SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[x] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
NABISCO HOLDINGS CORP.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[x] Fee computed on table below per Exchange Act Rules 14c-5(g) 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:
265,069,593 shares
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$55.00 per share (representing the merger consideration payable
in cash to Nabisco Holdings Corp. stockholders)
(4) Proposed maximum aggregate value of transaction:
$14,578,827,615
(5) Total fee paid:
$2,915,766
This fee is partially offset as provided below. The remaining
$570,016 is being paid with this filing.
[ ] Fee paid previously with preliminary materials
[x] 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:
$2,345,750
(2) Form, Schedule or Registration Statement No.:
Schedule 14A
(3) Filing Party:
Nabisco Group Holdings Corp.
(4) Date Filed:
July 21, 2000
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[PRELIMINARY DRAFT DATED JULY 28, 2000, SUBJECT TO COMPLETION]
[NABISCO LOGO]
NABISCO HOLDINGS CORP.
7 Campus Drive
Parsippany, NJ 07054-0311
Dear Stockholder:
The Board of Directors of Nabisco Holdings Corp. has approved a merger
agreement which provides for the acquisition of the company by Philip Morris
Companies Inc. for $55 per share.
The proposed merger requires approval by a majority of the voting power of
all outstanding shares of Nabisco Holdings. Nabisco Group Holdings Corp.
("NGH"), the controlling stockholder of Nabisco Holdings, has agreed to approve
the merger upon receipt of approval of the transaction by NGH's public
stockholders. NGH will seek approval from its stockholders at a special meeting
to be held on o, 2000.
We are not asking you to vote on the merger and the merger agreement. If
NGH stockholders approve the transaction at their special meeting on o, 2000,
NGH, in its capacity as controlling stockholder of Nabisco Holdings, will on the
same day act by written consent to adopt the merger agreement and approve the
merger. Your approval is not being sought and is not required.
Please read the attached statement carefully for information about the
merger. Please note, however, that Nabisco Holdings is not asking you for a
proxy and you are requested not to send a proxy.
Please do not send in your share certificates at this time. If the merger
is completed, you will be sent a letter of transmittal for that purpose as soon
as reasonably practicable thereafter.
We appreciate your support.
Sincerely,
[SIGNATURE TO COME] SIGNATURE TO COME]
Steven F. Goldstone James M. Kilts
Chairman President and Chief Executive Officer
Information Statement dated o, 2000 and first mailed to
stockholders on or about o, 2000.
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[NABISCO LOGO]
NABISCO HOLDINGS CORP.
7 Campus Drive
Parsippany, NJ 07054-0311
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INFORMATION STATEMENT
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WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY
This information statement is being furnished to the holders of common stock,
$0.01 par value, of Nabisco Holdings Corp. ("Nabisco Holdings") in connection
with the proposed acquisition of the company by Philip Morris Companies Inc.
("Philip Morris"). The acquisition will be effected by the merger of a
wholly-owned subsidiary of Philip Morris with and into Nabisco Holdings pursuant
to an Agreement and Plan of Merger dated as of June 25, 2000 by and among
Nabisco Holdings, Philip Morris and the merger subsidiary.
Under the merger agreement, upon completion of the merger, each outstanding
Class A and Class B share of Nabisco Holdings common stock, other than shares as
to which appraisal rights have been properly exercised, will be converted into
the right to receive $55 in cash.
The proposed merger requires approval by a majority of the voting power of all
outstanding shares of Nabisco Holdings. Nabisco Group Holdings Corp. ("NGH") is
the controlling stockholder of Nabisco Holdings, owning Class B shares
representing 97.6% of the voting power of Nabisco Holdings. NGH has agreed to
approve the merger upon receipt of approval of the transaction by NGH's public
stockholders. NGH will seek approval from its stockholders at a special meeting
to be held on o, 2000.
We are not asking you to vote on the merger or the merger agreement. If NGH
stockholders approve the transaction at their special meeting on o, 2000, NGH,
in its capacity as controlling stockholder of Nabisco Holdings, will on the same
day act by written consent to adopt the merger agreement and approve the merger.
Your approval is not being sought and is not required.
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SUMMARY TERM SHEET...........................................................1
SUMMARY......................................................................2
THE MERGER...................................................................5
General.................................................................5
Company Information and the 1999 Restructuring..........................5
Background of the Transactions..........................................6
Nabisco Holdings' Reasons for the Merger; Recommendation
of the Nabisco Holdings Board of Directors............................8
Opinions of Financial Advisors.........................................10
Merger Agreement.......................................................20
NGH Voting and Indemnity Agreement.....................................27
Other Matters..........................................................30
INTERESTS OF OFFICERS AND DIRECTORS.........................................31
Stock Options, Restricted Stock and Restricted Stock Units.............31
Agreements with Certain Executive Officers.............................33
Indemnification; Directors' and Officers' Insurance....................35
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES......................36
APPRAISAL RIGHTS............................................................38
SECURITY OWNERSHIP..........................................................41
Security Ownership of Management.......................................41
Security Ownership of Certain Beneficial Owners........................42
WHERE YOU CAN FIND MORE INFORMATION.........................................44
Annex A--Merger Agreement...................................................A-1
Annex B--NGH Voting and Indemnity Agreement.................................B-1
Annex C--Opinion of UBS Warburg LLC.........................................C-1
Annex D--Opinion of Morgan Stanley & Co. Incorporated.......................D-1
Annex E--Section 262 of the Delaware General Corporation Law
Relating to Appraisal Rights.................................E-1
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SUMMARY TERM SHEET
Q: What transaction is being proposed?
A: We are proposing the acquisition of Nabisco Holdings by Philip Morris for
$55 per share. The acquisition will be effected by the merger of a
wholly-owned subsidiary of Philip Morris with and into Nabisco Holdings.
Q: What is the reason for the merger?
A: Your Board of Directors believes that the merger is fair to and in the best
interests of the company's stockholders. An important factor in the Board's
determination was the broad scope of the auction conducted by management
and outside advisors for the sale of Nabisco Holdings.
Q: What will I receive in the merger?
A: After the merger is completed, you will receive $55 in exchange for each of
your shares of Nabisco Holdings.
Q: What vote of stockholders is required to approve the merger?
A: The merger requires approval by a majority of the voting power of all
outstanding shares of Nabisco Holdings. NGH, the controlling stockholder of
Nabisco Holdings, has agreed to approve the merger upon receipt of approval
of the transaction by NGH's public stockholders. As a result, your vote is
not required.
Q: Why is there no Nabisco Holdings stockholder meeting about this
transaction?
A: No Nabisco Holdings stockholder meeting is necessary because NGH controls
sufficient shares to approve the merger by written consent.
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
merger is completed.
Q: Do I have appraisal rights?
A: If you so choose, you will be entitled to exercise appraisal rights upon
completion of the merger. See "Appraisal Rights" in this information
statement.
Q: When will the merger be completed?
A: We are working towards completing the merger as quickly as possible. In
addition to stockholder approval, we must also obtain regulatory approvals.
We expect to complete the merger during the third or fourth quarter of
2000.
Q: Whom do I call if I have questions about the merger?
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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SUMMARY
This summary highlights selected information from this information statement and
may not contain all of the information that is important to you. To understand
the proposed merger fully and for a more complete description of the legal terms
of the merger, you should carefully read this document and the documents to
which we have referred you. Additional information about Nabisco Holdings 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 44.
The Merger
This information statement relates to the acquisition of Nabisco Holdings by
Philip Morris for $55 per share. The acquisition will be effected by the merger
of a wholly-owned subsidiary of Philip Morris with and into Nabisco Holdings.
The Companies
Nabisco Holdings Corp.
Nabisco Group Holdings Corp.
7 Campus Drive
Parsippany, NJ 07054-0311
(973) 682-5000
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. NGH is a holding company which owns 100% of the
outstanding 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.
Philip Morris Companies Inc.
120 Park Avenue
New York, NY 10017-5592
(917) 663-5000
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.
Reasons for the Merger
The Board of Directors of Nabisco Holdings believes that the proposed merger is
fair to and in the best interests of Nabisco Holdings stockholders. An important
factor in the Board's determination was the broad scope of the auction conducted
by management and outside advisors for the sale of Nabisco Holdings.
To review the reasons for the merger in greater detail, see page 8.
Interests of Officers and Directors in the Merger
You should be aware that a number of Nabisco Holdings officers and directors may
have interests in the merger that are different from, or in addition to, yours
(see page 31).
Legal Documents
The merger agreement and the related NGH voting and indemnity agreement are
attached as Annex A and Annex B to this information statement. We encourage you
to read these agreements as they are the legal documents that govern the merger.
Consideration
In the merger, each share of Nabisco Holdings common stock (including the
213,250,000 shares of Class B common stock of Nabisco Holdings owned by NGH)
will be exchanged for $55 in cash.
Stockholder Vote Required to Approve the Merger
The merger requires approval by a majority of the voting power of all
outstanding shares of Nabisco Holdings common stock. NGH, the controlling
stockholder of Nabisco Holdings, has entered into a voting and indemnity
agreement with Philip Morris with respect to the merger. The agreement generally
provides that, upon receiving approval from NGH stockholders, NGH will promptly
vote in favor of (or execute a written consent adopting) the merger. The
approval by NGH is the only approval from Nabisco
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Holdings stockholders required to complete the merger.
Opinions of Financial Advisors (see page 10)
In deciding to approve the merger, the Board of Directors considered the
opinions of Nabisco Holdings' 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 merger is fair to such stockholders
from a financial point of view. These opinions are attached as Annex C and Annex
D to this information statement.
Regulatory Approvals (see page 30)
The 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.
Conditions to the Merger (see page 24)
The obligation of Nabisco Holdings and Philip Morris to complete the 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 sale of its 80.5% interest in Nabisco Holdings);
o no law, court order or injunction shall prohibit the 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 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 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 Merger Agreement (see page 25)
Nabisco Holdings and Philip Morris may mutually agree at any time prior to the
completion of the merger to terminate the merger agreement. In addition, either
Nabisco Holdings or Philip Morris may terminate the merger agreement if:
(1) the merger has not been completed by April 30, 2001;
(2) there is a permanent legal prohibition to the completion of the
merger;
(3) NGH stockholders do not approve the sale of NGH's 80.5% interest in
Nabisco Holdings;
(4) the NGH voting and indemnity agreement has been terminated because the
NGH Board has withdrawn its recommendation of the merger agreement or
NGH has accepted a superior proposal or breached its obligation to
vote in favor of the 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 merger agreement if:
(6) the Nabisco Holdings Board fails to recommend the merger, withdraws or
modifies in a manner adverse to Philip Morris its approval or
recommendation of the 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 merger agreement, or materially breaches its
representations and warranties.
Nabisco Holdings may terminate the 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
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recommendation, notice, negotiation and termination fee provisions of
the 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 merger agreement or materially breaches its
representations and warranties.
Termination Fees and Expense Reimbursement (see page 26)
Nabisco Holdings must pay Philip Morris a termination fee of $445 million if:
o the merger agreement terminates as described in items (6), (7) or (9)
above;
o the 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 merger agreement, Nabisco Holdings enters
into a definitive agreement relating to any acquisition proposal or
such a transaction is completed; or
o the 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 an
acquisition of Nabisco Holdings and within nine months after
termination of the 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 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 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 merger agreement terminates as described in
item (10) above.
Material U.S. Federal Income Tax Consequences of the Merger (see page 36)
The receipt by a Nabisco Holdings stockholder of cash for Nabisco Holdings
shares will be a taxable transaction for United States federal income tax
purposes. A Nabisco Holdings 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 Nabisco Holdings shares
surrendered in the merger. That gain or loss will be a capital gain or loss if
the Nabisco Holdings shares are held as a capital asset by the stockholder.
Appraisal Rights (see page 38)
Nabisco Holdings stockholders will be entitled to appraisal rights under Section
262 of the Delaware General Corporation Law in connection with the merger.
Section 262 is reprinted in its entirety as Annex E to this information
statement.
Annex E 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 E may result in the
loss of appraisal rights. You should not take any action at this time to perfect
your appraisal rights. We will send you a notice of appraisal rights at a later
date that will describe the timing of any action you will be required to take to
perfect your appraisal rights.
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THE MERGER
General
Nabisco Holdings' Board of Directors is using this information statement to
inform Nabisco Holdings' public stockholders about the proposed acquisition of
Nabisco Holdings by Philip Morris. The Nabisco Holdings Board of Directors has
approved the acquisition.
The proposed acquisition 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
"merger agreement"). As more fully described in "The Merger--Merger Agreement",
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 merger be
converted into the right to receive $55 per share in cash.
NGH is seeking approval from NGH's stockholders for the sale, pursuant to
the merger agreement, of all 213,250,000 shares of Class B common stock of
Nabisco Holdings currently owned by NGH. The approval from NGH stockholders is
required for this transaction because it constitutes the disposition of
substantially all of the assets of NGH. The special meeting of NGH stockholders
for this purpose will take place on o, 2000.
If NGH stockholders approve the sale of the Nabisco Holdings shares, NGH
will act by written consent, as controlling stockholder of Nabisco Holdings, to
adopt the merger agreement. Since NGH holds 97.6% of the voting power of Nabisco
Holdings, no approval by Nabisco Holdings' public stockholders will be required.
NGH's obligation to vote in favor of the merger agreement, and against any
competing proposals, is set forth in the NGH voting and indemnity agreement
described in "NGH Voting and Indemnity Agreement" and attached as Annex B to
this information statement.
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, RJR transferred all of the outstanding Class B common
stock of Nabisco Holdings to 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
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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 risks to NGH and its stockholders
posed by Mr. Icahn and his accumulation of stock, 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.
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 of NGH held a special meeting to
consider the proposal set forth in Mr. Icahn's letter. At that meeting, the
Board of Directors of NGH 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 NGH 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 NGH
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 NGH 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
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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. Starting on April 12, 2000, NGH's
legal and financial advisors began meeting with potential bidders to discuss due
diligence issues. Numerous such meetings were held during April and May.
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 structural issues. 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 a 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. 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, in the course of
discussions with NGH and Nabisco Holdings, Philip Morris indicated that it would
be prepared to increase its bid to $55 per share and pay $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, NGH 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 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
7
<PAGE>
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. Following these discussions, senior management of NGH
and RJR had several conversations regarding RJR's offer. During the course of
those conversations, NGH's representatives advised RJR that it 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, RJR agreed to increase
its bid to $30 per NGH share.
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, Steven F. Goldstone, Chairman of NGH and Nabisco Holdings,
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 the 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. 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.
Nabisco Holdings' Reasons for the Merger; Recommendation of the Nabisco Holdings
Board of Directors
The Boards of Directors of Nabisco Holdings and NGH have determined that
the Nabisco Holdings merger is fair to and in the best interests of Nabisco
Holdings and its stockholders. The Nabisco Holdings Board has approved the
merger agreement and the NGH Board has approved the NGH voting and indemnity
agreement.
In the course of reaching its decision to approve the merger, the Nabisco
Holdings Board consulted with Nabisco Holdings' management, as well as its
financial and legal advisors, and considered the following factors:
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(1) the broad scope of the auction for 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 $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. Icahn 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 merger is fair, from a financial
point of view, to Nabisco Holdings' stockholders, including NGH;
(4) the fact that the 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 merger;
(5) the lack of any required approval by Philip Morris stockholders to
complete the merger;
(6) the opinion provided by Davis Polk & Wardwell to NGH and RJR 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 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 in "The Merger--Merger Agreement") and to
terminate the 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 view of the wide variety of factors considered in connection with its
evaluation of the merger and the complexity of these matters, the Nabisco
Holdings Board 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 the recommendation. The 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 merger. See "Opinions of Financial Advisors". In
addition, the Board did not undertake to make any specific determination as to
whether any particular factor was essential to its ultimate determination, but
rather the Board conducted an overall analysis of the factors described above,
including through discussions with and questioning of its management and legal
and financial advisors. In considering the factors described above, individual
members of the Board may have given different weight to different factors.
9
<PAGE>
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
merger.
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 C to this information 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 merger;
o 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 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 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;
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;
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<PAGE>
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 merger with the publicly available
financial terms of selected other transactions that UBS Warburg
believed to be generally relevant;
o reviewed drafts of the 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 merger agreement.
UBS Warburg was not asked to and did not recommend the specific
consideration payable in the 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 described below. The summary of
these analyses is not a complete description of the analyses underlying UBS
Warburg's opinion. 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 is identical to Nabisco Holdings or its businesses or
the merger, nor is an evaluation of the results entirely mathematical. Rather,
the analyses involve complex considerations and judgments concerning financial
and
11
<PAGE>
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. The tables alone do not constitute a complete
description of the financial analyses. 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.
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
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.
12
<PAGE>
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 Range of Multiples of
Selected Public Companies:
-----------------------------
Mean Medium
---- ------
Enterprise Value
Actual Trailing 12 Months Sales................ 1.9x 2.0x
Actual Trailing 12 Months EBITDA............... 10.0x 10.2x
Actual Trailing 12 Months EBIT................. 12.6x 12.5x
Equity Value
Estimated Calendar 2000 EPS.................... 17.3x 17.7x
2000 P/E
IBES Five-Year Growth Rate..................... 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 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 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. Hicks, Muse, Tate & Furst Inc. 9/6/96
(Food Division)
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
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 merger in that these transactions involved
companies in the branded foods industry. The selected transactions may
significantly differ from the merger based
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<PAGE>
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 Multiples of Selected
Transactions:
-----------------------------
Mean Medium
---- ------
Enterprise Value to Actual Trailing 12 Months:
Sales.............................................. 1.6x 1.3x
EBITDA............................................. 11.5x 11.4x
EBIT............................................... 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 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 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 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. 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 D to
this information 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
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fairness, from a financial point of view, of the consideration to be paid
pursuant to the 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 merger and does not constitute a recommendation to any
stockholder of Nabisco Holdings or NGH as to how to vote with respect to the
merger. The summary of the opinion of Morgan Stanley set forth in this
information 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 merger agreement, as well as the NGH
voting and indemnity agreement;
o discussed the tax implications of the consummation of the 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.
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 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 merger will
be consummated in accordance with the terms set forth in the merger agreement
without material modification or waiver. Morgan Stanley also assumed that the
consummation of the 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
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June 25, 2000, but its opinion did not address Nabisco Holdings' underlying
business decision to effect the transactions contemplated by the merger
agreement.
The following is a brief summary of certain 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. The tables alone do not constitute
a complete description of the financial analyses.
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., H.J. Heinz Company, Hershey Foods Corporation, 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 merger of $55.00 per share. Morgan
Stanley also noted that the implied premium of the consideration in the 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 H.J. Heinz Company;
o Hershey Foods Corporation;
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 merger agreement and Nabisco
Holdings based on the Unaffected Price.
<TABLE>
2000E Price-to
Aggregate Earnings
Value/2000E Price/ Five-Year Ratio/Five-Year
EBITDA 2000E EPS 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>
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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 15 food industry transactions, including:
o the acquisition of Bestfoods by Unilever PLC and Unilever N.V.;
o the acquisition of Slim-Fast Foods Company by Unilever N.V.;
o the acquisition of The Iams Company by The Procter & Gamble Company;
o the acquisition of United Biscuits (Holdings) plc by Finalrealm Limited;
o the acquisition of Tropicana Products, Inc. by PepsiCo, Inc.;
o the acquisition of Keebler Foods Company by Flowers Industries, Inc.;
o the acquisition of Pet Incorporated by Grand Metropolitan plc;
o the acquisition of Pace Foods Ltd. by Campbell Soup Company;
o the acquisition of Snapple Beverage Corp. by The Quaker Oats Company;
o the acquisition of Borden Inc. by Kohlberg Kravis Roberts & Co.;
o the acquisition of Gerber Products Company by Sandoz Ltd.;
o the acquisition of Beatrice Company by ConAgra, Inc.;
o the acquisition of RJR Nabisco, Inc. by Kohlberg Kravis Roberts & Co.;
o the acquisition of Kraft Foods, Inc. by Philip Morris Companies Inc.;
and
o the acquisition of The Pillsbury Company by Grand Metropolitan plc.
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 merger agreement.
<TABLE>
Aggregate Aggregate Aggregate
Value/ Value/ Value/
LTM Sales LTM EBITDA LTM EBIT
--------- ---------- ---------
<S> <C> <C> <C>
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
</TABLE>
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 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
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<PAGE>
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
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 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 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
merger agreement and other terms of the 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 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
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<PAGE>
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 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 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.
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Merger Agreement
The following summary of the merger agreement is qualified by reference to
the complete text of the merger agreement, which is incorporated by reference
and attached as Annex A to this information statement.
The Merger
Under the 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 Merger
As soon as practicable after all of the conditions set forth in the 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 merger will be
completed at the time the certificate is filed.
Merger Consideration
The merger agreement provides that each share of Nabisco Holdings common
stock outstanding immediately prior to the completion of the merger (except for
shares as to which appraisal rights have been properly exercised), will, at the
completion of the 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.
Surrender of Certificates and Payment Procedures
Philip Morris will appoint an exchange agent to handle the exchange of your
share certificates for the merger consideration. Soon after the 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 Nabisco Holdings will only represent the right
to receive the merger consideration. No interest will be paid or will accrue on
the merger consideration payable.
At the completion of the merger, the stock transfer book of Nabisco
Holdings 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
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 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
merger in the case of options that were outstanding on the date of the 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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Covenants
Nabisco Holdings and Philip Morris have agreed to certain covenants in the
merger agreement. A description of the covenants follows:
No Solicitation by Nabisco Holdings. The 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 merger from its 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 merger
agreement;
o the 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
merger agreement to its stockholders. However, the 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 merger
agreement;
o the 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 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") and to obtain the
necessary approvals under foreign laws governing antitrust or merger
control matters as soon as
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<PAGE>
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 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
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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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 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 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 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 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:
<TABLE>
<S> <C>
o corporate existence and power; o tax matters;
o corporate authorization; o employee benefits matters;
o governmental authorization; o compliance with laws and court orders;
o non-contravention; o finders' fees;
o capitalization; o receipt of opinion of financial advisors;
o subsidiaries; o environmental matters;
o SEC filings; o intellectual property rights;
o disclosure documents; o ownership and condition of real property;
o accuracy of financial statements; o material contracts and joint ventures;
o absence of certain changes; o indebtedness; and
o absence of undisclosed liabilities; o inapplicability of anti-takeover statute.
o no material litigation;
</TABLE>
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 merger agreement do not
survive the completion of the merger or the termination of the merger agreement.
Conditions to the Merger
Mutual Closing Conditions. The obligations of Nabisco Holdings and
Philip Morris to complete the merger are subject to the satisfaction of the
following conditions:
o adoption of the 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 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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<PAGE>
Termination
Nabisco Holdings and Philip Morris may mutually agree, at any time prior to
the completion of the merger, to terminate the merger agreement. In addition,
either Nabisco Holdings or Philip Morris may terminate the merger agreement if:
(1) the merger has not been completed by April 30, 2001. Neither
Nabisco Holdings nor Philip Morris may terminate the merger
agreement on this basis, however, if its breach of the merger
agreement results in the merger not being completed by this date;
(2) there is a permanent legal prohibition to the completion of the
merger;
(3) the merger agreement has not been adopted by Nabisco Holdings
stockholders because the requisite vote of the NGH stockholders
to approve the sale of NGH's Nabisco Holdings shares 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 merger
agreement or NGH has accepted a superior proposal or breached its
obligation to vote in favor of the merger and against completing
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 merger agreement if:
(6) the Nabisco Holdings Board fails to recommend the merger,
withdraws or modifies in a manner adverse to Philip Morris its
approval or recommendation of the merger or the 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 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 merger agreement if:
(9) if 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 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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<PAGE>
(10) Philip Morris fails to perform in any material respect any
material obligation to be performed under the 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 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 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 merger agreement terminates as described in items (6), (7) or
(9) under "- Termination";
o the 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 merger agreement,
Nabisco Holdings enters into a definitive agreement in respect of
any acquisition proposal or such a transaction is completed; or
o the 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 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 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 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
merger agreement if the merger agreement terminates as described in item (10)
under "--Termination".
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Amendments and Waivers
The parties may amend the merger agreement or waive its terms and
conditions before the completion of the merger, but, after Nabisco Holdings'
stockholders have approved the merger agreement, the parties may not amend the
merger agreement in a manner that would reduce or change the kind of
consideration stockholders will receive in the merger without further approval
of Nabisco Holdings' stockholders.
NGH Voting and Indemnity Agreement
The following summary of the NGH voting and indemnity agreement 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 sale of the Nabisco Holdings shares pursuant to
the merger agreement, NGH has agreed, in its capacity as controlling
stockholder of Nabisco Holdings, to adopt by written consent or otherwise
the merger agreement, and to execute and deliver such written consent
immediately following (i.e., the same day as) approval of the sale of the
Nabisco Holdings shares by NGH stockholders. No further approval by the
Nabisco Holdings public stockholders will be required in connection with
the merger. NGH has further agreed that, if NGH stockholders approve the
sale of the Nabisco Holdings shares, 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 for the sale
of the Nabisco Holdings share 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; and
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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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 merger) than the
merger (or, if applicable, the amended proposal offered by Phillip 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 with RJR or waive any of its
rights under that agreement in any manner that would materially
delay completion of the 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
with RJR 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 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 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 sale of NGH's Nabisco Holdings
shares at such meeting.
(b) The 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
merger) as the superior proposal.
(c) The 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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(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 merger
agreement, in any of the following circumstances:
o NGH terminates the voting and indemnity agreement as described
above in paragraph (b) under "- Termination";
o the 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 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 voting and indemnity agreement as
described above in paragraphs (c) under "--Termination".
If termination fees become payable under both the 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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<PAGE>
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
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 merger and to pay all related fees and expenses.
There is no financing condition to the closing of the merger.
Regulatory Matters
U.S. Antitrust. Under the HSR Act and the related rules, the 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. Expiration or termination of the HSR Act waiting
period is a condition to the completion of the 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 merger on June 26, 2000 and expect
to file formal notifications with the European Commission of the merger
agreement in mid-August, 2000. Completion of review under the European
Commission merger regulation is a condition to the 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, Columbia, 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 merger. We can give no assurance that the
required regulatory approvals will be obtained on terms that satisfy the
conditions to closing of the merger or within the time frame contemplated
by Nabisco Holdings and Philip Morris.
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INTERESTS OF OFFICERS AND DIRECTORS
You should be aware that the officers and directors of Nabisco Holdings and
NGH have interests in the merger and in the acquisition of NGH by RJR
(collectively, the "transactions") that are different from, or in addition to,
their interests as stockholders of Nabisco Holdings generally. The Nabisco
Holdings Board was aware of these interests and considered them, among other
matters, in approving the merger, the 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 $55.00 (for Nabisco Holdings
options), respectively (in each case, the "Option Spread").
The following table shows the number of unvested NGH and Nabisco Holdings
options held by NGH's and Nabisco Holdings' executive officers and directors
whose vesting will accelerate as a result of the transactions, the number of
already vested options and the estimated value of all NGH options and Nabisco
Holdings options held by such persons.
<TABLE>
Number of
Unvested
Number of Nabisco
Unvested NGH Holdings Aggregate
Options that Options that Already Option Spread
Accelerate as a Aggregate Value Accelerate as a Vested Value of all
Result of the Already Vested of all NGH Result of the Nabisco Nabisco
Transactions(1) NGH Options Options(2) Transactions(1) Holdings Holdings
Name (#) (#) ($) (#) Options(#) Options(3)($)
---- --------------- -------------- --------------- --------------- ---------- -------------
<S> <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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Number of
Unvested
Number of Nabisco
Unvested NGH Holdings Aggregate
Options that Options that Already Option Spread
Accelerate as a Aggregate Value Accelerate as a Vested Value of all
Result of the Already Vested of all NGH Result of the Nabisco Nabisco
Transactions(1) NGH Options Options(2) Transactions(1) Holdings Holdings
Name (#) (#) ($) (#) Options(#) Options(3)($)
---- --------------- -------------- --------------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
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) of
Number (and value) Nabisco Holdings
of NGH Restricted Stock
Name Restricted Stock Units(1) Units(1)
---- ------------------------ ---------------------
Mr. Goldstone............... 200,000 0
($6,000,000) ($0)
Mr. Kilts................... 0 310,000
($0) ($17,050,000)
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Number (and value) of
Number (and value) Nabisco Holdings
of NGH Restricted Stock
Name Restricted Stock Units(1) 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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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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(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).
Indemnification; Directors' and Officers' Insurance
See "The Merger--Merger Agreement--Covenants--Indemnification and Insurance
of Nabisco Holding Directors and Officers."
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<PAGE>
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
This summary of the material United States federal income tax consequences
to Nabisco Holdings stockholders, other than NGH, of the merger is for general
information and is based on the law as currently in effect. This summary does
not discuss all of the tax consequences that may be relevant to a Nabisco
Holdings 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 Nabisco Holdings shares
as part of a straddle or a hedging or conversion transaction and stockholders
who acquired their Nabisco Holdings shares through the exercise of an employee
stock option or otherwise as compensation.
Nabisco Holdings stockholders are urged to consult their own tax advisors
as to the particular tax consequences to them of the merger, including the
effect of United States state and local tax laws or foreign tax laws.
A United States holder refers to:
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 a Nabisco Holdings stockholder that is
not a United States holder.
United States Holders
The receipt in the merger by a United States holder of cash for Nabisco
Holdings shares will be a taxable transaction for United States federal income
tax purposes. A Nabisco Holdings 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 merger and the stockholder's tax basis in the
Nabisco Holdings shares surrendered in the merger. That gain or loss will be a
capital gain or loss if the Nabisco Holdings shares are held as a capital asset
by the Nabisco Holdings stockholder, and will be long term capital gain or loss
if the Nabisco Holdings shares have been held for more than one year at the time
of the merger.
A Nabisco Holdings stockholder that is a United States holder may be
subject to backup withholding at a rate of 31% unless, at the time it surrenders
Nabisco Holdings shares in the 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
A Nabisco Holdings 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 Nabisco Holdings shares in the 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 Nabisco Holdings 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 merger is completed, or
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<PAGE>
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 merger by a
Non-United States holder unless, at the time it surrenders Nabisco Holdings
shares in the 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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APPRAISAL RIGHTS
Under Section 262 ("Section 262") of the Delaware General Corporation Law
(the "DGCL"), if you comply with the conditions established by Section 262, 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 merger, together with a fair rate of interest, if any, judicially
determined by the Delaware Court of Chancery (the Delaware Court") and paid to
you in cash.
The following discussion is not a complete statement 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 E to this information
statement. All references in Section 262 and in this summary to a "stockholder"
are to the record holder of the shares of Nabisco Holdings stock as to which
appraisal rights are asserted. If you have a beneficial interest in shares of
stock held of record in the name of another person, such as a broker or nominee,
you will be required to 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 is accomplished by written consent
pursuant to Section 228 of DGCL, the corporation, either before or within 10
days after the completion of the merger, must notify each stockholder entitled
to appraisal rights of the approval of the merger and that appraisal rights are
available and include in the notice a copy of Section 262. We will send you such
a notice no more than 10 days after the completion of the merger. At that time,
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. You are not presently required to take action to
perfect your appraisal rights. The notice we will send to you no more than 10
days after the completion of the merger will describe the timing of any action
you will be required to take to perfect your appraisal rights.
If you wish to exercise the right to dissent from the merger and demand
appraisal under Section 262, you will be required to deliver to Nabisco Holdings
a written demand for appraisal of your shares of Nabisco Holdings stock within
20 days after the date of mailing of the notice of completion of the merger,
which demand will be sufficient if it reasonably informs Nabisco Holdings of
your identity and that you intend to demand appraisal of your shares.
Only a holder of record of shares of Nabisco Holdings stock issued and
outstanding immediately prior to the completion of the merger will be entitled
to assert appraisal rights for the shares of 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 stock owned and that the stockholder intends
thereby to demand appraisal of the stockholder's shares of Nabisco Holdings
stock.
If your shares of Nabisco Holdings 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 Nabisco Holdings 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 Nabisco Holdings stock
as nominee for several beneficial owners may exercise appraisal rights with
respect to the shares of Nabisco Holdings stock held for one or more beneficial
owners while not exercising those rights with respect to the shares of Nabisco
Holdings stock held for one or more other beneficial owners; in that case, the
written demand should set forth the number of shares of Nabisco Holdings 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 Nabisco Holdings
stock held in the name of the record owner. If you hold your shares of Nabisco
Holdings stock in brokerage accounts or other nominee forms and wish to exercise
appraisal
38
<PAGE>
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.
Within 120 days after the completion of the merger, but not thereafter,
either Nabisco Holdings or any holder of dissenting shares of Nabisco Holdings
stock who has complied with the requirements of Section 262 may file a petition
in the Delaware Court demanding a determination of the fair value of all shares
of Nabisco Holdings stock held by dissenting stockholders. Nabisco Holdings is
under no obligation to and has no present intent to file a petition for
appraisal, and you should not assume that Nabisco Holdings will file a petition
or that Nabisco Holdings 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 merger, any stockholder who has
complied with the provisions of Section 262 to that point in time will be
entitled to receive from Nabisco Holdings, upon written request, a statement
setting forth the aggregate number of shares of Nabisco Holdings stock which
demands for appraisal have been received by Nabisco Holdings and the aggregate
number of holders of the shares. Nabisco Holdings must mail this statement to
the stockholder within 10 days of receipt of a request or within 10 days after
the expiration of the period for the delivery of demands as described above,
whichever is later.
A stockholder timely filing a petition for appraisal with the Delaware
Court must deliver a copy to Nabisco Holdings, which will then be obligated
within 20 days to provide the Delaware Court with a duly verified list
containing the names and addresses of all stockholders who have demanded
appraisal of their shares of Nabisco Holdings stock. After notice to the
stockholders, the Delaware Court is empowered to conduct a hearing on the
petition to determine which stockholders are entitled to appraisal rights. The
Delaware Court 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 may dismiss the proceedings as to that
stockholder.
After determining the stockholders entitled to an appraisal, the Delaware
Court will appraise the "fair value" of their shares, exclusive of any element
of value arising from the accomplishment or expectation of the 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 and taxed upon the parties as the Delaware Court deems equitable. Upon
application of a holder of dissenting shares of Nabisco Holdings stock, the
Delaware Court 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 Nabisco Holdings 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 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 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."
39
<PAGE>
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the completion of the 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 merger).
If any stockholder who demands appraisal of shares of Nabisco Holdings
stock under Section 262 fails to perfect, or effectively withdraws or loses, the
right to appraisal, the stockholder's shares of Nabisco Holdings stock will be
converted into the right to receive the merger consideration in cash in
accordance with the 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 merger. A stockholder may withdraw a demand for appraisal by delivering to
Nabisco Holdings 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 merger will require the
written approval of Nabisco Holdings. 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.
40
<PAGE>
SECURITY OWNERSHIP
Security Ownership of Management
The following table sets forth certain information, as of June 30, 2000,
regarding the beneficial ownership of (i) Nabisco Holdings Class A common stock
and (ii) common stock, par value $.01 per share, of NGH by each director of
Nabisco Holdings, by each of the five most highly compensated executive officers
of Nabisco Holdings (as required by SEC rules) and by all directors and
executive officers of as a group. Most of these individuals have the opportunity
to become the beneficial owners of additional shares of Nabisco Holdings common
stock as a result of stock options vesting or becoming exercisable. See
"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 Nabisco Holdings or its subsidiaries and have
sole voting and investment power over all securities for which they are shown as
beneficial owner.
<TABLE>
Number of Shares
of Class A Percent of Number of Shares
Nabisco Holdings Class A of NGH Percent of
Common Stock Nabisco Holdings Common Stock NGH
Name of Beneficial Owner Beneficially Owned Common Stock Beneficially Owned Common Stock
------------------------ ------------------ ---------------- ------------------ ------------
(1)(2)(3) (1) (1)(4)
<S> <C> <C>
Herman Cain.............................. 10,300 * 0 *
John T. Chain, Jr........................ 11,300 * 21,837 *
Julius L. Chambers....................... 0 * 19,866 *
John L. Clendenin........................ 500 * 20,290 *
Douglas R. Conant........................ 215,903 0.41% 0 *
Steven F. Goldstone...................... 274,981 0.53% 3,037,852 0.92%
Ray J. Groves............................ 0 * 19,165 *
James E. Healey.......................... 58,000 0.11% 0 *
David B. Jenkins......................... 11,900 * 0 *
Nancy Karch(5)........................... 0 * 6,000 *
James M. Kilts........................... 11,000 * 256,813 *
Fred H. Langhammer....................... 0 * 8,475 *
Richard H. Lenny......................... 4,225 * 1,000 *
H. Eugene Lockhart....................... 0 * 13,929 *
Theodore E. Martin....................... 0 * 14,720 *
Rozanne L. Ridgway....................... 0 * 11,694 *
C. Michael Sayeau........................ 230,719 0.44% 46 *
All Directors and Officers as a Group.... 1,529,066 2.9% 3,449,344 1.05%
</TABLE>
----------
* Less than 0.1%
(1) For purposes of this table, a person or group of persons is deemed to be
the "beneficial owner" of any shares that such person has the right to
acquire within 60 days. For purposes of computing the percentage of
outstanding shares held by each person or group of persons named above on a
given date, any security that such persons or persons 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 Class A common stock beneficially owned includes
shares subject to currently exercisable options in the following amounts:
(i) 10,300 shares for each of General Chain and Messrs. Cain and Jenkins;
(ii) 214,852 shares for Mr. Conant; (iii) 260,000 shares for Mr. Goldstone;
(iv) 229,718 shares for Mr. Sayeau; (v) 55,000 shares for Mr. Healey and
(vi) 1,486,848 shares for all directors and executive officers as a group.
(3) The number of shares of Class A common stock beneficially owned does not
include units issued in the following amounts: (i) 501 units for Mr. Cain;
(ii) 46,200 units for Mr. Conant; (iii) 17,500 units for
41
<PAGE>
Mr. Healey; (iv) 310,000 units for Mr. Kilts; (v) 38,500 units for Mr.
Lenny; (vi) 39,000 units for Mr. Sayeau; and (vii) 611,889 units to all
directors and executive officers as a group. The units issued to Mr. Cain
are common stock equivalents and were received as deferred compensation.
The units issued to the officers are equivalents to restricted stock grants
and were received as deferred equity incentives.
(4) 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 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 and (x)
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; 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 629,591 units for all directors and
officers as a group.
(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 Nabisco Holdings and its affiliates
during the past few years, for which the consulting firm has been paid
usual and customary fees.
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 Nabisco Holdings to be
the beneficial owners of more than 5% of any class of Nabisco Holdings' voting
securities. The information was obtained from Nabisco Holdings records and
information supplied by the stockholders, including information on Schedule 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>
Number of Shares Percent
Title of Class Name and Address Beneficially Owned of Class
-------------- ----------------------------------------- ------------------ --------
<S> <C> <C> <C>
Class A Southeastern Asset Management, Inc.(1) 4,801,100 9.3%
common stock 6410 Poplar Avenue
Suite 900
Memphis, TN 38119
Class A FMR Corp.(2) 2,567,780 5.0%
common stock 82 Devonshire Street
Boston, MA 02109
Class A John A. Levin & Co., Inc.(3) 3,340,000 6.4%
common stock One Rockefeller Plaza
New York, NY 10020
Class A Harris Associates L.P.(4) 3,269,700 6.3%
common stock Two North LaSalle Street,
Suite 500
Chicago, IL 60602-3790
Class B Nabisco Group Holdings Corp. (5) 213,250,000 100%
common stock 7 Campus Drive
Parsippany, NJ 07054-0311
</TABLE>
42
<PAGE>
----------
(1) Share numbers and percentages are based on information as of June 30, 2000
from Nabisco Holdings' transfer agent. According to the Schedule 13G filed
with the SEC on July 7, 2000 by Southeastern Asset Management, Inc.
("Southeastern"), Southeastern is the beneficial owner of 4,090,300 shares
of Class A common stock. Southeastern has sole voting power over 3,166,300
of these shares, shared voting power over 235,000 of these shares, and no
voting power over 689,000 of these shares. Southeastern has sole
dispositive power over 3,835,300 of these shares, shared dispositive power
over 235,000 of these shares, and no dispositive power over 20,000 of these
shares.
(2) Share numbers and percentages are based on information as of June 30, 2000
from Nabisco Holdings' transfer agent. On June 9, 2000, FMR Corp. ("FMR"),
Edward C. Johnson 3d, Abigail P. Johnson and Fidelity Management & Research
Company ("FMRC") jointly filed a Schedule 13G with the SEC. According to
the Schedule 13G, FMRC, a wholly-owned subsidiary of FMR, is the beneficial
owner of 2,662,300 shares of Class A common stock, as investment advisor to
various registered investment companies (the "Funds"). Edward C. Johnson
3d, FMR and the Funds each has sole dispositive power, and the Funds have
sole power to vote, the 2,662,300 shares owned by the Funds. As investment
manager of institutional accounts, Fidelity Management Trust Company, a
wholly-owned subsidiary of FMR, is the beneficial owner of 95,300 shares of
Class A common stock. Edward C. Johnson 3d and FMR each has sole
dispositive power over these shares, sole voting power over 39,200 of these
shares and no voting power over 56,100 of these shares.
(3) Share numbers and percentages are based on information as of June 30, 2000
from Nabisco Holdings' transfer agent. According to the Schedule 13G filed
jointly with the SEC by John A. Levin & Co., Inc. ("Levin & Co.") and
Baker, Fentress & Company ("Baker Fentress") on February 14, 2000, Levin &
Co., an indirect wholly-owned subsidiary of Baker Fentress, is the
beneficial owner of 3,319,650 shares of Class A common stock, which it
holds for the accounts of its investment advisory clients. Levin & Co. has
sole voting and dispositive power over 34,500 of these shares.
(4) Share numbers and percentages are based on information as of June 30, 2000
from Nabisco Holdings' transfer agent. According to the Schedule 13G filed
jointly with the SEC on February 7, 2000 by Harris Associates L.P.
("Harris") and Harris Associates Inc., Harris, of which Harris Associates
Inc. is the general partner, may be deemed the beneficial owner of
2,819,700 shares of Class A common stock by reason of advisory and other
relationships with the owners of these shares. Harris has sole voting power
over none of these shares and sole dispositive power over 446,400 of these
shares.
(5) NGH is the beneficial owner of all 213,250,000 outstanding shares of Class
B common stock, which account for approximately 80.5% of the economic
interest in Nabisco Holdings and 97.6% of the combined voting power of its
outstanding common stock. Because each of these shares is immediately
convertible into a share of Class A common stock at the option of the
holder, NGH is also deemed to be the beneficial owner of the same number of
shares of Class A common stock. Upon such conversion, these shares would
account for 80.5% of the economic interest in Nabisco Holdings and 80.5% of
the voting power of the outstanding common stock. NGH has voting and
investment power over these shares.
43
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Nabisco Holdings 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 Nabisco Holdings 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 Nabisco Holdings to "incorporate by reference" information
into this information 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
information statement, except for any information superseded by information in,
or incorporated by reference in, this information statement. This information
statement incorporates by reference the documents set forth below that Nabisco
Holdings has previously filed with the SEC. These documents contain important
information about Nabisco Holdings and our finances.
Nabisco Holdings SEC Filings (File No. 1-13566) 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 July 28, 2000
We are also incorporating by reference additional documents that we file
with the SEC between the date of this information statement and the date that
NGH acts by written consent to approve the merger.
If you are a Nabisco Holdings 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 Nabisco Holdings at the following address:
Nabisco 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.
You should rely only on the information contained or incorporated by reference
in this information statement. We have not authorized anyone to provide you with
information that is different from what is contained in this information
statement. This information statement is dated o, 2000. You should not assume
that the information contained in the information statement is accurate as of
any date other than such date, and the mailing of this information statement to
stockholders shall not create any implication to the contrary.
44
<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
ii
<PAGE>
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
iii
<PAGE>
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'
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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.
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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
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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
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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
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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
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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:
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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.
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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
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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
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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
43
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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
44
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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
5
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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
<PAGE>
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
4
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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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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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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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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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(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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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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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
[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
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ANNEX D
[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
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ANNEX E
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
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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
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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
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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).
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