==============================================================================
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
RJR Nabisco Holdings Corp.
(Name of Registrant as Specified In Its Charter)
RJR Nabisco Holdings Corp.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[x] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
==============================================================================
RJR
NABISCO
Working For All Shareholders . . . Responsibility
April 1996
==============================================================================
YOUR MESSAGE TO US
Enhance Returns To Shareholders
bullet Deliver on performance
bullet Use cash generating power of company to enhance returns
bullet Spin off Nabisco
==============================================================================
OUR RESPONSE:
IMMEDIATE ACTION TO FULFILL PROMISES
==============================================================================
bullet Improved Operating Performance
bullet New Policy to Enhance Immediate Returns
bullet Commitment to Responsible Spin-Off
==============================================================================
OUR RESPONSE:
NEW FINANCIAL POLICY
==============================================================================
Enhance Shareholder Value
bullet Higher dividends
dash raised by 23%
dash direct return for Nabisco value
bullet Share buy-back
dash 10 million share objective
dash $100 million this year
bullet Financial integrity maintained
dash competitive flexibility
dash investment grace rating
==============================================================================
OUR RESPONSE:
COMMITMENT TO SPIN-OFF
bullet IPO of 19.5% of Nabisco
bullet Initiated dividend
bullet Restructured debt
dash separate debt, capital structure for Nabisco
dash stand-alone debt now totals $5.4 billion
dash extended maturities, reduced bank debt
==============================================================================
OUR RESPONSE:
COMMITMENT TO SPIN-OFF
==============================================================================
Reaffirmed by Board
bullet As soon as possible
bullet While preserving value of RJR Tobacco
bullet Responsibly
==============================================================================
OUR RESPONSE:
STRENGTHEN OUR BUSINESS
==============================================================================
Accomplishments in 1995
dash Tobacco Business
bullet Strengthened management
dash Andy Schindler
President and CEO, R.J. Reynolds
dash Pierre de Labouchere
President and CEO, RJR International
dash Ove Sorensen
EVP, Marketing, R.J. Reynolds
bullet Creative marketing initiatives
bullet Significant further cost reductions
==============================================================================
OUR RESPONSE:
STRENGTHEN OUR BUSINESS
==============================================================================
Accomplishments in 1995
dash Domestic Tobacco
bullet Market share turnaround
bullet Volume improvements
dash Camel up 10%
dash Doral up 10%
dash Full price stable
bullet Strong share gains for Camel, Doral
bullet Created Moonlight Tobacco unit
dash launched 8 new full-price brands
==============================================================================
OUR RESPONSE:
STRENGTHEN OUR BUSINESS
Accomplishments in 1995
dash International Tobacco
bullet Major growth in developing markets
bullet Restructured/rationalized operations, costs
bullet Building distribution with market-specific S&D ventures
in former Soviet Union, Turkey, Poland and Hungary
bullet New low tar and nicotine offerings launched
successfully in Western Europe and Japan
bullet Q4 '95 trends positive; '96 trends resuming historical
growth patterns
==============================================================================
OUR RESPONSE:
STRENGTHEN OUR BUSINESS
==============================================================================
Accomplishments in 1995
dash Food Business
bullet Revenues up 8%
bullet International sales up 15%
bullet Strong new product momentum
bullet New acquisitions "additive" to earnings
bullet IPO achieved
==============================================================================
OUR RESPONSE:
STRENGTHEN OUR BUSINESS
Commitments for 1996
bullet Return more cash to shareholders
bullet Keep spin-off on "front burner"
bullet Pursue other value-enhancing transactions
bullet Deliver improved operating performance
dash strong 4Q 1995
dash positive first quarter 1996 trends to date
==============================================================================
THEIR RESPONSE:
WHAT LEBOW AND ICAHN OFFER
==============================================================================
bullet History of Irresponsible Dealings
bullet Dumping Laggard Liggett on RJR
bullet LeBow-Controlled Board and Management
bullet Management Experience Inapplicable to RJR
bullet Sham Settlement: Reckless Publicity Ploy
bullet Financial Policy: Empty Promises
==============================================================================
THE LEBOW-ICAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
History of Irresponsible Dealings
Western Union/New Valley
Performance Graph
latitude illustrates share price is 0-5
longitude is dates
bullet LeBow acquired controlling stake (12/87)
dash loaded company with $500 million
in junk from Drexel at share price 2.9
bullet Bondholders threaten to force bankruptcy (11/90)
dash LeBow discontinued $2.4 million annual
management fee share price at less than 1
bullet Western Union bankrupt (3/93-1/95)
dash Western Union bankruptcy shares nearly
worthless* share price at less than .5
- ---------
* Trading of New Valley Stock suspended by NYSE, 4/1/93.
Trading resumed on OTC, 4/5/94.
==============================================================================
THE LEBOW-ICAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
History of Irresponsible Dealings
Performance Chart
latitude illustrates share price
longitude illustrates dates
bullet LeBow acquired majority state for $105 million (1/85)
dash put up only $5 million equity share price
at 15
bullet LeBow received $10 million in dividends by 9/88
share price at 11
bullet MAI files for Chapter 11 (4/93)
dash common shareholders wiped out share
price at less than 1
- ----------
* Trading of MAI stock suspended by NYSE, 4/14/93.
Common stockholders' interests eliminated in bankruptcy.
==============================================================================
THE LEBOW-lCAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
History of Irresponsible Dealings
dash Brooke/Liggett
bullet Dismal operating performance
dash since Le Bow gained control of Liggett
arrow collapse of market share
arrow major loss of distribution
arrow continues to trade load
arrow destruction of profits
arrow no marketing investment
==============================================================================
THE LEBOW-lCAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
History of Irresponsible Dealings
dash Brooke/Liggett (continued)
bullet Shareholder conflict and "documented history
of self-dealing"
(Roger Lowenstein, WSJ, 1 11/21/95)
bullet LeBow took personal loans or lines of credit
from Brooke Group
dash $5 million in 1991
dash $6.5 million in 1992
dash $1.5 million in 1993
bullet Settlement with shareholders forced LeBow in 1994 to:
dash repay $16 million in loans
dash waive rights to $6.25 million in preferred
dividends
==============================================================================
THE LEBOW-ICAHN AGENDA
WHAT DO THEY OFFER?
==============================================================================
Laggard Ligget
"Since he took it public, the stock has been a dog."
(Joel Tillinghast, Fidelity Investments, WSJ, 8/16/89)
Historical U.S. Tobacco Market Share Data
(Index 1991 = 100%)
Bar graph
latitude illustrates 60% to 120%
latitude illustrates 1991 through 1996
1991 is 100%, 1002 is 88%, 1003 is 71%, 1994 is 68%, 1995 is 64%.
bullet Many capable CEOs, but market share still
down precipitously
bullet Full price share evaporation
bullet Minor player in unattractive segment
dash implications of reckless actions much
greater for RJR
==============================================================================
THE LEBOW-ICAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
Dumping Laggard Liggett on RJR Shareholders
bullet LeBow denied interest in Liggett/RJR merger
dash continued to pursue merger agenda
dash deliberately misled investors re merger interest
bullet Real agenda confirmed
dash evidenced by sworn testimony
dash "settlement" terms
bullet Now openly seeking Liggett merger
==============================================================================
THE LEBOW-lCAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
Dumping Laggard Liggett on RJR Shareholders
dash In his associates' own words, under oath*:
bullet "He (LeBow) said he was uncomfortable talking to the
large stockholders and not mentioning his hope of
possibly merging Liggett with RJR" (Starbuck)
bullet Nominees received a "book (which) contained information
illustrating the financial impact of a combination
between RJR and Liggett . . . He sets forth a lot of
detail between Liggett and RJR. I have to assume this
is part of the plan" (Frome)
bullet "I don't think he has any chance of winning, he will not
win, if it's perceived that he is going to merge it
(RJR) with Liggett" (Icahn)
- -------
* from depositions taken in January 1996
==============================================================================
THE LEBOW-ICAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
Controlled Board and Management
bullet Hand-picked board
dash are directors and/or officers of LeBow entities
dash 7 out of 10 with financial ties to LeBow
dash 8 out of 10 lack Fortune 500 board experience
dash where are the 8 "independent directors" LeBow
talks about?
bullet LeBow-clirected management
dash companies controlled by LeBow are run by LeBow
dash management will NOT set policy
dash example at Liggett: general counsel NOT
involved in "settlement deal"
==============================================================================
THE LEBOW BOARD SLATE:
WELL MOTIVATED?
==============================================================================
Why They Joined, In Their Own Words*
bullet "I thought it might be financially beneficial to me. .
fees, legal fees, stock options and stuff like that. .
bullet "If you had called me and asked me, I would have said no,
but these were friends of mine. . ." (Burns)
bullet "No specific reason. Because I wanted to." (Chakalian)
bullet "I was interested in seeing the inside on an M&A takeover
attempt. . . I study these, I teach them. " (Starbuck)
bullet "Howard and Ben are fun. I know Carl and I hang around
bars and have fun and stuff like that." (Frome)
- --------
* from depositions taken in January 1996
==============================================================================
THE LEBOW BOARD SLATE
==============================================================================
Willing to
Experience Commit To
Paid To Otherwise Non-LeBow as Fortune Immediate
Be On On LeBow's Directorship 500 Spin-off
Directors LeBow's Slate Payroll Experience Director Under Oath*
- --------- ------------- ---------- ------------ ---------- -----------
Arnold Burns Yes Yes No No No
Rouben Chakalian Yes No No
Robert Frome Yes No No
Dale Hanson Yes Yes No +
Richard Lampen Yes No No
Bennett LeBow Yes No
Barry Ridings Yes Yes No No
William Starbuck Yes No No No
Peter Strauss Yes No No No
Frederick Zuckerman Yes Yes No
- ----------
* from depositions taken in January 1995
+ did not testify
==============================================================================
RJR NABISCO BOARD
==============================================================================
Quality, Integrity' Experience
Non-Executive Director
Directors Since Experience
------------- -------- ----------
John T. Chain, Jr. 1994 Retired Commander-in-Chief,
Strategic Air Command.
Director, Northrop Grumman Corp.;
Thomas Group Inc.
Julius L. Chambers 1994 Chancellor, North Carolina Central
University. Director,
First Union National Bank
John L. Clendenin 1994 Chairman, CEO, BellSouth. Director,
Coca-Cola Enterprises Inc.;
Springs Industries Inc.;
New York Stock Exchange Inc.
Ray J. Groves 1995 Chairman, Legg Mason Merchant
Banking Inc. Former Chairman,
CEO, Ernst & Young LLP. Director,
Consolidated Natural Gas Company;
Marsh & McLennan Inc.
Charles M. Harper 1993 Former CEO, RJRN. Former Chairman,
CEO, ConAgra Inc. Director, Norwest
Corp.; Valmont Industries Inc.
John G. Medlin, Jr. 1989 Chairman, Wachovia Corp. Director,
Burlington Industries Inc.; Media
General Inc.; US Air Group, Inc.
Rozanne L. Ridgway 1989 Co-Chair, Atlantic Council of the
U.S., former Asst. Secretary
of State. Director, Bell Atlantic;
Boeing; Citicorp; Emerson Electric;
Sara Lee Corporation; Union Carbide
==============================================================================
RJR NABISCO BOARD
==============================================================================
Responsible and Responsive
bullet Corporate governance and nominating committee
dash review compensation
dash continuing public ownership transition
dash seeking additional responsible outside directors
==============================================================================
FULFORD'S U.K. EXPERIENCE:
INAPPLICABLE TO RJR
==============================================================================
International Market
% SOM
Share of World Market
Point Graph
latitude illustrates % SOM
longitude illustrates 1990 to 1995
RJRT is at 2.3% SOM in 1990, at 2.9% SOM in 1991, at 2.9% SOM in 1992,
at 3.5% SOM in 1993, at 3.8% SOM in 1994, at 3.7% SOM in 1995.
Imperial is at .75% SOM at 1990, at .70% SOM at 1991, at .69% SOM in 1992,
at .7% SOM at 1993, at .7% SOM at 1994, at .7% SOM at 1995.
$ millions
Operating Profits
Point Graph
latitude illustrates $ millions 400-800
longitude illustrates year 1990 to 1995
RJRT is at 400 million in 1990, at 495 million in 1991, at 505 million in
1992, at 610 million in 1993, 710 million in 1994, 700 million in 1995.
Imperial is at 415 million in 1990, 412 million in 1991, 445 million in 1992,
475 million in 1993, 500 million in 1994, at 550 million in 1995.
bullet RJR's international tobacco operations outperform Imperial
dash volume and share of world market much stronger
dash operating profits increased at 11% compound
rate vs. 5% for Imperial since '90
bullet RJR's business well positioned to grow internationally
at double digit rates, based on:
dash demand for American Blend products (e.g.,
Winston, Camel and Salem)
dash history of development in local markets.
bullet Imperial's non-U.K. business is 1/17th the size of
RJRT's international business
bullet Fulford's non-UK experience limited
==============================================================================
FULFORD'S U.K. EXPERIENCE:
NOT RELEVANT IN THE U.S.
==============================================================================
The U.K.
- --------
bullet No premium segment champion or dominant brand
bullet Leading competitor willing to cede share to
Imperial's value approach
bullet Brand support feeble compared to U.S.
dash 50% - 60% less per unit than U.S.
dash Merchandising and sales support a
fraction of U.S. experience
bullet Prices have moved up almost in lock-step
across various price segments
The U.S.
- --------
bullet Marlboro champion of full-price and dominant S.O.M.
bullet Brand support intense across market
dash advertising
dash promotion
dash merchandising
dash sales
bullet Prices across tiers had diverged until PM
stepped in on Marlboro Friday, April, 1993
bullet Full price brands are regaining share in the
U.S. industry. Value brands are shrinking
==============================================================================
FULFORD'S U.K. EXPERIENCE:
NOT NEEDED AT RJR
==============================================================================
RJR's Strategy:
Contain Costs, Reduce Capital Invested, Build Brands
bullet RJR's U.S. cost containment efforts have been significant
dash headcount has been reduced by over 34% since
the LBO
dash over $1 billion of costs have been taken out of
the business
RJR Headcount
Bar Graph
latitude illustrates 16,000 to 8,000
longitude illustrates years 1988 to 1995
1998 is 14,200, 1990 is 12,500, 1992 is 11,000, 1995 is 9,800.
RJR Working Capital
(Millions of Dollars)
Bar Graph
latitude illustrates 1,000 to 0
longitude illustrates years 1989 through 1992
1989 is at 800, 1991 is at 400, 1993 is at 200, 1995 is at 40.
bullet Significant capital has been taken out of the business
dash working capital needs have been reduced from $810
million in 1989 to ($27) million in 1995
==============================================================================
FULFORD'S U.K. EXPERIENCE
NOT NEEDED AT RJR
==============================================================================
RJR's Strategic Objective: Build the Busines
bullet Be strong #2
bullet 1995 domestic tobacco marketplace performance has improved
1995 Performance
-----------------------------------------------------------
Full Year Fourth Quarter
----------------- -----------------------
1995 vs. 1994 4Q95 vs. 4Q94
------ -------- ------- -----------
123.5 -5% Volume 30.6 +1%
77.3 -1% Full Price 19.4 +5%
46.2 -13% Savings 11.2 -6%
17.3% 0.2pt. Price SOM 17.4% +.1pt.
- ---------
(Units in Billions)
bullet Brand strengthening programs are being rolled out
dash leverage Camel
dash reposition/stabilize Winston and Salem
dash develop new full-price opportunities
dash grow Doral
bullet Continue focus on growing cash flow
==============================================================================
LEBOW'S SHAM SETTLEMENTS:
A DANGEROUS P.R. PLOY
==============================================================================
Illusory and Unlikely to be Implemented
bullet Castano "settlement" will evaporate if:
dash the class is decertified as industry analysts expect
dash "too many" people opt out (at LeBow's complete
discretion)
dash notice to the class costs more than $1
million (unless plaintiffs agree to pay the excess)
arrow $1 million will not even begin to pay for
notice to a "class" of this size
bullet Castano "settlement" unlikely to be approved because:
dash "settlement" likely will not satisfy the requirement
of fairness
dash Liggett contribution may not even pay for cost of
administering the unmanageable "settlement"
bullet Even Castano plaintiffs counsel appear to doubt "settlement"
will be implemented
==============================================================================
LEBOW'S SHAM SETTLEMENTS
A DANGEROUS P.R. PLOY
==============================================================================
Il1usory and Unlikely to be Implemented (continued)
bullet Attorneys General "settlement" will be ineffective:
dash in any state, if tobacco companies win in that state
dash if "too many" other states have filed lawsuits and
have not settled (at LeBow's complete discretion)
bullet Attorneys General "settlement" is politically untenable
dash would require large states (e.g., NY, CA, TX) to
accept far less favorable terms than small states
(e.g., MS, WV)
==============================================================================
LEBOW'S SHAM SETTLEMENTS:
NO SOLUTION
==============================================================================
Castano Settlement Court Approval Unlikely
Other Class Actions:
Broin Unaffected
Lacey Unaffected
Granier Unaffected
Engle Disputed by Class Counsel
Other Litigation:
Butler Unaffected
Cordova Unaffected
Mangini Unaffected
Haines Unaffected
FDA Litigation Unaffected
Future Lawsuits Unaffected
43 States who have not filed suit Unaffected
Minnesota and Texas Unaffected
Grand Jury Investigations Unaffected
Personal Injury Cases Unaffected
New theories of liability (e.g., RICO) Unaffected
==============================================================================
LEBOW'S SHAM SETTLEMENTS:
MAJOR CLAIMS UNRESOLVED
==============================================================================
Castano and Attorneys General Settlements
bullet Do not settle second-hand smoke claims
bullet Do not settle other pending class cases
bullet Do not settle all "addiction" claims, including individuals
who opt out
bullet Do not settle other alleged personal injury claims
bullet Do not settle claims by states which do not join in the
attorneys general "settlements" (other states unlikely to
do so)
bullet Do not resolve potential for future claims
bullet Do not resolve regulatory claims
bullet Do not resolve grand jury investigations
==============================================================================
LEBOW'S SHAM SETTLEMENTS:
RAISE NEW CONCERNS
==============================================================================
Hinder Spin-Off Invite Litigation
"LeBow may achieve precisely the opposite of what he intended ...
increased risk that counsel .. could now be granted an
injunction blocking a Nabisco spin-off
(Gary Black, Sanford C. Bernstein, 3/15/96)
bullet Do not eliminate and probably increase injunction risk
bullet Other attorneys general and plaintiffs can still move to
enjoin spin-off
bullet Even non-named members of Castano class could seek injunction
bullet "Settlement" only encourages more lawsuits
bullet Plaintiffs can use "settlement" to support the validity of
their claim
bullet Could also unleash new flood of litigation
bullet Bankrolls tobacco litigants for future claims
==============================================================================
LEBOW'S SHAM SETTLEMENTS:
DEVASTATING EFFECTS
==============================================================================
Damages RJR and Whole Industry
bullet Billions of dollars lost off tobacco industry market value
bullet Not an "insurance" policy -- Liggett remains subject to
numerous suits, many of which could destroy its
insignificant market capitalization
bullet Could lead to new political and regulatory attacks
bullet Undermines market view of tobacco industry's unified defense
bullet Under LeBow-run board, RJR would have to pay nearly $3
billion over
25 years (far in excess of current legal costs) to
participate in "settlement"
bullet while remaining exposed to additional potential liability
bullet Severe damage to full price brand marketing
dash of which Liggett does virtually none
==============================================================================
LEBOW'S SHAM SETTLEMENTS:
DEVASTATING EFFECTS
==============================================================================
Damages RJR and Whole Industry
Total Equity Value of
U.S. Tobacco Industry Stocks ($Billion)
Bar Graph
latitude illustrates dollars in Billions $115-$135
longitude illustrates dates in 1996
On 3/21/96 is at 131, on 3/13/96 is at 124.5, on 3/14/96 is at 118,
on 3/15/96 is at 123, on 3/18/96 is at 117.
==============================================================================
LEBOW'S SHAM SETTLEMENTS:
DEVASTATING EFFECTS
==============================================================================
What The Experts Say
bullet "Liggett's settlement won't alleviate long-term risk of new law
suits" (David Greising et al., BusinessWeek, 3/25/96)
bullet "Class members with any intelligence would opt out . . .
Opt-outs will probably be high" (Gary Black, Sanford
C. Bernstein, 3/15/96)
bullet "We believe (the Fifth Circuit) will not approve this
settlement" (Martin Feldman, Smith Barney, 3/18/96)
bullet "It's just. . . a fantasy" (Richard Daynard, Plaintiffs'
Attorney, BusinessWeek, 3/25/96)
bullet I don't think anybody in their right mind who owns RJR wants
any part of this" (John C. Maxwell, Jr., Wheat First Butcher
Singer, Advertising Age, 3/1 8196)
bullet "We're going to sue them with their own money" (Bob
Butterworth, Florida Attorney General, The Washington
Times, 3/16/96)
==============================================================================
LEBOW'S SHAM SETTLEMENTS:
DEVASTATING EFFECTS
==============================================================================
What The Professionals Say
bullet "The settlement addresses only a limited piece of the tobacco
landscape and is so full of holes that it won't affect our
approach to litigation or regulation" (Steve Parrish,
Philip Morris companies, The New York Times, 3/13/96)
bullet "We remain confident in the strength of our litigation
position. We intend to fight and win all the cases in
which we are involved" (Philip Morris spokesman, Bloomberg,
3/13/96)
bullet "Brown & Williamson will continue to defend all lawsuits
aggressively ... The Liggett Group's reported 'settlement'
... is a decision clearly based not on legal merits but on
its continuing merger baffle with RJR ...
"The settlement is unlikely to ever become effective ...
Liggett, which holds a market share of only 2%, can use
this tactic in its merger fight while not having to
ultimately settle anything, as lawsuits continue to be
won." (Brown & Williamson statement, reported by Knight-
Ridder, 3/13/96)
==============================================================================
THE LEBOW-ICAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
Empty Promise Of Immediate Spin Off
bullet No guarantees
dash Brooke Group proxy: ". . . there can be no
assurances that a spin-off would be completed
within the six month period."
dash proposed directors not committed -- under oath
dash Liggett"settlement" proposal illusory
bullet If he's not spinning it, he's running it
==============================================================================
THE LEBOW-ICAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
Empty Promise Of Immediate Spin-Off
bullet Proposed directors not committed, in sworn testimony*
dash Frome: Has not told LeBow that he would support a
spin-off
dash Ridings: "I have not guaranteed how I would vote on
any matter"
dash Starbuck: Not committed to an immediate spin-off
dash Strauss: Has not agreed to support spin-off proposal
dash Zuckerman: "Do I have to answer that question?. . I
will pay the greatest possible attention . . .
given the facts at the time"
dash Burns: Willingness to support spin-off "absolutely
not" required.
- -----------
* from depositions taken in January 1996
==============================================================================
THE LEBOW-ICAHN AGENDA:
WHAT DO THEY OFFER?
==============================================================================
Empty Promise Of $2.00 Dividend
bullet Miscalculates cash flow of RJR Tobacco stand-alone
dash as adjusted, tobacco dividend would equal $1.57
based on 60% payout ratio
bullet Does not offer share repurchase program initiated by RJRN
(worth another $.37/share)
LeBow's Estimates Adjusted Estimates
----------------- ------------------
($ in millions - except Per Share data)
Net Income, plus
Amortization and
Depreciation: $1,162 $1,162
Less: Pfd. C. (80) (140)
Less Cap. Exp. (223) (310)
Net Cash Flow/Share 859 712
Payout Ratio: 63% 60%
Cash Dividend/Sh $2.00 $1.57
==============================================================================
THE LEBOW-lCAHN AGENDA:
SETTING THEIR SIGHTS ON RJR NABISCO
==============================================================================
bullet Issues of trust and judgment
dash reckless litigation settlement proposal
dash Liggett-RJR consolidation agenda
dash greenmail pact between Icahn and LeBow
bullet Real agenda is control
dash protections not enforceable
dash no practical recourse
dash commitments re: affiliate transactions riddled with
loopholes
bullet Disregard for financial and operational integrity
dash debt ratings downgrade likely with $2.00 tobacco
dividend potential for more serious implications
dash likely to impair future competitiveness
==============================================================================
THE CLEAR CHOICE
==============================================================================
RJR Nabisco Board and Management
bullet Experienced, independent, responsible
bullet Turned around business
bullet Positioned company for growth
bullet Committed to, prepared for responsible spin-off
bullet StelIar team with incentive to perform for you
bullet Strong mandate for new CEO
bullet Implemented return of cash for shareholders
bullet Single-minded mission: SHAREHOLDER VALUE
==============================================================================
No permission has been sought or received to quote from,
or refer to, published materials cited in this document.
==============================================================================
[RJR Nabisco Logo]
April 3, 1996
Dear RJR Nabisco Shareholder:
For your information, enclosed is a copy of the presentation made by RJR
Nabisco senior management at recent meetings with our institutional
shareholders. As you will see, this presentation sets forth our position on
the proposals made by Benett LeBow and Brooke Group in their efforts to
elect a new slate of directors for the company.
In summary:
o We have heard your message and we have taken immediate action to
increase the value of your investment. These steps include an increased
dividend, a share repurchase program and our renewed commitment to a
responsible and timely spin-off of Nabisco. (PAGES 2-11)
o A strong body of evident suggests that Benett LeBow and his partner Carl
Icahn are more interested in their own self-enrichment than in the
enrichment of all RJR Nabisco shareholders. This evidence includes a
long history of shareholder conflict and self-dealing, reckless and
ineffective management, and a hidden agenda to dump LeBow's
financially ailing Liggett on RJR Nabisco at an unreasonable cost to
shareholders. (PAGES 12-19)
o Finally, the presentation addresses LeBow's so-called ``settlement''
with plaintiff's attorneys in certain litigation against Liggett, and
its devastating effects on RJR Nabisco and our whole industry. (PAGES
29-37)
In this presentation, you will find considerable detail and thrid-party
comment from legal experts, security analysts and the media on why LeBow's
agenda for RJR Nabisco won't work.
If you have any questions regarding the issues raised by the enclosed
document, please call me at (212) 258-5777 or other members of our senior
management.
RJR Nabisco's management has made great strides in the last few months.
We're making progress towards our operational and financial goals, and
we're committed to maximizing the value of your investment in RJR Nabisco.
Sincerely,
/s/ Huntley R. Whitacre
[MACKENZIE PARTNERS LOGO]
April 3, 1996
Dear RJR Nabisco Institutional Investor:
On behalf of RJR Nabisco, we are pleased to enclose a copy of the
Company's briefing book in connection with the April 17 annual meeting and
the proxy contest for control of the RJR Nabisco Board of Directors
launched by Bennett LeBow.
The enclosed material recounts in detail the Company's views with regard to
its improving financial and operating performance, its commitment to a
responsible spin-off implemented at the right time, and a brief history of
Bennett LeBow's poor record, sham settlement, and irresponsible,
self-dealing tactics for companies which he has controlled.
If we can answer any questions you may have about these materials, provide
additional copies, or assist in any other way, please telephone me direct
at 212/929-5940. Please also feel free to speak to my colleagues Neil Call
at 212/929-5804 or Daniel Burch at 212/929-5748.
Sincerely,
- ----------------------
/s/ Stanley J. Kay, Jr.
Stanley J. Kay, Jr.
Senior Vice President
RJR
NABISCO logo
Huntley R. Whitacre
Senior Vice President
Investor Relations
April 4, 1996
Scott Offen
Fidelity Mgmt. & Research
82 Devonshire Street
Boston, MA 02109
Dear Scott:
I thought you would be interested in the attached material on Brooke Group and
Liggett. Key points include:
o Brooke Group stock performance is not as strong as LeBow states. The
Brooke Group stock is actually lower today than in 1987 when LeBow took
over. LeBow however, includes in his calculations the value of Sky Box of
$16.00/Brooke share when acquired by marvel in 1995 even though Sky Box was
spun off and disassociated from Brooke in 1993.
o Liggett's performance has been terrible. Volumes, sales, and market shares
have tumbled. Article written in the Winston-Salem Journal (enclosed)
describe the sad state of affairs at Liggett.
o Brooke Group has had net losses from continuing operations over the past
five years. Brooke has just reported a $45 million loss from continuing
operations, larger than the $16 million loss in 1994.
o LeBow has led MAI and Western Union into bankruptcy. While LeBow likes to
work with troubled companies, his efforts only worsen their performasnce.
Self-dealing is clearly part of his record.
The evidence seems overwhelming that Bennett LeBow's Brooke Group is a very
troubled business and that the companies he controls perform terribly. Is
this the kind of manager that should be involved at all in running one of the
world's largest food and tobacco companies?
If you have questions regarding the issues raised by the enclosed document,
please call me at (212) 258-5777.
Sincerely,
/s/ Huntley R. Whitacre
------------------------
Huntley R. Whitacre
RJR Nabisco, Inc.
1301 Avenue of the Americas
New York, New York 10019-6013
(212) 258-5777
FAX (212) 969-9178