AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 1994
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RJR NABISCO HOLDINGS CORP.
(Exact name of Registrant as specified in its charter)
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DELAWARE 6719 13-3490602
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 258-5600
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
LAWRENCE R. RICCIARDI, ESQ.
RJR NABISCO HOLDINGS CORP.
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 258-5600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
SAMUEL F. PRYOR III, ESQ. CHARLES I. COGUT, ESQ. ANDREW R. BROWNSTEIN, ESQ.
DAVIS POLK & WARDWELL SIMPSON THACHER & BARTLETT WACHTELL, LIPTON, ROSEN & KATZ
450 LEXINGTON AVENUE 425 LEXINGTON AVENUE 51 WEST 52ND STREET
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10019
(212) 450-4000 (212) 455-2000 (212) 403-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As promptly as practicable after this Registration Statement is declared
effective and upon consummation of the transactions described in the enclosed
Offering Circular/Prospectus.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED(1) TO BE REGISTERED(2) PER UNIT(3) OFFERING PRICE(3) FEE(3)
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Common Stock, par value $.01 per
share............................ 353,680,264 shares Not Applicable Not Applicable $409,524.52
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(1) This Registration Statement relates to securities of the Registrant
exchangeable for shares of common stock, par value $.625 per share ("Borden
Common Stock"), and, unless and until redeemed by Borden, the associated
Preferred Stock Purchase Rights, of Borden, Inc., a New Jersey corporation
("Borden"), in the exchange offer by Borden Acquisition Corp., a New Jersey
corporation ("Borden Acquisition"), for all of the outstanding shares of
Borden Common Stock (the "Exchange Offer") and in the proposed merger of
Borden Acquisition with and into Borden (the "Merger").
(2) The number of shares of common stock, par value $.01 per share ("Holdings
Common Stock"), of the Registrant to be registered is based upon 141,515,502
shares (excluding shares held in treasury, which Borden has agreed to cancel
and retire upon consummation of the Merger) of Borden Common Stock
outstanding on September 23, 1994, plus 45,031 shares of Borden Common Stock
issuable upon conversion of Borden's Preferred Stock--Series B and 7,357,473
shares of Borden Common Stock issuable upon exercise of stock options of
Borden, in each case, outstanding on September 23, 1994 multiplied by 2.375,
the maximum Exchange Ratio (as defined in the enclosed Offering
Circular/Prospectus).
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f). Based on a price of $13.75 per share of Borden
Common Stock, calculated on the basis of the average high and low prices of
a share of Borden Common Stock as reported on the New York Stock Exchange
Composite Tape on September 28, 1994.
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE OFFERING CIRCULAR/PROSPECTUS
OF THE INFORMATION REQUIRED BY PART 1 OF FORM S-4
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FORM S-4 ITEM
----------------------------------------- LOCATION IN OFFERING CIRCULAR/PROSPECTUS
-----------------------------------------
A. INFORMATION ABOUT THE TRANSACTION
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1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Outside Front Cover Page; Facing Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Table of Contents; Available Information;
Incorporation of Certain Documents by
Reference
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; Certain Significant
Considerations; The Exchange Offer
4. Terms of the Transaction................. Summary; The Exchange Offer; Description
of Holdings Capital Stock; Description of
Borden Capital Stock and Rights;
Comparison of Rights of Holders of Borden
and Holdings Common Stock
5. Pro Forma Financial Information.......... Not Applicable
6. Material Contacts with Company Being
Acquired................................. Summary; The Exchange Offer
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters................ The Exchange Offer; Security Ownership of
Certain Beneficial Owners and Management
8. Interests of Named Experts and Counsel... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to
S-3 Registrants........................ Available Information; Incorporation of
Certain Documents by Reference; Summary;
Comparative Market Prices and Dividends;
RJR Nabisco Holdings Corp.; RJR Nabisco
Holdings Corp. Selected Historical
Consolidated Financial Data; Description
of Holdings Capital Stock; Comparison of
Rights of Holders of Borden and Holdings
Common Stock
11. Incorporation of Certain Information
by Reference........................... Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2
or S-3 Registrants..................... Not Applicable
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FORM S-4 ITEM
----------------------------------------- LOCATION IN OFFERING CIRCULAR/PROSPECTUS
-----------------------------------------
13. Incorporation of Certain Information by
Reference................................ Not Applicable
14. Information with Respect to Registrants
Other than S-2 or S-3 Registrants........ Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to
S-3 Companies.......................... Available Information; Incorporation of
Certain Documents by Reference;
Summary--Borden, Inc.; Borden, Inc.
Selected Historical Consolidated
Financial Data; Description of Borden
Capital Stock and Rights; Comparison of
Rights of Holders of Borden and Holdings
Common Stock
16. Information with Respect to S-2
or S-3 Companies....................... Not Applicable
17. Information with Respect to Companies
Other than S-2 or S-3 Companies.......... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer................ Available Information; Incorporation of
Certain Documents by Reference; Summary;
The Exchange Offer; Security Ownership of
Certain Beneficial Owners and Management
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<PAGE>
OFFERING CIRCULAR/PROSPECTUS (Subject to Completion)
Issued October 5, 1994
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.
-------------------
THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON , 1994,
UNLESS THE EXCHANGE OFFER IS EXTENDED.
-------------------
Borden Acquisition Corp., a New Jersey corporation (the "Purchaser"), a
wholly owned 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 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 consecutive
trading days immediately preceding the second trading day prior to 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.
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 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. 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 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 "Proposed 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.
The last reported sale price of the Holdings Common Stock on October 3, 1994
on the NYSE Composite Tape was $6 7/8 per share. The last reported sale price of
the Borden Common Stock on October 3, 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 "CERTAIN 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.
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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.
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The Dealer Manager for the Exchange Offer is:
MORGAN STANLEY & CO.
Incorporated
, 1994
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS OFFERING CIRCULAR/PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
STATE.
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(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 (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
Proposed 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 Proposed Merger, provided that the
Minimum Condition is satisfied without being reduced or waived, Borden will
submit the Proposed Merger to Borden's shareholders for approval. If the
Proposed Merger is submitted to Borden's shareholders for approval, the Proposed
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 Proposed 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 Proposed Merger, unless the Proposed
Merger is submitted to Borden's shareholders for approval.
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's shareholders 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 Securities Exchange Act of 1934, as amended
(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 shall be the Partnership or a
wholly owned direct or indirect subsidiary of the Partnership) 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) 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 termination 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 Proposed 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)
2
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(continued from prior page)
Pursuant to Rules 14d-9 and 14e-2 under the Exchange Act, Borden will be
required to file with the Securities and Exchange Commission (the "Commission")
and with the NYSE a statement on Schedule 14D-9 (together with any amendments
thereto, the "Schedule 14D-9") furnishing certain information with respect to
its recommendation concerning the Exchange Offer. The Schedule 14D-9 should be
available for inspection and copying as described herein under "Available
Information" (except that the Schedule 14D-9 will not be available at the
regional offices of the Commission). Borden shareholders should obtain and read
the Schedule 14D-9 before making a decision whether to exchange their Borden
Shares in the Exchange Offer.
-------------------
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.
3
<PAGE>
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
PARTNERSHIP, THE PURCHASER OR ANY AFFILIATE THEREOF, 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 PARTNERSHIP, 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 PARTNERSHIP, 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.
TABLE OF CONTENTS
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PAGE
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Available Information................................................................. 5
Incorporation of Certain Documents by Reference....................................... 5
Summary............................................................................... 7
Certain Significant Considerations.................................................... 24
The Exchange Offer.................................................................... 31
RJR Nabisco Holdings Corp............................................................. 71
RJR Nabisco Holdings Corp. Selected Historical Consolidated Financial Data............ 73
Security Ownership of Certain Beneficial Owners and Management........................ 75
Borden, Inc........................................................................... 77
Borden, Inc. Selected Historical Consolidated Financial Data.......................... 78
The Purchaser and the Partnership..................................................... 80
Description of Holdings Capital Stock................................................. 80
Description of Borden Capital Stock and Rights........................................ 88
Comparison of Rights of Holders of Borden and Holdings Common Stock................... 89
Legal Matters......................................................................... 92
Experts............................................................................... 93
</TABLE>
4
<PAGE>
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 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.
Pursuant to Rules 14d-9 and 14e-2 under the Exchange Act, Borden will be
required to file with the Commission and with the NYSE a statement on the
Schedule 14D-9 furnishing certain information with respect to its position
concerning the Exchange Offer. The Schedule 14D-9 should be available for
inspection and copying as set forth above (except that the Schedule 14D-9 will
not be available at the regional offices of the Commission). In addition to the
information set forth herein, Borden shareholders should obtain and read the
Schedule 14D-9 before making a decision whether to exchange their Borden Shares
in the Exchange Offer.
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 and the six months ended June 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.
5
<PAGE>
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 and the six months ended June 30, 1994; and
3. Borden's Current Reports on Form 8-K dated January 5, 1994, March 21,
1994, September 11, 1994, September 12, 1994 and 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 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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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. As used herein, "Holdings" means RJR Nabisco Holdings Corp.
and its consolidated subsidiaries, unless the context otherwise requires. Unless
otherwise defined herein, capitalized terms used in this Summary have the
respective meanings ascribed to them elsewhere in this Offering
Circular/Prospectus.
-------------------
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 Partnership, 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 discussion of certain factors that should be considered by Borden
shareholders in connection with their consideration of the Exchange Offer, see
"Certain Significant Considerations."
RJR NABISCO HOLDINGS CORP.
The operating subsidiaries of Holdings owned through RJR Nabisco, Inc.
("RJRN") comprise one of the largest tobacco and food companies in the world. In
the United States, the tobacco business is conducted by R.J. Reynolds Tobacco
Company ("RJRT"), the second largest manufacturer of cigarettes, and the
packaged foods business is conducted by the Nabisco Group ("Nabisco"), the
largest manufacturer and marketer of cookies and crackers. Tobacco operations
outside the United States are conducted by R.J. Reynolds Tobacco International,
Inc. ("Tobacco International") and food operations outside the United States and
Canada are conducted by Nabisco International, Inc. ("Nabisco International").
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.
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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 Group. 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!, SNACKWELL'S, NEWTONS, 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
the nine top 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, more than double the share of its closest competitor, and
a 55% share of the domestic cracker industry sales, 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
over $200 million in sales to become the sixth largest cookie/cracker brand in
the United States. On the basis of the most recent data available, LIFE SAVERS
is the largest selling hard candy in the United States, with an approximately
16.5% share of the hard 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. 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 (the "Acquisition") at the direction of KKR. Prior to the Acquisition,
RJRN was a publicly held corporation. See "Certain 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.
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BORDEN, INC.
Borden is engaged primarily in manufacturing, processing, purchasing and
distributing a broad range of products. Borden is organized into 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).
Recent Announcement. Borden has announced that it expects to record pretax
charges of $150 million to $200 million in its third quarter 1994 results,
scheduled to be announced October 26. Approximately $95 million of the amount
relates to less-than-estimated proceeds from the divestiture of discontinued
operations, as announced by Borden in January 1994. Third quarter results
will also include charges for the write-down of certain impaired assets and
the reversal of the unused portion of the 1993 restructuring charge for
business re-engineering. Management reviewed the 1993 restructuring program
in light of recent events and determined that a portion of the reserve for
this project would not be utilized. Borden said in its announcement that
the charges would lead to a net loss for the third quarter of 1994.
THE PURCHASER AND THE PARTNERSHIP
The Purchaser, a New Jersey corporation and a wholly owned 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. The Partnership is a Delaware limited partnership, whose
general partner is KKR Associates, an affiliate of KKR. The Partnership's
principal assets consist of investments in various entities, including its
investment in Holdings Common Stock. The Partnership may transfer to another
partnership, of which KKR Associates is also the general partner (together with
the Partnership, the "Common Stock Partnerships"), a portion of its interest in
the Purchaser (or the other Common Stock Partnership may acquire an interest
directly from the Purchaser). 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 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 a direct or indirect wholly owned subsidiary of the
Partnership).
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<PAGE>
THE EXCHANGE OFFER, THE PROPOSED 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 has, among other things, (1)
determined that the Merger Agreement and the Conditional Purchase/Option
Agreement and the Transactions, including the Exchange Offer and the Proposed
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 "Description of Merger Agreement and Conditional
Purchase/Option Agreement."
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 Proposed 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 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 Proposed 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 Proposed Merger, provided that the Minimum Condition is satisfied
without being reduced or waived, Borden will submit the Proposed Merger to the
Borden shareholders for approval. If the Proposed Merger is required to be
submitted to Borden's shareholders for approval, the Proposed 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.
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'S SHAREHOLDERS 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 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
, 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.
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<PAGE>
The Exchange Offer is subect 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 "Certain Significant
Considerations--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 as soon as practicable 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."
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.
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--Procedures 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), as promptly as
practicable 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.
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 , 1994. 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 "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.
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<PAGE>
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."
Subject to the 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. 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 preceding
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.
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 Proposed
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
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<PAGE>
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 Proposed Merger and to obtain the
necessary approval by its shareholders of the Merger Agreement and the
transactions contemplated thereby, including the Proposed 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 Proposed 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 Proposed 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.
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 Proposed 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
14
<PAGE>
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 Proposed 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 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."
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."
15
<PAGE>
Conditions to Each Party's Obligations to Effect the Proposed Merger. The
Merger Agreement provides that the respective obligation of each party to effect
the Proposed 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 Proposed 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 Proposed 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
Proposed 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 Proposed 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 Proposed 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
Proposed 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
Proposed 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 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), on the terms and
subject to the conditions set forth therein.
16
<PAGE>
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), 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 Proposed 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) 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
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
17
<PAGE>
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 Proposed
Merger, and the Purchaser does not intend to accord dissenters' rights to
holders of Borden Common Stock unless required by applicable law.
CERTAIN TAX CONSEQUENCES
The receipt of shares of Holdings Common Stock pursuant to the Exchange
Offer or the Proposed 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. See "The Exchange Offer--Certain 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 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. 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.
18
<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. Holdings has not paid dividends on the Holdings Common Stock.
See "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
</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
</TABLE>
19
<PAGE>
RJR NABISCO HOLDINGS CORP.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below as of June 30, 1994
and for the six months ended June 30, 1994 and 1993 were derived from Holdings'
unaudited quarterly 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 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 Holdings' consolidated
financial statements and Holdings' unaudited quarterly consolidated condensed
financial statements incorporated herein by reference.
<TABLE>
<CAPTION>
HOLDINGS
------------------------------------------------------------------------
RJRN
FOR THE SIX ----------
MONTHS ENDED JUNE
30,
FOR THE YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLIONS EXCEPT PER ----------------- -----------------------------------------------------------------
SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2/9 TO 12/31 1/1 TO 2/8
------------ ----------
RESULTS OF OPERATIONS
Net sales......................... $ 7,356 $ 7,455 $15,104 $15,734 $14,989 $13,879 $ 12,114 $ 650
------- ------- ------- ------- ------- ------- ------ -----
Cost of products sold............. 3,264 3,060 6,640 6,326 6,088 5,652 5,241 332
Selling, advertising,
administrative and
general expenses................ 2,473 2,820 5,731 5,788 5,358 4,801 4,276 295
Amortization of trademarks and
goodwill........................ 312 310 625 616 609 608 557 10
Restructuring expense............. -- -- 730 106 -- -- -- --
------- ------- ------- ------- ------- ------- ------ -----
Operating income(1)............. 1,307 1,265 1,378 2,898 2,934 2,818 2,040 13
Interest and debt expense......... (588) (620) (1,209) (1,449) (2,217) (3,176) (3,340) (44)
Change in control costs........... -- -- -- -- -- -- -- (247)
Other income (expense), net....... (43) 4 (58) 7 (69) (44) 169 15
------- ------- ------- ------- ------- ------- ------ -----
Income (loss) from continuing
operations before income
taxes.......................... 676 649 111 1,456 648 (402) (1,131) (263)
Provision (benefit) for income
taxes........................... 290 297 114 680 280 60 (156) (66)
------- ------- ------- ------- ------- ------- ------ -----
Income (loss) from continuing
operations.................... 386 352 (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) (112) (142) (477) -- 33 -- --
------- ------- ------- ------- ------- ------- ------ -----
Net income (loss)................. 241 240 (145) 299 368 (429) (976) (173)
Preferred stock dividends......... 65 13 68 31 173 50 -- 4
------- ------- ------- ------- ------- ------- ------ -----
Net income (loss) applicable to
common stock.................... $ 176 $ 227 $ (213) $ 268 $ 195 $ (479) $ (976) $ (177)
------- ------- ------- ------- ------- ------- ------ -----
------- ------- ------- ------- ------- ------- ------ -----
PER SHARE DATA
Income (loss) from continuing
operations
per common and common equivalent
share........................... $ .22 $ .25 $ (.05) $ .55 $ .22 $ (1.19) $ (3.21) $ (.89)
Dividends per share of Series A
Preferred Stock(3).............. 1.670 1.670 3.34 3.34 .49 -- -- --
Dividends per share of Series C
Preferred Stock(3).............. .935 -- -- -- -- -- -- --
BALANCE SHEET DATA
(AT END OF PERIODS)
Working capital................... $ 510 -- $ 202 $ 730 $ 165 $(1,089) $ 106 --
Total assets...................... 31,874 -- 31,295 32,041 32,131 32,915 36,412 --
Total debt........................ 11,615 -- 12,448 14,218 14,531 18,918 25,159 --
Redeemable preferred stock(4)..... -- -- -- -- -- 1,795 -- --
Stockholders' equity(5)........... 10,814 -- 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........................... 5.88 -- 5.77 -- -- -- -- --
</TABLE>
(Footnotes on following page)
20
<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 included $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 June 30, 1994 and December 31 of each year
from 1993 to 1989 includes non-cash expenses related to accumulated
trademark and goodwill amortization of $3.327 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.
21
<PAGE>
BORDEN, INC.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below for the six months
ended June 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 six months ended June 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. All such adjustments are of a normal recurring nature.
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 SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
-------------------- --------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
REVENUE
Net sales.................................................. $ 2,642 $ 2,650 $ 5,506 $ 5,872 $ 5,924
COST AND EXPENSES
Cost of goods sold......................................... 1,998 1,944 4,078 4,302 4,269
Marketing, general and administrative expenses............. 526 499 1,224 1,163 1,024
Restructuring charges(1)................................... -- -- 115 298 67
Interest expense........................................... 58 62 125 116 167
Equity in income of affiliates............................. (5) (6) (16) (19) (24)
Minority interest.......................................... 19 20 41 40 3
Other (income) and expense, net............................ 18 18 23 (4) (13)
Income taxes............................................... 11 39 (27) 14 151
-------- -------- -------- -------- --------
2,625 2,576 5,563 5,910 5,644
-------- -------- -------- -------- --------
EARNINGS
(Loss) income from continuing operations................... 17 74 (57) (38) 280
Discontinued operations:(1)(2)
(Loss) income from operations............................ -- (28) (66) (86) 15
Loss on disposal......................................... -- -- (490) -- --
-------- -------- -------- -------- --------
(Loss) income before extraordinary item and cumulative
effect of
accounting changes....................................... 17 46 (613) (124) 295
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.......................................... $ 17 $ 28 $ (631) $ (364) $ 295
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SHARE DATA
(Loss) income from continuing operations................... $ .12 $ .53 $ (.40) $ (.27) $ 1.90
Discontinued operations:
(Loss) income from operations............................ -- (.20) (.47) (.60) .10
Loss on disposal......................................... -- -- (3.47) -- --
-------- -------- -------- -------- --------
(Loss) income before extraordinary item and cumulative
effect of
accounting changes....................................... .12 .33 (4.34) (.87) 2.00
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......................... $ .12 $ .20 $ (4.47) $ (2.54) $ 2.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Cash dividends paid per common share....................... $ .15 $ .60 $ .90 $ 1.185 $ 1.12
Average number of common shares outstanding during the
period................................................... 141.5 140.8 141.0 143.4 147.6
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
----------- ----------------
1994 1993 1992
----------- ------ ------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE DATA)
BALANCE SHEET DATA
Current assets........................................................ $ 1,469 $1,290 $1,928
Investments and other assets.......................................... 459 443 352
Property and equipment................................................ 1,338 1,337 1,788
Intangibles........................................................... 790 802 1,178
Total assets.......................................................... 4,056 3,872 5,246
Current liabilities................................................... 1,528 1,372 1,808
Long-term debt........................................................ 1,244 1,241 1,330
Other liabilities (including long-term debt).......................... 2,270 2,254 2,312
Shareholders' equity.................................................. 258 246 1,126
Book value per common share........................................... 1.82 1.74
</TABLE>
- ------------
(1) 1993 includes a pretax charge of $752.3 million for business divestitures
and restructuring. 1992 and 1991 include pretax restructuring charges of
$377.2 million and $71.6 million, respectively.
(2) Financial data for the years prior to 1993 were restated in 1993 to reflect
discontinued operations.
(3) Set forth below is selected financial data for the years ended December 31,
1990 and 1989 (in millions, except per share data).
<TABLE>
<CAPTION>
1990 1989
------ ------
<S> <C> <C>
Net sales........................................................... $6,273 $6,391
Net (loss) income................................................... 320 (17)
Net (loss) income per common share.................................. 2.16 (.11)
Cash dividends per common share..................................... 1.035 .90
Average number of common shares outstanding during period........... 147.9 148.2
Current assets...................................................... 2,026 2,011
Total assets........................................................ 5,284 4,825
Property, plant and equipment, net.................................. 1,707 1,441
Current liabilities................................................. 1,847 1,466
Long-term debt...................................................... 1,340 1,441
Shareholders equity................................................. 1,842 1,689
</TABLE>
- ------------
Results for these years have been restated for discontinued operations and to
consistently present marketing expenses.
(4) For a discussion concerning Borden's announcement that it expects to record
pretax charges of $150 million to $200 million in its third quarter results,
see "Borden--Recent Announcement."
See Notes to Borden's Consolidated Financial Statements and Borden's Unaudited
Quarterly Consolidated Financial Statements incorporated herein by reference.
23
<PAGE>
CERTAIN 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 Legislation, Litigation and Other Concerns
RJRT 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.
In addition, 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 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
24
<PAGE>
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.
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, Tobacco International or the
cigarette industry generally but such legislation or regulations could have an
adverse effect on RJRT, Tobacco International or the cigarette industry
generally.
In addition, 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. Eight 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 and flight attendants
alleging personal injury from exposure to ETS in their workplace. 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 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 June 30, 1994 under
Note 7 to Holdings' Consolidated Condensed Financial Statements for the period
ending June 30, 1994 and "Legal Proceedings--Tobacco Related Litigation," both
of which are incorporated herein by reference.
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
25
<PAGE>
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
60% in the second quarter 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 will increase
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 expected to be more than offset by higher revenues for lower price
brands resulting from the fourth quarter price increase referenced above. The
same result is expected 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 June 30, 1994, each of which
is incorporated herein by reference.
Leverage, Debt Service and Dividends
Holdings, together with its subsidiaries, had, at June 30, 1994, a ratio of
consolidated total debt to total stockholders' equity of 1.1-to-1.
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 terms governing certain of the
indebtedness incurred in connection with the Acquisition 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. The mandatory conversion of Holdings' Series A Conversion
Preferred Stock (the "Series A Preferred Stock") on November 15, 1994 will
constitute a change of control under the provisions of Holdings' bank credit
agreements that, unless waived, will permit the lenders to terminate their
commitments and then accelerate indebtedness outstanding thereunder. Holdings
expects to obtain a waiver of these provisions. In addition, upon the change of
control, the holders of certain of Holdings' public debt may tender such debt to
Holdings for repurchase at a repurchase price in excess of its principal amount
plus accrued interest. See "Description of Holdings Capital Stock--Contractual
Restrictions on Payment of Dividends."
26
<PAGE>
Although Holdings pays dividends on its outstanding preferred stock, it has
not paid a dividend on Holdings Common Stock. The timing, amount and form of
future dividends on Holdings Common Stock, if any, will depend, among other
things, upon the effect of applicable restrictions 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.
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 June 30, 1994, total current liabilities and
long-term debt of Holdings' subsidiaries were approximately $14.8 billion.
KKR Ownership
As of August 31, 1994, an aggregate of approximately 44.81% (or 32.30% 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
the 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 aggregate of approximately 32.00% to
29.41% (25.99% to 23.89% 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 20.82% to 14.51% (16.91% to
11.78% on a fully diluted basis) if 100% of the Borden Shares are exchanged. In
addition, seven of Holdings' fifteen directors are partners or executives of
KKR.
Shares Available for Trading
Of the 1,147,681,192 shares of Holdings Common Stock outstanding as of
August 31, 1994, approximately 579 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 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). Moreover, based on
the $6 7/8 closing price of Holdings Common Stock on September 30, 1994, an
additional 45,020,800 shares of Holdings Common Stock would be freely tradeable
if the Option were exercised in full and Borden elected to use its registration
rights to sell or dispose of such shares in a public offering. The Registration
Rights Agreements bar Borden from exercising these rights for nine months
commencing on the effective date of the Registration Statement. Holdings is
unable to predict the effect, if any, that the increase in freely tradeable
shares of Holdings Common Stock will have on the market value of such shares.
INFORMATION CONCERNING THE TRANSACTIONS
Market for Shares of Borden Common Stock
If the Proposed 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
27
<PAGE>
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 Proposed 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.
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 September 23, 1994, there were approximately 38,729 holders of record
of Borden Shares. Approximately 38,614 holders held in the aggregate
approximately 141,515,502 shares of Borden Common Stock (excluding 53,465,136
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 Proposed Merger is not immediately thereafter
consummated), the shares of Borden Common Stock no longer meet the 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
"--Registration Under the Exchange Act") and other factors.
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 Proposed Merger is consummated, shares of Borden Common Stock
will in any event no longer constitute "margin securities."
28
<PAGE>
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 shareholders 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.
Inability to Participate in Future Borden Earnings
Shareholders whose Borden Shares are exchanged for shares of Holdings Common
Stock in the Exchange Offer or the Proposed Merger will not be entitled to
participate as shareholders in any future growth of Borden's business or
earnings, or in any future dividends that may be declared by the Board of
Directors of Borden.
Inability to Consummate the Proposed 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 in the Proposed Merger. 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 Proposed Merger of the Purchaser
with Borden, provided that the Minimum Condition is satisfied without being
reduced or waived, Borden will submit the Proposed Merger to Borden's
shareholders for approval. If the Proposed Merger is submitted to Borden's
shareholders for approval, the Proposed 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. There can be no
assurance that the required vote of Borden shareholders will be obtained or that
the Proposed Merger will be consummated.
If the Proposed Merger is consummated, shareholders of Borden who elected
not to tender their Borden Shares in the Exchange Offer will receive upon
consummation of such Proposed 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 Proposed 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
29
<PAGE>
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 Proposed Merger is not consummated, Borden shareholders other than those
affiliated with KKR, 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."
30
<PAGE>
THE EXCHANGE OFFER
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. 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.
PURPOSE OF THE EXCHANGE OFFER; THE PROPOSED MERGER
The Exchange Offer is being made 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 Proposed
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 proposed merger of the
Purchaser with Borden, provided that the Minimum Condition is satisfied without
being reduced or waived, Borden will submit the proposed merger to Borden's
shareholders for approval. If the Proposed Merger is submitted to Borden's
shareholders for approval, the Proposed 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
Proposed 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 also relates to shares of Holdings Common
Stock that may be issued in connection with the consummation of the Proposed
Merger, unless the Proposed Merger is submitted to Borden's Shareholders for
approval.
The Board of Directors of Borden has (1) determined that the Exchange Offer,
the Proposed Merger and the other Transactions, taken together, are fair to the
shareholders of Borden, and recommends 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 and the Conditional Purchase/Option
Agreement and the transactions contemplated thereby. See the Schedule 14D-9 for
a description of the background of the Transactions from Borden's perspective
and for a discussion of the recommendation of Borden's Board of Directors and
the reasons therefor and for other relevant information.
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
Proposed 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
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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 Board. See "Certain 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'S SHAREHOLDERS 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.
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."
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.
No fractional shares of Holdings Common Stock will be distributed. The
Exchange Agent, acting as agent for Borden shareholders otherwise entitled to
receive fractional shares, will aggregate all fractional shares and sell them
for the accounts of such shareholders. 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) 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 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. 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
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Exchange Offer, see "--Extension of Tender Period; Termination; Amendment."
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 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 as soon as practicable 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, 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."
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
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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 "--Procedures 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), as promptly as practicable
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.
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 a direct or indirect wholly owned subsidiary of the
Partnership).
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
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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.
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.
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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.
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
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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) or Book-Entry Confirmations of such Borden Shares or Rights
(if available) 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 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, 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 Partnership, 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
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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 10 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 for exchange
by the Purchaser pursuant to the Exchange Offer, may also be withdrawn at any
time after , 1994. 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
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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 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."
Subject to the 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. 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 preceding 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.
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
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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 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
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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 Proposed 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, or 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 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) or 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 Proposed 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
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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.
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.
CERTAIN TAX CONSEQUENCES
Certain Federal Income Tax Consequences. The summary of tax consequences set
forth below is for general information only. The tax treatment of each Borden
shareholder will depend in part upon his particular situation. Special tax
consequences not described herein may be applicable to particular classes of
taxpayers, such as financial institutions, 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 PROPOSED 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 Proposed Merger will be a taxable transaction for federal income
tax purposes and may also be a taxable
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transaction under applicable state, local, foreign or other tax laws. Generally,
a Borden shareholder will recognize gain or loss 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 Proposed
Merger, as the case may be. For federal income tax purposes, such gain or loss
will be a capital gain or loss if the Borden Shares are a capital asset in the
hands of such shareholder, 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 Proposed Merger, as the case may be. There are limitations
on the deductibility of capital losses.
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 Proposed 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 Proposed 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 Proposed Merger. Upon
receipt of the consideration for either the Exchange Offer or the Proposed
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 a fee of $3 million upon commencement of the Exchange
Offer and of an additional $4.9 million at such time as the Purchaser accepts
for exchange pursuant to the Exchange Offer and/or otherwise acquires in
connection with the Transactions at least 50.1% of the Borden Shares. 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 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.
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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.
The consideration to be provided to Borden's shareholders pursuant to the
Exchange Offer and the Proposed 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."
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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
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 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 Proposed
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
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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 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 may not 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 should expire at 11:59 P.M., New
York City time, on October 19, 1994, unless such waiting period is earlier
terminated by the FTC and the Antitrust Division or extended by a request from
the FTC or the Antitrust Division for additional information or documentary
material prior to the expiration of the waiting period. Pursuant to the HSR Act,
the Partnership has requested early termination of the waiting period applicable
to the Exchange Offer. There can be no assurance, however, that the 30-day HSR
Act waiting period will be terminated early. If, however, either the FTC or the
Antitrust Division were to request additional information or documentary
material from the Partnership, the waiting period would expire at 11:59 P.M.,
New York City time, on the twentieth calendar day after the date of substantial
compliance by the Partnership with such request. Thereafter, the waiting period
could be extended only by court order. If the acquisition of Borden Shares is
delayed pursuant to a request by the FTC or the Antitrust Division for
additional information or documentary material pursuant to the HSR Act, the
Exchange Offer may, but need not, be extended and, in any event, the exchange of
and exchange for Borden Shares will be deferred until 20 days after the request
is substantially complied with, unless the 20-day extended period expires on or
before the date when the initial 30-day period would otherwise have expired or
unless the waiting period is sooner terminated by the FTC and the Antitrust
Division. Only one extension of such waiting period pursuant to a request for
additional information is authorized by the HSR Act and the rules promulgated
thereunder, except by court order. Any such extension of the waiting period will
not give rise to any withdrawal rights not otherwise provided for by applicable
law. See "--Withdrawal Rights." Although Borden is required to file certain
information and documentary material with the Antitrust Division and the FTC in
connection with the Exchange Offer, neither Borden's failure to make such
filings nor a request from the Antitrust Division or the FTC for additional
information or documentary material made to Borden will extend the waiting
period.
On September 29, 1994, Borden filed a Premerger Notification and Report Form
in connection with the Exchange Offer and the other Transactions. Accordingly,
the waiting period under the HSR Act should expire at 11:59 P.M., New York City
time, on October 19, 1994, subject to early termination (which has been
requested by Borden) or extension as described above with respect to the
Partnership's HSR Act filing.
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 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
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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.
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.
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Based on publicly available information, the Purchaser believes that 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 intends to file any required notifications.
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. This filing must normally be made within seven days of the
earlier of the announcement of a public bid, the conclusion of the relevant
agreement or acquisition of a controlling interest. 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.
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
Borden conducts certain operations in Canada. The Investment Canada Act (the
"ICA") requires that notice of the acquisition of "control" (as defined in the
ICA) by "non-Canadians" (as defined in the
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ICA) of any "Canadian business" (as defined in the ICA) be furnished to
Investment Canada, a Canadian governmental agency.
The acquisition of Borden Shares by the Purchaser pursuant to the Exchange
Offer may constitute an indirect acquisition of a "Canadian business" within the
meaning of the ICA. The Purchaser intends to file any required notice under the
ICA. 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 intends to file any required notice and
information with respect to its proposed acquisition with the Canadian Director
and, to the extent necessary, observe the applicable waiting period and/or apply
to the Canadian Director for an advance ruling certificate to the effect that
the Exchange Offer or Proposed Merger would not prevent or lessen, or be likely
to prevent or lessen, competition substantially. See "--Certain Conditions of
the Exchange Offer."
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.
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PENDING LITIGATION
Litigation Against Holdings. Five 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 v. Greeniaus, et al., C.A. No. 13749; Malloy v. Greeniaus,
et al., C.A. No. 13748; 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. The plaintiff
in the Mushala case has filed a First Request for Production of Documents.
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.
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Litigation Against Borden. Eleven putative class actions have been filed by
purported Borden shareholders in the New Jersey and Ohio state courts against
Borden, members of Borden's Board of Directors and, in two of the 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 v. Borden, Inc., et al.; Weiss v. Borden, Inc., et al.;
Stepak v. Borden, Inc., et al.; Strougo v. Borden, Inc., et al.; Krim v. Borden,
Inc., et al.; Peterson v. Borden, Inc., et al.; Marcus v. Borden, Inc., et al.;
and Dwyer v. Borden, Inc., et al. (collectively, the "Borden 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" the company 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 Borden Class Complaints seek preliminary and
permanent relief, including a preliminary injunction, damages in an unspecified
amount and attorneys' fees.
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 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 Proposed 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 Proposed 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
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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 Proposed 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 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 Proposed 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 a direct or indirect wholly owned subsidiary of the
Partnership).
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
Proposed 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").
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Merger. Pursuant to the Merger Agreement, if approval of Borden's
shareholders is required by applicable law in order to consummate the Proposed
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 Proposed 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 Proposed Merger.
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 Proposed 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 Proposed Merger) and (b) (i) if the Proposed 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 Proposed
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
Proposed 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 Proposed
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 Proposed 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 Proposed 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 Proposed 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 Proposed 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.
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By virtue of the Proposed 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 Proposed 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 Proposed
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 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 Proposed
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
Proposed 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. 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 Proposed Merger is consummated. According to
the Merger Agreement, as of September 23, 1994, there were outstanding Stock
Options with respect to 7,357,473 Borden Shares. Of these, Stock Options with
respect to 1,408,326 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 Proposed 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 Proposed 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
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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 Proposed 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 Proposed Merger to the date of distribution.
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 Proposed
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 Proposed
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 Proposed Merger).
As soon as reasonably practicable after the effective time, 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 Proposed 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, 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 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
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provision of the Merger Agreement, each holder of shares of Borden Common Stock
exchanged pursuant to the Proposed 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 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 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 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.
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 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.
Any portion of the consideration in the Proposed 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 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 (or immediately prior to such
earlier date on which any shares of Holdings Common Stock, any
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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 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 Proposed
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 Proposed 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 Proposed 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) certain sales and pledges of accounts receivable, or mortgages
of other property in connection with certain financings or refinancings outside
the United States and (D) 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 another person (other than certain guarantees by Borden
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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 Proposed 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 Proposed 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.
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
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
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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 Proposed 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 Proposed
Merger. Pursuant to the Merger Agreement, Borden is required to maintain, for
the two-year period following the effective time of the Proposed 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 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.
Indemnification and Insurance. Under the Merger Agreement, the certificate
of incorporation and by-laws of the surviving corporation in the Proposed Merger
shall contain provisions eliminating
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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
Proposed 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 Proposed Merger will maintain in effect for six years from the effective
time of the Proposed 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 Proposed 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 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
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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 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 Proposed Merger. The
Merger Agreement provides that the respective obligation of each party to effect
the Proposed 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 Proposed 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 Proposed 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 Proposed 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
Proposed 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 Proposed 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 second 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 Proposed 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 Proposed 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
Proposed 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 Proposed 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 Proposed 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 Proposed 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
Proposed Merger or the Merger Agreement and provided, further, that a
"stop-look-and-listen" communication with respect to the Exchange Offer, the
Proposed 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 Proposed 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
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its recommendation of the Exchange Offer, the Proposed Merger and the Merger
Agreement; (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 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 Proposed 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 Proposed 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 Proposed 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 Proposed 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 Proposed Merger), at any time prior to the effective time
of
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the Proposed Merger, 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
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
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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 ((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 Proposed 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 Proposed Merger, and the Purchaser does not intend to accord dissenters'
rights to holders of Borden Common Stock unless required by applicable law.
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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), on the terms and
subject to the conditions set forth 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), 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)
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
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paid to Purchaser (or its designee) by such other party or parties in
consideration for such Borden 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.
70
<PAGE>
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."
RJR NABISCO HOLDINGS CORP.
The operating subsidiaries of Holdings owned through RJR Nabisco, Inc.
("RJRN") comprise one of the largest tobacco and food companies in the world. In
the United States, the tobacco business is conducted by R.J. Reynolds Tobacco
Company ("RJRT"), the second largest manufacturer of cigarettes, and the
packaged foods business is conducted by the Nabisco Group ("Nabisco"), the
largest manufacturer and marketer of cookies and crackers. Tobacco operations
outside the United States are conducted by R.J. Reynolds Tobacco International,
Inc. ("Tobacco International") and food operations outside the United States and
Canada are conducted by Nabisco International, Inc. ("Nabisco International").
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.
71
<PAGE>
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 Group. 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!, SNACKWELL'S, NEWTONS, 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
the nine top 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, more than double the share of its closest competitor, and
a 55% share of the domestic cracker industry sales, 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
over $200 million in sales to become the sixth largest cookie/cracker brand in
the United States. On the basis of the most recent data available, LIFE SAVERS
is the largest selling hard candy in the United States, with an approximately
16.5% share of the hard 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. 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 (the "Acquisition") at the direction of KKR. Prior to the Acquisition,
RJRN was a publicly held corporation. See "Certain Significant
Considerations--KKR Ownership."
72
<PAGE>
RJR NABISCO HOLDINGS CORP.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of June 30, 1994
and for the six months ended June 30, 1994 and 1993 were derived from Holdings'
unaudited quarterly 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 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 Holdings' consolidated
financial statements and Holdings' unaudited quarterly consolidated condensed
financial statements incorporated herein by reference.
<TABLE>
<CAPTION>
HOLDINGS
------------------------------------------------------------------------ RJRN
FOR THE SIX ----------
MONTHS ENDED JUNE
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......................... $ 7,356 $ 7,455 $15,104 $15,734 $14,989 $13,879 $ 12,114 $ 650
------- ------- ------- ------- ------- ------- ------ ----------
Cost of products sold............. 3,264 3,060 6,640 6,326 6,088 5,652 5,241 332
Selling, advertising,
administrative and
general expenses................ 2,473 2,820 5,731 5,788 5,358 4,801 4,276 295
Amortization of trademarks and
goodwill........................ 312 310 625 616 609 608 557 10
Restructuring expense............. -- -- 730 106 -- -- -- --
------- ------- ------- ------- ------- ------- ------ ----------
Operating income(1)............. 1,307 1,265 1,378 2,898 2,934 2,818 2,040 13
Interest and debt expense......... (588) (620) (1,209) (1,449) (2,217) (3,176) (3,340) (44)
Change in control costs........... -- -- -- -- -- -- -- (247)
Other income (expense), net....... (43) 4 (58) 7 (69) (44) 169 15
------- ------- ------- ------- ------- ------- ------ ----------
Income (loss) from continuing
operations before income
taxes.......................... 676 649 111 1,456 648 (402) (1,131) (263)
Provision (benefit) for income
taxes........................... 290 297 114 680 280 60 (156) (66)
------- ------- ------- ------- ------- ------- ------ ----------
Income (loss) from continuing
operations..................... 386 352 (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) (112) (142) (477) -- 33 -- --
------- ------- ------- ------- ------- ------- ------ ----------
Net income (loss)................. 241 240 (145) 299 368 (429) (976) (173)
Preferred stock dividends......... 65 13 68 31 173 50 -- 4
------- ------- ------- ------- ------- ------- ------ ----------
Net income (loss) applicable to
common stock.................... $ 176 $ 227 $ (213) $ 268 $ 195 $ (479) $ (976) $ (177)
------- ------- ------- ------- ------- ------- ------ ----------
------- ------- ------- ------- ------- ------- ------ ----------
PER SHARE DATA
Income (loss) from continuing
operations per common and common
equivalent share................ $ .22 $ .25 $ (.05) $ .55 $ .22 $ (1.19) $ (3.21) $ (.89)
Dividends per share of Series A
Preferred Stock(3).............. 1.670 1.670 3.34 3.34 .49 -- -- --
Dividends per share of Series C
Preferred Stock(3).............. .935 -- -- -- -- -- -- --
BALANCE SHEET DATA
(AT END OF PERIODS)
Working capital................... $ 510 -- $ 202 $ 730 $ 165 $(1,089) $ 106 --
Total assets...................... 31,874 -- 31,295 32,041 32,131 32,915 36,412 --
Total debt........................ 11,615 -- 12,448 14,218 14,531 18,918 25,159 --
Redeemable preferred stock(4)..... -- -- -- -- -- 1,795 -- --
Stockholders' equity(5)........... 10,814 -- 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........................... 5.88 -- 5.77 -- -- -- -- --
</TABLE>
(Footnotes on following page)
73
<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 included $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 June 30, 1994 and December 31 of each year
from 1993 to 1989 includes non-cash expenses related to accumulated
trademark and goodwill amortization of $3.327 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.
74
<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 August 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,
(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 203,085,971 shares and 14.96%
(11.78% on a fully diluted basis), respectively. Information concerning Borden
shares and options outstanding is based on information available on September
23, 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 48.51% 448,009,553 33.00%
9 West 57th Street
New York, New York 10019
College Retirement Equities Fund(2).............. 57,360,153 5.00 57,360,153 4.22
730 Third Avenue
New York, New York 10017
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(3)(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)............................... 14,186 * 14,186 *
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
partners. Such persons may be deemed to share beneficial ownership of the
shares shown as owned
(Footnotes continued on following page)
75
<PAGE>
(Footnotes continued from preceding page)
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) College Retirement Equities Fund reported in its Schedule 13G dated February
8, 1994 that it had sole voting and investment power over all of its shares.
(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; 1,602,606 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 June 20, 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.
76
<PAGE>
BORDEN, INC.
Borden is engaged primarily in manufacturing, processing, purchasing and
distributing a broad range of products. Borden is organized into 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.
Recent Announcement. Borden has announced that it expects to record pretax
charges of $150 million to $200 million in its third quarter 1994 results,
scheduled to be announced October 26. Approximately $95 million of the amount
relates to less-than-estimated proceeds from the divestiture of discontinued
operations, as announced by Borden in January 1994. Third quarter results
will also include charges for the write-down of certain impaired assets and
the reversal of the unused portion of the 1993 restructuring charge for
business re-engineering. Management reviewed the 1993 restructuring program
in light of recent events and determined that a portion of the reserve for
this project would not be utilized. Borden said in its announcement that the
charges would lead to a net loss for the third quarter of 1994.
77
<PAGE>
BORDEN, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the six months
ended June 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 six months ended June 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. All such adjustments are of a normal recurring nature.
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 SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
-------------------- --------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUE
Net sales.................................................. $ 2,642 $ 2,650 $ 5,506 $ 5,872 $ 5,924
COST AND EXPENSES
Cost of goods sold......................................... 1,998 1,944 4,078 4,302 4,269
Marketing, general and administrative expenses............. 526 499 1,224 1,163 1,024
Restructuring charges(1)................................... -- -- 115 298 67
Interest expense........................................... 58 62 125 116 167
Equity in income of affiliates............................. (5) (6) (16) (19) (24)
Minority interest.......................................... 19 20 41 40 3
Other (income) and expense, net............................ 18 18 23 (4) (13)
Income taxes............................................... 11 39 (27) 14 151
-------- -------- -------- -------- --------
2,625 2,576 5,563 5,910 5,644
-------- -------- -------- -------- --------
EARNINGS
(Loss) income from continuing operations................... 17 74 (57) (38) 280
Discontinued operations:(1)(2)
(Loss) income from operations............................ -- (28) (66) (86) 15
Loss on disposal......................................... -- -- (490) -- --
-------- -------- -------- -------- --------
(Loss) income before extraordinary item and cumulative
effect of
accounting changes....................................... 17 46 (613) (124) 295
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.......................................... $ 17 $ 28 $ (631) $ (364) $ 295
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SHARE DATA
(Loss) income from continuing operations................... $ .12 $ .53 $ (.40) $ (.27) $ 1.90
Discontinued operations:
(Loss) income from operations............................ -- (.20) (.47) (.60) .10
Loss on disposal......................................... -- -- (3.47) -- --
-------- -------- -------- -------- --------
(Loss) income before extraordinary item and cumulative
effect of
accounting changes....................................... .12 .33 (4.34) (.87) 2.00
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......................... $ .12 $ .20 $ (4.47) $ (2.54) $ 2.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Cash dividends paid per common share....................... $ .15 $ .60 $ .90 $ 1.185 $ 1.12
Average number of common shares outstanding during the
period................................................... 141.5 140.8 141.0 143.4 147.6
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
----------- ----------------
1994 1993 1992
----------- ------ ------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Current assets........................................................ $ 1,469 $1,290 $1,928
Investments and other assets.......................................... 459 443 352
Property and equipment................................................ 1,338 1,337 1,788
Intangibles........................................................... 790 802 1,178
Total assets.......................................................... 4,056 3,872 5,246
Current liabilities................................................... 1,528 1,372 1,808
Long-term debt........................................................ 1,244 1,241 1,330
Other liabilities (including long-term debt).......................... 2,270 2,254 2,312
Shareholders' equity.................................................. 258 246 1,126
Book value per common share........................................... 1.82 1.74
</TABLE>
(Footnotes on following page)
78
<PAGE>
(Footnotes for preceding page)
- ------------
(1) 1993 includes a pretax charge of $752.3 million for business divestitures
and restructuring. 1992 and 1991 include pretax restructuring charges of
$377.2 million and $71.6 million, respectively.
(2) Financial data for the years prior to 1993 were restated in 1993 to reflect
discontinued operations.
(3) Set forth below is selected financial data for the years ended December 31,
1990 and 1989 (in millions, except per share data).
<TABLE>
<CAPTION>
1990 1989
------ ------
<S> <C> <C>
Net sales........................................................... $6,273 $6,391
Net (loss) income................................................... 320 (17)
Net (loss) income per common share.................................. 2.16 (.11)
Cash dividends per common share..................................... 1.035 1.90
Average number of common shares outstanding during period........... 147.9 148.2
Current assets...................................................... 2,026 2,011
Total assets........................................................ 5,284 4,825
Property, plant and equipment, net.................................. 1,707 1,441
Current liabilities................................................. 1,847 1,466
Long-term debt...................................................... 1,340 1,441
Shareholders equity................................................. 1,842 1,689
</TABLE>
Results for these years have been restated for discontinued operations and to
consistently present marketing expenses.
(4) For discussion concerning Borden's announcement that it expects to record
pretax charges of $150 million to $200 million in its third quarter 1994
results, see "Recent Announcement".
See Notes to Borden's Consolidated Financial Statements and Borden's
Unaudited Quarterly
Consolidated Financial Statements incorporated herein by reference.
79
<PAGE>
THE PURCHASER AND THE PARTNERSHIP
The Purchaser, a New Jersey corporation and a wholly owned 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. The Partnership is a Delaware limited partnership, whose
general partner is KKR Associates, an affiliate of KKR. The Partnership's
principal assets consist of investments in various entities, including its
investment in Holdings. The Partnership may transfer to the other Common Stock
Partnership a portion of its interest in the Purchaser.
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 August 31, 1994, 1,147,681,192 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 15,439,699 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. Holdings' and RJRN's
credit agreement, dated as of December 1, 1991, as amended (the "1991 Credit
Agreement") and Holdings' and RJRN's credit agreement dated as of April 5, 1993,
the amended (the "1993 Credit Agreement," and together with the 1991 Credit
Agreement, 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."
The Holdings Common Stock is listed on the NYSE.
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<PAGE>
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 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
$3.34 per annum, payable quarterly in arrears. Each share of Series A Preferred
Stock will mandatorily convert into four shares of Holdings Common Stock on
November 15, 1994, subject to adjustment in certain events (the "Series A Common
Equivalent Rate"). In addition, each share of Series A Preferred Stock may be
redeemed by Holdings, in whole or in part, at any time at a redemption price to
be paid in shares of Holdings Common Stock, plus accrued and unpaid dividends.
The optional redemption price declines from $64.82 per share by $.009218 on each
day following November 8, 1991 to $55.36 on September 15, 1994, and is $54.80
thereafter.
Immediately prior to the effectiveness of 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, each outstanding share
of Series A Preferred Stock will convert automatically into (i) shares of
Holdings Common Stock at a rate, which currently is four shares of Holdings
Common Stock for each share of Series A Preferred Stock, in effect immediately
prior to such merger or consolidation, plus (ii) the right to receive an amount
in cash equal to all accrued and unpaid dividends on such Series A Preferred
Stock to and including the business day immediately prior to the effective date
of the merger or consolidation (the "Settlement Date"), plus (iii) the right to
receive an amount of cash initially equal to $10.02, declining by $.009218 on
each day following November 8, 1991 to $.56 on September 15, 1994, and equal to
zero thereafter, unless sooner redeemed. At the option of Holdings, it may
deliver on the Settlement Date in lieu of some or all of the cash consideration
described in clauses (ii) and (iii) of the preceding sentence, shares of
Holdings Common Stock.
Holders of Series A Preferred Stock have 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, are 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, are 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 exceed 25% of the total board of directors or be less than one
director. While such holders are entitled to elect two directors, they shall not
be entitled to participate with the holders of Holdings Common Stock in the
election of any other directors, but would continue 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 will be 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
81
<PAGE>
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.
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.
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<PAGE>
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 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.
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.
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
83
<PAGE>
and unpaid dividends, before any distribution is made on any class of junior
securities, including Holdings Common Stock.
CONTRACTUAL RESTRICTIONS 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 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 other dividends or distributions, repurchases or redemptions, when added to
all dividends or distributions, repurchases or redemptions, made in accordance
with this clause (iv) after December 19, 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.
The RJRN Subordinated Debenture Indenture and the Senior Note Indenture, 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. The restrictions in these
indentures have the effect of prohibiting the payment of dividends or the making
of other payments or distributions by RJRN in respect of its Capital Stock (as
defined in the RJRN Subordinated Debenture Indenture and the Senior Note
Indenture) if, at the time of such payment (x) a default under such indentures
shall have occurred and be continuing, (y) RJRN, after giving effect to such
payment, could not incur at least $1.00 of additional Indebtedness (as defined
in the RJRN Subordinated Debenture Indenture and the Senior Note Indenture) by
virtue of meeting certain fixed charge coverage ratios as set forth in the
restrictions on Indebtedness in such indentures or (z) after giving effect to
such payment, the aggregate amount expended for all Restricted Payments (as
hereinafter defined) subsequent to September 30, 1990 (December 31, 1990, in the
case of the Senior Note Indenture) shall exceed the sum of (1) 25% (50% in the
case of the Senior Note Indenture excluding the cash dividends referred to in
(3) below) of the aggregate Consolidated Net Operating Income (as hereinafter
defined) of RJRN accrued on a cumulative basis subsequent to December 31, 1990,
plus (2) the aggregate net proceeds received by RJRN from the issuance and sale
(other than to a subsidiary (as defined in the RJRN
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<PAGE>
Subordinated Debenture Indenture and the Senior Note Indenture)) after December
31, 1990, of RJRN's Capital Stock (other than Redeemable Stock (as defined in
the RJRN Subordinated Debenture Indenture and the Senior Note Indenture)),
including the issuance or sale for cash after December 31, 1990, or upon the
conversion after December 31, 1990, of any Indebtedness of RJRN (which
Indebtedness is, by its terms, convertible into Capital Stock (other than
Redeemable Stock) of RJRN) or from the exercise after December 31, 1990 of any
options, warrants or other rights to acquire Capital Stock (other than
Redeemable Stock) of RJRN plus (3) in the case of the Senior Note Indenture, the
aggregate net proceeds received by RJRN from capital contributions made to RJRN
after December 31, 1990 plus $250 million plus the amount of all cash dividends
from an Unrestricted Subsidiary (as defined in the Senior Note Indenture) after
December 31, 1990, minus (4) the aggregate amount of certain payments made with
respect to minority interests previously made by all Subsidiaries of RJRN;
provided, however, that notwithstanding the foregoing restrictions, (a) such
indentures do not prevent the payment of dividends by RJRN on RJRN's common
stock, following public offerings of RJRN's or Holdings' Common Stock, of up to
6% per annum of the net proceeds received by RJRN in such public offering or, in
the case of public offerings by Holdings, up to 6% per annum of the amount of
proceeds contributed down to RJRN as common equity and (b) the RJRN Subordinated
Debenture Indenture permits loans, advances, dividends and distributions by RJRN
to Holdings to the extent necessary to permit Holdings to pay cash dividends on
the Holdings Common Stock on and after May 1, 1993, up to $100 million per annum
limited to an aggregate of $250 million, provided no default under such
indenture shall have occurred and be continuing or occur and be continuing as a
consequence thereof.
As used herein:
"Restricted Payments" means (i) the declaration or payment of any
dividend or the making of any distribution on RJRN's Capital Stock or to
holders of RJRN's Capital Stock (other than dividends or distributions
payable in RJRN's common stock or in shares of RJRN's Capital Stock) or the
making of any loans or advances to the holders of RJRN's Capital Stock or to
Holdings or the purchase of Capital Stock of Holdings, (ii) the purchase,
redemption or acquisition or retirement for value by RJRN or any of its
Subsidiaries of any such Capital Stock (or options, warrants or other rights
to acquire such Capital Stock) or Capital Stock or any other security of a
direct or indirect parent of RJRN, (iii) the redemption, repurchase,
defeasance (including, but not limited to, in substance or legal defeasance)
or the acquisition or retirement for value by RJRN or any of its
Subsidiaries prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of Indebtedness of RJRN that is pari passu
or subordinate (whether pursuant to its terms or by operation of law) in
right of payment to the RJRN Subordinated Debentures under the RJRN
Subordinated Debenture Indenture or subordinate (whether pursuant to its
terms or by operation of law) in right of payment to the Senior Notes under
the Senior Note Indenture and which was scheduled to mature (after giving
effect to any and all options to extend the maturity thereof) on or after
the maturity date of the RJRN Subordinated Debentures or the Senior Notes,
as the case may be (after giving effect to any and all options to extend the
maturity thereof) (except, in the case of the Senior Notes, certain
permitted redemptions, repurchases, defeasances, acquisitions or retirements
for value of the subordinated Indebtedness of RJRN) or (iv) the making of
any Investment in any Unrestricted Subsidiary in excess of the Minimum
Permitted Investment (as such terms are defined, respectively, in the RJRN
Subordinated Debenture Indenture and the Senior Note Indenture).
"Consolidated Net Operating Income" of any person means, for any period,
the aggregate Consolidated Net Income of such person and its Subsidiaries
for such period, determined on a consolidated basis in accordance with
generally accepted accounting principles, adjusted by excluding (to the
extent not otherwise excluded in calculating Consolidated Net Income) the
net extraordinary gain or the net extraordinary loss, as the case may be,
during such period and including, in the case of the RJRN Subordinated
Debenture Indenture, the amount of all dividends
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<PAGE>
received by RJRN or its Subsidiaries from an Unrestricted Subsidiary in
excess of the amount of all Investments made by RJRN in such Unrestricted
Subsidiary.
"Consolidated Net Income" of any person means, for any period, the net
income (or loss) of such person and its Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles, provided that there shall be excluded (i) the net
income (or loss) of any person that is not a Subsidiary of such person in
which any other person (other than such person or any of its Subsidiaries)
has a joint interest, except to the extent of the amount of dividends or
other distributions actually paid to such person or any of its Subsidiaries
by such other person during such period, (ii) except to the extent
includible pursuant to the foregoing clause (i), the net income (or loss) of
any other person accrued prior to the date it becomes a Subsidiary of such
person or is merged into or consolidated with such person or any of its
Subsidiaries or such other person's assets are acquired by such person or
any of its Subsidiaries, (iii) the net income of any Subsidiary to the
extent that the declaration or payment of dividends or similar distributions
by that Subsidiary of that income is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Subsidiary and (iv) any gains or losses attributable to Asset Sales (as
defined in the RJRN Subordinated Debenture Indenture and the Senior Note
Indenture) on an after-tax basis (in the case of the Senior Note Indenture).
In determining "Consolidated Net Income" the RJRN Subordinated Debenture
Indenture and the Senior Note Indenture specify that generally accepted
accounting principles applicable to RJRN for 1988 fiscal year shall apply,
without giving effect to (i) certain adjustments required or permitted by
Accounting Principles Board Opinions Nos. 16 and 17 in respect of the
Acquisition and the related financings, (ii) the effects of any "carryover
basis" accounting required by generally accepted accounting principles, (iii)
the amortization of certain goodwill and intangible assets consummated prior to
the tender offer for RJRN's shares of Holdings Common Stock ended February 9,
1989 and (iv) the amortization or write-off of certain expenses in respect of
the Acquisition and the related financing and debt issued prior to the
Acquisition.
The mandatory conversion of Holdings' Series A Preferred Stock into Holdings
Common Stock on November 15, 1994 will constitute a change of control under the
provisions of the Credit Agreements, the Senior Note Indenture relating to $1.5
billion of 10 1/2% Senior Notes due 1998 and the Subordinated Debenture
Indenture relating to $100 million of 13 1/2% Subordinated Debentures due 2001.
Unless waived, the change of control would cause the commitments of the banks to
be reduced to zero under the Credit Agreements and would entitle the Required
Banks (as defined) to call an event of default and accelerate indebtedness under
the Credit Agreements. Holdings expects to obtain a waiver of these provisions
from the Required Banks under each of the Credit Agreements. Under the Senior
Note Indenture and the Subordinated Debenture Indenture, the change of control
will entitle the holders of the 10 1/2% Senior Notes and the 13 1/2%
Subordinated Debentures to tender such debt to RJRN at 101% plus accrued
interest. In addition, upon the change of control, the 10 1/2% Senior Notes will
be redeemable, at the option of RJRN, at the principal amount thereof plus
accrued interest and a premium equal to the greater of (i) 1.0% of their
principal amount and (ii) the excess of (A) the present value of the required
interest and principal payments due on such notes, computed using a discount
rate equal to the Treasury Rate, as defined, plus 50 basis points, over (B) the
outstanding principal amount of such notes. The 13 1/2% Subordinated Debentures
are currently redeemable at 106.75% plus accrued interest to the date of
redemption.
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
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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, stock or asset sales and other
transactions resulting in a financial benefit to 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
141,515,502 shares were issued and outstanding as of September 23, 1994
(excluding 53,465,136 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 September 23,
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
September 23, 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 September 23, 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 September 23, 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
Proposed 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 certain of those
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 Proposed 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 Proposed 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, 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.
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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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:
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT
DELIVERY:
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.
UNITED STATES EUROPE
77 Water Street Royex House, Aldermanbury Square
New York, New York 10005 London, England EC2V 7HR
1-800-755-3106 (Toll Free) (44) 71 600 5005 (Collect)
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
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any person who was
or is, or is threatened to be made, a party to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. A Delaware corporation may indemnify any
person who was or is a director, officer, employee or agent of the corporation
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the director, officer, employee or agent
is adjudged to be liable to the corporation. Where a director, officer, employee
or agent is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
(including attorneys' fees) which such director, officer, employee or agent
actually and reasonably incurred in connection therewith.
In accordance with the Delaware Law, Article Sixth of the Certificate of
Incorporation of Holdings contains a provision to limit the personal liability
of the directors of Holdings for monetary damages for breach of their fiduciary
duty. This provision eliminates each director's liability to Holdings or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware Law providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions, or (iv) for any transaction from which a director derived an
improper personal benefit. The effect of this provision is to eliminate the
personal liability of directors for monetary damages for actions involving a
breach of their fiduciary duty of care, including any such actions involving
gross negligence.
Article IV of the By-Laws of Holdings provides for indemnification of any
current or former officer or director of Holdings to the full extent permitted
by applicable law.
In connection with the Exchange Offer, the Partnership has agreed to
indemnify Holdings and its directors, officers, affiliates and controlling
persons and Borden and its directors, officers, affiliates and controlling
persons from certain liabilities under the federal securities laws to the extent
they arise out of or are based upon information relating to the Partnership
furnished by the Partnership to Holdings for inclusion in the Registration
Statement or required to be included therein and omitted from the information
furnished. In addition, Borden has provided a similar indemnity to Holdings and
its directors, officers, affiliates and controlling persons and the Partnership
and its partners and affiliates and their respective directors, officers and
controlling persons with respect to information it furnishes to Holdings for
inclusion in the Registration Statement or required to be included therein and
omitted from the information furnished. Holdings has provided a similar
indemnity to the Partnership and its partners and affiliates and their
respective directors, officers and controlling persons and Borden and its
directors, officers, affiliates and controlling persons with respect to
information it furnishes for inclusion in the Registration Statement or required
to be included therein and omitted from the information furnished. See
"Summary."
II-1
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ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------
<C> <S>
*1.1 Form of Dealer Manager Agreement.
**2.1 Agreement and Plan of Merger dated as of September 23, 1994 among
Borden Acquisition Corp., Whitehall Associates, L.P. and
Borden, Inc.
**2.2 Conditional Purchase/Stock Option Agreement dated as of September
23, 1994 by and among Whitehall Associates, L.P., Borden
Acquisition Corp. and Borden, Inc.
3.1 Amended and Restated Certificate of Incorporation of RJR Nabisco
Holdings Corp., filed October 1, 1990 (incorporated by
reference to Exhibit 3.1 to Amendment No. 4 filed on October 2,
1990, to the Registration Statement on Form S-4 of RJR Nabisco
Holdings Corp., Registration No. 33-36070, filed on July 25,
1990, as amended (the "Form S-4, Registration No. 33-36070")).
3.1(a) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed January 29,
1991 (incorporated by reference to Exhibit 3.1(a) to Amendment
No. 3, filed on January 31, 1991, to the Registration Statement
on Form S-4 of RJR Nabisco Holdings Corp., Registration No.
33-38227).
3.1(b) Certificate of Designation of ESOP Convertible Preferred Stock,
filed April 10, 1991 (incorporated by reference to Exhibit
3.1(b) to Amendment No. 2 filed on April 11, 1991, to the
Registation Statement on Form S-1 of RJR Nabisco Holdings
Corp., Registration No. 33-39532, filed on March 20, 1991).
3.1(c) Certificate of Designation of Series A Conversion Preferred
Stock, filed November 7, 1991 (incorporated by reference to
Exhibit 3.1(c) to Amendment No. 3, filed on November 1, 1991,
to the Registration Statement on Form S-1 of RJR Nabisco
Holdings Corp., Registration No. 33-43137, filed October 2,
1991).
3.1(d) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed December 16,
1991 (incorporated by reference to Exhibit 3.1(d) of the Annual
Report on Form 10-K of RJR Nabisco Holdings Corp., RJR Nabisco
Holdings Group, Inc., RJR Nabisco Capital Corp. and RJR
Nabisco, Inc. for the fiscal year ended December 31, 1991, File
Nos. 1-10215, 1-10214, 1-10248 and 1-6388 (the "1991 Form
10-K")).
3.1(e) Certificate of Amendment to the Amended and Restated Certificate
of Incorporation of RJR Nabisco Holdings Corp. (relating to the
authorization of the issuance of additional shares of Common
Stock) filed April 6, 1993 (incorporated by reference to
Exhibit 3.3 of the Quarterly Report on Form 10-Q of RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc. for the fiscal quarter
ended March 31, 1993, filed April 30, 1993 (the "March 1993
Form 10-Q")).
3.1(f) Certificate of Designation of Series B Cumulative Preferred
Stock, filed August 16, 1993 (incorporated by reference to
Exhibit 3.1(f) of the Annual Report on Form 10-K of RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc. for the fiscal year ended
December 31, 1993, File Nos. 1-10215 and 1-6388 (the "1993 Form
10-K")).
3.1(g) A composite of the Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., as amended to
August 16, 1993 (incorporated by reference to Exhibit 3.1(g) of
the 1993 Form 10-K).
3.1(h) Certificate of Designation of Series C Conversion Preferred Stock
(incorporated by reference to Exhibit 4.1(h) to the
Registration Statement on Form S-3 of RJR Nabisco Holdings
Corp., Registration No. 33-52381 filed on February 2, 1994, as
amended (the Form S-3, Registration No. 33-52381).
3.2 Amended and Restated By-laws of RJR Nabisco Holdings Corp., as
amended, effective January 20, 1994 (incorporated by reference
to Exhibit 3.2 to the 1993 Form 10-K).
4.1 Credit Agreement dated as of December 1, 1991, among RJR Nabisco
Holdings Corp., RJR Nabisco Holdings Group, Inc., RJR Nabisco
Capital Corp., RJR Nabisco, Inc. and the lending institutions
party thereto (incorporated by reference to Exhibit 4.1 of the
1991 Form 10-K) (the "Credit Agreement").
4.1(a) Amendment No. 1 to Credit Agreement, dated as of October 21, 1992
(incorporated by reference to Exhibit 4.1(a) of the Annual
Report on Form 10-K of RJR Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the fiscal year ended December 31, 1992, File
Nos. 1-10215 and 1-6388).
4.1(b) Amendment No. 2 to Credit Agreement, dated as of March 4, 1993
(incorporated by reference to Exhibit 4.2 of the March 1993
Form 10-Q).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
4.1(c) Amendment No. 3 to Credit Agreement, dated as of October 12, 1993
(incorporated by reference to Exhibit 10.1 of the Quarterly
Report on Form 10-Q of RJR Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the quarter ended September 30, 1993 (the
"September 1993 Form 10-Q").
4.2 Credit Agreement dated as of April 5, 1993 among RJR Nabisco
Holdings Corp., RJR Nabisco, Inc. and the lending institutions
party thereto (incorporated by reference to Exhibit 4.3 of the
March 1993 Form 10-Q) (the "1993 Credit Agreement")
4.2(a) Amendment No. 1 to 1993 Credit Agreement, dated October 12, 1993
(incorporated by reference to Exhibit 10.1 of the September
1993 10-Q).
4.3 Indenture dated as of April 25, 1991 among RJR Nabisco Capital
Corp., RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group,
Inc., RJR Nabisco, Inc. and Citibank, N.A., as Trustee,
relating to the 10 1/2% Senior Notes due 1998, including form
of securities. (incorporated by reference to Exhibit 4.5 to
Amendment No. 7 filed on August 11, 1993, to the Registration
Statement on Form S-3 of RJR Nabisco Holdings Corp.,
Registration No. 33-58930, filed March 1, 1993, as amended (the
"Form S-3, Registration No. 33-58930")).
4.3(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Citibank, N.A., as Trustee, relating to the 10
1/2% Senior Notes due 1998 (incorporated by reference to
Exhibit 4.5(a) to the Form S-3, Registration No. 33-58930).
4.5 Indenture dated as of May 22, 1989 among RJR Holdings Capital
Corp., RJR Holdings Corp., RJR Holdings Group, Inc., RJR
Nabisco, Inc. and Security Pacific National Trust Company (New
York), as Trustee, relating to the 15% Payment-in-Kind
Subordinated Debentures due 2001, including form of securities
(incorporated by reference to Exhibit 4.6 to the Form S-3,
Registration No. 33-58930).
4.5(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Security Pacific National Trust Company (New
York), as Trustee, relating to the 15% Payment-in-Kind
Subordinated Debentures due 2001 (incorporated by reference to
Exhibit 4.6(a) to the Form S-3, Registration No. 33-58930).
4.6 Indenture dated as of May 22, 1989 among RJR Holdings Capital
Corp., RJR Holdings Corp., RJR Holdings Group, Inc., RJR
Nabisco, Inc. and Security Pacific National Trust Company (New
York), as Trustee, relating to the Subordinated Discount
Debentures due 2001, including form of securities (incorporated
by reference to Exhibit 4.7 to the Form S-3, Registration No.
33-58930).
4.6(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Security Pacific National Trust Company (New
York), as Trustee, relating to the Subordinated Discount
Debentures due 2001 (incorporated by reference to Exhibit
4.7(a) to the Form S-3, Registration No. 33-58930).
4.7 Indenture dated as of May 22, 1989 among RJR Holdings Capital
Corp., RJR Holdings Corp., RJR Holdings Group, Inc., RJR
Nabisco, Inc. and U.S. Trust Company of California, N.A., as
Trustee, relating to the 13 1/2% Subordinated Debentures due
2001, including form of securities (incorporated by reference
to Exhibit 4.8 to the Form S-3, Registration No. 33-58930).
4.7(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Security Pacific National Trust Company (New
York), as trustee, relating to the 13 1/2% Subordinated
Debentures due 2001 (incorporated by reference to Exhibit
4.8(a) to the Form S-3, Registration No. 33-58930).
*5. Opinion of Jo-Ann Ford regarding the legality of the securities
being registered.
10.1 Registration Rights Agreement, dated as of February 9, 1989,
among RJR Holdings Corp., RJR Associates, L.P., KKR Partners
II, L.P., Drexel Burnham Lambert Incorporated and Merrill Lynch
& Co. (incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form S-1 of RJR Holdings Corp.,
Registration No. 33-29401, filed on June 20, 1989, as amended).
10.28 Registration Rights Agreement (Common Stock), dated as of July
15, 1990, between RJR Nabisco Holdings Corp. and Whitehall
Associates, L.P. (incorporated by reference to Exhibit 4.5 to
the Form S-4, Registration No. 33-36070).
*10.50 Indemnification Agreement, dated as of October 4, 1994, among RJR
Nabisco Holdings Corp., Whitehall Associates, L.P., Borden
Acquisition Corp. and Borden, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 of the 1993 Form 10-K).
**23.1 Consent of Deloitte & Touche LLP, Independent Auditors for RJR
Nabisco Holdings Corp. and RJR Nabisco, Inc.
**23.2 Consent of Price Waterhouse LLP, Independent Accountants for
Borden, Inc.
*23.3 Consent of Jo-Ann Ford (included in her opinion filed as Exhibit
5.1).
**24.1 Powers of Attorney of Charles M. Harper, Stephen R. Wilson,
Robert S. Roath, John T. Chain, Jr., John R. Clendenin, James
H. Greene, Jr., H. John Greeniaus, James W. Johnston, Henry R.
Kravis, John G. Medlin, Jr., Paul E. Raether, Lawrence R.
Ricciardi, Rozanne L. Ridgway, Clifton S. Robbins and Scott M.
Stuart.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter from the Dealer Manager to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
*99.4 Form of letter to clients for use by Brokers, Dealers, Commercial
Banks and Other Nominees.
*99.5 Form of Guidelines for Certification of Taxpayer Indentification
Number on Substitute Form W-9.
</TABLE>
- ------------
* To be filed by amendment.
** Filed herewith.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of Regulation S-X at the start of
any delayed offering or throughout a continuous offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospects is sent or given, the
latest quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
The undersigned registrant hereby undertakes that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
The undersigned registrant hereby undertakes that every prospectus (i) that
is filed pursuant to the paragraph immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415, will
be filed as part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on October 5, 1994.
RJR NABISCO HOLDINGS CORP.
By: /s/ JO-ANN FORD
................................
Title: Vice President, Assistant
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on October 5, 1994.
SIGNATURE TITLE
- ----------------------------- ----------------------------
* Chairman of the Board and
............................. Chief Executive Officer
(Charles M. Harper) (principal executive
officer) and Director
* Executive Vice President and
............................. Chief Financial Officer
(Stephen R. Wilson) (principal financial
officer)
* Senior Vice President and
............................. Controller (principal
(Robert S. Roath) accounting officer)
* Director
.............................
(John T. Chain, Jr.)
* Director
.............................
(John L. Clendenin)
* Director
.............................
(James H. Greene, Jr.)
* Director
.............................
(H. John Greeniaus)
* Director
.............................
(James W. Johnston)
* Director
.............................
(Henry R. Kravis)
* Director
.............................
(John G. Medlin, Jr.)
* Director
.............................
(Paul E. Raether)
* Director
.............................
(Lawrence R. Ricciardi)
II-6
<PAGE>
SIGNATURE TITLE
- ----------------------------- ----------------------------
* Director
.............................
(Rozanne L. Ridgway)
* Director
.............................
(Clifton S. Robbins)
............................. Director
(George R. Roberts)
* Director
.............................
(Scott M. Stuart)
............................. Director
(Michael T. Tokarz)
*By: /s/ JO-ANN FORD
.....................................
Jo-Ann Ford
Attorney-in-fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ---------- ------------------------------------------------------------------------- --------
<C> <S> <C>
*1.1 Form of Dealer Manager Agreement.........................................
**2.1 Agreement and Plan of Merger dated as of September 23, 1994 among Borden
Acquisition Corp., Whitehall Associates, L.P. and Borden, Inc............
**2.2 Conditional Purchase/Stock Option Agreement dated as of September 23,
1994 by and among Whitehall Associates, L.P., Borden Acquisition Corp.
and Borden, Inc........................................................
3.1 Amended and Restated Certificate of Incorporation of RJR Nabisco Holdings
Corp., filed October 1, 1990 (incorporated by reference to Exhibit 3.1
to Amendment No. 4 filed on October 2, 1990, to the Registration
Statement on Form S-4 of RJR Nabisco Holdings Corp., Registration No.
33-36070, filed on July 25, 1990, as amended (the "Form S-4,
Registration No. 33-36070"))...........................................
3.1(a) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed January 29, 1991
(incorporated by reference to Exhibit 3.1(a) to Amendment No. 3, filed
on January 31, 1991, to the Registration Statement on Form S-4 of RJR
Nabisco Holdings Corp., Registration No. 33-38227).....................
3.1(b) Certificate of Designation of ESOP Convertible Preferred Stock, filed
April 10, 1991 (incorporated by reference to Exhibit 3.1(b) to
Amendment No. 2 filed on April 11, 1991, to the Registation Statement
on Form S-1 of RJR Nabisco Holdings Corp., Registration No. 33-39532,
filed on March 20, 1991)...............................................
3.1(c) Certificate of Designation of Series A Conversion Preferred Stock, filed
November 7, 1991 (incorporated by reference to Exhibit 3.1(c) to
Amendment No. 3, filed on November 1, 1991, to the Registration
Statement on Form S-1 of RJR Nabisco Holdings Corp., Registration No.
33-43137, filed October 2, 1991).......................................
3.1(d) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed December 16, 1991
(incorporated by reference to Exhibit 3.1(d) of the Annual Report on
Form 10-K of RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group,
Inc., RJR Nabisco Capital Corp. and RJR Nabisco, Inc. for the fiscal
year ended December 31, 1991, File Nos. 1-10215, 1-10214, 1-10248 and
1-6388 (the "1991 Form 10-K")).........................................
3.1(e) Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp. (relating to the
authorization of the issuance of additional shares of Common Stock)
filed April 6, 1993 (incorporated by reference to Exhibit 3.3 of the
Quarterly Report on Form 10-Q of RJR Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the fiscal quarter ended March 31, 1993, filed April
30, 1993 (the "March 1993 Form 10-Q")).................................
3.1(f) Certificate of Designation of Series B Cumulative Preferred Stock, filed
August 16, 1993 (incorporated by reference to Exhibit 3.1(f) of the
Annual Report on Form 10-K of RJR Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the fiscal year ended December 31, 1993, File Nos.
1-10215 and 1-6388 (the "1993 Form 10-K")).............................
3.1(g) A composite of the Amended and Restated Certificate of Incorporation of
RJR Nabisco Holdings Corp., as amended to August 16, 1993 (incorporated
by reference to Exhibit 3.1(g) of the 1993 Form 10-K)..................
3.1(h) Certificate of Designation of Series C Conversion Preferred Stock
(incorporated by reference to Exhibit 4.1(h) to the Registration
Statement on Form S-3 of RJR Nabisco Holdings Corp., Registration No.
33-52381 filed on February 2, 1994, as amended (the Form S-3,
Registration No. 33-52381)...............................................
3.2 Amended and Restated By-laws of RJR Nabisco Holdings Corp., as amended,
effective January 20, 1994 (incorporated by reference to Exhibit 3.2 to
the 1993 Form 10-K)....................................................
4.1 Credit Agreement dated as of December 1, 1991, among RJR Nabisco Holdings
Corp., RJR Nabisco Holdings Group, Inc., RJR Nabisco Capital Corp., RJR
Nabisco, Inc. and the lending institutions party thereto (incorporated
by reference to Exhibit 4.1 of the 1991 Form 10-K) (the "Credit
Agreement")............................................................
4.1(a) Amendment No. 1 to Credit Agreement, dated as of October 21, 1992
(incorporated by reference to Exhibit 4.1(a) of the Annual Report on
Form 10-K of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the
fiscal year ended December 31, 1992, File Nos. 1-10215 and 1-6388).....
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ---------- ------------------------------------------------------------------------- --------
<C> <S> <C>
4.1(b) Amendment No. 2 to Credit Agreement, dated as of March 4, 1993
(incorporated by reference to Exhibit 4.2 of the March 1993 Form
10-Q)..................................................................
4.1(c) Amendment No. 3 to Credit Agreement, dated as of October 12, 1993
(incorporated by reference to Exhibit 10.1 of the Quarterly Report on
Form 10-Q of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the
quarter ended September 30, 1993 (the "September 1993 Form 10-Q")......
4.2 Credit Agreement dated as of April 5, 1993 among RJR Nabisco Holdings
Corp., RJR Nabisco, Inc. and the lending institutions party thereto
(incorporated by reference to Exhibit 4.3 of the March 1993 Form 10-Q)
(the "1993 Credit Agreement")..........................................
4.2(a) Amendment No. 1 to 1993 Credit Agreement, dated October 12, 1993
(incorporated by reference to Exhibit 10.1 of the September 1993
10-Q)..................................................................
4.3 Indenture dated as of April 25, 1991 among RJR Nabisco Capital Corp., RJR
Nabisco Holdings Corp., RJR Nabisco Holdings Group, Inc., RJR Nabisco,
Inc. and Citibank, N.A., as Trustee, relating to the 10 1/2% Senior
Notes due 1998, including form of securities. (incorporated by
reference to Exhibit 4.5 to Amendment No. 7 filed on August 11, 1993,
to the Registration Statement on Form S-3 of RJR Nabisco Holdings
Corp., Registration No. 33-58930, filed March 1, 1993, as amended (the
"Form S-3, Registration No. 33-58930"))................................
4.3(a) First Supplemental Indenture dated as of May 18, 1992 among RJR Nabisco,
Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group, Inc. and
Citibank, N.A., as Trustee, relating to the 10 1/2% Senior Notes due
1998 (incorporated by reference to Exhibit 4.5(a) to the Form S-3,
Registration No. 33-58930).............................................
4.5 Indenture dated as of May 22, 1989 among RJR Holdings Capital Corp., RJR
Holdings Corp., RJR Holdings Group, Inc., RJR Nabisco, Inc. and
Security Pacific National Trust Company (New York), as Trustee,
relating to the 15% Payment-in-Kind Subordinated Debentures due 2001,
including form of securities (incorporated by reference to Exhibit 4.6
to the Form S-3, Registration No. 33-58930)............................
4.5(a) First Supplemental Indenture dated as of May 18, 1992 among RJR Nabisco,
Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group, Inc. and
Security Pacific National Trust Company (New York), as Trustee,
relating to the 15% Payment-in-Kind Subordinated Debentures due 2001
(incorporated by reference to Exhibit 4.6(a) to the Form S-3,
Registration No. 33-58930).............................................
4.6 Indenture dated as of May 22, 1989 among RJR Holdings Capital Corp., RJR
Holdings Corp., RJR Holdings Group, Inc., RJR Nabisco, Inc. and
Security Pacific National Trust Company (New York), as Trustee,
relating to the Subordinated Discount Debentures due 2001, including
form of securities (incorporated by reference to Exhibit 4.7 to the
Form S-3, Registration No. 33-58930)...................................
4.6(a) First Supplemental Indenture dated as of May 18, 1992 among RJR Nabisco,
Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group, Inc. and
Security Pacific National Trust Company (New York), as Trustee,
relating to the Subordinated Discount Debentures due 2001 (incorporated
by reference to Exhibit 4.7(a) to the Form S-3, Registration No.
33-58930)..............................................................
4.7 Indenture dated as of May 22, 1989 among RJR Holdings Capital Corp., RJR
Holdings Corp., RJR Holdings Group, Inc., RJR Nabisco, Inc. and U.S.
Trust Company of California, N.A., as Trustee, relating to the 13 1/2%
Subordinated Debentures due 2001, including form of securities
(incorporated by reference to Exhibit 4.8 to the Form S-3, Registration
No. 33-58930)............................................................
4.7(a) First Supplemental Indenture dated as of May 18, 1992 among RJR Nabisco,
Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group, Inc. and
Security Pacific National Trust Company (New York), as trustee,
relating to the 13 1/2% Subordinated Debentures due 2001 (incorporated
by reference to Exhibit 4.8(a) to the Form S-3, Registration No.
33-58930)..............................................................
*5. Opinion of Jo-Ann Ford regarding the legality of the securities being
registered.............................................................
10.1 Registration Rights Agreement, dated as of February 9, 1989, among RJR
Holdings Corp., RJR Associates, L.P., KKR Partners II, L.P., Drexel
Burnham Lambert Incorporated and Merrill Lynch & Co. (incorporated by
reference to Exhibit 4.3 to the Registration Statement on Form S-1 of
RJR Holdings Corp., Registration No. 33-29401, filed on June 20, 1989,
as amended)............................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ---------- ------------------------------------------------------------------------- --------
<C> <S> <C>
10.28 Registration Rights Agreement (Common Stock), dated as of July 15, 1990,
between RJR Nabisco Holdings Corp. and Whitehall Associates, L.P.
(incorporated by reference to Exhibit 4.5 to the Form S-4, Registration
No. 33-36070)..........................................................
*10.50 Indemnification Agreement, dated as of October 4, 1994, among RJR Nabisco
Holdings Corp., Whitehall Associates, L.P., Borden Acquisition Corp.
and Borden, Inc........................................................
21 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21
of the 1993 Form 10-K).................................................
**23.1 Consent of Deloitte & Touche LLP, Independent Auditors for RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc....................................
**23.2 Consent of Price Waterhouse LLP, Independent Accountants for Borden,
Inc....................................................................
*23.3 Consent of Jo-Ann Ford (included in her opinion filed as Exhibit 5.1)....
**24.1 Powers of Attorney of Charles M. Harper, Stephen R. Wilson, Robert S.
Roath, John T. Chain, Jr., John R. Clendenin, James H. Greene, Jr., H.
John Greeniaus, James W. Johnston, Henry R. Kravis, John G. Medlin,
Jr., Paul E. Raether, Lawrence R. Ricciardi, Rozanne L. Ridgway,
Clifton S. Robbins and Scott M. Stuart.................................
*99.1 Form of Letter of Transmittal............................................
*99.2 Form of Notice of Guaranteed Delivery....................................
*99.3 Form of Letter from the Dealer Manager to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees..............................
*99.4 Form of letter to clients for use by Brokers, Dealers, Commercial Banks
and Other Nominees.....................................................
*99.5 Form of Guidelines for Certification of Taxpayer Indentification Number
on Substitute Form W-9.................................................
</TABLE>
- ------------
* To be filed by amendment.
** Filed herewith.
EXHIBIT 2.1
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-
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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
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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,
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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
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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
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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.
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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
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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
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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:
-----------
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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 I. Miller
------------------------------
Name: Allan I. 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 2.2
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 I. Miller
-------------------
Name: Allan I. 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 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of RJR Nabisco Holdings Corp. ("Holdings") on Form S-4 (the "Registration
Statement") of (1) our report dated February 1, 1994 (except with respect to the
subsequent events discussed in Note 17, as to which the date is April 13, 1994),
included in Holdings' Registration Statement No. 33-52381 on Form S-3 ("Form
S-3"), at the time such Form S-3 was declared effective by the Commission and
(2) our report dated February 1, 1994 (except with respect to the subsequent
event discussed in Note 17, as to which the date is February 24, 1994),
appearing in the Annual Report on Form 10-K of Holdings for the year ended
December 31, 1993.
We also consent to the reference to us under the headings "Summary
Historical Consolidated Financial Data", "Selected Historical Consolidated
Financial Data" and "Experts" in the Offering Circular/Prospectus, which is part
of this Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
October 4, 1994
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of RJR Nabisco
Holdings Corp. of our report dated March 20, 1994, which appears on page 41 of
Borden, Inc.'s 1993 Annual Report to Shareholders, which is incorporated by
reference in its Annual Report on Form 10-K for the year ended December 31,
1993. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page 12 of such Annual Report on
Form 10-K. We also consent to the reference to us under the headings "Experts"
and "Borden, Inc. Selected Historical Consolidated Financial Data" in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Borden, Inc. Selected Historical Consolidated
Financial Data."
PRICE WATERHOUSE LLP
Columbus, Ohio
October 4, 1994
Exhibit 24.1
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each of the
undersigned, being a director or officer, or both, of RJR NABISCO
HOLDINGS CORP., a Delaware corporation (the "Company"), do hereby
make, constitute and appoint Jo-Ann Ford, Joan E. Gmora and
Lawrence R. Ricciardi, and each of them, attorneys-in-fact and
agents of the undersigned with full power and authority of
substitution and resubstitution, in any and all capacities, to
execute for and on behalf of the undersigned the Registration
Statement on Form S-4 relating to the shares of common stock of
the Company held by Kohlberg Kravis Roberts & Co. to be exchanged
for shares of Borden, Inc., and any and all pre-effective and
post-effective amendments or supplements to the foregoing
Registration Statement and any other documents and instruments
incidental thereto, and to deliver and file the same, with all
exhibits thereto, and all documents and instruments in connection
therewith, with the Securities and Exchange Commission, and with
each exchange on which any class of securities of the Company is
registered, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing that said attorneys-in-fact and agents, and
each of them, deem advisable or necessary to enable the Company
to effectuate the intents and purposes hereof, and the
undersigned hereby fully ratify and confirm all that said
attorneys-in-fact and agents, or any of them, or their or his or
her substitute or substitutes, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed
his or her name, this 4th day of October, 1994.
/s/ Charles M. Harper Chairman of the Board and Chief
--------------------------
Charles M. Harper Executive Officer, Director
/s/ Stephen R. Wilson Executive Vice President and Chief
--------------------------
Stephen R. Wilson Financial Officer
/s/ Robert S. Roath Senior Vice President and Controller
--------------------------
Robert S. Roath
<PAGE>
Page 2
/s/ John T. Chain, Jr. Director
--------------------------
John T. Chain, Jr.
/s/ John L. Clendenin Director
--------------------------
John L. Clendenin
/s/ James H. Greene, Jr. Director
--------------------------
James H. Greene, Jr.
/s/ H. John Greeniaus Director
--------------------------
H. John Greeniaus
/s/ James W. Johnston Director
--------------------------
James W. Johnston
/s/ Henry R. Kravis Director
--------------------------
Henry R. Kravis
/s/ John G. Medlin, Jr. Director
--------------------------
John G. Medlin, Jr.
/s/ Paul E. Raether Director
--------------------------
Paul E. Raether
/s/ Lawrence R. Ricciardi Director
--------------------------
Lawrence R. Ricciardi
/s/ Rozanne L. Ridgway Director
--------------------------
Rozanne L. Ridgway
/s/ Clifton S. Robbins Director
--------------------------
Clifton S. Robbins
Director
--------------------------
George R. Roberts
/s/ Scott M. Stuart Director
--------------------------
Scott M. Stuart
Director
--------------------------
Michael T. Tokarz
