed;
(c) any change shall have occurred since the date hereof in the
business, financial condition or results of operations of the Company or any of
its subsidiaries which has had, or would reasonably be expected to have, a
Material Adverse Effect with respect to the Company, including, without
limitation, the commencement in respect of, or by, the Company of an
involuntary, or voluntary, proceeding under any applicable bankruptcy law,
decree, order or any other case or proceeding adjudging the Company a bankrupt
or insolvent, or the condition of the Company is such that it is unable to pay
all of its liabilities as such liabilities mature or has unreasonably small
capital for conducting the business theretofore or proposed to be conducted by
it;
(d) there shall have occurred (and the adverse effect of such
occurrence shall, in the reasonable judgment of Purchaser, be continuing) (i)
any general suspension of trading in, or limitation on prices for, securities
on any national securities exchange or in the over-the-counter market in the
United States, (ii) any extraordinary or material adverse change in United
States financial markets generally, including, without limitation, a decline of
at least 25% in either the Dow Jones Average of Industrial Stocks or the
Standard & Poor's 500 index from the date hereof, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iv) any limitation (whether or not mandatory) by any
Governmental Entity, on, or any other event that would reasonably
<PAGE>
4
be expected to materially adversely affect, the extension of credit by banks or
other lending institutions, (v) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving the
United States (other than in Haiti) which would reasonably be expected to have
a Material Adverse Effect or materially adversely affect (or materially delay)
the consummation of the Offer or (vi) in the case of any of the foregoing
existing at the time of commencement of the Offer, a material acceleration or
worsening thereof;
(e) the Agreement shall have been terminated in accordance with its
terms or the Offer shall have been amended or terminated with the consent of
the Company.
The foregoing conditions are for the sole benefit of the Parent and
Purchaser and may be asserted by the Parent or Purchaser regardless of the
circumstances giving rise to any such condition and may be waived by the Parent
or Purchaser in whole or in part, provided however, that if Purchaser shall
-------- -------
have exercised the Conditional Purchase Right in whole or in part prior to the
termination of the Offer Purchaser shall not be permitted to waive the Minimum
Condition. The Parent's or Purchaser's failure at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
<PAGE>
EXHIBIT A
---------
RESTATED CERTIFICATE OF INCORPORATION
OF
BORDEN, INC.
Pursuant to N.J.S. 14A:9-5(4)
Dated: , 1994
-------------
THE UNDERSIGNED corporation certifies that it has adopted the
following restated certificate of incorporation:
ARTICLE I
Corporate Name
The name of the corporation is Borden, Inc.
ARTICLE II
Purpose
The purpose for which this corporation is organized is to engage in
any activity within the purposes for which corporations may be organized under
the New Jersey Business Corporation Act.
ARTICLE III
Capital Stock
1. Authorized Shares
The corporation is authorized to issue 300,000,000 shares $.01 par
value
2. Pre-emptive Rights
The shareholders of the corporation shall not have pre-emptive
rights.
<PAGE>
2
3. Shareholder Vote Required
The affirmative vote of a majority of votes cast by the shareholders
shall be required to authorize or approve any action or matter to be voted upon
by the shareholders, except that directors shall be elected as provided by law.
ARTICLE IV
Registered Office and Agent
The address of the corporation's current registered office is 65
Livingston Avenue, Roseland, New Jersey 07068; the name of the corporation's
current registered agent at that address is John R. MacKay 2nd.
ARTICLE V
Current Board of Directors
The current board of directors consists of three persons whose name
and addresses are as follows:
Clifton S. Robbins
9 West 57th Street
New York, New York 10019
Scott M. Stuart
9 West 57th Street
New York, New York 10019
Alexander Navab
9 West 57th Street
New York, New York 10019
ARTICLE VI
Indemnification
Every person who is or was a director or an officer of the
corporation shall be indemnified by the corporation to the fullest extent
allowed by law, including the indemnification
<PAGE>
3
permitted by N.J.S. 14A:3-5(8), against all liabilities and expenses imposed
upon or incurred by that person in connection with any proceeding in which that
person may be made, or threatened to be made, a party, or in which that person
may become involved by reason of that person being or having been a director or
an officer of or of serving or having served in any capacity with any other
enterprise at the request of the corporation, whether or not that person is a
director or an officer or continues to serve the other enterprise at the time
the liabilities or expenses are imposed or incurred. During the pendency of
any such proceeding, the corporation shall, to the fullest extent permitted by
law, promptly advance expenses that are incurred, from time to time, by a
director or an officer in connection with the proceeding, subject to the
receipt by the corporation of an undertaking as required by law.
ARTICLE VII
Personal Liability of Directors or Officers
A director or officer of the corporation shall not be personally
liable to the corporation or its shareholders for the breach of any duty owed
to the corporation or its shareholders except to the extent that an exemption
from personal liability is not permitted by the New Jersey Business Corporation
Act.
<PAGE>
4
IN WITNESS WHEREOF, the undersigned corporation has caused this
certificate to be executed on its behalf by its duly authorized officer as of
the date first above written.
BORDEN, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT B
[Closing Date]
RJR Nabisco Holdings Corp.
1301 Avenue of the Americas
New York, New York 10019
Gentlemen:
I have been advised that I have been identified as a possible
"affiliate" of Borden, Inc., a New Jersey corporation (the "Company"), as that
term is defined for purposes of paragraphs (c) and (d) of Rule 145 of the
General Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933
(the "Securities Act"), although nothing contained herein should be construed
as an admission of such fact.
Pursuant to the terms of an Agreement and Plan of Merger dated as of
September 23, 1994 (the "Merger Agreement") among Borden Acquisition Corp., a
New Jersey corporation ("Purchaser"), Whitehall Associates, L.P., a Delaware
limited partnership, and the Company, Purchaser will be merged with and into
the Company (the "Merger"). As a result of the Merger, I will receive Merger
Consideration (as defined in the Merger Agreement), including shares of common
stock, par value $.01 per share ("Holdings Common Stock"), of RJR Nabisco
Holdings Corp., a Delaware corporation ("Holdings") in exchange for shares of
common stock, par value $.625 per share ("Common Stock"), of the Company owned
by me at the effective time of the Merger as determined pursuant to the Merger
Agreement.
A. In connection therewith, I represent, warrant and agree that:
1. I shall not make any sale, transfer or other disposition of the
Holdings Common Stock I receive as a result of the Merger in violation of
the Securities Act or the Rules and Regulations.
2. I have been advised that the issuance of Holdings Common Stock to
me as a result of the Merger has been registered with the Commission under
the Securities Act on a Registration Statement on Form S-4. However, I
have also been advised that, because at the time the Merger was submitted
for a vote of the stockholders of the Company I may have been an
"affiliate" of the Company and the distribution by me of the shares of
Holdings Common Stock I receive as a result of the Merger has not been
registered under the Securities Act, such shares must be held by me
indefinitely unless (i) such distribution of such shares has been
registered under the Securities Act, (ii) a sale of such shares is made in
conformity with the provisions of
<PAGE>
2
Rule 145 promulgated by the Commission under the Securities Act or (iii)
such sale is pursuant to a transaction which, in the opinion of counsel
reasonably satisfactory to Holdings or as described in a "no-action" or
interpretive letter from the staff of the Commission, is not required to
be registered under the Securities Act.
3. I have carefully read this letter and the Merger Agreement and
have discussed the requirements of the Merger Agreement and other
limitations upon the sale, transfer or other disposition of the shares of
Holdings Common Stock to be received by me, to the extent I have felt
necessary, with my counsel or with counsel for the Company.
B. Furthermore, in connection with the matters set forth herein, I
understand and agree that:
1. Holdings is under no further obligation to register the sale,
transfer or other disposition of the shares of Holdings Common Stock
received by me as a result of the Merger or to take any other action
necessary in order to make compliance with an exemption from registration
available, except as set forth in paragraph C below.
2. Stop transfer instructions will be given to the transfer agents
of Holdings with respect to the shares of Holdings Common Stock I will
receive as a result of the merger, and there will be placed on the
certificates representing such shares, or any certificates delivered in
substitution therefor, a legend stating in substance:
"The shares represented by this certificate were issued in
a transaction to which Rule 145 under the Securities Act of
1933 applies. The shares represented by this certificate
may be transferred only in accordance with the terms of an
agreement dated , 1994 between the registered
holder hereof and RJR Nabisco Holdings Corp., a copy of
which agreement is on file at the principal offices of RJR
Nabisco Holdings Corp."
3. Unless the transfer by me of my shares of Holdings Common Stock
is a sale made in conformity with the provisions of Rule 145 of the Rules
and Regulations or made pursuant to a registration under the Securities
Act, Holdings reserves the right to put the following legend on the
certificates issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were
acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof
<PAGE>
3
within the meaning of the Securities Act of 1933 and may not be sold,
pledged or otherwise transferred except pursuant to a registration
statement or in accordance with an exemption from the registration
requirements of the Securities Act of 1933."
It is understood and agreed that the legends set forth above shall be
removed and substitute certificates shall be delivered without any such legend
and the transfer agents will be instructed to effectuate transfers of shares of
Holdings Common Stock if the undersigned delivers to Holdings a letter from the
staff of the Commission or an opinion of counsel in form and substance
reasonably satisfactory to Holdings to the effect that such legend is not
required for the purposes of the Securities Act.
C. Holdings hereby represents, warrants and agrees that:
For as long as resales of any shares of Holdings Common Stock owned
by me are subject to Rule 145, Holdings will use all reasonable efforts to
make all filings of the nature specified in paragraph (c)(1) of Rule 144
of the Rules and Regulations.
Very truly yours,
EXHIBIT 11(c)(2)
CONDITIONAL PURCHASE/STOCK OPTION AGREEMENT
-------------------------------------------
Conditional Purchase/Stock Option Agreement dated as of September 23,
1994 by and among Whitehall Associates, L.P., a Delaware limited partnership
("Parent"), Borden Acquisition Corp., a New Jersey corporation and a wholly
owned subsidiary of Parent ("Purchaser"), and Borden, Inc., a New Jersey
corporation (the "Company").
RECITALS
--------
Concurrently herewith, Parent, Purchaser and the Company are entering
into an Agreement and Plan of Merger of even date herewith (the "Merger
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), which contemplates, among other
things, an offer to exchange (the "Offer"), pursuant to which each share of
Common Stock accepted by Purchaser in accordance with the Offer shall be
converted into the right to receive from Purchaser that number of fully paid and
nonassessable shares of Holdings Common Stock equal to the Exchange Ratio.
Subject to the terms and conditions of the Merger Agreement, the Offer will be
followed by a merger (the "Merger") of Purchaser with and into the Company.
As a condition to their willingness to enter into the Merger
Agreement, Parent and Purchaser have required that the Company agree, and
believing it to be in the best interests of the Company, the Company has agreed,
among other things, to grant to Parent the Option (as hereinafter defined).
AGREEMENT
---------
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. The Conditional Purchase Option.
-------------------------------
1.1 Grant of Option. The Company hereby grants to Purchaser an
---------------
irrevocable option to purchase up to 28,138,000 shares of Common Stock (the
"Shares"), on the terms and subject to the conditions set forth herein (the
"Option"). At the time that the Option is exercised, the Company shall
designate whether the Shares shall be newly issued Shares or Shares of treasury
stock of the Company.
1.2 Exercise of Option.
------------------
(a) The Option may be exercised by Purchaser (or its designee, which
designee must be Parent or a direct or indirect wholly owned subsidiary of
Parent), in whole or in part, at any time, or from time to time, during the
period beginning on the date hereof and ending on the Expiration Date, provided
--------
that if
<PAGE>
Purchaser (or its designee) has not exercised the Option in whole or in part
prior to the expiration of the Offer, it shall not be entitled to exercise the
Option thereafter if it waives or otherwise reduces the Minimum Condition and
accepts fewer than 41% of the outstanding Shares for payment in the Offer. As
used herein, the term "Expiration Date" means the first to occur of any of the
following dates:
(x) the Effective Time (as defined in the Merger Agreement); or
(y) March 21, 1995 (unless Purchaser has theretofore sent the
written notice specified in Section 1.2(b)).
(b) If Purchaser wishes to exercise the Option (the "Option
Purchase"), Purchaser shall send a written notice to the Company of its
intention to exercise the Option, specifying the number of Shares to be
purchased (and the denominations of the share certificate or certificates to be
issued), whether Purchaser and/or a designee of Purchaser will be purchasing the
Shares and the place, and, if then known, time and date of the closing of such
purchase (the "Closing Date" or the "Closing"), which date shall not be less
than two business days nor more than ten business days from the date on which
such notice is delivered; provided, that the Closing shall be held only if (i)
--------
such purchase would not otherwise violate or cause the violation of, any
applicable law or regulations (including, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder, or the rules of the New York Stock Exchange, Inc. (the "NYSE")) and
(ii) no statute, rule, regulation, decree, order or injunction shall have been
promulgated, enacted, entered into or enforced by any governmental agency or
authority or court which prohibits delivery of the Shares, whether temporary,
preliminary or permanent (provided, however, that the parties hereto shall use
-------- -------
their best efforts to have any such order, decree or injunction vacated or
reversed). In the event the Closing is delayed as a result of clause (i) or
(ii) above, the Closing Date shall be within five business days following the
cessation of such violation, statute, rule, regulation, decree, order or
injunction, as the case may be; provided, further, that, notwithstanding any
-------- -------
prior notice of intention to exercise the Option, Purchaser shall not be
obligated to purchase any Shares pursuant to this Section 1.2(b) after the date
nine months following the date of such notice.
(c) At any Closing, the Company shall deliver to Purchaser (or its
designee) all of the Shares to be purchased by delivery of a certificate or
certificates evidencing such Shares in the denominations designated by Purchaser
in the notice required under Section 1.2(b). If at the time of issuance of any
Shares pursuant to an exercise of all or part of the Option
<PAGE>
3
hereunder, the Company shall not have redeemed the Rights (as defined in the
Rights Agreement, dated as of January 28, 1986 between the Company and The Bank
of New York, as Rights Agent (the "Rights Agreement"), as amended on November
29, 1988, May 22, 1991, September 11, 1994 and the date hereof), then each Share
issued pursuant to such exercise shall have attached to it Rights or new rights
with terms substantially the same as and at least as favorable to the Parent as
are provided under the Rights.
1.3 Conversion of Option.
--------------------
(a) Upon the Conversion Date (as defined below), if any, the Option
will be converted in part from an irrevocable option to purchase the Shares into
an obligation on the part of Purchaser (or its designee, which designee must be
Parent or a direct or indirect wholly owned subsidiary of Parent) to exercise
the Option to acquire, and of Parent to cause Purchaser to take such action,
subject to applicable law (the "Mandatory Purchase"), on the terms and subject
to the conditions set forth herein, such number of Shares, which when added to
the number of Shares purchased in the Offer (together with any Shares previously
purchased pursuant to the Option) as will result in Purchaser beneficially
owning more than 50% of the outstanding shares of Common Stock (the "Mandatory
Purchase Shares"). Shares subject to the Option in excess of the number of
Mandatory Purchase Shares shall continue, subject to the terms of Section
1.2(a), to be subject to purchase at the option of the Purchaser. As used
herein, the term "Conversion Date" means the date, if any, on which Purchaser or
Parent or a direct or indirect wholly owned subsidiary of Parent acquires more
than 41%, but less than 50%, of the outstanding shares of Common Stock in
accordance with the terms and conditions of the Offer.
(b) If the Conversion Date occurs, Purchaser shall send a written
notice to the Company, specifying the number of Mandatory Purchase Shares (and
the denominations of the share certificate or certificates thereunder), whether
Purchaser or a designee of Purchaser will be purchasing the Mandatory Purchase
Shares and, if then known, the place, time and date of the closing of such
purchase (the "Mandatory Closing Date" or the "Mandatory Closing"), which date
shall not be less than two business days nor more than ten business days from
the date on which such notice is delivered; provided, that the Mandatory Closing
--------
shall be held only if (i) such purchase would not otherwise violate or cause the
violation of, any applicable law or regulations (including, the HSR Act, the
Exchange Act and the rules and regulations thereunder, or the rules of the NYSE)
and (ii) no statute, rule, regulation, decree, order or injunction shall have
been promulgated, enacted, entered into, or enforced by any governmental agency
or authority or court which prohibits delivery of the Mandatory Purchase Shares,
whether temporary, preliminary or permanent (provided, however, that the parties
-------- -------
hereto shall use their best efforts to have any such order,
<PAGE>
4
decree or injunction vacated or reversed). In the event the Mandatory Closing
is delayed as a result of clause (i) or (ii) above, the Mandatory Closing Date
shall be within five business days following the cessation of such violation,
statute, rule, regulation, decree, order or injunction, as the case may be.
(c) At the Mandatory Closing, if any, the Company shall deliver to
Purchaser (or its designee) all of the Mandatory Purchase Shares to be purchased
by delivery of a certificate or certificates evidencing such shares in the
denominations designated by Purchaser. If at the time of issuance of any
Mandatory Purchase Shares, the Company shall not have redeemed the Rights, then
each Mandatory Purchase Share issued pursuant to such exercise shall have
attached to it Rights or new rights with terms substantially the same as and at
least as favorable to the Purchaser as are provided under the Rights.
1.4 Payments. In the event Purchaser exercises the Option (including
--------
an obligatory exercise pursuant to Section 1.3), Purchaser (or, at Purchaser's
option, its designee) shall, at any Closing or Mandatory Closing, as the case
may be, deliver to the Company, such number of shares (rounded to the nearest
whole share) of Holdings Common Stock (the "Exchanged Shares") as shall equal
the product of the Option Exchange Ratio (as defined below) and the number of
Shares purchased pursuant to this Section 1. The "Option Exchange Ratio" shall
mean the quotient (rounded to the nearest 1/100,000) obtained by dividing (i)
$11.00 (the "Option Purchase Price") by (ii) the average of the average of the
high and low prices of Holdings Common Stock as reported on the New York Stock
Exchange Composite Tape on each of the ten consecutive trading days immediately
preceding the second trading day prior to (x) the date of notice of exercise in
the case of an Option Purchase or (y) the date of exercise in the case of a
Mandatory Purchase. In the event that a payment is actually made to Parent
pursuant to Section 8.3(b) of the Merger Agreement, the Option Purchase Price
shall be adjusted upward (retroactively if necessary and net of any taxes or
brokerage fees paid in connection with the sale, tender or exchange of shares by
Purchaser or its designee, which designee must be Parent or a direct or indirect
wholly owned subsidiary of Parent) to reflect (i) with respect to any Shares
sold, tendered, or exchanged in any third party transaction that triggers a
payment pursuant to Section 8.3(b) of the Merger Agreement, the price per share
(subject to the calculation principles set forth in the next succeeding
sentence) actually paid to holders of Common Stock of the Company as a result of
any such third party transaction and (ii) with respect to any Shares sold,
tendered or exchanged to another party or parties by Purchaser (or its designee)
other than pursuant to such third party transaction, the price per share
(subject to the calculation principles set forth in clause (i) of the next
succeeding sentence) actually paid to Purchaser (or its designee) by such other
party or parties in consideration for such Shares (the "Option Purchase Price
Adjustment"). To the extent the "price per share" referred
<PAGE>
5
to in the preceding sentence consists in whole or in part of non-cash
consideration, it shall be based on the trading market value thereof or if there
is no trading market for such consideration, the fair market value as determined
by an independent investment banker jointly selected by Purchaser and the
Company. The Option Purchase Price Adjustment shall be payable with respect to
shares actually sold, tendered or exchanged promptly following receipt of the
consideration therefor (and, if necessary, the valuation thereof), and Purchaser
agrees promptly, but in no event later than two business days following such
event, to notify the Company of the receipt of such consideration. Parent
agrees promptly, but in no event later than two business days following written
notice thereof, together with related bills or receipts, to reimburse the
Company for all reasonable out-of-pocket costs, fees and expenses, including,
without limitation, the reasonable fees and disbursements of counsel and the
expenses of litigation, incurred in connection with collecting the Option
Purchase Price Adjustment as a result of any willful breach by Parent of its
obligations under this Section 1.4.
2. Representations and Warranties.
------------------------------
2.1 Representations and Warranties of Purchaser and Parent.
------------------------------------------------------
Purchaser and Parent hereby represent and warrant, jointly and severally, to the
Company:
(a) Due Authorization. The execution and delivery of this
-----------------
Agreement and the consummation of the transactions contemplated hereby
(including the exercise of the Option) have been duly and validly
authorized by Purchaser, and no other corporate proceedings on the part of
Purchaser are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes a valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with
its terms subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(b) No Conflicts. Except for (i) filings under the HSR Act and
------------
the applicable requirements, if any, of any relevant foreign jurisdictions,
(ii) the applicable requirements of the Exchange Act and (iii) the
applicable requirements of state takeover laws, (A) no filing with, and no
permit, authorization, consent or approval of, any state, federal or
foreign public body or authority is necessary for the execution of this
Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby (including the exercise of the Option) and
(B) neither the execution and delivery of this Agreement by
<PAGE>
6
Purchaser nor the consummation by Purchaser of the transactions
contemplated hereby (including the exercise of the Option) nor compliance
by Purchaser with any of the provisions hereof shall (1) conflict with or
result in any breach of, or require a vote under, any provision of the
Certificate of Incorporation or By-Laws of Purchaser, (2) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
to which Purchaser is a party or by which it or any of its properties or
assets may be bound or (3) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Purchaser, or any of its
properties or assets, except in the case of (2) or (3) for violations,
breaches or defaults which would not, in the aggregate, have a material
adverse effect on the business, results of operations or financial
condition of Purchaser or materially impair the ability of Purchaser to
perform its obligations hereunder.
(c) Good Standing. Purchaser is a corporation duly organized,
-------------
validly existing and in good standing under the laws of the State of New
Jersey and has all requisite power and authority to execute and deliver
this Agreement.
(d) Distribution. Any Shares acquired by Purchaser (or any
------------
designee of Purchaser) upon exercise of the Option will not be transferred
or otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act").
(e) No Conflicts for Holdings. Except for (i) filings under the
-------------------------
HSR Act and the applicable requirements, if any, of any relevant foreign
jurisdictions, (ii) the applicable requirements of the Exchange Act and
(iii) the applicable requirements of state takeover laws, (A) no filing
with, and no permit, authorization, consent or approval of, any state,
federal or foreign public body or authority is necessary with respect to
Holdings in connection with the consummation of the transactions
contemplated hereby (including the exercise of the Option) and (B) the
consummation of the transactions contemplated hereby (including the
exercise of the Option) or compliance by Parent with any of the provisions
hereof does not (1) conflict with or result in any breach of, or require a
vote under, any provision of the certificate of incorporation or by-laws of
Holdings, (2) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
<PAGE>
7
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument
or obligation to which Holdings is a party or by which it or any of its
properties or assets may be bound other than Holdings' and RJRN's credit
agreement dated as of April 5, 1993, as amended, and Holdings' and RJRN's
credit agreement dated as of December 1, 1991, as amended or (3) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to Holdings, or any of its properties or assets, except in the case of (2)
or (3) for violations, breaches or defaults which would not, in the
aggregate, have a material adverse effect of the business, results of
operations or financial condition of Holdings or materially impair the
ability of Parent or Purchaser to perform any of its respective obligations
hereunder.
2.2 Representations and Warranties of Parent.
----------------------------------------
Parent hereby represents and warrants to the Company.
(a) Due Authorization. The execution and delivery of this
-----------------
Agreement and the consummation of the transactions contemplated hereby
(including the exercise of the Option) have been duly and validly
authorized by Parent, and no other proceedings on the part of Parent are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and constitutes a valid and binding agreement of
Parent, enforceable against Parent in accordance with its terms subject to
the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
good faith and fair dealing.
(b) No Conflicts. Except for (i) filings under the HSR Act and
------------
the applicable requirements, if any, of any relevant foreign jurisdictions,
(ii) the applicable requirements of the Exchange Act and (iii) the
applicable requirements of state takeover laws, (A) no filing with, and no
permit, authorization, consent or approval of, any state, federal or
foreign public body or authority is necessary for the execution of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby (including the exercise of the Option) and (B) neither
the execution and delivery of this Agreement by Parent nor the consummation
by Parent of the transactions contemplated hereby (including the exercise
of the Option) nor compliance by Parent with any of the provisions hereof
shall (1) conflict with or result in any breach of, or require a vote
under, any provision of the governing documents of Parent, (2) result in a
violation or breach of,
<PAGE>
8
or constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which Parent is a party or
by which it or any of its properties or assets may be bound or (3) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to Parent, or any of its properties or assets, except in the case of (2) or
(3) for violations, breaches or defaults which would not, in the aggregate,
have a material adverse effect of the business, results of operations or
financial condition of Parent or materially impair the ability of Parent to
perform any of its obligations hereunder.
(c) Good Standing. Parent is a limited partnership duly
-------------
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite power and authority to execute and
deliver this Agreement.
(d) Holdings Shares. Subject to any transfer of shares to
---------------
Purchaser (or its designee) in connection with the transactions
contemplated by this Agreement and the Merger Agreement, Parent has good
and valid title to the shares of Holdings Common Stock that will serve as
consideration in connection with the exercise of the Option, free and clear
of all claims, liens, encumbrances, security interests and charges of any
nature and upon delivery thereof to the Company they shall be free and
clear of all claims, liens, encumbrances, security interests and charges of
any nature. All of the shares of Holdings Common Stock to be exchanged in
consideration of the exercise of the Option are duly authorized, validly
issued, fully paid and nonassessable with no personal liability attached to
the ownership thereof and have been approved for listing on the NYSE.
2.3 Representations and Warranties of the Company. The Company
---------------------------------------------
hereby represents and warrants to Purchaser and Parent:
(a) Due Authorization. The execution and delivery of this
-----------------
Agreement and the consummation of the transactions contemplated hereby
(including the exercise of the Option) have been duly and validly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company
and constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms
<PAGE>
9
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
good faith and fair dealing.
(b) Shares. Subject to Section 2.3(c), the Company has taken
------
all necessary corporate and other action to authorize, and to permit it to
deliver, and at all times from the date hereof until such time as the
obligation to deliver Shares hereunder terminates will have reserved for
delivery (in the case of Shares of treasury stock) or issuance (in the case
of newly issued Shares), upon exercise of the Option, 28,138,000 shares of
Common Stock. All of such Shares are (in the case of Shares of treasury
stock), or shall be (in the case of newly issued Shares), duly authorized,
validly issued, fully paid and nonassessable with no personal liability
attached to the ownership thereof and are approved for listing on the NYSE
(in the case of Shares of treasury stock). Upon delivery of such Shares
they shall be free and clear of all claims, liens, encumbrances, security
interests and charges of any nature whatsoever and shall not be subject to
any preemptive right of any shareholder of the Company.
(c) No Conflicts. Except for (i) filings under the HSR Act, if
------------
applicable, (ii) the applicable requirements of the Exchange Act and (iii)
the applicable requirements of state takeover laws, (A) no filing with, and
no permit, authorization, consent or approval of, any state, federal or
foreign public body or authority is necessary for the execution of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby (including the exercise of the Option) and
(B) neither the execution and delivery of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby
(including the exercise of the Option) nor compliance by the Company with
any of the provisions hereof shall (x) conflict with or result in any
breach of, or require any vote under, any provision of the Restated
Certificate of Incorporation of the Company (the "Charter") or the By-Laws
of the Company, (y) result in a violation or breach of, or constitute (with
or without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument
or obligation to which the Company or any of its subsidiaries is a party or
by which any of them or any of their properties or assets may be bound or
(z) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or its subsidiaries or any of
<PAGE>
10
their properties or assets, except in the case of (y) or (z) for
violations, breaches or defaults which would not, in the aggregate, have a
material adverse effect on the business, assets, results of operations or
financial condition of the Company and its subsidiaries taken as a whole or
materially impair the ability of the Company to perform its obligations
hereunder.
(d) Board Action. The Company's Board of Directors, at a
------------
meeting duly called and held, has approved the execution of this Agreement
and the transactions contemplated hereby, including the exercise of the
Option, prior to the execution of this Agreement, and such approval
constitutes approval of the execution of this Agreement and the
consummation of the transactions contemplated hereby, including the
exercise of the Option, for purposes of Sections 14A:10A-4 and 14A:10A-5 of
the New Jersey Business Corporation Act (the "NJBCA") and Article VIII of
the Charter, and the approval of the transactions contemplated by this
Agreement by the Board of Directors of the Company shall also constitute,
solely for the purposes of Sections 14A:10-4 and 14A:10-5 of the NJBCA and,
to the extent that there are no Continuing Directors (as defined in the
Charter), Article VIII of the Charter, an approval of any future "Business
Combination" (as defined in Section 14A:10A-3 of the NJBCA and Article VIII
of the Charter) between the Company and Parent or any affiliate thereof,
provided that (x) such "Business Combination" is approved by a majority of
the Independent Directors and (y) if appropriate, the Company shall have
received the opinion of an investment banking firm selected by the
Independent Directors that such "Business Combination" is fair to the
Company's shareholders from a financial point of view.
(e) Rights Amendment. The Company's Board of Directors has
----------------
amended the Rights Agreement prior to the execution of this Agreement and
the Merger Agreement so that neither the execution nor the delivery of this
Agreement or the Merger Agreement or both such agreements, taken together,
nor the consummation of the transactions contemplated hereby, will (i)
trigger the exercisability of the Rights (as defined in the Rights
Agreement), the separation of the Rights from the stock certificates to
which they are attached, or any other provisions of the Rights Agreement,
including causing Parent and/or Purchaser from becoming an Acquiring Person
(as defined in the Rights Agreement), the occurrence of a Distribution Date
(as defined in the Rights Agreement) or a Shares Acquisition Date (as
defined in the Rights Agreement) or (ii) trigger the rights of the holders
of the common units of Borden Chemicals and Plastics Limited Partnership,
pursuant to the Second Amended and Restated Deposit Agreement dated
February 16, 1993, to require the Company to purchase the common units held
by them.
<PAGE>
11
(f) Good Standing. The Company is a corporation duly organized,
-------------
validly existing and in good standing under the laws of the State of New
Jersey and has all requisite corporate power and authority to execute and
deliver this Agreement.
(g) Distribution. Exchanged Shares acquired by the Company upon
------------
exercise of the Option will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration under the
Securities Act.
3. Adjustment Upon Changes in Capitalization. In the event of any
-----------------------------------------
change in the number (or conversion or exchange) of issued and outstanding
shares of Common Stock by reason of any stock dividend, split-up, merger,
recapitalization, combination, exchange of shares, spin-off or other change in
the corporate or capital structure of the Company which could have the effect of
diluting or otherwise diminishing Purchaser's rights hereunder (including any
issuance of Common Stock or other equity security of the Company at a price
below the fair value thereof), the number and kind of Shares or other securities
subject to the Option and the Option Exchange Ratio therefor shall be
appropriately adjusted so that Purchaser shall receive upon exercise (or, if
such a change occurs between exercise and Closing or Mandatory Closing, as the
case may be, upon Closing or Mandatory Closing, as the case may be) of the
Option the number and kind of shares or other securities or property that
Purchaser would have received in respect of the Shares that Purchaser is
entitled to purchase upon exercise of the Option if the Option had been
exercised (or the purchase thereunder had been consummated, as the case may be)
immediately prior to such event. The rights of Purchaser under this Section
shall be in addition to, and shall in no way limit, its rights against the
Company for breach of the Merger Agreement.
4. Registration of Shares Held by Purchaser (or its Designee) under
----------------------------------------------------------------
the Securities Act. (a) If the Option is exercised, the Company agrees to
- ------------------
extend to Purchaser (or its designee) registration rights on the same terms and
subject to the same conditions as Holdings has extended to Parent pursuant to
the Registration Rights Agreement dated July 15, 1990 between Holdings and
Parent (the "Registration Rights Agreement"); provided that (i) for purposes of
--------
Section 4(a) of the Registration Rights Agreement, Common Stock of the Company
shall be deemed to have been registered after the date of the agreement under
the Securities Act, (ii) for purposes of Section 4(a) and the definition of
"Demand Party" the reference to 13,600,000 shares of Common Stock shall be
deemed to mean 6,500,000 shares of Common Stock, (iii) for purposes of Section
4(c) of the Registration Rights Agreement, only the first two registrations of
Registrable Securities (as defined in the Rights Agreement) will be at the
expense of the Company and (iv) notices to the respective parties shall be given
as provided in this Agreement.
<PAGE>
12
5. Registration of Shares Held by the Company Under the Securities
---------------------------------------------------------------
Act. If the Option is exercised, then subject in all respects to the terms and
- ---
conditions of the Registration Rights Agreement, the Company shall succeed with
respect to the shares of Holdings Common Stock acquired as a result of the
exercise of the Option to the rights and obligations of a subsequent Holder
under such agreement, unless, in the written opinion of counsel to Holdings,
which opinion shall be delivered to the Company and which shall be reasonably
satisfactory in form and substance to the Company and its counsel, registration
of the shares of Holdings Common Stock acquired as a result of the exercise of
the Option is not required to lawfully sell and distribute such shares in the
manner contemplated by the Company. By its execution of this Agreement, the
Company agrees to be bound by the terms of the Registration Rights Agreement.
If the Option is exercised, Parent and the Company agree that the Company will
be entitled to two (2) registrations at the expense of Holdings (or if Holdings
refuses to bear such expenses, at the expense of Parent or Purchaser) of
Registrable Securities (as defined in the Registration Rights Agreement)
pursuant to Section 4(c) of the Registration Rights Agreement, and, subject to
the terms of the Registration Rights Agreement, such other registrations at its
own expense as it shall request.
6. Board of Directors. (a) If requested by Parent, the Company
------------------
shall, following the exercise of the Option and the purchase of the Shares, and
from time to time thereafter, take all actions necessary to cause the Applicable
Percentage (as defined below) of directors (and of members of each committee of
the Board of Directors) (rounded in each case to the next highest director or
member) of the Company selected by Parent to consist of persons designated or
elected by Parent (whether, at the election of the Company, by means of
increasing the size of the board of directors or seeking the resignation of
directors and causing Parent's designees to be elected). The "Applicable
Percentage" means the ratio of (i) the total voting power of all Shares
purchased in accordance with the exercise of the Option and/or accepted for
exchange pursuant to the Offer to (ii) the total voting power of the outstanding
voting securities of the Company, rounded to the nearest whole number and
expressed as a percentage; provided that if Purchaser has acquired at least
28,138,000 Shares the Applicable Percentage shall not be less than 33-1/3%.
(b) The Company's obligations to cause designees of Parent to be
elected or appointed to the Board of Directors of the Company shall be subject
to Section 14(f) of the Exchange Act, and Rule 14f-1 promulgated thereunder.
The Company shall promptly take all actions required pursuant to Section 14(f)
and Rule 14f-1 in order to fulfill its obligations under this Section 6 and
shall include in the Schedule 14D-9 such information with respect to the Company
and its officers and directors as is required under Section 14(f) and Rule 14f-
1. Parent and Purchaser will supply to the Company any information with respect
<PAGE>
13
to any of them and their nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of Parent's designees
pursuant to this Section 6 and prior to the Effective Time, any amendment by the
Company of this Agreement, extension by the Company for the performance or
waiver of the obligations, conditions or other acts of Parent or Purchaser or
waiver by the Company of its rights hereunder, will require the concurrence of a
majority of the Independent Directors.
7. Antitrust Filing and Divestitures. The Company and Parent shall,
---------------------------------
as promptly as practicable, file notification and report forms under the HSR Act
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and make any other necessary
filings with the applicable Governmental Entities related to the transactions
contemplated by this Agreement and the Merger Agreement and shall use their best
efforts to respond as promptly as practicable to all inquiries received from the
FTC or the Antitrust Division or such other Governmental Entities for additional
information or documentation. Provided that following receipt of such approvals
Purchaser acquires at least 28,138,000 Shares pursuant to the exercise of the
Option (and/or pursuant to consummation of the Offer), the Company agrees to
make any and all divestitures or undertakings required by the FTC, the Antitrust
Division or any other applicable Governmental Entity in connection with the
transactions contemplated by this Agreement and the Merger Agreement, which
divestitures in each case shall be reasonably acceptable to Parent and
Purchaser. The costs and expenses of obtaining and complying with the antitrust
requirements of the FTC, the Antitrust Division or any other Governmental Entity
shall be paid by the Company. The parties agree to use their best efforts to
cause the other conditions to this Agreement to be satisfied, and the Company
agrees to use its best efforts to cause the representations and warranties set
forth in Sections 2.3(d) and 2.3(e) to continue to be true and correct.
8. Public Announcements. The initial press release with respect to
--------------------
the transactions contemplated hereby shall be mutually satisfactory to the
parties hereto and thereafter, except as may be required by applicable laws,
court process or by obligations pursuant to any listing agreement with a
national securities exchange, no party shall issue any press release or make any
public filings relating to the transactions contemplated hereby, including the
exercise of the Option, without affording the Company on the one hand, and
Parent on the other, the opportunity to review and comment upon such release or
filing.
9. Further Assurances. From time to time, at the other party's
------------------
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable
<PAGE>
14
to consummate the transactions contemplated by this Agreement, including,
without limitation, to vest in Purchaser good title to any Shares purchased
hereunder and to vest in the Company good title to any shares of Holdings Common
Stock delivered to the Company hereunder.
10. Survival of Representations and Warranties. The respective
------------------------------------------
representations and warranties of the Company, Purchaser and Parent contained
herein or in any certificates or other documents delivered at or prior to any
Closing or Mandatory Closing, as the case may be, shall not survive the closing
of the transactions contemplated hereby, and the agreements contained herein
shall survive the closing of the transactions contemplated hereby.
11. Miscellaneous.
-------------
11.1 Entire Agreement; Assignment. This Agreement and the Merger
----------------------------
Agreement (i) constitute the entire agreement among the parties with respect to
the subject matter hereof and thereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and thereof and (ii) shall not be assigned by
operation of law or otherwise, provided that Parent and Purchaser may each
assign its rights and obligations to Parent or any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Parent or
Purchaser, as the case may be, of its obligations hereunder if such assignee
does not perform such obligations. Subject to the foregoing, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by the parties
hereto and their respective successors (including any successor in interest by
merger, sale of all or substantially all of the assets or otherwise) and
assigns.
11.2 Amendments. This Agreement may not be modified, amended,
----------
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
11.3 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Purchaser or Parent, to
Whitehall Associates, L.P.
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
Attention: Clifton S. Robbins
<PAGE>
15
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: David J. Sorkin, Esq.
(b) if to the Company, to
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215
Attention: Frank J. Tasco
with copies to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Andrew R. Brownstein, Esq.
11.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New Jersey, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
11.5 Enforcement. The parties agree that irreparable damage would
-----------
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New Jersey or the City of New York, this being in
addition to any other remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of (i) the United States District Court for the District
of New Jersey and the United States District Court for the Southern District of
New York in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement to the extent such courts would
have subject matter jurisdiction with respect to such dispute and (ii) the
courts of the State of New Jersey and the State of New York otherwise, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction or
venue by motion or other request for leave from any such court and (c) agrees
that it will not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than such courts
sitting in the State of New Jersey or the State of New York.
<PAGE>
16
11.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but both of
which shall constitute one and the same Agreement.
11.7 Descriptive Headings. The descriptive headings used herein are
--------------------
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
11.8 Severability. Whenever possible, each provision or portion of
------------
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein. Without limiting the generality of the foregoing, in the
event that the number of Shares issuable upon exercise of the Option or upon
the Mandatory Purchase, or the number of shares of Holdings Common Stock to be
delivered as consideration therefore, is held to be invalid, illegal or
unenforceable for any reason (including as a result of the failure to obtain
any required vote of stockholders to authorize such issuance), the number of
Shares so issuable, and the number of shares of Holdings Common Stock to be so
delivered, shall be reduced to that number which could validly and legally be
issued and/or delivered as the case may be.
11.9 Definitions. For purposes of this Agreement:
-----------
(a) an "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first person;
(b) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
and
(c) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board
of Directors or other governing body (or, if there are no such voting
interests, more than 50% of the equity interests of which) is owned
directly or indirectly by such first person.
(d) "trading market value per share" means the average of the
average of the high and low prices of a security
<PAGE>
17
(equitably adjusted to take into account the factors addressed in Section
3 hereof, if applicable) on the principal trading market for that security
on each of the ten consecutive trading days immediately preceding the
second trading day prior to the date of measurement (which shall be agreed
upon in good faith by the Company and Purchaser).
11.10 Non-Recourse. Notwithstanding anything that may be expressed
------------
or implied in this Agreement, Parent covenants, agrees and acknowledges and the
Company, by its acceptance of the benefits of this Agreement, covenants, agrees
and acknowledges that no recourse under this Agreement or any documents or
instruments delivered in connection with this Agreement shall be had against
any officer, agent or employee of Parent or against any partner of Parent or
any director, officer, employee, partner, affiliate or assignee of any of the
foregoing, whether by the enforcement of any assessment or by any legal or
equitable proceeding, or by virtue of any statute, regulation or other
applicable law, it being expressly agreed and acknowledged that no personal
liability whatsoever shall attach to, be imposed on or otherwise be incurred by
any officer, agent or employee of Parent or any partner of Parent or any
director, officer, employee, partner, affiliate or assignee of any of the
foregoing, as such for any obligations of Parent under this Agreement or any
documents or instruments delivered in connection with this Agreement or for any
claim based on, in respect of or by reason of such obligations or their
creation; provided, however, that the foregoing limitation of liability shall
-------- -------
in no way constitute a limitation on the rights of the Company to enforce any
remedies it may have against the undistributed assets of Parent for the
collection of any obligations or liabilities in connection with this Agreement
or the transactions contemplated hereby.
<PAGE>
18
IN WITNESS WHEREOF, the Company, Parent and Purchaser have caused
this Agreement to be duly executed as of the day and year first above written.
Borden, Inc.
By: /s/ Allan L. Miller
-------------------
Name: Allan L. Miller
Title: Senior Vice President,
Chief Administrative
Officer and General
Counsel
Whitehall Associates, L.P.
By: KKR Associates, a limited
partnership, its General Partner
By: /s/ Henry Kravis
----------------
Title: General Partner
Borden Acquisition Corp.
By: /s/ Clifton S. Robbins
----------------------
Name: Clifton S. Robbins
Title: President
EXHIBIT 11(c)(3)
AMENDMENT
---------
AMENDMENT, dated as of November 15, 1994 (the
"Amendment"), among BORDEN ACQUISITION CORP., a New Jersey
---------
corporation ("Purchaser"), WHITEHALL ASSOCIATES, L.P., a Delaware
---------
limited partnership ("Parent"), and BORDEN, INC., a New Jersey
------
corporation (the "Company") to the Agreement and Plan of Merger,
-------
dated as of September 23, 1994 (the "Original Agreement"), among
------------------
Purchaser, Parent and the Company.
1. Amendment to Section 1.1. Section 1.1 of the
------------------------
Original Agreement is hereby amended by deleting the third
sentence thereof in its entirety and inserting in lieu thereof
the following:
"The 'Exchange Ratio' shall mean the quotient (rounded
to the nearest 1/100,000) obtained by dividing (i) $14.25 by
(ii) the average of the average of the high and low sales
prices of Holdings Common Stock as reported on the New York
Stock Exchange Composite Tape on each of the ten full
consecutive trading days ending immediately prior to the ten
business day period ending on the date of expiration of the
Offer (the "Valuation Period"); provided that the Exchange
Ratio shall not be less than 1.78125 or greater than 2.375."
2. Authorization; Effectiveness. (a) This Amendment
----------------------------
has been duly executed and delivered by each party hereto and
constitutes a valid and binding obligation of each such party,
enforceable against such party in accordance with its terms
subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair
dealing.
(b) This Amendment shall become effective upon
execution and delivery by the parties hereto. Except as
expressly amended hereby, the provisions of the Original
Agreement are and shall remain in full force and effect.
3. Governing Law. This Amendment shall be governed by
-------------
and construed in accordance with the laws of the State of New
Jersey, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
4. Counterparts. This Amendment may be executed in
------------
two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.
<PAGE>
2
IN WITNESS WHEREOF, each of the parties has caused this
Amendment to be executed on its behalf by its officers thereunto
duly authorized, all as of the day and year first above written.
WHITEHALL ASSOCIATES, L.P.
By: KKR Associates, a limited
partnership, its General
Partner
By:
------------------------------
Title: General Partner
BORDEN ACQUISITION CORP.
By:
------------------------------
Name: Clifton S. Robbins
Title: President
BORDEN, INC.
By:
------------------------------
Name: Allan L. Miller
Title: Senior Vice President,
Chief Administrative
Officer and General
Counsel
EXHIBIT 11(c)(4)
DEALER MANAGER AGREEMENT
November 22, 1994
Morgan Stanley & Co.
Incorporated
1251 Avenue of the Americas
New York, New York 10020
Dear Sirs:
1. General. Borden Acquisition Corp., a
-------
New Jersey corporation ("Bidder") and a subsidiary of
Whitehall Associates, L.P. (and, prior to the consummation
of the Exchange Offer referred to below, common stock of
which will also be held by KKR Partners II, L.P.
(collectively "Parents")), limited partnerships affiliated
with Kohlberg Kravis Roberts & Co., L.P., plans to make an
offer (such offer, as it may from time to time be amended
and supplemented, being the "Exchange Offer") for all
outstanding shares of common stock, par value $.625 per
share (the "Shares"), of Borden, Inc., a New Jersey
corporation (the "Company"), in exchange for shares of
common stock, par value $.01 per share (the "Exchange
Shares") of RJR Nabisco Holdings Corp. ("Holdings"), on the
terms and subject to the conditions set forth in the
Exchange Offer Materials (as defined below).
2. Engagement as Dealer Manager. Bidder hereby
----------------------------
engages you as sole Dealer Manager in connection with the
Exchange Offer. As Dealer Manager, you agree, in accordance
<PAGE>
with your customary practice, to perform in connection with
the Exchange Offer the services that are customarily
performed by investment banking concerns in connection with
similar exchange offers, including, without limitation,
soliciting the tender of Shares pursuant to the Exchange
Offer. As Dealer Manager in connection with the Exchange
Offer, you shall act as an independent contractor (and shall
not be deemed to act as an agent of Bidder) with duties
solely to Bidder.
3. Solicitation of Tenders. In soliciting
-----------------------
tenders, no securities broker or dealer, commercial bank or
trust company shall be deemed to act as your agent or the
agent of Bidder or Parent; and you, as Dealer Manager, shall
not be deemed the agent of any other securities broker or
dealer or of any commercial bank or trust company.
4. Exchange Offer Material. (a) Holdings has
-----------------------
filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations of the Commission
thereunder, a registration statement (File No. 33-55767) in
respect of the Exchange Shares issuable pursuant to the
Exchange Offer and such registration statement and any post-
effective amendment thereto has been declared effective by
the Commission. Any offering circular-prospectus used
before the time such registration statement becomes
effective is hereinafter referred to as a "Preliminary
-2-
<PAGE>
Prospectus"; the various parts of such registration
statement, including all exhibits thereto and including the
documents incorporated by reference in the offering
circular-prospectus contained in the registration statement
at the time such part of the registration statement became
effective, each as amended at the time such part of the
registration statement became effective, is hereinafter
called the "Registration Statement"; and the final offering
circular-prospectus, in the form included in the
Registration Statement at the time it became effective, is
hereinafter called the "Prospectus," except that if the
final offering circular-prospectus furnished to you for use
in connection with the Exchange Offer differs from the
offering circular-prospectus set forth in the Registration
Statement (whether or not such prospectus is required to be
filed pursuant to Rule 424(b) under the Act), the term
"Prospectus" shall refer to the final offering circular-
prospectus furnished to you for such use. Any reference
herein to any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include the documents incorporated
by reference therein pursuant to Item 11 of Form S-4 under
the Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any
documents filed after the date of such Preliminary
-3-
<PAGE>
Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement
shall be deemed to refer to and include any annual report of
Holdings filed pursuant to Section 13(a) or 15(d) of the
Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the
Registration Statement.
(b) Bidder has prepared and filed, or agrees that
prior to or on the Commencement Date (as defined below) it
will file, with the Commission under the Exchange Act and
the rules and regulations promulgated thereunder a Statement
on Schedule 14D-1 with respect to the Exchange Offer
(including the exhibits thereto and any documents
incorporated by reference therein, the "Schedule 14D-1").
(c) The Registration Statement and the
Prospectus, and the related letter of transmittal to be used
by holders tendering Shares pursuant to the Exchange Offer
(the "Letter of Transmittal"), notice of guaranteed
delivery, and any other offering materials and information
as the Bidder may use or prepare, approve or authorize for
use in connection with the Exchange Offer, including the
Schedule 14D-1, each as amended or supplemented from time to
-4-
<PAGE>
time, are herein collectively referred to as the "Exchange
Offer Materials."
(d) Bidder agrees that, a reasonable time prior
to using, or filing with the Commission, it will furnish to
you draft copies of the Exchange Offer Materials (other than
documents incorporated by reference therein by Holdings) and
will give reasonable consideration to your and your
counsel's prompt comments, if any, thereon, provided,
however, that Bidder may issue press releases without
furnishing you with draft copies thereof if due to time
constraints it is not practicable to do so.
5. Exchange Offer. (a) Bidder intends to
--------------
commence the Exchange Offer as soon as practicable after the
Registration Statement becomes effective under the Act by
publicly announcing its commencement and by mailing, or
causing to be mailed on its behalf, copies of the
Prospectus, the related Letter of Transmittal and such of
the other Exchange Offer Materials as may be required or as
Bidder may elect to furnish to each holder of record of the
Shares (the date of the commencement of such distribution
being herein called the "Commencement Date").
(b) Bidder has approved the Exchange Offer
Materials and authorizes you and any other securities dealer
or any commercial bank or trust company to use the Exchange
Offer Materials in connection with the solicitation of
tenders and you agree not to provide any information to
-5-
<PAGE>
holders of Shares in connection with any solicitation other
than the information contained in the Exchange Offer
Materials. You shall not have any obligation to cause any
Exchange Offer Materials to be transmitted generally to the
holders of the Shares.
6. Withdrawal. In the event that (i) Bidder or
----------
Parent uses or permits the use of, any Exchange Offer
Materials (a) which are required to be but have not been
timely submitted to you previously for your and your
counsel's comments or (b) which have been so submitted, and
you have or your counsel has made comments which have not
been reflected in a manner reasonably satisfactory to you
and your counsel; (ii) any of Bidder or Holdings shall have
breached, in any material respect, any of its
representations, warranties, agreements or covenants herein;
(iii) the Registration Statement shall not have become
effective on or prior to the Commencement Date, or, at any
time during the Exchange Offer, a stop order suspending the
effectiveness of the Registration Statement shall have been
issued or a proceeding for that purpose shall have been
instituted or shall be pending or threatened by the
Commission, or a request for additional information on the
part of the Commission shall not have been satisfied to your
reasonable satisfaction; or there shall have been issued, at
any time during the Exchange Offer, any temporary
restraining order or injunction restraining or enjoining you
-6-
<PAGE>
from acting in your capacity as Dealer Manager with respect
to the Exchange Offer; (iv) Deloitte & Touche LLP,
independent public accountants to Holdings, shall not have
furnished to you on the Commencement Date, a letter dated
the date of delivery thereof, in form and substance
satisfactory to you, containing statements and information
of the type ordinarily included in accountants' "procedures
letters" with respect to the financial statements and
certain financial information relating to Holdings contained
in or incorporated by reference into the Registration
Statement or the Prospectus and confirming that they are
independent accountants within the meaning of the Act and
the Exchange Act and the respective applicable published
rules and regulations thereunder; or (v) on the Commencement
Date you shall not have received a certificate of an
executive officer of Bidder, dated as of the date of
delivery thereof, to the effect that all representations and
warranties of Bidder contained herein are true and correct
in all material respects as though expressly made at such
time and Bidder has performed in all material respects, all
of its obligations hereunder theretofore required to be
performed; then you shall be entitled to withdraw as Dealer
Manager in connection with the Exchange Offer without any
liability or penalty to you or any other Indemnified Person
(as defined in Section 14 below) and without loss of any
right to indemnification or contribution provided in
-7-
<PAGE>
Section 14. If you withdraw as Dealer Manager in connection
with the Exchange Offer, you shall promptly refund any fee
paid to you as a result of the commencement of the Exchange
Offer by Bidder pursuant to the Engagement Letter.
7. Fees. Pursuant to a letter agreement dated
----
September 12, 1994 between Bidder and you (the "Engagement
Letter"), Bidder has agreed, among other things, to
compensate you for your services as financial advisor to
Bidder, including your services as Dealer Manager. No
separate compensation shall be payable hereunder.
8. Reimbursement of Expenses, Etc. Whether or
-------------------------------
not any Shares are acquired pursuant to the Exchange Offer,
Bidder agrees to reimburse all dealers and brokers
(including you), commercial banks, trust companies and
nominees for their customary mailing and handling expenses
incurred in forwarding the Exchange Offer Materials to their
customers. The expense reimbursement provisions of the
Engagement Letter are incorporated herein by reference as if
restated herein in their entirety, and Bidder agrees to
reimburse your expenses as provided therein.
9. The Exchange Agent and Information Agent.
----------------------------------------
Bidder has appointed, and authorizes you to communicate
with, First Chicago Trust Company of New York, in its
capacity as exchange agent (the "Exchange Agent"), and
D.F. King & Co., Inc., in its capacity as information agent
(the "Information Agent"), in connection with the Exchange
-8-
<PAGE>
Offer. Bidder shall advise or cause the Exchange Agent to
advise you at 5:00 p.m., New York City time, or as promptly
as practicable thereafter, daily or more frequently if
requested as to major tally figures, by telephone or
facsimile transmission as to, as of 4:00 p.m., the following
information with respect to Shares (and Rights if
applicable) tendered: (i) the number of Shares (and Rights
if applicable) validly tendered on such day; (ii) the number
of Shares (and Rights if applicable) validly tendered
represented by certificates physically held by the Exchange
Agent (or for which the Exchange Agent has received
confirmation of receipt of book-entry transfer of such
Shares (and Rights if applicable) into its account at a
Book-Entry Transfer Facility pursuant to the procedures set
forth in the Exchange Offer) on such day; (iii) the number
of Shares (and Rights if applicable) represented by Notices
of Guaranteed Delivery on such day; (iv) the number of
Shares (and Rights if applicable) properly withdrawn on such
day; and (v) the cumulative totals of the number of Shares
(and Rights if applicable) in categories (i) through (iv)
above. On the day following such oral communication, Bidder
shall furnish or cause the Exchange Agent to furnish you
with a written report confirming the above information which
has been communicated orally. Bidder shall furnish or cause
the Exchange Agent to furnish you with such reasonable
-9-
<PAGE>
information on the tendering shareholders of Borden as may
be reasonably requested from time to time.
10. Representations and Warranties of Bidder.
----------------------------------------
Bidder represents and warrants to you that:
(a) Bidder is a corporation duly organized,
validly existing and in good standing under the laws of
the jurisdiction of its incorporation, each Parent is a
limited partnership duly organized, validly existing
and in good standing under the laws of the jurisdiction
of its organization, Bidder has all necessary power and
authority to execute and deliver this Agreement and to
perform its obligations hereunder and each of Bidder
and each Parent has all necessary power and authority
to consummate the Exchange Offer.
(b) The Exchange Offer, this Agreement and
all other actions by Bidder and each Parent
contemplated in the Exchange Offer Materials and this
Agreement have been duly and validly authorized by all
necessary corporate or partnership action by Bidder and
each Parent, and no other corporate or partnership
proceedings by Bidder or either Parent are necessary to
authorize any such actions.
(c) This Agreement has been duly and validly
executed and delivered by Bidder and is a legal, valid
and binding obligation of Bidder, enforceable against
Bidder in accordance with its terms, except as affected
-10-
<PAGE>
by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a
proceeding in equity or at law), an implied covenant of
good faith and fair dealing and considerations of
public policy. The Engagement Letter and the indemnity
letter dated September 12, 1994 between Bidder and you
(the "Indemnity Letter") each has been duly and validly
executed and delivered by Bidder and each is a legal,
valid and binding obligation of Bidder enforceable
against it in accordance with their respective terms,
except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether
considered in a proceeding in equity or at law), an
implied covenant of good faith and fair dealing and
considerations of public policy.
(d) The Registration Statement conforms, and
the Prospectus and any further amendments or
supplements to the Registration Statement or the
Prospectus will conform, in all material respects to
the requirements of the Act and the Exchange Act and
the rules and regulations of the Commission thereunder;
the Registration Statement did not, as of its effective
-11-
<PAGE>
date, and will not, as of the date of effectiveness of
any amendment thereto, contain an untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the
statements therein not misleading; and the Prospectus
did not and will not, as of its filing date or as of
the filing date of any amendment or supplement thereto,
include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading; provided,
however, that this representation and warranty shall
not apply to any statements or omissions made in
reliance upon and in conformity with information
furnished in writing to Bidder or Holdings by you
expressly for use therein; provided, further, that this
representation and warranty does not cover information
regarding the Company.
(e) The Schedule 14D-1, as originally filed
and subsequently amended, the other Exchange Offer
Materials and any amendment or supplement thereto con-
form, or will conform, in all material respects with
all applicable requirements of the Act and the Exchange
Act and the rules and regulations of the Commission
thereunder; and none of the Schedule 14D-1, the other
Exchange Offer Materials or any amendment or supplement
-12-
<PAGE>
thereto includes, or will include, an untrue statement
of a material fact or omit to state a material fact
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading; provided, however, that this
representation and warranty shall not apply to any
statements or omissions made in reliance upon and in
conformity with information furnished in writing to
Bidder or Holdings by you expressly for use therein;
provided, further, that this representation and
warranty does not cover information regarding the
Company.
(f) Bidder will accept Shares for exchange
in accordance with and subject to the terms and
conditions of the Exchange Offer; and Bidder has
requested the Exchange Agent and the Exchange Agent has
agreed with Bidder to make appropriate arrangements
with The Depository Trust Company, the Midwest
Securities Trust Company, the Philadelphia Depository
Trust Company and any other "qualified" registered
securities depository to allow for the book-entry
movement of exchanged Shares between depository
participants and the Exchange Agent.
(g) Except as disclosed in the Prospectus,
(i) the Exchange Offer, the consummation of the
transactions contemplated by the Exchange Offer and the
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<PAGE>
execution and delivery of, and the consummation of the
transactions contemplated in, this Agreement will
comply in all material respects with all applicable
requirements of law, including the Act, the Exchange
Act, the various state securities or "blue sky" laws
and state "takeover" statutes (collectively, "State
Statutes") and all applicable regulations of the
Commission or any other governmental agency (an "Other
Agency"), and (ii) except for permits and similar
authorizations required under the securities or "blue
sky" laws of certain jurisdictions, and except for such
consents which are required and have been obtained, the
commencement and consummation by Bidder and Parent of
the Exchange Offer and the other transactions
contemplated herein and in the Exchange Offer do not
and will not require any material consent, approval,
authorization or permit of, filing with or notification
to, the Commission or any Other Agency.
(h) Except as would not have a material
adverse effect on the ability of Bidder to perform its
obligations hereunder and of Bidder and each Parent to
consummate the Exchange Offer and the other
transactions contemplated thereby, the Exchange Offer,
the consummation of the transactions contemplated by
the Exchange Offer and the execution and delivery of,
and the consummation of the transactions contemplated
-14-
<PAGE>
in, this Agreement do not and will not (i) conflict
with or violate the certificate of incorporation or by-
laws or equivalent organizational documents of Bidder
or either Parent, (ii) conflict with or violate any
order, judgment or decree applicable to Bidder or
either Parent or by which any property or asset of
Bidder or either Parent is bound, or (iii) result in a
breach of or constitute a default (or an event which
with notice or lapse of time or both would become a
default) under, or give to others any rights of
termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encum-
brance on any property or asset of Bidder or either
Parent pursuant to, any loan or credit agreement,
indenture, mortgage, note or other agreement or
instrument to which Bidder or either Parent or any of
their subsidiaries or affiliates is a party or by which
any of them or any of their respective properties or
assets is bound.
(i) Neither Bidder nor either Parent is, or
will be as a result of the consummation of the Exchange
Offer, an "investment company" under the Investment
Company Act of 1940, as amended, and the rules and
regulations promulgated by the Commission thereunder.
11. Representations and Warranties Relating to
------------------------------------------
Holdings. Bidder represents and warrants to you that:
--------
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<PAGE>
(a) Holdings is a corporation duly
organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and
has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its
obligations hereunder.
(b) The execution and delivery of this
Agreement and the performance by Holdings of its
obligations hereunder have been duly and validly
authorized by all necessary corporate actions by
Holdings.
(c) This Agreement has been duly and validly
executed and delivered by Holdings and is a legal,
valid and binding obligation of Holdings, enforceable
against it in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether
considered in a proceeding in equity or at law), an
implied covenant of good faith and fair dealing and
considerations of public policy.
(d) The execution and delivery of this
Agreement and the performance by Holdings of its
obligations hereunder do not and will not (i) conflict
with the certificate of incorporation or by-laws of
-16-
<PAGE>
Holdings, (ii) conflict with or violate any order,
judgment or decree applicable to Holdings or by which
any property or asset of Holdings is bound, or
(iii) except as disclosed in the Exchange Offer
Materials result in a material breach of or constitute
a material default (or an event which with notice or
lapse of time or both would become a default) under, or
give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property
or asset of Holdings pursuant to, any loan or credit
agreement, indenture, mortgage, note or other agreement
or instrument to which Holdings or any of its
subsidiaries or affiliates is a party or by which any
of them or any of their respective properties or assets
is bound.
(e) Holdings has obtained all consents,
approvals, authorizations and orders of, and has duly
made all registrations, qualifications and filings
with, any court or regulatory authority or other
governmental agency or instrumentality required on its
part to be obtained or made in connection with the
execution, delivery and performance of this Agreement
by it and the registration of the Exchange Shares for
exchange.
-17-
<PAGE>
(f) The financial statements of Holdings and
its subsidiaries set forth or incorporated by reference
in the Exchange Offer Materials fairly present the
financial condition of Holdings and its consolidated
subsidiaries as of the dates indicated and the results
of operations and changes in financial position for the
periods therein specified, and have been prepared in
conformity with generally accepted accounting
principles consistently applied throughout the periods
involved (except as otherwise stated therein).
(g) No order preventing or suspending the
use of any Preliminary Prospectus has been issued by
the Commission, and the Registration Statement on the
date it became effective did not contain an untrue
statement of a material fact or omit to state a
material fact required to be stated therein or
necessary to make the statements therein, in the light
of the circumstances under which they were made, not
misleading; provided, however, that this representation
and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with
information furnished in writing to Holdings by you
expressly for use therein.
(h) Except as disclosed in the Prospectus,
since the date of the most recent audited financial
statements included in the Exchange Offer Materials,
-18-
<PAGE>
Holdings has conducted its business only in the
ordinary course consistent with past practice, and
there is not and has not been any change in the
business, financial condition or results of operations
of Holdings or any of its subsidiaries which has had,
or would reasonably be expected to have, a material
adverse effect on the business, financial condition or
results of operations of Holdings and its subsidiaries,
taken as a whole.
(i) All of the issued and outstanding shares
of Holdings common stock have been duly and validly
authorized and issued, are fully paid and
non-assessable and conform to the description of the
Holdings common stock contained in the Prospectus. All
of the Exchange Shares transferred to holders of the
Shares pursuant to the Exchange Offer will be
transferred free and clear of all liens, charges and
encumbrances of all kinds.
12. Opinions of Counsel to Bidder and Holdings.
------------------------------------------
Bidder has delivered to you opinions in form and substance
satisfactory to you, of Lowenstein, Sandler, Kohl, Fisher &
Boylan, P.A., special New Jersey counsel to Bidder, Simpson
Thacher & Bartlett, counsel to Bidder, Davis, Polk &
Wardwell, counsel to Holdings, and Jo-Ann Ford, counsel of
Holdings.
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<PAGE>
13. Covenants of Bidder and Holdings. (a)
--------------------------------
Bidder will notify you, promptly after it receives notice
thereof, of the time when the Registration Statement, or any
amendment thereto, has been filed or becomes effective, or
any amendment or supplement to the Prospectus or any
amendment to the Schedule 14D-1 or any amended or additional
Exchange Offer Materials shall have been filed, of the
receipt of any comments from the Commission relating to the
Exchange Offer, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use
of any Preliminary Prospectus or Prospectus or any of the
Exchange Offer Materials, of the suspension of the
qualification of the Exchange Shares for offering or sale in
connection with the Exchange Offer in any jurisdiction, of
any request by the Commission to amend or supplement the
Registration Statement, the Prospectus, or the Schedule
14D-1 or the other Exchange Offer Materials. Bidder will
also inform you, promptly after it receives notice thereof,
of any material litigation or other administrative
proceeding with respect to the Exchange Offer.
(b) Holdings will notify you, promptly after it
receives notice thereof, of the time when the Registration
Statement, or any amendment thereto, has been filed or
becomes effective, or any amendment or supplement to the
Prospectus of the receipt of any comments from the
Commission relating to the Registration Statement, of the
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<PAGE>
issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary
Prospectus or Prospectus, of the suspension of the
qualification of the Exchange Shares for offering or sale in
connection with the Exchange Offer in any jurisdiction, of
any request by the Commission to amend or supplement the
Registration Statement. Holdings will also inform you,
promptly after it receives notice thereof, of any material
litigation or other administrative proceeding with respect
to the Exchange Offer in which it is named as a party.
(c) Bidder will cause all amendments and
supplements filed with the Commission to be distributed to
holders of the Shares as may be required by the Act and the
Exchange Act and the rules and regulations of the Commission
thereunder. During the period referred to in the second
sentence of paragraph (d) below, Bidder will deliver to you,
without charge, such number of copies of the Prospectus and
the other Exchange Offer Materials (as supplemented or
amended) as you may reasonably request. Prior to the
consummation of the Exchange Offer and before amending or
supplementing the Registration Statement, any Preliminary
Prospectus, the Prospectus, the Schedule 14D-1 or the other
Exchange Offer Materials, or approving any other material
for use in connection with the Exchange Offer, other than,
in each case, documents incorporated by reference therein by
Holdings, Bidder will furnish you with a copy of each such
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<PAGE>
proposed amendment or supplement, provided, however, that
Bidder may issue press releases without furnishing you with
draft copies thereof if due to time constraints it is not
practicable to do so.
(d) Bidder will comply in all material respects
with the Act and the Exchange Act and the rules and
regulations of the Commission thereunder in connection with
the Registration Statement and the Prospectus, and the other
Exchange Offer Materials, the Exchange Offer and the
transactions contemplated hereby and thereby. If at any
time during the period when a prospectus is required to be
delivered by the Act or the Exchange Act and the rules and
regulations promulgated thereunder in connection with the
Exchange Offer any event shall occur as a result of which it
is necessary to amend or supplement the Prospectus or any of
the other Exchange Offer Materials in order to make the
statements therein, in the light of the circumstances under
which they were made when such Prospectus or other Exchange
Offer Materials are delivered, not misleading, or if in the
opinion of your counsel or in the opinion of Bidder, it
shall be necessary to amend or supplement the Registration
Statement or the Prospectus or any of the other Exchange
Offer Materials in order to comply with law, Bidder will
notify you and promptly prepare and furnish, at its own
expense, to you and file with the Commission, if required,
such amendment or supplement as may be necessary so that the
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<PAGE>
statements in the Prospectus or other Exchange Offer
Materials, as amended or supplemented, will not, in the
light of the circumstances under which they were made when
the Prospectus or the other Exchange Offer Materials are
delivered, be misleading or so that the Registration
Statement and the Prospectus or such other Exchange Offer
Materials comply with law.
(e) Holdings will comply in all material respects
with the Act and the Exchange Act and the rules and
regulations of the Commission thereunder in connection with
the Registration Statement and the Prospectus. If at any
time during the period when a prospectus is required to be
delivered by the Act or the Exchange Act and the rules and
regulations promulgated thereunder in connection with the
Exchange Offer any event shall occur as a result of which it
is necessary to amend or supplement the Prospectus in order
to make the statements therein, in the light of the
circumstances under which they were made when such
Prospectus is delivered, not misleading, or if in the
opinion of your counsel or in the opinion of Holdings, it
shall be necessary to amend or supplement the Registration
Statement or the Prospectus in order to comply with law,
Holdings will notify you and promptly prepare and furnish,
at its own expense, to you and file with the Commission, if
required, such amendment or supplement as may be necessary
so that the statements in the Prospectus, as amended or
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<PAGE>
supplemented, will not, in the light of the circumstances
under which they were made when the Prospectus is delivered,
be misleading or so that the Registration Statement and the
Prospectus comply with law.
(f) Bidder and Holdings will endeavor to qualify
the Exchange Shares for offering and sale under the
securities or Blue Sky laws of such jurisdictions as you
shall reasonably request and Bidder will pay all expenses
(including reasonable fees and disbursements of its counsel)
in connection therewith.
(g) Holdings will make generally available to its
security holders as soon as practicable, but in any event
not later than 12 months after the effective date of the
Registration Statement (as defined in Rule 158(c) under the
Act) an earnings statement of Holdings and its subsidiaries
complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the
option of Holdings, Rule 158 under the Act).
(h) Bidder shall promptly give you notice of any
change of the expiration date of the Exchange Offer, of the
occurrence of any event which could cause Bidder and Parent
to withdraw, rescind, modify or amend the Exchange Offer and
of any consummation of the Exchange Offer.
(i) Bidder shall promptly give you notice of any
material request for additional information or other
material action by (i) the Federal Trade Commission or the
-24-
<PAGE>
Antitrust Division of the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or the rules promulgated thereunder, (ii) the
European Commission under Regulations (EEC) No. 4064/89, or
(iii) the Director of Investigation and Research under
Canada's Competition Act.
(j) Bidder shall promptly give you any other
information relating to the Exchange Offer which you may
from time to time reasonably request.
14. Indemnification and Contribution; Settlement
--------------------------------------------
of Litigation; Release. (a) The provisions of the
----------------------
Indemnity Letter relating to indemnification are
incorporated herein by reference as if restated herein in
their entirety, and Bidder agrees to indemnify you and the
other Indemnified Persons as provided in the Indemnity
Letter.
(b) In case any proceeding (including any
governmental investigation) shall be instituted involving
any person in respect of which indemnity may be sought
pursuant to Section 14(a), such person (the "indemnified
party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party in such proceeding and shall pay the
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<PAGE>
reasonable fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and
the indemnified party and representation of both parties by
the same counsel would be inappropriate due to actual or
potential differing interests between them. It is under-
stood that the indemnifying party shall not, in connection
with any proceeding or related proceeding in the same
jurisdiction, be liable for the reasonable fees and expenses
of more than one separate firm (in addition to any local
counsel) for all such indemnified parties, and that all such
fees and expenses shall be reimbursed as they are incurred.
The indemnifying party shall not be liable for any settle-
ment of any proceeding effected without its written consent,
but if settled with such consent or if there shall be a
final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or
judgment. Bidder will not, without your prior written
consent, settle, compromise, consent to the entry of any
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<PAGE>
judgment in or otherwise seek to terminate any action,
claim, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not you
are a party thereto) unless such settlement, compromise,
consent or termination includes a release of you from any
liabilities arising out of such action, claim, suit or
proceeding.
(c) If the indemnification provided for in
Section 14(a) above is unavailable to an indemnified party
or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabil-
ities (i) in such proportion as is appropriate to reflect
the relative benefits received by Bidder on the one hand and
you on the other from the Exchange Offer or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of Bidder and Holdings
on the one hand and of you on the other, in the case of
statements or omissions in connection with the statements or
omission or, in the case of any other action or omission,
the action or omission which resulted in such losses,
claims, damages or liabilities, as well as any other
-27-
<PAGE>
relevant equitable considerations. The relative benefits
received by Bidder on the one hand and you on the other in
connection with the Exchange Offer shall be deemed to be in
the same proportion as the maximum aggregate value of the
consideration proposed to be paid by Bidder to acquire the
Shares pursuant to the Exchange Offer bears to the maximum
aggregate fee proposed to be paid to you pursuant to Section
7 of this Agreement (including any such fee payable pursuant
to the Engagement Letter) as a result of the acquisition of
the Shares pursuant to the Exchange Offer. The relative
fault of Bidder and Holdings on the one hand and you on the
other shall be determined by reference to, among other
things, in the case of statements or omission, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact
relates to information supplied by Bidder or Holdings on the
one hand or you on the other and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission and, in the
case of any other action or omission, whether such action or
omission was taken or omitted to be taken by Bidder or
Holdings on the one hand or you on the other and the
parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such action or
omission.
-28-
<PAGE>
(d) Bidder and you agree that it would not be
just and equitable if contribution pursuant to subsection
(c) of this Section 14 were determined by pro rata
allocation or by any other method of allocation which does
not take account of the equitable considerations referred to
in subsection (c) of this Section 14. The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in Section 14(c)
above shall be deemed to include, subject to the limitations
set forth above, any reasonable legal or other expenses
reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 14, you shall
not be required to contribute any amount in excess of the
amount by which the fee paid to you as provided in Section 7
of this Agreement (including any such fee payable pursuant
to the Engagement Letter) exceeds the amount of any damages
which you have been required to pay in the case of
statements or omissions, by reason of such untrue or alleged
untrue statement or omission or alleged omission, or, in the
case of actions or omissions, by reason of such action or
omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
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<PAGE>
(e) The agreements contained in Section 7, the
indemnity and contribution agreement contained in this
Section 14 and the representations and warranties of Bidder
set forth in Sections 10 and 11 hereof shall remain
operative and in full force and effect regardless of (i) any
termination or cancellation of this Agreement, (ii) any
completion of the engagement provided by this Agreement or
(iii) any investigation made by or on behalf of you and your
officers, partners or directors or of any person controlling
you and shall survive any acquisition of the Shares, whether
pursuant to the Exchange Offer or otherwise.
(f) The reimbursement, indemnity and contribution
obligations of Bidder under this Section 14 shall be in
addition to any liability which the Bidder may otherwise
have, shall extend upon the same terms and conditions to
your affiliates and your partners, directors, agents,
employees and controlling persons, if any (such persons,
collectively referred to herein as, the "Indemnified
Person"), and shall inure to the benefit of any successors,
assigns, heirs and personal representative of Morgan Stanley
& Co. Incorporated and any other such Indemnified Persons
referred to above.
15. Severability. If any term or other provision
------------
of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other
provisions of this Agreement shall nevertheless remain in
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<PAGE>
full force and effect so long as the economic and legal
substance of the agreements contained herein is not affected
in any manner adverse to any party.
16. Counterparts. This Agreement may be executed
------------
by the different parties hereto in one or more separate
counterparts, each of which when executed shall be deemed an
original, but all of which together shall constitute one and
the same agreement.
17. Binding Effect. This Agreement shall be
--------------
binding upon and inure solely to the benefit of each party
hereto and the Indemnified Persons, and nothing in this
Agreement, express or implied, is intended to or shall
confer upon any other person any right, benefit or remedy.
18. Governing Law. This Agreement shall be
-------------
governed by and construed in accordance with the laws of the
State of New York applicable to contracts executed in and to
be performed in that State.
19. Entire Agreement. This Agreement, together
----------------
with the Engagement Letter and the Indemnity Letter, consti-
tute the entire agreement among the parties hereto with
respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject
matter hereof.
20. Amendment. This Agreement may not be amended
---------
except in writing signed by each party to be bound thereby.
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<PAGE>
21. Notices. All notices and other communica-
-------
tions required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly
given if delivered in person, or by registered or certified
mail (postage prepaid, return receipt requested) to the
parties hereto as follows (or, as to each party, at such
other address as shall be designated by such party in a
written notice complying as to delivery with the terms of
this paragraph):
(a) If to you:
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
Attention: O. Griffith Sexton
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Neil T. Anderson
(b) If to Bidder:
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street, Suite 4200
New York, New York 10019
Attention: Clifton S. Robbins and
Scott M. Stuart
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Charles I. Cogut and
David J. Sorkin
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(c) If to Holdings:
RJR Nabisco Holdings Corp.
1301 Avenue of the Americas
New York, New York 10019
Attention: Lawrence R. Ricciardi
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Samuel F. Pryor III
22. Subheadings. The descriptive headings
-----------
contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
Please indicate your willingness to act as Dealer
Manager on the terms set forth herein and your acceptance of
the foregoing provisions by signing in the space provided
below for that purpose and returning to us a copy of this
-33-
<PAGE>
letter, whereupon this letter and your acceptance shall
constitute a binding agreement among us.
Very truly yours,
BORDEN ACQUISITION CORP.
By
-----------------------------
Name:
Title:
RJR NABISCO HOLDINGS CORP.
By
-----------------------------
Name:
Title:
Accepted as of the date
first set forth above:
MORGAN STANLEY & CO.
INCORPORATED
By
-----------------------
Name:
Title:
-34-
EXHIBIT 11(g)(1)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------X
:
LINDA MUSHALA, :
: Civil Action No. 13738
Plaintiff, :
:
:
- v. - :
:
H. JOHN GREENIAUS, JAMES W. JOHNSTON, :
CHARLES M. HARPER, HENRY R. KRAVIS, :
PAUL E. RAETHER, GEORGE R. ROBERTS, :
JAMES J. GREENE, JR., SCOTT M. :
STEWART, MICHAEL TOKARZ, SAUL :
FOX, CLIFTON S. ROBBINS and :
KOHLBERG KRAVIS ROBERTS & CO., L.P., :
:
Defendants, :
:
and :
:
RJR NABISCO HOLDINGS CORP., :
:
Nominal Defendant. :
- ----------------------------------------X
COMPLAINT
---------
Plaintiff, by and through undersigned counsel, alleges upon information
and belief, except as to paragraph 2, which is alleged on knowledge, as follows:
1. Plaintiff brings this action to redress injuries to RJR Nabisco
Holdings Corp. ("RJR" or the "Company") and its public shareholders which would
result from RJR's acquisition of a 20% interest in Borden Inc. ("Borden") (the
"Purchase") directed by RJR's controlling shareholder, Kohlberg Kravis Roberts &
Co., L.P. ("KKR") after KKR acquires Borden by merger. RJR's proposed
acquisition of an interest in Borden is at an unfairly high price which benefits
KKR at the expense of RJR and its shareholders.
<PAGE>
THE PARTIES
-----------
2. Plaintiff Linda Mushala has owned 100 shares of RJR common stock since
prior to the announcement of the Purchase and the KKR/Borden merger (the
"Merger").
3. Defendant RJR is a Delaware corporation and is an international
company principally engaged in the food and tobacco industries. RJR is a global
leader in the food and tobacco industries with annual sales of over $30 billion.
RJR's wholly-owned subsidiary RJR Nabisco, Inc., is the Company's operating
subsidiary.
4. The following defendants are officers of the Company (the "Management
Defendants") and all were appointed by virtue of KKR's control of RJR's Board
and continue to serve in these extraordinarily lucrative positions at KKR'S
discretion:
a. Defendant Charles M. Harper is an RJR director, and is its
chairman and chief executive officer. For fiscal year 1993, Harper earned over
$2.6 million dollars and acquired stock options for an additional 8.75 million
shares. Harper owns 622,688 shares of RJR stock.
b. Defendant H. John Greeniaus is a director of the Company and the
Chairman and Chief Executive Officer of Nabisco Foods Group. In fiscal 1993,
Greeniaus received over $1.2 million in compensation, $600,000 in restricted
stock awards and 500,000 shares in stock options. Greeniaus owns over 2 million
shares of RJR stock.
c. Defendant James W. Johnston, is an RJR director and the Chairman and
Chief Executive Officer of R. J. Reynolds Tobacco Company. For the 1993 fiscal
year, Johnston earned over
2
<PAGE>
$950,000, received $826,468 in restricted stock awards and options for the
purchase of an additional 500,000 shares. Johnston owns over 2 million shares of
RJR stock.
5. Defendant KKR is a Delaware limited partnership which is engaged in
the investment banking business. As a result of KKR's acquisition of RJR
Nabisco Inc. in 1988, KKR owns approximately 48.9% of RJR common stock. By
virtue of its stock ownership and the fact that eight of RJR's directors are
affiliated with KKR, KKR controls the business and affairs of the Company and
has caused it to enter into the self-dealing transaction described herein.
6. Defendants Henry R. Kravis, Paul E. Raether, George R. Roberts, James
H. Greene, Jr., Scott M. Stewart, Michael Tokarz, Saul Fox and Clifton S.
Robbins are all directors of RJR and executives, general partners and/or limited
partners in KKR. Each of these directors has the ability to control the business
and affairs of RJR by virtue of their membership on the Board and KKR's
ownership of RJR common stock. Defendants named in paragraphs 4 and 6 are
referred to herein as the "Director Defendants".
7. KKR acquired RJR in 1989 and 1990, for approximately $3.2 billion, an
average of approximately $5.60 per share. KKR sold RJR stock to the investing
public in 1991 for $11.25 per share.
FACTS
-----
8. On September 12, 1994, KKR announced that it was purchasing 100% of
Borden in a $2 billion transaction. As announced by the wire services:
3
<PAGE>
Columbus, Ohio, Sept. 12 (Bloomberg) --Kohlberg Kravis
Roberts & Co. will trade about $2 billion in stock, or half
its controlling stake in RJR Nabisco Holdings Corp., for all
of troubled food giant Borden Inc., the companies said
today.
KKR, the privately held takeover boutique behind RJR
Nabisco's massive leveraged buyout, said the transaction
values Borden stock at $14.25, a premium of 22.6% over the
closing price of Borden shares on Friday.
Thus, as a result of the merger, KKR will reduce its controlling interest
in RJR by approximately 50%. As stated in the news release "KKR will continue
to own an approximately $2 billion stake in RJR Nabisco, to have significant
representation on the board, and to play an active role in exploring ways to
maximize shareholder value."
9. Also on September 12, RJR announced that following KKR's purchase of
Borden, KKR would sell part of its stake in Borden to RJR for newly issued RJR
shares. Under the arrangement, after KKR acquires 100% of Borden, RJR will
issue approximately $500 million in new RJR common shares to Borden in return
for a 20% stake in Borden. RJR also will receive warrants to purchase an
additional 10% of Borden and have an opportunity to designate a number of
directors to Borden's Board.
10. The agreement for RJR to purchase a 20% stake in Borden is manifestly
unfair to RJR's shareholders. While KKR is obtaining, in the first instance,
100% of Borden for approximately $2 billion, RJR will only receive a 20%
interest in Borden for consideration worth $500 million.
11. KKR, which controls RJR (and will control Borden after the Merger),
proposes charging RJR an exorbitant mark-up of
4
<PAGE>
$100 million over what KKR paid for the same 20% interest in Borden. Moreover,
RJR is paying for its Borden stake on the basis of a $14.25 per share price --
which reflects a control premium paid by KKR. As KKR is retaining 80% ownership
of Borden, it is grossly unfair for RJR to pay any control premium for its
Borden stake. Had the defendants acted in good faith and dealt fairly with RJR,
RJR's price per share should be significantly less than the $14.25 per share to
be paid for Borden by KKR.
12. Thus, as the transaction is structured, KKR will effectively pay $1.5
billion for its 80% interest in Borden, and, through Borden, will receive back a
substantial portion of its RJR stock, as a result of RJR's purchase of 20% of
Borden. Moreover, KKR has structured the deal so that it might take advantage of
substantial tax losses associated with its investment in RJR by paying the full
$2 billion price for Borden in RJR stock, while at the same time it will receive
back $500 million in RJR stock as part of the second step of the transaction.
13. Moreover, the issuance of $500 million in new RJR common stock will
substantially dilute the cash value and shareholdings of the non-controlling
public stockholders of RJR.
DERIVATIVE CLAIM
----------------
14. Plaintiff brings the following claim derivatively for the benefit of
RJR.
15. The Purchase serves no corporate interest of RJR, but rather serves to
facilitate KKR's acquisition of Borden while ensuring KKR's continued control of
RJR.
5
<PAGE>
16. Moreover, the proposed price of the Purchase grossly overvalues RJR's
proposed 20% interest in Borden for the benefit of KKR and to the detriment of
RJR. It causes RJR to issue its stock for inadequate consideration, thereby
wasting RJR's assets.
17. Demand on RJR's Board of Directors to bring this claim would be futile
and is therefore excused because:
a. RJR's Board is legally incapable of exercising judgment
independent of KKR's interests. Eight of RJR's seventeen Board members (as set
forth in paragraph 6) are also executives, general partners and/or limited
partners of KKR and the three management directors, who are defendants herein,
are dependent upon RJR for their continued employment and compensation. These
defendants, therefore, are not independent and make up a majority of RJR's
Board.
b. For the same reasons, a majority of RJR's directors have an
interest in implementing the Purchase.
c. Corporate waste, involving the overpayment for RJR's proposed
stake in Borden, cannot constitute business judgment.
d. A majority of RJR's directors are responsible for the wrongs
alleged and are named as defendants herein and cannot be expected to sue
themselves.
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings the following claims individually and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of
all common stockholders of RJR and their successors in interest (other than the
defendants named herein),
6
<PAGE>
and those partnerships, corporations, and other entities that have suffered and
will suffer the harm more fully described heroin (hereinafter the "Class").
19. The Class is so numerous, that the joinder of all members is
impracticable. As of March 29, 1994, RJR had over 1.1 billion common shares
outstanding. Consequently, the number of Class members is believed to be in the
thousands.
20. Plaintiff's claims are typical of the claims of the Class and
plaintiff will fairly and adequately protect the interests of the other Class
members. Plaintiff has retained counsel who are experienced and competent in
both class and derivative litigation, and the plaintiff has no interests which
are contrary to, or in conflict with, those of the other members of the class to
be represented.
21. There are questions of law and fact common to the Class including,
inter alia:
- ----- ----
a. whether the Director Defendants have breached and will continue
to breach the fiduciary duties owed by them to the plaintiff and the Class by
virtue of their participation and/or acquiescence in the conduct complained of
herein;
b. whether the Director Defendants have engaged in self-dealing
transactions which benefit, inter alia, KKR and the KKR investors, at the
----- ----
expense of the shareholders of RJR;
c. whether, in breach of their duties of care and loyalty, the
Director Defendants wrongfully diluted the cash value and voting rights of the
non-controlling shareholders; and
d. whether KKR aided and abetted the Director Defendants' breaches
of fiduciary duty.
7
<PAGE>
22. The prosecution of separate actions by individual Class members would
create a risk of inconsistent and varying adjudications concerning the subject
matter of this action, which adjudications could establish incompatible
standards of conduct for the defendants in connection with the actions
complained of herein.
23. The defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
CLAIM FOR RELIEF
----------------
24. Plaintiff incorporates the allegations in paragraphs 1 through 13 and
15-16 above as if fully set forth herein.
25. If implemented, the Purchase will result in a dilution of both the
cash value of the public shareholders' interest in RJR and their voting power.
26. Accordingly, the Director Defendants have breached their fiduciary
duties by, inter alia, putting the interests of KKR and its general and limited
----- ----
partners, among others, ahead of the interests of RJR's shareholders generally,
and have used their positions of control as directors of RJR for the purpose of
maximizing the business and financial interests of KKR and its partners, at the
expense of RJR's public shareholders.
27. KKR, as RJR's controlling shareholder, is obligated to deal fairly
with RJR's public shareholders. The Purchase, proposed by KKR to serve its own
interests, breaches that duty.
28. Alternatively, KKR had knowledge of the fiduciary duties owed by the
Director Defendants to the public shareholders
8
<PAGE>
of RJR. KKR knowingly and substantially participated in Director Defendants'
breaches of fiduciary duties as alleged herein.
29. KKR, therefore, is liable to plaintiff and other members of the Class
who have been damaged by the breaches of fiduciary duty.
* * *
30. As to all claims above, plaintiff has no adequate remedy at law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiff demands judgment and preliminary and permanent
relief, including injunctive relief, as follows:
A. An order certifying the individual claims herein as a class action and
designating plaintiff and the undersigned counsel as the representatives
thereof;
B. Declaring and decreeing that the proposed Purchase is a breach of the
fiduciary duties of KKR and the Director Defendants and is therefore unlawful
and unenforceable;
C. Enjoining the defendants from taking any action with respect to
consummating the Purchase;
D. Rescinding, to the extent already implemented, the Purchase or any of
the terms thereof;
E. If all or most of the relief requested above is not granted, a
judgment awarding RJR, plaintiff and the Class compensation for the damages they
sustain as a result of the defendants' unlawful conduct as alleged herein;
9
<PAGE>
F. A judgment awarding plaintiff's attorneys' fees, and costs of suit,
including expert fees; and
G. Such other and further relief as this Court deems just and proper.
Dated: September 13, 1994
ROSENTHAL MONHAIT GROSS
& GODDESS, P.A.
_____________________________
First Federal Plaza
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Max W. Berger, Esq.
Vincent R. Cappucci, Esq.
Bernstein Litowitz Berger
& Grossmann
1285 Avenue of the Americas
33rd Floor
New York, NY 10019
(212) 554-1400
10
EXHIBIT 11(g)(2)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
_______________________________________x
DOROTHY LEFFLER, :
:
Plaintiff, :
:
:
:
- v. - :
:
H. JOHN GREENIAUS, JAMES W. JOHNSTON, :
CHARLES M. HARPER, HENRY R. KRAVIS, :
PAUL E. RAETHER, GEORGE R. ROBERTS, : C.A. No. 13751
JAMES J. GREENE, JR., SCOTT M. :
STEWART, MICHAEL TOKARZ, SAUL :
FOX, CLIFTON S. ROBBINS and :
KOHLBERG KRAVIS ROBERTS & CO., L.P., :
:
Defendants, :
:
and :
:
RJR NABISCO HOLDINGS CORP., :
:
:
Nominal Defendant. :
_______________________________________x
COMPLAINT
---------
Plaintiff, by and through undersigned counsel, alleges upon information and
belief, except as to paragraph 2, which is alleged on knowledge, as follows:
1. Plaintiff brings this action to redress injuries to RJR Nabisco
Holdings Corp. ("RJR" or the "Company") and its public shareholders which would
result from RJR's acquisition of a 20% interest in Borden Inc. ("Borden") (the
"Purchase") directed by RJR's controlling shareholder, Kohlberg Kravis Roberts &
Co., L. P. ("KKR") after KKR acquires Borden by merger. RJR's proposed
acquisition of an interest in Borden is at an unfairly high price which benefits
KKR at the expense of RJR and its shareholders.
<PAGE>
THE PARTIES
-----------
2. Plaintiff Dorothy Leffler has owned shares of RJR common stock since
prior to the announcement of the Purchase and the KKR/Borden merger (the
"Merger").
3. Defendant RJR is a Delaware corporation and is an international
company principally engaged in the food and tobacco industries. RJR is a global
leader in the food and tobacco industries with annual sales of over $30 billion.
RJR's wholly-owned subsidiary RJR Nabisco, Inc., is the Company's operating
subsidiary.
4. The following defendants are officers of the Company (the "Management
Defendants") and all were appointed by virtue of KKR's control of RJR's Board
and continue to serve in these extraordinarily lucrative positions at KKR'S
discretion:
a. Defendant Charles M. Harper is an RJR director, and is its
chairman and chief executive officer. For fiscal year 1993, Harper earned over
$2.6 million dollars and acquired stock options for an additional 8.75 million
shares. Harper owns 622,688 shares of RJR stock.
b. Defendant H. John Greeniaus is a director of the Company and the
Chairman and Chief Executive Officer of Nabisco Foods Group. In fiscal 1993,
Greeniaus received over $1.2 million in compensation, $600,000 in restricted
stock awards and 500,000 shares in stock options. Greeniaus owns over 2 million
shares of RJR stock.
c. Defendant James W. Johnston, is an RJR director and the Chairman
and Chief Executive Officer of R. J. Reynolds Tobacco Company. For the 1993
fiscal year, Johnston earned over
2
<PAGE>
$950,000, received $826,468 in restricted stock awards and options for the
purchase of an additional 500,000 shares. Johnston owns over 2 million shares of
RJR stock.
5. Defendant KKR is a Delaware limited partnership which is engaged in
the investment banking business. As a result of KKR's acquisition of RJR
Nabisco Inc. in 1988, KKR owns approximately 48.9% of RJR common stock. By
virtue of its stock ownership and the fact that eight of RJR's directors are
affiliated with KKR, KKR controls the business and affairs of the Company and
has caused it to enter into the self-dealing transaction described herein.
6. Defendants Henry R. Kravis, Paul E. Raether, George R. Roberts, James
H. Greene, Jr., Scott M. Stewart, Michael Tokarz, Saul Fox and Clifton S.
Robbins are all directors of RJR and executives, general partners and/or limited
partners in KKR. Each of these directors has the ability to control the
business and affairs of RJR by virtue of their membership on the Board and KKR's
ownership of RJR common stock. Defendants named in paragraphs 4 and 6 are
referred to herein as the "Director Defendants".
7. KKR acquired RJR in 1989 and 1990, for approximately $3.2 billion, an
average of approximately $5.60 per share. KKR sold RJR stock to the investing
public in 1991 for $11.25 per share.
FACTS
-----
8. On September 12, 1994, KKR announced that it was purchasing 100% of
Borden in a $2 billion transaction. As announced by the wire services:
3
<PAGE>
Columbus, Ohio, Sept. 12 (Bloomberg) -- Kohlberg Kravis
Roberts & Co. will trade about $2 billion in stock, or half
its controlling stake in RJR Nabisco Holdings Corp., for all
of troubled food giant Borden Inc., the companies said
today.
KKR, the privately held takeover boutique behind RJR
Nabisco's massive leveraged buyout, said the transaction
values Borden stock at $14.25, a premium of 22.6% over the
closing price of Borden shares on Friday.
Thus, as a result of the merger, KKR will reduce its controlling interest in RJR
by approximately 50%. As stated in the news release "KKR will continue to own
an approximately $2 billion stake in RJR Nabisco, to have significant
representation on the board, and to play an active role in exploring ways to
maximize shareholder value."
9. Also on September 12, RJR announced that following KKR's purchase of
Borden, KKR would sell part of its stake in Borden to RJR for newly issued RJR
shares. Under the arrangement, after KKR acquires 100% of Borden, RJR will
issue approximately $500 million in new RJR common shares to Borden in return
for a 20% stake in Borden. RJR also will receive warrants to purchase an
additional 10% of Borden and have an opportunity to designate a number of
directors to Borden's Board.
10. The agreement for RJR to purchase a 20% stake in Borden is manifestly
unfair to RJR's shareholders. While KKR is obtaining, in the first instance,
100% of Borden for approximately $2 billion, RJR will only receive a 20%
interest in Borden for consideration worth $500 million.
11. KKR, which controls RJR (and will control Borden after the Merger),
proposes charging RJR an exorbitant mark-up of
4
<PAGE>
$100 million over what KKR paid for the same 20% interest in Borden. Moreover,
RJR is paying for its Borden stake on the basis of a $14.25 per share price --
which reflects a control premium paid by KKR. As KKR is retaining 80% ownership
of Borden, it is grossly unfair for RJR to pay any control premium for its
Borden stake. Had the defendants acted in good faith and dealt fairly with RJR,
RJR's price per share should be significantly less than the $14.25 per share to
be paid for Borden by KKR.
12. Thus, as the transaction is structured, KKR will effectively pay $1.5
billion for its 80% interest in Borden, and, through Borden, will receive back a
substantial portion of its RJR stock, as a result of RJR's purchase of 20% of
Borden. Moreover, KKR has structured the deal so that it might take advantage of
substantial tax losses associated with its investment in RJR by paying the full
$2 billion price for Borden in RJR stock, while at the same time it will receive
back $500 million in RJR stock as part of the second step of the transaction.
13. Moreover, the issuance of $500 million in new RJR common stock will
substantially dilute the cash value and shareholdings of the non-controlling
public stockholders of RJR.
DERIVATIVE CLAIM
----------------
14. Plaintiff brings the following claim derivatively for the benefit of
RJR.
15. The Purchase serves no corporate interest of RJR, but rather serves to
facilitate KKR's acquisition of Borden while ensuring KKR's continued control of
RJR.
5
<PAGE>
16. Moreover, the proposed price of the Purchase grossly overvalues RJR's
proposed 20% interest in Borden for the benefit of KKR and to the detriment of
RJR. It causes RJR to issue its stock for inadequate consideration, thereby
wasting RJR's assets.
17. Demand on RJR's Board of Directors to bring this claim would be futile
and is therefore excused because:
a. RJR's Board is legally incapable of exercising judgment
independent of KKR's interests. Eight of RJR's seventeen Board members (as set
forth in paragraph 6) are also executives, general partners and/or limited
partners of KKR and the three management directors, who are defendants herein,
are dependent upon RJR for their continued employment and compensation. These
defendants, therefore, are not independent and make up a majority of RJR's
Board.
b. For the same reasons, a majority of RJR's directors have an
interest in implementing the Purchase.
c. Corporate waste, involving the overpayment for RJR's proposed
stake in Borden, cannot constitute business judgment.
d. A majority of RJR's directors are responsible for the wrongs
alleged and are named as defendants herein and cannot be expected to sue
themselves.
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings the following claims individually and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of
all common stockholders of RJR and their successors in interest (other than the
defendants named herein),
6
<PAGE>
and those partnerships, corporations, and other entities that have suffered and
will suffer the harm more fully described herein (hereinafter the "Class").
19. The Class is so numerous, that the joinder of all members is
impracticable. As of March 29, 1994, RJR had over 1.1 billion common shares
outstanding. Consequently, the number of Class members is believed to be in the
thousands.
20. Plaintiff's claims are typical of the claims of the Class and
plaintiff will fairly and adequately protect the interests of the other Class
members. Plaintiff has retained counsel who are experienced and competent in
both class and derivative litigation, and the plaintiff has no interests which
are contrary to, or in conflict with, those of the other members of the Class to
be represented.
21. There are questions of law and fact common to the Class including,
inter alia:
- ----- ----
a. whether the Director Defendants have breached and will continue
to breach the fiduciary duties owed by them to the plaintiff and the Class by
virtue of their participation and/or acquiescence in the conduct complained of
herein;
b. whether the Director Defendants have engaged in self-dealing
transactions which benefit, inter alia, KKR and the KKR investors, at the
----- ----
expense of the shareholders of RJR;
c. whether, in breach of their duties of care and loyalty, the
Director Defendants wrongfully diluted the cash value and voting rights of the
non-controlling shareholders; and
d. whether KKR aided and abetted the Director Defendants' breaches
of fiduciary duty.
7
<PAGE>
22. The prosecution of separate actions by individual Class members would
create a risk of inconsistent and varying adjudications concerning the subject
matter of this action, which adjudications could establish incompatible
standards of conduct for the defendants in connection with the actions
complained of herein.
23. The defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
CLAIM FOR RELIEF
----------------
24. Plaintiff incorporates the allegations in paragraphs 1 through 13 and
15-16 above as if fully set forth herein.
25. If implemented, the Purchase will result in a dilution of both the
cash value of the public shareholders' interest in RJR and their voting power.
26. Accordingly, the Director Defendants have breached their fiduciary
duties by, inter alia, putting the interests of KKR and its general and limited
----- ----
partners, among others, ahead of the interests of RJR's shareholders generally,
and have used their positions of control as directors of RJR for the purpose of
maximizing the business and financial interests of KKR and its partners, at the
expense of RJR's public shareholders.
27. KKR, as RJR's controlling shareholder, is obligated to deal fairly
with RJR's public shareholders. The Purchase, proposed by KKR to serve its own
interests, breaches that duty.
28. Alternatively, KKR had knowledge of the fiduciary duties owed by the
Director Defendants to the public shareholders
8
<PAGE>
of RJR. KKR knowingly and substantially participated in the Director
Defendants' breaches of fiduciary duties as alleged herein.
29. KKR, therefore, is liable to plaintiff and other members of the Class
who have been damaged by the breaches of fiduciary duty.
* * *
30. As to all claims above, plaintiff has no adequate remedy at law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiff demands judgment and preliminary and permanent relief,
including injunctive relief, as follows:
A. An order certifying the individual claims herein as a class action and
designating plaintiff and the undersigned counsel as the representatives
thereof;
B. Declaring and decreeing that the proposed Purchase is a breach of the
fiduciary duties of KKR and the Director Defendants and is therefore unlawful
and unenforceable;
C. Enjoining the defendants from taking any action with respect to
consummating the Purchase;
D. Rescinding, to the extent already implemented, the Purchase or any of
the terms thereof;
E. If all or most of the relief requested above is not granted, a
judgment awarding RJR, plaintiff and the Class compensation for the damages they
sustain as a result of the defendants' unlawful conduct as alleged herein;
9
<PAGE>
F. A judgment awarding plaintiff's attorneys' fees, and costs of suit,
including expert fees; and
G. Such other and further relief as this Court deems just and proper.
Dated: September 16, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By:_______________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Bragar & Wexler, P.C.
900 Third Avenue
New York, NY 10022
10
EXHIBIT 11(g)(3)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ---------------------------------------X
LEONARD I. SCHREIBER and ELLEN :
MCBRIDE, :
:
Plaintiffs, :
:
:
- v. - :
:
H. JOHN GREENIAUS, JAMES W. JOHNSTON, :
CHARLES M. HARPER, HENRY R. KRAVIS, :
PAUL E. RAETHER, GEORGE R. ROBERTS, : C.A. No. 13749
JAMES J. GREENE, JR., SCOTT M. :
STEWART, MICHAEL TOKARZ, SAUL :
FOX, CLIFTON S. ROBBINS and :
KOHLBERG KRAVIS ROBERTS & CO., L.P., :
:
Defendants, :
:
and :
:
RJR NABISCO HOLDINGS CORP., :
:
Nominal Defendant. :
- ---------------------------------------X
COMPLAINT
---------
Plaintiffs, by and through undersigned counsel, allege upon information and
belief, except as to paragraph 2, which is alleged on knowledge, as follows:
1. Plaintiffs bring this action to redress injuries to RJR Nabisco
Holdings Corp. ("RJR" or the "Company") and its public shareholders which would
result from RJR's acquisition of a 20% interest in Borden Inc. ("Borden") (the
"Purchase") directed by RJR's controlling shareholder, Kohlberg Kravis Roberts &
Co., L.P. ("KKR") after KKR acquires Borden by merger. RJR's proposed
acquisition of an interest in Borden is at an unfairly high price which benefits
KKR at the expense of RJR and its shareholders.
<PAGE>
THE PARTIES
-----------
2. Plaintiffs have owned shares of RJR common stock since prior to the
announcement of the Purchase and the KKR/Borden merger (the "Merger").
3. Defendant RJR is a Delaware corporation and is an international
company principally engaged in the food and tobacco industries. RJR is a global
leader in the food and tobacco industries with annual sales of over $30 billion.
RJR's wholly-owned subsidiary RJR Nabisco, Inc., is the Company's operating
subsidiary.
4. The following defendants are officers of the Company (the "Management
Defendants") and all were appointed by virtue of KKR's control of RJR's Board
and continue to serve in these extraordinarily lucrative positions at KKR'S
discretion:
a. Defendant Charles M. Harper is an RJR director, and is its
chairman and chief executive officer. For fiscal year 1993, Harper earned over
$2.6 million dollars and acquired stock options for an additional 8.75 million
shares. Harper owns 622,688 shares of RJR stock.
b. Defendant H. John Greeniaus is a director of the Company and the
Chairman and Chief Executive Officer of Nabisco Foods Group. In fiscal 1993,
Greeniaus received over $1.2 million in compensation, $600,000 in restricted
stock awards and 500,000 shares in stock options. Greeniaus owns over 2 million
shares of RJR stock.
c. Defendant James W. Johnston, is an RJR director and the Chairman
and Chief Executive Officer of R. J. Reynolds Tobacco Company. For the 1993
fiscal year, Johnston earned over
2
<PAGE>
$950,000, received $826,468 in restricted stock awards and options for the
purchase of an additional 500,000 shares. Johnston owns over 2 million shares of
RJR stock.
5. Defendant KKR is a Delaware limited partnership which is engaged in
the investment banking business. As a result of KKR's acquisition of RJR
Nabisco Inc. in 1988, KKR owns approximately 48.9% of RJR common stock. By
virtue of its stock ownership and the fact that eight of RJR's directors are
affiliated with KKR, KKR controls the business and affairs of the Company and
has caused it to enter into the self-dealing transaction described herein.
6. Defendants Henry R. Kravis, Paul E. Raether, George R. Roberts, James
H. Greene, Jr., Scott M. Stewart, Michael Tokarz, Saul Fox and Clifton S.
Robbins are all directors of RJR and executives, general partners and/or limited
partners in KKR. Each of these directors has the ability to control the business
and affairs of RJR by virtue of their membership on the Board and KKR's
ownership of RJR common stock. Defendants named in paragraphs 4 and 6 are
referred to herein as the "Director Defendants".
7. KKR acquired RJR in 1989 and 1990, for approximately $3.2 billion, an
average of approximately $5.60 per share. KKR sold RJR stock to the investing
public in 1991 for $11.25 per share.
FACTS
-----
8. On September 12, 1994, KKR announced that it was purchasing 100% of
Borden in a $2 billion transaction. As announced by the wire services:
3
<PAGE>
Columbus, Ohio, Sept. 12 (Bloomberg) --Kohlberg Kravis
Roberts & Co. will trade about $2 billion in stock, or half
its controlling stake in RJR Nabisco Holdings Corp., for all
of troubled food giant Borden Inc., the companies said
today.
KKR, the privately held takeover boutique behind RJR
Nabisco's massive leveraged buyout, said the transaction
values Borden stock at $14.25, a premium of 22.6% over the
closing price of Borden shares on Friday.
Thus, as a result of the merger, KKR will reduce its controlling interest in RJR
by approximately 50%. As stated in the news release "KKR will continue to own
an approximately $2 billion stake in RJR Nabisco, to have significant
representation on the board, and to play an active role in exploring ways to
maximize shareholder value."
9. Also on September 12, RJR announced that following KKR's purchase of
Borden, KKR would sell part of its stake in Borden to RJR for newly issued RJR
shares. Under the arrangement, after KKR acquires 100% of Borden, RJR will
issue approximately $500 million in new RJR common shares to Borden in return
for a 20% stake in Borden. RJR also will receive warrants to purchase an
additional 10% of Borden and have an opportunity to designate a number of
directors to Borden's Board.
10. The agreement for RJR to purchase a 20% stake in Borden is manifestly
unfair to RJR's shareholders. While KKR is obtaining, in the first instance,
100% of Borden for approximately $2 billion, RJR will only receive a 20%
interest in Borden for consideration worth $500 million.
11. KKR, which controls RJR (and will control Borden after the Merger),
proposes charging RJR an exorbitant mark-up of
4
<PAGE>
$100 million over what KKR paid for the same 20% interest in Borden. Moreover,
RJR is paying for its Borden stake on the basis of a $14.25 per share price --
which reflects a control premium paid by KKR. As KKR is retaining 80% ownership
of Borden, it is grossly unfair for RJR to pay any control premium for its
Borden stake. Had the defendants acted in good faith and dealt fairly with RJR,
RJR's price per share should be significantly less than the $14.25 per share to
be paid for Borden by KKR.
12. Thus, as the transaction is structured, KKR will effectively pay $1.5
billion for its 80% interest in Borden, and, through Borden, will receive back a
substantial portion of its RJR stock, as a result of RJR's purchase of 20% of
Borden. Moreover, KKR has structured the deal so that it might take advantage of
substantial tax losses associated with its investment in RJR by paying the full
$2 billion price for Borden in RJR stock, while at the same time it will receive
back $500 million in RJR stock as part of the second step of the transaction.
13. Moreover, the issuance of $500 million in new RJR common stock will
substantially dilute the cash value and shareholdings of the non-controlling
public stockholders of RJR.
DERIVATIVE CLAIM
----------------
14. Plaintiffs bring the following claim derivatively for the benefit of
RJR.
15. The Purchase serves no corporate interest of RJR, but rather serves to
facilitate KKR's acquisition of Borden while ensuring KKR's continued control of
RJR.
5
<PAGE>
16. Moreover, the proposed price of the Purchase grossly overvalues RJR's
proposed 20% interest in Borden for the benefit of KKR and to the detriment of
RJR. It causes RJR to issue its stock for inadequate consideration, thereby
wasting RJR's assets.
17. Demand on RJR's Board of Directors to bring this claim would be futile
and is therefore excused because:
a. RJR's Board is legally incapable of exercising judgment
independent of KKR's interests. Eight of RJR's seventeen Board members (as set
forth in paragraph 6) are also executives, general partners and/or limited
partners of KKR and the three management directors, who are defendants herein,
are dependent upon RJR for their continued employment and compensation. These
defendants, therefore, are not independent and make up a majority of RJR's
Board.
b. For the same reasons, a majority of RJR's directors have an
interest in implementing the Purchase.
c. Corporate waste, involving the overpayment for RJR's proposed
stake in Borden, cannot constitute business judgment.
d. A majority of RJR's directors are responsible for the wrongs
alleged and are named as defendants herein and cannot be expected to sue
themselves.
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiffs bring the following claims individually and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of
all common stockholders of RJR and their successors in interest (other than the
defendants named herein),
6
<PAGE>
and those partnerships, corporations, and other entities that have suffered and
will suffer the harm more fully described herein (hereinafter the "Class").
19. The Class is so numerous, that the joinder of all members is
impracticable. As of March 29, 1994, RJR had over 1.1 billion common shares
outstanding. Consequently, the number of Class members is believed to be in the
thousands.
20. Plaintiffs' claims are typical of the claims of the Class and
plaintiffs will fairly and adequately protect the interests of the other Class
members. Plaintiffs have retained counsel who are experienced and competent in
both class and derivative litigation, and the plaintiffs have no interests which
are contrary to, or in conflict with, those of the other members of the Class to
be represented.
21. There are questions of law and fact common to the
Class including, inter alia:
----- ----
a. whether the Director Defendants have breached and will continue
to breach the fiduciary duties owed by them to the plaintiffs and the Class by
virtue of their participation and/or acquiescence in the conduct complained of
herein;
b. whether the Director Defendants have engaged in self-dealing
transactions which benefit, inter alia, KKR and the KKR investors, at the
----- ----
expense of the shareholders of RJR;
c. whether, in breach of their duties of care and loyalty, the
Director Defendants wrongfully diluted the cash value and voting rights of the
non-controlling shareholders; and
d. whether KKR aided and abetted the Director Defendants' breaches
of fiduciary duty.
7
<PAGE>
22. The prosecution of separate actions by individual Class members would
create a risk of inconsistent and varying adjudications concerning the subject
matter of this action, which adjudications could establish incompatible
standards of conduct for the defendants in connection with the actions
complained of herein.
23. The defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
CLAIM FOR RELIEF
----------------
24. Plaintiffs incorporate the allegations in paragraphs 1 through 13 and
15-16 above as if fully set forth herein.
25 If implemented, the Purchase will result in a dilution of both the
cash value of the public shareholders' interest in RJR and their voting power.
26. Accordingly, the Director Defendants have breached their fiduciary
duties by, inter alia, putting the interests of KKR and its general and limited
----- ----
partners, among others, ahead of the interests of RJR's shareholders generally,
and have used their positions of control as directors of RJR for the purpose of
maximizing the business and financial interests of KKR and its partners, at the
expense of RJR's public shareholders.
27. KKR, as RJR's controlling shareholder, is obligated to deal fairly
with RJR's public shareholders. The Purchase, proposed by KKR to serve its own
interests, breaches that duty.
28. Alternatively, KKR had knowledge of the fiduciary duties owed by the
Director Defendants to the public shareholders
8
<PAGE>
of RJR. KKR knowingly and substantially participated in the Director
Defendants' breaches of fiduciary duties as alleged herein.
29. KKR, therefore, is liable to plaintiffs and other members of the Class
who have been damaged by the breaches of fiduciary duty.
* * *
30. As to all claims above, plaintiffs have no adequate remedy at law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiffs demand judgment and preliminary and permanent
relief, including injunctive relief, as follows:
A. An order certifying the individual claims herein as a class action and
designating plaintiffs and the undersigned counsel as the representatives
thereof;
B. Declaring and decreeing that the proposed Purchase is a breach of the
fiduciary duties of KKR and the Director Defendants and is therefore unlawful
and unenforceable;
C. Enjoining the defendants from taking any action with respect to
consummating the Purchase;
D. Rescinding, to the extent already implemented, the Purchase or any of
the terms thereof;
E. If all or most of the relief requested above is not granted, a
judgment awarding RJR, plaintiffs and the Class compensation for the damages
they sustain as a result of the defendants' unlawful conduct as alleged herein;
9
<PAGE>
F. A judgment awarding plaintiffs' attorneys' fees, and costs of suit,
including expert fees; and
G. Such other and further relief as this Court deems just and proper.
Dated: September 16, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: _________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Irving Bizar, Esquire
BIZAR & MARTIN
485 Madison Avenue
New York, NY 10022
(212) 752-7200
10
EXHIBIT 11(g)(4)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ---------------------------------------X
:
THOMAS M. MALLOY, :
:
Plaintiff, :
:
:
- v.- :
:
H. JOHN GREENIAUS, JAMES W. JOHNSTON, :
CHARLES M. HARPER, HENRY R. KRAVIS, :
PAUL E. RAETHER, GEORGE R. ROBERTS, : C.A. No. 13748
JAMES J. GREENE, JR., SCOTT M. :
STEWART, MICHAEL TOKARZ, SAUL :
FOX, CLIFTON S. ROBBINS and :
KOHLBERG KRAVIS ROBERTS & CO., L.P., :
:
Defendants, :
:
and :
:
RJR NABISCO HOLDINGS CORP., :
:
Nominal Defendant. :
- ---------------------------------------X
COMPLAINT
---------
Plaintiff, by and through undersigned counsel, alleges upon information and
belief, except as to paragraph 2, which is alleged on knowledge, as follows:
1. Plaintiff brings this action to redress injuries to RJR Nabisco
Holdings Corp. ("RJR" or the "Company") and its public shareholders which would
result from RJR's acquisition of a 20% interest in Borden Inc. ("Borden") (the
"Purchase") directed by RJR's controlling shareholder, Kohlberg Kravis Roberts &
Co., L.P. ("KKR") after KKR acquires Borden by merger. RJR's proposed
acquisition of an interest in Borden is at an unfairly high price which benefits
KKR at the expense of RJR and its shareholders.
<PAGE>
THE PARTIES
-----------
2. Plaintiff Thomas M. Malloy has owned 1500 shares of RJR common stock
since prior to the announcement of the Purchase and the KKR/Borden merger (the
"Merger").
3. Defendant RJR is a Delaware corporation and is an international
company principally engaged in the food and tobacco industries. RJR is a global
leader in the food and tobacco industries with annual sales of over $30 billion.
RJR's wholly-owned subsidiary RJR Nabisco, Inc., is the Company's operating
subsidiary.
4. The following defendants are officers of the Company (the "Management
Defendants") and all were appointed by virtue of KKR's control of RJR's Board
and continue to serve in these extraordinarily lucrative positions at KKR'S
discretion:
a. Defendant Charles M. Harper is an RJR director, and is its
chairman and chief executive officer. For fiscal year 1993, Harper earned over
$2.6 million dollars and acquired stock options for an additional 8.75 million
shares. Harper owns 622,688 shares of RJR stock.
b. Defendant H. John Greeniaus is a director of the Company and the
Chairman and Chief Executive Officer of Nabisco Foods Group. In fiscal 1993,
Greeniaus received over $1.2 million in compensation, $600,000 in restricted
stock awards and 500,000 shares in stock options. Greeniaus owns over 2 million
shares of RJR stock.
c. Defendant James W. Johnston, is an RJR director and the Chairman
and Chief Executive Officer of R. J. Reynolds Tobacco Company. For the 1993
fiscal year, Johnston earned over
2
<PAGE>
$950,000, received $826,468 in restricted stock awards and options for the
purchase of an additional 500,000 shares. Johnston owns over 2 million shares of
RJR stock.
5. Defendant KKR is a Delaware limited partnership which is engaged in
the investment banking business. As a result of KKR's acquisition of RJR
Nabisco Inc. in 1988, KKR owns approximately 48.9% of RJR common stock. By
virtue of its stock ownership and the fact that eight of RJR's directors are
affiliated with KKR, KKR controls the business and affairs of the Company and
has caused it to enter into the self-dealing transaction described herein.
6. Defendants Henry R. Kravis, Paul E. Raether, George R. Roberts, James
H. Greene, Jr., Scott M. Stewart, Michael Tokarz, Saul Fox and Clifton S.
Robbins are all directors of RJR and executives, general partners and/or limited
partners in KKR. Each of these directors has the ability to control the
business and affairs of RJR by virtue of their membership on the Board and KKR's
ownership of RJR common stock. Defendants named in paragraphs 4 and 6 are
referred to herein as the "Director Defendants".
7. KKR acquired RJR in 1989 and 1990, for approximately $3.2 billion, an
average of approximately $5.60 per share. KKR sold RJR stock to the investing
public in 1991 for $11.25 per share.
FACTS
-----
8. On September 12, 1994, KKR announced that it was purchasing 100% of
Borden in a $2 billion transaction. As announced by the wire services:
3
<PAGE>
Columbus, Ohio, Sept. 12 (Bloomberg) --Kohlberg Kravis
Roberts & Co. will trade about $2 billion in stock, or half
its controlling stake in RJR Nabisco Holdings Corp., for all
of troubled food giant Borden Inc., the companies said
today.
KKR, the privately held takeover boutique behind RJR
Nabisco's massive leveraged buyout, said the transaction
values Borden stock at $14.25, a premium of 22.6% over the
closing price of Borden shares on Friday.
Thus, as a result of the merger, KKR will reduce its controlling interest in RJR
by approximately 50%. As stated in the news release "KKR will continue to own
an approximately $2 billion stake in RJR Nabisco, to have significant
representation on the board, and to play an active role in exploring ways to
maximize shareholder value."
9. Also on September 12, RJR announced that following KKR's purchase of
Borden, KKR would sell part of its stake in Borden to RJR for newly issued RJR
shares. Under the arrangement, after KKR acquires 100% of Borden, RJR will
issue approximately $500 million in new RJR common shares to Borden in return
for a 20% stake in Borden. RJR also will receive warrants to purchase an
additional 10% of Borden and have an opportunity to designate a number of
directors to Borden's Board.
10. The agreement for RJR to purchase a 20% stake in Borden is manifestly
unfair to RJR's shareholders. While KKR is obtaining, in the first instance,
100% of Borden for approximately $2 billion, RJR will only receive a 20%
interest in Borden for consideration worth $500 million.
11. KKR, which controls RJR (and will control Borden after the Merger),
proposes charging RJR an exorbitant mark-up of
4
<PAGE>
$100 million over what KKR paid for the same 20% interest in Borden. Moreover,
RJR is paying for its Borden stake on the basis of a $14.25 per share price --
which reflects a control premium paid by KKR. As KKR is retaining 80% ownership
of Borden, it is grossly unfair for RJR to pay any control premium for its
Borden stake. Had the defendants acted in good faith and dealt fairly with RJR,
RJR's price per share should be significantly less than the $14.25 per share to
be paid for Borden by KKR.
12. Thus, as the transaction is structured, KKR will effectively pay $1.5
billion for its 80% interest in Borden, and, through Borden, will receive back a
substantial portion of its RJR stock, as a result of RJR's purchase of 20% of
Borden. Moreover, KKR has structured the deal so that it might take advantage of
substantial tax losses associated with its investment in RJR by paying the full
$2 billion price for Borden in RJR stock, while at the same time it will receive
back $500 million in RJR stock as part of the second step of the transaction.
13. Moreover, the issuance of $500 million in new RJR common stock will
substantially dilute the cash value and shareholdings of the non-controlling
public stockholders of RJR.
DERIVATIVE CLAIM
----------------
14. Plaintiff brings the following claim derivatively for the benefit of
RJR.
15. The Purchase serves no corporate interest of RJR, but rather serves to
facilitate KKR's acquisition of Borden while ensuring KKR's continued control of
RJR.
5
<PAGE>
16. Moreover, the proposed price of the Purchase grossly overvalues RJR's
proposed 20% interest in Borden for the benefit of KKR and to the detriment of
RJR. It causes RJR to issue its stock for inadequate consideration, thereby
wasting RJR's assets.
17. Demand on RJR's Board of Directors to bring this claim would be futile
and is therefore excused because:
a. RJR's Board is legally incapable of exercising judgment
independent of KKR's interests. Eight of RJR's seventeen Board members (as set
forth in paragraph 6) are also executives, general partners and/or limited
partners of KKR and the three management directors, who are defendants herein,
are dependent upon RJR for their continued employment and compensation. These
defendants, therefore, are not independent and make up a majority of RJR's
Board.
b. For the same reasons, a majority of RJR's directors have an
interest in implementing the Purchase.
c. Corporate waste, involving the overpayment for RJR's proposed
stake in Borden, cannot constitute business judgment.
d. A majority of RJR's directors are responsible for the wrongs
alleged and are named as defendants herein and cannot be expected to sue
themselves.
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings the following claims individually and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of
all common stockholders of RJR and their successors in interest (other than the
defendants named herein),
6
<PAGE>
and those partnerships, corporations, and other entities that have suffered and
will suffer the harm more fully described herein (hereinafter the "Class").
19. The Class is so numerous, that the joinder of all members is
impracticable. As of March 29, 1994, RJR had over 1.1 billion common shares
outstanding. Consequently, the number of Class members is believed to be in the
thousands.
20. Plaintiff's claims are typical of the claims of the Class and
plaintiff will fairly and adequately protect the interests of the other Class
members. Plaintiff has retained counsel who are experienced and competent in
both class and derivative litigation, and the plaintiff has no interests which
are contrary to, or in conflict with, those of the other members of the Class to
be represented.
21. There are questions of law and fact common to the Class including,
inter alia:
- ----- ----
a. whether the Director Defendants have breached and will continue
to breach the fiduciary duties owed by them to the plaintiff and the Class by
virtue of their participation and/or acquiescence in the conduct complained of
herein;
b. whether the Director Defendants have engaged in self-dealing
transactions which benefit, inter alia, KKR and the KKR investors, at the
----- ----
expense of the shareholders of RJR;
c. whether, in breach of their duties of care and loyalty, the
Director Defendants wrongfully diluted the cash value and voting rights of the
non-controlling shareholders; and
d. whether KKR aided and abetted the Director Defendants' breaches
of fiduciary duty.
7
<PAGE>
22. The prosecution of separate actions by individual Class members would
create a risk of inconsistent and varying adjudications concerning the subject
matter of this action, which adjudications could establish incompatible
standards of conduct for the defendants in connection with the actions
complained of herein.
23. The defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
CLAIM FOR RELIEF
----------------
24. Plaintiff incorporates the allegations in paragraphs 1 through 13 and
15-16 above as if fully set forth herein.
25. If implemented, the Purchase will result in a dilution of both the
cash value of the public shareholders' interest in RJR and their voting power.
26. Accordingly, the Director Defendants have breached their fiduciary
duties by, inter alia, putting the interests of KKR and its general and limited
----- ----
partners, among others, ahead of the interests of RJR's shareholders generally,
and have used their positions of control as directors of RJR for the purpose of
maximizing the business and financial interests of KKR and its partners, at the
expense of RJR's public shareholders.
27. KKR, as RJR's controlling shareholder, is obligated to deal fairly
with RJR's public shareholders. The Purchase, proposed by KKR to serve its own
interests, breaches that duty.
28. Alternatively, KKR had knowledge of the fiduciary duties owed by the
Director Defendants to the public shareholders
8
<PAGE>
of RJR. KKR knowingly and substantially participated in the Director
Defendants' breaches of fiduciary duties as alleged herein.
29. KKR, therefore, is liable to plaintiff and other members of the Class
who have been damaged by the breaches of fiduciary duty.
* * *
30. As to all claims above, plaintiff has no adequate remedy at law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiff demands judgment and preliminary and permanent
relief, including injunctive relief, as follows:
A. An order certifying the individual claims herein as a class action and
designating plaintiff and the undersigned counsel as the representatives
thereof;
B. Declaring and decreeing that the proposed Purchase is a breach of the
fiduciary duties of KKR and the Director Defendants and is therefore unlawful
and unenforceable;
C. Enjoining the defendants from taking any action with respect to
consummating the Purchase;
D. Rescinding, to the extent already implemented, the Purchase or any of
the terms thereof;
E. If all or most of the relief requested above is not granted, a
judgment awarding RJR, plaintiff and the Class compensation for the damages they
sustain as a result of the defendants' unlawful conduct as alleged herein;
9
<PAGE>
F. A judgment awarding plaintiff's attorneys' fees, and costs of suit,
including expert fees; and
G. Such other and further relief as this Court deems just and proper.
Dated: September 16, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: ___________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Klari Neuwelt, Esquire
LAW OFFICE OF KLARI NEUWELT
950 Third Avenue, 8th Floor
New York, NY 10022
(212) 593-8800
10
EXHIBIT 11(g)(5)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR CASTLE COUNTY
_____________________________________________x
HENRY L. SCHWARTZ, :
:
Plaintiff, :
:
:
- v. - :
:
H. JOHN GREENIAUS, JAMES W. JOHNSTON, :
CHARLES M. HARPER, HENRY R. KRAVIS, :
PAUL E. RAETHER, GEORGE R. ROBERTS, : C.A. No. 13758
JAMES J. GREENE, JR., SCOTT M. :
STEWART, MICHAEL TOKARZ, SAUL :
FOX, CLIFTON S. ROBBINS and :
KOHLBERG KRAVIS ROBERTS & CO., L.P., :
:
Defendants, :
:
and :
:
RJR NABISCO HOLDINGS CORP., :
:
Nominal DEFENDANT. :
_____________________________________________X
COMPLAINT
---------
Plaintiff, by and through undersigned counsel, alleges upon information and
belief, except as to paragraph 2, which is alleged on knowledge, as follows:
1. Plaintiff brings this action to redress injuries to RJR Nabisco
Holdings Corp. ("RJR" or the "Company") and its public shareholders which would
result from RJR's acquisition of a 20% interest in Borden Inc. ("Borden") (the
"Purchase") directed by RJR's controlling shareholder, Kohlberg Kravis Roberts &
Co., L. P. ("KKR") after KKR acquires Borden by merger. RJR's proposed
acquisition of an interest in Borden is at an unfairly high price which benefits
KKR at the expense of RJR and its shareholders.
<PAGE>
THE PARTIES
-----------
2. Plaintiff Henry L. Schwartz has owned 100 shares of RJR common stock
since prior to the announcement of the Purchase and the KKR/Borden merger (the
"Merger").
3. Defendant RJR is a Delaware corporation and is an international
company principally engaged in the food and tobacco industries. RJR is a global
leader in the food and tobacco industries with annual sales of over $30 billion.
RJR's wholly-owned subsidiary RJR Nabisco, Inc., is the Company's operating
subsidiary.
4. The following defendants are officers of the Company (the "Management
Defendants") and all were appointed by virtue of KKR's control of RJR's Board
and continue to serve in these extraordinarily lucrative positions at KKR'S
discretion:
a. Defendant Charles M. Harper is an RJR director, and is its
chairman and chief executive officer. For fiscal year 1993, Harper earned over
$2.6 million dollars and acquired stock options for an additional 8.75 million
shares. Harper owns 622,688 shares of RJR stock.
b. Defendant H. John Greeniaus is a director of the Company and the
Chairman and Chief Executive officer of Nabisco Foods Group. In fiscal 1993,
Greeniaus received over $1.2 million in compensation, $600,000 in restricted
stock awards and 500,000 shares in stock options. Greeniaus owns over 2 million
shares of RJR stock.
c. Defendant James W. Johnston, is an RJR director and the Chairman
and Chief Executive Officer of R. J. Reynolds
2
<PAGE>
Tobacco Company. For the 1993 fiscal year, Johnston earned over $950,000,
received $826,468 in restricted stock awards and options for the purchase of an
additional 500,000 shares. Johnston owns over 2 million shares of RJR stock.
5. Defendant KKR is a Delaware limited partnership which is engaged in
the investment banking business. As a result of KKR's acquisition of RJR
Nabisco Inc. in 1988, KKR owns approximately 48.9% of RJR common stock. By
virtue of its stock ownership and the fact that eight of RJR's directors are
affiliated with KKR, KKR controls the business and affairs of the Company and
has caused it to enter into the self-dealing transaction described herein.
6. Defendants Henry R. Kravis, Paul E. Raether, George R. Roberts, James
H. Greene, Jr., Scott M. Stewart, Michael Tokarz, Saul Fox and Clifton S.
Robbins are all directors of RJR and executives, general partners and/or limited
partners in KKR. Each of these directors has the ability to control the business
and affairs of RJR by virtue of their membership on the Board and KKR's
ownership of RJR common stock. Defendants named in paragraphs 4 and 6 are
referred to herein as the "Director Defendants".
7. KKR acquired RJR in 1989 and 1990, for approximately $3.2 billion, an
average of approximately $5.60 per share. KKR sold RJR stock to the investing
public in 1991 for $11.25 per share.
3
<PAGE>
FACTS
-----
8. On September 12, 1994, KKR announced that it was purchasing 100% of
Borden in a $2 billion transaction. As announced by the wire services:
Columbus, Ohio, Sept. 12 (Bloomberg) -- Kohlberg Kravis
Roberts & Co. will trade about $2 billion in stock, or half
its controlling stake in RJR Nabisco Holdings Corp., for all
of troubled food giant Borden Inc., the companies said
today.
KKR, the privately held takeover boutique behind RJR
Nabisco's massive leveraged buyout, said the transaction
values Borden stock at $14.25, a premium of 22.6% over the
closing price of Borden shares on Friday.
Thus, as a result of the merger, KKR will reduce its controlling interest in RJR
by approximately 50%. As stated in the news release "KKR will continue to own an
approximately $2 billion stake in RJR Nabisco, to have significant
representation on the board, and to play an active role in ex1p1oring ways to
maximize shareholder value."
9. Also on September 12, RJR announced that following KKR's purchase of
Borden, KKR would sell part of its stake in Borden to RJR for newly issued RJR
shares. Under the arrangement, after KKR acquires 100% of Borden, RJR will
issue approximately $500 million in new RJR common shares to Borden in return
for a 20% stake in Borden. RJR also will receive warrants to purchase an
additional 10% of Borden and have an opportunity to designate a number of
directors to Borden's Board.
10. The agreement for RJR to purchase a 20% stake in Borden is manifestly
unfair to RJR'S shareholders. While KKR is obtaining, in the first instance,
100% of Borden for approximately
4
<PAGE>
$2 billion, RJR will only receive a 20% interest in Borden for consideration
worth $500 million.
11. KKR, which controls RJR (and will control Borden after the Merger),
proposes charging RJR an exorbitant mark-up of $100 million over what KKR paid
for the same 20% interest in Borden. Moreover, RJR is paying for its Borden
stake on the basis of a $14.25 per share price -- which reflects a control
premium paid by KKR. As KKR is retaining 80% ownership of Borden, it is grossly
unfair for RJR to pay any control premium for its Borden stake. Had the
defendants acted in good faith and dealt fairly with RJR, RJR's price per share
should be significantly less than the $14.25 per share to be paid for Borden by
KKR.
12. Thus, as the transaction is structured, KKR will effectively pay $1.5
billion for its 80% interest in Borden, and, through Borden, will receive back a
substantial portion of its RJR stock, as a result of RJR's purchase of 20% of
Borden. Moreover, KKR has structured the deal so that it might take advantage of
substantial tax losses associated with its investment in RJR by paying the full
$2 billion price for Borden in RJR stock, while at the same time it will receive
back $500 million in RJR stock as part of the second step of the transaction.
13. Moreover, the issuance of $500 million in new RJR common stock will
substantially dilute the cash value and shareholdings of the non-controlling
public stockholders of RJR.
DERIVATIVE CLAIM
----------------
14. Plaintiff brings the following claim derivatively for the benefit of
RJR.
5
<PAGE>
15. The Purchase serves no corporate interest of RJR, but rather serves to
facilitate KKR's acquisition of Borden while ensuring KKR's continued control of
RJR.
16. Moreover, the proposed price of the Purchase grossly overvalues RJR's
proposed 20% interest in Borden for the benefit of KKR and to the detriment of
RJR. It causes RJR to issue its stock for inadequate consideration, thereby
wasting RJR's assets.
17. Demand on RJR's Board of Directors to bring this claim would be futile
and is therefore excused because:
a. RJR's Board is legally incapable of exercising judgment
independent of KKR's interests. Eight of RJR's seventeen Board members (as set
forth in paragraph 6) are also executives, general partners and/or limited
partners of KKR and the three management directors, who are defendants herein,
are dependent upon RJR for their continued employment and compensation. These
defendants, therefore, are not independent and make up a majority of RJR's
Board.
b. For the same reasons, a majority of RJR's directors have an
interest in imp1ementing the Purchase.
c. Corporate waste, involving the overpayment for RJR's proposed
stake in Borden, cannot constitute business judgment.
d. A majority of RJR's directors are responsible for the wrongs
alleged and are named as defendants herein and cannot be expected to sue
themselves.
6
<PAGE>
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings the following claims individually and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of
all of the RJR preferred stockholders and their successors in interest (other
than the defendants named herein), who have suffered and will suffer the harm
more fully described herein (hereinafter the "Class").
19. The Class is so numerous that the joinder of all members is
impracticable. As of March 29, 1994, RJR had over 1.1 billion common shares
outstanding. Consequently, the number of class members is believed to be in the
thousands.
20. Plaintiff's claims typical of the claims of the Class and plaintiff
will fairly and adequately protect the interests of the other Class members.
Plaintiff has retained counsel who are experienced and competent in both class
and derivative litigation, and the plaintiff has no interests which are contrary
to, or in conflict with, those of the other members of the Class to be
represented.
21. There are questions of law and fact common to the Class including,
inter alia:
- ----- ----
a. whether the Director Defendants have breached and will continue
to breach the fiduciary duties owed by them to the plaintiff and the Class by
virtue of their participation and/or acquiescence in the conduct complained of
herein;
b. whether the Director Defendants have engaged in self-dealing
transactions which benefit, inter alia, KKR and the KKR investors, at the
----- ----
expense of the shareholders of RJR;
7
<PAGE>
c. whether, in breach of their duties of care and loyalty, the
Director Defendants wrongfully diluted the cash value of the non-controlling
shareholders; and
d. whether KKR aided and abetted the Director Defendants' breaches
of fiduciary duty.
22. The prosecution of separate actions by individual Class members would
create a risk of inconsistent and varying adjudications concerning the subject
matter of this action, which adjudications could establish incompatible
standards of conduct for the defendants in connection with the actions
complained of herein.
23. The defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
CLAIM FOR RELIEF
----------------
24. Plaintiff incorporates the allegations in paragraphs 1 through 13 and
15-16 above as if fully set forth herein.
25. If implemented, the Purchase will result in a dilution of both the
cash value of the public shareholders' interest in RJR and their voting power.
26. Accordingly, the Director Defendants have breached their fiduciary
duties by, inter alia, putting the interests of KKR and its general and limited
----- ----
partners, among others, ahead of the interests of RJR's shareholders generally,
and have used their position of control as directors of RJR for the purpose of
maximizing the business and financial interests of KKR and its partners, at the
expense of RJR's public shareholders.
8
<PAGE>
27. KKR, as RJR's controlling shareholder, is obligated to deal fairly
with RJR's public shareholders. The Purchase, proposed by KKR to serve its own
interests, breaches that duty.
28. Alternatively, KKR had knowledge of the fiduciary duties owed by the
Director Defendants to the public shareholders of RJR. KKR knowingly and
substantially participated in the Director Defendants' breaches of fiduciary
duties as alleged herein.
29. KKR, therefore, is liable to plaintiff and other members of the Class
who have been damaged by the breaches of fiduciary duty.
* * *
30. As to all claims above, plaintiff has no adequate remedy at law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiff demands judgment and preliminary and permanent relief,
including injunctive relief, as follows:
A. An order certifying the individual claims herein as a class action and
designating plaintiff and the undersigned counsel as the representatives
thereof;
B. Declaring and decreeing that the proposed Purchase is a breach of the
fiduciary duties of KKR and the Director Defendants and is therefore unlawful
and unenforceable;
C. Enjoining the defendants from taking any action with respect to
consummating the Purchase;
D. Rescinding, to the extent already implemented, the Purchase or any of
the terms thereof;
9
<PAGE>
E. If all or most of the relief requested above is not granted, a
judgment awarding RJR, plaintiff and the Class compensation for the damages they
sustain as a result of the defendants' unlawful conduct as alleged herein;
F. A judgment awarding plaintiff's attorneys' fees, and costs of suit,
including expert fees; and
G. Such other and further relief as this Court deems just and proper.
Dated: September 21, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS P.A.
By:________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Kantrowitz & Goldhamer, P. C.
747 Chestnut Ridge Road
Chestnut Ridge, New York 10977-6216
10
EXHIBIT 11(g)(6)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ---------------------------------------X
:
MARGARET ALESSI, :
:
Plaintiff, :
:
:
- v. - :
:
H. JOHN GREENIAUS, JAMES W. JOHNSTON, :
CHARLES M. HARPER, HENRY R. KRAVIS, :
PAUL E. RAETHER, GEORGE R. ROBERTS, : C.A. No. 13750
JAMES J. GREENE, JR., SCOTT M. :
STEWART, MICHAEL TOKARZ, SAUL :
FOX, CLIFTON S. ROBBINS and :
KOHLBERG KRAVIS ROBERTS & CO., L.P., :
:
Defendants, :
:
and :
:
RJR NABISCO HOLDINGS CORP., :
:
Nominal Defendant. :
- ---------------------------------------X
COMPLAINT
---------
Plaintiff, by and through undersigned counsel, alleges upon information and
belief, except as to paragraph 2, which is alleged on knowledge, as follows:
1. Plaintiff brings this action to redress injuries to RJR Nabisco
Holdings Corp. ("RJR" or the "Company") and its public shareholders which would
result from RJR's acquisition of a 20% interest in Borden Inc. ("Borden") (the
"Purchase") directed by RJR's controlling shareholder, Kohlberg Kravis Roberts &
Co., L.P. ("KKR") after KKR acquires Borden by merger. RJR's proposed
acquisition of an interest in Borden is at an unfairly high price which benefits
KKR at the expense of RJR and its shareholders.
<PAGE>
THE PARTIES
------------
2. Plaintiff Margaret Alessi has owned shares of RJR common stock since
prior to the announcement of the Purchase and the KKR/Borden merger (the
"Merger").
3. Defendant RJR is a Delaware corporation and is an international
company principally engaged in the food and tobacco industries. RJR is a global
leader in the food and tobacco industries with annual sales of over $30 billion.
RJR's wholly-owned subsidiary RJR Nabisco, Inc., is the Company's operating
subsidiary.
4. The following defendants are officers of the Company (the "Management
Defendants") and all were appointed by virtue of KKR's control of RJR's Board
and continue to serve in these extraordinarily lucrative positions at KKR'S
discretion:
a. Defendant Charles M. Harper is an RJR director, and is its
chairman and chief executive officer. For fiscal year 1993, Harper earned over
$2.6 million dollars and acquired stock options for an additional 8.75 million
shares. Harper owns 622,688 shares of RJR stock.
b. Defendant H. John Greeniaus is a director of the Company and the
Chairman and Chief Executive Officer of Nabisco Foods Group. In fiscal 1993,
Greeniaus received over $1-2 million in compensation, $600,000 in restricted
stock awards and 500,000 shares in stock options. Greeniaus owns over 2 million
shares of RJR stock.
c. Defendant James W. Johnston, is an RJR director and the Chairman
and Chief Executive Officer of R. J. Reynolds Tobacco Company. For the 1993
fiscal year, Johnston earned over
2
<PAGE>
$950,000, received $826,468 in restricted stock awards and options for the
purchase of an additional 500,000 shares. Johnston owns over 2 million shares of
RJR stock.
5. Defendant KKR is a Delaware limited partnership which is engaged in
the investment banking business. As a result of KKR's acquisition of RJR Nabisco
Inc. in 1988, KKR owns approximately 48.9% of RJR common stock. By virtue of
its stock ownership and the fact that eight of RJR's directors are affiliated
with KKR, KKR controls the business and affairs of the Company and has caused it
to enter into the self-dealing transaction described herein.
6. Defendants Henry R. Kravis, Paul E. Raether, George R. Roberts, James
H. Greene, Jr., Scott M. Stewart, Michael Tokarz, Saul Fox and Clifton S.
Robbins are all directors of RJR and executives, general partners and/or limited
partners in KKR. Each of these directors has the ability to control the
business and affairs of RJR by virtue of their membership on the Board and KKR's
ownership of RJR common stock. Defendants named in paragraphs 4 and 6 are
referred to herein as the "Director Defendants".
7. KKR acquired RJR in 1989 and 1990, for approximately $3.2 billion, an
average of approximately $5.60 per share. KKR sold RJR stock to the investing
public in 1991 for $11.25 per share.
FACTS
-----
8. On September 12, 1994, KKR announced that it was purchasing 100% of
Borden in a $2 billion transaction. As announced by the wire services:
3
<PAGE>
Columbus, Ohio, Sept. 12 (Bloomberg) -- Kohlberg Kravis
Roberts & Co. will trade about $2 billion in stock, or half
its controlling stake in RJR Nabisco Holdings Corp., for all
of troubled food giant Borden Inc., the companies said
today.
KKR, the privately held takeover boutique behind RJR
Nabisco's massive leveraged buyout, said the transaction
values Borden stock at $14.25, a premium of 22.6% over the
closing price of Borden shares on Friday.
Thus, as a result of the merger, KKR will reduce its controlling interest in RJR
by approximately 50%. As stated in the news release "KKR will continue to own
an approximately $2 billion stake in RJR Nabisco, to have significant
representation on the board, and to play an active role in exploring ways to
maximize shareholder value."
9. Also on September 12, RJR announced that following KKR's purchase of
Borden, KKR would sell part of its stake in Borden to RJR for newly issued RJR
shares. Under the arrangement, after KKR acquires 100% of Borden, RJR will
issue approximately $500 million in new RJR common shares to Borden in return
for a 20% stake in Borden. RJR also will receive warrants to purchase an
additional 10% of Borden and have an opportunity to designate a number of
directors to Borden's Board.
10. The agreement for RJR to purchase a 20% stake in Borden is manifestly
unfair to RJR's shareholders. While KKR is obtaining, in the first instance,
100% of Borden for approximately $2 billion, RJR will only receive a 20%
interest in Borden for consideration worth $500 million.
11. KKR, which controls RJR (and will control Borden after the Merger),
proposes charging RJR an exorbitant mark-up of
4
<PAGE>
$100 million over what KKR paid for the same 20% interest in Borden. Moreover,
RJR is paying for its Borden stake on the basis of a $14.25 per share price --
which reflects a control premium paid by KKR. As KKR is retaining 80% ownership
of Borden, it is grossly unfair for RJR to pay any control premium for its
Borden stake. Had the defendants acted in good faith and dealt fairly with RJR,
RJR's price per share should be significantly less than the $14.25 per share to
be paid for Borden by KKR.
12. Thus, as the transaction is structured, KKR will effectively pay $1.5
billion for its 80% interest in Borden, and, through Borden, will receive back a
substantial portion of its RJR stock, as a result of RJR's purchase of 20% of
Borden. Moreover, KKR has structured the deal so that it might take advantage of
substantial tax losses associated with its investment in RJR by paying the full
$2 billion price for Borden in RJR stock, while at the same time it will receive
back $500 million in RJR stock as part of the second step of the transaction.
13. Moreover, the issuance of $500 million in new RJR common stock will
substantially dilute the cash value and shareholdings of the non-controlling
public stockholders of RJR.
DERIVATIVE CLAIM
----------------
14. Plaintiff brings the following claim derivatively for the benefit of
RJR.
15. The Purchase serves no corporate interest of RJR, but rather serves to
facilitate KKR's acquisition of Borden while ensuring KKR's continued control of
RJR.
5
<PAGE>
16. Moreover, the proposed price of the Purchase grossly overvalues RJR's
proposed 20% interest in Borden for the benefit of KKR and to the detriment of
RJR. It causes RJR to issue its stock for inadequate consideration, thereby
wasting RJR's assets.
17. Demand on RJR's Board of Directors to bring this claim would be futile
and is therefore excused because:
a. RJR's Board is legally incapable of exercising judgment
independent of KKR's interests. Eight of RJR's seventeen Board members (as set
forth in paragraph 6) are also executives, general partners and/or limited
partners of KKR and the three management directors, who are defendants herein,
are dependent upon RJR for their continued employment and compensation. These
defendants, therefore, are not independent and make up a majority of RJR's
Board.
b. For the same reasons, a majority of RJR's directors have an
interest in implementing the Purchase.
c. Corporate waste, involving the overpayment for RJR's proposed
stake in Borden, cannot constitute business judgment.
d. A majority of RJR's directors are responsible for the wrongs
alleged and are named as defendants herein and cannot be expected to sue
themselves.
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings the following claims individually and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of
all common stockholders of RJR and their successors in interest (other than the
defendants named herein),
6
<PAGE>
and those partnerships, corporations, and other entities that have suffered and
will suffer the harm more fully described herein (hereinafter the "Class").
19. The Class is so numerous, that the joinder of all members is
impracticable. As of March 29, 1994, RJR had over 1.1 billion common shares
outstanding. Consequently, the number of Class members is believed to be in the
thousands.
20. Plaintiff's claims are typical of the claims of the Class and
plaintiff wi11 fairly and adequately protect the interests of the other Class
members. Plaintiff has retained counsel who are experienced and competent in
both class and derivative litigation, and the plaintiff has no interests which
are contrary to, or in conflict with, those of the other members of the Class to
be represented.
21. There are questions of law and fact common to the Class including,
inter alia:
- ----- ----
a. whether the Director Defendants have breached and will continue
to breach the fiduciary duties owed by them to the plaintiff and the Class by
virtue of their participation and/or acquiescence in the conduct complained of
herein;
b. whether the Director Defendants have engaged in self-dealing
transactions which benefit, inter alia, KKR and the KKR investors, at the
----- ----
expense of the shareholders of RJR;
c. whether, in breach of their duties of care and loyalty, the
Director Defendants wrongfully diluted the cash value and voting rights of the
non-controlling shareholders; and
d. whether KKR aided and abetted the Director Defendants' breaches
of fiduciary duty.
7
<PAGE>
22. The prosecution of separate actions by individual Class members would
create a risk of inconsistent and varying adjudications concerning the subject
matter of this action, which adjudications could establish incompatible
standards of conduct for the defendants in connection with the actions
complained of herein.
23. The defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
CLAIM FOR RELIEF
----------------
24. Plaintiff incorporates the allegations in paragraphs 1 through 13 and
15-16 above as if fully set forth herein.
25. If implemented, the Purchase will result in a dilution of both the
cash value of the public shareholders' interest in RJR and their voting power.
26. Accordingly, the Director Defendants have breached their fiduciary
duties by, inter alia, putting the interests of KKR and its general and limited
----- ----
partners, among others, ahead of the interests of RJR's shareholders generally,
and have used their positions of control as directors of RJR for the purpose of
maximizing the business and financial interests of KKR and its partners, at the
expense of RJR's public shareholders.
27. KKR, as RJR's controlling shareholder, is obligated to deal fairly
with RJR's public shareholders. The Purchase, proposed by KKR to serve its own
interests, breaches that duty.
28. Alternatively, KKR had knowledge of the fiduciary duties owed by the
Director Defendants to the public shareholders
8
<PAGE>
of RJR. KKR knowingly and substantially participated in the Director
Defendants' breaches of fiduciary duties as alleged herein.
29. KKR, therefore, is liable to plaintiff and other members of the Class
who have been damaged by the breaches of fiduciary duty.
* * *
30. As to all claims above, plaintiff has no adequate remedy at law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiff demands judgment and preliminary and permanent
relief, including injunctive relief, as follows:
A. An order certifying the individual claims herein as a class action and
designating plaintiff and the undersigned counsel as the representatives
thereof;
B. Declaring and decreeing that the proposed Purchase is a breach of the
fiduciary duties of KKR and the Director Defendants and is therefore unlawful
and unenforceable;
C. Enjoining the defendants from taking any action with respect to
consummating the Purchase;
D. Rescinding, to the extent already implemented, the Purchase or any of
the terms thereof;
E. If all or most of the relief requested above is not granted, a
judgment awarding RJR, plaintiff and the Class compensation for the damages they
sustain as a result of the defendants' unlawful conduct as alleged herein;
9
<PAGE>
F. A judgment awarding plaintiff's attorneys' fees, and costs of suit,
including expert fees; and
G. Such other and further relief as this Court deems just and proper.
Dated: September 16, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: __________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
GOODKIND LABATON RUDOFF & SUCHAROW
100 Park Avenue
New York, NY 10017-5563
(212) 907-0700
10
EXHIBIT 11(g)(7)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
____________________________________________x
FRANK DEBORA, :
:
Plaintiff, :
:
:
- v. - :
:
:
H. JOHN GREENIAUS, JAMES W. JOHNSTON, :
CHARLES M. HARPER, HENRY R. KRAVIS, :
PAUL E. RAETHER, GEORGE R. ROBERTS, : C.A. No.13755 :
JAMES J. GREENE, JR., SCOTT M. :
STEWART, MICHAEL TOKARZ, SAUL :
FOX, CLIFTON S. ROBBINS and :
KOHLBERG KRAVIS ROBERTS & CO., L.P., :
:
:
Defendants, :
:
and :
:
RJR NABISCO HOLDINGS CORP., :
:
:
:
Nominal Defendant. :
_____________________________________________x
COMPLAINT
---------
Plaintiff, by and through undersigned counsel, alleges upon information and
belief, except as to paragraph 2, which is alleged on knowledge, as follows:
1. Plaintiff brings this action to redress injuries to RJR Nabisco
Holdings Corp. ("RJR" or the "Company") and its public shareholders which would
result from RJR's acquisition of a 20% interest in Borden Inc. ("Borden") (the
"purchase") directed by RJR's controlling shareholder, Kohlberg Kravis Roberts &
Co., L.P. ("KKR") after KKR acquires Borden by merger. RJR's proposed
acquisition of an interest in Borden is at an unfairly high price which benefits
KKR at the expense of RJR and its shareholders.
<PAGE>
THE PARTIES
-----------
2. Plaintiff Frank Debora has owned shares of RJR Covertible Preferred A
stock since prior to the announcement of the Purchase and the KKR/Borden merger
(the "Merger").
3. Defendant RJR is a Delaware corporation and is an international
company principally engaged in the food and tobacco industries. RJR is a global
leader in the food and tobacco industries with annual sales of over $30 billion.
RJR's wholly-owned subsidiary RJR Nabisco, Inc., is the Company's operating
subsidiary.
4. The following defendants are officers of the Company (the "Management
Defendants") and all were appointed by virtue of KKR's control of RJR's Board
and continue to serve in these extraordinarily lucrative positions at KKR'S
discretion:
a. Defendant Charles M. Harper is an RJR director, and is its
chairman and chief executive officer. For fiscal year 1993, Harper earned over
$2.6 million dollars and acquired stock options for an additional 8.75 million
shares. Harper owns 622,688 shares of RJR stock.
b. Defendant H. John Greeniaus is a director of the Company and the
Chairman and Chief Executive Officer of Nabisco Foods Group. In fiscal 1993,
Greeniaus received over $1.2 million in compensation, $600,000 in restricted
stock awards and 500,000 shares in stock options. Greeniaus owns over 2 million
shares of RJR stock.
c. Defendant James W. Johnston, is an RJR director and the Chairman
and Chief Executive Officer of R. J. Reynolds
2
<PAGE>
Tobacco Company. For the 1993 fiscal year, Johnston earned over $950,000,
received $826,468 in restricted stock awards and options for the purchase of an
additional 500,000 shares. Johnston owns over 2 million shares of RJR stock.
5. Defendant KKR is a Delaware limited partnership which is engaged in
the investment banking business. As a result of KKR's acquisition of RJR
Nabisco Inc. in 1988, KKR owns approximately 48.9% of RJR common stock. By
virtue of its stock ownership and the fact that eight of RJR's directors are
affiliated with KKR, KKR controls the business and affairs of the Company and
has caused it to enter into the self-dealing transaction described herein.
6. Defendants Henry R. Kravis, Paul E. Raether, George R. Roberts, James
H. Greene, Jr., Scott M. Stewart, Michael Tokarz, Saul Fox and Clifton S.
Robbins are all directors of RJR and executives, general partners and/or limited
partners in KKR. Each of these directors has the ability to control the
business and affairs of RJR by virtue of their membership on the Board and KKR's
ownership of RJR common stock. Defendants named in paragraphs 4 and 6 are
referred to herein as the "Director Defendants".
7. KKR acquired RJR in 1989 and 1990, for approximately $3.2 billion, an
average of approximately $5.60 per share. KKR sold RJR stock to the investing
public in 1991 for $11.25 per share.
3
<PAGE>
FACTS
-----
8. On September 12, 1994, KKR announced that it was purchasing 100% of
Borden in a $2 billion transaction. As announced by the wire services:
Columbus, Ohio, Sept. 12 (Bloomberg) -- Kohlberg Kravis
Roberts & Co. will trade about $2 billion in stock, or half
its controlling stake in RJR Nabisco Holdings Corp., for all
of troubled food giant Borden Inc., the companies said
today.
KKR, the privately held takeover boutique behind RJR
Nabisco's massive leveraged buyout, said the transaction
values Borden stock at $14.25, a premium of 22.6% over the
closing price of Borden shares on Friday.
Thus, as a result of the merger, KKR will reduce its controlling interest in RJR
by approximately 50%. As stated in the news release "KKR will continue to own
an approximately $2 billion stake in RJR Nabisco, to have significant
representation on the board, and to play an active role in exploring ways to
maximize shareholder value."
9. Also on September 12, RJR announced that following KKR's purchase of
Borden, KKR would sell part of its stake in Borden to RJR for newly issued RJR
shares. Under the arrangement, after KKR acquires 100% of Borden, RJR will
issue approximately $500 million in new RJR common shares to Borden in return
for a 20% stake in Borden. RJR also will receive warrants to purchase an
additional 10% of Borden and have an opportunity to designate a number of
directors to Borden's Board.
10. The agreement for RJR to purchase a 20% stake in Borden is manifestly
unfair to RJR's shareholders. While KKR is obtaining, in the first instance,
100% of Borden for approximately
4
<PAGE>
$2 billion, RJR will only receive a 20% interest in Borden for consideration
worth $500 million.
11. KKR, which controls RJR (and will control Borden after the Merger),
proposes charging RJR an exorbitant mark-up of $100 million over what KKR paid
for the same 20% interest in Borden. Moreover, RJR is paying for its Borden
stake on the basis of a $14.25 per share price -- which reflects a control
premium paid by KKR. As KKR is retaining 80% ownership of Borden, it is grossly
unfair for RJR to pay any control premium for its Borden stake. Had the
defendants acted in good faith and dealt fairly with RJR, RJR's price per share
should be significantly less than the $14.25 per share to be paid for Borden by
KKR.
12. Thus, as the transaction is structured, KKR will effectively pay $1.5
billion for its 80% interest in Borden, and, through Borden, will receive back a
substantial portion of its RJR stock, as a result of RJR's purchase of 20% of
Borden. Moreover, KKR has structured the deal so that it might take advantage of
substantial tax losses associated with its investment in RJR by paying the full
$2 billion price for Borden in RJR stock, while at the same time it will receive
back $500 million in RJR stock as part of the second step of the transaction.
13. Moreover, the issuance of $500 million in new RJR common stock will
substantially adversely impact the cash value of the preferred stock of RJR.
DERIVATIVE CLAIM
----------------
14. Plaintiff brings the following claim derivatively for the benefit of
RJR.
5
<PAGE>
15. The Purchase serves no corporate interest of RJR, but rather serves to
facilitate KKR's acquisition of Borden while ensuring KKR's continued control of
RJR.
16. Moreover, the proposed price of the Purchase grossly overvalues RJR's
proposed 20% interest in Borden for the benefit of KKR and to the detriment of
RJR. It causes RJR to issue its stock for inadequate consideration, thereby
wasting RJR's assets.
17. Demand on RJR's Board of Directors to bring this claim would be futile
and is therefore excused because:
a. RJR's Board is legally incapable of exercising judgment
independent of KKR's interests. Eight of RJR's seventeen Board members (as set
forth in paragraph 6) are also executives, general partners and/or limited
partners of KKR and the three management directors, who are defendants herein,
are dependent upon RJR for their continued employment and compensation. These
defendants, therefore, are not independent and make up a majority of RJR's
b. For the same reasons, a majority of RJR's directors have an
interest in implementing the Purchase.
c. Corporate waste, involving the overpayment for RJR's proposed
stake in Borden, cannot constitute business judgment.
d. A majority of RJR's directors are responsible for the wrongs
alleged and are named as defendants herein and cannot be expected to sue
themselves.
6
<PAGE>
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings the following claims individually and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of
all of the RJR preferred stockholders and their successors in interest (other
than the defendants named herein), who have suffered and will suffer the harm
more fully described herein (hereinafter the "Class").
19. The Class is so numerous, that the joinder of all members is
impracticable. RJR has about 550 million shares of preferred stock outstanding.
Consequently, the number of Class members is believed to be in the thousands.
20. Plaintiff's claims are typical of the claims of the Class and
plaintiff will fairly and adequately protect the interests of the other Class
members. Plaintiff has retained counsel who are experienced and competent in
both class and derivative litigation, and the plaintiff has no interests which
are contrary to, or in conflict with, those of the other members of the Class to
be represented.
21. There are questions of law and fact common to the Class including,
inter alia:
- ----- ----
a. whether the Director Defendants have breached and will continue
to breach the fiduciary duties owed by them to the plaintiff and the Class by
virtue of their participation and/or acquiescence in the conduct complained of
herein;
b. whether the Director Defendants have engaged in self-dealing
transactions which benefit, inter alia, KKR and the KKR investors, at the
----- ----
expense of the shareholders of RJR;
7
<PAGE>
c. whether, in breach of their duties of care and loyalty, the
Director Defendants wrongfully diluted the cash value of the non-controlling
shareholders; and
d. whether KKR aided and abetted the Director Defendants' breaches
of fiduciary duty.
22. The prosecution of separate actions by individual Class members would
create a risk of inconsistent and varying adjudications concerning the subject
matter of this action, which adjudications could establish incompatible
standards of conduct for the defendants in connection with the actions
complained of herein.
23. The defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
CLAIM FOR RELIEF
----------------
24. Plaintiff incorporates the allegations in paragraphs 1 through 13 and
15-16 above as if fully set forth herein.
25. If implemented, the Purchase will result in a dilution of both the
cash value of the public shareholders' interest in RJR and their voting power.
26. Accordingly, the Director Defendants have breached their fiduciary
duties by, inter alia, putting the interests of KKR and its general and limited
----- ----
partners, among others, ahead of the interests of RJR's shareholders generally,
and have used their positions of control as directors of RJR for the purpose of
maximizing the business and financial interests of KKR and its partners, at the
expense of RJR's public shareholders.
8
<PAGE>
27. KKR, as RJR's controlling shareholder, is obligated to deal fairly
with RJR's public shareholders. The Purchase, proposed by KKR to serve its own
interests, breaches that duty.
28. Alternatively, KKR had knowledge of the fiduciary duties owed by the
Director Defendants to the public shareholders of RJR. KKR knowingly and
substantially participated in the Director Defendants' breaches of fiduciary
duties as alleged herein.
29. KKR, therefore, is liable to plaintiff and other members of the Class
who have been damaged by the breaches of fiduciary duty.
* * *
30. As to all claims above, plaintiff has no adequate remedy at law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiff demands judgment and preliminary and permanent relief,
including injunctive relief, as follows:
A. An order certifying the individual claims herein as a class action and
designating plaintiff and the undersigned counsel as the representatives
thereof;
B. Declaring and decreeing that the proposed Purchase is a breach of the
fiduciary duties of KKR and the Director Defendants and is therefore unlawful
and unenforceable;
C. Enjoining the defendants from taking any action with respect to
consummating the Purchase;
D. Rescinding, to the extent already implemented, the Purchase or any of
the terms thereof;
9
<PAGE>
E. If all or most of the relief requested above is not granted, a
judgment awarding RJR, plaintiff and the Class compensation for the damages they
sustain as a result of the defendants' unlawful conduct as alleged herein;
F. A judgment awarding plaintiff's attorneys' fees, and costs of suit,
including expert fees; and
G. Such other and further relief as this Court deems just and proper.
Dated: September 20, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By:______________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Law Office of Zachary Alan Starr
275 Madison Avenue
35th Floor
New York, NY 10016
10
EXHIBIT 11(g)(8)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
ARUN J. SHINGALA, Custodian for Sunil )
Arun Shingala, )
)
Plaintiff, )
)
v. )
)
)
CHARLES M. HARPER, LAWRENCE R. RICCIARDI, ) C.A. No. 13739
JOHN T. CHAIN, JR., JOHN L. CLENDENIN, ) -----
H. JOHN GREENIAUS, JAMES W. JOHNSTON, )
HENRY R. KRAVIS, JOHN G. MEDLIN, JR., )
PAUL C. RAETHER, ROZANNE L. RIDGWAY, )
CLIFTON S. ROBBINS, GEORGE R. ROBERTS, )
JAMES H. GREENE, SCOTT M. STUART, )
MICHAEL T. TOKARZ, AND BORDEN, INC. )
)
Defendants, )
)
and )
)
RJR HOLDINGS CORP., )
)
Nominal Defendant. )
SHAREHOLDER'S DERIVATIVE COMPLAINT
----------------------------------
Plaintiff, by his attorneys, complains of defendants on information
and belief, except as to paragraph 2, which is alleged upon personal knowledge,
as follows:
1. This action is brought derivatively on behalf of RJR Holdings,
Inc. ("RJR" or the "Company"), a Delaware corporation, for breach of fiduciary
duty and corporate waste.
<PAGE>
THE PARTIES
-----------
2. Plaintiff has held RJR stock continuously at all times relevant
to this Complaint, and continues to hold such stock.
3. (a) Defendant Charles M. Harper is Chairman of the Board and
Chief Executive Officer and has held that position since May 1993. In 1993
Harper earned approximately $3 million from RJR.
(b) Defendant Lawrence R. Ricciardi is President, General
Counsel and a Director. In 1993 he earned approximately $1,000,000 from RJR.
(c) Defendant H. John Greeniaus is Chairman and Chief Executive
Officer of Nabisco Foods Group and a Director. He earned approximately $1.2
million in 1993 from RJR.
(d) Defendant James W. Johnston is Chairman and Chief Executive
Officer of R.J. Reynolds Tobacco Company and a Director of RJR. He earned
approximately $1,000,000 in 1993 from RJR.
(e) Defendant James H. Greene is a general Partner of Kohlberg,
Kravis and Roberts & Co. ("KKR") and affiliated companies and a Director of RJR.
(f) Defendant Henry Kravis is a general partner of KKR and
affiliated companies and a Director of RJR.
(g) Defendant Paul E. Raether is a general partner of KKR and a
Director of RJR.
-2-
<PAGE>
(h) Defendant Clifton S. Robbins is an executive of KKR and a
limited partner of KKR affiliate, and a Director of RJR.
(i) Defendant George R. Roberts is a general partner of KKR and
a KKR affiliate, and a Director of RJR.
(j) Defendant Scott M. Stuart is an executive of KKR and a
limited partner of a KKR affiliate, and a Director of RJR.
(k) Defendant Michael T. Tokarz is a general partner of KKR, a
KKR affiliate and a Director of RJR.
(l) Defendants John T. Chain Jr., John L. Clendenin, John G.
Medlin Jr., Rozanne L. Ridgway, are Directors of RJR.
4. Defendant KKR, a partnership, owns 556,766,236 shares of RJR
common stock or 48.9% of the outstanding common stock of RJR and exercises
effective control over RJR. As a result of a going private transaction in 1988,
KKR acquired RJR.
5. Defendant RJR is a Delaware corporation with offices at 1301
Avenue of the Americas, New York, NY 10019. The Company, through wholly owned
RJR Nabisco Inc., operates substantial tobacco and food businesses, including
the sale of cigarettes such as Winston, Salem, Camel, and Vantage and foods
products such as Oreo Cookies, Wheat Thins, and Ritz Crackers, among others.
6. Defendant Borden is a New Jersey corporation engaging in the sale
of various food products and chemicals. It
-3-
<PAGE>
sells its products nationally to food stores and uses of chemical products.
7. The director defendants ("Director Defendants") owe RJR the
highest duties of good faith and loyalty. KKR as owner of a near majority of
RJR shares, as designee of 7 KKR representatives on the RJR Board and the
designee of the 4 officer director members of the Board, have effective control
of the RJR Board. KKR therefore owes RJR the same fiduciary duties as do the
Director Defendants.
FACTUAL ALLEGATIONS
-------------------
8. On September 12, 1994, it was jointly announced by KKR and
Borden, Inc. ("Borden") that KKR had agreed in principle to the acquisition of
all of the outstanding common stock of Borden by a KKR partnership in exchange
for RJR common stock owned by KKR, to be valued at $14.25 per Borden share (the
"Exchange Offer"). In the announcement, KKR and Borden stated that the purchase
price represented a premium of 22.8% over the $11.625 closing price of Borden
common stock on September 9, 1994.
9. The number of RJR shares to be received by holders of Borden
common shares will be determined by dividing $14.25 by the average of the high
and the low prices of RJR Nabisco stock for a 10 day trading period to be set,
but in no event will holders of Borden common shares receive greater than 2.375
RJR shares or less than 1.78125 RJR shares per Borden share.
-4-
<PAGE>
10. KKR further reported that, in connection with its agreement to
acquire Borden, RJR had also agreed in principle that, upon KKR's acquisition of
100% of Borden, RJR will issue about $500 million of its newly issued common
shares for newly issued Borden shares priced at $14.25 each, representing a 20%
pro forma interest in Borden. RJR will also receive a warrant to purchase an
- --- -----
additional 10% interest in Borden as part of its investment. RJR will receive
an undetermined number of seats on Borden's Board. It was also announced that
RJR and KKR had agreed that if Borden should agree to sell any of its food
business assets in the future, RJR may use its Borden shares as payment for
those businesses.
11. It was also reported that at the time a definitive merger
agreement is entered into, Borden will grant KKR an option to purchase from
Borden up to 19.9% of the outstanding Borden common stock, for $11 per share, so
that if KKR purchases Borden shares in the Exchange Offer, it will obtain at
least 51% of Borden's common stock. KKR would then effect a merger of Borden
into a KKR subsidiary on the same terms as the Exchange Offer.
12. It is expected that the total consideration to be paid in the
Exchange Offer for 100% of Borden common shares is approximately $2 billion, and
that it will cost RJR approximately $500,000,000 to acquire its 20% stake in
Borden. It is expected that after the acquisition, KKR will retain a $2 billion
stake in RJR, and continue to control its activities. After giving effect to
the Exchange Offer, KKR's ownership of RJR shares would drop
-5-
<PAGE>
to approximately 20%. However, it would effectively be approximately 30% due to
the anticipated ownership by Borden of $500 million of RJR shares and the
control of 80% of Borden shares by KKR.
13. Borden is a company in serious financial difficulty. It has been
on a downward spiral since 1991, ending in the forced resignation of its Chief
Executive, Anthony D'Amato. After his departure, Borden took a writeoff of $486
million, resulting in a loss from continuing operations of $57 million. Its
debt has been downgraded to BBB from A+ in 1991, and its stock, prior to the
announcement of the Exchange Offer, had fallen to near its 10 year low.
Standard & Poors had placed Borden's long term debt and commercial paper under
review for further downgrade. Indeed, Borden has had great difficulty in
obtaining additional financing and has had to pay interest rates equivalent to a
junk bond rate to obtain credit.
14. In an attempt to revitalize itself, Borden has tried to sell off
some of its food product lines to decrease its huge debt and then to
reinvigorate the remaining food businesses. These assets sales had not been
particularly successful.
15. The sale of assets had previously raised only $165 million. For
instance, its food service line was sold for $70 million to H.J. Heinz, yielding
a purchase price equivalent to only 31% of revenues. Generally, prime food
company assets sell for a $1.00 per $1.00 revenues. It has been reported that
-6-
<PAGE>
unless further assets are sold Borden will have no free cash flow in 1994.
16. Turn around efforts on the remaining food businesses have not
been successful. While Borden has attempted to increase the sales volume of its
remaining food products, it has done so primarily by price cutting and special
incentives, which, have slightly increased market share, but have resulted in a
decline of margins and an evaporation of operating profits in these product
lines. Furthermore, Borden has failed to control its costs. While sales are
projected to decline due to product line sales, costs have remained flat. The
company is so overextended that it has only approximately $0.85 in current
assets per dollar in current liabilities.
17. Additionally, it is in intense competition with other food
business competitors which have historically been far better at developing new
products which yield good market share at healthy operating margins and which
competitors have also been better at obtaining supermarket shelf space. In short
Borden is at this juncture a tale of woe. An acquiror who obtains Borden runs
tremendous risks with respect to its investment.
VIOLATIONS ALLEGED
------------------
18. The Exchange Offer and the RJR purchase of Borden shares are
solely to benefit KKR. KKR is in the corporate acquisition business and takes
very significant risks acquiring companies with the expectation that they, or
their assets may ultimately be sold at a profit. Pursuant to the Exchange Offer
-7-
<PAGE>
it is expected to obtain majority control of Borden and to then acquire the
balance of Borden shares by a merger.
19. Pursuant to the transactions, RJR will obtain only a 20% stake in
Borden. RJR is not an investment company and is not in the business of
investing in companies by acquiring minority stock interests, especially one as
troubled as Borden. The $500 million acquisition of Borden shares serves no
legitimate business purpose of RJR, but benefits KKR, as it effectively cuts
KKR's cost of acquisition of Borden by approximately 25%. Due to KKR's
domination and effective control of the RJR Board, RJR has been required to
participate in the transaction, where it has no legitimate interest to do so.
20. RJR will pay the same per share price for the acquisition of its
minority interest in Borden as KKR will pay to acquire the entire company. The
purchase of a 20% minority interest that includes a premium paid to obtain
control constitutes a waste of RJR's assets and benefits only KKR, which will
sell the minority Borden interest at an inflated price. Further, the Borden
shares acquired by RJR will be impossible to sell on the open market, and it is
highly likely that no one will have any interest in purchasing them in a private
transaction. Although RJR will be given the option to acquire Borden assets if
they are sold and use its Borden shares to do so, it may be forced to do so as
that route may be the only effective method of ridding itself of the Borden
shares.
-8-
<PAGE>
21. Although RJR will acquire a warrant to purchase an additional 10%
of Borden's common stock, this warrant does not provide RJR with anywhere near
the additional value necessary to compensate it for the unreasonable risks that
it is being forced to take.
22. Given Borden's deplorable financial condition, the minority
investment by RJR in Borden does not benefit its business, but that of KKR.
Clearly, RJR will have no effective way of divesting itself of its Borden
investment, except by the purchase of the very troubled Borden food lines.
23. The investment by RJR in Borden, makes it less likely that RJR
will be in position to restructure itself to divide its tobacco and food
operations, which has been under consideration. Thus RJR is being forced to
forego this strategic option to its detriment, in favor of an investment which
benefits only KKR.
24. The foregoing scheme constitutes a breach of fiduciary duty of
loyalty by the Director Defendants since they are acting primarily for the
benefit of KKR to the detriment of RJR. KKR has also breached its fiduciary
duties owed to RJR by proffering this scheme to use RJR's assets to fund its
merchant banking operations. As a result of the scheme, RJR will be damaged
financially and competitively, will pay excessive amounts for the securities
acquired in the transaction. The scheme constitutes a gross waste of RJR's
assets for the benefit of KKR.
-9-
<PAGE>
DEMAND FUTILITY
---------------
25. Plaintiff has not demanded that RJR's Board of Directors
institute an action against the directors to recover for the wrongs alleged
above. Such demand would be futile, and is therefore excused, for at least the
following reasons:
(a) A majority of RJR's Board of Directors is composed of
directors that are outright KKR desingees or officers of RJR who were
selected by KKR and cannot be asked to sue themselves. Accordingly,
RJR's Board cannot be expected to take any action to redress the
wrongs alleged.
(b) RJR's directors lack the independence necessary to decide
whether or not RJR should take action to redress the wrongs alleged.
The RJR Board is controlled and dominated by KKR.
(c) The wrongs alleged above constitute breaches of fiduciary
and/or corporate waste. Accordingly, these transactions cannot be the
product of reasoned business judgement.
(d) A majority of the RJR Board owes loyalty to KKR and will not
take any legal action against KKR.
26. Plaintiff has no adequate remedy at law.
-10-
<PAGE>
WHEREFORE plaintiff demands relief as follows:
A. That the Court enjoin RJR's purchase of Borden shares;
B. That the Court require defendants to account to RJR for losses
RJR has and will sustain as a result of the wrongs alleged herein;
C. That the Court award RJR damages against the defendants for all
losses it has sustained as a result of the wrongs alleged herein;
D. That the Court award plaintiff the costs and expenses of this
action, including reasonable attorneys', experts' and accountants' fees;
E. Such other and further relief as the Court deems just and proper.
Dated: Wilmington, Delaware
September 13, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By:__________________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
WOLF POPPER ROSS WOLF & JONES
845 Third Avenue
New York, NY 10022
-11-
EXHIBIT 11(g)(9)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
_______________________________________x
ALAN R. KAHN, )
)
Plaintiff, ) C.A. No. 13767
)
v. )
)
KOHLBERG KRAVIS ROBERTS & CO., )
KKR ASSOCIATES, HENRY R. KRAVIS, )
GEORGE R. ROBERTS, PAUL E. RAETHER, )
JAMES H. GREENE, JR., SCOTT M. STUART, )
CLIFTON S. ROBBINS, MICHAEL T. TOKARZ )
and RJR NABISCO HOLDINGS CORP., )
)
Defendants. )
_______________________________________x
COMPLAINT
---------
Plaintiff, by his undersigned attorneys, alleges as follows:
1. Alan R. Kahn is, and has been at all relevant times, the owner of
common stock and depository shares representing 1/4 share of preferred
convertible A of RJR Nabisco Holdings Corp. ("RJR Holdings" or the "Company").
Plaintiff brings this action derivatively on behalf of the Company.
2. The Company is a Delaware corporation with its principal place of
business located at 1301 Avenue of the Americas, New York, New York. It is
engaged in the food and tobacco businesses. Through certain of its
subsidiaries, the Company is one of the largest packaged food companies in the
world. In 1993, its food subsidiaries had revenues of over $7 billion, with
operating income of $624 million.
<PAGE>
3. Defendant Kohlberg Kravis Roberts & Co. ("KKR") is a Delaware limited
partnership with its principal place of business located at 9 West 57th Street,
New York, New York.
4. Defendant KKR Associates is a limited partnership with its principal
place of business located at 9 West 57th Street, New York, New York. KKR
Associates is owned or controlled by KKR.
5. KKR Associates is the sole general partner of Whitehall Associates,
L.P. ("Whitehall") and of a second limited partnership that are the owners of
common stock of RJR Holdings. The Company's April 11, 1994 proxy statement (the
"1994 Proxy") reported that, by virtue of its position as general partner, KKR
Associates is the beneficial owner of 566,766,236 shares of RJR Holdings common
stock owned by such limited partnerships, or 48.9% of the Company common shares
outstanding, as of March 29, 1994.
6. Defendants Henry R. Kravis ("Kravis"), George R. Roberts, Paul E.
Raether, James H. Greene, Jr., Clifton S. Robbins ("Robbins"), Scott M. Stuart
and Michael T. Tokarz (the "KKR Directors") are directors of RJR Holdings. In
addition, they are either general partners of both KKR and KKR Associates
(together "KKR"), or limited partners of KKR Associates and executives of KKR.
7. Since KKR's acquisition of an equity interest in the Company in 1989,
it has exercised effective control over the Company and the conduct of its
business. During most of such period, KKR was the beneficial owner of the
Company's common stock. KKR used its majority position to manage the business
and affairs of the
2
<PAGE>
Company and to elect the Company's board of directors. After KKR's ownership
position dropped marginally below 50%, the same board of directors remained in
office and KKR continued to exercise control over the business and affairs of
the Company.
8. From 1989 through the year ended December 31, 1993, KKR, pursuant to
an oral understanding, rendered management, consulting and financial services to
the Company for an annual fee of $10 million. In 1994, pursuant to a settlement
agreement approved by this Court in another action (the "Prior Action"), KKR and
the Company entered into a written contract (the "Services Contract"). The
Services Contract provided for the same services as were performed by KKR for
the Company under the oral understanding, but reduced the annual fee from $10
million to $8 million in 1994, $7 million in 1995, $6 million in 1996 and $5
million in 1994 and for each calendar year thereafter. The Services Contract
also provided that KKR may request additional fees in the event that it performs
extraordinary services for the Company.
9. Pursuant to the prior oral understanding and the Services Contract,
KKR was required, for the annual fee, to perform investment banking services for
the Company in connection with the acquisition of businesses in food related
companies, including finding prospective acquisitions. In the event of a major
acquisition, KKR was entitled to receive a fee in excess of the annual fee. In
a deposition taken in connection with the settlement of the Prior Action, a
Company officer testified that KKR had, in fact, rendered services in connection
with mergers and acquisitions under the arrangement for the provision of
services by KKR which preceded the Services Contract. Defendant Robbins, in
another deposition taken in the Prior Action, likewise testified that
3
<PAGE>
KKR provided investment banking services to the Company in connection with
acquisitions. Moreover, in a brief submitted in support of the settlement of
the Prior Action, the fees to be paid to KKR under the Services Contract were
justified by reason of KKR's agreement to provide merger and acquisition
services to the Company.
10. With the assistance of KKR and in connection with its duties for which
it received an annual fee of $10 million, the Company made many acquisitions in
the food industry. Thus in 1992, the Company acquired the assets of New York
Style Bagel Chip Company, Inc., the country's leading producer and marketer of
bagel chips and pita chips, Plush Pippin Corporation, a leading regional
supplier of frozen pies to in-store supermarket bakeries, Stella D'oro Biscuit
Co., Inc., which manufactures breadsticks, breakfast biscuits, specialty cakes,
pastries and snacks, the Now & Later confection brand, a fruit chewy taffy
product, Industrias Alimenticias Maguary S.A., the largest producer of packaged
fruit-based beverages in Brazil, and Lance S.A. de C.V., a leading Mexican
biscuit and pasta manufacturer. During 1993, the Company acquired a 50%
interest in both Royal Brands, S.A. in Spain and Royal Brands Portugal ("Royal
Brands") approximately 95% of Cia. Arturo Field y la Estrella Ltda., S.A. in
Peru, and increased its equity interest in a partially owned business in
Venezuela to 100%. In 1994, the Company acquired 71% of Establecimiento Modelo
Terrabusi S.A., Argentina's second largest cookie and cracker business and the
remaining 50% of Royal Brands.
11. On September 11, 1994, KKR, acting on behalf of Whitehall, entered
into an agreement with Borden, Inc. ("Borden") for the acquisition, by a
4
<PAGE>
corporation to be formed by Whitehall, of all of Borden's common stock in
exchange for shares of RJR Holdings (the "KKR-Borden Agreement").
12. The acquisition of Borden is within RJR Holdings' line of business.
Like RJR Holdings, Borden is engaged in the prepared foods business. Borden
manufactures and distributes well known brands of dairy products, snacks and
pastas, as well as other products, with a significant portion of its sales and
income from overseas operations. Moreover, RJR Holdings is financially able to
acquire Borden, since under the KKR-Borden Agreement, Borden agreed to be
acquired for RJR Holdings common stock.
13. KKR, by reason of its exercise of control and domination of the
Company's business affairs and the membership of its partners and executives on
the Company's Board, and the KKR Directors, by virtue of their acceptance of
their respective offices, are fiduciaries of the Company and its public
shareholders and owe to them the duty faithfully, loyally, diligently,
prudently, honestly, and carefully to conduct the business of the Company in the
best interest of all shareholders and not to favor their own interest, or the
interests of KKR, over the interests of the Company and its public shareholders.
14. The right to purchase Borden was a corporate opportunity belonging to
the Company. KKR and the KKR Directors were constrained by their legal duty to
the Company and its shareholders to allow the Company to acquire Borden. The
failure of KKR and the KKR Directors to offer the above described corporate
opportunity to the Company constitutes a violation of fiduciary duty.
5
<PAGE>
15. By reason of the Services Contract and KKR's fiduciary duty to the
Company resulting therefrom and from KKR's position as the Company's management,
financial and investment adviser since 1989, KKR was required to acquire Borden,
for the Company. KKR's failure to offer Borden to RJR Holdings violated such
contractual and fiduciary duties.
16. Plaintiff has no adequate remedy at law.
DEMAND IS FUTILE
----------------
17. Demand upon the board of directors of RJR Holdings to commence this
action would be futile because:
(a) The KKR Directors constitute seven of the Company's fifteen
directors;
(b) Four of the Company's remaining directors also serve as its
senior executives (the "Officer-Directors"). Directors Charles M. Harper
("Harper") is the Company's chairman and chief executive officer, James W.
Johnston ("Johnston") heads the Company's tobacco business, H. John Greeniaus
("Greeniaus") heads the Company's food business, and Lawrence R. Ricciardi
("Ricciardi") is the Company's president and chief counsel. Such directors
receive enormous amounts of salary and other compensation from the Company. In
1993, Harper received from the Company a salary of $704,615, a bonus of
$1,750,000, other compensation of various kinds totalling nearly $900,000 and
8,750,000 stock options. In that year Ricciardi received a salary of
$557,333, a bonus of $462,000, restricted stock awards ("awards") valued at
$815,625 and other compensation of about $120,000. Greeniaus recieved a salary
of
6
<PAGE>
$603,445, a bonus of $557,000, awards valued at $600,000 and other compensation
of over $110,000, and Johnston received a salary of $607,292, a bonus of
$225,000, awards valued at $826,400 and other compensation of nearly $200,000.
Each of Ricciardi, Johnston and Greeniaus also received 500,000 stock options.
Each of such directors owe their positions with the Company to KKR and the KKR
Directors. Harper was selected by Kravis to serve as the Company's chairman and
chief executive officer, and was elected to those positions at Kravis'
insistence. The other Officer-Directors owe their position to KKR and the KKR
Directors directly, or owe their positions directly to Harper, and indirectly to
KKR and the KKR Directors. Moreover, according to the 1994 Proxy, a majority of
the Compensation Committee of the Board are KKR Directors. That committee has
responsibility for all compensation and benefits matters of the Company's
executive officers. Accordingly, each of the Officer-Directors is dependent on
maintaining the goodwill of KKR and the KKR Directors in order to retain their
positions and the compensation and benefits that flow therefrom. As a result,
the Officer-Directors have a substantial direct interest in adhering to the
dictates of KKR and the KKR Directors, and none of the Officer-Directors could
be expected to consider a request to prosecute an action against KKR and the KKR
Directors in an impartial manner;
(c) The remaining four Company directors (the "Other Directors") are
John T. Chain, Jr. ("Chain"), John L. Clendenin ("Clendenin"), John G. Medlin,
Jr. ("Medlin") and Rozanne L. Ridgway ("Ridgway"). By reason of their
membership on other boards of directors and other duties, the Other Directors
are unable to devote the
7
<PAGE>
time or attention required to perform their duties as Company directors
properly. Ridgway is co-chair of the Atlantic Council of the United States,
chairperson of the Baltic-American Enterprise Fund and according to the 1994
Proxy, a director of six large publicly held corporations in addition to the
Company. Clendenin is the chairrman and chief executive officer of Bell South
Corporation, the largest of the regional Bell companies and, in market value,
the fifth largest telecommunication company in the world. According to the 1994
Proxy, he also serves on eight other boards of directors, including that of the
New York Stock Exchange. According to the 1994 Proxy, Medlin is the chairman of
Wachovia Corporation and serves on the boards of four other corporations.
According to the 1994 Proxy, Chain is an executive vice president of Burlington
Northern Railroad, and serves as a director of Kemper Corporation and Northrop
Corporation.
(d) By reason of the aforesaid facts, RJR Holdings' board of
directors cannot, in good faith, exercise any independent business judgment as
to whether to approve a resolution authorizing the filing of a suit against the
other defendants on the basis of the claims asserted herein;
(e) Prosecution of this action by RJR Holdings would place control of
this action in the hands of persons inimical to its rights, who could not be
expected to proceed vigorously against themselves; and
(f) The wrongs complained of herein constitute a waste of the
Company's assets which cannot be the product of the exercise of sound business
judgment or ratified by director approval.
8
<PAGE>
WHEREFORE, plaintiff prays for judgment as follows:
A. Declaring that KKR and the KKR Directors have violated their fiduciary
duties to the Company and its public shareholders by reason of their conduct
described above;
B. Declaring KKR be in breach of the Services Contract and declaring the
Services Contract to be null and void;
C. Requiring the defendants to account to RJR Holdings for the profits to
KKR and the damages suffered by RJR Holdings as a result of the transactions
complained of herein;
D. Allowing plaintiff the cost and expense of this action, including
reasonable attorneys' fees; and
E. Granting such other and further relief as may be just and proper.
Dated: Wilmington, Delaware
September 26, 1994
BIGGS AND BATTAGLIA
By: /s/ Robert D. Goldberg
_________________________
Robert D. Goldberg
1800 Mellon Bank Center
P.O. Box 1489
Wilmington, DE 19899
(302) 655-9677
Attorneys for Plaintiff
Of Counsel:
SILVERMAN, HARNES & HARNES
International Plaza
750 Lexington Avenue
New York, NY 10022
(212) 754-2333
9
EXHIBIT 11(g)(10)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------X
LINDA MUSHALA, :
:
Plaintiff, :
: C.A. No. 13738
v. :
:
H. JOHN GREENIAUS, et al. ; :
-- --- :
Defendants. :
- ------------------------------X
ARUN J. SHINGALA, :
:
Plaintiff, :
: C.A. No. 13739
v. :
:
CHARLES M. HARPER, et al., :
-- -- :
Defendants. :
- ------------------------------X
THOMAS M. MALLOY, :
:
Plaintiff, :
: C.A. No. 13748
v. :
:
CHARLES M. HARPER, et al., :
-- --- :
Defendants. :
- ------------------------------X
LEONARD I. SCHREIBER, et al., :
-- --- :
Plaintiffs, :
: C.A. No. 13749
v. :
:
H. JOHN GREENIAUS, et al., :
-- --- :
Defendants. :
- ------------------------------X
MARGARET ALESSI, :
:
Plaintiff, :
: C.A. No. 13750
v. :
:
H. JOHN GREENIAUS, et al., :
-- --- :
Defendants. :
- ------------------------------X
<PAGE>
- ------------------------------X
DOROTHY LEFFLER, :
:
Plaintiff, :
: C.A. No. 13751
v. :
:
H. JOHN GREENIAUS, et al., :
-- --- :
Defendants. :
- ------------------------------X
FRANK DEBORA, :
:
Plaintiff, :
: C.A. No. 13755
v. :
:
H. JOHN GREENIAUS, et al., :
-- --- :
Defendants. :
- ------------------------------X
HENRY L. SCHWARTZ :
:
Plaintiff, :
: C.A. No. 13758
v. :
:
H. JOHN GREENIAUS, et al., :
-- --- :
Defendants. :
- ------------------------------X
ALAN KAHN, :
:
Plaintiff, :
: C.A. No. 13767
v. :
:
KOHLBERG KRAVIS ROBERTS & :
CO., et al., :
-- --- :
Defendants. :
- ------------------------------X
ORDER OF CONSOLIDATION
----------------------
It appearing that the above-captioned actions involve the same subject
matter, and that the administration of justice would be best served by
consolidating the actions.
IT IS, this 25th day of October , 1994,
-------- -----------------------------
ORDERED AS FOLLOWS:
2
<PAGE>
1. The above-captioned actions shall be consolidated for all purposes.
2. Hereafter, papers need only be filed in Civil Action No. 13738.
3. The caption of the consolidated action shall be as
follows:
- -----------------------------------X
IN RE RJR NABISCO HOLDINGS CORP. : CONSOLIDATED
SHAREHOLDERS LITIGATION : C.A. No. 13738
- -----------------------------------X
4. The law firms of LAW OFFICES OF RICHARD APPLEBY, 39 Broadway, New
York, NY 10006, BERNSTEIN, LITOWITZ, BERGER & GROSSMANN, 1285 Avenue of the
Americas, New York, NY 10019, BIGGS & BATTAGLIA, 1800 Mellon Bank Center, P.O.
Box 1489, Wilmington, DE 19899, BIZAR & MARTIN, 485 Madison Avenue, New York, NY
10022, BRAGAR & WEXLER, P.C., 900 Third Avenue, New York, NY 10022, LAW OFFICE
OF KLARI NEUWELT, 950 Third Avenue, 8th Floor, New York, NY 10022, KANTROWITZ &
GOLDHAMER, P.C., 747 Chestnut Ridge Road, Chestnut Ridge, NY 10977-6216,
SILVERMAN HARNES & HARNES, International Plaza, 750 Lexington Avenue, New York,
NY 10022, LAW OFFICE OF ZACHARY ALAN STARR, 275 Madison Avenue, 35th Floor, New
York, NY 10016, and WOLF POPPER ROSS WOLF & JONES, 845 Third Avenue, New York,
NY 10022 shall constitute plaintiffs' Committee of the Whole.
5. The law firms of WOLF POPPER ROSS WOLF & JONES and BERNSTEIN LITOWITZ
BERGER & GROSSMANN are hereby designated plaintiffs' Co-Lead Counsel. The law
firm of ROSENTHAL, MONHAIT,
3
<PAGE>
GROSS & GODDESS, P.A. is hereby designated as Delaware liaison counsel for
plaintiffs.
6. All documents previously filed and served to date in any of the cases
consolidated herein are deemed a part of the record in the consolidated action.
Plaintiffs designate the complaint in Civil Action No. 13738 as the complaint in
the consolidated action. Defendants shall answer, move or otherwise respond to
the foregoing complaint on or before November 7, 1994. Defendants need not
respond to the complaints in the other constituent actions.
7. Plaintiffs' Co-Lead Counsel shall set policy for plaintiffs for the
prosecution of this litigation, delegate and monitor the work performed by the
plaintiffs' attorneys to ensure that there is no duplication of effort or
unnecessary expense, coordinate on behalf of plaintiffs the initiation and
conduct of discovery proceedings, conduct settlement negotiations, and provide
supervision and coordination of the activities of plaintiffs' counsel.
___________________________
Vice Chancellor
4
EXHIBIT 11(g)(11)
Miles M. Tepper
LAW OFFICE OF MILES M. TEPPER
7 Becker Farm Road
Roseland, New Jersey 07068
(201) 740-1881
IN THE SUPERIOR COURT OF THE STATE OF NEW JERSEY
CHANCERY DIVISION ESSEX COUNTY
- ----------------------------------------x
PAUL L. KOHNSTAMM, on behalf of : Docket No.
himself and all others similarly :
situated, :
: C - 257 - 94
Plaintiff, : ---
:
: Class Action Complaint
v. :
:
BORDEN INC., FRANK J. TASCO, ERVIN R. :
SHAMES, FREDERICK E. HENNIG, WILBERT J. :
LEMELLE, ROBERT P. LUCIANO, H. BARCLAY :
MORLEY, JOHN E. SEXTON, PATRICIA CARRY :
STEWART and KOHLBERG KRAVIS ROBERTS & :
CO., :
:
Defendants. :
:
- ----------------------------------------x
Plaintiff, by his attorneys, alleges upon information and belief (said
information and belief being based, in part, upon the investigation conducted by
and through his undersigned counsel), except with respect to his ownership of
Borden Inc. ("Borden" or the "Company") common stock, and his suitability to
serve as a class representative, which is alleged upon personal knowledge, as
follows:
<PAGE>
PARTIES
-------
1. Plaintiff is the owner of shares of defendant Borden. He is a resident
of the State of New York.
2. Defendant Borden is a corporation organized and existing under the
laws of the State of New Jersey. Borden maintains its principal offices at 180
East Broad Street, Columbus, Ohio 43215. Borden is a producer and distributor
of a variety of consumer food products, consumer adhesives and industrial
adhesives.
3. Defendant Kohlberg Kravis & Roberts Co. ("KKR") is a corporation
organized and existing under the laws of the State of Delaware with its
principal offices located in New York, New York. KKR is a "buyout firm" that
owns a substantial interest in, among others, RJR Nabisco Holdings Corp.
("RJR").
4. Defendant Frank J. Tasco is Chairman of the Board of Directors of
Borden.
5. Defendant Ervin S. Shames is President, Chief Executive Officer and a
Director of Borden.
6. Defendant Frederick E. Hennig is a Director of Borden.
7. Defendant Wilbert J. Lemelle is a Director of Borden.
8. Defendant Robert P. Luciano is a Director of Borden.
9. Defendant H. Barclay Morley is a Director of Borden.
10. Defendant John E. Sexton is a Director of Borden.
11. Defendant Patricia Carry Stewart is a Director of Borden.
2
<PAGE>
12. The foregoing individual directors of Borden (collectively the
"Director Defendants"), owe fiduciary duties to Borden and its shareholders.
3
<PAGE>
CLASS ACTION REGULATIONS
------------------------
13. Plaintiff brings this action on his own behalf and as a class action
on behalf of all shareholders of defendant Borden (except defendants herein and
any person, firm, trust, corporation or other entity related to or affiliated
with any of the defendants) or their successors in interest, who have been or
will be adversely affected by the conduct of defendants alleged herein.
14. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. As
of April 22, 1994, there were over 141 million shares of defendant Borden's
common stock outstanding owned by tens of thousands of shareholders of record.
(b) There are questions of law and fact which are common to members
of the Class and which predominate over any questions affecting any individual
members. The common questions include, inter alia, the following:
----- ----
i. Whether one or more of the defendants has engaged in a plan and
scheme to enrich themselves at the expense
of defendant Borden's public stockholders;
ii. Whether the Defendant Directors have breached
their fiduciary duties owed by them to plaintiff and members of the Class,
and/or have aided and abetted in such breach, by
4
<PAGE>
virtue of their participation and/or acquiescence and by their other conduct
complained of herein;
iii. Whether defendants have failed to fully disclose the true value
of defendant Borden's assets and earning power and the future financial benefits
which they expect to derive from Borden's purchase by KKR.
iv. Whether the Defendant Directors have wrongfully failed and
refused to seek a purchaser of Borden at the highest possible price and,
instead, have sought to chill potential offers and allow the valuable assets of
defendant Borden to be acquired by defendant KKR at an unfair and inadequate
price;
v. Whether defendant KKR has induced or aided and abetted breaches
of fiduciary duty by members of Borden's Board of Directors.
vi. Whether plaintiff and the other members of the Class will be
irreparably damaged by the transactions complained of herein; and
vii. Whether defendants have breached or aided and abetted the
breaches of the fiduciary and other common law duties owed by them to plaintiff
and the other members of the Class.
15. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of
plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interest as the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class
5
<PAGE>
and will fairly and adequately protect the interests of the Class.
16. Plaintlff anticipates that there will not be any difficulty in the
management of this litigation.
17. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action.
FACTUAL BACKGROUND
------------------
18. On September 12, 1994, KKR and Borden announced that they had agreed
in principle to the acquisition of all of the outstanding common stock of Borden
by a KRR partnership in exchange for RJR stock owned by that partnership, valued
at $14.25 per Borden share, or a total of approximately $2 billion. The
transaction is scheduled to close by September 23, 1994 (the "Transaction").
The Transaction has already been approved by the Director Defendants.
19. On Friday, September 9, 1994, Borden stock closed at $11.625 per
share.
20. Although the purchase price represents a small premium over the most
recent closing price of Borden stock, the Company's stock price recently
averaged between $15 and $20 per share. In addition to the fact that the price
offered is unfair and inadequate, the Transaction also provides that at the time
a definitive merger agreement is entered into, Borden will grant KKR a "lock up"
option to purchase from Borden up to 19.9% of the outstanding Borden common
stock for $11 a share payable in RJR
6
<PAGE>
Nabisco stock. If the option is exercised, KKR must purchase at least 41% of
the outstanding Borden common stock in the exchange offer if it acquires any
shares in the exchange offer. If KKR acquires at least 41%, but less than 51%
of Borden common stock in the exchange offer, the option must be exercised by
KKR, to the extent necessary for KKR to own at least 51% of the outstanding
Borden common stock. In the event any competing transaction is consummated, KKR
would be paid certain amounts under the merger agreement. In addition,
Defendants have agreed that if a merger agreement with Borden is not entered
into by September 23, 1994, KKR will purchase 19.9% of the outstanding common
shares of Borden at only $11 a share.
21. Further, RJR also announced on September 12, 1994 that it has reached
an agreement in principle with KKR to acquire a minority interest in Borden upon
KKR's successful acquisition of 100 percent of Borden. RJR will issue to Borden
approximately $500 million of newly issued RJR common shares for newly issued
Borden shares priced at $14.25 each, representing a 20 percent pro forma
interest in Borden.
22. The Director Defendants and KKR have agreed that, if the merger is
consummated, senior management will remain in place and that their compensation
structure will be altered to provide greater incentive compensation awards.
Also, a majority of the current directors will remain on the Board.
7
<PAGE>
23. The proposed Transaction is wrongful, unfair and harmful to Borden's
public stockholders, the Class members, and represents an attempt by defendants
to aggrandize the personal and financial positions and interests of board
members at the expense of and to the detriment of the stockholders of the
Company. The proposed transaction will deny plaintiff and other Class members
their rights to share appropriately in the true value of the Company's assets
and future growth in profits and earnings, while usurping the same for the
benefit of defendant KKR (and for RJR, of which KKR will continue to own a
substantial interest) at an unfair and inadequate priee.
CLAIM AGAINST ALL DEFENDANTS
----------------------------
24. Defendants other than KKR, acting in concert, have violated their
fiduciary duties owed to the public shareholders of Borden and put their own
personal interests and the interests of defendant KKR ahead of the interests of
the Borden public shareholders and have used their control positions as officers
and directors of Borden for the purpose of reaping personal gain for board
members at the expense of Borden's public shareholders.
25. The Defendant Directors failed to (1) undertake an adequate
evaluation of Borden's worth as a potential merger/acquisition candidate;
(2) take adequate steps to enhance Borden's value and/or attractiveness as a
merger/acquisition candidate; (3) effectively expose Borden to the marketplace
in an effort to create an active and open auction for Borden; or (4) act
independently so that the interests of the Company's public
8
<PAGE>
shareholders would be protected. Instead, defendants have set a price for the
shares of stock that does not reflect the true value of Borden and without an
appropriate premium.
26. While the Defendant Directors of Borden should seek out other possible
purchasers of the assets of Borden or its stock in a manner designed to obtain
the highest possible price for Borden's shareholders, or seek to enhance the
value of Borden for all its current shareholders, they have instead resolved to
wrongfully allow KKR to obtain the valuable assets of Borden at a bargain price,
which under the circumstances here, disproportionately benefits KKR.
27. These tactics pursued by the defendants are, and will continue to be,
wrongful, unfair and harmful to Borden's public shareholders, and are an attempt
by certain defendants to aggrandize their personal positions, interests and
finances at the expense of and to the detriment of the Borden public
stockholders. These maneuvers by the defendants will deny members of the Class
their right to share appropriately in the true value of Borden's valuable
assets, future earnings and profitable businesses to the same extent as they
would as Borden's shareholders.
28. In contemplating, planning and/or effecting the foregoing specified
acts and in pursuing and structuring the Transaction, defendants are not acting
in good faith toward plaintiff and the Class, and have breached, and are
breaching, their fiduciary duties to plaintiff and the Class.
9
<PAGE>
29. Because the Defendant Directors (and those acting in concert with
them) dominate and control the business and corporate affairs of Borden and
because they are in possession of private corporate information concerning
Borden's businesses and future prospects, there exists an imbalance and
disparity of knowledge and economic power between the defendants and the public
shareholders of Borden which makes it inherently unfair to Borden's public
shareholders.
30. Defendant KKR has acted and is acting with knowledge or with reckless
disregard that the other defendants are in breach of their fiduciary duties to
Borden's public shareholders and have participated in such breaches of fiduciary
duties by the directors of Borden and thus are liable as aiders and abettors.
31. By reason of the foregoing acts, practices and course of conduct, the
Defendant Directors have failed to use the required care and diligence in the
exercise of their fiduciary obligations owed to Borden and its public
shareholders.
32. As a result of the actions of the defendants, plaintiff and the Class
have been and will be damaged in that they will not receive the fair value of
Borden's assets and business in exchange for their Hamilton's shares, and have
been and will be prevented from obtaining a fair price for their shares of
Borden common stock.
10
<PAGE>
33. Unless enjoined by this Court, the Defendant Directors will continue
to breach their fiduciary duties owed to plaintiff and the Class, all to the
irreparable harm of the Class. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained as a class action;
(b) Declaring that the proposed Transaction is unfair, unjust and
inequitable to plaintiff and the other members of the
Class;
(c) Enjoining preliminarily and permanently the defendants from taking any
steps necessary to accomplish or implement the proposed merger of defendant
Borden with defendant KKR at a price that is not fair and equitable;
(d) Requiring defendants to compensate plaintiff and the members of the
Class for all losses and damages suffered and to be suffered by them as a result
of the acts and transactions complained of herein, together with prejudgment and
post-judgment interest;
(e) Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys', accountants', and experts' fees; and
(f) Granting such other and further relief as may be just and proper.
11
<PAGE>
Dated: September 12, 1994
LAW OFFICES OF MILES M. TEPPER
By: /s/ Miles M. Tepper
______________________________
Miles M. Tepper
7 Becker Farm Road
Roseland, New Jersey 07068
(201) 740-1881
OF COUNSEL:
CHARLES PIVEN
LAW OFFICES OF CHARLES PIVEN
The Legg Mason Tower
Suite 2700
111 S. Calvert Street
Baltimore, Maryland 21202
WOLF HALDENSTEIN ADLER FREEMAN HERZ
270 Madison Avenue
New York, New York 10016
(212) 545-4600
Attorneys for Plaintiffs
12
<PAGE>
CERTIFICATION
The Plaintiff hereby certifies that the matter in controversy is not
the subject of any other action pending in any court and is likewise not the
subject of any pending arbitration proceeding. The plaintiff further certifies
that on information and belief there may be one or more actions contemplated
against some or all of the same defendants in this or another county within this
State regarding the subject matter of this action. Plaintiff is not aware of
any other parties who should be joined in this action.
Dated: September 12, 1994
/s/ Miles M. Tepper
_____________________
Miles M. Tepper
Attorney for Plaintiff
EXHIBIT 11(g)(12)
GOLDSTEIN TILL & LITE
744 Broad Street
Newark, New Jersey 07102
(201) 623-3000
Attorneys for Plaintiffs
- ----------------------------------x
:
BARBARA LUBIN, MARTIN H. OLESH, : SUPERIOR COURT OF
PAMELA SKULSKY, and MARTIN : NEW JERSEY
WEBER, on behalf of themselves : CHANCERY DIVISION
and all others similarly : MERCER COUNTY
MER-C-000139-94 : DOCKET NO.
situated, :
:
Plaintiffs, :
:
-against- : Civil Action
:
BORDEN, INC., ERVIN SHAMES and :
FRANK TASCO, :
: CLASS ACTION COMPLAINT
Defendants. :
:
- ----------------------------------x
Plaintiffs, by their attorneys, allege upon information and
belief, except as to paragraphs 1-5 which are alleged upon knowledge, as
follows:
THE PARTIES
1. Plaintiff Barbara Lubin resides at 8625 Banyan Court,
Tamarack, Florida.
2. Plaintiff Martin H. Olesh resides at 7506 191st
Street, Flushing, New York.
<PAGE>
3. Plaintiff Pamela Skulsky resides at 6179 Devon Drive,
Columbia, Maryland.
4. Plaintiff Martin Weber resides at 2037 Ocean Avenue,
Brooklyn, New York.
5. Each plaintiff is the owner of shares of the common
stock of defendant Borden, Inc. and has been the owner continuously of such
shares since prior to the wrongs complained of herein.
6. Defendant Borden, Inc. ("Borden" or the "Company") is
a corporation duly existing and organized under the laws of the State of New
Jersey, with its principal offices located in Columbus, Ohio. The Company
produces and distributes a variety of consumer food products, including pastas
and sauces, snack food items, dairy products such as fluid milk and other
products. The Company also manufactures and distributes its products.
7. As of April 22, 1994, there were approximately 141
million shares of the Company's common stock outstanding held by over 40,000
shareholders of record.
8. Defendant Ervin Shames ("Shames") is, and at all times
relevant hereto has been, President and Chief Executive Officer of the Company.
-2-
<PAGE>
9. Defendant Frank Tasco ("Tasco") is, and at all times
relevant hereto has been, Chairman of the Board of the Company.
10. The defendants referred to in paragraphs 8 and 9 are
collectively referred to herein as the "Individual Defendants."
11. By reason of the above Individual Defendants'
positions with the Company as officers and/or directors, said individuals are in
a fiduciary relationship with plaintiffs and the other public stockholders of
Borden, and owe plaintiffs and the other members of the class the highest
obligations of good faith, fair dealing, due care, loyalty and full, candid and
adequate disclosure.
CLASS ACTION ALLEGATIONS
12. Each plaintiff brings this action pursuant to R. 4:32
et seq. of the New Jersey Court Rules, on his or her own behalf and as a class
action on behalf of him or herself and all Borden securities holders or their
successors in interest, similarly situated (the "Class"). Excluded from the
class are defendants herein and any person, firm, trust, corporation, or other
entity related to or affiliated with any of the defendants.
-3-
<PAGE>
13. This action is properly maintainable as a class
action.
14. The class is so numerous that joinder of all members
is impracticable. As of April 22, 1994, there were approximately 141 million
shares of Borden common stock outstanding held by over 40,000 shareholders of
record.
15. There are questions of law and fact which are common
to the class and which predominate over questions affecting any individual class
members. The common questions include, inter alia, the following:
(a) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the class;
(b) whether the proposed merger set forth below is grossly
unfair to the class;
(c) whether defendants are engaging in self-dealing to
benefit themselves;
(d) whether plaintiffs and the other members of the class
would be irreparably damaged were the transactions complained of herein
consummated; and
(e) whether defendants have breached, or aided and abetted
the breach of fiduciary and other common law duties owed by them to plaintiffs
and the other members of the class.
-4-
<PAGE>
16. Each plaintiff is committed to prosecuting this action
and has retained competent counsel experienced in litigation of this nature.
The claims of each plaintiff are typical of the claims of the other members of
the class and each plaintiff has the same interests as the other members of the
class. Accordingly, each plaintiff is an adequate
representative of the class and will fairly and adequately protect the interests
of the class.
17. Plaintiffs anticipate that there will be no difficulty
in the management of this litigation.
18. Defendants have acted on grounds generally applicable
to the class with respect to the matters complained of herein, thereby making
appropriate the relief sought herein with respect to the class as a whole.
CLAIM FOR RELIEF
19. According to news reports on September 12, 1994,
Kohlberg Kravis Roberts & Co. ("KKR") and defendant Borden have agreed in
principle to the acquisition of all of the outstanding common stock of Borden by
a KKR partnership in exchange for RJR Nabisco Holdings Corp. common stock valued
at about $2 billion, based on Borden's approximately 141 million common shares
outstanding.
-5-
<PAGE>
20. KKR also said that in connection with its agreement
with Borden, RJR Nabisco Holdings Corp. has agreed in principle that upon KKR's
acquisition of 100% of Borden and subject to certain other conditions, RJR
Nabisco will issue about $500 million of its newly issued common shares for
newly issued Borden shares priced at $14.25 each, representing a 20% pro forma
interest in Borden. RJR Nabisco will also receive a warrant to purchase an
additional 10% interest in Borden as part of its investment.
21. KKR said Borden agreed that at the time a definitive
merger agreement is entered into, Borden will grant KKR an option to purchase
from Borden up to 19.9% of the outstanding Borden common stock for $11 a share
payable in RJR Nabisco stock.
22. If the option is exercised, KKR must purchase at least
41% of the outstanding Borden common stock in the exchange offer if it acquires
any shares in the exchange offer. If KKR acquires at least 41%, but less than
51%, of Borden common stock in the exchange offer, the option must be exercised
by KKR, to the extent necessary for KKR to own at least 51% of the outstanding
Borden common stock. KKR and Borden agreed that if a merger agreement with
Borden is not entered into by September 23, 1994, KKR will purchase 19.9% of the
outstanding common shares of Borden at $11 a share.
-6-
<PAGE>
23. The exchange offer for Borden will be conditioned on
the receipt by KKR of at least 41% of the outstanding Borden common stock. It
is contemplated that following the completion of the exchange offer, KKR will
merge a newly formed corporation which it controls into Borden in a merger in
which holders of any then-outstanding Borden common stock will receive the same
consideration as holders of Borden common stock receive in the exchange offer.
24. Plaintiffs seek to enjoin the consummation of the
imminent agreement between KKR and Borden whereby KKR would swap RJR Nabisco
Holding stock for all of the outstanding Borden common stock.
25. The consideration proposed to be paid to class members
is unconscionable, unfair and grossly inadequate because, among other things:
(a) the intrinsic value of Borden's common stock is
materially in excess of the amount to be received by Borden stockholders in the
transaction giving due consideration to the Company's strategic value, the
recent market price of the Company's stock and Borden's brand name recognition;
(b) the consideration agreed upon did not result from an
appropriate consideration of the value of Borden as
-7-
<PAGE>
there was no opportunity to accurately ascertain Borden's value through open
bidding or a market check.
26. The Individual Defendants have thus far failed to
announce any active auction or open bidding procedures best calculated to
maximize shareholder value.
27. Borden's shareholders will, if the transaction is
consummated, be deprived of the opportunity for substantial gains which the
Company may realize.
28. In announcing the transaction, the defendants have
failed to disclose among other things the full extent of the growth and value
potential of Borden and the expected increase in its profitability.
29. The defendants have not, in accordance with their
fiduciary duties:
(a) acted independently so that the interests of Borden's
public shareholders would be protected;
(b) adequately ensured that no conflicts of interest exist
or if such conflicts exist to ensure that all conflicts would be resolved in the
best interests of Borden's public shareholders; and
-8-
<PAGE>
(c) taken all appropriate steps to enhance Borden's value
and attractiveness as a merger acquisition, restructuring or recapitalization
candidate.
30. Because the Individual Defendants dominate and control
the business and corporate affairs of Borden, and are in possession of private
corporate information concerning Borden's assets, businesses and future
prospects, there exists an imbalance and disparity of knowledge and economic
power between them and the public stockholders of Borden which makes it
inherently unfair for them to pursue any proposed transaction wherein they will
reap disproportionate benefits to the exclusion of other means of maximizing
stockholder value.
31. By reason of the foregoing acts, practices and course
of conduct, the defendants have failed to exercise ordinary care and diligence
in the exercise of their fiduciary obligations toward plaintiffs and the other
Borden public stockholders.
32. As a result of the actions of defendants, plaintiffs
and the other members of the Class have been and will be damaged in that they
have not and will not receive their fair proportion of the value of Borden's
assets and businesses and will be prevented from obtaining appropriate
consideration for their shares of Borden's common stock.
-9-
<PAGE>
33. Unless enjoined by this Court, the defendants will
continue to breach their fiduciary duties owed to plaintiffs and the other
members of the Class, and may consummate the proposed transaction which will
exclude the Class from its fair proportionate share of Borden's valuable assets
and businesses, and/or benefit them in the unfair manner complained of herein,
all to the irreparable harm of the Class, as aforesaid.
34. Plaintiffs and the Class have no adequate remedy at
law.
WHEREFORE, plaintiffs demand judgment, as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary
duties to plaintiffs and the other members of the Class, including those of due
care and candor;
C. Rescinding any transactions effected by the defendants
in an unfair manner and for an unfair price and in the event such transaction is
consummated prior to trial, awarding rescissory damages;
D. Enjoining the complained of transaction or any related
transactions;
-10-
<PAGE>
E. Ordering defendants, jointly and severally, to pay to
plaintiffs and the Class all damages suffered and to be suffered by them as a
result of the acts and transactions alleged herein;
F. Ordering defendants, jointly and severally, to account
to plaintiffs and the Class for all profits realized and to be realized by them
as a result of the transaction complained of and pending such accounting to hold
such profits in a constructive trust for the benefit of plaintiffs and the other
members of the class;
G. Awarding plaintiffs the costs and disbursements of the
action, including allowance for plaintiffs' reasonable attorneys' and experts'
fees; and
H. Granting such other and further relief as may be just
and proper in the premises.
Dated: September 12, 1994
GOLDSTEIN TILL & LITE
By: /s/
---------------------------
Allyn Z. Lite
Joseph J. DePalma
744 Broad Street, Suite 800
Newark, New Jersey 07102
Telephone: (201) 623-3000
-11-
<PAGE>
OF COUNSEL:
ABBEY & ELLIS BERNSTEIN LIEBHARD & LIFSHITZ 212 East
212 East 39th Street 274 Madison Avenue
New York, New York 10016 New York, New York 10016
(212) 889-3700 (212) 779-1414
KAUFMAN, MALCHMAN, KIRBY SCHIFFRIN & CRAIG, LTD.
& SQUIRE Three Bala Plaza East
919 Third Avenue Suite 500
New York, New York 10022 Bala Cynwyd, Pennsylvania 19004 (212)
(212) 371-6600 (215) 667-7706
-12-
<PAGE>
CERTIFICATION PURSUANT TO RULE 4:5-1
Pursuant to Rule 4:5-1, it is hereby stated that the matter in
controversy is not the subject of any other action pending in any other Court or
pending in any arbitration proceeding to the best of my knowledge and belief,
except for a matter entitled, Norman Weiss. et al. v. Borden Inc., et al., filed
in this Court on this date. Also to the best of my belief, no other action or
arbitration proceeding is contemplated. Further, other than the parties set
forth in this pleading, at the present time I know of no other party that should
be joined in the within action.
GOLDSTEIN TILL & LITE
Attorney for Plaintiff
By: /s/
-----------------
Allyn Z. Lite
Dated: September 13, 1994
-13-
EXHIBIT 11(g)(13)
GOLDSTEIN TILL & LITE
Allyn Z. Lite, Esq.
744 Broad Street, Suite 800
Newark, New Jersey 07102
(201) 623-3000
Attorneys for Plaintiffs
- ------------------------------- )
NORMAN WEISS, STELLA COHORSKY, ) SUPERIOR COURT OF NEW JERSEY
ABRAHAM JOSEPH and ROBERT WARING) MERCER COUNTY
on behalf of themselves and all ) CHANCERY DIVISION
others similarly situated, )
)
Plaintiffs, ) Civil Action
)
-against- ) CLASS ACTION COMPLAINT
) ----------------------
BORDEN INC., KOHLBERG KRAVIS )
ROBERTS & CO., ERVIN R. SHAMES, )
FRANK J. TASCO, H. BARCLAY )
MORLEY, JOHN E. SEXTON, )
FREDERICK E. HENNING, WILBERT )
J. LEMELLE, ROBERT P. LUCIANO, )
and PATRICIA CARRY STEWART, )
)
Defendants. )
_______________________________ )
Plaintiffs, Norman Weiss who resides at 941 East 28th Street, Brooklyn, New
York 11210, Stella Cohorsky who resides at 25 Kirk Street, Avenell, New Jersey
07001, Abraham Joseph who resides at 85 Taylor Street, Apartment 15D, Brooklyn,
New York 11211; and Robert Waring who resides at 26 Wooley Lane, Great Neck, New
York 11023, by their attorneys, allege upon information and belief, based, in
part, upon an investigation conducted by
1
<PAGE>
and through the undersigned counsel, except with respect to their ownership of
Borden Inc. common stock and their suitability to serve as class
representatives, which are alleged upon personal knowledge as follows:
THE PARTIES
-----------
1. Plaintiffs Norman Weiss, Stella Cohorsky, Abraham Joseph and Robert
Waring are and have been at all relevant times owners of shares of the common
stock of Borden Inc. ("Borden" or the "Company").
2. Defendant Borden is a corporation organized and existing under the
laws of the State of New Jersey with its principal executive offices located at
180 East Broad Street, Columbus, Ohio, 43215. Borden is an international food
company, with a diversified line of products among snack foods, dairy products,
household items and special market foods, including cheese, yogurt, glue, pasta,
frozen desserts, arts and crafts supplies, caulking and industrial coatings.
Borden had, as of December 31, 1993, approximately 141,358,035 shares of common
stock issued and outstanding, which shares are held by at least hundreds of
shareholders of record and are traded on the New York Stock Exchange.
3. Defendant Kohlberg Kravis Roberts & Co. ("KKR") is a corporate buyout
firm located in New York, New York. KKR is named as a defendant herein because,
as a party to the proposed merger, it is a necessary party to be joined in this
action in order to obtain the relief sought.
2
<PAGE>
4. (a) Defendant Ervin R. Shames ("Shames") is and has been at all
relevant times the Company's President and Chief Executive Officer and a
director;
(b) Defendant Frank J. Tasco ("Tasco") is and has been at all
relevant times the Company's Chairman of the Board of Directors;
(c) Defendant H. Barclay Morley ("Morley") is and has been at all
relevant times a director of Borden;
(d) Defendant John E. Sexton ("Sexton") is and has been at all
relevant times a director of Borden;
(e) Defendant Frederick E. Henning ("Henning") is and has been at all
relevant times a director of Borden;
(f) Defendant Wilbert J. Lemelle ("Lemelle") is and has been at all
relevant times a director of Borden;
(g) Defendant Robert P. Luciano ("Luciano") is and has been at all
relevant times a director of Borden; and
(h) Defendant Patricia Carry Stewart ("Stewart") is and has been at
all relevant times a director of Borden.
The defendants described in paragraphs 4(a) - (h) above are hereinafter
sometimes collectively referred to as the "individual defendants" or the
"director defendants."
5. By virtue of the individual defendants' positions as officers and/or
directors of Borden, said individual defendants are in a fiduciary relationship
with the plaintiffs and other public shareholders of Borden and owe plaintiffs
and other
3
<PAGE>
members of the Class the highest obligation of good faith, fair dealing, loyalty
and due care.
CLASS ACTION ALLEGATIONS
------------------------
6. Plaintiffs bring this action individually and, pursuant to R. 4:32 of
the New Jersey Court Rules as a class action on behalf of all shareholders of
Borden, and their successors in interest who are or will be threatened with
injury arising from defendants' actions as more fully described below (the
"Class"). Excluded from the Class are defendants herein and any person, firm,
trust, corporation or other entity related to or affiliated with any of the
defendants.
7. This action is properly maintainable as a class action under the laws
of the State of New Jersey for the following reasons:
(a) The Class, which includes at least hundreds of shareholders of
record scattered throughout the United States and foreign countries, is so
numerous that joinder of all members is impracticable.
(b) There are questions of law and fact common to members of the
Class which predominate over any questions affecting only individual members,
including, inter alia, the following:
----- ----
(i) whether one or more of the defendants has engaged in a plan
and scheme to enrich themselves at the expense of Borden's public shareholders;
4
<PAGE>
(ii) whether the defendants have breached their fiduciary duties
owed by them to plaintiffs and members of the Class and/or have aided and
abetted in such breach by virtue of their participation and/or acquiescence and
by their other conduct complained of herein;
(iii) whether defendants have failed to fully disclose the true
value of Borden's assets and earning power, as well as the future financial
benefits they expect to derive, through the merger with KKR;
(iv) whether the defendants have wrongfully failed and refused to
seek a purchaser of Borden at the highest possible price and instead have sought
to chill potential offers and acquire the valuable assets of Borden for KKR at
an unfair and inadequate price;
(v) whether plaintiffs and the other members of the Class will
be irreparably damaged by the transactions complained of herein;
(vi) whether defendants have breached, and/or aided and abetted
one another in the breach of, the fiduciary and other common law duties owed by
them to plaintiffs and the other members of the Class; and
(vii) whether defendants are pursuing a scheme and course of
business designed to eliminate the public shareholders of Borden in violation of
the laws of the State of New Jersey.
(c) The claims of plaintiffs are typical of the claims of the other
members of the Class, and plaintiffs have no
5
<PAGE>
interests that are adverse or antagonistic to the interests of the Class.
(d) Plaintiffs are committed to the vigorous prosecution of this
action and have retained competent counsel experienced in litigation of this
nature. Accordingly, plaintiffs are adequate representatives of the Class and
will fairly and adequately protect the interests of the Class.
(e) Plaintiffs anticipate that there will not be any difficulty in
the management of this litigation as a class action.
8. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action.
FACTUAL BACKGROUND AND SUBSTANTIVE ALLEGATIONS
----------------------------------------------
9. On or about December 22, 1993, Borden announced to the financial news
wire services that it was not engaged in any negotiations for a sale or merger
of the Company. Borden announced that instead they would restructure and that
details would be announced in early January, 1994.
10. On January 5, 1994, Borden announced the details of its restructuring
and refocusing plan. The restructuring included $650 million in charges to
fourth-quarter 1993 earnings and the sale of the Company's North American
snacks, seafood and other units. The units put up for sale represented about
$1.25 billion, or 20 percent, of Borden's projected sales of $6.75
6
<PAGE>
billion for 1993. According to defendant Tasco: "The goal of the program is to
build shareholder value by focusing on and revitalizing our best businesses.
Defendant Shames stated that other key elements of the restructuring plan
included the introduction of new consumer-oriented marketing programs to
strengthen Borden's core food businesses of pasta, niche grocery and
international foods. The restructuring plans also called for a turnaround of
Borden's domestic dairy business, largely through volume recovery and cost
reduction and retention of nearly all of the non-food businesses as important
contributors to current cash flow and earnings.
11. Borden said the plans also called for cost reductions phasing in over
two years and reaching an annualized savings rate of $100 million to $125
million by the end of 1995. Savings would be achieved through a combination of
divestments and gains in efficiency and productivity.
12. On January 26, 1994, Borden announced that it expects its
restructuring, along with increased marketing and cost reductions, to improve
its performance in 1994. Defendant Shames stated: "I believe the new
restructuring plan that we are implementing will improve Borden's performance
and build shareholder value." Shames also stated that Borden projects 1994
earnings at the upper end of the $0.75 to $1.00 per share range of estimates by
security analysts who follow Borden closely. The press release also stated that
quarterly earnings are expected to
7
<PAGE>
strengthen after a marginally profitable first quarter as momentum and cost
savings build during the year.
13. On April 25, 1994, Borden released its 1994 first quarter earnings.
Defendant Shames stated in the press release disseminated to the investing
public that: "The fundamentals of our businesses have improved. Although there
is much to be done throughout the North American Foods businesses, Borden is
making significant gains in many areas in rebuilding volume and market
share....we are making significant progress in our cost saving programs and
running above our projection for increased cash flow."
14. On May 16, 1994, Borden announced that it had sold its Borden
Foodservice Group to H.J. Heinz Co. for an undisclosed amount. The division had
sales of $270 million in 1993 but has been unprofitable in recent years. Borden
stated that: "We are moving ahead on schedule with our divestment of
businesses."
15. On May 20, 1994, Borden announced the sale of three additional
businesses as part of its restructuring program. Shames stated that "[o]ur
divestiture program is on track."
16. On July 11, Borden announced that it had sold its Bama Food business
to Welch's. Terms of the transaction were not disclosed. Shames stated: "We
are also making progress in our efforts to sell our salty snacks business."
17. On August 25, 1994, Borden announced that it has finalized an
agreement to sell its Jays Foods, Inc. snack
8
<PAGE>
business to Special Foods Company. Terms of the agreement were not disclosed.
18. On September 12, 1994, Borden and KKR shocked the market by announcing
that KKR had agreed to acquire Borden in a transaction valued at approximately
$2 billion.
19. Under the terms of the agreement, Borden shareholders will receive RJR
Nabisco Holdings Corp. ("RJR") stock owned by KKR worth approximately $14.25 per
Borden share. The press release announcing the deal stated inter alia:
----- ----
It is contemplated that a definitive merger agreement will be executed
within two weeks. The agreement will provide for an exchange offer by
KKR in which holders of Borden common stock would have the right to
exchange their shares for RJR Nabisco common stock. The exact number
of RJR Nabisco shares to be exchanged for each Borden share will be
determined by dividing $14.25 by the average of the high and low
prices of RJR Nabisco stock for a 10-day trading period to be
established in the offer, provided that in no event will Borden
stockholders receive greater than 2.375 RJR Nabisco shares, nor less
than 1.78125 RJR Nabisco shares for each Borden share. The transaction
will be taxable to Borden shareholders.
20. The press release also stated:
KKR also announced that in connection with its agreement with Borden,
RJR Nabisco Holdings Corp. has agreed in principle that upon KKR's
successful acquisition of 100% of Borden and subject to certain other
conditions, RJR Nabisco will issue approximately $500 million in newly
issued RJR Nabisco common shares for newly issued Borden shares priced
at $14.25 each, representing a 20 percent pro forma interest in
Borden. RJR Nabisco also will receive a warrant to purchase an
additional 10 percent interest in Borden as part of its investment.
"We believe that, after a full consideration of all the risks and
opportunities confronting Borden today, this transaction is the best
outcome for Borden shareholders, said Frank J. Tasco, Chairman of
Borden. The restructuring pursued since January has resulted in
volume and share gains in many of Borden's businesses.
9
<PAGE>
Moreover, the earnings trend is also improving, but it is clear that
additional investment in our brands and in capital are needed in order to
capture the Company's potential...."
21. Also as part of the deal, Borden has agreed that at the time a
definitive merger agreement is entered into, Borden will grant KKR an option to
purchase from Borden up to 19.9% of the outstanding Borden common stock for $11
per share payable in RJR Nabisco common stock. If the option is exercised, KKR
must purchase at least 41% of the outstanding Borden common stock in the
exchange offer if it acquires any shares in the exchange offer. If KKR acquires
at least 41%, but less than 51%, of Borden common stock in the exchange offer,
the option must be exercised by KKR, to the extent necessary for KKR to own at
least 51% of the outstanding Borden common stock. KKR has also agreed that if a
merger agreement is not entered into by September 23, 1994, KKR will, subject
only to necessary regulatory approvals, purchase 19.9% of the outstanding shares
of Borden common stock for $11 per share.
22. The proposed merger transaction is wrongful, unfair and harmful to
Borden's shareholders, including plaintiffs and the other Class members, because
just as Borden's restructuring efforts, whose cost was borne by Borden
shareholders, were bearing fruit and its earnings potential was on an upswing,
Borden and KKR are attempting to usurp form Borden's shareholders the benefits
of the restructuring.
10
<PAGE>
23. The proposed merger transaction is further wrongful, unfair and
harmful to Borden's shareholders, including plaintiffs and the other Class
members, and represents an attempt by the director defendants to aggrandize
their personal financial positions and interests and to enrich themselves at the
expense of and to the detriment of the Company's shareholders. The proposed
transaction denies to plaintiffs and other Class members their right to share
proportionately in the true value of the Company's assets and future growth in
profits and earnings while usurping the same for the benefit of KKR at an unfair
and inadequate price.
FIRST COUNT
-----------
24. Defendants, acting in concert and aiding and abetting one another,
have violated their fiduciary duties owed to the public shareholders of Borden
and put their own personal interests and the interests of KKR ahead of the
interests of Borden's public shareholders, including plaintiffs and the Class
members, and have used their control positions as officers and directors of
Borden, all as alleged herein, for the purpose of reaping high personal profits
at the expense of the Company's public shareholders.
25. In negotiating the proposed merger/acquisition of Borden by KKR,
defendants did not exercise good faith, fair dealing, loyalty and due care by
failing, among other things, to:
11
<PAGE>
(a) evaluate adequately the Company's worth as a potential
merger/acquisition candidate;
(b) take sufficient steps to enhance Borden's value and/or
attractiveness as a merger/acquisition candidate;
(c) expose the Company effectively in the marketplace to create an
active and open auction for the Company and its assets; and
(d) act independently so that the interests of Borden's public
shareholders would be protected throughout the merger/acquisition process.
26. Furthermore, in granting a lock-up option to KKR for 19.9% of Borden's
outstanding shares at a price of only $11, rather than the $14.25 to be paid to
Borden's shareholders, the defendants failed to achieve an appropriate premium
or recognition of the added value of the Company that will result from it being
wholly-owned by KKR.
27. In contemplating and implementing a plan to obtain immediate financial
rewards for themselves, the director defendants have failed to act in the best
interests of Borden's public shareholders by failing, among other things, to:
(a) undertake an adequate evaluation of the Company's worth as a
potential merger/acquisition candidate;
(b) ensure than no conflicts of interest existed; and
(c) act independently to ensure that the interests of Borden's public
shareholders would be protected.
12
<PAGE>
28. The director defendants have agreed among themselves that they will
not solicit any other proposal or initiate discussions with any other persons or
entities regarding any offer or proposal for the acquisition of the business of
Borden through merger, asset sale, stock sale or otherwise while Borden is still
a publicly held company. Thus, the director defendants have resolved to
wrongfully obtain the valuable assets of Borden for KKR at a bargain price,
which under these circumstances, disproportionately benefits them. By secretly
negotiating and implementing the merger/acquisition plan while ignoring other
options, the director defendants have violated their fiduciary duties to
plaintiffs and other public shareholders of Borden.
29. The strategy and tactics pursued by the defendants are and will
continue to be wrongful, unfair and harmful to Borden's public shareholders,
serve no legitimate business purpose of Borden and are essentially designed to
aggrandize the personal positions, interests and finances of the director
defendants at the expense of and to the detriment of the Company's public
shareholders. The defendants' course of action will deny plaintiffs and other
Class members their right to share in the true value of Borden's valuable
assets, future earnings and profitable businesses to the same extent that they
would as Borden shareholders.
30. In contemplating, devising and executing the aforementioned course of
conduct and in pursuing and structuring the proposed merger/acquisition
transaction, the director defendants
13
<PAGE>
have not acted in good faith toward plaintiffs and other members of the Class
and have breached, and are continuing to breach, their fiduciary duties to
plaintiffs and the Class.
31. Since the director defendants, and those acting under their direction
and control, dominate and control the business and corporate affairs of Borden,
and because they are in possession of private corporate information concerning
Borden's businesses and future prospects, there exists an imbalance and
disparity of knowledge and economic power between the defendants and the public
shareholders of Borden which makes defendants' course of action and the
contemplated transaction inherently unfair to Borden's public shareholders. The
proposed transaction will ensure that the director defendants will
disproportionately benefit from the value of Borden's assets and its future
financial prospects in contravention of the director defendants' fiduciary
duties to maximize the value of Borden's shares.
32. Defendants have acted and are acting with knowledge that the
individual defendants, and each of them, have breached and are breaching their
fiduciary duties to Borden's public shareholders and have, nevertheless,
intentionally, recklessly or negligently induced, and/or aided and abetted one
another, in such breaches of fiduciary duties by the directors of Borden.
33. By virtue of the foregoing acts, practices and course of action, the
director defendants have failed to exercise due care and diligence in compliance
with their fiduciary obligations toward Borden and its public shareholders.
14
<PAGE>
34. The acts and course of conduct complained of hereinabove were willful,
malicious and oppressive in that the defendants, and each of them, knew that
their actions, as enumerated herein, involve improper and illegal practices,
violations of law and other acts completely foreign to the duties of officers
and directors to carry out corporate affairs in a fair, just, honest and
equitable manner. By reason of the foregoing, plaintiffs and the Class are
entitled to punitive damages.
35. By virtue of the foregoing actions of the defendants, plaintiffs and
the Class have been, are and will be damaged in that they will not receive the
fair value of Borden's assets and business in exchange for their Borden stock
and have been, are and will be prevented from obtaining a fair price for their
shares of the Company's stock.
36. Unless enjoined by this Court, the defendants will continue in their
harmful course of conduct and the director defendants will continue to breach
their fiduciary duties owed by them to plaintiffs and to the Class and will
exclude plaintiffs and the Class from receiving fair value for their
proportionate share of Borden's valuable assets and business, all to the
irreparable harm of plaintiffs and the Class.
37. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs, on behalf of themselves and the members of the
Class, demands judgment as follows:
15
<PAGE>
A. Declaring that this lawsuit is properly maintainable as a class action
and certifying plaintiffs as representatives of the Class.
B. Declaring that the defendants have committed a gross abuse of trust
and have breached (or aided and abetted such breach of) their fiduciary and
other duties owed to plaintiffs and the members of the Class;
C. Declaring that the proposed transaction of merger/acquisition of
Borden by KKR is a legal nullity;
D. Preliminarily and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in concert with or for
them from taking any steps necessary to accomplish or implement the proposed
merger of Borden with KKR at a price that is not fair and equitable;
E. In the event that the transaction is consummated, rescinding it and
setting it aside;
F. Imposing a voting trust upon the shares of Borden owned or controlled
by defendants to restrain their ability to use their voting control of the
Company to effect the transaction;
G. Awarding to plaintiffs and the Class compensatory and punitive damages
against the director defendants, jointly and severally, in an amount to be
determined at trial, together with prejudgment interest, at the maximum rate
allowable by law, from the date of the wrongs to the date of judgment herein;
16
<PAGE>
H. Awarding plaintiffs the costs and disbursements of this action,
including reasonable attorneys', accountants' and experts' fees; and
I. Granting such other and further relief as the Court may deem just and
proper.
DATED: September 12, 1994
GOLDSTEIN, TILL & LITE
By:/s/ Allyn Z. Lite
_____________________________
Allyn Z. Lite
744 Broad Street, Suite 800
Newark, New Jersey 07102
(201) 623-3000
STULL, STULL & BRODY
6 East 45th Street
New York, New York 10017
(212) 687-7230
LAW OFFICES OF JOSEPH H. WEISS
319 Fifth Avenue
New York, New York 10016
(212) 532-4171
MILBERG, WEISS BERSHAD
HYNES & LERACH
One Pennsylvania Plaza
New York, New York 10119
(212) 594-5300
ROBERT D. ALLISON & ASSOCIATES
Robert D. Allison, Esq.
122 S. Michigan Avenue
Chicago, Illinois 60603
(312) 427-4500
Attorneys for Plaintiffs
17
<PAGE>
CERTIFICATION PURSUANT TO R. 4:5-1
----------------------------------
Pursuant to R. 4:5-1, it is hereby stated that the matter in controversy is
not the subject of any other action pending in any other court or pending in any
arbitration proceeding to the best of my knowledge and belief, except for a
matter entitled, Barbara Lubin, et. al. v. Borden Inc., et. al., filed in this
----------------------------------------------
court on this date. Also to the best of my belief, no other action or
arbitration proceeding is contemplated. Further, other than the parties set
forth in this pleading, at the present time I know of no other party that should
be joined in the within action.
GOLDSTEIN TILL & LITE
By: /s/ Allyn Z. Lite
___________________________
Allyn Z. Lite
Dated: September 13, 1994
18
EXHIBIT 11(g)(14)
GOLDSTEIN TILL & LITE
744 Broad Street, Suite 800
Newark, New Jersey 07102
(201) 623-3000
Attorneys for Plaintiff
___________________________________
X SUPERIOR COURT OF NEW JERSEY
BERNARD STEPAK, on behalf of : CHANCERY DIVISION
himself and all others similarly : MERCER COUNTY
situated, : DOCKET NO.
:
Plaintiff, :
:
:
: CLASS ACTION COMPLAINT
BORDEN INC., FRANK J. TASCO, ERVIN : ----------------------
R. SHAMES, FREDERICK E. HENNIG, :
WILBERT J. LEMELLE, ROBERT P. :
LUCIANO, H. BARCLAY MORLEY, JOHN :
E. SEXTON, PATRICIA CARRY STEWART :
and KOHLBERG KRAVIS ROBERTS & CO., :
:
Defendants. :
___________________________________X
Plaintiff, by his attorneys, alleges upon information and belief (said
information and belief being based, in part, upon the investigation conducted by
and through his undersigned counsel), except with respect to his ownership of
Borden, Inc. ("Borden" or the "Company") common stock, and his suitability to
serve as a class representative which are alleged upon personal knowledge, as
follows:
<PAGE>
PARTIES
-------
1. Plaintiff, who resides at 76 W. 33rd Street, Bayonne, New Jersey,
is the owner of shares of defendant Borden.
2. Defendant Borden is a corporation organized and existing under
the laws of the State of New Jersey. Borden maintains its principal offices at
180 East Broad Street, Columbus, Ohio 43215. Borden is a producer and
distributor of a variety of consumer food products, consumer adhesive and
industrial adhesives.
3. Defendant Kohlberg Kravis & Roberts Co. ("KKR") is a corporation
organized and existing under the laws of the State of Delaware with its
principal offices located in New York, New York. KKR is a "buy-out firm" that
owns a substantial interest in, among others, RJR Nabisco Holdings
Corp. ("RJR").
4. Defendant Frank J. Tasco is Chairman of the Board of Directors of
Borden.
5. Defendant Ervin S. Shames is President, Chief Executive Officer
and a Director of Borden.
6. Defendant Frederick E. Hennig is a Director of Borden.
7. Defendant Wilbert J. Lemelle is a Director of Borden.
8. Defendant Robert P. Luciano is a Director of Borden.
9. Defendant H. Barclay Morley is a Director of Borden.
-2-
<PAGE>
10. Defendant John E. Sexton is a Director of Borden.
11. Defendant Patricia Carry Stewart is a Director of Borden.
12. The foregoing individual directors of Borden (collectively the
"Director Defendants") owe fiduciary duties to Borden and its shareholders.
CLASS ACTION ALLEGATIONS
------------------------
13. Plaintiff brings this action upon Rule 4:32 of the New Jersey
Court Rules on his own behalf and as a class action on behalf of all
shareholders of defendant Borden (except defendants herein and any person, firm,
trust, corporation or other entity related to or affiliated with any of the
defendants) or their successors in interest, who have been or will be adversely
affected by the conduct of defendants alleged herein.
14. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. As
of April 22, 1994, there were over 141 million shares of defendant Borden's
common stock outstanding owned by tens of thousands of shareholders of record.
(b) There are questions of law and fact which are common to
members of the Class and which predominate over any questions affecting any
individual members. The common questions include, inter alia, the following:
----- ----
-3-
<PAGE>
i. Whether one or more of the defendants has engaged in a plan
and scheme to enrich themselves at the expense of defendant Borden's public
stockholders;
ii. Whether the Defendant Directors have breached their
fiduciary duties owed by them to plaintiff and members of the Class, and/or have
aided and abetted in such breach, by virtue of their participation and/or
acquiescence and by their other conduct complained of herein;
iii. Whether defendants have failed to fully disclose the true
value of defendant Borden's assets and earning power and the future financial
benefits which they expect to derive from Borden's purchase by KKR;
iv. Whether the Defendant Directors have wrongfully failed and
refused to seek a purchaser of Borden at the highest possible price and,
instead, have sought to chill potential offers and allow the valuable assets of
defendant Borden to be acquired by defendant KKR at an unfair and inadequate
price;
v. Whether defendant KKR has induced or aided and abetted
breaches of fiduciary duty by members of Borden's Board of Directors;
vi. Whether plaintiff and the other members of the Class will be
irreparably damaged by the transactions complained of herein; and
-4-
<PAGE>
vii. Whether defendants have breached or aided and abetted the
breaches of the fiduciary and other common law duties owed by them to plaintiff
and the other members of the Class.
15. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interest as the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
16. Plaintiff anticipates that there will not be any difficulty in
the management of this litigation.
17. For the reasons stated herein, a class action is superior to
other available methods for the fair and efficient adjudication of this action.
FACTUAL BACKGROUND
------------------
18. On September 12, 1994, KKR and Borden announced that they had
agreed in principle to the acquisition of all of the outstanding common stock of
Borden by a KKR partnership in exchange for RJR stock owned by that partnership,
valued at $14.25 per Borden share, or a total of approximately $2 billion. The
transaction is scheduled to close by September 23, 1994 (the "Transaction").
The Transaction has already been approved by the Director Defendants.
19. On Friday, September 9, 1994, Borden stock closed at $11.625 per
share.
-5-
<PAGE>
20. Although the purchase represents a small premium over the most
recent closing price of Borden stock, the Company's stock price recently
averaged between $15 and $20 per share. In addition to the fact that the price
offered is unfair and inadequate, the Transaction also provides that at the time
a definitive merger agreement is entered into, Borden will grant KKR a "lock up"
option to purchase from Borden up to 19.9% of the outstanding Borden common
stock for $11 a share payable in RJR Nabisco stock. If the option is exercised,
KKR must purchase at least 41% of the outstanding Borden common stock in the
exchange offer if it acquires any shares in the exchange offer. If KKR acquires
at least 41%, but less than 51% of Borden common stock in the exchange offer,
the option must be exercised by KKR, to the extent necessary for KKR to own at
least 51% of the outstanding Borden common stock. In the event any competing
transaction is consummated, KKR would be paid certain amounts under the merger
agreement. In addition, Defendants have agreed that if a merger agreement with
Borden is not entered into by September 23, 1994, KKR will purchase 19.9% of the
outstanding common shares of Borden at only $11 a share.
21. Further, RJR also announced on September 12, 1994 that it has
reached an agreement in principle with KKR to acquire a minority interest in
Borden upon KKR's successful acquisition of 100 percent of Borden. RJR will
issue to Borden approximately $500 million of newly issued RJR common shares for
newly issued
-6-
<PAGE>
Borden shares priced at $14.25 each, representing a 20 percent pro forma
interest in Borden.
22. The Director Defendants and KKR have agreed that, if the merger
is consummated, senior management will remain in place and that their
compensation structure will be altered to provide greater incentive compensation
awards. Also, a majority of the current directors will remain on the Board.
23. The proposed Transaction is wrongful, unfair and harmful to
Borden's public stockholders, the Class members, and represents an attempt by
defendants to aggrandize the personal and financial positions and interests of
board members at the expense of and to the detriment of the stockholders of the
Company. The proposed transaction will deny plaintiff and other Class members
their rights to share appropriately in the true value of the Company's assets
and future growth in profits and earnings, while usurping the same for the
benefit of defendant KKR (and for RJR, of which KKR will continue to own a
substantial interest) at an unfair and inadequate price.
CLAIM AGAINST ALL DEFENDANTS
----------------------------
24. Defendants other than KKR, acting in concert, have violated their
fiduciary duties owed to the public shareholders of Borden and put their own
personal interests and the interests of defendant KKR ahead of the interests of
the Borden public shareholders and have used their control positions as officers
and directors of Borden for the purpose of reaping personal gain for board
members at the expense of Borden's public shareholders.
-7-
<PAGE>
25. The Defendant Directors failed to (1) undertake an adequate
evaluation of Borden's worth as a potential merger/acquisition candidate; (2)
take adequate steps to enhance Borden's value and/or attractiveness as a
merger/acquisition candidate; (3) effectively expose Borden to the marketplace
in an effort to create an active and open auction for Borden; or (4) act
independently so that the interest of the Company's public shareholders would be
protected. Instead, defendants have set a price for the shares of stock that
does not reflect the true value of Borden and without an appropriate premium.
26. While the Defendant Directors of Borden should seek out other
possible purchasers of the assets of Borden or its stock in a manner designed to
obtain the highest possible price for Borden's shareholders, to seek to enhance
the value of Borden for all its current shareholders, they have instead resolved
to wrongfully allow KKR to obtain the valuable assets of Borden at a bargain
price, which under the circumstances here, disproportionately benefits KKR.
27. These tactics pursued by the defendants are, and will continue to
be, wrongful, unfair and harmful to Borden's public shareholders, and are an
attempt by certain defendants to aggrandize their personal positions, interests
and finances at the expense of and to the detriment of the Borden public
stockholders. These maneuvers by the defendants will deny members of the Class
their right to share appropriately in the true value of Borden's valuable
assets, future earnings and
-8-
<PAGE>
profitable businesses to the same extent as they would as Borden's shareholders.
28. In contemplating, planning and/or effecting the foregoing
specified acts and in pursuing and structuring the Transaction, defendants are
not acting in good faith toward plaintiff and the Class, and have breached, and
are breaching, their fiduciary duties to plaintiff and the Class.
29. Because the Defendant Directors (and those acting in concert with
them) dominate and control the business and corporate affairs of Borden and
because they are in possession of private corporate information concerning
Borden's businesses and future prospects, there exists an imbalance and
disparity of knowledge and economic power between the defendants and the public
shareholders of Borden which makes it inherently unfair to Borden's public
shareholders.
30. Defendant KKR has acted and is acting with knowledge or with
reckless disregard that the other defendants are in breach of their fiduciary
duties to Borden's public shareholders and have participated in such breaches of
fiduciary duties by the directors of Borden and thus are liable as aiders and
abettors.
31. By reason of the foregoing acts, practices and course of conduct,
the Defendant Directors have failed to use the required care and diligence in
the exercise of their fiduciary obligations owed to Borden and its public
shareholders.
-9-
<PAGE>
32. As a result of the actions of the defendants, plaintiff and the
Class have been and will be damaged in that they will not receive the fair value
of Borden's assets and business in exchange for their RJR shares, and have been
and will be prevented from obtaining a fair price for their shares of Borden
common stock.
33. Unless enjoined by the Court, the Defendant Directors will
continue to breach their fiduciary duties owed to plaintiff and the Class, all
to the irreparable harm of the Class. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained as a class action;
(b) Declaring that proposed Transaction is unfair, unjust and
inequitable to plaintiff and the other members of the Class;
(c) Enjoining preliminarily and permanently the defendants from
taking any steps necessary to accomplish or implement the proposed merger of
defendant Borden with defendant KKR at a price that is not fair and equitable;
(d) Requiring defendants to compensate plaintiff and the members of
the Class for all losses and damages suffered and to be suffered by them as a
result of the acts and transactions complained of herein, together with
prejudgment and post-judgment interest;
-10-
<PAGE>
(e) Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys', accountants', and experts', fees; and
(f) Granting such other and further relief as may be just and proper.
Dated: September 16, 1994
GOLDSTEIN TILL & LITE
By: /s/ Allyn Z. Lite
___________________________
Allyn Z. Lite
744 Broad Street
Newark, New Jersey 07102
(201) 623-3000
OF COUNSEL:
MICHAEL J. BONI
SETH I. GROSSMAN
HAROLD E. KOHN
JOSEPH C. KOHN
KOHN, NAST & GRAF, P.C.
1101 Market Street
Suite 2400
Philadelphia, Pennsylvania 19107
(215) 238-1700
Attorney for Plaintiffs
-11-
<PAGE>
CERTIFICATION PURSUANT TO R. 4:5-1
-----------------------------------
Pursuant to R. 4:5-1, it is hereby stated that the matter in controversy
is not the subject of any other action pending in any other court or pending in
any arbitration proceeding to the best of my knowledge and belief, except for
the matters entitled, Barbara Lubin, et al. v. Borden Inc., et al., filed in
--------------------------------------------
this Court on September 13, 1994; Norman Weiss, et al v. Borden, Inc., et al.,
-------------------------------------------
filed in this Court on September 13, 1994 and Jerry Krim, et al. v. Borden Inc.,
----------------------------------
et al., filed in this Court on September 14, 1994. Also to the best of my
- ------
belief, no other action or arbitration proceeding is contemplated. Further,
other than the parties set forth in this pleading, at the present time I know of
no other party that should be joined in the within action.
GOLDSTEIN TILL & LITE
By: /s/ Allyn Z. Lite
___________________________________
Allyn Z. Lite
Dated: September 16, 1994
-12-
EXHIBIT 11(g)(15)
WILENTS, GOLDMAN & SPITZER
Warren W. Wilentz, Esq.
Georgia Haglund, Esq.
90 Woodbridge Center Drive
Woodbridge, NJ 07095
Tel. (908) 636-8000
Attorneys for Plaintiffs
(Additional attorneys on signature page)
- -------------------------------)
ROBERT STROUGO, THOMAS TASSONE,) SUPERIOR COURT OF NEW JERSEY
MOISE KATZ, CHARLES MILLER and ) CHANCERY DIVISION
WILLIAM STEINER on behalf of ) _______COUNTY
themselves and all others ) DOCKET No. _________
similarly situated, )
)
Plaintiffs, ) CLASS ACTION COMPLAINT
) ----------------------
-against- ) JURY TRIAL DEMANDED
)
BORDEN, INC., FREDERICK E. )
HENNIG, WILBERT J. LEMELLE, )
ROBERT P. LUCIANO, H. BARCLAY )
MORLEY, JOHN E. SEXTON, ERVIN )
R. SHAMES, PATRICIA CARRY )
STEWART, and FRANK J. TASCO )
)
Defendants. )
_______________________________)
Plaintiffs, by their attorneys, allege upon personal knowledge as to
themselves and their own acts, and upon information and belief based, in part,
upon the investigation conducted by counsel which included, among other things,
a review of the public financial filings of Borden, Inc. ("Borden") with the
Securities and Exchange Commission ("SEC"), news releases, and other publicly
published materials as follows:
SUMMARY OF THE ACTION
---------------------
1. Plaintiffs bring this action, pursuant to R 4:32 of the New Jersey
Rules Governing Civil Practice, individually and on
<PAGE>
behalf of a class of persons, other than defendants and persons in privity with
them, who own the common stock of Borden, Inc. ("Borden" or the "Company"), to
enjoin defendants from breaching their fiduciary duties in connection with the
proposed sale of Borden to Kohlberg Kravis Roberts & Co. ("KKR") and RJR Nabisco
Inc. ("RJR") in exchange for shares of the common stock of RJR at a value of
$14.25 worth of RJR stock for every one share of Borden (the "Transaction" or
"Offer"). Plaintiff alleges that, in light of the facts set forth below,
Borden's Board of Directors (the "Board"), all of whom have been named as
defendants in this action ("Individual Defendants", defined below), have
breached and are continuing to breach their fiduciary duties to the stockholders
of Borden which require defendants to take all reasonable steps to assure the
maximization of stockholder value.
PARTIES
-------
2. Plaintiffs Robert Strougo, Thomas Tassone, Moise Katz, Charles Miller
and William Steiner are and were at all relevant times shareholders of defendant
Borden.
3. Borden is a corporation duly organized and existing under the laws of
the State of New Jersey, with its principal place of business located at 180
East Broad Street, Columbus, OH 43215. Borden is primarily engaged in the
production and sale of various processed foods including, among other things,
dairy and pasta products.
4. Defendant Frederick E. Hennig ("Hennig") has been a Director since
1990. He is a member of the Committee on Officers'
2
<PAGE>
Compensation and of the Executive, Audit and Nominating Committees of the Borden
Board of Directors. The Audit Committee met three times in 1993. The Executive
Committee did not meet in 1993. The Nominating Committee, created in November
1993, met in February 1994 to review and propose nominees for election as
directors. The Committee on Officers' Compensation met seven times in 1993.
5. Defendant Wilbert J. Lemelle ("Lemelle") has been a Director since
1987. He is Chairman of the Audit Committee and a member of the Executive and
Nominating Committees and of the Committee on Officers' Compensation of the
Borden Board.
6. Defendant Robert P. Luciano ("Luciano") has been a Director since
1989. He is Chairman of the Nominating Committee and a member of the Audit and
Executive Committees and of the Committee on Officers' Compensation of the
Borden Board.
7. Defendant H. Barclay Morley ("Morley") has been a Director since 1992.
He is Chairman of the Committee on Officers' Compensation and a member of the
Executive, Nominating and Pension Committees of the Borden Board. The Pension
Committee met three times in 1993.
8. Defendant John E. Sexton ("Sexton") was elected to the Board in 1994.
9. Defendant Ervin R. Shames ("Shames") has been Chief Executive Officer
and a Director since 1993. He is a member of the Executive and Pension
committees of the Borden Board.
10. Defendant Patricia Carry Stewart ("Stewart") has been a Director since
1976. She is Chair of the Pension Committee
3
<PAGE>
and a member of the Executive, Audit and Nominating Committees of the Borden
Board.
11. Defendant Frank J. Tasco has been a Director since 1988 and the
Chairman of the Board since December 9, 1993. He is Chairman of the Executive
Committee and a member of the Pension Committee of the Borden Board. In
addition to his compensation as a Director, he is to be paid $100,000 per
quarter to serve as Chairman of the Board.
12. The individuals named in paragraphs 4 through 11 are hereinafter
referred to as the "Individual Defendants." Each Director who is not currently
an employee of the Company is paid a retainer of $28,000 per annum and a per
meeting fee of $1,000 for each meeting of the Board or of any Committee thereof.
In addition, non-employee Committee Chairmen are paid an additional annual
retainer of $1,000.
13. By reason of their positions and because of their ability to control
the business and corporate affairs of Borden at all relevant times, the
Individual Defendants owed and owe Borden's shareholders fiduciary obligations
of fidelity, trust, loyalty, and due care, and were and are required to use
their utmost ability to control and supervise Borden in a fair, informed, just
and equitable manner and to act in furtherance of the best interests of Borden
and its shareholders.
4
<PAGE>
CLASS ACTION ALLEGATIONS
------------------------
14. Plaintiffs bring this action on their own behalf and as a class
action, pursuant to R 4:32 of the New Jersey Rules Governing Civil Practice, on
behalf of all shareholders of Borden (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants) who are or will be threatened with injury arising from
defendants' actions as more fully described herein (the "Class").
15. This action is properly maintainable as a class action.
16. The Class is so numerous that joinder of all members is impracticable.
As of June 30, 1994, Borden had approximately 141,424,181 shares of common stock
outstanding and approximately 41,000 shareholders of record, who are located
throughout the United States. Borden's common stock trades on the New York
Stock Exchange ("NYSE").
17. There are questions of law and fact common to the Class that
predominate over questions affecting only individual Class members. The common
questions include, inter alia, the following:
----- ----
(a) Whether the Individual Defendants have breached their fiduciary
duties owed by them to plaintiffs and to the other members of the Class;
(b) Whether the conduct of the Individual Defendants has prevented
and is preventing plaintiffs and the Class from
5
<PAGE>
receiving the maximum value per share that could be received in a corporate
transaction free from the restraints imposed by the Individual Defendants; and
(c) Whether plaintiffs and the other members of the class will suffer
irreparable harm if the wrongful acts alleged in this complaint are not
enjoined.
18. Plaintiffs are committed to prosecuting this action and have retained
competent counsel experienced in shareholder litigation of this nature.
Plaintiffs' claims are typical of the claims of other members of the Class and
plaintiffs have the same interests as the other members of the Class.
Plaintiffs and their counsel will fairly and adequately represent the interests
of the Class.
19. Plaintiffs do not anticipate any unusual difficulties in the
management of this action as a class action.
20. A class action is superior to other available methods for the fair and
efficient adjudication of the controversy.
CLAIM FOR RELIEF
----------------
21. In the very recent past, Borden, a well known manufacturer of dairy
and other food products, has experienced a significant decline in its
profitability. Borden's recent difficulties have been tied to several primary
factors, including, mismanagement, the incurrence of excessive debt to finance
numerous acquisitions, and several recent restructurings.
22. Over the past several years, Borden, under the stewardship of its
former chief executives, Romeo J. Ventres
6
<PAGE>
("Ventres") and Anthony S. D'Amato ("D'Amato"), has suffered an abysmal decline
in its financial performace. In fact, the Company's proxy statement dated April
8, 1994 (the "1994 Proxy") includes a comparison of Borden's performance, as
measured by cumulative total shareholder return on its common stock, with the
S&P 500 and the S&P Food and Chemical Indexes that highlights Borden's decline:
- ------------------------------------------------------
1991 1992 1993
- ------------------------------------------------------
Borden, Inc. 120.7 110.2 68.3
- ------------------------------------------------------
S&P 500 Stock Index 166.1 178.7 196.7
- ------------------------------------------------------
S&P Food Index 214.2 214.2 196.0
- ------------------------------------------------------
S&P Chemical 143.0 156.6 175.2
- ------------------------------------------------------
23. Thus, as indicated by the foregoing, while Borden has experienced
significant performance declines, the performance of market and companies in the
two primary industries in which Borden derives revenues and profits have
significantly improved. A large measure of Borden's dismal performance can be
traced to Messrs. Ventres' and D'Amato's ill fated campaign to acquire non-
synergistic companies without proper due diligence and without consideration of
the effect on Borden of incurring excessive debt to complete such acquisitions.
Between 1986 and 1991, the Company spent almost $2 billion on 91 different
acquisitions. As noted in a recent Wall Street Journal article:
Once prominent, Borden is seemingly invisible these days, with little
advertising and marketing and a hodgepodge of small products. Sales
and profits in every major division are declining. It has shed
thousands of
7
<PAGE>
workers, slashed its dividend by 75% and, since 1989, taken $1.5 billion in
restructuring charges -- a huge sum for a company with $7.14 billion in
1992 sales. In the third quarter, the company posted its ninth consecutive
quarterly decline in operating earnings. Borden's stock, which peaked in
1991 at $38.75, closed [on January 17, 1994] at $15.
24. As detailed in the article, Borden reeled from acquisition to
acquisition, pressing senior managers to move quickly, often spending "as little
as two weeks conducting due diligence before agreeing to acquisitions",
according to one former Borden executive. As Han Kim, a twenty-year Borden
veteran notes, "we were hurriedly buying companies for the sake of buying
companies."
25. For example, in 1987, Borden acquired Laura Scudder's snack-food line
for $100 million; however, unbeknownst to Borden (due to inadequate due
diligence), Laura Scudder faced significant union difficulties which led to
Borden's closing of all Laura Scudder plants in California, roughly one year
after the acquisition.
26. In December of 1993, D'Amato, resigned his position with Borden and a
new management team led by Ervin R. Shames was brought in to re-energize the
Company, oversee a new restructuring plan and/or aid in the sale of the Company.
Although significant damage has already been visited on Borden, its many
franchise brand names and products, including the Bravo and Wise snack food
product lines and Borden dairy products continue to retain significant value.
In an effort to turn around Borden's dismal slide, new
8
<PAGE>
management has taken substantial restructuring charges which have further driven
down Borden's stock price.
27. On or about August 30, 1994, Moody's Investors Service Inc.
("Moody's") lowered the long-term debt and commercial paper ratings of Borden to
Baa3 from Baa2 and to Prime-3 from Prime-2, respectively, and kept these ratings
on review for further possible downgrade. "The downgrade is based on Borden's
weaker than anticipated operating performance and the expectation that
bondholder protection measurements will remain weak....", according to Moody's.
28. Borden's stock, which traded as high as $29.125 in 1993 and at $19.875
only a year ago, has continued to sag in 1994, recently falling below $12 per
share to its nine year low.
29. Having taken significant restructuring charges, and terminated former
managers, Borden is now in a position to develop the full value of its many well
known brands and clearly has been trading at a discount that does not reflect
the full value of its assets. Indeed, as recently as September 13, 1994, the
Wall Street Journal reported that Borden's managers were still "hoping for time
- -------------------
to turn around the company."
30. On September 12, 1994, prior to the NYSE opening, the Dow Jones
Newswire reported that Borden had agreed to a KKR offer to swap RJR stock owned
by KKR for all of Borden's outstanding common stock, valued at approximately
$14.25 per Borden share, a premium of 22.6% (Borden stock had closed at $11.625
on Friday, September 9, 1994). The exact number of RJR Nabisco shares
9
<PAGE>
to be exchanged for each Borden share will be determined by dividing $14.25 by
the average of the high and low prices of RJR Nabisco stock for a 10-day trading
period to be established in the Offer, provided that in no event will Borden
stockholders receive greater than 2.375 RJR shares, nor less than 1.78125 RJR
shares for each Borden share.
31. In connection with its agreement with Borden, RJR has agreed in
principle that upon KKR's acquisition of 100% of Borden and subject to certain
other conditions, RJR will issue about $500 million of its newly issued common
shares for newly issued Borden shares priced at $14.25 each, representing a 20%
pro forma interest in Borden. RJR also will receive a warrant to purchase an
additional 10% interest in Borden as part of its investment.
32. KKR announced that Borden has agreed that at the time a definitive
merger agreement is entered into, Borden will grant KKR an option to purchase
from Borden up to 19.9% of the outstanding Borden common stock for $11 a share
payable in RJR Nabisco stock. If the option is exercised, KKR must purchase at
least 41% of the outstanding Borden common stock in the exchange offer if it
acquires any shares in the exchange offer. If KKR acquires at least 41%, but
less than 51% of Borden common stock in the exchange offer, the option must be
exercised by KKR, to the extent necessary for KKR to own at 51% of the
outstanding Borden common stock. KKR will not obtain any economic gain from the
option in the event any competing transaction consummated, but
10
<PAGE>
would be paid certain amounts under the merger agreement in such circumstances.
33. Commenting on the proposed merger, the Dow Jones Newswire reported
Borden Chairman Tasco as stating:
We believe that, after a full consideration of all the risks and
opportunities confronting Borden today, this transaction is the best
outcome for Borden shareholders. The restructuring pursued since
-------------------------------
January has resulted in volume and share gains in many of Borden's
------------------------------------------------------------------
businesses. Moreover, the earnings trend is also improving, but it is
---------- ----------------------------------------------
clear that additional investment in our brands and in capital are
needed in order to capture the company's potential. Therefore, after
exploration of a full range of alternatives, the board has concluded
that KKR's proposal presents the best opportunity for Borden's
shareholders, customers and associates. (Emphasis added).
34. Thus, despite Borden's direct acknowledgement that the Company had
turned the corner and had begun to show positive signs of recovery as a result
of the change in management and the most recent restructuring, defendants are
attempting to sell the Company, at an unfair price in order to preserve their
management positions with the commensurate salary and perquisites enuring to
their benefit, while curtailing the right of Borden shareholders' to participate
in the long-awaited turnaround in the Company's fortunes. Contrary to Borden's
assertion that this is "the best outcome for shareholders", according to an
article in the September 13, 1994 New York Times, "most [analysts] agreed that
--------------
Borden was being bought at a fire-sale price." Moreover, the article continues,
"[a]lmost all Borden holders will be selling at a loss if this deal goes
through." Yet perhaps even worse, Borden shareholders will be receiving shares
of a company (RJR) that they
11
<PAGE>
did not decide to purchase and one with significant problems and declining
value.
35. As of December, 1993, Borden has been seeking a buyer for the Company
or some form of capital infusion to fully realize its potential. Consequently,
the Board has fiduciary duties to shop the Company to the highest bidder and to
maximize shareholder value and may not blindly accept the first offer to come
along that would allow management to retain their positions with the Company.
36. The Individual Defendants' fiduciary obligations require them to:
(a) undertake an appropriate evaluation of alternatives designed to
maximize value for Borden's public stockholders; including separate sales of
Borden's dairy and/or other businesses;
(b) act independently, by, among other things, appointing a
disinterested committee so that the interests of Borden's public stockholders
would be protected, or alternatively, appointing a shareholder committee to
review all bona fide offers;
---- ----
(c) take all appropriate steps to enhance Borden's value and
attractiveness as a merger or acquisition candidate;
(d) cooperate with all persons having a bona fide interest in
---- ----
proposing any transaction that would maximize shareholder value;
12
<PAGE>
(e) take all steps to create an active market for Borden in order to
maximize shareholder value in a free and unfettered auction; and
(g) adequately ensure that no conflicts of interest exist between the
Individual Defendants' own interests and their fiduciary obligation to the
public stockholders or, if such conflicts exist, to ensure that all such
conflicts are resolved in favor of Borden's public shareholders.
37. In failing to perform the acts set forth in paragraph 36, defendants
are not acting in good faith to the Class, and have breached and are breaching
their fiduciary duties to the Class.
38. Defendants, in violation of their fiduciary obligations, have failed
to act in a manner designed to maximize stockholder value Borden's public
stockholders.
39. The Offer by KKR will deny Class members the opportunity to share
proportionately in the true value of Borden's assets, profitable business, and
future growth in profits and earnings.
40. By reason of the foregoing acts, practices and course of conduct, the
Individual Defendants have been grossly negligent in the exercise of their
fiduciary obligations toward plaintiffs and the other Borden public
shareholders.
41. Unless enjoined by this Court, the Individual Defendants will continue
to breach their fiduciary duties owed to
13
<PAGE>
plaintiffs and the other members of the Class, all to the irreparable harm of
the Class, as described above.
42. Plaintiffs and the other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiffs demand judgment, as follows:
(a) declaring this to be a proper class action with plaintiffs as the
representatives of the Class;
(b) declaring that the defendants and each of them have committed a gross
abuse of trust and have breached their fiduciary duties to plaintiffs and the
other members of the Class;
(c) directing the Individual Defendants to discharge their fiduciary
duties to plaintiffs and the other members of the Class by announcing their
intentions to:
(1) act independently on a fully informed basis in the best interests
of Borden's public shareholders;
(2) undertake an appropriate evaluation of alternatives designed to
maximize value for Borden's public stockholders; including separate sales of
Borden's dairy and/or other businesses;
(3) take all appropriate steps to enhance Borden's value and
attractiveness as a merger or acquisition candidate;
(4) cooperate with all persons having a bona fide interest in
---- ----
proposing any transaction that would maximize shareholder value;
(5) take all steps to create an active auction for Borden in order to
maximize shareholder value; and
14
<PAGE>
(6) adequately ensure that no conflicts of interest exist between
defendants' own interests and their fiduciary obligation to maximize shareholder
value or, if such conflicts exist, to ensure that all such conflicts are
resolved in favor of Borden's public shareholders.
(c) preliminarily and permanently enjoining defendants and all persons
acting under, in concert with, or for them, from breaching their fiduciary
duties to plaintiff and the Class;
(d) ordering defendants to permit a stockholders' committee comprised of
Class members and their representatives to ensure a fair procedure, adequate
procedural safe-guards, and independent input by plaintiffs and the Class in
connection with any transaction for the assets and/or common stock of Borden;
(e) Awarding plaintiffs and the Class compensatory damages;
(f) awarding plaintiffs the costs and disbursements of the action,
including a reasonable allowance for attorneys' and experts' fees; and
15
<PAGE>
(g) granting such other and further relief as may be just and proper in
the premises.
Dated: September 13, 1994
Respectfully submitted,
WILENTZ, GOLDMAN & SPITZER
By: _____________________________
Warren W. Wilentz, Esq.
Georgia Haglund, Esq.
90 Woodbridge Center Drive
Woodbridge, NJ 07095
(908) 636-8000
Liaison Counsel for Plaintiffs
OF COUNSEL:
WECHSLER SKIRNICK HARWOOD
KALEBIAN & FEFFER
Stuart D. Wechsler, Esq.
Andrew D. Friedman, Esq.
555 Madison Avenue
New York, NY 10022
Tel. (212) 935-7400
Attorneys for Robert Strougo
GARWIN, BRONSAPT, GERSTEIN
& FISHER
Scott W. Fisher, Esq.
Jerald M. Sterin, Esq.
1501 Broadway, Suite 1416
New York, NY 10036
Tel. (212) 398-0055
Fax: (212) 764-6620
Attorneys for Thomas Tassone
16
<PAGE>
ARNOLD A. GERSHON, P.C.
Arnold A. Gershon, Esq.
295 Madison Avenue
Room 807
New York, New York 10017
(212) 684-3033
Attorney for Moise Katz
ELWOOD S. SIMON & ASSOCIATES, P.C.
Elwood S. Simon, Esq.
Bloomfield Center, Suite 315
1533 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
(810) 646-9730
Attorneys for Charles Miller
LAW OFFICES OF ZACHARY A. STARR
Zachary A. Starr, Esq.
275 Madison Avenue
New York, New York 10016
(212) 808-5535
Attorneys for William Steiner
17
<PAGE>
RULE 4:5-1 CERTIFICATION
------------------------
I hereby certify that upon information and belief there may be other
actions now pending against Borden Inc. and the Individual Defendants for
similar relief. However, plaintiffs are not parties to any other actions.
Moreover, I am unaware of any arbitration proceeding and no such other action or
arbitration proceeding is contemplated by plaintiffs; and there are no other
parties who, to the best of my knowledge, should be joined in this action at
this time.
I hereby certify that the foregoing statements made by me are true. I am
aware that if any of the foregoing statements made by me are willfully false, I
am subject to punishment.
___________________________
GEORGIA HAGLUND, ESQ.
DATED: September 13, 1994
18
EXHIBIT 11(g)(16)
GOLDSTEIN, TILL & LITE
Allyn Z. Lite, Esq.
Amy M. Riel, Esq.
744 Broad Street, Suite 800
Newark, New Jersey 07102
(201) 623-3000
Attorneys for Plaintiff
- ----------------------------------x
JERRY KRIM, on behalf of himself : SUPERIOR COURT OF NEW JERSEY
and all others similarly situated,: CHANCERY DIVISION
: MERCER COUNTY
Plaintiff, : DOCKET NO.
:
v. :
:
BORDEN INC., FRANK J. TASCO, ERVIN: CLASS ACTION COMPLAINT
R. SHAMES, FREDERICK E. HENNIG, : ----------------------
WILBERT J. LEMELLE, ROBERT P. :
LUCIANO, H. BARCLAY MORLEY, JOHN :
E. SEXTON, PATRICIA CARRY STEWART :
and KOHLBERG KRAVIS ROBERTS & CO.,:
:
Defendants. :
:
- ----------------------------------x
Plaintiff, by his attorneys, alleges upon information and belief (said
information and belief being based, in part, upon the investigation conducted by
and through his undersigned counsel), except with respect to his ownership of
Borden, Inc. ("Borden" or the "Company") common stock, and his suitability to
serve as a class representative which are alleged upon personal knowledge, as
follows:
<PAGE>
PARTIES
-------
1. Plaintiff, Jerry Krim, who resides at 4623 North Carlin Spring Road,
Arlington, Virginia 22203, is the owner of shares of defendant Borden and has
been the owner continuously of such shares since prior to the wrongs complained
of herein. He is a resident of the State of Virginia.
2. Defendant Borden is a corporation organized and existing under the
laws of the State of New Jersey. Borden maintains its principal offices at 180
East Broad Street, Columbus, Ohio 43215. Borden is a producer and distributer of
a variety of consumer food products, consumer adhesives and industrial
adhesives.
3. Defendant Kohlberg Kravis & Roberts Co. ("KKR") is a corporation
organized and existing under the laws of the State of Delaware with its
principal offices located in New York, New York. KKR is a "buyout firm" that
owns a substantial interest in, among others, RJR Nabisco Holdings Corp.
("RJR").
4. Defendant Frank J. Tasco is Chairman of the Board of Directors of
Borden.
5. Defendant Ervin S. Shames is and at all relevant times hereto has been
President, Chief Executive Officer and a Director of Borden.
6. Defendant Frederick E. Hennig is and at all relevant times hereto has
been a Director of Borden.
7. Defendant Wilbert J. Lemelle is and at all relevant times hereto has
been a Director of Borden.
2
<PAGE>
8. Defendant Robert P. Luciano is and at all relevant times hereto has
been a Director of Borden.
9. Defendant H. Barclay Morley is and at all relevant times hereto has
been a Director of Borden.
10. Defendant John E. Saxton is and at all relevant times hereto has been
a Director of Borden.
11. Defendant Patricia Carry Stewart is and at all relevant times hereto
has been a Director of Borden.
12. The foregoing individual directors of Borden (collectively the
"Director Defendants") owe the fiduciary duties of good faith, fair dealing,
loyalty and full, candid and adequate disclosure to Borden and its shareholders.
CLASS ACTION ALLEGATIONS
------------------------
13. Plaintiff brings this action on his own behalf and as a class action
on behalf of all shareholders of defendant Borden (except defendants herein and
any person, firm, trust, corporation or other entity related to or affiliated
with any of the defendants) or their successors in interest, who have been or
will be adversely affected by the conduct of defendants alleged herein.
14. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. As
of April 22, 1994, there were over
3
<PAGE>
141 million shares of defendant Borden's common stock outstanding owned by tens
of thousands of shareholders of record.
(b) There are questions of law and fact which are common to members
of the Class and which predominate over any questions affecting any individual
members. The common questions include, inter alia, the following:
----- ----
i. Whether one or more of the defendants has engaged in a plan and
scheme to enrich themselves at the expense of defendant Borden's public
stockholders;
ii. Whether the Defendant Directors have breached their fiduciary
duties owed by them to plaintiff and members of the Class, and/or have aided and
abetted in such breach, by virtue of their participation and/or acquiescence and
by their other conduct complained of herein;
iii. Whether defendants have failed to fully disclose the true value
of defendant Borden's assets and earning power and the future financial benefits
which they expect to derive from Borden's purchase by KKR;
iv. Whether the Defendant Directors have wrongfully failed and
refused to seek a purchaser of Borden at the highest possible price and,
instead, have sought to chill potential offers and allow the valuable assets of
defendant Borden to be acquired by defendant KKR at an unfair and inadequate
price;
v. Whether defendant KKR has induced or aided and abetted breaches
of fiduciary duty by members of Borden's Board of Directors;
4
<PAGE>
vi. Whether plaintiff and the other members of the Class will be
irreparably damaged by the transactions complained
of herein; and
vii. Whether defendants have breached or aided and abetted the
breaches of the fiduciary and other common law duties owed by them to plaintiff
and the other members of the Class.
15. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of
plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interest as the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
16. Plaintiff anticipates that there will not be any difficulty in the
management of this litigation.
17. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action.
FACTUAL BACKGROUND
------------------
18. On September 12, 1994, KKR and Borden announced that they had agreed
in principle to the acquisition of all of the outstanding common stock of Borden
by a KKR partnership in exchange for RJR stock owned by that partnership, valued
at $14.25 per Borden share, or a total of approximately $2 billion. The
transaction is scheduled to close by September 23, 1994 (the
5
<PAGE>
"Transaction"). The Transaction has already been approved by the Director
Defendants.
19. On Friday, September 9, 1994, Borden stock closed at $11.625 per
share.
20. Although the purchase price represents a small premium over the most
recent closing price of Borden stock, the Company's stock price recently
averaged between $15 and $20 per share. In addition to the fact that the price
offered is unfair and inadequate, the Transaction also provides that at the time
a definitive merger agreement is entered into, Borden will grant KKR a "lock up"
option to purchase from Borden up to 19.9% of the outstanding Borden common
stock for $11 a share payable in RJR Nabisco stock. If the option is exercised,
KKR must purchase at least 41% of the outstanding Borden common stock in the
exchange offer if it acquires any shares in the exchange offer. If KKR acquires
at least 41%, but less than 51% of Borden common stock in the exchange offer,
the option must be exercised by KKR, to the extent necessary for KKR to own at
least 51% of the outstanding Borden common stock. In the event any competing
transaction is consummated, KKR would be paid certain amounts under the merger
agreement. In addition, Defendants have agreed that if a merger agreement with
Borden is not entered into by September 23, 1994, KKR will purchase 19.9% of the
outstanding common shares of Borden at only $11 a share.
21. Further, RJR also announced on September 12, 1994 that it has reached
an agreement in principle with KKR to acquire a
6
<PAGE>
minority interest in Borden upon KKR's successful acquisition of 100 percent of
Borden. RJR will issue to Borden approximately $500 million of newly issued RJR
common shares for newly issues Borden shares priced at $14.25 each, representing
a 20 percent pro forma interest in Borden.
22. The Director Defendants and KKR have agreed that, if the merger is
consummated, senior management will remain in place and that their compensation
structure will be altered to provide greater incentive compensation awards.
Also, a majority of the current directors will remain on the Board.
23. The proposed Transaction is wrongful, unfair and harmful to Borden's
public stockholders, the Class members, and represents an attempt by defendants
to aggrandize the personal and financial positions and interests of board
members at the expense of and to the detriment of the stockholders of the
Company. The proposed transaction will deny plaintiff and other Class members
their rights to share appropriately in the true value of the Company's assets
and future growth in profits and earnings, while usurping the same for the
benefit of defendant KKR (and for RJR, of which KKR will continue to own a
substantial interest) at an unfair and inadequate price.
CLAIM AGAINST ALL DEFENDANTS
----------------------------
24. Defendants other that KKR, acting in concert, have violated their
fiduciary duties owed to the public shareholders of Borden and put their own
personal interests and the interests of defendant KKR ahead of the interests of
the Borden public
7
<PAGE>
shareholders and have used their control positions as officers and directors of
Borden for the purpose of reaping personal gain for board members at the expense
of Borden's public shareholders.
25. The Defendant Directors failed to (1) undertake an adequate evaluation
of Borden's worth as a potential merger/acquisition candidate; (2) take adequate
steps to enhance Borden's value and/or attractiveness as a merger/acquisition
candidate; (3) effectively expose Borden to the marketplace in an effort to
create an active and open auction for Borden; or (4) act independently so that
the interest of the Company's public shareholders would be protected. Instead,
defendants have set a price for the shares of stock that does not reflect the
true value of Borden and without an appropriate premium.
26. While the Defendant Directors of Borden should seek out other possible
purchasers of the assets of Borden or its stock in a manner designed to obtain
the highest possible price for Borden's shareholders, or seek to enhance the
value of Borden for all its current shareholders, they have instead resolved to
wrongfully allow KKR to obtain the valuable assets of Borden at a bargain price,
which under the circumstances here, disproportionately benefits KKR.
27. These tactics pursued by the defendants are, and will continue to be,
wrongful, unfair and harmful to Borden's public shareholders, and are an attempt
by certain defendants to aggrandize their personal positions, interests and
finances at the expense of and to the detriment of the Borden public
8
<PAGE>
stockholders. These maneuvers by the defendants will deny members of the Class
their right to share appropriately in the true value of Borden's valuable
assets, future earnings and profitable businesses to the same extent as they
would as Borden's shareholders.
28. In contemplating, planning and/or effecting the foregoing specified
acts and in pursuing and structuring the Transaction, defendants are not acting
in good faith toward plaintiff and the Class, and have breached, and are
breaching, their fiduciary duties to plaintiff and the Class.
29. Because the Defendant Directors (and those acting in concert with
them) dominate and control the business and corporate affairs of Borden and
because they are in possession of private corporate information concerning
Borden's businesses and future prospects, there exists an imbalance and
disparity of knowledge and economic power between the defendants and the public
shareholders of Borden which makes it inherently unfair to Borden's public
shareholders.
30. Defendant KKR has acted and is acting with knowledge or with reckless
disregard that the other defendants are in breach of their fiduciary duties to
Borden's public shareholders and have participated in such breaches of fiduciary
duties by the directors of Borden and thus are liable as aiders and abettors.
31. By reason of the foregoing acts, practices and course of conduct, the
Defendant Directors have failed to use the
9
<PAGE>
required care and diligence in the exercise of their fiduciary obligations owed
to Borden and its public shareholders.
32. As a result of the actions of the defendants, plaintiff and the Class
have been and will be damaged in that they will not receive the fair value of
Borden's assets and business in exchange for their RJR shares, and have been and
will be prevented from obtaining a fair price for their shares of Borden common
stock.
33. Unless enjoined by the Court, the Defendant Directors will continue to
breach their fiduciary duties owed to plaintiff and the Class, all to the
irreparable harm of the Class. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained as a class action;
(b) Declaring that the proposed Transaction is unfair, unjust and
inequitable to plaintiff and the other members of the Class;
(c) Enjoining preliminarily and permanently the defendants from taking any
steps necessary to accomplish or implement the proposed merger of defendant
Borden with defendant KKR at a price that is not fair and equitable;
(d) Requiring defendants to compensate plaintiff and the members of the
Class for all losses and damages suffered and to be suffered by them as a result
of the acts and transactions
10
<PAGE>
complained of herein, together with prejudgment and post-judgment interest;
(e) Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys', accountants', and experts' fees; and
(f) Granting such other and further relief as may be just and proper.
Dated: September 13, 1994
GOLDSTEIN, TILL & LITE
By: /s/ Allyn Z. Lite
___________________
Allyn Z. Lite
744 Broad Street
Newark, New Jersey 07102
(201) 623-3000
OF COUNSEL:
HARVEY GREENFIELD
LAW FIRM OF HARVEY GREENFIELD
300 Park Avenue
19th Floor
New York, New York 10022
(212) 832-8880
Attorney for Plaintiffs
11
<PAGE>
CERTIFICATION PURSUANT TO R. 4:5-1
----------------------------------
Pursuant to R. 4:5-1, it is hereby stated that the matter in
controversy is not the subject of any other action pending in any
other court or pending in any arbitration proceeding to the best
of my knowledge and belief, except for the matters entitled,
Barbara Lubin, et al. v. Borden Inc., et al., filed in this Court on September
- --------------------------------------------
13, 1994 and Norman Weiss, et al. v. Borden, Inc., et. al., filed in this Court
---------------------------------------------
on September 13, 1994. Also to the best of my belief, no other action or
arbitration proceeding is contemplated. Further, other than the parties set
forth in this pleading, at the present time I know of no other party that
should be joined in the within action.
GOLDSTEIN TILL & LITE
By: /s/ AMY M. RIEL
__________________________
AMY M. RIEL
Dated: September 14, 1994
12
EXHIBIT 11(g)(17)
GOLDSTEIN TILL & LITE
744 Broad Street
Newark, New Jersey 07102
(201) 623-3000
Attorneys for Plaintiffs
- - - - - - - - - - - - - - - - - x
JAMES PETERSON and SIDNEY : SUPERIOR COURT OF NEW JERSEY
GLICK, on behalf of themselves : CHANCERY DIVISION
and all others similarly : MERCER COUNTY
situated, : DOCKET NO.
:
Plaintiffs, :
: Civil Action
vs. :
:
BORDEN, INC., ERVIN SHAMES and : CLASS ACTION COMPLAINT
FRANK TASCO, :
:
Defendants. :
- - - - - - - - - - - - - - - - - x
Plaintiffs, by their attorneys, allege upon information and
belief, except as to paragraphs 1-3 which are alleged upon knowledge, as
follows:
THE PARTIES
1. Plaintiff James Peterson resides at 3212 Beverly Road,
South Plainfield, New Jersey 07080.
2. Plaintiff Sidney Glick resides at 1047 Neilson Street,
Far Rockaway, New York 11691.
3. Each plaintiff is the owner of shares of the common
stock of defendant Borden, Inc. and has been the owner
<PAGE>
continuously of such shares since prior to the wrongs complained of herein.
4. Defendant Borden, Inc. ("Borden" or the "Company") is
a corporation duly existing and organized under the laws of the State of New
Jersey, with its principal offices located in Columbus, Ohio. The Company
produces and distributes a variety of consumer food products, including pastas
and sauces, snack food items, dairy products such as fluid milk and other
products. The Company also manufactures and distributes its products.
5. As of April 22, 1994, there were approximately 141
million shares of the Company's common stock outstanding held by over 40,000
shareholders of record.
6. Defendant Ervin Shames ("Shames") is, and at all times
relevant hereto has been, President and Chief Executive Officer of the Company.
7. Defendant Frank Tasco ("Tasco") is, and at all times
relevant hereto has been, Chairman of the Board of the Company.
8. The defendants referred to in paragraphs 8 and 9 are
collectively referred to herein as the "Individual Defendants."
-2-
<PAGE>
9. By reason of the above Individual Defendants'
positions with the Company as officers and/or directors, said individuals are in
a fiduciary relationship with plaintiffs and the other public stockholders of
Borden, and owe plaintiffs and the other members of the class the highest
obligations of good faith, fair dealing, due care, loyalty and full, candid and
adequate disclosure.
CLASS ACTION ALLEGATIONS
10. Each plaintiff brings this action pursuant to R. 4:32
et seq. of the New Jersey Court Rules, on his or her own behalf and as a class
action on behalf of him or herself and all Borden securities holders or their
successors in interest, similarly situated (the "Class"). Excluded from the
class are defendants herein and any person, firm, trust, corporation, or other
entity related to or affiliated with any of the defendants.
11. This action is properly maintainable as a class
action.
12. The class is so numerous that joinder of all members
is impracticable. As of April 22, 1994, there were approximately 141 million
shares of Borden common stock outstanding held by over 40,000 shareholders of
record.
-3-
<PAGE>
13. There are questions of law and fact which are common
to the class and which predominate over questions affecting any individual class
members. The common questions include, inter alia, the following:
(a) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the class;
(b) whether the proposed merger set forth below is
grossly unfair to the class;
(c) whether defendants are engaging in self-dealing to
benefit themselves;
(d) whether plaintiffs and the other members of the class
would be irreparably damaged were the transactions complained of herein
consummated; and
(e) whether defendants have breached, or aided and abetted
the breach of fiduciary and other common law duties owed by them to plaintiffs
and the other members of the class.
14. Each plaintiff is committed to prosecuting this action
and has retained competent counsel experienced in litigation of this nature.
The claims of each plaintiff are typical of the claims of the other members of
-4-
<PAGE>
the class and each plaintiff has the same interests as the other
members of the class. Accordingly, each plaintiff is an adequate
representative of the class and will fairly and adequately protect the interests
of the class.
15. Plaintiffs anticipate that there will be no difficulty
in the management of this litigation.
16. Defendants have acted on grounds generally applicable
to the class with respect to the matters complained of herein, thereby making
appropriate the relief sought herein with respect to the class as a whole.
CLAIM FOR RELIEF
17. According to news reports on September 12, 1994,
Kohlberg Kravis Roberts & Co. ("KKR") and defendant Borden have agreed in
principle to the acquisition of all of the outstanding common stock of Borden by
a KKR partnership in exchange for RJR Nabisco Holdings Corp. common stock valued
at about $2 billion, based on Borden's approximately 141 million common shares
outstanding.
18. KKR also said that in connection with its agreement
with Borden, RJR Nabisco Holdings Corp. has agreed in principle that upon KKR's
acquisition of 100% of Borden and subject to certain other conditions, RJR
Nabisco will issue about $500 million of its newly issued common shares for
newly issued Borden shares priced at $14.25 each, representing a 20%
-5-
<PAGE>
pro forma interest in Borden. RJR Nabisco will also receive a warrant to
purchase an additional 10% interest in Borden as part of its investment.
19. KKR said Borden agreed that at the time a definitive
merger agreement is entered into, Borden will grant KKR an option to purchase
from Borden up to 19.9% of the outstanding Borden common stock for $11 a share
payable in RJR Nabisco stock.
20. If the option is exercised, KKR must purchase at least
41% of the outstanding Borden Common stock in the exchange offer if it acquires
any shares in the exchange offer. If KKR acquires at least 41%, but less than
51%, of Borden common stock in the exchange offer, the option must be exercised
by KKR, to the extent necessary for KKR to own at least 51% of the outstanding
Borden common stock. KKR and Borden agreed that if a merger agreement with
Borden is not entered into by September 23, 1994, KKR will purchase 19.9% of the
outstanding common shares of Borden at $11 a share.
21. The exchange offer for Borden will be conditioned on
the receipt by KKR of at least 41% of the outstanding Borden common stock. It
is contemplated that following the completion of the exchange offer, KKR will
merge a newly formed corporation which it controls into Borden in a merger in
which holders of any then-outstanding Borden common stock will
-6-
<PAGE>
receive the same consideration as holders of Borden common stock receive in the
exchange offer.
22. Plaintiffs seek to enjoin the consummation of the
imminent agreement between KKR and Borden whereby KKR would swap RJR Nabisco
Holding stock for all of the outstanding Borden common stock.
23. The consideration proposed to be paid to class members
is unconscionable, unfair and grossly inadequate because, among other things:
(a) the intrinsic value of Borden's common stock is
materially in excess of the amount to be received by Borden stockholders in the
transaction giving due consideration to the Company's strategic value, the
recent market price of the Company's stock and Borden's brand name recognition;
(b) the consideration agreed upon did not result from an
appropriate consideration of the value of Borden as there was no opportunity to
accurately ascertain Borden's value through open bidding or a market check.
24. The Individual Defendants have thus far failed to
announce any active auction or open bidding procedures best calculated to
maximize shareholder value.
-7-
<PAGE>
25. Borden's shareholders will, if the transaction is
consummated, be deprived of the opportunity for substantial gains which the
Company may realize.
26. In announcing the transaction, the defendants have
failed to disclose among other things the full extent of the growth and value
potential of Borden and the expected increase in its profitability.
27. The defendants have not, in accordance with their
fiduciary duties:
(a) acted independently so that the interests of Borden's
public shareholders would be protected;
(b) adequately ensured that no conflicts of interest exist
or if such conflicts exist to ensure that all conflicts would be resolved in the
best interests of Borden's public shareholders; and
(c) taken all appropriate steps to enhance Borden's value
and attractiveness as a merger acquisition, restructuring or recapitalization
candidate.
28. Because the Individual Defendants dominate and control
the business and corporate affairs of Borden, and are in possession of private
corporate information concerning Borden's assets, businesses and future
prospects, there exists
-8-
<PAGE>
an imbalance and disparity of knowledge and economic power between them and the
public stockholders of Borden which makes it inherently unfair for them to
pursue any proposed transaction wherein they will reap disproportionate
benefits to the exclusion of other means of maximizing stockholder value.
29. By reason of the foregoing acts, practices and course
of conduct, the defendants have failed to exercise ordinary care and diligence
in the exercise of their fiduciary obligations toward plaintiffs and the other
Borden public stockholders.
30. As a result of the actions of defendants, plaintiffs
and the other members of the Class have been and will be damaged in that they
have not and will not receive their fair proportion of the value of Borden's
assets and businesses and will be prevented from obtaining appropriate
consideration for their shares of Borden's common stock.
31. Unless enjoined by this Court, the defendants will
continue to breach their fiduciary duties owed to plaintiffs and the other
members of the Class, and may consummate the proposed transaction which will
exclude the Class from its fair proportionate share of Borden's valuable assets
and businesses, and/or benefit them in the unfair manner complained of herein,
all to the irreparable harm of the Class, as aforesaid.
-9-
<PAGE>
32. Plaintiffs and the Class have no adequate remedy at
law.
WHEREFORE, plaintiffs demand judgment, as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary duties
to plaintiffs and the other members of the Class, including those of due care
and candor;
C. Rescinding any transactions effected by the defendants
in an unfair manner and for an unfair price and in the event such transaction
is consummated prior to trial, awarding rescissory damages;
D. Enjoining the complained of transaction or any related
transactions;
E. Ordering defendants, jointly and severally, to pay to
plaintiffs and the Class all damages suffered and to be suffered by them as a
result of the acts and transactions alleged herein;
F. Ordering defendants, jointly and severally, to
account to plaintiffs and the Class for all profits realized and to be realized
by them as a result of the transaction complained of and pending such accounting
to hold such profits
-10-
<PAGE>
in a constructive trust for the benefit of plaintiffs and the other members of
the class;
G. Awarding plaintiffs the costs and disbursements of the
action, including allowance for plaintiffs' reasonable attorneys' and experts'
fees; and
H. Granting such other and further relief as may be just
and proper in the premises.
Dated: September 16, 1994
GOLDSTEIN TILL & LITE
By: /s/
-----------------------------------------
Allyn Z. Lite
Joseph J. DePalma
744 Broad Street, Suite 800
Newark, New Jersey 07102
Telephone: (201) 623-3000
OF COUNSEL:
SIROTA & SIROTA
747 Third Avenue
New York, New York 10017
(212) 759-5555
LAW OFFICES OF CURTIS V. TRINKO
310 Madison Avenue, 14th Floor
New York, New York 10017
(212) 490-9550
-11-
<PAGE>
CERTIFICATION PURSUANT TO RULE 4:5-1
Pursuant to R. 4:5-1, it is hereby stated that the matter in
controversy is not the subject of any other action pending in any other court or
pending in any arbitration proceeding to the best of my knowledge and belief,
except for the matters entitled, Barbara Lubin, et al. v. Borden, Inc., et al.,
filed in this Court on September 13, 1994; Norman Weiss, et al. v. Borden, Inc.,
et al., filed in this Court on September 13, 1994; Jerry Krim, et al. v. Borden,
Inc., et al., filed in this Court on September 14, 1994 and Bernard Stepak v.
Borden, Inc., et al., filed with this Court this date. Also to the best of my
belief, no other action or arbitration proceeding is contemplated. Further,
other than the parties set forth in this pleading, at the present time I know of
no other party that should be joined in the within action.
GOLDSTEIN TILL & LITE
By: /s/
----------------------------------------
Allyn Z. Lite
Dated: September 16, 1994
-12-
EXHIBIT 11(g)(18)
GOLDSTEIN TILL & LITE
Allyn Z. Lite (AL 6774)
744 Broad Street
Newark, New Jersey 07102
(201) 623-3000
Attorneys for Plaintiff
- - - - - - - - - - - - - - - - - - x
DANIEL MARCUS on behalf of : SUPERIOR COURT OF NEWJERSEY
himself and all others similarly : CHANCERY DIVISION
situated, : MERCER COUNTY
: DOCKET NO. MER-C-000149-94
Plaintiff, :
: Civil Action
v. :
:
BORDEN, INC., ERVIN SHAMES and : CLASS ACTION COMPLAINT
FRANK TASCO, :
:
Defendants. :
- - - - - - - - - - - - - - - - - - x
Plaintiff, by his attorneys, alleges upon information and
belief, except as to paragraph 1 which is alleged upon knowledge, as follows:
THE PARTIES
1. Plaintiff, who resides at 367 McKinley Boulevard,
Paramus, New Jersey 07652, is the owner of shares of the common stock of
defendant Borden, Inc. and has been the owner continuously of such shares since
prior to the wrongs complained of herein.
2. Defendant Borden, Inc. ("Borden" or the "Company") is
a corporation duly existing and organized under the
<PAGE>
laws of the State of New Jersey, with its principal offices located in Columbus,
Ohio. The Company produces and distributes a variety of consumer food products,
including pastas and sauces, snack food items, dairy products such as fluid milk
and other products. The Company also manufactures and distributes its products.
3. As of April 22, 1994, there were approximately 141
million shares of the Company's common stock outstanding held by over 40,000
shareholders of record.
4. Defendant Ervin Shames ("Shames") is and at all times
relevant hereto has been President and Chief Executive Officer of the Company.
5. Defendant Frank Tasco ("Tasco") is and at all times
relevant hereto has been Chairman of the Board of the Company.
6. The defendants referred to in paragraphs 4 and 5 are
collectively referred to herein as the "Individual Defendants."
7. By reason of the above Individual Defendants'
positions with the Company as officers and/or directors, said individuals are in
a fiduciary relationship with plaintiffs and the other public stockholders of
Borden, and owe plaintiffs and the other members of the class the highest
obligations of good
-2-
<PAGE>
faith, fair dealing, due care, loyalty and full, candid and adequate disclosure.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action on his own behalf and as
a class action on behalf of himself and all Borden securities holders or their
successors in interest, similarly situated (the "Class"). Excluded from the
class are defendants herein and any person, firm, trust, corporation, or other
entity related to or affiliated with any of the defendants.
9. This action is properly maintainable as a class
action.
10. The class is so numerous that joinder of all members
is impracticable. As of April 22, 1994, there were approximately 141 million
shares of Borden common stock outstanding held by over 40,000 shareholders of
record.
11. There are questions of law and fact which are common
to the class and which predominate over questions affecting any individual class
members. The common questions include, inter alia, the following:
(a) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the class;
-3-
<PAGE>
(b) whether the merger is grossly unfair to the class;
(c) whether defendants are engaging in self-dealing to
benefit themselves;
(d) whether plaintiffs and the other members of the class
would be irreparably damaged were the transactions complained of herein
consummated; and
(e) whether defendants have breached, or aided and abetted
the breach of fiduciary and other common law duties owed by them to plaintiffs
and the other members of the class.
12. Plaintiff is committed to prosecuting this action and
has retained competent counsel experienced in litigation of this nature. The
claims of plaintiff are typical of the claims of the other members of the class
and plaintiff has the same interests as the other members of the class.
Accordingly, plaintiff is an adequate representative of the class and will
fairly and adequately protect the interests of the class.
13. Plaintiff anticipates that there will be no difficulty
in the management of this litigation.
14. Defendants have acted on grounds generally applicable
to the class with respect to the matters complained
-4-
<PAGE>
of herein, thereby making appropriate the relief sought herein with respect to
the class as a whole.
CLAIM FOR RELIEF
15. According to news reports on September 12, 1994,
Kohlberg Kravis Roberts & Co. ("KKR") and defendant Borden have agreed in
principle to the acquisition of all of the outstanding common stock of Borden by
a KKR partnership in exchange for RJR Nabisco Holdings Corp. common stock valued
at $14.25 per Borden share.
16. Plaintiff seeks to enjoin the consummation of the
imminent agreement between KKR and Borden whereby KKR would swap RJR Nabisco
Holding stock for all of the outstanding Borden common stock. Pursuant to the
proposed terms of the transaction, KKR will also receive a warrant to buy an
additional 10% of Borden's shares. If the merger is not closed by September 23,
1994, KKR will buy 28 million shares of Borden's outstanding shares, also as a
stock swap for RJR Nabisco Holding stock. Further, under the terms of the
agreement, KKR would receive from Borden, a $20 million advisory fee, plus up to
$15 million in expenses, if the transaction falls through for any reason. If the
transaction is cancelled because a higher bidder successfully takes over Borden,
the payment would grow by $30 million to a total of $65 million. In addition,
KKR's purchase of $28 million shares of Borden would proceed.
-5-
<PAGE>
Therefore, the winning bidder for Borden would end up owning more than $300
million of RJR stock when it bought Borden and its payment for the company would
grow by the same amount. A potential buyer with no desire to have such a large
investment in RJR might thus be deterred from bidding.
17. The consideration proposed to be paid to class members
is unconscionable and unfair and grossly inadequate because, among other things:
(a) the intrinsic value of Borden's common stock is
materially in excess of the amount to be received by Borden stockholders in the
transaction giving due consideration to the Company's strategic value, the
recent market price of the Company's stock and Borden's brand name recognition;
(b) the consideration agreed upon did not result from an
appropriate consideration of the value of Borden as there was no opportunity to
accurately ascertain Borden's value through open bidding or a market check.
18. The director defendants have thus far failed to
announce any active auction or open bidding procedures best calculated to
maximize shareholder value.
19. Borden's shareholders will, if the transaction is
consummated, be deprived of the opportunity for substantial gains which the
Company may realize.
-6-
<PAGE>
20. In announcing the transaction, the defendants have
failed to disclose among other things the full extent of the growth and value
potential of Borden and the expected increase in its profitability.
21. The defendants have not, in accordance with their
fiduciary duties:
(a) acted independently so that the interests of Borden's
public shareholders would be protected;
(b) adequately ensured that no conflicts of interest exist
or if such conflicts exist to ensure that all conflicts would be resolved in the
best interests of Borden's public shareholders; and
(c) taken all appropriate steps to enhance Borden's value
and attractiveness as a merger acquisition, restructuring or recapitalization
candidate.
22. Because the individual defendants dominate and control
the business and corporate affairs of Borden, and are in possession of private
corporate information concerning Borden's assets, businesses and future
prospects, there exists an imbalance and disparity of knowledge and economic
power between them and the public stockholders of Borden which makes
-7-
<PAGE>
it inherently unfair for them to pursue any proposed transaction wherein they
will reap disproportionate benefits to the exclusion of other means of
maximizing stockholder value.
23. By reason of the foregoing acts, practices and course
of conduct, the defendants have failed to exercise ordinary care and diligence
in the exercise of their fiduciary obligations toward plaintiff and the other
Borden public stockholders.
24. As a result of the actions of defendants, plaintiff
and the other members of the Class have been and will be damaged in that they
have not and will not receive their fair proportion of the value of Borden's
assets and businesses and will be prevented from obtaining appropriate
consideration for their shares of Borden's common stock.
25. Unless enjoined by this Court, the defendants will
continue to breach their fiduciary duties owed to plaintiff and the other
members of the Class, and may consummate the proposed transaction which will
exclude the Class from its fair proportionate share of Borden's valuable assets
and businesses, and/or benefit them in the unfair manner complained of herein,
all to the irreparable harm of the Class, as aforesaid.
26. Plaintiff and the Class have no adequate remedy at
law.
-8-
<PAGE>
WHEREFORE, plaintiff demands judgment, as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class, including those of due
care and candor;
C. Rescinding any transactions effected by the defendants
in an unfair manner and for an unfair price and in the event such transaction is
consummated prior to trial, awarding rescissory damages;
D. Enjoining the complained of transaction or any related
transactions;
E. Ordering defendants, jointly and severally, to pay to
plaintiff and the Class all damages suffered and to be suffered by them as a
result of the acts and transactions alleged herein;
F. Ordering defendants, jointly and severally, to account
to plaintiff and the Class for all profits realized and to be realized by them
as a result of the transaction complained of and pending such accounting to hold
such profits in a constructive trust for the benefit of plaintiff and the other
members of the class;
-9-
<PAGE>
G. Awarding plaintiff the costs and disbursements of the
action, including allowance for plaintiff's reasonable attorneys' and experts'
fees; and
H. Granting such other and further relief as may be just
and proper in the premises.
Dated: September 22, 1994
GOLDSTEIN TILL & LITE
By: /s/
-----------------------------------------
Allyn Z. Lite
744 Broad Street
Newark, New Jersey 07102
Telephone: (201) 623-3000
OF COUNSEL:
THE LAW OFFICES OF JAMES V. BASHIAN
James V. Bashian, Esq.
500 Fifth Avenue
Suite 2800
New York, New York 10110
(212) 921-4110
-10-
<PAGE>
CERTIFICATION PURSUANT TO RULE 4:5-1
Pursuant to R. 4:5-1, it is hereby stated that the matter in
controversy is not the subject of any other action pending in any other court or
pending in any arbitration proceeding to the best of my knowledge and belief,
except for the matters entitled, Barbara Lubin, et al. v. Borden Inc., et al.,
filed in this Court on September 13, 1994; Norman Weiss, et al. v. Borden Inc.,
et al., filed in this Court on September 13, 1994; Jerry Krim, et al. v. Borden
Inc., et al., filed in this Court on September 14, 1994; Bernard Stepak v.
Borden Inc., et al., filed with this Court on September 16, 1994; and James
Peterson and Sidney Glick v. Borden, Inc., filed with this Court on September
16, 1994. Also to the best of my belief, no other action or arbitration
proceeding is contemplated. Further, other than the parties set forth in this
pleading, at the present time I know of no other party that should be joined in
the within action.
GOLDSTEIN TILL & LITE
By: /s/
---------------------
Allyn Z. Lite
Dated: September 22, 1994
-11-
EXHIBIT 11(g)(19)
GOLDSTEIN TILL & LITE
744 Broad Street
Newark, New Jersey 07102
(201) 623-3000
Attorneys for Plaintiffs
- - - - - - - - - - - - - - - - - - - - - -x
KATHLEEN DWYER, on behalf of : SUPERIOR COURT OF NEW JERSEY
herself and all others : CHANCERY DIVISION
similarly situated, : MERCER COUNTY
: DOCKET NO. MER-C-0152-94
Plaintiffs, :
:
v. : Civil Action
:
BORDEN, INC., ERVIN SHAMES and :
FRANK TASCO, :
: CLASS ACTION COMPLAINT
Defendants. :
- - - - - - - - - - - - - - - - - - - - - -x
Plaintiff, by her attorneys, alleges upon information and
belief, except as to paragraphs 1 which is alleged upon knowledge, as follows:
THE PARTIES
1. Plaintiff Kathleen Dwyer resides at 12860 Northants
Circle, Carmel, Indiana 46032.
2. Plaintiff is the owner of shares of the common stock
of defendant Borden, Inc. and has been the owner continuously of such shares
since prior to the wrongs complained of herein.
<PAGE>
3. Defendant Borden, Inc. ("Borden" or the "Company") is
a corporation duly existing and organized under the laws of the State of New
Jersey, with its principal offices located in Columbus, Ohio. The Company
produces and distributes a variety of consumer food products, including pastas
and sauces, snack food items, dairy products such as fluid milk and other
products. The Company also manufactures and distributes its products.
4. As of April 22, 1994, there were approximately 141
million shares of the Company's common stock outstanding held by over 40,000
shareholders of record.
5. Defendant Ervin Shames ("Shames") is, and at all times
relevant hereto has been, President and Chief Executive Officer of the Company.
6. Defendant Frank Tasco ("Tasco") is, and at all times
relevant hereto has been, Chairman of the Board of the Company.
7. The defendants referred to in paragraphs 5 and 6 are
collectively referred to herein as the "Individual Defendants."
8. By reason of the above Individual Defendants'
positions with the Company as officers and/or directors, said individuals are in
a fiduciary relationship with plaintiff and
-2-
<PAGE>
the other public stockholders of Borden, and owe plaintiff and the other
members of the class the highest obligations of good faith, fair dealing, due
care, loyalty and full, candid and adequate disclosure.
CLASS ACTION ALLEGATIONS
9. Plaintiff brings this action pursuant to R. 4:32 et
seq. of the New Jersey Court Rules, on her own behalf and as a class action on
behalf of herself and all Borden securities holders or their successors in
interest, similarly situated (the "Class"). Excluded from the class are
defendants herein and any person, firm, trust, corporation, or other entity
related to or affiliated with any of the defendants.
10. This action is properly maintainable as a class
action.
11. The class is so numerous that joinder of all members
is impracticable. As of April 22, 1994, there were approximately 141 million
shares of Borden common stock outstanding held by over 40,000 shareholders of
record.
12. There are questions of law and fact which are common
to the class and which predominate over questions affecting any individual class
members. The common questions include, inter alia, the following:
-3-
<PAGE>
(a) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the class;
(b) whether the proposed merger set forth below is grossly
unfair to the class;
(c) whether defendants are engaging in self-dealing to
benefit themselves;
(d) whether plaintiffs and the other members of the class
would be irreparably damaged were the transactions complained of herein
consummated; and
(e). whether defendants have breached, or aided and abetted
the breach of fiduciary and other common law duties owed by them to plaintiffs
and the other members of the class.
13. Plaintiff is committed to prosecuting this action and
has retained competent counsel experienced in litigation of this nature. The
claims of plaintiff are typical of the claims of the other members of the class
and plaintiff has the same interests as the other members of the class.
Accordingly, plaintiff is an adequate representative of the class and will
fairly and adequately protect the interests of the class.
14. Plaintiff anticipates that there will be no difficulty
in the management of this litigation.
-4-
<PAGE>
15. Defendants have acted on grounds generally applicable
to the class with respect to the matters complained of herein, thereby making
appropriate the relief sought herein with respect to the class as a whole.
CLAIM FOR RELIEF
16. According to news reports on September 12, 1994,
Kohlberg Kravis Roberts & Co. ("KKR") and defendant Borden have agreed in
principle to the acquisition of all of the outstanding common stock of Borden by
a KKR partnership in exchange for RJR Nabisco Holdings Corp. common stock valued
at about $2 billion, based on Borden's approximately 141 million common shares
outstanding.
17. KKR also said that in connection with its agreement
with Borden, RJR Nabisco Holdings Corp. has agreed in principle that upon KKR's
acquisition of 100% of Borden and subject to certain other conditions, RJR
Nabisco will issue about $500 million of its newly issued common shares for
newly issued Borden shares priced at $14.25 each, representing a 20% pro forma
interest in Borden. RJR Nabisco will also receive a warrant to purchase an
additional 10% interest in Borden as part of its investment.
18. KKR said Borden agreed that at the time a definitive
merger agreement is entered into, Borden will grant
-5-
<PAGE>
KKR an option to purchase from Borden up to 19.9% of the outstanding Borden
common stock for $11 a share payable in RJR Nabisco stock.
19. If the option is exercised, KKR must purchase at least
41% of the outstanding Borden common stock in the exchange offer if it acquires
any shares in the exchange offer. If KKR acquires at least 41%, but less than
51%, of Borden common stock in the exchange offer, the option must be exercised
by KKR, to the extent necessary for KKR to own at least 51% of the outstanding
Borden common stock. KKR and Borden agreed that if a merger agreement with
Borden is not entered into by September 23, 1994, KKR will purchase 19.9% of the
outstanding common shares of Borden at $11 a share.
20. The exchange offer for Borden will be conditioned on
the receipt by KKR of at least 41% of the outstanding Borden common stock. It
is contemplated that following the completion of the exchange offer, KKR will
merge a newly formed corporation which it controls into Borden in a merger in
which holders of any then-outstanding Borden common stock will receive the same
consideration as holders of Borden common stock receive in the exchange offer.
21. Plaintiff seeks to enjoin the consummation of the
imminent agreement between KKR and Borden whereby KKR would
-6-
<PAGE>
swap RJR Nabisco Holding stock for all of the outstanding Borden common stock.
22. The consideration proposed to be paid to class members
is unconscionable, unfair and grossly inadequate because, among other things:
(a) the intrinsic value of Borden's common stock is
materially in excess of the amount to be received by Borden stockholders in the
transaction giving due consideration to the Company's strategic value, the
recent market price of the Company's stock and Borden's brand name recognition;
(b) the consideration agreed upon did not result from an
appropriate consideration of the value of Borden as there was no opportunity to
accurately ascertain Borden's value through open bidding or a market check.
23. The Individual Defendants have thus far failed to
announce any active auction or open bidding procedures best calculated to
maximize shareholder value.
24. Borden's shareholders will, if the transaction is
consummated, be deprived of the opportunity for substantial gains which the
Company may realize.
25. In announcing the transaction, the defendants have
failed to disclose among other things the full extent of
-7-
<PAGE>
the growth and value potential of Borden and the expected increase in its
profitability.
26. The defendants have not, in accordance with their
fiduciary duties:
(a) acted independently so that the interests of Borden's
public shareholders would be protected;
(b) adequately ensured that no conflicts of interest exist
or if such conflicts exist to ensure that all conflicts would be resolved in the
best interests of Borden's public shareholders; and
(c) taken all appropriate steps to enhance Borden's value
and attractiveness as a merger acquisition, restructuring or recapitalization
candidate.
27. Because the Individual Defendants dominate and control
the business and corporate affairs of Borden, and are in possession of private
corporate information concerning Borden's assets, businesses and future
prospects, there exists an imbalance and disparity of knowledge and economic
power between them and the public stockholders of Borden which makes it
inherently unfair for them to pursue any proposed transaction wherein they will
reap disproportionate benefits to the exclusion of other means of maximizing
stockholder value.
-8-
<PAGE>
28. By reason of the foregoing acts, practices and course
of conduct, the defendants have failed to exercise ordinary care and diligence
in the exercise of their fiduciary obligations toward plaintiff and the other
Borden public stockholders.
29. As a result of the actions of defendants, plaintiff
and the other members of the Class have been and will be damaged in that they
have not and will not receive their fair proportion of the value of Borden's
assets and businesses and will be prevented from obtaining appropriate
consideration for their shares of Borden's common stock.
30. Unless enjoined by this Court, the defendants will
continue to breach their fiduciary duties owed to plaintiff and the other
members of the Class, and may consummate the proposed transaction which will
exclude the Class from its fair proportionate share of Borden's valuable assets
and businesses, and/or benefit them in the unfair manner complained of herein,
all to the irreparable harm of the Class, as aforesaid.
31. Plaintiff and the Class have no adequate remedy at
law.
WHEREFORE, plaintiff demands judgment, as follows:
A. Declaring this to be a proper class action;
-9-
<PAGE>
B. Ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class, including those of due
care and candor;
C. Rescinding any transactions effected by the defendants
in an unfair manner and for an unfair price and in the event such transaction is
consummated prior to trial, awarding rescissory damages;
D. Enjoining the complained of transaction or any related
transactions;
E. Ordering defendants, jointly and severally, to pay to
plaintiffs and the Class all damages suffered and to be suffered by them as a
result of the acts and transactions alleged herein;
F. Ordering defendants, jointly and severally, to account
to plaintiff and the Class for all profits realized and to be realized by them
as a result of the transaction complained of and pending such accounting to hold
such profits in a constructive trust for the benefit of plaintiff and the other
members of the class;
G. Awarding plaintiff the costs and disbursements of the
action, including allowance for plaintiff's reasonable attorneys' and experts'
fees; and
-10-
<PAGE>
H. Granting such other and further relief as may be just
and proper in the premises.
Dated: September 23, 1994
GOLDSTEIN TILL & LITE
By: /s/
----------------------------
Allyn Z. Lite
Joseph J. DePalma
744 Broad Street, Suite 800
Newark, New Jersey 07102
Telephone: (201) 623-3000
OF COUNSEL:
DAVID B. KAHN & ASSOCIATES
David B. Kahn, Esq.
Mark E. King, Esq.
Suite 100
One Northfield Plaza
Northfield, Illinois 60093
DAVIS MINER BARNHILL & GALLAND, P.C.
Charles Barnhill, Esq.
Paul Strauss, Esq.
14 W. Erie Street
Chicago, Illinois 60610
-11-
<PAGE>
CERTIFICATION PURSUANT TO RULE 4:5-1
Pursuant to R. 4:5-1, it is hereby stated that the matter in
controversy is not the subject of any other action pending in any other court or
pending in any arbitration proceeding to the best of my knowledge and belief,
except for the matters entitled, Barbara Lubin, et al. v. Borden Inc., et al.,
filed in this Court on September 13, 1994; Norman Weiss, et al. v. Borden, Inc.,
et al., filed in this Court on September 13, 1994; Jerry Krim, et al. v. Borden
Inc., et al., filed in this Court on September 14, 1994; Bernard Stepak v.
Borden Inc., et al., filed with this Court on September 16, 1994; James Peterson
and Sidney Glick v. Borden, Inc., filed with this Court on September 16, 1994;
and Daniel Marcus v. Borden Inc., et al., filed with this Court on September 22,
1994. Also to the best of my belief, no other action or arbitration proceeding
is contemplated. Further, other than the parties set forth in this pleading, at
the present time I know of no other party that should be joined in the within
action.
GOLDSTEIN TILL & LITE
By:/s/
---------------------------
Allyn Z. Lite
Dated: September 23, 1994
EXHIBIT 11(g)(20)
GOLDSTEIN, TILL, & LITE
Allyn Z. Lite, Esq.
Amy M. Riel, Esq.
744 Broad Street, Suite 800
Newark, New Jersey 07102
(201) 623-3000
Attorneys for Plaintiff
______________________________________________X
:
PITTMAN NEUROSURGICAL P.A. Defined : SUPERIOR COURT OF
Benefit Plan U.T.D. 9/1/77, R. CLINTON : NEW JERSEY
PITTMAN, TRUSTEE, on behalf of itself and all : MERCER COUNTY
others similarly situated, : CHANCERY DIVISION
:
Plaintiff :
: CIVIL ACTION NO:
against :
:
: MER C 158 94
BORDEN INC., KOHLBERG KRAVIS :
ROBERTS & CO., ERVIN R. SHAMES, : CLASS ACTION
FRANK J. TASCO, H. BARCLAY MORLEY, : ------------
JOHN E. SEXTON, FREDERICK E. HENN- : COMPLAINT
ING, WILBERT J. LEMELLE, ROBERT P. : ---------
LUCIANO, and PATRICIA CARRY STEWART, :
:
Defendants. :
______________________________________________X
Plaintiff alleges upon information and belief based, in part, upon an
investigation conducted by and through the undersigned counsel, except with
respect to its ownership of
<PAGE>
Borden Inc. common stock and its suitability to serve as class representative,
which are alleged upon personal knowledge, as follows:
THE PARTIES
-----------
1. Plaintiff is and has been at all relevant times the owner of shares of
the common stock of Borden Inc. ("Borden" or the "Company").
2. Defendant Borden is a corporation organized and existing under the
laws of the State of New Jersey with its principal executive offices located at
180 East Broad Street, Columbus, Ohio, 43215. Borden is an international food
company, with a diversified line of products among snack foods, dairy products,
household items and special market foods, including cheese, yogurt, glue, pasta,
frozen desserts, arts and crafts supplies, caulking and industrial coatings.
Borden had, as of December 31, 1993, approximately 141,358,035 shares of common
stock issued and outstanding, which shares are held by at least hundreds of
shareholders of record and are traded on the New York Stock Exchange.
3. Defendant Kohlberg Kravis Roberts & Co. ("KKR") is a corporate buyout
firm located in New York, New York. KKR is named as a defendant herein because,
as a party to the proposed merger, it is a necessary party to be joined in this
action in order to obtain the relief sought.
4. (a) Defendant Ervin R. Shames ("Shames") is and has been at all
relevant times the Company's President and Chief Executive Officer and a
director;
(b) Defendant Frank J. Tasco ("Tasco") is and has been at all relevant
times the Company's Chairman of the Board of Directors;
2
<PAGE>
(c) Defendant H. Barclay Morley ("Morley") is and has been at all
relevant times a director of Borden;
(d) Defendant John E. Sexton ("Sexton") is and has been at all
relevant times a director of Borden;
(e) Defendant Frederick E. Henning ("Henning") is and has been at all
relevant times a director of Borden;
(f) Defendant Wilbert J. Lemelle ("Lemelle") is and has been at all
relevant times a director of Borden;
(g) Defendant Robert P. Luciano ("Luciano") is and has been at all
relevant times a director of Borden; and
(h) Defendant Patricia Carry Stewart ("Stewart") is and has been at
all relevant times a director of Borden.
The defendants described in paragraphs 4(a)-(h) above are hereinafter
sometimes collectively referred to as the "individual defendants" or the
"director defendants."
5. By virtue of the individual defendants' positions as officers and/or
directors of Borden, said individual defendants are in a fiduciary relationship
with plaintiff and other public shareholders of Borden and owe plaintiff and
other members of the Class the highest obligation of good faith, fair dealing,
loyalty and due care.
3
<PAGE>
CLASS ACTION ALLEGATIONS
------------------------
6. Plaintiff brings this action individually and pursuant to R. 4:32 of
-
the New Jersey Court Rules as a class action on behalf of all shareholders of
Borden, and their successors in interest who are or will be threatened with
injury arising from
defendants' actions as more fully described below (the "Class"). Excluded from
the Class are defendants herein and any person, firm, trust, corporation or
other entity related to or affiliated with any of the defendants.
7. This action is properly maintainable as a class action under the laws
of the State of New Jersey for the following reasons:
(a) The Class, which includes at least hundreds of shareholders of
record scattered throughout the United States and foreign countries, is so
numerous that joinder of all members is impracticable.
(b) There are questions of law and fact common to members of the Class
which predominate over any questions affecting only individual members,
including, inter alia, the following:
----- ----
(i) whether one or more of the defendants has engaged in a plan and
scheme to enrich themselves at the expense of Borden's public shareholders;
(ii) whether the defendants have breached their fiduciary duties owed
by them to plaintiff and members of the Class and/or have aided and abetted in
such breach by virtue of their participation and/or acquiescence and by their
other conduct complained of herein;
4
<PAGE>
(iii) whether defendants have failed to fully disclose the true value
of Borden's assets and earning power, as well as the future financial benefits
they expect to derive, through the merger with KKR;
(iv) whether the defendants have wrongfully failed and refused to seek
a purchaser of Borden at the highest possible price and instead have sought to
chill potential offers and acquire the valuable assets of Borden for KKR at an
unfair and inadequate price;
(v) whether plaintiff and the other members of the Class will be
irreparably damaged by the transactions complained of herein;
(vi) whether defendants have breached, and/or aided and abetted one
another in the breach of, the fiduciary and other common law duties owed by them
to plaintiff and the other members of the Class; and
(vii) whether defendants are pursuing a scheme and course of business
designed to eliminate the public shareholders of Borden in violation of the laws
of the State of New Jersey.
(c) The claims of plaintiff are typical of the claims of the other
members of the Class, and plaintiff has no interests that are adverse or
antagonistic to the interests of the Class.
(d) Plaintiff is committed to the vigorous prosecution of this
action and has retained competent counsel experienced in litigation of this
nature. Accordingly, plaintiff is an adequate representative of the Class
and will fairly and adequately protect the interests of the Class.
5
<PAGE>
(e) Plaintiff anticipates that there will not be any difficulty in the
management of this litigation as a class action.
8. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action.
FACTUAL BACKGROUND AND SUBSTANTIVE ALLEGATIONS
----------------------------------------------
9. On or about December 22, 1993, Borden announced to the financial news
wire services that it was not engaged in any negotiations for a sale or merger
of the Company. Borden announced that instead they would restructure and that
details would be announced in early January, 1994.
10. On January 5, 1994, Borden announced the details of its restructuring
and refocusing plan. The restructuring included $650 million in charges to
fourth-quarter 1993 earnings and the sale of the Company's North American
snacks, seafood and other units. The units put up for sale represented about
$1.25 billion, or 20 percent, of Borden's projected sales of $6.75 million for
1993. According to defendant Tasco: "The goal of the program is to build
shareholder value by focusing on and revitalizing our best businesses."
Defendant Shames stated that other key elements of the restructuring plan
included the introduction of new consumer-oriented marketing programs to
strengthen Borden's core food businesses of pasta, niche grocery and
international foods. The restructuring plans also called for a turnaround of
Borden's domestic dairy business, largely through volume recovery and cost
reduction and retention of nearly all of the non-food businesses as important
contributors to current cash flow and earnings.
6
<PAGE>
11. Borden said the plans also called for cost reductions phasing in over
two years and reaching an annualized savings rate of $100 million to $125
million by the end of 1995. Savings would be achieved through a combination of
divestments and gains in efficiency and productivity.
12. On January 26, 1994, Borden announced that it expects its
restructuring, along with increased marketing and cost reductions, to improve
its performance in 1994. Defendant Shames stated: "I believe the new
restructuring plan that we are implementing will improve Borden's performance
and build shareholder value." Shames also stated that Borden projects 1994
earnings at the upper end of the $0.75 to $1.00 per share range of estimates by
security analysts who follow Borden closely. The press release also stated that
quarterly earnings are expected to strengthen after a marginally profitable
first quarter as momentum and cost savings build during the year.
13. On April 25, 1994, Borden released its 1994 first quarter earnings.
Defendant Shames stated in the press release disseminated to the investing
public that: "The fundamentals of our businesses have improved. Although there
is much to be done throughout the North American Foods businesses, Borden is
making significant gains in many areas in rebuilding volume and market
share....We are making significant progress in our cost saving programs and
running above our projection for increased cash flow."
14. On May 16, 1994, Borden announced that it had sold its Borden
Foodservice Group to H.J. Heinz Co. for an undisclosed amount. The division had
sales of $270 million in 1993 but has been unprofitable in recent years. Borden
stated that: "We are moving ahead on schedule with our divestment of
businesses."
7
<PAGE>
15. On May 20, 1994, Borden announced the sale of three additional
businesses as part of its restructuring program. Shames stated that "[o]ur
divestiture program is on track."
16. On July 11, Borden announced that it had sold its Bama Foods business
to Welch's. Terms of the transaction were not disclosed. Shames stated: "We
are also making progress in our efforts to sell our salty snacks business."
17. On August 25, 1994, Borden announced that it has finalized an agreement
to sell its Jays Foods, Inc. snack Business to Special Foods Company. Terms of
the agreement were not disclosed.
18. On September 12, 1994, Borden and KKR shocked the market by announcing
that KKR had agreed to acquire Borden in a transaction valued at approximately
$2 billion.
19. Under the terms of the agreement, Borden shareholders will receive RJR
Nabisco Holdings Corp. ("RJR") stock owned by KKR worth approximately $14.25 per
Borden share. The press release announcing the deal stated inter alia:
----- ----
It is contemplated that a definitive merger agreement will be executed within
two weeks. The agreement will provide for an exchange offer by KKR in which
holders of Borden common stock would have the right to exchange their shares for
RJR Nabisco common stock. The exact number of RJR Nabisco shares to be
exchanged for each Borden share will be determined by dividing $14.25 by the
average of the high and low prices of RJR Nabisco stock for a 10-day trading
period to be established in the offer, provided that in no event will Borden
stockholders receive greater than 2.375 RJR Nabisco shares, nor
8
<PAGE>
less than 1.78125 RJR Nabisco shares for each Borden share. The transaction will
be taxable to Borden shareholders.
20. The press release also stated:
KKR also announced that in connection with its agreement with Borden, RJR
Nabisco Holdings Corp. has agreed in principle that upon KKR's successful
acquisition of 100% of Borden and subject to certain other conditions, RJR
Nabisco will issue approximately $500 million in newly issued RJR Nabisco common
shares for newly issued Borden shares priced at $14.25 each, representing a 20
percent pro forma interest in Borden. RJR Nabisco also will receive a warrant
to purchase an additional 10 percent interest in Borden as part of its
investment.
"We believe that, after a full consideration of all the risks and opportunities
confronting Borden today, this transaction is the best outcome for Borden
shareholders, said Frank J. Tasco, Chairman of Borden. The restructuring
pursued since January has resulted in volume and share gains in many of Borden's
businesses.
Moreover, the earnings trend is also improving, but it is clear that additional
investment in our brands and in capital are needed in order to capture the
Company's potential .... "
21. Also as part of the deal, Borden has agreed that at the time a
definitive merger agreement is entered into, Borden will grant KKR an option
to purchase from Borden up to 19.9% of the outstanding Borden common stock for
$11 per share payable in RJR Nabisco
9
<PAGE>
common stock. If the option is exercised, KKR must purchase at least 41% of the
outstanding Borden common stock in the exchange offer if it acquires any shares
in the exchange offer. If KKR acquires at least 41%, but less than 51%, of
Borden common stock in the exchange offer, the option must be exercised by KKR,
to the extent necessary for KKR to own at least 51% of the outstanding Borden
common stock. KKR has also agreed that if a merger agreement is not entered
into by September 23, 1994, KKR will, subject only to necessary regulatory
approvals, purchase 19.9% of the outstanding shares of Borden common stock for
$11 per share.
22. The proposed merger transaction is wrongful, unfair and harmful to
Borden's shareholders, including plaintiffs and the other Class members, because
just as Borden's restructuring efforts, whose cost was borne by Borden
shareholders, were bearing fruit and its earnings potential was on an upswing,
Borden and KKR are attempting to usurp form Borden's shareholders the benefits
of the restructuring.
23. The proposed merger transaction is further wrongful, unfair and harmful
to Borden's shareholders, including plaintiffs and the other Class members, and
represents an attempt by the director defendants to aggrandize their personal
financial positions and interests and to enrich themselves at the expense of and
to the detriment of the Company's shareholders. The proposed transaction denies
to plaintiffs and other Class members their right to share proportionately in
the true value of the Company's assets and future growth in profits and earnings
while usurping the same for the benefit of KKR at an unfair and inadequate
price.
10
<PAGE>
FIRST COUNT
-----------
24. Defendants, acting in concert and aiding and abetting one another, have
violated their fiduciary duties owed to the public shareholders of Borden and
put their own personal interests and the interests of KKR ahead of the interests
of Borden's public shareholders, including plaintiffs and the Class members, and
have used their control positions as officers and directors of Borden, all as
alleged herein, for the purpose of reaping high personal profits at the expense
of the Company's public shareholders.
25. In negotiating the proposed merger/acquisition of Borden by KKR,
defendants did not exercise good faith, fair dealing, loyalty and due care by
failing, among other things, to:
(a) evaluate adequately the Company's worth as a potential
merger/acquisition candidate;
(b) take sufficient steps to enhance Borden's value and/or
attractiveness as a merger/acquisition candidate;
(c) expose the Company effectively in the marketplace to create an
active and open auction for the Company and its assets; and
(d) act independently so that the interests of Borden's public
shareholders would be protected throughout the merger/acquisition process.
26. Furthermore, in granting a lock-up option to KKR for 19.9% of Borden's
outstanding shares at a price of only $11, rather than the $14.25 to be paid to
Borden's
11
<PAGE>
shareholders, the defendants failed to achieve an appropriate premium or
recognition of the added value of the Company that will result from it being
wholly-owned by KKR.
27. On September 24, 1994, Borden agreed to meet with Paul Kazarian, head
of the investment group Japonica Partners to discuss a rival proposal.
Following the meeting, Kazarian expressed an intention to make a cash offer for
Borden's shares in the range of $16-$18 for a majority stake in the Company. As
part of his evaluation process, Kazarian requested but was denied access to
certain due diligence materials regarding Borden.
28. On September 23, 1994 the Wall Street Journal published an article
-------------------
entitled "Don't Let KKR Milk Borden" wherein corporate law professor John
Pound discussed Kazarian's offer as follows: "The Kazarian offer looks better
if it pans out. Mr. Kazarian has apparently offered to give investors cash for
their shares, not stock in another company. Moreover, he is proposing a
partial, not a full buyout. That would allow shareholders to retain their
shares and profit from a turnaround that may ultimately result. One can
quibble about the price and about the degree of control accorded to
Mr. Kazarian, but the concept is far sounder than the KKR one."
29. Despite the fact that Kazarian's offer is in the greater interest of
the Borden shareholders, the director defendants continue to favor and endorse
KKR's offer.
30. In contemplating and implementing a plan to obtain immediate financial
rewards for themselves, the director defendants have failed to act in the best
interests of Borden's public shareholders by failing, among other things, to:
12
<PAGE>
(a) undertake an adequate evaluation of the Company's worth as a
potential merger/acquisition candidate;
(b) ensure that no conflicts of interest existed; and
(c) act independently to ensure that the interests of Borden's public
shareholders would be protected.
31. The director defendants have agreed among themselves that they
will not solicit any other proposal or initiate discussions with any other
persons or entities regarding any offer or proposal for the acquisition of the
business of Borden through merger, asset sale, stock sale or otherwise while
Borden is still a publicly held company. Thus, the director defendants have
resolved to wrongfully obtain the valuable assets of Borden for KKR at a bargain
price, which under these circumstances, disproportionately benefits them. By
secretly negotiating and implementing the merger/acquisition plan while ignoring
other options, the director defendants have violated their fiduciary duties to
plaintiff and other public shareholders of Borden.
32. The strategy and tactics pursued by the defendants are and will
continue to be wrongful, unfair and harmful to Borden's public shareholders,
serve no legitimate business purpose of Borden and are essentially designed to
aggrandize the personal positions, interests and finances of the director
defendants at the expense of and to the detriment of the Company's public
shareholders. The defendants' course of action will deny plaintiff and other
Class members their right to share in the true value of Borden's valuable
assets, future earnings and profitable businesses to the same extent that they
would as Borden shareholders.
13
<PAGE>
33. In contemplating, devising and executing the aforementioned course of
conduct and in pursuing and structuring the proposed merger/acquisition
transaction, the director defendants have not acted in good faith toward
plaintiff and other members of the Class and have breached, and are continuing
to breach, their fiduciary duties to plaintiff and the Class.
34. Since the director defendants, and those acting under their direction
and control, dominate and control the business and corporate affairs of
Borden, and because they are in possession of private corporate information
concerning Borden's businesses and future prospects, there exists an imbalance
and disparity of knowledge and economic power between the defendants and the
public shareholders of Borden which makes defendants' course of action and the
contemplated transaction inherently unfair to Borden's public shareholders.
The proposed transaction will ensure that the director defendants will
disproportionately benefit from the value of Borden's assets and its future
financial prospects in contravention of the director defendants' fiduciary
duties to maximize the value of Borden's shares.
35. Defendants have acted and are acting with knowledge that the
individual defendants, and each of them, have breached and are breaching their
fiduciary duties to Borden's public shareholders and have, nevertheless,
intentionally, recklessly or negligently induced, and/or aided and abetted one
another, in such breaches of fiduciary duties by the directors of Borden.
36. By virtue of the foregoing acts, practices and course of action, the
director defendants have failed to exercise due care and diligence in
compliance with their fiduciary obligations toward Borden and its public
shareholders.
14
<PAGE>
37. The acts and course of conduct complained of hereinabove were willful,
malicious and oppressive in that the defendants, and each of them, knew that
their actions, as enumerated herein, involve improper and illegal practices,
violations of law and other acts completely foreign to the duties of officers
and directors to carry out corporate affairs in a fair, just, honest and
equitable manner. By reason of the foregoing, plaintiff and the Class are
entitled to punitive damages.
38. By virtue of the foregoing actions of the defendants, plaintiff and the
Class have been, are and will be damaged in that they will not receive the fair
value of Borden's assets and business in exchange for their Borden stock and
have been, are and will be prevented from obtaining a fair price for their
shares of the Company's stock.
39. Unless enjoined by this Court, the defendants will continue in their
harmful course of conduct and the director defendants will continue to breach
their fiduciary duties owed by them to plaintiff and to the Class and will
exclude plaintiff and the Class from receiving fair value for their
proportionate share of Borden's valuable assets and business, all to the
irreparable harm of plaintiff and the Class.
40. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff, on behalf of itself and the members of the Class,
demands judgment as follows:
A. Declaring that this lawsuit is properly maintainable as a class
action and certifying plaintiff as representatives of the Class;
15
<PAGE>
B. Declaring that the defendants have committed a gross abuse of trust
and have breached (or aided and abetted such breach of) their fiduciary and
other duties owed to plaintiff and the members of the Class;
C. Declaring that the proposed transaction of merger/acquisition of
Borden by KKR is a legal nullity;
D. Preliminarily and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in concert with or
for them from taking any steps necessary to accomplish or implement the
proposed merger of Borden with KKR at a price that is not fair and equitable;
E. In the event that the transaction is consummated, rescinding it
and setting it aside;
F. Imposing a voting trust upon the shares of Borden owned or
controlled by defendants to restrain their ability to use their voting control
of the Company to effect the transaction;
G. Awarding to plaintiff and the Class compensatory and punitive
damages against the director defendants, jointly and severally, in an amount to
be determined at trial, together with prejudgment interest, at the maximum rate
allowable by law, from the date of the wrongs to the date of judgment herein;
H. Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys', accountants' and experts' fees; and
16
<PAGE>
I. Granting such other and further relief as the Court may deem just
and proper.
Dated: September 29, 1994
GOLDSTEIN TILL & LITE
By /s/ Allyn Z. Lite
____________________
Allyn Z. Lite
Amy M. Riel
744 Broad Street, Suite 800
Newark, New Jersey 07102
(201) 623-3000
GILMAN AND PASTOR
Kenneth G. Gilman
David Pastor
One Boston Place
28th Floor
Boston, Massachusetts 02108
Tel. 617/589-3750
Fax 617/589-3749
17
<PAGE>
CERTIFICATION PURSUANT TO RULE 4:5-1
------------------------------------
Pursuant to R. 4:5-1, it is hereby stated that the matter in controversy
is not the subject of any other action pending in any other court or pending in
any arbitration proceeding to the best of my knowledge and belief, except for
the matters entitled, Barbara Lubin, et al. v. Borden Inc., et al., filed in
--------------------------------------------
this Court on September 13, 1994; Norman Weiss, et al v. Borden, Inc., et al.,
-------------------------------------------
filed in this Court on September 13, 1994; Jerry Krim, et al. v. Borden Inc., et
-------------------------------------
al., filed in this Court on September 14, 1994; Bernard Stepak vs. Borden Inc.,
- --- -------------------------------
et al., filed with this Court on September 16, 1994; James Peterson and Sidney
- ------ -------------------------
Click vs. Borden, Inc., filed with this Court on September 16, 1994; Daniel
- ---------------------- ------
Marcus vs. Borden Inc., et al., filed with this Court on September 22, 1994 and
- ------------------------------
Dwyer vs. Borden, Inc., filed with this Court on September 23, 1994. Also to
- ----------------------
the best of my belief, no other action or arbitration proceeding is
contemplated. Further, other than the parties set forth in this pleading, at
the present time I know of no other party that should be joined in the within
action.
GOLDSTEIN TILL & LITE
By: /s/ Allyn Z. Lite
_______________________________
Allyn Z. Lite
Dated: September 29, 1994
18
EXHIBIT 11(g)(21)
COURT OF COMMON PLEAS
FRANKLIN COUNTY, OHIO
- --------------------------------x
ERICA HARTMAN :
Plaintiff, : Case No. 94CVH09-6306
: ------------
-against- :
:
BORDEN, INC., ERVIN SHAMES and :
FRANK TASCO, :
c/o 180 E. BROAD ST. :
COLUMBUS, OH 43215 : CLASS ACTION COMPLAINT
: ----------------------
Defendants. : WITH JURY DEMAND
:
- --------------------------------x
Plaintiff, by her attorneys, allege upon information and belief,
except as to paragraph 1 which is alleged upon knowledge, as follows:
THE PARTIES
-----------
1. Plaintiff is the owner of shares of the common stock of defendant
Borden, Inc. and has been the owner continuously of such shares since prior to
the wrongs complained of herein.
2. Defendant Borden, Inc. ("Borden" or the "Company") is a
corporation duly existing and organized under the laws of the State of New
Jersey, with its principal offices located in the State of New Jersey, with
its principal offices located in Columbus, Ohio. The Company produces and
distributes a variety of consumer food products, including pastas and sauces,
snack food items, dairy products such as fluid milk and other products. The
Company also manufactures and distributes its products.
1
<PAGE>
3. As of April 22, 1994, there were approximately 141 million shares
of the Company's common stock outstanding held by over 40,000 shareholders of
record.
4. Defendant Ervin Shames ("Shames") is and at all times relevant
hereto has been President and Chief Executive Officer of the Company.
5. Defendant Frank Tasco ("Tasco") is and at all times relevant
hereto has been Chairman of the Board of the Company.
6. The defendants referred to in paragraphs 5 and 6 are collectively
referred to herein as the "Individual Defendants."
7. By reason of the above Individual Defendants' positions with the
Company as officers and/or directors, said individuals are in a fiduciary
relationship with plaintiff and the other public stockholders of Borden, and owe
plaintiff and the other members of the class the highest obligations of good
faith, fair dealing, due care, loyalty and full, candid and adequate disclosure.
CLASS ACTION ALLEGATIONS
------------------------
8. Plaintiff brings this action on her own behalf and as a class
action on behalf of herself and all Borden securities holders or their
successors in interest, similarly situated (the "Class").
Excluded from the class are defendants herein and
2
<PAGE>
any person, firm, trust, corporation, or other entity related to or affiliated
with any of the defendants.
9. This action is properly maintainable as a class action.
10. The class is so numerous that joinder of all members is
impracticable. As of April 22, 1994, there were approximately 141 million
shares of Borden common stock outstanding held by over 40,000 shareholders
of record.
11. There are questions of law and fact which are common to the class
and which predominate over questions affecting any individual class members.
The common questions include,
inter alia, the following:
- ----- ----
(a) whether defendants have engaged in conduct constituting
unfair dealing to the detriment of the class;
(b) whether the proposed merger is grossly unfair to the class;
(c) whether defendants are engaging in self-dealing to benefit
themselves;
(d) whether plaintiff and the other members of the class would
be irreparably damaged were the transactions complained of herein consummated;
and
3
<PAGE>
(e) whether defendants have breached, or aided and abetted the
breach of fiduciary and other common law duties owed by them to plaintiff and
the other members of the class.
12. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The
claims of plaintiff are typical of the claims of the other members of the
class and plaintiff has the same interests as the other members of the class.
Accordingly, plaintiff is an adequate representative of the class and will
fairly and adequately protect the interests of the class.
13. Plaintiff anticipates that there will be no difficulty in the
management of this litigation.
14. Defendants have acted on grounds generally applicable to the
class with respect to the matters complained of herein, thereby making
appropriate the relief sought herein with respect to the class as a whole.
CLAIM FOR RELIEF
----------------
15. According to news reports on September 12, 1994, Kohlberg Kravitz
Roberts & Co. ("KKR") and defendant Borden have agreed in principle to the
acquisition of all of the outstanding common stock of Borden by a KKR
partnership in exchange for RJR
4
<PAGE>
Nabisco Holdings Corp. common stock valued at $14.25 per Borden share.
16. Plaintiff seeks to enjoin the consummation of the imminent
agreement between KKR and Borden whereby KKR would swap RJR Nabisco Holding
stock for all of the outstanding Borden common stock. Pursuant to the proposed
terms of the transaction, KKR will also receive a warrant to buy an additional
10% of Borden's shares. If the merger is not closed by September 23, 1994, KKR
will buy 19.9% of Borden's outstanding shares.
17. The consideration proposed to be paid to class members is
unconscionable and unfair and grossly inadequate because, among other things:
(a) the intrinsic value of Borden's common stock is materially
in excess of the amount to be received by Borden stockholders in the transaction
giving due consideration to the Company's strategic value, the recent market
price of the Company's stock and Borden's brand name recognition;
(b) the consideration agreed upon did not result from an
appropriate consideration of the value of Borden as there was no opportunity to
accurately ascertain Borden's value through open bidding or a market check.
5
<PAGE>
18. The Individual Defendants have thus far failed to announce any
active auction or open bidding procedures best calculated to maximize
shareholder value.
19. Borden shareholders will, if the transaction is consummated, be
deprived of the opportunity for substantial gains which the Company may realize.
20. In announcing the transaction, the defendants have failed to
disclose among other things the full extent of the growth and value potential of
Borden and the expected increase in its profitability.
21. The defendants have not, in accordance with their fiduciary
duties:
(a) acted independently so that the interests of Borden's public
shareholders would be protected;
(b) adequately ensured that no conflicts of interest exist or if
such conflicts exist to ensure that all conflicts would be resolved in the best
interests of Borden's public shareholders; and
(c) taken all appropriate steps to enhance Borden's value and
attractiveness as a merger acquisition, restructuring or recapitalization
candidate.
6
<PAGE>
22. Because the Individual Defendants dominate and control the
business and corporate affairs of Borden, and are in possession of private
corporate information concerning Borden's assets, businesses and future
prospects, there exists an imbalance and disparity of knowledge and economic
power between them and the public stockholders of Borden which makes it
inherently unfair for them to pursue any proposed transaction wherein they
will reap disproportionate benefits to the exclusion of other means of
maximizing stockholder value.
23. By reason of the foregoing acts, practices and course of conduct,
the defendants have failed to exercise ordinary care and diligence in the
exercise of their fiduciary obligations toward plaintiff and the other Borden
public stockholders.
24. As a result of the actions of defendants, plaintiff and the other
members of the Class have been and will be damaged in that they have not and
will not receive their fair proportion of the value of Borden's assets and
businesses and will be prevented from obtaining appropriate consideration for
their shares of Borden's common stock.
25. Unless enjoined by this Court, the defendants will continue to
breach their fiduciary duties owed to plaintiff and the other members of the
Class, and may consummate the
7
<PAGE>
proposed transaction which will exclude the Class from its fair proportionate
share of Borden's valuable assets and businesses, and/or benefit them in the
unfair manner complained of herein, all to the irreparable harm of the Class, as
aforesaid.
26. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment, as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary duties to
plaintiff and the other members of the Class, including those of due care and
candor;
C. Rescinding any transactions effected by the defendants in an
unfair manner and for an unfair price and in the event such transaction is
consummated prior to trial, awarding rescissory damages;
D. Enjoining the complained of transaction or any related
transactions;
E. Ordering defendants, jointly and severally, to pay to plaintiff
and the Class all damages suffered and to be suffered by them as a result of the
acts and transactions alleged herein;
8
<PAGE>
F. Ordering defendants, jointly and severally, to account to
plaintiff and the Class for all profits realized and to be realized by them as a
result of the transaction complained of and pending such accounting to hold such
profits in a con-
structive trust for the benefit of plaintiff and the other members of the class;
G. Awarding plaintiff the costs and disbursements of the action,
including allowance for plaintiff's reasonable attorneys' and experts' fees; and
H. Granting such other and further relief as may be just and proper
in the premises.
Dated: September 12, 1994
MICHAEL J. HARDESTY, L.P.A.
By: /s/ Michael J. Hardesty
__________________________
Michael J. Hardesty (0009771)
1335 Dublin Road
Suite 200A
Dublin, OH 43215
(614) 481-3587
OF COUNSEL:
Stanley R. Wolfe
Berger & Montague, P.C.
1622 Locust Street
Philadelphia, PA 19103-6365
Strauss & Troy
By: /s/ Richard S. Wayne
_______________________
Richard S. Wayne (0022390)
2100 PNC Center
201 E. Fifth Street
Cincinnati, Ohio 45202
(513) 629-9472
9
EXHIBIT 11(g)(22)
COURT OF COMMON PLEAS
FRANKLIN COUNTY, OHIO
- -----------------------------------x
DAVID JAROSLAWICZ and GEORGE B. :
ALLEN, ISRAEL BOLLAG, and :
VIVIAN BOLLAG, : Case No. 94CVH09-6654
: ------------
Plaintiffs, :
:
-against- :
:
BORDEN, INC., ERVIN SHAMES, : CLASS ACTION COMPLAINT
FRANK TASCO, FREDERICK E. HENNIG, : ----------------------
WILBERT J. LEMELLE, ROBERT P. : (Jury Trial Demanded)
LUCIANO, H. BARCLAY MORLEY, :
JOHN E. SEXTON, and PATRICIA :
CARRY STEWART, :
180 East Broad Street :
Columbus, Ohio 43215 :
:
Defendants. :
:
- -----------------------------------x
Plaintiffs, by their attorneys, allege upon information and belief, except
as to paragraph 1 which is alleged upon knowledge, as follows:
THE PARTIES
-----------
1. Plaintiffs are the owners of shares of the common stock of defendant
Borden, Inc. and have been the owners continuously of such shares since prior to
the wrongs complained of herein.
2. Defendant Borden, Inc. ("Borden" or the "Company") is a corporation
duly existing and organized under the laws of the State of New Jersey, with its
principal offices located in Columbus, Ohio. The Company manufactures, produces
and distributes a variety of consumer food products, including pastas and
sauces, snack food items, dairy products such as fluid milk and other products.
<PAGE>
3. As of April 22, 1994, there were approximately 141 million shares of
the Company's common stack outstanding held by over 40,000 shareholders of
record.
4. Defendant Ervin Shames ("Shames") is and at all times relevant hereto
has been President and Chief Executive Officer of the Company.
5. Defendant Frank Tasco ("Tasco") is and at all times relevant hereto
has been Chairman of the Board of the Company.
6. Defendants Frederick E. Hennig, Wilbert J. Lemelle, Robert P. Luciano,
H. Barclay Morley, John E. Sexton, and Patricia Carry Stewart are and at all
times relevant hereto have been members of the Board of the Company.
7. The Defendants referred to in paragraphs 5, 6, and 7 are collectively
referred to herein as the "Individual Defendants."
8. By reason of the above Individual Defendants' positions with the
Company as officers and/or directors, said individuals are in a fiduciary
relationship with Plaintiffs and the other public stockholders of Borden, and
owe Plaintiffs and the other members of the Class the highest obligations of
good faith, fair dealing, due care, loyalty and full, candid and adequate
disclosure.
CLASS ACTION ALLEGATIONS
------------------------
9. Plaintiffs bring this action on their own behalf and as a class action
on behalf of themselves and all Borden securities holders or their successors in
interest, similarly situated (the "Class"). Excluded from the Class are
Defendants herein and any
2
<PAGE>
person, firm, trust, corporation, or other entity related to or
affiliated with any of the Defendants.
10. This action is properly maintainable as a class
action.
11. The Class is so numerous that joinder of all
members is impracticable.
12. There are questions of law and fact which are
common to the Class and which predominate over questions
affecting any individual Class members. The common questions
includes, inter alia, the following:
(a) whether Defendants have engaged in conduct
constituting unfair dealing to the detriment of the Class;
(b) whether the proposed merger is grossly unfair
to the Class;
(c) whether Defendants are engaging in self-
dealing to benefit themselves;
(d) whether Plaintiffs and the other members of
the Class would be irreparably damaged were the transactions
complained of herein consummated; and
(e) whether Defendants have breached, or aided
and abetted the breach of fiduciary and other common law duties
owed by them to Plaintiffs and the other members of the Class.
13. Plaintiffs are committed to prosecuting this
action and have retained competent counsel experienced in
litigation of this nature. The claims of Plaintiff are typical
of the claims of the other members of the Class and Plaintiffs
have the same interests as the other members of the Class.
Accordingly, Plaintiffs are
3
<PAGE>
adequate representatives of the Class and will fairly and
adequately protect the interests of the Class.
14. Plaintiffs anticipate that there will be no difficulty
in the management of this litigation.
15. Defendants have acted on grounds generally applicable
to the Class with respect to the matters complained of herein,
thereby making appropriate the relief sought herein with respect
to the Class as a whole.
CLAIM FOR RELIEF
----------------
16. According to news reports on September 12, 1994,
Kohlberg Kravis Roberts & Co. ("KKR") and Defendant Borden have
agreed in principle to the acquisition of all of the outstanding
common stock of Borden by a KKR partnership in exchange for RJR
Nabisco Holdings Corp. common stock valued at $14.25 per Borden
share.
17. Plaintiffs seek to enjoin the consummation of the
imminent agreement between KKR and Borden whereby KKR would swap
RJR Nabisco Holding stock for all of the outstanding Borden
common stock. Pursuant to the proposed terms of the transaction,
KKR will also receive a warrant to buy an additional 10% of
Borden's shares. If the merger is not closed by September 23,
1994, KKR will buy 19.9% of Borden's outstanding shares.
18. The consideration proposed to be paid to Class members
is unconscionable and unfair and grossly inadequate because,
among other things:
(a) the intrinsic value of Borden's common stock is
materially in excess of the amount to be received by Borden
4
<PAGE>
stockholders in the transaction giving due consideration to the
Company's strategic value, the recent market price of the
Company's stock (which has been as high as $38.375 per share),
and Borden's brand name recognition;
(b) the consideration agreed upon did not result from
an appropriate consideration of the value of Borden as there was
no opportunity to accurately ascertain Borden's value through
open bidding or a market check;
(c) many analysts believe that KKR has been, for some
time, trying without success to sell its excess RJR Nabisco
stock; consequently KKR is getting the better of the bargain
because it is unloading its poorly performing and relatively
undesirable RJR Nabisco stock in exchange for far more desirable
Borden stock.
19. The Individual Defendants have thus far failed to
announce any active auction or open bidding procedures best
calculated to maximize shareholder value.
20. Some analysts believe that certain subdivisions of
Borden could be sold for a greater value than the entire
consideration that KKR is paying to purchase Borden in its
entirety.
21. On September 13, 1994, the New York Times reported that
--------------
"most agreed that Borden was being bought at a firesale price,"
and that KKR "believes that Borden, at its current price, is
incredibly cheap, as well as a good way for Kohlberg, Kravis to
reduce its disappointing investment in RJR Nabisco." The report
further stated that "[a]lmost all Borden holders will be selling
at a loss if this deal goes through."
5
<PAGE>
22. Borden shareholders will, if the transaction is consum-
mated, be deprived of the opportunity for substantial gains which
the Company may realize.
23. In announcing the transaction, the Defendants have
failed to disclose among other things the full extent of the
growth and value potential of Borden and the expected increase in
its profitability.
24. The Defendants have not, in accordance with their
fiduciary duties:
(a) acted independently so that the interests
of Borden's public shareholders would be protected;
(b) adequately ensured that no conflicts of interest
exist or if such conflicts exist to ensure that all conflicts
would be resolved in the best interests of Borden's public
shareholders; and
(c) taken all appropriate steps, including conducting
an active auction, to enhance Borden's value and attractiveness
as a merger acquisition, restructuring or recapitalization
candidate.
25. Because the Individual Defendants dominate and control
the business and corporate affairs of Borden, and are in
possession of private corporate information concerning Borden's
assets, businesses and future prospects, there exists an
imbalance and disparity of knowledge and economic power between
them and the public stockholders of Borden which makes it
inherently unfair for them to pursue any proposed transaction
wherein they will reap
6
<PAGE>
disproportionate benefits to the exclusion of other means of
maximizing stockholder value.
26. By reason of the foregoing acts, practices and course
of conduct, the Defendants have failed to exercise ordinary care
and diligence in the exercise of their fiduciary obligations
toward Plaintiffs and the other Borden public stockholders.
27. As a result of the actions of Defendants, Plaintiffs
and the other members of the Class have been and will be damaged
in that they have not and will not receive their fair proportion
of the value of Borden's assets and businesses and will be
prevented from obtaining appropriate consideration for their
shares of Borden's common stock.
28. Unless enjoined by this Court, the Defendants will
continue to breach their fiduciary duties owed to Plaintiffs and
the other members of the Class, and may consummate the proposed
transaction which will exclude the Class from its fair
proportionate share of Borden's valuable assets and businesses,
and/or benefit them in the unfair manner complained of herein,
all to the irreparable harm of the Class, as aforesaid.
29. Plaintiffs and the Class have no adequate remedy at
law.
WHEREFORE, Plaintiffs demand judgment, as follows:
A. Declaring this to be a proper class action;
B. Ordering Defendants to carry out their fiduciary
duties to Plaintiffs and the other members of the Class,
including those of due care and candor;
C. Rescinding any transactions effected by the
Defendants in an unfair manner and for an unfair price and in the
7
<PAGE>
event such transactions are consummated prior to trial, awarding
rescissory damages;
D. Enjoining the complained of transaction or any
related transactions;
E. Ordering Defendants, jointly and severally, to account
to Plaintiffs and the Class all damages suffered and to be
suffered by them as a result of the acts and transactions alleged
herein;
F. Ordering Defendants, jointly and severally, to pay
to Plaintiffs and the Class for all profits realized and to be
realized by them as a result of the transactions complained of
and pending such accounting to hold such profits in a
constructive trust for the benefit of Plaintiffs and the other
members of the Class;
G. Awarding Plaintiffs the costs and disbursements of
the action, including allowance for Plaintiff's reasonable
attorneys' and experts' fees; and
H. Granting such other and further relief as may be
just and proper in the premises.
Dated: September 22, 1994
MICHAEL J. HARDESTY CO., L.P.A.
/s/ Michael J. Hardesty
______________________________
Michael J. Hardesty (0009771)
1335 Dublin Road
Suite 200A
Dublin, OH 43215
(614) 481-3587
8
<PAGE>
STRAUSS & TROY
/s/ Richard S. Wayne
_________________________
Richard S. Wayne (0022390)
2100 PNC Center
201 E. 5th Street
Cincinnati, OH 45202
(513) 621-2120
Attorneys for Plaintiffs
OF COUNSEL:
SAVETT, FRUTKIN, PODELL & RYAN, P.C.
330 Walnut Street, Suite 508
Philadelphia, PA 19106
(215) 923-5400
ZWERLING, SCHACHTER & ZWERLING
Robert S. Schachter
767 Third Avenue
New York, NY 10017-2023
(212) 223-3900
LEVIN FISHBEIN SEDRAN & BERMAN
320 Walnut Street, Suite 600
Philadelphia, PA 19106
(215) 592-1500
9
