AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1994
REGISTRATION NO. 33-55767
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RJR NABISCO HOLDINGS CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 6719 13-3490602
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 258-5600
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
LAWRENCE R. RICCIARDI, ESQ.
RJR NABISCO HOLDINGS CORP.
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 258-5600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
SAMUEL F. PRYOR III, ESQ. CHARLES I. COGUT, ESQ. ANDREW R. BROWNSTEIN, ESQ.
DAVIS POLK & WARDWELL SIMPSON THACHER & BARTLETT WACHTELL, LIPTON, ROSEN & KATZ
450 LEXINGTON AVENUE 425 LEXINGTON AVENUE 51 WEST 52ND STREET
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10019
(212) 450-4000 (212) 455-2000 (212) 403-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As promptly as practicable after this Registration Statement is declared
effective and upon consummation of the transactions described in the enclosed
Offering Circular/Prospectus.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE OFFERING CIRCULAR/PROSPECTUS
OF THE INFORMATION REQUIRED BY PART 1 OF FORM S-4
FORM S-4 ITEM LOCATION IN OFFERING CIRCULAR/PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus............................. Outside Front Cover Page; Facing Page
2. Inside Front and Outside Back Cover Pages
of Prospectus.......................... Table of Contents; Available Information;
Incorporation of Certain Documents by
Reference
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.......... Summary; Certain Significant
Considerations; The Exchange Offer
4. Terms of the Transaction................. Summary; The Exchange Offer; Description
of Holdings Capital Stock; Description of
Borden Capital Stock and Rights;
Comparison of Rights of Holders of Borden
and Holdings Common Stock
5. Pro Forma Financial Information.......... Not Applicable
6. Material Contacts with Company Being
Acquired............................... Summary; The Exchange Offer
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters.............. The Exchange Offer; Security Ownership of
Certain Beneficial Owners and Management
8. Interests of Named Experts and Counsel... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to
S-3 Registrants........................ Available Information; Incorporation of
Certain Documents by Reference; Summary;
Comparative Market Prices and Dividends;
RJR Nabisco Holdings Corp.; RJR Nabisco
Holdings Corp. Selected Historical
Consolidated Financial Data; RJR Nabisco
Holdings Corp. Selected Pro Forma
Consolidated Financial Data; Description
of Holdings Capital Stock; Comparison of
Rights of Holders of Borden and Holdings
Common Stock
11. Incorporation of Certain Information
by Reference........................... Incorporation of Certain Documents by
Reference
FORM S-4 ITEM LOCATION IN OFFERING CIRCULAR/PROSPECTUS
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12. Information with Respect to S-2
or S-3 Registrants..................... Not Applicable
13. Incorporation of Certain Information by
Reference.............................. Not Applicable
14. Information with Respect to Registrants
Other than S-2 or S-3 Registrants...... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to
S-3 Companies.......................... Available Information; Incorporation of
Certain Documents by Reference;
Summary--Borden, Inc.; Borden, Inc.
Selected Historical Consolidated
Financial Data; Description of Borden
Capital Stock and Rights; Comparison of
Rights of Holders of Borden and Holdings
Common Stock
16. Information with Respect to S-2
or S-3 Companies....................... Not Applicable
17. Information with Respect to Companies
Other than S-2 or S-3 Companies........ Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited..... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer................ Available Information; Incorporation of
Certain Documents by Reference; Summary;
The Exchange Offer; Security Ownership of
Certain Beneficial Owners and Management
OFFERING CIRCULAR/PROSPECTUS (Subject to Completion)
Issued November 8, 1994
Exchange Offer for
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Borden, Inc.
By Exchanging for Each Such Share
A Number of Shares of Common Stock of
RJR Nabisco Holdings Corp.
Based on the Exchange Ratio Described Below
by
Borden Acquisition Corp.
a corporation formed at the direction of
Kohlberg Kravis Roberts & Co.
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THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON , 1994,
UNLESS THE EXCHANGE OFFER IS EXTENDED.
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Borden Acquisition Corp., a New Jersey corporation (the "Purchaser"), a
subsidiary of Whitehall Associates, L.P. (the "Partnership"), an affiliate of
Kohlberg Kravis Roberts & Co., L.P. ("KKR"), hereby offers, upon the terms and
subject to the conditions set forth herein and in the related Letter of
Transmittal (collectively, the "Exchange Offer"), to exchange shares of common
stock, par value $.01 per share (the "Holdings Common Stock"), of RJR Nabisco
Holdings Corp., a Delaware corporation ("Holdings"), owned by the Purchaser or
its affiliates for all outstanding shares (the "Borden Shares") of common stock,
par value $.625 per share (collectively, the "Borden Common Stock"), and the
associated Preferred Stock Purchase Rights (the "Rights"), of Borden, Inc., a
New Jersey corporation ("Borden"), not already owned by the Purchaser or its
affiliates. Each Borden Share accepted by the Purchaser in accordance with the
Exchange Offer shall be exchanged for that number of fully paid and
nonassessable shares of Holdings Common Stock equal to the Exchange Ratio. The
term "Exchange Ratio" means the quotient (rounded to the nearest 1/100,000)
obtained by dividing (i) $14.25 by (ii) the average of the average of the high
and low sales prices of the Holdings Common Stock as reported on the New York
Stock Exchange (the "NYSE") Composite Tape on each of the ten consecutive
trading days immediately preceding the second trading day prior to the date of
expiration of the Exchange Offer, including any extension thereof (the
"Valuation Period"), provided that the Exchange Ratio shall not be less than
1.78125 or greater than 2.375.
The Exchange Offer is conditioned upon, among other things, there being
validly tendered and not properly withdrawn prior to the expiration of the
Exchange Offer a number of Borden Shares which, when added to any Borden Shares
previously acquired by the Partnership or the Purchaser (other than any of the
28,138,000 shares of Borden Common Stock subject to the Option (as hereinafter
defined)), represents more than 41% of the Borden Shares outstanding on a fully
diluted basis (other than dilution due to the Rights) (the "Minimum Condition").
The Exchange Offer is also subject to other terms and conditions, which Borden
shareholders should carefully consider. As of the date hereof, except for shares
of Borden Common Stock that may be acquired upon exercise of the Option, the
Partnership and the Purchaser do not beneficially own any Borden Shares. See
"The Exchange Offer--Certain Conditions of the Exchange Offer" and "Description
of Merger Agreement and Conditional Purchase/Option Agreement."
The Board of Directors of Borden has, among other things, (1) determined
that the Merger Agreement and the Conditional Purchase/Option Agreement (each as
hereinafter defined) and the transactions contemplated thereby, including the
Exchange Offer and the merger of the Purchaser with Borden (such merger is
hereinafter called the "Merger" and, collectively with the other transactions
contemplated by the Merger Agreement and the Conditional Purchase/Option
Agreement, the "Transactions"), taken together, are fair to the shareholders of
Borden, and resolved to recommend that holders of Borden Shares accept the
Exchange Offer, tender their Borden Shares to the Purchaser in the Exchange
Offer and, if required by applicable law, approve and adopt the Merger
Agreement, and (2) approved the Merger Agreement, the Conditional
Purchase/Option Agreement and the Transactions.
The last reported sale price of the Holdings Common Stock on November 7,
1994 on the NYSE Composite Tape was $6 5/8 per share. The last reported sale
price of the Borden Common Stock on November 7, 1994 on the NYSE Composite Tape
was $13 5/8 per share. On September 9, 1994, the last full trading day prior to
the public announcement of the execution of the letter of intent with respect to
the Transactions (as defined herein), the closing sale price, as reported on the
NYSE Composite Tape, was $7 for the Holdings Common Stock and $11 7/8 for the
Borden Common Stock. Borden shareholders should obtain a current quote for the
Holdings Common Stock and the Borden Common Stock.
(continued on next page)
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SEE "CERTAIN SIGNIFICANT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS OF BORDEN SHARES IN
CONNECTION WITH THEIR CONSIDERATION OF
THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
OFFERING CIRCULAR/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The Dealer Manager for the Exchange Offer is:
MORGAN STANLEY & CO.
Incorporated
November , 1994
(continued from prior page)
The Purchaser, the Partnership and Borden have entered into an Agreement and
Plan of Merger dated as of September 23, 1994 (the "Merger Agreement") pursuant
to which, among other things, following the consummation of the Exchange Offer,
subject to certain conditions, the Purchaser will be merged with Borden in the
Merger. If, following the Exchange Offer and exercise of the Option, the
Purchaser and its affiliates own more than 90% of the outstanding Borden Shares,
the Purchaser will take all necessary or appropriate action, without further
action by the Board of Directors or shareholders of Borden, to merge the
Purchaser with Borden as soon as practicable. If, following the Exchange Offer
and exercise of the Option, approval of Borden's shareholders is required by
applicable law in order to consummate the Merger, provided that the Minimum
Condition is satisfied without being reduced or waived, Borden will submit the
Merger to Borden's shareholders for approval. If the Merger is submitted to
Borden's shareholders for approval, the Merger will require the approval of the
holders of not less than 66 2/3% of the outstanding Borden Shares, including the
Borden Shares owned by the Purchaser and its affiliates. In the event the Merger
is consummated, holders of Borden Shares will receive the same number of shares
of Holdings Common Stock for each Borden Share as are exchanged for each Borden
Share in the Exchange Offer. This Offering Circular/Prospectus, as amended or
supplemented from time to time, also relates to shares of Holdings Common Stock
that may be issued in connection with the consummation of the Merger, unless the
Merger is submitted to Borden's shareholders for approval, in which case the
Purchaser will solicit proxies from Borden shareholders pursuant to separate
proxy materials in compliance with Section 14(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
This Offering Circular/Prospectus does not constitute a solicitation of a
proxy, consent or authorization for or with respect to any special meeting or
other meeting of Borden shareholders who do not tender their Borden Shares or
any action in lieu thereof. Any such solicitation will be made only pursuant to
separate proxy materials in compliance with Section 14(a) of the Exchange Act.
Pursuant to a Conditional Purchase/Stock Option Agreement dated as of
September 23, 1994 (the "Conditional Purchase/Option Agreement"), Borden has
granted to the Purchaser (or its designee, which designee shall be the
Partnership or a wholly owned direct or indirect subsidiary of the Partnership
and which may, in any such case, act for itself or as agent for the Partnership
and/or KKR Partners II, L.P. (together with the Partnership, the "Common Stock
Partnerships"), which will, prior to the consummation of the Exchange Offer,
hold shares of common stock of the Purchaser, as the case may be) a right (the
"Option") to purchase up to 28,138,000 shares of Borden Common Stock (the
"Option Shares") (approximately 19.9% of the outstanding Borden Shares as of the
date hereof) in exchange for the number of shares of Holdings Common Stock
(rounded to the nearest 1/100,000) obtained by dividing (i) $11.00 by (ii) the
average of the average of the high and low sales prices of the Holdings Common
Stock as reported on the NYSE Composite Tape on each of the ten consecutive
trading days immediately preceding the second trading day prior to the date of
notice of exercise of the Option (or, if exercise of the Option is required as
described below, the date of exercise), as adjusted in certain events, for each
share of Borden Common Stock. Subject to applicable law, if the Purchaser (or
the Partnership or a wholly owned direct or indirect subsidiary of the
Partnership) acquires more than 41% (but not more than 50%) of the outstanding
Borden Shares in the Exchange Offer, the Option must be exercised to the extent
necessary so that, following such exercise, the Purchaser will own more than 50%
of the outstanding Borden Shares. If the Purchaser shall have exercised the
Option in whole or in part prior to the expiration of the Exchange Offer, the
Purchaser may not waive or reduce the Minimum Condition. In addition, if the
Purchaser has not exercised the Option prior to the expiration of the Exchange
Offer, it will not be entitled to exercise the Option thereafter if it waives or
otherwise reduces the Minimum Condition and accepts fewer than 41% of the Borden
Shares for exchange in the Exchange Offer. See "The Exchange Offer--Purpose of
the Exchange Offer; the Merger" and "Description of Merger Agreement and
Conditional Purchase/Option Agreement."
Unless the context requires otherwise, all references in this Offering
Circular/Prospectus to "Borden Shares" shall be deemed to refer also to the
associated Rights issued pursuant to the Rights Agreement, dated as of January
28, 1986 (as amended, the "Rights Agreement"), between Borden and The Bank of
New York, as Rights Agent (the "Rights Agent"), and all references to "Rights"
shall be deemed to include all benefits that may inure to the shareholders of
Borden or to holders of the Rights pursuant to the Rights Agreement, unless and
until the Rights are redeemed by Borden in accordance with the Merger Agreement.
(continued on next page)
2
(continued from prior page)
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IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Borden Shares (and Rights if applicable) should either (1) complete and sign the
Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile) and any other required documents to the Exchange
Agent (as defined herein), and either deliver the certificates representing the
tendered Borden Shares ("Share Certificates") and, if separate, certificates
representing the tendered Rights ("Rights Certificates"), and any other required
documents to the Exchange Agent or tender such Borden Shares (and Rights if
applicable) pursuant to the procedure for book-entry transfer described herein
or (2) request such shareholder's broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for such shareholder. Shareholders
having Borden Shares (and Rights if applicable) registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if they
desire to tender Borden Shares (and Rights if applicable) so registered. Unless
and until the Rights are redeemed in accordance with the Merger Agreement,
holders of Borden Shares will be required to tender the Rights associated with
such Borden Shares in order to effect a valid tender of such Borden Shares.
A shareholder who desires to tender Borden Shares (and Rights if applicable)
and whose Share Certificates (and Rights Certificates if applicable) are not
immediately available, or who cannot comply with the procedure for book-entry
transfer on a timely basis, may tender such Borden Shares (and Rights if
applicable) by following the procedures for guaranteed delivery described
herein.
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Questions and requests for assistance may be directed to Morgan Stanley &
Co. Incorporated (the "Dealer Manager") or to D.F. King & Co., Inc. (the
"Information Agent"), at their respective addresses and telephone numbers set
forth on the back cover of this Offering Circular/Prospectus. Additional copies
of this Offering Circular/Prospectus, a Letter of Transmittal and a Notice of
Guaranteed Delivery may also be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS OFFERING CIRCULAR/PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
STATE.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
OFFERING CIRCULAR/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMMON
STOCK PARTNERSHIPS, THE PURCHASER OR ANY AFFILIATE THEREOF, BY HOLDINGS OR
BORDEN OR BY THE DEALER MANAGER. THIS OFFERING CIRCULAR/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS OFFERING
CIRCULAR/PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. NO ACTION HAS BEEN OR WILL BE TAKEN
IN ANY JURISDICTION BY THE COMMON STOCK PARTNERSHIPS, THE PURCHASER OR ANY
AFFILIATE THEREOF, HOLDINGS OR BORDEN OR BY THE DEALER MANAGER THAT WOULD PERMIT
A PUBLIC OFFERING OF THE SECURITIES OFFERED HEREBY OR POSSESSION OR DISTRIBUTION
OF THIS OFFERING CIRCULAR/PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT
PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE
POSSESSION THIS OFFERING CIRCULAR/PROSPECTUS COMES ARE REQUIRED BY THE COMMON
STOCK PARTNERSHIPS, THE PURCHASER AND THEIR AFFILIATES, HOLDINGS AND BORDEN AND
BY THE DEALER MANAGER TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS
AS TO THE OFFERING OF THE SECURITIES OFFERED HEREBY AND THE DISTRIBUTION OF THIS
OFFERING CIRCULAR/PROSPECTUS.
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The Exchange Offer is not being made to (nor will tenders be accepted from
or on behalf of) holders of Borden Shares in any jurisdiction (including Japan)
in which the making of the Exchange Offer or the acceptance thereof would not be
in compliance with the laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Exchange Offer to be made on
behalf of the Purchaser by a licensed broker or dealer, the Exchange Offer shall
be deemed to be made on behalf of the Purchaser by the Dealer Manager or one or
more registered brokers or dealers that are licensed under the laws of such
jurisdiction.
4
TABLE OF CONTENTS
PAGE
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Available Information................................................................. 6
Incorporation of Certain Documents by Reference....................................... 6
Summary............................................................................... 8
Certain Significant Considerations.................................................... 29
Information Concerning Holdings..................................................... 29
Information Concerning the Transactions............................................. 33
The Exchange Offer.................................................................... 36
Background.......................................................................... 36
Purpose of the Exchange Offer; the Merger........................................... 37
Terms of the Exchange Offer; Expiration Date........................................ 38
Exchange of Shares of Borden Common Stock........................................... 39
Procedure for Tendering Shares of Borden Common Stock............................... 40
Withdrawal Rights................................................................... 44
Extension of Tender Period; Termination; Amendment.................................. 45
Certain Conditions of the Exchange Offer............................................ 46
Certain Tax Consequences............................................................ 48
Fees and Expenses of the Exchange Offer and Source of Funds......................... 49
Certain Regulatory Approvals and Legal Matters...................................... 50
Pending Litigation.................................................................. 56
Description of Merger Agreement and Conditional Purchase/Option Agreement............. 58
Merger Agreement.................................................................... 58
Conditional Purchase/Option Agreement............................................... 74
RJR Nabisco Holdings Corp............................................................. 78
RJR Nabisco Holdings Corp. Selected Historical Consolidated Financial Data............ 81
RJR Nabisco Holdings Corp. Selected Pro Forma Consolidated Financial Data............. 83
Security Ownership of Certain Beneficial Owners and Management........................ 89
Borden, Inc........................................................................... 91
Borden, Inc. Selected Historical Consolidated Financial Data.......................... 92
The Purchaser and the Common Stock Partnerships....................................... 94
Description of Holdings Capital Stock................................................. 94
Common Stock........................................................................ 94
Preferred Stock..................................................................... 95
Contractual Restrictions and Policies on Payment of Dividends....................... 98
Certain Statutory and By-law Provisions............................................. 101
Description of Borden Capital Stock and Rights........................................ 102
Comparison of Rights of Holders of Borden and Holdings Common Stock................... 103
Legal Matters......................................................................... 106
Experts............................................................................... 107
5
AVAILABLE INFORMATION
Holdings and Borden are subject to the informational requirements of the
Exchange Act and in accordance therewith file reports, proxy statements and
other information with the Commission. The reports, proxy statements and other
information filed by Holdings and Borden with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and should be
available at the Commission's Regional Offices at 7 World Trade Center, 13th
Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, material filed by
Holdings and Borden can be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
Holdings has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Holdings Common Stock to be offered in the Transactions. The Purchaser will be
filing a Tender Offer Statement on Schedule 14D-1 (together with any amendments
thereto, the "Schedule 14D-1") with the Commission in connection with the
Exchange Offer. This Offering Circular/Prospectus does not contain all the
information set forth in the Registration Statement or the Schedule 14D-1 and
the exhibits thereto. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements contained in this
Offering Circular/Prospectus or in any document incorporated in this Offering
Circular/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein include all material terms of such
contracts or other documents but are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or the Schedule 14D-1 or such other
document, each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Holdings (File No.
1-10215) pursuant to the Exchange Act are incorporated by reference in this
Offering Circular/Prospectus:
1. Holdings' Annual Report on Form 10-K for the year ended December 31,
1993 (which incorporates by reference certain information from Holdings'
Proxy Statement relating to the 1994 Annual Meeting of Shareholders);
2. Holdings' Quarterly Reports on Form 10-Q for the three months ended
March 31, 1994, the six months ended June 30, 1994 and the nine months ended
September 30, 1994;
3. Holdings' Current Report on Form 8-K/A filed April 27, 1994; and
4. The Consolidated Financial Statements of Holdings as of December 31,
1993 and 1992 and for each of the years in the three year period ended
December 31, 1993 and the related notes thereto, and Management's Discussion
and Analysis of Financial Condition and Results of Operations, included in
the Registration Statement on Form S-3 (Registration No. 33-52381), at the
time such Registration Statement was declared effective by the Commission.
The following documents filed with the Commission by Borden (File No. 1-71)
pursuant to the Exchange Act are incorporated by reference in this Offering
Circular/Prospectus:
1. Borden's Annual Report on Form 10-K for the year ended December 31,
1993 (which incorporates by reference certain information from Borden's
Proxy Statement relating to the 1994 Annual Meeting of Shareholders and
Borden's 1993 Annual Report to Shareholders);
2. Borden's Quarterly Reports on Form 10-Q for the three months ended
March 31, 1994 and the six months ended June 30, 1994; and
6
3. Borden's Current Reports on Form 8-K dated January 5, 1994, March 21,
1994, September 11, 1994 and September 12, 1994, and its two Current Reports
on Form 8-K, each dated October 5, 1994.
All documents and reports filed by Holdings and Borden pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Offering
Circular/Prospectus and prior to the completion of the Transactions (including
Borden's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to be filed pursuant to Rules 14d-9 and 14e-2 under the Exchange Act)
shall be deemed to be incorporated by reference in this Offering
Circular/Prospectus and to be a part hereof from the dates of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Offering Circular/Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Offering Circular/Prospectus.
THIS OFFERING CIRCULAR/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS OFFERING CIRCULAR/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, IN THE CASE OF DOCUMENTS RELATING TO HOLDINGS, TO RJR
NABISCO, INC., 1301 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019 (TELEPHONE
NUMBER (212) 258-5600), ATTENTION: INVESTOR RELATIONS DEPARTMENT; OR, IN THE
CASE OF DOCUMENTS RELATING TO BORDEN, TO BORDEN, INC., 180 EAST BROAD STREET,
COLUMBUS, OHIO 43215 (TELEPHONE NUMBER (614) 225-3395), ATTENTION: DOCUMENTS
MAILING DEPT. IN ORDER TO ENSURE TIMELY DELIVERY OF DOCUMENTS, ANY REQUEST
SHOULD BE MADE NO LATER THAN FIVE DAYS PRIOR TO THE EXPIRATION DATE (AS
HEREINAFTER DEFINED), AS IT MAY BE EXTENDED FROM TIME TO TIME.
7
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Offering Circular/Prospectus. Reference is
made to, and this Summary is qualified in its entirety by, the more detailed
information contained or incorporated by reference in this Offering
Circular/Prospectus. As used herein, "Holdings" means RJR Nabisco Holdings Corp.
and its consolidated subsidiaries, unless the context otherwise requires. Unless
otherwise defined herein, capitalized terms used in this Summary have the
respective meanings ascribed to them elsewhere in this Offering
Circular/Prospectus.
-------------------
The Registration Statement is being filed by Holdings at the request of the
Partnership pursuant to the terms of a Registration Rights Agreement between
Holdings and the Partnership dated as of July 15, 1990 and a Registration Rights
Agreement among Holdings, certain affiliates of KKR and others dated as of
February 9, 1989 (collectively, the "Registration Rights Agreements"). All
information contained or incorporated by reference in this Offering
Circular/Prospectus relating to KKR, the Common Stock Partnerships, the
Purchaser and the Transactions has been supplied by the Purchaser, all such
information relating to Holdings has been supplied by Holdings and all such
information relating to Borden has been supplied by Borden. Although Holdings
does not have any knowledge that would indicate that any of the information
which has been furnished by others is inaccurate or untrue in any material
respect, no assurance can be given that facts or events of which it is unaware
exist that may affect the significance or accuracy of the information furnished.
-------------------
FOR A DISCUSSION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE CONSIDERED BY
BORDEN SHAREHOLDERS IN CONNECTION WITH THEIR CONSIDERATION OF THE EXCHANGE
OFFER, INCLUDING CERTAIN FACTORS RELATING TO AN INVESTMENT IN HOLDINGS AND THE
TRANSACTIONS, SEE "CERTAIN SIGNIFICANT CONSIDERATIONS."
RJR NABISCO HOLDINGS CORP.
The operating subsidiaries of Holdings owned through RJR Nabisco, Inc.
("RJRN") comprise one of the largest tobacco and food companies in the world. In
the United States, the tobacco business is conducted by R.J. Reynolds Tobacco
Company ("RJRT"), the second largest manufacturer of cigarettes, and the
packaged foods business is conducted by Nabisco Holdings Corp. ("Nabisco"), the
largest manufacturer and marketer of cookies and crackers. Tobacco operations
outside the United States are conducted by R.J. Reynolds Tobacco International,
Inc. ("Tobacco International") and food operations outside the United States and
Canada are conducted by Nabisco. Together, RJRT's and Tobacco International's
tobacco products are sold around the world under a variety of brand names. Food
products are sold in the United States, Canada, Latin America and certain other
international markets.
Domestic Tobacco. RJRT's largest selling cigarette brands in the United
States include WINSTON, DORAL, SALEM, CAMEL, MONARCH and VANTAGE. RJRT's other
cigarette brands, including BEST VALUE, MORE, NOW, STERLING, MAGNA and CENTURY,
are marketed to meet a variety of smoker preferences. All RJRT brands are
marketed in a variety of styles. A primary long-term objective of RJRT is to
increase earnings and cash flow through selective marketing investments in its
key brands and continual improvements in its cost structure and operating
efficiency. Marketing programs for full-price brands are designed to build brand
awareness and add value to the brands in order to retain current adult smokers
and attract adult smokers of competitive brands. RJRT believes it is essential
to compete in all segments of the cigarette market, and accordingly offers a
range of lower-priced brands intended to appeal to more cost-conscious adult
smokers. Based on data collected for RJRT by an independent market research
firm, RJRT had an overall share of retail consumer cigarette sales during 1993
of 29.8%, an increase of approximately one share point from 1992.
8
International Tobacco. Tobacco International operates in over 160 markets
around the world and is the second largest of two international cigarette
producers that have significant positions in the American Blend segment of the
international tobacco market. Tobacco International markets over 55 brands of
which WINSTON, CAMEL and SALEM, all American Blend cigarettes, are its
international leaders. Tobacco International has strong brand presence in
Western Europe and is well established in its other key markets in the Middle
East/Africa, Asia and Canada. Tobacco International is aggressively pursuing
development opportunities in Eastern Europe and the former Soviet Union.
Nabisco. Nabisco's domestic operations represent one of the largest packaged
food businesses in the world. Through its domestic divisions, Nabisco
manufactures and markets cookies, crackers, snack foods, hard and bite-size
candy, gum, nuts, hot cereals, margarine, pet foods, dry-mix dessert products
and other grocery products under established and well-known trademarks,
including OREO, CHIPS AHOY!, NEWTONS, SNACKWELL'S, RITZ, PREMIUM, LIFE SAVERS,
PLANTERS, A.1, GREY POUPON, MILK-BONE, ORTEGA, CREAM OF WHEAT, FLEISCHMANN'S and
BLUE BONNET. Nabisco Biscuit Company ("Nabisco Biscuit") is the largest
manufacturer and marketer in the United States cookie and cracker industry with
the nine of the top ten selling brands, each of which had annual sales of over
$100 million in 1993. Overall, in 1993, Nabisco Biscuit had a 37% share of the
domestic cookie industry sales and a 55% share of the domestic cracker industry
sales, in the aggregate more than three times the share of its closest
competitor. In 1992, Nabisco Biscuit became the leading manufacturer and
marketer of no fat/reduced fat cookies and crackers with the introduction of the
SNACKWELL'S line. In 1993, the SNACKWELL'S brand recorded net sales of $186
million, which made SNACKWELL'S the sixth largest cookie/cracker brand in the
United States. Based on 1993 net sales, LIFE SAVERS is the largest selling hard
roll candy in the United States, with an approximately 25.4% share of the hard
roll candy category, and PLANTERS nuts are the clear leader in the packaged nut
category, with a market share of more than five times that of its nearest
competitor.
Nabisco is also a leading producer of powdered dessert and drink mixes,
biscuits, baking powder and other grocery items, industrial yeast and bakery
ingredients in many of the 17 Latin American countries in which it has
operations. Nabisco has significantly increased its presence in Europe through
the acquisition of Royal Brands S.A. in Spain and Royal Brands Portugal.
RJRN was acquired in 1989 by an indirect, wholly owned subsidiary of
Holdings (the "Acquisition") at the direction of KKR. Prior to the Acquisition,
RJRN was a publicly held corporation. See "Certain Significant
Considerations--KKR Ownership."
The principal executive office of Holdings is located at 1301 Avenue of
Americas, New York, New York 10019; its telephone number is (212) 258-5600.
RECENT DEVELOPMENTS
Nabisco Initial Public Offering and Related Transactions. On October 28,
1994, Nabisco filed a registration statement with the Commission for the initial
public offering of 45 million shares of its Class A Common Stock (51.75 million
shares if the underwriters' over-allotment options are exercised in full). For
purposes of the filing, the initial offering price was estimated to be between
$23 and $26 per share. Upon completion of the proposed public offering, Holdings
would beneficially own 100% of Nabisco's outstanding Class B Common Stock, which
would represent approximately 82.6% of the economic interest in Nabisco (80.5%
if the underwriters' over-allotment options are exercised in full). Holders of
Class A Common Stock of Nabisco generally would have identical rights to holders
of Class B Common Stock except that holders of Class A Common Stock would be
entitled to one vote per share while holders of Class B Common Stock would be
entitled to ten votes per share on all matters submitted to a vote of
stockholders. The registration statement has not become effective and there can
be no assurance that such offering will be consummated.
9
The initial public offering of shares of Nabisco is part of a broader
proposed initiative of Holdings designed to reduce consolidated debt of Holdings
by approximately $1 billion and establish a separately traded common stock for
Nabisco. After completion of the proposed public offering, Holdings anticipates
commencing a quarterly cash dividend on its common stock of $.075 per
share or $.30 per share on an annualized basis. The proposed transactions are
subject to the approval of lenders under RJRN's bank credit facilities.
At the time of the proposed public offering, Nabisco is expected to have
approximately $4.2 billion of intercompany debt and approximately $1.3 billion
of borrowings under a short-term bank credit agreement. The net proceeds of the
proposed public offering will be used by Nabisco to repay a portion of the
borrowings under its bank facility.
As part of the initiative, RJRN has called for redemption several issues of
debt securities, including $1.5 billion of 10 1/2% Senior Notes due 1998,
approximately $374 million of 8 3/8% Sinking Fund Debentures due 2017, $100
million of 13 1/2% Subordinated Debentures due 2001 and approximately $25
million of 7 3/8% Sinking Fund Debentures due 2001, all of which are redeemable
with various redemption premiums. RJRN expects to fund these redemptions with
borrowings under its existing credit facilities, proceeds from Holdings' Series
C Preferred Stock offering completed on May 6, 1994 and internally generated
cash flow. See "Selected Pro Forma Consolidated Financial Data."
Upon completion of the proposed public offering of Nabisco, RJRN may seek to
restructure approximately $6 billion of its domestic publicly held debt which
currently limits the ability of Nabisco to incur long-term debt other than
intercompany debt. The restructuring, which would require consent of public
debtholders and lenders under bank facilities, may include one or more offers to
exchange Nabisco debt securities for a portion of such debt. The goal of the
exchange offers would be to permit Nabisco to establish long-term borrowing
capacity independent of its parent and to reduce its intercompany debt. No
assurance can be given that RJRN will seek to restructure its debt or that any
such restructuring will be consummated.
The Board of Directors of Holdings has adopted certain policies that would
become effective upon the closing of the Nabisco initial public offering. One
policy would provide that Holdings would limit, until December 31, 1998, the
aggregate amount of cash dividends on its capital stock. Under this policy,
during that period Holdings would not pay any extraordinary cash dividends and
would limit the amount of its cash dividends, cash distributions and repurchases
for cash of capital stock and subordinated debt to an amount equal to the sum of
$500 million plus (i) 65% of Holdings' cumulative consolidated net income before
extraordinary gains or losses and restructuring charges and (ii) net cash
proceeds of up to $250 million in any year from the sale of capital stock of
Holdings or its subsidiaries (other than proceeds from the Nabisco initial
public offering) to the extent used to repay, purchase or redeem debt or
preferred stock. Another policy would provide that Holdings would not declare a
dividend or distribution to its stockholders of the shares of capital stock of a
subsidiary before December 31, 1996. Another policy sets forth the intention of
Holdings that it would not make such a distribution prior to December 31, 1998
if that distribution would cause the ratings of the senior indebtedness of RJRN
to be reduced from investment grade to non-investment grade or if, after giving
effect to such distribution, any publicly held senior indebtedness of the
distributed company would not be rated investment grade. There is no assurance
that any such distribution will take place. Additional policies provide that an
amount equal to the net cash proceeds from any issuance and sale of equity by
Holdings or from any sale outside the ordinary course of business of material
assets owned or used by subsidiaries in the tobacco business, in each case
before December 31, 1998, would be used either to repay, purchase or redeem
consolidated indebtedness or to acquire properties, assets or businesses to be
used in existing or new lines of business and that an amount equal to the net
cash proceeds of any secondary sale of shares of Nabisco before December 31,
1998 would be used to repay, purchase or redeem consolidated debt. No assurance
can be given that Holdings will issue or sell any equity or sell any material
assets outside the ordinary course of business.
10
Termination of Agreement in Principle Relating to Borden. Holdings has been
unable to reach a definitive agreement for the transaction contemplated by its
agreement in principle with KKR to acquire a minority interest in Borden, as
announced on September 12, 1994. That announcement indicated that, following
KKR's successful acquisition of Borden, Holdings would issue to Borden
approximately $500 million of newly issued common shares of Holdings for newly
issued Borden shares representing a 20% pro forma interest in Borden and a
warrant to acquire an additional 10% pro forma interest in Borden. The inability
to reach agreement resulted from various complexities affecting the transaction,
including certain accounting issues. Holdings may in the future explore a basis
on which it or its Nabisco subsidiary may acquire a minority equity interest in
Borden in exchange for common stock of Holdings. However, Holdings is not
currently engaged in any such negotiations, and there is no assurance that
Holdings will seek to pursue any such negotiations or that any such negotiations
will be successful.
BORDEN, INC.
Borden is engaged primarily in manufacturing, processing, purchasing and
distributing a broad range of products through three operating divisions: North
American Foods, International Foods and Packaging and Industrial Products. North
American Foods is comprised of niche grocery, pasta and sauce, and dairy
products, while International Foods includes international milk powder, European
bakery products and several European grocery and pasta businesses. Packaging and
Industrial Products includes primarily wallcoverings, adhesives and resins, and
plastic films and packaging.
Borden was incorporated in New Jersey on April 24, 1899 as the successor to
a business founded in 1857. Borden's principal executive offices are located at
180 East Broad Street, Columbus, Ohio 43215 (telephone number 614-225-4000).
RECENT DEVELOPMENTS
On October 26, 1994, Borden announced its results for the third quarter
ended September 30, 1994, which included a net loss of $130.5 million or $.92
per share, including a pretax charge to income of $181.2 million. The pretax
charge of $181.2 million consisted of $104.5 million for less-than-estimated
proceeds from the divestiture of discontinued operations, as announced by Borden
in January 1994, $52.2 million for estimated transaction fees and expenses with
respect to the Transactions, $54.4 million for the write-down of two
partnerships and of goodwill related to the Fisher cheese brand, and $16.5
million for additions to environmental, litigation and idle property reserves.
The third quarter results also included a credit of $50.1 million for the
reversal of prior restructuring charges associated with previous restructuring
programs. Borden's management reviewed the prior restructuring programs in light
of recent events and determined that portions of the reserves for these programs
would not be utilized. Borden also reported that its operating income for the
quarter ended September 30, 1994 was $75.3 million, including $23.9 million of
the credit for the reversal of restructuring charges, and a $28.9 million charge
for the write-off of Fisher cheese goodwill. In addition, Borden announced the
declaration of a quarterly dividend on the Borden Common Stock by its Board of
Directors of $.01 per share, payable December 1 to shareholders of record
November 10, reduced from $.075 per share for the prior quarter of 1994.
THE PURCHASER AND THE COMMON STOCK PARTNERSHIPS
The Purchaser, a New Jersey corporation and a subsidiary of the Partnership,
was organized in connection with the Transactions and has not carried on any
activities to date other than those incident to its formation and the
Transactions. Prior to the consummation of the Exchange Offer, KKR Partners II,
L.P. will become a holder of shares of common stock of the Purchaser. Each of
the Common Stock Partnerships is a Delaware limited partnership, whose general
partner is KKR Associates, an affiliate of KKR. The principal assets of each
of the Common Stock Partnerships consist of investments in various
11
entities, including investments in Holdings Common Stock. The principal offices
of the Purchaser and the Common Stock Partnerships are located at 9 West 57th
Street, New York, New York 10019; telephone number (212) 750-8300.
The Purchaser has reserved the right to transfer or assign, in whole or from
time to time in part, to one or more affiliates, the right to exchange all or
any portion of the Borden Shares tendered pursuant to the Exchange Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations pursuant to the Exchange Offer and will in no way prejudice the
rights of tendering shareholders to exchange for Borden Shares validly tendered
and accepted for exchange pursuant to the Exchange Offer. According to the
Merger Agreement, it is presently contemplated that the right of the Purchaser
to exchange for shares of Borden Common Stock pursuant to the Exchange Offer and
the right of the Purchaser to exercise the Option will be assigned to the
Partnership or to a direct or indirect wholly owned subsidiary of the
Partnership, which may, in any such case, act for itself and/or as agent for one
or both of the Common Stock Partnerships, as the case may be.
For information concerning beneficial ownership of Holdings Common Stock by
affiliates of the Purchaser, see "Security Ownership of Certain Beneficial
Owners and Management."
THE EXCHANGE OFFER, THE MERGER AND RELATED TRANSACTIONS
The Purchaser, the Partnership and Borden have entered into the Merger
Agreement and the Conditional Purchase/Option Agreement, which provide for the
consummation of the Transactions, upon the terms and subject to the conditions
thereof. The Board of Directors of Borden has, among other things, (1)
determined that the Merger Agreement and the Conditional Purchase/Option
Agreement and the Transactions, including the Exchange Offer and the Merger,
taken together, are fair to the shareholders of Borden, and resolved to
recommend that holders of Borden Shares accept the Exchange Offer, tender their
Borden Shares to the Purchaser in the Exchange Offer and, if required by
applicable law, approve and adopt the Merger Agreement, and (2) approved the
Merger Agreement, the Conditional Purchase/Option Agreement and the
Transactions. See "Description of Merger Agreement and Conditional
Purchase/Option Agreement."
In the Exchange Offer, each Borden Share accepted by the Purchaser in
accordance with the Exchange Offer shall be converted into the right to receive
from the Purchaser that number of fully paid and nonassessable shares of
Holdings Common Stock equal to the Exchange Ratio, which is the quotient
(rounded to the nearest 1/100,000) obtained by dividing (i) $14.25 by (ii) the
average of the average of the high and low sales prices of the Holdings Common
Stock as reported on the NYSE Composite Tape during the Valuation Period,
provided that the Exchange Ratio shall not be less than 1.78125 or greater than
2.375.
If the Merger is consummated, holders of Borden Shares will receive the same
number of shares of Holdings Common Stock for each Borden Share as are exchanged
for each Borden Share in the Exchange Offer.
The Exchange Offer is being made for the purpose of acquiring 100% of the
outstanding Borden Shares. If, following the Exchange Offer and exercise of the
Option, the Purchaser and its affiliates own more than 90% of the outstanding
Borden Shares, the Purchaser will take all necessary or appropriate action,
without further action by the Board of Directors or shareholders of Borden, to
consummate the Merger of the Purchaser with Borden as soon as practicable. If,
following the Exchange Offer and exercise of the Option, approval of Borden's
shareholders is required by applicable law in order to consummate the Merger,
provided that the Minimum Condition is satisfied without being reduced or
waived, Borden will submit the Merger to the Borden shareholders for approval.
If the Merger is required to be submitted to Borden's shareholders for approval,
the Merger will require the approval of the holders of not less than 66 2/3% of
the outstanding Borden Shares, including the Borden Shares owned by the
Purchaser and its affiliates.
12
THIS OFFERING CIRCULAR/PROSPECTUS DOES NOT CONSTITUTE A SOLICITATION OF A
PROXY, CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO ANY SPECIAL MEETING OR
OTHER MEETING OF BORDEN SHAREHOLDERS WHO DO NOT TENDER THEIR BORDEN SHARES OR
ANY ACTION IN LIEU THEREOF. ANY SUCH SOLICITATION WILL BE MADE ONLY PURSUANT TO
SEPARATE PROXY MATERIALS IN COMPLIANCE WITH SECTION 14(A) OF THE EXCHANGE ACT.
EXCHANGE OFFER
Terms of the Exchange Offer; Expiration Date. Upon the terms and subject to
the conditions of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser hereby offers to exchange shares of Holdings Common
Stock for all outstanding Borden Shares at the Exchange Ratio, provided that
such Borden Shares are validly tendered on or prior to the Expiration Date and
not properly withdrawn as described under "The Exchange Offer--Withdrawal
Rights." The term "Expiration Date" means 12:00 Midnight, New York City time, on
December , 1994, unless the Purchaser shall have extended the period of time
for which the Exchange Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Exchange Offer, as so extended
by the Purchaser, shall expire.
The Exchange Offer is subject to, among other things, the Minimum Condition.
The Exchange Offer is also subject to other material terms and conditions, which
Borden shareholders should carefully consider. The Purchaser has reserved the
right (but shall not be obligated) to waive any or all of the conditions,
provided, however, that if the Purchaser shall have exercised the Option in
whole or in part prior to the termination of the Exchange Offer, the Purchaser
shall not be permitted to waive the Minimum Condition. See "Certain Significant
Considerations--Information Concerning the Transactions--Exchange Offer
Conditions Related to Indebtedness," "The Exchange Offer--Certain Conditions of
the Exchange Offer" and "Description of Merger Agreement and Conditional
Purchase/Option Agreement."
Exchange of Shares of Borden Common Stock. Upon the terms and subject to the
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for exchange, and will exchange for shares of Holdings
Common Stock, all Borden Shares validly tendered and not properly withdrawn on
or prior to the Expiration Date promptly after the later to occur of (i) the
Expiration Date and (ii) the satisfaction or waiver of the conditions of the
Exchange Offer set forth under "The Exchange Offer-- Certain Conditions of the
Exchange Offer." See "The Exchange Offer--Exchange of Shares of Borden Common
Stock" and "--Withdrawal Rights."
In all cases, exchange of Borden Shares tendered and accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of (i) Share Certificates (and Rights Certificates if applicable)
for Borden Shares, or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Borden Shares into the Exchange Agent's account at
The Depository Trust Company, the Midwest Securities Trust Company or the
Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth under "The Exchange Offer--Procedure for Tendering Shares
of Borden Common Stock," (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message (as defined below) in connection with a
book-entry transfer, and (iii) any other documents required by the Letter of
Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Borden Shares which are the subject of such
Book-Entry Confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that the Purchaser may
enforce such agreement against such participant.
13
Unless and until the Rights are redeemed in accordance with the Merger
Agreement, holders of Borden Shares will be required to tender the Rights
associated with such Borden Shares in order to effect a valid tender of such
Borden Shares. As of the date hereof, the Rights trade together with the Borden
Shares and a tender of the Borden Shares will be deemed to be a tender of the
associated Rights. If separate Rights Certificates are issued, tendering
shareholders will then be required to tender both Share Certificates and Rights
Certificates in order to effect a valid tender.
If any tendered Borden Shares are not accepted for exchange for any reason
or if Share Certificates (and Rights Certificates if applicable) are submitted
for more Borden Shares than are tendered, Share Certificates (and Rights
Certificates if applicable) for Borden Shares evidencing un-exchanged or un-
tendered Borden Shares will be returned, without expense to the tendering
shareholder (or, in the case of Borden Shares tendered by book-entry transfer
into the Exchange Agent's account at a Book-Entry Transfer Facility pursuant to
the procedures described under "The Exchange Offer--Procedure for Tendering
Shares of Borden Common Stock--Book-Entry Transfer," such Borden Shares will be
credited to an account maintained at such Book-Entry Transfer Facility), in each
case with the related Rights Certificates (if applicable), promptly following
the expiration, termination or withdrawal of the Exchange Offer.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to shareholders pursuant to the Exchange Offer, such increased
consideration will be given to all shareholders whose Borden Shares are
exchanged pursuant to the Exchange Offer, whether or not such Borden Shares were
tendered or accepted for exchange prior to such increase in consideration.
Procedure for Tendering Shares of Borden Common Stock. Except as set forth
below, in order for Borden Shares (and Rights if applicable) to be validly
tendered pursuant to the Exchange Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in connection with a
book-entry delivery of Borden Shares (and Rights if applicable) and any other
documents required by the Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the back cover of this
Offering Circular/Prospectus on or prior to the Expiration Date and either (i)
the Share Certificates (and Rights Certificates if applicable) evidencing
tendered Borden Shares (and Rights if applicable) must be received by the
Exchange Agent at such address or such Borden Shares (and Rights if applicable)
must be tendered pursuant to the procedure for book-entry transfer and a
Book-Entry Confirmation must be received by the Exchange Agent, in each case on
or prior to the Expiration Date, or (ii) the guaranteed delivery procedures must
be complied with.
THE METHOD OF DELIVERY OF BORDEN SHARES (AND RIGHTS IF APPLICABLE), AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Withdrawal Rights. Tenders of Borden Shares (and Rights if applicable) made
pursuant to the Exchange Offer are irrevocable, except that Borden Shares (and
Rights if applicable) tendered pursuant to the Exchange Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless theretofore accepted
for exchange by the Purchaser pursuant to the Exchange Offer, may also be
withdrawn at any time after , 1995. If the Purchaser extends the
Exchange Offer, is delayed in its acceptance for exchange of or exchange for
Borden Shares or is unable to exchange Borden Shares validly tendered pursuant
to the Exchange Offer for any reason, then, without prejudice to the Purchaser's
rights under the Exchange Offer, the Exchange Agent may nevertheless, on behalf
of the Purchaser, retain tendered Borden Shares (and Rights if applicable), and
such Borden Shares (and Rights if applicable) may not be withdrawn except to the
extent that tendering shareholders are entitled to withdrawal rights as
described below. Any such delay will be by an extension of the Exchange Offer to
the extent required by law.
14
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent
at one of its addresses set forth on the back cover of this Offering
Circular/Prospectus. Any notice of withdrawal must specify the name of the
person who tendered the Borden Shares (and Rights if applicable) to be
withdrawn, the number of Borden Shares (and Rights if applicable) to be
withdrawn and the name of the registered holder, if different from that of the
person who tendered such Borden Shares (and Rights if applicable). If Share
Certificates (or Rights Certificates if applicable) for Borden Shares (and
Rights if applicable) to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Exchange Agent and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Borden Shares (and Rights if
applicable) have been tendered for the account of an Eligible Institution. If
Borden Shares (and Rights if applicable) have been tendered pursuant to the
procedure for book-entry transfer as described under "The Exchange
Offer--Procedure for Tendering Shares of Borden Common Stock--Book-Entry
Transfer," any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Borden Shares (and Rights if applicable), in which case a notice of withdrawal
will be effective if delivered to the Exchange Agent by any method of delivery
described in the first sentence of this paragraph.
Any Borden Shares (and Rights if applicable) properly withdrawn will
thereafter be deemed not to have been validly tendered for purposes of the
Exchange Offer. However, withdrawn Borden Shares (and Rights if applicable) may
be re-tendered at any time on or prior to the Expiration Date by following one
of the procedures described under "The Exchange Offer--Procedure for Tendering
Shares of Borden Common Stock."
Extension of Tender Period; Termination; Amendment. The Purchaser expressly
reserves the right, in its sole discretion, at any time and from time to time,
to extend the period during which the Exchange Offer is open for any reason,
including the occurrence of any of the conditions specified under "The Exchange
Offer--Certain Conditions of the Exchange Offer," by giving oral or written
notice of such extension to the Exchange Agent. During any such extension, all
Borden Shares (and Rights if applicable) previously tendered and not properly
withdrawn will remain subject to the Exchange Offer, subject to the rights of a
tendering shareholder to withdraw such shareholder's Borden Shares (and Rights
if applicable). Pursuant to the Merger Agreement, the Purchaser has agreed that,
upon the request of Borden (and without limiting the number of times that the
Purchaser may extend the Exchange Offer, or the total number of days for which
the Exchange Offer may be extended), the Purchaser will extend the Exchange
Offer, one or more times, for an aggregate of not more than twenty business
days. See "The Exchange Offer--Withdrawal Rights" and "Description of Merger
Agreement and Conditional Purchase/Option Agreement."
The Purchaser acknowledges (i) that Rule 14e-1(c) under the Exchange Act
requires the Purchaser to pay the consideration offered or return the Borden
Shares (and Rights if applicable) tendered promptly after the termination or
withdrawal of the Exchange Offer and (ii) that the Purchaser may not delay
acceptance for exchange of, or exchange for (except as provided in clause (i) of
the succeeding sentence), any Borden Shares upon the occurrence of any of the
conditions specified under "The Exchange Offer--Certain Conditions of the
Exchange Offer" without extending the period of time during which the Exchange
Offer is open. Subject to the foregoing and any other applicable regulations of
the Commission, the Purchaser also reserves the right, in its sole discretion,
at any time or from time to time to (i) delay acceptance for exchange of or,
regardless of whether such Borden Shares were theretofore accepted for exchange,
exchange for any Borden Shares pending receipt of any regulatory approvals
specified under "The Exchange Offer--Certain Regulatory Approvals and Legal
Matters," (ii) terminate the Exchange Offer (whether or not any Borden Shares
have theretofore been accepted for exchange) if any of the conditions referred
to under "The Exchange Offer--Certain Conditions of the Exchange Offer" has not
been satisfied or upon the occurrence of any of the conditions specified
thereunder and (iii) waive any condition or otherwise amend the Exchange Offer
in any respect, in each case, by giving oral or written notice of such delay,
termination, waiver or amendment to the Exchange Agent and by making a public
announcement thereof.
15
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, and such announcement
in the case of an extension will be made no later than 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Purchaser may choose to make any public
announcement, except as provided by applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that material changes be promptly
disseminated to holders of Borden Shares), the Purchaser shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
Merger. Pursuant to the Merger Agreement, if approval of Borden's
shareholders is required by applicable law in order to consummate the Merger,
provided that the Minimum Condition is satisfied without being reduced or
waived, following the acceptance for exchange of Borden Shares pursuant to the
Exchange Offer, Borden, acting through its Board of Directors, will, in
accordance with applicable law, as soon as practicable following the expiration
or termination of the Exchange Offer, duly call, give notice of, convene and,
subject to the right of the parties to delay a special meeting under certain
circumstances described in the Merger Agreement, hold a special meeting of its
shareholders (the "Borden Shareholders' Meeting") for the purpose of considering
and taking action upon the Merger Agreement and the Merger and to obtain the
necessary approval by its shareholders of the Merger Agreement and the
transactions contemplated thereby, including the Merger.
Under the Merger Agreement, in the event that the Partnership and the
Purchaser, or any other direct or indirect subsidiary of the Partnership
acquires at least 90% of the outstanding Borden Shares, the parties have agreed
to take all necessary or appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Exchange Offer
without a meeting of shareholders of Borden, in accordance with applicable
provisions of the New Jersey Business Corporation Act (the "NJBCA").
By virtue of the Merger and without any further action on the part of the
holder of any shares of Borden Common Stock or any shares of capital stock of
the Purchaser, each issued and outstanding share of Borden Common Stock (other
than shares owned by Borden or any subsidiary of Borden or the Partnership, the
Purchaser or any other subsidiary of the Partnership) will be converted into the
right to receive a number of fully paid and nonassessable shares of Holdings
Common Stock equal to the number of fully paid and nonassessable shares of
Holdings Common Stock that were delivered by the Purchaser with respect to each
share of Borden Common Stock that was validly tendered and not properly
withdrawn and accepted for exchange pursuant to the terms of the Exchange Offer.
Representations and Warranties. The Merger Agreement contains certain
representations and warranties of Borden, the Partnership and the Purchaser. See
"Description of Merger Agreement and Conditional Purchaser/Option Agreement."
Covenants Regarding Conduct of Business. Except as contemplated by the
Merger Agreement, during the period from the date of the Merger Agreement to the
date on which a majority of the Board of Directors of Borden consists of
designees or representatives of the Partnership, Borden, with respect to itself
and each of its subsidiaries, has agreed in the Merger Agreement to conduct its
operations according to its ordinary course of business consistent with past
practice and to use its best efforts to preserve intact its business
organization, to keep available the services of its current officers and
employees and to preserve existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relationships with it to the end that its goodwill and ongoing businesses will
be unimpaired at the date on which a majority of the Board of Directors of
Borden consists of designees or representatives of the Partnership.
16
No Solicitation. Under the Merger Agreement, except with respect to
divestitures in accordance with Borden's January 1994 restructuring plan, Borden
has agreed that neither it nor any of its subsidiaries will, nor will it or any
of its subsidiaries authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of its subsidiaries to, (a) solicit,
initiate, encourage (including by way of furnishing information), or take any
other action to facilitate, any inquiry or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any acquisition or
purchase of a substantial amount of assets of, or any equity interest in, Borden
or any of its subsidiaries or any tender offer (including a self tender offer)
or exchange offer, merger, consolidation, business combination, sale of
substantially all assets, sale of securities, recapitalization, liquidation,
dissolution or similar transaction involving Borden or any of its subsidiaries
(other than the transactions contemplated by the Merger Agreement or the
Conditional Purchase/Option Agreement) or any other transaction the consummation
of which would or could reasonably be expected to impede, interfere with,
prevent or materially delay the Merger or the exercise of the Option or which
would or could reasonably be expected to materially dilute the benefits to the
Purchaser of the transactions contemplated by the Merger Agreement
(collectively, "Transaction Proposals") or agree to or endorse any Transaction
Proposal or (b) enter into or participate in any discussions or negotiations
regarding any of the foregoing, or furnish to any other person any information
with respect to its business, properties or assets or any of the foregoing, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing; provided, however, that the foregoing clauses will not prohibit
Borden from (i) furnishing information pursuant to an appropriate
confidentiality letter concerning Borden and its businesses, properties or
assets to a third party who has made a Transaction Proposal, (ii) engaging in
discussions or negotiations with such a third party who has made a Transaction
Proposal or (iii) following receipt of a Transaction Proposal, taking and
disclosing to its shareholders a position contemplated by Rule 14e-2(a) under
the Exchange Act or changing the Recommendations, but in each case referred to
in the foregoing clauses (i) through (iii) only after the Board of Directors of
Borden concludes in good faith that such action is necessary or appropriate in
order for the Board of Directors of Borden to act in a manner which is
consistent with its fiduciary obligations under applicable law. If the Board of
Directors of Borden receives a Transaction Proposal, then Borden has agreed
promptly to inform the Partnership of the terms and conditions of such proposal
and the identity of the person making it and to keep the Partnership generally
informed with reasonable promptness of any steps it is taking pursuant to the
foregoing with respect to such Transaction Proposal.
Cooperation and Best Efforts. Pursuant to the Merger Agreement, subject to
certain conditions and limitations described therein, the parties have agreed to
cooperate with each other and to use their respective best efforts to take
appropriate actions so that the transactions contemplated by the Merger
Agreement and the Conditional Purchase/Option Agreement may be consummated.
In addition, in the Merger Agreement, Borden and the Partnership have agreed
that, as promptly as practicable, they will file notification and report forms
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") and make any
other necessary filings with the applicable governmental entities related to the
transactions contemplated by the Merger Agreement, including the Exchange Offer
and the Merger, and the Conditional Purchase/Option Agreement and will use their
best efforts to respond as promptly as practicable to all inquiries received
from the FTC or the Antitrust Division or such other governmental entities for
additional information or documentation. Provided that following receipt of such
approvals the Purchaser (or one of its affiliates) acquires at least 28,138,000
Shares pursuant to the Exchange Offer and/or the Option, Borden has agreed to
make any and all divestitures or undertakings required by the FTC, the Antitrust
Division or any other applicable government entity in connection with the
Transactions, which divestitures in each case shall be reasonably acceptable to
the Partnership and the Purchaser. See "Certain Regulatory Approvals and Legal
Matters" for a discussion of, among other
17
things, the current status of filings by the Partnership and Borden under the
HSR Act and related matters.
Redemption of Rights. Pursuant to the Merger Agreement, Borden has agreed to
redeem all outstanding Rights at a redemption price of one and two-thirds cents
per Right effective immediately prior to the acceptance for exchange of any
Borden Shares pursuant to the Exchange Offer, provided that the Minimum
Condition is satisfied in the Exchange Offer. In accordance with the Merger
Agreement, Borden has amended the Rights Agreement so that none of the execution
or the delivery of the Merger Agreement or the Conditional Purchase/Option
Agreement, or both such agreements taken together, or commencement of the
Exchange Offer or the acceptance of Borden Shares for exchange pursuant to the
Exchange Offer, or the consummation of the transactions contemplated by the
Conditional Purchase/Option Agreement will, among other things, trigger the
exercisability of the Rights, the separation of the Rights from the stock
certificates to which they are attached or any other provisions of the Rights
Agreement. Borden has agreed, under certain circumstances, to take other
specified actions with respect to the Rights. See "Description of Merger
Agreement and Conditional Purchase/Option Agreement."
Conditions to Each Party's Obligations to Effect the Merger. The Merger
Agreement provides that the respective obligation of each party to effect the
Merger is subject to certain conditions, including, among other things, the
consummation of the Exchange Offer and the truth and correctness as of the
effective date of the Merger of certain representations and warranties of the
parties to the Merger Agreement with respect to material adverse changes in
their business, financial condition or results of operations. See "Description
of Merger Agreement and Conditional Purchase/Option Agreement."
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time, notwithstanding approval
thereof by the shareholders of Borden, but prior to the effective time of the
Merger: (a) by mutual written consent of the Partnership, the Purchaser and
Borden; (b) by the Partnership or Borden if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the United
States or any country or economic region in which either Borden or the
Partnership, directly or indirectly, has material assets or operations, shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; (c) by
the Partnership if due to an occurrence or circumstance which would result in a
failure to satisfy any of the conditions to the Exchange Offer the Purchaser
shall have terminated the Exchange Offer, unless such termination shall have
been caused by or resulted from the failure of the Partnership or the Purchaser
to perform in any material respect their material covenants and agreements
contained in the Merger Agreement; (d) by the Partnership if Borden shall have
modified or amended in any respect materially adverse to the Partnership or the
Purchaser or withdrawn its approval or recommendation of the Exchange Offer, the
Merger or the Merger Agreement, subject to certain exceptions; (e) by the
Partnership if Borden shall have (i) entered into any definitive agreement to
effect the transaction contemplated by a Transaction Proposal, (ii) recommended
any Transaction Proposal from a person other than the Partnership or the
Purchaser or any of its affiliates or (iii) resolved to do any of the foregoing;
(f) by the Partnership if certain alternative acquisitions shall have occurred;
(g) by Borden if (i) due to an occurrence or circumstance that would result in a
failure to satisfy any of the conditions of the Exchange Offer the Purchaser
shall have terminated the Exchange Offer, subject to certain exceptions; (h) by
the Partnership or Borden if, without fault of the terminating party, the
effective time of the Merger shall not have occurred on or before June 30, 1995
(provided, that the right to terminate the Merger Agreement under this clause
(h) shall not be available to any party whose failure to fulfill any obligation
under the Merger Agreement has been the cause of, or results in, the failure of
the Merger to have been consummated within such period); (i) by Borden if on or
after December 15, 1994, the termination date of a waiver granted to Borden of
certain provisions relating to changes in control of Borden under the credit
agreement dated
18
as of August 16, 1994 among Borden and the banks' party thereto shall not then
extend past December 15, 1994 and certain other events shall occur as a result
thereof; or (j) by the Partnership or Borden if any required approval of the
shareholders of Borden shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of shareholders
or at any adjournment thereof. See "Description of Merger Agreement and
Conditional Purchase/Option Agreement."
Certain Required Payments. Pursuant to the Merger Agreement, Borden has
agreed to make certain payments to the Partnership and the Purchaser in respect
of expenses (in the aggregate amount of up to $15 million) and fees (in the
aggregate amount of up to $30 million), including upon certain termination
events with respect to the Merger Agreement.
CERTAIN PROVISIONS OF THE CONDITIONAL PURCHASE/OPTION AGREEMENT
Pursuant to the Conditional Purchase/Option Agreement, Borden has granted to
the Purchaser the irrevocable Option to purchase up to 28,138,000 Option Shares
(or approximately 19.9% of the outstanding Borden Shares as of the date hereof),
on the terms and subject to the conditions set forth therein.
Exercise of Option. Under the Conditional Purchase/Option Agreement, the
Option may be exercised by the Purchaser (or its designee, which designee must
be the Partnership or a direct or indirect wholly owned subsidiary of the
Partnership and which may, in any such case, act for itself and/or as agent for
one or both of the Common Stock Partnerships, as the case may be), in whole or
in part, at any time, or from time to time, during the period beginning on the
date of the Conditional Purchase/Option Agreement and ending on the Option
Expiration Date (as defined below), provided that if the Purchaser (or its
designee) has not exercised the Option in whole or in part prior to the
expiration of the Exchange Offer, it will not be entitled to exercise the Option
thereafter if it waives or otherwise reduces the Minimum Condition and accepts
fewer than 41% of the outstanding Borden Shares for payment in the Exchange
Offer. The term "Option Expiration Date" means the first to occur of the
effective time of the Merger and March 21, 1995 (unless the Purchaser has
theretofore sent a written notice of its intention to exercise the Option).
Conversion of Option. The Conditional Purchase/Option Agreement provides
that, upon the Conversion Date (as defined below), if any, the Option will be
converted in part from an irrevocable option to purchase the Borden Shares into
an obligation on the part of the Purchaser (or its designee, which designee must
be the Partnership or a direct or indirect wholly owned subsidiary of the
Partnership and which may, in any such case, act for itself and/or as agent for
one or both of the Common Stock Partnerships, as the case may be) to exercise
the Option to acquire, and of the Partnership to cause the Purchaser to take
such action, subject to applicable law (the "Mandatory Purchase"), on the terms
and subject to the conditions set forth in the Conditional Purchase/Option
Agreement, such number of Borden Shares which, when added to the number of
Borden Shares purchased in the Exchange Offer (together with any Borden Shares
previously purchased pursuant to the Option) will result in the Purchaser
beneficially owning more than 50% of the outstanding shares of Borden Common
Stock (the "Mandatory Purchase Shares"). Borden Shares subject to the Option in
excess of the number of Mandatory Purchase Shares will continue to be subject to
purchase at the option of the Purchaser. The term "Conversion Date" means the
date, if any, on which the Purchaser or the Partnership or a direct or indirect
wholly owned subsidiary of the Partnership acquires more than 41%, but less than
50%, of the outstanding shares of Borden Common Stock pursuant to the Exchange
Offer.
Payments. The Conditional Purchase/Option Agreement provides that, in the
event the Purchaser exercises the Option, the Purchaser (or, at the Purchaser's
option, its designee) will deliver to Borden, such number of shares (rounded to
the nearest whole share) of Holdings Common Stock as will equal the product of
the Option Exchange Ratio (as defined below) and the number of Borden Shares
19
purchased pursuant to the exercise of the Option. The term "Option Exchange
Ratio" means the quotient (rounded to the nearest 1/100,000) obtained by
dividing (i) $11.00 (the "Option Purchase Price") by (ii) the average of the
average of the high and low prices of Holdings Common Stock as reported on the
NYSE Composite Tape on each of the ten consecutive trading days immediately
preceding the second trading day prior to (x) the date of notice of exercise in
the case of an Option Purchase or (y) the date of exercise in the case of a
Mandatory Purchase, subject to adjustment under certain circumstances.
BOARD REPRESENTATION
The Merger Agreement and the Conditional Purchase/Option Agreement provide
that, if requested by the Partnership, Borden will, following the acceptance for
exchange of the Borden Shares to be exchanged pursuant to the Exchange Offer
and/or the purchase of the Option Shares in accordance with the Conditional
Purchase/Option Agreement, and from time to time thereafter, take all actions
necessary to cause the Applicable Percentage (as defined below) of directors
(and of members of each committee of the Board of Directors) (rounded in each
case to the next highest director or member) of Borden selected by the
Partnership to consist of persons designated or elected by the Partnership
(whether, at the election of Borden, by means of increasing the size of the
Borden Board of Directors or seeking the resignation of directors and causing
the Partnership's designees to be elected). The term "Applicable Percentage"
means the ratio of (i) the total voting power of all Borden Shares accepted for
exchange pursuant to the Exchange Offer and/or purchased in accordance with the
Conditional Purchase/Option Agreement to (ii) the total voting power of the
outstanding voting securities of Borden, rounded to the nearest whole number and
expressed as a percentage; provided that, if the Purchaser has acquired at least
28,138,000 Borden Shares, the Applicable Percentage will not be less than
33 1/3%.
DISSENTERS' RIGHTS
Holders of Borden Common Stock will not be entitled to dissenters' rights
under New Jersey law in connection with the Exchange Offer or the Merger, and
the Purchaser does not intend to accord dissenters' rights to holders of Borden
Common Stock.
CERTAIN TAX CONSEQUENCES
The receipt of shares of Holdings Common Stock pursuant to the Exchange
Offer or the Merger will generally result in the recognition of gain or loss for
federal income tax purposes by a Borden shareholder in an amount equal to the
difference between the fair market value of the consideration received
(including cash received in lieu of fractional shares) and such shareholder's
adjusted tax basis in the Borden Shares exchanged and may also have tax
consequences under applicable state, local, foreign or other tax laws. See "The
Exchange Offer--Certain Tax Consequences."
FEES AND EXPENSES OF THE EXCHANGE OFFER
Morgan Stanley & Co. Incorporated ("Morgan Stanley") is acting as the
Purchaser's financial advisor in connection with the proposed acquisition of
Borden Common Stock and as Dealer Manager for the Exchange Offer. The Purchaser
has retained D.F. King & Co., Inc. to act as the Information Agent and First
Chicago Trust Company of New York to act as the Exchange Agent in connection
with the Exchange Offer.
Morgan Stanley, the Information Agent and the Exchange Agent each will
receive compensation for their respective services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities in connection therewith, including certain liabilities under
the federal securities laws. The aggregate amount of the fees and expenses of
the Dealer Manager, the
20
Information Agent and the Exchange Agent is estimated to be up to approximately
$8.25 million. See "The Exchange Offer--Fees and Expenses of the Exchange Offer
and Source of Funds."
CERTAIN REGULATORY APPROVALS AND LEGAL MATTERS
Except as set forth in "The Exchange Offer--Certain Regulatory Approvals and
Legal Matters," neither the Purchaser nor the Partnership is aware of any
licenses or other regulatory permits that appear to be material to the business
of Borden and its subsidiaries, taken as a whole, that might be adversely
affected by the Purchaser's acquisition of Borden Shares (and the indirect
acquisition of the stock of Borden's subsidiaries) as contemplated herein, or of
any filings, approvals or other actions by or with any domestic (federal or
state), foreign or supranational governmental authority or administrative or
regulatory agency that would be required prior to the acquisition of Borden
Shares (or the indirect acquisition of the stock of Borden's subsidiaries) by
the Purchaser pursuant to the Exchange Offer as contemplated herein. Should any
such approval or other action be required, it is the Purchaser's present
intention to seek such approval or action. The Purchaser does not presently
intend, however, to delay the exchange of Borden Shares tendered pursuant to the
Exchange Offer pending the receipt of any such approval or the taking of any
such action (subject to the Purchaser's right to delay or decline to exchange
Borden Shares if any of the conditions described under "The Exchange
Offer--Certain Conditions of the Exchange Offer" shall have occurred). There can
be no assurance that any such approval or other action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the business of Borden, the Partnership or the Purchaser or that
certain parts of the businesses of Borden, the Partnership or the Purchaser
might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or other action or in
the event that such approval was not obtained or such other action was not
taken, any of which could cause the Purchaser to elect to terminate the Exchange
Offer without the exchange of the Borden Shares thereunder.
21
COMPARATIVE MARKET PRICES AND DIVIDENDS
The Holdings Common Stock and the Borden Common Stock are listed and
principally traded on the NYSE (Symbols: RN and BN, respectively). The following
tables set forth the high and low sales prices per share of the Holdings Common
Stock as reported on the NYSE Composite Tape and the high and low sales prices
per share of the Borden Common Stock and cash dividends paid by Borden for each
period indicated. See "Borden, Inc.--Recent Developments." Holdings has not paid
dividends on the Holdings Common Stock. See "RJR Nabisco Holdings Corp.--Recent
Developments" and "Description of Holdings Capital Stock." The fiscal year for
each company ends on December 31 of each year. On September 9, 1994, the last
full trading day prior to the public announcement of the execution of the letter
of intent with respect to the Transactions, the closing sale price per share, as
reported on the NYSE Composite Tape, was $7 for the Holdings Common Stock and
$11 7/8 for the Borden Common Stock. Recent closing sale prices for shares of
Holdings Common Stock and Borden Common Stock are set forth on the cover page of
this Offering Circular/Prospectus.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE HOLDINGS COMMON
STOCK AND THE BORDEN COMMON STOCK.
HOLDINGS COMMON STOCK
SALES PRICE
----------------
FISCAL YEAR HIGH LOW
- ----------------------------------------------------------------- ------------- ------------
1992
First Quarter.................................................. $ 11 3/4 $ 8 3/4
Second Quarter................................................. 10 3/8 8 3/8
Third Quarter.................................................. 9 7/8 8
Fourth Quarter................................................. 9 1/4 7 7/8
1993
First Quarter.................................................. $ 9 1/4 $ 7 5/8
Second Quarter................................................. 8 1/8 5 1/8
Third Quarter.................................................. 5 7/8 4 1/2
Fourth Quarter................................................. 7 3/8 4 3/8
1994
First Quarter.................................................. $ 8 1/8 $ 5 5/8
Second Quarter................................................. 7 5 1/2
Third Quarter.................................................. 7 1/8 5 5/8
Fourth Quarter (through November 7, 1994)...................... 7 1/4 6 1/2
BORDEN COMMON STOCK
SALES PRICE
----------------- CASH
FISCAL YEAR HIGH LOW DIVIDEND
- ----------------------------------------------------- ------------- ------------- --------
1992
First Quarter...................................... $ 34 7/8 $ 31 3/8 $ .285
Second Quarter..................................... 34 3/4 29 1/2 .300
Third Quarter...................................... 31 1/8 26 1/4 .300
Fourth Quarter..................................... 29 1/2 26 1/4 .300
1993
First Quarter...................................... $ 29 1/8 $ 24 1/4 $ .300
Second Quarter..................................... 27 17 5/8 .300
Third Quarter...................................... 19 5/8 14 3/4 .150
Fourth Quarter..................................... 19 5/8 14 3/8 .150
1994
First Quarter...................................... $ 18 3/8 $ 13 1/8 $ .075
Second Quarter..................................... 13 7/8 11 7/8 .075
Third Quarter...................................... 14 1/4 11 .075
Fourth Quarter (through November 7, 1994).......... 13 7/8 13 3/8 .010
22
COMPARISON OF CERTAIN HISTORICAL PER SHARE DATA
The following table shows comparative historical per share data for Holdings
and Borden. The information presented should be read in conjunction with the
historical consolidated financial statements and notes thereto, which appear
elsewhere in or are incorporated by reference in this Offering
Circular/Prospectus. See "RJR Nabisco Holdings Corp. Selected Historical
Consolidated Financial Data" and "Borden, Inc. Selected Historical Consolidated
Financial Data."
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1994 DECEMBER 31, 1993
------------- -----------------
HOLDINGS
Book Value per common share(1)
(at end of period).......................................... $5.88 $5.77
Cash dividends declared per common share...................... -- --
Income (Loss) from continuing operations
per common and common equivalent share...................... .22 (0.05)
BORDEN
Book value per common share
(at end of period).......................................... $1.82 $1.74
Cash dividends paid per
common share................................................ .15 .90
(Loss) Income from continuing
operations.................................................. .12 (.40)
- ------------
(1) After conversion of Series A Preferred Stock and Series C Preferred Stock.
23
RJR NABISCO HOLDINGS CORP.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below as of September 30,
1994 and for the nine months ended September 30, 1994 and 1993 were derived from
Holdings Consolidated Condensed Financial Statements incorporated herein by
reference. The summary consolidated financial data presented below as of
December 31, 1993 and 1992 and for each of the years in the three-year period
ended December 31, 1993 for Holdings were derived from Holdings' Consolidated
Financial Statements, incorporated herein by reference, which have been audited
by Deloitte & Touche LLP, independent auditors. In addition, the summary
consolidated financial data as of December 31, 1991, 1990 and 1989, for the year
ended December 31, 1990 and for the period from February 9, 1989 through
December 31, 1989 for Holdings and for the period from January 1, 1989 through
February 8, 1989 for RJRN were derived from the consolidated financial
statements of Holdings and RJRN as of December 31, 1991, 1990 and 1989, for the
year ended December 31, 1990 and for each of the periods within the one-year
period ended December 31, 1989, not presented or incorporated herein by
reference, which have been audited by Deloitte & Touche LLP, independent
auditors. The data should be read in conjunction with Holdings' Consolidated
Financial Statements and Holdings' Consolidated Condensed Financial Statements
incorporated herein by reference.
HOLDINGS
------------------------------------------------------------------------
RJRN
FOR THE NINE ----------
MONTHS ENDED
SEPTEMBER 30,
FOR THE YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLIONS EXCEPT PER ----------------- -----------------------------------------------------------------
SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------------------------
2/9 TO 12/31 1/1 TO 2/8
------------ ----------
RESULTS OF OPERATIONS
Net sales......................... $11,322 $11,053 $15,104 $15,734 $14,989 $13,879 $ 12,114 $ 650
------- ------- ------- ------- ------- ------- ------ -----
Cost of products sold............. 5,079 4,709 6,640 6,326 6,088 5,652 5,241 332
Selling, advertising,
administrative and
general expenses................ 3,789 4,182 5,731 5,788 5,358 4,801 4,276 295
Amortization of trademarks and
goodwill........................ 469 466 625 616 609 608 557 10
Restructuring expense............. -- -- 730 106 -- -- -- --
------- ------- ------- ------- ------- ------- ------ -----
Operating income(1)............. 1,985 1,696 1,378 2,898 2,934 2,818 2,040 13
Interest and debt expense......... (828) (910) (1,209) (1,449) (2,217) (3,176) (3,340) (44)
Change in control costs........... -- -- -- -- -- -- -- (247)
Other income (expense), net....... (81) (4) (58) 7 (69) (44) 169 15
------- ------- ------- ------- ------- ------- ------ -----
Income (loss) from continuing
operations before income
taxes.......................... 1,076 782 111 1,456 648 (402) (1,131) (263)
Provision (benefit) for income
taxes........................... 474 356 114 680 280 60 (156) (66)
------- ------- ------- ------- ------- ------- ------ -----
Income (loss) from continuing
operations..................... 602 426 (3) 776 368 (462) (975) (197)
Income (loss) from operations of
discontinued businesses, net of
income taxes(2)................. -- -- -- -- -- -- (1) 24
Extraordinary item--(loss) gain on
early extinguishments of debt,
net of income
taxes........................... (145) (110) (142) (477) -- 33 -- --
------- ------- ------- ------- ------- ------- ------ -----
Net income (loss)................. 457 316 (145) 299 368 (429) (976) (173)
Preferred stock dividends......... 98 33 68 31 173 50 -- 4
------- ------- ------- ------- ------- ------- ------ -----
Net income (loss) applicable to
common stock $ 359 $ 283 $ (213) $ 268 $ 195 $ (479) $ (976) $ (177)
------- ------- ------- ------- ------- ------- ------ -----
------- ------- ------- ------- ------- ------- ------ -----
PER SHARE DATA
Income (loss) from continuing
operations
per common and common equivalent
share........................... $ .33 $ .29 $ (.05) $ .55 $ .22 $ (1.19) $ (3.21) $ (.89)
Dividends per share of Series A
Preferred Stock(3).............. 2.51 2.51 3.34 3.34 .49 -- -- --
Dividends per share of Series C
Preferred Stock(3).............. 2.44 -- -- -- -- -- -- --
BALANCE SHEET DATA
(AT END OF PERIODS)
Working capital................... $ 358 -- $ 202 $ 730 $ 165 $(1,089) $ 106 --
Total assets...................... 31,851 -- 31,295 32,041 32,131 32,915 36,412 --
Total debt........................ 11,205 -- 12,448 14,218 14,531 18,918 25,159 --
Redeemable preferred stock(4)..... -- -- -- -- -- 1,795 -- --
Stockholders' equity(5)........... 10,957 -- 9,070 8,376 8,419 2,494 1,237 --
Book value per common share after
conversion of Series A Preferred
Stock and Series C Preferred
Stock........................... 5.94 -- 5.77 -- -- -- -- --
(Footnotes on following page)
24
(Footnotes for preceding page)
- ------------
(1) The 1992 amount includes a gain of $98 million on the sale of the
ready-to-eat cold cereal business.
(2) The 1989 amount for Holdings includes $237 million of interest expense
allocated to discontinued operations.
(3) On November 8, 1991, Holdings issued 52,500,000 shares of Series A Preferred
Stock and sold 210,000,000 Series A Depositary Shares. On May 6, 1994,
Holdings issued 26,675,000 shares of Series C Preferred Stock and sold
266,750,000 Series C Depositary Shares. Because Series A Preferred Stock and
Series C Preferred Stock mandatorily convert into Holdings Common Stock,
dividends on such shares are reported similar to common equity dividends.
(4) On December 16, 1991, an amendment to the Amended and Restated Certificate
of Incorporation of Holdings was filed which deleted the provisions
providing for the mandatory redemption of the redeemable preferred stock of
Holdings on November 1, 2015. Accordingly, such securities were presented as
a component of Holdings' stockholders' equity as of December 31, 1992 and
1991. Such securities were redeemed on December 6, 1993.
(5) Holdings' stockholders' equity at September 30, 1994 and December 31 of each
year from 1993 to 1989 includes non-cash expenses related to accumulated
trademark and goodwill amortization of $3.484 billion, $3.015 billion,
$2.390 billion, $1.774 billion, $1.165 billion and $557 million,
respectively.
See Notes to Holdings' Consolidated Financial Statements and Holdings'
Consolidated Condensed Financial Statements incorporated herein by reference.
25
RJR NABISCO HOLDINGS CORP.
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
The following tables present summary pro forma consolidated financial data
of Holdings derived from the pro forma consolidated condensed financial
statements of Holdings and notes thereto (the "Holdings Pro Forma Financial
Statements") set forth herein. The data should be read in conjunction with the
historical consolidated financial statements of Holdings and notes thereto (the
"Holdings Consolidated Financial Statements"), the historical consolidated
condensed financial statements of Holdings and notes thereto (the "Holdings
Consolidated Condensed Financial Statements") and other financial information
set forth or incorporated by reference herein. NABISCO HAS FILED A REGISTRATION
STATEMENT WITH THE COMMISSION WITH RESPECT TO A PROPOSED INITIAL PUBLIC OFFERING
OF 45,000,000 SHARES OF ITS CLASS A COMMON STOCK, BUT SUCH REGISTRATION
STATEMENT HAS NOT BEEN DECLARED EFFECTIVE BY THE COMMISSION. NO ASSURANCE CAN BE
GIVEN THAT SUCH OFFERING WILL BE CONSUMMATED.
FOR THE NINE MONTHS FOR THE YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1994 1993
------------------- ------------------
PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA(1)
Net sales................................................ $11,322 $ 15,104
Cost of products sold.................................... 5,079 6,640
Selling, advertising, administrative and general
expenses............................................... 3,789 5,731
Amortization of trademarks and goodwill.................. 469 625
Restructuring expense.................................... -- 730
------- -------
Operating income....................................... 1,985 1,378
Interest and debt expense................................ (716) (1,048)
Other income (expense), net.............................. (81) (58)
------- -------
Income before income taxes............................. 1,188 272
Provision for income taxes............................... 513 170
------- -------
Income before minority interest in income of Nabisco... 675 102
Minority interest in income of Nabisco................... (32) (29)
------- -------
Net income(2).......................................... 643 73
Less preferred stock dividends........................... 98 68
------- -------
Net income applicable to Common Stock.................. $ 545 $ 5
------- -------
------- -------
PER SHARE DATA
Net income per common and common equivalent(2)........... $ .36 $ .00
Dividends per share of Common Stock...................... .225 .30
Dividends per share of Series A Preferred Stock.......... 2.505 3.34
Dividends per share of Series C Preferred Stock.......... 2.438 --
SEPTEMBER 30, 1994
------------------
PRO FORMA CONSOLIDATED BALANCE SHEET DATA(3)
Working capital................................................................ $ 108
Total assets................................................................... 31,439
Total debt..................................................................... 10,018
Stockholders' equity........................................................... 11,227
Book value per common share after conversion of Series A Preferred Stock and
Series C Preferred Stock..................................................... 6.06
- ------------
(1) Gives effect to the following transactions and events as if they occurred as
of January 1, 1993: (i) borrowings of $1.3 billion under the Nabisco Credit
Agreement (as hereafter defined) and the application of funds provided
through such borrowings to repay a portion of the borrowings under the 1991
Credit Agreement; (ii) the sale and issuance of 45,000,000 shares of Nabisco
Class A Common Stock in the Nabisco Common Stock Offerings (as hereafter
defined), the resulting reduction in Holdings' proportionate interest in
Nabisco and the application of the estimated net proceeds of approximately
$1,047 million (assuming an initial public offering price of $24.50 per
share) therefrom to repay a portion of the borrowings under the Nabisco
Credit Agreement; (iii) the assumed payment of quarterly dividends on
Holdings' Common Stock of $.075 per share and the increased level of net
indebtedness assumed to be outstanding had such dividend payments been made;
(iv) the redemption of $1.5 billion of the 10 1/2% Senior Notes dues 1998,
approximately $374 million of the 8 3/8% Debentures due 2017, $100 million
of the 13 1/2% Subordinated Debentures due 2001 and approximately $25
million of the 7 3/8% Debentures due 2001 through borrowings under the 1991
Credit Agreement and proceeds from Holdings' Series C Preferred Stock
offering completed on May 6, 1994; and (v) the tax effect of the foregoing.
(2) Excludes extraordinary items related to the loss on early extinguishments of
debt, net of income taxes, for the nine months ended September 30, 1994 and
the year ended December 31, 1993 of $145 million and $142 million,
respectively.
(3) Gives effect to the pro forma transactions and events described in clauses
(i), (ii), and (iv) of Note (1) above as if they occurred on September 30,
1994.
26
BORDEN, INC.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below for the six months
ended June 30, 1994 and 1993 were derived from unaudited quarterly consolidated
financial statements contained in Borden's Quarterly Report on Form 10-Q at and
for the six months ended June 30, 1994 and incorporated herein by reference. The
summary consolidated financial data presented below for each of the years in the
three-year period ended December 31, 1993 for Borden were derived from the
consolidated financial statements contained in Borden's Annual Report on Form
10-K for the year ended December 31, 1993 and incorporated by reference herein,
which have been audited by Price Waterhouse LLP, independent accountants. The
unaudited quarterly consolidated financial statements include all adjustments
which are, in the opinion of Borden management, necessary for a fair statement
of the interim results. All such adjustments are of a normal recurring nature.
Results for interim periods are not necessarily indicative of results to be
expected for the full year. The data below should be read in conjunction with
the audited consolidated financial statements and unaudited quarterly
consolidated condensed financial statements of Borden, and the related notes
thereto, incorporated by reference herein.
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
REVENUE
Net sales.................................. $ 2,642 $ 2,650 $ 5,506 $ 5,872 $ 5,924 $ 6,273 $ 6,391
COST AND EXPENSES
Cost of goods sold......................... 1,998 1,944 4,078 4,302 4,269 4,644 4,859
Marketing, general and administrative
expenses................................. 526 499 1,224 1,163 1,024 1,020 902
Restructuring charges(1)................... -- -- 115 298 67 -- 463
Interest expense........................... 58 62 125 116 167 156 129
Equity in income of affiliates............. (5) (6) (16) (19) (24) (23) (17)
Minority interest.......................... 19 20 41 40 3 3 1
Other (income) and expense, net............ 18 18 23 (4) (13) 12 11
Income taxes............................... 11 39 (27) 14 151 169 76
-------- -------- -------- -------- -------- -------- --------
2,625 2,576 5,563 5,910 5,644 5,981 6,424
-------- -------- -------- -------- -------- -------- --------
EARNINGS
(Loss) income from continuing operations... 17 74 (57) (38) 280 292 (33)
Discontinued operations:(1)(2)
(Loss) income from operations............ -- (28) (66) (86) 15 28 16
Loss on disposal......................... -- -- (490) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
(Loss) income before extraordinary item and
cumulative effect of accounting
changes.................................. 17 46 (613) (124) 295 320 (17)
Extraordinary loss on early retirement of
debt..................................... -- -- -- (11) -- -- --
Cumulative effect of change in accounting
for:
Postemployment benefits.................. -- (18) (18) -- -- -- --
Postretirement benefits other than
pensions................................ -- -- -- (189) -- -- --
Income taxes............................. -- -- -- (40) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net (loss) income.......................... $ 17 $ 28 $ (631) $ (364) $ 295 $ 320 $ (17)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
SHARE DATA
(Loss) income from continuing operations... $ .12 $ .53 $ (.40) $ (.27) $ 1.90 $ 1.97 $ (0.22)
Discontinued operations:
(Loss) income from operations............ -- (.20) (.47) (.60) .10 0.19 0.11
Loss on disposal......................... -- -- (3.47) -- -- -- --
-------- -------- -------- -------- --------
(Loss) income before extraordinary item and
cumulative effect of accounting
changes.................................. .12 .33 (4.34) (.87) 2.00 2.16 (0.11)
Extraordinary loss on early retirement of
debt..................................... -- -- -- (.07) -- -- --
Cumulative effect of change in accounting
for:
Postemployment benefits.................. -- (.13) (.13) -- -- -- --
Postretirement benefits other than
pensions................................ -- -- -- (1.32) -- -- --
Income taxes............................. -- -- -- (.28) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net (loss) income per common share......... $ .12 $ .20 $ (4.47) $ (2.54) $ 2.00 $ 2.16 $ (0.11)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Cash dividends paid per common share....... $ .15 $ .60 $ .90 $ 1.185 $ 1.12 $ 1.035 $ 0.90
Average number of common shares outstanding
during the period........................ 141.5 140.8 141.0 143.4 147.6 147.9 148.2
27
AT JUNE 30, AT DECEMBER 31,
----------- ----------------------------------------------
1994 1993 1992 1991 1990 1989
----------- ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE DATA)
BALANCE SHEET DATA
Current assets.......................................... $1,469 $1,290 $1,928 $1,921 $2,026 $2,011
Investments and other assets............................ 459 443 352 319 237 160
Property and equipment.................................. 1,338 1,337 1,788 1,904 1,707 1,441
Intangibles............................................. 790 802 1,178 1,317 1,314 1,213
Total assets............................................ 4,056 3,872 5,246 5,461 5,284 4,825
Current liabilities..................................... 1,528 1,372 1,808 1,414 1,847 1,466
Long-term debt.......................................... 1,244 1,241 1,330 1,346 1,340 1,441
Other liabilities (including long-term debt)............ 2,270 2,254 2,312 2,072 1,595 1,670
Shareholders' equity.................................... 258 246 1,126 1,975 1,842 1,689
Book value per common share............................. 1.82 1.74 8.01 13.39 12.50 11.41
- ------------
(1) 1993 includes a pretax charge of $752.3 million for business divestitures
and restructuring. 1992, 1991 and 1989 include pretax restructuring charges
of $377.2 million, $71.6 million and $570.7 million, respectively.
(2) Financial data for the years prior to 1993 were restated in 1993 to reflect
discontinued operations.
See Notes to Borden's Consolidated Financial Statements and Borden's Unaudited
Quarterly Consolidated Financial Statements incorporated herein
by reference.
28
CERTAIN SIGNIFICANT CONSIDERATIONS
Holders of Borden Common Stock should carefully consider the following
factors in connection with their consideration of the Exchange Offer.
INFORMATION CONCERNING HOLDINGS
Tobacco-Related Considerations
General. RJRT is the second largest cigarette manufacturer in the United
States, and in the year ended December 31, 1993, RJRT's domestic tobacco
business comprised approximately 33% of Holdings' net sales and approximately
42% of Holdings' operating income from continuing operations before corporate
expenses, amortization of trademarks and goodwill and restructuring expense.
Domestic cigarette industry retail unit sales have declined in the last three
calendar years at an average rate of approximately 2.5% per year. Holdings
believes that the decline is due to a number of factors, including
manufacturers' price increases in recent years, excise tax increases, asserted
adverse health effects of smoking, diminishing social acceptance of smoking and
governmental and private restrictions on smoking. For many years, the
advertising, sale and use of cigarettes has been under attack by government and
health officials in the United States and in other countries, principally due to
claims that cigarette smoking is harmful to health. This attack has resulted in
a number of substantial restrictions on the marketing, advertising and use of
cigarettes, diminishing social acceptability of smoking and activities by
anti-smoking groups designed to inhibit cigarette sales, the form and content of
cigarette advertising and the testing and introduction of new cigarette
products. Together with substantial increases in state and federal excise taxes
on cigarettes, this attack has had and will likely continue to have an adverse
effect on cigarette sales.
Possible Legislative and Regulatory Activities. The Clinton Administration
and members of Congress have introduced bills in Congress that would
significantly increase the federal excise tax on cigarettes, eliminate the
income tax deductibility of a portion of the cost of tobacco advertising, ban
smoking in public buildings and workplaces, add additional health warnings on
cigarette packaging and advertising and further restrict the marketing of
tobacco products.
In January 1993, the U.S. Environmental Protection Agency released a report
on the respiratory effects of environmental tobacco smoke ("ETS") which
concludes that ETS is a known human lung carcinogen in adults; and in children
causes increased respiratory tract disease and middle ear disorders and
increases the severity and frequency of asthma. In September 1991, the U.S.
Occupational Safety and Health Administration ("OSHA") issued a Request for
Information relating to indoor air quality, including ETS, in occupational
settings. In March 1994, OSHA announced proposed regulations that would restrict
smoking in the workplace to designated smoking rooms that are separately
exhausted to the outside. Although RJRT cannot predict the form of any
regulations that may be finally adopted by OSHA, if the proposed regulations are
adopted, RJRT expects that many employers who have not already done so will
prohibit smoking in the workplace rather than make expenditures necessary to
establish designated smoking areas to accommodate smokers. Because many
employers currently do not permit smoking in the workplace, RJRT cannot predict
the effect of any regulations that may be adopted, but incremental restrictions
on smokers could have an adverse effect on cigarette sales and RJRT.
During February 1994, the Commissioner of the U.S. Food and Drug
Administration (the "FDA"), which historically has refrained from asserting
jurisdiction over most cigarette products, stated that he intended to cause the
FDA to work with the U.S. Congress to resolve the regulatory status of
cigarettes under the Food, Drug and Cosmetic Act. During the second quarter of
1994, hearings were held in this regard, and RJRT, along with other members of
the United States cigarette industry, were asked to provide voluntarily certain
documents and other information to Congress. RJRT is unable to predict the
outcome of any Congressional deliberations or the likelihood that the FDA will
assert jurisdiction over cigarettes in some manner. Were the FDA to assert
jurisdiction in a manner that
29
materially restricts the availability of cigarettes to consumers, it would
likely have a significant adverse effect on RJRT and Holdings.
In addition, in June 1994, legislation was introduced in the U.S. Senate
which would authorize the Attorney General of the United States to seek to
recover from tobacco product manufacturers funds paid out in the form of
Medicaid and Medicare payments to treat illnesses allegedly related to the use
of tobacco products. It is not possible to predict whether such legislation will
be enacted or any resulting effect thereof on RJRT.
It is not possible to determine what additional federal, state or local
legislation or regulations relating to smoking or cigarettes will be enacted or
to predict any resulting effect thereof on RJRT, Tobacco International or the
cigarette industry generally but such legislation or regulations could have an
adverse effect on RJRT, Tobacco International or the cigarette industry
generally.
Tobacco-Related Litigation. Various legal actions, proceedings and claims
are pending or may be instituted against RJRT or its affiliates or indemnitees,
including those claiming that lung cancer and other diseases have resulted from
the use of or exposure to RJRT's tobacco products. The plaintiffs in these
actions seek recovery on a variety of legal theories, including strict liability
in tort, design defect, negligence, breach of warranty, failure to warn, fraud,
misrepresentation, unfair trade practices, conspiracy, unjust enrichment,
indemnity and common law public nuisance. Seven of these cases purport to be
class actions brought on behalf of thousands of claimants. Purported classes
include individuals claiming to be addicted to cigarettes, flight attendants
alleging personal injury from exposure to ETS in their workplace and parents
claiming that Joe Camel advertising constitutes an unfair trade practice. In one
such case, a Florida state court judge granted plaintiffs' motion to certify a
class. Defendants will appeal that ruling to the Florida District Court of
Appeals. In addition, three states, acting through their attorneys general, have
sued RJRT (and in two cases, RJRN) and other industry members on various
theories to recoup expenses incurred by the states in the treatment of diseases
purportedly associated with cigarette smoking and to enjoin certain marketing
practices. A fourth state has enacted legislation which would facilitate the
filing of such an action in that state. Litigation is subject to many
uncertainties, and it is possible that some of the legal actions, proceedings or
claims could be decided against RJRT or its affiliates or indemnitees.
Determinations of liability or adverse rulings against other cigarette
manufacturers that are defendants in similar actions, even if such rulings are
not final, could adversely affect the litigation against RJRT and its affiliates
or indemnitees and increase the number of such claims. Although it is impossible
to predict the outcome of such events or their effect on RJRT, a significant
increase in litigation activities could have an adverse effect on RJRT. RJRT
believes that it has a number of valid defenses to any such actions, and intends
to defend vigorously all such actions. Holdings believes that the ultimate
outcome of all pending tobacco litigation matters should not have a material
adverse effect on the financial position of Holdings; however, it is possible
that the results of operations or cash flows of Holdings in particular quarterly
or annual periods or the financial condition of Holdings could be materially
affected by the ultimate outcome of certain pending litigation matters. For an
additional discussion of legislation and litigation relating to the cigarette
industry and RJRT, see Holdings' Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 under "Business--Tobacco--Legislation and other Matters
Affecting the Cigarette Industry" and "--Litigation Affecting the Cigarette
Industry" and Holdings' Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994 under Note 7 to Holdings' Consolidated Condensed
Financial Statements for the period ended September 30, 1994 and "Legal
Proceedings-- Tobacco Related Litigation," both of which are incorporated herein
by reference.
Impact of Competitive Activity
RJRT's largest U.S. competitor announced competitive initiatives in April
1993 that ultimately resulted in significant changes in the U.S. cigarette
market. These competitive actions and responses by RJRT and other competitors
effectively lowered the retail price of full price cigarette brands and raised
the price of the most highly discounted brands in the second half of 1993. This
resulted in a market
30
comprised of a full price tier and a lower price tier of products (as opposed to
the three or more tiers that had previously existed) and in smaller relative
price differences between brands in different tiers.
The costs of responding to these competitive initiatives and the decrease in
list prices for full price cigarette brands of approximately 40 cents per pack
were primarily responsible for a sharp decline in RJRT's 1993 operating company
contribution, since improved net prices of approximately 12 cents per pack
(including the price increase referenced below) in the most highly discounted
brands did not and are not expected to offset the current lower margins on full
price brands. Notwithstanding these lower margins, full price brands remain more
profitable than lower price brands, which consist of certain national brands
designed to have a lower price and of private label brands for retailers and
distributors. The private label brands are generally the least profitable of
RJRT's brands, but are important to facilitate RJRT's service to wholesale and
retail customers.
Although RJRT's full price volume as a percentage of total volume declined
to 56% in 1993 from 65% in 1992, lower retail prices on full price brands since
the third quarter of 1993 have resulted in an increase in full price volume to
59% in the first nine months of 1994. The increased full price volume occurred
despite significantly reduced promotional expenses on full price brands during
this period.
During the fourth quarter of 1993, RJRT increased the list price of its
brands by 4 cents per pack, which was generally matched by other competitors and
reflected increased stability in the marketplace during the latter part of 1993.
This stability has continued into 1994 and, together with operating cost
reductions and favorable product mix shifts, has improved margins, although 1994
profit margins remain below first quarter 1993 levels. However, RJRT is unable
to predict whether pricing stability and profit margin improvements are
sustainable.
The effect of a law requiring U.S. manufacturers to use at least 75%
American-grown tobacco in their cigarettes produced after 1993 has increased
RJRT's raw material costs for all brands, with a larger effect on costs for
lower price brands since these brands historically have contained a higher
percentage of lower cost foreign-grown tobacco than full price brands. The cost
increase is more than offset by higher revenues for lower price brands resulting
from the fourth quarter price increase referenced above. The same result has
occurred for full price brands. For additional information, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Tobacco--1993 Competitive Activity" and "Business--Other Matters--Competition"
in Holdings' Annual Report on Form 10-K for the fiscal year ended December 31,
1993 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Tobacco" in Holdings' Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1994, each of which is incorporated
herein by reference.
Leverage and Debt Service
Holdings, together with its subsidiaries, had, at September 30, 1994, a
ratio of consolidated total debt to total stockholders' equity of 1.0-to-1. On a
pro forma basis, after giving effect to the initial public offering of shares of
Nabisco and related transactions, which will result in a reduction of
consolidated total debt, Holdings' ratio of consolidated total debt to total
stockholders' equity at September 30, 1994 would be 0.9 to 1. See "RJR Nabisco
Holdings Corp. Selected Pro Forma Consolidated Financial Data."
Although Holdings has significantly reduced its consolidated indebtedness
and improved its consolidated debt-to-equity ratios since the Acquisition, the
indebtedness and debt-to-equity ratio of Holdings and its subsidiaries continue
to have the effect, generally, of restricting the flexibility of Holdings and
its subsidiaries in responding to changing business and economic conditions
insofar as they affect the financial condition and financing requirements of
Holdings and its subsidiaries. Moreover, the Credit Agreement dated as of
December 19, 1991 (as amended from time to time, the "1991 Credit Agreement")
and the Credit Agreement dated as of April 5, 1993 (as amended from time to
time, the "1993 Credit Agreement" and, together with the 1991 Credit Agreement,
the "Credit Agreements") and the terms governing certain other indebtedness
impose significant operating and
31
financial restrictions on Holdings and its subsidiaries. These restrictions
limit the ability of Holdings and its subsidiaries to incur indebtedness, pay
dividends, engage in transactions with stockholders and affiliates, create
liens, sell certain assets and certain subsidiaries' stock, engage in certain
mergers or consolidations and make investments in unrestricted subsidiaries.
RJRN has called certain issues of debt securities for redemption. See
"Description of Capital Stock--Contractual Restrictions and Policies on Payment
of Dividends".
Limitations on Dividends
Although Holdings pays dividends on its outstanding preferred stock, it has
not yet paid a dividend on Holdings Common Stock. In connection with the
initiative recently announced by Holdings (see "RJR Nabisco Holdings
Corp.--Recent Developments"), Holdings has indicated that it anticipates, upon
completion of the proposed initial public offering of common stock of Nabisco,
commencing payment of a quarterly cash dividend on the Holdings Common Stock of
$.075 per share or $.30 per share on an annualized basis. Holdings has also
adopted a policy, which will become effective upon completion of the proposed
Nabisco initial public offering, under which Holdings would limit the aggregate
amount of cash dividends paid on its capital stock prior to December 31, 1998.
The policy would also preclude a dividend or distribution to its shareholders of
the shares of capital stock of a subsidiary until December 31, 1996 and would
set forth certain intentions of Holdings with respect to such a dividend or
distribution prior to December 31, 1998. The timing, amount and form of
dividends on Holdings Common Stock will depend, among other things, upon the
effect of applicable restrictions and policies on the payment of dividends
referred to above, Holdings' results of operations, financial condition, cash
requirements, prospects and other factors deemed relevant by its board of
directors. See "Description of Holdings Capital Stock--Contractual Restrictions
and Policies on Payment of Dividends."
Holding Company Structure
Holdings' cash flow and consequent ability to meet its obligations under its
indebtedness and to pay future dividends on the Holdings Common Stock, if any,
and preferred stock are substantially dependent upon the earnings and cash flow
available after debt service of RJRN and the availability of such earnings and
cash flows to Holdings by way of dividends, distributions, loans and other
advances. Holdings Common Stock is junior in right of payment to all existing
and future liabilities, obligations (whether or not for borrowed money) and
preferred stock of Holdings, and is structurally subordinate to all existing and
future liabilities and obligations (whether or not for borrowed money) of RJRN
and its subsidiaries. As of September 30, 1994, total current liabilities and
long-term debt of Holdings' subsidiaries were approximately $14.6 billion.
KKR Ownership
As of September 30, 1994, an aggregate of approximately 44.82% (or 32.31% on
a fully diluted basis) of the total voting power of Holdings was held by the
Common Stock Partnerships. After giving effect to the mandatory conversion of
Holdings Series A Preferred Stock on November 15, 1994, and assuming all
outstanding options for Borden Common Stock are exercised, all of Borden's
Series B Preferred Stock is converted to Borden Common Stock and Borden Shares
equal to the Minimum Condition are exchanged in the Exchange Offer at the
minimum and maximum Exchange Ratios, respectively, an aggregate of approximately
32.00% to 29.41% (26.00% to 23.89% on a fully diluted basis) of the total
voting power of Holdings will be held or controlled by the Common Stock
Partnerships. The total voting power of Holdings held or controlled by the
Common Stock Partnerships will decrease to an aggregate of approximately 20.82%
to 14.51% (16.92% to 11.78% on a fully diluted basis) if 100% of the Borden
Shares are exchanged. In addition, seven of Holdings' sixteen directors are
partners or executives of KKR.
For information concerning the decision by Holdings not to pursue a
transaction with Borden, see "RJR Nabsico Holdings Corp.--Recent Developments"
and "The Exchange Offer--Background."
32
Significant Increase in Shares Available for Trading
Of the 1,147,648,192 shares of Holdings Common Stock outstanding as of
September 30, 1994, approximately 579 million are held by persons that are not
affiliates or management of Holdings and are freely tradeable. After giving
effect to the mandatory conversion of Holdings' Series A Preferred Stock on
November 15, 1994 and assuming Borden Shares equal to the Minimum Condition are
exchanged in the Exchange Offer at the minimum and maximum Exchange Ratios,
respectively, an aggregate of up to an additional 109 million to 145 million
shares of Holdings Common Stock will be freely tradeable (265 million to 354
million shares if all of the Borden Shares are exchanged). Moreover, based on
the $7 closing price of Holdings Common Stock on October 31, 1994, an additional
44,216,858 shares of Holdings Common Stock would be freely tradeable if the
Option were exercised in full and Borden elected to use its registration rights
to sell or dispose of such shares in a public offering. The Registration Rights
Agreements bar Borden from exercising these rights for nine months commencing on
the effective date of the Registration Statement. Holdings is unable to predict
the effect, if any, that the increase in freely tradeable shares of Holdings
Common Stock will have on the market value of such shares.
INFORMATION CONCERNING THE TRANSACTIONS
Inability to Participate in Future Borden Earnings or Divestitures
Shareholders whose Borden Shares are exchanged for shares of Holdings Common
Stock in the Exchange Offer or the Merger will not be entitled to participate as
shareholders in any future growth of Borden's business or earnings, in any
future dividends that may be declared by the Board of Directors of Borden or in
the proceeds of any future divestitures of subsidiaries or businesses conducted
by Borden.
Lack of Dissenters' Rights
Holders of Borden Common Stock will not be entitled to dissenters' rights
under New Jersey law in connection with the Exchange Offer or the Merger, and
the Purchaser does not intend to accord dissenters' rights to holders of Borden
Common Stock.
Possible Adverse Effect on Market for Shares of Borden Common Stock
If the Merger is not immediately consummated upon completion of the Exchange
Offer, the exchange of Borden Shares pursuant to the Exchange Offer will reduce
the number of Borden Shares that might otherwise trade publicly and is likely to
reduce the number of holders of Borden Shares, which could adversely affect the
liquidity and market value of the remaining Borden Shares held by shareholders
other than the Purchaser. The Purchaser cannot predict whether the reduction in
the number of Borden Shares that might otherwise trade publicly would have an
adverse or beneficial effect on the market price for or marketability of the
Borden Shares. If the Merger is consummated, all trading of Borden Common Stock
will cease and there will no longer be a market for shares of Borden Common
Stock.
Possible Loss of Stock Exchange Listing of Borden Common Stock
According to the NYSE's published guidelines, the NYSE would consider
delisting the Borden Shares if, among other things, the number of publicly held
Borden Shares (excluding Borden Shares held by officers, directors, their
immediate families and other concentrated holdings of 10% or more) were less
than 600,000, there were fewer than 1,200 holders of at least 100 Borden Shares
or the aggregate market value of the publicly held Borden Shares was less than
$5 million.
As of September 30, 1994, there were approximately 38,729 holders of record
of Borden Shares. Approximately 38,614 holders held in the aggregate
approximately 141,520,602 shares of Borden Common Stock (excluding 53,465,136
shares held in treasury). Because of the large number of shares of Borden Common
Stock held in the names of brokers and nominees, the Purchaser is unable to
estimate the number of beneficial owners of 100 or more shares or the aggregate
number of shares of Borden Common Stock they own. If, upon the completion of the
Exchange Offer (and if the Merger is
33
not immediately thereafter consummated), the shares of Borden Common Stock no
longer meet the requirements of the NYSE for continued listing and the listing
of shares of Borden Common Stock is discontinued, the market for the shares of
Borden Common Stock would be adversely affected.
The Borden Common Stock also may be delisted from foreign exchanges on which
it is listed, subject to applicable requirements of such exchanges.
The extent of the public market for the shares of Borden Common Stock and
availability of quotations would depend upon such factors as the number of
holders and/or the aggregate market value of the publicly held shares of Borden
Common Stock at such time, the interest in maintaining a market in the shares of
Borden Common Stock on the part of securities firms, the possible termination of
registration of the shares of Borden Common Stock under the Exchange Act (see
"--Possible Termination of Registration Under the Exchange Act") and other
factors.
Possible Loss of Status as "Margin Securities"
The shares of Borden Common Stock are currently "margin securities" under
the regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such shares of Borden Common
Stock. In the event that the shares of Borden Common Stock are no longer listed
on the NYSE upon completion of the Exchange Offer, depending upon factors such
as the number of holders of the shares of Borden Common Stock and the number and
market value of publicly held shares of Borden Common Stock, such shares might
no longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations, in which event the shares of Borden Common Stock may
no longer be used as collateral for loans by brokers. In addition, if
registration of the shares of Borden Common Stock under the Exchange Act is
terminated upon completion of the Exchange Offer, the shares of Borden Common
Stock will no longer constitute "margin securities." There can be no assurance
that, in the future, shares of Borden Common Stock will continue to constitute
"margin securities" and be available as collateral for loans made by brokers;
however, if the Merger is consummated, shares of Borden Common Stock will in any
event no longer constitute "margin securities."
Possible Termination of Registration Under the Exchange Act
The shares of Borden Common Stock are currently registered under the
Exchange Act. Such registration may be terminated upon application of Borden to
the Commission if the shares of Borden Common Stock are not listed on a national
securities exchange and there are fewer than 300 holders of record. Termination
of the registration of the shares of Borden Common Stock under the Exchange Act
would substantially reduce the information required to be furnished by Borden to
holders of shares of Borden Common Stock and to the Commission and would make
certain of the provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy or
information statement in connection with shareholder action and the related
requirement of an annual report to shareholders and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the shares of Borden Common Stock. Furthermore,
"affiliates" of Borden and persons holding "restricted securities" of Borden
Common Stock may be deprived of the ability to dispose of such securities
pursuant to Rule 144 promulgated under the Securities Act. If registration of
the shares of Borden Common Stock under the Exchange Act were terminated, the
shares of Borden Common Stock would no longer be "margin securities" or eligible
for listing or reporting on the Nasdaq National Market. The Purchaser does not
currently intend to seek to terminate registration of the shares of Borden
Common Stock.
Effects of Inability to Consummate the Merger
Pursuant to the Merger Agreement, among other things, following the
consummation of the Exchange Offer, subject to certain conditions, the Purchaser
will be merged with Borden. If, following the Exchange Offer and exercise of the
Option, approval of Borden's shareholders is required by applicable law in order
to consummate the Merger of the Purchaser with Borden, provided that the
34
Minimum Condition is satisfied without being reduced or waived, Borden will
submit the Merger to Borden's shareholders for approval. If the Merger is
submitted to Borden's shareholders for approval, the Merger will require the
approval of the holders of not less than 66 2/3% of the outstanding Borden
Shares, including the Borden Shares owned by the Purchaser and its affiliates.
There can be no assurance that the required vote of Borden shareholders will be
obtained or that the Merger will be consummated.
If the Merger is consummated, shareholders of Borden who elected not to
tender their Borden Shares in the Exchange Offer will receive upon consummation
of such Merger the same number of shares of Holdings Common Stock in exchange
for each of their Borden Shares as they would have received in the Exchange
Offer.
If, following the consummation of the Exchange Offer, the Merger is not
consummated, KKR Associates, which is the general partner of the Common Stock
Partnerships, indirectly will control the number of Borden Shares acquired by
the Purchaser pursuant to the Exchange Offer and upon exercise of the Option.
Under the Merger Agreement and the Conditional Purchase/Option Agreement,
following the acceptance for exchange of the Borden Shares to be exchanged
pursuant to the Exchange Offer and/or the purchase of the Option Shares in
accordance with the Conditional Purchase/Option Agreement, and from time to time
thereafter, subject to applicable law, Borden has agreed to take all actions
necessary to cause the Applicable Percentage of directors (and of members of
each committee of the Board of Directors) (rounded in each case to the next
highest director or member) of Borden selected by the Partnership to consist of
persons designated or elected by the Partnership (whether, at the election of
Borden, by means of increasing the size of the board of directors or seeking the
resignation of directors and causing the Partnership's designees to be elected);
provided that, if the Purchaser has acquired at least 28,138,000 Borden Shares,
the Applicable Percentage will not be less than 33 1/3%. As a result of its
ownership of such Borden Shares and right to designate nominees for election to
Borden's Board of Directors, KKR Associates, an affiliate of KKR, indirectly
will be able to influence decisions of the shareholders and such Board. This
concentration of influence in one shareholder may adversely affect the market
value of the Borden Common Stock.
To the extent KKR controls more than 50% of the outstanding Borden Shares
following the consummation of the Exchange Offer and exercise of the Option, but
the Merger is not consummated, Borden shareholders other than those affiliated
with KKR will lack sufficient voting power to elect directors or to cause other
actions to be taken which require majority approval.
Exchange Offer Conditions Related to Indebtedness
The Exchange Offer is conditioned upon, among other things, the obtaining of
all consents and waivers on terms satisfactory to the Partnership necessary in
order that the consummation of the transactions contemplated by the Merger
Agreement and the Conditional Purchase/Option Agreement not constitute events
giving rise to events of default or other rights permitting debt to become due
prior to maturity.
The Exchange Offer is also conditioned upon Borden having refinanced, or
received commitments for refinancing or indications satisfactory to the
Partnership from lenders that it will be able to refinance, in each case on
market terms reasonably acceptable to the Partnership, the principal bank credit
facilities of Borden and T.M.I. Associates, L.P., subject to certain
limitations.
In the event such consents, waivers or refinancing commitments are not
obtained, the Purchaser will have the right not to accept for exchange, exchange
or deliver shares of Holdings Common Stock for, subject to Rule 14e-1(c) under
the Exchange Act, any Borden Shares tendered and may terminate or (subject to
the terms of the Merger Agreement) amend the Exchange Offer or may postpone the
acceptance for exchange of the Borden Shares tendered. No assurance can be given
that such consents, waivers or refinancing commitments will be obtained.
Further, if the Purchaser were to waive the condition to the Exchange Offer that
the aforementioned consents and waivers be obtained, some or all of such
indebtedness or other obligations could become payable prior to their
maturities. See "The Exchange Offer--Terms of the Exchange Offer; Expiration
Date" and "--Certain Conditions of the Exchange Offer."
35
THE EXCHANGE OFFER
BACKGROUND
In early 1993, representatives of KKR met with Anthony S. D'Amato, then
chairman and chief executive officer of Borden, Lawrence O. Doza, then vice
president and chief financial officer of Borden, and a representative of one of
Borden's financial advisors to discuss KKR's interest in exploring a possible
transaction involving KKR and Borden. Following that meeting, Mr. D'Amato
advised KKR's representatives that Borden preferred not to pursue a transaction
with KKR at that time. Thereafter, although no formal discussions were held,
KKR's interest in a possible transaction with Borden continued, especially when
Borden's analysis of possible restructuring alternatives became known to KKR in
the late summer of 1993. Borden continued to maintain that it was not interested
in a transaction with any third parties, including KKR.
In December 1993, Lazard Freres & Co., financial advisor to the Borden Board
of Directors, initiated contact with KKR regarding a possible transaction with
KKR. KKR, in turn, brought the possibility of a transaction with Borden to the
attention of senior executives of Holdings. Holdings thereafter had several
investigatory meetings with Borden's advisors in New York City, but no formal
due diligence was conducted at Borden's headquarters in Columbus, Ohio.
Following such meetings and further analysis by Holdings of a possible
transaction with Borden, Holdings decided that it would not pursue a transaction
with Borden. Among other things, Holdings believed that, in light of its own
indebtedness, Borden's debt levels precluded the acquisition of all of Borden.
Additionally, Holdings determined that its strategic interest was in
substantially less than all of Borden's businesses.
Investigatory discussions between representatives of KKR and Borden resumed
in February 1994 and occurred sporadically thereafter. In April 1994, KKR
indicated to Borden's representatives that it might be willing to assist Borden
in connection with Borden's restructuring efforts, although Borden did not
express interest in such assistance at that time. In July and August, KKR again
initiated contact with Borden's advisors to reiterate KKR's continuing interest
in exploring an investment in Borden. In early August 1994, KKR discussed with
Borden's advisors its possible interest in an investment in Borden using
securities owned by partnerships controlled by KKR. Lazard Freres & Co.
indicated to KKR Borden's willingness to pursue discussions and, shortly
thereafter, KKR and Borden signed a confidentiality agreement and KKR began to
receive certain due diligence information concerning Borden.
Following its initial review of this information, KKR indicated an interest
in pursuing more complete due diligence. KKR was advised that, if it planned to
make a proposal to Borden regarding a transaction, it should be prepared to do
so by September 7, 1994, when Borden's Board of Directors was scheduled to meet
to consider its management's proposed new restructuring plan, which Borden was
to consider as an alternative to a transaction with KKR. This plan would have
involved the sale of Borden's dairy business, sale of profitable non-food
businesses and a cut in Borden's quarterly dividend to $.01 per share. On August
25 and 26, 1994, representatives of KKR and representatives of Borden held due
diligence meetings in Columbus, Ohio. Charles M. Harper, Chairman of the Board
and Chief Executive Officer of Holdings, and H. John Greeniaus, Chairman of the
Board and Chief Executive Officer of Nabisco Foods Group, attended the meetings
on August 25, 1994 at the request of KKR.
On Friday, September 2, 1994, KKR made an oral proposal to acquire a 75%
interest in Borden for consideration valued at $13.50 per Borden Share, based on
an exchange of Holdings Common Stock for Borden Common Stock. Negotiations
continued over the next several days, particularly with regard to KKR's
willingness to pursue an acquisition of the entire company. KKR's revised
proposal for all of Borden was presented to Borden's Board of Directors on
September 7, 1994, following meetings between representatives of KKR and the
Chairman of the Board and the Chief Executive Officer of Borden. Discussions and
negotiations continued between representatives of KKR and Borden and, on
September 11, 1994, the Partnership and Borden signed a letter of intent with
respect to the Transactions based on a value of $14.25 per Borden Share.
36
Following the signing of the letter of intent on September 11, 1994, KKR and
Borden, and their representatives, negotiated the Merger Agreement and
Conditional Purchase/Option Agreement, which were executed on September 23,
1994, following approval by Borden's Board of Directors.
In addition to the information set forth above, Borden shareholders will be
mailed Borden's Schedule 14D-9, which will be incorporated herein by reference
and will contain a description of the background of the Transactions from
Borden's perspective and other relevant information.
PURPOSE OF THE EXCHANGE OFFER; THE MERGER
The Exchange Offer is being made for the purpose of acquiring 100% of the
outstanding Borden Shares. If, following the Exchange Offer and exercise of the
Option, the Purchaser and its affiliates own more than 90% of the outstanding
Borden Shares, the Purchaser will take all necessary or appropriate action,
without further action by the Board of Directors or shareholders of Borden, to
consummate the Merger of the Purchaser with Borden as soon as practicable. If,
following the Exchange Offer and exercise of the Option, approval of Borden's
shareholders is required by applicable law in order to consummate the Merger,
provided that the Minimum Condition is satisfied without being reduced or
waived, Borden will submit the Merger to Borden's shareholders for approval. If
the Merger is submitted to Borden's shareholders for approval, the Merger will
require the approval of the holders of not less than 66 2/3% of the outstanding
Borden Shares, including the Borden Shares owned by the Purchaser and its
affiliates. In the event the Merger is consummated, holders of Borden Shares
will receive the same number of shares of Holdings Common Stock for each Borden
Share as are exchanged for each Borden Share in the Exchange Offer.
This Offering Circular/Prospectus also relates to shares of Holdings Common
Stock that may be issued in connection with the consummation of the Merger,
unless the Merger is submitted to Borden's shareholders for approval, in which
case the Purchaser will solicit proxies from Borden shareholders pursuant to
separate proxy materials in compliance with Section 14(a) of the Exchange Act.
The Board of Directors of Borden has (1) determined that the Exchange Offer,
the Merger and the other Transactions, taken together, are fair to the
shareholders of Borden, and recommends that holders of Borden Shares accept the
Exchange Offer, tender their Borden Shares to the Purchaser in the Exchange
Offer and, if required by applicable law, approve and adopt the Merger Agreement
and (2) approved the Merger Agreement and the Conditional Purchase/Option
Agreement and the transactions contemplated thereby.
The Exchange Offer is subject, among other things, to the Minimum Condition.
Except as described below, the Minimum Condition, and the other conditions to
the Exchange Offer, may be waived by the Purchaser in whole or in part, in its
sole discretion. However, the Minimum Condition may not be waived if the Option
has been exercised in whole or in part prior to the Expiration Date. In
addition, if the Purchaser acquires more than 41% (but not more than 50%) of the
outstanding Borden Shares in the Exchange Offer, the Purchaser must exercise the
Option to the extent necessary so that, following such exercise, the Purchaser
will own more than 50% of the outstanding Borden Shares. In the event the Merger
is not consummated, the Purchaser will control the number of Borden Shares
acquired by the Purchaser pursuant to the Exchange Offer and upon exercise of
the Option. Under the Merger Agreement and the Conditional Purchase/Option
Agreement, following the acceptance for exchange of the Borden Shares to be
exchanged pursuant to the Exchange Offer and/or the purchase of the Option
Shares in accordance with the Conditional Purchase/Option Agreement, and from
time to time thereafter, subject to applicable law, Borden has agreed to take
all actions necessary to cause the Applicable Percentage of directors (and of
members of each committee of the Board of Directors) (rounded in each case to
the next highest director or member) of Borden selected by the Partnership to
consist of persons designated or elected by the Partnership (whether, at the
election of Borden, by means of increasing the size of the board of directors or
seeking the resignation of directors and causing
37
the Partnership's designees to be elected); provided that, if the Purchaser has
acquired at least 28,138,000 Borden Shares, the Applicable Percentage will not
be less than 33 1/3%. As a result of its ownership of such Borden Shares and
right to designate nominees for election to Borden's Board of Directors, the
Purchaser will be able significantly to influence decisions of the shareholders
and such Board. See "Certain Significant Considerations," "The Exchange
Offer--Certain Conditions of the Exchange Offer" and "Description of Merger
Agreement and Conditional Purchase/Option Agreement."
THIS OFFERING CIRCULAR/PROSPECTUS DOES NOT CONSTITUTE A SOLICITATION OF A
PROXY, CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO ANY SPECIAL MEETING OR
OTHER MEETING OF BORDEN SHAREHOLDERS WHO DO NOT TENDER THEIR BORDEN SHARES OR
ANY ACTION IN LIEU THEREOF. ANY SUCH SOLICITATION WILL BE MADE ONLY PURSUANT TO
SEPARATE PROXY MATERIALS IN COMPLIANCE WITH SECTION 14(A) OF THE EXCHANGE ACT.
See "Description of Merger Agreement and Conditional Purchase/Option
Agreement" for a description of certain fees that are or may be payable to KKR
in connection with the Transactions.
TERMS OF THE EXCHANGE OFFER; EXPIRATION DATE
Upon the terms and subject to the conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser hereby offers to
exchange shares of Holdings Common Stock for all outstanding Borden Shares at
the Exchange Ratio, provided that such Borden Shares are validly tendered on or
prior to the Expiration Date and not properly withdrawn as described under
"--Withdrawal Rights."
Upon the terms and subject to the conditions of the Exchange Offer,
including without limitation the Minimum Condition, the Purchaser will exchange
all such Borden Shares for shares of Holdings Common Stock. Tendering
shareholders will not be obligated to pay any charges or expenses of the
Exchange Agent or any brokerage commissions. Except as set forth in the Letter
of Transmittal, transfer taxes on the exchange of Borden Shares pursuant to the
Exchange Offer will be paid by or on behalf of the Purchaser.
No fractional shares of Holdings Common Stock will be distributed. The
Exchange Agent, acting as agent for record holders of Borden Shares otherwise
entitled to receive fractional shares of Holdings Common Stock, will aggregate
all fractional shares and sell them for the accounts of such shareholders.
Proceeds from sales of fractional shares will be paid by the Exchange Agent
based upon the average net selling price per share of all such sales (following
the deduction of applicable transaction costs of third parties other than the
Exchange Agent, Borden, the Purchaser or affiliates of any of the foregoing).
See "--Procedure for Tendering Shares of Borden Common Stock--Backup Federal Tax
Withholding."
The Exchange Offer is subject to certain conditions set forth under
"--Certain Conditions of the Exchange Offer," any of which may be waived by the
Purchaser, except that in the event the Purchaser exercises the Option in whole
or in part, then the Purchaser is not permitted to waive the Minimum Condition.
If any condition is not satisfied, the Purchaser may (i) terminate the Exchange
Offer and return all tendered Borden Shares to tendering shareholders, (ii)
extend the Exchange Offer and, subject to withdrawal rights as set forth under
"--Withdrawal Rights," retain all such Borden Shares until the expiration of the
Exchange Offer as so extended, (iii) waive such condition (other than, in
certain circumstances described herein, the Minimum Condition) and, subject to
any requirement to extend the period of time during which the Exchange Offer is
open, exchange all Borden Shares validly tendered for exchange on or prior to
the Expiration Date and not properly withdrawn, or (iv) subject to applicable
law, delay acceptance for exchange of or exchange for any Borden Shares until
satisfaction or waiver of such condition to the Exchange Offer even though the
Exchange Offer has expired. For a description of the Purchaser's right to extend
the period of time during which the Exchange Offer is open and to amend, delay
or terminate the Exchange Offer and for a description of withdrawal rights of
Borden's shareholders in such circumstances, see "--Extension of Tender Period;
Termination; Amendment" and "--Withdrawal Rights." The Purchaser's right to
delay acceptance for exchange of or
38
exchange for Borden Shares tendered for exchange pursuant to the Exchange Offer
is subject to provisions of applicable law, including, to the extent applicable,
Rule 14e-1(c) promulgated under the Exchange Act, which requires that the
Purchaser pay the consideration offered or return the Borden Shares deposited by
or on behalf of Borden shareholders promptly after the termination or withdrawal
of the Exchange Offer. Pursuant to the Merger Agreement, the Purchaser has
agreed that, upon the request of Borden (and without limiting the number of
times that the Purchaser may extend the Exchange Offer, or the total number of
days for which the Exchange Offer may be extended), the Purchaser will extend
the Exchange Offer, one or more times, for an aggregate of not more than twenty
business days. See "Description of Merger Agreement and Conditional
Purchase/Option Agreement."
Following the effectiveness of the Registration Statement, this Offering
Circular/Prospectus and the related Letter of Transmittal will be mailed to
record holders of Borden Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
Borden shareholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Borden Shares.
EXCHANGE OF SHARES OF BORDEN COMMON STOCK
Upon the terms and subject to the conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser will accept for
exchange, and will exchange for shares of Holdings Common Stock, all Borden
Shares validly tendered and not properly withdrawn on or prior to the Expiration
Date promptly after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions of the Exchange Offer set forth under
"--Certain Conditions of the Exchange Offer." Subject to applicable rules of the
Commission, which may require extension of the Exchange Offer and related
withdrawal rights, the Purchaser expressly reserves the right to delay
acceptance for exchange of or exchange for Borden Shares pending receipt of
regulatory approvals referred to under "--Certain Regulatory Approvals and Legal
Matters." See "--Withdrawal Rights" and "--Extension of Tender Period;
Termination Amendment."
Unless and until the Rights are redeemed in accordance with the Merger
Agreement, holders of Borden Shares will be required to tender the Rights
associated with such Borden Shares in order to effect a valid tender of such
Borden Shares. As of the date hereof, the Rights trade together with the Borden
Shares and a tender of the Borden Shares will be deemed to be a tender of the
associated Rights. If separate Rights Certificates are issued, tendering
shareholders will then be required to tender both Share Certificates and Rights
Certificates in order to effect a valid tender. See "--Procedure for Tendering
Shares of Borden Common Stock."
In all cases, exchange of Borden Shares tendered and accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of (i) Share Certificates (and Rights Certificates if applicable)
for Borden Shares, or a Book-Entry Confirmation of a book-entry transfer of such
Borden Shares into the Exchange Agent's account at a Book-Entry Transfer
Facility pursuant to the procedures set forth under "--Procedure for Tendering
Shares of Borden Common Stock," (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
(iii) any other documents required by the Letter of Transmittal.
For purposes of the Exchange Offer, the Purchaser will be deemed to have
accepted for exchange Borden Shares validly tendered and not properly withdrawn
as, if and when the Purchaser gives oral or written notice to the Exchange Agent
of the Purchaser's acceptance for exchange of such Borden Shares pursuant to the
Exchange Offer. Upon the terms and subject to the conditions of the Exchange
Offer, exchange of Borden Shares accepted for exchange pursuant to the Exchange
Offer will be made by deposit of tendered Borden Shares with the Exchange Agent,
which will act as agent for the tendering shareholders for the purpose of
receiving shares of Holdings Common Stock from the Purchaser and
39
transmitting such shares of Holdings Common Stock to tendering shareholders.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID PURSUANT TO THE EXCHANGE OFFER,
REGARDLESS OF ANY DELAY IN MAKING SUCH EXCHANGE. If, for any reason whatsoever,
acceptance for exchange of or exchange for any Borden Shares tendered pursuant
to the Exchange Offer is delayed, or the Purchaser is unable to accept for
exchange or exchange for Borden Shares tendered pursuant to the Exchange Offer,
then, without prejudice to the Purchaser's rights set forth herein, the Exchange
Agent may, nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c)
under the Exchange Act, retain tendered Borden Shares and such Borden Shares may
not be withdrawn except to the extent that the tendering stockholder is entitled
to and duly exercises withdrawal rights as described under "--Withdrawal
Rights."
If any tendered Borden Shares are not accepted for exchange for any reason
or if Share Certificates (and Rights Certificates if applicable) are submitted
for more Borden Shares than are tendered, Share Certificates (and Rights
Certificates if applicable) for Borden Shares evidencing un-exchanged or un-
tendered Borden Shares will be returned, without expense to the tendering
shareholder (or, in the case of Borden Shares tendered by book-entry transfer
into the Exchange Agent's account at a Book-Entry Transfer Facility pursuant to
the procedures described under "--Procedure for Tendering Shares of Borden
Common Stock--Book-Entry Transfer," such Borden Shares will be credited to an
account maintained at such Book-Entry Transfer Facility), in each case with the
related Rights Certificates (if applicable), promptly following the expiration,
termination or withdrawal of the Exchange Offer.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to shareholders pursuant to the Exchange Offer, such increased
consideration will be given to all shareholders whose Borden Shares are
exchanged pursuant to the Exchange Offer, whether or not such Borden Shares were
tendered or accepted for exchange prior to such increase in consideration.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates, the right to exchange
all or any portion of the Borden Shares tendered pursuant to the Exchange Offer,
but any such transfer or assignment will not relieve the Purchaser of its
obligations under the Exchange Offer and will in no way prejudice the rights of
tendering shareholders to exchange for Borden Shares validly tendered and
accepted for exchange pursuant to the Exchange Offer. According to the Merger
Agreement, it is presently contemplated that the right of the Purchaser to
exchange for shares of Borden Common Stock pursuant to the Exchange Offer and
the right of the Purchaser to exercise the Option will be assigned to the
Partnership or to a direct or indirect wholly owned subsidiary of the
Partnership, which may, in any such case, act for itself and/or as agent for one
or both of the Common Stock Partnerships, as the case may be.
PROCEDURE FOR TENDERING SHARES OF BORDEN COMMON STOCK
Except as set forth below, in order for Borden Shares (and Rights if
applicable) to be validly tendered pursuant to the Exchange Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Borden Shares (and Rights if
applicable) and any other documents required by the Letter of Transmittal, must
be received by the Exchange Agent at one of its addresses set forth on the back
cover of this Offering Circular/Prospectus on or prior to the Expiration Date
and either (i) the Share Certificates (and Rights Certificates if applicable)
evidencing tendered Borden Shares (and Rights if applicable) must be received by
the Exchange Agent at such address or such Borden Shares (and Rights if
applicable) must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the Exchange
Agent, in each case on or prior to the Expiration Date, or (ii) the guaranteed
delivery procedures described below must be complied with.
Unless and until the Rights are redeemed in accordance with the Merger
Agreement, holders of Borden Shares will be required to tender the Rights
associated with such Borden Shares in order to effect a valid tender of such
Borden Shares. Accordingly, shareholders who sell their Rights separately
40
from their Borden Shares and do not otherwise acquire Rights may not be able to
satisfy the requirements of the Exchange Offer for a valid tender of Borden
Shares. If the Distribution Date (as defined in the Rights Agreement) has
occurred and Rights Certificates have been distributed to such holders prior to
the date of tender pursuant to the Exchange Offer, Rights Certificates
representing a number of Rights equal to the number of Borden Shares being
tendered must be delivered to the Exchange Agent in order for such Borden Shares
to be validly tendered. If the Distribution Date has occurred and Rights
Certificates have not been distributed prior to the time Borden Shares are
tendered pursuant to the Exchange Offer, Rights may be tendered prior to a
shareholder receiving Rights Certificates by use of the guaranteed delivery
procedures described below. A tender of Borden Shares without Rights
Certificates constitutes an agreement by the tendering shareholder to deliver
Rights Certificates representing a number of Rights equal to the number of
Borden Shares tendered pursuant to the Exchange Offer to the Exchange Agent
within five business days after the date such Rights Certificates are
distributed. Unless and until the Rights are redeemed in accordance with the
Merger Agreement, the Purchaser reserves the right to require that it receive
such Rights Certificates prior to accepting Borden Shares for exchange. In that
event, exchange for Borden Shares tendered and accepted for exchange pursuant to
the Exchange Offer will be made only after timely receipt by the Exchange Agent
of, among other things, Rights Certificates, if Rights Certificates have been
distributed to holders of Borden Shares. See "Description of Merger Agreement
and Conditional Purchase/Option Agreement."
THE METHOD OF DELIVERY OF BORDEN SHARES (AND RIGHTS IF APPLICABLE), AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer
The Exchange Agent will make a request to establish accounts with respect to
the Borden Shares at the Book-Entry Transfer Facilities for purposes of the
Exchange Offer within two business days after the date of this Offering
Circular/Prospectus. Any financial institution that is a participant in the
system of any Book-Entry Transfer Facility may make book-entry delivery of
Borden Shares by causing such Book-Entry Transfer Facility to transfer such
Borden Shares into the Exchange Agent's account at such Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Borden Shares may be effected
through book-entry transfer at a Book-Entry Transfer Facility, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other documents required by the
Letter of Transmittal, must, in any case, be received by the Exchange Agent at
one of its addresses set forth on the back cover of this Offering
Circular/Prospectus prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with.
If Rights Certificates are issued, to the extent that the Rights become
eligible for book-entry transfer under procedures established by a particular
Book-Entry Transfer Facility, the Exchange Agent will make a request to
establish an account with respect to the Rights at such Book-Entry Transfer
Facility as soon as practicable. No assurance can be given, however, that
book-entry delivery of Rights will be available. If book-entry delivery of
Rights is available, the foregoing book-entry transfer procedure will also apply
to Rights. If book-entry delivery is not available and if separate Rights
Certificates have been issued, a tendering shareholder is not relieved of
delivery requirements hereunder and thus will be required to tender Rights by
means of actual delivery of Rights Certificates or pursuant to the guaranteed
delivery procedures set forth below.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
41
Signature Guarantees
Signatures on Letters of Transmittal must be guaranteed by a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., or by a commercial bank or trust
company having an office or correspondent in the United States (each of the
foregoing being referred to as an "Eligible Institution"), except in cases where
Borden Shares are tendered (i) by a registered holder of Borden Shares who has
not completed either the box labeled "Special Exchange Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instructions 1 and 5 of the Letter
of Transmittal.
If the Share Certificates (or the Rights Certificates if applicable) are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment in respect of fractional shares of Holdings Common
Stock is to be made, or Share Certificates (or Rights Certificates if
applicable) not accepted for exchange or not tendered are to be returned, to a
person other than the registered holder(s), the Share Certificates (or Rights
Certificates if applicable), as the case may be, must be endorsed or accompanied
by appropriate stock powers, in either case, signed exactly as the name(s) of
the registered holder(s) appear on such certificates, with the signature(s) on
such certificates or stock powers guaranteed as aforesaid. See Instructions 1
and 5 of the Letter of Transmittal.
If Share Certificates (and Rights Certificates if applicable) are forwarded
separately to the Exchange Agent, a properly completed and duly executed Letter
of Transmittal (or a facsimile thereof) must accompany each such delivery.
Guaranteed Delivery
If a shareholder desires to tender Borden Shares (and Rights if applicable)
pursuant to the Exchange Offer and such shareholder's Share Certificates (or
Rights Certificates if applicable) are not immediately available or such
shareholder cannot deliver Share Certificates (or Rights Certificates if
applicable) and all other required documents to reach the Exchange Agent on or
prior to the Expiration Date, or such shareholder cannot complete the procedure
for delivery by book-entry transfer on a timely basis, such Borden Shares (and
Rights if applicable) may nevertheless be tendered, provided that all of the
following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates and Rights Certificates, as the case may be
(or a Book-Entry Confirmation), representing all tendered Borden Shares (and
Rights if applicable), in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message) and any other documents
required by the Letter of Transmittal are received by the Exchange Agent
within (A) in the case of Borden Shares, five NYSE trading days after the
date of execution of such Notice of Guaranteed Delivery, and (B) in the case
of Rights, a period ending on the later of (x) five NYSE trading days after
the date of execution of such Notice of Guaranteed Delivery and (y) five
business days after the date Rights Certificates are distributed to
shareholders of Borden (if applicable).
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Exchange Agent and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, exchange of Borden Shares
accepted for exchange pursuant to the Exchange Offer will in all cases be made
only after timely receipt by the Exchange Agent of Shares Certificates for, or
of Book-Entry Confirmation with respect to, such Borden Shares, and if the
Distribution Date has occurred, Rights Certificates for, or a Book-Entry
Confirmation, if
42
available, with respect to, the associated Rights (unless the Purchaser elects,
in its sole discretion, to exchange such Borden Shares pending receipt of the
Rights Certificates for, or a Book-Entry Confirmation with respect to, such
Rights), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message), and any other documents
required by the Letter of Transmittal. Accordingly, exchange of Borden Shares
might not be made to all tendering shareholders at the same time, and will
depend upon when Share Certificates (or Rights Certificates if applicable) or
Book-Entry Confirmations of such Borden Shares (or Rights if applicable) are
received into the Exchange Agent's account at a Book-Entry Transfer Facility.
If the Rights are redeemed by Borden in accordance with the Merger
Agreement, the guaranteed delivery procedure with respect to Rights Certificates
and the requirement for the tender of Rights will no longer apply.
Appointment as Proxy
By executing the Letter of Transmittal, a tendering shareholder irrevocably
appoints designees of the Purchaser, and each of them, as such shareholder's
attorneys-in-fact and proxies, with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such shareholder's
rights with respect to the Borden Shares (and Rights if applicable) tendered by
such shareholder and accepted for exchange by the Purchaser (and with respect to
any and all other Borden Shares (and Rights if applicable) or other securities
issued or issuable in respect of such Borden Shares (and Rights if applicable)
on or after the date hereof). All such powers of attorney and proxies shall be
considered irrevocable and coupled with an interest in the tendered Borden
Shares (and Rights if applicable). Such appointment will be effective when, and
only to the extent that, the Purchaser accepts such Borden Shares for exchange.
Upon such acceptance for exchange, all prior powers of attorney and proxies
given by such shareholder with respect to such Borden Shares (and Rights if
applicable) (and such other shares and securities) will be revoked without
further action, and no subsequent powers of attorney and proxies may be given
nor any subsequent written consents executed (and, if given or executed, will
not be deemed effective). The designees of the Purchaser will be empowered to
exercise all voting and other rights of such shareholder as they in their sole
discretion may deem proper at any annual or special meeting of Borden's
shareholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. The Purchaser reserves the right to
require that, in order for Borden Shares (and Rights if applicable) to be deemed
validly tendered, immediately upon the Purchaser's exchange for such Borden
Shares, the Purchaser must be able to exercise full voting rights with respect
to such Borden Shares, (Rights if applicable) and other securities, including
voting at any meeting of shareholders.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Borden Shares (and Rights
if applicable) will be determined by the Purchaser, in its sole discretion,
which determination shall be final and binding on all parties. The Purchaser
reserves the absolute right to reject any and all tenders determined by it not
to be in proper form or the acceptance for exchange of which may, in the opinion
of its counsel, be unlawful. Except as otherwise described herein, the Purchaser
also reserves the absolute right to waive any of the conditions of the Exchange
Offer or any defect or irregularity in any tender of Borden Shares (and Rights
if applicable) of any particular shareholder whether or not similar defects or
irregularities are waived in the case of other shareholders. No tender of Borden
Shares (and Rights if applicable) will be deemed to have been validly made until
all defects and irregularities have been cured or waived. None of the Purchaser,
the Common Stock Partnerships, the Dealer Manager, the Exchange Agent, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. The Purchaser's interpretation of the
terms and conditions of the Exchange Offer (including the Letter of Transmittal
and the instructions thereto) will be final and binding.
43
Backup Federal Tax Withholding
UNDER THE FEDERAL INCOME TAX LAWS, THE EXCHANGE AGENT WILL BE REQUIRED TO
WITHHOLD 31 PERCENT OF THE AMOUNT OF ANY PAYMENTS MADE TO CERTAIN SHAREHOLDERS
PURSUANT TO THE EXCHANGE OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING, EACH SUCH SHAREHOLDER MUST PROVIDE THE EXCHANGE AGENT WITH SUCH
SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE
INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
Other Matters
The Purchaser's acceptance for exchange of Borden Shares tendered pursuant
to any of the procedures described above will constitute a binding agreement
between the tendering shareholder and the Purchaser upon the terms and subject
to the conditions of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of Borden Shares (and Rights if applicable) made pursuant to the
Exchange Offer are irrevocable, except that Borden Shares (and Rights if
applicable) tendered pursuant to the Exchange Offer may be withdrawn at any time
on or prior to the Expiration Date and, unless theretofore accepted for exchange
by the Purchaser pursuant to the Exchange Offer, may also be withdrawn at any
time after , 1995. If the Purchaser extends the Exchange Offer, is
delayed in its acceptance for exchange of or exchange for Borden Shares or is
unable to exchange Borden Shares validly tendered pursuant to the Exchange Offer
for any reason, then, without prejudice to the Purchaser's rights under the
Exchange Offer, the Exchange Agent may nevertheless, on behalf of the Purchaser,
retain tendered Borden Shares (and Rights if applicable), and such Borden Shares
(and Rights if applicable) may not be withdrawn except to the extent that
tendering shareholders are entitled to withdrawal rights as described below. Any
such delay will be by an extension of the Exchange Offer to the extent required
by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent
at one of its addresses set forth on the back cover of this Offering
Circular/Prospectus. Any notice of withdrawal must specify the name of the
person who tendered the Borden Shares (and Rights if applicable) to be
withdrawn, the number of Borden Shares (and Rights if applicable) to be
withdrawn and the name of the registered holder, if different from that of the
person who tendered such Borden Shares (and Rights if applicable). If Share
Certificates (or Rights Certificates if applicable) for Borden Shares (and
Rights if applicable) to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Exchange Agent and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Borden Shares (and Rights if
applicable) have been tendered for the account of an Eligible Institution. If
Borden Shares (and Rights if applicable) have been tendered pursuant to the
procedure for book-entry transfer as described under "--Procedure for Tendering
Shares of Borden Common Stock--Book-Entry Transfer," any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Borden Shares (and Rights if
applicable), in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by any method of delivery described in the first sentence
of this paragraph.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Partnership, any of their affiliates or assigns, the Dealer
Manager, the Exchange Agent, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Borden Shares (and Rights if applicable) properly withdrawn will
thereafter be deemed not to have been validly tendered for purposes of the
Exchange Offer. However, withdrawn Borden Shares
44
(and Rights if applicable) may be re-tendered at any time on or prior to the
Expiration Date by following one of the procedures described under "--Procedure
for Tendering Shares of Borden Common Stock."
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period during which the Exchange Offer
is open for any reason, including the occurrence of any of the conditions
specified under "--Certain Conditions of the Exchange Offer," by giving oral or
written notice of such extension to the Exchange Agent. During any such
extension, all Borden Shares (and Rights if applicable) previously tendered and
not properly withdrawn will remain subject to the Exchange Offer, subject to the
rights of a tendering shareholder to withdraw such shareholder's Borden Shares
(and Rights if applicable). See "--Withdrawal Rights."
Pursuant to the Merger Agreement, the Purchaser has agreed that, upon the
request of Borden (and without limiting the number of times that the Purchaser
may extend the Exchange Offer, or the total number of days for which the
Exchange Offer may be extended), the Purchaser will extend the Exchange Offer,
one or more times, for an aggregate of not more than twenty business days. See
"Description of Merger Agreement and Conditional Purchase/Option Agreement."
The Purchaser acknowledges (i) that Rule 14e-1(c) under the Exchange Act
requires the Purchaser to pay the consideration offered or return the Borden
Shares (and Rights if applicable) tendered promptly after the termination or
withdrawal of the Exchange Offer and (ii) that the Purchaser may not delay
acceptance for exchange of, or exchange for (except as provided in clause (i) of
the succeeding sentence), any Borden Shares upon the occurrence of any of the
conditions specified under "--Certain Conditions of the Exchange Offer" without
extending the period of time during which the Exchange Offer is open. Subject to
the foregoing and any other applicable regulations of the Commission, the
Purchaser reserves the right, in its sole discretion, at any time or from time
to time to (i) delay acceptance for exchange of or, regardless of whether such
Borden Shares were theretofore accepted for exchange, exchange for any Borden
Shares pending receipt of any regulatory approvals specified under "--Certain
Regulatory Approvals and Legal Matters," (ii) terminate the Exchange Offer
(whether or not any Borden Shares have theretofore been accepted for exchange)
if any of the conditions referred to under "--Certain Conditions of the Exchange
Offer" has not been satisfied or upon the occurrence of any of the conditions
specified thereunder and (iii) waive any condition or otherwise amend the
Exchange Offer in any respect, in each case, by giving oral or written notice of
such delay, termination, waiver or amendment to the Exchange Agent and by making
a public announcement thereof.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, and such announcement
in the case of an extension will be made no later than 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Purchaser may choose to make any public
announcement, except as provided by applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that material changes be promptly
disseminated to holders of Borden Shares), the Purchaser shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Exchange Offer,
or if it waives a material condition of the Exchange Offer, the Purchaser will
extend the Exchange Offer to the extent required by Rules 14d-4(c) and 14d-6(d)
under the Exchange Act. The minimum period during which an offer must remain
open following material changes in the terms of the offer, other than a change
in price or a change in percentage of securities sought or a change in any
dealer's soliciting fee, will depend upon the facts and circumstances, including
the materiality, of the changes. With respect to a change in price or, subject
to certain limitations, a change in the percentage of securities sought or a
change in any dealer's soliciting fee, a minimum ten business day period from
the day of such change is generally required to allow for adequate dissemination
to shareholders. Accordingly, if prior to the Expiration Date, the Purchaser
decreases the number of Borden Shares being sought, increases or decreases the
45
consideration offered pursuant to the Exchange Offer or changes any dealer's
soliciting fee, and if the Exchange Offer is scheduled to expire at any time
earlier than the period ending on the tenth business day from the date that
notice of such increase, decrease or change is first published, sent or given to
shareholders, the Exchange Offer will be extended at least until the expiration
of such ten business day period. For purposes of the Exchange Offer, a "business
day" means any day other than a Saturday, Sunday or a federal holiday and
consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
CERTAIN CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Purchaser
shall not be required to accept for exchange, exchange or deliver any shares of
Holdings Common Stock for, subject to Rule 14e-1(c) under the Exchange Act, any
Borden Shares tendered and may terminate or (subject to the terms of the Merger
Agreement) amend the Exchange Offer or may postpone the acceptance for exchange
of the Borden Shares tendered, if immediately before acceptance for exchange of
any such Borden Shares (whether or not any Borden Shares have theretofore been
accepted for exchange pursuant to the Exchange Offer): (i) the Minimum Condition
shall not have been satisfied; (ii) any waiting period under the HSR Act
applicable to the purchase of Borden Shares pursuant to the Exchange Offer shall
not have expired or been terminated or the requisite approvals, authorizations
or consents required by the Investment Canada Act, Canada's Competition Act and
the European Community (see "--Certain Regulatory Approvals and Legal Matters")
shall not have been obtained; (iii) all consents and waivers on terms
satisfactory to the Partnership necessary in order that the consummation of the
transactions contemplated by the Merger Agreement and the Conditional
Purchase/Option Agreement not constitute (A) an event of default or an event
which with or without notice or the passage of time would constitute an event of
default under any indebtedness, partnership agreement or equityholders agreement
of Borden or any subsidiary (or Borden Chemicals and Plastics Limited
Partnership, Borden Chemicals and Plastics Operating Limited Partnership and
T.M. Investors Limited Partnership) ("Indebtedness"), including, without
limitation, Borden's Amended and Restated Credit Agreement dated as of August
16, 1994 with Citibank, N.A., as Administrative Agent, and T.M. Investors
Limited Partnership's Amended and Restated Credit Agreement dated as of August
16, 1994 with Citibank, N.A., as Administrative Agent, or (B) an event which
would individually or in combination with other events give rise to an
obligation on the part of Borden to repay or repurchase any Indebtedness,
partnership interest or equity interest, which event of default or other event
described in clause (A) or (B) above would give rise to, with or without notice
or the passage of time and taking into account any cross-acceleration or
cross-default provisions, the obligation to repay prior to maturity or the
acceleration of an aggregate of at least $25 million of Indebtedness or other
obligations shall not have been obtained; (iv) Borden shall not have refinanced,
or received commitments for refinancing or indications satisfactory to the
Partnership from lenders that it will be able to refinance, in each case on
market terms reasonably acceptable to the Partnership, the principal bank credit
facilities of Borden and T.M.I. Associates, L.P., provided that such refinancing
shall not be required to increase the available lines of credit under such
facilities except to meet the working capital and other reasonable needs of
Borden and its subsidiaries and shall principally be related to extending
maturities and renegotiating repayment schedules under such facilities as
appropriate to meet Borden's business plan as determined by the Partnership and
Borden; (v) the Registration Statement and any required post-effective amendment
thereto shall not have become effective under the Securities Act or shall be the
subject of any stop order or proceedings seeking a stop order, or any material
"blue sky" and other state securities laws applicable to the registration of the
Holdings Common Stock to be exchanged for Borden Common Stock shall not have
been complied with; or (vi) any of the following shall occur and remain in
effect and shall, in the reasonable judgment of the Purchaser in any such case,
make it inadvisable to proceed with the Exchange Offer or such acceptance for
exchange of any of the Borden Shares or to proceed with the Merger:
(a) (i) any representation or warranty of Borden in the Merger Agreement
shall have been untrue as of the date of the Merger Agreement and shall
continue to be untrue, which untrue
46
representations or warranties, in the aggregate, would have a Material
Adverse Effect (as defined below) on Borden; or there has been a breach by
Borden of any covenant or agreement set forth in the Merger Agreement or the
Conditional Purchase/Option Agreement having a Material Adverse Effect on
Borden which has not been cured; (ii) the SEC Documents (as defined below)
filed by Borden with the Commission since the date of the Merger Agreement
did not comply in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission promulgated thereunder applicable to such SEC
Documents, or the SEC Documents (including any and all financial statements
included therein), except to the extent revised or superseded by a
subsequent filing with the Commission, as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; or
(iii) the consolidated financial statements of Borden included in the SEC
Documents filed since the date of the Merger Agreement did not comply as to
form in all material respects with applicable accounting requirements and
the published rules and regulations of the Commission with respect thereto,
were not prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited consolidated quarterly
statements, as permitted by Form 10-Q of the Commission) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) or did not fairly present the consolidated financial
position of Borden and its consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited quarterly statements,
to normal year-end audit adjustments);
(b) there shall be any United States or foreign statute, rule,
regulation, decree, order or injunction promulgated, enacted, entered into
or enforced by any governmental entity, that (i) restrains or prohibits the
making or consummation of the Exchange Offer or the Merger or restrains or
prohibits the performance of the Merger Agreement or the Conditional
Purchase/Option Agreement, (ii) prohibits or materially limits the ownership
or operation by the Partnership or the Purchaser of all or any substantial
portion of the business or assets of Borden or any of its subsidiaries or
compels the Partnership or the Purchaser to dispose of or to hold separate
all or any substantial portion of the business or assets of Borden or any of
its subsidiaries, or imposes any material limitation on the ability of the
Partnership or the Purchaser to conduct such business or own such assets or
(iii) imposes material limitations on the ability of the Partnership or the
Purchaser (or any other affiliate of the Partnership or the Purchaser) to
acquire or hold or to exercise full rights of ownership of the Borden
Shares, including, but not limited to, the right to vote the Borden Shares
acquired by the Purchaser on all matters properly presented to the
shareholders of Borden; provided, however, that the Partnership and the
Purchaser shall have used their best efforts to have any such decree, order
or injunction vacated or reversed;
(c) any change shall have occurred since the date of the Merger
Agreement in the business, financial condition or results of operations of
Borden or any of its subsidiaries which has had, or would reasonably be
expected to have, a Material Adverse Effect with respect to Borden,
including, without limitation, the commencement in respect of, or by, Borden
of an involuntary, or voluntary, proceeding under any applicable bankruptcy
law, decree, order or any other case or proceeding adjudging Borden a
bankrupt or insolvent, or the condition of Borden is such that it is unable
to pay all of its liabilities as such liabilities mature or has unreasonably
small capital for conducting the business theretofore or proposed to be
conducted by it;
(d) there shall have occurred (and the adverse effect of such occurrence
shall, in the reasonable judgment of the Purchaser, be continuing) (i) any
general suspension of trading in, or limitation on prices for, securities on
any national securities exchange or in the over-the-counter market in the
United States, (ii) any extraordinary or material adverse change in United
States financial markets generally, including, without limitation, a decline
of at least 25% in either the Dow Jones Average of Industrial Stocks or the
Standard & Poor's 500 index from the date of the
47
Merger Agreement, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iv) any
limitation (whether or not mandatory) by any governmental entity, on, or any
other event that would reasonably be expected to materially adversely
affect, the extension of credit by banks or other lending institutions, (v)
a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States
(other than in Haiti) which would reasonably be expected to have a Material
Adverse Effect or materially adversely affect (or materially delay) the
consummation of the Exchange Offer or (vi) in the case of any of the
foregoing existing at the time of commencement of the Exchange Offer, a
material acceleration or worsening thereof; or
(e) the Merger Agreement shall have been terminated in accordance with
its terms or the Exchange Offer shall have been amended or terminated with
the consent of Borden.
The foregoing conditions are for the sole benefit of the Partnership and the
Purchaser and may be asserted by the Partnership or the Purchaser regardless of
the circumstances giving rise to any such condition and may be waived by the
Partnership or the Purchaser in whole or in part, provided, however, that if the
Purchaser shall have exercised the Option in whole or in part prior to the
termination of the Exchange Offer, the Purchaser shall not be permitted to waive
the Minimum Condition. The Partnership's or the Purchaser's failure at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
The term "Material Adverse Effect" means, when used in connection with any
person, any change or effect that either individually or in the aggregate with
all other such other changes or effects is materially adverse to the business,
financial condition or results of operations of such person and its subsidiaries
taken as a whole or adversely affects the ability of such person to consummate
the transactions contemplated by the Merger Agreement in any material respect.
The term "SEC Documents" means, with respect to any person, all reports,
schedules, forms, statements and other documents filed with the Commission by
such person since January 1, 1990, in each case including all exhibits and
schedules thereto and documents incorporated by reference therein.
CERTAIN TAX CONSEQUENCES
Certain Federal Income Tax Consequences. The following summary sets forth
the material federal income tax consequences of the Exchange Offer and the
Merger to a Borden shareholder. The tax treatment of each Borden shareholder
will depend in part upon his particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States, shareholders who acquired their Borden Shares
through the exercise of an employee stock option or otherwise as compensation,
and persons who received payments in respect of options to acquire Borden
Shares. ALL SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE EXCHANGE OFFER AND THE MERGER TO THEM,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND FOREIGN TAX LAWS.
The receipt of shares of Holdings Common Stock pursuant to the Exchange
Offer or the Merger will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction under applicable state, local,
foreign or other tax laws. Generally, a Borden shareholder will recognize gain
or loss for federal income tax purposes in an amount equal to the difference
between the fair market value of the consideration received (including cash
received in lieu of fractional shares) and such shareholder's adjusted tax basis
in the Borden Shares. The fair market value of the Holdings Common Stock will be
the mean between the high and the low trading prices on the NYSE Composite Tape
on the date the Purchaser accepts such Borden Shares for exchange pursuant to
the Exchange Offer or the effective date of the Merger, as the case may be. For
federal income tax purposes, such gain or loss will be a capital gain or loss if
the Borden Shares are a capital asset in the hands of such shareholder, and a
long-term capital gain or loss if such shareholder's holding period is more than
one year as of the date
48
the Purchaser accepts such Borden Shares for exchange pursuant to the Exchange
Offer or the effective date of the Merger, as the case may be. There are
limitations on the deductibility of capital losses. The exchange of Borden
Shares for shares of Holdings Common Stock pursuant to the Exchange Offer or the
Merger may also have tax consequences under applicable state, local, foreign or
other tax laws.
A Borden shareholder will have a tax basis in the shares of Holdings Common
Stock received pursuant to the Exchange Offer or the Proposed Merger equal to
the fair market value of such shares as of the date the Purchaser accepts such
Borden Shares for exchange pursuant to the Exchange Offer or the effective date
of the Merger, as the case may be, and a new holding period for such shares will
commence on the day after such date.
New York Real Estate Transfer Taxes. The New York State Real Property
Transfer Gains Tax, the New York State Real Estate Transfer Tax and the New York
City Real Property Transfer Tax (collectively, the "Real Estate Transfer Taxes")
are imposed on the transfer or acquisition, directly or indirectly, of
controlling interests in an entity which owns interests in real property located
in New York State or New York City, as the case may be. The Exchange Offer and
the Merger will result in the taxable transfer of controlling interests in
entities which own New York State or New York City real property for purposes of
the Real Estate Transfer Taxes. Although any Real Estate Transfer Taxes could be
imposed directly on the shareholders of Borden, Borden will complete and file
any necessary tax returns, and Borden will pay all Real Estate Transfer Taxes
that are imposed as a result of the Exchange Offer and the Merger. Upon receipt
of the consideration for either the Exchange Offer or the Merger, each
shareholder of Borden will be deemed to have agreed to be bound by the Real
Estate Transfer Tax returns filed by Borden.
FEES AND EXPENSES OF THE EXCHANGE OFFER AND SOURCE OF FUNDS
Morgan Stanley is acting as the Purchaser's financial advisor in connection
with the proposed acquisition of Borden Common Stock and as Dealer Manager for
the Exchange Offer. In connection with such services, the Purchaser has agreed
to pay to Morgan Stanley an advisory fee (based on the time and effort expended
by Morgan Stanley in connection with the transaction) estimated to be between
$200,000 and $300,000, a fee of $3 million payable upon commencement of the
Exchange Offer (against which the advisory fee will be credited) and a
successful transaction fee of up to $7.95 million (against which both the
advisory fee and the Exchange Offer commencement fee will be credited) based on
the aggregate value of the consideration exchanged for Borden Shares in the
transactions. The successful transaction fee will become payable in the event
that the Purchaser acquires more than 51% of the Borden Shares (pursuant to the
Exchange Offer, the Merger or otherwise). In addition, the Purchaser has agreed
to reimburse Morgan Stanley for its reasonable out-of-pocket expenses, including
fees and expenses of its legal counsel, in connection with the provision of its
financial advisory services to the Purchaser and the Exchange Offer, and has
agreed to indemnify Morgan Stanley against certain liabilities and expenses
relating to, arising out of or in connection with its engagement, including
certain liabilities under the federal securities laws.
The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and First Chicago Trust Company of New York to act as the Exchange Agent
in connection with the Exchange Offer. The Information Agent may contact holders
of shares of Borden Common Stock by mail, telephone, telex, telegraph and
personal interviews and may request brokers, dealers and other nominee
shareholders to forward materials relating to the Exchange Offer to beneficial
owners. The Information Agent and the Exchange Agent each will receive
reasonable and customary compensation for their respective services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities in connection therewith, including certain
liabilities under the federal securities laws. Neither the Information Agent nor
the Exchange Agent has been retained to make solicitations or recommendations in
their respective roles as Information Agent or Exchange Agent.
49
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person for soliciting tenders of shares of Borden Common Stock
pursuant to the Exchange Offer. Brokers, dealers, commercial banks and trust
companies will, upon request, be reimbursed by the Purchaser for reasonable and
necessary costs and expenses incurred by them in forwarding materials to their
customers.
The consideration to be provided to Borden's shareholders pursuant to the
Exchange Offer and the Merger will be shares of Holdings Common Stock currently
owned by the Common Stock Partnerships. Certain fees and expenses of the
Partnership and the Purchaser in connection with the Transactions will be paid
by Borden pursuant to the Merger Agreement or by the Partnership and/or KKR,
from internally generated funds. See "Description of Merger Agreement and
Conditional Purchase/Option Agreement--Merger Agreement."
Pursuant to the Registration Rights Agreement, Holdings will pay certain
expenses incident to the registration of the Holdings Common Stock to be
exchanged for Borden Common Stock, including filing fees.
Pursuant to an Indemnification Agreement, each of Holdings, Borden and the
Partnership and the Purchaser have agreed to indemnify the other parties for
certain liabilities under the Securities Act and the Exchange Act with respect
to certain information furnished by such parties to the others in connection
with the preparation of the Registration Statement and this Offering
Circular/Prospectus.
CERTAIN REGULATORY APPROVALS AND LEGAL MATTERS
General
Except as set forth below, neither the Purchaser nor the Partnership is
aware of any governmental licenses or other regulatory permits that appear to be
material to the business of Borden and its subsidiaries, taken as a whole, that
might be adversely affected by the Purchaser's acquisition of Borden Shares (and
the indirect acquisition of the stock of Borden's subsidiaries) as contemplated
herein, or of any filings, approvals or other actions by or with any domestic
(federal or state), foreign or supranational governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of Borden Shares (or the indirect acquisition of the stock of
Borden's subsidiaries) by the Purchaser pursuant to the Exchange Offer as
contemplated herein. Should any such approval or other action be required, it is
the Purchaser's present intention to seek such approval or action. The Purchaser
does not presently intend, however, to delay the exchange of Borden Shares
tendered pursuant to the Exchange Offer pending the receipt of any such approval
or the taking of any such action (subject to the Purchaser's right to delay or
decline to exchange Borden Shares if any of the conditions described under
"--Certain Conditions of the Exchange Offer" shall have occurred). There can be
no assurance that any such approval or other action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the business of Borden, the Partnership or the Purchaser or that
certain parts of the businesses of Borden, the Partnership or the Purchaser
might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or other action or in
the event that such approval was not obtained or such other action was not
taken, any of which could cause the Purchaser to elect to terminate the Exchange
Offer without the exchange of the Borden Shares thereunder. In the Merger
Agreement, Borden has agreed to make any and all divestitures or undertakings
required by the FTC, the Antitrust Division or any other applicable governmental
entity in connection with the Transactions, which divestitures in each case
shall be reasonably acceptable to the Partnership and the Purchaser, provided
that certain conditions are met. See "Description of Merger Agreement and
Conditional Purchase/Option Agreement--Merger Agreement."
50
State Takeover Laws
A number of states (including New Jersey, where Borden is incorporated) have
adopted takeover laws and regulations which purport, to varying degrees, to be
applicable to attempts to acquire securities of corporations which are
incorporated in such states or which have, or whose business operations have
substantial economic effects in such states, or which have substantial assets,
security holders, principal executive offices or principal places of business
therein. However, in 1982, the Supreme Court of the United States, in Edgar v.
Mite Corp., invalidated on constitutional grounds the Illinois Business
Takeovers Act, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult, and the reasoning in
such decision is likely to apply to certain other state takeover statutes. In
1987, however, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of
the United States held that the State of Indiana could, as a matter of corporate
law and, in particular, those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without the prior approval of the remaining
stockholders, provided that such laws were applicable only under certain
conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal
district court in Oklahoma ruled that the Oklahoma takeover statutes were
unconstitutional insofar as they applied to corporations incorporated outside of
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in Grand
Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
Under New Jersey law, a publicly-traded New Jersey corporation with its
principal executive offices or significant business operations located in New
Jersey is prohibited from consummating a business combination with an interested
shareholder for a period of five years unless the business combination is
approved by the board of directors prior to the date the shareholder became
interested. In addition, after the five-year period a New Jersey corporation may
not engage in a business combination with an interested shareholder unless
either (i) the business combination is approved by the board of directors prior
to the date the shareholder became an interested shareholder or (ii) the
business combination is approved by the holders of two-thirds of the voting
stock not held by the interested shareholder or (iii) subject to certain other
requirements, the consideration per share received in the business combination
is at least equal to the greater of (x) the highest price per share paid by the
interested shareholder in the five years prior to either the announcement of the
business combination or the date at which the interested shareholder became
such, whichever results in a higher price, and (y) the market price on either
the date the business combination is announced or on the date the interested
shareholder first became such, whichever is higher. New Jersey law defines
"interested shareholder" as a person beneficially owning 10% or more of the
outstanding voting stock of the corporation. Because Borden's Board of Directors
approved the Merger Agreement and the transactions contemplated thereby prior to
the Purchaser attaining the status of an "interested shareholder," the Merger
may be effected prior to the expiration of the five year waiting period provided
in the New Jersey business combination statutes. See "Description of Merger
Agreement and Conditional Purchase/Option Agreement--Merger Agreement--Merger"
for a discussion of certain limitations on business combinations between the
Partnership (and its affiliates) and Borden under certain circumstances. See
"Comparison of Rights of Holders of Borden and Holdings Common Stock."
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Exchange Offer. The Purchaser
reserves the right to challenge the validity or applicability of any state law
allegedly applicable to the Exchange Offer and nothing in this Offering
Circular/Prospectus nor any action taken in connection herewith is intended as a
waiver of that right. In the event that any state takeover statute is found
applicable to the Exchange Offer, the
51
Purchaser might be unable to accept for exchange or exchange for Borden Shares
tendered pursuant to the Exchange Offer or be delayed in continuing or
consummating the Exchange Offer. In such case, the Purchaser may not be
obligated to accept for exchange, or exchange for, any Borden Shares tendered.
See "--Certain Conditions of the Exchange Offer."
Antitrust
Under the HSR Act and the rules that have been promulgated thereunder by the
FTC, certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division and the FTC and certain
waiting period requirements have been satisfied. The acquisition of Borden
Shares pursuant to the Exchange Offer is subject to such requirements.
The Partnership filed on September 19, 1994 with the FTC and the Antitrust
Division a Premerger Notification and Report Form in connection with the
exchange of Borden Shares pursuant to the Exchange Offer. Under the provisions
of the HSR Act applicable to the Exchange Offer, the exchange of Borden Shares
pursuant to the Exchange Offer may not be consummated until the expiration of a
30-calendar day waiting period following the filing by the Partnership.
Accordingly, the waiting period under the HSR Act applicable to such exchange of
Borden Shares pursuant to the Exchange Offer was to expire at 11:59 P.M., New
York City time, on October 19, 1994, unless extended by a request from the FTC
or the Antitrust Division for additional information or documentary material
prior to its expiration. On October 19, 1994, the FTC requested additional
information and documentary material from the Partnership and the Partnership
responded to such request on November 4, 1994. Accordingly, the waiting period
will expire at 11:59 P.M., New York City time, on the twentieth calendar day
after the date of substantial compliance by the Partnership with such request.
Thereafter, the waiting period could be extended only by court order. If the
acquisition of Borden Shares is delayed as a result thereof, the Exchange Offer
may, but need not, be extended and, in any event, the exchange of and exchange
for Borden Shares will be deferred until 20 days after the request is
substantially complied with. Only one extension of the waiting period pursuant
to a request for additional information is authorized by the HSR Act and the
rules promulgated thereunder, except by court order. Any such extension of the
waiting period will not give rise to any withdrawal rights not otherwise
provided for by applicable law. See "--Withdrawal Rights." Although Borden is
required to file certain information and documentary material with the Antitrust
Division and the FTC in connection with the Exchange Offer, neither Borden's
failure to make such filings nor a request from the Antitrust Division or the
FTC for additional information or documentary material made to Borden will
extend the waiting period.
On September 29, 1994, Borden filed a Premerger Notification and Report Form
in connection with the Exchange Offer and the other Transactions. Accordingly,
the waiting period under the HSR Act was to expire at 11:59 P.M., New York City
time, on October 19, 1994, subject to extension as described above with respect
to the Partnership's HSR Act filing. On October 19, 1994, Borden received a
request from the FTC for additional information and documentary material.
Accordingly, under the provisions of the HSR Act applicable to the Exchange
Offer, the exchange of Borden Shares pursuant to the Exchange Offer may not be
consummated until the expiration of a 20-calendar day waiting period following
the date of substantial compliance by Borden with such request, unless the
waiting period is sooner terminated by the FTC and the Antitrust Division.
Thereafter, the waiting period could be extended only by court order. Borden is
currently engaged in complying with this request. While Borden has a duty
substantially to comply with the request within a reasonable period of time, its
compliance does not affect the waiting period.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Borden
Shares by the Purchaser pursuant to the Exchange Offer. At any time before or
after the exchange by the Purchaser of Borden Shares pursuant to the Exchange
Offer, the FTC and the Antitrust Division could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the exchange of Borden Shares pursuant to the
Exchange Offer or seeking the divestiture of Borden Shares acquired by
52
the Purchaser or the divestiture of substantial assets of Holdings, the
Partnership, its subsidiaries or Borden. Private parties and state attorneys
general may also bring legal action under federal or state antitrust laws under
certain circumstances. Based upon an examination of publicly available
information relating to the businesses in which Holdings, the Partnership and
its subsidiaries and Borden and its subsidiaries are engaged, the Partnership
and the Purchaser believe that the Exchange Offer will not violate the antitrust
laws. Nevertheless, there can be no assurance that a challenge to the Exchange
Offer on antitrust grounds will not be made or, if such a challenge is made, of
the result. See "--Certain Conditions of the Exchange Offer" for a discussion of
certain conditions of the Exchange Offer, including conditions with respect to
litigation.
In the Merger Agreement, Borden has agreed to make any and all divestitures
or undertakings required by the FTC, the Antitrust Division or any other
applicable governmental entity in connection with the Transactions, which
divestitures in each case shall be reasonably acceptable to the Partnership and
the Purchaser, provided that certain conditions are met. See "Description of
Merger Agreement and Conditional Purchase/Option Agreement--Merger Agreement."
New Jersey Industrial Site Recovery Act
The New Jersey Industrial Site Recovery Act (formerly known as the
Environmental Cleanup Responsibility Act, or "ECRA") and the implementing
regulations thereunder (collectively "ISRA") subjects the "transfer" of an
"industrial establishment" in New Jersey to various requirements concerning the
identification of certain environmental matters and their remediation.
Requirements include the timely submission to the New Jersey Department of
Environmental Protection (the "NJDEP") of detailed information about
environmental matters at the industrial establishment. The NJDEP may also
require additional investigation of environmental conditions at the industrial
establishment, the development of an NJDEP-approved cleanup plan to address
environmental conditions, and the implementation of the plan, along with a
financial guarantee, such as a surety bond, self guarantee or a letter of
credit, of the implementation of the cleanup plan. Under specified conditions,
the NJDEP may defer actual implementation of the cleanup plan if the entity
acquiring control of the industrial establishment is certified to have the
financial ability to implement the plan.
Under ISRA, the acquisition of a controlling stock interest in a company
which is the owner or operator of an industrial establishment is generally a
"transfer" subject to ISRA.
Borden has certain facilities located in New Jersey. If these facilities are
industrial establishments subject to ISRA, the acquisition of more than a
majority of the outstanding Borden Shares by the Purchaser pursuant to the
Exchange Offer may constitute a "transfer" subject to ISRA.
After consummation of the Exchange Offer and after the Purchaser has
reviewed the nature and extent of Borden's operations in New Jersey and
consulted with counsel, the Purchaser will determine whether any of Borden's
properties are establishments subject to ISRA and, if so, the Purchaser will
comply, or seek to cause Borden to comply, with ISRA in the time frame set forth
in ISRA. See "--Certain Conditions of the Exchange Offer."
Connecticut Environmental Transfer Law
The Connecticut Transfer Act, Conn. Gen. Stat. Sec.Sec.22a-134 et seq. (the
"CTA"), requires that prior to the transfer of ownership of an establishment
subject to the CTA, the transferor must submit a "Negative Declaration" to the
transferee stating (i) that there has been no spillage or discharge of hazardous
waste on the property or that any such spillage or discharge has been cleaned up
according to the procedures and requirements of the Connecticut Department of
Environmental Protection (the "CDEP") and (ii) that any hazardous waste
remaining on-site is being managed in accordance with all applicable
regulations. If the transferor cannot submit a "Negative Declaration," the
transferee or another party to the transfer must certify to the Commissioner of
the CDEP that such transferee or other party will contain or otherwise mitigate
the effects of any spillage or discharge in accordance with the procedures and
timetable approved by the Commissioner pursuant to an order or consent decree.
53
Borden operates certain facilities in Connecticut. The Purchaser will seek to
determine whether any of Borden's properties are establishments subject to the
CTA and, if so, the Purchaser will comply, or seek to cause Borden to comply,
with the CTA as promptly as practicable following consummation of the Exchange
Offer. See "--Certain Conditions of the Exchange Offer."
EEA Merger Regulation
Borden conducts substantial operations within the European Economic Area
("EEA") and certain of the individual member states of the EEA. Regulation (EEC)
No. 4064/89 (the "Merger Regulation") and Article 57 of the EEA Agreement
require that notices of concentrations with a "Community dimension" be provided
to the European Commission for review and approval for compatibility with the
common market prior to being put into effect. The Exchange Offer would be deemed
to have a "Community dimension" if the combined aggregate worldwide consolidated
annual revenues of both the Partnership and Borden exceed ECU 5 billion, if the
Community-wide annual revenues of each of the Partnership and Borden exceed ECU
250 million, and if both the Partnership and Borden do not receive more than
two-thirds of their respective Community-wide revenues from one and the same
member state. The Purchaser believes that the Exchange Offer may be considered
to have a "Community dimension." If the Exchange Offer falls within the Merger
Regulation, the European Commission, as opposed to individual member states, has
exclusive jurisdiction to review it, subject to certain exceptions. The
Purchaser filed the required notifications on October 24, 1994.
Under the Merger Regulation, a concentration that meets the foregoing
criteria requires the filing of a notification in a prescribed form with the
European Commission. As indicated above, this filing was made on October 24,
1994. Transactions subject to the filing requirements of the Merger Regulation
are suspended automatically until three weeks after receipt of the notification.
The European Commission may extend the suspension period for such period as it
finds necessary to make a final decision on the legality of the transaction. In
the case of a public bid, the bidder may acquire shares of the target company
during the suspension period, but may not vote such shares until after the end
of the period unless the European Commission grants permission to do so in order
to maintain the full value of the bidder's investment.
The European Commission must decide whether to initiate proceedings within
one month after the receipt of the notification, subject to certain extensions
for holidays or if an individual member state has requested a referral of the
transaction (or part of it) to itself. If proceedings are initiated, the
European Commission must reach a decision in the proceedings within four months
of the commencement of the proceedings. If the European Commission fails to
reach a decision within either of these time periods the transaction will be
deemed to be compatible with the common market.
If the European Commission declares the Exchange Offer to be not compatible
with the common market, it may prevent the consummation of the transaction,
order a divestiture if the transaction has already been consummated or impose
conditions or other obligations. In the event that the transaction is found not
to be subject to the Merger Regulation, various national merger control regimes
of the member states of the EEA may apply, resulting in the possibility that
approvals may be necessary from the various national authorities.
There can be no assurance that a challenge to the Exchange Offer will not be
made pursuant to the Merger Regulation or, alternatively, pursuant to the merger
regulations of one or more of the various member states, or, if such a challenge
is made, what the outcome will be. See "--Certain Conditions of the Exchange
Offer."
Investment Canada Act
The Investment Canada Act (the "ICA") requires certain "non-Canadian"
persons (as defined in the ICA) that wish to acquire "control" (as defined in
the ICA) of a "Canadian business" (as defined in the ICA) to file either a
notification or an application for review with a Canadian governmental agency
known as Investment Canada. Whether such an acquisition is reviewable or only
requires notification
54
depends on various factors, including the size of the parties and the nature of
the Canadian business being acquired. The Exchange Offer and Merger only require
notification under the ICA and the Purchaser intends to submit a notice within
the requisite time period. See "--Certain Conditions of the Exchange Offer."
Canadian Pre-Merger Notification Requirements
Certain provisions of Canada's Competition Act require pre-notification to
the Director of Investigation and Research appointed under the Competition Act
(the "Canadian Director") of significant corporate transactions, such as the
acquisition of a large percentage of the stock of a public company which has
Canadian operations, or a merger or consolidation involving such an entity.
Pre-notification is generally required with respect to transactions in which the
parties to the transactions and their affiliates have assets in Canada, or
annual gross revenues from sales in, from or into Canada, in excess of Cdn. $400
million and which involve the direct or indirect acquisition of an operating
business, the value of the assets of which, or the gross revenues from sales in
or from Canada generated from these assets, exceed Cdn. $35 million per year.
For transactions subject to the notification requirements, notice must be given
seven or 21 days prior to the completion of the transaction depending on the
information provided to the Canadian Director. The Canadian Director may waive
the waiting period. After the applicable waiting period expires or is waived,
the transaction may be completed. If the Canadian Director determines that the
proposed transaction prevents or lessens, or is reasonably likely to prevent or
lessen, competition substantially in a definable market, the Canadian Director
may apply to the Competition Tribunal, a special purpose Canadian tribunal, to,
among other things, require the disposition of the Canadian assets acquired in
such transaction. The Purchaser has filed the required notice and has provided
information with respect to its proposed acquisition with the Canadian Director
and has observed the applicable waiting period. In addition, the Purchaser has
applied to the Canadian Director for an advance ruling certificate to the effect
that he would not have sufficient grounds on which to apply to the Competition
Tribunal for a review of the Exchange Offer or Merger on the basis that it would
prevent or lessen, or be likely to prevent or lessen, competition substantially.
See "--Certain Conditions of the Exchange Offer."
Other Foreign Approvals
Borden also owns property and conducts business in a number of other foreign
countries and jurisdictions. In connection with the acquisition of the Borden
Shares pursuant to the Exchange Offer, the laws of certain of those foreign
countries and jurisdictions, including, without limitation, Australia, may
require the filing of information with, or the obtaining of the approval of,
governmental authorities in such countries and jurisdictions. The governments in
such countries and jurisdictions might attempt to impose additional conditions
on Borden's operations conducted in such countries and jurisdictions as a result
of the acquisition of the Borden Shares pursuant to the Exchange Offer. There
can be no assurance that the Purchaser will be able to cause Borden or its
subsidiaries to satisfy or comply with such laws or that compliance or
non-compliance will not have adverse consequences for Borden or any subsidiary
after purchase of the Borden Shares pursuant to the Exchange Offer.
55
PENDING LITIGATION
Litigation Against Holdings. Six putative class and derivative actions have
been filed by purported Holdings shareholders in the Court of Chancery of the
State of Delaware in and for New Castle County against the members of the
Holdings Board of Directors, KKR, and Holdings challenging the proposed
acquisition by Holdings of an interest in Borden. These actions, encaptioned
Mushala v. Greeniaus, et al., C.A. No. 13738; Leffler v. Greeniaus, et al., C.A.
No. 13751; Schreiber v. Greeniaus, et al., C.A. No. 13749; Malloy v. Greeniaus,
et al., C.A. No. 13748; Schwartz v. Greeniaus, et al., C.A. No. 13758; and
Alessi v. Greeniaus, et al., C.A. No. 13750 (collectively, the "Class and
Derivative Complaints"), allege, among other things, that the "agreement for
[Holdings] to purchase a 20% stake in Borden is manifestly unfair" to Holdings'
shareholders and constitutes a breach of fiduciary duty in that (i) the price
paid by Holdings for its Borden stake is inflated because it includes a "control
premium" and (ii) the issuance of "new [Holdings] common stock will
substantially dilute the cash value and shareholdings of the non-controlling
public stockholders of [Holdings]." The Class and Derivative Complaints also
allege that the proposed acquisition of a stake in Borden "serves no corporate
interest of [Holdings], but rather serves to facilitate KKR's acquisition of
Borden while ensuring KKR's continued control of [Holdings]," and constitutes
corporate waste. The Class and Derivative Complaints seek preliminary and
permanent relief, including declaratory relief, a preliminary injunction,
rescission, damages and attorneys' fees. The plaintiff in the Mushala case has
filed a First Request for Production of Documents.
An additional putative class and derivative action, encaptioned Debora v.
Greeniaus, et al., C.A. No. 13755, has also been brought in the Court of
Chancery of the State of Delaware in and for New Castle County by a purported
holder of Holdings' Series A Preferred Stock. The Debora action names the same
defendants and contains the same allegations and prayers for relief as the Class
and Derivative Complaints.
A putative shareholder's derivative complaint, encaptioned Shingala v.
Harper, et al., C.A. No. 13739, has been filed in the Court of Chancery of the
State of Delaware in and for New Castle County by a putative Holdings
shareholder against Borden, Holdings and members of the Board of Directors of
Holdings alleging that the proposed acquisition by Holdings of a stake in Borden
constitutes a breach of the fiduciary duty of loyalty of Holdings' Board of
Directors. The Shingala complaint alleges that the purpose of the Borden
transaction is "solely to benefit KKR," "serves no legitimate business purpose
of [Holdings]" and that Holdings "has been required to participate in the
transaction" due to "KKR's domination and effective control of the Holdings
Board." The Shingala complaint further alleges that the investment by Holdings
in Borden "makes it less likely that Holdings will be in position to restructure
itself to divide its tobacco and food operations" to the "detriment" of
Holdings, and that the price paid by Holdings for its Borden shares is inflated.
The Shingala complaint seeks an injunction of the Borden transaction, damages,
and attorneys' fees.
An additional putative shareholder's derivative complaint, encaptioned Kahn
v. Kohlberg Kravis Roberts & Co., et al., C.A. No. 13767, has also been filed in
the Court of Chancery of the State of Delaware in and for New Castle County by a
purported holder of common stock and depositary shares representing 1/4 share of
Series A Preferred Stock of Holdings. This action is against KKR, KKR
Associates, Holdings and members of the Holdings Board of Directors who are also
directors of KKR and alleges, among other things, breach of an investment
banking services contract between KKR and Holdings, breach of fiduciary duty and
waste of corporate assets. The Kahn complaint alleges that "the right to
purchase Borden was a corporate opportunity" belonging to Holdings and the
"failure of KKR and the KKR directors to offer the above described corporate
opportunity to [Holdings] constitutes a violation of fiduciary duty." The
complaint further alleges that KKR was required to acquire Borden for Holdings
"[b]y reason of the Services Contract and KKR's fiduciary duty to [Holdings]
resulting therefrom and from KKR's position as the Company's management,
financial and investment adviser"
56
and therefore KKR violated "contractual and fiduciary duties" to Holdings by
failing to offer Borden to Holdings. The complaint seeks declaratory relief, an
accounting, damages, expenses and attorneys' fees.
On October 25, 1994, the Court of Chancery signed an order consolidating the
nine actions described above for all purposes.
Holdings believes that the ultimate outcome of the litigation described
above should not have a material adverse effect on Holdings' financial condition
or results of operations.
Litigation Against Borden. Eleven putative class actions have been filed by
purported Borden shareholders in the New Jersey and Ohio state courts against
Borden, members of its Board and, in two of the cases, KKR. These actions,
encaptioned Kohnstamm v. Borden, Inc., et al., C-257-94; Hartman v. Borden,
Inc., et al., 94-CV-H09-6306; Jaroslawicz v. Borden, Inc., et al.,
94-CV-H09-6654; Lubin v. Borden, Inc., et al.; Weiss v. Borden, Inc., et al.;
Stepak v. Borden, Inc., et al.; Strougo v. Borden, Inc., et al.; Krim v. Borden,
Inc., et al.; Peterson v. Borden, Inc., et al.; Marcus v. Borden, Inc., et al.;
and Dwyer v. Borden, Inc., et al. (collectively, the "Class Complaints"),
allege, among other things, that Borden is being sold at too low a price, and
that Borden's directors have breached their fiduciary duties by failing to
"auction" Borden and by "locking up" a transaction that is not in the best
interests of shareholders. KKR is alleged to have aided and abetted these
breaches of fiduciary duty. The Class Complaints seek preliminary and permanent
relief, including a preliminary injunction, damages in an unspecified amount and
attorneys' fees.
The parties have agreed to consolidate all pending New Jersey actions into
one action in Mercer County under Docket No. C-139-94. The Ohio cases, Hartman
v. Borden, Inc., et al., 94-CV-HO9-6306 and Jaroslawicz v. Borden, Inc., et al.,
94 CV-H09-6654, have been stayed pursuant to a court order pending resolution of
the New Jersey consolidated action.
Borden has also been named as a defendant in a putative shareholder
derivative action, encaptioned Shingala v. Harper, et al., C.A. No. 13739, filed
against Holdings in the Court of Chancery of the State of Delaware. See
"--Pending Litigation--Litigation Against Holdings."
Borden believes that the ultimate outcome of the litigation described above
should not have a material adverse effect on Borden's financial condition or
results of operations.
57
DESCRIPTION OF MERGER AGREEMENT AND
CONDITIONAL PURCHASE/OPTION AGREEMENT
The following are summaries of certain provisions of the Merger Agreement
and the Conditional Purchase/Option Agreement, which are filed as exhibits to
the Registration Statement of which this Offering Circular/Prospectus is a part
and are incorporated herein by reference. Such summaries include all material
terms of such agreements but are not necessarily complete and are qualified in
their entirety by reference to such exhibits.
MERGER AGREEMENT
Exchange Offer. Pursuant to the Merger Agreement, on the terms and subject
to the conditions described herein under "--The Exchange Offer," the Partnership
and the Purchaser have agreed to commence the Exchange Offer as soon as
reasonably practicable following the effectiveness of the Registration Statement
of which this Offering Circular/Prospectus is a part. Without the written
consent of Borden, the Purchaser may not decrease the number of Borden Shares
being sought in the Exchange Offer, change the form of consideration payable in
the Exchange Offer (other than by adding consideration), add additional
conditions to the Exchange Offer or make any other change in the terms or
conditions of the Exchange Offer which is adverse to the holders of Borden
Shares, except that a waiver by the Purchaser of any condition in whole or in
part at any time and from time to time in its discretion will not be deemed to
be materially adverse to any holder of Borden Shares. If the Purchaser shall
have exercised the Option in whole or in part prior to the termination of the
Exchange Offer, the Purchaser may not waive the Minimum Condition. The Purchaser
has agreed with Borden that upon the request of Borden (and without limiting the
number of times that the Purchaser may extend the Exchange Offer, or the total
number of days for which the Exchange Offer may be extended), the Purchaser will
extend the Exchange Offer, one or more times, for an aggregate of not more than
twenty business days. See "The Exchange Offer--Certain Conditions of the
Exchange Offer."
In accordance with the Merger Agreement, Borden has approved of and
consented to the Exchange Offer and represented and warranted that (a) its Board
of Directors has (i) determined that the Merger Agreement and the Conditional
Purchase/Option Agreement and the transactions contemplated thereby, including
the Exchange Offer and the Merger, taken together, are fair to the shareholders
of Borden, and resolved to recommend that holders of Borden Shares (A) accept
the Exchange Offer, (B) tender their Borden Shares to the Purchaser, and (C) if
required by applicable law, approve and adopt the Merger Agreement and the
Merger (collectively, the "Recommendations") and (ii) approved the Merger
Agreement and the Conditional Purchase/Option Agreement and the transactions
contemplated thereby, and that such approval constitutes approval of the Merger
Agreement and the Conditional Purchase/Option Agreement and the transactions
contemplated thereby for purposes of Sections 14A:10A-4 and 14A:10A-5 of the
NJBCA and Article VIII of Borden's Restated Certificate of Incorporation (the
"Charter") (relating to the approval requirements for certain business
combinations) and renders inapplicable certain change in control provisions of
certain debt securities and loan documents of Borden and its subsidiaries and
(b) Borden's financial advisors have delivered to the Board of Directors of
Borden their respective written opinions to the effect that, as of September 22,
1994, the consideration to be received by holders of Borden Shares pursuant to
each of the Exchange Offer and the Merger was fair to such holders from a
financial point of view. Borden has agreed, subject to certain exceptions
described below under "--No Solicitation," not to change the Recommendations
unless the average of the average of the high and the low sales prices of the
Holdings Common Stock as reported on the NYSE Composite Tape for the Valuation
Period is less than the price per share that would yield an Exchange Ratio of
2.375 or less (without giving effect to the limitation regarding the minimum and
maximum Exchange Ratio pursuant to the definition thereof). Borden will not have
any right to terminate the Merger Agreement as a result of any such change in
the Recommendations and
58
notwithstanding any such change in the Recommendations, Borden will continue to
be bound by its representations and warranties and covenants contained in the
Merger Agreement (except representations and warranties and covenants with
respect to the Recommendations), including, without limitation, those with
respect to the Rights Agreement, antitrust approvals and divestitures (provided
that following receipt of such approvals the Purchaser purchases at least
28,138,000 Borden Shares), Article VIII of the Charter and Sections 14A:10A-4
and 14A:10A-5 of the NJBCA.
According to the Merger Agreement, to the knowledge of Borden after due
inquiry, all the directors of Borden intend to tender their Borden Shares
pursuant to the Exchange Offer or to vote their Borden Shares in favor of
approval and adoption of the Merger and the Merger Agreement at the
shareholders' meeting in respect thereof, if any.
The Purchaser has reserved the right to transfer or assign, in whole or from
time to time in part, to one or more affiliates, the right to exchange all or
any portion of the Borden Shares tendered pursuant to the Exchange Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations pursuant to the Exchange Offer and will in no way prejudice the
rights of tendering shareholders to exchange for Borden Shares validly tendered
and accepted for exchange pursuant to the Exchange Offer. According to the
Merger Agreement, it is presently contemplated that the right of the Purchaser
to exchange for shares of Borden Common Stock pursuant to the Exchange Offer and
the right of the Purchaser to exercise the Option will be assigned to the
Partnership or to a direct or indirect wholly owned subsidiary of the
Partnership, which may, in any such case, act for itself or as agent for one or
both of the Common Stock Partnerships, as the case may be.
The Merger Agreement provides that, if requested by the Partnership, Borden
will, following the acceptance for exchange of the Borden Shares to be exchanged
pursuant to the Exchange Offer and/or the purchase of the Option Shares in
accordance with the Conditional Purchase/Option Agreement, and from time to time
thereafter, take all actions necessary to cause the Applicable Percentage of
directors (and of members of each committee of the Board of Directors) (rounded
in each case to the next highest director or member) of Borden selected by the
Partnership to consist of persons designated or elected by the Partnership
(whether, at the election of Borden, by means of increasing the size of the
board of directors or seeking the resignation of directors and causing the
Partnership's designees to be elected); provided that, if the Purchaser has
acquired at least 28,138,000 Borden Shares, the Applicable Percentage shall not
be less than 33 1/3%.
Following the election or appointment of the Partnership's designees as
described in the preceding paragraph and prior to the effective time of the
Merger, any amendment by Borden or termination by Borden of the Merger Agreement
or the Conditional Purchase/Option Agreement, extension by Borden for the
performance or waiver of the obligations, conditions or other acts of the
Partnership or the Purchaser or waiver by Borden of its rights under the Merger
Agreement or the Conditional Purchase/Option Agreement, will require the
concurrence of a majority of directors of Borden then in office who are not
affiliated with the Partnership or the Purchaser or selected by the Partnership
for appointment or election to the board of directors of Borden ("Independent
Borden Directors").
Merger. Pursuant to the Merger Agreement, if approval of Borden's
shareholders is required by applicable law in order to consummate the Merger,
provided that the Minimum Condition is satisfied without being reduced or
waived, following the acceptance for exchange of Borden Shares pursuant to the
Exchange Offer, Borden, acting through its Board of Directors, will, in
accordance with applicable law, as soon as practicable following the expiration
or termination of the Exchange Offer: duly call, give notice of, convene and,
subject to the right of the parties to delay a special meeting under certain
circumstances described in the Merger Agreement, hold the Borden Shareholders'
Meeting for the purpose of considering and taking action upon the Merger
Agreement and the Merger and use its best efforts to obtain the necessary
approval by its shareholders of the Merger Agreement and the transactions
contemplated thereby, including the Merger.
59
In the Merger Agreement, Borden has agreed that (a) its obligations
described in the preceding paragraph (including, without limitation, the
obligation to submit the Merger Agreement and the Merger to a vote of Borden's
shareholders) will not be affected by the withdrawal or modification of the
Recommendations (but there shall be no obligation of the Board of Directors of
Borden to continue the Recommendation that shareholders approve and adopt the
Merger Agreement and the Merger) and (b) (i) if the Merger is not approved by
the shareholders of Borden following the acceptance for exchange of Borden
Shares pursuant to the Exchange Offer or the purchase of Borden Shares pursuant
to the Conditional Purchase/Option Agreement or (ii) if the Merger is not
submitted to the shareholders of Borden but the Purchaser has acquired at least
28,138,000 Borden Shares, the approval of the transactions contemplated by the
Merger Agreement, including the Exchange Offer and the Merger, by the Board of
Directors of Borden shall constitute, solely for the purposes of Sections
14A:10A-4 and 14A:10A-5 of the NJBCA and, to the extent that there are no
Continuing Directors (as defined in the Charter), Article VIII of the Charter,
an approval of any future "Business Combination" (as defined in Section
14A:10A-3 of the NJBCA and Article VIII of the Charter) between Borden and the
Partnership or any affiliate thereof, provided that (x) such "Business
Combination" is approved by a majority of the Independent Borden Directors and
(y) if appropriate, Borden shall have received the opinion of an investment
banking firm selected by the Independent Directors that such "Business
Combination" is fair to Borden's shareholders from a financial point of view (an
"Excepted Future Transaction").
At the Borden Shareholders' Meeting, each of the Partnership and the
Purchaser has agreed that it will vote, or cause to be voted, all Borden Shares
acquired in the Exchange Offer or otherwise beneficially owned by it or any of
its respective subsidiaries in favor of the approval and adoption of the Merger
Agreement and the transactions contemplated thereby, including the Merger.
Under the Merger Agreement, in the event that the Partnership and the
Purchaser, or any other direct or indirect subsidiary of the Partnership
acquires at least 90% of the outstanding Borden Shares, the parties have agreed
to take all necessary or appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Exchange Offer
without a meeting of shareholders of Borden, in accordance with applicable
provisions of the NJBCA.
Upon the effective time of the Merger, the Purchaser will be merged with and
into Borden, and Borden will continue as the surviving corporation in the Merger
under the name "Borden, Inc."
The directors of the Purchaser at the effective time of the Merger will be
the directors of the surviving corporation, each to hold office in accordance
with the restated certificate of incorporation and by-laws of the surviving
corporation and until the earlier of his or her resignation or removal or until
his or her successor is duly elected and qualified, as the case may be. The
officers of Borden at the effective time of the Merger will be the officers of
the surviving corporation, each to hold office in accordance with the restated
certificate of incorporation and by-laws of the surviving corporation and until
the earlier of his or her resignation or removal or until his or her successor
is duly appointed and qualified, as the case may be.
By virtue of the Merger and without any action on the part of the holder of
any shares of Borden Common Stock or any shares of capital stock of the
Purchaser: (a) each share of common stock of the Purchaser issued and
outstanding immediately prior to the effective time of the Merger will be
converted into a number of shares of common stock, par value $.01 per share, of
the surviving corporation equal to one one-thousandth of the total number of
outstanding shares of Borden Common Stock immediately prior to the Merger, which
will be all of the issued and outstanding capital stock of the surviving
corporation; (b) each share of Borden Common Stock that is owned by Borden or by
any subsidiary of Borden and each share of Borden Common Stock that is owned by
the Partnership, the Purchaser or any other subsidiary of the Partnership will
automatically be cancelled and retired and cease to exist, and no cash, Holdings
Common Stock or other consideration will be delivered or deliverable in exchange
therefor; and (c) each issued and outstanding share of Borden Common Stock
60
will be converted into the right to receive a number of fully paid and
nonassessable shares of Holdings Common Stock equal to the number of fully paid
and nonassessable shares of Holdings Common Stock that were delivered by the
Purchaser with respect to each share of Borden Common Stock that was validly
tendered and not properly withdrawn and accepted for exchange pursuant to the
terms of the Exchange Offer.
The Merger Agreement provides that, as of the effective time of the Merger,
each holder of a then outstanding option to purchase Borden Common Stock (a
"Stock Option") shall receive with respect to each share subject to such Stock
Option an amount in cash equal to the excess, if any, of (i) the product of the
final Exchange Ratio and the average of the average of the high and the low
sales prices of the Holdings Common Stock as reported on each of the ten
consecutive trading days immediately preceding the effective time of the Merger
over (ii) the per share exercise price of such Stock Option, and Borden shall
cause the surrender and cancellation of each Stock Option (and any related stock
appreciation right) with respect to which a payment by Borden is made. Based
upon the closing stock price of $6 5/8 for the Holdings Common Stock on November
7, 1994, the estimated aggregate net payment to holders of Borden Stock Options
would be $2,722,928 million. With respect to Stock Options not so surrendered
and cancelled, such Stock Options shall, if not previously terminated or expired
in accordance with their terms, terminate upon the grantee leaving Borden except
upon such grantee's death, Disability (as defined for purposes of the plans
under which the Stock Options were granted) or retirement at or after age
sixty-five (or such earlier age as the Purchaser may expressly agree) and except
that, to the extent provided under any such existing Stock Option, if the
grantee is terminated by Borden without Cause (as defined for purposes of the
plans under which the Stock Options were granted) within two years following a
Change in Control (as defined for purposes of the plans under which the Stock
Options were granted) of Borden, the grantee shall have a period of ninety days
following such termination within which to exercise such Stock Option. No
employee who has been previously granted a Stock Option or stock appreciation
right will be approved for retirement for purposes of any plan or agreement
under which such Stock Option or right has been granted without the express
consent of the Purchaser. The Purchaser and Borden have agreed to continue to
discuss the manner in which outstanding Stock Options shall be treated after the
Merger is consummated. According to the Merger Agreement, as of September 23,
1994, there were outstanding Stock Options with respect to 7,357,473 Borden
Shares. Of these, Stock Options with respect to 1,408,326 Borden Shares, with an
average exercise price of $12.31, were exercisable at prices of $14.25 or less.
Under the Merger Agreement, Borden has agreed to take all steps necessary so
that no participant in any employee plans, programs or arrangements of Borden
will have any right to acquire or receive any Borden Common Stock or other
equity interest in Borden on or after the effective time of the Merger other
than in connection with the exercise of Stock Options outstanding on the date of
the Merger Agreement which have not been cancelled as described in the preceding
paragraph. On or prior to the effective time of the Merger, Borden has agreed to
amend each of its (and cause the amendment of each of its affiliate's) qualified
defined contribution plans to eliminate any investment in Borden Common Stock
after such effective time. In addition, Borden has agreed to cause an amendment
of each of its employee plans, programs and arrangements pursuant to which an
employee may be entitled to receive Borden Common Stock (each a "Stock Plan") to
provide that any employee entitled to receive Borden Common Stock in respect of
previously deferred bonuses or compensation will receive instead cash equal to
the product of (i) the final Exchange Ratio multiplied by the average of the
average of the high and the low closing sales prices of the Holdings Common
Stock as reported on each of the ten consecutive trading days immediately
preceding the effective time of the Merger and (ii) the number of shares of
Borden Common Stock so deferred, plus interest equal to the rate otherwise
credited on deferred amounts under the applicable plans or, if no such rate is
credited, the prime rate established by Chemical Bank, from time to time on such
deferred bonuses or compensation from the effective time of the Merger to the
date of distribution.
61
Pursuant to the Merger Agreement, subject to the terms of any Borden plan,
any merger consideration paid in respect of restricted shares of Borden Common
Stock held by any employee or former employee of Borden or any of its affiliates
will remain restricted and subject to the same terms and conditions imposed on
such restricted shares.
Exchange of Certificates and Exchange Procedures in the Merger. Pursuant to
the Merger Agreement, at or prior to the effective time, the Purchaser shall
deposit with or for the account of a bank or trust company designated by the
Partnership, which shall be reasonably satisfactory to Borden (the "Merger
Exchange Agent"), for the benefit of the holders of shares of Borden Common
Stock, for exchange, the consideration to be paid in the Merger in respect of
each Borden Share outstanding immediately prior to the effective time (other
than Borden Shares to be cancelled and retired in connection with the Merger).
As soon as reasonably practicable after the effective time, the Purchaser
will instruct the Merger Exchange Agent to mail to each holder of record
immediately prior to the effective time (other than holders of Borden Shares to
be cancelled and retired in connection with the Merger) of a Share Certificate
or Share Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Share Certificates
shall pass, only upon proper delivery of the Share Certificates to the Merger
Exchange Agent and shall be in such form and have such other provisions as the
Partnership or the Purchaser may reasonably specify) (the "Merger Letter of
Transmittal") and (ii) instructions for use in effecting the surrender of the
Share Certificates in exchange for Holdings Common Stock. Upon surrender to the
Merger Exchange Agent of Share Certificates, together with such Merger Letter of
Transmittal duly executed and any other required documents, and acceptance
thereof by the Merger Exchange Agent, each holder of a Share Certificate shall
be entitled to a certificate or certificates representing the number of full
shares of Holdings Common Stock into which the aggregate number of shares of
Borden Common Stock previously represented by such Share Certificate surrendered
shall have been converted pursuant to the Merger Agreement. The Merger Exchange
Agent shall accept such Share Certificates upon compliance with such reasonable
terms and conditions as the Merger Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. After the
effective time, there shall be no further transfer on the books and records of
Borden or its transfer agent of Share Certificates and if such Share
Certificates are presented to Borden for transfer, they shall be cancelled
against delivery of certificates for Holdings Common Stock as described herein.
If any certificate for such Holdings Common Stock is to be issued in a name
other than that in which the Share Certificate surrendered for exchange is
registered, it shall be a condition of such exchange that the Share Certificate
so surrendered shall be properly endorsed, with signature guaranteed, or
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Purchaser or its transfer agent any transfer or other
taxes required by reason of the issuance of certificates for such Holdings
Common Stock in a name other than that of the registered holder of the Share
Certificate surrendered, or establish to the satisfaction of the Purchaser or
its transfer agent that such tax has been paid or is not applicable. Until
surrendered as described herein, each Share Certificate shall be deemed at any
time after the effective time to represent only the right to receive upon such
surrender the merger consideration.
No certificates or scrip representing fractional shares of Holdings Common
Stock shall be issued upon the surrender for exchange of Share Certificates, and
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Holdings; and notwithstanding any other provision
of the Merger Agreement, each holder of shares of Borden Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of Holdings Common Stock (after taking into account all
shares of Borden Common Stock delivered by such holder) shall receive, in lieu
thereof, a cash payment (without interest) representing such holder's
proportionate interest in the net proceeds from the sale by the Merger Exchange
Agent (following the deduction of applicable transaction costs of third parties
other than the Merger Exchange Agent,
62
Borden, the Purchaser or affiliates of any of the foregoing), on behalf of all
such holders, of the shares (the "Excess Shares") of Holdings Common Stock
representing all such fractions. Such sale shall be made as soon as practicable
after the effective time.
No dividends or other distributions with respect to Holdings Common Stock
with a record date after the effective time shall be paid to the holder of any
unsurrendered Share Certificate for shares of Borden Common Stock with respect
to the shares of Holdings Common Stock represented thereby, and no cash payment
in lieu of fractional shares shall be paid to any such holder as described
above, until the surrender of such Share Certificate as described herein.
Subject to the effect of applicable laws, following surrender of any such Share
Certificate, there shall be delivered to the holder of such Share Certificate a
certificate representing whole shares of Holdings Common Stock issued in
exchange therefor and, without interest, (i) at the time of such surrender or as
promptly after the sale of the Excess Shares as practicable, the amount of any
cash payable in lieu of a fractional share of Holdings Common Stock to which
such holder is entitled as described herein and the amount of dividends or other
distributions with a record date after the effective time theretofore paid with
respect to such whole shares of Holdings Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions payable
with respect to such whole shares of Holdings Common Stock with a record date
after the effective time but prior to such surrender and a payment date
subsequent to such surrender. In no event shall the persons entitled to receive
such dividends or other distributions be entitled to receive interest on such
dividends or other distributions.
All shares of Holdings Common Stock delivered and cash paid upon the
surrender for exchange of Share Certificates which represented shares of Borden
Common Stock (including any cash paid in respect of fractional shares of
Holdings Common Stock) shall be deemed to have been delivered (and paid) in full
satisfaction of all rights pertaining to the shares of Borden Common Stock
theretofore represented by such Share Certificates, subject, however, to the
surviving corporation's obligation, with respect to shares of Borden Common
Stock, to pay any dividends or make any other distributions with a record date
prior to the effective time which may have been declared or made by Borden on
such shares of Borden Common Stock prior to the date of the Merger Agreement and
which remain unpaid at the effective time.
Any portion of the consideration in the Merger deposited with the Merger
Exchange Agent (the "Exchange Fund") which remains undistributed to the holders
of the certificates representing shares of Borden Common Stock for nine months
after the effective time shall be delivered to the Partnership, upon demand, and
any holders of shares of Borden Common Stock who have not theretofore complied
with the foregoing exchange procedures shall thereafter look only to the
Partnership and only as general creditors thereof for payment of their claim for
Holdings Common Stock (or any security or consideration into which Holdings
Common Stock is converted) and any cash in lieu of fractional shares of Holdings
Common Stock and shall look only to the Partnership and only as general
creditors thereof for payment of any dividends or distributions with respect to
Holdings Common Stock to which such holders may be entitled.
None of the Partnership, the Purchaser, Holdings, Borden or the Merger
Exchange Agent shall be liable to any person in respect of any shares of
Holdings Common Stock (or dividends or distributions with respect thereto) or
cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Share Certificates
which represented shares of Borden Common Stock shall not have been surrendered
prior to five years after the effective time (or immediately prior to such
earlier date on which any shares of Holdings Common Stock, any cash in lieu of
fractional shares of Holdings Common Stock or any dividends or distributions
with respect to Holdings Common Stock in respect of such Share Certificate would
otherwise escheat to or become the property of any governmental entity), any
such shares, cash, dividends or distributions in
63
respect of such certificate shall, to the extent permitted by applicable law,
become the property of the Partnership, free and clear of all claims or interest
of any person previously entitled thereto.
The Merger Exchange Agent shall invest any cash included in the Exchange
Fund, as directed by the Partnership, on a daily basis. Any interest and other
income resulting from such investments shall be paid to the Partnership.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of Borden relating, with respect to Borden and
its subsidiaries, to, among other things, (a) organization, standing and similar
corporate matters; (b) certain subsidiaries; (c) Borden's capital structure; (d)
the authorization, execution, delivery, performance and enforceability of the
Merger Agreement, the Conditional Purchase/Option Agreement and related matters;
(e) documents filed by Borden with the Commission and the accuracy of
information contained therein; (f) the accuracy of information supplied by
Borden in connection with this Offering Circular/Prospectus and other documents
filed with the Commission in connection with the Exchange Offer and the Merger;
(g) the absence of certain changes or events since the date of the most recent
audited financial statements filed with the Commission, including material
adverse changes with respect to Borden; (h) benefit plans and other matters
relating to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and employment matters; (i) filing of tax returns and payment of
taxes; (j) the inapplicability of provisions of Borden's Charter and the NJBCA
relating to business combinations with interested stockholders and state
takeover or similar statutes, to the Merger Agreement, the Conditional
Purchase/Option Agreement and related agreements and transactions; (k)
environmental matters; (l) brokers' fees and expenses; (m) no material conflicts
with laws or agreements of Borden and its subsidiaries; (n) any required vote of
shareholders to approve the Merger Agreement, the Merger and the other
transactions contemplated thereby and the Conditional Purchase/Option Agreement
and the transactions contemplated thereby; (o) certain matters relating to the
Rights; and (p) certain resolutions of Borden's Board of Directors relating to
the declaration and payment of future dividends.
The Merger Agreement also contains customary representations and warranties
of the Purchaser and the Partnership relating to, among other things, (a)
organization, standing and similar corporate matters with respect to the
Purchaser and Holdings; (b) subsidiaries of the Purchaser and Holdings; (c) the
Purchaser's and Holdings' capital structures; (d) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement and the
Conditional Purchase/Option Agreement and related matters with respect to the
Purchaser, the Partnership and Holdings, as applicable; (e) documents filed by
Holdings with the Commission and the accuracy of information contained therein;
(f) the accuracy of information supplied by the Partnership or the Purchaser in
connection with this Offering Circular/Prospectus and other documents filed with
the Commission in connection with the Exchange Offer and the Merger; (g)
brokers' fees and expenses; (h) interim operations of the Purchaser; and (i) the
absence of certain changes or events since the most recent financial statements
filed with the Commission, including material adverse changes with respect to
Holdings.
In addition, the Merger Agreement contains representations of the
Partnership relating to, among other things, (a) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters; (b) the Partnership's good title to the Holdings Common Stock to be
transferred pursuant to the Merger Agreement and the Conditional Purchase/Option
Agreement, and the listing thereof on the NYSE; and (c) no material conflicts
with laws or agreements of the Partnership.
64
Covenants Regarding Conduct of Business. Except as contemplated by the
Merger Agreement, during the period from the date of the Merger Agreement to the
date on which a majority of the Board of Directors of Borden consist of
designees or representatives of the Partnership, Borden, with respect to itself
and each of its subsidiaries, has agreed in the Merger Agreement to conduct its
operations according to its ordinary course of business consistent with past
practice and to use its best efforts to preserve intact its business
organization, to keep available the services of its current officers and
employees and to preserve existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relationships with it to the end that its goodwill and ongoing businesses will
be unimpaired at the date on which a majority of the Board of Directors of
Borden consist of designees or representatives of the Partnership. Without
limiting the generality of the foregoing, and except as otherwise contemplated
by the Merger Agreement, or as required by law or contract existing on the date
of the Merger Agreement, prior to the date on which a majority of the Board of
Directors of Borden consists of designees or representatives of the Partnership,
Borden has agreed that neither it nor any of its subsidiaries will, without the
prior written consent of the Partnership: (i) (x) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its capital
stock (except (A) certain dividends and distributions by subsidiaries of Borden
to their respective parents and (B) that Borden may continue the declaration and
payment of regular quarterly cash dividends not in excess of $.01 per share on
the shares of Borden Common Stock (with usual record and payment dates and in
accordance with its past dividend policy)), (y) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital stock or
(z) except for the redemption of the Rights and the outstanding Preferred
Stock-Series B of Borden, purchase, redeem or otherwise acquire any shares of
capital stock of Borden or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities; (ii) subject to certain exceptions, authorize for issuance, issue,
deliver, sell or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise), pledge or otherwise encumber any shares of its capital
stock or the capital stock of any of its subsidiaries, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible securities
or any other securities or equity equivalents; (iii) amend its certificate of
incorporation, by-laws or other comparable charter or organizational documents
or alter through merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of any subsidiary not
constituting an inactive subsidiary of Borden; (iv) acquire or agree to acquire
(x) by merging or consolidating with, or by purchasing a substantial portion of
the stock or assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof or (y) any assets that are material, individually or in the
aggregate, to Borden and its subsidiaries taken as a whole, except purchases of
inventory in the ordinary course of business consistent with past practice; (v)
sell, lease, license, mortgage or otherwise encumber or subject to any lien or
otherwise dispose of any of its properties or assets, except sales of (A)
inventory in the ordinary course of business consistent with past practice (B)
properties or assets (x) with a value of less than $10 million individually but
not more than $25 million in the aggregate, (y) that are currently being
marketed or sold by Borden pursuant to Borden's January 1994 restructuring plan
(but for consideration not lower than certain specified prices to the extent
disclosed in writing to the Partnership) or (z) with respect to which a
definitive agreement has been entered into by Borden prior to September 12, 1994
(provided that no material modification or amendment shall be made to any such
agreements), (C) certain sales and pledges of accounts receivable, or mortgages
of other property in connection with certain financings or refinancings outside
the United States and (D) in connection with certain capital expenditures
otherwise permitted by the Merger Agreement; (vi) except in the ordinary course
of business consistent with past practice and except for an increase of up to
$300 million of the amount available or outstanding under a certain credit
agreement and the refinancing of certain industrial revenue bonds in an
aggregate outstanding principal amount of $40 million, subject to certain
conditions, (y) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person (other than certain guarantees by Borden
65
in favor of subsidiaries or by any of its subsidiaries in favor of Borden),
issue or sell any debt securities or warrants or other rights to acquire any
debt securities of Borden or any of its subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice or (z) make any loans, advances or capital contributions to,
or investments in, any other person, other than to Borden or any direct or
indirect wholly owned subsidiary of Borden; (vii) expend funds for capital
expenditures other than in accordance with Borden's current capital expenditure
plans; (viii) waive, release, grant, or transfer any rights of value or modify
or change in any material respect any existing license, lease, contract or other
document, other than in the ordinary course of business consistent with past
practice; (ix) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization; (x) enter into
or amend any material collective bargaining agreement, other than in the
ordinary course of business; (xi) change any accounting principle used by it,
unless required by the Commission or the Financial Accounting Standards Board;
(xii) subject to certain exceptions, make any tax election or settle or
compromise any income tax liability or file its 1994 federal income tax return
prior to the last day (including extensions) prescribed by law, in the case of
any of the foregoing, material to the business, financial condition or results
of operations of Borden and its subsidiaries taken as a whole; (xiii) settle or
compromise any litigation (whether or not commenced prior to the date of the
Merger Agreement) or settle, pay or compromise any claims not required to be
paid, individually in an amount in excess of $1 million and in the aggregate in
an amount in excess of $10 million, other than in consultation and cooperation
with the Purchaser, and, with respect to any such settlement, with the prior
written consent of the Purchaser; (xiv) take any action which would cause any
debt securities of Borden or any of its subsidiaries no longer to be listed on
any national securities exchange or registered pursuant to the Exchange Act,
other than with respect to any such debt securities that have become due as a
result of the maturity thereof; or (xv) authorize any of, or commit or agree to
take any of, the foregoing actions.
In the Merger Agreement, Borden has also agreed, subject to certain
exceptions, that neither it nor any of its subsidiaries will adopt or amend any
bonus, profit sharing, compensation, severance, termination, stock option, stock
appreciation right, pension, retirement, employment or other employee benefit
agreement, trust, plan or other arrangement for the benefit or welfare of any
director, officer or, except in the ordinary course of business consistent with
past practice with respect to employees of Borden or any of its subsidiaries,
increase in any manner the compensation or fringe benefits of any director,
officer or, except in the ordinary course of business consistent with past
practice with respect to employees of Borden or any of its subsidiaries, pay any
benefit not required by any existing agreement or place any assets in any trust
for the benefit of employees or directors of Borden or any of its subsidiaries,
other than contributions to the directors trust fund in the ordinary course of
business and consistent with past practice; provided, however, that
notwithstanding the foregoing, any amendments required to be made to the
provisions of any employee pension plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code in order to maintain such status may
be made.
Pursuant to the Merger Agreement, the Partnership and the Purchaser have
agreed that, during the period from the date of the Merger Agreement to the
effective time of the Merger, the Purchaser
will not engage in any activities of any nature except as provided in, or in
connection with the transactions contemplated by, the Merger Agreement.
No Solicitation. Under the Merger Agreement, except with respect to
divestitures in accordance with Borden's January 1994 restructuring plan, Borden
has agreed that neither it nor any of its subsidiaries will, nor will it or any
of its subsidiaries authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of its subsidiaries to, (a) solicit,
initiate, encourage (including by way of furnishing information), or take any
other action to facilitate, any Transaction Proposal or agree to or endorse any
66
Transaction Proposal or (b) enter into or participate in any discussions or
negotiations regarding any of the foregoing, or furnish to any other person any
information with respect to its business, properties or assets or any of the
foregoing, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing; provided, however, that the foregoing clauses will not
prohibit Borden from (i) furnishing information pursuant to an appropriate
confidentiality letter concerning Borden and its businesses, properties or
assets to a third party who has made a Transaction Proposal, (ii) engaging in
discussions or negotiations with such a third party who has made a Transaction
Proposal or (iii) following receipt of a Transaction Proposal, taking and
disclosing to its shareholders a position contemplated by Rule 14e-2(a) under
the Exchange Act or changing the Recommendations, but in each case referred to
in the foregoing clauses (i) through (iii), only after the Board of Directors of
Borden concludes in good faith that such action is necessary or appropriate in
order for the Board of Directors of Borden to act in a manner which is
consistent with its fiduciary obligations under applicable law. If the Board of
Directors of Borden receives a Transaction Proposal, then Borden has agreed
promptly to inform the Partnership of the terms and conditions of such proposal
and the identity of the person making it and to keep the Partnership generally
informed with reasonable promptness of any steps it is taking pursuant to the
foregoing with respect to such Transaction Proposal.
Under the Merger Agreement, neither Borden nor any subsidiary will waive any
provision of any confidentiality or standstill or similar agreement to which it
is a party without the prior written consent of the Partnership, unless the
Board of Directors of Borden or such subsidiary concludes in good faith that
waiving such provision is necessary or appropriate in order for the Board of
Directors of Borden to act in a manner which is consistent with its fiduciary
obligations under applicable law.
Access to Information. Subject to applicable provisions regarding
confidentiality, each of Borden and the Partnership has agreed in the Merger
Agreement to, and to cause each of its subsidiaries to, afford to the other
parties and to their representatives reasonable access during normal business
hours during the period prior to the effective time of the Merger to all its
properties, books, contracts, commitments, personnel and records and, during
such period, to, and to cause each of its subsidiaries to, furnish as promptly
as practicable to the other parties and their respective representatives such
information concerning its business, properties, financial conditions,
operations and personnel as they may from time to time reasonably request.
Cooperation and Best Efforts. Pursuant to the Merger Agreement, subject to
certain conditions and limitations described therein, the parties have agreed to
cooperate with each other and to use their respective best efforts to take
actions appropriate so that the transactions contemplated by the Merger
Agreement and the Conditional Purchase/Option Agreement may be consummated.
Certain Antitrust Matters and Divestitures. In the Merger Agreement, Borden
and the Partnership have agreed, as promptly as practicable, to file
notification and report forms under the HSR Act with the FTC and the Antitrust
Division and to make any other necessary filings with the applicable
governmental entities related to the transactions contemplated by the Merger
Agreement, including the Transactions, and the Conditional Purchase/Option
Agreement and to use their best efforts to respond as promptly as practicable to
all inquiries received from the FTC or the Antitrust Division or such other
governmental entities for additional information or documentation. Provided that
following receipt of such approvals the Purchaser (or one of its affiliates)
acquires at least 28,138,000 Borden Shares pursuant to the Exchange Offer and/or
the Option, Borden has agreed to make any and all divestitures or undertakings
required by the FTC, the Antitrust Division or any other applicable governmental
entity in connection with the Transactions, which divestitures in each case
shall be reasonably acceptable to the Partnership and the Purchaser.
Employee Benefits Matters. Pursuant to the Merger Agreement, prior to the
occurrence of a "Change in Control" as defined in the Supplemental Benefit Trust
Agreement between Borden and
67
Wachovia Bank of North Carolina, N.A. (the "Trust Agreement"), Borden has agreed
to take all such action as may be necessary so that no funding of the Trust
created thereunder will occur as a result of the transactions contemplated by
the Merger Agreement. The Trust Agreement will be amended prior to a Change in
Control to permit the disposition of all Borden Shares held thereunder. Borden
may amend certain benefit plans that would have been required to be funded
pursuant to the terms of the Trust Agreement in a manner which provides for a
lump-sum distribution to, but does not result in the constructive receipt of
compensation by, a covered employee of his or her deferred compensation
thereunder in the event of the involuntary termination or normal retirement
(under Borden's Employees Retirement Income Plan) of such employee.
Prior to the effective time of the Merger, the Purchaser will not request
that Borden cancel, and Borden will be under no obligation to cancel, certain
agreements ("Core Management Agreements") between Borden and certain executives
of Borden designated by Borden which provide for certain payments and benefits
in the event of certain terminations of employment.
The Purchaser (or its affiliate) has agreed to continue Borden's Non-Exempt
Associate Assistance Program and Exempt Associate Assistance Program, on terms
no less favorable than the terms in existence on the date of the Merger
Agreement, for the one-year period following the effective time of the Merger.
Pursuant to the Merger Agreement, Borden is required to maintain, for the
two-year period following the effective time of the Merger, employee plans and
programs which are substantially similar in the aggregate to those pension and
welfare plans maintained for employees of Borden generally.
Borden has agreed that neither it nor any of its affiliates will accelerate
the payment of any deferred award under any bonus plan or arrangement nor award
or pay any pro rata awards thereunder as a result, or in anticipation, of the
transactions contemplated by the Merger Agreement; provided that Borden may pay
the 1994 annual bonuses pursuant to its Management Incentive Plan or other
similar annual bonus plan in a manner which is consistent with past practice and
the achievement of goals set forth therein.
Borden also has agreed to ensure that no prohibited transaction (within the
meaning of Section 406 of ERISA or 4975 of the Internal Revenue Code) will occur
with respect to any Borden Plan as a result of the transactions contemplated by
the Merger Agreement.
With respect to any of certain employees of Borden, in lieu of any other
severance arrangement for such individual, Borden has agreed to pay such
employee in the event of that employee's termination by Borden after a "Change
in Control" without "Cause" (as those terms are defined in the Core Management
Agreements) a cash severance amount equal to twelve months of salary. The
special severance payments described herein will no longer be applicable when
twelve (eighteen for one employee) months have elapsed after the Change in
Control. For certain executives of Borden, such executive's letter of employment
will be modified so that a termination without Cause prior to the second
anniversary of a Change in Control (as defined in such letters) will include a
termination by the executive due to the occurrence of any one of the following
events without his advance consent: (i) the executive's office is relocated to a
different city; (ii) the executive's base salary is reduced or his bonus
opportunity is materially lower than other Borden executives of comparable rank;
(iii) there is a material diminution in the nature or scope of the authority or
responsibilities attached to the executive's position (and, for this purpose, a
diminution in nature or scope of authority or responsibilities will not be
deemed to occur simply because the company or business in which the executive is
engaged has changed in size or structure); or (iv) in the case of one executive,
the business (either separately or as part of a larger business unit) in which
the executive is engaged is sold or otherwise disposed of. The maximum payment
Borden would be required to pay to management described above as a result of the
transaction assuming all change in control payments on termination and other
severance payments are triggered (including those in the immediately preceding
sentence) is estimated to be approximately $31 million.
68
Indemnification and Insurance. Under the Merger Agreement, the certificate
of incorporation and by-laws of the surviving corporation in the Merger shall
contain provisions eliminating personal liability of directors and officers of
the surviving corporation and with respect to indemnification, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the effective time of the Merger in any manner that would adversely affect
the rights thereunder of individuals who at such time were directors, officers,
agents or employees of Borden.
In addition, pursuant to the Merger Agreement, the surviving corporation in
the Merger will maintain in effect for six years from the effective time of the
Merger policies of directors' and officers' liability insurance containing terms
and conditions which are not less advantageous than those policies maintained by
Borden at the date of the Merger Agreement, with respect to matters occurring
prior to the effective time of the Merger, to the extent available, and having
the maximum available coverage under the current policies of directors and
officers' liability insurance; provided that such surviving corporation will not
be required to spend in excess of a $3 million annual premium therefor; provided
further that if such surviving corporation would be required to spend in excess
of a $3 million premium per annum to obtain insurance having the maximum
available coverage under the current policies, such surviving corporation will
be required, subject to availability, to spend $3 million to maintain or procure
such insurance coverage, subject to its availability.
In furtherance of and not in limitation of the preceding paragraph, the
Partnership and the Purchaser have agreed that the officers and directors of
Borden that are defendants in all litigation commenced by shareholders of Borden
with respect to (x) the performance of their duties as such officers and/or
directors under federal or state law (including litigation under federal and
state securities laws) and (y) the Purchaser's offer or proposal to acquire
Borden, including, without limitation, any and all such litigation commenced on
or after September 11, 1994 (the "Subject Litigation"), will be entitled to be
represented, at the reasonable expense of Borden, in the Subject Litigation by
one counsel (and New Jersey counsel if appropriate and one local counsel in each
jurisdiction in which a case is pending) each of which such counsel will be
selected by a plurality of such director defendants; provided that neither
Borden nor the surviving corporation nor the Partnership shall be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld) and that a condition to the indemnification payments
provided as described above shall be that such director defendant not have
settled any Subject Litigation without the consent of the Partnership or the
surviving corporation; and provided further that the surviving corporation and
the Partnership shall have no obligation to any officer/director defendant when
and if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such officer/director defendant in the manner contemplated by the Merger
Agreement is prohibited by applicable law.
Redemption of Series B Preferred Stock. The Merger Agreement provides that,
if the Minimum Condition is satisfied without having been waived or lowered,
Borden will, promptly after consummation of the Exchange Offer, in the manner
and to the extent permitted by the Charter, redeem all of its outstanding shares
of Preferred Stock-Series B prior to any record date in connection with the
Proposed Merger at the amount provided for redemption in the Charter, and Borden
has agreed, subject to first obtaining required approvals under certain debt
instruments of Borden, promptly to commence taking all steps necessary to effect
such redemptions.
Redemption of Rights. Pursuant to the Merger Agreement, Borden has agreed to
redeem all outstanding Rights at a redemption price of one and two-thirds cents
per Right effective immediately prior to the acceptance for exchange of any
Borden Shares pursuant to the Exchange Offer, provided that the Minimum
Condition is satisfied in the Exchange Offer. In accordance with the Merger
Agreement, Borden has amended the Rights Agreement so that none of the execution
or the delivery of the Merger Agreement or the Conditional Purchase/Option
Agreement, or both such agreements taken together, or commencement of the
Exchange Offer or the acceptance of Borden Shares for exchange
69
pursuant to the Exchange Offer, or the consummation of the transactions
contemplated by the Conditional Purchase/Option Agreement will (i) trigger the
exercisability of the Rights, the separation of the Rights from the stock
certificates to which they are attached or any other provisions of the Rights
Agreement, including causing the Partnership and/or the Purchaser from becoming
an Acquiring Person (as defined in the Rights Agreement), the occurrence of a
Distribution Date (as defined in the Rights Agreement) or a Shares Acquisition
Date (as defined in the Rights Agreement) or (ii) trigger the right of the
holders of the common units of Borden Chemicals and Plastics Limited
Partnership, pursuant to the Second Amended and Restated Deposit Agreement dated
February 16, 1993, to require Borden to purchase the common units held by such
holders. Borden and the Partnership have also agreed in the Merger Agreement
that, if Borden amends any provision of the Rights Agreement in connection with
a Transaction Proposal (or with respect to any person) or if the application of
the Rights Agreement or any provision thereof is enjoined with respect to any
person or Transaction Proposal or if Borden agrees to redeem the Rights on terms
more favorable than the terms set forth with respect to the Partnership and the
Purchaser in the Merger Agreement (any of such events, a "Third Party Rights
Amendment") in a manner that makes such Third Party Rights Amendment less
restrictive with respect to such person, or in connection with such Transaction
Proposal, or is otherwise more favorable with respect to such person, or in
connection with such Transaction Proposal, than the Rights Agreement as then in
effect with respect to Parent and Purchaser, Borden will be deemed (if and to
the extent possible and without derogating the obligations of Borden pursuant to
the next sentence), without the necessity of any action by Borden or the Rights
Agent, to have so amended the Rights Agreement with respect to the Partnership
and the Purchaser to the same extent or to have agreed to redeem the Rights with
respect to Partnership and the Purchaser on terms as favorable. Borden has
agreed to notify the Partnership promptly of any Third Party Rights Amendment
and simultaneously with the execution of the Third Party Rights Amendment to
execute a written amendment to the Rights Agreement with respect to the
foregoing.
Conditions to Each Party's Obligations to Effect the Merger. The Merger
Agreement provides that the respective obligation of each party to effect the
Merger is subject to the following conditions: (i) if required by New Jersey law
or the Charter, the approval of Borden's shareholders shall have been obtained;
(ii) any waiting period applicable to the Merger under the HSR Act shall have
terminated or expired; (iii) Borden Shares shall have been purchased pursuant to
the Exchange Offer; (iv) the Registration Statement shall have become effective,
and any required post-effective amendment shall have become effective, under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and any material "blue sky" and other state securities
laws applicable to the registration of the Holdings Common Stock to be exchanged
for shares of Borden Common Stock shall have been complied with; and (v) no
statute, rule, regulation, executive order, decree, or injunction shall have
been enacted, entered, promulgated or enforced by any governmental entity which
prohibits the consummation of the Merger, whether temporary, preliminary or
permanent, provided, however, that the parties have agreed to use their best
efforts to have any such order, decree or injunction vacated.
Conditions to Obligation of Borden. Pursuant to the Merger Agreement, if
fewer than 66 2/3% of the Borden Shares outstanding on a fully diluted basis
(other than dilution due to the Rights) shall have been accepted for exchange in
the Exchange Offer, the obligation of Borden to effect the Merger is further
subject to the condition that the representation and warranty of the Purchaser
and the Partnership to the effect that, except as disclosed in documents filed
by Holdings with the Commission, since the date of the most recent audited
financial statements included in such documents, Holdings has conducted its
business only in the ordinary course consistent with past practice, and there is
not and has not been any change in the business, financial condition or results
of operations of Holdings or any of its subsidiaries which has had, or would
reasonably be expected to have, a Material Adverse Effect with respect to
Holdings shall be true and correct, as of the date of the Merger Agreement and
as of the closing date as though made on and as of the closing date.
70
Conditions to Obligations of the Purchaser and the Partnership to Effect the
Merger. If fewer than 66 2/3% of the Borden Shares outstanding on a fully
diluted basis (other than dilution due to the Rights) shall have been accepted
for exchange in the Exchange Offer, the obligations of the Purchaser and the
Partnership to effect the Merger are further subject to the following
conditions: (i) the representation and warranty of Borden to the effect that,
except as disclosed in SEC Documents filed by Borden with the Commission, since
the date of the most recent audited financial statements included in such
documents, Borden has conducted its business only in the ordinary course
consistent with past practice, and there is not and has not been any change in
the business, financial condition or results of operations of Borden or any of
its subsidiaries which has had, or would reasonably be expected to have a
Material Adverse Effect with respect to Borden shall be true and correct, as of
the date of the Merger Agreement and as of the closing date as though made on
and as of the closing date; (ii) subject to certain exceptions, Borden shall
have performed in all material respects certain affirmative covenants required
to be performed by it under the Merger Agreement at or prior to the effective
date; and (iii) the representation and warranty referred to in clause (e) of the
second paragraph under "Representations and Warranties" above, applied mutatis
mutandis to the documents filed by Borden with the Commission since the date of
the Merger Agreement, shall be true and correct in all material respects as of
closing date as though made on and as of the closing date.
Notwithstanding the foregoing, the obligations of Borden or the Purchaser
and the Partnership under the Merger Agreement to effect the Merger are not
subject to the satisfaction or waiver of any of the conditions described in the
two preceding paragraphs to the extent that the failure of any such condition to
be satisfied is the result of any action approved by a majority of those
directors of Borden who are designees or representatives of the Partnership or
to the extent the same results from affirmative action taken by Borden with the
knowledge of its Board of Directors while a majority of the directors of Borden
consists of persons designated or elected by the Partnership.
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time, notwithstanding approval
thereof by the shareholders of Borden, but prior to the effective time of the
Merger: (a) by mutual written consent of the Partnership, the Purchaser and
Borden; (b) by the Partnership or Borden, if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the United
States or any country or economic region in which either Borden or the
Partnership, directly or indirectly, has material assets or operations, shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; (c) by
the Partnership if due to an occurrence or circumstance which would result in a
failure to satisfy any of the conditions to the Exchange Offer the Purchaser
shall have terminated the Exchange Offer, unless such termination shall have
been caused by or resulted from the failure of the Partnership or the Purchaser
to perform in any material respect their material covenants and agreements
contained in the Merger Agreement; (d) by the Partnership, if Borden shall have
modified or amended in any respect materially adverse to the Partnership or the
Purchaser or withdrawn its approval or recommendation of the Exchange Offer, the
Merger or the Merger Agreement, provided that any communication that advises
that Borden has received a Transaction Proposal or is engaging in certain
permitted activities with respect to a Transaction Proposal and that takes no
action or position with respect to the Exchange Offer, the Merger, the Merger
Agreement or any Transaction Proposal shall not be deemed to be a withdrawal,
modification or amendment of Borden's approval or recommendation of the Exchange
Offer, the Merger or the Merger Agreement and provided, further, that a
"stop-look-and-listen" communication with respect to the Exchange Offer, the
Merger or the Merger Agreement of the nature contemplated in Rule 14d-9(e) under
the Exchange Act made by Borden as a result of a Transaction Proposal (whether
or not a tender offer), without more, shall not be deemed to be a modification
or amendment of Borden's approval or recommendation of the Exchange Offer, the
Merger or the Merger Agreement that is materially adverse to the Partnership or
the Purchaser, if within 10 business days after the date of such communication
Borden shall have reaffirmed its recommendation of the Exchange Offer, the
Merger and the Merger Agreement; (e) by
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the Partnership if Borden shall have (i) entered into any definitive agreement
to effect the transaction contemplated by a Transaction Proposal, (ii)
recommended any Transaction Proposal from a person other than the Partnership or
the Purchaser or any of its affiliates or (iii) resolved to do any of the
foregoing; (f) by the Partnership, if any corporation (including Borden or any
of its subsidiaries), partnership, person, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act) other than the Partnership or any of its
subsidiaries (collectively, "Persons") shall have become the beneficial owner of
more than 35% of the outstanding Borden Shares (excluding any dilution due to
the Rights) (an "Alternative Acquisition"); (g) by Borden if (i) due to an
occurrence or circumstance that would result in a failure to satisfy any of the
conditions of the Exchange Offer the Purchaser shall have terminated the
Exchange Offer, unless such termination shall have been caused by or resulted
from the failure of Borden to perform in any material respect its material
covenants and agreements contained in the Merger Agreement or (ii) prior to the
exchange of Borden Shares pursuant to the Exchange Offer, any person shall have
made a bona fide Transaction Proposal (A) that the Board of Directors of Borden
determines in its good faith judgment is more favorable to Borden's shareholders
than the Exchange Offer and the Merger and (B) as a result of which the Board of
Directors concludes in good faith that termination of the Merger Agreement is
necessary or appropriate in order for the Board of Directors to act in a manner
which is consistent with its fiduciary obligations under applicable law,
provided that such termination under this clause (ii) shall not be effective
until payment of the full fee and expense reimbursement required as described
under "--Certain Required Payments" below; (h) by the Partnership or Borden if,
without fault of the terminating party, the effective time of the Merger shall
not have occurred on or before June 30, 1995 (provided, that the right to
terminate the Merger Agreement under this clause (h) shall not be available to
any party whose failure to fulfill any obligation under the Merger Agreement has
been the cause of, or results in, the failure of the Merger to have been
consummated within such period); (i) by Borden if (i) on or after December 15,
1994, the termination date of the waiver granted to Borden of certain provisions
relating to changes in control of the credit agreement dated as of August 16,
1994 among Borden and the banks' party thereto shall not then extend past
December 15, 1994 and (ii) Borden (A) shall have received written notice from
the administrative agent under such credit agreement that, as a result of the
applicability of such provisions, all amounts payable under the credit agreement
and the other related loan documents shall have become and be due and payable
(and provided that the Merger Agreement shall be deemed to be terminated without
any further action by any party immediately prior to the receipt by Borden of
such notice), (B) shall have been advised in writing by the administrative agent
that, as a result of such provisions, the required number of banks have
requested or consented to such action or (C) Borden shall reasonably believe
either such action referred to in (A) or (B) above to be imminent based on
communications with the administrative agent, any of the banks party to such
credit agreement or representatives thereof; or (j) by the Partnership or Borden
if any required approval of the shareholders of Borden shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of shareholders or at any adjournment thereof.
Amendment. Subject to the concurrence of a majority of the Independent
Borden Directors (following the election or appointment of the Partnership's
designees pursuant to the Merger Agreement and prior to the effective time of
the Merger), the Merger Agreement may be amended or supplemented at any time
before or after the date on which a majority of the board of directors of Borden
shall consist of designees or representatives of the Partnership but, after such
date, no amendment shall be made which decreases or increases the Exchange Ratio
or which adversely affects the rights of Borden's shareholders under the Merger
Agreement without the approval of Borden and Borden's shareholders. The Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties.
Extension; Waiver. Subject to the concurrence of a majority of the
Independent Borden Directors (following the election or appointment of the
Partnership's designees pursuant to the Merger Agreement and prior to the
effective time of the Merger), at any time prior to the effective time of the
Merger, the parties may (i) extend the time for the performance of any of the
obligations or other acts of the
72
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein of the other parties hereto or in any document,
certificate or writing delivered pursuant hereto or (iii) waive compliance by
the other parties hereto with any of the agreements or conditions contained
herein. Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to assert any of its rights under the
Merger Agreement shall not constitute a waiver of such rights.
Certain Required Payments. Pursuant to the Merger Agreement, Borden has
agreed promptly, but in no event later than two business days following written
notice thereof, together with related bills or receipts, to reimburse the Parent
and the Purchaser for all of their Expenses (as defined below) as incurred from
time to time in an aggregate amount of up to $15 million, against which
aggregate amount Expenses actually reimbursed (other than the fee in the amount
of $20 million (the "Initial Advisory Fee") reimbursed by Borden upon the
execution of a certain letter agreement dated September 11, 1994 between the
Parent and Borden (the "Letter Agreement")) may be credited. The term "Expenses"
includes all out-of-pocket expenses and fees including the fees and
disbursements of counsel, financial printers, experts, consultants and
accountants, as well as all fees and expenses payable to investment banking
firms and other financial institutions and their respective agents and counsel,
whether incurred prior to, on or after the date of the Merger Agreement,
incurred in connection with the transactions contemplated by the Merger
Agreement, the Letter Agreement and the Conditional Purchase/Option Agreement.
The parties have acknowledged that the reimbursement of the Initial Advisory Fee
shall not limit the reimbursement of any additional advisory fees paid by the
Parent or the Purchaser to non-affiliates of the Purchaser.
Under the Merger Agreement, if (i) (x) prior to termination of the Merger
Agreement, any Person shall have commenced, publicly proposed or communicated to
Borden a Transaction Proposal (a "Pre-Termination Transaction Proposal") (y) the
Merger Agreement is terminated and (z) on or prior to June 30, 1996, any Person
who commenced, publicly proposed or communicated to Borden a Pre-Termination
Transaction Proposal enters into any definitive agreement to effect the
transaction contemplated by such Transaction Proposal (whether or not related to
such Pre-Termination Transaction Proposal) or effects an Alternative
Acquisition; or (ii) prior to the purchase of Borden Shares pursuant to the
Exchange Offer, the Merger Agreement is terminated pursuant to clause (d) under
"--Termination" above (other than solely in the event that the average of the
closing sales prices of the Holdings Common Stock as reported on the NYSE
Composite Tape for the Valuation Period is less than the price per share that
would yield an Exchange Ratio of 2.375 or less without giving effect to any
minimum or maximum Exchange Ratio pursuant to the definition thereof) or (iii)
prior to the purchase of Borden Shares pursuant to the Exchange Offer, the
Merger Agreement is terminated pursuant to clause (e), (f) or clause (g)(ii)
under "--Termination" above, then in each case, Borden shall promptly, but in no
event later than one business day after the first of such events shall occur,
pay KKR a fee of $30 million in cash, which amount shall be payable in same day
funds. No more than $30 million in aggregate shall be payable to KKR and no fee
shall be payable to KKR pursuant to this provision if $30 million has been paid
to KKR as described in the succeeding paragraph.
If the Parent, together with any subsidiary or affiliate of the Parent
including the Purchaser, shall acquire beneficial ownership (in one or more
transactions) of a majority of the outstanding shares of Borden Common Stock,
then Borden shall promptly, but in no event later than one business day after
such event shall occur, pay KKR a fee of $30 million in cash, which amount shall
be payable in same day funds. No fee shall be payable to KKR pursuant to this
provision if $30 million has been paid to KKR as described in the preceding
paragraph.
If the fee of $30 million in cash required to be paid by Borden to KKR as
described in the two immediately preceding paragraphs (the "Transaction Fee") is
not paid within five business days after the events set forth above requiring
payment of the Transaction Fee occur, KKR, at its sole option, may demand (the
"Fee Demand") that Borden tender to KKR, immediately in satisfaction of the
Transaction Fee, such number of shares (rounded to the nearest whole share) of
(i) Borden Common Stock
73
((A) if it is publicly traded and (B) which at the request of KKR shall be
issued in shares of treasury stock, if available) or (ii), at the sole option of
KKR if the Option shall have been exercised, and Borden shall at the time own
Holdings Common Stock that is not subject to any other call or exchange right,
Holdings Common Stock equal to (x) $30 million divided by (y) the Average Market
Price. The term "Average Market Price" means the average of the average of the
high and low prices of Borden Common Stock, or Holdings Common Stock, as the
case may be, as reported on the NYSE Composite Tape on each of the ten
consecutive trading days immediately preceding the second trading day prior to
the Fee Demand. Borden has acknowledged that it is obligated to pay the
Transaction Fee in cash and that such obligation is not derogated in any respect
by the existence of the option of KKR to seek satisfaction of such obligation by
means of the Fee Demand.
In addition to the foregoing, Borden has agreed in the Merger Agreement
promptly, but in no event later than two business days following written notice
thereof, together with related bills or receipts, to reimburse KKR, the Parent
and the Purchaser for all reasonable out-of-pocket costs, fees and expenses,
including, without limitation, the reasonable fees and disbursements of counsel
and the expenses of litigation, incurred in connection with collecting Expenses
and the Transaction Fee as a result of any willful breach by Borden of its
obligations described above.
Except as otherwise provided above, under the Merger Agreement, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with the transactions contemplated by the Merger Agreement and the Conditional
Purchase/Option Agreement will be paid by the party incurring such expenses
(including, in the case of Borden, the costs of printing the Schedule 14D-9 and
any other filings to be printed, and in each case all exhibits, amendments or
supplements thereto). Notwithstanding the foregoing, the costs and expenses of
preparing and distributing any proxy statement and obtaining and complying with
the antitrust requirements of any governmental entity will be paid by Borden.
No Recourse Provisions. Nothwithstanding anything that may be expressed or
implied in the Merger Agreement, no recourse under the Merger Agreement or the
Conditional Purchase/Option Agreement or any documents or instruments delivered
in connection therewith shall be had against any officer, agent or employee of
the Partnership or against any partner of the Partnership or any director,
officer, employee, partner, affiliate or assignee of any of the foregoing,
whether by the enforcement of any assessment or by any legal or equitable
proceeding, or by virtue of any statute, regulation or other applicable law, and
no personal liability whatsoever shall attach to, be imposed on or otherwise be
incurred by an officer, agent or employee of the Partnership or any partner of
the Partnership or any director, officer, employee, partner, affiliate or
assignee of any of the foregoing, as such for any obligations of the Partnership
under the Merger Agreement or any documents or instruments delivered in
connection with the Merger Agreement or the Conditional Purchase/Option
Agreement or for any claim based on, in respect of or by reason of such
obligations or their creation; provided, however, that the foregoing limitation
of liability shall in no way constitute a limitation on the rights of Borden to
enforce any remedies it may have against the undistributed assets of the
Partnership for the collection of any obligations or liabilities in connection
with the Merger Agreement or the Conditional Purchase/Option Agreement.
Dissenters' Rights. Holders of Borden Common Stock will not be entitled to
dissenters' rights under New Jersey law in connection with the Exchange Offer or
the Merger, and the Purchaser does not intend to accord dissenters' rights to
holders of Borden Common Stock unless required by applicable law.
CONDITIONAL PURCHASE/OPTION AGREEMENT
Pursuant to the Conditional Purchase/Option Agreement, Borden has granted to
the Purchaser the irrevocable Option to purchase up to 28,138,000 Option Shares
(or approximately 19.9% of the outstanding Borden Shares as of the date hereof),
on the terms and subject to the conditions set forth
74
therein. At the time that the Option is exercised, Borden will designate whether
the Option Shares shall be newly issued shares or shares of treasury stock of
Borden.
Exercise of Option. Under the Conditional Purchase/Option Agreement, the
Option may be exercised by the Purchaser (or its designee, which designee must
be the Partnership or a direct or indirect wholly owned subsidiary of the
Partnership and which may, in any such case, act for itself and/or as agent for
one or both of the Common Stock Partnerships, as the case may be), in whole or
in part, at any time, or from time to time, during the period beginning on the
date of the Conditional Purchase/Option Agreement and ending on the Option
Expiration Date, provided that if the Purchaser (or its designee) has not
exercised the Option in whole or in part prior to the expiration of the Exchange
Offer, it will not be entitled to exercise the Option thereafter if it waives or
otherwise reduces the Minimum Condition and accepts fewer than 41% of the
outstanding Borden Shares for payment in the Exchange Offer.
Pursuant to the Conditional Purchase/Option Agreement, the purchase of
Borden Shares upon exercise of the Option will occur only if (i) such purchase
would not otherwise violate or cause the violation of, any applicable law or
regulations (including, the HSR Act, the Exchange Act and the rules and
regulations thereunder, or the rules of the NYSE) and (ii) no statute, rule,
regulation, decree, order or injunction shall have been promulgated, enacted,
entered into or enforced by any governmental agency or authority or court which
prohibits delivery of the Borden Shares, whether temporary, preliminary or
permanent (provided, however, that the parties shall have agreed to use their
best efforts to have any such order, decree or injunction vacated or reversed).
In the event a closing of such purchase is delayed as a result of clause (i) or
(ii) above, the Purchaser shall not be obligated to purchase any Borden Shares
after the date nine months following the date of its notice of exercise of the
Option.
Conversion of Option. The Conditional Purchase/Option Agreement provides
that, upon the Conversion Date, if any, the Option will be converted in part
from an irrevocable option to purchase the Borden Shares into an obligation on
the part of the Purchaser (or its designee, which designee must be the
Partnership or a direct or indirect wholly owned subsidiary of the Partnership
and which may, in any such case, act for itself and/or as agent for one or both
of the Common Stock Partnerships, as the case may be) to make the Mandatory
Purchase, on the terms and subject to the conditions set forth in the
Conditional Purchase/Option Agreement, of the Mandatory Purchase Shares. Borden
Shares subject to the Option in excess of the number of Mandatory Purchase
Shares will continue to be subject to purchase at the option of the Purchaser.
Payments. The Conditional Purchase/Option Agreement provides that, in the
event the Purchaser exercises the Option, the Purchaser (or, at the Purchaser's
option, its designee) will, at any closing or Mandatory Purchase closing, as the
case may be, deliver to Borden, such number of shares (rounded to the nearest
whole share) of Holdings Common Stock as will equal the product of the Option
Exchange Ratio and the number of Borden Shares purchased pursuant to the
exercise of the Option.
In the event that a payment is actually made to the Partnership pursuant to
the provisions of the Merger Agreement described in the second paragraph under
"--Merger Agreement--Certain Required Payments," the Option Purchase Price will
be adjusted upward (retroactively if necessary and net of any taxes or brokerage
fees paid in connection with the sale, tender or exchange of shares by Purchaser
or its designee, which designee must be the Partnership or a direct or indirect
wholly owned subsidiary of the Partnership) to reflect (i) with respect to any
Borden Shares sold, tendered, or exchanged in any third party transaction that
triggers a payment pursuant to such provisions of the Merger Agreement, the
price per share (subject to the calculation principles described in the next
succeeding sentence) actually paid to holders of Borden Common Stock as a result
of any such third party transaction and (ii) with respect to any Borden Shares
sold, tendered or exchanged to another party or parties by Purchaser (or its
designee) other than pursuant to such third party transaction, the price per
share (subject to the calculation principles set forth in the next succeeding
sentence) actually paid to Purchaser (or its designee) by such other party or
parties in consideration for such Borden
75
Shares (the "Option Purchase Price Adjustment"). To the extent the "price per
share" referred to in the preceding sentence consists in whole or in part of
non-cash consideration, it will be based on the trading market value thereof or
if there is no trading market for such consideration, the fair market value as
determined by an independent investment banker jointly selected by the Purchaser
and Borden. The Option Purchase Price Adjustment shall be payable with respect
to shares actually sold, tendered or exchanged promptly following receipt of the
consideration therefor (and, if necessary, the valuation thereof), and the
Purchaser agrees promptly, but in no event later than two business days
following such event, to notify Borden of the receipt of such consideration. The
Partnership agrees promptly, but in no event later than two business days
following written notice thereof, together with related bills or receipts, to
reimburse Borden for all reasonable out-of-pocket costs, fees and expenses,
including, without limitation, the reasonable fees and disbursements of counsel
and the expenses of litigation, incurred in connection with collecting the
Option Purchase Price Adjustment as a result of any willful breach by the
Partnership of its obligations in connection with the Option Purchase Price
Adjustment.
Representations and Warranties of the Purchaser. The Conditional
Purchase/Option Agreement contains customary representations and warranties of
the Purchaser and the Partnership relating to, among other things: (a)
organization, standing and similar matters; (b) the authorization, execution,
delivery, performance and enforceability of the Conditional Purchase/Option
Agreement and related matters; (c) no material conflicts with laws or agreements
of the Purchaser, the Partnership and Holdings; (d) with respect to the
Purchaser only, distribution of the Borden Shares that would be acquired upon
exercise of the Option in compliance with the Securities Act; and (e) with
respect to the Partnership only, title to shares of Holdings Common Stock.
The Conditional Purchase/Option Agreement also contains customary
representations and warranties of Borden relating to, among other things: (a)
organization, standing and similar corporate matters; (b) the authorization,
execution, delivery, performance and enforceability of the Conditional
Purchase/Option Agreement and related matters; (c) no material conflicts with
laws or agreements of Borden or its subsidiaries; (d) certain resolutions of
Borden's Board of Directors; (e) certain amendments to the Rights Agreement in
connection with the Transactions; and (f) distribution of the shares of Holdings
Common Stock that would be acquired upon exercise of the Option in compliance
with the Securities Act.
Adjustment Upon Changes in Capitalization. Pursuant to the Conditional
Purchase/Option Agreement, in the event of any change in the number (or
conversion or exchange) of issued and outstanding shares of Borden Common Stock
by reason of any stock dividend, split-up, merger, recapitalization,
combination, exchange of shares, spin-off or other change in the corporate or
capital structure of Borden which could have the effect of diluting or otherwise
diminishing the Purchaser's rights under the Conditional Purchase/Option
Agreement (including any issuance of Borden Common Stock or other equity
security of Borden at a price below the fair value thereof), the number and kind
of Borden Shares or other securities subject to the Option and the Option
Exchange Ratio therefor will be appropriately adjusted so that the Purchaser
will receive upon exercise of the Option (or at the closing of the purchase upon
such exercise) the number and kind of shares or other securities or property
that the Purchaser would have received in respect of the Borden Shares that the
Purchaser is entitled to purchase upon exercise of the Option if the Option had
been exercised (or such closing had occurred) immediately prior to such event.
Registration Rights. The Conditional Purchase/Option Agreement provides
that, if the Option is exercised, Borden will extend to the Purchaser (or its
designee) registration rights with respect to the Option Shares on substantially
the same terms and subject to the same conditions as Holdings has extended to
the Partnership pursuant to the Registration Rights Agreement dated July 15,
1990 between Holdings and the Partnership (the "Registration Rights Agreement"),
a copy of which is on file with the Commission, except that only the first two
registrations of Registrable Securities (as defined in the Registration Rights
Agreement) will be at the expense of Borden.
76
The Conditional Purchase/Option Agreement also provides that, if the Option
is exercised, then subject in all respects to the terms and conditions of the
Registration Rights Agreement, Borden will succeed with respect to the shares of
Holdings Common Stock acquired as a result of the exercise of the Option to the
rights and obligations of a subsequent Holder (as defined in the Registration
Rights Agreement) under such agreement, unless, in the written opinion of
counsel to Holdings, which opinion shall be delivered to Borden and shall be
reasonably satisfactory in form and substance to Borden and its counsel,
registration of the shares of Holdings Common Stock acquired as a result of the
exercise of the Option is not required to lawfully sell and distribute such
shares in the manner contemplated by Borden. By its execution of the Conditional
Purchase/Option Agreement, Borden has agreed to be bound by the terms of the
Registration Rights Agreement. If the Option is exercised, the Partnership and
Borden have agreed that Borden will be entitled to two registrations at the
expense of Holdings (or if Holdings refuses to bear such expenses, at the
expense of the Partnership or the Purchaser) of Registrable Securities and,
subject to the terms of the Registration Rights Agreement, such other
registrations at its own expense as it shall request.
Board of Directors. The Conditional Purchase/Option Agreement includes
provisions relating to the Purchaser's designation of persons as directors of
Borden following the exercise of the Option similar to those described with
respect to the Merger Agreement under "--Merger Agreement--Board of Directors"
above.
Amendments. The Conditional Purchase/Option Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties thereto.
Certain Antitrust Matters and Divestitures. In the Conditional
Purchase/Option Agreement, Borden has made certain agreements relating to
antitrust matters and divestitures similar to those described with respect to
the Merger Agreement under "--Merger Agreement--Certain Antitrust Matters and
Divestitures."
77
RJR NABISCO HOLDINGS CORP.
The operating subsidiaries of Holdings owned through RJRN comprise one of
the largest tobacco and food companies in the world. In the United States, the
tobacco business is conducted by RJRT, the second largest manufacturer of
cigarettes, and the packaged foods business is conducted by Nabisco, the largest
manufacturer and marketer of cookies and crackers. Tobacco operations outside
the United States are conducted by Tobacco International and food operations
outside the United States and Canada are conducted by Nabisco. Together, RJRT's
and Tobacco International's tobacco products are sold around the world under a
variety of brand names. Food products are sold in the United States, Canada,
Latin America and certain other international markets.
Domestic Tobacco. RJRT's largest selling cigarette brands in the United
States include WINSTON, DORAL, SALEM, CAMEL, MONARCH and VANTAGE. RJRT's other
cigarette brands, including BEST VALUE, MORE, NOW, STERLING, MAGNA and CENTURY,
are marketed to meet a variety of smoker preferences. All RJRT brands are
marketed in a variety of styles. A primary long-term objective of RJRT is to
increase earnings and cash flow through selective marketing investments in its
key brands and continual improvements in its cost structure and operating
efficiency. Marketing programs for full-price brands are designed to build brand
awareness and add value to the brands in order to retain current adult smokers
and attract adult smokers of competitive brands. RJRT believes it is essential
to compete in all segments of the cigarette market, and accordingly offers a
range of lower-priced brands intended to appeal to more cost-conscious adult
smokers. Based on data collected for RJRT by an independent market research
firm, RJRT had an overall share of retail consumer cigarette sales during 1993
of 29.8%, an increase of approximately one share point from 1992.
International Tobacco. Tobacco International operates in over 160 markets
around the world and is the second largest of two international cigarette
producers that have significant positions in the American Blend segment of the
international tobacco market. Tobacco International markets over 55 brands of
which WINSTON, CAMEL and SALEM, all American Blend cigarettes, are its
international leaders. Tobacco International has strong brand presence in
Western Europe and is well established in its other key markets in the Middle
East/Africa, Asia and Canada. Tobacco International is aggressively pursuing
development opportunities in Eastern Europe and the former Soviet Union.
Nabisco. Nabisco's domestic operations represent one of the largest packaged
food businesses in the world. Through its domestic divisions, Nabisco
manufactures and markets cookies, crackers, snack foods, hard and bite-size
candy, gum, nuts, hot cereals, margarine, pet foods, dry-mix dessert products
and other grocery products under established and well-known trademarks,
including OREO, CHIPS AHOY!, NEWTONS, SNACKWELL'S, RITZ, PREMIUM, LIFE SAVERS,
PLANTERS, A.1, GREY POUPON, MILK-BONE, ORTEGA, CREAM OF WHEAT, FLEISCHMANN'S and
BLUE BONNET. Nabisco Biscuit Company ("Nabisco Biscuit") is the largest
manufacturer and marketer in the United States cookie and cracker industry with
nine of the top ten selling brands, each of which had annual sales of over $100
million in 1993. Overall, in 1993, Nabisco Biscuit had a 37% share of the
domestic cookie industry sales and a 55% share of the domestic cracker industry
sales, in the aggregate more than three times the share of its closest
competitor. In 1992, Nabisco Biscuit became the leading manufacturer and
marketer of no fat/reduced fat cookies and crackers with the introduction of the
SNACKWELL'S line. In 1993, the SNACKWELL'S brand recorded net sales of $186
million, which made SNACKWELL'S the sixth largest cookie/cracker brand in the
United States. Based on 1993 net sales, LIFE SAVERS is the largest selling
hard roll candy in the United States, with an approximately 25.4% share of the
hard roll candy category, and PLANTERS nuts are the clear leader in the packaged
nut category, with a market share of more than five times that of its nearest
competitor.
Nabisco is also a leading producer of powdered dessert and drink mixes,
biscuits, baking powder and other grocery items, industrial yeast and bakery
ingredients in many of the 17 Latin American
78
countries in which it has operations. Nabisco has significantly increased its
presence in Europe through the acquisition of Royal Brands S.A. in Spain and
Royal Brands Portugal.
RJRN was acquired in 1989 by an indirect, wholly owned subsidiary of
Holdings (the "Acquisition") at the direction of KKR. Prior to the Acquisition,
RJRN was a publicly held corporation. See "Certain Significant
Considerations--KKR Ownership."
RECENT DEVELOPMENTS
Nabisco Initial Public Offering and Related Transactions. On October 28,
1994, Nabisco filed a registration statement with the Commission for the initial
public offering of 45 million shares of its Class A Common Stock (51.75 million
shares if the underwriters' over-allotment options are exercised in full). For
purposes of the filing, the initial offering price was estimated to be between
$23 and $26 per share. Upon completion of the proposed public offering, Holdings
would beneficially own 100% of Nabisco's outstanding Class B Common Stock, which
would represent approximately 82.6% of the economic interest in Nabisco (80.5%
if the underwriters' over-allotment options are exercised in full). Holders of
Class A Common Stock of Nabisco generally would have identical rights to holders
of Class B Common Stock except that holders of Class A Common Stock would be
entitled to one vote per share while holders of Class B Common Stock would be
entitled to ten votes per share on all matters submitted to a vote of
stockholders. The registration statement has not become effective and there can
be no assurance that such offering will be consummated.
The initial public offering of shares of Nabisco is part of a broader
proposed initiative of Holdings designed to reduce consolidated debt of Holdings
by approximately $1 billion and establish a separately traded common stock for
Nabisco. After completion of the proposed public offering, Holdings anticipates
commencing a quarterly cash dividend on its common stock of $.075 per
share or $.30 per share on an annualized basis. The proposed transactions are
subject to the approval of lenders under RJRN's bank credit facilities.
At the time of the proposed public offering, Nabisco is expected to have
approximately $4.2 billion of intercompany debt and approximately $1.3 billion
of borrowings under a short-term bank credit agreement. The net proceeds of the
proposed public offering will be used by Nabisco to repay a portion of the
borrowings under its bank facility.
As part of the initiative, RJRN has called for redemption several issues of
debt securities, including $1.5 billion of 10 1/2% Senior Notes due 1998,
approximately $374 million of 8 3/8% Sinking Fund Debentures due 2017, $100
million of 13 1/2% Subordinated Debentures due 2001 and approximately $25
million of 7 3/8% Sinking Fund Debentures due 2001, all of which are redeemable
with various redemption premiums. RJRN expects to fund these redemptions with
borrowings under its existing credit facilities, proceeds from Holdings' Series
C Preferred Stock offering completed on May 6, 1994 and internally generated
cash flow. See "Selected Pro Forma Consolidated Financial Data."
Upon completion of the proposed public offering of Nabisco, RJRN may seek to
restructure approximately $6 billion of its domestic publicly held debt which
currently limits the ability of Nabisco to incur long-term debt other than
intercompany debt. The restructuring, which would require consent of public
debtholders and lenders under bank facilities, may include one or more offers to
exchange Nabisco debt securities for a portion of such debt. The goal of the
exchange offers would be to permit Nabisco to establish long-term borrowing
capacity independent of its parent and to reduce its intercompany debt. No
assurance can be given that RJRN will seek to restructure its debt or that any
such restructuring will be consummated.
The Board of Directors of Holdings has adopted certain policies, which would
become effective upon the closing of the Nabisco initial public offering. One
policy would provide that Holdings would limit, until December 31, 1998, the
aggregate amount of cash dividends on its capital stock. Under this policy,
during that period Holdings would not pay any extraordinary cash dividends and
would limit the
79
amount of its cash dividends, cash distributions and repurchases for cash of
capital stock and subordinated debt to an amount equal to the sum of $500
million plus (i) 65% of Holdings' cumulative consolidated net income before
extraordinary gains or losses and restructuring charges and (ii) net cash
proceeds of up to $250 million in any year from the sale of capital stock of
Holdings or its subsidiaries (other than proceeds from the Nabisco initial
public offering) to the extent used to repay, purchase or redeem debt or
preferred stock. Another policy would provide that Holdings would not declare a
dividend or distribution to its stockholders of the shares of capital stock of a
subsidiary before December 31, 1996. Another policy sets forth the intention of
Holdings that it would not make such a distribution prior to December 31, 1998
if that distribution would cause the ratings of the senior indebtedness of RJRN
to be reduced from investment grade to non-investment grade or if, after giving
effect to such distribution, any publicly held senior indebtedness of the
distributed company would not be rated investment grade. There is no assurance
that any such distribution will take place. Additional policies provide that an
amount equal to the net cash proceeds from any issuance and sale of equity by
Holdings or from any sale outside the ordinary course of business of material
assets owned or used by subsidiaries in the tobacco business, in each case
before December 31, 1998, would be used either to repay, purchase or redeem
consolidated indebtedness or to acquire properties, assets or businesses to be
used in existing or new lines of business and that an amount equal to the net
cash proceeds of any secondary sale of shares of Nabisco before December 31,
1998 would be used to repay, purchase or redeem consolidated debt. No assurance
can be given that Holdings will issue or sell any equity or sell any material
assets outside the ordinary course of business.
Termination of Agreement in Principle Relating to Borden. Holdings has been
unable to reach a definitive agreement for the transaction contemplated by its
agreement in principle with KKR to acquire a minority interest in Borden, as
announced on September 12, 1994. That announcement indicated that, following
KKR's successful acquisition of Borden, Holdings would issue to Borden
approximately $500 million of newly issued common shares of Holdings for newly
issued Borden shares representing a 20% pro forma interest in Borden and a
warrant to acquire an additional 10% pro forma interest in Borden. The inability
to reach agreement resulted from various complexities affecting the transaction,
including certain accounting issues. Holdings may in the future explore a basis
on which it or its Nabisco subsidiary may acquire a minority equity interest in
Borden in exchange for common stock of Holdings. However, Holdings is not
currently engaged in any such negotiations, and there is no assurance that
Holdings will seek to pursue any such negotiations or that any such negotiations
will be successful.
80
RJR NABISCO HOLDINGS CORP.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of September 30,
1994 and for the nine months ended September 30, 1994 and 1993 were derived from
Holdings' unaudited quarterly consolidated condensed financial statements
incorporated herein by reference. The selected consolidated financial data
presented below as of December 31, 1993 and 1992 and for each of the years in
the three-year period ended December 31, 1993 for Holdings were derived from
Holdings' consolidated financial statements, incorporated herein by reference,
which have been audited by Deloitte & Touche LLP, independent auditors. In
addition, the selected consolidated financial data as of December 31, 1991, 1990
and 1989, for the year ended December 31, 1990 and for the period from February
9, 1989 through December 31, 1989 for Holdings and for the period from January
1, 1989 through February 8, 1989 for RJRN were derived from the consolidated
financial statements of Holdings and RJRN as of December 31, 1991, 1990 and
1989, for the year ended December 31, 1990 and for each of the periods within
the one-year period ended December 31, 1989, not presented or incorporated
herein by reference, which have been audited by Deloitte & Touche LLP,
independent auditors. The data should be read in conjunction with Holdings'
consolidated financial statements and Holdings' unaudited quarterly consolidated
condensed financial statements incorporated herein by reference.
HOLDINGS
------------------------------------------------------------------------
RJRN
FOR THE NINE ----------
MONTHS ENDED
SEPTEMBER 30,
FOR THE YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLIONS EXCEPT PER ----------------- -----------------------------------------------------------------
SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------------------------
2/9 TO 12/31 1/1 TO 2/8
------------ ----------
RESULTS OF OPERATIONS
Net sales......................... $11,322 $11,053 $15,104 $15,734 $14,989 $13,879 $ 12,114 $ 650
------- ------- ------- ------- ------- ------- ------ ----------
Cost of products sold............. 5,079 4,709 6,640 6,326 6,088 5,652 5,241 332
Selling, advertising,
administrative and
general expenses................ 3,789 4,182 5,731 5,788 5,358 4,801 4,276 295
Amortization of trademarks and
goodwill........................ 469 466 625 616 609 608 557 10
Restructuring expense............. -- -- 730 106 -- -- -- --
------- ------- ------- ------- ------- ------- ------ ----------
Operating income(1)............. 1,985 1,696 1,378 2,898 2,934 2,818 2,040 13
Interest and debt expense......... (828) (910) (1,209) (1,449) (2,217) (3,176) (3,340) (44)
Change in control costs........... -- -- -- -- -- -- -- (247)
Other income (expense), net....... (81) (4) (58) 7 (69) (44) 169 15
------- ------- ------- ------- ------- ------- ------ ----------
Income (loss) from continuing
operations before income
taxes.......................... 1,076 782 111 1,456 648 (402) (1,131) (263)
Provision (benefit) for income
taxes........................... 474 356 114 680 280 60 (156) (66)
------- ------- ------- ------- ------- ------- ------ ----------
Income (loss) from continuing
operations..................... 602 426 (3) 776 368 (462) (975) (197)
Income (loss) from operations of
discontinued businesses, net of
income taxes(2)................. -- -- -- -- -- -- (1) 24
Extraordinary item--(loss) gain on
early extinguishments of debt,
net of income
taxes........................... (145) (110) (142) (477) -- 33 -- --
------- ------- ------- ------- ------- ------- ------ ----------
Net income (loss)................. 457 316 (145) 299 368 (429) (976) (173)
Preferred stock dividends......... 98 33 68 31 173 50 -- 4
------- ------- ------- ------- ------- ------- ------ ----------
Net income (loss) applicable to
common stock $ 359 $ 283 $ (213) $ 268 $ 195 $ (479) $ (976) $ (177)
------- ------- ------- ------- ------- ------- ------ ----------
------- ------- ------- ------- ------- ------- ------ ----------
PER SHARE DATA
Income (loss) from continuing
operations
per common and common equivalent
share........................... $ .33 $ .29 $ (.05) $ .55 $ .22 $ (1.19) $ (3.21) $ (.89)
Dividends per share of Series A
Preferred Stock(3).............. 2.51 2.51 3.34 3.34 .49 -- -- --
Dividends per share of Series C
Preferred Stock(3).............. 2.44 -- -- -- -- -- -- --
BALANCE SHEET DATA
(AT END OF PERIODS)
Working capital................... 358 -- $ 202 $ 730 $ 165 $(1,089) $ 106 --
Total assets...................... 31,851 -- 31,295 32,041 32,131 32,915 36,412 --
Total debt........................ 11,205 -- 12,448 14,218 14,531 18,918 25,159 --
Redeemable preferred stock(4)..... -- -- -- -- -- 1,795 -- --
Stockholders' equity(5)........... 10,957 -- 9,070 8,376 8,419 2,494 1,237 --
Book value per common share after
conversion of Series A Preferred
Stock and Series C Preferred
Stock........................... 5.94 -- 5.77 -- -- -- -- --
(Footnotes on following page)
81
(Footnotes for preceding page)
- ------------
(1) The 1992 amount includes a gain of $98 million on the sale of the
ready-to-eat cold cereal business.
(2) The 1989 amount for Holdings includes $237 million of interest expense
allocated to discontinued operations.
(3) On November 8, 1991, Holdings issued 52,500,000 shares of Series A Preferred
Stock and sold 210,000,000 Series A Depositary Shares. On May 6, 1994,
Holdings issued 26,675,000 shares of Series C Preferred Stock and sold
266,750,000 Series C Depositary Shares. Because Series A Preferred Stock and
Series C Preferred Stock mandatorily convert into Holdings Common Stock,
dividends on such shares are reported similar to common equity dividends.
(4) On December 16, 1991, an amendment to the Amended and Restated Certificate
of Incorporation of Holdings was filed which deleted the provisions
providing for the mandatory redemption of the redeemable preferred stock of
Holdings on November 1, 2015. Accordingly, such securities were presented as
a component of Holdings' stockholders' equity as of December 31, 1992 and
1991. Such securities were redeemed on December 6, 1993.
(5) Holdings' stockholders' equity at September 30, 1994 and December 31 of each
year from 1993 to 1989 includes non-cash expenses related to accumulated
trademark and goodwill amortization of $3.484 billion, $3.015 billion,
$2.390 billion, $1.774 billion, $1.165 billion and $.557 billion,
respectively.
See Notes to Holdings' Consolidated Financial Statements and Holdings' Unaudited
Quarterly Consolidated Condensed Financial Statements incorporated herein by
reference.
82
RJR NABISCO HOLDINGS CORP.
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The Holdings Pro Forma Financial Statements reflect the effects of
adjustments to the historical results of operations and financial condition of
Holdings. The Holdings Pro Forma Financial Statements should be read in
conjunction with the Holdings Consolidated Financial Statements, the Holdings
Consolidated Condensed Financial Statements and other financial information set
forth or incorporated by reference herein.
The Holdings pro forma consolidated condensed statements of income excluding
extraordinary items related to the loss on early extinguishments of debt, net of
income taxes, give effect to the following transactions and events as if they
occurred as of January 1, 1993: (i) borrowings of $1.3 billion under the Nabisco
Credit Agreement and the application of funds provided through such borrowings
to repay a portion of the borrowings under the 1991 Credit Agreement; (ii) the
sale and issuance of 45,000,000 shares of Nabisco Class A Common Stock in the
Nabisco Common Stock Offerings, the resulting reduction in Holdings'
proportionate interest in Nabisco and the application of the estimated net
proceeds of approximately $1,047 million (assuming an initial public offering
price of $24.50 per share) therefrom to repay a portion of the borrowings under
the Nabisco Credit Agreement; (iii) the assumed payment of quarterly dividends
on Holdings' Common Stock of $.075 per share and the increased level of net
indebtedness assumed to be outstanding had such dividend payments been made;
(iv) the redemption of $1.5 billion of the 10 1/2% Senior Notes due 1998,
approximately $374 million of the 8 3/8% Debentures due 2017, $100 million of
13 1/2% Subordinated Debentures due 2001 and approximately $25 million of the
7 3/8% Debentures due 2001 through borrowings under the 1991 Credit Agreement
and proceeds from Holdings' Series C Preferred Stock offering completed on May
6, 1994; and (v) the tax effect of the foregoing. Holdings' pro forma
consolidated condensed balance sheet gives effect to the pro forma transactions
and events described in clauses (i), (ii) and (iv) above, as if they occurred on
September 30, 1994.
Management believes the assumptions used provide a reasonable basis on which
to present the pro forma financial data. THE HOLDINGS PRO FORMA FINANCIAL
STATEMENTS ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE
CONSTRUED TO BE INDICATIVE OF HOLDINGS' RESULTS OF OPERATIONS OR FINANCIAL
POSITION HAD THE TRANSACTIONS AND EVENTS DESCRIBED ABOVE BEEN CONSUMMATED ON THE
DATES ASSUMED AND DO NOT PROJECT HOLDINGS' RESULTS OF OPERATIONS OR FINANCIAL
POSITION FOR ANY FUTURE DATE OR PERIOD. NABISCO HAS FILED A REGISTRATION
STATEMENT WITH THE COMMISSION WITH RESPECT TO A PROPOSED INITIAL PUBLIC OFFERING
OF 45,000,000 SHARES OF ITS CLASS A COMMON STOCK, BUT SUCH REGISTRATION
STATEMENT HAS NOT BEEN DECLARED EFFECTIVE BY THE COMMISSION. NO ASSURANCE CAN BE
GIVEN THAT SUCH OFFERING WILL BE CONSUMMATED.
83
RJR NABISCO HOLDINGS CORP.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Net sales....................................................... $ 11,322 $11,322
---------- ---------
Cost and expenses:
Cost of products sold.......................................... 5,079 5,079
Selling, advertising, administrative and general expenses...... 3,789 3,789
Amortization of trademarks and goodwill........................ 469 469
---------- ---------
Operating income............................................. 1,985 1,985
Interest and debt expense....................................... (828) $ 112(a) (716)
Other income (expense), net..................................... (81) (81)
---------- --- ---------
Income before income taxes................................... 1,076 112 1,188
Provision for income taxes...................................... 474 39(b) 513
---------- --- ---------
Income before minority interest in income of Nabisco......... 602 73 675
Minority interest in income of Nabisco.......................... -- (32)(c) (32)
---------- --- ---------
Net income................................................... 602 41 643
Less preferred stock dividends.................................. 98 98
---------- --- ---------
Net income applicable to Common Stock........................ $ 504 $ 41 $ 545
---------- --- ---------
---------- --- ---------
Per Share Data
Net income per common and common equivalent.................. $ .33 $ .36
Dividends per share of Common Stock.......................... -- .225
Dividends per share of Series A Preferred Stock.............. 2.505 2.505
Dividends per share of Series C Preferred Stock.............. 2.438 2.438
See Notes to Pro Forma Consolidated Condensed Statements of Income.
84
RJR NABISCO HOLDINGS CORP.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Net sales....................................................... $ 15,104 $15,104
---------- ---------
Cost and expenses:
Cost of products sold.......................................... 6,640 6,640
Selling, advertising, administrative and general expenses...... 5,731 5,731
Amortization of trademarks and goodwill........................ 625 625
Restructuring expense.......................................... 730 730
---------- ---------
Operating income............................................. 1,378 1,378
Interest and debt expense....................................... (1,209) $ 161(a) (1,048)
Other income (expense), net..................................... (58) (58)
---------- --- ---------
Income before income taxes................................... 111 161 272
Provision for income taxes...................................... 114 56(b) 170
---------- --- ---------
Income (loss) before minority interest in income of
Nabisco.................................................... (3) 105 102
Minority interest in income of Nabisco.......................... -- (29)(c) (29)
---------- --- ---------
Net income (loss)............................................ (3) 76 73
Less preferred stock dividends.................................. 68 68
---------- --- ---------
Net income (loss) applicable to Common Stock................. $ (71) $ 76 $ 5
---------- --- ---------
---------- --- ---------
Per Share Data
Net income (loss) per common and common equivalent........... $ (.05) $ .00
Dividends per share of Common Stock.......................... -- .30
Dividends per share of Series A Preferred Stock.............. 3.34 3.34
See Notes to Pro Forma Consolidated Condensed Statements of Income.
85
RJR NABISCO HOLDINGS CORP.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
The following is a summary of the pro forma adjustments reflected in the Pro
Forma Consolidated Condensed Statements of Income:
(a) Adjust historical interest and debt expense, as applicable, based
upon (i) borrowings of $1.3 billion under the Nabisco Credit Agreement and
the application of funds provided through such borrowings to repay a portion
of the borrowings under the 1991 Credit Agreement; (ii) the sale and
issuance of 45,000,000 shares of Nabisco Class A Common Stock in the Nabisco
Common Stock Offerings, the resulting reduction in Holdings' proportionate
interest in Nabisco and the application of the estimated net proceeds of
approximately $1,047 million (assuming an initial public offering price of
$24.50 per share) therefrom to repay a portion of the borrowings under the
Nabisco Credit Agreement; (iii) the assumed payment of quarterly dividends
on Holdings' Common Stock of $.075 per share and the increased level of net
indebtedness assumed to be outstanding had such dividend payments been made;
(iv) the redemption of $1.5 billion of the 10 1/2% Senior Notes due 1998,
approximately $374 million of the 8 3/8% Debentures due 2017, $100 million
of 13 1/2% Subordinated Debentures due 2001 and approximately $25 million of
the 7 3/8% Debentures due 2001 through borrowings under the 1991 Credit
Agreement and proceeds from Holdings' Series C Preferred Stock offering
completed on May 6, 1994.
(b) Recognize income taxes on the pro forma adjustments at the U.S.
statutory rate of 35%.
(c) Record the reduction of Holdings' proportionate interest in Nabisco
resulting from the Nabisco Common Stock Offerings.
86
RJR NABISCO HOLDINGS CORP.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1994
(DOLLARS IN MILLIONS)
PRO FORMA
HISTORICAL ADJUSTMENTS AFTER ADJUSTMENTS
---------- ----------- -----------------
ASSETS
Current assets:
Cash and cash equivalents............................ $ 647 $ (399) (a) $ 248
Accounts and notes receivable, net................... 1,107 1,107
Inventories.......................................... 2,504 2,504
Prepaid expenses and excise taxes.................... 414 414
---------- ----------- -------
TOTAL CURRENT ASSETS............................. 4,672 (399) 4,273
---------- ----------- -------
Property, plant and equipment, at cost................. 7,710 7,710
Less accumulated depreciation.......................... (2,281) (2,281)
---------- -------
Net property, plant and equipment.................... 5,429 5,429
---------- -------
Trademarks, net........................................ 8,573 8,573
Goodwill, net.......................................... 12,761 12,761
Other assets and deferred charges...................... 416 (13)(a) 403
---------- ----------- -------
$ 31,851 $ (412) $31,439
---------- ----------- -------
---------- ----------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable........................................ $ 229 $ 229
Accounts payable..................................... 469 469
Accrued liabilities.................................. 2,646 (83)(a) 2,563
Current maturities of long-term debt................. 613 613
Income taxes accrued................................. 357 $ (66)(a) 291
---------- ----------- -------
TOTAL CURRENT LIABILITIES........................ 4,314 (149) 4,165
---------- ----------- -------
Long-term debt (less current maturities)............... 10,363 (140)(a) 9,176
-- (b)
(1,300)(c)
253 (c)
Other noncurrent liabilities........................... 2,534 654 (c) 3,188
Deferred income taxes.................................. 3,683 3,683
Stockholders' equity:
ESOP convertible preferred stock..................... 247 247
Series A convertible preferred stock................. 2 2
Series B preferred stock............................. 1,250 1,250
Series C convertible preferred stock................. 3 3
Common Stock......................................... 11 11
Paid-in capital...................................... 10,214 393 (c) 10,607
Retained earnings (accumulated deficit).............. (427) (123)(a) (550)
Receivable from ESOP................................. (190) (190)
Other stockholders' equity........................... (153) (153)
---------- ----------- -------
TOTAL STOCKHOLDERS' EQUITY....................... 10,957 270 11,227
---------- ----------- -------
$ 31,851 $ (412) $31,439
---------- ----------- -------
---------- ----------- -------
See Notes to Pro Forma Consolidated Condensed Balance Sheet.
87
RJR NABISCO HOLDINGS CORP.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
The following is a summary of the pro forma adjustments reflected in the Pro
Forma Consolidated Condensed Balance Sheet:
(a) The redemption of $1.5 billion of the 10 1/2% Senior Notes dues
1998, approximately $374 million of the 8 3/8% Debentures due 2017, $100
million of the 13 1/2% Subordinated Debentures due 2001 and approximately
$25 million of the 7 3/8% Debentures due 2001, including the payment of
accrued interest on such notes and debentures in the aggregate amount of $83
million, through borrowings under the 1991 Credit Agreement and proceeds
from Holdings' Series C Preferred Stock offering completed on May 6, 1994,
the write off of related unamortized financing costs of $13 million and the
resulting extraordinary loss of $123 million net of related income taxes of
$66 million.
(b) Borrowings of $1.3 billion under the Nabisco Credit Agreement and
the application of funds provided through such borrowings to repay a portion
of the borrowings under the 1991 Credit Agreement.
(c) The sale and issuance of 45,000,000 shares of Nabisco Class A Common
Stock in the Nabisco Common Stock Offerings, the resulting reduction in
Holdings' proportionate interest in Nabisco and the application of the
estimated net proceeds of approximately $1,047 million (assuming an initial
public offering price of $24.50 per share) therefrom to repay a portion of
the borrowings under the Nabisco Credit Agreement.
88
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Holdings Common Stock as of September 30, 1994 by (a) persons known
to Holdings to be the beneficial owners of more than five percent of the
outstanding Holdings Common Stock, (b) each director of Holdings, (c) each of
the five most highly compensated executive officers of Holdings during the 1993
fiscal year of Holdings, (d) one individual who served as Chief Executive
Officer of Holdings during the 1993 fiscal year of Holdings and (e) all
directors and executive officers of Holdings as a group. The following table
assumes: (i) the mandatory conversion of Holdings' Series A Preferred Stock,
(ii) all outstanding options for Borden Common Stock are exercised, (iii) all
outstanding shares of Borden's Series B Preferred Stock are converted into
Borden Common Stock and (iv) Borden Shares equal to the Minimum Condition are
exchanged in the Exchange Offer at an Exchange Ratio of 1.78125 to 1. If 100% of
the Borden Shares are exchanged at an Exchange Ratio of 2.375 to 1, the
Beneficial Ownership After Exchange Offer and Mandatory Conversion for KKR
Associates shown in the table below would be 203,085,971 shares and 14.96%
(11.78% on a fully diluted basis), respectively. Information concerning Borden
shares and options outstanding is based on information available on
September 30, 1994. Except as otherwise noted, the persons named in the table
below have sole voting and investment power with respect to all shares shown as
beneficially owned by them.
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO EXCHANGE AFTER EXCHANGE OFFER
OFFER AND AND
NAME OF BENEFICIAL OWNER MANDATORY CONVERSION MANDATORY CONVERSION
- ------------------------------------------------- ---------------------- ----------------------
SHARES PERCENT SHARES PERCENT
----------- ------- ----------- -------
KKR Associates(1)................................ 556,766,236 48.51% 448,009,553 33.00%
9 West 57th Street
New York, New York 10019
FMR Corp.(2)..................................... 120,887,980 10.21 120,883,980 8.90
82 Devonshire Street
Boston, Massachusetts 02109
College Retirement Equities Fund(3).............. 57,360,153 5.00 57,360,153 4.22
730 Third Avenue
New York, New York 10017
John T. Chain, Jr.(4)............................ 40,000 * 40,000 *
John L. Clendenin................................ 2,266 * 2,266 *
Louis V. Gerstner, Jr.(5)........................ 2,114,213 .18 2,114,213 .16
James H. Greene, Jr.(1).......................... 27,301 * 27,301 *
H. John Greeniaus(4)............................. 2,234,093 .19 2,234,093 .16
Charles M. Harper(4)............................. 2,810,490 .24 2,810,490 .21
James W. Johnston(4)(6).......................... 2,174,455 .19 2,174,455 .16
Henry R. Kravis(1)............................... 289,189 * 289,189 *
John G. Medlin, Jr............................... 34,333 * 34,333 *
Paul E. Raether(1)............................... 94,185 * 94,185 *
Lawrence R. Ricciardi(4)(7)...................... 1,435,339 .13 1,435,339 .11
Rozanne L. Ridgway(4)............................ 30,000 * 30,000 *
Clifton S. Robbins(1)............................ 21,614 * 21,614 *
George R. Roberts(1)............................. 289,189 * 289,189 *
Scott M. Stuart(1)............................... 14,186 * 14,186 *
G. Richard Thoman(4)............................. -- -- -- --
Michael T. Tokarz(1)............................. 29,577 * 29,577 *
Karl M. von der Heyden(4)........................ 1,921,315 .17 1,921,315 .14
All directors and executive officers of Holdings
as a group (other than as set forth above in
relation to KKR Associates)(1)(4).............. 19,029,327 1.64% 19,029,327 1.39%
- ------------
* Less than 0.1%.
(1) Shares of Holdings Common Stock shown as beneficially owned by KKR
Associates include shares owned of record by the limited partnerships of
which KKR Associates is the sole general partner and as to which it
possesses sole voting and investment power, including the Partnership and,
after giving effect to the Exchange Offer, any shares of Holdings Common
Stock held by Borden upon exercise of the Option and indirectly controlled
by KKR Associates. KKR Associates is a limited
(Footnotes continued on following page)
89
(Footnotes continued from preceding page)
partnership of which Messrs. Greene, Kravis, Raether, Roberts and Tokarz,
all directors of Holdings, and Saul A. Fox, Robert I. MacDonnell and Michael
N. Michelson are the general partners. Such persons may be deemed to share
beneficial ownership of the shares shown as owned by KKR Associates. The
foregoing persons disclaim beneficial ownership of any such shares. Messrs.
Robbins and Stuart, both directors of Holdings, are limited partners of KKR
Associates.
(2) According to the Schedule 13G dated October 7, 1994 jointly filed by FMR
Corp. and Edward C. Johnson 3d, Chairman of FMR Corp. and a member of a
controlling group with respect to FMR Corp., the 120,887,980 shares of
Holdings Common Stock shown as beneficially owned by FMR Corp. and Mr.
Johnson include (i) 112,056,000 shares (including 33,841,300 shares issuable
within 60 days upon the Mandatory Conversion) beneficially owned by Fidelity
Management & Research Company, a registered investment adviser and wholly
owned subsidiary of FMR Corp., as a result of acting as investment adviser
to several registered investment companies that own such shares (the
"Fidelity Funds") and (ii) 8,831,980 shares (including 1,914,500 shares
issuable within 60 days upon the Mandatory Conversion) beneficially owned by
Fidelity Management Trust Company, a bank and wholly owned subsidiary of FMR
Corp., as a result of serving as investment manager of institutional
accounts. According to the Schedule 13G, (a) FMR Corp. and Mr. Johnson each
has sole investment power, but neither has sole voting power, over the
shares owned by the Fidelity Funds and (b) FMR Corp. has sole investment
power over all of, has sole voting power over certain of, and has no voting
power over the remainder of, the shares owned by the institutional accounts.
(3) College Retirement Equities Fund reported in its Schedule 13G dated February
8, 1994 that it had sole voting and investment power over all of its shares.
(4) For purposes of this table, a person or group of persons is deemed to be the
"beneficial owner" of any shares that such person has the right to acquire
within 60 days. For purposes of computing the percentage of outstanding
shares held by each person or group of persons named above on a given date,
any security that such person or persons has the right to acquire within 60
days is deemed to be outstanding, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. The
number of shares beneficially owned includes (i) 30,000 shares subject to
currently exercisable options granted to each of Mr. Chain and Ms. Ridgway;
2,187,500 shares subject to currently exercisable options granted to Mr.
Harper; 1,602,606 shares subject to currently exercisable options granted to
each of Messrs. Greeniaus and Johnston; 1,069,799 shares subject to
currently exercisable options granted to Mr. Ricciardi; and 11,918,850
shares subject to currently exercisable options granted to all directors and
executive officers as a group; and (ii) 768, 1,308, 1,317, 1,315, 1,315 and
19,486 shares of Holdings Common Stock currently issuable on conversion of a
like number of shares of ESOP Preferred Stock (as defined below) owned by,
respectively, Messrs. Harper, Greeniaus, Johnston, Ricciardi, von der Heyden
and all directors and executive officers as a group.
(5) The outstanding shares of Holdings Common Stock shown as beneficially owned
by Mr. Gerstner include 103,600 shares held in trust for the benefit of Mr.
Gerstner's children, as to which Mr. Gerstner disclaims beneficial
ownership.
(6) The outstanding shares of Holdings Common Stock shown as beneficially owned
by Mr. Johnston include 60,000 shares held in trust for the benefit of Mr.
Johnston's children, as to which Mr. Johnston disclaims beneficial
ownership.
(7) The outstanding shares of Holdings Common Stock shown as beneficially owned
by Mr. Ricciardi include 60,000 shares held in trust for the benefit of Mr.
Ricciardi's children, as to which Mr. Ricciardi disclaims beneficial
ownership.
As of June 20, 1994, Wachovia Bank of North Carolina, N.A. ("Wachovia"), Box
3875, Trust Operations, Winston-Salem, North Carolina 27102, beneficially owned
15,490,964 shares of ESOP Convertible Preferred Stock of Holdings ("ESOP
Preferred Stock"), representing 100% of the issued and outstanding ESOP
Preferred Stock. Wachovia holds such shares in its capacity as Trustee of the
RJRN Defined Contribution Master Trust. Under the terms of the Master Trust,
Wachovia is required to vote shares of ESOP Preferred Stock allocated to
participants' accounts in accordance with instructions received from such
participants and to vote allocated shares of ESOP Preferred Stock for which it
has not received instructions and unallocated shares in the same ratio as shares
with respect to which instructions have been received. Wachovia has no
investment power with respect to shares of ESOP Preferred Stock.
90
BORDEN, INC.
Borden is engaged primarily in manufacturing, processing, purchasing and
distributing a broad range of products through three operating divisions: North
American Foods, International Foods and Packaging and Industrial Products. North
American Foods is comprised of niche grocery, pasta and sauce, and dairy
products, while International Foods includes international milk powder, European
bakery products and several European grocery and pasta businesses. Packaging and
Industrial Products includes primarily wallcoverings, adhesives and resins, and
plastic films and packaging.
RECENT DEVELOPMENTS
On October 26, 1994, Borden announced its results for the third quarter
ended September 30, 1994, which included a net loss of $130.5 million, or $.92
per share, including a pretax charge to income of $181.2 million. The pretax
charge of $181.2 million consisted of $104.5 million for less-than-estimated
proceeds from the divestiture of discontinued operations, as announced by Borden
in January 1994, $52.2 million for estimated transaction fees and expenses with
respect to the Transactions, $54.4 million for the write-down of two
partnerships and of goodwill related to the Fisher cheese brand, and $16.5
million for additions to environmental, litigation and idle property reserves.
The third quarter results also included a credit of $50.1 million for the
reversal of prior restructuring charges associated with the previous
restructuring programs. Borden's management reviewed the prior restructuring
programs in light of recent events and determined that portions of the reserves
for these programs would not be utilized. Borden also reported that its
operating income for the quarter ended September 30, 1994 was $75.3 million,
including $23.9 million of the credit for the reversal of restructuring charges,
and a $28.9 million charge for the write-off of Fisher cheese goodwill.
In addition, Borden announced the declaration of a quarterly dividend on the
common stock by its Board of Directors of $.01 per share, payable December 1
to shareholders of record November 10, reduced from $.075 per share for
the prior quarter of 1994.
91
BORDEN, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the six months
ended June 30, 1994 and 1993 were derived from unaudited quarterly consolidated
financial statements contained in Borden's Quarterly Report on Form 10-Q at and
for the six months ended June 30, 1994 and incorporated herein by reference. The
selected consolidated financial data presented below for each of the years in
the three-year period ended December 31, 1993 for Borden were derived from the
consolidated financial statements contained in Borden's Annual Report on Form
10-K for the year ended December 31, 1993 and incorporated by reference herein,
which have been audited by Price Waterhouse LLP, independent accountants. The
unaudited quarterly consolidated financial statements include all adjustments
which are, in the opinion of Borden management, necessary for a fair statement
of the interim results. All such adjustments are of a normal recurring nature.
Results for interim periods are not necessarily indicative of results to be
expected for the full year. The data below should be read in conjunction with
the audited consolidated financial statements and unaudited quarterly
consolidated condensed financial statements of Borden, and the related notes
thereto, incorporated by reference herein.
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
REVENUE
Net sales......................................... $ 2,642 $ 2,650 $ 5,506 $ 5,872 $ 5,924 $ 6,273 $ 6,391
COST AND EXPENSES
Cost of goods sold................................ 1,998 1,944 4,078 4,302 4,269 4,644 4,859
Marketing, general and administrative expenses.... 526 499 1,224 1,163 1,024 1,020 902
Restructuring charges(1).......................... -- -- 115 298 67 -- 463
Interest expense.................................. 58 62 125 116 167 156 129
Equity in income of affiliates.................... (5) (6) (16) (19) (24) (23) (17)
Minority interest................................. 19 20 41 40 3 3 1
Other (income) and expense, net................... 18 18 23 (4) (13) 12 11
Income taxes...................................... 11 39 (27) 14 151 169 76
-------- -------- -------- -------- -------- -------- --------
2,625 2,576 5,563 5,910 5,644 5,981 6,424
-------- -------- -------- -------- -------- -------- --------
EARNINGS
(Loss) income from continuing operations.......... 17 74 (57) (38) 280 292 (33)
Discontinued operations:(1)(2)
(Loss) income from operations................... -- (28) (66) (86) 15 28 16
Loss on disposal................................ -- -- (490) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
(Loss) income before extraordinary item and
cumulative effect of
accounting changes.............................. 17 46 (613) (124) 295 320 (17)
Extraordinary loss on early retirement of debt.... -- -- -- (11) -- -- --
Cumulative effect of change in accounting for:
Postemployment benefits......................... -- (18) (18) -- -- -- --
Postretirement benefits other than pensions..... -- -- -- (189) -- -- --
Income taxes.................................... -- -- -- (40) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net (loss) income................................. $ 17 $ 28 $ (631) $ (364) $ 295 $ 320 $ (17)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
SHARE DATA
(Loss) income from continuing operations.......... $ .12 $ .53 $ (.40) $ (.27) $ 1.90 $ 1.97 $ (0.22)
Discontinued operations:
(Loss) income from operations................... -- (.20) (.47) (.60) .10 0.19 0.11
Loss on disposal................................ -- -- (3.47) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
(Loss) income before extraordinary item and
cumulative effect of
accounting changes.............................. .12 .33 (4.34) (.87) 2.00 2.16 (0.11)
Extraordinary loss on early retirement of debt.... -- -- -- (.07) -- -- --
Cumulative effect of change in accounting for:
Postemployment benefits......................... -- (.13) (.13) -- -- -- --
Postretirement benefits other than pensions..... -- -- -- (1.32) -- -- --
Income taxes.................................... -- -- -- (.28) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net (loss) income per common share................ $ .12 $ .20 $ (4.47) $ (2.54) $ 2.00 $ 2.16 $ (0.11)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Cash dividends paid per common share.............. $ .15 $ .60 $ .90 $ 1.185 $ 1.12 $ 1.035 $ 0.90
Average number of common shares outstanding during
the period...................................... 141.5 140.8 141.0 143.4 147.6 147.9 148.2
AT JUNE 30, AT DECEMBER 31,
----------- ----------------------------------------------
1994 1993 1992 1991 1990 1989
----------- ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
BALANCE SHEET DATA
Current assets.......................................... $ 1,469 $1,290 $1,928 $1,921 $2,026 $2,011
Investments and other assets............................ 459 443 352 319 237 160
Property and equipment.................................. 1,338 1,337 1,788 1,904 1,707 1,441
Intangibles............................................. 790 802 1,178 1,317 1,314 1,213
Total assets............................................ 4,056 3,872 5,246 5,461 5,284 4,825
Current liabilities..................................... 1,528 1,372 1,808 1,414 1,847 1,466
Long-term debt.......................................... 1,244 1,241 1,330 1,346 1,340 1,441
Other liabilities (including long-term debt)............ 2,270 2,254 2,312 2,072 1,595 1,670
Shareholders' equity.................................... 258 246 1,126 1,975 1,842 1,689
Book value per common share............................. 1.82 1.74 8.01 13.39 12.50 11.41
(Footnotes on following page)
92
(Footnotes for preceding page)
- ------------
(1) 1993 includes a pretax charge of $752.3 million for business divestitures
and restructuring. 1992, 1991 and 1989 include pretax restructuring charges
of $377.2 million, $71.6 million and $570.7 million, respectively.
(2) Financial data for the years prior to 1993 were restated in 1993 to reflect
discontinued operations.
See Notes to Borden's Consolidated Financial Statements and Borden's Unaudited
Quarterly Consolidated Financial Statements incorporated herein by reference.
93
THE PURCHASER AND THE COMMON STOCK PARTNERSHIP
The Purchaser, a New Jersey corporation and a subsidiary of the Partnership,
was organized in connection with the Transactions and has not carried on any
activities to date other than those incident to its formation and the
Transactions. Prior to the consummation of the Exchange Offer, KKR Partners II,
L.P. will become a holder of shares of common stock of the Purchaser. Each of
the Common Stock Partnerships is a Delaware limited partnership, whose general
partner is KKR Associates, an affiliate of KKR. The principal assets of each of
the Common Stock Partnerships consist of investments in various entities,
including investments in Holdings.
DESCRIPTION OF HOLDINGS CAPITAL STOCK
The authorized capital stock of Holdings consists of 2,200,000,000 shares of
Holdings Common Stock and 150,000,000 shares of preferred stock, par value $.01
per share (the "Preferred Stock"). As of August 31, 1994, 1,147,681,192 shares
of Holdings Common Stock were outstanding. As of such date, 94,664,699 shares of
Preferred Stock were outstanding, of which 52,500,000 shares were Series A
Preferred Stock, 50,000 shares were Series B Cumulative Preferred Stock (the
"Series B Preferred Stock"), 26,675,000 shares were Series C Preferred
Conversion Stock (the "Series C Preferred Stock") and 15,439,699 shares were
ESOP Preferred Stock.
The following is a description of the terms of the capital stock of
Holdings. This description does not purport to be complete and is qualified in
its entirety by reference to Holdings' Amended and Restated Certificate of
Incorporation, as amended (the "Holdings Certificate of Incorporation"), which
has been incorporated by reference as an exhibit to the Registration Statement
of which this Offering Circular/Prospectus is a part and is incorporated by
reference herein. Holdings believes that the summaries of the Holdings
Certificate of Incorporation set forth below are accurate and complete summaries
of the material terms of such instruments.
COMMON STOCK
Each share of Holdings Common Stock is entitled to one vote at all meetings
of stockholders of Holdings for the election of directors of Holdings and on all
other matters. Dividends may be paid to the holders of Holdings Common Stock
when, as and if declared by the board of directors of Holdings out of funds
legally available therefor. The Holdings Common Stock has no preemptive or
similar rights. Holders of Holdings Common Stock are not liable to further call
or assessment. Upon liquidation, dissolution or winding up of the affairs of
Holdings, any assets remaining after provision for payment of creditors (and any
liquidation preference of any outstanding preferred stock) would be distributed
pro rata among holders of the Holdings Common Stock. Holdings has never paid any
cash dividends on shares of the Holdings Common Stock. Holdings' and RJRN's
credit agreement, dated as of December 1, 1991, as amended (the "1991 Credit
Agreement") and Holdings' and RJRN's credit agreement dated as of April 5, 1993,
the amended (the "1993 Credit Agreement," and together with the 1991 Credit
Agreement, the "Credit Agreements") restrict cash dividends and other
distributions on Holdings Common Stock. The indenture relating to subordinated
debentures (the "RJRN Subordinated Debentures") of RJRN (the "RJRN Subordinated
Debenture Indenture") and the indenture relating to certain senior notes (the
"Senior Notes") of RJRN (the "Senior Note Indenture") restrict dividends or
distributions to Holdings from RJRN and its subsidiaries which could otherwise
be used for the payment of cash dividends on the Holdings Common Stock by
Holdings. The timing, amount and form of future dividends, if any, will depend,
among other things, upon the effect of applicable restrictions on the payment of
dividends, results of operations, financial condition, cash requirements,
prospects and other factors deemed relevant by the board of directors of
Holdings. See "Certain Significant Considerations--Holding Company Structure"
and "Description of Holdings Capital Stock--Contractual Restrictions on Payment
of Dividends."
94
The Holdings Common Stock is listed on the NYSE.
First Chicago Trust Company of New York is the registrar and transfer agent
for the Holdings Common Stock.
PREFERRED STOCK
Series A Preferred Stock. Each share of Series A Preferred Stock is entitled
to receive, when, as and if declared by the board of directors of Holdings, out
of funds legally available therefor, cumulative cash dividends at a rate of
$3.34 per annum, payable quarterly in arrears. Each share of Series A Preferred
Stock will mandatorily convert into four shares of Holdings Common Stock on
November 15, 1994, subject to adjustment in certain events (the "Series A Common
Equivalent Rate"). In addition, each share of Series A Preferred Stock may be
redeemed by Holdings, in whole or in part, at any time at a redemption price to
be paid in shares of Holdings Common Stock, plus accrued and unpaid dividends.
The optional redemption price declines from $64.82 per share by $.009218 on each
day following November 8, 1991 to $55.36 on September 15, 1994, and is $54.80
thereafter.
Immediately prior to the effectiveness of a merger or consolidation of
Holdings (other than a merger or consolidation of Holdings with or into a wholly
owned subsidiary of Holdings) that results in the conversion or exchange of
Holdings Common Stock into other securities or property, each outstanding share
of Series A Preferred Stock will convert automatically into (i) shares of
Holdings Common Stock at a rate, which currently is four shares of Holdings
Common Stock for each share of Series A Preferred Stock, in effect immediately
prior to such merger or consolidation, plus (ii) the right to receive an amount
in cash equal to all accrued and unpaid dividends on such Series A Preferred
Stock to and including the business day immediately prior to the effective date
of the merger or consolidation (the "Settlement Date"), plus (iii) the right to
receive an amount of cash initially equal to $10.02, declining by $.009218 on
each day following November 8, 1991 to $.56 on September 15, 1994, and equal to
zero thereafter, unless sooner redeemed. At the option of Holdings, it may
deliver on the Settlement Date in lieu of some or all of the cash consideration
described in clauses (ii) and (iii) of the preceding sentence, shares of
Holdings Common Stock.
Holders of Series A Preferred Stock have the right, voting together with the
holders of Holdings Common Stock (and any other class of capital stock of
Holdings entitled to vote together with the Holdings Common Stock, including the
Series C Preferred Stock and ESOP Preferred Stock) as one class, to vote in the
election of directors and upon each other matter coming before any meeting of
the stockholders on the basis initially of one vote (equal to one-fourth of the
Series A Common Equivalent Rate) for each Series A Preferred Stock held;
provided that the holders of Series A Preferred Stock are not entitled to vote
on any increase or decrease in the number of authorized shares of any class or
classes of stock. In the event dividends on all series of Preferred Stock,
including the Series A Preferred Stock, are in arrears and unpaid for six
quarterly periods, the holders of Series A Preferred Stock, together with the
holders of all other outstanding series of Preferred Stock entitled to vote
thereon, are entitled to elect two additional directors to the board of
directors of Holdings until all cumulative dividends on all series of Preferred
Stock, have been paid or declared and set aside for payment; provided that such
directors may not exceed 25% of the total board of directors or be less than one
director. While such holders are entitled to elect two directors, they shall not
be entitled to participate with the holders of Holdings Common Stock in the
election of any other directors, but would continue to vote with the holders of
Holdings Common Stock upon each other matter coming before any meeting of the
stockholders.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series A Preferred Stock will be entitled to receive $40.50
per share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Holdings
Common Stock.
95
Series B Preferred Stock. Each share of Series B Preferred Stock is entitled
to receive, when, as and if declared by the board of directors of Holdings, out
of funds legally available therefor, cumulative preferential cash dividends at
the rate per annum of 9.25%, payable quarterly in arrears. On and after August
19, 1998, Holdings, at its option upon not less than 30 nor more than 60 days'
notice, may redeem shares of the Series B Preferred Stock, as a whole or in
part, at any time, at a redemption price equivalent to $25,000 per share, plus
accrued and unpaid dividends thereon to the date fixed for redemption, without
interest, to the extent Holdings will have funds legally available therefor.
The Series B Preferred Stock has no stated maturity and is not subject to
any sinking fund or mandatory redemption. The Series B Preferred Stock is not
convertible into, or exchangeable for, shares of any other class or series of
stock of Holdings.
The holders of the Series B Preferred Stock do not have any voting rights,
except as otherwise provided by law and under certain other limited
circumstances.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series B Preferred Stock will be entitled to receive
$25,000 per share, plus an amount equal to any accrued and unpaid dividends,
before any distribution is made on any class of junior securities, including
Holdings Common Stock.
Series C Preferred Stock. Each share of Series C Preferred Stock is entitled
to receive, when, as and if declared by the board of directors of Holdings, out
of funds legally available therefor, cumulative preferential cash dividends
accruing at a rate of $6.012 per annum, payable quarterly in arrears. Each share
of Series C Preferred Stock will mandatorily convert into ten shares of Holdings
Common Stock on May 15, 1997, subject to adjustment in certain events (the
"Series C Common Stock Equivalent"), plus accrued and unpaid dividends on the
Series C Preferred Stock until the date of conversion. In addition, each share
of Series C Preferred Stock may be redeemed by Holdings, in whole or in part, at
any time or from time to time prior to the mandatory conversion date at a
redemption price to be paid in shares of Holdings Common Stock (or following
certain circumstances, other consideration), plus accrued and unpaid dividends.
The optional redemption price declines from $112.286 per share by $.01656 per
share on each day following May 6, 1994 to $95.246 per share on March 15, 1997,
and is $94.25 thereafter (the "Call Price").
Immediately prior to a merger or consolidation of Holdings (other than a
merger or consolidation of Holdings with or into a wholly owned subsidiary of
Holdings) that results in the conversion or exchange of Holdings Common Stock
into other securities or property, outstanding Series C Preferred Stock may be
converted at the option of Holdings into (i) shares of Holdings Common Stock at
a rate equal to the Series C Common Stock Equivalent (currently ten shares for
each share of Series C Preferred Stock), in effect immediately prior to such
merger or consolidation, plus (ii) the right to receive an amount in cash (which
may, at the option of Holdings, be payable in shares of Holdings Common Stock)
equal to all accrued and unpaid dividends on such Series C Preferred Stock to
and including the Settlement Date, plus (iii) the right to receive an amount of
cash (which may, at the option of Holdings, be payable in shares of Holdings
Common Stock) initially equal to $18.036 per share, declining by $.01656 on each
day following May 6, 1994 to $.996 on March 15, 1997 and equal to zero
thereafter. The shares of Holdings Common Stock issuable under clause (i) above
will be reduced, if necessary, so that the value of the aggregate consideration
described in clauses (i) and (iii) above does not exceed the Call Price on the
Settlement Date. Alternatively, Holdings may cause the Series C Preferred Stock
to remain outstanding or convert into a substantially similar security of
Holdings or of the entity issuing the consideration in such merger or
consolidation. In that event, each holder of a share of Series C Preferred Stock
may elect to convert the Series C Preferred Stock into Holdings Common Stock at
a rate equal to the Series C Common Stock Equivalent immediately prior to the
merger or consolidation (provided that the number of shares of Holdings Common
Stock issuable will be reduced, if necessary, so that the value of such shares
does not exceed the Call Price on the Settlement Date), plus the right to
receive an amount of cash (which may, at the option of Holdings, be
96
payable in shares of Holdings Common Stock) equal to all accrued and unpaid
dividends on such Series C Preferred Stock to and including the Settlement Date.
If Holdings has recommended acceptance of (or has expressed no opinion and
is remaining neutral toward) a tender offer which would result in the ownership
by the bidder (or an affiliate of the bidder) of more than 50% of the then
outstanding Holdings Common Stock, then each holder of Series C Preferred Stock
will have the option to convert such shares, in whole (but not in part), into
Holdings Common Stock at the Series C Stock Equivalent in effect at the close of
business on the day prior to the date of expiration or termination of such
tender offer; provided that the number of shares of Holdings Common Stock
issuable upon such conversion will be reduced if necessary, so that the value of
such shares does not exceed the Call Price on such date.
If Holdings distributes to holders of Holdings Common Stock the capital
stock of a subsidiary representing all or substantially all of either of
Holdings' two present principal lines of business (the "Spinoff Company"),
Holdings will (subject to the final sentence of this paragraph) convert each
share of Series C Preferred Stock into one-half of a share of the existing
Series C Preferred Stock and one-half of a share of a substantially equivalent
security of the Spinoff Company. In such case, the conversion rate per share of
the new Series C Preferred Stock will be equal to a fraction, of which the
numerator will be the product of the market price of Holdings Common Stock prior
to the distribution and the Series C Common Stock Equivalent and of which the
denominator will be the excess of the market price of Holdings Common Stock
prior to the distribution over the market value of a share of the Spinoff
Company. The conversion rate per share of the new security of the Spinoff
Company will be equal to a fraction, of which the numerator will be the product
of the market price of Holdings Common Stock prior to the distribution and the
Series C Common Stock Equivalent and of which the denominator will be the market
value of a share of the Spinoff Company. Alternatively, Holdings may elect to
distribute to each holder of Series C Preferred Stock the number of shares of
capital stock of the Spinoff Company that such holder would have been entitled
to receive if the Series C Preferred Stock had been converted to Holdings Common
Stock immediately prior to the distribution at the Series C Common Stock
Equivalent then in effect. In the event that either (a) the fair value of the
shares of the Spinoff Company distributed are greater than or equal to 95% of
the market price of Holdings Common Stock prior to the distribution or (b) the
record date for the distribution is fixed less than twenty-one trading days
prior to such record date, then Holdings must elect to distribute the shares of
the Spinoff Company to the holders of the shares of Series C Preferred Stock in
accordance with the preceding sentence.
The voting rights of the holders of Series C Preferred Stock are generally
consistent with those of the holders of Series A Preferred Stock.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series C Preferred Stock will be entitled to receive $60.50
per share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Holdings
Common Stock.
ESOP Preferred Stock. Each share of ESOP Preferred Stock is entitled to
receive, when, as and if declared by the board of directors of Holdings, out of
funds legally available therefor, cumulative cash dividends at a rate of 7.8125%
of stated value per annum ($1.25 per annum) at least until April 10, 1999,
payable semi-annually in arrears. Each share of ESOP Preferred Stock is
convertible into one share of Holdings Common Stock, subject to adjustment in
certain events. The ESOP Preferred Stock is redeemable at the option of
Holdings, in whole or in part, at any time on or after April 10, 1999, at an
initial optional redemption price of $16.25 per share, declining thereafter on
an annual basis in the amount of $.125 a year to $16 per share on April 10,
2001, plus accrued and unpaid dividends. Under certain other circumstances, the
ESOP Preferred Stock is subject to redemption at any time. Holders of ESOP
Preferred Stock have voting rights which are generally consistent with those of
the holders of the Series A Preferred Stock.
97
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of ESOP Preferred Stock will be entitled to receive $16.00 per
share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Holdings
Common Stock.
CONTRACTUAL RESTRICTIONS AND POLICIES ON PAYMENT OF DIVIDENDS
Holdings is subject to various contractual restrictions on its ability to
pay dividends on its Preferred Stock and Holdings Common Stock.
Under the Credit Agreements, if no event of default exists thereunder in the
case of clauses (i), (iii) and (iv) below, Holdings may (i) declare and pay
regularly scheduled dividends on its preferred or preference stock outstanding
on December 9, 1991, in the case of the 1991 Credit Agreement, and April 5,
1993, in the case of the 1993 Credit Agreement, when and as scheduled at
dividend rates not exceeding those in effect on December 19, 1991, in the case
of the 1991 Credit Agreement, and April 5, 1993, in the case of the 1993 Credit
Agreement; (ii) issue shares of Holdings Common Stock upon the exercise of any
warrants or options or upon the conversion or redemption of any convertible or
redeemable preferred stock, and in connection with any such exercise, conversion
or redemption, Holdings may pay cash in lieu of issuing fractional shares of
Holdings Common Stock; (iii) repurchase shares of Holdings Common Stock (and/or
options or warrants in respect thereof) pursuant to and in accordance with the
terms of, management and/or employee stock plans; (iv) declare and pay, or
otherwise effect, any other cash dividend or other dividend or distribution, or
repurchase or redeem any capital stock, provided that the aggregate amount of
such dividends, distributions, repurchases and redemptions, when added to all
dividends, distributions, repurchases and redemptions, made in accordance with
this clause (iv) after December 9, 1991, in the case of the 1991 Credit
Agreement, and January 1, 1992, in the case of the 1993 Credit Agreement, will
not exceed an amount equal to the sum of (x) 50% of the sum of (A) consolidated
net income of Holdings and its subsidiaries for the period (taken as one
accounting period) from January 1, 1992 to the last day of the last fiscal
quarter of Holdings then ended plus (B) all losses from debt retirement deducted
in determining consolidated net income of Holdings and its subsidiaries for the
period referred to in clause (A) above plus (y) the aggregate cash proceeds (net
of underwriting discounts and commissions) received by Holdings after March 22,
1993, in the case of the 1991 Credit Agreement, and April 5, 1993, in the case
of the 1993 Credit Agreement, from issuances of its equity securities; (v) issue
and exchange shares of any class or series of Holdings common stock now or
hereafter outstanding for shares of any other class or series of Holdings common
stock now or hereafter outstanding and (vi) in connection with any
reclassification of Holdings common stock and any exchange permitted by clause
(v) above, pay cash in lieu of issuing fractional shares of any class or series
of Holdings common stock.
RJRN and Holdings are seeking to amend the Credit Agreements to permit the
completion of the proposed Nabisco initial public offering and to allow Nabisco
Inc., Nabisco's immediate subsidiary, to obtain a $1.5 billion short-term credit
facility. In the amendments (the "Amendments") to the Credit Agreements proposed
by RJRN and Holdings, Holdings would be subject to new limits on its ability to
pay dividends on its Preferred Stock and Holdings Common Stock. Specifically, if
the proposed Amendments become effective, Holdings would be able to (i) issue
shares of Holdings Common Stock upon the exercise of any warrants or options or
upon the conversion or redemption of any convertible or redeemable preferred
stock and, in connection with any such exercise, conversion or redemption,
Holdings would be able to pay cash in lieu of issuing fractional shares of
Holdings Common Stock; (ii) if no event of default existed under the Credit
Agreements, repurchase Holdings Common Stock (and/or options or warrants in
respect thereof) pursuant to, and in accordance with the terms of, management
and/or employee stock plans; (iii) if no event of default existed under the
Credit Agreements, declare and pay, or otherwise effect, any other cash dividend
or other dividend or distribution, or repurchase or redeem any capital stock,
provided that the aggregate amount of such dividends, distributions, repurchases
and redemptions, when added to all dividends, distributions, repurchases and
redemptions
98
made in accordance with this clause (iii) after the effective date of the
Amendments, would not exceed an amount equal to the sum of (x) $1 billion plus
(y) 50% of the sum of (A) consolidated net income of Holdings and its
subsidiaries for the period (taken as one accounting period) from January 1,
1995 to the last day of the last fiscal quarter of Holdings then ended plus (B)
all losses from debt retirement deducted in determining consolidated net income
of Holdings and its subsidiaries for the period referred to in clause (A) above
plus (z) the aggregate cash proceeds (net of underwriting discounts and
commissions) received by Holdings after the effective date of the Amendments
from issuances of its equity securities (provided that the aggregate amount of
such aggregate net cash proceeds received in any twelve-month period shall be
deemed not to exceed $250 million for purposes of this clause (iii)(z)), in each
case determined at the time of the declaration thereof, provided that such
dividend, distribution or redemption payment was paid within 45 days of the
making of such declaration; (iv) issue and exchange shares of any class or
series of its common stock now or hereafter outstanding for shares of any other
class or series of its common stock now or hereafter outstanding; and (v) in
connection with any reclassification of its common stock and any exchange
permitted by clause (v) above, pay cash in lieu of issuing fractional shares of
any class or series of its common stock. RJRN and Holdings anticipate that
their lenders will consent to the proposed amendment and to the establishment
of a short-term credit facility for Nabisco, Inc.
The Senior Note Indenture, under which $1.5 billion of 10 1/2%
Senior Notes due 1998 (the "Senior Notes") are outstanding, and the RJRN
Subordinated Debenture Indenture, under which $100 million of
13 1/2% Subordinated Debentures due 2001 (the "Subordinated Debentures") are
outstanding, by containing restrictions on the payment of cash dividends or
the making of other distributions by RJRN to Holdings in excess of certain
specified amounts and for certain specified purposes, also effectively limit
the payment of dividends on the Holdings Common Stock or any Preferred Stock.
Holdings has called all of the Senior Notes and Subordinated Debentures for
redemption on November 30, 1994 and December 2, 1994, respectively.
In addition to the contractual restrictions referred to above, the Board of
Directors of Holdings has adopted a policy, which will become effective upon the
closing of the proposed Nabisco initial public offering, under which Holdings
would limit, until December 31, 1998, the aggregate amount of cash dividends on
its Capital Stock. Under this policy, Holdings:
(a) would not pay any extraordinary cash dividends;
(b) would not make any Restricted Payment if, after giving effect to such
Restricted Payment, the aggregate amount expended for all Restricted Payments
subsequent to December 31, 1994 exceeds the sum of (i) $500 million, plus (ii)
65% of Consolidated Net Income of Holdings on a cumulative basis subsequent to
December 31, 1994, plus (iii) aggregate cash proceeds of up to $250 million
received in any year subsequent to December 31, 1994 by Holdings or a Subsidiary
from the issuance and sale (other than to a Subsidiary) of Holdings' or such
Subsidiary's Capital Stock (or of other securities that are subsequently
converted into or exchanged for Holdings' or such Subsidiary's Capital Stock)
(other than proceeds from the initial public offering of Nabisco), it being
understood that any aggregate net cash proceeds from any issuance and sale of
any Capital Stock will be counted only up to the amount of any indebtedness or
preferred stock of Holdings or any Subsidiary that has been repaid, purchased,
redeemed or otherwise acquired for value by Holdings or any Subsidiary within
one year before or after such issuance and sale. If Holdings or a Subsidiary
repays, purchases, redeems or otherwise acquires for value indebtedness or
preferred stock of Holdings or a Subsidiary in exchange for Capital Stock of
Holdings or a Subsidiary, Holdings or such Subsidiary shall be deemed to have
received the net cash proceeds equal to the market value of the Capital Stock so
issued in exchange (such market value to be determined by Holdings' Board of
Directors, whose good faith determination shall be conclusive);
(c) will use an amount equal to the net cash proceeds received prior to
December 31, 1998 from (i) the issuance and sale by Holdings of any Capital
Stock (other than to a Subsidiary or current, future or former directors,
officers or employees of Holdings or any Subsidiary (or their estates or
beneficiaries under their estates) or (ii) any sale outside the ordinary course
of business of material assets owned or used by any of its Subsidiaries in the
tobacco business (other than to another Subsidiary) either to
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repay, purchase, redeem or otherwise acquire for value indebtedness of Holdings
or a Subsidiary or to acquire properties, assets or businesses to be used in
existing or new lines of business of Holdings or its Subsidiaries; and
(d) will use an amount equal to the net cash proceeds received by Holdings
or RJRN prior to December 31, 1998 from the sale to third parties of shares of
common stock of Nabisco held by either of them to repay, purchase, redeem or
otherwise acquire for value indebtedness of Holdings or a Subsidiary.
The foregoing policy will not prevent the payment of a cash dividend within
90 days of its declaration if, at the time of declaration, such payment would
have complied with the foregoing policy or the purchase, redemption,
acquisition, cancellation or other retirement for value of Capital Stock,
options on Capital Stock, stock appreciation rights or similar securities held
by current, future or former directors, officers or employees of Holdings or any
Subsidiary or certain trusts or estates for their benefit.
Holdings has also adopted a policy, which will become effective upon the
closing of the proposed Nabisco initial public offering, to the effect that it
will not declare a dividend or distribution on its Capital Stock prior to
December 31, 1996 that is paid in Capital Stock of a Subsidiary owned by
Holdings or a Subsidiary and that it is its intent not to make such a
distribution to its stockholders prior to December 31, 1998 if (a) such
distribution would cause the ratings of RJRN's publicly held senior
indebtedness to be reduced from investment grade to non-investment grade or (b)
any publicly held senior indebtedness of the distributed Subsidiary would,
after giving effect to such distribution, be rated non-investment grade.
For purposes of the foregoing policies:
"Capital Stock" means any and all shares, interests, participations or other
equivalents (however designated) of capital stock and any rights (other than
debt securities convertible into capital stock), warrants or options to acquire
such Capital Stock.
"Consolidated Net Income" of Holdings means, for any period, the aggregate
consolidated net income of Holdings and its Subsidiaries for such period,
determined on a consolidated basis in accordance with generally accepted
accounting principles as in effect from time to time, adjusted by excluding (to
the extent not otherwise excluded in calculating consolidated net income) any
net extraordinary gain or net extraordinary loss, as the case may be, and any
restructuring charges.
"Restricted Payment" means (i) any payment of any cash dividend or
distribution by Holdings on its Capital Stock, (ii) any purchase, redemption or
other acquisition for cash by Holdings of its Capital Stock (other than any such
purchase, redemption or acquisition for value in exchange for, or in an amount
equal to the proceeds of, an offering of Capital Stock of Holdings or any
Subsidiary or, in the case of Holdings' Series B Preferred Stock or any other
non-convertible preferred stock of Holdings outstanding from time to time, for
indebtedness of Holdings or any Subsidiary and (iii) any purchase, redemption or
other acquisition for cash by Holdings of any Subordinated Debt prior to any
scheduled maturity, scheduled repayment or scheduled sinking fund payment (other
than any such purchase, redemption or other acquisition for value in exchange
for, or in an amount equal to the proceeds of, an offering of Capital Stock or
Subordinated Debt of Holdings or any Subsidiary).
"Subordinated Debt" means any indebtedness of Holdings or any Subsidiary
which by its terms is expressly subordinated in right of payment to any other
indebtedness of Holdings or any Subsidiary, provided, however, that the term
Subordinated Debt shall not include any intercompany indebtedness.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by Holdings.
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CERTAIN STATUTORY AND BY-LAW PROVISIONS
Holdings is currently, and following the consummation of the offering will
be, subject to the "business combination" statute of the Delaware General
Corporation Law (the "DGCL"). In general, Section 203 of the DGCL prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an "interested stockholder," unless
(a) prior to such date the board of directors of the corporation approved either
the "business combination" or the transaction which resulted in the stockholder
becoming an "interested stockholder," (b) upon consummation of the transaction
which resulted in the stockholder becoming an "interested stockholder," the
"interested stockholder" owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (i)
by persons who are directors and also officers and (ii) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (c) on or subsequent to such date the "business combination" is
approved by the board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested stockholder." A
"business combination" includes mergers, stock or asset sales and other
transactions resulting in a financial benefit to the "interested stockholders."
An "interested stockholder" is a person who, together with affiliates and
associates, owns (or if such person is an affiliate or associate of the
corporation within three years, did own) 15% or more of the corporation's voting
stock.
Holdings' By-laws establish an advance notice procedure for stockholders to
make nominations of candidates for election as directors, or to bring other
business before an annual meeting of stockholders of Holdings. The By-laws
provide that only persons who are nominated by, or at the direction of, the
board of directors of Holdings or any committee designated by the board of
directors of Holdings, or by a stockholder who has given timely written notice
to the Secretary of Holdings prior to the meeting at which directors are to be
elected, will be eligible for election as directors of Holdings. The By-laws
also provide that in order to properly submit any business to an annual meeting
of stockholders, a stockholder must give timely written notice to the Secretary
of Holdings of such stockholder's intention to bring such business before such
meeting. Generally, for notice of stockholder nominations or other business to
be made at an annual meeting to be timely under the By-laws, such notice must be
received by Holdings (i) not less than 120 days nor more than 150 days before
the first anniversary date of Holdings' proxy statement in connection with the
last annual meeting of stockholders or (ii) if no annual meeting was held in the
previous year or the date of the applicable annual meeting has been changed by
more than 30 days from the date contemplated at the time of the previous year's
proxy statement, not less than a reasonable time, as determined by the board of
directors of Holdings, prior to the date of the applicable annual meeting. Under
the By-laws, a stockholder's notice must also contain certain information
specified in the By-laws.
The provisions described above, together with certain terms of Holdings
outstanding Preferred Stock and its ability to issue additional Preferred Stock,
may have the effect of delaying stockholder actions with respect to certain
business combinations and the election of new members of the board of directors
of Holdings. As such, the provisions could have the effect of discouraging open
market purchases of Holdings Common Stock because they may be considered
disadvantageous by a stockholder who desires to participate in a business
combination or elect a new director.
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DESCRIPTION OF BORDEN CAPITAL STOCK AND RIGHTS
Borden has authorized 480,000,000 shares of Borden Common Stock, of which
141,515,502 shares were issued and outstanding as of September 23, 1994
(excluding 53,465,136 shares held in Borden's treasury). Borden has also
authorized 10,000,000 shares of Preferred Stock, without par value. Of these
10,000,000 Preferred Shares, 475,000 have been designated Preferred
Stock--Series A, none of which were issued or outstanding as of September 23,
1994. In addition, 688,700 shares of Preferred Stock have been designated
Preferred Stock--Series B, of which 6,822 were issued and outstanding as of
September 23, 1994. Each share of preferred series B stock has an involuntary
liquidating value of $28.88, bears an annual cumulative dividend of $1.32, is
convertible into 6.6 shares of Borden Common Stock and is redeemable at Borden's
option. At September 23, 1994, 45,031 shares of Borden Common Stock were
reserved for issuance upon conversion of the preferred series B stock. In
addition, 2,400,000 shares of Preferred Stock have been designated Series C
Junior Participating Preferred Stock of Borden (the "Series C Stock"), none of
which were issued and outstanding as of September 23, 1994.
Under the Rights Agreement, each outstanding share of Borden Common Stock
has one Right, which entitles the shareholder to purchase, under certain
circumstances, one one-hundredth of a share of Series C Stock at a purchase
price of $175, subject to adjustment (the "Purchase Price").
The Rights Agreement provides that the Rights become exercisable on the
tenth day (calendar days in the case of clause (i) and business days in the case
of clause (ii)) (the "Distribution Date") following the earlier of: (i) the
acquisition by any person or group (an "Acquiring Person") of beneficial
ownership of 20% or more of the outstanding Borden Common Stock or (ii) the
commencement by any person or group of a tender offer which would result in such
person owning 20% or more of the outstanding Borden Common Stock. After the
acquisition by any Acquiring Person of 20% of the Borden Common Stock but before
such person has acquired 50% of the Borden Common Stock, Borden may exchange all
or part of the Rights at the rate of one share of Borden Common Stock per Right.
Subsequent to the date that the Rights become exercisable, the Rights will trade
separately from the Borden Common Stock. The percentage ownership required to
trigger a Distribution Date may be reduced by Borden to not less than the
greater of (i) the sum of 0.001% and the largest percentage of the outstanding
Borden Common Stock then known by Borden to be beneficially owned by any person
and (ii) 10%.
Under the Rights Agreement, the Rights are redeemable at a price of one and
two-thirds cents per Right by the vote of the Board of Directors of Borden, at
any time until the time when a person has acquired 20% or more of the
outstanding Borden Common Stock.
In the event that Borden were acquired in a merger or other business
combination transaction or more than 50% of its consolidated assets or earning
power were sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value of two times the Purchase Price of the Right.
In the event any person becomes an Acquiring Person, each holder of a Right
will thereafter have the right to purchase, upon payment of the Purchase Price,
such number of shares of Borden Common Stock having a market value equal to
twice the Purchase Price. The Acquiring Person will not be entitled to the
benefit of such right and Rights beneficially owned by such Acquiring Person
will thereafter be void.
In the event of any merger, consolidation or other transaction in which
shares of Borden Common Stock are exchanged, each share of the Series C Stock
will be entitled to receive 100 times the amount and type of consideration
received per share of Borden Common Stock.
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The Rights Agreement was amended as of September 11, 1994 and as of
September 23, 1994 to provide that (i) the letter agreement dated as of
September 11, 1994 between Borden and the Partnership pursuant to which the
Partnership stated its intent to enter into the Merger Agreement and
transactions contemplated thereby does not cause the Partnership or the
Purchaser to be the "Beneficial Owner" (as defined in the Rights Agreement) of
any Borden Shares or cause a Distribution Date to occur and (ii) none of the
execution or delivery of the Merger Agreement or the Conditional Purchase/Option
Agreement, or both such agreements taken together, or commencement of the
Exchange Offer, or the consummation of the transactions contemplated by the
Conditional Purchase/Option Agreement will trigger the exercisability of the
Rights, the separation of the Rights from the stock certificates to which they
are attached or any other provisions of the Rights Agreement, including causing
the Partnership and/or the Purchaser from becoming an Acquiring Person (as
defined in the Rights Agreement), the occurrence of the Distribution Date or a
Share Acquisition Date (as defined in the Rights Agreement).
COMPARISON OF RIGHTS OF HOLDERS
OF BORDEN AND HOLDINGS COMMON STOCK
The rights of shareholders of Borden are currently governed by applicable
New Jersey law, including the NJBCA, and by Borden's Charter and By-laws. If the
Merger is consummated, shareholders of Borden will become shareholders of
Holdings and their rights will be governed by applicable Delaware law, including
the DGCL, and by Holdings' Certificate of Incorporation and By-laws. Although it
is not practicable to compare all of the differences between the corporation
laws of Delaware and New Jersey and between the governing corporate documents of
Borden and Holdings, the following is a summary of the material differences
which may significantly affect the rights of Borden's shareholders.
Antitakeover Provisions
Both Delaware and New Jersey have enacted legislation which encourages a
potential acquiror of certain publicly-held corporations organized in the state
to negotiate with the board of directors and make it more difficult to effect an
acquisition not approved by the board. Under Delaware law, a publicly-held
corporation may be prohibited from consummating a business combination with an
"interested shareholder" for a period of three years after the shareholder
became interested unless (i) the business combination was approved by the board
of directors prior to the date the shareholder became interested, (ii) the
business combination was approved by the holders of 66 2/3% of the outstanding
voting other than shares held by the interested shareholder or (iii) upon
consummation of the transaction that resulted in the shareholder becoming an
interested shareholder, the interested shareholder owned at least 85% of the
corporation's voting stock. Under Delaware law, "beneficial ownership" of 15% or
more of the outstanding voting stock results in "interested shareholder" status.
Under New Jersey law, a publicly-traded New Jersey corporation with its
principal executive offices or significant business operations located in New
Jersey is prohibited from consummating a business combination with an interested
shareholder for a period of five years unless the business combination is
approved by the board of directors prior to the date the shareholder became
interested. In addition, after the five-year period, a New Jersey corporation
may not engage in a business combination with an interested shareholder unless
either (i) the business combination is approved by the board of directors prior
to the date the shareholder became an interested shareholder or (ii) the
business combination is approved by the holders of two-thirds of the voting
stock not held by the interested shareholder or (iii) subject to certain other
requirements, the consideration per share received in the business combination
is at least equal to the greater of (x) the highest price per share paid by the
interested shareholder in the five years prior to either the announcement of the
business combination or the date at which the interested shareholder became
such, whichever results in a higher price, and (y) the market price on either
the date the business combination is announced or on the date the
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interested shareholder first became such, whichever is higher. New Jersey law
defines "interested shareholder" as a person beneficially owning 10% or more of
the outstanding voting stock of the corporation.
Borden's Charter adds to the requirements of the NJBCA and provides that no
business combination with a "related person" (defined as a shareholder who
beneficially owns 20% or more of any class of capital stock of the corporation)
may occur unless (i) the business combination is approved by the affirmative
vote of at least 80% of the outstanding shares of capital stock entitled to vote
for directors, (ii) the business combination is approved by a majority of the
continuing directors (defined as a director who is not affiliated with any
"related person" and was a director prior to the time that the "related person"
crossed the threshold of 5% voting power of any class of capital stock) or (iii)
the consideration to be received per share in the business combination is at
least as high as the greater of the highest price per share of prior purchases
of Borden's capital stock by the "related person" and the average closing price
per share on the NYSE for the prior 200 trading days. See "The Exchange
Offer--Description of Merger Agreement and Conditional Purchase/Option
Agreement" for a discussion of certain agreements of Borden with respect to the
antitakeover provisions of the NJBCA and Borden's Charter in connection with the
Exchange Offer, the Merger and the Option.
Dissenters' or Appraisal Rights
Both the DGCL and the NJBCA give shareholders the right to dissent from
certain business acquisitions, dispositions and combinations and to demand and
receive cash payment of the fair value of their shares. These rights are known
as "appraisal rights" in Delaware and "dissenters' rights" in New Jersey.
Shareholders of a Delaware corporation generally have appraisal rights with
respect to a merger or consolidation. Unless the corporation's certificate of
incorporation provides otherwise, such appraisal rights generally are not
available (i) when the corporation is to be the surviving corporation and no
vote of its shareholders is required for the merger, except that appraisal
rights are available in certain short-form mergers under Section 253 of the DGCL
in which the parent corporation of a subsidiary more than 90% (but less than
100%) of the common stock of which is owned by the parent merges with such
subsidiary, or (ii) when the stock of the constituent corporation, on the record
date fixed to determine the shareholders entitled to receive notice of and vote
on the agreement of merger, is listed on a national securities exchange or held
of record by more than 2,000 shareholders, unless in the case of (i) or (ii)
above, such shareholders are required by the terms of the merger to accept
anything other than shares of stock of the surviving corporation, shares of
stock of another corporation that are so listed or held by such number of record
holders, cash in lieu of fractional shares of such stock, or any combination
thereof. Shareholders of a Delaware corporation do not have appraisal rights
with respect to the disposition of all or substantially all the assets of the
corporation unless the corporation's certificate of incorporation provides
otherwise.
Shareholders of a New Jersey corporation generally have dissenters' rights
with respect to a merger or consolidation as well as with respect to the
disposition of all or substantially all of the assets of the corporation. Such
dissenters' rights are not available to shareholders of a New Jersey corporation
(i) if the shares that they hold are a class or series that is listed on a
national securities exchange or is held of record by 1,000 or more shareholders
or (ii) if, pursuant to such disposition of assets, merger or consolidation,
they will receive stock or other securities so listed or held, cash, or a
combination of cash and such securities. A shareholder of a surviving
corporation in a merger will not have dissenters' rights if the vote of
shareholders of the corporation was not required for approval of the plan of
merger. Dissenters' rights are not available to holders of Borden Shares in the
Exchange Offer or the Merger. See "The Exchange Offer--Right to Dissent and
Appraisal Rights."
104
Special Meetings of Shareholders
Under Delaware law, special meetings of shareholders may be called by the
board of directors of a corporation or by such person or persons as may be
authorized by the certificate of incorporation or by the by-laws of the
corporation. Holdings' By-laws permit the chairman of the board of directors or,
upon written request to the chairman or secretary, the holders of not less than
25% of the outstanding shares of Holdings Common Stock to call a special
meeting.
Under New Jersey law, special meetings of shareholders may be called by the
president or board of directors of a corporation or by such other officers,
directors or shareholders, as may be provided in the by-laws. The By-laws of
Borden permit the chairman, chief executive officer, president or a majority of
directors to call a special meeting. In addition, under New Jersey law, upon the
application of a holder or holders of not less than 10% of all the shares
entitled to vote at a meeting, a court for good cause shown may order a special
meeting to be called and held.
Action By Written Consent
The DGCL provides that, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at any annual or
special meeting of shareholders of a corporation may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, is signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Holdings' Certificate of Incorporation does not contain a
provision limiting the right to act by written consent.
Under the NJBCA, except as otherwise provided in a corporation's certificate
of incorporation, any action required or permitted to be taken at a meeting of
shareholders, other than the annual election of directors, may be taken without
a meeting upon (i) the written consent of shareholders who would have been
entitled to cast the minimum number of votes that would be necessary to
authorize such action at a meeting at which all shareholders entitled to vote
thereon were present and voting and (ii) ten or twenty days' (depending on the
circumstances) written notice to all non-consenting shareholders who would have
been entitled to notice of a meeting to vote on such action. Borden's Charter
does not contain a provision limiting the right to act by written consent.
Statutory Voting Requirements
The DGCL generally requires the approval of a majority of the outstanding
voting shares for merger, consolidation, sale of all or substantially all of the
corporation's assets, or an amendment to its certificate of incorporation unless
the corporation's certificate of incorporation provides for a higher voting
requirement. The NJBCA generally requires approval by a majority of votes cast
at a meeting of shareholders by those entitled to vote, unless the charter or
another provision of the NJBCA requires a greater plurality. Holdings'
Certificate of Incorporation does not contain any higher voting requirement.
Borden's Charter provides that the affirmative vote of two-thirds of all issued
and outstanding voting stock is required to adopt a plan of merger or
consolidation involving Borden. In addition, Borden's Charter provides that the
consent of 85% of all the issued and outstanding voting stock is required to
approve the lease or sale of all the property and assets of Borden.
The NJBCA permits a New Jersey corporation, without shareholder approval, to
sell all or substantially all of its assets if such sale is in the ordinary
course of the corporation's business. The DGCL contains no similar provision.
Limiting of Liability and Indemnification of Directors and Officers
Delaware law permits a corporation to indemnify its directors and officers
and limit the liability of its directors for monetary damages for breach of the
fiduciary duty of care as a director or officer except in certain circumstances.
New Jersey law permits a corporation to indemnify and limit the liability of
105
both directors and officers under similar circumstances. Holdings' Certificate
of Incorporation and By-laws contain provisions limiting the liability of
directors and officers to the maximum extent permitted by the DGCL. Borden's
Charter and By-laws contain provisions indemnifying and limiting the liability
of directors and officers to the maximum extent permitted by the NJBCA.
Classified Board of Directors
Under Delaware law, a corporation may have a classified board of directors
providing for up to three classes of directors each having a term of up to three
years, and newly elected directors selected by the board of directors may serve
to the expiration of the term of the class to which they are named. Under New
Jersey law a corporation may have a classified board of directors, but no class
of directors shall hold office for a term shorter than one year or longer than
five years, and the term of at least one class shall expire in each year. In
addition, directors elected to the board of directors to fill newly created
directorships serve until the next annual meeting of shareholders. Neither
Holdings nor Borden has a classified board of directors.
Dividends
Delaware law permits corporations to pay dividends out of surplus or, in the
event there is no surplus, out of (i) net profits for the fiscal year in which
the dividend is declared or (ii) net profits for the preceding year.
Under New Jersey law, a dividend may not be paid if the corporation would be
unable to pay its debts as they become due in the usual course of business or if
the corporation's total assets would be less than its total liabilities.
Shareholder Derivative Actions
Under New Jersey law, if the shareholder-plaintiffs in a shareholder
derivative action own less than 5% of the outstanding shares of any class of the
stock of the corporation on behalf of which such shareholders are bringing suit
(unless such shares have a fair market value in excess of $25,000), the
corporation may require the shareholder-plaintiffs to give security for the
reasonable expenses, including attorneys' fees of the corporation or any
defendants; moreover, shareholders found by a court of competent jurisdiction to
have instituted a derivative suit without reasonable cause may be required to
pay the reasonable expenses, including attorney's fees, of the defendants named
in such action.
No comparable provisions exist under the DGCL.
Loans to and Guarantees of Obligations of Officers and Employees
Under both Delaware and New Jersey law, a corporation may lend money to, or
guarantee of an obligation of, an officer, employee or director of a corporation
whenever in the judgment of the board of directors of the corporation such loan
or guarantee may reasonably be expected to benefit the corporation. Delaware law
also requires that loans or guarantees may be made for a director only if the
director is an officer or employee.
LEGAL MATTERS
The legality of the Holdings Common Stock being offered hereby is being
passed upon for Holdings by Jo-Ann Ford, Vice President, Assistant General
Counsel and Secretary of Holdings. Ms. Ford owns options to purchase shares of
Holdings Common Stock which represent less than 0.1% of the currently
outstanding shares of Holdings Common Stock.
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EXPERTS
The consolidated financial statements of Holdings as of December 31, 1993
and 1992 and for each of the years in the three year period ended December 31,
1993 incorporated in this Offering Circular/Prospectus by reference from (1)
Holdings' Registration Statement No. 33-52381 on Form S-3, at the time such
Registration Statement was declared effective and (2) Holdings' Annual Report on
Form 10-K for the year ended December 31, 1993 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Borden, Inc. incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 1993, have been so incorporated in reliance on the report (which
contains an explanatory paragraph relating to the restatement and
reclassification of the 1992 consolidated financial statements as described in
note 3 to the financial statements) of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Borden
Shares and/or Rights and any other required documents should be sent or
delivered by each shareholder of Borden or his broker, dealer, commercial bank,
trust company or other nominee to the Exchange Agent as follows:
The Exchange Agent for the Exchange Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
BY MAIL: BY HAND OR OVERNIGHT DELIVERY:
First Chicago Trust Company of New York First Chicago Trust Company of New York
Tenders & Exchanges Tenders & Exchanges
P.O. Box 2563--Suite 4668 14 Wall Street
Jersey City, New Jersey 07303-2563 Suite 4680--BOR, 8th Floor
New York, New York 10005
Any questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and addresses
listed below. Additional copies of this Offering Circular/Prospectus, the Letter
of Transmittal and the Notice of Guaranteed Delivery may also be obtained from
the Information Agent. You may also contact your broker, dealer, commercial bank
or trust company for assistance concerning the Exchange Offer.
The Information Agent for the Exchange Offer is:
D.F. KING & CO., INC.
UNITED STATES EUROPE
77 Water Street Royex House, Aldermanbury Square
New York, New York 10005 London, England EC2V 7HR
1-800-755-3106 (Toll Free) (44) 71 600 5005 (Collect)
The Dealer Manager for the Exchange Offer is:
MORGAN STANLEY & CO.
Incorporated
1251 Avenue of the Americas
New York, New York 10020
(212) 703-4774
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any person who was
or is, or is threatened to be made, a party to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. A Delaware corporation may indemnify any
person who was or is a director, officer, employee or agent of the corporation
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the director, officer, employee or agent
is adjudged to be liable to the corporation. Where a director, officer, employee
or agent is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
(including attorneys' fees) which such director, officer, employee or agent
actually and reasonably incurred in connection therewith.
In accordance with the Delaware Law, Article Sixth of the Certificate of
Incorporation of Holdings contains a provision to limit the personal liability
of the directors of Holdings for monetary damages for breach of their fiduciary
duty. This provision eliminates each director's liability to Holdings or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware Law providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions, or (iv) for any transaction from which a director derived an
improper personal benefit. The effect of this provision is to eliminate the
personal liability of directors for monetary damages for actions involving a
breach of their fiduciary duty of care, including any such actions involving
gross negligence.
Article IV of the By-laws of Holdings provides for indemnification of any
current or former officer or director of Holdings to the full extent permitted
by applicable law.
In connection with the Exchange Offer, the Partnership has agreed to
indemnify Holdings and its directors, officers, affiliates and controlling
persons and Borden and its directors, officers, affiliates and controlling
persons from certain liabilities under the federal securities laws to the extent
they arise out of or are based upon information relating to the Partnership
furnished by the Partnership to Holdings for inclusion in the Registration
Statement or required to be included therein and omitted from the information
furnished. In addition, Borden has provided a similar indemnity to Holdings and
its directors, officers, affiliates and controlling persons and the Partnership
and its partners and affiliates and their respective directors, officers and
controlling persons with respect to information it furnishes to Holdings for
inclusion in the Registration Statement or required to be included therein and
omitted from the information furnished. Holdings has provided a similar
indemnity to the Partnership and its partners and affiliates and their
respective directors, officers and controlling persons and Borden and its
directors, officers, affiliates and controlling persons with respect to
information it furnishes for inclusion in the Registration Statement or required
to be included therein and omitted from the information furnished. See
"Summary."
II-1
ITEM 21. EXHIBITS.
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------
*1.1 Form of Dealer Manager Agreement.
**2.1 Agreement and Plan of Merger dated as of September 23, 1994 among
Borden Acquisition Corp., Whitehall Associates, L.P. and
Borden, Inc.
**2.2 Conditional Purchase/Stock Option Agreement dated as of September
23, 1994 by and among Whitehall Associates, L.P., Borden
Acquisition Corp. and Borden, Inc.
3.1 Amended and Restated Certificate of Incorporation of RJR Nabisco
Holdings Corp., filed October 1, 1990 (incorporated by
reference to Exhibit 3.1 to Amendment No. 4 filed on October 2,
1990, to the Registration Statement on Form S-4 of RJR Nabisco
Holdings Corp., Registration No. 33-36070, filed on July 25,
1990, as amended (the "Form S-4, Registration No. 33-36070")).
3.1(a) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed January 29,
1991 (incorporated by reference to Exhibit 3.1(a) to Amendment
No. 3, filed on January 31, 1991, to the Registration Statement
on Form S-4 of RJR Nabisco Holdings Corp., Registration No.
33-38227).
3.1(b) Certificate of Designation of ESOP Convertible Preferred Stock,
filed April 10, 1991 (incorporated by reference to Exhibit
3.1(b) to Amendment No. 2 filed on April 11, 1991, to the
Registation Statement on Form S-1 of RJR Nabisco Holdings
Corp., Registration No. 33-39532, filed on March 20, 1991).
3.1(c) Certificate of Designation of Series A Conversion Preferred
Stock, filed November 7, 1991 (incorporated by reference to
Exhibit 3.1(c) to Amendment No. 3, filed on November 1, 1991,
to the Registration Statement on Form S-1 of RJR Nabisco
Holdings Corp., Registration No. 33-43137, filed October 2,
1991).
3.1(d) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed December 16,
1991 (incorporated by reference to Exhibit 3.1(d) of the Annual
Report on Form 10-K of RJR Nabisco Holdings Corp., RJR Nabisco
Holdings Group, Inc., RJR Nabisco Capital Corp. and RJR
Nabisco, Inc. for the fiscal year ended December 31, 1991, File
Nos. 1-10215, 1-10214, 1-10248 and 1-6388 (the "1991 Form
10-K")).
3.1(e) Certificate of Amendment to the Amended and Restated Certificate
of Incorporation of RJR Nabisco Holdings Corp. (relating to the
authorization of the issuance of additional shares of Common
Stock) filed April 6, 1993 (incorporated by reference to
Exhibit 3.3 of the Quarterly Report on Form 10-Q of RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc. for the fiscal quarter
ended March 31, 1993, filed April 30, 1993 (the "March 1993
Form 10-Q")).
3.1(f) Certificate of Designation of Series B Cumulative Preferred
Stock, filed August 16, 1993 (incorporated by reference to
Exhibit 3.1(f) of the Annual Report on Form 10-K of RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc. for the fiscal year ended
December 31, 1993, File Nos. 1-10215 and 1-6388 (the "1993 Form
10-K")).
3.1(g) A composite of the Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., as amended to
August 16, 1993 (incorporated by reference to Exhibit 3.1(g) of
the 1993 Form 10-K).
3.1(h) Certificate of Designation of Series C Conversion Preferred Stock
(incorporated by reference to Exhibit 4.1(h) to the
Registration Statement on Form S-3 of RJR Nabisco Holdings
Corp., Registration No. 33-52381 filed on February 2, 1994, as
amended (the Form S-3, Registration No. 33-52381).
3.2 Amended and Restated By-laws of RJR Nabisco Holdings Corp., as
amended, effective January 20, 1994 (incorporated by reference
to Exhibit 3.2 to the 1993 Form 10-K).
4.1 Credit Agreement dated as of December 1, 1991, among RJR Nabisco
Holdings Corp., RJR Nabisco Holdings Group, Inc., RJR Nabisco
Capital Corp., RJR Nabisco, Inc. and the lending institutions
party thereto (incorporated by reference to Exhibit 4.1 of the
1991 Form 10-K) (the "Credit Agreement").
4.1(a) Amendment No. 1 to Credit Agreement, dated as of October 21, 1992
(incorporated by reference to Exhibit 4.1(a) of the Annual
Report on Form 10-K of RJR Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the fiscal year ended December 31, 1992, File
Nos. 1-10215 and 1-6388).
4.1(b) Amendment No. 2 to Credit Agreement, dated as of March 4, 1993
(incorporated by reference to Exhibit 4.2 of the March 1993
Form 10-Q).
II-2
4.1(c) Amendment No. 3 to Credit Agreement, dated as of October 12, 1993
(incorporated by reference to Exhibit 10.1 of the Quarterly
Report on Form 10-Q of RJR Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the quarter ended September 30, 1993 (the
"September 1993 Form 10-Q").
4.2 Credit Agreement dated as of April 5, 1993 among RJR Nabisco
Holdings Corp., RJR Nabisco, Inc. and the lending institutions
party thereto (incorporated by reference to Exhibit 4.3 of the
March 1993 Form 10-Q) (the "1993 Credit Agreement")
4.2(a) Amendment No. 1 to 1993 Credit Agreement, dated October 12, 1993
(incorporated by reference to Exhibit 10.1 of the September
1993 10-Q).
4.3 Indenture dated as of April 25, 1991 among RJR Nabisco Capital
Corp., RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group,
Inc., RJR Nabisco, Inc. and Citibank, N.A., as Trustee,
relating to the 10 1/2% Senior Notes due 1998, including form
of securities. (incorporated by reference to Exhibit 4.5 to
Amendment No. 7 filed on August 11, 1993, to the Registration
Statement on Form S-3 of RJR Nabisco Holdings Corp.,
Registration No. 33-58930, filed March 1, 1993, as amended (the
"Form S-3, Registration No. 33-58930")).
4.3(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Citibank, N.A., as Trustee, relating to the
10 1/2% Senior Notes due 1998 (incorporated by reference to
Exhibit 4.5(a) to the Form S-3, Registration No. 33-58930).
4.5 Indenture dated as of May 22, 1989 among RJR Holdings Capital
Corp., RJR Holdings Corp., RJR Holdings Group, Inc., RJR
Nabisco, Inc. and Security Pacific National Trust Company (New
York), as Trustee, relating to the 15% Payment-in-Kind
Subordinated Debentures due 2001, including form of securities
(incorporated by reference to Exhibit 4.6 to the Form S-3,
Registration No. 33-58930).
4.5(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Security Pacific National Trust Company (New
York), as Trustee, relating to the 15% Payment-in-Kind
Subordinated Debentures due 2001 (incorporated by reference to
Exhibit 4.6(a) to the Form S-3, Registration No. 33-58930).
4.6 Indenture dated as of May 22, 1989 among RJR Holdings Capital
Corp., RJR Holdings Corp., RJR Holdings Group, Inc., RJR
Nabisco, Inc. and Security Pacific National Trust Company (New
York), as Trustee, relating to the Subordinated Discount
Debentures due 2001, including form of securities (incorporated
by reference to Exhibit 4.7 to the Form S-3, Registration No.
33-58930).
4.6(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Security Pacific National Trust Company (New
York), as Trustee, relating to the Subordinated Discount
Debentures due 2001 (incorporated by reference to Exhibit
4.7(a) to the Form S-3, Registration No. 33-58930).
4.7 Indenture dated as of May 22, 1989 among RJR Holdings Capital
Corp., RJR Holdings Corp., RJR Holdings Group, Inc., RJR
Nabisco, Inc. and U.S. Trust Company of California, N.A., as
Trustee, relating to the 13 1/2% Subordinated Debentures due
2001, including form of securities (incorporated by reference
to Exhibit 4.8 to the Form S-3, Registration No. 33-58930).
4.7(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Security Pacific National Trust Company (New
York), as trustee, relating to the 13 1/2% Subordinated
Debentures due 2001 (incorporated by reference to Exhibit
4.8(a) to the Form S-3, Registration No. 33-58930).
*5. Opinion of Jo-Ann Ford regarding the legality of the securities
being registered.
10.1 Registration Rights Agreement, dated as of February 9, 1989,
among RJR Holdings Corp., RJR Associates, L.P., KKR Partners
II, L.P., Drexel Burnham Lambert Incorporated and Merrill Lynch
& Co. (incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form S-1 of RJR Holdings Corp.,
Registration No. 33-29401, filed on June 20, 1989, as amended).
10.28 Registration Rights Agreement (Common Stock), dated as of July
15, 1990, between RJR Nabisco Holdings Corp. and Whitehall
Associates, L.P. (incorporated by reference to Exhibit 4.5 to
the Form S-4, Registration No. 33-36070).
*10.50 Form of Indemnification Agreement, dated as of October 4, 1994,
among RJR Nabisco Holdings Corp., Whitehall Associates, L.P.,
Borden Acquisition Corp. and Borden, Inc.
II-3
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 of the 1993 Form 10-K).
+23.1 Consent of Deloitte & Touche LLP, Independent Auditors for RJR
Nabisco Holdings Corp. and RJR Nabisco, Inc.
+23.2 Consent of Price Waterhouse LLP, Independent Accountants for
Borden, Inc.
*23.3 Consent of Jo-Ann Ford (included in her opinion filed as Exhibit
5.1).
**24.1 Powers of Attorney of Charles M. Harper, Stephen R. Wilson,
Robert S. Roath, John T. Chain, Jr., John R. Clendenin, James
H. Greene, Jr., H. John Greeniaus, James W. Johnston, Henry R.
Kravis, John G. Medlin, Jr., Paul E. Raether, Lawrence R.
Ricciardi, Rozanne L. Ridgway, Clifton S. Robbins and Scott M.
Stuart.
+99.1 Form of Letter of Transmittal.
+99.2 Form of Notice of Guaranteed Delivery.
+99.3 Form of Letter from the Dealer Manager to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
+99.4 Form of letter to clients for use by Brokers, Dealers, Commercial
Banks and Other Nominees.
+99.5 Form of Guidelines for Certification of Taxpayer Indentification
Number on Substitute Form W-9.
- ------------
* To be filed by amendment.
** Previously filed.
+ Filed herewith.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of Regulation S-X at the start of
any delayed offering or throughout a continuous offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration
II-4
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospects is sent or given, the
latest quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
The undersigned registrant hereby undertakes that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
The undersigned registrant hereby undertakes that every prospectus (i) that
is filed pursuant to the paragraph immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415, will
be filed as part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on November 7, 1994.
RJR NABISCO HOLDINGS CORP.
. By: /s/ JO-ANN FORD
.............................
Title: Vice President, Assistant
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on November 7, 1994.
SIGNATURE TITLE
- ----------------------------- ----------------------------
* Chairman of the Board and
............................. Chief Executive Officer
(Charles M. Harper) (principal executive
officer) and Director
* Executive Vice President and
............................. Chief Financial Officer
(Stephen R. Wilson) (principal financial
officer)
* Senior Vice President and
............................. Controller (principal
(Robert S. Roath) accounting officer)
* Director
.............................
(John T. Chain, Jr.)
Director
.............................
(Julius L. Chambers)
* Director
.............................
(John L. Clendenin)
* Director
.............................
(James H. Greene, Jr.)
* Director
.............................
(H. John Greeniaus)
* Director
.............................
(James W. Johnston)
* Director
.............................
(Henry R. Kravis)
* Director
.............................
(John G. Medlin, Jr.)
* Director
.............................
(Paul E. Raether)
II-6
SIGNATURE TITLE
- ----------------------------- ----------------------------
* Director
.............................
(Lawrence R. Ricciardi)
* Director
.............................
(Rozanne L. Ridgway)
* Director
.............................
(Clifton S. Robbins)
............................. Director
(George R. Roberts)
* Director
.............................
(Scott M. Stuart)
............................. Director
(Michael T. Tokarz)
*By: /s/ JO-ANN FORD
....................................
Jo-Ann Ford
Attorney-in-fact
II-7
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------------------------------------------------------------------- --------
*1.1 Form of Dealer Manager Agreement.......................................
**2.1 Agreement and Plan of Merger dated as of September 23, 1994 among
Borden Acquisition Corp., Whitehall Associates, L.P. and Borden,
Inc..................................................................
**2.2 Conditional Purchase/Stock Option Agreement dated as of September 23,
1994 by and among Whitehall Associates, L.P., Borden Acquisition
Corp. and Borden, Inc................................................
3.1 Amended and Restated Certificate of Incorporation of RJR Nabisco
Holdings Corp., filed October 1, 1990 (incorporated by reference to
Exhibit 3.1 to Amendment No. 4 filed on October 2, 1990, to the
Registration Statement on Form S-4 of RJR Nabisco Holdings Corp.,
Registration No. 33-36070, filed on July 25, 1990, as amended (the
"Form S-4, Registration No. 33-36070"))..............................
3.1(a) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed January 29, 1991
(incorporated by reference to Exhibit 3.1(a) to Amendment No. 3,
filed on January 31, 1991, to the Registration Statement on Form S-4
of RJR Nabisco Holdings Corp., Registration No. 33-38227)............
3.1(b) Certificate of Designation of ESOP Convertible Preferred Stock, filed
April 10, 1991 (incorporated by reference to Exhibit 3.1(b) to
Amendment No. 2 filed on April 11, 1991, to the Registation Statement
on Form S-1 of RJR Nabisco Holdings Corp., Registration No. 33-39532,
filed on March 20, 1991).............................................
3.1(c) Certificate of Designation of Series A Conversion Preferred Stock,
filed November 7, 1991 (incorporated by reference to Exhibit 3.1(c)
to Amendment No. 3, filed on November 1, 1991, to the Registration
Statement on Form S-1 of RJR Nabisco Holdings Corp., Registration No.
33-43137, filed October 2, 1991).....................................
3.1(d) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed December 16, 1991
(incorporated by reference to Exhibit 3.1(d) of the Annual Report on
Form 10-K of RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group,
Inc., RJR Nabisco Capital Corp. and RJR Nabisco, Inc. for the fiscal
year ended December 31, 1991, File Nos. 1-10215, 1-10214, 1-10248 and
1-6388 (the "1991 Form 10-K")).......................................
3.1(e) Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp. (relating to the
authorization of the issuance of additional shares of Common Stock)
filed April 6, 1993 (incorporated by reference to Exhibit 3.3 of the
Quarterly Report on Form 10-Q of RJR Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the fiscal quarter ended March 31, 1993, filed
April 30, 1993 (the "March 1993 Form 10-Q")).........................
3.1(f) Certificate of Designation of Series B Cumulative Preferred Stock,
filed August 16, 1993 (incorporated by reference to Exhibit 3.1(f) of
the Annual Report on Form 10-K of RJR Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the fiscal year ended December 31, 1993, File Nos.
1-10215 and 1-6388 (the "1993 Form 10-K"))...........................
3.1(g) A composite of the Amended and Restated Certificate of Incorporation of
RJR Nabisco Holdings Corp., as amended to August 16, 1993
(incorporated by reference to Exhibit 3.1(g) of the 1993 Form
10-K)................................................................
3.1(h) Certificate of Designation of Series C Conversion Preferred Stock
(incorporated by reference to Exhibit 4.1(h) to the Registration
Statement on Form S-3 of RJR Nabisco Holdings Corp., Registration No.
33-52381 filed on February 2, 1994, as amended (the Form S-3,
Registration No. 33-52381)...........................................
3.2 Amended and Restated By-laws of RJR Nabisco Holdings Corp., as amended,
effective January 20, 1994 (incorporated by reference to Exhibit 3.2
to the 1993 Form 10-K)...............................................
4.1 Credit Agreement dated as of December 1, 1991, among RJR Nabisco
Holdings Corp., RJR Nabisco Holdings Group, Inc., RJR Nabisco Capital
Corp., RJR Nabisco, Inc. and the lending institutions party thereto
(incorporated by reference to Exhibit 4.1 of the 1991 Form 10-K) (the
"Credit Agreement")..................................................
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------------------------------------------------------------------- --------
4.1(a) Amendment No. 1 to Credit Agreement, dated as of October 21, 1992
(incorporated by reference to Exhibit 4.1(a) of the Annual Report on
Form 10-K of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the
fiscal year ended December 31, 1992, File Nos. 1-10215 and
1-6388)..............................................................
4.1(b) Amendment No. 2 to Credit Agreement, dated as of March 4, 1993
(incorporated by reference to Exhibit 4.2 of the March 1993 Form
10-Q)................................................................
4.1(c) Amendment No. 3 to Credit Agreement, dated as of October 12, 1993
(incorporated by reference to Exhibit 10.1 of the Quarterly Report on
Form 10-Q of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the
quarter ended September 30, 1993 (the "September 1993 Form 10-Q")....
4.2 Credit Agreement dated as of April 5, 1993 among RJR Nabisco Holdings
Corp., RJR Nabisco, Inc. and the lending institutions party thereto
(incorporated by reference to Exhibit 4.3 of the March 1993 Form
10-Q) (the "1993 Credit Agreement")..................................
4.2(a) Amendment No. 1 to 1993 Credit Agreement, dated October 12, 1993
(incorporated by reference to Exhibit 10.1 of the September 1993
10-Q)................................................................
4.3 Indenture dated as of April 25, 1991 among RJR Nabisco Capital Corp.,
RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group, Inc., RJR
Nabisco, Inc. and Citibank, N.A., as Trustee, relating to the 10 1/2%
Senior Notes due 1998, including form of securities. (incorporated by
reference to Exhibit 4.5 to Amendment No. 7 filed on August 11, 1993,
to the Registration Statement on Form S-3 of RJR Nabisco Holdings
Corp., Registration No. 33-58930, filed March 1, 1993, as amended
(the "Form S-3, Registration No. 33-58930")).........................
4.3(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Citibank, N.A., as Trustee, relating to the 10 1/2%
Senior Notes due 1998 (incorporated by reference to Exhibit 4.5(a) to
the Form S-3, Registration No. 33-58930).............................
4.5 Indenture dated as of May 22, 1989 among RJR Holdings Capital Corp.,
RJR Holdings Corp., RJR Holdings Group, Inc., RJR Nabisco, Inc. and
Security Pacific National Trust Company (New York), as Trustee,
relating to the 15% Payment-in-Kind Subordinated Debentures due 2001,
including form of securities (incorporated by reference to Exhibit
4.6 to the Form S-3, Registration No. 33-58930)......................
4.5(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Security Pacific National Trust Company (New York),
as Trustee, relating to the 15% Payment-in-Kind Subordinated
Debentures due 2001 (incorporated by reference to Exhibit 4.6(a) to
the Form S-3, Registration No. 33-58930).............................
4.6 Indenture dated as of May 22, 1989 among RJR Holdings Capital Corp.,
RJR Holdings Corp., RJR Holdings Group, Inc., RJR Nabisco, Inc. and
Security Pacific National Trust Company (New York), as Trustee,
relating to the Subordinated Discount Debentures due 2001, including
form of securities (incorporated by reference to Exhibit 4.7 to the
Form S-3, Registration No. 33-58930).................................
4.6(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Security Pacific National Trust Company (New York),
as Trustee, relating to the Subordinated Discount Debentures due 2001
(incorporated by reference to Exhibit 4.7(a) to the Form S-3,
Registration No. 33-58930)...........................................
4.7 Indenture dated as of May 22, 1989 among RJR Holdings Capital Corp.,
RJR Holdings Corp., RJR Holdings Group, Inc., RJR Nabisco, Inc. and
U.S. Trust Company of California, N.A., as Trustee, relating to the
13 1/2% Subordinated Debentures due 2001, including form of
securities (incorporated by reference to Exhibit 4.8 to the Form S-3,
Registration No. 33-58930)...........................................
4.7(a) First Supplemental Indenture dated as of May 18, 1992 among RJR
Nabisco, Inc., RJR Nabisco Holdings Corp., RJR Nabisco Holdings
Group, Inc. and Security Pacific National Trust Company (New York),
as trustee, relating to the 13 1/2% Subordinated Debentures due 2001
(incorporated by reference to Exhibit 4.8(a) to the Form S-3,
Registration No. 33-58930)...........................................
*5. Opinion of Jo-Ann Ford regarding the legality of the securities being
registered...........................................................
EXHIBIT NO. DESCRIPTION PAGE NO.
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10.1 Registration Rights Agreement, dated as of February 9, 1989, among RJR
Holdings Corp., RJR Associates, L.P., KKR Partners II, L.P., Drexel
Burnham Lambert Incorporated and Merrill Lynch & Co. (incorporated by
reference to Exhibit 4.3 to the Registration Statement on Form S-1 of
RJR Holdings Corp., Registration No. 33-29401, filed on June 20,
1989, as amended)....................................................
10.28 Registration Rights Agreement (Common Stock), dated as of July 15,
1990, between RJR Nabisco Holdings Corp. and Whitehall Associates,
L.P. (incorporated by reference to Exhibit 4.5 to the Form S-4,
Registration No. 33-36070)...........................................
*10.50 Form of Indemnification Agreement, dated as of October 4, 1994, among
RJR Nabisco Holdings Corp., Whitehall Associates, L.P., Borden
Acquisition Corp. and Borden, Inc....................................
21 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21
of the 1993 Form 10-K)...............................................
+23.1 Consent of Deloitte & Touche LLP, Independent Auditors for RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc..................................
+23.2 Consent of Price Waterhouse LLP, Independent Accountants for Borden,
Inc..................................................................
*23.3 Consent of Jo-Ann Ford (included in her opinion filed as Exhibit
5.1).................................................................
**24.1 Powers of Attorney of Charles M. Harper, Stephen R. Wilson, Robert S.
Roath, John T. Chain, Jr., John R. Clendenin, James H. Greene, Jr.,
H. John Greeniaus, James W. Johnston, Henry R. Kravis, John G.
Medlin, Jr., Paul E. Raether, Lawrence R. Ricciardi, Rozanne L.
Ridgway, Clifton S. Robbins and Scott M. Stuart......................
+99.1 Form of Letter of Transmittal..........................................
+99.2 Form of Notice of Guaranteed Delivery..................................
+99.3 Form of Letter from the Dealer Manager to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees............................
+99.4 Form of letter to clients for use by Brokers, Dealers, Commercial Banks
and Other Nominees...................................................
+99.5 Form of Guidelines for Certification of Taxpayer Indentification Number
on Substitute Form W-9...............................................
- ------------
* To be filed by amendment.
** Previously filed.
+ Filed herewith.