SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
Nabisco Group Holdings Corp.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share, of Nabisco Holdings Corp.
(2) Aggregate number of securities to which transaction applies:
213,250,000 shares
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$55.00 per share
(4) Proposed maximum aggregate value of transaction:
$11,728,750,000*
(5) Total fee paid:
$2,345,750
(*) Represents the aggregate cash to be received by the Registrant from
the sale of the Common Stock.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[PRELIMINARY DRAFT DATED SEPTEMBER 1, 2000, SUBJECT TO COMPLETION]
[NABISCO GROUP HOLDINGS LOGO]
TRANSACTIONS PROPOSED - YOUR VOTE IS VERY IMPORTANT
Dear Stockholder:
The Board of Directors of Nabisco Group Holdings Corp. has approved two
major transactions:
(1) the sale of Nabisco Group Holdings Corp.'s 80.5% interest in Nabisco
Holdings Corp. to Philip Morris Companies Inc., and
(2) the subsequent acquisition of Nabisco Group Holdings Corp. by R.J.
Reynolds Tobacco Holdings, Inc. for $30 per NGH share.
We are asking stockholders of Nabisco Group Holdings Corp. to approve each
of these transactions, which are more fully described in this booklet.
We have scheduled a special meeting for our stockholders to vote on each
of the transactions. The date, time and place of the meeting are:
o, 2000
10:30 a.m., Eastern Time
Hotel DuPont
11th and Market Streets
Wilmington, Delaware 19801
Your vote is very important. Please vote by proxy, telephone or internet
FOR each proposed transaction today. We appreciate your support.
Sincerely,
[SIGNATURE TO COME] [SIGNATURE TO COME]
Steven F. Goldstone James M. Kilts
Chairman President and Chief Executive Officer
Important: your proxy card is enclosed in the address window of the envelope
containing this material. If you plan to attend the special meeting in person
please follow the procedures set forth on page IV-3 to obtain an admission
ticket. Voting your proxy by telephone or through the internet is available for
this special meeting. See page I-2 or IV-2 for more information.
Proxy Statement dated o, 2000, and first mailed to stockholders
on or about o, 2000.
<PAGE>
[NABISCO GROUP HOLDINGS LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF NABISCO GROUP HOLDINGS CORP.
Time:
10:30 a.m., Eastern Time
Date:
o, 2000
Place:
Hotel DuPont
11th and Market Streets
Wilmington, Delaware 19801
Purpose:
o Vote on the sale of Nabisco Group Holdings Corp.'s 80.5% interest in
Nabisco Holdings Corp. to Philip Morris Companies, Inc.
o Vote on the subsequent acquisition of Nabisco Group Holdings Corp. by
R.J. Reynolds Tobacco Holdings, Inc. for $30 per share
o Conduct other business if properly raised
Only stockholders of record on August 29, 2000 may vote at the meeting.
Only stockholders or their proxy holders and guests of Nabisco Group
Holdings Corp. may attend the meeting.
Your vote is important. Please complete, sign, date and return your proxy
card in the enclosed envelope promptly, or authorize the individuals named
on your proxy card to vote your shares by calling the toll-free telephone
number or using the internet as described in the instructions included
with your proxy card.
Sincerely,
[SIGNATURE TO COME]
James A. Kirkman III
Senior Vice President, General Counsel
and Secretary
Parsippany, New Jersey
o, 2000
<PAGE>
TABLE OF CONTENTS
CHAPTER ONE - SUMMARY AND TRANSACTIONS OVERVIEW
SUMMARY TERM SHEET...........................................................I-1
SUMMARY......................................................................I-3
The Transactions........................................................I-3
The Companies...........................................................I-3
Reasons for the Transactions............................................I-3
Recommendation to Stockholders..........................................I-4
Interests of Officers and Directors in the
Transactions.......................................................I-4
Sale of Nabisco Holdings Shares.........................................I-4
Acquisition of NGH by RJR...............................................I-6
TRANSACTIONS OVERVIEW........................................................I-9
General.................................................................I-9
Company Information and the 1999
Restructuring.....................................................I-10
Background of the Transactions.........................................I-10
NGH's Reasons for the Transactions;
Recommendation of the NGH Board
of Directors......................................................I-13
INTERESTS OF OFFICERS AND DIRECTORS IN
THE TRANSACTIONS.......................................................I-16
CHAPTER TWO- SALE OF NABISCO HOLDINGS SHARES
NABISCO HOLDINGS MERGER
AGREEMENT..............................................................II-1
The Nabisco Holdings Merger............................................II-1
Completion of the Nabisco Holdings
Merger............................................................II-1
Merger Consideration...................................................II-1
Stock Options..........................................................II-1
Covenants..............................................................II-2
Representations and Warranties.........................................II-5
Conditions to the Nabisco Holdings Merger..............................II-5
Termination............................................................II-6
Certain Fees and Expenses..............................................II-7
Amendments and Waivers.................................................II-8
OTHER MATTERS...............................................................II-8
Financing of the Merger................................................II-8
Regulatory Matters.....................................................II-8
Appraisal Rights.......................................................II-9
NGH VOTING AND INDEMNITY
AGREEMENT..............................................................II-9
Covenants..............................................................II-9
Termination...........................................................II-10
Certain Fees and Expenses.............................................II-11
Indemnification.......................................................II-11
OPINIONS OF FINANCIAL ADVISORS.............................................II-12
Opinion of UBS Warburg LLC............................................II-12
Opinion of Morgan Stanley & Co.
Incorporated.....................................................II-16
Fee Arrangements......................................................II-21
CHAPTER THREE - ACQUISITION OF NGH BY RJR
NGH MERGER AGREEMENT.......................................................III-1
The NGH Merger........................................................III-1
Completion of the NGH Merger..........................................III-1
Merger Consideration..................................................III-1
Surrender of Certificates and Payment
Procedures.......................................................III-1
Stock Options.........................................................III-2
Covenants.............................................................III-2
Representations and Warranties........................................III-4
Conditions to the NGH Merger..........................................III-5
Termination...........................................................III-6
Certain Fees and Expenses.............................................III-7
Amendments and Waivers................................................III-8
OTHER MATTERS..............................................................III-8
Regulatory Matters....................................................III-8
Stockholder Rights Plan ..............................................III-8
Material United States Federal Income Tax
Consequences to NGH Stockholders
of the NGH Merger................................................III-8
Litigation...........................................................III-10
Appraisal Rights.....................................................III-10
CHAPTER FOUR- INFORMATION ABOUT THE MEETING AND VOTING
Matters Relating to the Meeting.......................................IV-1
Vote Necessary to Approve Proposals...................................IV-2
Proxies...............................................................IV-2
Other Business; Adjournments..........................................IV-4
Security Ownership of Management......................................IV-4
Security Ownership of Certain Beneficial
Owners...........................................................IV-6
<PAGE>
CHAPTER FIVE - ADDITIONAL INFORMATION FOR STOCKHOLDERS
FUTURE STOCKHOLDER PROPOSALS................................................V-1
WHERE YOU CAN FIND MORE
INFORMATION............................................................V-1
ANNEXES
Annex A........ Nabisco Holdings Merger Agreement
Annex B........ NGH Voting and Indemnity Agreement
Annex C........ NGH Merger Agreement
Annex D........ Opinion of UBS Warburg LLC
Annex E........ Opinion of Morgan Stanley & Co. Incorporated
Annex F........ Section 262 of the Delaware General Corporation Law
(Appraisal Rights)
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Chapter One - Summary and Transactions Overview
CHAPTER ONE
SUMMARY AND TRANSACTIONS OVERVIEW
SUMMARY TERM SHEET
Q: What transactions are being proposed?
A: Two transactions are being proposed:
o the sale of Nabisco Group Holdings Corp.'s 80.5% interest in Nabisco
Holdings Corp. to Philip Morris Companies Inc. and
o the subsequent acquisition of Nabisco Group Holdings Corp. by R.J.
Reynolds Tobacco Holdings, Inc. for $30 per share.
Q: What are the reasons for the transactions?
A: In order to maximize shareholder value, the Board conducted an auction for
the sale of Nabisco Group Holdings and Nabisco Holdings. Your Board of
Directors believes that each of the proposed transactions is fair to and
in the best interests of the company's stockholders; and that the
transactions will provide value to stockholders substantially greater than
the trading prices of Nabisco Group Holdings stock prior to the
announcement of the transactions. An important factor in the Board's
determinations was the broad scope of the auction conducted by management
and outside advisors for the sale of Nabisco Group Holdings and Nabisco
Holdings.
Q: What will I receive in the transactions?
A: After the acquisition of Nabisco Group Holdings is completed, you will
receive $30 in exchange for each of your shares of Nabisco Group Holdings.
Q: When is the stockholder meeting?
A: o, 2000.
Q: What vote of stockholders is required to approve the transactions?
A: Stockholders will vote separately on each transaction. Each transaction
requires approval by holders of a majority of the outstanding shares of
Nabisco Group Holdings common stock.
Q: Are the transactions conditioned on each other?
A: R.J. Reynolds and Nabisco Group Holdings are not obligated to, and will
not, complete the Nabisco Group Holdings transaction unless the Nabisco
Holdings transaction or a comparable acquisition transaction with respect
to Nabisco Holdings is completed. The Nabisco Holdings transaction may be
completed whether or not the Nabisco Group Holdings transaction is
completed.
Q: What will happen if Nabisco Group Holdings sells its Nabisco Holdings
shares, but is not subsequently acquired by R.J. Reynolds?
A: The Nabisco Holdings shares constitute essentially all of the assets of
Nabisco Group Holdings. After the sale of these shares, Nabisco Group
Holdings would have approximately $11.728 billion in cash proceeds from
the sale and estimated net liabilities of approximately $450 million,
before taking into account any potential tax benefits.
If the acquisition of Nabisco Group Holdings by R.J. Reynolds is not
completed, the Board of Directors of Nabisco Group Holdings will,
consistent with its fiduciary duties and taking into account the legal
environment in which it operates, including the risks of potential tobacco
litigation, explore alternative uses for or investment of the cash
proceeds from the sale of the Nabisco Holdings shares. We can give no
assurance as to the nature, timing or value of these alternatives, and we
believe that the acquisition of Nabisco Group Holdings by R.J. Reynolds
provides the highest value to Nabisco Group Holdings stockholders that
could reasonably be expected to be achieved compared to any other possible
transaction.
Q: What should stockholders do now?
A: You should complete, sign, date and mail your proxy card in the enclosed
return envelope or vote by telephone or the internet as soon as possible
so that your shares may be represented at the meeting. In order to assure
that your vote is obtained, please give your proxy by following the
instructions on your proxy card even if you
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Chapter One - Summary and Transactions Overview
currently plan to attend the meeting in person. The Board of Directors of
Nabisco Group Holdings recommends that you vote in favor of each of the
transactions.
Q: How do I vote by telephone or over the internet?
A: Telephone and internet voting are available as follows:
o by telephone, call 1-877-PRX-VOTE (1-877-779-8683) in the United
States or 1-201-536-8073 outside the United States;
or
o by internet, visit the website www.eproxyvote.com/ngh
When you vote by telephone or internet, simply follow the instructions
provided. You will need to provide your personal identification number
from your proxy card in order to vote by either of these methods. If your
shares are held in the name of a bank or broker, follow the voting
instructions you receive on your proxy card. Telephone and internet voting
is offered to stockholders owning shares through most banks and brokers.
Q: What do I do if I want to change my vote?
A: Just send in a later-dated, signed proxy card to our Secretary or vote
again by telephone or the internet before the meeting. Or, you can attend
the meeting in person and vote. You may also revoke your proxy by sending
a notice of revocation to our Secretary at 7 Campus Drive, Parsippany, NJ
07054-0311.
Q: If my shares are held in "street name" by my broker, will my broker vote
my shares for me?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on
the proposals. You should therefore be sure to provide your broker with
instructions on how to vote your shares. If you do not give voting
instructions to your broker, you will, in effect, be voting against the
proposals unless you appear in person at the meeting and vote in favor of
the proposals.
Q: Should I send in my stock certificates now?
A: No. A letter of transmittal for use in surrendering your stock
certificates and obtaining payment for the shares will be sent to you
promptly after the acquisition of Nabisco Group Holdings is completed.
Q: Do I have appraisal rights?
A: If you so choose, you are entitled to exercise appraisal rights in
connection with the acquisition of Nabisco Group Holdings so long as you
do not vote your outstanding shares of NGH common stock in favor of
adoption of the NGH merger agreement and so long as you take all other
steps required to perfect your rights. See "Chapter Three-Other
Matters-Appraisal Rights".
Q: When will the transactions be completed?
A: We are working towards completing the transactions as quickly as possible.
In addition to stockholder approval, we must also obtain regulatory
approvals. We expect to complete the transactions during the fourth
quarter of 2000.
Q: Whom do I call if I have questions about the transactions?
A: If you have any questions, require assistance, or need additional copies
of this information statement or other related materials, please call
MacKenzie Partners, Inc. at 1-800-322-2885.
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<PAGE>
Chapter One - Summary and Transactions Overview
SUMMARY
The following is a summary of the material information from this proxy
statement and may not contain all of the information that is important to you.
To understand the proposed transactions fully and for a more complete
description of the legal terms of the transactions, you should carefully read
this document and the documents to which we have referred you. Additional
information about Nabisco Group Holdings Corp. ("NGH") has been filed with the
Securities and Exchange Commission and is available upon request without
charge; see "Where You Can Find More Information" on page V-1.
The Transactions
This proxy statement relates to two transactions:
(1) the sale of NGH's 80.5% interest in Nabisco Holdings Corp. to Philip
Morris Companies Inc. (the "Nabisco Sale") pursuant to a merger in
which Philip Morris Companies Inc. will acquire all of the
outstanding Nabisco Holdings Corp. common stock for $55 per share
(the "Nabisco Holdings merger"), and
(2) the subsequent acquisition of NGH pursuant to a merger in which R.J.
Reynolds Tobacco Holdings, Inc. will acquire all of the outstanding
NGH common stock for $30 per share (the "NGH merger").
NGH stockholders will receive $30 per NGH share upon completion of these
transactions.
The Companies
Nabisco Group Holdings Corp.
Nabisco Holdings Corp.
7 Campus Drive
Parsippany, NJ 07054-0311
(973) 682-5000
NGH is a holding company which owns 100% of the outstanding Class B common
stock of Nabisco Holdings Corp. ("Nabisco Holdings"), representing
approximately 80.5% of the economic interest and 97.6% of the total voting
power of Nabisco Holdings' outstanding common stock. Nabisco Holdings, through
its operating subsidiaries, is one of the largest food companies in the world,
and the largest manufacturer and marketer of cookies and crackers in the United
States.
Philip Morris Companies Inc.
120 Park Avenue
New York, NY 10017-5592
(917) 663-5000
The first proposed transaction relates to the sale of NGH's 80.5% interest in
Nabisco Holdings to Philip Morris Companies Inc. ("Philip Morris"). This
transaction will be effected through the merger of Nabisco Holdings with a
subsidiary of Philip Morris pursuant to a merger agreement. Philip Morris is a
holding company whose principal wholly-owned subsidiaries, Philip Morris
Incorporated, Philip Morris International Inc., Kraft Foods, Inc. and Miller
Brewing Company, are engaged in the manufacture and sale of various consumer
products. Philip Morris is the largest consumer packaged goods company in the
world.
R.J. Reynolds Tobacco Holdings, Inc.
401 North Main Street
Winston-Salem, NC 27102-2866
(336) 741-5500
The second proposed transaction relates to the acquisition of NGH by R.J.
Reynolds Tobacco Holdings, Inc. ("RJR") after the sale of NGH's 80.5% interest
in Nabisco Holdings. This transaction will be effected through the merger of
NGH with a subsidiary of RJR pursuant to a merger agreement. RJR, a holding
company, owns 100% of the stock of its operating subsidiary, R. J. Reynolds
Tobacco Company ("Reynolds Tobacco"). Reynolds Tobacco is the second largest
cigarette manufacturer in the United States. Reynolds Tobacco's largest selling
cigarette brands, DORAL, CAMEL, WINSTON and SALEM, were four of the top ten
best-selling brands of cigarettes in the United States in 1999.
Reasons for the Transactions
In order to maximize shareholder value, the Board conducted an auction for the
sale of Nabisco Group Holdings and Nabisco Holdings. The Board of Directors of
NGH believes that each of the Nabisco
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Chapter One - Summary and Transactions Overview
Sale and the NGH merger is fair to and in the best interests of NGH's
stockholders; and that the transactions will provide value to stockholders
substantially greater than the trading prices of Nabisco Group Holdings stock
prior to the announcement of the transactions. An important factor in the
Board's determinations was the broad scope of the auction conducted by
management and outside advisors for the sale of NGH and Nabisco Holdings.
To review the reasons for the transactions in greater detail, see pages I-13
through I-15.
Recommendation to Stockholders
Members of the NGH Board of Directors present at the meeting unanimously voted
to recommend and they are recommending that NGH stockholders vote FOR each of
the transactions. All but one member of the NGH Board of Directors attended the
meeting. The absent member was unavailable.
Interests of Officers and Directors in the Transactions
When you consider the Board of Directors' recommendation that NGH stockholders
vote in favor of each of the proposals, you should be aware that a number of
NGH officers and directors may have interests in the transactions that are
different from, or in addition to, yours (see page I-16).
Sale of Nabisco Holdings Shares
The Nabisco Holdings merger agreement and the related NGH voting and indemnity
agreement are attached as Annex A and Annex B to this proxy statement. We
encourage you to read these agreements as they are the legal documents that
govern the sale of the Nabisco Holdings shares.
Consideration
In the Nabisco Holdings merger, each share of Nabisco Holdings common stock
(including all the publicly traded Class A common stock and the 213,250,000
shares of Class B common stock of Nabisco Holdings owned by NGH) will be
exchanged for $55 in cash. The Nabisco Sale represents approximately $11.728
billion in gross proceeds to NGH before giving effect to the liabilities of
NGH.
NGH Stockholder Vote Required to Approve the Nabisco Sale
The Nabisco Sale requires approval by holders of a majority of the outstanding
shares of NGH common stock because the Nabisco Holdings shares constitute
substantially all of the assets of NGH.
NGH has entered into a voting and indemnity agreement with Philip Morris with
respect to the Nabisco Sale. The agreement generally provides that, upon
receiving approval of the Nabisco Sale from the NGH stockholders, NGH will
promptly vote in favor of (or execute a written consent adopting) the Nabisco
Holdings merger. The approval by NGH is the only approval from Nabisco Holdings
stockholders required to complete the Nabisco Holdings merger. The voting and
indemnity agreement is described in Chapter Two.
Opinions of Financial Advisors (see page II-12)
In deciding to approve the Nabisco Sale, NGH's Board of Directors considered
the opinions of NGH's financial advisors. The Board received written opinions
dated June 25, 2000 from each of UBS Warburg LLC and Morgan Stanley & Co.
Incorporated to the effect that the consideration to be received by Nabisco
Holdings stockholders, including NGH, in the Nabisco Holdings merger is fair to
such stockholders from a financial point of view. These opinions are attached
as Annex D and Annex E.
Regulatory Approvals (see page II-8)
The Nabisco Holdings merger cannot be completed until
o the waiting period under the Hart-Scott-Rodino Act has expired or
been terminated; and
o the European Commission approves the merger.
Independent Transaction
The Nabisco Holdings merger is an independent transaction. It will be completed
if the Nabisco Sale is approved by holders of a majority of NGH's outstanding
shares and the other conditions to the
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Chapter One - Summary and Transactions Overview
Nabisco Holdings merger are satisfied. The completion of the Nabisco Holdings
merger is not dependent on the completion of the NGH merger. In the event the
Nabisco Holdings merger is completed and the NGH merger is not completed, NGH
will hold the proceeds of the Nabisco Sale but NGH stockholders will not
immediately receive any cash for their NGH shares.
Conditions to the Nabisco Sale (see page II-5)
The obligation of Nabisco Holdings and Philip Morris to complete the Nabisco
Holdings merger depends upon meeting a number of conditions, including the
following:
o approval by NGH (which, in turn, depends on approval by NGH
stockholders of the Nabisco Sale);
o no law, court order or injunction shall prohibit the Nabisco Holdings
merger;
o receipt of the regulatory approvals we refer to above;
o accuracy as of the closing of the representations and warranties made
by the other party to the extent specified in the Nabisco Holdings
merger agreement; and
o performance in all material respects by the other party of the
obligations required to be performed at or prior to closing.
In addition, Philip Morris's obligation to complete the Nabisco Holdings merger
is subject to receipt of all required consents and approvals of governmental
entities, except those that, if not received, would not have a material adverse
effect on Nabisco Holdings.
Termination of the Nabisco Holdings Merger Agreement (see page II-6)
Nabisco Holdings and Philip Morris may mutually agree at any time prior to the
completion of the Nabisco Holdings merger to terminate the Nabisco Holdings
merger agreement. In addition, either Nabisco Holdings or Philip Morris may
terminate the Nabisco Holdings merger agreement if:
(1) the Nabisco Holdings merger has not been completed by April 30, 2001;
(2) there is a permanent legal prohibition to the completion of the
Nabisco Holdings merger;
(3) NGH stockholders do not approve the Nabisco Sale;
(4) the NGH voting and indemnity agreement has been terminated because
the NGH Board has withdrawn its recommendation of the Nabisco
Holdings merger agreement or NGH has accepted a superior proposal or
breached its obligation to vote in favor of the Nabisco Holdings
merger; or
(5) a change in tax law occurs that would reasonably be expected to
result in specified adverse tax consequences.
Philip Morris may terminate the Nabisco Holdings merger agreement if:
(6) the Nabisco Holdings Board fails to recommend the Nabisco Holdings
merger, withdraws or modifies in a manner adverse to Philip Morris
its approval or recommendation of the Nabisco Holdings merger or
approves or recommends a superior proposal relating to an acquisition
of Nabisco Holdings;
(7) Nabisco Holdings enters into or announces its intention to enter into
a definitive agreement with respect to a superior proposal relating
to an acquisition of Nabisco Holdings; or
(8) Nabisco Holdings fails to perform in any material respect any
material obligation under the Nabisco Holdings merger agreement, or
materially breaches its representations and warranties.
Nabisco Holdings may terminate the Nabisco Holdings merger agreement if:
(9) its Board authorizes Nabisco Holdings to enter into a written
agreement concerning a superior proposal with respect to Nabisco
Holdings, so long as Nabisco Holdings has complied with the
non-solicitation, board recommendation, notice, negotiation and
termination fee provisions of the Nabisco Holdings merger agreement
and Philip Morris has not made a definitive, binding offer that is at
least as favorable to the Nabisco Holdings stockholders as the
superior proposal; or
(10) Philip Morris fails to perform in any material respect any material
obligation under the Nabisco Holdings merger agreement or materially
breaches its representations and warranties.
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Chapter One - Summary and Transactions Overview
Termination Fees and Expense Reimbursement (see page II-7)
Nabisco Holdings must pay Philip Morris a termination fee of $445 million if:
o the Nabisco Holdings merger agreement terminates as described in
items (6), (7) or (9) above;
o the Nabisco Holdings merger agreement terminates as described in item
(8) above, if at the time of termination a third party has made an
acquisition proposal relating to an acquisition of Nabisco Holdings
and within nine months after termination of the Nabisco Holdings
merger agreement, Nabisco Holdings enters into a definitive agreement
relating to any acquisition proposal or such a transaction is
completed; or
o the Nabisco Holdings merger agreement terminates as described in
items (3) or (4) above and prior to the NGH stockholder meeting, a
third party or Nabisco Holdings has publicly announced an acquisition
proposal relating to the acquisition of Nabisco Holdings and within
nine months after termination of the Nabisco Holdings merger
agreement, Nabisco Holdings enters into a definitive agreement
relating to any acquisition proposal or such a transaction is
completed.
Nabisco Holdings must pay Philip Morris up to $30 million for Philip Morris's
transaction-related expenses if:
o the Nabisco Holdings merger agreement terminates as described in item
(8) above, if at the time of termination, a third party has made an
acquisition proposal for Nabisco Holdings; or
o the Nabisco Holdings merger agreement terminates as described in item
(3) above.
The expense reimbursement payment would reduce the $445 million payment if it
becomes payable.
Philip Morris must pay Nabisco Holdings up to $30 million for Nabisco Holdings'
transaction-related expenses if the Nabisco Holdings merger agreement
terminates as described in item (10) above.
Appraisal Rights
NGH stockholders do not have any appraisal rights in connection with the
Nabisco Sale.
Acquisition of NGH by RJR
The NGH merger agreement is attached as Annex C to this proxy statement. We
encourage you to read the NGH merger agreement as it is the legal document that
governs the acquisition of NGH.
Consideration
In the NGH merger, NGH stockholders will receive $30 in exchange for each share
of NGH common stock.
NGH Stockholder Vote Required to Approve the NGH Merger
The NGH merger requires approval by holders of a majority of the outstanding
shares of NGH common stock.
Regulatory Approvals
The NGH merger cannot be completed until the applicable waiting period under
the Hart-Scott-Rodino Act has expired or been terminated.
NGH Merger Conditioned on Nabisco Sale
The NGH merger is conditioned on completion of the Nabisco Sale or a comparable
acquisition transaction involving Nabisco Holdings. If no such transaction
occurs, NGH and RJR will not be obligated to, and will not, proceed with the
NGH merger.
Other Conditions to the NGH Merger (see page III-5)
The obligation of NGH and RJR to complete the NGH merger depends upon meeting a
number of conditions, including the following:
o completion of the Nabisco Holdings merger, or a comparable
acquisition transaction, as discussed above;
o approval by the stockholders of NGH;
o no law, court order, verdict or injunction shall (1) prohibit the NGH
merger or (2)
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Chapter One - Summary and Transactions Overview
cause completion of the NGH merger to constitute a breach of the
fiduciary duties of the Board of Directors of either party;
o expiration or termination of the Hart-Scott-Rodino Act waiting
period;
o accuracy as of the closing of the representations and warranties made
by the other party to the extent specified in the NGH merger
agreement; and
o performance in all material respects by the other party of the
obligations required to be performed at or prior to closing.
RJR's obligation to complete the NGH merger is subject to additional
conditions, including:
o NGH must have at least $11.728 billion (less transaction costs) in
cash in its bank accounts; and
o NGH must have complied with its covenant to require Nabisco Holdings
to pay its customary quarterly cash dividend prior to the time NGH's
customary quarterly cash dividend is due.
Termination of the NGH Merger Agreement (see page III-6)
NGH and RJR may mutually agree at any time prior to the completion of the NGH
merger to terminate the NGH merger agreement. In addition, either NGH or RJR
may terminate the NGH merger agreement if:
(1) the NGH merger has not been completed by April 30, 2001 (or such
later date on which any agreement relating to an alternative Nabisco
Holdings merger shall terminate);
(2) there is a permanent legal prohibition to the completion of the NGH
merger;
(3) NGH stockholders do not adopt the NGH merger agreement;
(4) the Nabisco Holdings merger agreement has been terminated for any
reason other than acceptance by Nabisco Holdings of a superior
proposal;
(5) the information set forth in representation letters supporting the
tax opinion of Davis Polk & Wardwell delivered in connection with the
transactions is not true in all material respects; or
(6) a change in tax law occurs that would reasonably be expected to
result in specified adverse tax consequences.
RJR may terminate the NGH merger agreement if:
(7) the NGH Board fails to recommend the NGH merger, withdraws or
modifies in a manner adverse to RJR its approval or recommendation of
the NGH merger or approves or recommends a superior proposal;
(8) NGH enters into or announces its intention to enter into a definitive
agreement with respect to a superior proposal;
(9) NGH fails to perform in any material respect any material obligation
under the NGH merger agreement, or materially breaches its
representations and warranties; or
(10) a law, court order, verdict or injunction shall cause completion of
the NGH merger to constitute a breach of the fiduciary duties of the
Board of Directors of RJR.
NGH may terminate the NGH merger agreement if:
(11) its Board authorizes NGH to enter into a written agreement concerning
a superior proposal with respect to NGH, so long as NGH has complied
with the non-solicitation, board recommendation, notice, negotiation
and termination fee provisions of the NGH merger agreement and RJR
has not made a definitive, binding offer that is at least as
favorable to the NGH stockholders as the superior proposal;
(12) RJR fails to perform in any material respect any material obligation
under the NGH merger agreement, or materially breaches any of its
representations and warranties; or
(13) a law, court order, verdict or injunction shall cause completion of
the NGH merger to constitute a breach of the fiduciary duties of the
Board of Directors of NGH.
Termination Fees and Expense Reimbursement (see page III-7)
NGH must pay RJR a termination fee of $300 million if:
o the NGH merger agreement terminates as described in items (7), (8),
(11) or (13) above;
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Chapter One - Summary and Transactions Overview
o the NGH merger agreement terminates as described in item (9) above,
if at the time of termination a third party has made an acquisition
proposal and within nine months after termination of the NGH merger
agreement, NGH enters into a definitive agreement relating to any
acquisition proposal or such a transaction is completed;
o the NGH merger agreement terminates as described in item (3) above
and prior to the NGH stockholder meeting, a third party or NGH has
publicly announced an acquisition proposal and within nine months
after termination of the NGH merger agreement, NGH enters into a
definitive agreement relating to any acquisition proposal or such a
transaction is completed; or
o the NGH merger agreement terminates as described in item (4) above
and at such time a third party has made an acquisition proposal with
respect to NGH and within nine months after termination of the NGH
merger agreement, NGH enters into a definitive agreement relating to
any acquisition proposal with respect to NGH or such a transaction is
completed.
NGH must pay RJR up to $30 million for RJR's transaction-related expenses if:
o the NGH merger agreement terminates as described in item (9) above,
if at the time of termination, a third party has made an acquisition
proposal for NGH; or
o the NGH merger agreement terminates as described in item (3) above.
The expense reimbursement payment would reduce the $300 million payment if it
becomes payable.
RJR must pay NGH up to $30 million for NGH's transaction-related expenses if
the NGH merger agreement terminates as described in item (12) above.
Material U.S. Federal Income Tax Consequences to NGH Stockholders of the NGH
Merger (see page III-8)
The receipt by an NGH stockholder of cash for NGH shares will be a taxable
transaction for United States federal income tax purposes. An NGH stockholder
generally will recognize gain or loss in an amount equal to the difference
between the cash received by the stockholder and the stockholder's tax basis in
the NGH shares surrendered in the NGH merger. That gain or loss will be a
capital gain or loss if the NGH shares are held as a capital asset by the NGH
stockholder.
Appraisal Rights (see page III-10)
NGH stockholders will be entitled to appraisal rights under Section 262 of the
Delaware General Corporation Law in connection with the NGH merger so long as
such stockholder does not vote its outstanding shares of NGH common stock in
favor of adoption of the NGH merger agreement and so long as such stockholder
takes all steps necessary to perfect such stockholder's rights. Section 262 is
reprinted in its entirety as Annex F to this proxy statement.
Annex F should be reviewed carefully by anyone who wishes to exercise statutory
appraisal rights or who wishes to preserve the right to do so, because failure
to comply strictly with the procedures set forth in Annex F may result in the
loss of appraisal rights.
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Chapter One - Summary and Transactions Overview
TRANSACTIONS OVERVIEW
General
NGH's Board of Directors is using this proxy statement to solicit proxies
from the stockholders of NGH for use at the special meeting. At the special
meeting, NGH stockholders will vote on two transactions:
o the sale of NGH's 80.5% interest in Nabisco Holdings to Philip Morris
for $55 per Nabisco Holdings share; and
o the subsequent acquisition of NGH by RJR for $30 per share
(collectively, the "transactions").
The NGH Board of Directors has approved, and recommends that NGH
stockholders approve, the sale of all 213,250,000 shares of Class B common
stock of Nabisco Holdings currently owned by NGH (the "Nabisco Sale"). We are
seeking approval from NGH stockholders for this transaction because it
constitutes the disposition of substantially all of the assets of NGH. Although
none of the executive officers or directors of NGH has entered into any voting
agreement with respect to the transactions, all such executive officers and
directors have indicated their intention to vote their shares in favor of the
transactions.
The proposed Nabisco Sale would occur pursuant to the Agreement and Plan
of Merger dated as of June 25, 2000 among Nabisco Holdings, Philip Morris and
Strike Acquisition Corp., a wholly-owned subsidiary of Philip Morris (the
"Nabisco Holdings merger agreement"). As more fully described in Chapter Two of
this proxy statement, under this agreement all outstanding shares of Nabisco
Holdings common stock - consisting of the Class A shares held by Nabisco
Holdings' public stockholders and the Class B shares held by NGH - will at the
completion of the Nabisco Holdings merger be converted into the right to
receive $55 per share in cash. This represents approximately $11.728 billion in
gross proceeds to NGH from the sale of its Class B shares of Nabisco Holdings.
If NGH stockholders approve the Nabisco Sale, NGH will act by written
consent, as controlling stockholder of Nabisco Holdings, to adopt the Nabisco
Holdings merger agreement. Since NGH holds 97.6% of the voting power of Nabisco
Holdings, no approval by the Nabisco Holdings' public stockholders will be
required. NGH's obligation to vote in favor of the Nabisco Holdings merger
agreement, and against any competing proposals, is set forth in the NGH voting
and indemnity agreement described in Chapter Two of this proxy statement.
After completion of the Nabisco Holdings merger, NGH will have
approximately $11.728 billion in proceeds from the Nabisco Sale and estimated
net liabilities of approximately $450 million, before taking into account any
potential tax benefits. As more fully described in Chapter Three of this proxy
statement, the NGH Board of Directors has approved, and recommends that NGH
stockholders approve, a second transaction in which NGH would then be acquired
pursuant to an Agreement and Plan of Merger dated as of June 25, 2000 among
NGH, RJR and RJR Acquisition Corp., a wholly-owned subsidiary of RJR (the "NGH
merger agreement"). As more fully described in Chapter Three of this proxy
statement, under this agreement all outstanding shares of NGH common stock will
at the completion of the NGH merger be converted into the right to receive $30
per share in cash. Based on 326,357,077 NGH shares outstanding as of June 30,
2000, this represents approximately $9.8 billion payable for all shares of NGH,
or approximately 86.9% of NGH's anticipated net assets of approximately $11.278
billion after the sale of its Nabisco Holdings shares.
Each of the Nabisco Sale and the NGH merger requires the affirmative vote
of a majority of the outstanding shares of NGH common stock. NGH stockholders
will vote on each transaction separately. Completion of the Nabisco Sale is not
conditioned on approval of the NGH merger. However, the NGH merger cannot and
will not be completed unless the Nabisco Sale, or another comparable
acquisition transaction involving Nabisco Holdings, is completed. Failure by
NGH stockholders to approve the Nabisco Sale means that the Nabisco Sale will
not occur and, unless a comparable acquisition transaction relating to Nabisco
Holdings is approved, NGH and RJR will not be obligated to, and will not,
proceed with the NGH merger.
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Chapter One - Summary and Transactions Overview
Chapter One of this proxy statement provides an overview of the
transactions, including the background of and reasons for the transactions and
the interests of officers and directors in the transactions. Chapter Two
discusses the sale of the Nabisco Holdings shares pursuant to the Nabisco
Holdings merger agreement. Chapter Three discusses the subsequent acquisition
of NGH pursuant to the NGH merger agreement.
Company Information and the 1999 Restructuring
NGH is a holding company which owns 100% of the outstanding shares of
Class B common stock of Nabisco Holdings, representing approximately 80.5% of
the economic interest and 97.6% of the total voting power of Nabisco Holdings'
outstanding common stock. Nabisco Holdings, through its operating subsidiaries,
is one of the largest food companies in the world, and the largest manufacturer
and marketer of cookies and crackers in the United States.
Prior to the second quarter of 1999, NGH also owned 100% of R.J. Reynolds
Tobacco Holdings, Inc. ("RJR"), a holding company which owns R. J. Reynolds
Tobacco Company ("Reynolds Tobacco"). During the second quarter of 1999, a
series of reorganization transactions was completed, as a result of which NGH,
Nabisco Holdings and its subsidiaries are no longer affiliated with RJR,
Reynolds Tobacco and its subsidiaries. The principal transactions that affected
NGH were the following:
o On May 12, 1999, RJR and Reynolds Tobacco completed the sale of their
international tobacco business to Japan Tobacco Inc. for $8 billion,
including the assumption of approximately $200 million of net debt.
Proceeds from the sale were used to reduce debt and for general
corporate purposes.
o On May 18, 1999, pursuant to an internal reorganization, RJR
transferred all of the outstanding Class B common stock of Nabisco
Holdings to its parent, NGH, through a merger transaction (the
"Nabisco Holdings Distribution").
o On June 14, 1999, NGH distributed all of the outstanding shares of
RJR common stock to NGH common stockholders of record as of May 27,
1999 (the "RJR Spinoff").
In connection with the 1999 restructuring, NGH, RJR, Nabisco Holdings and
Reynolds Tobacco entered into a Tax Sharing Agreement dated as of June 14,
1999. The Tax Sharing Agreement contains a number of covenants that are
intended to protect the tax-free nature of the RJR Spinoff and the Nabisco
Holdings Distribution, including a covenant that neither NGH nor Nabisco
Holdings will merge with any other person before June 14, 2001, unless the
companies obtain an opinion of Davis Polk & Wardwell acceptable to RJR and
Reynolds Tobacco, or a ruling from the IRS, in either case to the effect that
the proposed transactions will not cause the RJR Spinoff to be taxable to NGH
or the Nabisco Holdings Distribution to be taxable to RJR or NGH.
Background of the Transactions
On February 4, 2000, Carl C. Icahn and certain of his affiliates ("Icahn")
filed a statement of beneficial ownership on Schedule 13D disclosing that since
December 3, 1999 Icahn had acquired 6.7% of NGH's shares "because [Icahn]
believe[d] that they are undervalued compared to their intrinsic worth". The
statement further indicated that Icahn "may, from time to time, communicate
with [NGH] concerning its affairs, including, possibly, exploring methods to
enhance stockholder value". On March 1, 2000, Icahn filed an amendment to the
Schedule 13D, indicating that Icahn's ownership of NGH had increased to 7.8%.
On March 10, 2000, Icahn & Co., Inc., an Icahn affiliate, sent a letter
notifying NGH of its intention to propose nominations of persons for election
as directors at NGH's 2000 Annual Meeting of Stockholders. By this time, Mr.
Icahn had also increased his beneficial ownership of NGH to 8.9%.
On March 13, 2000, in response to the risk that Mr. Icahn might acquire
control of NGH without paying a fair price, the Board of Directors of NGH
adopted a stockholder rights plan, which would be triggered if any person
acquired 10% or more of NGH's stock. The rights plan provides that if any
person becomes the beneficial owner of
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Chapter One - Summary and Transactions Overview
10% or more of NGH's stock, all stockholders, other than such acquiring person,
will be entitled to receive, for each right held, upon payment of the exercise
price of $50, NGH common stock (or other securities) equal in value to twice
such amount.
On March 30, 2000, Mr. Icahn sent a letter to the Board of Directors of
NGH stating that he was prepared to commence a tender offer for 100 million
shares of NGH's common stock at $13.00 per share, subject to certain
conditions, including that the Board of Directors (1) eliminate NGH's
stockholder rights plan, (2) approve his purchase of shares in the proposed
tender offer for purposes of Section 203 of the Delaware General Corporation
Law and (3) change the 2000 Annual Meeting so that he would be able to vote the
shares he purchased in the proposed tender offer at that meeting. By March 30,
2000, Mr. Icahn had further increased his beneficial ownership of NGH to 9.6%.
Consummation of the proposed offer would have resulted in Icahn owning over 131
million shares in total, or approximately 40% of NGH.
On the same day, NGH issued a press release stating that the proposal
would be reviewed by the Board of Directors and urging that NGH stockholders
take no action pending further announcement from the Board.
On April 3, 2000, the Board of Directors held a special meeting to
consider the proposal set forth in Mr. Icahn's letter. At that meeting, the
Board of Directors unanimously determined that the price offered in Mr. Icahn's
letter was inadequate and that his proposal was not in the best interests of
NGH's stockholders. It was the consensus of the Board that, in the absence of
Mr. Icahn's proposal and threatened proxy contest, NGH and its stockholders
would be best served by continuing with Nabisco Holdings' strategic plan and
staying the course as an independent public company while Nabisco Holdings'
business and financial results continued to improve. However, the Board
concluded, based on the advice of its financial and legal advisors and proxy
solicitor, that continuing with this strategy in the face of Mr. Icahn's
actions presented a substantial risk that Icahn could gain control of NGH
without providing stockholders adequate value, and thus that the Board should
explore all practicable alternatives. As a result, NGH issued a press release
announcing that its Board of Directors had directed its management to explore
all alternatives to maximize stockholder value, including the sale of NGH or
the sale of NGH's 80.5% ownership interest in Nabisco Holdings. NGH also
announced that it had engaged UBS Warburg LLC ("UBS Warburg") and Morgan
Stanley & Co. Incorporated ("Morgan Stanley") as financial advisors.
The following day, Mr. Icahn sent a letter to the Board of Directors of
NGH indicating that, subject to due diligence by himself and his banking
institutions for a three-week period, he would be willing to pay $16 per share
for all outstanding NGH shares in a transaction to be completed on a "friendly"
basis.
NGH responded on April 5, 2000 with a letter to Mr. Icahn inviting him to
join the process then being implemented by NGH's financial advisors, aimed at
assuring that NGH stockholders received the greatest value possible for their
shares. NGH encouraged Mr. Icahn to contact NGH's financial advisors to obtain
a confidentiality agreement and a schedule for submission of bids. NGH noted
that the Board of Directors would consider all bona fide proposals at the
appropriate time.
On April 10, 2000, Icahn executed a confidentiality agreement with NGH.
The agreement contained a limited standstill provision, under which Icahn
agreed to refrain from making an unsolicited offer for NGH or waging a proxy
contest until the earlier of July 15, 2000 and the date a definitive agreement
is executed with any person for the sale of NGH or Nabisco Holdings.
Beginning the first week of April 2000, management and the financial and
legal advisors of NGH conducted an auction process for the sale of NGH and
Nabisco Holdings. The financial and legal advisors contacted numerous potential
bidders. On April 6, 2000, confidentiality agreements were sent to a number of
these parties, and 15 such agreements in total were signed over the following
weeks. In particular, confidentiality agreements were signed with Philip Morris
on April 19, 2000 and with RJR on May 5, 2000. After the confidentiality
agreements were signed, informational packages were sent to potential bidders,
or in the case of Mr. Icahn, to his financing source. Starting on April 12,
2000, NGH's legal and financial advisors began meeting with the potential
bidders who had signed confidentiality agreements to discuss due diligence
issues. Numerous such meetings were held during April and May. During this same
time period, management and the financial and legal advisors of NGH also
explored the
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Chapter One - Summary and Transactions Overview
alternative of converting NGH to a registered investment company following the
sale of its 80.5% interest in Nabisco Holdings. As described below, the Board
subsequently determined that the sale of NGH to RJR at $30 per share would
provide greater value to the stockholders than conversion of NGH to an
investment company.
Representatives of NGH contacted several parties, including RJR, regarding
their possible interest in the acquisition of NGH after the sale of Nabisco
Holdings. NGH's legal advisors met with the legal advisors of one party, other
than RJR, to discuss the prior restructuring transactions and how an
acquisition of NGH would be structured. A meeting between senior management of
NGH and that party followed. The party later reported it would not be
submitting a bid in the auction process, but would continue to evaluate making
a proposal once a definitive agreement for the sale of Nabisco Holdings had
been signed. In addition, because of RJR's status as a party to the Tax Sharing
Agreement described above and as a member of the NGH consolidated tax group
prior to the RJR Spinoff, management and legal advisors of NGH and RJR had a
number of conversations about the impact of the proposed transactions on the
tax treatment of the 1999 restructuring.
On May 11, 2000, the financial advisors received preliminary indications
of interest from a number of bidders. Three parties, including Philip Morris,
submitted bids for Nabisco Holdings. One party submitted a bid for the non-
biscuit portion of Nabisco Holdings' assets. Icahn submitted a bid for NGH; RJR
submitted a bid for NGH after the sale of Nabisco Holdings. These parties were
invited to pursue a further due diligence investigation of NGH and Nabisco
Holdings through management presentations and visits to a data room, each of
which began on May 22 and continued for several weeks thereafter. After May 11,
2000, one additional party presented a preliminary proposal to acquire Nabisco
Holdings, and that party thereafter was permitted to participate in the due
diligence process.
On June 7, 2000, draft merger agreements and a draft NGH voting and
indemnity agreement were sent to the bidders. However, NGH did not enter into
negotiations with any of the seven parties who had submitted preliminary
indications of interest with respect to such indications at that time. Of those
seven parties, three (for reasons that were not disclosed to NGH) did not
submit final bids. Four bidders submitted final bids at the close of business
on June 21, 2000.
In its June 21st bid, Philip Morris offered to purchase 100% of the
capital stock of Nabisco Holdings for $54 per share. On June 22, 2000, Steven
F. Goldstone, Chairman of NGH and Nabisco Holdings, met with Geoffrey Bible,
Chief Executive Officer and Chairman of Philip Morris, and Louis Camilleri,
Chief Financial Officer of Philip Morris, and requested that Philip Morris
increase its bid and assume NGH and Nabisco Holdings transaction costs. After
further negotiations, Mr. Bible stated that Philip Morris would be prepared to
increase its bid to $55 per share and pay up to $50 million in
transaction-related expenses if the parties could come to agreement quickly on
the other terms outlined in Philip Morris's June 21st proposal. In response to
Philip Morris's request for a period of exclusive negotiations, Mr. Goldstone
sent a letter to Philip Morris committing not to negotiate with anyone else for
the sale of Nabisco Holdings until the Board had either accepted or rejected
Philip Morris's offer.
Another all-cash bid for Nabisco Holdings was submitted on June 21st by
another party at a lower price than the Philip Morris bid. On June 23rd, the
financial advisors for this other party contacted Nabisco Holdings' financial
advisors and indicated that they were in the process of putting together a
higher bid. Nabisco Holdings' financial advisors responded that, in view of the
late stage of the auction process, any enhanced bid should be submitted as soon
as possible. No such bid was ever submitted.
In its June 21st bid, RJR offered to purchase 100% of the capital stock of
NGH, after the sale of Nabisco Holdings had been completed, for a specified
percentage of the net after-tax proceeds received by NGH from such sale, which
percentage varied depending on the sale price of Nabisco Holdings. Based on a
$55 per share price for Nabisco Holdings and RJR's assumptions as to NGH's net
liabilities, this bid implied a per share price for NGH of $28.22. On June 22,
2000, a series of discussions occurred between the legal and financial advisors
for NGH and RJR regarding certain of the terms and conditions contained in
RJR's bid. Following these discussions, Mr. Goldstone and Andrew Schindler,
Chairman and Chief Executive Officer of RJR, had several conversations
regarding RJR's offer. During the course of those conversations, Mr. Goldstone
advised Mr. Schindler that he should assume that NGH and Nabisco Holdings would
be accepting an offer for Nabisco Holdings at $55 per share. At the conclusion
of these discussions, Mr. Schindler agreed to increase RJR's bid to $30 per NGH
share.
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Chapter One - Summary and Transactions Overview
In his June 21st bid, Mr. Icahn offered to acquire NGH, assuming no prior
sale of Nabisco Holdings, for a combination of $19 in cash and $9 face value in
two-year 14% notes for each NGH share. The bid contemplated increasing the
leverage at Nabisco Holdings by approximately $3.5 billion in order to finance
a substantial portion of the NGH acquisition. Financing for the transactions
was not committed and was subject to further due diligence by Mr. Icahn's
lenders. On June 22, 2000, Mr. Goldstone telephoned Mr. Icahn to request that
he consider raising his bid for NGH. Later that day, Mr. Icahn sent a letter to
Mr. Goldstone increasing his bid to $19 in cash and $12 face value in two-year
14% notes for each NGH share. Alternatively, Mr. Icahn offered to acquire NGH
after the sale of Nabisco Holdings for 88% of the cash proceeds to NGH from
such sale, net of taxes and other liabilities. This offer was conditioned on
obtaining financing, which Mr. Icahn estimated would take three weeks.
On June 23, 2000, the NGH Board and Nabisco Holdings Board held a joint
meeting to evaluate the bids. The Boards received a presentation from UBS
Warburg and Morgan Stanley regarding the financial aspects of the proposals,
and from Davis Polk & Wardwell regarding the legal aspects of the proposals. At
the conclusion of the meeting, the Boards instructed management, along with the
financial and legal advisors, to pursue negotiations with Philip Morris for the
acquisition of Nabisco Holdings and with RJR for the acquisition of NGH,
subject to final approval by the Boards.
Management and the legal advisors for the parties negotiated the terms of
the definitive agreements in the following days. Davis Polk & Wardwell
delivered the tax opinion required under the Tax Sharing Agreement with respect
to the proposed transactions, and RJR confirmed that such opinion was
acceptable to RJR for purposes of these transactions.
On June 25, 2000, the NGH Board and Nabisco Holdings Board held a joint
meeting to give final consideration to the transactions. Davis Polk & Wardwell
made a presentation regarding the terms and conditions of the Nabisco Holdings
merger agreement with Philip Morris, the related NGH voting and indemnity
agreement and the NGH merger agreement with RJR. Each of UBS Warburg and Morgan
Stanley delivered its oral opinion to the Nabisco Holdings and NGH Boards,
which was subsequently confirmed in writing, that as of such date and based
upon and subject to the matters stated in the opinion, the consideration to be
received in the Nabisco Holdings merger is fair from a financial point of view
to Nabisco Holdings stockholders, including NGH. The NGH Board did not request,
and did not receive, a fairness opinion from its financial advisors relating to
the NGH merger. The NGH Board believed it could conclude on its own that the
RJR acquisition of NGH at $30 per share would provide greater value than the
alternative uses for the cash proceeds from the Nabisco Sale, specifically the
investment of such proceeds and conversion of NGH to a registered investment
company. The NGH Board's conclusion was based, in part, on calculations
prepared by NGH's financial advisors regarding the range of likely discounts to
net asset value at which NGH stock would trade if NGH were converted to a
registered investment company, which range was based on a review of the
historical trading discount of NGH's stock relative to its underlying asset
value. By the affirmative vote of all directors present, the
Nabisco Holdings Board then approved the Nabisco Holdings merger agreement and
the NGH voting and indemnity agreement, and the NGH Board approved the NGH
merger agreement, the NGH voting and indemnity agreement and the sale of the
Nabisco Holdings shares by NGH. NGH issued a press release that afternoon
announcing the transactions.
NGH's Reasons for the Transactions; Recommendation of the NGH Board of Directors
At its June 25, 2000 meeting, members of the NGH Board of Directors
present at the meeting unanimously determined that the NGH merger and the
Nabisco Sale are each fair to and in the best interests of NGH and its
stockholders, and approved the NGH merger agreement, the NGH voting and
indemnity agreement and the Nabisco Sale. Accordingly, the Board of Directors
of NGH recommends that NGH's stockholders vote "FOR" approval of (1) the
Nabisco Sale and (2) the NGH merger. All but one member of the NGH Board of
Directors attended the meeting. The absent member was unavailable.
In the course of reaching its decision to approve the Nabisco Sale, the
NGH Board of Directors consulted with NGH's management, as well as its
financial and legal advisors, and considered the following factors:
(1) the broad scope of the auction for NGH and Nabisco Holdings
conducted by management and the financial and legal advisors, which
involved contacting all parties that were likely to have a potential
interest and providing substantial due diligence information to bidders;
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Chapter One - Summary and Transactions Overview
(2) the fact that the merger consideration of $55 per Nabisco
Holdings share represented a premium of approximately 101% over the
closing price of Nabisco Holdings stock on March 29, 2000, the day prior
to the announcement by Mr. Ichan of his proposal to acquire 100 million
NGH shares for $13 per share;
(3) the opinions of UBS Warburg and Morgan Stanley that, as of June
25, 2000 and based upon and subject to the matters stated in the opinions,
the consideration to be received in the Nabisco Holdings merger is fair,
from a financial point of view, to Nabisco Holdings' stockholders,
including NGH;
(4) the fact that the Nabisco Holdings merger agreement did not
include a financing condition and the Board's conclusion, based on
consultation with its legal and financial advisors and information
provided by Philip Morris, that Philip Morris could reasonably finance the
purchase price for the Nabisco Holdings merger;
(5) the lack of any required approval by Philip Morris stockholders
to complete the Nabisco Holdings merger;
(6) the opinion of Davis Polk & Wardwell that the proposed
transactions will not cause the Nabisco Holdings Distribution or the RJR
Spinoff to be taxable, which opinion was required under the Tax Sharing
Agreement; and
(7) the terms and conditions of the Nabisco Holdings merger agreement
and the NGH voting and indemnity agreement, including the provisions that
permit Nabisco Holdings or NGH to furnish information to and participate
in discussions or negotiations with a third party that has made an
unsolicited acquisition proposal if the applicable Board of Directors
determines in good faith that such an acquisition proposal is likely to
result in a superior proposal (as described under "Chapter Two--Nabisco
Holdings Merger Agreement-Covenants-No Solicitation by Nabisco Holdings")
and to terminate the Nabisco Holdings merger agreement to accept such
superior proposal upon prior notice to, and further negotiations with,
Philip Morris and payment of a $445 million termination fee.
In the course of reaching its decision to approve the NGH merger, the NGH
Board of Directors consulted with NGH's management, as well as its financial
and legal advisors, and considered the following factors:
(1) the broad scope of the auction for NGH and Nabisco Holdings
conducted by management and the financial and legal advisors, which
involved contacting all parties that were likely to have a potential
interest and providing substantial due diligence information to bidders;
(2) the fact that the merger consideration of $30 per NGH share
represented a premium of approximately 222% over the closing price of NGH
stock on March 29, 2000, the day prior to the announcement by Mr. Icahn of
his proposal to acquire 100 million NGH shares for $13 per share;
(3) the historical discount between the trading price of NGH shares
and the value of NGH's 80.5% interest in Nabisco Holdings based on the
trading price for the Class A common stock of Nabisco Holdings, which
discount reached a high of 57.9%, a low of 21.3% and averaged 39.6% since
the RJR Spinoff on June 14, 1999;
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(4) the fact that $30 per NGH share represents a 16.3% discount to
the $55 per share price being paid in the Nabisco Holdings merger,
substantially less than the historical trading discount;*
--------
* To calculate the relative discount of an NGH share to a Nabisco Holdings
share, you need to take into account NGH's 80.5% ownership interest in Nabisco
Holdings and the number of shares outstanding of both companies. If there were
no discount, the price of an NGH share would equal 65.2% of the price of a
Nabisco Holdings share. As such, $30 per NGH share represents a 16.3% discount
to $55 per Nabisco Holdings share because:
($55) x (0.652) = $35.86
$30.00 versus $35.86 -> 16.3% discount
(5) the Board's belief that, while the price offered by Mr. Icahn for
NGH (after the sale of Nabisco Holdings) was comparable to RJR's $30 per
share price after taking into account net liabilities, Mr. Icahn's offer
presented greater risk of non-completion because (x) the offer would have
involved negotiation with Mr. Icahn about the amount of NGH's net
liabilities upon which his offer was based, (y) the offer did not address
the terms and conditions upon which Mr. Icahn would have been willing to
sign a definitive merger agreement, in contrast to the RJR proposal and
(z) statements made by RJR to NGH representatives indicated that there was
a substantial risk that any transaction with Mr. Icahn could give rise to
a dispute with RJR under the Tax Sharing Agreement;
(6) the opinion of Davis Polk & Wardwell that the proposed
transactions will not cause the Nabisco Holdings Distribution or the RJR
Spinoff to be taxable, which opinion was required under the Tax Sharing
Agreement;
(7) the Board's consideration of alternative uses for the cash
proceeds from the Nabisco Sale, specifically, the investment of such cash
proceeds and conversion of NGH to a registered investment company, and its
conclusion (based, in part, upon the views of NGH's financial advisors
regarding the likely range of discounts to net asset value at which the
stock of such an investment company would trade and its knowledge of the
prices at which NGH stock had been trading, which reflected a discount to
its underlying asset value resulting at least in part from the perceived
risks of tobacco litigation) that the sale of NGH at $30 per share
provided greater value to NGH stockholders than such alternative;
(8) the fact that distributing the cash proceeds of the Nabisco Sale
to NGH stockholders would have entailed compliance with the dissolution
and liquidation provisions of the Delaware General Corporation Law, which
could have resulted in a substantial delay of any distribution and the
potential restriction in the transferability of NGH shares pending the
completion of the dissolution procedures; and
(9) the terms and conditions of the NGH merger agreement, including
the provisions that permit NGH to furnish information to and participate
in discussions or negotiations with a third party that has made an
unsolicited acquisition proposal if the NGH Board of Directors determines
in good faith that such acquisition proposal is likely to result in a
superior proposal (as described under "Chapter Three--NGH Merger
Agreement-Covenants-No Solicitation by NGH") and to terminate the NGH
merger agreement to accept such superior proposal upon prior notice to,
and further negotiations with, RJR and payment of a $300 million
termination fee.
In view of the wide variety of factors considered in connection with its
evaluation of the Nabisco Sale and the NGH merger and the complexity of these
matters, the NGH Board of Directors did not find it useful to and did not
attempt to quantify, rank or otherwise assign relative weights to the factors
considered in connection with each recommendation. The NGH Board relied on the
experience and expertise of UBS Warburg and Morgan Stanley, its financial
advisors, for quantitative analysis of the financial terms of the Nabisco Sale
(see "Chapter Two--Opinions of Financial Advisors") and the NGH merger. In
addition, the NGH Board did not undertake to make any specific determination as
to whether any particular factor was essential to the NGH Board's ultimate
determination, but rather the NGH Board conducted an overall analysis of the
factors described above, including thorough discussions
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Chapter One - Summary and Transactions Overview
with and questioning of NGH's management and legal and financial advisors. In
considering the factors described above, individual members of the NGH Board of
Directors may have given different weight to different factors.
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Chapter One - Summary and Transactions Overview
INTERESTS OF OFFICERS AND DIRECTORS IN THE TRANSACTIONS
In considering the recommendations of the NGH Board with respect to the
transactions, you should be aware that the officers and directors of NGH have
interests in the transactions that are different from, or in addition to, their
interests as stockholders of NGH generally. The NGH Board was aware of these
interests and considered them, among other matters, in approving the Nabisco
Sale, the NGH merger agreement, the NGH voting and indemnity agreement and the
transactions contemplated by these agreements.
Stock Options, Restricted Stock and Restricted Stock Units
NGH's and Nabisco Holdings' Long-Term Incentive Plans (each, an "LTIP")
contain change of control provisions that will give rise to accelerated vesting
of outstanding unvested options as a result of the transactions. In addition,
shares of restricted stock, restricted stock units and certain contingent
performance shares outstanding under each LTIP will also be subject to
accelerated vesting upon stockholder approval of the transactions. Any NGH or
Nabisco Holdings option held by a current or former employee or director that
is not exercised before completion of the transactions will be cancelled in
exchange for a cash payment. Outstanding NGH options held by individuals
actively employed by the predecessor to NGH or its subsidiaries on October 11,
1995 and NGH options granted thereafter and prior to January 15, 1999, will be
cancelled in exchange for a cash payment equal to the value of the NGH options
using a specified "Black-Scholes Methodology" (see Note 4 to the following
table). All other NGH options and all Nabisco Holdings options will be
cancelled in exchange for a cash payment equal to the difference between the
option exercise price and $30.00 (for NGH options) or $55.00 (for Nabisco
Holdings options), respectively (in each case, the "Option Spread").
The following table shows the number of unvested NGH and Nabisco Holdings
options held by NGH's and Nabisco Holdings' executive officers and directors
whose vesting will accelerate as a result of the transactions, the number of
already vested options and the estimated value of all NGH options and Nabisco
Holdings options held by such persons.
<TABLE>
Number of
Unvested
Number of Nabisco
Unvested NGH Holdings Already Aggregate
Options that Options that Vested Option Spread
Accelerate as a Aggregate Value Accelerate as a Nabisco Value of all
Result of the Already Vested of all NGH Result of the Holdings Nabisco Holdings
Transactions(1) NGH Options Options(2) Transactions(1) Options Options(3)
Name (#) (#) ($) (#) (#) ($)
---- --------------- -------------- --------------- --------------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Steven F. Goldstone
Chairman of NGH and Nabisco
Holdings and Former Chief
Executive Officer of NGH..... -0- 3,021,323 $56,606,596 (4) -0- 460,000 $ 7,648,700
James M. Kilts
President and Chief Executive
Officer of Nabisco Holdings
and NGH...................... 1,722,298 256,813 34,681,660 (5) 559,100 405,900 11,992,405
Richard H. Lenny
President, Nabisco Biscuit
Company...................... 520,000 -0- 8,675,000 124,100 75,900 2,690,570
Douglas R. Conant
President, Nabisco Foods
Company...................... 450,000 -0- 7,485,938 88,950 275,902 6,840,288
James E. Healey
Executive Vice President & Chief
Financial Officer of Nabisco
Holdings and Senior Vice
President and Chief Financial
Officer of NGH............... 382,000 -0- 6,338,750 79,350 106,150 2,647,320
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Chapter One - Summary and Transactions Overview
Number of
Unvested
Number of Nabisco
Unvested NGH Holdings Already Aggregate
Options that Options that Vested Option Spread
Accelerate as a Aggregate Value Accelerate as a Nabisco Value of all
Result of the Already Vested of all NGH Result of the Holdings Nabisco Holdings
Transactions(1) NGH Options Options(2) Transactions(1) Options Options(3)
Name (#) (#) ($) (#) (#) ($)
---- --------------- -------------- --------------- --------------- -------- ----------------
C. Michael Sayeau
Executive Vice President &
Chief Personnel Officer of
Nabisco Holdings.............. 327,000 -0- 5,463,750 77,850 280,868 7,600,969
James A. Kirkman III
Executive Vice President,
General Counsel and Secretary
of Nabisco Holdings and
Senior Vice President,
General Counsel and Secretary
of NGH........................ 270,000 -0- 4,546,875 64,600 224,997 5,771,453
David B. Rickard
Former Senior Vice President &
Chief Financial Officer of NGH -0- 388,993 7,003,400 (4) -0- -0- -0-
William L. Rosoff
Former Senior Vice President &
General Counsel of NGH........ -0- 233,480 4,188,631 (4) -0- -0- -0-
All other executive officers as a
group .......................... 1,749,000 -0- 29,157,702 461,451 811,018 23,255,039
Non-Employee directors as a group. 31,642 132,057 1,704,529 9,330 33,870 910,453
</TABLE>
---------
(1) This represents the number estimated to be unvested as of June 30, 2000.
(2) The estimated value of NGH options shown in this column assumes a value of
NGH common stock of $30 per share and, except as noted for Messrs.
Goldstone, Kilts, Rickard and Rosoff, is based on the Option Spread.
(3) The estimated Option Spread value shown in this column assumes a value of
Nabisco Holdings common stock of $55 per share.
(4) Following completion of the NGH merger, the NGH options held by Messrs.
Goldstone, Rickard and Rosoff will be cancelled in exchange for cash
payments equal to the value of the NGH options under a Black-Scholes
methodology using the following assumptions: a value of $30 per share; a
term equal to the remaining portion of the original option term; a
risk-free factor equal to the average yield on zero-coupon U.S. government
issues; a maturity coincident with the expiration of the remaining option
term; a dividend yield of $.49 per year as a percent of $30 per share; and
a volatility based on the daily share closing prices from June 15, 1999
through completion of the NGH merger. The values noted are estimates based
on these assumptions, and assume a closing date of September 15, 2000 and
a stable market price of $27.00 through the closing date. Actual
valuations of these options may vary from the above numbers.
(5) The value shown for Mr. Kilts includes the Option Spread value of
1,590,000 NGH options and, based on the assumptions in Note 4 above, the
estimated Black-Scholes value of 389,111 NGH options.
The following table shows the number of NGH and Nabisco Holdings
restricted stock units held by NGH's and Nabisco Holdings' officers and
directors and the estimated value of such shares and units (based on the
applicable transaction price). These shares and units will vest upon
stockholder approval of the transactions.
Number (and value) Number (and value)
of NGH of Nabisco Holdings
Name Restricted Stock Units(1) Restricted Stock Units(1)
---- ------------------------- -------------------------
Mr. Goldstone.......... 200,000 0
($6,000,000) ($0)
Mr. Kilts.............. 0 310,000
($0) ($17,050,000)
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Chapter One - Summary and Transactions Overview
Number (and value) Number (and value)
of NGH of Nabisco Holdings
Name Restricted Stock Units(1) Restricted Stock Units(1)
---- ------------------------- -------------------------
Mr. Lenny.............. 42,000 38,500
($1,260,000) ($2,117,500)
Mr. Conant............. 36,000 46,200
($1,080,000) ($2,541,000)
Mr. Healey............. 29,000 17,500
($870,000) ($962,500)
Mr. Sayeau............. 28,000 39,000
($840,000) ($2,145,000)
Mr. Kirkman............ 24,500 25,800
($735,000) ($1,419,000)
Mr. Rickard............ 0 0
($0) ($0)
Mr. Rosoff............. 0 0
($0) ($0)
All other executive
officers as a group.. 141,500 142,529
($4,245,000) ($7,839,095)
Non-Employee Directors
as a group........... 128,591 9,529
($3,857,730) ($524,095)
---------
(1) The estimated values assume a value of NGH common stock of $30 and a value
of Nabisco Holdings common stock of $55.
Agreements with Certain Executive Officers
NGH and Mr. Goldstone are parties to an agreement providing that Mr.
Goldstone will serve as Chairman of the NGH and the Nabisco Holdings Boards of
Directors. While serving as Chairman of both Boards of Directors, Mr. Goldstone
will receive an annual fee of $1,250,000 and NGH-provided office facilities in
lieu of any other compensation or benefits. Mr. Goldstone will not receive any
additional benefits upon termination of his service as Chairman of the NGH and
Nabisco Holdings Boards. Under a separation agreement with NGH, dated December
31, 1999, pursuant to which Mr. Goldstone ceased to be the CEO of NGH, Mr.
Goldstone is entitled to benefit continuation through December 31, 2002, and
will be eligible for retiree health and life coverage thereafter. Under his
separation agreement, Mr. Goldstone is also entitled to the payment through
2006 of annual insurance premiums of $74,000 and related tax-reimbursement
payments, as well as NGH-provided office facilities until age 65 and to
tax-reimbursement payments in connection therewith. Mr. Goldstone also holds
301,725 NGH contingent performance shares which will be payable as a result of
the NGH transaction, with a value of $9,051,750. If a "parachute excise tax" is
imposed on any payments to Mr. Goldstone (including with respect to the options
and restricted stock units noted above), he will be entitled to tax
reimbursement payments.
Mr. Kilts is a party to an employment agreement with Nabisco Holdings,
Nabisco, Inc. and NGH pursuant to which Mr. Kilts serves as President and Chief
Executive Officer of Nabisco Holdings, Nabisco, Inc. and NGH and as a member of
the Board of Directors of Nabisco Holdings, Nabisco Inc. and NGH. Pursuant to
the employment agreement, Mr. Kilts is entitled to receive an annual base
salary of at least $1,000,000 per year and is eligible for an annual target
bonus opportunity of not less than 100% of his base salary for the relevant
year. Upon his completion of five years of active service (or certain earlier
involuntary terminations of employment), Mr. Kilts is entitled to a minimum
annual pension of $200,000 (payable generally as a single life annuity
beginning at age 60). Under the
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Chapter One - Summary and Transactions Overview
employment agreement, Nabisco Holdings also provides Mr. Kilts with additional
term life insurance and will provide Mr. Kilts with retiree medical coverage,
with a minimum of 10 years' credited service, upon his retirement on or after
age 55.
Mr. Kilts' employment agreement provides that if his employment is
terminated without "cause" by Nabisco Holdings or if he terminates his
employment for "good reason," then he will be entitled to two times his annual
salary and annual target bonus opportunity, payable over three years, and
benefit continuation for three years, and his annual incentive award will vest
pro-rata and be paid in a lump sum. In addition, Mr. Kilts will be entitled to
secretarial services and an office for six months, outplacement benefits, and a
cash payment for his 125,000 Nabisco Holdings contingent performance shares in
the amount of $6,875,000. However, if such a termination occurs within two
years after stockholder approval of the transactions, then Mr. Kilts will be
entitled to three times such salary and bonus and three times his annual
perquisite allowance, in a lump sum, in lieu of the continued payment of salary
and bonus for two years as noted above, and he will also be entitled to receive
his company automobile with a related tax reimbursement payment. If Mr. Kilts'
employment is terminated without cause immediately after the consummation of
the transaction, he will be entitled to a cash severance payment of
approximately $6,600,000. "Cause" includes a crime involving moral turpitude or
misconduct materially damaging to Nabisco Holdings, Nabisco, Inc. or NGH. "Good
reason" includes a reduction in Mr. Kilts' responsibilities, a reduction in his
salary or certain incentive opportunities, relocation, or a change of control
or divestiture of Nabisco Holdings or Nabisco, Inc. following which the
Chairman of Nabisco Holdings is anyone other than the immediately prior
Chairman of NGH. Compensation continuance is based on the highest annual rate
of salary in effect prior to termination or a change of control and the higher
of the current target incentive award opportunity for the calendar year in
which employment terminates or a change of control occurs, or, if higher, the
actual award for the prior year. The transactions will constitute a change of
control under Mr. Kilts' employment agreement. If a "parachute" excise tax is
imposed on any payments to Mr. Kilts (including with respect to the options,
stock units and performance shares noted above), he will be entitled to tax
reimbursement payments.
Each of Messrs. Lenny, Conant, Healey, Sayeau, Kirkman and the other
Nabisco Holdings executive officers is a party to an employment agreement with
Nabisco Holdings, Nabisco, Inc. and NGH which provides that if the executive's
employment is involuntarily terminated other than for "cause" by Nabisco, Inc.
or if the executive terminates his employment for "good reason," he will be
entitled to two years base salary plus bonus, payable over three years, benefit
continuation for three years and certain other benefits, including the vesting
pro-rata and payment in a lump sum of annual incentive awards. In addition, if
the executive will be age 50 with 10 years of service at the end of benefit
continuation, he will be deemed eligible for retiree benefits under all welfare
benefit and executive compensation plans. However, if such a termination occurs
within two years after stockholder approval of the transactions, then the
executive will be entitled to two times such salary and bonus and three times
his annual perquisite allowance, in a lump sum, in lieu of the continued
payment of salary and bonus for two years as noted above, and he will also be
entitled to receive his company automobile with a related tax reimbursement
payment. The 2000 base salary and annual target bonus opportunity (as a
percentage of base salary) for Messrs. Lenny, Conant, Healey, Sayeau and
Kirkman is: $470,000, 85%; $400,000, 85%; $385,000, 75%; $340,000, 65%; and
$305,000, 60%, respectively. If Messrs. Lenny, Conant, Healey, Sayeau and
Kirkman are terminated without cause immediately after the transactions, they
will be entitled to cash severance payments of approximately $1,900,000,
$1,650,000, $1,500,000, $1,400,000, and $1,200,000, respectively. Under their
agreements, "cause" generally includes certain criminal conduct, certain other
misconduct and the failure to perform certain employment duties; and "good
reason" generally includes, but is not limited to, certain reductions in
duties, pay, grade, or incentive opportunities, and relocation. Compensation
continuance is based on the highest annual rate of salary in effect prior to
termination or a change of control and the current target incentive award
opportunity for the calendar year in which employment terminates or a change of
control occurs, or in the case of Messrs. Sayeau and Kirkman, if higher, the
actual award for the prior year. Upon involuntary termination, annual incentive
awards will be paid and all vested and a portion of the unvested retention
awards under the Nabisco Holdings 1999 Retention Program will be paid. (The
aggregate of such retention payments for Messrs. Lenny, Conant, Healey, Sayeau
and Kirkman is approximately: $799,500; $793,000; $633,750; $509,000; and
$416,000, respectively, assuming termination without cause immediately after
the transactions.) In the event that a "parachute" excise tax is imposed on any
payments to any of Messrs. Lenny, Conant, Healey, Sayeau and Kirkman, or any
other Nabisco Holdings executive officers
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<PAGE>
Chapter One - Summary and Transactions Overview
(including with respect to the options and stock units noted above), the
officer will also be entitled to tax reimbursement payments.
Under their separation agreements with NGH, pursuant to which they ceased
to be NGH officers and employees, Messrs. Rickard and Rosoff are entitled to
benefit continuation for three years following their terminations of
employment, and each will be eligible for retiree health and life insurance
coverage. If a "parachute" excise tax is imposed on any payments to Mr. Rickard
or Mr. Rosoff, each will be entitled to tax reimbursement payments.
Under the Deferred Compensation Plan of Nabisco, Inc., participants were
permitted to elect to have their accounts paid immediately upon a change of
control. In addition, participants in this plan were permitted to elect to
defer amounts payable to them with respect to the cashout of their options and
restricted stock units, as described above, and any severance payable to them
under the employment agreements described above. All deferred amounts are
required to be funded through a Nabisco grantor trust. In addition,
participants who are terminated within two years after completion of the
transactions will be allowed to have payments of their accounts made over
periods of up to 10 years, even if they have less than five years of service;
absent a change of control, such participants would have received a lump sum
distribution. Finally, under this plan Nabisco is obligated to pay legal fees
incurred by participants to enforce their rights under the plan after
completion of the transactions.
Under the Nabisco Holdings Annual Incentive Award Plan, upon consummation
of the transactions, all participants will receive a pro-rata bonus based upon
their target awards. The payments that will be made to Messrs. Kilts, Lenny,
Conant, Healey, Sayeau and Kirkman under this provision, assuming a closing
date of September 15, 2000, will be approximately $710,000, $285,000, $245,000,
$205,000, $160,000, and $130,000, respectively (assuming termination without
cause immediately after the transactions).
It is anticipated that Philip Morris will enter into an agreement with Mr.
Kilts, effective as of the closing of the transaction. If the proposed
agreement becomes final, Mr. Kilts would make himself available for
consultation and would be subject to certain restrictive covenants, including a
noncompete covenant and a nonsolicitation covenant and would be entitled to an
office and secretary. Furthermore, under the proposed agreement, Mr. Kilts
would be entitled to enhanced supplemental retirement benefits. In lieu of the
cashing out of Mr. Kilts' unvested Nabisco Holdings options and certain
restricted shares, those options and restricted shares would be converted, upon
the closing of the transaction, into Philip Morris options and restricted
shares. It is possible that no agreement between Philip Morris and Mr. Kilts
will be reached or that any agreement reached will be on terms different from
those described above.
Prior Employment Relationships
Prior to joining Nabisco Holdings in 1998, Mr. Kilts was Executive Vice
President - Worldwide Food of Philip Morris Companies from 1994 to 1997. Prior
thereto, Mr. Kilts was President of Kraft USA from 1989 to 1994.
Prior to joining Nabisco Holdings as President of Nabisco Biscuit Company
in 1998, Mr. Lenny was President of Pillsbury North America from 1996 to 1998
and President, Pillsbury Specialty Brands, from 1995 to 1996. Prior thereto,
Mr. Lenny was an employee of Kraft Foods from 1977 to 1995.
Indemnification; Directors' and Officers' Insurance
See "Chapter Three--NGH Merger Agreement--Covenants--Indemnification and
Insurance of NGH Directors and Officers."
I-21
<PAGE>
CHAPTER TWO
SALE OF NABISCO HOLDINGS SHARES
The NGH Board of Directors has approved, and recommends that NGH
stockholders approve, the sale of all 213,250,000 shares of Class B common
stock of Nabisco Holdings currently owned by NGH for $55 per Nabisco Holdings
share pursuant to the Nabisco Holdings merger. We are seeking approval from NGH
stockholders for this transaction because it constitutes the disposition of
substantially all of the assets of NGH. The proposed sale would occur pursuant
to the Nabisco Holdings merger agreement described below. If NGH stockholders
approve the Nabisco Sale, NGH will act by written consent, in its capacity as
controlling stockholder of Nabisco Holdings, to adopt the Nabisco Holdings
merger agreement. NGH's obligation to vote in favor of adoption of the Nabisco
Holdings merger agreement, and against any competing proposals, is set forth in
the NGH voting and indemnity agreement described below.
NABISCO HOLDINGS MERGER AGREEMENT
The following is a summary of the material terms of the Nabisco Holdings
merger agreement and is qualified by reference to the complete text of the
Nabisco Holdings merger agreement, which is incorporated by reference and
attached as Annex A.
The Nabisco Holdings Merger
Under the Nabisco Holdings merger agreement, a subsidiary of Philip Morris
will merge with and into Nabisco Holdings in accordance with Delaware law. The
separate existence of the merger subsidiary will cease and Nabisco Holdings
will become a wholly-owned subsidiary of Philip Morris.
Completion of the Nabisco Holdings Merger
As soon as practicable after all of the conditions set forth in the
Nabisco Holdings merger agreement have been satisfied or waived, the parties
will file a certificate of merger with the Secretary of State of the State of
Delaware. The Nabisco Holdings merger will be completed at the time the
certificate is filed.
Merger Consideration
The Nabisco Holdings merger agreement provides that each share of Nabisco
Holdings common stock outstanding immediately prior to the completion of the
Nabisco Holdings merger (except for shares as to which appraisal rights have
been properly exercised), will, at the completion of the Nabisco Holdings
merger, be converted into the right to receive $55 per share in cash, without
interest. However, shares of Nabisco Holdings held as treasury shares or owned
by Philip Morris or its subsidiaries will be canceled without any payment for
those shares.
Stock Options
At or immediately prior to the completion of the Nabisco Holdings merger,
each employee and director option to purchase shares outstanding under any
stock option or compensation plan or arrangement of Nabisco Holdings, whether
or not vested or exercisable, will be canceled, and Nabisco Holdings will pay
each optionholder an amount in cash determined by multiplying (1) the excess,
if any, of $55 over the applicable exercise price of such option by (2) the
number of shares to which such option relates (assuming full vesting of all
outstanding options). The payment shall be made before, at or promptly after
the completion of the Nabisco Holdings merger in the case of options that were
outstanding on the date of the Nabisco Holdings merger agreement. Otherwise,
the payment shall be made when and if such option is exercised (or vests, if
converted into the right to receive cash) in accordance with its terms.
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Chapter Two - Sale of Nabisco Holdings Shares
Covenants
Nabisco Holdings and Philip Morris have agreed to certain covenants in the
Nabisco Holdings merger agreement. A description of the covenants follows:
No Solicitation by Nabisco Holdings. The Nabisco Holdings merger
agreement prohibits Nabisco Holdings from soliciting, initiating or
encouraging any proposal for an alternative acquisition transaction
involving Nabisco Holdings or its subsidiaries, or negotiating with or
furnishing nonpublic information to, any third party regarding such an
acquisition transaction, except that Nabisco Holdings may engage in such
activities prior to receipt of approval of the Nabisco Holdings merger
from Nabisco Holdings stockholders if:
o Nabisco Holdings has received an unsolicited acquisition
proposal from that third party, has so notified Philip Morris
and has complied with the non-solicitation provisions of the
Nabisco Holdings merger agreement;
o the Nabisco Holdings Board determines in good faith that such
proposal is likely to result in a superior proposal, as defined
below, and after consultation with outside legal counsel, that
the failure to take such action would constitute a breach of its
fiduciary duties;
o the third party executes a confidentiality agreement with terms
no less favorable to Nabisco Holdings than those contained in
the confidentiality agreement with Philip Morris; and
o Nabisco Holdings notifies Philip Morris of the action it intends
to take with respect to the acquisition proposal.
Nabisco Holdings Board's Covenant to Recommend. The Nabisco Holdings
Board of Directors has agreed to recommend the approval and adoption of
the Nabisco Holdings merger agreement to Nabisco Holdings stockholders.
However, the Nabisco Holdings Board is permitted to withdraw, or modify in
a manner adverse to Philip Morris, its recommendation, if:
o Nabisco Holdings has received an unsolicited acquisition
proposal from a third party, has so notified Philip Morris and
has complied with the non-solicitation provisions of the Nabisco
Holdings merger agreement;
o the Nabisco Holdings Board determines in good faith that such
proposal constitutes a superior proposal, as defined below, and
after consultation with outside legal counsel, that the failure
to take such action would constitute a breach of its fiduciary
duties; and
o Nabisco Holdings notifies Philip Morris of the action it intends
to take with respect to its recommendation.
A "superior proposal" is a bona fide written acquisition proposal (1)
on terms that the Board of Directors of Nabisco Holdings determines in
good faith (after consultation with its financial advisor and taking into
account all terms and conditions of the proposal, including the legal,
financial and regulatory aspects) provide greater value to Nabisco
Holdings' stockholders than the Nabisco Holdings merger (or, if
applicable, the amended proposal offered by Philip Morris) and (2) that is
reasonably likely to be completed.
Reasonable Best Efforts Covenant. Nabisco Holdings and Philip Morris
have agreed to use their reasonable best efforts to take all actions
necessary, proper or advisable under applicable laws and regulations to
complete the Nabisco Holdings merger. In particular, Nabisco Holdings and
Philip Morris have agreed to take all actions necessary to cause the
expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act")
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Chapter Two - Sale of Nabisco Holdings Shares
and to obtain the necessary approvals under foreign laws governing
antitrust or merger control matters as soon as practicable, including, in
the case of Philip Morris, entering into any required settlement,
undertaking, consent decree or stipulation with any governmental entity or
implementing any required divestiture, hold separate or similar
transaction with respect to any assets. However, Philip Morris is not
required to waive any substantial rights or to accept any substantial
limitation on its operations or to dispose of any significant assets in
connection with obtaining any such consent or authorization unless such
waiver, limitation or disposition would not reasonably be expected to have
a material adverse effect on Nabisco Holdings, Philip Morris or Philip
Morris's food business.
Nabisco Holdings' Interim Operations. Nabisco Holdings has agreed
that until the completion of the Nabisco Holdings merger, Nabisco Holdings
and its subsidiaries will conduct their business and operate their
properties in the ordinary course consistent with past practice and will
use reasonable best efforts to preserve intact their business
organizations and relationships with third parties and to keep available
the services of their present officers and employees. Nabisco Holdings has
also agreed, with certain exceptions, that neither it nor its subsidiaries
will prior to the completion of the Nabisco Holdings merger do any of the
following without the consent of Philip Morris:
o declare dividends other than customary quarterly cash dividends
and intercompany dividends;
o repurchase, redeem or otherwise acquire shares or other
securities of Nabisco Holdings or any of its subsidiaries;
o issue, encumber or sell any shares of Nabisco Holdings, or any
securities convertible into shares, or any rights, warrants or
options to acquire any shares, other than pursuant to existing
stock-based awards or options, or additional options awarded
pursuant to existing stock plans in the ordinary course not in
excess of 100,000 shares and not granted to any officers or
directors of Nabisco Holdings;
o amend the certificate of incorporation, by-laws or the terms of
any outstanding securities of Nabisco Holdings or its
subsidiaries;
o merge with, invest in or acquire the stock or assets of any
entity, other than pursuant to existing disclosed commitments,
ordinary course purchases of materials and other items, planned
capital expenditures or any transaction in the ordinary course
not over $5 million;
o sell, lease, license or otherwise dispose of any subsidiary or
assets, other than pursuant to existing disclosed commitments,
sales of inventory and equipment in the ordinary course or any
transaction in the ordinary course not over $10 million;
o incur or guarantee indebtedness in excess of $4.6 billion in the
aggregate outstanding at any time;
o adopt or amend an existing employee benefits or compensation
arrangement;
o increase the compensation of executive officers or directors by
any amount or of other employees in the aggregate by more than
2% over existing compensation;
o renew or enter into any material collective bargaining
agreement;
o contribute to any trust or employee arrangement, except as
required under existing agreements;
o adopt a plan of liquidation, dissolution, merger, consolidation,
recapitalization or reorganization, or enter into any agreement
providing for acceleration of payment or performance as a result
of a change in control;
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Chapter Two - Sale of Nabisco Holdings Shares
o enter into or renew any material noncompete or exclusivity
agreement;
o enter into, amend or terminate any agreement with a term longer
than a year and having an aggregate value over $10 million;
o renew, enter into, amend or waive any material rights under any
affiliate contract or loan, certain distribution agreements or
certain joint venture agreements;
o exercise any voting or veto rights under the United Biscuits
joint venture agreements relating to acquisitions, dispositions
or additional indebtedness, other than the fulfillment of
certain existing commitments;
o settle or compromise any material litigation or waive or release
any material claim;
o change accounting policies;
o sell, license, lease or otherwise dispose of any intellectual
property rights, other than existing disclosed commitments; or
o agree or commit to do any of the foregoing.
Employee Benefits Matters. Philip Morris has agreed that for a period
of two years after the completion of the Nabisco Holdings merger, Nabisco
Holdings will provide employee compensation and benefits for current and
former employees of Nabisco Holdings and its subsidiaries that are in the
aggregate not less favorable to such employees than the benefits plans and
arrangements currently maintained by Nabisco Holdings. In the event the
employment of any Nabisco Holdings employee is terminated other than for
cause during this two-year period, the employee will receive severance or
separation benefits in an aggregate amount at least equal to the severance
or separation benefits the employee would have received under such
circumstances under the benefits plans and arrangements currently
maintained by Nabisco Holdings. Philip Morris has also agreed that Nabisco
Holdings will after the merger give Nabisco Holdings employees full credit
for purposes of eligibility, vesting and, for purposes of vacation and
severance benefits only, benefit accrual under any new plans or
arrangements for the employees' service recognized for these purposes
under benefits plans and arrangements currently maintained by Nabisco
Holdings. The obligations outlined above do not extend to employees
represented by collective bargaining units and employees with employment
agreements, because these employees will receive compensation and benefits
in accordance with their respective collective bargaining agreements or
employment agreements.
Indemnification and Insurance of Nabisco Holdings Directors and
Officers. Philip Morris has agreed that it will cause Nabisco Holdings for
six years after the Nabisco Holdings merger:
o to indemnify Nabisco Holdings' present and former officers and
directors for liabilities from their acts or omissions in those
capacities occurring prior to the completion of the Nabisco
Holdings merger, to the fullest extent permitted by applicable
laws or provided under Nabisco Holdings' charter and bylaws; and
o to provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the completion
of the Nabisco Holdings merger on terms with respect to coverage
and amount no less favorable than the existing policy, provided
that the aggregate annual premium paid need not exceed 200% of
the current rate paid by Nabisco Holdings.
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Representations and Warranties
Nabisco Holdings made certain customary representations and warranties to
Philip Morris, including as to:
o corporate existence and power; o tax matters;
o corporate authorization; o employee benefits matters;
o governmental authorization; o compliance with laws and court
o non-contravention; orders;
o capitalization; o finders' fees;
o subsidiaries; o receipt of opinion of financial
o SEC filings; advisors;
o disclosure documents; o environmental matters;
o accuracy of financial statements; o intellectual property rights;
o absence of certain changes; o ownership and condition of real
o absence of undisclosed liabilities; property;
o no material litigation; o material contracts and joint
ventures;
o indebtedness; and
o inapplicability of anti-takeover
statute.
Philip Morris made certain customary representations and warranties to
Nabisco Holdings, including as to:
o corporate existence; o disclosure documents;
o corporate authorization; o finders' fees; and
o governmental authorization; o availability of financing.
o non-contravention;
The representations and warranties contained in the Nabisco Holdings
merger agreement do not survive the completion of the Nabisco Holdings merger
or the termination of the Nabisco Holdings merger agreement.
Conditions to the Nabisco Holdings Merger
Mutual Closing Conditions. The obligations of Nabisco Holdings and
Philip Morris to complete the Nabisco Holdings merger are subject to the
satisfaction of the following conditions:
o adoption of the Nabisco Holdings merger agreement by NGH, as
controlling stockholder of Nabisco Holdings;
o no law, court order, injunction or other legal restraint shall
prohibit the merger;
o expiration or termination of the HSR Act waiting period;
o approval by the European Commission;
o accuracy as of the closing of the representations and warranties
made by the other party to the extent specified in the merger
agreement; and
o performance in all material respects by the other party of the
obligations required to be performed at or prior to closing.
Additional Closing Condition for Philip Morris's Benefit. Philip
Morris's obligation to complete the Nabisco Holdings merger is subject to
receipt of all required consents and approvals of government entities,
except for consents and approvals which, if not received, would not have a
material adverse effect on Nabisco Holdings.
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Chapter Two - Sale of Nabisco Holdings Shares
Termination
Nabisco Holdings and Philip Morris may mutually agree, at any time prior
to the completion of the Nabisco Holdings merger, to terminate the Nabisco
Holdings merger agreement. In addition, either Nabisco Holdings or Philip
Morris may terminate the Nabisco Holdings merger agreement if:
(1) the Nabisco Holdings merger has not been completed by April 30, 2001.
Neither Nabisco Holdings nor Philip Morris may terminate the Nabisco
Holdings merger agreement on this basis, however, if its breach of
the Nabisco Holdings merger agreement results in the Nabisco Holdings
merger not being completed by this date;
(2) there is a permanent legal prohibition to the completion of the
Nabisco Holdings merger;
(3) the Nabisco Holdings merger agreement has not been adopted by Nabisco
Holdings stockholders because the requisite vote of the NGH
stockholders to approve the Nabisco Sale was not obtained at a duly
held NGH stockholders' meeting;
(4) the NGH voting and indemnity agreement has terminated because the NGH
Board has withdrawn its recommendation of the Nabisco Holdings merger
agreement or NGH has accepted a superior proposal or breached its
obligation to vote in favor of the Nabisco Holdings merger and
against competing proposals; or
(5) a change in tax law occurs that (i) would apply to a transaction
completed after such change in tax law (despite a binding written
agreement for such transaction) and (ii) would reasonably be expected
to result in (A) the imposition of tax on gain realized with respect
to Nabisco Holdings shares arising out of the Nabisco Holdings
Distribution or on gain realized with respect to RJR shares arising
out of the RJR Spinoff or (B) a material increase in the tax
liability of NGH resulting from the Nabisco Holdings merger.
Philip Morris may terminate the Nabisco Holdings merger agreement if:
(6) the Nabisco Holdings Board fails to recommend the Nabisco Holdings
merger, withdraws or modifies in a manner adverse to Philip Morris
its approval or recommendation of the Nabisco Holdings merger or the
Nabisco Holdings merger agreement, approves or recommends a superior
proposal relating to an acquisition of Nabisco Holdings, or resolves
to do any of the foregoing;
(7) Nabisco Holdings enters into, or publicly announces its intention to
enter into, a definitive agreement or an agreement in principle with
respect to a superior proposal relating to an acquisition of Nabisco
Holdings; or
(8) Nabisco Holdings fails to perform in any material respect any
material obligation to be performed under the Nabisco Holdings merger
agreement, or breaches any of its representations and warranties such
that Philip Morris's condition to closing in this respect cannot be
satisfied, and in either case such failure is not cured within 15
business days or such longer period during which Nabisco Holdings
exercises its reasonable best efforts to cure.
Nabisco Holdings may terminate the Nabisco Holdings merger agreement if:
(9) its Board authorizes Nabisco Holdings to enter into a written
agreement concerning a superior proposal, so long as Nabisco Holdings
has complied with the non-solicitation, board recommendation, notice,
negotiation and termination fee provisions of the Nabisco Holdings
merger agreement and Philip Morris has not made a definitive, binding
offer that the Nabisco Holdings Board determines, in good faith after
consultation with its financial advisors, is at least as favorable to
the Nabisco Holdings stockholders as the superior proposal; or
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(10) Philip Morris fails to perform in any material respect any material
obligation to be performed under the Nabisco Holdings merger
agreement or breaches any of its representations and warranties such
that Nabisco Holdings' condition to closing in this respect cannot be
satisfied, and in either case such failure is not cured within 15
business days or such longer period during which Philip Morris
exercises its reasonable best efforts to cure.
If the Nabisco Holdings merger agreement is validly terminated, it will
become void without any liability on any party unless such party is in willful
breach. However, the provisions relating to termination fees and expenses and
certain other provisions will continue in effect.
Certain Fees and Expenses
Except as described below, all costs and expenses incurred in connection
with the Nabisco Holdings merger agreement and related transactions will be
paid by the party incurring such costs or expenses.
Nabisco Holdings and NGH Advisor Fees. The parties have agreed that
Nabisco Holdings will be responsible for fees and expenses of the financial,
legal and other advisors to Nabisco Holdings and NGH up to $50 million, and NGH
will be responsible for all such fees and expenses in excess of $50 million.
Termination Fees. Nabisco Holdings has agreed to pay Philip Morris $445
million in cash, net of any expenses paid as described below, in any of the
following circumstances:
o the Nabisco Holdings merger agreement terminates as described in
items (6), (7) or (9) under --Termination;"
o the Nabisco Holdings merger agreement terminates as described in item
(8) under "--Termination" (other than as a result of a breach of
representation not caused by action of Nabisco Holdings and not
capable of being cured using reasonable best efforts), if at the time
of termination a third party has made an acquisition proposal
relating to an acquisition of Nabisco Holdings and within nine months
after termination of the Nabisco Holdings merger agreement, Nabisco
Holdings enters into a definitive agreement in respect of any
acquisition proposal or such a transaction is completed; or
o the Nabisco Holdings merger agreement terminates as described in
items (3) or (4) under "--Termination" and, prior to the NGH
stockholder meeting, a third party or Nabisco Holdings has publicly
announced an acquisition proposal relating to an acquisition of
Nabisco Holdings and within nine months after termination of the
Nabisco Holdings merger agreement, Nabisco Holdings enters into a
definitive agreement in respect of any acquisition proposal or such a
transaction is completed.
Expense Reimbursement. Nabisco Holdings has agreed to pay Philip Morris up
to $30 million as reimbursement for expenses relating to the negotiation and
execution of the merger agreement in any of the following circumstances:
o the Nabisco Holdings merger agreement terminates as described in item
(8) under "--Termination" if, at the time of termination, a third
party has made an acquisition proposal for Nabisco Holdings; or
o the Nabisco Holdings merger agreement terminates as described in item
(3) under "--Termination."
The expense reimbursement payment would reduce the $445 million payment if
it becomes payable.
Philip Morris has agreed to pay Nabisco Holdings up to $30 million as
reimbursement for expenses relating to the negotiation and execution of the
Nabisco Holdings merger agreement if the Nabisco Holdings merger agreement
terminates as described in item (10) under "--Termination."
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Amendments and Waivers
The parties may amend the Nabisco Holdings merger agreement or waive its
terms and conditions before the completion of the Nabisco Holdings merger, but,
after Nabisco Holdings' stockholders have approved the Nabisco Holdings merger
agreement, the parties may not amend the Nabisco Holdings merger agreement in a
manner that would reduce or change the kind of consideration Nabisco Holdings
stockholders will receive in the Nabisco Holdings merger without further
approval of Nabisco Holdings' stockholders.
OTHER MATTERS
Financing of the Merger
Philip Morris has obtained commitments from Chase Securities Inc. and
Credit Suisse First Boston Corp. to provide financing to Philip Morris in an
amount sufficient, together with Philip Morris's existing credit facilities,
cash on hand and other liquid securities, to pay all required amounts under the
Nabisco Holdings merger agreement to Nabisco Holdings stockholders, to effect
all necessary refinancing of Nabisco Holdings' or Philip Morris's existing
indebtedness that is required as a result of the Nabisco Holdings merger and to
pay all related fees and expenses. There is no financing condition to the
closing of the Nabisco Holdings merger.
Regulatory Matters
U.S. Antitrust. Under the HSR Act and the related rules, the Nabisco
Holdings merger may not be completed until notifications have been given,
certain information has been furnished to the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice and specified
waiting period requirements have been satisfied. On July 21, 2000, NGH (as
controlling stockholder of Nabisco Holdings) and Philip Morris each filed the
required notification and report forms under the HSR Act with the Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice. On August 18, 2000, the Federal Trade Commission requested additional
information in connection with the Nabisco Holdings merger, thereby extending
the HSR Act waiting period to the 20th day after substantial compliance with
the information request. Expiration or termination of the HSR Act waiting
period, which is expected during the fourth quarter of 2000, is a condition to
the completion of the Nabisco Holdings merger.
European Union. Under EC Council Regulation No. 4064/89 and accompanying
regulations, the Nabisco Holdings merger is subject to review by the European
Commission. Nabisco Holdings and Philip Morris informally notified the European
Commission of the Nabisco Holdings merger on June 26, 2000 and expect to file
formal notifications, if necessary, with the European Commission of the Nabisco
Holdings merger agreement in early September. Completion of review, if
required, under the European Commission merger regulation is a condition to the
Nabisco Holdings merger.
Other Laws. Nabisco Holdings and Philip Morris conduct operations in a
number of jurisdictions where other regulatory filings or approvals may be
required or advisable in connection with the completion of the merger. Nabisco
Holdings and Philip Morris are currently in the process of reviewing whether
filings or approvals may be required or desirable in these other jurisdictions.
It is currently anticipated that filings will be made in Argentina, Brazil,
Canada, Colombia, Hungary, Mexico, South Africa and Taiwan.
General. It is possible that governmental entities having jurisdiction
over Nabisco Holdings and Philip Morris may seek concessions as conditions for
granting approval of the Nabisco Holdings merger. We can give no assurance that
the required regulatory approvals will be obtained on terms that satisfy the
conditions to closing of the Nabisco Holdings merger or within the time frame
contemplated by Nabisco Holdings and Philip Morris.
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Chapter Two - Sale of Nabisco Holdings Shares
Appraisal Rights
Holders of NGH common stock are not entitled to dissenters' appraisal
rights under Delaware law in connection with the Nabisco Sale.
NGH VOTING AND INDEMNITY AGREEMENT
The following is a summary of the material terms of the NGH voting and
indemnity agreement and is qualified by reference to the complete text of such
agreement, which is incorporated by reference and attached as Annex B.
Covenants
NGH has agreed to certain covenants in the NGH voting and indemnity
agreement. The material covenants are as follows:
Agreement to Vote in Favor of the Nabisco Holdings Merger. If NGH
stockholders approve the Nabisco Sale, NGH has agreed, in its capacity as
controlling stockholder of Nabisco Holdings, to adopt by written consent
or otherwise the Nabisco Holdings merger agreement, and to execute and
deliver such written consent immediately following (i.e., the same day as)
approval of the Nabisco Sale by NGH stockholders. No further approval by
the Nabisco Holdings public stockholders will be required in connection
with the Nabisco Holdings merger. NGH has further agreed that, if NGH
stockholders approve the Nabisco Sale, NGH will vote against any competing
transaction or proposal.
No Solicitation by NGH. The NGH voting and indemnity agreement
prohibits NGH from soliciting, initiating or encouraging any proposal for
an alternative acquisition transaction involving NGH or its subsidiaries,
or negotiating with or furnishing nonpublic information to, any third
party regarding such an acquisition transaction, except that NGH may
engage in such activities prior to receipt of NGH stockholder approval of
the Nabisco Sale if:
o NGH has received an unsolicited acquisition proposal from that
third party, has so notified Philip Morris and has complied with
the non-solicitation provisions of the NGH voting and indemnity
agreement;
o the NGH Board determines in good faith that such proposal is
likely to result in a superior proposal, as defined below, and
after consultation with outside legal counsel, that the failure
to take such action would constitute a breach of its fiduciary
duties;
o the third party executes a confidentiality agreement with terms
no less favorable to NGH than those contained in the
confidentiality agreement with Philip Morris; and
o NGH notifies Philip Morris of the action it intends to take with
respect to the acquisition proposal.
NGH Board's Covenant to Recommend. The NGH Board of Directors has
agreed to recommend the sale of NGH's shares of Nabisco Holdings pursuant
to the Nabisco Holdings merger agreement. However, the NGH Board is
permitted to withdraw, or modify in a manner adverse to Philip Morris, its
recommendation, if:
o NGH has received an unsolicited acquisition proposal from a
third party, has so notified Philip Morris and has complied with
the non-solicitation provisions of the NGH voting and indemnity
agreement; and
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Chapter Two - Sale of Nabisco Holdings Shares
o the NGH Board determines in good faith that such proposal
constitutes a superior proposal, as defined below, and after
consultation with outside legal counsel, that the failure to
take such action would constitute a breach of its fiduciary
duties; and
o NGH notifies Philip Morris of the action it intends to take with
respect to its recommendation.
A "superior proposal" is a bona fide written acquisition proposal (1)
on terms that the Board of Directors of NGH determines in good faith
(after consultation with its financial advisor and taking into account all
terms and conditions of the proposal, including the legal, financial and
regulatory aspects) are more favorable to NGH's stockholders (taking into
account the consideration to be received by NGH in the Nabisco Holdings
merger) than the Nabisco Holdings merger (or, if applicable, the amended
proposal offered by Philip Morris) and (2) that is reasonably likely to be
completed.
No Amendments to Certain Agreements. NGH has agreed not to:
o amend the NGH merger agreement or waive any of its rights under
that agreement in any manner that would materially delay
completion of the Nabisco Holdings merger or create any material
additional liabilities of Nabisco Holdings;
o amend or terminate NGH's stockholder rights plan, except to
permit the transactions contemplated by the NGH merger agreement
and the Nabisco Holdings merger agreement or any other
transaction to be completed after the Nabisco Holdings merger;
or
o amend the Distribution Agreement dated as of May 12, 1999 among
NGH, RJR and Reynolds Tobacco in any manner adverse to Nabisco
Holdings' rights under specified provisions of that agreement.
Termination
The NGH voting and indemnity agreement may be terminated in any of the
following ways:
(a) The NGH voting and indemnity agreement will automatically terminate on
the earlier to occur of:
(1) the completion of the Nabisco Holdings merger;
(2) the termination of the Nabisco Holdings merger agreement; and
(3) the date of the NGH stockholder meeting (including reasonable
extensions up to 30 days to obtain additional proxies), if NGH
stockholders fail to approve the Nabisco Sale at such meeting.
(b) The NGH voting and indemnity agreement may be terminated by NGH if its
Board authorizes NGH to enter into a written agreement concerning a superior
proposal, so long as NGH has complied with the non- solicitation, board
recommendation, notice, negotiation and termination fee provisions of the NGH
voting and indemnity agreement and Philip Morris has not made a definitive,
binding offer that the NGH Board determines, in good faith after consultation
with its financial advisors, is at least as favorable to NGH stockholders
(taking into account the consideration to be received by NGH in the Nabisco
Holdings merger) as the superior proposal.
(c) The NGH voting and indemnity agreement may be terminated by Philip
Morris if:
(1) the NGH Board fails to recommend, or withdraws or modifies in a
manner adverse to Philip Morris, its approval or recommendation
of the sale of the Nabisco Holdings shares, recommends a
superior proposal, or resolves to do any of the foregoing;
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Chapter Two - Sale of Nabisco Holdings Shares
(2) NGH enters into, or publicly announces its intention to enter
into, a definitive agreement with respect to a superior
proposal; or
(3) NGH breaches its obligations to vote in favor of the Nabisco
Holdings merger and against any competing proposal.
If the NGH voting and indemnity agreement is validly terminated, most of
its provisions will cease to have effect. The expenses and indemnification
provisions will survive any termination, but the indemnification provisions
will terminate automatically if both the Nabisco Holdings merger agreement and
the NGH merger agreement have terminated.
Certain Fees and Expenses
Except as described below, all costs and expenses incurred in connection
with the NGH voting and indemnity agreement and related transactions will be
paid by the party incurring such costs or expenses.
Nabisco Holdings and NGH Advisor Fees. The parties have agreed that
Nabisco Holdings will be responsible for fees and expenses of the financial,
legal and other advisors to Nabisco Holdings and NGH up to $50 million, and NGH
will be responsible for all such fees and expenses in excess of $50 million.
Termination Fees. NGH has agreed to pay Philip Morris $445 million in
cash, less termination fees or expenses previously paid under the Nabisco
Holdings merger agreement, in any of the following circumstances:
o NGH terminates the NGH voting and indemnity agreement as described
above in paragraph (b) under "--Termination;"
o the NGH voting and indemnity agreement terminates as described above
in paragraph (a)(3) under "--Termination" and, prior to the NGH
stockholder meeting, a third party, NGH or Nabisco Holdings has
announced an acquisition proposal and within nine months after
termination of the NGH voting and indemnity agreement, NGH or Nabisco
Holdings enters into a definitive agreement involving any acquisition
proposal with respect to Nabisco Holdings or NGH or such a
transaction is completed; or
o Philip Morris terminates the NGH voting and indemnity agreement as
described above in paragraph (c) under "--Termination."
If termination fees become payable under both the Nabisco Holdings merger
agreement and the NGH voting and indemnity agreement, a single fee will be paid
by Nabisco Holdings. However, if Nabisco Holdings fails to pay such fee in full
on a timely basis, NGH will immediately pay the fee, in which case NGH shall
have the right to obtain reimbursement of the fee from Nabisco Holdings.
Indemnification
After completion of the Nabisco Holdings merger, NGH has generally agreed
to indemnify Philip Morris and its affiliates for liabilities relating to NGH's
business and Nabisco Holdings has generally agreed to indemnify NGH and its
affiliates for liabilities relating to Nabisco Holdings' business.
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Chapter Two - Sale of Nabisco Holdings Shares
OPINIONS OF FINANCIAL ADVISORS
NGH and Nabisco Holdings jointly retained UBS Warburg LLC and Morgan
Stanley & Co. Incorporated to act as financial advisors in connection with the
transactions.
Opinion of UBS Warburg LLC
At the joint meeting of the NGH Board and the Nabisco Holdings Board held
on June 25, 2000, UBS Warburg delivered its oral opinion to the effect that, as
of the date of the opinion and based on and subject to the matters described in
the opinion, including a review of the definitive agreements for the
transaction, the consideration of $55.00 per share in cash that each of the
holders of Nabisco Holdings common stock other than Philip Morris and its
affiliates is to receive pursuant to the Nabisco Holdings merger agreement is
fair, from a financial point of view, to the holders of Nabisco Holdings common
stock, including NGH. The opinion was confirmed by delivery of a written
opinion dated June 25, 2000, the date of execution of the Nabisco Holdings
merger agreement.
The following summary of the UBS Warburg opinion is qualified in its
entirety by reference to the full text of the opinion. The full text of the UBS
Warburg opinion sets forth the assumptions made, procedures followed, matters
considered and limitations on the scope of the review undertaken and is
attached as Annex D to this proxy statement and incorporated herein by
reference. We encourage you to read carefully the UBS Warburg opinion in its
entirety.
UBS Warburg's opinion:
o is directed to the NGH Board and the Nabisco Holdings Board;
o relates only to the fairness, from a financial point of view, to the
holders of Nabisco Holdings common stock, including NGH, of the
consideration to be received by such holders in the Nabisco Holdings
merger;
o does not address the relative fairness of the consideration to be
paid pursuant to the Nabisco Holdings merger agreement to the holders
of the Class A common stock and to NGH, the holder of the Class B
common stock;
o does not constitute a recommendation to holders of NGH or Nabisco
Holdings common stock about how to vote on the transactions;
o does not address NGH's or Nabisco Holdings' underlying business
decision to effect the Nabisco Holdings merger, the form of the
transaction or the after-tax consequences of the transaction to any
holder of Nabisco Holdings common stock; and
o is necessarily based upon economic, monetary, market and other
conditions as they existed as of the date of the opinion and should
be evaluated based upon those conditions.
In arriving at its opinion, UBS Warburg, among other things:
o reviewed publicly available business and historical financial
information relating to Nabisco Holdings;
o reviewed the reported prices and trading activity for Nabisco
Holdings Class A common stock;
o reviewed internal financial information and other data concerning the
business and financial prospects of Nabisco Holdings, including
estimates and financial forecasts prepared by the management of
Nabisco Holdings, which were provided to UBS Warburg by Nabisco
Holdings;
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Chapter Two - Sale of Nabisco Holdings Shares
o held discussions with members of senior management of Nabisco
Holdings regarding the business and prospects of Nabisco Holdings, as
well as other matters it believed relevant to its inquiry;
o reviewed publicly available financial and stock market data with
respect to selected companies in lines of business UBS Warburg
believed to be generally comparable to those of Nabisco Holdings;
o compared the financial terms of the Nabisco Holdings merger with the
publicly available financial terms of selected other transactions
that UBS Warburg believed to be generally relevant;
o reviewed drafts of the Nabisco Holdings merger agreement and related
agreements; and
o conducted and considered other financial studies, analyses,
investigations and information that it considered necessary or
appropriate.
In connection with its review, at NGH's and Nabisco Holdings' direction,
UBS Warburg:
o did not independently verify any of the information referred to above
and relied on it as being complete and accurate in all material
respects;
o assumed that the financial forecasts and estimates referred to above
were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Nabisco
Holdings as to the future financial performance of Nabisco Holdings;
o did not make any independent evaluation or appraisal of any of the
assets or liabilities of Nabisco Holdings, nor was UBS Warburg
furnished with any similar evaluation or appraisal;
o did not express any opinion as to the prices at which the NGH common
stock would trade subsequent to the Nabisco Holdings merger or the
use of proceeds from the Nabisco Holdings merger by NGH or any other
Nabisco Holdings stockholder; and
o assumed that Nabisco Holdings, Philip Morris and Strike Acquisition
Corp. would comply with all material terms of the Nabisco Holdings
merger agreement.
UBS Warburg was not asked to and did not recommend the specific
consideration payable in the Nabisco Holdings merger, which was determined
through negotiation between NGH and Nabisco Holdings, on the one hand, and
Philip Morris, on the other hand. At NGH's and Nabisco Holdings' direction, UBS
Warburg contacted third parties to solicit indications of interest in possible
business combination transactions with NGH and Nabisco Holdings. UBS Warburg
held discussions with a number of these parties before the date of its opinion.
Except to the extent set forth above, neither NGH nor Nabisco Holdings limited
UBS Warburg regarding the procedures to be followed or factors to be considered
in rendering its opinion.
In preparing its opinion, UBS Warburg performed a variety of financial and
comparative analyses. The material analyses are summarized below. The
preparation of a fairness opinion is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, is not susceptible to partial analysis or summary
descriptions. In arriving at its opinion, UBS Warburg made qualitative
judgments as to the significance and relevance of each analysis and factor
considered by it. Accordingly, UBS Warburg believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the processes underlying the analyses set forth in
its opinion.
In performing its analyses, UBS Warburg made numerous assumptions with
respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
NGH or Nabisco Holdings. No company, transaction or business used in those
analyses as a comparison
II-13
<PAGE>
Chapter Two - Sale of Nabisco Holdings Shares
is identical to Nabisco Holdings or its businesses or the Nabisco Holdings
merger, nor is an evaluation of the results entirely mathematical. Rather, the
analyses involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the companies, business segments or
transactions being analyzed.
The estimates contained in the analyses performed by UBS Warburg and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than suggested by these analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which a business might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future.
NGH and Nabisco Holdings selected UBS Warburg based on its experience,
expertise and reputation. UBS Warburg is an internationally recognized
investment banking firm that regularly engages in the valuation of businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. In the past, UBS Warburg and its predecessors have provided
investment banking services to NGH, Nabisco Holdings and Philip Morris and
received customary compensation for the rendering of these services. In the
ordinary course of its business, UBS Warburg, its successors and affiliates may
trade or have traded securities of NGH, Nabisco Holdings and Philip Morris for
their own accounts and, accordingly, may at any time hold a long or short
position in such securities. UBS Warburg and its affiliates, including UBS AG,
may have other business relationships with NGH, Nabisco Holdings, Philip Morris
and their respective affiliates.
The following is a summary of the material financial analyses used by UBS
Warburg in connection with the rendering of its opinion. The financial analyses
summarized below include information presented in tabular format. In order to
fully understand the financial analyses, the tables must be read together with
the text of each summary. Considering the data set forth below without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the financial analyses.
Historical Stock Price Analysis. UBS Warburg reviewed the historical
trading prices for Nabisco Holdings Class A common stock for the period from
June 15, 1999 through June 21, 2000, and compared the movements in those prices
to the movements of an index of publicly-traded branded foods companies for the
same period. The branded food company index consists of Campbell Soup Company,
ConAgra, Inc., General Mills, Inc., H.J. Heinz Company, Hershey Foods
Corporation, Keebler Foods Company, Kellogg Company, The Quaker Oats Company,
Ralston Purina Company and Sara Lee Corporation. UBS Warburg observed that,
during the period from March 29, 2000 (the last day prior to the announcement
of Mr. Icahn's intention to commence a tender offer for 100 million shares of
NGH's common stock) to June 21, 2000, the per share price of Nabisco Holdings
Class A common stock increased 94.1% from $27.31 on March 21, 2000 to $53.00 on
June 21, 2000. During the same period, the branded food company index increased
by 15.2%.
Selected Public Companies Trading Analysis. UBS Warburg reviewed and
analyzed selected financial information, ratios and public market multiples for
the following 10 publicly-traded branded food companies:
o Campbell Soup Company
o ConAgra, Inc.
o General Mills, Inc.
o H.J. Heinz Company
o Hershey Foods Corporation
o Keebler Foods Company
o Kellogg Company
o The Quaker Oats Company
o Ralston Purina Company
o Sara Lee Corporation
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Chapter Two - Sale of Nabisco Holdings Shares
UBS Warburg chose the selected public companies because they were
publicly-traded companies that, for purposes of the analysis, UBS Warburg
considered reasonably similar to Nabisco Holdings in that these companies
operate in the branded foods industry. The selected public companies may
significantly differ from Nabisco Holdings based on, among other things, the
size of the companies, the geographic coverage of the companies' operations,
and the particular segments of the branded foods industry in which the
companies focus.
UBS Warburg reviewed, among other things, the following:
o enterprise values, calculated as the market value of fully diluted
equity securities plus indebtedness and minority interests less cash,
as of June 21, 2000, as a multiple of actual trailing 12 months
sales, earnings before interest, taxes, depreciation and
amortization, commonly referred to as EBITDA, and earnings before
interest and taxes, commonly referred to as EBIT;
o equity values, calculated as per share closing stock prices on June
21, 2000, as a multiple of estimated calendar 2000 earnings per
share, commonly referred to as EPS; and
o the ratio of 2000 estimated price/earnings ratio to five-year growth
rate provided by I/B/E/S International Inc., or IBES.
This analysis indicated the following implied multiples for the selected
public companies:
Implied Multiples of
Selected Transactions
-----------------------------
Low High Mean Median
--- ---- ---- ------
Enterprise Value
Actual Trailing 12 Months Sales.......... 0.6x 2.7x 1.9x 2.0x
Actual Trailing 12 Months EBITDA......... 7.5x 12.7x 10.0x 10.2x
Actual Trailing 12 Months EBIT........... 10.0x 15.0x 12.6x 12.5x
Equity Value
Estimated Calendar 2000 EPS.............. 11.1x 22.2x 17.3x 17.7x
2000 P/E
IBES Five-Year Growth Rate............... 1.1x 2.2x 1.7x 1.7x
UBS Warburg then compared the implied multiples derived for the selected
public companies with the relevant financial statistics for Nabisco Holdings.
This comparison yielded an implied valuation range of $32 to $42 per Nabisco
Holdings share versus the $55 per Nabisco Holdings share offered by Philip
Morris. Actual trailing 12 months data for Nabisco Holdings and the selected
companies were based on the respective companies' Forms 10-K and 10-Q.
Estimated financial data for the selected companies were based on publicly
available research analysts' estimates. Estimated financial data for Nabisco
Holdings were based on internal estimates provided by the management of Nabisco
Holdings.
Selected Transactions Analysis. UBS Warburg reviewed and compared publicly
available information relating to the following 10 selected transactions in the
branded foods industry announced since 1985:
Announcement
Target Acquiror Date
------ -------- ------------
Bestfoods Unilever N.V. and Unilever PLC 5/25/00
American Home Products Corp.
(Food Division) Hicks, Muse, Tate & Furst Inc. 9/6/96
Pet Incorporated Grand Metropolitan plc 1/9/95
Gerber Products Company Sandoz Ltd. 5/23/94
Borden, Inc. Kohlberg Kravis Roberts & Co. 9/12/94
Snapple Beverage Corp. The Quaker Oats Company 11/2/94
Beatrice Company ConAgra, Inc. 6/7/90
The Pillsbury Company Grand Metropolitan plc 10/4/88
Kraft Foods, Inc. Philip Morris 10/18/88
General Foods Corporation Philip Morris 9/27/85
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Chapter Two - Sale of Nabisco Holdings Shares
UBS Warburg chose the selected transactions because they were business
combinations that, for the purposes of the analysis, UBS Warburg considered to
be reasonably similar to the Nabisco Holdings merger in that these transactions
involved companies in the branded foods industry. The selected transactions may
significantly differ from the Nabisco Holdings merger based on, among other
things, the size of the transactions, the structure of the transactions and the
date the transactions were consummated.
UBS Warburg reviewed, among other things, the enterprise values implied in
the relevant transactions as a multiple of actual trailing 12-months sales,
EBITDA and EBIT.
This analysis indicated the following implied multiples for the selected
transactions:
Implied Range of Multiples of
Selected Public Companies
-----------------------------
Low High Mean Median
--- ---- ---- ------
Enterprise Value to Actual Trailing
12 Months:
Sales..................................... 0.5x 3.2x 1.6x 1.3x
EBITDA.................................... 5.2x 16.9x 11.5x 11.4x
EBIT...................................... 7.6x 24.0x 15.4x 14.9x
UBS Warburg then compared the implied multiples derived for the selected
transactions with the relevant financial statistics for Nabisco Holdings. This
comparison yielded an implied valuation range of $48 to $59 per Nabisco
Holdings share versus the $55 per Nabisco Holdings share offered by Philip
Morris. All multiples for the selected transactions were based on publicly
available information at the time of the announcement of the particular
transaction. Actual trailing 12-months data for Nabisco Holdings was based on
its applicable Forms 10-K and 10-Q.
Discounted Cash Flow Analysis. UBS Warburg performed a discounted cash
flow analysis, using internal estimates of the management of Nabisco Holdings,
in order to derive an implied equity value reference range for Nabisco
Holdings. This analysis was based on:
o the present value of the estimated unlevered, after-tax free cash
flows that Nabisco Holdings could generate over the five-year period
2000 through 2004; and
o the present value of the 2004 terminal value of Nabisco Holdings
based on a range of multiples applied to its estimated future 2004
EBITDA.
For purposes of this analysis, UBS Warburg used discount rates of 8.5% to
10.0%, which were based on Nabisco Holdings' estimated weighted average cost of
capital, and terminal 2004 EBITDA multiples of 9.0x to 11.0x, which were
derived by reference to the selected public companies trading analysis. This
analysis implied a per share equity value reference range for Nabisco Holdings
of $44 to $58.
Opinion of Morgan Stanley & Co. Incorporated
Pursuant to a letter agreement dated as of April 3, 2000, Morgan Stanley
was engaged by NGH and Nabisco Holdings to provide financial advisory services
in connection with the Nabisco Holdings merger. At the joint meeting of the
Boards of Directors of NGH and Nabisco Holdings on June 25, 2000, Morgan
Stanley rendered its oral opinion, subsequently confirmed in writing on the
same day, that based upon and subject to the various considerations set forth
in the opinion, the aggregate consideration to be paid pursuant to the Nabisco
Holdings merger agreement to the holders of the Class A common stock and Class
B common stock of Nabisco Holdings (other than Philip Morris and its
affiliates) is fair from a financial point of view to such holders, including
NGH.
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<PAGE>
Chapter Two - Sale of Nabisco Holdings Shares
Morgan Stanley did not opine on the relative fairness of the consideration to
be paid to NGH, as the holder of the Class B common stock, and to the holders
of the Class A common stock.
The full text of the written opinion of Morgan Stanley, dated June 25,
2000, which sets forth, among other things, assumptions made, procedures
followed, matters considered and limitations on the scope of the review
undertaken by Morgan Stanley in rendering its opinion, is attached as Annex E
to this proxy statement. Stockholders are urged to, and should, read the
opinion carefully and in its entirety. Morgan Stanley's opinion is directed to
the Boards of Directors of NGH and Nabisco Holdings and addresses only the
fairness, from a financial point of view, of the consideration to be paid
pursuant to the Nabisco Holdings merger agreement in the aggregate to the
holders of shares of Nabisco Holdings common stock as of the date of the
opinion, does not address any other aspect of the Nabisco Holdings merger and
does not constitute a recommendation to any stockholder of Nabisco Holdings or
NGH as to how to vote with respect to the Nabisco Holdings merger. The summary
of the opinion of Morgan Stanley set forth in this proxy statement is qualified
in its entirety by reference to the full text of such opinion.
In connection with rendering its opinion, Morgan Stanley, among other
things:
o reviewed certain publicly available financial statements and other
information of Nabisco Holdings;
o reviewed certain internal financial statements and other financial
and operating data concerning Nabisco Holdings prepared by the
management of Nabisco Holdings;
o reviewed certain financial projections regarding Nabisco Holdings
prepared by the management of Nabisco Holdings;
o discussed the past and current operations and financial condition and
the prospects of Nabisco Holdings with senior executives of Nabisco
Holdings;
o reviewed the reported prices and trading activity of the Class A
common stock;
o compared the financial performance of Nabisco Holdings and the prices
and trading activity of the Class A common stock with that of certain
comparable publicly-traded companies and their securities;
o reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
o participated in certain discussions and negotiations among
representatives of Nabisco Holdings, NGH and Philip Morris and their
financial and legal advisors;
o reviewed certain drafts of the Nabisco Holdings merger agreement, as
well as the NGH voting and indemnity agreement;
o discussed the tax implications of the consummation of the Nabisco
Holdings merger with Nabisco Holdings, NGH and their counsel; and
o performed such other analyses and considered such other factors as
Morgan Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. With respect to the financial
projections, Morgan Stanley assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of Nabisco Holdings.
II-17
<PAGE>
Chapter Two - Sale of Nabisco Holdings Shares
Morgan Stanley did not make, and did not assume any responsibility for
making, any independent valuation or appraisal of the assets or liabilities of
Nabisco Holdings, nor was it furnished with any such appraisals. Morgan Stanley
assumed that the executed versions of the Nabisco Holdings merger agreement and
the NGH voting and indemnity agreement would not differ in any material respect
from the last drafts reviewed by Morgan Stanley. Morgan Stanley assumed that
the Nabisco Holdings merger will be consummated in accordance with the terms
set forth in the Nabisco Holdings merger agreement without material
modification or waiver. Morgan Stanley also assumed that the consummation of
the Nabisco Holdings merger would not adversely affect the tax-free treatment
of the RJR Spinoff. Morgan Stanley's opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to it, as of June 25, 2000, but its opinion did not address Nabisco
Holdings' underlying business decision to effect the transactions contemplated
by the Nabisco Holdings merger agreement.
The following is a brief summary of all material analyses performed by
Morgan Stanley in connection with its oral opinion and the preparation of its
written opinion letter dated June 25, 2000. Some of these summaries of
financial analyses include information presented in tabular format. In order to
fully understand the financial analyses used by Morgan Stanley, the tables must
be read together with the text of each summary.
Historical share price performance. Morgan Stanley reviewed the stock
performance of Nabisco Holdings and compared such performance with the stock
performance of the companies comprising a U.S.-based, large capitalization food
company index (the "Large Capitalization Food Company Index"), which consists
of the following companies: Bestfoods, Campbell Soup Company, ConAgra, Inc.,
General Mills, Inc., Hershey Foods Corporation, H.J. Heinz Company, Kellogg
Company, The Quaker Oats Company, Ralston Purina Company and Sara Lee
Corporation. Morgan Stanley observed that during the period from March 29, 2000
(the last day prior to the announcement of Mr. Icahn's intention to commence a
tender offer for 100 million shares of NGH common stock) to June 21, 2000, the
price per share of Nabisco Holdings Class A common stock increased 94.1%.
Nabisco Holdings Class A common stock closed at $27.31 per share on March 29,
2000 (the "Unaffected Price") and closed at $53.00 per share on June 21, 2000.
In comparison, the Large Capitalization Food Company Index increased 15.9%
during the period from March 29, 2000 to June 21, 2000. Morgan Stanley noted
that the trading range for the 52-week period ended March 29, 2000 for the
Class A common stock was from $26.94 per share to $43.75 per share and compared
that to the consideration to be paid in the Nabisco Holdings merger of $55.00
per share. Morgan Stanley also noted that the implied premium of the
consideration in the Nabisco Holdings merger of $55.00 per share to the
Unaffected Price was 101.4%.
Peer group comparison. Morgan Stanley compared financial information of
Nabisco Holdings with publicly- available information for the following
U.S.-based, large capitalization food companies:
o Bestfoods;
o Campbell Soup Company;
o ConAgra, Inc.;
o General Mills, Inc.;
o Hershey Foods Corporation;
o H.J. Heinz Company;
o Kellogg Company; and
o The Quaker Oats Company.
For this analysis, Morgan Stanley examined a range of estimates based on
securities research analysts' estimates. The following table presents, as of
June 21, 2000, the low, high and median of the ratio of aggregate value,
defined as market capitalization plus total debt less cash and cash
equivalents, to estimated calendar year 2000 EBITDA, the ratio of share price
to estimated calendar year 2000 EPS, the estimated growth in earnings per share
over a five-year period, as provided by selected research analysts on
publicly-traded companies, and the ratio of the estimated calendar year 2000
price-to-earnings ratio to the estimated five-year growth in earnings per
share. Morgan Stanley then compared this information to similar information for
Nabisco Holdings based on the consideration to be received pursuant to the
Nabisco Holdings merger agreement and Nabisco Holdings based on the Unaffected
Price.
II-18
<PAGE>
Chapter Two - Sale of Nabisco Holdings Shares
<TABLE>
2000E Price-to
Aggregate Earnings
Value/2000E Price/2000E Five-Year EPS Ratio/Five-Year
EBITDA EPS Growth EPS Growth
----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Low........................................ 7.0x 11.1x 9.0% 1.1x
High....................................... 12.4 25.3 10.0 2.5
Median..................................... 9.8 17.7 10.0 1.8
Nabisco Holdings merger consideration...... 12.6 23.8 10.0 2.4
Nabisco Holdings (Unaffected Price)........ 7.5 11.8 10.0 1.2
</TABLE>
Morgan Stanley noted that a trading comparable multiple range for the peer
group companies of 9.0x-11.5x of 2000E EBITDA would imply a Nabisco Holdings
price range for the Class A common stock of approximately $36 to $49 per share.
No company utilized in the peer group comparison analysis is identical to
Nabisco Holdings. In evaluating the peer group, Morgan Stanley made judgments
and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of Nabisco Holdings, such as the impact of competition on
the business of Nabisco Holdings or the industry generally, industry growth and
the absence of any material adverse change in the financial condition and
prospects of Nabisco Holdings or the industry or in the financial markets in
general. Mathematical analysis, such as determining the average or median, is
not in itself a meaningful method of using peer group data.
Analysis of selected precedent transactions. Morgan Stanley compared
statistics based on publicly available information for selected precedent
transactions to the relevant financial statistics for Nabisco Holdings. Morgan
Stanley reviewed the following 15 food industry transactions:
Announcement
Target Acquiror Date
------ -------- ------------
Bestfoods Unilever PLC and Unilever N.V. 5/25/00
Slim-Fast Foods Company Unilever N.V. 4/12/00
The Iams Company The Procter & Gamble Company 8/11/99
United Biscuits (Holdings) plc Finalrealm Limited 12/17/99
Tropicana Products, Inc. PepsiCo, Inc. 7/20/98
Keebler Foods Company Flowers Industries, Inc. 2/3/98
Pet Incorporated Grand Metropolitan plc 1/9/95
Pace Foods Ltd. Campbell Soup Company 11/28/94
Snapple Beverage Corp. The Quaker Oats Company 11/2/94
Borden Inc. Kohlberg Kravis Roberts & Co. 9/12/94
Gerber Products Company Sandoz Ltd. 5/23/94
Beatrice Company ConAgra, Inc. 6/7/90
RJR Nabisco, Inc. Kohlberg Kravis Roberts & Co. 10/24/88
Kraft Foods, Inc. Philip Morris Companies Inc. 10/17/88
The Pillsbury Company Grand Metropolitan plc 10/4/88
The following table presents the high, low and median ratios of aggregate
value to last twelve-month ("LTM") sales, EBITDA and earnings before interest
and taxes ("EBIT") for the selected precedent transactions and compared this
information to similar information for Nabisco Holdings based on the
consideration to be received pursuant to the Nabisco Holdings merger agreement.
Aggregate Aggregate Aggregate
Value/LTM Value/LTM Value/LTM
Sales EBITDA EBIT
--------- --------- ---------
Low........................................ 0.6x 5.4x 7.9x
High....................................... 4.7 18.6 32.0
Median..................................... 1.8 12.4 18.3
Nabisco Holdings merger consideration...... 2.3 13.9 22.6
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<PAGE>
Chapter Two - Sale of Nabisco Holdings Shares
Morgan Stanley observed that a trading comparable multiple range of
12.0x-15.0x of LTM EBITDA for selected precedent transactions would imply a
Nabisco Holdings price range for the Class A common stock of approximately $46
to $60 per share.
No transaction utilized as a comparison in the selected precedent
transactions analysis is identical to the Nabisco Holdings merger. In
evaluating the transactions listed above, Morgan Stanley made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Nabisco Holdings, such as the impact of competition on the business
of Nabisco Holdings or the industry generally, industry growth and the absence
of any adverse material change in the financial condition and prospects of
Nabisco Holdings or the industry or in the financial markets in general.
Mathematical analysis, such as determining the average or median, is not in
itself a meaningful method of using comparable transaction data.
Discounted cash flow analysis. Morgan Stanley performed a discounted cash
flow analysis, which is an analysis of the present value of projected unlevered
free cash flows using terminal year EBITDA multiples and discount rates of
Nabisco Holdings. Morgan Stanley analyzed Nabisco Holdings' business using
publicly-available information, discussions with Nabisco Holdings' management
and certain financial forecasts prepared by Nabisco Holdings management for the
fiscal years 2000 through 2004. The terminal value was calculated using
terminal multiples of estimated 2004 EBITDA ranging from 9.0x to 11.0x. For
purposes of this analysis, Morgan Stanley estimated Nabisco Holdings'
discounted unlevered free cash flow value using discount rates ranging from
8.5% to 9.5%. The range of discount rates was selected based in part on an
analysis of food industry companies used to derive a range of estimated
weighted average costs of capital and the experience and judgment of Morgan
Stanley with respect to the food industry. The discounted cash flow analysis
implied a range of values for Nabisco Holdings Class A common stock of
approximately $43 to $55 per share.
In connection with the review of the Nabisco Holdings merger by the Boards
of Directors of NGH and Nabisco Holdings, Morgan Stanley performed a variety of
financial and comparative analyses for purposes of its opinion given in
connection therewith. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or summary
description. In arriving at its opinion, Morgan Stanley considered the results
of all of its analyses as a whole and did not attribute any particular weight
to any analysis or factor considered by it. Furthermore, Morgan Stanley
believes that selecting any portion of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its
opinion. In addition, Morgan Stanley may have given various analyses and
factors more or less weight than other analyses and factors and may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Morgan Stanley's view of the actual value of Nabisco
Holdings.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Nabisco Holdings. Any
estimates contained in Morgan Stanley's analyses are not necessarily indicative
of future results or actual values, which may be significantly more or less
favorable than those suggested by such estimates. The analyses performed were
prepared solely as part of Morgan Stanley's analysis of the fairness from a
financial point of view of the consideration to be paid pursuant to the Nabisco
Holdings merger agreement in the aggregate to the holders of Nabisco Holdings
common stock, including NGH, and were conducted in connection with the delivery
of the Morgan Stanley opinion to the Boards of Directors of NGH and Nabisco
Holdings. The consideration to be received by the holders of the common stock
pursuant to the Nabisco Holdings merger agreement and other terms of the
Nabisco Holdings merger agreement and the NGH voting and indemnity agreement
were determined through arm's-length negotiations between NGH, Nabisco Holdings
and Philip Morris and were approved by the NGH and the Nabisco Holdings Boards
of Directors. Morgan Stanley provided advice to NGH and Nabisco Holdings during
such negotiations; however, Morgan Stanley did not recommend any specific
consideration to Nabisco Holdings or that any specific consideration
constituted the only appropriate consideration for the Nabisco Holdings merger.
In addition, as described above, Morgan Stanley's opinion and presentation to
the NGH and the Nabisco Holdings Boards of Directors was one of many factors
taken into consideration by such Boards of Directors in making their decision
to approve the Nabisco Holdings merger. Consequently, the Morgan Stanley
analyses as described above
II-20
<PAGE>
Chapter Two - Sale of Nabisco Holdings Shares
should not be viewed as determinative of the opinion of the NGH and the Nabisco
Holdings Boards of Directors with respect to the value of Nabisco Holdings or
of whether the NGH or the Nabisco Holdings Boards of Directors would have been
willing to agree to a different consideration.
The NGH and the Nabisco Holdings Boards of Directors retained Morgan
Stanley based upon Morgan Stanley's qualifications, experience and expertise
and its knowledge of the business affairs of NGH and Nabisco Holdings. Morgan
Stanley is an internationally recognized investment banking and advisory firm.
Morgan Stanley, as part of its investment banking and financial advisory
business, is continuously engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
In the past, Morgan Stanley has provided financial advisory and financing
services for NGH, Nabisco Holdings and Philip Morris and has received fees for
the rendering of these services. In the ordinary course of business, Morgan
Stanley may from time to time trade in the securities or indebtedness of NGH,
Nabisco Holdings or Philip Morris for its own account, the accounts of
investment funds and other clients under the management of Morgan Stanley and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities or indebtedness.
Fee Arrangements
Pursuant to an engagement letter dated March 13, 2000 among NGH, Nabisco
Holdings and UBS Warburg, and an engagement letter dated April 3, 2000 among
NGH, Nabisco Holdings and Morgan Stanley, each of UBS Warburg and Morgan
Stanley provided financial advisory services and a fairness opinion to NGH and
Nabisco Holdings in connection with the Nabisco Holdings merger. Pursuant to
the engagement letters, NGH and Nabisco Holdings have agreed to pay UBS Warburg
and Morgan Stanley in the aggregate as compensation for their services the
following amounts: (i) retainer fees of $200,000 per month, (ii) opinion fees
of $10,000,000, and (iii) transaction fees of $41,000,000 upon the completion
of an acquisition transaction involving NGH or Nabisco Holdings, against which
any retainer fees and opinion fees paid will be credited, it being understood
that no more than $41,000,000 in transaction fees will be payable even if more
than one such transaction is completed. In addition, pursuant to the engagement
letters, Nabisco Holdings has agreed to pay the financial advisors incentive
fees of $8,000,000 in the aggregate upon the closing of the Nabisco Holdings
merger based upon the $55 per share consideration, and NGH and Nabisco Holdings
have agreed to pay additional discretionary incentive fees of $8,000,000 in the
aggregate to the financial advisors.
NGH and Nabisco Holdings have also agreed to reimburse UBS Warburg and
Morgan Stanley for their expenses reasonably incurred in performing their
services. In addition, NGH and Nabisco Holdings have agreed to indemnify each
of UBS Warburg and Morgan Stanley and their respective affiliates, and their
respective directors, officers, agents and employees and each person, if any,
controlling UBS Warburg or Morgan Stanley or any of their affiliates against
certain liabilities and expenses related to or arising out of UBS Warburg's or
Morgan Stanley's engagement and any related transactions.
II-21
<PAGE>
CHAPTER THREE
ACQUISITION OF NGH BY RJR
The NGH Board of Directors has approved, and recommends that NGH
stockholders adopt, the NGH merger agreement pursuant to which RJR will acquire
NGH after NGH's sale of its 80.5% interest in Nabisco Holdings.
NGH MERGER AGREEMENT
The following is a summary of the material terms of the NGH merger
agreement and is qualified by reference to the complete text of the NGH merger
agreement, which is incorporated by reference and attached as Annex C.
The NGH Merger
Under the NGH merger agreement, a subsidiary of RJR will merge with and
into NGH in accordance with Delaware law. The separate existence of the merger
subsidiary will cease and NGH will become a wholly-owned subsidiary of RJR.
Completion of the NGH Merger
As soon as practicable after all of the conditions set forth in the NGH
merger agreement have been satisfied or waived, the parties will file a
certificate of merger with the Secretary of State of the State of Delaware. The
NGH merger will be completed at the time the certificate is filed.
Merger Consideration
The NGH merger agreement provides that each share of NGH common stock
outstanding immediately prior to the completion of the NGH merger (except for
shares as to which appraisal rights have been properly exercised), together
with the preferred stock purchase rights associated with each such share, will,
at the completion of the NGH merger, be converted into the right to receive $30
per share in cash, without interest, prorated for fractional shares. However,
shares of NGH held as treasury shares or owned by RJR or its subsidiaries will
be canceled without any payment for those shares.
In the event (1) the Nabisco Holdings merger agreement is terminated in
accordance with its terms, (2) RJR has not terminated the NGH merger agreement
and (3) a transaction is completed where NGH receives, in its capacity as a
stockholder of Nabisco Holdings, more than $55 per Nabisco Holdings share, an
automatic adjustment to the merger consideration payable by RJR will be made.
The amount of the merger consideration will be increased so that in addition to
the $30 per share in cash described above, NGH stockholders will generally
receive one-half of the per share net proceeds (as defined in the NGH merger
agreement) to NGH in excess of $55 per Nabisco Holdings share.
Surrender of Certificates and Payment Procedures
RJR will appoint an exchange agent to handle the exchange of your share
certificates for the merger consideration. Soon after the NGH merger is
completed, the exchange agent will send you a letter of transmittal and
instructions explaining how to surrender your share certificates. If you
surrender your certificates to the exchange agent, together with a properly
completed letter of transmittal, and all other documents the exchange agent may
reasonably require, you will receive the appropriate merger consideration.
Until surrendered in accordance with the foregoing instructions, each
certificate formerly representing shares of NGH will only represent the right
to receive the merger consideration. No interest will be paid or will accrue on
the merger consideration payable.
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Chapter Three - Acquisition of NGH by RJR
At the completion of the NGH merger, the stock transfer book of NGH will
be closed and there will be no further registration of transfers of shares. If
certificates of shares are presented after the completion of the NGH merger
they will be canceled and exchanged for the right to receive the merger
consideration.
Stock Options
At or immediately prior to the completion of the NGH merger, each employee
and director option to purchase shares outstanding under any stock option or
compensation plan or arrangement of NGH, whether or not vested or exercisable,
will be canceled, and NGH will pay each optionholder at or promptly after the
completion of the NGH merger an amount in cash equal to (1) the excess, if any,
of the merger consideration per share over the applicable exercise price of
such option multiplied by the number of shares to which such option relates
(assuming full vesting of all outstanding options) or (2) for certain specified
options, the greater of the amount calculated under clause (1) or the
Black-Scholes value of such option determined in accordance with the terms of
the merger agreement.
Covenants
NGH and RJR have agreed to certain covenants in the NGH merger agreement.
A description of the covenants follows:
No Solicitation by NGH. The NGH merger agreement prohibits NGH
from soliciting, initiating or encouraging any proposal for an
alternative acquisition transaction involving NGH or its
subsidiaries, or negotiating with or furnishing nonpublic information
to, any third party regarding such an acquisition transaction, except
that NGH may engage in such activities prior to receipt of approval
of the NGH merger from NGH stockholders if:
o NGH has received an unsolicited acquisition proposal from
that third party, has so notified RJR and has complied with
the non-solicitation provisions of the NGH merger
agreement;
o the NGH Board determines in good faith that such proposal
is likely to result in a superior proposal, as defined
below, and after consultation with outside legal counsel,
that the failure to take such action would constitute a
breach of its fiduciary duties;
o the third party executes a confidentiality agreement with
terms no less favorable to NGH than those contained in the
confidentiality agreement with RJR; and
o NGH notifies RJR of the action it intends to take with
respect to the acquisition proposal.
NGH Board's Covenant to Recommend. The NGH Board of Directors
has agreed to recommend the approval and adoption of the NGH merger
agreement to NGH stockholders. However, the NGH Board is permitted to
withdraw, or modify in a manner adverse to RJR, its recommendation,
if:
o NGH has received an unsolicited acquisition proposal from a
third party, has so notified RJR and has complied with the
non-solicitation provisions of the NGH merger agreement;
o the NGH Board determines in good faith that such proposal
constitutes a superior proposal, as defined below, and
after consultation with outside legal counsel, that the
failure to take such action would constitute a breach of
its fiduciary duties; and
o NGH notifies RJR of the action it intends to take with
respect to its recommendation.
A "superior proposal" is a bona fide written acquisition
proposal (1) on terms that the Board of Directors of NGH determines
in good faith (after consultation with its financial advisor and
taking into account all terms and conditions of the proposal,
including the legal, financial and regulatory aspects)
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Chapter Three - Acquisition of NGH by RJR
provide greater value to NGH's stockholders than the NGH merger (or,
if applicable, the amended proposal offered by RJR) and (2) that is
reasonably likely to be completed.
Reasonable Best Efforts Covenant. NGH and RJR have agreed to use
their reasonable best efforts to take all actions necessary, proper
or advisable under applicable laws and regulations to complete the
NGH merger. In particular, NGH and RJR have agreed to take all
actions necessary to cause the expiration or termination of the
applicable waiting period under the HSR Act.
NGH's Interim Operations. NGH has agreed that until the
completion of the NGH merger, NGH will conduct its business in the
ordinary course consistent with past practice and will use reasonable
best efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services
of its present officers and employees. NGH has also agreed, with
certain exceptions, that it will not prior to the completion of the
NGH merger do any of the following without the consent of RJR:
o declare dividends other than customary quarterly cash
dividends;
o repurchase, redeem or otherwise acquire or offer to acquire
any shares or other securities of NGH;
o issue, encumber or sell any voting securities of NGH, or
any securities convertible into voting securities, or any
rights, warrants or options to acquire any voting
securities or convertible securities, other than pursuant
to existing stock-based awards or options, or split,
combine or reclassify any of its capital stock or issue any
other securities for shares of its capital stock;
o amend the certificate of incorporation, by-laws or any
material terms of any outstanding securities of NGH;
o merge or consolidate with any entity or acquire a material
amount of stock or assets of any other entity;
o sell or otherwise dispose of the Nabisco Holdings shares or
any other assets except pursuant to the Nabisco Holdings
merger agreement;
o incur or guarantee any indebtedness or issue or guarantee
any debt securities;
o adopt or amend any employee plan or benefit arrangement or
materially change any funding assumptions of any existing
employee plan or benefit arrangement;
o increase the compensation of officers, directors or
employees or pay any benefit or amount not required by any
existing employee plan or benefit arrangement;
o settle or satisfy any claims or liabilities, other than
liabilities disclosed and reserved for in NGH's financial
statements, or waive the benefits of any standstill
agreement;
o encumber or dispose of any of its properties or assets
except through the Nabisco Holdings merger agreement;
o make any material tax election or settle any material income
tax liability;
o fail to cause Nabisco Holdings to pay its customary
quarterly cash dividend prior to the time NGH's customary
quarterly cash dividend is due;
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Chapter Three - Acquisition of NGH by RJR
o fail to cause Nabisco Holdings to comply with the Nabisco
Holdings merger agreement and the NGH voting and indemnity
agreement;
o fail to comply with, amend or waive any right under the NGH
voting agreement, or permit Nabisco Holdings to amend or
waive any right under the NGH voting agreement or the
Nabisco Holdings merger agreement, in a manner that would
create additional liability for NGH or delay the NGH
merger;
o take any other action that would cause the representation
in the NGH merger agreement with respect to the absence of
certain changes not to be true and correct;
o adopt a plan of liquidation, dissolution, merger,
consolidation, recapitalization or reorganization, or enter
into any material agreement providing for acceleration of
any material payment or performance as a result of a change
in control; or
o agree or commit to do any of the foregoing.
Employee Benefits Matters. RJR has agreed, jointly and severally
with NGH, that NGH will expressly assume, honor, comply with and
uphold in accordance with their terms certain specified employee
benefits agreements, understandings or undertakings.
Indemnification and Insurance of NGH Directors and Officers. RJR
has agreed, jointly and severally with NGH, that it will cause NGH
for six years after the NGH merger:
o to indemnify NGH's present and former officers and
directors for liabilities from their acts or omissions in
those capacities occurring prior to the completion of the
NGH merger, to the fullest extent permitted by applicable
laws or provided under NGH's charter and by-laws; and
o to provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the
completion of the NGH merger on terms with respect to
coverage and amount no less favorable than the existing
policy, provided that the aggregate annual premium paid
need not exceed 200% of the current rate of premium and
brokerage costs paid by NGH.
Trust Originated Preferred Securities. NGH has agreed to cause
the trustees of Nabisco Group Holdings Capital Trust II to (1)
dissolve the trust and (2) cause NGH's 9 1/2% Junior Subordinated
Debentures to be distributed to holders of the preferred and common
securities of such trust in exchange therefor, which in each case
will occur prior to the completion of the NGH merger. In addition,
NGH will prior to the completion of the NGH merger (1) deliver an
irrevocable notice to the Debentures trustee stating that all
outstanding Debentures are to be redeemed on September 30, 2003 and
(2) take all necessary action to cause a "covenant defeasance" of the
Debentures.
Representations and Warranties
NGH made certain customary representations and warranties to RJR,
including as to:
o corporate existence and power; o no material litigation*;
o corporate authorization; o tax matters;
o governmental authorization; o employee benefits matters;
--------
* NGH does not believe that the filing of the purported shareholder
actions described under "--Litigation" in any way causes this representation to
be inaccurate.
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<TABLE>
<S> <C> <C> <C>
o non-contravention; o compliance with laws and court orders;
o capitalization; o finders' fees;
o matters relating to the Nabisco Holdings o environmental matters;
merger; o certain contracts;
o SEC filings; o insurance;
o disclosure documents; o other agreements;
o accuracy of financial statements; o certain agreements; and
o absence of certain changes; o inapplicability of anti-takeover statute
o absence of undisclosed liabilities; and amendment of rights agreement.
</TABLE>
RJR made certain customary representations and warranties to NGH,
including as to:
o corporate existence; o non-contravention;
o corporate authorization; o disclosure documents; and
o governmental authorization; o finders' fees.
The representations and warranties contained in the NGH merger agreement
do not survive the completion of the NGH merger or the termination of the NGH
merger agreement.
Conditions to the NGH Merger
Mutual Closing Conditions. The obligations of NGH and RJR to complete
the NGH merger are subject to the satisfaction of the following
conditions:
o adoption of the NGH merger agreement by the stockholders of NGH;
o no law, court order, verdict, injunction or other legal restraint
shall prohibit the NGH merger or cause the completion of the NGH
merger to constitute a breach of the fiduciary duties of the Board
of Directors of either party in the judgment of such Board as
determined in good faith based on the advice of outside legal
counsel;
o expiration or termination of the HSR Act waiting period;
o completion of the Nabisco Holdings merger or an alternative
Nabisco Holdings merger. An "alternative Nabisco Holdings merger"
is another comparable transaction by which all Nabisco Holdings
stockholders receive, or have the right to receive upon the
surrender of their shares, cash in payment for their shares of
Nabisco Holdings common stock and which does not result in any
material additional liabilities to NGH or RJR;
o accuracy as of the closing of the representations and warranties
made by the other party to the extent specified in the NGH merger
agreement; and
o performance in all material respects by the other party of the
obligations required to be performed at or prior to closing.
Additional Closing Conditions for RJR's Benefit. RJR's obligation to
complete the NGH merger is subject to the following additional conditions:
o NGH must have at least $11.728 billion in cash, net of certain
expenses, in immediately available funds in its bank accounts;
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Chapter Three - Acquisition of NGH by RJR
o NGH must have complied with its covenant to require Nabisco
Holdings to pay its customary quarterly cash dividend prior to the
time NGH's customary quarterly cash dividend is due; and
o RJR's designees must constitute all of the members of the Board of
Trustees of the Nabisco Foundation.
Termination
NGH and RJR may mutually agree to terminate the NGH merger agreement
without completing the NGH merger. In addition, either NGH or RJR may terminate
the NGH merger agreement if:
(1) the NGH merger has not been completed by April 30, 2001 (or such
later date on which any agreement relating to an alternative Nabisco
Holdings merger shall terminate). Neither NGH nor RJR may terminate
the NGH merger agreement on this basis, however, if its breach of the
NGH merger agreement results in the NGH merger not being completed by
this date;
(2) there is a permanent legal prohibition to the completion of the NGH
merger;
(3) the NGH merger agreement has not been adopted by NGH stockholders at
a duly held stockholders' meeting;
(4) the Nabisco Holdings merger agreement has been terminated in
accordance with its terms for any reason other than in connection
with the acceptance by Nabisco Holdings of a superior proposal;
(5) the information and representations set forth in the letters dated
June 25, 2000 provided by Steven F. Goldstone and James M. Kilts in
connection with the opinion of Davis Polk & Wardwell dated June 25,
2000 delivered to NGH and RJR pursuant to the Tax Sharing Agreement
are not true and complete in all material respects; or
(6) a change in tax law occurs that (i) would apply to a transaction
completed after such change in tax law (despite a binding written
agreement for such transaction) and (ii) would reasonably be expected
to result in (A) the imposition of tax on gain realized with respect
to Nabisco Holdings shares arising out of the Nabisco Holdings
Distribution or on gain realized with respect to RJR shares arising
out of the RJR Spinoff or (B) a material increase in the tax
liability of NGH resulting from the Nabisco Holdings merger.
RJR may terminate the NGH merger agreement if:
(7) the NGH Board fails to recommend the NGH merger, withdraws or
modifies in a manner adverse to RJR its approval or recommendation of
the NGH merger or the NGH merger agreement, approves or recommends a
superior proposal, or resolves to do any of the foregoing;
(8) NGH enters into, or publicly announces its intention to enter into, a
definitive agreement or an agreement in principle with respect to a
superior proposal;
(9) NGH fails to perform in any material respect any material obligation
to be performed under the NGH merger agreement, or breaches any of
its representations and warranties such that RJR's condition to
closing in this respect cannot be satisfied, and in either case such
failure is not cured within 15 business days or such longer period
during which NGH exercises its reasonable best efforts to cure; or
(10) a law, court order, verdict or injunction shall cause completion of
the NGH merger to constitute a breach of the fiduciary duties of the
Board of Directors of RJR in the judgment of such Board as determined
in good faith based on advice of outside legal counsel.
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Chapter Three - Acquisition of NGH by RJR
NGH may terminate the NGH merger agreement if:
(11) its Board authorizes NGH to enter into a written agreement concerning
a superior proposal with respect to NGH, so long as NGH has complied
with the non-solicitation, board recommendation, notice, negotiation
and termination fee provisions of the NGH merger agreement and RJR
has not made a definitive, binding offer that the NGH Board
determines, in good faith after consultation with its financial
advisors, is at least as favorable to the NGH stockholders as the
superior proposal;
(12) RJR fails to perform in any material respect any material obligation
to be performed under the NGH merger agreement, or breaches any of
its representations and warranties such that NGH's condition to
closing in this respect cannot be satisfied, and in either case such
failure is not cured within 15 business days or such longer period
during which RJR exercises its reasonable best efforts to cure; or
(13) a law, court order, verdict or injunction shall cause completion of
the NGH merger to constitute a breach of the fiduciary duties of the
Board of Directors of NGH in the judgment of such Board as determined
in good faith based on advice of outside legal counsel.
If the NGH merger agreement is validly terminated, it will become void
without any liability on any party unless such party is in willful breach.
However, the provisions relating to termination fees and expenses, and certain
other specified provisions, will continue in effect.
Certain Fees and Expenses
Except as described below, all costs and expenses incurred in connection
with the NGH merger agreement and related transactions will be paid by the
party incurring such costs or expenses.
Nabisco Holdings and NGH Advisor Fees. The parties have agreed that
Nabisco Holdings will be responsible for fees and expenses of the financial,
legal and other advisors to Nabisco Holdings and NGH up to $50 million, and NGH
will be responsible for all such fees and expenses in excess of $50 million.
Termination Fees. NGH has agreed to pay RJR $300 million in cash, net of
any expenses paid as described below, in any of the following circumstances:
o the NGH merger agreement terminates as described in items (7), (8),
(11) or (13) under "--Termination;"
o the NGH merger agreement terminates as described in item (9) under
"--Termination" (other than as a result of a breach of representation
not caused by action of NGH and not capable of being cured using
reasonable best efforts), if at the time of termination a third party
has made an acquisition proposal and, within nine months after
termination of the NGH merger agreement, NGH enters into a definitive
agreement in respect of any acquisition proposal or such a
transaction is completed;
o the NGH merger agreement terminates as described in item (3) under
"--Termination" and prior to the NGH stockholder meeting, a third
party or NGH has publicly announced an acquisition proposal and
within nine months after termination of the NGH merger agreement, NGH
enters into a definitive agreement in respect of any acquisition
proposal or such a transaction is completed; or
o the NGH merger agreement terminates as described in item (4) under
"--Termination" and at such time a third party has made an
acquisition proposal with respect to NGH and within nine months after
termination of the NGH merger agreement, NGH enters into a definitive
agreement in respect of any acquisition proposal with respect to NGH
or such a transaction is completed.
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Chapter Three - Acquisition of NGH by RJR
Expense Reimbursement. NGH has agreed to pay RJR up to $30 million as
reimbursement for expenses relating to the negotiation and execution of the NGH
merger agreement in any of the following circumstances:
o the NGH merger agreement terminates as described in item (9) under
"--Termination" if, at the time of termination, a third party has
made an acquisition proposal for NGH; or
o the NGH merger agreement terminates as described in item (3) under
"--Termination."
The expense reimbursement payment would reduce the $300 million payment if
it becomes payable.
RJR has agreed to pay NGH up to $30 million as reimbursement for expenses
relating to the negotiation and execution of the NGH merger agreement if the
NGH merger agreement terminates as described in item (12) under
"--Termination."
Amendments and Waivers
The parties may amend the NGH merger agreement or waive its terms and
conditions before the completion of the NGH merger, but, after NGH's
stockholders have approved the NGH merger agreement, the parties may not amend
the NGH merger agreement in a manner that would reduce or change the kind of
consideration NGH stockholders will receive in the NGH merger without further
approval of NGH's stockholders.
OTHER MATTERS
Regulatory Matters
U.S. Antitrust. Under the HSR Act and the related rules, the NGH merger
may not be completed until notifications have been given, certain information
has been furnished to the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice and specified waiting period
requirements have been satisfied. On July 24, 2000, NGH and RJR each filed the
required notification and report forms under the HSR Act with the Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice. Expiration or termination of the HSR Act waiting period is a condition
to the NGH merger. The HSR Act waiting period expired on August 23, 2000.
Stockholder Rights Plan
On June 25, 2000, NGH entered into an amendment to its stockholder rights
plan to exempt the NGH merger and the Nabisco Sale from the provisions of such
plan.
Material United States Federal Income Tax Consequences to NGH Stockholders of
the NGH Merger
This summary of the material United States federal income tax consequences
to NGH stockholders of the NGH merger is based on the law as currently in
effect. This summary does not discuss all of the tax consequences that may be
relevant to an NGH stockholder in light of its particular circumstances or to
stockholders subject to special rules, such as financial institutions,
broker-dealers, tax-exempt organizations, stockholders that hold their NGH
shares as part of a straddle or a hedging or conversion transaction and
stockholders who acquired their NGH shares through the exercise of an employee
stock option or otherwise as compensation.
NGH stockholders are urged to consult their own tax advisors as to the
particular tax consequences to them of the NGH merger, including the effect of
United States state and local tax laws or foreign tax laws.
A United States holder refers to:
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Chapter Three - Acquisition of NGH by RJR
o a citizen or resident of the United States,
o a corporation or other entity created or organized in the United
States or under the laws of the United States or of any political
subdivision of the United States, or
o an estate or trust, the income of which is includible in gross income
for federal income tax purposes regardless of its source.
A Non-United States holder refers to an NGH stockholder that is not a
United States holder.
United States Holders
The receipt in the NGH merger by a United States holder of cash for NGH
shares will be a taxable transaction for United States federal income tax
purposes. An NGH stockholder that is a United States holder will recognize gain
or loss in an amount equal to the difference between the cash received by the
stockholder in the NGH merger and the stockholder's tax basis in the NGH shares
surrendered in the NGH merger. That gain or loss will be a capital gain or loss
if the NGH shares are held as a capital asset by the NGH stockholder, and will
be long term capital gain or loss if the NGH shares have been held for more
than one year at the time of the NGH merger.
An NGH stockholder that is a United States holder may be subject to backup
withholding at a rate of 31% unless, at the time it surrenders NGH shares in
the NGH merger, it provides its taxpayer identification number and certifies
that the number is correct or properly certifies that it is awaiting a taxpayer
identification number, or unless an exemption is demonstrated to apply. Backup
withholding is not an additional tax. Amounts so withheld can be refunded or
credited against the federal income tax liability of the United States holder,
provided appropriate information is forwarded to the IRS.
Non-United States Holders
An NGH stockholder that is a Non-United States holder will not be subject
to United States federal income tax on any gain realized on a disposition of
NGH shares in the NGH merger unless:
o the gain is effectively connected with a trade or business in the
United States of that Non-United States holder,
o that Non-United States holder is a non-resident alien individual who
holds the NGH shares as a capital asset and who is present in the
United States for 183 or more days during the calendar year in which
the NGH merger is completed, or
o that Non-United States holder is subject to tax under the provisions
of the Internal Revenue Code on the taxation of United States
expatriates.
Information reporting and backup withholding imposed at a rate of 31% may
apply under specified circumstances to cash payments received in the NGH merger
by a Non-United States holder unless, at the time it surrenders NGH shares in
the NGH merger, the Non-United States holder certifies as to its foreign status
or otherwise establishes an exemption. Backup withholding is not an additional
tax. Amounts so withheld can be refunded or credited against the federal income
tax liability of the Non-United States holder, provided appropriate information
is forwarded to the IRS.
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Chapter Three - Acquisition of NGH by RJR
Litigation
During the week of June 26, 2000, two actions were filed in the Court of
Chancery for the State of Delaware and one action was filed in the Chancery
Division of the Superior Court of New Jersey, in each case by alleged common
stockholders of NGH on behalf of a purported class of similarly situated NGH
stockholders. The actions are styled Alfonse Mayer, et al. v. Nabisco Group
Holdings Corporation, et al., C.A. 18126, Harriet Rand, et al. v. Nabisco Group
Holdings Corporation, et al., C.A. 18129NC, and Mark Schneider v. Steven F.
Goldstone, et al., Docket No. L-2028-00. The complaints in the actions name as
defendants NGH and the members of its Board of Directors, and allege that the
NGH directors breached their fiduciary duties to NGH stockholders by agreeing
to the NGH merger and by allegedly failing to obtain the highest value for NGH
stockholders in the NGH merger. The complaints seek injunctive relief and
monetary damages in an unspecified amount. Defendants believe that the factual
allegations on which these complaints are premised are groundless and intend to
defend the actions vigorously. None of these complaints challenges the validity
or fairness of the Nabisco Holdings merger or seeks injunctive relief or
monetary damages in connection with the Nabisco Holdings merger.
Appraisal Rights
Under Section 262 ("Section 262") of the Delaware General Corporation Law
(the "DGCL"), if you do not vote your outstanding shares of NGH common stock in
favor of adoption of the NGH merger agreement, you will be entitled to dissent
and elect to have the "fair value" of your shares, exclusive of any element of
value arising from the accomplishment or expectation of the NGH merger,
together with a fair rate of interest, if any, judicially determined by the
Delaware Court of Chancery and paid to you in cash.
The following is a summary of the law pertaining to appraisal rights under
the DGCL and is qualified in its entirety by the full text of Section 262, a
copy of which is provided as Annex F to this proxy statement. All references in
Section 262 and in this summary to a "stockholder" are to the record holder of
the shares of NGH common stock as to which appraisal rights are asserted. If
you have a beneficial interest in shares of common stock held of record in the
name of another person, such as a broker or nominee, you must act promptly to
cause the record holder to follow the steps summarized below properly and in a
timely manner to perfect your appraisal rights.
Under Section 262, where a merger agreement is to be submitted for
adoption at a meeting of stockholders, as in the case of the special meeting of
NGH stockholders described in this proxy statement, the corporation, not less
than 20 days prior to the meeting, must notify each person who was a
stockholder on the record date entitled to appraisal rights that appraisal
rights are available and include in the notice a copy of Section 262. This
proxy statement is that notice to you, and a copy of Section 262 is attached to
this proxy statement as Annex F. If you wish to exercise your appraisal rights
or wish to preserve the right to do so, you should review carefully Section 262
and seek advice of legal counsel, since failure to comply fully with the
procedures of Section 262 will result in the loss of appraisal rights.
If you wish to exercise the right to dissent from the NGH merger and
demand appraisal under Section 262, you must satisfy each of the following
conditions:
o You must deliver to NGH written demand for appraisal of your shares
of NGH common stock before the vote on adoption of the NGH merger
agreement at the special meeting, which demand will be sufficient if
it reasonably informs NGH of your identity and that you intend to
demand the appraisal of your shares;
o You must not vote in favor of adoption of the NGH merger agreement.
Because a proxy that does not contain voting instructions will,
unless revoked, be voted in favor of the NGH merger agreement, if you
vote by proxy and wish to exercise appraisal rights, you must vote
against adoption of the NGH merger agreement or abstain from voting
on adoption of the NGH merger agreement; and
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Chapter Three - Acquisition of NGH by RJR
o You must continuously hold your shares from the date of making your
written demand through the completion of the NGH merger. If you are
the record holder of shares of common stock on the date the written
demand for appraisal is made but thereafter transfer these shares
prior to the completion of the NGH merger, you will lose any right to
appraisal in respect of the shares.
Neither voting in person or by proxy against, abstaining from voting on or
failing to vote on the proposal to adopt the NGH merger agreement will
constitute a written demand for appraisal within the meaning of Section 262.
The written demand for appraisal must be in addition to and separate from any
such proxy or vote.
Only a holder of record of shares of NGH common stock issued and
outstanding immediately prior to the completion of the NGH merger is entitled
to assert appraisal rights for the shares of common stock registered in that
holder's name. A demand for appraisal should be executed by or on behalf of the
stockholder of record, fully and correctly, as that stockholder's name appears
on the stock certificates, should specify the stockholder's name and mailing
address, the number of shares of common stock owned and that the stockholder
intends thereby to demand appraisal of the stockholder's shares of NGH common
stock.
If your shares of NGH common stock are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of a written
demand should be made in that capacity. If your shares of NGH common stock are
owned of record by more than one person as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all owners. An
authorized agent, including one or more joint owners, may execute a demand for
appraisal on behalf of a stockholder; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, the agent is acting as agent for the owner or owners.
A record holder such as a broker who holds shares of NGH common stock as
nominee for several beneficial owners may exercise appraisal rights with
respect to the shares of NGH common stock held for one or more beneficial
owners while not exercising those rights with respect to the shares of NGH
common stock held for one or more other beneficial owners; in that case, the
written demand should set forth the number of shares of NGH common stock as to
which appraisal is sought, and where no number of shares is expressly
mentioned, the demand will be presumed to cover all shares of NGH common stock
held in the name of the record owner. If you hold your shares of NGH common
stock in brokerage accounts or other nominee forms and wish to exercise
appraisal rights, you are urged to consult with your broker to determine the
appropriate procedures for the making of a demand for appraisal by the nominee.
A stockholder who elects to exercise appraisal rights under Section 262
should mail or deliver a written demand to Nabisco Group Holdings Corp., 7
Campus Drive, Parsippany, New Jersey, 07054-0311, Attention: Secretary.
Within ten days after the completion of the NGH merger, the surviving
corporation must send a notice as to the effectiveness of the NGH merger to
each former NGH stockholder who has made a written demand for appraisal in
accordance with Section 262 and who has not voted in favor of adoption of the
NGH merger agreement. Within 120 days after the completion of the NGH merger,
but not thereafter, either NGH or any holder of dissenting shares of NGH common
stock who has complied with the requirements of Section 262 may file a petition
in the Delaware Court of Chancery demanding a determination of the fair value
of all shares of NGH common stock held by dissenting stockholders. NGH is under
no obligation to and has no present intent to file a petition for appraisal,
and you should not assume that NGH will file a petition or that NGH will
initiate any negotiations with respect to the fair value of the shares.
Accordingly, if you desire to have your shares appraised, you should initiate
any petitions necessary for the perfection of your appraisal rights within the
time periods and in the manner prescribed in Section 262.
Within 120 days after the completion of the NGH merger, any stockholder
who has complied with the provisions of Section 262 to that point in time will
be entitled to receive from NGH, upon written request, a
III-11
<PAGE>
Chapter Three - Acquisition of NGH by RJR
statement setting forth the aggregate number of shares of NGH common stock not
voted in favor of adoption of the NGH merger agreement and with respect to
which demands for appraisal have been received and the aggregate number of
holders of the shares. NGH must mail this statement to the stockholder within
10 days of receipt of a request.
A stockholder timely filing a petition for appraisal with the Delaware
Court of Chancery must deliver a copy to NGH, which will then be obligated
within 20 days to provide the Delaware Court of Chancery with a duly verified
list containing the names and addresses of all stockholders who have demanded
appraisal of their shares of NGH common stock. After notice to the
stockholders, the Delaware Court of Chancery is empowered to conduct a hearing
on the petition to determine which stockholders are entitled to appraisal
rights. The Delaware Court of Chancery may require stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings, and if any
stockholder fails to comply with the requirement, the Delaware Court of
Chancery may dismiss the proceedings as to that stockholder.
After determining the stockholders entitled to an appraisal, the Delaware
Court of Chancery will appraise the "fair value" of their shares, exclusive of
any element of value arising from the accomplishment or expectation of the NGH
merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. The costs of the action may be
determined by the Delaware Court of Chancery and taxed upon the parties as the
Delaware Court of Chancery deems equitable. Upon application of a holder of
dissenting shares of NGH common stock, the Delaware Court of Chancery may also
order that all or a portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including, reasonable attorneys' fees
and the fees and expenses of experts, be charged pro rata against the value of
all of the shares of NGH common stock entitled to appraisal.
If you consider seeking appraisal, you should be aware that the fair value
of your shares as determined under Section 262 could be more than, the same as
or less than the merger consideration you would receive under the NGH merger
agreement if you did not seek appraisal of your shares.
In determining fair value and, if applicable, a fair rate of interest, the
Delaware Court of Chancery is to take into account all relevant factors. In
Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered, and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that, in making this determination of fair value,
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts that could be
ascertained as of the date of the merger that throw any light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
further stated that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the
merger and not the product of speculation, may be considered." Section 262
provides that fair value is to be "exclusive of any element of value arising
from the accomplishment or expectation of the merger."
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the completion of the NGH merger, be entitled to vote the
shares subject to this demand for any purpose or to receive payment of
dividends or other distributions on those shares (except dividends or other
distributions payable to holders of record of shares as of a record date prior
to the completion of the NGH merger).
If any stockholder who demands appraisal of shares of NGH common stock
under Section 262 fails to perfect, or effectively withdraws or loses, the
right to appraisal, the stockholder's shares of NGH common stock will be
converted into the right to receive the merger consideration in cash in
accordance with the NGH merger agreement, without interest. A stockholder will
fail to perfect, or effectively lose or withdraw, the right to appraisal if no
petition for appraisal is filed within 120 calendar days after the completion
of the NGH merger. A stockholder may
III-12
<PAGE>
Chapter Three - Acquisition of NGH by RJR
withdraw a demand for appraisal by delivering to NGH a written withdrawal of
the demand for appraisal and acceptance of the merger consideration, except
that any such attempt to withdraw made more than 60 calendar days after the
completion of the NGH merger will require the written approval of NGH. Once a
petition for appraisal has been filed, the appraisal proceeding may not be
dismissed as to any stockholder, absent approval of the Delaware Court of
Chancery.
III-13
<PAGE>
CHAPTER FOUR
INFORMATION ABOUT THE MEETING AND VOTING
NGH's Board of Directors is using this proxy statement to solicit proxies
from the holders of NGH common stock for use at the meeting. We are first
mailing this proxy statement and accompanying form of proxy to NGH stockholders
on or about o, 2000.
Matters Relating to the Meeting
--------------------------------------------------------------------------------
Date, Time and o, 2000
Place: 10:30 a.m., Eastern Time
Hotel DuPont
11th and Market Streets
Wilmington, Delaware 19801
--------------------------------------------------------------------------------
Purpose of Meeting 1. the sale of NGH's 80.5% interest in Nabisco
is to Vote on the Holdings to Philip Morris pursuant to the
Following Items: Nabisco Holdings merger;
2. the subsequent acquisition of NGH by RJR for
$30 per share pursuant to the NGH merger;
3. such other matters as may properly come
before the meeting, including the approval of
any adjournment of the meeting.
NGH stockholders will vote on each proposal
separately. RJR and NGH are not obligated to, and
will not, complete the NGH merger unless, among
other things, the Nabisco Sale or a comparable
acquisition transaction involving Nabisco Holdings
is completed. The Nabisco Sale may be completed
whether or not the NGH merger is completed.
--------------------------------------------------------------------------------
Record Date: The record date for shares entitled to vote is August
29, 2000.
--------------------------------------------------------------------------------
Outstanding Shares As of August 29, 2000, there were 326,398,507 shares
Held on Record of NGH common stock outstanding.
Date:
--------------------------------------------------------------------------------
Shares Entitled to Shares entitled to vote are NGH common stock held
Vote: at the close of business on the record date, o, 2000.
Each share of NGH common stock that you own entitles
you to one vote.
Shares held by NGH in its treasury are not voted.
--------------------------------------------------------------------------------
Quorum A quorum of stockholders is necessary to hold a valid
Requirement: meeting.
The presence in person or by proxy at the meeting of
holders of shares representing a majority of the
votes of the NGH common stock entitled to vote at
the meeting is a quorum. Abstentions and broker
"non-votes" count as present for establishing a
quorum. Shares held by NGH in its treasury do not
count toward a quorum.
A broker non-vote occurs on an item when a broker is
not permitted to vote on that item without
instruction from the beneficial owner of the shares
and no instruction is given.
--------------------------------------------------------------------------------
IV-1
<PAGE>
Chapter Four - Information About the Meeting and Voting
Shares Beneficially As of June 30, 2000, NGH directors and executive
Owned by NGH officers beneficially owned 3,438,774 shares of NGH
Directors and common stock, including exercisable options. These
Executive Officers as shares represent in total approximately 1.04% of the
June 30, 2000: voting power of NGH common stock.
These individuals have indicated that they will vote
in favor of the proposals recommended by the NGH
Board.
--------------------------------------------------------------------------------
Vote Necessary to Approve Proposals
--------------------------------------------------------------------------------
Item Vote Necessary*
--------------------------------------------------------------------------------
1. Nabisco Sale Proposal Approval of the Nabisco Sale requires the affirmative
vote of a majority of the outstanding shares of NGH
common stock. Withheld votes and abstentions have
the same effect as a vote against.
--------------------------------------------------------------------------------
2. NGH Merger Proposal Approval of the NGH merger requires the affirmative
vote of a majority of the outstanding shares of NGH
common stock. Withheld votes and abstentions have
the same effect as a vote against.
--------------------------------------------------------------------------------
Your Board recommends that you vote "FOR" each of these proposals.
-------------------
* Under New York Stock Exchange rules, if your broker holds your shares in
its name, your broker may not vote your shares on Items 1 or 2 absent
instructions from you. Without your voting instructions, a broker non-vote
will occur on Items 1 and 2 and will, as to Items 1 and 2, have the effect
of a vote against.
Proxies
Voting Your Proxy. You may vote in person at the meeting or by proxy. We
recommend you vote by proxy even if you plan to attend the meeting in person.
You can always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as
your proxy will vote your shares as you have directed. You may vote for or
against the proposals or abstain from voting.
How to Vote by Proxy
--------------------------------------------------------------------------------
By Telephone*: Call 1-877-PRX-VOTE (1-877-779-8683) in
the United States or 1-201-536-8073 outside the
United States and follow the instructions. You will
need to give the personal identification number
contained on your proxy card.
--------------------------------------------------------------------------------
By Internet*: Go to www.eproxyvote.com/ngh and follow the
instructions. You will need to give the personal
identification number contained on your proxy card.
--------------------------------------------------------------------------------
In Writing: Complete, sign, date and return your proxy card in
the enclosed envelope.
--------------------------------------------------------------------------------
-------------------
* If your shares are held in the name of a bank or broker, follow the voting
instructions you receive on your proxy card. Telephone and internet voting
are offered to stockholders owning Nabisco Group Holdings shares through
most banks and brokers. Section 212 of the Delaware General Corporation
Law authorizes the use of electronic transmission, such as transmissions
over the internet, to grant a proxy.
IV-2
<PAGE>
Chapter Four - Information About the Meeting and Voting
If you submit your proxy but do not make specific choices, your proxy will
follow the Board of Director's recommendations and vote your shares:
o "FOR" the proposed sale of Nabisco Holdings shares;
o "FOR" the proposed acquisition of NGH by RJR; and
o In its discretion as to any other business as may properly come
before the meeting.
Revoking Your Proxy. You may revoke your proxy before it is voted by:
o submitting a new proxy with a later date, including a proxy given by
telephone or internet,
o notifying NGH's Secretary in writing before the meeting that you have
revoked your proxy, or
o voting in person at the meeting.
Attendance at the meeting. Attendance at the meeting will be limited to
stockholders as of the record date, and to guests of NGH. Admittance tickets
will be required. If you are a stockholder and plan to attend, you must request
an admittance ticket by writing to the Office of the Secretary of NGH at 7
Campus Drive, Parsippany, NJ 07054- 0311. If your shares are not registered in
your own name, evidence of your stock ownership must accompany your letter. You
can obtain this evidence from your bank or brokerage firm, typically in the
form of your most recent monthly statement. An admittance ticket will be held
in your name at the registration desk, not mailed to you in advance of the
meeting. The auditorium will open at 10:00 a.m.
Voting in person. If you plan to attend the meeting and wish to vote in
person, we will give you a ballot at the meeting.
People with disabilities. We can provide reasonable assistance to help you
participate in the meeting if you tell us about your disability and your plan
to attend. Please call or write the Secretary of NGH at least two weeks before
the meeting at 7 Campus Drive, Parsippany, NJ 07054-0311, (973) 682-5000.
Confidential voting. Independent inspectors count the votes. Your
individual vote is kept confidential from us unless special circumstances
exist.
Proxy solicitation. We will pay our own costs of soliciting proxies.
In addition to this mailing, NGH employees may solicit proxies personally,
electronically or by telephone. NGH is paying MacKenzie Partners, Inc. a fee of
$25,000 plus expenses to help with the solicitation.
The extent to which these proxy soliciting efforts will be necessary
depends entirely upon how promptly proxies are submitted. You should send in
your proxy by mail, telephone or internet without delay. We also reimburse
brokers and other nominees for their expenses in sending these materials to you
and getting your voting instructions.
Do not send in any stock certificates with your proxy cards. The exchange
agent will mail transmittal forms with instructions for the surrender of stock
certificates for NGH common stock to former NGH stockholders as soon as
practicable after the completion of the NGH merger.
IV-3
<PAGE>
Chapter Four - Information About the Meeting and Voting
Other Business; Adjournments
We are not currently aware of any other business to be acted upon at the
meeting. If, however, other matters are properly brought before the meeting, or
any adjourned meeting, your proxies will have discretion to vote or act on
those matters according to their best judgment, including to adjourn the
meeting.
Adjournments may be made for the purpose of, among other things,
soliciting additional proxies. Any adjournment may be made from time to time by
approval of the holders of shares representing a majority of the votes present
in person or by proxy at the meeting, whether or not a quorum exists, without
further notice other than by an announcement made at the meeting. We do not
currently intend to seek an adjournment of the meeting.
Security Ownership of Management
The following table sets forth certain information, as of June 30, 2000,
regarding the beneficial ownership of (i) NGH common stock and (ii) Nabisco
Holdings Class A common stock, by each director of NGH, by each of the five
most highly compensated executive officers of NGH (as required by SEC rules)
and by all directors and executive officers of NGH as a group. Most of these
individuals have the opportunity to become the beneficial owners of additional
shares of NGH common stock as a result of stock options vesting or becoming
exercisable. See "Chapter One-Interests of Officers and Directors in the
Transactions." Otherwise, except as noted, the persons named in the table below
do not own, beneficially or of record, any other securities of NGH or its
subsidiaries and have sole voting and investment power over all securities for
which they are shown as beneficial owners.
<TABLE>
Number of Shares of Percent of
Nabisco Holdings Nabisco
Number of Shares of Percent of Class A Holdings
NGH Common NGH Common Stock Class A
Stock Beneficially Common Beneficially Common
Name of Beneficial Owner Owned (1)(2) Stock Owned (1)(3) Stock
------------------------ ------------------- ---------- ------------------- ----------
<S> <C> <C> <C> <C>
John T. Chain, Jr.................... 21,837 * 11,300 *
Julius L. Chambers................... 19,866 * 0 *
John L. Clendenin.................... 20,290 * 500 *
Douglas R. Conant.................... 0 * 215,903 0.41%
Steven F. Goldstone (4).............. 3,037,852 0.92% 274,981 0.53%
Ray J. Groves........................ 19,165 * 0 *
James E. Healey...................... 0 * 58,000 0.11%
David B. Jenkins..................... 0 * 11,900 *
Nancy Karch (5)...................... 6,000 * 0 *
James M. Kilts....................... 256,813 * 11,000 *
James A. Kirkman III................. 236 * 182,098 0.35%
Fred H. Langhammer................... 8,475 * 0 *
Richard H. Lenny..................... 1,000 * 4,225 *
H. Eugene Lockhart................... 13,929 * 0 *
Theodore E. Martin................... 14,720 * 0 *
Rozanne L. Ridgway................... 11,694 * 0 *
All Directors and Executive Officers
as a Group........................ 3,438,774 1.04% 923,281 1.75%
David B. Rickard..................... 390,993 * 0 *
William L. Rosoff (6)................ 254,424 * 0 *
</TABLE>
-------------------
* Less than 0.1%.
(1) For purposes of this table, a person 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
IV-4
<PAGE>
Chapter Four - Information About the Meeting and Voting
each person named above, any security that such person has the right to
acquire within 60 days is deemed to be outstanding, but it is not deemed
to be outstanding for the purpose of computing the percentage ownership of
any other person.
(2) The number of shares of NGH common stock beneficially owned includes
shares subject to currently exercisable options in the following amounts:
(i) 19,837 shares for each of General Chain and Messrs. Chambers and
Clendenin; (ii) 3,021,323 shares for Mr. Goldstone; (iii) 18,000 shares
for Mr. Groves; (iv) 256,813 shares for Mr. Kilts; (v) 8,475 shares for
Mr. Langhammer; (vi) 13,659 shares for Mr. Lockhart; (vii) 14,720 shares
for Mr. Martin; (viii) 11,694 shares for Ms. Ridgway; (ix) 6,000 shares
for Ms. Karch; (x) 388,993 shares for Mr. Rickard; (xi) 233,480 shares for
Mr. Rosoff; and (xii) 3,410,195 shares for all directors and executive
officers as a group. The number of shares of NGH common stock beneficially
owned does not include the following stock units, which are common stock
equivalents received as equity incentives or as deferred fees and other
compensation: 7,954 units for each of General Chain, Mr. Chambers and Ms.
Ridgway; 33,003 units for Mr. Clendenin; 36,000 units for Mr. Conant;
200,000 units for Mr. Goldstone; 25,569 units for Mr. Groves; 29,000 units
for Mr. Healey; 1,004 units for each of Mr. Jenkins and Ms. Karch; 24,500
units for Mr. Kirkman; 11,888 units for Mr. Langhammer; 42,000 units for
Mr. Lenny; 15,144 units for Mr. Lockhart; 17,117 units for Mr. Martin; and
460,091 units for all directors and executive officers as a group.
(3) The number of shares of Nabisco Holdings Class A common stock beneficially
owned includes shares subject to currently exercisable options in the
following amounts: (i) 10,300 shares for General Chain and Mr. Jenkins;
(ii) 214,852 shares for Mr. Conant; (iii) 260,000 shares for Mr.
Goldstone; (iv) 55,000 shares for Mr. Healey; (v) 182,097 shares for Mr.
Kirkman; and (vi) 884,467 shares for all directors and executive officers
as a group. The number of shares of Nabisco Holdings Class A common stock
beneficially owned does not include Nabisco Holdings stock units in the
following amounts: (i) 46,200 units for Mr. Conant; (ii) 17,500 units for
Mr. Healey; (iii) 310,000 units for Mr. Kilts; (iv) 25,800 units for Mr.
Kirkman; (v) 38,500 units for Mr. Lenny; and (vi) 460,091 units for all
directors and executive officers as a group.
(4) Mr. Goldstone is also the holder of 301,725 contingent performance shares
each equal in value to one share of NGH common stock which will be paid to
Mr. Goldstone only if (i) Mr. Goldstone remains Chairman of NGH through
December 31, 2001 (unless he is terminated as Chairman by NGH or he
voluntarily terminates his service as Chairman with good reason) and (ii)
the market price for NGH common stock averages $29.00 or more for any
consecutive 30-day period ending on or prior to December 31, 2001.
(5) Until December 31, 1999 and for more than five years prior thereto, Ms.
Karch was a Senior Partner and Director of McKinsey & Company, Inc., an
international consulting firm. McKinsey & Company, Inc. has, from time to
time, provided consulting services to NGH and its subsidiaries during the
past few years, for which the consulting firm has been paid usual and
customary fees.
(6) Mr. Rosoff is a partner at Davis Polk & Wardwell, a New York law firm. Mr.
Rosoff was Senior Vice President and General Counsel from January 15, 1998
through October 15, 1999. Until December 31, 1997 and for more than five
years prior thereto, Mr. Rosoff was a partner at Davis Polk & Wardwell.
Davis Polk & Wardwell has, from time to time, provided legal services to
NGH and its subsidiaries during the past few years, for which the law firm
has been paid usual and customary fees.
IV-5
<PAGE>
Chapter Four - Information About the Meeting and Voting
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information, as of June 30, 2000,
regarding the beneficial ownership of persons known to NGH to be the beneficial
owners of more than five percent of any class of NGH's voting securities. The
information was obtained from NGH records and information supplied by the
stockholders, including information on Schedules 13D and 13G. 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>
Name and Address Number of Shares Percent of
Title of Class of Beneficial Owner Beneficially Owned Class
-------------- -------------------- ------------------ ----------
<S> <C> <C> <C>
Common Stock........ Capital Research and Management 45,450,000 13.9%
Company (1)
333 South Hope Street
Los Angeles, CA 90071
Common Stock........ Carl C. Icahn (2) 31,000,000 9.5%
c/o Carl Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, NY 10153
</TABLE>
-------------------
(1) Share numbers and percentages are based on information as of June 30, 2000
from NGH's transfer agent. According to Amendment No. 2 to a Schedule 13G
dated February 11, 2000 filed with the SEC by Capital Research and
Management Company ("Capital"), Capital, a registered investment advisor,
is deemed to be the beneficial owner of 42,625,000 shares of NGH common
stock as a result of acting as investment adviser to various registered
investment companies.
(2) Share numbers and percentages are based on information as of June 30, 2000
from NGH's transfer agent. On June 22, 2000, Carl C. Icahn, Icahn & Co.,
Inc ("Icahn & Co."), High River Limited Partnership ("High River"),
Riverdale LLC ("Riverdale") and Barberry Corp. ("Barberry" and,
collectively, the "Icahn Affiliates") filed Amendment No. 9 to a Schedule
13D (the "Amended Schedule 13D"). According to the Amended Schedule 13D,
the Icahn Affiliates may be deemed to beneficially own, in the aggregate,
31,237,200 shares of NGH common stock. Mr. Icahn has shared voting and
dispositive power over the 31,237,200 shares. Icahn & Co. has sole voting
and dispositive power over 8,272,900 of the shares. High River has sole
and Riverdale has shared voting and dispositive power over 14,347,200 of
the shares. Barberry has sole voting and dispositive power over 8,617,100
of the shares.
IV-6
<PAGE>
CHAPTER FIVE
ADDITIONAL INFORMATION FOR STOCKHOLDERS
FUTURE STOCKHOLDER PROPOSALS
NGH will hold an annual meeting in the year 2001 only if the NGH merger
described in this proxy statement has not already been completed. If such
meeting is held, proposals of stockholders intended to be included in NGH's
2001 Annual Meeting Proxy Statement must be received by the Secretary of NGH no
later than November 30, 2000 at NGH's principal executive offices: Nabisco
Group Holdings Corp., 7 Campus Drive, Parsippany, NJ 07054-0311. Other
stockholder proposals intended to be presented at NGH's 2001 Annual Meeting but
not in the Annual Meeting Proxy Statement, must be received in writing at the
same address, together with other required information as set forth in NGH's
By-Laws, between February 9, 2001 and March 10, 2001.
WHERE YOU CAN FIND MORE INFORMATION
NGH files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
or other information NGH files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our
SEC filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov."
The SEC allows NGH to "incorporate by reference" information into this
proxy statement, which means that we can disclose important information to you
by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy
statement, except for any information superseded by information in, or
incorporated by reference in, this proxy statement. This proxy statement
incorporates by reference the documents set forth below that NGH has previously
filed with the SEC. These documents contain important information about NGH and
our finances.
NGH SEC Filings (File No. 1-10215) Period
................................................................................
Annual Report on Form 10-K Fiscal Year ended December 31, 1999
Quarterly Report on Form 10-Q Fiscal Quarter ended March 31, 2000
Current Report on Form 8-K Filed on March 14, 2000
We are also incorporating by reference additional documents that we file
with the SEC between the date of this proxy statement and the date of the
meeting.
If you are an NGH stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the
SEC. Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this proxy statement. Stockholders may obtain documents incorporated
by reference in this proxy statement by requesting them in writing or by
telephone from NGH at the following address:
Nabisco Group Holdings Corp.
7 Campus Drive
Parsippany, NJ 07054-0311
Attention: Investor Relations
Telephone: (973) 682-6478
If you would like to request documents from us, please do so by o, 2000 to
receive them before the meeting.
You should rely only on the information contained or incorporated by reference
in this proxy statement to vote on the proposals. We have not authorized anyone
to provide you with information that is different from
V-1
<PAGE>
Chapter Five - Additional Information For Stockholders
what is contained in this proxy statement. This proxy statement is dated o,
2000. You should not assume that the information contained in the proxy
statement is accurate as of any date other than such date, and the mailing of
this proxy statement to stockholders shall not create any implication to the
contrary.
V-2
<PAGE>
ANNEXES
VI-1
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
dated as of
June 25, 2000
among
NABISCO HOLDINGS CORP.,
PHILIP MORRIS COMPANIES INC.,
and
STRIKE ACQUISITION CORP.
<PAGE>
TABLE OF CONTENTS
--------------------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger .....................................................6
SECTION 2.02. Conversion of Shares............................................7
SECTION 2.03. Surrender and Payment...........................................7
SECTION 2.04. Dissenting Shares...............................................8
SECTION 2.05. Stock Options...................................................9
SECTION 2.06. Adjustments.....................................................9
SECTION 2.07. Withholding Rights..............................................9
SECTION 2.08. Lost Certificates..............................................10
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation...................................10
SECTION 3.02. Bylaws ....................................................10
SECTION 3.03. Directors and Officers.........................................10
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power..................................11
SECTION 4.02. Corporate Authorization........................................11
SECTION 4.03. Governmental Authorization.....................................11
SECTION 4.04. Non-contravention..............................................12
SECTION 4.05. Capitalization.................................................12
SECTION 4.06. Subsidiaries...................................................13
SECTION 4.07. SEC Filings....................................................14
SECTION 4.08. Financial Statements...........................................14
SECTION 4.09. Disclosure Documents...........................................15
SECTION 4.10. Absence of Certain Changes.....................................15
SECTION 4.11. No Undisclosed Liabilities.....................................17
SECTION 4.12. Compliance with Laws and Court Orders..........................17
i
<PAGE>
PAGE
SECTION 4.13. Litigation ....................................................18
SECTION 4.14. Finders' Fees..................................................18
SECTION 4.15. Opinion of Financial Advisors..................................18
SECTION 4.16. Taxes..........................................................18
SECTION 4.17. Employee Benefit Plans.........................................20
SECTION 4.18. Environmental Matters..........................................23
SECTION 4.19. Intellectual Property..........................................24
SECTION 4.20. Antitakeover Statute...........................................24
SECTION 4.21. Real Property..................................................24
SECTION 4.22. Contracts; Joint Ventures......................................24
SECTION 4.23. Indebtedness...................................................25
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 5.01. Corporate Existence and Power..................................25
SECTION 5.02. Corporate Authorization........................................26
SECTION 5.03. Governmental Authorization.....................................26
SECTION 5.04. Non-contravention..............................................26
SECTION 5.05. Disclosure Documents...........................................27
SECTION 5.06. Finders' Fees..................................................27
SECTION 5.07. Financing ....................................................27
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company.........................................28
SECTION 6.02. Stockholder Action by Written Consent; Information
Material.....................................................31
SECTION 6.03. Access to Information..........................................31
SECTION 6.04. No Solicitation; Other Offers..................................32
SECTION 6.05. Third Party Standstill Agreements..............................34
ARTICLE 7
COVENANTS OF PARENT
SECTION 7.01. Confidentiality................................................34
SECTION 7.02. Obligations of Merger Subsidiary...............................34
SECTION 7.03. Director and Officer Liability.................................35
SECTION 7.04. Employee Matters...............................................36
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PAGE
ARTICLE 8
COVENANTS OF PARENT AND THE COMPANY
SECTION 8.01. Reasonable Best Efforts........................................37
SECTION 8.02. Certain Filings................................................38
SECTION 8.03. Public Announcements...........................................38
SECTION 8.04. Further Assurances.............................................38
SECTION 8.05. Notices of Certain Events......................................39
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to Obligations of Each Party........................39
SECTION 9.02. Conditions to the Obligations of Parent and
Merger Subsidiary............................................40
SECTION 9.03. Conditions to the Obligations of the Company...................40
ARTICLE 10
TERMINATION
SECTION 10.01. Termination...................................................41
SECTION 10.02. Effect of Termination.........................................43
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices ....................................................44
SECTION 11.02. Non-Survival of Representations and Warranties................45
SECTION 11.03. Amendments; No Waivers........................................45
SECTION 11.04. Expenses ....................................................46
SECTION 11.05. Successors and Assigns........................................47
SECTION 11.06. Governing Law.................................................47
SECTION 11.07. Jurisdiction..................................................47
SECTION 11.08. WAIVER OF JURY TRIAL..........................................48
SECTION 11.09. Counterparts; Effectiveness; Benefit..........................48
SECTION 11.10. Entire Agreement..............................................48
SECTION 11.11. Captions ....................................................48
SECTION 11.12. Severability..................................................48
SECTION 11.13. Specific Performance..........................................49
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 25, 2000,
among Nabisco Holdings Corp., a Delaware corporation (the "Company"), Philip
Morris Companies Inc., a Virginia corporation ("Parent"), and Strike Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger
Subsidiary").
WHEREAS, the respective Boards of Directors of Parent, Merger
Subsidiary and the Company have approved this Agreement, and deem it advisable
and in the best interests of their respective stockholders to consummate the
merger of Merger Subsidiary with and into the Company on the terms and
conditions set forth herein; and
WHEREAS, as a condition and inducement to Parent entering this
Agreement, concurrently with the execution and delivery of this Agreement,
Parent and Nabisco Group Holdings Corp., a Delaware corporation ("NGH"), a
significant stockholder of the Company, are entering into a voting and indemnity
agreement (the "NGH Voting Agreement") pursuant to which, among other things,
NGH has agreed to vote its Shares in favor of the above-described merger,
subject to approval by NGH's stockholders.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person.
"Benefit Arrangement" means any employment, severance or similar
contract, plan, policy, fund or arrangement (whether or not written) providing
for compensation, bonus, profit-sharing, stock option, or other stock-related
rights or other forms of incentive or deferred compensation, perquisites,
vacation benefits, insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, worker's compensation,
supplemental unemployment benefits, severance benefits and post-employment or
retirement benefits (including compensation, pension, health, medical or life
insurance or other
<PAGE>
benefits) that (i) is not an Employee Plan, (ii) is entered into, maintained,
administered or contributed to, as the case may be, by the Company or any of its
Affiliates and (iii) covers any employee or former employee of the Company or
any of its Subsidiaries employed in the United States.
"Business Day" means a day other than Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"Class A Shares" means the shares of Class A common stock, $0.01 par
value, of the Company.
"Class B Shares" means the shares of Class B common stock, $0.01 par
value, of the Company.
"Code" means the Internal Revenue Code of 1986.
"Company Balance Sheet" means the consolidated balance sheet of the
Company as of December 31, 1999 and the footnotes thereto set forth in the
Company 10-K.
"Company Intellectual Property Rights" means all material
Intellectual Property Rights owned or licensed and used or held for use by the
Company or any of its Subsidiaries.
"Company 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1999.
"Controlled Group Liability" means any and all liabilities (i) under
Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and
4971 of the Code, (iv) as a result of a failure to comply with the continuation
coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the
Code and (v) under corresponding or similar provisions of foreign laws or
regulations, other than such liabilities that arise solely out of, or relate
solely to, the Employee Plans, Benefit Arrangements and International Plans
listed in the Company Disclosure Schedule.
"Delaware Law" means the General Corporation Law of the State of
Delaware.
"Employee Arrangement" means any Benefit Arrangement, Employee
Plan or International Plan.
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"Employee Plan" means any "employee benefit plan", as defined in
Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by the Company or any of its
Affiliates and (iii) covers any employee or former employee of the Company or
any of its Subsidiaries.
"Environmental Laws" means any federal, state, local or foreign law,
regulation, rule, order or decree, in each case as in effect on the date hereof,
that has as its principal purpose the protection of the environment or the
effect of the environment on human health and safety.
"Environmental Permits" means all permits, licenses, certificates or
approvals necessary for the operation of the Company or any of its Subsidiaries
as currently conducted to comply with all applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code or Section 4001(b)(1) or 4001(a)(14) of ERISA.
"Governmental Entity" means any federal, state, local or foreign
government or any court, tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency, domestic, foreign or
supranational.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Intellectual Property Right" means any trademark, service mark,
trade name, mask work, invention, patent, trade secret, copyright, know-how or
proprietary information contained on any website, processes, formulae, products,
technologies, discoveries, apparatus, Internet domain names, trade dress and
general intangibles of like nature (together with goodwill), customer lists,
confidential information, licenses, software, databases and compilations
including any and all collections of data and all documentation thereof
(including any registrations or applications for registration of any of the
foregoing) or any other similar type of proprietary intellectual property right.
"International Plan" means any employment, severance or similar
contract or arrangement (whether or not written) or any plan, policy, fund,
program or arrangement or contract providing for compensatory severance,
insurance coverage (including any self-insured arrangements), workers'
3
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compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, pension or retirement benefits or for deferred compensation, profit-
sharing, bonuses, stock options, stock appreciation rights or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
that (i) is not an Employee Plan or a Benefit Arrangement, (ii) is entered into,
maintained, administered or contributed to by the Company or any of its
Affiliates and (iii) covers any employee or former employee of the Company or
any of its Subsidiaries.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien, any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the condition (financial or otherwise), business,
assets or results of operations of such Person and its Subsidiaries, taken as a
whole except any such effect resulting from or arising in connection with: (i)
changes in circumstances or conditions affecting food companies in general, (ii)
changes in general economic or business conditions or in financial markets in
the United States or (iii) this Agreement or the transactions contemplated
hereby or the announcement hereof.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 3(37) of ERISA.
"1933 Act" means the Securities Act of 1933.
"1934 Act" means the Securities Exchange Act of 1934.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"SEC" means the Securities and Exchange Commission.
"Shares" means the Class A Shares and the Class B Shares.
4
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"Significant Joint Ventures" means, together with their Subsidiaries,
(i) Bladeland Limited, (ii) Nabisco South Africa (Proprietary) Limited, (iii) PT
Nabisco Foods, (iv) Beijing Yili Food Company, (v) Beijing Nabisco Food Company
and (vi) any comparable joint venture or partnership of the Company or any of
its Subsidiaries.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such Person.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of
June 14, 1999 among NGH, R.J. Reynolds Tobacco Holdings, Inc., R. J. Reynolds
Tobacco Company and the Company, as such agreement may be amended from
time to time.
"Title IV Plan" means a plan subject to Title IV of ERISA other than
any Multiemployer Plan.
"Withdrawal Liability" means liability to or with respect to a
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan, as those terms are defined in Part I of Subtitle E of Title
IV of ERISA.
Any reference in this Agreement to a statute shall be to such
statute, as amended from time to time, and to the rules and regulations
promulgated thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- ---------
Acquisition Proposal................................. 6.04
Agents............................................... 6.04
Certificates......................................... 2.03
Change in Tax Law.................................... 10.01
Company Disclosure Schedule.......................... Article 4
Company Employees.................................... 7.04
Company Information Statement........................ 4.09
Company Properties................................... 4.21
Company SEC Documents................................ 4.07
Company Securities................................... 4.05
Company Subsidiary Securities........................ 4.06
5
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Term Section
---- ---------
Confidentiality Agreement............................ 6.03
Contracts............................................ 4.22
Effective Time....................................... 2.01
Exchange Agent....................................... 2.03
Filed Contracts...................................... 4.22
Financing Agreements................................. 5.07
GAAP................................................. 4.08
Indemnified Person................................... 7.03
IRS.................................................. 4.16
JV Agreements........................................ 4.22
Merger............................................... 2.01
Merger Consideration................................. 2.02
NGH.................................................. recitals
NGH Stockholder Meeting.............................. 10.01
NGH Voting Agreement................................. recitals
Preferred Shares..................................... 4.05
RJR.................................................. 10.01
Superior Proposal.................................... 6.04
Surviving Corporation................................ 2.01
Tax Return........................................... 4.16
Taxes................................................ 4.16
Taxing Authority..................................... 4.16
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger. (a) At the Effective Time, Merger
Subsidiary shall be merged (the "Merger") with and into the Company in
accordance with Delaware Law, whereupon the separate existence of Merger
Subsidiary shall cease, and the Company shall be the surviving corporation (the
"Surviving Corporation").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, the Company and
Merger Subsidiary will file a certificate of merger with the Delaware Secretary
of State and make all other filings or recordings required by Delaware Law in
connection with the Merger. The Merger shall become effective at such time (the
"Effective Time") as the certificate of merger is duly filed with the Delaware
Secretary of State or at such later time as is specified in the certificate of
merger.
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(c) From and after the Effective Time, the Surviving Corporation
shall possess all the rights, powers, privileges and franchises and be subject
to all of the obligations, liabilities, restrictions and disabilities of the
Company and Merger Subsidiary, all as provided under Delaware Law.
SECTION 2.02. Conversion of Shares. At the Effective Time:
(a) except as otherwise provided in Section 2.02(b) or Section 2.04,
each Share outstanding immediately prior to the Effective Time shall be
converted into the right to receive $55.00 in cash, without interest (the
"Merger Consideration");
(b) each Share held by the Company as treasury stock or owned by
Parent or any of its Subsidiaries immediately prior to the Effective Time shall
be canceled, and no payment shall be made with respect thereto; and
(c) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights, powers
and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
SECTION 2.03. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent (the "Exchange Agent") reasonably acceptable to
the Company for the purpose of exchanging certificates representing Shares (the
"Certificates") for the Merger Consideration. At the Effective Time, Parent will
deposit with the Exchange Agent the Merger Consideration to be paid in respect
of the Shares. Promptly after the Effective Time, Parent will send, or will
cause the Exchange Agent to send, to each holder of Shares at the Effective Time
a letter of transmittal and instructions (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) for use in such exchange.
(b) Each holder of Shares that have been converted into the right to
receive the Merger Consideration will be entitled to receive, upon surrender to
the Exchange Agent of a Certificate, together with a properly completed letter
of transmittal, the Merger Consideration payable for each Share represented by
such Certificate. Until so surrendered, each such Certificate shall represent
after the Effective Time for all purposes only the right to receive such Merger
Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
Person other than the Person in whose name the surrendered Certificate is
registered, it
7
<PAGE>
shall be a condition to such payment that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Exchange Agent any transfer or
other taxes required as a result of such payment to a Person other than the
registered holder of such Certificate or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration
of transfers of Shares. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, they shall be canceled and exchanged for the
Merger Consideration provided for, and in accordance with the procedures set
forth, in this Article 2.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.03(a) (and any interest or other income
earned thereon) that remains unclaimed by the holders of Shares one year after
the Effective Time shall be returned to Parent, upon demand, and any such holder
who has not exchanged Shares for the Merger Consideration in accordance with
this Section 2.03 prior to that time shall thereafter look only to Parent for
payment of the Merger Consideration in respect of such Shares without any
interest thereon. Notwithstanding the foregoing, Parent shall not be liable to
any holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property, escheat or similar laws. Any amounts remaining
unclaimed by holders of Shares three years after the Effective Time (or such
earlier date immediately prior to such time when the amounts would otherwise
escheat to or become property of any governmental authority) shall become, to
the extent permitted by applicable law, the property of Parent free and clear of
any claims or interest of any Person previously entitled thereto.
(f) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.03(a) to pay for Shares for which appraisal
rights have been perfected shall be returned to Parent, upon demand.
SECTION 2.04. Dissenting Shares. Notwithstanding Section 2.02, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Delaware Law shall not be
converted into a right to receive the Merger Consideration, unless such holder
fails to perfect, withdraws or otherwise loses its right to appraisal. If, after
the Effective Time, such holder fails to perfect, withdraws or loses its right
to appraisal, such Shares shall be treated as if they had been converted as of
the Effective Time into a right to receive the Merger Consideration. The Company
shall give Parent prompt notice of any demands received by the Company for
8
<PAGE>
appraisal of Shares. Except as required by applicable law or with the prior
written consent of Parent, the Company shall not make any payment with respect
to, or settle or offer to settle, any such demands.
SECTION 2.05. Stock Options. (a) At or immediately prior to the
Effective Time, each employee or director stock option to purchase Shares
outstanding under any stock option or compensation plan or arrangement of the
Company, whether or not vested or exercisable, shall be canceled, and the
Company shall pay each holder of any such option at the time provided below for
each such option an amount in cash determined by multiplying (i) the excess, if
any, of the Merger Consideration per Share over the applicable exercise price of
such option by (ii) the number of Shares such holder could have purchased
(assuming full vesting of all options) had such holder exercised such option in
full immediately prior to the Effective Time. In the case of each such option
that is outstanding on the date hereof, such payment shall be made before, at or
promptly after the Effective Time. In all other cases, such payment shall be
made when and if such option is exercised (or vests, if converted into a right
to receive cash) in accordance with its terms.
(b) Prior to the Effective Time, the Company shall (i) use its best
efforts to obtain any consents from holders of options to purchase Shares
granted under the Company's stock option or compensation plans or arrangements
and (ii) make any amendments to the terms of such stock option or compensation
plans or arrangements that, in the case of either clauses (i) or (ii), are
necessary to give effect to the transactions contemplated by Section 2.05(a).
Notwithstanding any other provision of this Section, payment may be withheld in
respect of any employee stock option until such necessary consents are obtained,
and the Company shall withhold from such payments all amounts required by
applicable law or regulation to be withheld for taxes or otherwise.
SECTION 2.06. Adjustments. If, during the period between the date of
this Agreement and the Effective Time, any change in the outstanding Shares
shall occur, including by reason of any reclassification, recapitalization,
stock split or combination, exchange or readjustment of Shares, or stock
dividend thereon with a record date during such period, the Merger Consideration
and any other amounts payable pursuant to this Agreement shall be appropriately
adjusted.
SECTION 2.07. Withholding Rights. Each of the Surviving Corporation
and Parent shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to this Article 2 such amounts as it is
required to deduct and withhold with respect to the making of such payment under
any provision of federal, state, local or foreign tax law. If the Surviving
Corporation or Parent, as the case may be, so withholds amounts, such amounts
9
<PAGE>
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which the Surviving Corporation or Parent, as
the case may be, made such deduction and withholding.
SECTION 2.08. Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article.
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation. The certificate of
incorporation of the Company in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 3.02. Bylaws. The bylaws of Merger Subsidiary in effect at
the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 3.03. Directors and Officers. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, (i) the directors of Merger Subsidiary at the Effective
Time shall be the directors of the Surviving Corporation and (ii) the officers
of the Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or subsections of
the disclosure schedule delivered by the Company to Parent on or prior to the
date hereof (the "Company Disclosure Schedule") or in the Company SEC Documents,
the Company represents and warrants to Parent that:
10
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SECTION 4.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. The Company has heretofore
made available to Parent true and complete copies of the certificate of
incorporation and bylaws of the Company as currently in effect.
SECTION 4.02. Corporate Authorization. (a) The execution, delivery
and performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company's
corporate powers and, except for the affirmative vote of the holders of a
majority of the outstanding Shares in connection with the consummation of the
Merger, have been duly authorized by all necessary corporate action on the part
of the Company. The affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of any of the Company's
capital stock necessary in connection with the consummation of the Merger. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding agreement of the Company.
(b) At a meeting duly called and held, the Company's Board of
Directors has (i) determined that this Agreement and the transactions
contemplated hereby are fair to and in the best interests of the Company's
stockholders, (ii) declared advisable, approved and adopted this Agreement and
the transactions contemplated hereby and (iii) resolved (subject to Section
6.04(c)) to recommend approval and adoption of this Agreement and the Merger by
its stockholders.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any Governmental Entity, other than (i) the filing of a
certificate of merger with respect to the Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (ii) compliance with any
applicable requirements of the HSR Act and of laws, rules and regulations in
foreign jurisdictions governing antitrust or merger control matters, (iii)
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compliance with any applicable requirements of the 1933 Act, the 1934 Act and
any other applicable securities or takeover laws, whether state or foreign and
(iv) any actions or filings the absence of which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company or materially to impair the ability of the Company to consummate the
transactions contemplated by this Agreement.
SECTION 4.04. Non-contravention. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (i) contravene, conflict
with, or result in any violation or breach of any provision of the certificate
of incorporation or bylaws of the Company or of the similar organizational
documents of any of its material Subsidiaries, (ii) assuming compliance with the
matters referred to in Section 4.03, contravene, conflict with, or result in a
violation or breach of any provision of any applicable law, regulation,
judgment, injunction, order or decree, (iii) require any consent or other action
by any Person under, constitute (with or without notice or lapse of time or
both) a default under, or cause or permit the termination, cancellation,
acceleration or other change of any right or obligation or the loss of any
benefit to which the Company or any of its Subsidiaries is entitled under any
provision of any agreement or other instrument binding upon the Company or any
of its Subsidiaries (or their respective Company Properties) or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of the Company and
its Subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries, except, in the case of clauses
(ii), (iii) and (iv), for such matters as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company
or prevent or materially delay the consummation of the Merger.
SECTION 4.05. Capitalization. (a) The authorized capital stock of the
Company consists of (i) 1 billion shares of common stock, $0.01 par value per
share, of which (x) 265,000,000 shares have been designated as Class A Shares,
(y) 213,250,000 shares have been designated as Class B Shares and (z) the
remaining 521,750,000 shares may be designated by the Board of Directors of the
Company as either Class A Shares or Class B Shares prior to issuance, and (ii)
75,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred
Shares"). As of June 22, 2000, there were outstanding: (1) 52,704,984 Class A
Shares (including equivalents payable in cash or Class A Shares); (2)
213,250,000 Class B Shares; (3) employee and director stock options to purchase
an aggregate of 20,913,569 Class A Shares; and (4) no Preferred Shares. All
shares of capital stock of the Company outstanding as of the date hereof have
been duly authorized and validly issued and are fully paid and nonassessable.
All Class A Shares
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issuable upon exercise of outstanding employee or director stock options have
been duly authorized and, when issued in accordance with the terms thereof, will
be validly issued and will be fully paid and nonassessable.
(b) Except as set forth in this Section 4.05 and for changes since
June 22, 2000 resulting from the exercise of employee or director stock options
outstanding on such date, there are no outstanding (i) shares of capital stock
or voting securities of the Company, (ii) securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company or (iii) options or other rights to acquire from the Company or other
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "Company Securities"). There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the Company Securities.
SECTION 4.06. Subsidiaries. (a) Each Subsidiary of the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has all powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. Each such Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. All material Subsidiaries
of the Company and their respective jurisdictions of incorporation are
identified in the Company 10-K. Section 4.06 of the Company Disclosure Schedule
identifies the Company's direct and indirect percentage ownership of each
Subsidiary.
(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary of the Company, is owned
by the Company, directly or indirectly, free and clear of any Lien and free of
any other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other voting securities
or ownership interests). There are no outstanding (i) securities of the Company
or any of its Subsidiaries convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any
Subsidiary of the Company or (ii) options or other rights to acquire from the
Company or any of its Subsidiaries, or other obligation of the Company or any of
its Subsidiaries to issue, any capital
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stock or other voting securities or ownership interests in, or any securities
convertible into or exchangeable for any capital stock or other voting
securities or ownership interests in, any Subsidiary of the Company (the items
in clauses (i) and (ii) being referred to collectively as the "Company
Subsidiary Securities"). There are no outstanding obligations of the Company or
any of its Subsidiaries (i) to repurchase, redeem or otherwise acquire any of
the Company Subsidiary Securities, (ii) to register any Company Subsidiary
Securities under the 1933 Act or any state securities law or (iii) to grant
preemptive or antidilutive rights with respect to any Company Subsidiary
Securities.
SECTION 4.07. SEC Filings. (a) The Company has made available to
Parent (i) the Company's annual reports on Form 10-K for its fiscal years ended
December 31, 1999 and 1998, (ii) its quarterly report on Form 10-Q for its
fiscal quarter ended March 31, 2000, (iii) its proxy or information statements
relating to meetings of, or actions taken without a meeting by, the stockholders
of the Company held since December 31, 1999 and (iv) all of its other reports,
statements, schedules and registration statements filed with the SEC since
December 31, 1999 (the documents referred to in this Section 4.07(a),
collectively, the "Company SEC Documents").
(b) As of its filing date, each Company SEC Document complied as to
form in all material respects with the applicable requirements of the 1933 Act
and the 1934 Act, as the case may be.
(c) As of its filing date (or, if amended or superceded by a filing
prior to the date hereof, on the date of such filing), each Company SEC Document
filed pursuant to the 1934 Act did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(d) Each Company SEC Document that is a registration statement, as
amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of
the date such statement or amendment became effective, did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
(e) Other than Nabisco, Inc., no Subsidiary of the Company is subject
to the periodic reporting requirements of the 1934 Act.
SECTION 4.08. Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements
(including the related notes) of the Company included in the Company SEC
Documents fairly
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present in all material respects, in conformity with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis (except as
may be indicated in the notes thereto), the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments that are not expected to be material in
amount in the case of any unaudited interim financial statements).
SECTION 4.09. Disclosure Documents. The information statement of the
Company to be filed with the SEC in connection with the Merger (the "Company
Information Statement") and any amendments or supplements thereto will, when
filed, comply as to form in all material respects with the applicable
requirements of the 1934 Act. At the time the Company Information Statement or
any amendment or supplement thereto is first mailed to stockholders of the
Company, the Company Information Statement, as supplemented or amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The representations and warranties contained in this Section 4.09 will not apply
to statements or omissions included in the Company Information Statement based
upon information furnished to the Company by Parent specifically for use
therein.
SECTION 4.10. Absence of Certain Changes. Since December 31, 1999,
the business of the Company and its Subsidiaries has been conducted in the
ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts that, either individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company
(other than customary quarterly cash dividends on the Shares in an amount not
greater than $.188 per Share per quarter), or any repurchase, redemption or
other acquisition by the Company or any of its Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
the Company or any of its Subsidiaries;
(c) any amendment of any material term of any outstanding security of
the Company or any of its Subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any of
its Subsidiaries of any indebtedness for borrowed money other than in the
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ordinary course of business and in amounts and on terms consistent with past
practices;
(e) any creation or other incurrence by the Company or any of its
Subsidiaries of any Lien on any material asset other than in the ordinary course
of business consistent with past practices;
(f) any making of any loan, advance or capital contributions to or
investment in any Person not wholly owned, directly or indirectly, by the
Company, other than immaterial amounts in the ordinary course of business
consistent with past practices;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or any of
its Subsidiaries that has had or would reasonably be expected to have a Material
Adverse Effect on the Company;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its Subsidiaries relating to its assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its Subsidiaries of any contract or
other right, in either case, material to the Company and its Subsidiaries, taken
as a whole, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(i) any change in any method of accounting, method of tax accounting
or accounting principles or practice by the Company or any of its Subsidiaries,
including, without limitation, any amendment of the Tax Sharing Agreement,
except for any such change which is not significant or which is required by
reason of a concurrent change in GAAP;
(j) any (i) grant of any severance or termination pay to (or
amendment to any existing arrangement with) any director, officer or (to the
extent material in the aggregate) employee of the Company or any of its
Subsidiaries, (ii) establishment, adoption or amendment (except as required by
applicable law) of any collective bargaining, bonus, profit-sharing, thrift,
pension, retirement or other benefit plan or arrangement covering any director,
officer or employee of the Company or any of its Subsidiaries, (iii) other than
as disclosed in Section 4.10(j)(iii) of the Company Disclosure Schedule,
increase in compensation, bonus or other benefits payable to any director or
executive officer (or other officer with an employment agreement) of the
Company, or (iv) other than in the ordinary course of business consistent with
past practice, increase in compensation, bonus
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or other benefits payable to any employee not described in clause (iii) of the
Company or any of its Subsidiaries;
(k) any material labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company or any of its Subsidiaries,
which employees were not subject to a collective bargaining agreement at
December 31, 1999, or any material lockouts, strikes, slowdowns, work stoppages
or threats thereof by or with respect to such employees;
(l) any settlement or waiver of a material litigation or claim; or
(m) any agreement to do any of the foregoing.
SECTION 4.11. No Undisclosed Liabilities. There are no liabilities or
obligations of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than:
(a) liabilities or obligations disclosed or provided for in the
Company Balance Sheet or in the notes thereto or in the Company SEC Documents
filed prior to the date hereof,
(b) liabilities or obligations incurred in the ordinary course of
business that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company,
(c) immaterial liabilities or obligations not incurred in the
ordinary course which, taken together, are not material to the Company and its
Subsidiaries taken as a whole,
(d) liabilities or obligations under this Agreement, or
(e) liabilities or obligations incurred in connection with the
transactions contemplated hereby and disclosed in the Company Disclosure
Schedule.
No representations or warranties with respect to environmental
matters are being made in this Section 4.11.
SECTION 4.12. Compliance with Laws and Court Orders. Neither the
Company nor any of its Subsidiaries nor any of their respective properties is in
violation of, or has since December 31, 1999 violated, any applicable law,
statute, ordinance, rule, regulation, judgment, injunction, order or decree,
except for
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violations that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
prevent or materially delay the consummation of the Merger. The Company and its
Subsidiaries are in compliance with the terms of all required governmental
licenses, authorizations, permits, consents and approvals, except where the
failure so to comply would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
SECTION 4.13. Litigation. There is no action, suit, investigation or
proceeding pending, or, to the knowledge of the Company, threatened, against the
Company or any of its Subsidiaries, or any of their respective properties before
any court or arbitrator or before or by any Governmental Entity, that, if
determined or resolved adversely in accordance with the plaintiff's demands,
would reasonably be expected to have a Material Adverse Effect on the Company or
prevent or materially delay the consummation of the Merger. Neither the Company
nor any of its Subsidiaries is subject to any outstanding order, writ,
injunction or decree that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the Merger.
SECTION 4.14. Finders' Fees. Except for UBS Warburg LLC, Morgan
Stanley & Co. Incorporated and Bear, Stearns & Co. Inc., copies of whose
engagement agreements have been provided to Parent, there is no investment
banker, broker, finder or other intermediary that has been retained by or is
authorized to act on behalf of the Company or any of its Subsidiaries who might
be entitled to any fee or commission from the Company or any of its Affiliates
in connection with the transactions contemplated by this Agreement. The fees,
commissions and expenses of UBS Warburg, LLC, Morgan Stanley & Co. Incorporated,
Bear, Stearns & Co. Inc., Davis Polk & Wardwell, Deloitte & Touche LLP and any
other advisors retained by the Company or NGH in connection with the
transactions contemplated by this Agreement to be paid by the Company will not
exceed $50 million.
SECTION 4.15. Opinion of Financial Advisors. The Company has received
an opinion of UBS Warburg LLC and an opinion of Morgan Stanley & Co.
Incorporated, each dated as of the date of this Agreement and each to the effect
that, as of the date of such opinion, the Merger Consideration is fair to the
Company's stockholders from a financial point of view. Complete and correct
signed copies of such opinions will be delivered to Parent as soon as
practicable after the date of this Agreement.
SECTION 4.16. Taxes. (a) The Company and each of its Subsidiaries has
timely filed (or has had timely filed on its behalf) or will file or cause to be
timely
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filed all material Tax Returns required by applicable law to be filed by it or
on its behalf prior to or as of the Effective Time, and all such Tax Returns
are, or will be at the time of filing, true and complete in all material
respects.
(b) The Company and each of its Subsidiaries has paid (or has had
paid on its behalf), or, where payment is not yet due, has established (or has
had established on its behalf and for its sole benefit and recourse) or (with
respect to new contingencies arising after the date hereof) will establish or
cause to be established in accordance with GAAP on or before the Effective Time
an adequate accrual for the payment of, all taxes due with respect to any period
ending prior to or as of the Effective Time.
(c) The federal income Tax Returns filed with respect to the Company
and its Subsidiaries have been examined and settled with the Internal Revenue
Service (the "IRS") (or the applicable statutes of limitation for the assessment
of federal income Taxes for such periods have expired) for all years through
1994.
(d) There are no material Liens or encumbrances for Taxes on any of
the assets of the Company or any of its Subsidiaries.
(e) The Company and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes.
(f) No federal, state, local or foreign audits or administrative
proceedings are pending with regard to any material Taxes or Tax Return of the
Company or its Subsidiaries and none of them has received a written notice of
any proposed audit or proceeding regarding any pending audit or proceeding.
(g) "Taxes" shall mean any and all taxes, charges, fees, levies or
other assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, goods and services, service use, license, value added, capital,
net worth, payroll, profits, withholding, franchise, transfer and recording
taxes, fees and charges, and any other taxes, assessment or similar charges
imposed by the IRS or any taxing authority (whether domestic or foreign
including any state, county, local or foreign government or any subdivision or
taxing agency thereof (including a United States possession)) (a "Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments. "Tax Return" shall mean any report, return, document, declaration
or other information or filing required to be
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supplied to any Taxing Authority or jurisdiction (foreign or domestic) with
respect to Taxes, including information returns, any documents with respect to
or accompanying payments of estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information.
SECTION 4.17. Employee Benefit Plans. (a) The Company has made
available to Parent copies of each material Employee Plan (and, if applicable,
related trust agreements) and all amendments thereto and written interpretations
thereof together with the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto), summary plan description and any material
modifications thereto, annual financial report and actuarial valuation report
prepared in connection with any such Employee Plan and all trust agreements,
insurance contracts and other funding vehicles relating thereto. The Company
Disclosure Schedule identifies each such Employee Plan that is (i) a
Multiemployer Plan, (ii) a Title IV Plan or (iii) maintained in connection with
any trust described in Section 501(c)(9) of the Code.
(b) Each material Employee Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified
during the period since its adoption; each trust created under any such Plan is
exempt from tax under Section 501(a) of the Code and has been so exempt since
its creation. The Company has made available to Parent the most recent
determination letter of the Internal Revenue Service relating to each such
Employee Plan. Each material Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations, including ERISA and the
Code.
(c) The Company has made available to Parent copies (or if there is
no written plan document, any existing written descriptions) of each material
Benefit Arrangement (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof. Each such Benefit
Arrangement has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all applicable statutes, orders,
rules and regulations and has been maintained in good standing with applicable
regulatory authorities.
(d) There has been no failure of a group health plan (as defined in
Section 5000(b)(1) of the Code) to meet the requirements of Code Section
4980B(f) with respect to a qualified beneficiary (as defined in Section
4980B(g)). Neither the Company nor any of its Subsidiaries has contributed to a
nonconforming group health plan (as defined in Section 5000(c)) and no ERISA
Affiliate of the Company or any of its Subsidiaries has incurred a tax under
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Section 5000(a) that is or could become a liability of the Company or any of its
Subsidiaries.
(e) The Company has made available to Parent copies of each material
International Plan. Each such International Plan has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all applicable statutes, orders, rules and regulations (including any
special provisions relating to qualified plans where such Plan was intended so
to qualify) and has been maintained in good standing with applicable regulatory
authorities. There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any of its Subsidiaries
relating to, or change in employee participation or coverage under, any material
International Plan that would increase materially the expense of maintaining
such International Plan above the level of expense incurred in respect thereof
for the most recent fiscal year ended prior to the date hereof. Each such
International Plan that is intended to be funded and/or book-reserved is fully
funded and/or book-reserved, as appropriate, based upon reasonable actuarial
assumptions.
(f) The Company Disclosure Schedule contains a complete list of all
material Employee Arrangements. Except as specifically provided in the foregoing
documents made available to Parent, no amendments to any such Employee
Arrangement have been adopted or approved nor has the Company or any of its
Affiliates undertaken to make any such amendments or to adopt or approve any new
material Employee Arrangement.
(g) All material contributions required to be made to any Employee
Arrangement or any trust or other arrangement funding any of the foregoing by
applicable law or regulation or by any plan document or other contractual
undertaking, and all material premiums due or payable with respect to insurance
policies funding any Employee Arrangement, for any period through the date
hereof have been timely made or paid in full.
(h) With respect to each Title IV Plan: (i) there does not exist any
accumulated funding deficiency within the meaning of Code Section 412 or Section
302 of ERISA, whether or not waived; (ii) no reportable event within the meaning
of Section 4043(c) of ERISA for which the 30-day notice requirement has not been
waived has occurred, and the consummation of the transactions contemplated by
this Agreement will not result in the occurrence of any such reportable event;
(iii) all premiums to the PBGC have been timely paid in full; (iv) no material
liability (other than for premiums to the PBGC) under Title IV of ERISA has been
or is expected to be incurred by the Company or any of its Subsidiaries; and (v)
the PBGC has not instituted proceedings to terminate any such Title IV Plan and,
to the Company's knowledge, no condition exists that
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presents a risk that such proceedings will be instituted or which would
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Title IV Plan.
(i) There does not now exist, nor do any circumstances exist that
could result in, any Controlled Group Liability that would be a material
liability of the Company or any of its Subsidiaries following the Closing. None
of the Company and its Subsidiaries nor any of their respective ERISA Affiliates
has incurred any material Withdrawal Liability that has not been satisfied in
full. With respect to each Employee Plan that is a Multiemployer Plan: (i) if
the Company or any of its Subsidiaries or any of their respective ERISA
Affiliates were to experience a withdrawal or partial withdrawal from such plan,
no material Withdrawal Liability would be incurred; and (ii) none of the Company
and its Subsidiaries, nor any of their respective ERISA Affiliates has received
any notification, nor has any reason to believe, that any such Employee Plan is
in reorganization, has been terminated, is insolvent, or may reasonably be
expected to be in reorganization, to be insolvent, or to be terminated.
(j) The Company Disclosure Schedule sets forth: (i) an accurate and
complete list of each material Employee Arrangement under which the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby could (either alone or in conjunction with any other event
such as termination of employment) result in, cause the accelerated vesting,
funding or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer or director of the Company, or any of its
Subsidiaries, or for which the Company or any of its Subsidiaries could be
liable, or would limit the right of the Company or any of its Subsidiaries to
amend, merge, terminate or receive a reversion of assets from any material
Employee Arrangement or related trust; (ii) the aggregate dollar amounts payable
by the Company and its Subsidiaries pursuant to or with respect to bonuses and
other incentive compensation in connection with or as a result of the
consummation of the transactions contemplated hereby; (iii) the aggregate
liabilities of the Company and its Subsidiaries, together with any corresponding
assets held in any grantor trust of the Company and its Subsidiaries, pursuant
to each Employee Arrangement (other than Employee Plans that are qualified under
Section 401(a) of the Code) providing any supplemental or excess retirement
benefits or other deferred compensation (whether elective or nonelective), in
each case determined as of the date set forth in the Company Disclosure Schedule
and (iv) the aggregate amounts of change-of-control severance and other
change-of-control payments (whether contingent or not) that have been or will be
deferred under the Company's Deferred Compensation Plan. No outstanding options
to purchase Shares granted to any current or former employee or director of the
Company or any of its Affiliates contain any provision that would entitle the
holder to receive
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any cash payment with respect thereto in connection with the consummation of the
transactions contemplated hereby in excess of the amounts provided for in
Section 2.05 hereof.
(k) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), investigations, lawsuits or arbitrations which
have been asserted or instituted, and, to the Company's knowledge, no set of
circumstances exists which may reasonably be expected to give rise to a claim or
lawsuits, against the material Employee Arrangements, any fiduciaries thereof
with respect to their duties to such Employee Arrangements or the assets of any
of the trusts under any of such Employee Arrangements which could reasonably be
expected to result in any material liability of the Company or any of its
Subsidiaries to the PBGC, the Department of Treasury, the Department of Labor,
or any other U.S. or foreign governmental authority, or to any of such Employee
Arrangements, any participant in any such Employee Arrangement, or any other
party. Without limiting the generality of the foregoing, neither the Company nor
any of its Affiliates has any actual or contingent liability under any such
Employee Arrangement or under any applicable law or regulation for pay or
benefits incurred as a result of corporate restructuring, downsizing, layoffs or
similar events that has not been fully satisfied or adequately reserved for in
the audited consolidated financial statements (including the related notes) and
unaudited consolidated financial statements (including the related notes) of the
Company included in the Company SEC Documents.
SECTION 4.18. Environmental Matters. Except as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company:
(i) no written notice, demand, request for information, citation,
summons or order has been received, no penalty has been assessed, and
no investigation, action, claim, suit or proceeding is pending or, to
the knowledge of the Company, threatened by any Governmental Entity or
other Person which alleges a violation by the Company or any
Subsidiary of the Company of any Environmental Law;
(ii) the Company and its Subsidiaries are in compliance with all
Environmental Laws and all Environmental Permits; and
(iii) there are no liabilities or obligations of the Company or
any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise arising
(x) under or in connection with any Environmental Law or any related
claim or (y) in connection with any environmental matter.
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SECTION 4.19. Intellectual Property. The Company and its Subsidiaries
own, or are validly licensed or otherwise have the right to use, all Company
Intellectual Property Rights used in the conduct of their businesses, except
where the failure to own or possess valid rights to such Company Intellectual
Property Rights would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. No Company
Intellectual Property Right is subject to any outstanding judgment, injunction,
order, decree or agreement restricting the use thereof by the Company or any of
its Subsidiaries or restricting the licensing thereof by the Company or any of
its Subsidiaries to any Person, except for any judgment, injunction, order,
decree or agreement which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company. Neither
the Company nor any of its Subsidiaries is infringing on any other Person's
Intellectual Property Rights and to the knowledge of the Company no Person is
infringing on any Company Intellectual Property Rights, except, in either case,
as would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company. Except for such matters as would not
reasonably be expected to have a Material Adverse Effect on the Company, as of
May 31, 2000 (i) neither the Company nor any of its Subsidiaries was a defendant
in any action, suit, investigation or proceeding relating to, or otherwise was
notified of, any alleged claim of infringement of any Intellectual Property
Right and (ii) the Company and its Subsidiaries had no outstanding claim or suit
for any continuing infringement by any other Person of any Company Intellectual
Property Rights.
SECTION 4.20. Antitakeover Statute. The Company has taken all action
necessary to exempt the Merger and this Agreement and the transactions
contemplated hereby from the provisions of Section 203 of Delaware Law.
SECTION 4.21. Real Property. Except as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company: (i) the Company or its Subsidiaries have good and marketable fee
title or a valid leasehold interest in all of the real property and related
equipment used by the Company or its Subsidiaries or otherwise reflected in the
Company's financial statements identified in Section 4.08 above (collectively,
the "Company Properties"), in each case free and clear of any Liens or rights of
third parties and (ii) the Company Properties (taking into account, without
limitation, all Liens related thereto, all zoning and other restrictions
applicable thereto and the condition thereof) are suitable and adequate for the
conduct of the businesses of the Company and its Subsidiaries as currently
conducted.
SECTION 4.22. Contracts; Joint Ventures. (a) Except for employee
benefit plans and any contracts filed as an exhibit to any Company SEC Documents
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("Filed Contracts"), Section 4.22(a) of the Company Disclosure Schedule lists
all oral or written contracts, agreements, guarantees and leases that exist as
of the date hereof to which the Company or any of its Subsidiaries is a party or
by which it is bound which are or would be required to be filed as an exhibit to
the Company SEC Documents (the listed contracts and the Filed Contracts, the
"Contracts"). All of the Contracts governed by the laws of the United States or
any state and, to the knowledge of the Company, all of the Contracts governed by
the laws of any foreign jurisdiction, are valid and binding obligations of the
Company or such Subsidiary and, to the knowledge of the Company, the valid and
binding obligation of each other party thereto, with only such exceptions as
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. Neither the Company or such Subsidiary nor, to the knowledge of the
Company, any other party thereto is in violation of or in default in respect of,
nor has there occurred an event or condition which with the passage of time or
giving of notice (or both) would constitute a default under or permit the
termination of, any such Contract, except such violations or defaults under or
terminations which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
(b) The Company has made available to Parent complete and correct
copies of all agreements relating to the formation and governance of the
Significant Joint Ventures (the "JV Agreements"). Other than as contained in the
JV Agreements, the Company has no obligations of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, to loan
funds to, make capital contributions to, or guarantee indebtedness or other
obligations of, the Significant Joint Ventures.
SECTION 4.23. Indebtedness. At the date hereof, the Company and its
Subsidiaries have outstanding indebtedness for borrowed money (including,
without limitation, off-balance sheet indebtedness, guarantees of third party
indebtedness and capitalized lease obligations) in an aggregate principal amount
not greater than $4.5 billion.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
SECTION 5.01. Corporate Existence and Power. Each of Parent and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
corporate
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powers and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except for those
licenses, authorizations, permits, consents and approvals the absence of which
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent. Since the date of its incorporation, Merger
Subsidiary has not engaged in any activities other than in connection with or as
contemplated by this Agreement or in connection with arranging any financing
required to consummate the transactions contemplated hereby.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement has been
duly executed and delivered by Parent and Merger Subsidiary and constitutes a
valid and binding agreement of each of Parent and Merger Subsidiary.
SECTION 5.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any Governmental
Entity, other than (i) the filing of a certificate of merger with respect to the
Merger with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which Parent is qualified to do
business, (ii) compliance with any applicable requirements of the HSR Act and of
laws, rules and regulations in foreign jurisdictions governing antitrust or
merger control matters, (iii) compliance with any applicable requirements of the
1933 Act, the 1934 Act and any other applicable securities or takeover laws,
whether state or foreign and (iv) any actions or filings the absence of which
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent or materially to impair the ability of Parent
and Merger Subsidiary to consummate the transactions contemplated by this
Agreement.
SECTION 5.04. Non-contravention. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby do not and will not (i) contravene, conflict with, or result in any
violation or breach of any provision of the certificate of incorporation or
bylaws of Parent or Merger Subsidiary, (ii) assuming compliance with the matters
referred to in Section 5.03, contravene, conflict with, or result in any
violation or breach of any provision of any law, regulation, judgment,
injunction, order or decree or (iii) require any consent or other action by any
Person under, constitute (with or without notice of lapse of time or both) a
default under, or cause or permit the
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termination, cancellation, acceleration or other change of any right or
obligation or the loss of any benefit to which Parent or Merger Subsidiary is
entitled under any provision of any agreement or other instrument binding upon
Parent or Merger Subsidiary, except, in the case of clauses (ii) and (iii), for
such matters as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent or prevent or materially delay
the consummation of the Merger.
SECTION 5.05. Disclosure Documents. The information with respect to
Parent and any of its Subsidiaries that Parent furnishes to the Company
specifically for use in the Company Information Statement will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading at the time such Company Information
Statement or any amendment or supplement thereto is first mailed to stockholders
of the Company.
SECTION 5.06. Finders' Fees. Except for Chase Securities Inc., Credit
Suisse First Boston and Wasserstein Perella & Co., Inc., whose fees will be paid
by Parent, there is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of Parent who might
be entitled to any fee or commission from the Company or any of its Affiliates
upon consummation of the transactions contemplated by this Agreement.
SECTION 5.07. Financing. Parent has received and furnished copies to
the Company of fully executed and operative agreements (the "Financing
Agreements") with Chase Securities Inc. and Credit Suisse First Boston Corp.
dated as of June 22, 2000 pursuant to which such entities have agreed, subject
to the terms and conditions thereof, to provide financing to Parent in an amount
sufficient, together with existing credit facilities, cash on hand and other
liquid securities owned directly or indirectly by Parent, to pay all cash
amounts payable to Company stockholders and optionholders in connection with the
transactions contemplated by this Agreement, to effect, assuming the accuracy of
the Company's representations in this Agreement, all necessary refinancing of
existing indebtedness of the Company and its Subsidiaries or of Parent and its
Subsidiaries that is required as a result of the transactions contemplated by
this Agreement, and to pay all related fees and expenses. As of the date hereof,
Parent knows of no facts or circumstances that could reasonably be expected to
result in any of the conditions set forth in the Financing Agreements not being
satisfied.
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ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.01. Conduct of the Company. From the date hereof until the
Effective Time, the Company and its Subsidiaries shall conduct their business
and operate their properties in the ordinary course consistent with past
practice and shall use their reasonable best efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers and employees. Without limiting
the generality of the foregoing, except with the prior written consent of Parent
or as contemplated by this Agreement or as set forth in the Company Disclosure
Schedule, from the date hereof until the Effective Time neither the Company nor
any of its Subsidiaries shall:
(a) declare, set aside or pay any dividend or other distribution
with respect to any share of its capital stock, other than (x) customary
quarterly cash dividends on the Shares in an amount not to exceed $.188 per
Share per quarter and (y) dividends and other distributions paid by any
Subsidiary of the Company to the Company or any wholly-owned Subsidiary of the
Company;
(b) repurchase, redeem or otherwise acquire any shares of capital
stock or other securities of, or other ownership interests in, the Company or
any of its Subsidiaries;
(c) issue, deliver, pledge, encumber or sell any Shares, or any
securities convertible into Shares, or any rights, warrants or options to
acquire any Shares, other than (i) issuances pursuant to stock-based awards or
options that are outstanding on the date hereof, as referenced in Section 4.05
of this Agreement, or are granted in accordance with the following clause (ii),
and (ii) additional options to acquire Shares granted at fair market value or
other awards based on Shares under the terms of the Company's stock plans as in
effect on the date hereof in the ordinary course consistent with past practice,
but in no event shall such options and awards relate to more than 100,000
Shares, nor shall any such options or awards be granted to any officers or
directors of the Company or contain any provisions relating to the acceleration
of vesting that are triggered by the execution of this Agreement or the
consummation of the Merger;
(d) amend its Certificate of Incorporation or By-Laws or other
comparable organizational documents or amend any terms of the outstanding
securities of the Company or its Subsidiaries;
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(e) merge or consolidate with any other Person, make any investment
in any other Person, including any joint venture, or acquire the stock or assets
or rights of any other Person other than (i) pursuant to existing contracts or
commitments as set forth in Section 6.01 of the Company Disclosure Schedule,
(ii) in each case in the ordinary course of business consistent with past
practice, purchases of raw materials, property, plant and equipment, services
and items used or consumed in the manufacturing process, (iii) capital
expenditures made pursuant to the Company's 2000 Capital Expenditure Program, a
copy of which has been made available to Parent, or (iv) transactions that are
in the ordinary course consistent with past practice and not individually in
excess of $5 million;
(f) sell, lease, license or otherwise dispose of any Subsidiary or
any assets, securities, rights or property other than (but for purposes of
clauses (i) - (iii), excluding matters addressed in Section 6.01(r)) (i)
pursuant to existing contracts or commitments as set forth in Section 6.01 of
the Company Disclosure Schedule, (ii) sales of inventory and equipment in the
ordinary course of business consistent with past practice, or (iii) transactions
that are in the ordinary course consistent with past practice and not
individually in excess of $10 million;
(g) incur any indebtedness (whether or not reflected on the
Company's balance sheet) for borrowed money, guarantee any such indebtedness,
enter into any new or amend existing facilities relating to indebtedness, issue
or sell any debt securities or warrants or other rights to acquire any debt
securities or guarantee any debt securities, other than any indebtedness,
guarantee or issuance incurred under current facilities (or renewals or
replacements thereof made in consultation with Parent) in the ordinary course of
business consistent with past practice in an aggregate amount not to exceed $4.6
billion outstanding at any time or incurred between the Company and any of its
wholly owned Subsidiaries or between any of such wholly owned Subsidiaries;
(h) except as required under any collective bargaining agreement
(whether now or hereafter in effect) or under Section 2.05 or as may be mutually
agreed upon between Parent and the Company, enter into or adopt any new, or
amend any existing, Employee Arrangement, other than as required by law, except
that, in order to retain a current employee or recruit a new employee, in each
case consistent with past practice, the Company or its Subsidiaries may amend
Employee Arrangements with individual employees who are not officers or
directors of the Company if such amendments will result in not more than a de
minimis additional cost to the Company or its Subsidiaries and will not
materially increase the obligations of the Company or its Subsidiaries;
(i) except (i) as permitted under Section 6.01(h) or (ii) to the
extent required under any collective bargaining agreement (whether now or
hereafter in
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effect) or by written employment agreements existing on the date of this
Agreement and listed in the Company Disclosure Schedule, increase the
compensation payable or to become payable to its officers, directors or
employees, except for increases in the ordinary course of business consistent
with past practice in salaries or wages of employees (who are not executive
officers or directors of the Company or any of its Subsidiaries) that, in any
event, do not result in aggregate increases in such compensation by more than 2%
over the compensation in effect on the date of this Agreement;
(j) renew any collective bargaining agreement or enter into any new
collective bargaining agreement, if such renewed or new collective bargaining
agreement would materially increase the costs and/or obligations imposed on the
Company and its Subsidiaries thereunder;
(k) contribute any amount to any Employee Arrangement or any trust
or other arrangement funding any Employee Arrangement, except to the extent
required by the existing terms of such Employee Arrangement, trust or other
funding arrangement, by any collective bargaining agreement now or hereafter in
effect, by any written employment agreement existing on the date of this
Agreement and listed in the Company Disclosure Schedule, or by applicable law;
(l) (i) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization or (ii) enter into any agreement or exercise any discretion
providing for acceleration of payment or performance as a result of a change of
control of the Company or its Subsidiaries;
(m) renew or enter into any non-compete, exclusivity or similar
agreement that would restrict or limit, in any material respect, the operations
of the Company or its Subsidiaries, or, after the Effective Time, of Parent or
its Subsidiaries;
(n) enter into, modify in any material respect, amend in any
material respect or terminate any (i) Contract or (ii) agreement having a term
longer than one year and having an aggregate value over its term greater than
$10 million;
(o) (i) renew, enter into, amend or waive any material right under
(A) any contract with or loan to any Affiliate of the Company (other than its
wholly-owned Subsidiaries), except with respect to certain employment matters
as permitted under other covenants contained herein, (B) any distribution
agreement that is not terminable without penalty on thirty days notice, other
than any distribution agreement which involves or would be expected to involve
monthly sales not in excess of $25,000 and which is otherwise in the ordinary
course of
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business consistent with past practice or (C) any JV Agreement except as
permitted under Section 6.01(e)(2) of the Company Disclosure Schedule, or (ii)
exercise any voting or veto rights under the United Biscuits transaction
documents (as set forth in Section 4.10(h) of the Company Disclosure Schedule)
with respect to acquisitions, dispositions or the incurrence of additional
indebtedness, other than (x) the refinancing described in such documents and (y)
the fulfillment of any existing commitments of the Company and its Subsidiaries
under such documents;
(p) settle or compromise any material litigation, or waive, release
or assign any material claims, including with respect to any Company
Intellectual Property Rights;
(q) adopt any change, other than as required by the SEC or by GAAP,
in its accounting policies, procedures or practices;
(r) sell, license, lease or otherwise dispose of any Company
Intellectual Property Rights or any brand or line of business, other than
pursuant to agreements in place on the date hereof and disclosed in Section
6.01(r) of the Company Disclosure Schedule;
(s) agree or commit to do any of the foregoing.
SECTION 6.02. Stockholder Action by Written Consent; Information
Material. In lieu of calling a meeting of the Company's stockholders, the
Company will seek approval and adoption of this Agreement and the Merger by
written consent of NGH. Such approval will be sought so that, on the same
Business Day as the NGH Stockholder Meeting, such consent shall be obtained and
shall be effective (assuming that the NGH Stockholder Approval (as defined in
the NGH Voting Agreement) is obtained). Subject to Section 6.04(c), the Board of
Directors of the Company shall recommend approval and adoption of this Agreement
and the Merger by the Company's stockholders. In connection with such action by
written consent, the Company will (i) promptly prepare and file with the SEC,
use its best efforts to have cleared by the SEC and thereafter mail to its
stockholders as promptly as practicable the Company Information Statement, (ii)
use its best efforts to obtain the necessary approvals by its stockholders of
this Agreement and the transactions contemplated hereby and (iii) otherwise
comply with all legal requirements applicable to such approvals.
SECTION 6.03. Access to Information. From the date hereof until the
Effective Time and subject to applicable law and the Confidentiality Agreement
dated as of April 19, 2000 between NGH and Parent, as modified (the
"Confidentiality Agreement"), the Company shall (i) give Parent, its counsel,
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financial advisors, auditors and other authorized representatives reasonable
access to the offices, properties, books and records of the Company and its
Subsidiaries, (ii) furnish to Parent, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and other
information as such Persons may reasonably request, (iii) instruct the
employees, counsel, financial advisors, auditors and other authorized
representatives of the Company and its Subsidiaries to cooperate with Parent in
its investigation of the Company and its Subsidiaries and (iv) promptly advise
Parent orally and in writing of any fact or circumstance reasonably likely to
have a Material Adverse Effect on the Company. Any investigation pursuant to
this Section shall be conducted in such manner as not to interfere unreasonably
with the conduct of the business of the Company and its Subsidiaries. No
information or knowledge obtained by Parent in any investigation pursuant to
this Section shall affect or be deemed to modify any representation or warranty
made by the Company hereunder.
SECTION 6.04. No Solicitation; Other Offers. (a) From the date hereof
until the earlier of the Effective Time and the termination of this Agreement in
accordance with Article 10, the Company and its Subsidiaries will not, and the
Company will use its reasonable best efforts to cause the officers, directors,
employees, investment bankers, consultants or other agents or representatives
(collectively, "Agents") of the Company and its Subsidiaries not to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal, (ii) engage in discussions or negotiations with any Person concerning
an Acquisition Proposal, (iii) disclose any nonpublic information relating to
the Company or any of its Subsidiaries to any Person who, to the knowledge of
the Company, is considering making, or has made, an Acquisition Proposal or (iv)
take any other action to facilitate any inquiries or the making of any proposal
that constitutes or that could reasonably be expected to lead to an Acquisition
Proposal. The Company will notify Parent promptly (but in no event later than 24
hours) after receipt by the Company of any Acquisition Proposal or any request
for nonpublic information relating to the Company or any of its Subsidiaries by
any Person who, to the knowledge of the Company, is making, or has made, an
Acquisition Proposal. The Company shall promptly provide such notice orally and
in writing and shall identify the Person making, and all terms and conditions
of, any such Acquisition Proposal or request. The Company shall keep Parent
promptly informed of the status and details of any such Acquisition Proposal
(including amendments or proposed amendments) or request and any discussions or
negotiations pursuant to Section 6.04(b) and the Company shall provide to Parent
copies of any written communications between the Company and any Person making
the Acquisition Proposal. The Company shall, and the Company shall use
reasonable best efforts to cause its Subsidiaries and the Agents of the Company
and its Subsidiaries to, cease immediately and cause to be terminated all
activities, discussions and negotiations, if any, with any Persons conducted
prior
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to the date hereof with respect to any Acquisition Proposal. Nothing contained
in this Agreement shall prevent the Board of Directors of the Company from
complying with Rule 14d-9 or Rule 14e-2 under the 1934 Act with respect to any
Acquisition Proposal.
(b) Notwithstanding the foregoing, the Company may prior to receipt
of the NGH Stockholder Approval (as defined in the NGH Voting Agreement),
negotiate or otherwise engage in substantive discussions with, and furnish
nonpublic information to, any Person in response to an unsolicited Acquisition
Proposal by such Person if (i) the Company has complied with the terms of
Section 6.04(a), (ii) the Board of Directors of the Company determines in good
faith that such Acquisition Proposal is likely to result in a Superior Proposal
and, after consultation with outside legal counsel, that the failure to take
such action would constitute a breach of its fiduciary duties under applicable
law, (iii) such Person executes a confidentiality agreement with terms no less
favorable to the Company than those contained in the Confidentiality Agreement
(except as to the standstill provisions) and (iv) the Company shall have
delivered to Parent prior written notice advising Parent that it intends to take
such action.
(c) The Board of Directors of the Company shall be permitted to
withdraw, or modify in a manner adverse to Parent, its recommendation to its
stockholders referred to in Section 6.02 hereof, but only if (i) the Company has
complied with the terms of Section 6.04(a), (ii) the Company has received an
unsolicited Acquisition Proposal which the Board of Directors determines in good
faith constitutes a Superior Proposal, (iii) the Board of Directors of the
Company determines in good faith, after consultation with outside legal counsel,
that the failure to take such action would constitute a breach of its fiduciary
duties under applicable law and (iv) the Company shall have delivered to Parent
a prior written notice advising Parent that it intends to take such action.
(d) For purposes of this Agreement:
"Acquisition Proposal" means any offer or proposal for a merger,
reorganization, consolidation, share exchange, business combination, or other
similar transaction involving the Company or any of its Subsidiaries or any
proposal or offer to acquire, directly or indirectly, more than 35% of the
voting securities of the Company, or a substantial portion of the assets of the
Company and its Subsidiaries taken as a whole, other than the transactions
contemplated by this Agreement.
"Superior Proposal" means any bona fide written Acquisition Proposal
(i) on terms that the Board of Directors of the Company determines in good faith
(after consultation with a financial advisor of nationally recognized reputation
and
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taking into account all the terms and conditions of the Acquisition Proposal
including the legal, financial and regulatory aspects of the proposal) provide
greater value to the Company's stockholders than the transaction contemplated
hereunder, as amended pursuant to Section 10.01(d) if applicable and (ii) that
is reasonably likely to be consummated by the Person making such Acquisition
Proposal.
(e) The Company will promptly provide to Parent any information
regarding the Company provided to any Person making an Acquisition Proposal that
was not previously provided to Parent.
SECTION 6.05. Third Party Standstill Agreements. During the period
from the date of this Agreement until the Effective Time or earlier termination
of this Agreement, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement relating to the making
of an Acquisition Proposal to which it or any of its Subsidiaries is a party
(other than any involving Parent or its Subsidiaries). During such period, the
Company agrees to use reasonable best efforts to enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreements, including
seeking injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state thereof having jurisdiction.
ARTICLE 7
COVENANTS OF PARENT
Parent agrees that:
SECTION 7.01. Confidentiality. Prior to the Effective Time and after
any termination of this Agreement, Parent will hold, and will use its reasonable
best efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence all documents and
information concerning the Company or any of its Subsidiaries furnished to
Parent or its Affiliates in connection with the transactions contemplated by
this Agreement in accordance with the terms of the Confidentiality Agreement.
SECTION 7.02. Obligations of Merger Subsidiary. Parent will take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
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SECTION 7.03. Director and Officer Liability. Parent shall cause the
Surviving Corporation, and the Surviving Corporation hereby agrees, to do the
following:
(a) For six years after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless each present and former officer
and director of the Company (each an "Indemnified Person") in respect of acts or
omissions occurring at or prior to the Effective Time to the fullest extent
permitted by Delaware Law or any other applicable laws or provided under the
Company's certificate of incorporation and bylaws in effect on the date hereof,
provided that such indemnification shall be subject to any limitation imposed
from time to time under applicable law.
(b) The Surviving Corporation shall pay all expenses, including
reasonable fees and expenses of counsel, that an Indemnified Person may incur in
enforcing the indemnity and other obligations provided for in this Section 7.03.
The Surviving Corporation shall be entitled to assume the defense of any action,
suit, investigation or proceeding and the Surviving Corporation shall not be
liable to any Indemnified Person for any legal expenses of separate counsel or
any other expenses subsequently incurred by such Indemnified Person in
connection with the defense thereof, except that if the Surviving Corporation
elects not to assume such defense or counsel for the Indemnified Person advises
that there are issues that raise conflicts of interest between the Surviving
Corporation and the Indemnified Person, the Indemnified Person may retain
counsel reasonably satisfactory to the Surviving Corporation, and the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Person promptly as statements therefor are received; provided that
the Surviving Corporation shall not be liable for the fees of more than one
counsel for all Indemnified Persons, other than local counsel, unless a conflict
of interest shall be caused thereby, and provided further that the Surviving
Corporation shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld).
(c) For six years after the Effective Time, the Surviving
Corporation shall provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering each
such Indemnified Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date hereof;
provided if the aggregate annual premiums for such insurance at any time during
such period shall exceed 200% of the per annum rate of premium paid by the
Company and its Subsidiaries as of the date hereof for such insurance, then
Parent shall, or shall cause its
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Subsidiaries to, provide only such coverage as shall then be available at an
annual premium equal to 200% of such rate.
(d) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 7.03.
(e) The rights of each Indemnified Person under this Section 7.03
shall be in addition to any rights such Person may have under the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries, under
Delaware Law or any other applicable laws or under any agreement of any
Indemnified Person with the Company or any of its Subsidiaries. These rights
shall survive consummation of the Merger and are intended to benefit, and shall
be enforceable by, each Indemnified Person.
SECTION 7.04. Employee Matters. (a) For a period of two years after
the Effective Time, the Surviving Corporation will provide employee compensation
and benefits for the benefit of current and former employees of the Company and
its Subsidiaries, other than employees represented by collective bargaining
units and employees with which the Company or NGH have entered into employment
agreements (the compensation and benefits for which such employees shall be in
accordance with their respective collective bargaining agreement or employment
agreement), ("Company Employees") that are in the aggregate not less favorable
to such employees than the Employee Arrangements. The foregoing notwithstanding,
in the event the employment of any Company Employee is terminated other than for
cause during the two-year period beginning at the Effective Time, such employee
shall receive severance or separation benefits in an aggregate amount at least
equal to the severance or separation benefits such employee would have received
under such circumstances under the Employee Arrangements listed in the Company
Disclosure Schedule.
(b) The Surviving Corporation shall give Company Employees full
credit for purposes of eligibility, vesting and, for purposes of vacation and
severance benefits only, benefit accrual under any such plans or arrangements
maintained by the Surviving Corporation pursuant to Section 7.04(a) for such
employees' service recognized for such purposes under the Employee Arrangements.
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(c) As soon as practicable after the date of this Agreement, the
Company shall take all steps necessary or appropriate to (i) delete from the
Company's Deferred Compensation Plan and all other Employee Arrangements (other
than Employee Plans that are qualified under Section 401(a) of the Code and
contracts currently in effect with individual employees with respect to benefits
accrued as of the date of this Agreement) providing any supplemental or excess
retirement benefits or other deferred compensation (whether elective or
nonelective) any and all provisions limiting or eliminating the ability to amend
or terminate such plans after a "change of control" or similar events, except
for such limitations that merely prevent the reduction or elimination of rights
and benefits that have already vested or accrued thereunder, and (ii) ensure
that the provision for employer matching contributions under the Company's
Deferred Compensation Plan does not apply to amounts deferred under that plan
that are payable as a result of a "change of control" or otherwise in connection
with the consummation of the transactions contemplated hereby, and to eliminate
such provision effective not later than the Effective Time.
(d) Nothing contained in this Agreement shall be construed to
prevent the termination of employment of any Company Employee or the amendment
or termination of any particular Employee Arrangement to the extent permitted by
its terms as in effect immediately before the Effective Time.
ARTICLE 8
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 8.01. Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, Company and Parent will use their reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement. In
furtherance and not in limitation of the foregoing, each of Parent and Company
agrees (i) to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act (and to make such other filings as are required under
laws, rules and regulations in foreign jurisdictions governing antitrust or
merger control matters) with respect to the transactions contemplated hereby as
promptly as practicable after the date hereof and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act (or pursuant to such foreign laws, rules or
regulations) and (ii) to take all other actions necessary to cause the
expiration or termination of the applicable waiting periods
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under the HSR Act (and to obtain the necessary approvals under such foreign
laws, rules or regulations) as soon as practicable, including, in the case of
Parent, entering into any required settlement, undertaking, consent decree or
stipulation with any Governmental Entity or implementing any required
divestiture, hold separate or similar transaction with respect to any assets;
provided, that, Parent shall not be required to agree, and the Company shall not
agree without Parent's consent, to waive any substantial rights or to accept any
substantial limitation on its operations or to dispose of any significant assets
in connection with obtaining any such consent or authorization unless such
waiver, limitation or disposition would not reasonably be expected to have a
Material Adverse Effect on the Company, Parent or Parent's food business, and
provided, further, that at Parent's written request, the Company shall agree to
any such waiver, limitation or disposal, which agreement may, at the Company's
option, be conditioned upon and effective only as of the Effective Time.
SECTION 8.02. Certain Filings. The Company and Parent shall cooperate
with one another and use their best efforts (i) in connection with the
preparation of the Company Information Statement, (ii) in determining whether
any action by or in respect of, or filing with, any governmental body, agency,
official, or authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement and (iii) in taking such actions or making any such filings,
furnishing information required in connection therewith or with the Company
Information Statement and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 8.03. Public Announcements. Parent and the Company will
consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated hereby
and, except as may be required by applicable law or any listing agreement with
any national securities exchange, will not issue any such press release or make
any such public statement prior to such consultation.
SECTION 8.04. Further Assurances. At and after the Effective Time,
the officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
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SECTION 8.05. Notices of Certain Events. Each of the Company and
Parent shall promptly notify the other of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting the Company, Parent or any of their respective Subsidiaries
that relate to the consummation of the transactions contemplated by this
Agreement.
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to Obligations of Each Party. The
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) this Agreement shall have been approved and adopted by the
stockholders of the Company in accordance with Delaware Law;
(b) no provision of any applicable law or regulation and no judgment,
temporary restraining order, preliminary or permanent injunction, order, decree
or other legal restraint or prohibition shall prohibit the consummation of the
Merger;
(c) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated; and
(d) Parent and the Company shall have received in respect of the
Merger and any matters arising therefrom confirmation by way of a decision from
the Commission of the European Communities under Regulation No. 4064/89 (with or
without the initiation of proceedings under Article 6(1)(c) thereof) that the
Merger and any matters arising therefrom are compatible with the common market.
39
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SECTION 9.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) except with respect to the representations and warranties of the
Company contained in Section 4.10(a) of this Agreement, the representations and
warranties of the Company contained in this Agreement and in any certificate or
other writing delivered by the Company pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
in all material respects at and as of the Effective Time as if made at and as of
such time (or, if given as of a specific date, at and as of such date) with only
such exceptions as would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company;
(c) the representations and warranties of the Company contained in
Section 4.10(a) of this Agreement shall be true at and as of the Effective Time
as if made at and as of such time;
(d) Parent shall have received a certificate signed by an executive
of the Company to the foregoing effect; and
(e) all consents or approvals of any Governmental Entity required in
connection with the consummation of the transactions contemplated hereby shall
have been obtained, except for such consents or approvals which, if not
obtained, would not, individually or in the aggregate, have a Material Adverse
Effect on the Company;
SECTION 9.03. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) each of Parent and Merger Subsidiary shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time;
(b) the representations and warranties of Parent and Merger
Subsidiary contained in this Agreement and in any certificate or other writing
delivered by Parent or Merger Subsidiary pursuant hereto, disregarding all
qualifications and
40
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exceptions contained therein relating to materiality or Material Adverse Effect
or any similar standard or qualification, shall be true in all material respects
at and as of the Effective Time as if made at and as of such time (or, if given
as of a specific date, at and as of such date) with only such exceptions as
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent; and
(c) the Company shall have received a certificate signed by an
executive officer of Parent to the foregoing effect.
ARTICLE 10
TERMINATION
SECTION 10.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before April 30,
2001, provided that the right to terminate this Agreement pursuant to
this Section 10.01(b)(i) shall not be available to any party whose
breach of any provision of this Agreement results in the failure of
the Merger to be consummated by such time;
(ii) there shall be any law or regulation that makes consummation
of the Merger illegal or otherwise prohibited or any judgment,
injunction, order or decree of any Governmental Entity enjoining
Company or Parent from consummating the Merger is entered and such
judgment, injunction, decree or order shall have become final and
nonappealable;
(iii) this Agreement shall not have been approved and adopted in
accordance with Delaware Law by the Company's stockholders by reason
of the failure to obtain the required vote of NGH's stockholders for
approval of the sale of NGH's Shares pursuant this Agreement at a duly
held meeting (including any adjournments thereof) of NGH's
stockholders (the "NGH Stockholder Meeting"); or
41
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(iv) the NGH Voting Agreement shall have terminated pursuant to
Section 7(b) or 7(c) thereof;
(c) by Parent, if
(i) the Board of Directors of the Company shall have failed to
recommend or shall have withdrawn, or modified in a manner adverse to
Parent, its approval or recommendation of this Agreement or the
Merger, shall have approved or recommended a Superior Proposal, or
shall have resolved to do any of the foregoing,
(ii) the Company shall have entered into, or publicly announced
its intention to enter into, a definitive agreement or an agreement in
principle with respect to a Superior Proposal; or
(iii) the Company shall have (1) failed to perform in any
material respect any material obligation or to comply in any material
respect with any material agreement or covenant of the Company to be
performed or complied with by it under this Agreement or (2) breached
any of its representations or warranties such that the condition set
forth in Section 9.02(b) or 9.02(c) cannot be satisfied, which failure
under clause (1) or (2) shall not be cured within 15 Business Days of
notice from Parent (or such longer period during which the Company
exercises reasonable best efforts to cure);
(d) by the Company, if the Board of Directors of the Company
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a written agreement concerning a Superior Proposal, provided
however that (i) the Company shall have complied with Section 6.04, (ii) the
Company shall have given Parent at least three Business Days written prior
notice of its intention to terminate the Agreement, attaching a description of
all material terms and conditions of the Superior Proposal to such notice, (iii)
during such three Business Days or greater period, the Company engages in good
faith negotiations with Parent with respect to such changes as Parent may
propose to the terms of the Merger and this Agreement, (iv) Parent does not make
prior to such termination of this Agreement a definitive, binding offer which
the Board of Directors of the Company determines, in good faith after
consultation with its financial advisors, is at least as favorable to the
stockholders of the Company as the Superior Proposal, and (v) the Company prior
to such termination pursuant to this Section 10.01(d) pays to Parent in
immediately available funds the fee required to be paid pursuant to Section
11.04(b). The Company agrees to notify Parent promptly if its intention to enter
into a written agreement referred to in its notification shall change at any
time after giving such notification;
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(e) by the Company, if Parent or Merger Subsidiary shall have (i)
failed to perform in any material respect any material obligation or to comply
in any material respect with any material agreement or covenant of Parent or
Merger Subsidiary to be performed or complied with by it under this Agreement or
(ii) breached any of such party's representations or warranties contained in
this Agreement such that the condition set forth in Section 9.03(b) cannot be
satisfied, which failure or breach described in such clause (i) or (ii) shall
not be cured within 15 Business Days of notice from the Company (or such longer
period during which Parent or Merger Subsidiary exercises reasonable best
efforts to cure); or
(f) by either the Company or Parent, if since the date of this
Agreement, there has been a change in the Code, final or temporary Treasury
Regulations promulgated under Section 355(e) or Section 358(g), published
pronouncements of the Internal Revenue Service having the same force and effect
as final or temporary Treasury Regulations promulgated under Section 355(e) or
Section 358(g), case law applying Section 355(e) or Section 358(g), or other
relevant binding legal authority relating to Section 355(e) or Section 358(g)
(collectively "Change in Tax Law"), that (i) would apply to a transaction
consummated subsequent to such Change in Tax Law notwithstanding the existence
of a binding written agreement with respect to such transaction, and (ii) would
reasonably be expected to result in (A) the imposition of tax on gain realized
with respect to the stock of the Company arising out of the distribution on May
18, 1999 by R.J. Reynolds Tobacco Holdings, Inc. ("RJR") to NGH of all of the
outstanding Class B Shares or on gain realized with respect to the stock of RJR
arising out of the distribution on June 14, 1999 by NGH to the holders of its
common stock of all of the outstanding common stock of RJR, or (B) a material
increase in the tax liability of NGH resulting from the Merger as compared to
the tax liability that would have arisen in the absence of such Change in Tax
Law.
The party desiring to terminate this Agreement pursuant to this Section 10.01
(other than pursuant to Section 10.01(a)) shall give notice of such termination
to the other party.
SECTION 10.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void and of no effect
with no liability on the part of any party (or any stockholder, director,
officer, employee, agent, consultant or representative of such party) to the
other party hereto, provided that, if such termination shall result from the
willful (i) failure of either party to fulfill a condition to the performance of
the obligations of the other party or (ii) failure of either party to perform a
covenant hereof, such party shall be fully liable for any and all liabilities
and damages incurred or suffered by the
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other party as a result of such failure. The provisions of Sections 7.01, 11.04,
11.06, 11.07 and 11.08 shall survive any termination hereof pursuant to Section
10.01.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission) and shall be given,
if to Parent or Merger Subsidiary, to:
Philip Morris Companies Inc.
120 Park Avenue
New York, New York 10017
Attention: Charles R. Wall
Fax: (917) 663-5817
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Martin Lipton
Andrew J. Nussbaum
Fax: (212) 403-2000
and
Hunton & Williams
200 Park Avenue
New York, New York 10166
Attention: Jerry E. Whitson
Fax: (212) 309-1100
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if to the Company, to:
Nabisco Holdings Corp.
7 Campus Drive
Parsippany, New Jersey 07054
Attention: James A. Kirkman III
Fax: (973) 539-9150
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Rosoff
Fax: (212) 450-4800
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a Business Day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding Business Day in the place of receipt.
SECTION 11.02. Non-Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement.
SECTION 11.03. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Effective Time if, but only if,
such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement or, in the case of a waiver, by each
party against whom the waiver is to be effective, provided that, after the
adoption of this Agreement by the stockholders of the Company and without their
further approval, no such amendment or waiver shall reduce the amount or change
the kind of consideration to be received in exchange for the Shares.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
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SECTION 11.04. Expenses. (a) Except as otherwise provided in this
Section, all costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense.
(b) If:
(i) the Company shall terminate this Agreement pursuant to
Section 10.01(d);
(ii) Parent shall terminate this Agreement (A) pursuant to
Section 10.01(c)(i) or 10.01(c)(ii), or (B) pursuant to Section
10.01(c)(iii) (other than as a result of a breach of representation
not caused by action (including breach of a covenant contained herein)
of the Company after the date hereof and not capable of being cured
using reasonable best efforts) if, in the case of this clause (B), at
such time a third party shall have made an Acquisition Proposal and
within nine months after termination of this Agreement the Company
enters into a definitive agreement in respect of any Acquisition
Proposal or such a transaction is consummated; or
(iii) either the Company or Parent shall terminate this Agreement
pursuant to Section 10.01(b)(iii) or 10.01(b)(iv) and (A) prior to the
NGH Stockholder Meeting a third party or the Company shall have
publicly announced an Acquisition Proposal and (B) within nine months
after termination of this Agreement the Company enters into a
definitive agreement in respect of any Acquisition Proposal or such a
transaction is consummated;
then in any case as described in clause (i), (ii) or (iii), the Company shall
pay to Parent (by wire transfer of immediately available funds not later than
the date of termination of this Agreement or, in the case of clauses (ii)(B) and
(iii), the earlier of the date of such definitive agreement or consummation of
such a transaction) an amount equal to $445 million, less any amounts previously
paid pursuant to Section 11.04(c); provided however that such amount shall be
reduced by the amount of any fee paid by NGH to Parent pursuant to Section 8(b)
of the NGH Voting Agreement. The Company shall be entitled to deduct and
withhold from any payments made to Parent under this Section 11.04(b) such
amounts as may be required to be deducted or withheld therefrom under the Code
or under any applicable provisions of state or local tax law. To the extent such
amounts are so deducted or withheld, such amounts shall be treated for purposes
of this Section 11.04(b) as having been paid to Parent.
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(c) If:
(i) Parent shall terminate this Agreement pursuant to Section
10.01(c)(iii) and at such time a third party shall have made an
Acquisition Proposal; or
(ii) the Company or Parent shall terminate this Agreement
pursuant to Section 10.01(b)(iii);
then the Company shall within five Business Days pay to Parent in immediately
available funds up to $30 million as reimbursement for documented expenses
incurred in connection with the negotiation and execution of this Agreement.
(d) If the Company shall terminate this Agreement pursuant to Section
10.01(e), then Parent shall within five Business Days pay to the Company in
immediately available funds up to $30 million as reimbursement for documented
expenses incurred in connection with the negotiation and execution of this
Agreement.
SECTION 11.05. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except that Parent or
Merger Subsidiary may transfer or assign, in whole or from time to time in part,
to one or more of its Affiliates, the right to enter into the transactions
contemplated by this Agreement, but no such transfer or assignment will relieve
Parent or Merger Subsidiary of its obligations hereunder.
SECTION 11.06. Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of Delaware, without
regard to the conflicts of law rules of such state.
SECTION 11.07. Jurisdiction. Any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in any federal court located in the State of Delaware or any Delaware
state court, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient form. Process in any such
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suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 11.01 shall be deemed effective service of process on such
party.
SECTION 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 11.09. Counterparts; Effectiveness; Benefit. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Except as provided in Section 7.03, no provision of this Agreement is intended
to confer any rights, benefits, remedies, obligations, or liabilities hereunder
upon any Person other than the parties hereto and their respective successors
and assigns.
SECTION 11.10. Entire Agreement. This Agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and supersedes all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter of this Agreement.
SECTION 11.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 11.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
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SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled, without posting a bond or similar indemnity, to an injunction or
injunctions to prevent breaches of this Agreement or to enforce specifically the
performance of the terms and provisions hereof in any federal court located in
the State of Delaware or any Delaware state court, in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
NABISCO HOLDINGS CORP.
By: /s/ James M. Kilts
-------------------------
Name: James M. Kilts
Title: President and Chief Executive
Officer
PHILIP MORRIS COMPANIES INC.
By: /s/ Louis Camilleri
--------------------------
Name: Louis Camilleri
Title: Senior Vice President and Chief
Financial Officer
STRIKE ACQUISITION CORP.
By: /s/ Nancy DeLisi
--------------------------
Name: Nancy DeLisi
Title: President
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ANNEX B
VOTING AND INDEMNITY AGREEMENT
Voting and Indemnity Agreement dated as of June 25, 2000 between
Nabisco Group Holdings Corp. ("NGH"), a Delaware corporation, Philip Morris
Companies Inc., a Virginia corporation ("Parent"), and, solely for purposes of
Sections 5(d), 8(c) and 9 of this Agreement, Nabisco Holdings Corp., a Delaware
corporation (the "Company").
WHEREAS, the Company, Parent and Strike Acquisition Corp. ("Merger
Subsidiary") are concurrently with the execution and delivery of this Agreement
entering into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which Merger Subsidiary will merge with and into the Company on the terms and
conditions set forth therein; and
WHEREAS, in order to induce Parent to enter into the Merger
Agreement, Parent has requested NGH, and NGH has agreed, to enter into this
Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined herein
shall have the meaning assigned to such terms in the Merger Agreement.
SECTION 2. NGH Stockholder Meeting; Proxy Material. NGH shall cause a
meeting of its stockholders (the "NGH Stockholder Meeting") to be duly called
and held (as promptly as practicable following filing of the proxy statement of
NGH relating to such meeting) at which its stockholders will vote on a
resolution to authorize the sale of the Shares (as defined below) pursuant to
the Merger Agreement (the "NA Sale") and related matters. Unless Parent
otherwise agrees, the NGH Stockholder Meeting will be held either simultaneously
with or prior to any other meeting of the NGH stockholders to be held in
connection with the NGH Merger Agreement or any other transaction replacing the
NGH Merger Agreement. Subject to Section 6(c), the Board of Directors of NGH
shall recommend approval of the NA Sale by NGH's stockholders. In connection
with such meeting, NGH will (i) promptly prepare and file with the SEC, use its
best efforts to have cleared by the SEC and thereafter mail to its stockholders
as promptly as practicable a proxy statement of NGH and all other proxy
materials for such meeting, (ii) use its reasonable best efforts (including
postponing or adjourning the NGH Stockholder Meeting to solicit additional
proxies for a period of up to 30 days) to obtain the approval of the NA Sale by
holders of a majority of the outstanding stock of NGH entitled to vote thereon
(the "NGH Stockholder Approval") and (iii) otherwise comply with all legal
requirements applicable to
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such meeting. The NGH Stockholder Approval will be presented as a single
proposal in the NGH proxy statement and will not be conditioned on approval of
any other proposal. Parent and its counsel shall be given an opportunity to
review and comment on the NGH proxy statement prior to its being filed with the
SEC or mailed to NGH stockholders, and NGH shall provide to Parent copies of any
comments received from the SEC in connection therewith and shall consult with
Parent in responding to the SEC.
SECTION 3. Agreement to Vote. Subject to obtaining the NGH
Stockholder Approval, NGH agrees to vote all Shares (as defined below) at any
meeting of stockholders of the Company, or pursuant to any action by written
consent (which consent, in the case of clause (a) of this Section 3, it shall
execute and deliver to the Company immediately following (i.e. on the same day)
receipt of the NGH Stockholder Approval), in each case where such matters arise
(a) in favor of the adoption of the Merger Agreement and the transactions
contemplated by the Merger Agreement and (b) against (i) any proposal made in
opposition to or in competition with the Merger and the transactions
contemplated by the Merger Agreement, (ii) any merger, reorganization,
consolidation, share exchange, business combination, sale of assets or other
similar transaction with or involving the Company and any party other than
Parent, or (iii) any other action the consummation of which would reasonably be
expected to prevent or delay consummation of the transactions contemplated by
the Merger Agreement.
SECTION 4. Representations and Warranties of NGH. NGH hereby
represents and warrants to Parent that:
(a) Ownership of Shares. NGH owns, beneficially and of record,
213,250,000 shares (the "Shares") of Class B common stock, $0.01 par value per
share, of the Company, free and clear of any Lien and, subject to applicable
law, free of any other limitation or restriction (including any restriction on
the right to vote or otherwise dispose of the Shares). None of the Shares is
subject to any voting trust or other agreement or arrangement with respect to
the voting of such Shares. Except for the Shares, NGH does not beneficially own
any (i) shares of capital stock or voting securities of the Company, (ii)
securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities of the Company or (iii) options or other rights to
acquire from the Company any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, other than as provided in the Corporate Agreement dated as of June 14,
1999 among NGH, the Company and R.J. Reynolds Tobacco Holdings, Inc. ("RJR").
(b) Corporate Authorization. Subject to obtaining the NGH Stockholder
Approval, the execution, delivery and performance by NGH of this Agreement
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and the consummation by NGH of the transactions contemplated hereby are within
NGH's corporate powers and have been duly authorized by all necessary corporate
action on the part of NGH. This Agreement has been duly executed and delivered
by NGH and constitutes a valid and binding Agreement of NGH.
(c) Non-Contravention. Subject to obtaining the NGH Stockholder
Approval and to compliance with the matters set forth in Section 10, the
execution, delivery and performance by NGH of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
contravene, conflict with, or result in any violation or breach of any provision
of the certificate of incorporation or bylaws of NGH, (ii) contravene, conflict
with, or result in any violation or breach of any applicable law, rule,
regulation, judgment, injunction, order or decree, (iii) require any consent or
other action by any Person under, constitute (with or without notice or lapse of
time or both) a default under, or cause or permit the termination, cancellation
or acceleration or other change of any right or obligation or the loss of any
benefit to which NGH is entitled under any provision of any agreement or other
instrument binding on NGH, except in the case of clauses (ii) and (iii) for such
matters as would not materially impair NGH's ability to perform its obligations
under this Agreement.
(d) Opinion of Financial Advisors. NGH has received an opinion of
UBS Warburg LLC and an opinion of Morgan Stanley & Co. Incorporated, each dated
as of the date of this Agreement and each to the effect that, as of the date of
such opinion, the NA Sale is fair from a financial point of view to the
Company's stockholders, including NGH. Complete and correct signed copies of
such opinions will be delivered to Parent as soon as practicable after the date
of this Agreement. NGH has received the consent of each of UBS Warburg LLC and
Morgan Stanley & Co. Incorporated to include the above-referenced opinions in
the NGH proxy statement relating to the NA Sale.
(e) Tax Representation. NGH represents and warrants that the
requirement set forth in Section 4.06 of the Tax Sharing Agreement with respect
to this Agreement, the Merger Agreement and consummation of the transactions
contemplated by this Agreement and the Merger Agreement (collectively, the
"Transactions") has been fully satisfied on or prior to the date hereof, each
party to the Tax Sharing Agreement has irrevocably waived any right it may
otherwise have had to consent to the Transactions, and no such party will have
any claim or right under the Tax Sharing Agreement to payment from the Company
or Parent in connection with the consummation of the Transactions insofar as
such claim or right to payment relates to the taxability of the Internal
Distribution or the Distribution (each as defined in the Tax Sharing Agreement)
by reason of the consummation of the Transactions.
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(f) NGH Merger Agreement. (i) NGH hereby represents and warrants to
Parent that the NGH Merger Agreement will be substantially in the form
previously provided to Parent. NGH will not amend or modify the NGH Merger
Agreement or waive any of its rights thereunder in any manner that would
reasonably be expected to materially delay or prevent consummation of the Merger
or create any material additional liabilities of the Company.
(ii) With respect to NGH's actions under Section 6.05 (Surety
Obligations) of the NGH Merger Agreement, NGH shall take such actions
in consultation with the Company and in a manner that does not
unreasonably disrupt the Company's business or operations.
(iii) Without the prior written consent of Parent, NGH will not
amend or modify Section 7.04 of the NGH Merger Agreement in any manner
that would adversely affect Parent or the Company.
(g) Without limiting the indemnification provided in Section 9(a)
herein and the assumption of liability for certain employee obligations in
Section 7.04 of the NGH Merger Agreement, the Company and NGH, after the date
hereof, will consider in good faith making appropriate arrangements to provide
for the administration of such employee obligations, provided that in no event
will the Company be required to incur any additional costs or liabilities in
connection therewith (other than routine administrative costs that do not impose
any incremental costs on the Company).
SECTION 5. Certain Covenants. (a) Except pursuant to the terms of
this Agreement and the Merger Agreement, NGH shall not, without the prior
written consent of Parent, directly or indirectly (i) grant any proxies or enter
into any voting trust or other agreement or arrangement with respect to the
voting of any Shares or (ii) acquire, sell, assign, transfer, encumber or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the direct or indirect acquisition or sale,
assignment, transfer, encumbrance or other disposition of, any Shares during the
term of this Agreement.
(b) During the period from the date of this Agreement until the
Effective Time or earlier termination of this Agreement, NGH shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement relating to the making of an Acquisition Proposal to which
it or any of its Subsidiaries is a party (other than any involving Parent or its
Subsidiaries). During such period, NGH agrees to use reasonable best efforts to
enforce, to the fullest extent permitted under applicable law, the provisions of
any such agreements, including seeking injunctions to prevent any breaches of
such
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<PAGE>
agreements and to enforce specifically the terms and provisions thereof in any
court of the United States or any state thereof having jurisdiction.
(c) During the period from the date of this Agreement until the
Effective Time or earlier termination of this Agreement, NGH shall not
terminate, amend, modify or waive any provision of the Rights Agreement, dated
as of March 13, 2000, between NGH and EquiServe Trust Company, N.A., as Rights
Agent (the "Rights Agreement"), except (i) that NGH shall take all action
necessary to ensure that the transactions contemplated by the Merger Agreement
and the NGH Merger Agreement (as defined below) are exempt from the provisions
of the Rights Agreement and (ii) NGH may take any action necessary to permit any
transaction that is to be completed after consummation of the NA Sale, so long
as such action would not adversely affect NGH's ability to obtain the NGH
Stockholder Approval.
(d) The Company shall pay the fees, commissions and expenses of UBS
Warburg LLC, Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc., Davis
Polk & Wardwell, Deloitte & Touche LLP and any other advisors retained by the
Company or NGH in connection with the transactions contemplated by this
Agreement and the Merger Agreement up to a maximum of $50 million (as permitted
by Section 4.14 of the Merger Agreement). NGH shall pay, or at or prior to the
Effective Time shall reimburse the Company for, all such fees, commission, and
expenses in excess of $50 million.
(e) Either before or after the Effective Time, NGH shall not amend
the Distribution Agreement, dated as of May 12, 1999, among RJR Nabisco Holdings
Corp., RJR Nabisco, Inc. and R.J. Reynolds Tobacco Company (the "Distribution
Agreement") in any manner adverse to the Company's rights under Articles 7 or 8
or Section 10.06 of the Distribution Agreement.
SECTION 6. No Solicitation; Other Offers. (a) From the date hereof
until the earlier of the Effective Time and the termination of this Agreement in
accordance with Section 7, NGH will not, and NGH will use its reasonable best
efforts to cause the officers, directors, employees, investment bankers,
consultants or other agents or representatives (collectively, "Agents") of NGH
not to, directly or indirectly, (i) solicit, initiate or encourage the
submission of any Acquisition Proposal, (ii) engage in discussions or
negotiations with any Person concerning an Acquisition Proposal, (iii) disclose
any nonpublic information relating to NGH or any of its Subsidiaries to any
Person who, to the knowledge of NGH, is considering making, or has made, an
Acquisition Proposal or (iv) take any other action to facilitate any inquiries
or the making of any proposal that constitutes, or that could reasonably be
expected to lead to, an Acquisition Proposal. NGH will notify Parent promptly
(but in no event later than 24 hours) after receipt by NGH
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<PAGE>
of any Acquisition Proposal or any request for nonpublic information relating to
NGH or any of its Subsidiaries by any Person who, to the knowledge of NGH, is
making, or has made, an Acquisition Proposal. NGH shall promptly provide such
notice orally and in writing and shall identify the Person making, and all terms
and conditions of, any such Acquisition Proposal or request. NGH shall keep
Parent promptly informed of the status and details of any such Acquisition
Proposal (including any amendments or proposed amendments) or request and any
discussions or negotiations pursuant to Section 6(b) and NGH shall provide to
Parent copies of any written communications between NGH and the Person making
the Acquisition Proposal. NGH shall, and NGH shall use reasonable best efforts
to cause the Agents of NGH to, cease immediately and cause to be terminated all
activities, discussions and negotiations, if any, with any Persons conducted
prior to the date hereof with respect to any Acquisition Proposal. Nothing
contained in this Agreement shall prevent the Board of Directors of NGH from
complying with Rule 14d-9 or Rule 14e-2 under the 1934 Act with respect to any
Acquisition Proposal.
(b) Notwithstanding the foregoing, NGH may prior to receipt of the
NGH Stockholder Approval negotiate or otherwise engage in substantive
discussions with, and furnish nonpublic information to, any Person in response
to an unsolicited Acquisition Proposal by such Person if (i) NGH has complied
with the terms of Section 6(a), (ii) the Board of Directors of NGH determines in
good faith that such Acquisition Proposal is likely to result in a Superior
Proposal and, after consultation with outside legal counsel, that the failure to
take such action would constitute a breach of its fiduciary duties under
applicable law, (iii) such Person executes a confidentiality agreement with
terms no less favorable to NGH than those contained in the Confidentiality
Agreement (except as to the standstill provisions) and (iv) NGH shall have
delivered to Parent prior written notice advising Parent that it intends to take
such action.
(c) The Board of Directors of NGH shall be permitted to withdraw, or
modify in a manner adverse to Parent, its recommendation to its stockholders
referred to in Section 2 hereof, but only if (i) NGH has complied with the terms
of Section 6(a), (ii) NGH has received an unsolicited Acquisition Proposal which
the Board of Directors determines in good faith constitutes a Superior Proposal,
(iii) the Board of Directors of NGH determines in good faith, after consultation
with outside legal counsel, that the failure to take such action would
constitute a breach of its fiduciary duties under applicable law and (iv) NGH
shall have delivered to Parent a prior written notice advising Parent that it
intends to take such action.
(d) For purposes of this Agreement:
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"Acquisition Proposal" means any offer or proposal for a merger,
reorganization, consolidation, share exchange, business combination, or other
similar transaction involving NGH or any of its Subsidiaries or any proposal or
offer to acquire, directly or indirectly, more than 35% of the voting securities
of NGH or the Company, or a substantial portion of the assets of NGH and its
Subsidiaries taken as a whole, other than the transactions contemplated by the
Merger Agreement or any transaction to be completed after consummation of the NA
Sale.
"Superior Proposal" means any bona fide written Acquisition Proposal
(i) on terms that the Board of Directors of NGH determines in good faith (after
consultation with a financial advisor of nationally recognized reputation and
taking into account all the terms and conditions of the Acquisition Proposal
including the legal, financial and regulatory aspects of the proposal) are more
favorable to NGH's stockholders (taking into account the consideration to be
received by NGH in the NA Sale) than the transaction contemplated by the Merger
Agreement, as amended pursuant to Section 10.01(d) of the Merger Agreement, if
applicable, and (ii) that is reasonably likely to be consummated by the Person
making such Acquisition Proposal.
(e) NGH will promptly provide to Parent any information regarding NGH
provided to any Person making an Acquisition Proposal which was not previously
provided to Parent.
SECTION 7. Termination. (a) Unless earlier terminated pursuant to
this Section, this Agreement will terminate on the earlier to occur of: (i) the
consummation of the Merger, (ii) termination of the Merger Agreement in
accordance with its terms and (iii) the date of the NGH Stockholder Meeting,
including reasonable extensions thereof up to 30 days to obtain additional
proxies, if the NGH Stockholder Approval shall not have been obtained at such
meeting by reason of the failure to obtain the required vote.
(b) NGH may terminate this Agreement if the Board of Directors of NGH
authorizes NGH, subject to complying with the terms of this Agreement, to enter
into a written agreement concerning a Superior Proposal, provided, however that
(i) NGH shall have complied with Section 6 hereof, (ii) NGH shall have given
Parent at least three Business Days written prior notice of its intention to
terminate the Agreement, attaching a description of all material terms and
conditions of the Superior Proposal to such notice, (iii) during such three
Business Days or greater period, the Company and NGH engage in good faith
negotiations with Parent with respect to such changes as Parent may propose to
the terms of this Agreement, the Merger and the Merger Agreement, (iv) Parent
does not make, prior to such termination of this Agreement, a definitive,
binding offer
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<PAGE>
which the Board of Directors of NGH determines, in good faith after consultation
with its financial advisors, is at least as favorable to the NGH stockholders
(taking into account the consideration to be received by NGH in the NA Sale) as
the Superior Proposal and (v) NGH, prior to such termination pursuant to this
clause (b), pays to Parent in immediately available funds the fee required to be
paid pursuant to Section 8(b). NGH agrees to notify Parent promptly if its
intention to enter into a written agreement in connection with a Superior
Proposal shall change at any time after giving such notification.
(c) Parent may terminate this Agreement if:
(i) the Board of Directors of NGH shall have failed to recommend
or shall have withdrawn, or modified in a manner adverse to Parent,
its approval or recommendation of the NA Sale, shall have approved or
recommended a Superior Proposal, or shall have resolved to do any of
the foregoing;
(ii) NGH shall have entered into, or publicly announced its
intention to enter into, a definitive agreement or an agreement in
principle with respect to a Superior Proposal; or
(iii) NGH shall breach its obligations set forth in Section 3,
which breach shall not be cured within two Business Days.
(d) The provisions of Sections 8, 9, 15, 16 and 17 will survive any
termination of this Agreement pursuant to Section 7. The provisions of Sections
4(e), 5(d), 5(e), 11 and 14 will survive termination of this Agreement pursuant
to Section 7(a)(i). The provisions of Section 9 of this Agreement will terminate
automatically if both the Merger Agreement and the NGH Merger Agreement shall
have been terminated.
SECTION 8. Expenses. (a) Except as otherwise provided in this
Agreement, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
(b) If:
(i) NGH shall terminate this Agreement pursuant to Section 7(b);
(ii) this Agreement shall terminate pursuant to Section 7(a)(iii)
and (A) prior to the NGH Stockholder Meeting a third party or NGH or
the Company shall have announced an Acquisition Proposal and (B)
within
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<PAGE>
nine months after termination of this Agreement the Company or NGH
enters into a definitive agreement in respect of any Acquisition
Proposal with respect to the Company or NGH, respectively, or such a
transaction is consummated; or
(iii) Parent shall terminate this Agreement pursuant to Section
7(c);
then NGH shall pay to Parent (by wire transfer of immediately available funds
not later than the date of termination of this Agreement or, in the case of
clause (ii), the date of such definitive agreement) an amount equal to $445
million less any amounts previously paid pursuant to Section 11.04(b) or
11.04(c) of the Merger Agreement. NGH shall be entitled to deduct and withhold
from any payments made to Parent under this Section 8(b) such amounts as may be
required to be deducted or withheld therefrom under the Code or under any
applicable provisions of state or local tax law. To the extent such amounts are
so deducted or withheld, such amounts shall be treated for purposes of this
Section 8(b) as having been paid to Parent.
(c) Notwithstanding the foregoing, if a fee shall become payable
pursuant to both Section 8(b) of this Agreement and Section 11.04(b) of the
Merger Agreement, the Company shall, and NGH shall cause the Company to, pay
such fee in accordance with and at the time provided for in the Merger Agreement
and no fee shall be initially payable by NGH hereunder; provided that NGH shall
remain liable and shall immediately pay such fee to the extent that the Company
shall fail timely to pay such fee in full, in which case NGH shall have the
right to obtain reimbursement of the fee from the Company.
SECTION 9. Indemnification.
(a) NGH Indemnification of Parent for NGH Liabilities. Subject to
Section 9(c), on and after the Effective Time, NGH shall indemnify and hold
harmless Parent and its affiliates (including the Company after the Merger) and
their respective present and former directors, officers and employees (each, a
"Parent Indemnitee") from and against any and all damage, loss, liability and
expense (including reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding)
("Losses") incurred or suffered by any Parent Indemnitee arising out of any NGH
Liabilities, regardless of whether such Losses arise as a result of the
negligence or strict liability (or any other liability under any theory of law
or equity) of such Parent Indemnitee.
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<PAGE>
(b) Company Indemnification of NGH for Company Liabilities. Subject
to Section 9(c), on and after the Effective Time, the Company shall indemnify
and hold harmless NGH and its affiliates and their respective present and former
directors, officers and employees (each, an "NGH Indemnitee") from and against
any and all Losses incurred or suffered by any NGH Indemnitee arising out of any
Company Liabilities, regardless of whether such Losses arise as a result of the
negligence or strict liability (or any other liability under any theory of law
or equity) of such NGH Indemnitee.
(c) Third-Party Rights; Tax Benefits and Insurance Proceeds. Any
indemnification pursuant to Section 9(a) or Section 9(b) shall be paid net of
any tax benefit or insurance proceeds to the Indemnified Party attributable to
the relevant payment. It is expressly agreed that no insurer or any other third
party shall be (i) entitled to a benefit (as a third-party beneficiary or
otherwise) that it would not be entitled to receive in the absence of Section
9(a) or Section 9(b), (ii) relieved of the responsibility to pay any claims to
which it is obligated or (iii) entitled to any subrogation rights with respect
to any obligation under Section 9(a) or Section 9(b).
(d) Insurance. NGH agrees to provide reasonable cooperation at the
expense of the Company in connection with any claims the Company may have under
insurance policies in effect at any time prior to the Effective Time that in any
way relate to Company Liabilities or Liabilities in respect of officers and
directors of the Company acting in their capacities as such. The Company agrees
to provide reasonable cooperation at the expense of NGH in connection with any
claims NGH may have under insurance policies in effect at any time prior to the
Effective Time that in any way relate to NGH Liabilities or Liabilities in
respect of officers and directors of NGH acting in their capacities as such.
(e) Definitions. For purposes of this Section 9, the following terms
have the following meanings:
"Company Liabilities" means all Liabilities, whether arising before,
at or after the Effective Time, of or in any way relating, in whole or in part,
to (a) the Company or any of its Subsidiaries or their respective employees
(except to the extent defined as NGH Liabilities below or expressly assumed by
NGH pursuant to Section 7.04 of the NGH Merger Agreement as in effect on the
date hereof or as amended with the prior written consent of Parent) or arising
from the conduct of, in connection with or in any way relating to, in whole or
in part, the business of the Company and its Subsidiaries, or the ownership or
use of assets or property in connection with that business or (b) any Benefit
Arrangement or Employee Plan (as such terms are defined in the Merger Agreement)
except to the extent expressly assumed by NGH pursuant to Section 7.04 of the
NGH Merger
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<PAGE>
Agreement as in effect on the date hereof or as amended with the prior written
consent of Parent. Notwithstanding the foregoing, "Company Liabilities" shall
exclude all Liabilities for Taxes of the Company or any of its Subsidiaries and
all Liabilities for Taxes that may otherwise be collected from the Company or
any of its Subsidiaries, in each case to the extent governed by the Tax Sharing
Agreement.
"Liabilities" means any and all claims, debts, liabilities and
obligations of any kind, character or description (whether known or unknown,
accrued, absolute, contingent or otherwise) whenever arising, including all
costs and expenses relating thereto.
"NGH Liabilities" means all Liabilities (other than Company
Liabilities), whether arising before, at or after the Effective Time, of or in
any way relating, in whole or in part, to (a) NGH or its employees or arising
from the conduct of, in connection with or in any way relating to, in whole or
in part, NGH's business, or the ownership or use of assets or property in
connection with that business or (b) the Liabilities expressly assumed by NGH
pursuant to Section 7.04 of the NGH Merger Agreement as in effect on the date
hereof or as amended with the prior written consent of Parent. Notwithstanding
the foregoing, "NGH Liabilities" shall exclude all (i) Liabilities for Taxes of
NGH and all Liabilities for Taxes that may otherwise be collected from NGH, in
each case to the extent governed by the Tax Sharing Agreement and (ii)
Liabilities addressed in Section 8.02 of the Distribution Agreement dated as of
May 12, 1999 among NGH, RJR and R. J. Reynolds Tobacco Company, which provision
shall remain in effect in accordance with its terms. Without limiting the
generality of the foregoing, "NGH Liabilities" shall also include all
Liabilities (i) for compensation deferred pursuant to any deferred compensation
plan, arrangement or agreement of NGH (which such plan shall not include the
Company's Deferred Compensation Plan); (ii) for compensation, benefits,
severance pay and benefits, or any similar payment or benefit that is payable
with respect to service by any individual as an employee or director of NGH,
whether or not such compensation has been deferred pursuant to the Company's
Deferred Compensation Plan or any other Employee Arrangement, except to the
extent NGH has previously contributed assets to fund such amounts to the
Retention Plan and Deferred Compensation Plan trust of Nabisco, Inc. (the
"Trust"); (iii) with respect to or arising out of any option to acquire equity
securities of NGH or any award of restricted stock, restricted stock units,
performance shares, performance units or other awards, in each case based on
equity securities of NGH or granted pursuant to the Nabisco Group Holdings Corp.
1990 Long Term Incentive Program, (iv) any "grossup" or similar make-whole or
indemnity payment required to be made under any Employee Arrangement with
respect to excise, income or other taxes imposed on any of the
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foregoing; and (v) Taxes imposed on the income of the Trust attributable to
assets thereof funding any of the foregoing.
"NGH Merger Agreement" means the Agreement and Plan of Merger
dated as of June 25, 2000 among NGH, R.J. Reynolds Tobacco Holdings, Inc. and
RJR Acquisition Corp.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of
June 14, 1999 among NGH, RJR, the Company and R. J. Reynolds Tobacco Company, as
such agreement may be amended from time to time by agreement of all the parties
thereto.
SECTION 10. Trust Originated Preferred Securities. Reference is made
to the Amended and Restated Declaration of Trust of Nabisco Group Holdings
Capital Trust II (formerly called RJR Nabisco Holdings Capital Trust II) dated
as of September 16, 1998, as amended by Amendment No. 1 thereto dated as of July
12, 1999 (the "Declaration"). Capitalized terms used in this Section 10 but not
defined elsewhere in this Agreement shall have the meanings assigned to such
terms in the Declaration. After the date hereof, and at such time as will not
delay consummation of the Merger, NGH shall exercise its option under the
Declaration to cause the Trustees to (i) dissolve the Trust and (ii) cause the
Debentures to be distributed to Holders of the Preferred Securities and Common
Securities in exchange therefor, which in each case shall occur prior to the
Effective Time. In addition, NGH will (x) deliver an irrevocable notice to the
Debenture Trustee stating that all outstanding Debentures are to be redeemed on
September 30, 2003 and (y) take all necessary action to cause the conditions set
forth in Section 10.1(C) of the Indenture to be satisfied such that a "covenant
defeasance" under such section will occur concurrently with the above-described
dissolution of the Trust and distribution of the Debentures.
SECTION 11. Name Change. As promptly as practicable after the
Effective Time, NGH shall change its name and the names of any of its
Subsidiaries or related entities to new names that do not include the word
"Nabisco" or any derivatives thereof and shall cease to use such name or
derivatives in its business or operations.
SECTION 12. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Parent, to:
Philip Morris Companies Inc.
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120 Park Avenue
New York, New York 10017
Attention: Charles R. Wall
Fax: (917) 663-5817
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Martin Lipton
Andrew J. Nussbaum
Fax: (212) 403-2000
and
Hunton & Williams
200 Park Avenue
New York, New York 10166
Attention: Jerry E. Whitson
Fax: (212) 309-1100
if to NGH, to:
Nabisco Group Holdings Corp.
7 Campus Drive
Parsippany, New Jersey 07054
Attention: James A. Kirkman III
Fax: (973) 539-9150
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Rosoff
Fax: (212) 450-4800
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a business day in the place of receipt. Otherwise, any
such notice, request or
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<PAGE>
communication shall be deemed not to have been received until the next
succeeding business day in the place of receipt.
SECTION 13. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement or, in the case of a waiver, by each party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 14. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto. If Parent, NGH or the Surviving
Corporation or any of its respective successors or assigns (i) consolidates with
or merges into any other Person and shall not be the surviving corporation or
entity of such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, proper provision shall be made so that the successors and assigns of
Parent, NGH, or the Surviving Corporation, as the case may be, shall assume the
obligations set forth in this Agreement.
SECTION 15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflicts of laws rules of such state.
SECTION 16. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal court located in the State of Delaware or any Delaware state court,
and each of the parties hereby consents to the jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
form. Process in any such suit, action or proceeding may be served on any party
anywhere in the world,
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whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 12 shall be deemed effective service of process on such
party.
SECTION 17. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 18. Counterparts; Effectiveness; Benefit. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Except as provided in Section 9, no provision of this Agreement is intended to
confer any rights, benefits, remedies, obligations, or liabilities hereunder
upon any Person other than the parties hereto and their respective successors
and assigns.
SECTION 19. Entire Agreement. This Agreement, the Confidentiality
Agreement and the Merger Agreement constitute the entire agreement between the
parties with respect to the subject matter of this Agreement and supersedes all
prior agreements and understandings, both oral and written, between the parties
with respect to the subject matter of this Agreement.
SECTION 20. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 21. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
SECTION 22. Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
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entitled, without posting a bond or similar indemnity, to an injunction or
injunctions to prevent breaches of this Agreement or to enforce specifically the
performance of the terms and provisions hereof in any federal court located in
the State of Delaware or any Delaware state court, in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
PHILIP MORRIS COMPANIES INC.
By: /s/ Louis Camilleri
----------------------------------
Name: Louis Camilleri
Title: Senior Vice President and
Chief Executive Officer
NABISCO GROUP HOLDINGS CORP.
By: /s/ James M. Kilts
----------------------------------
Name: James M. Kilts
Title: President and Chief
Executive Officer
NABISCO HOLDINGS CORP.,
solely for purposes of Section 5(d),
8(c) and 9 hereof
By: /s/ James M. Kilts
----------------------------------
Name: James M. Kilts
Title: President and Chief
Executive Officer
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ANNEX C
AGREEMENT AND PLAN OF MERGER
dated as of
June 25, 2000
among
NABISCO GROUP HOLDINGS CORP.,
R.J. REYNOLDS TOBACCO HOLDINGS, INC.,
and
RJR ACQUISITION CORP.
<PAGE>
TABLE OF CONTENTS
--------------------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................2
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger......................................................6
SECTION 2.02. Conversion of Shares............................................7
SECTION 2.03. Surrender and Payment...........................................7
SECTION 2.04. Dissenting Shares...............................................9
SECTION 2.05. Stock Options...................................................9
SECTION 2.06. Adjustments....................................................10
SECTION 2.07. Trust Originated Preferred Securities..........................10
SECTION 2.08. Withholding Rights.............................................10
SECTION 2.09. Lost Certificates..............................................11
SECTION 2.10. Associated Rights..............................................11
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation...................................11
SECTION 3.02. Bylaws.........................................................11
SECTION 3.03. Directors and Officers.........................................11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power..................................12
SECTION 4.02. Corporate Authorization........................................12
SECTION 4.03. Governmental Authorization.....................................13
SECTION 4.04. Non-contravention..............................................13
SECTION 4.05. Capitalization.................................................13
SECTION 4.06. Matters Relating to the NA Merger..............................14
SECTION 4.07. SEC Filings....................................................15
SECTION 4.08. Financial Statements...........................................16
SECTION 4.09. Disclosure Documents...........................................16
SECTION 4.10. Certain Contracts..............................................17
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PAGE
SECTION 4.11. Absence of Certain Changes.....................................17
SECTION 4.12. No Undisclosed Material Liabilities............................19
SECTION 4.13. Compliance with Laws and Court Orders..........................19
SECTION 4.14. Litigation ....................................................19
SECTION 4.15. Finders' Fees..................................................19
SECTION 4.16. Taxes..........................................................20
SECTION 4.17. Employee Benefit Plans.........................................21
SECTION 4.18. Environmental Matters..........................................22
SECTION 4.19. Antitakeover Statute and Rights Agreement......................23
SECTION 4.20. Insurance ....................................................23
SECTION 4.21. Other Agreements...............................................23
SECTION 4.22. Certain Agreements.............................................23
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 5.01. Corporate Existence and Power..................................24
SECTION 5.02. Corporate Authorization........................................24
SECTION 5.03. Governmental Authorization.....................................24
SECTION 5.04. Non-contravention..............................................25
SECTION 5.05. Disclosure Documents...........................................25
SECTION 5.06. Finders' Fees..................................................25
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company.........................................26
SECTION 6.02. Stockholder Meeting; Proxy Material............................28
SECTION 6.03. Access to Information..........................................29
SECTION 6.04. No Solicitation; Other Offers..................................29
SECTION 6.05. Surety Obligations.............................................31
SECTION 6.06. Rights Agreement...............................................32
ARTICLE 7
COVENANTS OF PARENT
SECTION 7.01. Confidentiality................................................32
SECTION 7.02. Obligations of Merger Subsidiary...............................32
SECTION 7.03. Director and Officer Liability.................................32
SECTION 7.04. Employee Matters...............................................34
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ARTICLE 8
COVENANTS OF PARENT AND THE COMPANY
SECTION 8.01. Reasonable Best Efforts........................................34
SECTION 8.02. Certain Filings................................................34
SECTION 8.03. Public Announcements...........................................35
SECTION 8.04. Further Assurances.............................................35
SECTION 8.05. Notices of Certain Events......................................35
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to Obligations of Each Party........................36
SECTION 9.02. Conditions to the Obligations of Parent and Merger
Subsidiary...................................................36
SECTION 9.03. Conditions to the Obligations of the Company...................37
ARTICLE 10
TERMINATION
SECTION 10.01. Termination...................................................38
SECTION 10.02. Effect of Termination.........................................41
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices ....................................................41
SECTION 11.02. Non-Survival of Representations and Warranties................42
SECTION 11.03. Amendments; No Waivers........................................42
SECTION 11.04. Expenses ....................................................42
SECTION 11.05. Successors and Assigns........................................44
SECTION 11.06. Governing Law.................................................44
SECTION 11.07. Jurisdiction..................................................44
SECTION 11.08. WAIVER OF JURY TRIAL..........................................45
SECTION 11.09. Counterparts; Effectiveness; Benefit..........................45
SECTION 11.10. Entire Agreement..............................................45
SECTION 11.11. Captions ....................................................45
SECTION 11.12. Severability..................................................45
SECTION 11.13. Specific Performance..........................................46
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 25, 2000,
among Nabisco Group Holdings Corp., a Delaware corporation (the "Company"),
R.J. Reynolds Tobacco Holdings, Inc., a Delaware corporation ("Parent"), and
RJR Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Subsidiary").
WHEREAS, the Company owns 213,250,000 shares of Class B common stock
of Nabisco Holdings Corp., a Delaware corporation ("NA"), representing an 80.6%
ownership interest in NA;
WHEREAS, Philip Morris Companies Inc., Strike Acquisition Corp. and
NA have entered into an Agreement and Plan of Merger dated the date hereof (the
"NA Merger Agreement") pursuant to which Strike Acquisition Corp. will
merge (the "NA Merger") with and into NA on the terms and conditions set forth
therein;
WHEREAS, Philip Morris Companies Inc. and the Company have entered
into a Voting and Indemnity Agreement (the "NA Voting Agreement") pursuant to
which the Company has agreed to vote its shares of Class B Common Stock of NA in
favor of the NA Merger, subject to approval by the Company's stockholders;
WHEREAS, by virtue of the NA Merger, each share of Class B common
stock of NA held by the Company will be converted into the right to receive
$55.00 in cash;
WHEREAS, the respective Boards of Directors of Parent, Merger
Subsidiary and the Company have approved this Agreement, and deem it advisable
and in the best interests of their respective stockholders to consummate the
merger of Merger Subsidiary with and into the Company on the terms and
conditions set forth herein; and
WHEREAS, the merger contemplated by this Agreement will occur only
after consummation of the NA Merger.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person.
"Benefit Arrangement" means any employment, severance or similar
contract or arrangement (whether or not written) providing for compensation,
bonus, profit-sharing, stock option, or other stock-related rights or other
forms of incentive or deferred compensation, perquisites, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, worker's compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance or other
benefits) that on or after January 1, 1994 (i) is or was not an Employee Plan,
(ii) is or was entered into, maintained, administered or contributed to, as the
case may be, by the Company or any of its Affiliates and (iii) covers or covered
any employee or former employee of the Company or any of its Subsidiaries
employed in the United States.
"Business Day" means a day other than Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"Code" means the Internal Revenue Code of 1986.
"Company Balance Sheet" means the consolidated balance sheet of the
Company as of December 31, 1999 and the footnotes thereto set forth in the
Company 10-K.
"Company 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1999.
"Delaware Law" means the General Corporation Law of the State of
Delaware.
"Employee Plan" means any "employee benefit plan", as defined in
Section 3(3) of ERISA, that on or after January 1, 1994 (i) is or was subject to
any provision of ERISA, (ii) is or was maintained, administered or contributed
to by
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the Company or any of its Affiliates and (iii) covers or covered any employee or
former employee of the Company or any of its Subsidiaries.
"Environmental Laws" means any and all federal, foreign, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decisions, injunctions, decrees, requirements of any governmental entity, any
and all common law requirements, rules and bases of liability regulating,
relating to or imposing liability or standards of conduct concerning pollution,
Hazardous Materials or protection of human health or safety as relating to the
environment or workplace, or the protection of the environment, as currently in
effect and includes the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. ss.ss.9601, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. ss.ss.1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. ss.ss.6901, et seq., the Clean Water Act, 33
U.S.C. ss.ss.1251, et seq., the Clean Air Act, 42 U.S.C. ss.7401, et seq., the
Toxic Substance Control Act, 15 U.S.C. ss.ss.2601, et seq., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss.ss.136, et seq.,
Occupational Safety and Health Act, 29 U.S.C. ss.ss.651, et seq. and the Oil
Pollution Act of 1990, 33 U.S.C. ss.ss.2701, et seq., as such laws have been
amended or supplemented, and the regulations promulgated pursuant thereto, and
all analogous state or local statutes.
"Environmental Permits" means all permits, licenses, certificates or
approvals necessary for the operation of the Company as currently conducted to
comply with all applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Governmental Entity" means any federal, state, local or foreign
government or any court, tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency, domestic, foreign or
supranational.
"Hazardous Material" mean any hazardous or toxic substances,
materials or wastes, defined, listed, classified or regulated as such in or
under any Environmental Law which includes petroleum, petroleum products,
friable asbestos, urea formaldehyde and polychlorinated biphenyls and any other
substance that could result in liability under any Environmental Laws.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
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"International Plan" means any employment, severance or similar
contract or arrangement (whether or not written) or any plan, policy, fund,
program or arrangement or contract providing for severance, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, pension or
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits that on or after January 1,
1994 (i) is or was not an Employee Plan or a Benefit Arrangement, (ii) is or was
entered into, maintained, administered or contributed to by the Company or any
of its Affiliates and (iii) covers or covered any employee or former employee of
the Company or any of its Subsidiaries.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien, any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Material Adverse Effect" means, with respect to any Person, any
event, change, circumstance or effect that is or would reasonably be expected to
be materially adverse to the condition (financial or otherwise), business,
assets or results of operations of such Person except any such effect resulting
from or arising in connection with: (i) changes in circumstances or conditions
affecting the food industry in general, in the case of the Company, or the
tobacco industry in general, in the case of Parent, and not in either case
specifically relating to or having a materially disproportionate effect on such
Person, or (ii) changes in general economic or business conditions or in
financial markets in the United States.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
"1933 Act" means the Securities Act of 1933.
"1934 Act" means the Securities Exchange Act of 1934.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
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"Rights" means the preferred stock purchase rights issued pursuant to
the terms of Rights Agreement dated as of March 13, 2000 between the Company and
EquiServe Trust Company, N.A., as Rights Agent.
"SEC" means the Securities and Exchange Commission.
"Shares" means the shares of common stock, $0.01 par value, of the
Company.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such Person.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of
June 14, 1999 among the Company, Parent, R. J. Reynolds Tobacco Company and NA,
as such agreement may be amended from time to time.
"Title IV Plan" means an Employee Plan subject to Title IV of ERISA
other than any Multiemployer Plan.
Any reference in this Agreement to a statute shall be to such
statute, as amended from time to time, and to the rules and regulations
promulgated thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Acquisition Proposal................................ 6.04
Agents.............................................. 6.04
Alternative NA Merger............................... 9.03
Certificates........................................ 2.03
Change in Tax Law................................... 10.01
Company Disclosure Schedule......................... Article 4
Company Proxy Statement............................. 4.09
Company SEC Documents............................... 4.07
Company Securities.................................. 4.05
Company Stock Options............................... 2.05
Company Stockholder Meeting......................... 6.02
Confidentiality Agreement........................... 6.03
Declaration......................................... 2.07
Effective Time...................................... 2.01
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Exchange Agent...................................... 2.03
GAAP................................................ 4.08
Indemnified Person.................................. 7.03
IRS................................................. 4.16
Merger.............................................. 2.01
Merger Consideration................................ 2.02
NA.................................................. recitals
NA Merger........................................... recitals
NA Merger Agreement................................. recitals
NA Shares........................................... 4.06
NA Voting Agreement................................. recitals
Preferred Shares.................................... 4.05
Special Board Determination......................... 9.01
Superior Proposal................................... 6.04
Surviving Corporation............................... 2.01
Tax Return.......................................... 4.16
Taxes............................................... 4.16
Taxing Authority.................................... 4.16
TOPrS Documents..................................... 2.07
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger. (a) At the Effective Time, Merger
Subsidiary shall be merged (the "Merger") with and into the Company in
accordance with Delaware Law, whereupon the separate existence of Merger
Subsidiary shall cease, and the Company shall be the surviving corporation (the
"Surviving Corporation").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, the Company and
Merger Subsidiary will file a certificate of merger with the Delaware Secretary
of State and make all other filings or recordings required by Delaware Law in
connection with the Merger. The Merger shall become effective at such time (the
"Effective Time") as the certificate of merger is duly filed with the Delaware
Secretary of State or at such later time as is specified in the certificate of
merger.
(c) From and after the Effective Time, the Surviving Corporation
shall possess all the rights, powers, privileges and franchises and be subject
to all of the obligations, liabilities, restrictions and disabilities of the
Company and Merger Subsidiary, all as provided under Delaware Law.
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SECTION 2.02. Conversion of Shares. (a) At the Effective Time:
(i) except as otherwise provided in Section 2.02(a)(ii) or
Section 2.04, each Share outstanding immediately prior to the
Effective Time, together with the associated Right, shall be converted
into the right to receive $30.00 in cash, without interest (the
"Merger Consideration"), prorated for fractional shares;
(ii) each Share held by the Company as treasury stock or owned by
Parent or any of its Subsidiaries immediately prior to the Effective
Time shall be canceled, and no payment shall be made with respect
thereto; and
(iii) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and
become one share of common stock of the Surviving Corporation with the
same rights, powers and privileges as the shares so converted and
shall constitute the only outstanding shares of capital stock of the
Surviving Corporation.
(b) In the event that (i) the NA Merger Agreement has been
terminated in accordance with its terms, (ii) Parent has not terminated this
Agreement pursuant to Section 10.01, and (iii) a transaction has been
consummated wherein the Company has received, in its capacity as a stockholder
of NA, more than $55 per NA share in such transaction, then the Merger
Consideration shall be increased by one-half of the difference between the Net
Proceeds and $11.729 billion divided by the number of then-outstanding Shares.
For purposes of this Agreement, "Net Proceeds" is defined as the cash amount
received by the Company in such transaction after deducting (A) any costs and
expenses (including, without limitation any termination fees) incurred by the
Company in connection with the termination of the NA Merger Agreement,
including, without limitation pursuant to the NA Merger Agreement or the NA
Voting Agreement and (B) the amounts by which the following items increase as a
result of such transaction or the increase in the Merger Consideration pursuant
to this Section 2.02(b): (w) the costs and expenses incurred by Parent in
connection with the transactions contemplated hereby,(x) amounts payable by
Parent (other than the Merger Consideration) pursuant to this Agreement, (y)
liabilities assumed or retained by Parent and the Company, and (z) Taxes
incurred by Parent and the Company.
SECTION 2.03. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent (the "Exchange Agent") reasonably acceptable to
the Company for the purpose of exchanging certificates representing Shares (the
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"Certificates") for the Merger Consideration. Promptly after the Effective Time,
Parent will cause to be deposited with the Exchange Agent the Merger
Consideration to be paid in respect of the Shares. Promptly after the Effective
Time, Parent will send, or will cause the Exchange Agent to send, to each holder
of record of Shares at the Effective Time a letter of transmittal and
instructions (which shall specify that the delivery shall be effected, and risk
of loss and title shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) for use in such exchange.
(b) Each holder of Shares that have been converted into the right to
receive the Merger Consideration will be entitled to receive, upon surrender to
the Exchange Agent of a Certificate, together with a properly completed letter
of transmittal, and all other documents the Exchange Agent may reasonably
require, the Merger Consideration payable for each Share represented by such
Certificate. Until so surrendered, each such Certificate shall represent after
the Effective Time for all purposes only the right to receive such Merger
Consideration. No interest shall be paid or will accrue on the Merger
Consideration payable pursuant to the provisions of this Article 2.
(c) If any portion of the Merger Consideration is to be paid to a
Person other than the Person in whose name the surrendered Certificate is
registered, it shall be a condition to such payment that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such payment shall pay to the Exchange
Agent any transfer or other taxes required as a result of such payment to a
Person other than the registered holder of such Certificate or establish to the
satisfaction of Parent that such tax has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of the Company
will be closed and there shall be no further registration of transfers of
Shares. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration provided for, and in accordance with the procedures set forth, in
this Article 2.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.03(a) (and any interest or other income
earned thereon) that remains unclaimed by the holders of Shares one year after
the Effective Time shall be returned to Parent, upon demand, and any such holder
who has not exchanged Shares for the Merger Consideration in accordance with
this Section 2.03 prior to that time shall thereafter look only to Parent for
payment of the Merger Consideration in respect of such Shares without any
interest thereon. Notwithstanding the foregoing, Parent shall not be liable to
any holder of Shares for any amount paid to a public official pursuant to
applicable abandoned
8
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property, escheat or similar laws. Any amounts remaining unclaimed by holders of
Shares three years after the Effective Time (or such earlier date immediately
prior to such time when the amounts would otherwise escheat to or become
property of any governmental authority) shall become, to the extent permitted by
applicable law, the property of Parent free and clear of any claims or interest
of any Person previously entitled thereto.
(f) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.03(a) to pay for Shares for which appraisal
rights have been perfected shall be returned to Parent, upon demand.
SECTION 2.04. Dissenting Shares. Notwithstanding Section 2.02, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Delaware Law shall not be
converted into a right to receive the Merger Consideration, unless such holder
fails to perfect, withdraws or otherwise loses its right to appraisal. If, after
the Effective Time, such holder fails to perfect, withdraws or loses its right
to appraisal, such Shares shall be treated as if they had been converted as of
the Effective Time into a right to receive the Merger Consideration. The Company
shall give Parent prompt notice of any demands received by the Company for
appraisal of Shares. Except as required by applicable law or with the prior
written consent of Parent, the Company shall not make any payment with respect
to, or settle or offer to settle, any such demands.
SECTION 2.05. Stock Options. (a) At or immediately prior to the
Effective Time, each employee or director stock option to purchase Shares
outstanding under any stock option or compensation plan or arrangement of the
Company, whether or not vested or exercisable ("Company Stock Options"), shall
be canceled, and the Company shall pay each holder of any such option at or
promptly after the Effective Time for each such option an amount in cash equal
to (i) the excess, if any, of the Merger Consideration per Share over the
applicable exercise price of such options multiplied by the number of Shares
such holder could have purchased (assuming full vesting of all Company Stock
Options) had such holder exercised such option in full immediately prior to the
Effective Time (the "Spread") or (ii) in the case of each Company Stock Option
specified in Section 2.05 of the Company Disclosure Schedule, the greater of the
Spread or the Black-Scholes value of such option, determined using the
assumptions set forth on Section 2.05 of the Company Disclosure Schedule.
(b) Prior to the Effective Time, the Company shall (i) use its
reasonable best efforts to obtain any consents from holders of Company Stock
Options and (ii) make any amendments to the terms of such stock option or
compensation
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plans or arrangements that, in the case of either clauses (i) or (ii), the
Company deems reasonably necessary to give effect to the transactions
contemplated by Section 2.05(a). Notwithstanding any other provision of this
Section, payment may be withheld in respect of any employee stock option until
such necessary consents are obtained.
SECTION 2.06. Adjustments. If, during the period between the date of
this Agreement and the Effective Time, any change in the outstanding Shares
shall occur, including by reason of any reclassification, recapitalization,
stock split or combination, exchange or readjustment of Shares, or stock
dividend (or dividend payable in any other securities) thereon with a record
date during such period, the Merger Consideration and any other amounts payable
pursuant to this Agreement shall be appropriately adjusted to provide to the
holders of Shares the same economic effect as contemplated by this Agreement
prior to such event.
SECTION 2.07. Trust Originated Preferred Securities. Reference is
made to the Amended and Restated Declaration of Trust of Nabisco Group Holdings
Capital Trust II (formerly called RJR Nabisco Holdings Capital Trust II) dated
as of September 16, 1998, as amended by Amendment No. 1 thereto dated as of July
12, 1999 (the "Declaration") and all related documentation, including the Terms
of the Preferred Securities and of the Common Securities (all such
documentation, together with the Declaration, the "TOPrS Documents").
Capitalized terms used in this Section 2.07 but not defined elsewhere in this
Agreement shall have the meanings assigned to such terms in the Declaration.
After the date hereof, the Company shall exercise its option under the
Declaration to cause the Trustees to (i) dissolve the Trust and (ii) cause the
Debentures to be distributed to Holders of the Preferred Securities and Common
Securities in exchange therefor (and comply with all applicable provisions of
the TOPrS Documents in respect of such exercise (including to seek a listing, if
required, of the Debentures)), which in each case shall occur prior to the
Effective Time. In addition, the Company will prior to the Effective Time (x)
deliver an irrevocable notice to the Debenture Trustee stating that all
outstanding Debentures are to be redeemed on September 30, 2003 and (y) take all
necessary action to cause the conditions set forth in Section 10.1(C) of the
Indenture to be satisfied such that a "covenant defeasance" under such section
will occur concurrently with the above-described dissolution of the Trust and
distribution of the Debentures. All of the actions set forth in this Section
2.07 shall be carried out in accordance with the terms of the TOPrS Documents.
SECTION 2.08. Withholding Rights. Each of the Surviving Corporation
and Parent shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to this Article 2 such amounts as it is
required to deduct and withhold with respect to the making of such payment under
any provision of federal, state, local or foreign tax law. If the Surviving
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Corporation or Parent, as the case may be, so withholds amounts, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which the Surviving Corporation or Parent, as
the case may be, made such deduction and withholding.
SECTION 2.09. Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article.
SECTION 2.10. Associated Rights. References in Article 1 and Article
2 of this Agreement to Shares shall include, unless the context requires
otherwise, the associated Rights.
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation. The certificate of
incorporation of the Company in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law, provided that, at the Effective Time, Article
First of such certificate of incorporation shall be amended to read as follows:
"The name of the Corporation is RJR Acquisition Corp.".
SECTION 3.02. Bylaws. The bylaws of Merger Subsidiary in effect at
the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 3.03. Directors and Officers. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, (i) the directors of Merger Subsidiary at the Effective
Time shall be the directors of the Surviving Corporation and (ii) the officers
of Merger Subsidiary at the Effective Time shall be the officers of the
Surviving Corporation.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or subsections of
the disclosure schedule delivered by the Company to Parent on or prior to the
date hereof (the "Company Disclosure Schedule") or in the Company SEC Documents,
the Company represents and warrants to Parent that:
SECTION 4.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. The Company has heretofore
made available to Parent true and complete copies of the certificate of
incorporation and bylaws of the Company as currently in effect.
SECTION 4.02. Corporate Authorization. (a) The execution, delivery
and performance by the Company of this Agreement and the NA Voting Agreement and
the consummation by the Company of the transactions contemplated hereby are
within the Company's corporate powers and, except for the affirmative vote of
the holders of a majority of the outstanding Shares in connection with the
consummation of the Merger, have been duly authorized by all necessary corporate
action on the part of the Company. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any of the
Company's capital stock necessary in connection with the consummation of the
Merger. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company and is enforceable in
accordance with its terms.
(b) At a meeting duly called and held, the Company's Board of
Directors has (i) determined that this Agreement and the NA Voting Agreement and
the transactions contemplated hereby are fair to and in the best interests of
the Company's stockholders, (ii) declared advisable and approved this Agreement
and the NA Voting Agreement and the transactions contemplated hereby and (iii)
resolved (subject to Section 6.04(c)) to recommend adoption of this Agreement by
its stockholders.
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SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any Governmental Entity, other than (i) the filing of a
certificate of merger with respect to the Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (ii) compliance with any
applicable requirements of the HSR Act and of laws, rules and regulations in
foreign jurisdictions governing antitrust or merger control matters, (iii)
compliance with any applicable requirements of the 1933 Act, the 1934 Act and
any other applicable securities or takeover laws, whether state or foreign and
(iv) any actions or filings the absence of which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company or materially to impair the ability of the Company to consummate the
transactions contemplated by this Agreement.
SECTION 4.04. Non-contravention. The execution, delivery and
performance by the Company of this Agreement and the NA Voting Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
contravene, conflict with, or result in any violation or breach of any provision
of the certificate of incorporation or bylaws of the Company, (ii) assuming
compliance with the matters referred to in Section 4.03, contravene, conflict
with, or result in a violation or breach of any provision of any applicable law,
regulation, judgment, injunction, order or decree, (iii) require any consent or
other action by any Person under, constitute a default under, or cause or permit
the termination, cancellation, acceleration or other change of any right or
obligation or the loss of any benefit to which the Company is entitled under any
provision of any agreement or other instrument binding upon the Company or any
license, franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of the Company or
(iv) result in the creation or imposition of any Lien on any asset of the
Company, except, in the case of clauses (ii), (iii) and (iv), for such matters
as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement.
SECTION 4.05. Capitalization. (a) The authorized capital stock of the
Company consists of 440,000,000 Shares and 150,000,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Shares"), of which 4,400,000
shares are designated Series A Participating Cumulative Preferred Stock. As of
June 21, 2000, there were outstanding: (1) 327,398,402 Shares (including
equivalents payable in cash or Shares); (2) employee and director stock options
to
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purchase an aggregate of 23,178,436 Shares; and (3) no Preferred Shares. All
shares of capital stock of the Company outstanding as of the date hereof have
been duly authorized and validly issued and are fully paid and nonassessable and
free of any preemptive rights. The Shares were not issued in violation of the
terms of any agreement or understanding binding on the Company and were issued
in compliance with all applicable Laws, including all federal, state and foreign
securities laws, rules and regulations. All of the Company's treasury shares
were acquired by the Company in compliance with all applicable Laws, including
all federal, state and foreign securities laws, rules and regulations. All
Shares issuable upon exercise of outstanding employee or directors stock options
have been duly authorized and, when issued in accordance with the terms thereof,
will be validly issued and will be fully paid and nonassessable and free of any
preemptive rights.
(b) Except as set forth in this Section 4.05 and for changes since
June 21, 2000 resulting from the exercise of employee or director stock options
outstanding on such date, there are no outstanding (i) shares of capital stock
or voting securities of the Company, (ii) securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company or (iii) options or other rights to acquire from the Company or other
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "Company Securities"). There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the Company Securities.
SECTION 4.06. Matters Relating to the NA Merger. (a) The Company owns
213,250,000 shares (the "NA Shares") of Class B common stock, $0.01 par value
per share, of NA, free and clear of any Lien and, subject to applicable law,
free of any other limitation or restriction (including any restriction on the
right to vote or otherwise dispose of such shares).
(b) The execution, delivery and performance by the Company of the NA
Voting Agreement and the consummation by the Company of the transactions
contemplated thereby are within the Company's corporate powers and, except for
the affirmative vote of the holders of a majority of the outstanding Shares in
connection with the sale of the NA Shares pursuant to the NA Merger Agreement,
have been duly authorized by all necessary corporate action on the part of the
Company. The affirmative vote of the holders of a majority of the outstanding
Shares is the only vote of the holders of any of the Company's capital stock
necessary in connection with the sale of the NA Shares pursuant to the NA Merger
Agreement. The NA Voting Agreement constitutes a valid and binding agreement
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of the Company enforceable against the Company in accordance with its terms. The
Company has provided Parent with a true and complete copy of the NA Voting
Agreement and no provisions thereof have been amended or the rights thereunder
waived in any manner that would create any additional liability of the Company
or materially impair or delay the consummation of the transactions contemplated
hereby.
(c) The execution, delivery and performance by NA of the NA Merger
Agreement and the consummation by NA of the transactions contemplated thereby
are within NA's corporate powers and, except for the affirmative vote of the
holders of a majority of the outstanding shares of common stock of NA in
connection with the consummation of the NA Merger, have been duly authorized by
all necessary corporate action on the part of NA. The affirmative vote of the
holders of a majority of the outstanding shares of common stock of NA is the
only vote of the holders of any of NA's capital stock necessary in connection
with the consummation of the NA Merger. The NA Merger Agreement constitutes a
valid and binding agreement of NA enforceable against NA in accordance with its
terms. The Company has provided Parent with a true and complete copy of the NA
Merger Agreement and no provisions thereof have been amended or the rights
thereunder waived in any manner that would create any additional liability of
the Company or materially impair or delay the consummation of the transactions
contemplated hereby.
(d) After consummation of the NA Merger, the Company will have no
Subsidiaries and will conduct no business operations. Except for NA, the Company
owns no shares of any corporation and has no other ownership or other investment
interest, either of record, beneficially or equitably, in any association,
partnership, joint venture or legal entity, except for marketable securities and
bank, checking and money market accounts and other cash equivalent instruments
and common securities under the TOPrS Documents. The Company does not conduct,
and has not since June 14, 1999 conducted, any operating activities except
through NA.
SECTION 4.07. SEC Filings. (a) The Company has filed all forms,
reports and documents required to be filed by it by the SEC or pursuant to
relevant securities statutes, regulations and rules. The Company has made
available to Parent (i) the Company's annual reports on Form 10-K for its fiscal
years ended December 31, 1999 and 1998, (ii) its quarterly report on Form 10-Q
for its fiscal quarter ended March 31, 2000, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
stockholders of the Company held since December 31, 1999 and (iv) all of its
other reports, statements, schedules and registration statements filed with the
SEC since December 31, 1999 (the documents referred to in this Section 4.07(a),
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collectively, the "Company SEC Documents"). The Company has filed all
registration statements, prospectuses, reports, schedules, forms, statements and
other documents required to be filed by it with the SEC since January 1, 1998.
(b) As of its filing date, each Company SEC Document complied as to
form in all material respects with the applicable requirements of the 1933 Act
and the 1934 Act, as the case may be.
(c) As of its filing date (or, if amended or superceded by a filing
prior to the date hereof, on the date of such filing), no Company SEC Document
filed pursuant to the 1934 Act contained any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.
(d) No Company SEC Document filed pursuant to the 1933 Act, as
amended or supplemented, if applicable, as of the date such document or
amendment became effective, contained any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
SECTION 4.08. Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company included in the Company SEC Documents fairly present in all material
respects, in conformity with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis (except as may be indicated in
the notes thereto), the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and their consolidated results
of operations and cash flows for the periods then ended (subject to normal
year-end adjustments in the case of any unaudited interim financial statements
that have not been and are not expected to be material in nature or amount).
SECTION 4.09. Disclosure Documents. The proxy statement of the
Company to be filed with the SEC in connection with the Merger (the "Company
Proxy Statement") and any amendments or supplements thereto will, when filed,
comply as to form in all material respects with the applicable requirements of
the 1934 Act. At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company, and at the
time such stockholders vote on adoption of this Agreement, the Company Proxy
Statement, as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The representations and warranties
contained in this Section 4.09 will not apply to statements or omissions
included in the
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Company Proxy Statement based upon information furnished to the Company by
Parent specifically for use therein.
SECTION 4.10. Certain Contracts. As of the date hereof, except as set
forth in the Company SEC Documents filed prior to the date of this Agreement,
the Company is not a party to or bound by any "material contracts" (as such term
is defined in Item 601(b)(10) of Regulation S-K of the SEC), which agreements or
arrangements could reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company and its Subsidiaries (including
the Surviving Corporation and its Subsidiaries), taken together, after giving
effect to the Merger.
SECTION 4.11. Absence of Certain Changes. Since December 31, 1999,
the business of the Company has been conducted in the ordinary course consistent
with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts that, either individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company
(other than customary quarterly cash dividends on the Shares in an amount not
greater than $.1225 per Share per quarter), or any repurchase, redemption or
other acquisition by the Company of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company;
(c) any amendment to the certificate of incorporation or by-laws of
the Company;
(d) any amendment of any material term of any outstanding security
of the Company;
(e) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices;
(f) any creation or other incurrence by the Company of any Lien on
any material asset other than in the ordinary course of business consistent with
past practices;
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(g) any making of any material loan, advance or capital
contributions to or investment in any Person other than in the ordinary course
of business consistent with past practices;
(h) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company that has
had or would reasonably be expected to have a Material Adverse Effect on the
Company;
(i) any transaction or commitment made, or any contract or agreement
entered into, by the Company relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by the Company
of any contract or other right, in either case, material to the Company, other
than transactions and commitments in the ordinary course of business consistent
with past practices and those contemplated by this Agreement, the NA Voting
Agreement and the NA Merger Agreement;
(j) any change in any method of accounting, method of tax accounting
or accounting principles or practice by the Company, except for any such change
which is not significant or which is required by reason of a concurrent change
in GAAP or Regulation S-X under the 1934 Act;
(k) any (i) grant of any bonus, severance or termination pay or
award under a long term incentive plan to (or amendment to any existing
arrangement with) any director, officer or (to the extent material in the
aggregate) employee of the Company, (ii) establishment, adoption or amendment
(except as required by applicable law) of any collective bargaining, bonus,
profit-sharing, thrift, pension, retirement or other benefit plan or arrangement
covering any director, officer or employee of the Company, or (iii) increase in
compensation, bonus or other benefits payable to any director, officer or
employee of the Company;
(l) any material labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company, which employees were not
subject to a collective bargaining agreement at December 31, 1999, or any
material lockouts, strikes, slowdowns, work stoppages or threats thereof by or
with respect to such employees;
(m) any settlement or waiver of a material litigation or claim; or
(n) any agreement to do any of the foregoing.
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SECTION 4.12. No Undisclosed Material Liabilities. There are no
liabilities or obligations of the Company of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, other
than:
(a) liabilities or obligations disclosed or provided for in the
Company Balance Sheet or in the notes thereto or in the Company SEC Documents
filed prior to the date hereof,
(b) liabilities or obligations that would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company, and
(c) liabilities or obligations under this Agreement, the NA Merger
Agreement, the NA Voting Agreement or incurred in connection with the
transactions contemplated hereby or thereby.
SECTION 4.13. Compliance with Laws and Court Orders. Neither the
Company nor any of its Subsidiaries is in violation of, and since December 31,
1999 has not violated, any applicable law, statute, ordinance, rule, regulation,
judgment, injunction, order or decree, except for violations that have not had
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company. The Company has not failed to obtain
or comply with the requirements of any license, permit or other authorization
necessary to the ownership of its assets and property except for failures that
have not had and could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
SECTION 4.14. Litigation. There is no claim, action, suit,
investigation or proceeding pending, or, to the knowledge of the Company,
threatened, against the Company or any of its Subsidiaries, or any of their
respective properties before any court or arbitrator or before or by any
governmental body, agency or official, domestic or foreign, that, if determined
or resolved adversely in accordance with the plaintiff's demands, would
reasonably be expected to have a Material Adverse Effect on the Company or
prevent, make illegal or materially delay or impair the ability of the Company
to consummate the transactions contemplated by this Agreement, the NA Voting
Agreement and the NA Merger Agreement. Neither the Company nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Merger.
SECTION 4.15. Finders' Fees. Except for UBS Warburg LLC and Morgan
Stanley & Co. Incorporated, copies of whose engagement agreements have been
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provided to Parent, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of the
Company who might be entitled to any fee or commission from the Company in
connection with the transactions contemplated by this Agreement.
SECTION 4.16. Taxes. (a) The Company and each of its Subsidiaries has
timely filed (or has had timely filed on its behalf) or will timely file or
cause to be timely filed all material Tax Returns required by applicable law to
be filed by it prior to or as of the Effective Time, and all such Tax Returns
are, or will be at the time of filing, true and complete in all material
respects.
(b) The Company and each of its Subsidiaries has paid (or has had
paid on its behalf), or, where payment is not yet due, has established (or has
had established on its behalf and for its sole benefit and recourse) or will
establish or cause to be established (or have established on its behalf and for
its sole benefit and recourse) in accordance with GAAP on or before the
Effective Time an adequate accrual for the payment of, all taxes and interest
due with respect to any period or portion thereof ending prior to or as of the
Effective Time.
(c) The federal income Tax Returns of the Company and its
Subsidiaries have been examined and settled with the Internal Revenue Service
(the "IRS") (or the applicable statutes of limitation for the assessment of
federal income Taxes for such periods have expired) for all years through 1994.
(d) There are no material Liens or encumbrances for Taxes on any of
the assets of the Company or any of its Subsidiaries.
(e) The Company and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the
reporting, payment and withholding of Taxes.
(f) No federal, state, local or foreign audits or administrative
proceedings are pending with regard to any material Taxes or Tax Return of the
Company or its Subsidiaries and none of them has received a written notice of
any proposed audit or proceeding regarding any pending audit or proceeding.
(g) No waivers of statutes of limitations have been given or
requested.
(h) "Taxes" shall mean any and all taxes, charges, fees, levies or
other assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, goods and services, service use, license, value added, capital,
net worth, payroll, profits, withholding, franchise, transfer and recording
taxes, fees and charges, and
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any other taxes, assessment or similar charges imposed by the IRS or any taxing
authority (whether domestic or foreign including any state, county, local or
foreign government or any subdivision or taxing agency thereof (including a
United States possession)) (a "Taxing Authority"), whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest whether paid or received, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "Tax Return" shall mean
any report, return, document, declaration or other information or filing
required to be supplied to any Taxing Authority or jurisdiction (foreign or
domestic) with respect to Taxes, including information returns, any documents
with respect to or accompanying payments of estimated Taxes, or with respect to
or accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
SECTION 4.17. Employee Benefit Plans. (a) Section 4.17 of the Company
Disclosure Schedule includes, and the Company has made available to Parent
copies of each Employee Plan (and, if applicable, related trust agreements) and
all amendments thereto and written interpretations thereof together with the
most recent annual report (Form 5500 including, if applicable, Schedule B
thereto) and actuarial valuation report prepared in connection with any such
Employee Plan. Section 4.17 of the Company Disclosure Schedule identifies each
such Employee Plan that is (i) a Multiemployer Plan, (ii) a Title IV Plan or
(iii) maintained in connection with any trust described in Section 501(c)(9) of
the Code.
(b) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period since its adoption; each trust created under any Employee Plan is exempt
from tax under Section 501(a) of the Code and has been so exempt since its
creation. The Company has made available to Parent the most recent determination
letter of the Internal Revenue Service relating to each such Employee Plan. Each
Employee Plan has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all applicable statutes, orders,
rules and regulations, including ERISA and the Code.
(c) Section 4.17 of the Company Disclosure Schedule includes, and
the Company has made available to Parent copies or descriptions of each Benefit
Arrangement (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof. Each such Benefit Arrangement has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations and has been maintained in good standing with applicable regulatory
authorities.
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(d) There has been no failure of a group health plan (as defined in
Section 5000(b)(1) of the Code) to meet the requirements of Code Sections
4980B(f), 9801 or 9802 with respect to a qualified beneficiary (as defined in
Section 4980B(g)) or other individual. Neither the Company nor any of its
Subsidiaries has contributed to a nonconforming group health plan (as defined in
Section 5000(c)) and no ERISA Affiliate of the Company or any of its
Subsidiaries has incurred a tax under Section 5000(a) that is or could become a
liability of the Company or any of its Subsidiaries.
(e) The Company neither maintains nor is obligated to contribute to
any International Plan.
(f) No Title IV Plan has or has incurred an accumulated funding
deficiency within the meaning of Section 302 of ERISA or Section 412 of the
Code, nor has any waiver of the minimum funding standards of Section 302 of
ERISA and Section 412 of the Code been requested of or granted by the Internal
Revenue Service with respect to any Title IV Plan, nor has any lien in favor of
any Title IV Plan arisen under Section 412(n) of the Code or Section 302(f) of
ERISA.
(g) Neither the Company nor an ERISA Affiliate has incurred or will
incur prior to the Effective Time any unpaid withdrawal liability (within the
meaning or Part 1 of Subtitle E of Title I of ERISA) with respect to a
Multiemployer Plan in excess of $5,000,000.
(h) The Company has delivered to Parent a complete list of any and
all current or former employees or directors of the Company or an Affiliate who
are entitled to the Black-Scholes value of their Company Stock Options in
accordance with Section 2.05.
(i) No grant agreement for any Original Options (as defined in
Section 2.05 of the Company Disclosure Schedule) granted after January 15, 1999
provides for Black-Scholes valuation upon cash-out.
SECTION 4.18. Environmental Matters. Except as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company:
(a) no written notice, demand, request for information, citation,
summons or order has been received, no penalty has been assessed, and no
investigation, action, claim, suit or proceeding is pending or, to the knowledge
of the Company, threatened by any governmental entity or other Person which
alleges a violation by the Company of any Environmental Law or involves any
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real property currently, or to the knowledge of the Company, formerly owned,
operated or leased by the Company or its Subsidiaries;
(b) the Company has been and is in compliance with all Environmental
Laws and all Environmental Permits;
(c) all real property owned and, to the knowledge of the Company,
all real property operated or leased by the Company or its Subsidiaries is free
of contamination of Hazardous Materials that would have an adverse effect on
human health or the environment; and
(d) there are no liabilities of the Company of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise
arising under any Environmental Law.
SECTION 4.19. Antitakeover Statute and Rights Agreement. (a) The
Company has taken all action necessary to exempt the Merger and this Agreement
and the transactions contemplated hereby from the provisions of Section 203 of
Delaware Law.
(b) The Board of Directors of the Company has approved an amendment
to the Rights Agreement and has resolved to take all other action necessary to
render the Rights inapplicable to the Merger, this Agreement and the
transactions contemplated hereby, and the Company will cause the Rights Agent to
execute such amendment promptly after execution of this Agreement. The Company
has delivered to Parent a true and correct copy of the Rights Agreement in
effect as of the execution and delivery of this Agreement.
SECTION 4.20. Insurance. Section 4.20 of the Company Disclosure
Schedule attached hereto contains a list that is complete in all material
respects of all policies of directors' and officers' liability insurance and
fiduciary insurance owned or held by, or the premiums and the brokerage fees of
which are paid by the Company or its Subsidiaries. There have been no claims
under any such policies since January 1, 1998.
SECTION 4.21. Other Agreements. The Company has delivered to Parent
true and correct copies of each of the NA Merger Agreement and the NA Voting
Agreement, duly executed by the parties thereto.
SECTION 4.22. Certain Agreements. Except with respect to Company
Stock Options, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, parachute payment,
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bonus or otherwise) becoming due to any director, employee or independent
contractor of the Company under any Employee Plan, Benefit Arrangement or
otherwise, (ii) materially increase any benefits otherwise payable under any
Employee Plan, Benefit Arrangement or otherwise or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
SECTION 5.01. Corporate Existence and Power. Each of Parent and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent. Since the date of its
incorporation, Merger Subsidiary has not engaged in any activities other than in
connection with or as contemplated by this Agreement or in connection with
arranging any financing required to consummate the transactions contemplated
hereby.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary.
SECTION 5.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any governmental
body, agency, official or authority, domestic or foreign, other than (i) the
filing of a certificate of merger with respect to the Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which Parent is qualified to do business, (ii) compliance with
any applicable requirements of the HSR Act and of laws, rules and regulations in
foreign jurisdictions governing antitrust or merger control matters, (iii)
compliance with
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any applicable requirements of the 1933 Act, the 1934 Act and any other
applicable securities or takeover laws, whether state or foreign and (iv) any
actions or filings the absence of which would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent or
materially to impair the ability of Parent and Merger Subsidiary to consummate
the transactions contemplated by this Agreement.
SECTION 5.04. Non-contravention. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby do not and will not (i) contravene, conflict with, or result in any
violation or breach of any provision of the certificate of incorporation or
bylaws of Parent or Merger Subsidiary, (ii) assuming compliance with the matters
referred to in Section 5.03, contravene, conflict with, or result in any
violation or breach of any provision of any law, regulation, judgment,
injunction, order or decree or (iii) require any consent or other action by any
Person under, constitute a default under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which Parent or Merger Subsidiary is entitled under any
provision of any agreement or other instrument binding upon Parent or Merger
Subsidiary, except, in the case of clauses (ii) and (iii), for such matters as
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
SECTION 5.05. Disclosure Documents. The information with respect to
Parent and any of its Subsidiaries that Parent furnishes to the Company
specifically for use in the Company Proxy Statement will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading at the time such Company Proxy
Statement or any amendment or supplement thereto is first mailed to stockholders
of the Company.
SECTION 5.06. Finders' Fees. Except for Lehman Brothers Inc. whose
fees will be paid by Parent, there is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Parent who might be entitled to any fee or commission from the Company upon
consummation of the transactions contemplated by this Agreement.
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ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.01. Conduct of the Company. From the date hereof until the
Effective Time, the Company shall conduct its business in the ordinary course
consistent with past practice and shall use its reasonable best efforts to
preserve intact its business organizations and relationships with third parties
and to keep available the services of its present officers and employees.
Without limiting the generality of the foregoing, except with the prior written
consent of Parent or as contemplated by this Agreement or as set forth in the
Company Disclosure Schedule, from the date hereof until the Effective Time the
Company shall not:
(a) declare, set aside or pay any dividend or other distribution
with respect to any share of its capital stock, other than customary quarterly
cash dividends on the Shares not to exceed $.1225 per Share per quarter;
(b) repurchase, redeem or otherwise acquire or offer to acquire any
shares of capital stock or other securities of, or other ownership interests in,
the Company;
(c) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any Lien any Shares, any other voting securities or any securities
convertible into Shares, or any rights, warrants or options to acquire any
Shares, voting securities or convertible securities other than issuances
pursuant to stock-based awards or options that are outstanding on the date
hereof or 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;
(d) amend its Certificate of Incorporation or By-Laws or other
comparable organizational documents or amend any material terms of the
outstanding securities of the Company;
(e) merge or consolidate with any other Person or acquire a material
amount of stock or assets of any other Person;
(f) sell or otherwise dispose of the NA Shares except pursuant to
the NA Merger Agreement;
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(g) incur any indebtedness for borrowed money, guarantee any such
indebtedness, issue or sell any debt securities or warrants or other rights to
acquire any debt securities or guarantee any debt securities;
(h) except as required under Section 2.05 or as may be mutually
agreed upon between Parent and the Company, enter into or adopt any new, or
amend any existing, Employee Plan or Benefit Arrangement, other than as required
by law, or materially change any actuarial or other assumption used to calculate
funding obligations with respect to any Employee Plan or Benefit Arrangement, or
change the manner in which contributions to any pension plan are made or the
basis on which such contributions are determined;
(i) except as permitted under Section 6.01(h) or by written
employment agreements existing on the date of this Agreement, increase the
compensation payable or to become payable to its directors, officers or
employees or pay any benefit or amount not required by an Employee Plan or
Benefit Arrangement as in effect on the date of this Agreement to any such
person;
(j) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets (including
securitizations) except pursuant to the NA Merger Agreement;
(k) without the prior consent of Parent, which consent shall not be
unreasonably withheld, pay, discharge, settle or satisfy any claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with its terms, of any liability recognized or
disclosed in the most recent consolidated financial statements (or described in
the notes thereto and included in such financial statements) of the Company
included in the Company SEC Documents or incurred since the date of such
financial statements for an amount in cash not to exceed (in the case of
liabilities other than those incurred since the date hereof) the amount of
specific reserve in respect of such claim, liability, obligation or litigation
included in such financial statements (or described in the notes thereto and
included in such financial statements), or waive the benefits of, or agree to
modify in any manner, any standstill or similar agreement to which the Company
or any of its Subsidiaries is a party;
(l) make any tax election that has, or fail to make any tax election
which failure could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the tax liability or tax attributes of
the Company or any of its Subsidiaries or settle or compromise any material
income tax liability;
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(m) fail to cause NA to pay its customary quarterly cash dividend
prior to the time at which payment of the Company's customary quarterly cash
dividend is due;
(n) fail to cause NA to comply with the terms of the NA Merger
Agreement or the NA Voting Agreement;
(o) fail to comply with the NA Voting Agreement or amend, or waive
any right, power or privilege under, the NA Voting Agreement or permit NA to
amend, or waive any right, power or privilege under, the NA Merger Agreement or
the Voting Agreement, in each case in any manner that would create any
additional liability of the Company or materially impair or delay the
consummation of the transactions contemplated hereby;
(p) take any action not otherwise specified in this Section 6.01
that would cause the representations and warranties set forth in Section 4.11 to
no longer be true and correct;
(q) (i) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization or (ii) enter into any material agreement or exercise any
discretion providing for acceleration of any material payment or performance as
a result of a change of control of the Company; and
(r) agree or commit to do any of the foregoing.
SECTION 6.02. Stockholder Meeting; Proxy Material. The Company shall
cause a meeting of its stockholders (the "Company Stockholder Meeting") to be
duly called and held as soon as reasonably practicable for the purpose of voting
on the approval and adoption of this Agreement and the Merger. In connection
with such meeting, the Company will (i) promptly prepare and file with the SEC,
use its best efforts to have cleared by the SEC and thereafter mail to its
stockholders as promptly as practicable the Company Proxy Statement and any
amendments or supplements thereto and all other proxy materials for such
meeting, (ii) use its reasonable best efforts (including postponing or
adjourning the Company Stockholder Meeting to solicit additional proxies for a
period of up to 30 days) to obtain the necessary approvals by its stockholders
of this Agreement and the transactions contemplated hereby and (iii) otherwise
comply with all legal requirements applicable to such meeting. Approval of the
Merger will be presented as a single proposal in the Company Proxy Statement and
will be conditioned solely upon the approval of the sale of NA Shares pursuant
to the NA Merger Agreement. The Company shall provide Parent and its legal
counsel with sufficient opportunity to comment upon the form and substance of
the Company
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Proxy Statement (including any amendments or supplements thereto) prior to
filing such with the SEC and the Company shall use its reasonable efforts to
incorporate Parent's reasonable comments into the Company Proxy Statement
(including any amendments or supplements thereto). The Company shall provide to
Parent copies of any comments received from the SEC in connection therewith and
shall consult with Parent in responding to the SEC. Subject to Section 6.04(c),
the Company Proxy Statement shall contain the unqualified recommendation of the
Board of Directors of the Company that its stockholders vote in favor of the
approval and adoption of this Agreement, the Merger and the transactions
contemplated hereby.
SECTION 6.03. Access to Information. From the date hereof until the
Effective Time and subject to applicable law and the Confidentiality Agreement
dated as of May 5, 2000 between the Company and Parent (the "Confidentiality
Agreement"), the Company shall (i) give Parent, its counsel, financial advisors,
auditors and other authorized representatives reasonable access to the offices,
properties, books and records of the Company, (ii) furnish to Parent, its
counsel, financial advisors, auditors and other authorized representatives such
financial, operating data and other information as such Persons may reasonably
request and (iii) instruct the employees, counsel, financial advisors, auditors
and other authorized representatives of the Company to cooperate with Parent in
its investigation of the Company and (iv) promptly advise Parent orally and in
writing of any fact or circumstances reasonably likely to have a Material
Adverse Effect on the Company. Any investigation pursuant to this Section shall
be conducted in such manner as not to interfere unreasonably with the conduct of
the business of the Company. No information or knowledge obtained by Parent in
any investigation pursuant to this Section shall affect or be deemed to modify
any representation or warranty made by the Company hereunder.
SECTION 6.04. No Solicitation; Other Offers. (a) From the date hereof
until the earlier of the Effective Time and the termination of this Agreement in
accordance with Article 10, the Company and its Subsidiaries will not, and the
Company will use its reasonable best efforts to cause the officers, directors,
employees, investment bankers, consultants or other agents or representatives
(collectively, "Agents") of the Company and its Subsidiaries not to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal, (ii) engage in discussions or negotiations with any Person concerning
an Acquisition Proposal, (iii) disclose any nonpublic information relating to
the Company or any of its Subsidiaries to any Person who, to the knowledge of
the Company, is considering making, or has made, an Acquisition Proposal or (iv)
take any other action to facilitate any inquiries or the making of any proposal
that constitutes or that could reasonably be expected to lead to an Acquisition
Proposal. The Company will notify Parent promptly (but in no event later than 24
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hours) after receipt by the Company of any Acquisition Proposal or any request
for nonpublic information relating to the Company or any of its Subsidiaries by
any Person who, to the knowledge of the Company, is making, or has made, an
Acquisition Proposal. The Company shall promptly provide such notice orally and
in writing and shall identify the Person making, and all terms and conditions
of, any such Acquisition Proposal or request. The Company shall keep Parent
promptly informed of the status and details of any such Acquisition Proposal
(including amendments or proposed amendments) or request and any discussions or
negotiations pursuant to Section 6.04(b) and the Company shall provide to Parent
copies of any written communications between the Company and any Person making
the Acquisition Proposal. The Company shall, and the Company shall use
reasonable best efforts to cause the Agents of the Company and its Subsidiaries
to, cease immediately and cause to be terminated all activities, discussions and
negotiations, if any, with any Persons conducted prior to the date hereof with
respect to any Acquisition Proposal or request. Nothing contained in this
Agreement shall prevent the Board of Directors of the Company from complying
with Rule 14d-9 or Rule 14e-2 under the 1934 Act with respect to any Acquisition
Proposal or shall prevent NA and its Agents from taking any action permitted
under Section 6.04 of the NA Merger Agreement.
(b) Notwithstanding the foregoing, the Company may, at any time
prior to the time the Company's stockholders shall have voted to approve this
Agreement, negotiate or otherwise engage in substantive discussions with, and
furnish nonpublic information to, any Person in response to an unsolicited
Acquisition Proposal by such Person if (i) the Company has complied with the
terms of Section 6.04(a), (ii) the Board of Directors of the Company determines
in good faith that such Acquisition Proposal is likely to result in a Superior
Proposal and, after consultation with outside legal counsel, that the failure to
take such action would constitute a breach of its fiduciary duties under
applicable law, (iii) such Person executes a confidentiality agreement with
terms no less favorable to the Company than those contained in the
Confidentiality Agreement (except as to the standstill provisions) and (iv) the
Company shall have delivered to Parent prior written notice advising Parent that
it intends to take such action.
(c) The Board of Directors of the Company shall be permitted to
withdraw, or modify in a manner adverse to Parent, its recommendation to its
stockholders referred to in Section 6.02 hereof, but only if (i) the Company has
complied with the terms of Section 6.04(a), (ii) the Company has received an
unsolicited Acquisition Proposal which the Board of Directors determines in good
faith constitutes a Superior Proposal, (iii) the Board of Directors of the
Company determines in good faith, after consultation with outside legal counsel,
that the failure to take such action would constitute a breach of its fiduciary
duties under
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applicable law and (iv) the Company shall have delivered to Parent 24 hours
prior written notice advising Parent that it intends to take such action.
(d) For purposes of this Agreement:
"Acquisition Proposal" means any offer or proposal for a merger,
reorganization, consolidation, share exchange, business combination, or other
similar transaction involving the Company or any of its Subsidiaries or any
proposal or offer to acquire, directly or indirectly, more than 35% of the
voting securities of the Company or NA, or a substantial portion of the assets
of the Company and its Subsidiaries taken as a whole, other than the
transactions contemplated by this Agreement and the NA Merger Agreement.
"Superior Proposal" means any bona fide written Acquisition Proposal
(i) on terms that the Board of Directors of the Company determines in good faith
(after consultation with a financial advisor of nationally recognized reputation
and taking into account all the terms and conditions of the Acquisition Proposal
including the legal, financial and regulatory aspects of the proposal) provide
greater value to the Company's stockholders than the transaction contemplated
hereunder, as amended pursuant to Section 10.01(d) if applicable and (ii) that
is reasonably likely to be consummated by the Person making such Acquisition
Proposal.
(e) The Company will promptly provide to Parent any information
regarding the Company provided to any Person making an Acquisition Proposal that
was not previously provided to Parent.
(f) During the period from the date of this Agreement until the
Effective Time or earlier termination of this Agreement, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement relating to the making of an Acquisition Proposal to which
it or any of its Subsidiaries is a party (other than any involving Parent or its
Subsidiaries). During such period, the Company agrees to use reasonable best
efforts to enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreements, including seeking injunctions to prevent any
breaches of such agreements and to enforce specifically the terms and provisions
thereof in any court of the United States or any state thereof having
jurisdiction.
SECTION 6.05. Surety Obligations. The Company will, and will cause NA
to, obtain any amendments, novations, releases, waivers, consents or approvals
necessary to release the Company and the Surviving Corporation, effective as of
the Effective Time, from all liability under any guarantee, performance bond,
letter of credit or other agreement guaranteeing or securing obligations of NA,
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such actions to be taken in consultation with NA and in a manner that does not
unreasonably disrupt NA's business or operations.
SECTION 6.06. Rights Agreement. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section
4.19(b)) reasonably requested in writing by Parent in order to render the Rights
inapplicable to the transactions contemplated by this Agreement to the extent
provided herein. Except as provided with respect to the transactions
contemplated by this Agreement and the NA Merger Agreement and except as set
forth in the Company Disclosure Letter, the Board of Directors of the Company
shall not, without the prior written consent of Parent (a) amend the Rights
Agreement or (b) take any action with respect to, or make any determinations
under, the Rights Agreement, including a redemption of the Rights or any action
to facilitate an Acquisition Proposal.
ARTICLE 7
COVENANTS OF PARENT
Parent agrees that:
SECTION 7.01. Confidentiality. Prior to the Effective Time and after
any termination of this Agreement, Parent will hold, and will use its reasonable
best efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence all documents and
information concerning the Company or any of its Subsidiaries furnished to
Parent or its Affiliates in connection with the transactions contemplated by
this Agreement in accordance with the terms of the Confidentiality Agreement.
SECTION 7.02. Obligations of Merger Subsidiary. Parent will take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 7.03. Director and Officer Liability. Parent shall cause the
Surviving Corporation, and the Surviving Corporation hereby agrees, to do the
following:
(a) For six years after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless each present and former officer
and director of the Company (each an "Indemnified Person") in respect of acts or
omissions occurring at or prior to the Effective Time to the fullest extent
permitted by
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Delaware Law or any other applicable laws or provided under the Company's
certificate of incorporation and bylaws in effect on the date hereof, provided
that such indemnification shall be subject to any limitation imposed from time
to time under applicable law.
(b) The Surviving Corporation shall pay all expenses, including
reasonable fees and expenses of counsel, that an Indemnified Person may incur in
enforcing the indemnity and other obligations provided for in this Section 7.03.
The Surviving Corporation shall be entitled to control the defense of any
action, suit, investigation or proceeding with counsel of its own choosing
reasonably acceptable to the Indemnified Person and the Indemnified Person shall
cooperate in the defense thereof. The Surviving Corporation shall not be liable
for the fees, costs or expenses of any other counsel for an Indemnified Person,
other than local counsel, unless a conflict of interest shall be caused thereby
in which case the Surviving Corporation shall pay the fees, costs and expenses
of one additional counsel of the Indemnified Person's choosing but reasonably
accepted to the Surviving Corporation, provided that the Surviving Corporation
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld).
(c) For six years after the Effective Time, the Surviving
Corporation shall provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering each
such Indemnified Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date hereof;
provided if the aggregate annual premiums for such insurance at any time during
such period shall exceed 200% of the per annum rate of premium and brokerage
costs paid by the Company and its Subsidiaries as of the date hereof for such
insurance, then the Surviving Corporation shall provide only such coverage as
shall then be available at an annual premium equal to 200% of such rate.
(d) If Parent, the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 7.03.
(e) The rights of each Indemnified Person under this Section 7.03
shall be in addition to any rights such Person may have under the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries, under
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Delaware Law or any other applicable laws or under any agreement of any
Indemnified Person with the Company or any of its Subsidiaries. These rights
shall survive consummation of the Merger and are intended to benefit, and shall
be enforceable by, each Indemnified Person.
(f) The obligations of the Surviving Corporation under this Section
7.03 shall be joint and several obligations of Parent and the Surviving
Corporation.
SECTION 7.04. Employee Matters. (a) The Surviving Corporation shall
expressly assume, honor, comply with and uphold in accordance with their terms
each of the agreements, understandings or undertakings listed on Section 7.04(a)
of the Company Disclosure Schedule.
(b) The obligations of the Surviving Corporation under this 7.04
shall be the joint and several obligation of Parent and the Surviving
Corporation.
ARTICLE 8
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 8.01. Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, Company and Parent will use their reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, and to assist and cooperate with the other parties in doing all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. In furtherance and
not in limitation of the foregoing, each of Parent and Company agrees to make an
appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby as promptly as practicable
after the date hereof and to supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to the HSR
Act and to take all other actions necessary to cause the expiration or
termination of the applicable waiting periods under the HSR Act as soon as
practicable.
SECTION 8.02. Certain Filings. The Company and Parent shall cooperate
with one another and use their reasonable best efforts (i) in connection with
the preparation of the Company Proxy Statement, (ii) in determining whether any
action by or in respect of, or filing with, any governmental body, agency,
official, or authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts, in
connection with the
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consummation of the transactions contemplated by this Agreement and (iii) in
taking such actions or making any such filings, furnishing information required
in connection therewith or with the Company Proxy Statement and seeking timely
to obtain any such actions, consents, approvals or waivers.
SECTION 8.03. Public Announcements. Parent and the Company will
consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated hereby
and, except as may be required by applicable law or any listing agreement with
any national securities exchange, will not issue any such press release or make
any such public statement prior to such consultation. The parties agree that the
initial press releases to be issued with respect to the transactions
contemplated hereby shall be in the form heretofore agreed by the parties.
SECTION 8.04. Further Assurances. At and after the Effective Time,
the officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
SECTION 8.05. Notices of Certain Events. Each of the Company and
Parent shall promptly notify the other of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting the Company, Parent or any of their respective Subsidiaries
that relate to the consummation of the transactions contemplated by this
Agreement.
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ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to Obligations of Each Party. The
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) this Agreement shall have been approved and adopted by the
stockholders of the Company in accordance with Delaware Law;
(b) No provision of any applicable law or regulation and no
judgment, temporary restraining order, preliminary or permanent injunction,
verdict, order or decree or other legal restraint or prohibition shall (i) make
illegal or prohibit the consummation of the Merger or (ii) cause the
consummation of the Merger to constitute a breach of the fiduciary duties of the
Board of Directors of the terminating party in the judgment of such Board of
Directors as determined in good faith based upon the advice of outside legal
counsel (a "Special Board Determination");
(c) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated; and
(d) there shall have been consummated the NA Merger or another
comparable transaction by which all NA stockholders shall have received, or have
the right to receive upon the surrender of their shares, cash in payment for
their shares of NA common stock and such transaction shall not have resulted in
any material additional liabilities of the Company or Parent (the "Alternative
NA Merger").
SECTION 9.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) except with respect to the representations and warranties of the
Company contained in Section 4.11(a) of this Agreement, the representations and
warranties of the Company contained in this Agreement and in any certificate or
other writing delivered by the Company pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
in all material
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respects at and as of the Effective Time as if made at and as of such time (or,
if given as of a specific date, at and as of such date) with only such
exceptions as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company;
(c) the representations and warranties of the Company contained in
Section 4.11(a) of this Agreement shall be true at and as of the Effective Time
as if made at and as of such time;
(d) Parent shall have received a certificate signed by an executive
of the Company to the foregoing effect;
(e) The Company shall have at least $11.728 billion (less any costs
and expenses paid in connection with the transactions contemplated hereby) in
cash in immediately available funds in its bank accounts;
(f) The Company shall have complied with its covenant in Section
6.01(m) (dividends); and
(g) designees of Parent shall constitute all of the members of the
Board of Trustees of the Nabisco Foundation.
SECTION 9.03. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) each of Parent and Merger Subsidiary shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time;
(b) the representations and warranties of Parent and Merger
Subsidiary contained in this Agreement and in any certificate or other writing
delivered by Parent or Merger Subsidiary pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
in all material respects at and as of the Effective Time as if made at and as of
such time (or, if given as of a specific date, at and as of such date) with only
such exceptions as would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent; and
(c) the Company shall have received a certificate signed by an
executive officer of Parent to the foregoing effect.
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ARTICLE 10
TERMINATION
SECTION 10.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before April 30,
2001 (or such later date on which any agreement relating to an
Alternative NA Merger shall terminate), provided that the right to
terminate this Agreement pursuant to this Section 10.01(b)(i) shall
not be available to any party whose breach of any provision of this
Agreement results in the failure of the Merger to be consummated by
such time;
(ii) there shall be any law or regulation that makes consummation
of the Merger illegal or otherwise prohibited or any judgment,
injunction, order or decree of any Governmental Entity having
competent jurisdiction enjoining Company or Parent from consummating
the Merger is entered and such judgment, injunction, judgment or order
shall have become final and nonappealable;
(iii) this Agreement shall not have been approved and adopted in
accordance with Delaware Law by the Company's stockholders by reason
of the failure to obtain the required vote at a duly held meeting of
stockholders or any adjournment thereof;
(iv) the NA Merger Agreement shall have terminated in accordance
with its terms for any reason other than in connection with the
acceptance by NA of a Superior Proposal;
(c) by Parent, if
(i) the Board of Directors of the Company shall have failed to
recommend or shall have withdrawn, or modified in a manner adverse to
Parent, its approval or recommendation of this Agreement or the
Merger,
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shall have approved or recommended a Superior Proposal, or shall have
resolved to do any of the foregoing;
(ii) the Company shall have entered into, or publicly announced
its intention to enter into, a definitive agreement or an agreement in
principle with respect to a Superior Proposal; or
(iii) the Company shall have (1) failed to perform in any
material respect any material obligation or to comply in any material
respect with any material agreement or covenant of the Company to be
performed or complied with by it under this Agreement or (2) breached
any of its representations or warranties such that the condition set
forth in Section 9.02(b) or 9.02(c) cannot be satisfied, which failure
under clause (1) or (2) shall not be cured within 15 Business Days of
notice from Parent (or such longer period during which the Company
exercises reasonable best efforts to cure); or
(iv) the Board of Directors of Parent shall have made a Special
Board Determination.
(d) by the Company, if the Board of Directors of the Company
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a written agreement concerning a Superior Proposal with respect to
the Company, provided however that (i) the Company shall have complied with
Section 6.04, (ii) the Company shall have given Parent at least three Business
Days written prior notice of its intention to terminate the Agreement, attaching
a description of all material terms and conditions of such Superior Proposal to
such notice, (iii) during such three Business Days or greater period, the
Company engages in good faith negotiations with Parent with respect to such
changes as Parent may propose to the terms of the Merger and this Agreement,
(iv) Parent does not make prior to such termination of this Agreement a
definitive, binding offer which the Board of Directors of the Company
determines, in good faith after consultation with its financial advisors, is at
least as favorable to the stockholders of the Company as such Superior Proposal,
and (v) the Company prior to such termination pursuant to this Section 10.01(d)
pays to Parent in immediately available funds the fee required to be paid
pursuant to Section 11.04(b). The Company agrees to notify Parent promptly if
its intention to enter into a written agreement referred to in its notification
shall change at any time after giving such notification.
(e) by the Company, if Parent or Merger Subsidiary shall have (i)
failed to perform in any material respect any material obligation or to comply
in any material respect with any material agreement or covenant of Parent or
Merger
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Subsidiary to be performed or complied with by it under this Agreement or (ii)
breached any of such party's representations or warranties contained in this
Agreement such that the condition set forth in Section 9.03(b) cannot be
satisfied, which failure or breach described in such clause (i) or (ii) shall
not be cured within 15 Business Days of notice from the Company (or such longer
period during which Parent or Merger Subsidiary exercises reasonable best
efforts to cure).
(f) by the Company or Parent, if
(i) the information and representations set forth in the letters
dated June 25, 2000 provided by Steven F. Goldstone and James M. Kilts
in connection with the opinion of Davis Polk & Wardwell dated June 25,
2000 delivered to the Company and Parent pursuant to the Tax Sharing
Agreement are not true and complete in all material respects; or
(ii) since the date of this Agreement, there has been a change in
the Code, final or temporary Treasury Regulations promulgated under
Section 355(e) or Section 358(g), published pronouncements of the
Internal Revenue Service having the same force and effect as final or
temporary Treasury Regulations promulgated under Section 355(e) or
Section 358(g), case law applying Section 355(e) or Section 358(g), or
other relevant binding legal authority relating to Section 355(e) or
Section 358(g) (collectively "Change in Tax Law"), that (A) would
apply to a transaction consummated subsequent to such Change in Tax
Law notwithstanding the existence of a binding written agreement with
respect to such transaction, and (B) would reasonably be expected to
result in (1) the imposition of tax on gain realized with respect to
the stock of NA arising out of the distribution on May 18, 1999 by
Parent to the Company of all of the outstanding shares of the Class B
common stock of NA or on gain realized with respect to the stock of
Parent arising out of the distribution on June 14, 1999 by the Company
to the holders of its common stock of all of the outstanding common
stock of Parent, or (2) a material increase in the tax liability of
the Company resulting from the NA Merger as compared to the tax
liability that would have arisen in the absence of such Change in Tax
Law.
(g) by the Company, if the Board of Directors of the Company shall
have made a Special Board Determination and the Company, prior to such
termination pursuant to this clause (g), pays to Parent in immediately available
funds the fee required to be paid pursuant to Section 11.04(b).
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The party desiring to terminate this Agreement pursuant to this Section 10.01
(other than pursuant to Section 10.01(a)) shall give notice of such termination
to the other party.
SECTION 10.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void and of no effect
with no liability on the part of any party (or any stockholder, director,
officer, employee, agent, consultant or representative of such party) to the
other party hereto, provided that, if such termination shall result from the
willful (i) failure of either party to fulfill a condition to the performance of
the obligations of the other party or (ii) failure of either party to perform a
covenant hereof, such party shall be fully liable for any and all liabilities
and damages incurred or suffered by the other party as a result of such failure.
The provisions of Sections 7.01, 11.04, 11.06, 11.07 and 11.08 shall survive any
termination hereof pursuant to Section 10.01.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission) and shall be given,
if to Parent or Merger Subsidiary, to:
R.J. Reynolds Tobacco Holdings, Inc.
401 North Main Street
Winston-Salem, North Carolina 27102-2866
Attention: General Counsel
Fax: (336) 741-2998
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Jere R. Thomson
Fax: (212) 755-7306
if to the Company, to:
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Nabisco Group Holdings Corp.
7 Campus Drive
Parsippany, New Jersey 07054
Attention: James A. Kirkman III
Fax: (973) 539-9150
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Rosoff
Fax: (212) 450-4800
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a Business Day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding Business Day in the place of receipt.
SECTION 11.02. Non-Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement.
SECTION 11.03. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Effective Time if, but only if,
such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement or, in the case of a waiver, by each
party against whom the waiver is to be effective, provided that, after the
adoption of this Agreement by the stockholders of the Company and without their
further approval, no such amendment or waiver shall reduce the amount or change
the kind of consideration to be received in exchange for the Shares.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
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SECTION 11.04. Expenses. (a) Except as otherwise provided in this
Section, all costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense.
(b) If:
(i) the Company shall terminate this Agreement pursuant to
Section 10.01(d) or 10.01(g);
(ii) Parent shall terminate this Agreement (A) pursuant to
Section 10.01(c)(i) or 10.01(c)(ii), or (B) pursuant to Section
10.01(c)(iii) (other than as a result of a breach of representation
not caused by action (including breach of a covenant contained herein)
of the Company after the date hereof and not capable of being cured
using reasonable best efforts) if, in the case of this clause (B), at
such time a third party shall have made an Acquisition Proposal and
within nine months after termination of this Agreement the Company
enters into a definitive agreement in respect of any Acquisition
Proposal or such a transaction is consummated;
(iii) either the Company or Parent shall terminate this Agreement
pursuant to Section 10.01(b)(iii) and (A) prior to the Company
Stockholder Meeting a third party or the Company shall have publicly
announced an Acquisition Proposal and (B) within nine months after
termination of this Agreement the Company enters into a definitive
agreement in respect of any Acquisition Proposal or such a transaction
is consummated; or
(iv) either the Company or Parent shall terminate this Agreement
pursuant to Section 10.01(b)(iv) and at such time a third party shall
have made an Acquisition Proposal with respect to the Company and
within nine months after termination of this Agreement the Company
enters into a definitive agreement in respect of any Acquisition
Proposal with respect to the Company or such a transaction is
consummated;
then in any case as described in clause (i), (ii), (iii) or (iv), the Company
shall pay to Parent (by wire transfer of immediately available funds not later
than the earlier of the date of termination of this Agreement or, in the case of
clauses (ii)(B), (iii) and (iv), the date of such definitive agreement or
consummation of such a transaction) an amount equal to $300 million, less any
amounts previously paid pursuant to Section 11.04(c). The Company shall be
entitled to deduct and withhold from any payments made to Parent under this
Section 11.04(b) such amounts as may be required to be deducted or withheld
therefrom under the Code
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or under any applicable provisions of state or local tax law. To the extent such
amounts are so deducted or withheld, such amounts shall be treated for purposes
of this Section 11.04(b) as having been paid to Parent.
(c) If:
(i) Parent shall terminate this Agreement pursuant to Section
10.01(c)(iii) and at such time a third party shall have made an
Acquisition Proposal; or
(ii) the Company or Parent shall terminate this Agreement
pursuant to Section 10.01(b)(iii);
then the Company shall within five Business Days pay to Parent in immediately
available funds up to $30 million as reimbursement for documented expenses
incurred in connection with the negotiation and execution of this Agreement.
(d) If the Company shall terminate this Agreement pursuant to Section
10.01(e), then Parent shall within five Business Days pay to the Company in
immediately available funds up to $30 million as reimbursement for documented
expenses incurred in connection with the negotiation and execution of this
Agreement.
SECTION 11.05. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except that Parent or
Merger Subsidiary may transfer or assign, in whole or from time to time in part,
to one or more of its Affiliates, the right to enter into the transactions
contemplated by this Agreement, but no such transfer or assignment will relieve
Parent or Merger Subsidiary of its obligations hereunder.
SECTION 11.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware, without regard to
the conflicts of law rules of such state.
SECTION 11.07. Jurisdiction. Any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in any federal court located in the State of Delaware or any Delaware
state court, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and
44
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irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient form. Process in
any such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 11.01 shall be deemed effective service of process on
such party.
SECTION 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 11.09. Counterparts; Effectiveness; Benefit. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Except as provided in Section 7.03, no provision of this Agreement is intended
to confer any rights, benefits, remedies, obligations, or liabilities hereunder
upon any Person other than the parties hereto and their respective successors
and assigns.
SECTION 11.10. Entire Agreement. This Agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and supersedes all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter of this Agreement. Notwithstanding the foregoing,
the Confidentiality Agreement is hereby amended to delete the sixth and twelfth
paragraphs thereof to the extent necessary to permit Parent to pursue any
Acquisition Proposal with respect to the Company that would be completed after
the NA Merger or any Alternative NA Merger.
SECTION 11.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 11.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the
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economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled (without posting a bond or similar indemnity) to an injunction or
injunctions to prevent breaches of this Agreement or to enforce specifically the
performance of the terms and provisions hereof in any federal court located in
the State of Delaware or any Delaware state court, in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
NABISCO GROUP HOLDINGS CORP.
By: /s/ James M. Kilts
-------------------------
Name: James M. Kilts
Title: President and Chief Executive
Officer
R.J. REYNOLDS TOBACCO
HOLDINGS, INC.
By: /s/ Charles A. Blixt
---------------------------
Name: Charles A. Blixt
Title: Executive Vice President and
General Counsel
RJR ACQUISITION CORP.
By: /s/ Charles A. Blixt
---------------------------
Name: Charles A. Blixt
Title: Executive Vice President and
General Counsel
47
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ANNEX D
[UBS WARBURG LETTERHEAD]
June 25, 2000
Board of Directors
Nabisco Group Holdings Corp.
7 Campus Drive
Parsippany, NJ 07054
Board of Directors
Nabisco Holdings Corp.
7 Campus Drive
Parsippany, NJ 07054
Members of the Boards of Directors:
We understand that Nabisco Group Holdings Corp., a Delaware corporation
("NGH"), and Nabisco Holdings Corp., a Delaware corporation ("NA"), are
considering a transaction (the "Transaction") whereby Philip Morris Companies
Inc., a Delaware corporation ("PM"), will acquire NA. Pursuant to the terms of
an Agreement and Plan of Merger, dated as of June 25, 2000 (the "Merger
Agreement"), by and among PM, Strike Acquisition Corp., a Delaware corporation
("Merger Sub") and a wholly owned subsidiary of PM, and NA, among other things,
(i) Merger Sub will be merged with and into NA (the "Merger"), and (ii) in
connection with the Merger, each issued and outstanding share of Class A common
stock, par value $.01 per share ("Class A Common Stock"), and Class B common
stock, par value $.01 per share ("Class B Common Stock" and, together with the
Class A Common Stock, the "NA Common Stock"), of NA (other than shares held by
NA as treasury stock or owned by PM or any of its subsidiaries and dissenting
shares under Section 2.04 of the Merger Agreement) will be converted into the
right to receive $55.00, without interest (the "Merger Consideration"). The
terms and conditions of the Transaction are more fully set forth in the Merger
Agreement and the Voting Agreement, dated as of June 25, 2000 (the "Voting
Agreement"), between NGH and PM.
You have requested our opinion as to the fairness to the holders of NA
Common Stock from a financial point of view of the Merger Consideration.
UBS Warburg LLC ("UBSW") has acted as financial advisor to the Board of
Directors of each of NGH and NA in connection with the Transaction, which joint
engagement was consented to by each of NGH and NA. UBSW will receive a fee from
NGH and NA the majority of which is payable upon the consummation of the
Transaction. In the past, UBSW and its predecessors have provided investment
banking services to NGH, NA and PM and received customary compensation for the
rendering of such services. In the ordinary course of business, UBSW, its
successors and affiliates may trade or have traded securities of NGH, NA and PM
for their own accounts and, accordingly, may at any time hold a long or short
position in such securities.
Our opinion does not address NGH's or NA's underlying business decision to
effect the Transaction or constitute a recommendation to any stockholder of NGH
or NA as to how such stockholder should vote with respect to the Transaction.
At your direction, we have not been asked to, nor do we, offer any opinion as
to the material terms of the Merger Agreement or the Voting Agreement, the form
of the Transaction or the after-tax consequences to any holder of NA Common
Stock of the Transaction. In addition, at your direction, we have considered
the value of NA as a whole on the assumption that all NA stockholders would
receive equal consideration for their shares of NA Common Stock. Furthermore,
at your direction, UBSW is not expressing any opinion as to the prices at which
the NGH common stock will trade subsequent to the Transaction or the use of the
proceeds from the Transaction by NGH or any other NA stockholder. In rendering
this opinion, we have assumed, with your consent, that the final executed form
of the Merger Agreement and the Voting Agreement does not differ in any
material respect from the drafts that we have examined, and that NA, PM and
Merger Sub will comply with all the material terms of the Merger Agreement and
the Voting Agreement. At your request, we have contacted third parties to
solicit indications of interest in a possible business
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combination transaction with NGH and NA.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to NA, (ii) reviewed the reported prices and trading activity for the
Class A Common Stock, (iii) reviewed certain internal financial information and
other data relating to the business and financial prospects of NA, including
estimates and financial forecasts prepared by management of NA, that were
provided to us by NA and not publicly available, (iv) conducted discussions
with members of the senior management of NA, (v) reviewed publicly available
financial and stock market data with respect to certain other companies in
lines of business we believe to be generally comparable to those of NA, (vi)
compared the financial terms of the Transaction with the publicly available
financial terms of certain other transactions which we believe to be generally
relevant, (vii) reviewed drafts of the Merger Agreement and the Voting
Agreement, and (viii) conducted such other financial studies, analyses, and
investigations, and considered such other information as we deemed necessary or
appropriate.
In connection with our review, at your direction, we have not assumed any
responsibility for independent verification for any of the information reviewed
by us for the purpose of this opinion and have, at your direction, relied on
its being complete and accurate in all material respects. In addition, at your
direction, we have not made any independent evaluation or appraisal of any of
the assets or liabilities (contingent or otherwise) of NA, nor have we been
furnished with any such evaluation or appraisal. With respect to the financial
forecasts and estimates referred to above, we have assumed, at your direction,
that they have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of NA as to the
future performance of NA. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair, from a financial point of view,
to the holders of NA Common Stock.
Very truly yours,
UBS WARBURG LLC
/s/ UBS Warburg LLC
2
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ANNEX E
[MORGAN STANLEY DEAN WITTER LETTERHEAD]
June 25, 2000
Board of Directors
Nabisco Holdings Corp.
7 Campus Drive
Parsippany, NJ 07054-0311
Board of Directors
Nabisco Group Holdings Corp.
7 Campus Drive
Parsippany, NJ 07054-0311
Ladies and Gentlemen:
We understand that Nabisco Holdings Corp. ("Target" or the "Company"), Philip
Morris Companies Inc. ("Buyer") and Strike Acquisition Corp., a wholly owned
subsidiary of Buyer ("Acquisition Sub"), propose to enter into an Agreement and
Plan of Merger, substantially in the form of the draft dated June 21, 2000 (the
"Merger Agreement"), which provides, among other things, for the merger (the
"Merger") of Acquisition Sub with and into Target. Pursuant to the Merger,
Target will become a wholly owned subsidiary of Buyer and each outstanding
share of Class A common stock, par value $.01 per share, of Target (the "Class
A Common Stock") and Class B Common Stock, par value $.01 per share, of Target
(the "Class B Common Stock", and together with the Class A Common Stock, the
"Common Stock") other than shares held in treasury or held by Buyer or any
affiliate of Buyer or as to which dissenters' rights have been perfected, will
be converted into the right to receive $55.00 per share in cash. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be paid
pursuant to the Merger Agreement in the aggregate is fair from a financial
point of view to the holders of Common Stock other than Buyer and its
affiliates.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management
of the Company;
(iii) reviewed certain financial projections regarding the Company
prepared by the management of the Company;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the
Company;
(v) reviewed the reported prices and trading activity of the Class A
Common Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of the Class A Common Stock with that of certain
comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
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(viii) participated in certain discussions and negotiations among
representatives of the Company, Nabisco Group Holdings Corp. (the
"Parent") and Buyer and their financial and legal advisors;
(ix) reviewed the drafts dated June 21, 2000 of the Merger Agreement, as
well as the Voting Agreement to be entered into between Parent and
Buyer (the "Voting Agreement");
(x) discussed the tax implications of the consummation of the Merger
with the Company, Parent and their counsel; and
(xi) performed such other analyses and considered such other factors as
we have deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have not made and have not assumed responsibility for making any independent
valuation or appraisal of the assets or liabilities of the Company, nor have we
been furnished with any such appraisals. We have assumed that the executed
versions of the Merger Agreement and the Voting Agreement will not differ in
any material respect from the last drafts thereof that we have reviewed. We
have assumed that the Merger will be consummated in accordance with the terms
set forth in the Merger Agreement without material modification or waiver. We
have also assumed that the consummation of the Merger will not adversely affect
the tax-free treatment of the spin-off of R.J. Reynolds Tobacco Holdings, Inc.
completed June 14, 1999. Our opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof, but our opinion does not address the
Company's underlying business decision to effect the transactions contemplated
by the Merger Agreement.
We have acted as financial advisor to the Board of Directors of the Company and
the Board of Directors of Parent in connection with the Merger and will receive
a fee from each of the Company and Parent for our services. In the past, Morgan
Stanley & Co. Incorporated and its affiliates ("Morgan Stanley") have provided
financial advisory and financing services for the Company, Parent and Buyer and
have received fees for the rendering of these services. In the ordinary course
of business, Morgan Stanley may from time to time trade in the securities or
indebtedness of the Company, Parent or Buyer for its own account, the accounts
of investment funds and other clients under the management of Morgan Stanley
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities or indebtedness.
It is understood that this letter is for the information of the Board of
Directors of the Company and Parent and may not be used for any other purpose
without our prior written consent, except that this opinion may be included in
its entirety, if required, in any filing made by the Company, Parent or Buyer
in respect of the Merger with the Securities and Exchange Commission. This
opinion does not address the relative fairness of the consideration to be paid
pursuant to the Merger Agreement to the holders of the Class A Common Stock and
the Class B Common Stock, and we express no opinion or recommendation as to how
the stockholders of the Company or the Parent should vote with respect to the
Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be paid pursuant to the Merger Agreement in the aggregate is
fair from a financial point of view to the holders of Common Stock other than
Buyer and its affiliates.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Raymond J. McGiure
-------------------------------
Raymond J. McGuire
Managing Director
2
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ANNEX F
SECTION 262 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
SECTION 262--Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
<PAGE>
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsections (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of such stockholder's
shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days
after the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before
the effective date of the merger or consolidation notifying each of the
holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger
or consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need
2
<PAGE>
only be sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining
the stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the effective
date of the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose
3
<PAGE>
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
339, L.'98, eff. 7-1-98).
4
<PAGE>
P R O X Y [Common]
NABISCO GROUP HOLDINGS CORP.
Special Meeting of Stockholders - o, 2000
Proxy Solicitation on Behalf of the Board of Directors
The undersigned hereby, with respect to all shares of Common Stock of
Nabisco Group Holdings Corp. (the "Company") which the undersigned may be
entitled to vote, constitutes and appoints each of Steven F. Goldstone, James
M. Kilts and James A. Kirkman III as his true and lawful agent and proxy, with
full power of substitution in each, to represent the undersigned and directs
First Chicago Trust Company of New York, as Depositary, in each case at the
Special Meeting of Stockholders of the Company to be held at the Hotel DuPont,
11th and Market Streets, Wilmington, Delaware 19801, on o, 2000 at 10:30 a.m.,
Eastern Time, and at any adjournments or postponements thereof, to vote such
stock on all matters coming before said meeting as set forth below.
1. To authorize the disposition of Nabisco Group Holdings Corp.'s entire
interest in Nabisco Holdings Corp., consisting of 213,250,000 shares of Class B
common stock of Nabisco Holdings Corp., which disposition will be effected
pursuant to the Agreement and Plan of Merger dated as of June 25, 2000 among
Nabisco Holdings Corp., Philip Morris Companies Inc. and Strike Acquisition
Corp.
2. To approve and adopt the Agreement and Plan of Merger (the "NGH Merger
Agreement") dated as of June 25, 2000 among Nabisco Group Holdings Corp., R.J.
Reynolds Tobacco Holdings, Inc. and RJR Acquisition Corp.
3. To grant discretionary authority to vote in favor of an adjournment of
the meeting, if necessary.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR proposals 1, 2 and 3. Please mark this Proxy Card, fill in the
date, sign on the reverse side and return promptly in the accompanying
envelope. No postage is necessary if mailed in the United States.
(SEE REVERSE SIDE)
--------------------------------------------------------------------------------
<PAGE>
[X] Please mark your votes as in this example.
The Board of Directors recommends a vote FOR proposal 1, FOR proposal 2
and FOR proposal 3.
<TABLE>
<S> <C> <C> <C> <C>
1. Authorize the disposition of Nabisco Group Holdings Corp.'s FOR [ ] AGAINST [ ] ABSTAIN [ ]
entire interest in Nabisco Holdings Corp. (see reverse)
2. Approve and adopt the NGH Merger Agreement FOR [ ] AGAINST [ ] ABSTAIN [ ]
(see reverse)
3. Grant discretionary authority to vote in favor FOR [ ] AGAINST [ ] ABSTAIN [ ]
of an adjournment of the meeting, if necessary
Change of address: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
------------------------------------ give full title as such.
------------------------------------ -----------------------------------------------------
Signature(s)
-----------------------------------------------------
Date Title
-------------------------------------------------------------------------------------------------------------------------------
(See Reverse Side for Instructions)
</TABLE>
Nabisco Group Holdings Corp. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the internet or the telephone. This eliminates the need
to return the proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
this box must be used to access the system.
To vote over the internet:
o Log on the internet and go to the web site http://www.eproxyvote.com/ngh
To vote over the telephone:
o On a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683) 24 hours
a day, 7 days a week; outside the U.S. call 1-201-536-8073.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card. If you choose to vote by mail, please mark, sign and
date your card and return your proxy card in the postage-paid envelope
provided.
If you have any questions or require assistance, please call:
MACKENZIE PARTNERS, INC.
(212) 929-5500 (COLLECT) OR (800) 322-2885 (TOLL-FREE)
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
Section 212 of the Delaware General Corporation Law authorizes the use of
electronic transmission, such as transmissions over the internet, to grant a
proxy.
<PAGE>
P R O X Y [Common/Beneficial]
NABISCO GROUP HOLDINGS CORP.
Special Meeting of Stockholders - o, 2000
Proxy Solicitation on Behalf of the Board of Directors
The undersigned hereby, with respect to all shares of Common Stock of
Nabisco Group Holdings Corp. (the "Company") which the undersigned may be
entitled to vote, constitutes and appoints each of Steven F. Goldstone, James
M. Kilts and James A. Kirkman III as his true and lawful agent and proxy, with
full power of substitution in each, to represent the undersigned and directs
First Chicago Trust Company of New York, as Depositary, in each case at the
Special Meeting of Stockholders of the Company to be held at the Hotel DuPont,
11th and Market Streets, Wilmington, Delaware 19801, on o, 2000 at 10:30 a.m.,
Eastern Time, and at any adjournments or postponements thereof, to vote such
stock on all matters coming before said meeting as set forth below.
1. To authorize the disposition of Nabisco Group Holdings Corp.'s entire
interest in Nabisco Holdings Corp., consisting of 213,250,000 shares of Class B
common stock of Nabisco Holdings Corp., which disposition will be effected
pursuant to the Agreement and Plan of Merger dated as of June 25, 2000 among
Nabisco Holdings Corp., Philip Morris Companies Inc. and Strike Acquisition
Corp.
2. To approve and adopt the Agreement and Plan of Merger (the "NGH Merger
Agreement") dated as of June 25, 2000 among Nabisco Group Holdings Corp., R.J.
Reynolds Tobacco Holdings, Inc. and RJR Acquisition Corp.
3. To grant discretionary authority to vote in favor of an adjournment of
the meeting, if necessary.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR proposals 1, 2 and 3. Please mark this Proxy Card, fill in the
date, sign on the reverse side and return promptly in the accompanying
envelope. No postage is necessary if mailed in the United States.
(SEE REVERSE SIDE)
--------------------------------------------------------------------------------
<PAGE>
[X] Please mark your votes as in this example.
The Board of Directors recommends a vote FOR proposal 1, FOR proposal
2 and FOR proposal 3.
<TABLE>
<S> <C> <C> <C> <C>
1. Authorize the disposition of Nabisco Group Holdings FOR [ ] AGAINST [ ] ABSTAIN [ ]
Corp.'s entire interest in Nabisco Holdings Corp. (see
reverse)
2. Approve and adopt the NGH Merger Agreement (see FOR [ ] AGAINST [ ] ABSTAIN [ ]
reverse)
3. Grant discretionary authority to vote in favor of FOR [ ] AGAINST [ ] ABSTAIN [ ]
an adjournment of the meeting, if necessary
Please sign exactly as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full title
as such.
--------------------------------------------
Signature(s)
--------------------------------------------
Date Title
</TABLE>
<PAGE>
P R O X Y [Common/$.835 Depositary Shares]
NABISCO GROUP HOLDINGS CORP.
Special Meeting of Stockholders - o, 2000
Proxy Solicitation on Behalf of the Board of Directors
The undersigned hereby, with respect to all shares of Common Stock of
Nabisco Group Holdings Corp. (the "Company") which the undersigned may be
entitled to vote, constitutes and appoints each of Steven F. Goldstone, James
M. Kilts and James A. Kirkman III as his true and lawful agent and proxy, with
full power of substitution in each, to represent the undersigned and directs
First Chicago Trust Company of New York, as Depositary, in each case at the
Special Meeting of Stockholders of the Company to be held at the Hotel DuPont,
11th and Market Streets, Wilmington, Delaware 19801, on o, 2000 at 10:30 a.m.,
Eastern Time, and at any adjournments or postponements thereof, to vote such
stock on all matters coming before said meeting as set forth below.
1. To authorize the disposition of Nabisco Group Holdings Corp.'s entire
interest in Nabisco Holdings Corp., consisting of 213,250,000 shares of Class B
common stock of Nabisco Holdings Corp., which disposition will be effected
pursuant to the Agreement and Plan of Merger dated as of June 25, 2000 among
Nabisco Holdings Corp., Philip Morris Companies Inc. and Strike Acquisition
Corp.
2. To approve and adopt the Agreement and Plan of Merger (the "NGH Merger
Agreement") dated as of June 25, 2000 among Nabisco Group Holdings Corp., R.J.
Reynolds Tobacco Holdings, Inc. and RJR Acquisition Corp.
3. To grant discretionary authority to vote in favor of an adjournment of
the meeting, if necessary.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR proposals 1, 2 and 3. Please mark this Proxy Card, fill in the
date, sign on the reverse side and return promptly in the accompanying
envelope. No postage is necessary if mailed in the United States.
(SEE REVERSE SIDE)
--------------------------------------------------------------------------------
IMPORTANT MESSAGE!
To Former Holders of $.835 Depositary Shares:
o You are entitled to vote at the Nabisco Group Holdings Corp. ("NGH")
Special Meeting of Stockholders to be held on o, 2000.
o You may use the proxy card attached above to vote. Please vote early!
o If you have any questions about voting, please call MacKenzie Partners,
Inc. toll free at 1-800-322-2885.
o Each $.835 Depositary Share formerly owned by you has been converted into
one-fifth of a share of NGH Common Stock, after adjustment to reflect the
Company's April 1995 reverse Common Stock split. The number of shares
printed on the reverse side of this card is the number of shares of NGH
Common Stock that you are entitled to receive upon exchange of your
certificate(s) representing $.835 Depositary Shares.
o Until the certificates representing your $.835 Depositary Shares are
exchanged for NGH Common Stock, we cannot send you any NGH Common Stock
dividends. To date, cash dividends aggregating approximately $8.6050 per
share of NGH Common Stock have accrued on your account.
o If you need assistance exchanging your $.835 Depositary Share
certificate(s), please call the Exchange Agent, First Chicago Trust
Company of New York, toll-free at 1-800-317-4432 and ask for the Tenders &
Exchanges Department.
Thank you for acting promptly.
Nabisco Group Holdings Corp.
<PAGE>
[X] Please mark your votes as in this example.
The Board of Directors recommends a vote FOR proposal 1, FOR proposal 2
and FOR proposal 3.
<TABLE>
<S> <C> <C> <C> <C>
1. Authorize the disposition of Nabisco Group Holdings Corp.'s FOR [ ] AGAINST [ ] ABSTAIN [ ]
entire interest in Nabisco Holdings Corp. (see reverse)
2. Approve and adopt the NGH Merger Agreement (see reverse) FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Grant discretionary authority to vote in favor of an FOR [ ] AGAINST [ ] ABSTAIN [ ]
adjournment of the meeting, if necessary
Change of address: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as
attorney, executor, administrator, trustee or
------------------------------------ guardian, please give full title as such.
------------------------------------
--------------------------------------------------
Signature(s)
--------------------------------------------------
Date Title
----------------------------------------------------------------------------------------------------------------------------
(See Reverse Side for Instructions)
</TABLE>
Nabisco Group Holdings Corp. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the internet or the telephone. This eliminates the need
to return the proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
this box must be used to access the system.
To vote over the internet:
o Log on the internet and go to the web site http://www.eproxyvote.com/ngh
To vote over the telephone:
o On a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683) 24 hours
a day, 7 days a week; outside the U.S. call 1-201-536-8073.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card. If you choose to vote by mail, please mark, sign and
date your card and return your proxy card in the postage-paid envelope
provided.
If you have any questions or require assistance, please call:
MACKENZIE PARTNERS, INC.
(212) 929-5500 (COLLECT) OR (800) 322-2885 (TOLL-FREE)
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
Section 212 of the Delaware General Corporation Law authorizes the use of
electronic transmission, such as transmissions over the internet, to grant a
proxy.
<PAGE>
P R O X Y [Common/Borden]
NABISCO GROUP HOLDINGS CORP.
Special Meeting of Stockholders - o, 2000
Proxy Solicitation on Behalf of the Board of Directors
The undersigned hereby, with respect to all shares of Common Stock of
Nabisco Group Holdings Corp. (the "Company") which the undersigned may be
entitled to vote, constitutes and appoints each of Steven F. Goldstone, James
M. Kilts and James A. Kirkman III as his true and lawful agent and proxy, with
full power of substitution in each, to represent the undersigned and directs
First Chicago Trust Company of New York, as Depositary, in each case at the
Special Meeting of Stockholders of the Company to be held at the Hotel DuPont,
11th and Market Streets, Wilmington, Delaware 19801, on o, 2000 at 10:30 a.m.,
Eastern Time, and at any adjournments or postponements thereof, to vote such
stock on all matters coming before said meeting as set forth below.
1. To authorize the disposition of Nabisco Group Holdings Corp.'s entire
interest in Nabisco Holdings Corp., consisting of 213,250,000 shares of Class B
common stock of Nabisco Holdings Corp., which disposition will be effected
pursuant to the Agreement and Plan of Merger dated as of June 25, 2000 among
Nabisco Holdings Corp., Philip Morris Companies Inc. and Strike Acquisition
Corp.
2. To approve and adopt the Agreement and Plan of Merger (the "NGH Merger
Agreement") dated as of June 25, 2000 among Nabisco Group Holdings Corp., R.J.
Reynolds Tobacco Holdings, Inc. and RJR Acquisition Corp.
3. To grant discretionary authority to vote in favor of an adjournment of
the meeting, if necessary.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR proposals 1, 2 and 3. Please mark this Proxy Card, fill in the
date, sign on the reverse side and return promptly in the accompanying
envelope. No postage is necessary if mailed in the United States.
(SEE REVERSE SIDE)
--------------------------------------------------------------------------------
IMPORTANT MESSAGE!
To Former Holders of Borden, Inc. Common Stock:
o You are entitled to vote at the Nabisco Group Holdings Corp. ("NGH")
Special Meeting of Stockholders to be held on o, 2000.
o You may use the proxy card attached above to vote. Please vote early!
o If you have any questions about voting, please call MacKenzie Partners,
Inc. toll free at 1-800-322-2885.
o Each share of Borden common stock reflected in your account is
exchangeable for .45829 of a share of NGH Common Stock, after adjustment
to reflect NGH's April 1995 reverse Common Stock split. The number of
shares printed on the reverse side of this card is the number of shares of
NGH Common Stock that you are entitled to receive upon exchange of your
Borden common stock.
o Until the certificates representing your Borden common stock are exchanged
for NGH Common Stock, we cannot send you any NGH Common Stock dividends.
To date, cash dividends aggregating approximately $8.59 per share of NGH
Common Stock have accrued on your account.
o If you need assistance exchanging your Borden common stock certificate(s),
please call the Exchange Agent, First Chicago Trust Company of New York,
toll-free at 1-800-619-1696 and ask for the Tenders & Exchanges
Department.
Thank you for acting promptly.
Nabisco Group Holdings Corp.
<PAGE>
[X] Please mark your votes as in this example.
The Board of Directors recommends a vote FOR proposal 1, FOR proposal 2
and FOR proposal 3.
<TABLE>
<S> <C> <C> <C> <C>
1. Authorize the disposition of Nabisco Group Holdings Corp.'s FOR [ ] AGAINST [ ] ABSTAIN [ ]
entire interest in Nabisco Holdings Corp. (see reverse)
2. Approve and adopt the NGH Merger Agreement (see reverse) FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Grant discretionary authority to vote in favor of FOR [ ] AGAINST [ ] ABSTAIN [ ]
an adjournment of the meeting, if necessary
Please sign exactly as name appears hereon.
Change of address: Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
------------------------------------ guardian, please give full title as such.
------------------------------------
-----------------------------------------------
Signature(s)
-----------------------------------------------
Date Title
-------------------------------------------------------------------------------------------------------------------------
(See Reverse Side for Instructions)
</TABLE>
Nabisco Group Holdings Corp. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the internet or the telephone. This eliminates the need
to return the proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
this box must be used to access the system.
To vote over the internet:
o Log on the internet and go to the web site http://www.eproxyvote.com/ngh
To vote over the telephone:
o On a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683) 24 hours
a day, 7 days a week; outside the U.S. call 1-201-536-8073.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card. If you choose to vote by mail, please mark, sign and
date your card and return your proxy card in the postage-paid envelope
provided.
If you have any questions or require assistance, please call:
MACKENZIE PARTNERS, INC.
(212) 929-5500 (COLLECT) OR (800) 322-2885 (TOLL-FREE)
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
Section 212 of the Delaware General Corporation Law authorizes the use of
electronic transmission, such as transmissions over the internet, to grant a
proxy.
<PAGE>
P R O X Y
Voting Instruction Card
NABISCO GROUP HOLDINGS CORP.
Special Meeting of Stockholders - o, 2000
Solicited by Fidelity Management Trust Company
The undersigned hereby constitutes and appoints Fidelity Management Trust
Company ("Fidelity"), as Trustee, his true and lawful agent and proxy, to
represent the undersigned at the Special Meeting of Stockholders of Nabisco
Group Holdings Corp. (the "Company"), to be held at the Hotel DuPont, 11th and
Market Streets, Wilmington, Delaware 19801, on o, 2000 at 10:30 a.m., Eastern
Time, and at any adjournments or postponements thereof, and to vote all the
shares of stock of the Company which the undersigned may be entitled to vote on
all matters coming before said meeting as set forth below.
1. To authorize the disposition of Nabisco Group Holdings Corp.'s entire
interest in Nabisco Holdings Corp., consisting of 213,250,000 shares of Class B
common stock of Nabisco Holdings Corp., which disposition will be effected
pursuant to the Agreement and Plan of Merger dated as of June 25, 2000 among
Nabisco Holdings Corp., Philip Morris Companies Inc. and Strike Acquisition
Corp.
2. To approve and adopt the Agreement and Plan of Merger (the "NGH Merger
Agreement") dated as of June 25, 2000 among Nabisco Group Holdings Corp., R.J.
Reynolds Tobacco Holdings, Inc. and RJR Acquisition Corp.
3. To grant discretionary authority to vote in favor of an adjournment of
the meeting, if necessary.
This Instruction Card when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, if
your card is not properly completed, or if your card is not timely received,
Fidelity will vote the shares credited to your account in the same proportion
as the shares for which instructions are received. Please mark this Instruction
Card, fill in the date, sign on the reverse side and return promptly in the
accompanying envelope. No postage is necessary if mailed in the United States.
(SEE REVERSE SIDE)
FIDELITY
--------------------------------------------------------------------------------
Fidelity Management Trust Company
300 Puritan Way MM3A
Marlborough, MA 01752-3078
o 2000
To: Participants in the Nabisco, Inc. Capital Investment Plan
As a participant in a Company sponsored employee benefit savings plan that
requires pass through voting, you are entitled to instruct Fidelity, in its
capacity as Trustee of the above named plan, how to vote shares of Common Stock
and Matching Stock allocated to your plan account. Enclosed are the following:
1. Notice of Special Meeting of Stockholders to be held on o, 2000 and the
accompanying Proxy Statement.
2. This Voting Instruction Card.
3. A postage-paid return envelope.
<PAGE>
These shares will be voted as you direct if this card is completed by you and
received by Fidelity on or before o, 2000. Fidelity is responsible for
tabulating the returns. Shares for which no instructions are received shall be
voted in the same proportion as the shares for which instructions are received.
We appreciate your completing, dating and signing the card above and returning
it promptly in the postage-paid return envelope.
Cordially yours,
Fidelity Management Trust Company
Trustee
Enclosures
<PAGE>
[X] Please mark your votes as in this example.
<TABLE>
<S> <C> <C> <C> <C>
1. Authorize the disposition of Nabisco Group Holdings Corp.'s FOR [ ] AGAINST [ ] ABSTAIN [ ]
entire interest in Nabisco Holdings Corp. (see reverse)
2. Approve and adopt the NGH Merger Agreement (see reverse) FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Grant discretionary authority to vote in favor of FOR [ ] AGAINST [ ] ABSTAIN [ ]
an adjournment of the meeting, if necessary
Please sign exactly as name appears hereon.
--------------------------------------------
Signature
--------------------------------------------
Date
----------------------------------------------------------------------------------------------------------------------
(See Reverse Side for Instructions)
</TABLE>
Nabisco Group Holdings Corp. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the internet or the telephone. This eliminates the need
to return the instruction card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
this box must be used to access the system.
To vote over the internet:
o Log on the internet and go to the web site http://www.eproxyvote.com/ngh
To vote over the telephone:
o On a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683) 24 hours
a day, 7 days a week; outside the U.S. call 1-201-536-8073.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the instruction card.
If you choose to vote your shares electronically, there is no need for you to
mail back your instruction card. If you choose to vote by mail, please mark,
sign and date your card and return your instruction card in the postage-paid
envelope provided.
If you have any questions or require assistance, please call:
MACKENZIE PARTNERS, INC.
(212) 929-5500 (COLLECT) OR (800) 322-2885 (TOLL-FREE)
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
Section 212 of the Delaware General Corporation Law authorizes the use of
electronic transmission, such as transmissions over the internet, to grant a
proxy.
<PAGE>
P R O X Y
Voting Instruction Card
NABISCO GROUP HOLDINGS CORP.
Special Meeting of Stockholders - o, 2000
Solicited by Fidelity Management Trust Company
The undersigned hereby constitutes and appoints Fidelity Management Trust
Company ("Fidelity"), as Trustee, his true and lawful agent and proxy, to
represent the undersigned at the Special Meeting of Stockholders of Nabisco
Group Holdings Corp. (the "Company"), to be held at the Hotel DuPont, 11th and
Market Streets, Wilmington, Delaware 19801, on o, 2000 at 10:30 a.m., Eastern
Time, and at any adjournments or postponements thereof, and to vote all the
shares of stock of the Company which the undersigned may be entitled to vote on
all matters coming before said meeting as set forth below.
1. To authorize the disposition of Nabisco Group Holdings Corp.'s entire
interest in Nabisco Holdings Corp., consisting of 213,250,000 shares of Class B
common stock of Nabisco Holdings Corp., which disposition will be effected
pursuant to the Agreement and Plan of Merger dated as of June 25, 2000 among
Nabisco Holdings Corp., Philip Morris Companies Inc. and Strike Acquisition
Corp.
2. To approve and adopt the Agreement and Plan of Merger (the "NGH Merger
Agreement") dated as of June 25, 2000 among Nabisco Group Holdings Corp., R.J.
Reynolds Tobacco Holdings, Inc. and RJR Acquisition Corp.
3. To grant discretionary authority to vote in favor of an adjournment of
the meeting, if necessary.
This Instruction Card when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, if
your card is not properly completed, or if your card is not timely received,
Fidelity will vote the shares credited to your account in the same proportion
as the shares for which instructions are received. Please mark this Instruction
Card, fill in the date, sign on the reverse side and return promptly in the
accompanying envelope. No postage is necessary if mailed in the United States.
(SEE REVERSE SIDE)
FIDELITY
--------------------------------------------------------------------------------
Fidelity Management Trust Company
300 Puritan Way MM3A
Marlborough, MA 01752-3078
o 2000
To: Participants in the Nabisco, Inc. Employee Savings Plan
As a participant in a Company sponsored employee benefit savings plan that
requires pass through voting, you are entitled to instruct Fidelity, in its
capacity as Trustee of the above named plan, how to vote shares of Common Stock
allocated to your plan account. Enclosed are the following:
1. Notice of Special Meeting of Stockholders to be held on o, 2000 and the
accompanying Proxy Statement.
2. This Voting Instruction Card.
3. A postage-paid return envelope.
<PAGE>
These shares will be voted as you direct if this card is completed by you and
received by Fidelity on or before o, 2000. Fidelity is responsible for
tabulating the returns. Shares for which no instructions are received shall be
voted in the same proportion as the shares for which instructions are received.
We appreciate your completing, dating and signing the card above and returning
it promptly in the postage-paid return envelope.
Cordially yours,
Fidelity Management Trust Company
Trustee
Enclosures
<PAGE>
[X] Please mark your votes as in this example.
<TABLE>
<S> <C> <C> <C> <C>
1. Authorize the disposition of Nabisco Group Holdings Corp.'s FOR [ ] AGAINST [ ] ABSTAIN [ ]
entire interest in Nabisco Holdings Corp. (see reverse)
2. Approve and adopt the NGH Merger Agreement (see reverse) FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Grant discretionary authority to vote in favor of an FOR [ ] AGAINST [ ] ABSTAIN [ ]
adjournment of the meeting, if necessary
Please sign exactly as name appears hereon.
---------------------------------------------
Signature
---------------------------------------------
Date
-----------------------------------------------------------------------------------------------------------------------
(See Reverse Side for Instructions)
</TABLE>
Nabisco Group Holdings Corp. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the internet or the telephone. This eliminates the need
to return the instruction card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
this box must be used to access the system.
To vote over the internet:
o Log on the internet and go to the web site http://www.eproxyvote.com/ngh
To vote over the telephone:
o On a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683) 24 hours
a day, 7 days a week; outside the U.S. call 1-201-536-8073.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the instruction card.
If you choose to vote your shares electronically, there is no need for you to
mail back your instruction card. If you choose to vote by mail, please mark,
sign and date your card and return your instruction card in the postage-paid
envelope provided.
If you have any questions or require assistance, please call:
MACKENZIE PARTNERS, INC.
(212) 929-5500 (COLLECT) OR (800) 322-2885 (TOLL-FREE)
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
Section 212 of the Delaware General Corporation Law authorizes the use of
electronic transmission, such as transmissions over the internet, to grant a
proxy.
<PAGE>
P R O X Y
Voting Instruction Card
NABISCO GROUP HOLDINGS CORP.
Special Meeting of Stockholders - o, 2000
Proxy Solicitation on Behalf of the Board of Directors
The undersigned hereby constitutes and appoints Vanguard Group, Custodian
under the Nabisco/Life Savers Puerto Rico Capital Accumulation Plan, his true
and lawful agent and proxy, to represent the undersigned at the Special Meeting
of Stockholders of Nabisco Group Holdings Corp. (the "Company"), to be held at
the Hotel DuPont, 11th and Market Streets, Wilmington, Delaware 19801, on o,
2000 at 10:30 a.m., Eastern Time, and at any adjournments or postponements
thereof, and to vote all the shares of stock of the Company which the
undersigned may be entitled to vote on all matters coming before said meeting
as set forth below.
1. To authorize the disposition of Nabisco Group Holdings Corp.'s entire
interest in Nabisco Holdings Corp., consisting of 213,250,000 shares of Class B
common stock of Nabisco Holdings Corp., which disposition will be effected
pursuant to the Agreement and Plan of Merger dated as of June 25, 2000 among
Nabisco Holdings Corp., Philip Morris Companies Inc. and Strike Acquisition
Corp.
2. To approve and adopt the Agreement and Plan of Merger (the "NGH Merger
Agreement") dated as of June 25, 2000 among Nabisco Group Holdings Corp., R.J.
Reynolds Tobacco Holdings, Inc. and RJR Acquisition Corp.
3. To grant discretionary authority to vote in favor of an adjournment of
the meeting, if necessary.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR proposals 1, 2 and 3. Please mark this Proxy Card, fill in the
date, sign on the reverse side and return promptly in the accompanying
envelope. No postage is necessary if mailed in the United States.
(SEE REVERSE SIDE)
VANGUARD
--------------------------------------------------------------------------------
Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355
DE TENER ALGUNA DUDA RELATIVO A ESTOS DOCUMENTOS FAVOR DE COMUNICARSE COM EL
DEPARTAMENTO DE RECURSOS HUMANOS.
o 2000
To: Participants in the Nabisco/Life Savers Puerto Rico Capital Accumulation
Plan
As a participant in a Company sponsored employee benefit savings plan that
requires pass through voting, you are entitled to instruct Vanguard, in its
capacity as Custodian of the above named plan, how to vote shares of Common
Stock allocated to your plan account. Enclosed are the following:
1. Notice of Special Meeting of Stockholders to be held on o, 2000 and the
accompanying Proxy Statement.
2. This Proxy/Voting Instruction Card.
<PAGE>
3. A postage-paid return envelope.
These shares will be voted as you direct if this card is completed by you and
received by First Chicago Trust Company of New York on or before o, 2000. First
Chicago Trust Company is responsible for tabulating the returns. Shares for
which no instructions are received shall be voted in the same proportion as the
shares for which instructions are received.
We appreciate your completing, dating and signing the card above and returning
it promptly in the postage-paid return envelope.
Cordially yours,
Vanguard Group
Custodian
Enclosures
<PAGE>
[X] Please mark your votes as in this example.
The Board of Directors recommends a vote FOR proposal 1, FOR proposal 2
and FOR proposal 3.
<TABLE>
<S> <C> <C> <C> <C>
1. Authorize the disposition of Nabisco Group Holdings Corp.'s FOR [ ] AGAINST [ ] ABSTAIN [ ]
entire interest in Nabisco Holdings Corp. (see reverse)
2. Approve and adopt the NGH Merger Agreement (see reverse) FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Grant discretionary authority to vote in favor of an FOR [ ] AGAINST [ ] ABSTAIN [ ]
adjournment of the meeting, if necessary
Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
-----------------------------------------------
Signature(s)
-----------------------------------------------
Date Title
-------------------------------------------------------------------------------------------------------------------------
(See Reverse Side for Instructions)
</TABLE>
Nabisco Group Holdings Corp. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the internet or the telephone. This eliminates the need
to return the proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
this box must be used to access the system.
To vote over the internet:
o Log on the internet and go to the web site http://www.eproxyvote.com/ngh
To vote over the telephone:
o On a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683) 24 hours
a day, 7 days a week; outside the U.S. call 1-201-536-8073.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card. If you choose to vote by mail, please mark, sign and
date your card and return your proxy card in the postage-paid envelope
provided.
If you have any questions or require assistance, please call:
MACKENZIE PARTNERS, INC.
(212) 929-5500 (COLLECT) OR (800) 322-2885 (TOLL-FREE)
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
Section 212 of the Delaware General Corporation Law authorizes the use of
electronic transmission, such as transmissions over the internet, to grant a
proxy.
<PAGE>
P R O X Y [COMMON/SERIES C DEPOSITARY SHARES]
NABISCO GROUP HOLDINGS CORP.
Special Meeting of Stockholders - o, 2000
Proxy Solicitation on Behalf of the Board of Directors
The undersigned hereby, with respect to all shares of Common Stock of
Nabisco Group Holdings Corp. (the "Company") which the undersigned may be
entitled to vote, constitutes and appoints each of Steven F. Goldstone, James
M. Kilts and James A. Kirkman III as his true and lawful agent and proxy, with
full power of substitution in each, to represent the undersigned and directs
First Chicago Trust Company of New York, as Depositary, in each case at the
Special Meeting of Stockholders of the Company to be held at the Hotel DuPont,
11th and Market Streets, Wilmington, Delaware 19801, on o, 2000 at 10:30 a.m.,
Eastern Time, and at any adjournments or postponements thereof, to vote such
stock on all matters coming before said meeting as set forth below.
1. To authorize the disposition of Nabisco Group Holdings Corp.'s entire
interest in Nabisco Holdings Corp., consisting of 213,250,000 shares of Class B
common stock of Nabisco Holdings Corp., which disposition will be effected
pursuant to the Agreement and Plan of Merger dated as of June 25, 2000 among
Nabisco Holdings Corp., Philip Morris Companies Inc. and Strike Acquisition
Corp.
2. To approve and adopt the Agreement and Plan of Merger (the "NGH Merger
Agreement") dated as of June 25, 2000 among Nabisco Group Holdings Corp., R.J.
Reynolds Tobacco Holdings, Inc. and RJR Acquisition Corp.
3. To grant discretionary authority to vote in favor of an adjournment of
the meeting, if necessary.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR proposals 1, 2 and 3. Please mark this Proxy Card, fill in the
date, sign on the reverse side and return promptly in the accompanying
envelope. No postage is necessary if mailed in the United States.
(SEE REVERSE SIDE)
--------------------------------------------------------------------------------
IMPORTANT MESSAGE!
To Former Holders of Series C Depositary Shares:
o You are entitled to vote at the Nabisco Group Holdings Corp. ("NGH")
Special Meeting of Stockholders to be held on o, 2000.
o You may use the proxy card attached above to vote. Please vote early!
o If you have any questions about voting, please call MacKenzie Partners,
Inc. toll free at 1-800-322-2885.
o Each Series C Depositary Share formerly owned by you has been converted
into one-fifth of a share of NGH Common Stock, after adjustment to reflect
the Company's April 1995 reverse Common Stock split. The number of shares
printed on the reverse side of this card is the number of shares of NGH
Common Stock that you are entitled to receive upon exchange of your
certificate(s) representing Series C Depositary Shares.
o Until the certificates representing your Series C Depositary Shares are
exchanged for NGH Common Stock, we cannot send you any NGH Common Stock
dividends. To date, cash dividends aggregating approximately $5.1025 per
share of NGH Common Stock have accrued on your account.
o If you need assistance exchanging your Series C Depositary Share
certificate(s), please call the Exchange Agent, First Chicago Trust
Company of New York, toll-free at 1-800-317-4432 and ask for the Tenders &
Exchanges Department.
Thank you for acting promptly. Nabisco Group Holdings Corp.
<PAGE>
[X] Please mark your votes as in this example.
The Board of Directors recommends a vote FOR proposal 1, FOR proposal 2
and FOR proposal 3.
<TABLE>
<S> <C> <C> <C> <C>
1. Authorize the disposition of Nabisco Group Holdings Corp.'s FOR [ ] AGAINST [ ] ABSTAIN [ ]
entire interest in Nabisco Holdings Corp. (see reverse)
2. Approve and adopt the NGH Merger Agreement (see reverse) FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Grant discretionary authority to vote in favor of an FOR [ ] AGAINST [ ] ABSTAIN [ ]
adjournment of the meeting, if necessary
Change of address: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
------------------------------------ guardian, please give full title as such.
------------------------------------
-------------------------------------------------
Signature(s)
-------------------------------------------------
Date Title
---------------------------------------------------------------------------------------------------------------------------
(See Reverse Side for Instructions)
</TABLE>
Nabisco Group Holdings Corp. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the internet or the telephone. This eliminates the need
to return the proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
this box must be used to access the system.
To vote over the internet:
o Log on the internet and go to the web site http://www.eproxyvote.com/ngh
To vote over the telephone:
o On a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683) 24 hours
a day, 7 days a week; outside the U.S. call 1-201-536-8073.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card. If you choose to vote by mail, please mark, sign and
date your card and return your proxy card in the postage-paid envelope
provided.
If you have any questions or require assistance, please call:
MACKENZIE PARTNERS, INC.
(212) 929-5500 (COLLECT) OR (800) 322-2885 (TOLL-FREE)
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
Section 212 of the Delaware General Corporation Law authorizes the use of
electronic transmission, such as transmissions over the internet, to grant a
proxy.
