<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: DECEMBER 31, 1993 Commission file number: 1-71
----------------- ----
BORDEN, INC.
New Jersey 13-0511250
- --------------------------------------- ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
180 East Broad St., Columbus, OH 43215 614-225-4000
- --------------------------------------- ----------------------------------
(Address of principal executive offices) (Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common stock par value $0.625* New York Stock Exchange
Preferred Share Purchase Rights
"
* Common stock also listed on exchanges in Switzerland and Tokyo
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and is not contained in the
definitive proxy statement incorporated by reference in Part III of this Form
10-K. [x].
Aggregate market value in thousands of the voting stock held by nonaffiliates
of the Registrant based upon the average bid and asked prices of such stock on
January 31, 1994: $2,197,270.
Number of shares of Common Stock, $0.625 par value, outstanding as of the
close of business on January 31, 1994: 141,391,826
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated
-------- ------------
Portions of Annual Report to Shareholders for year
ended December 31, 1993 Part I, Part II, Part IV
Portions of the 1994 Proxy Statement Part III
==============================================================================
The Exhibit Index is located herein at sequential pages 7 through 10.
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Part I
Item 1. Business
- ------- --------
The Company was incorporated on April 24, 1899. Information on the nature and
type of business and industry segments is contained on pages 24-26 of the
Company's 1993 Annual Report to Shareholders. A three-year summary of sales
and operating income by operating division is presented on page 21 of the
Company's 1993 Annual Report to Shareholders. All of the aforementioned pages
are incorporated herein by reference in this Form 10-K Annual Report.*
Item 2. Properties
- ------- ----------
Information on properties, contained on page 25 of the Company's 1993 Annual
Report to Shareholders, is incorporated herein by reference in this Form 10-K
Annual Report.*
Item 3. Legal Proceedings
- ------- -----------------
Environmental Proceedings
- -------------------------
The Company is involved in various proceedings relating to the designation of
certain waste sites for cleanup where the Company, along with a large number of
other companies, has potential liability under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or similar state
environmental laws. While the Company's ultimate liability will depend on many
factors including its volumetric share of waste, the financial viability of the
other companies and the remediation methods and technology used, management has
determined that, as of the date hereof, any costs incurred in connection with
individual sites will not be significant and even in the aggregate, will not
have a material adverse effect on the financial condition of the Company.
Private actions have been filed against the Company and numerous other
defendants beginning in 1986 in the State Court in Livingston Parish,
Louisiana, alleging personal injuries and property damage in connection with a
waste disposal site in Louisiana. Beginning in 1987, similar actions were
filed in state court in Camden, New Jersey, in connection with a waste
disposal site in New Jersey.
The Company's involvement in actions which were pending in Federal District
Court in Baton Rouge, Louisiana arising from a waste disposal site in Louisiana
was settled (January 1994) with payment by the Company of approximately
$27,000.
In February, 1993, an EPA Administrative Law Judge held that the Borden
Chemicals and Plastics Limited Partnership ("BCP") Illiopolis, Illinois
facility violated CERCLA and the Emergency Planning and Community Right to Know
Act ("EPCRA") by failing to report certain relief valve releases that the
Company believes are exempt from CERCLA and EPCRA reporting. A petition for
reconsideration has been filed. In addition, the Louisiana Department of
Environmental Quality ("LDEQ") has determined that a production
_______________
* Except as specifically indicated herein, no other data appearing in the
Company's 1993 Annual Report to Shareholders is deemed to be filed as part of
this Form 10-K Annual Report.
<PAGE> 3
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unit at BCP's Geismar facility should be subject to regulation under
Louisiana's hazardous waste statutes and regulations. That decision has been
appealed to the state courts. It is believed that allegations relating to
federal hazardous waste issues are being contemplated by the U.S. EPA. BCP
maintains that the production unit is not subject to regulation under federal
or state hazardous waste laws. The Company would be responsible for any
violations that predate the formation of BCP.
The U.S. EPA has issued a notice of violation alleging the violation of air
pollution regulations by a plant in Massachusetts (September 1988).
Allegations filed in Federal District Court in Helena, Montana in 1991 of water
pollution violations were resolved in October 1993 by the Company entering into
a consent decree and paying a civil fine of $265,000.
A notice of violation has been issued by the Maine Department of Environmental
Protection (April 1991) alleging the violation of certain solid waste and
wetlands regulations at a Scarborough, Maine facility.
OTHER LEGAL PROCEEDINGS
- -----------------------
The States of West Virginia, Virginia and Ohio have filed suits (12/93, 4/93
and 8/93) alleging antitrust violations in connection with the sale of milk to
schools in West Virginia, Virginia and Ohio school districts. A private
antitrust suit containing similar allegations was filed in Federal Court in
Oklahoma (4/93) on behalf of four school districts and seeks class action
certification. Federal Grand Jury investigations of similar allegations are
pending in Michigan, Indiana and Kentucky (6/91), Oklahoma (8/92), Ohio (2/93)
and the Plains States (9/93). Similar investigations by the state Attorneys
General are pending in Illinois (11/91) and North Carolina (6/93). Two private
antitrust suits alleging price fixing of wholesale/retail accounts were filed
in Florida (7/93) and W. Virginia (9/93).
From 1973 through 1980 the Company manufactured chemical components under the
name "Insulspray," for on-site installation of urea-formaldehyde foam
insulation in residences and commercial buildings. The Company has been a
defendant in litigation in Montreal, Canada involving allegations of personal
injury or property damage arising from the misapplication of, or defects in,
the insulation. The litigation, which was tried from September 1983 through
December 1989, was dismissed by the trial court in December 1991. An Appeal
has been filed by plaintiffs.
The Company and its Directors have been sued by persons purporting to represent
a class of purchasers of shares of the Company in Federal District Court in New
York (December 1993) for alleged violations of the Securities Exchange Act of
1934 in connection with certain statements made by or on behalf of the Company
in 1992 and 1993.
In addition, Company is involved in other litigation throughout the United
States which is considered to be in the ordinary course of the Company's
business.
The Company believes, based upon the information it presently possesses, and
taking into account its established accruals for estimated liability and its
insurance coverage, including its risk retention program, that the foregoing
proceedings and actions are unlikely to have a materially adverse effect on the
Company's financial position or operating results.
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Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
No matter was submitted during the fourth quarter of 1993 to a vote of
security holders, through the solicitation of proxies or otherwise.
Part II
Item 5. Market for the Registrant's Common Equity and Related
- ------- -----------------------------------------------------
Stockholder Matters
-------------------
The Company's common stock is traded on the New York Stock Exchange and
exchanges in Tokyo, Japan; and Basel, Geneva, Lausanne and Zurich, Switzerland.
The following information included in the 1993 Annual Report to Shareholders is
incorporated herein by reference in this Form 10-K Annual Report:*
[#] The high and low sales prices of the Company's common stock for
each quarterly period during the last two fiscal years, Note 15
page 40.
[#] The amount of quarterly dividends paid during the last two
fiscal years, Note 15, page 40.
The high and low sales prices of the Company's common stock on January 31, 1994
were $15.750 and $15.375, respectively.
The approximate number of holders of common stock, $0.625 par value, as of
January 31, 1994 was 40,818.
Item 6. Selected Financial Data
- ------- -----------------------
The five-year selected financial data for the years 1989 through 1993,
appearing on page 44 of the 1993 Annual Report to Shareholders, is incorporated
herein by reference in this Form 10-K Annual Report.*
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations
-------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations, appearing on pages 18 through 24 of the 1993 Annual Report to
Shareholders, is incorporated herein by reference in this Form 10-K Annual
Report.*
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The Consolidated Financial Statements and the report thereon of Price
Waterhouse dated March 20, 1994 appearing on pages 27 through 41 of the 1993
Annual Report to Shareholders, are incorporated herein by reference in this
Form 10-K Annual Report.*
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure
--------------------
No Form 8-K was issued by the Company during the two most recent fiscal years
ended December 31, 1993 reporting a change in or disagreement with accountants.
____________
* Except as specifically indicated herein, no other data appearing in the
Company's 1993 Annual Report to Shareholders is deemed to be filed as part of
this Form 10-K Annual Report.
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Part III
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
(a) The information relating to directors required by this item will be
contained under the caption "ELECTION OF DIRECTORS" in a definitive Proxy
Statement involving the election of directors which the registrant will file
with the Securities and Exchange Commission not later than 120 days after
December 31, 1993 (the "1994 Proxy Statement"), and such information is
incorporated herein by reference.
(b) Set forth below are the names and ages of the Executive Officers of
the Company and the positions and offices with the Company presently held by
each of them. Their terms of office extend to the next Annual Meeting of the
Board of Directors or until their successors are elected. There are no family
relationships between any of the Executive Officers of the Company.
<TABLE>
<CAPTION>
Served
Age on In Present
Dec. 31, Position
Name Position & Office 1993 Since
- -------------- ------------------------------------ -------- ---------
<S> <C> <C> <C>
*E. R. Shames President and Chief Executive Officer 53 1993
J. M. Saggese Executive Vice President, President
Packaging and Industrial Products
Division Domestic and International 62 1990
**L. O. Doza Senior Vice President and Chief
Financial Officer 55 1985
A. L. Miller Senior Vice President and Chief
Administrative Officer 61 1985
G. P. Morris Vice President and Chief Strategic Officer,
Vice President of Finance - North American
and International Foods Divisions 49 1994
R. D. Kautto Vice President - Human Resources 48 1994
D. A. Kelly Vice President and Treasurer 55 1980
**W. W. Kocher Vice President and General Counsel 59 1979
P. J. Keuper Vice President - Public Affairs 60 1991
P. J. Josenhans Secretary 57 1991
<FN>
--------------
* Also a Director of Borden, Inc.
** Mr. Lawrence O. Doza and Mr. Walter W. Kocher resigned effective March 1,
1994 and February 28, 1994, respectively.
</TABLE>
<PAGE> 6
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E. R. Shames was elected Chief Executive Officer effective December 9, 1993.
He is also President, to which he was elected effective June 28, 1993. Prior
to that he was Chairman, President and Chief Executive Officer of the Stride
Rite Corporation since 1990. Prior to that he was Chairman, President and
Chief Executive Officer of the Kendall Company.
J. M. Saggese has been Executive Vice President of the Company and President of
the Packaging and Industrial Products Division Domestic and International since
July 1, 1990. Prior to that he served as a Senior Group Vice President of the
Packaging and Industrial Products Division Domestic and International since
January 1, 1989.
G. P. Morris was elected Vice President and Chief Strategic Officer effective
February 7, 1994. He is also Vice President of Finance - North American and
International Foods Division, to which he was elected effective September 9,
1993. Prior to that he was Vice President and Group Executive of Maxwell House
Coffee Company.
R. D. Kautto was elected Vice President - Human Resources effective February 1,
1994. Prior to that he was Vice President - Employee Relations at Phillip
Morris Companies, Inc. since 1992. Prior to that he was Vice President - Human
Resources at General Foods U.S.A.
P. J. Keuper was elected Vice President - Public Affairs effective September 1,
1991. Prior to that he served as the Company's outside public relations
counsel as a Managing Director of Adams & Rinehart.
P. J. Josenhans was elected Secretary of the Company effective April 26, 1991.
He has served as Associate General Counsel since 1982.
Item 11. Executive Compensation
- -------- ----------------------
The information required by this item will be contained in the Company's
1994 Proxy Statement beginning with the information contained under the caption
"COMPENSATION OF DIRECTORS" and continuing through the caption "EMPLOYMENT,
TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS," and such information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The information required by this item will be contained under the caption
"OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES" in the Company's 1994 Proxy
Statement, and such information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
Not applicable
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Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- -------- ----------------------------------------------------------------
a) 1. Financial Statements
--------------------
The Consolidated Financial Statements and the report thereon of Price
Waterhouse dated March 20, 1994, appearing on pages 27 to 41 of the 1993 Annual
Report to Shareholders, are incorporated herein by reference in this Form 10-K
Annual Report. Except as specifically indicated herein, no other data
appearing in the Company's 1993 Annual Report to Shareholders is deemed to be
filed as part of this Form 10-K Annual Report.
2. Financial Statement Schedules
-----------------------------
The following additional financial data should be read in conjunction with
the Consolidated Financial Statements in the 1993 Annual Report to
Shareholders. All other schedules have been omitted because they are not
applicable or the required information is shown in the Consolidated Financial
Statements or Notes thereto. Financial statements of 50% or less owned persons
and other unconsolidated persons accounted for by the equity method have been
omitted because considered in the aggregate as a single subsidiary they do not
constitute a significant subsidiary.
<TABLE>
<CAPTION>
Sequential
Additional Financial Data Page
---------------------------------- ----------
<S> <C>
Report of independent accountants on financial
statement schedules 12
Financial schedules:
Property and equipment (Schedule V) 13
Accumulated depreciation of property and
equipment (Schedule VI) 14
</TABLE>
3. Exhibits
--------
Executive Compensation Plans and Arrangements are listed herein at Exhibits
(10)(iv) through (10)(xiv)(f).
(3)(i) Restated Certificate of Incorporation and
Amendments, incorporated herein by reference
from Exhibit 3(i) to the 1992 Form 10-K
Annual Report.
(ii) By-Laws.
(4)(i) Form of Indenture dated as of January 15,
1983, as supplemented by the First
Supplemental Indenture dated as of March 31,
1986 relating to the $200,000,000 8-3/8%
Sinking Fund Debentures due 2016,
incorporated herein by reference from
Exhibit 4(a) and (b) to Amendment No. 1 to
Registration Statement of Form S-3, File No.
33-4381.
<PAGE> 8
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(ii) Form of Indenture dated as of December 15,
1986, as supplemented by the First
Supplemental Debenture dated as of December
15, 1986 relating to the $315,000,000 Medium
Term Notes, Series A, incorporated herein by
reference from Exhibit 4(a) through (d) to
Amendment No. 1 to Registration Statement on
Form S-3, File No. 33-8775.
(iii) Form of Indenture dated as of December 15,
1987, as supplemented by the First
Supplemental Indenture dated as of December
15, 1987 and the Second Supplemental
Indenture dated as of February 1, 1993,
incorporated herein by reference from
Exhibit 4(a) through (d) to Registration
Statement on Form S-3, File No. 33-45770,
relating to the following Debentures and
Notes:
(a) The $125,000,000 9-7/8% Notes due
November 1, 1997.
(b) The $150,000,000 9-1/4% Sinking Fund
Debentures due 2019.
(c) The $200,000,000 9-1/5% Debentures
due 2021.
(d) The $250,000,000 7-7/8% Debentures
due 2023.
(iv) Form of Indenture relating to Zero Coupon
Notes due 2002, dated as of May 21, 1992,
incorporated herein by reference from
Exhibit 4(iv) to the 1992 Form 10-K Annual
Report.
(v) Form of Lynx Equity Unit Agreement relating
to Zero Coupon Notes due 2002, dated as of
May 21, 1992, incorporated herein by
reference from Exhibit 4(v) to the 1992 Form
10-K Annual Report.
(10)(i) Rights Agreement dated as of January 28,
1986, relating to preferred share purchase
rights, incorporated herein by reference
from Exhibit I to the Registrant's Form 8-K,
dated January 28, 1986.
(ii) Amendment to Rights Agreement dated as of
November 29, 1988, incorporated herein by
reference from Exhibit I to the Registrant's
Form 8, dated December 6, 1988.
(iii) Second Amendment to Rights Agreement dated
as of May 22, 1991, incorporated herein by
reference from Exhibit I to the Registrant's
Form 8, dated June 7, 1991.
(iv) 1994 Management Incentive Plan.
(v) 1994 Stock Option Plan.
<PAGE> 9
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(vi) Executive Family Survivor Protection Plan as amended through December
9, 1993.
(vii) Executives Excess Benefits Plan as amended through December 9, 1993.
(viii) Executives Supplemental Pension Plan as amended through December 9,
1993.
(ix) Advisory Directors Plan, incorporated herein by reference from
Exhibit 10(viii) to the 1989 Form 10-K Annual Report.
(x) Advisory Directors Plan Trust Agreement, incorporated herein by
reference from Exhibit 10(ix) to the 1988 Form 10-K Annual Report.
(xi) Supplemental Benefit Trust Agreement as amended through December 9,
1993.
(xii) Form of Indemnification Letter Agreements entered into with all
Directors of the Company, incorporated herein by reference from
Exhibit 10(xii) to the 1988 Form 10-K Annual Report.
(xiii) Form of Letter Agreement entered into with all holders of stock
appreciation rights, incorporated herein by reference from Exhibit
10(xiii) to the 1989 Form 10-K Annual Report.
(xiv) (a) Agreement with Mr. A. S. D'Amato, Chairman and Chief
Executive Officer, incorporated herein by reference from
Exhibit 10(i) to the June 30, 1993 Form 10-Q.
(b) Amendment to Agreement with Mr. A. S. D'Amato, incorporated
herein by reference from Exhibit 10(i) to the September 30,
1993 Form 10-Q.
(c) Supplement to Agreement with Mr. A. S. D'Amato.
(d) Agreement with Mr. E. R. Shames, President and Chief
Operating Officer, incorporated herein by reference from
Exhibit 10(ii) to the June 30, 1993 Form 10-Q.
(e) Description of Amendment to Agreement with Mr. E. R. Shames.
(f) Agreement with Mr. R. J. Ventres, Chairman of the Executive
Committee, incorporated herein by reference from Exhibit
10(xvii)(b) to the 1991 Form 10-K Annual Report.
<PAGE> 10
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(g) Description of Amendment to
Agreement with Mr. R. J. Ventres.
(h) Form of salary continuance
arrangement with Executive Officers,
incorporated herein by reference
from Exhibit 10(ix)(c) to the 1987
Form 10-K Annual Report.
(i) Agreement with Mr. J. G. Hettinger.
(j) Agreement with Mr. G. J. Waydo.
(xv) Second Amended and Restated Deposit
Agreement, dated February 16, 1993 among
Borden Chemicals and Plastics Limited
Partnership, Society National Bank, Borden,
Inc. and BCP Management, Inc., incorporated
herein by reference from Exhibit 10 (xviii)
to the 1992 Form 10-K Annual Report.
(12) Calculation of Ratio of Earnings to Fixed
Charges.
(13) Portion of 1993 Annual Report to
Shareholders.
(22) Subsidiaries of Registrant.
(24) The Consent of Independent Accountants and
Report of Independent Accountants on
Financial Statement Schedules appear on page
12 of this Form 10-K Annual Report.
Copies of the foregoing Exhibits are available to Shareholders of record upon
written request to Investor Relations at the Executive Offices of the Company,
and the payment of $.50 per page to help defray the cost of handling, copying,
and postage.
(b) Reports on Form 8-K
-------------------
On December 13, 1993 Borden, Inc. filed a Form 8-K which announced the
resignation by Anthony S. D'Amato of his position as Director, Chairman and
Chief Executive Officer of Borden, Inc. and the appointment of Frank J. Tasco
as Chairman of the Board and Ervin R. Shames as Chief Executive Officer.
<PAGE> 11
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BORDEN, INC.
By /s/ George P. Morris
------------------------------------
George P. Morris, Vice President
and Chief Strategic Officer (Principal
Financial Officer)
By /s/ Richard W. Pennell
------------------------------------
Richard W. Pennell, Assistant General
Controller (Principal Accounting Officer)
Date: March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities indicated, on the date set forth above.
Signature Title
--------- -----
/s/ F. J. Tasco Director and Chairman of the Board
- ---------------------------------------
(F. J. Tasco)
/s/ E. R. Shames Director, President and Chief
- --------------------------------------- Executive Officer
(E. R. Shames)
/s/ Frederick E. Hennig Director
- ---------------------------------------
(Frederick E. Hennig)
/s/ Wilbert J. LeMelle Director
- ---------------------------------------
(Wilbert J. LeMelle)
/s/ Robert P. Luciano Director
- ---------------------------------------
(Robert P. Luciano)
/s/ H. Barclay Morley Director
- ---------------------------------------
(H. Barclay Morley)
/s/ John E. Sexton Director
- ---------------------------------------
(John E. Sexton)
/s/ Patricia Carry Stewart Director
- ---------------------------------------
(Patricia Carry Stewart)
<PAGE> 12
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REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
To the Board of Directors of
Borden, Inc.
Our audits of the consolidated financial statements referred to in our
report dated March 20, 1994 appearing on page 41 of the 1993 Annual Report to
Shareholders of Borden, Inc., (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in Item 14
(a) 2 of this Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE
Columbus, Ohio
March 20, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (No. 33-45770)
and Form S-8 (No. 33-24225 and No. 2-91503) of Borden, Inc. of our report dated
March 20, 1994 appearing on page 41 of the Annual Report to Shareholders which
is incorporated by reference in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page 12 of this Form 10-K.
PRICE WATERHOUSE
Columbus, Ohio
March 28, 1994
<PAGE> 13
<TABLE>
Schedule V
BORDEN, INC. ----------
AND CONSOLIDATED SUBSIDIARIES
PROPERTY AND EQUIPMENT
-----------------------------
(IN MILLIONS)
<CAPTION>
ADDITIONS AT COST DEDUCTIONS
----------------------------------- ---------------------------------------
BUSINESSES
ACQUIRED OTHER
BALANCE CAPITAL IN PURCHASE RETIREMENTS ADDITIONS BALANCE
CLASSIFICATION JANUARY 1 EXPENDITURES TRANSACTIONS OR SALES DIVESTITURES AMORTIZATION (DEDUCTIONS) DECEMBER 31
- ---------------------- --------- ------------ ------------ -------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
- ----------------------------
LAND $ 125.6 $ 2.1 $ 6.1 $ 1.2 $ (14.9) $ 105.5
BUILDINGS 815.5 28.7 $ 1.0 22.8 3.0 (208.8) 609.6
MACHINERY AND EQUIPMENT $2,389.5 146.2 45.4 27.5 $6.4 (1) (508.1) 1,949.3
-------- ----- ----- ----- ----- ---- -------- --------
$3,330.6 $177.0 $ 1.0 $74.3 $31.7 $6.4 (1) $(731.8) (2) $2,664.4
======== ====== ===== ===== ===== ==== ======== ========
YEAR ENDED DECEMBER 31, 1992
- ----------------------------
LAND $ 122.6 $ 4.4 $ 0.3 $ 1.4 $ 0.9 $ 0.4 $ 125.6
BUILDINGS 782.1 55.3 1.5 13.3 11.6 1.5 815.5
MACHINERY AND EQUIPMENT 2,338.7 226.5 5.1 50.2 55.7 $5.1 (1) (66.8) 2,389.5
-------- ----- ----- ----- ----- ---- -------- --------
$3,243.6 $286.2 $ 6.9 $64.9 $68.2 $6.1 $ (66.9) (2) $3,330.6
======== ====== ===== ===== ===== ==== ======== ========
YEAR ENDED DECEMBER 31, 1991
- ----------------------------
LAND $ 113.1 $ 9.9 $ 2.1 $ 1.6 $ 0.5 $ (0.2) $ 122.8
BUILDINGS 675.1 117.6 6.0 6.3 4.4 (5.9) 782.1
MACHINERY AND EQUIPMENT 2,220.8 248.5 7.7 71.6 7.1 $5.9 (1) (53.5) 2,338.7
-------- ----- ----- ----- ----- ---- -------- --------
$3,009.0 $376.0 $15.8 $79.7 $12.0 $5.9 $ (59.6) (2) $3,243.6
======== ====== ===== ===== ===== ==== ======== ========
<FN>
(1) PRIMARILY AMORTIZATION OF CASES AND CANS WHICH IS RECORDED AS DEPRECIATION EXPENSE.
(2) IN 1993, $659.6 WAS RECLASSED TO NET ASSETS OF DISCOUNTINUED OPERATIONS. OTHER DEDUCTIONS CONSIST PRIMARILY OF TRANSLATION
ADJUSTMENTS.
</TABLE>
<PAGE> 14
<TABLE>
Schedule VI
BORDEN, INC. -----------
AND CONSOLIDATED SUBSIDIARIES
ACCUMULATED DEPRECIATION OF
PROPERTY AND EQUIPMENT
-----------------------------
(IN MILLIONS)
<CAPTION>
ADDITIONS DEDUCTIONS
--------- ---------------------------------------
ACCUMULATED
DEPRECIATION ACCUMULATED
CHARGED TO APPLICABLE TO DEPRECIATION OTHER
BALANCE COSTS AND RETIREMENTS APPLICABLE TO ADDITIONS BALANCE
CLASSIFICATION JANUARY 1 EXPENSES OR SALES DIVESTITURES (DEDUCTIONS) DECEMBER 31
- -------------------- --------- --------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
- ----------------------------
LAND (1) $ 9.5 $ 1.1 $ 0.4 $ (1.4) $ 8.8
BUILDINGS 265.6 52.0 30.1 1.4 (41.5) 244.6
MACHINERY AND EQUIPMENT $1,267.4 233.5 153.7 16.4 (256.5) 1,074.3
-------- ----- ------ ----- -------- --------
$1,542.5 $286.6 $184.2 $17.8 $(299.4) (2) $1,327.7
======== ====== ====== ===== ======== ========
YEAR ENDED DECEMBER 31, 1992
- ----------------------------
LAND (1) $ 8.2 $ 1.1 $ 0.1 $ 0.3 $ 9.5
BUILDINGS 228.4 47.0 5.9 1.7 (2.2) 265.6
MACHINERY AND EQUIPMENT 1,103.3 262.9 59.0 30.1 (9.7) 1,267.4
-------- ----- ------ ----- -------- --------
$1,339.9 $311.0 $ 65.0 $31.8 $ (11.6) (2) $1,542.5
======== ====== ====== ===== ======== ========
YEAR ENDED DECEMBER 31, 1991
- ----------------------------
LAND (1) $ 7.3 $ 0.9 $ 0.1 $ 0.1 $ 8.2
BUILDINGS 211.4 24.2 2.4 1.5 (3.3) 228.4
MACHINERY AND EQUIPMENT 1.083.5 137.6 96.3 4.4 (17.3) 1,103.3
-------- ----- ------ ----- -------- --------
$1,302.2 $162.9 $ 98.8 $ 5.9 $ (20.5) (2) $1,339.9
======== ====== ====== ===== ======== ========
<FN>
(1) REPRESENTS DEPRECIABLE IMPROVEMENTS TO LAND.
(2) IN 1993, $267.5 WAS RECLASSED TO NET ASSETS OF DISCOUNTINUED OPERATIONS. OTHER DEDUCTIONS CONSIST PRIMARY OF TRANSLATION
ADJUSTMENTS.
</TABLE>
<PAGE> 1
As of February 22, 1994
EXHIBIT 3(ii)
BY-LAWS
OF
BORDEN, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. Unless otherwise determined by resolution of the Board of
Directors, the annual meeting of the shareholders for the election of directors
and for the transaction of such other business as may properly come before the
meeting shall be held on the Friday after the third Wednesday (unless such day
be a holiday, then on the following business day or on such other day as the
Board of Directors shall designate) in April of each year at such time and
place as shall be designated by the Board of Directors and specified in the
notice of the meeting. Any annual meeting of shareholders may be postponed by
resolution of the Board of Directors upon public notice given prior to the date
previously scheduled for such annual meeting of shareholders.
SECTION 2. The officer or agent having charge of the stock transfer books
for shares of the Company shall make a complete list of the shareholders
entitled to vote at a shareholders' meeting or any adjournment thereof. Such
list may consist of cards arranged alphabetically or any equipment which
permits the visual display of the information required by this Section 2. Such
list shall
(a) be arranged alphabetically within each class, series, or group of
shareholders maintained by the Company for convenience of reference,
with the address of, and the number of shares held by, each
shareholder,
(b) be produced (or available by means of a visual display) at the time
and place of the meeting,
(c) be subject to the inspection of any shareholder for reasonable
periods during the meeting, and
(d) be PRIMA FACIE evidence as to who are the
shareholders entitled to examine such list
or to vote at any meeting.
SECTION 3. Special meetings of shareholders shall be held at such place and
at such time as shall be fixed by resolution of the Board of Directors with
respect to each such meeting and may be
<PAGE> 2
called at any time by the Chairman of the Board of Directors, Chief Executive
Officer or President or a majority of the directors. Any special meeting of
shareholders may be postponed by resolution of the Board of Directors upon
public notice given prior to the date previously scheduled for such special
meeting of shareholders. Only such business shall be conducted at a special
meeting of shareholders as shall have been brought before the meeting pursuant
to the Company's notice of meeting.
SECTION 4. Notice of the time, place and purpose or purposes of the annual
meeting of shareholders, and of all other shareholders' meetings, shall be
given by a written or printed notice to each shareholder entitled to vote at
the meeting, either personally or by mailing such notice postage prepaid
addressed to him at his address specified in the stock books of the Company,
not less than 10 nor more than 60 days prior to the date of such meeting.
When a meeting is adjourned to another time or place, it shall not be necessary
to give notice of the adjourned meeting if the time and place to which the
meeting is adjourned are announced at the meeting at which the adjournment is
taken and at the adjourned meeting only such business is transacted as might
have been transacted at the original meeting. However, if after the
adjournment the board fixes a new record date for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of record on
the new record date entitled to vote at such adjourned meeting.
SECTION 5. Except as otherwise provided by law or the Restated Certificate
of Incorporation of the Company, at all meetings of the shareholders, in order
to constitute a quorum, there shall be present, either in person or by proxy,
shareholders entitled to cast a majority of the votes at such meeting provided,
however, that whenever the holders of any class or series of shares shall be
entitled to vote separately on any specified item of business, this sentence
shall apply in determining the presence of a quorum of such class or series for
the transaction of such specified item of business. The shareholders present
in person or by proxy at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of sufficient
shareholders to constitute the remaining shareholders less than a quorum.
Whether or not a quorum is present, the chairman of the meeting or a majority
of the shareholders present in person or by proxy may adjourn the meeting from
time to time.
SECTION 6. At all meetings of the shareholders, each shareholder shall be
entitled to one vote for each share of the capital stock standing in his name
on the books of the Company, except as otherwise provided by the Restated
Certificate of Incorporation of the Company.
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<PAGE> 3
SECTION 7. At all meetings of the shareholders any shareholder shall be
entitled to vote by proxy. Every proxy shall be executed in writing by the
shareholder or his agent except that a proxy may be given by a shareholder or
his agent by telegram or cable or by any means of electronic communication
which results in a writing.
SECTION 8. For the purpose of determining the shareholders entitled to (a)
notice of or to vote at any meeting of shareholders or any adjournment thereof,
(b) give a written consent to any action without a meeting, or (c) receive
payment of any dividend or allotment of any right, or for the purpose of any
other corporate action or event, the Board may fix, in advance, a date as the
record date for any such determination of shareholders. Such dates shall not
be more than sixty nor less than ten days before the date of such meeting, nor
more than sixty days prior to any other action. The record date to determine
shareholders entitled to give a written consent may not be more than 60 days
before the date fixed for tabulation of the consents or, if no date has been
fixed for tabulation, more than 60 days before the last day on which consents
received may be counted.
If no record date is so fixed by the Board, (a) the record date for a meeting
of shareholders shall be the close of business on the day next preceding the
day on which notice is given, or, if no notice is given, the day next preceding
the day on which the meeting is held, and (b) the record date for determining
shareholders for any other purpose shall be at the close of business on the day
on which the resolution of the Board relating thereto is adopted.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof, unless the Board
fixes a new record date under this Section for the adjourned meeting.
SECTION 9. Election of directors shall be by a plurality of the votes cast
at an election and need not be by ballot unless a shareholder demands election
by ballot at the election and before the voting. All other shareholder actions
shall be authorized by a majority of the votes cast by the holders of shares
entitled to vote thereon, unless a greater plurality is required by law or the
Restated Certificate of Incorporation. Whenever not otherwise provided by law
or these by-laws, all questions submitted to a meeting of the shareholders
shall be decided by a viva VOCE VOTE unless shareholders holding at least 2,500
shares shall demand a vote by shares.
SECTION 10. Unless otherwise determined by resolution of
the Board of Directors,
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<PAGE> 4
(a) the Chairman of the Board shall, or shall designate an appropriate
officer of the Company to, call any annual or special meeting of
shareholders to order, act as Chairman of any such meeting of the
shareholders, determine the order of business of any such meeting, and
determine the rules of order and procedure to be followed in the conduct
of any such meeting; and
(b) the Secretary of the Company shall act as Secretary of the meeting.
Nothing in this section shall prohibit the Chairman of the meeting from
changing the order in which business shall be presented to the meeting if, in
the opinion of the Chairman, such change in procedure would not hinder the
orderly conduct of the meeting or the proper consideration of the matters to
come before it.
SECTION 11. (a) (1) Nominations of persons for election to the Board of
Directors of the Company and the proposal of business to be considered by the
shareholders at an annual meeting of shareholders may be made (i) pursuant to
the Company's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any shareholder of the Company who was a shareholder of
record at the time of giving of notice provided for in this by-law, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this by-law.
(2) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to clause (iii) of paragraph (a)(1)
of this by-law, the shareholder must have given timely notice thereof in
writing to the Secretary of the Company. To be timely, a shareholder's notice
shall be delivered to the Secretary of the Company not less than 60 days nor
more than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the shareholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the 10th day following the day on which public announcement
of the date of such meeting is first made. Such shareholder's notice shall set
forth (i) as to each person whom the shareholder proposes to nominate for
election or reelection as a director, the name, age, principal occupations and
employment during the past five years, name and principal business of any
corporation or other organization in which such occupations and employment were
carried on and a brief description of any arrangement or understanding between
such person and any other person(s) (naming such person(s)) pursuant to which
he was or is to be selected as a nominee; (ii) as to any other business that
the shareholder proposes to bring before
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<PAGE> 5
the meeting, a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such shareholder and the beneficial
owners, if any, on whose behalf the proposal is made; (iii) as to the
shareholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (A) the name and address of such
shareholder, as they appear on the Company's books, and of such beneficial
owner and (B) the class and number of shares of the Company which are owned
beneficially and of record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of
this by-law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Company is increased and there is no
public announcement naming all of the nominees for Director or specifying the
size of the increased Board of Directors made by the Company at least 70 days
prior to the first anniversary of the preceding year's annual meeting, a
shareholder's notice required by this by-law shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary of the Company not later
than the close of business on the 10th day following the day on which such
public announcement is first made by the Company.
(b) Nominations of persons for election to the Board of Directors may be
made at a special meeting of shareholders at which directors are to be elected
pursuant to the Company's notice of meeting (1) by or at the direction of the
Board of Directors or (2) provided that the Board of Directors has determined
that directors shall be elected at such special meeting, by any shareholder of
the Company who is a shareholder of record at the time of giving of notice
provided for in this by-law, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this by-law. In the event
the Board of Directors calls a special meeting of shareholders for the purpose
of electing one or more directors, any such shareholder may nominate a person
or persons (as the case may be), for election to such position(s) as specified
in the Company's notice of meeting, if the shareholder's notice required by
paragraph (a)(2) of this by-law shall be delivered to the Secretary of the
Company not earlier than the 90th day prior to such special meeting and not
later than the close of business on the later of the 60th day prior to such
meeting or the 10th day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
Board of Directors to be elected at such meeting.
(c)(1) Only such persons who are nominated in accordance with the procedures
set forth in this by-law shall be eligible to serve as directors and only such
business shall be conducted at a meeting of shareholders as shall have been
brought before the meeting in
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<PAGE> 6
accordance with the procedures set forth in this by-law. The Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance with
the procedures set forth in this by-law and, if any proposed nomination or
business is not in compliance with this by-law, to declare that such defective
proposal shall be disregarded.
(2) For purposes of this by-law, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the Company
with the Securities and Exchange Commission pursuant to Sections 13, 14 or
15(d) of the Exchange Act of 1934, as amended (the "Exchange Act").
(3) Notwithstanding the foregoing provisions of this by-law, a shareholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
by-law. Nothing in this by-law shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the Company's proxy statement
pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II
DIRECTORS
SECTION 1. The business and affairs of the Company shall be managed by or
under the direction of a Board of Directors consisting of eight (8) directors,
who shall at all times be shareholders. Subject to the provisions of the
Certificate of Incorporation of the Company, the members of the Board shall be
elected at each annual meeting of shareholders of the Company to hold office
until the next annual meeting, and the term of each director shall be from the
time of his election and qualification until the annual meeting of shareholders
next succeeding his election and until his successor shall have been elected
and shall have qualified. The Chairman of the Board shall be elected by the
Board from time to time and shall serve as Chairman of the Board until his
successor shall have been elected and shall have qualified. The Chairman of
the Board shall be a director, and may serve as the Chief Executive Officer of
the Company, but not otherwise as an officer or employee of the Company unless
so determined by the Board of Directors. An election of a Chairman of the
Board may be demanded by any two or more directors and, upon such demand, shall
be held at the next properly convened meeting of the Board.
SECTION 2. If the office of any director is not filled at an annual meeting
or becomes vacant, or if new directorships resulting from an increase in the
authorized number of directors are created, the remaining directors (even
though less than a quorum) by a
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<PAGE> 7
majority vote, or the sole remaining director, may fill such directorship. A
director so elected shall hold office until the next annual meeting of
shareholders and until his successor is elected and qualified in his stead.
Any directorship not filled by the Board of Directors may be filled by the
shareholders at an annual meeting or at a special meeting called for that
purpose.
SECTION 3. The Board of Directors shall have the power to remove a director
for cause and to suspend a director pending a final determination that cause
exists for removal.
SECTION 4. There shall be an annual meeting of the Board of Directors for
the election of officers and for such other business as may be brought before
the meeting, immediately after the annual election of directors and at the
place where the annual election of directors shall take place, or at such other
place as shall be designated in the notice for such meeting. In the absence of
a quorum at such time and place, such meeting shall be held as soon as
practicable at the principal business office of the Company in the Borough of
Manhattan of the City of New York and notice thereof shall be given by the
Secretary or an Assistant Secretary by notice delivered personally or by
telephone to each director, or mailed, telegraphed or sent by facsimile
transmission to his address upon the books of the Company at least two days
prior to the time of holding the meeting.
SECTION 5. Regular meetings of the Board of Directors may be held without
notice at such time and place as shall from time to time be determined by
resolution of the Board.
SECTION 6. Special meetings of the Board of Directors may be called by the
Chairman of the Board of Directors, Chief Executive Officer, President or by
any two directors at such time and place as specified in a notice delivered
personally or by telephone to each director, or mailed, telegraphed or sent by
facsimile transmission to his address upon the books of the Company, at least
two days prior to the time of holding the meeting.
SECTION 7. A majority of directors shall constitute a quorum for the
transaction of business.
SECTION 8. Subject to the restrictions contained in the Certificate of
Incorporation, the Board of Directors shall have power to have an office or
offices and to keep the books of the Company outside the State of New Jersey.
ARTICLE III
OFFICERS
SECTION 1. The officers of the Company may consist of a Chief Executive
Officer, a President, one or more Vice Presidents, a
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<PAGE> 8
Secretary, a Treasurer, and a General Controller and one or more Assistant
Secretaries, Assistant Treasurers and Assistant General Controllers. The said
officers shall be elected by ballot at the annual meeting of the Board of
Directors by a majority vote of the Board and shall hold office for one year,
and until their respective successors shall be elected, subject to Section 3
below, provided, however, that the Board of Directors may at pleasure omit the
election of any of the foregoing officers not required by law, and provided
further that the Board of Directors may at pleasure remove any officer of the
Company. The Chief Executive Officer and the President shall be directors of
the Company but no other officer need be a director. One person may hold more
than one office.
SECTION 2. The said officers shall have the powers and shall perform all the
duties incident to their said respective offices and shall perform such other
duties as shall from time to time be assigned to them by the Board of
Directors.
SECTION 3. The Chairman may be the Chief Executive Officer of the Company.
The term of office of the Chairman may continue until the first of the month
following the attainment by the incumbent of age 68 and that of the Chief
Executive officer may continue until the first of the month following the
attainment by the incumbent of age 67. The Board of Directors, by majority
vote may, however, waive such limitations for periods of one year at a time,
but not beyond age 70 for either. The Chairman of the Board or, in his
absence, a director selected by a majority of the Directors, shall preside at
meetings of the Board of Directors. Each Vice President or other officer shall
have general charge of such departments or divisions of the Company's business,
or shall perform such duties, as may from time to time be determined by the
Chief Executive Officer and they shall be responsible for the proper
administration of their respective departments or divisions to the Chief
Executive Officer. Departmental managers shall be responsible for the proper
administration of their departments to the officer in charge thereof.
SECTION 4. During the absence of the Chief Executive Officer, the Chief
Executive Officer shall designate, in writing to the Corporate Secretary, the
officer who shall be vested with all the powers of such office in respect of
the signing and execution of any contracts or other papers requiring the
signature of any such absent officer. In the event of any prolonged absence of
any officer of the Company, the Board of Directors may delegate his powers or
duties to any other executive officer, or to any director, during such absence,
and the person so delegated shall, for the time being, be the officer whose
powers and duties he so assumes.
SECTION 5. Any vacancy in any office shall be filled for the unexpired term
by a majority vote of the Board of Directors.
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<PAGE> 9
SECTION 6. The Board of Directors may create such other offices as they may
determine, elect or provide for the election of officers to fill the same,
define their powers and duties and fix their tenures of office. The Board may
also create or provide for the creation of (1) administrative divisions, and
(2) offices and committees for any such divisions and may elect or provide for
the election of officers and committee members to fill the positions so
created, define or make provision for the duties to be performed by such
officers and committees and the powers to be exercised by them and fix or make
provision for their tenures of office. The Board of Directors may delegate to
the Chief Executive Officer or to any other officer or any committee of the
Company the power to exercise some, any or all of the powers granted to the
Board by the foregoing provisions of this Section. The Chief Executive Officer
in turn may delegate to any other officer or any committee of the Company the
power to exercise some, any or all of the powers delegated to him by the Board
of Directors pursuant to the foregoing provisions of this Section.
ARTICLE IV
COMMITTEES
SECTION 1. There shall be an Executive Committee consisting of five or more
directors. The membership of this Committee shall consist of such number of
directors as the Board of Directors may, by a resolution adopted by a majority
of the entire Board, elect from time to time and their terms of office shall be
for such periods as the Board of Directors may designate. A majority of all
the members of the Committee shall constitute a quorum for the transaction of
business. The Board of Directors shall elect the Chairman of the Committee.
The Committee shall determine its own procedure and shall meet on call by the
Chairman of the Committee or by any two members of the Committee. In addition
to any general or special duties that may from time to time be delegated to it
by the Board of Directors, the Committee shall, subject to the laws of the
State of New Jersey, have and may exercise the powers of the Board during the
intervals between the meetings of the Board, including the periodic review of
management organization.
SECTION 2. There shall be a Pension Committee consisting of five or more
members, a majority of whom must be directors. The members shall be elected by
the Board of Directors at their annual meeting and shall hold office for one
year or until the election of their respective successors, provided, however,
that the Board of Directors may at pleasure remove any member of the Committee
who is not a director. The Board of Directors shall elect the Chairman of the
Committee. Vacancies on the Committee, or increases in the number thereof, may
be filled for the unexpired term by election by the Board of Directors at any
meeting of the Board. The Committee shall meet at its convenience and shall
determine its own procedure. In addition to any general or special duties that
may
9
<PAGE> 10
be delegated to it by the Board of Directors, the Committee may from time to
time consider, devise, report on and recommend to the Board a plan or plans, or
modifications thereof, and matters incident thereto, for the pensioning of
tried and faithful employees, with a view to increased efficiency of operation
and to closer cooperation between the Company and its officers and employees.
A majority of the members shall constitute a quorum of the Committee.
SECTION 3. There shall be an Audit Committee comprised of three or more
directors, independent of executive and operating management and free from any
relationships that might, in the opinion of the Board of Directors, be
considered to be a conflict of interest. The members shall be elected by the
Board of Directors, which shall also elect the Chairman of the Committee, at
their Annual Meeting, and shall hold office for one year or until the election
of their respective successors. A majority of the members shall constitute a
quorum of the Committee.
The Committee shall assist the Board in fulfilling its fiduciary
responsibilities relating to accounting policies, auditing and reporting
practices for the Company and shall, through regularly scheduled meetings
provide a direct line of communication between the Board and the Company's
independent accountants, as well as the internal auditor. It shall receive
management's recommendation of the independent auditing firm for the next year
and make its recommendation to be approved by the Board.
It shall review with the independent auditing firm the scope of its
examination, the consolidated financial statements prior to the approval of the
annual report by the Board, the competence and adequacy of financial,
accounting and internal audit management and control procedures of the Company,
recommendations of the independent auditors and management's response thereto,
the internal audit function and such other matters relating to financial
reports as it deems appropriate. It will require that serious differences
between the independent auditors and the management be reported to it.
SECTION 4. There shall be a Committee on Officers' Compensation comprised of
5 or more directors, independent of executive and operating management and free
from relationships that might, in the opinion of the Board of Directors, be
considered a conflict of interest. The members shall be elected by the Board of
Directors, who shall also elect the Chairman of the Committee at their Annual
Meeting, who shall hold office for one year or until the election of their
respective successors. A majority of the members shall constitute a quorum of
the Committee.
The Committee shall establish salaries for elected officers of the Company.
It shall be responsible for the administration of the Management Incentive
Plan, other incentive compensation plans and
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<PAGE> 11
related subjects. It shall also be responsible for the granting of options
under and administration of the Employees Stock Option Plan. This Committee
shall supervise and administer such other employee benefits plans as the Chief
Executive Officer or the Board of Directors shall, from time to time, direct.
SECTION 5. There shall be a Nominating Committee comprised of three or more
directors, independent of executive and operating management and free from any
relationship that might, in the opinion of the Board of Directors, be
considered to be a conflict of interest. The members shall be elected by the
Board of Directors, which shall also elect the Chairman of the Committee at its
Annual Meeting, and shall hold office for one year or until the election of
their respective successors. A majority of the members shall constitute a
quorum of the Committee.
The Committee shall review and determine the qualifications of potential
directors and shall be responsible for reviewing and making recommendations to
the Board of Directors with respect to the composition of the Board. It shall
research and recommend candidates to fill vacancies on the Board between annual
meetings of shareholders and shall propose to the Board of Directors a slate of
nominees for submission to the shareholders for election as directors at each
annual meeting of shareholders.
SECTION 6. The Committees created by the preceding sections of this Article
shall each keep a record of their actions and proceedings, and all their
actions shall be reported to the Board at its next ensuing meeting; except
that, when the meeting of the Board is held within 2 days after the committee
meeting, such report shall, if not made at the first meeting, be made to the
Board at its second meeting following such committee meeting.
ARTICLE V
DEPOSITORIES, CHECKS AND NOTES
SECTION 1. The Chairman of the Board, Chief Executive Officer, President,
Chief Financial Officer, Treasurer or an Assistant Treasurer of the Company
shall each have the authority to designate banks, trust companies or other
depositories in which funds of the Company shall be deposited to the credit of
the Company. All checks, drafts and orders for the payment of money shall be
signed by any one of the aforesaid officers, or by such other person or persons
as the Board of Directors or anyone of the aforesaid officers may from time to
time designate. Subject to
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<PAGE> 12
such limitations, restrictions and safeguards as any of the aforesaid officers
shall prescribe, signatures in the case of all checks, drafts and orders for
the payment of money may be facsimile signatures.
SECTION 2. The signature of any officer upon any bond, debenture, note or
similar instrument executed on behalf of the Company may be a facsimile
whenever authorized by the Board of Directors.
ARTICLE VI
DIVIDENDS
Subject to the provisions of law and the Certificate of Incorporation of the
Company, the Board of Directors shall have the power in its discretion to
declare and pay dividends upon the shares of stock of the Company of any class
in cash, in its own shares, in its bonds or in other property, including the
shares or bonds of other corporations. Anything in the Certificate of
Incorporation or these by-laws to the contrary notwithstanding, no holder of
any share of stock of the Company of any class shall have any right to any
dividend thereon unless such dividend shall have been declared by the Board of
Directors as aforesaid.
ARTICLE VII
SEAL
The seal of the Company shall be circular in form with the words "Borden,
Inc." on the circumference, and the figures "1899" in the center.
ARTICLE VIII
STOCK
SECTION 1. Certificates of stock shall be issued and signed by the Chairman
of the Board, Chief Executive Officer, President or a Vice President and may be
countersigned by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary and may be sealed with the seal of the Company or a
facsimile thereof. Any or all signatures upon a certificate, including those
of a stock transfer agent or a registrar, may be facsimile. In case any
officer or officers or any transfer agent or registrar of the Company who shall
have signed, or whose facsimile signature or signatures shall have been used on
any certificate or certificates shall cease to be such officer or officers, or
such transfer agent or registrar, for whatever cause, before such certificate
or certificates shall have been delivered, such certificate or certificates may
nevertheless be issued and delivered as though the
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person or persons who signed such certificate or certificates or whose
facsimile signature or signatures shall have been used thereon had not ceased
to be such officer or officers or such transfer agent or registrar, as the case
may be.
SECTION 2. All transfers of stock shall be made upon the books of the
Company upon surrender to the Company of the certificate or certificates for
such stock, duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer.
SECTION 3. Every person claiming a stock certificate in lieu of one lost or
destroyed shall give notice to the Company of such loss and destruction, and
shall also file in the office of the Company an affidavit as to his ownership
of the stock represented by the certificate, and of the facts which go to prove
its loss or destruction. He shall, if required by the Board of Directors, give
the Company a bond or agreement of indemnity in a form to be approved by
counsel, with or without sureties and in such amount as may be determined by
the Board or by an officer in whom authority therefor shall have been duly
vested by the Board against all loss, cost and damage which may arise from
issuing such new certificate. The officers of the Company, if satisfied from
the proof that the certificate is lost or destroyed, may then issue to him a
new certificate of the same tenor as the one lost or destroyed.
SECTION 4. The Board of Directors shall have the power and authority to make
all such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of the capital stock of
the Company. The Board of Directors may appoint transfer agents and registrars
of transfer, and may require any or all stock certificates to bear the
signature or facsimile signature of any such transfer agent and any such
registrar of transfers.
SECTION 5. Unless the Board of Directors by specific resolution provides
otherwise, all shares of the Company, which are reacquired pursuant to the New
Jersey Corporation Act, Section l4A:7-l6 by purchase, by redemption or by their
conversion into other shares of the Company, shall remain authorized and issued
shares and shall be considered treasury shares.
ARTICLE IX
FISCAL YEAR
SECTION 1. The fiscal year of the Company shall commence on the first day of
January in each year and end on the following thirty-first day of December.
SECTION 2. It shall be the duty of the principal financial officer to submit
a full report of the financial condition of the
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Company for the preceding fiscal year at a meeting of the Board of Directors
preceding the annual meeting of shareholders.
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each director or officer who was or is a party, or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative, or investigative
(including any action or suit by or in the right of the Company to procure a
judgment in its favor) by reason of the fact that he is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, trustee, employee or agent of any other
enterprise shall be indemnified by the Company if, as and to the extent
authorized by the laws of the State of New Jersey, against expenses (including
costs, disbursements and counsel fees), judgments, fines, penalties and amounts
paid or incurred in satisfaction of settlements actually and reasonably
incurred by him in connection with the defense or settlement of such action,
suit or proceeding, and any appeal thereof. The foregoing shall not be deemed
exclusive of any other rights to which any person indemnified may be entitled
under such laws or any lawful agreement, vote of shareholders or otherwise and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
ARTICLE XI
AMENDMENTS TO BY-LAWS
These by-laws may be altered, amended or added to by a majority vote of all
the directors, at any regular or special meeting provided that the notice of
such meeting, given personally or by telephone to each director, or mailed,
telegraphed or sent by facsimile transmission to his address upon the books of
the Company, at least two days prior to the time of holding the meeting,
indicates that the by-laws are to be repealed, altered or amended or that new
by-laws are to be adopted (but such notice need not specify the particular
by-laws to be repealed, altered or amended or the new by-laws to be adopted),
or if all of the directors at the time in office be present at such meeting, or
if those not present shall at any time waive or have waived notice thereof in
writing.
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EXHIBIT 10(iv)
BORDEN, INC. 02/28/94
1994 MANAGEMENT INCENTIVE PLAN
1. PURPOSES
The purposes of the Plan are (a) to provide an incentive to officers, other key
executives and managerial employees of the Company, (b) to attract, motivate,
and retain in the employ of the Company and its Subsidiaries individuals of
outstanding competence, (c) to enable the Company to compete with other
organizations offering similar arrangements, and (d) to further identify the
interest of officers, other key executives and managerial employees of the
Company and its Subsidiaries with those of the Company's shareholders
generally.
2. INCENTIVE COMPENSATION AMOUNT
For each Compensation Year, commencing with the calendar year 1994 and
continuing through the calendar year 1998, the Incentive Compensation Amount
shall be equal to the sum of the awards granted under both the annual and
long-term portions of the Plan.
3. CERTIFICATION
3.01 As soon as practicable after the end of each Compensation Year, the
independent accounting firm employed by the Company as its auditors shall
examine and report on the incentive compensation computation for such
Compensation Year or Years. Such report shall be in all respects final and
conclusive on the Company and its shareholders, the Committee, the members at
any time of the Incentive Compensation Group, the Participants and their
Beneficiaries, and all others who may be eligible for incentive compensation
awards or to whom such awards may be made or claiming under the Plan or
otherwise, and, except and to the extent amended by such auditors within six
weeks after submission to the Board of Directors, shall remain final and
conclusive as to the incentive compensation computation for such Compensation
Year irrespective of any subsequently discovered miscalculation or error and
irrespective of the results of any subsequent audit or review by the
Commissioner of Internal Revenue, or as the result of the action or decision of
any other agency or tribunal.
3.02 In addition to certification of the Incentive Compensation Amount,
the independent accounting firm employed by the Company shall certify that each
annual and long-term award has been computed in accord with the formula, if
any, applicable to such award.
3.03 Such certification reports by the Company's auditors of the Incentive
Compensation Amount and individual awards for each Compensation Year shall be
directed to and delivered to the Committee on Officers' Compensation which
shall then issue its certification of the results.
- ---------------------------------------------
NOTE: Unless otherwise required by the Plan, the terms capitalized in the
Plan and defined in Section 14 thereof, have the meanings ascribed to such
terms in such Section 14.
<PAGE> 2
4. INCENTIVE COMPENSATION GROUP
4.01 The Incentive Compensation Group for any Compensation Year shall
consist of the Chief Executive Officer of the Company and, subject to the
provisions of paragraph 4.02 below, such other officers and other key
executives and managerial employees of the Company and its Subsidiaries as the
Committee may select for such Compensation Year in the manner hereinafter
provided.
4.02 An employee selected for participation for any Compensation Year in
an incentive compensation, profit participation or bonus plan of any
Subsidiary, division or profit center of the Company shall not be eligible for
participation in this Plan for such Compensation Year except for the period of
time during such Compensation Year in which he is both a key executive or
managerial employee of a Corporate Division or Subsidiary.
4.03(a) Prior to the commencement of each Compensation Year, or such later
date permitted under regulations issued under Section 162(m), the Committee
shall select from the employees eligible for the Incentive Compensation Group
for such Compensation Year the employees who, in addition to the Chief
Executive Officer, will, in the opinion of the Committee, contribute
substantially to the progress and earning power of the Company and at the time
of such selection the Committee shall determine the basis for participation of
each employee so selected. The selection by the Committee of such employees
and its determination of the basis of participation of the members of the
Incentive Compensation Group shall, except in the case of the Chief Executive
Officer, be made on the recommendation of the Chief Executive Officer or on the
recommendation of such other officer or officers of the Company as he may
designate, but the Committee shall have full authority to act with respect to
the selection and participation of all employees, including the Chief Executive
Officer.
(b) In determining the amount that any member of the Incentive
Compensation Group who is or becomes a key executive or managerial employee of
a Corporate Division or Subsidiary of the Company during the Compensation Year
in which he is a member of the Incentive Compensation Group, may be eligible to
receive under this Plan, the Committee shall take into consideration and make
appropriate allowance for the amount which such member may be eligible to
receive under any other incentive compensation, profit participation or bonus
plan of the Corporate Division or Subsidiary of which such member is a key
executive or managerial employee.
4.04 Notwithstanding the provisions of paragraph 4.03 above, the Committee
may, at any time prior to the end of a Compensation Year, on recommendation of
the Chief Executive Officer or such other officer or officers of the Company as
he may designate, (a) add members to the Incentive Compensation Group for such
Compensation Year from among employees who have become eligible under the Plan
during such Compensation Year as the result of entering the employ of the
Company or a Subsidiary, promotions or otherwise, (b) eliminate members from
the Incentive Compensation Group, or (c) reduce the amount of incentive
compensation for any member or members for any reason
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deemed good and sufficient in the Committee's discretion.
4.05 An employee shall be eligible for selection as a member of the
Incentive Compensation Group for a Compensation Year only if employed by the
Company or a Subsidiary on a full-time basis at the time selected.
4.06 No member of the Committee shall, while serving on the Committee, be
eligible for membership in the Incentive Compensation Group.
4.07 A member of the Board of Directors of the Company or any committee
thereof shall not be eligible for membership in the Incentive Compensation
Group unless he shall also be an employee meeting the requirements of paragraph
4.05 above, but, if such an employee, he shall not be ineligible because he is
such a director.
4.08 Every member of the Committee while serving in a voting capacity,
shall meet all the criteria necessary to qualify as an outside director as
defined under Section 162(m).
5. AWARDS OF INCENTIVE
COMPENSATION
5.01 Subject to paragraph 5.04 below, the Committee may provide for annual
incentive awards and long-term incentive awards of a multi-year nature.
5.02(a)(i) Annual incentive awards, if any, if intended by the Committee
to meet the exception for performance-based compensation qualified under
Section 162(m), shall be paid under a preestablished performance goal based on
the business criterion of Pretax Income of the Company. The award procedure
operates as follows: In advance of each Compensation Year (except for the 1994
Compensation Year with respect to which the Committee must act prior to April
1, 1994), or such later date permitted under regulations issued under Section
162(m), the Committee will establish a dollar amount representing targeted
Pretax Income for that Compensation Year. At the same time, the Committee will
establish, for each Participant selected to be eligible for an annual award for
that Compensation Year, three percentages. The first represents the percentage
of the Participant's salary paid during that Compensation Year that the
Participant will receive as his annual award if the Company's actual Pretax
Income for that Compensation Year equals the targeted Pretax Income. The
second percentage, lower than the first, is the percentage of such salary that
he will receive as an annual award if the Company's actual Pretax Income is a
stated minimum amount, which is less than the targeted Pretax Income. The
third and highest percentage, is the percentage of such salary that the
Participant will receive if the Company earns at least a stated Pretax Income
which is higher than the targeted Pretax Income. If the Company's actual
Pretax Income is between the minimum and highest stated Pretax Income amounts,
the participant will receive a prorated award.
5.02(a)(ii) Annual incentive awards made under the Plan are expected to
meet the exception for performance-based compensation qualified under Section
162(m). However, the Committee in it's sole discretion may make other awards
which are different in amounts, form and time of payment, subject to paragraph
5.04 hereof and to any other terms and
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conditions that the Committee may impose.
5.02(b)(i) Long-term incentive awards, if any, if intended by the
Committee to meet the exception for performance-based compensation qualified
under Section 162(m), shall be paid under a preestablished performance goal
based on the business criterion of earnings per share ("e.p.s."). The
long-term award arrangements and procedure are as follows: Each long-term
award cycle shall consist of three calendar years. Each Compensation Year a
new long-term award cycle begins and, while in that year, there may be up to
two other cycles running from the two prior years, the calculation for each
cycle shall be completely independent and separate from any other cycles
running at the same time. In advance of each year, (except for the 1994
compensation year with respect to which the Committee must act prior to April
1, 1994), or such later date permitted under regulations issued under Section
162(m), as a new cycle is about to begin, the Committee establishes an e.p.s.
"standard" dollar goal for each of the three years of the forthcoming cycle and
percentages of the e.p.s. standard dollar goals below which no award will be
earned and at which the maximum award will be earned. The Committee may also
include as part of a cycle an increment of the allocation for the cycle as a
whole. At the same time, the Committee will establish, for each Participant
selected to be eligible for a long- term award, a dollar amount as a "standard"
allocation that would be earned if the standard e.p.s. goal is attained and the
percentages of the standard allocation to be earned at the lowest and highest
compensable levels of e.p.s. for that year. After each year of each cycle, the
actual e.p.s. achieved is compared with the "standard" e.p.s. for that year and
a portion of the allocation for that cycle is credited if a stated minimum
e.p.s. is earned, with the possibility of earning up to a maximum of 150% of
the allocation for any cycle in which all three years of a cycle exceeded the
"standard" e.p.s. If the Company's actual e.p.s. for a Compensation Year is
between the minimum, the standard, and highest stated e.p.s. for such year, the
Participant will receive an award prorated accordingly.
5.02(b)(ii) Long-term incentive awards, made under the Plan are expected
to meet the exception for performance-based compensation qualified under
Section 162(m). However, the Committee in its sole discretion may make other
awards which are different in amounts, form and time of payment, subject to
paragraph 5.04 hereof and to such other terms and conditions, if any, as the
Committee may impose.
Notwithstanding the above provisions of this paragraph 5.02, the Committee
may, in its discretion, reduce, or add additional conditions that would reduce,
the amount of compensation otherwise payable if any performance goal and other
conditions and requirements are not met.
5.03 As promptly as practicable after receiving notice, pursuant to
paragraph 3.03 above, that an incentive compensation computation is available
for a Compensation Year, and individual incentive amounts have been computed,
the Committee shall determine the time and form of payment of such awards as
hereafter more specifically provided. At the same time, the Committee may, on
recommendation of the Chief Executive Officer or such other officer or officers
of the Company as he may designate, make awards of incentive compensation to
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<PAGE> 5
employees who were eligible for the Incentive Compensation Group for such
Compensation Year but who had not been selected as members of the Incentive
Compensation Group during such Compensation Year pursuant to the provisions of
paragraphs 4.03 and 4.04, and shall similarly determine the time and form of
payment of such awards. Awards may be made either in cash, in shares of Common
Stock of the Company, in Share Units, or partly in one form and partly in one
or more other forms. In the case of an award in shares or Share Units, the
number shall be determined by using the Fair Market Value per share of Common
Stock on the date the award is approved for payment.
5.04 In no event shall any annual incentive award, made for any
Compensation Year to any Participant, exceed the lesser of 100% of the annual
salary of such Participant at the Participant's final salary rate for such
Compensation Year, or such other percentage of salary as the Committee may have
fixed in advance of such Compensation Year. Neither shall any long-term
incentive award exceed the lesser of 100% of the Participant's annual salary at
his final salary rate or such other percentage of salary as the Committee may
have fixed in advance of the Compensation Year. For the purpose of the Plan,
including, without limitation, this paragraph 5.04, the final year of a cycle
shall be deemed to be the Compensation Year of such cycle.
5.05 If the employment of a member of the Incentive Compensation Group
shall have terminated during a Compensation Year for any reason, other than for
"cause", or if a member of the Incentive Compensation Group shall have been on
leave of absence during any part of a Compensation Year, he, or, in the event
of his death, such person or persons as the Committee, upon recommendation of
the Chief Executive Officer or such officer or officers of the Company as he
may designate, may in its discretion select, may (but need not) be granted such
award, if any, or part thereof, but never in excess of the amount such member
would have received if employed throughout the whole of such Compensation Year,
on such basis, and upon such terms and conditions, if any, as the Committee may
in its discretion determine.
5.06 The reduction or elimination of an award for a Compensation Year of a
member of the Incentive Compensation Group for any reason shall not serve to
increase the awards for such Compensation Year to other members of the
Incentive Compensation Group.
5.07(a) Anything in paragraphs 3.01 or 5.01 above or elsewhere in the Plan
to the contrary notwithstanding, but subject to Section 15 below, in the event
of, or in anticipation of, a Change in Control, the Committee may, in its
discretion
(i) make pro-rata interim annual and long-term awards for the Compensation
Year in which falls the Change in Control, based on a good faith calculation
of a projected incentive compensation award for such Compensation Year
utilizing among other things and if deemed appropiate by Committee, the
lower of the estimated finiancial results for such Compensation Year or the
financial results for the next preceding year, and
(ii) make annual and long-term awards for the Compensation
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<PAGE> 6
Year next preceding the Compensation Year in which falls the Change in
Control, prior to receipt of, or finalization of, the auditor's
report provided for in paragraph 3.01 above, based upon the
Committee's best estimate of the financial results for such
Compensation Year.
(b) For purposes of this paragraph 5.07, a "Change in Control" shall be
deemed to occur if and when (i) an offeror other than the Company or a
Subsidiary purchases shares of Common Stock pursuant to a tender or exchange
offer for such shares, (ii) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, (iii) the membership of the Board changes as the result
of a contested election, such that individuals who were directors at the
beginning of any twenty- four month period (whether commencing before or after
the date of adoption of this Plan) do not constitute a majority of the Board at
the end of such period, or (iv) shareholders of the Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Company's
assets, or a plan of partial or complete liquidation.
6. TIME OF PAYMENT OF AWARDS
6.01 The Committee may determine the time of payment of awards of
incentive compensation by rules and regulations of general application, which
may provide for payment of awards at the time such awards are made or for a
class or classes of awards the payment of which shall be made, in whole or in
part, to the Participant or, in the event of his death, to his Beneficiary, at
a future time or times, in such installment or installments, if any, with or
without interest or interest equivalents and subject to such conditions, if
any, with respect to continued service or availability, non-competition or
otherwise, as the Committee may prescribe.
6.02 At the time that an employee shall be selected for participation in
the Plan for any Compensation Year, or as soon as practicable thereafter, the
Committee shall determine the amount, if any, of the award that may be made for
such Compensation Year which shall be paid upon the making of such award and
the portion of such award which shall be one of the class of awards established
by the Committee pursuant to paragraph 6.01 above. If the Committee shall have
failed to make such a determination in the case of any Participant for any
Compensation Year, the award to such Participant shall be paid in cash at the
time the award shall be made or as soon as practicable thereafter.
6.03 In making the determination provided for in paragraph 6.02 above, the
Committee may act with or without consultation with the Participant and to that
end may permit Participants to indicate a preference as to the time of payment
of any awards to be made to them.
7. FORM OF PAYMENT OF AWARDS
7.01 Once awards of incentive compensation have been earned, certified and
approved by the Committee for any Compensation Year they shall be paid in cash,
in shares of Common Stock, partly in
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cash and partly in such shares of Common Stock, or in the manner provided in
paragraph 7.03 or in such other manner as the Committee may in its sole
discretion from time to time determine.
7.02 Shares of Common Stock may be issued or transferred in payment of an
award subject to such restrictions as to transferability and as to such
requirements, if any, as to re-transfer to the Company in the event of failure
to comply with obligations as to continued service or availability,
non-competition or otherwise as the Committee may prescribe.
7.03 The Committee may in its discretion direct that a Participant be
contingently credited with shares of Common Stock or Share Units in payment of
an award, subject to such conditions, if any, as to continued service or
availability, non-competition or otherwise as the Committee may prescribe, and
may provide that the equivalent of any dividends paid on an equal number of
outstanding shares of Common Stock be paid to the Participant either at the
time such dividends are declared and paid or at some subsequent time or times
or that additional shares of Common Stock or Share Units equal to the amounts
of such dividends shall be contingently credited, subject to the same
conditions, if any, as those attached to delivery of the shares or payment of
cash in respect of Share Units in respect of which such dividend equivalents
are credited. Provided there has been compliance with any conditions attached
to the delivery or payment thereof, the shares and Share Units so contingently
credited shall be issued, transferred or payment in respect thereof made, to
the Participant or, in the event of his death, to his Beneficiary, at such time
or times and in such installments, if any, as the Committee may direct.
7.04 Cash contingently credited in payment of any award may carry such
rate of interest equivalent as the Committee may prescribe by rules and
regulations of general application, which shall in no event exceed the greater
of five per cent (5%) per annum computed no less often than quarter-annually,
and the 90-day prime certificate of deposit rate, determined quarter-annually,
in each case with such periodic compounding, if any, as the Committee may
prescribe.
7.05 In the event that the Company's obligation to pay an award for a
Compensation Year shall terminate or be reduced subsequent to such Compensation
Year as the result of failure to comply with requirements or conditions
attached thereto, or in the event that shares are re- transferred to the
Company or shares or Share Units contingently credited or dividend equivalents
in respect of shares or Share Units are cancelled, the amount thereof shall not
thereby become available to other members of the Incentive Compensation Group.
7.06 Shares of Common Stock to be transferred in payment of awards of
incentive compensation may be authorized but unissued shares or treasury stock
or shares acquired for the purpose of the Plan. Any and all shares purchased
by the Company for the purpose of the Plan, unless and until transferred
pursuant to the Plan (and not re-transferred to the Company), shall be and
remain the property of the Company and shall be available for any corporate
purposes; and neither the Incentive Compensation Group for any Compensation
Year, individually or as a group, nor any Participant or Beneficiary nor any
other
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person claiming under or through any of them, shall have any right, title or
interest in or to any such shares unless and until transferred pursuant to the
Plan.
7.07 Shares of Common Stock transferred under the Plan and shares of
Common Stock or Share Units contingently credited shall, for purposes of the
Plan, be valued at the Fair Market Value of such shares, as determined by the
Committee in the reasonable exercise of its discretion, (a) at the date as of
which such shares are transferred or payment in respect of shares or Share
Units is made or at the date shares or Share Units are contingently credited,
as the case may be, or (b) when deemed by the Committee to warrant it, at the
date an agreement for the transfer or contingent credit of such shares or Share
Units is made, as the Committee may determine.
7.08 Payment of dividends, dividend equivalents, interest or interest
equivalents in respect of awards under the Plan, amounts equal to increases or
decreases in market value in respect of shares of Common Stock transferred
under the Plan and amounts based on such increases or decreases in respect of
Share Units, shall not be charged against the amount of any award.
7.09 Any award payable in shares of Common Stock under the Plan may, in
the discretion of the Committee, be paid in cash on each date on which payment
in shares would otherwise have been made, in an amount equal to the Fair Market
Value on each such date, of a number of shares equal to the number of shares of
Common Stock which would otherwise have been transferred on such date.
7.10 Anything in the Plan to the contrary notwithstanding, in the case of
an award or awards of incentive compensation made in Share Units, the Committee
may reduce the amount payable with respect to such Share Units (but not to an
amount below the amount of such award or awards) if, and to the extent that,
the Committee determines that the amount payable would be in excess of
reasonable compensation.
7.11(a) Any award deferred under the Plan or under any of the Prior
Management Incentive Plans may, in the discretion of the Committee and with the
consent of the affected participant if necessary, be changed into any other
form of deferred award authorized by this Section 7; and any award that shall
be so changed shall be subject to all the terms and conditions of the Plan.
Unless the Committee shall otherwise direct, cash contingently credited in
payment of an outstanding award made under any of the Prior Management
Incentive Plans shall carry interest equivalents at the rate and with such
periodic compounding, if any, as may be prescribed from time to time by the
Committee for cash contingently credited in payment of awards under the Plan.
(b) Any award made to an employee who is at the time of the award, or
later becomes, an officer of the Company, heretofore or hereafter deferred
under an incentive plan of the Company or a Subsidiary, other than under the
Plan, or under any of the Prior Management Incentive Plans, may, in the
discretion of the Committee and with the consent of the affected officer if
necessary, be changed into any other form of deferred award authorized by this
Section 7; and any award that shall be so changed shall
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be subject to all the terms and conditions of the Plan.
7.12 The Company shall reserve up to 400,000 shares of Common Stock as
required for issuance pursuant to the Plan and to the Prior Management
Incentive Plans, provided, however, that in the event of any change in the
Common Stock through merger, consolidation, or reorganization, or in the event
of any dividend to holders of such stock payable in stock of the same class or
the issue to such holders of rights to subscribe to stock of the same class, or
in the event of any other change in the capital structure, the Committee or the
Board of Directors on recommendation of the Committee may make such adjustments
with respect to the number of shares reserved under this paragraph 7.12 or
provided for under any other provision of this or any of the Prior Management
Incentive Plans, as it deems equitable to prevent dilution or enlargement of
the rights of any then or later holder of such stock.
8. ADMINISTRATION
8.01 The Plan shall be administered by the Committee on Officers'
Compensation of the Board of Directors, which shall have full power and
discretion to construe and interpret the Plan. No member of the Committee
shall be eligible to receive an incentive compensation award while serving on
the Committee and no person shall be eligible to serve on the Committee unless
he shall be a "disinterested person" within the meaning of Rule 16b-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended from time to time, or any law, rule, regulation or other provision that
may hereafter replace such rule ("Rule 16b-3"), and an "outside director"
within the meaning of Section 162(m). Nothing herein shall prevent the Board
from imposing additional qualifications or requirements with respect to members
of the Committee.
Anything in this Plan to the contrary notwithstanding, but subject to
paragraph 15 below, insofar as this Plan applies to employees who are not
subject to reporting requirements of Section 16(a) of the Securities Exchange
Act of 1934, as amended from time to time, and who are not "covered employees"
within the meaning of Section 162(m) with respect to equity securities of the
Company, determinations and interpretations in individual cases can, if
delegated by the Committee be made by, or at the direction of, the Chief
Executive Officer of the Company.
8.02 The Committee may establish and from time to time amend rules and
regulations of general application for the administration of the Plan, subject
to the provisions thereof, and rules for its own organization and procedure.
The Committee may act or recommend by written determination instead of by
affirmative vote at a meeting, provided that any written determination shall be
signed by a majority of all the members of the Committee and all members of the
Committee shall have been notified. The Company shall pay such compensation,
if any, for the services of the members of the Committee and such of their
expenses, if any, and any other expenses, of the Plan as the Board of Directors
may from time to time approve.
8.03 Any costs incidental to the administration of the Plan shall be
borne by the Company.
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9. CERTAIN PROVISIONS RELATING TO PARTICIPATION
9.01 No member of the Incentive Compensation Group, no Participant, no
Beneficiary, no person claiming under or through any of them, nor any other
person shall have any right or interest, whether vested or otherwise, in the
Plan or its continuance, or in or to the payment of any award under the Plan,
whether such award be vested, contingent or otherwise, unless and until all the
terms and conditions of the Plan, of any rules and regulations of the Committee
thereunder, and of any instrument executed pursuant thereto, that affect such
award and its payment, shall have been fully complied with as specifically
provided in the Plan and the rules and regulations of the Committee thereunder.
No rights under the Plan, contingent or otherwise, shall be assignable or
subject to any encumbrance, pledge or charge of any nature, except as may be
specifically authorized by the Committee and no such rights shall be
transferrable other than by will or the laws of descent and distribution.
Rights may be exercised during the Participant's lifetime only by him or by his
guardian or legal representative, except that a Participant may, under such
rules and regulations as the Committee may establish, designate a Beneficiary
to receive any unpaid portion of an award after his death.
9.02 Neither the adoption of the Plan nor its operation shall in any way
affect the right and power of the Company or any Subsidiary to dismiss or
otherwise terminate the employment of any employee at any time for any reason
with or without cause.
9.03 By accepting any benefits under the Plan, each member of the
Incentive Compensation Group, each Participant, each Beneficiary, and each
person claiming under or through any of them, shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent to, any action
or decision taken or made or to be taken or made under the Plan by the Company,
the Board of Directors and the Committee.
10. GENERAL PROVISIONS
10.01 Any action taken or decision made under the respective provisions of
the Plan by the Company, the Board of Directors and the Committee, arising out
of or in connection with the construction, administration, interpretation or
effect of the Plan, or recommendations in accordance therewith, or of any rules
and regulations adopted thereunder, including, without limitation, any
adjustment in the number or class of shares to be issued or transferred under
the Plan as the result of a change affecting the Common Stock shall in each
case lie within the Committee's discretion and shall be conclusive and binding
on the Company, its Subsidiaries and its shareholders and on all members of the
Incentive Compensation Group, all Participants and Beneficiaries and all
persons claiming under or through any of them.
10.02 The Board of Directors and the Committee may rely upon any
information supplied to them by any officer of the Company or by the Company's
independent public accountants and may rely upon the advice of such accountants
and of counsel, and shall be fully protected in relying upon any such
information and advice. Members of the Board of Directors who are also
officers of the Company may on invitation attend the meetings of the Committee,
but,
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unless appointed and serving as members of the Committee, shall have no vote.
10.03 No member of the Board of Directors or of the Committee shall be
liable for any act or failure to act of any other member of such Board or
Committee, as the case may be, or of any officer, agent or employee, nor shall
any member of the Board of Directors or of the Committee be liable for any act,
or failure to act, of his own unless such act or failure to act shall have been
in bad faith or grossly negligent. Any document required to be delivered to
the Board of Directors or to the Committee shall be deemed to have been so
delivered if and when addressed to and received by the Secretary of the Company
or the Secretary of the Committee, as the case may be.
10.04 The fact that a member of the Board of Directors shall at the time
be, or shall theretofore have been or thereafter may be, a Participant or
eligible to receive an incentive compensation award shall not disqualify him
from taking part in and voting at any time as a director in favor of or against
amendment or termination of the Plan or other matters affecting the Plan.
10.05 Appropriate provision shall be made for any taxes that the Company
determines are required to be withheld from awards of incentive compensation
under the applicable laws or other regulations of any governmental authority,
whether Federal, state or local and whether domestic or foreign.
10.06 The place of administration of the Plan shall be conclusively deemed
to be within the State of Ohio, and the validity, construction, interpretation
and administration of the Plan, and of any rules and regulations or
determinations or decisions made thereunder, and the rights of any and all
persons having or claiming to have any interest therein or thereunder, shall be
governed by, and determined exclusively and solely in accordance with, the laws
of the State of Ohio. Without limiting the generality of the foregoing, the
period within which any action arising under or in connection with the Plan, or
any payment or award made or purportedly made under or in connection therewith,
must be commenced shall be governed by the laws of the State of Ohio,
irrespective of the place where the act or omission complained of took place
and of the residence of any party to such action and irrespective of the place
where the action may be brought.
11. TERM OF PLAN
The Plan shall be in effect, and awards of incentive compensation may be made
under the Plan, for each of the calendar years from 1994 to 1998, both
inclusive. Unless the Plan shall be renewed, no awards of incentive
compensation shall be made under the Plan for any calendar year subsequent to
1998, but as to awards made for the calendar years 1994 to 1998, both
inclusive, the Plan will continue in effect in accordance with its terms.
12. OTHER COMPENSATION OR INCENTIVE ARRANGEMENTS
The Plan is not intended as and shall not be deemed a substitute for or
preclude continuance or establishment of incentive compensation, profit
participation or bonus plans of Subsidiaries, divisions or profit centers of
the Company or any other plan, practice or arrangement for the payment of
compensation or fringe benefits, including, without limitation,
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commissions, prizes, suggestion or special awards, production or similar
bonuses, retirement, profit sharing, group insurance, stock purchase or stock
bonus plans or other bonus plans or arrangements, that may now or hereafter be
in effect for employees generally or any group or class of employees, and any
such plan, practice or arrangement may be continued or authorized and payment
thereunder made independently of the Plan.
13. AMENDMENT OR TERMINATION
13.01 Subject to any applicable shareholder approval requirement of law,
the Plan may at any time or from time to time be amended in any respect,
including, without limitation, to qualify incentive compensation awards
hereunder as performance-based compensation under Section 162(m), or may at any
time be terminated, by either the shareholders of the Company or by the Board
of Directors, subject to the provisions of paragraphs 13.02 and 13.03 below.
13.02 Only the shareholders of the Company may amend the provisions of the
Plan so as
(a) to increase any incentive compensation award for any Compensation Year
above the amount authorized by the Plan, and any rules and regulations
thereunder;
(b) to change the provisions of paragraph 8.01 relating to the
administration of the Plan;
(c) to materially modify the requirements as to eligibility for
participation in the Plan; or
(d) to change the provisions of this Section 13.
13.03 No amendment or termination of the Plan by either the shareholders
of the Company or the Board of Directors shall, without his consent, affect any
incentive compensation award theretofore made to a Participant.
14. DEFINITIONS
Unless otherwise required by the context, the terms used in this Plan shall
have the meanings set forth in this Section 14.
BENEFICIARY: As applied to a Participant, a person or entity (including a
trust or the estate of the Participant) designated with the approval of the
Committee, in a written document executed by the Participant in such form as
shall be approved by the Committee, to receive the unpaid balance of an award
after the death of the Participant. If at the time when an unpaid balance of
an award shall be or become payable at or after the death of a Participant
there shall not be any living person or any entity in existence so designated,
the term "Beneficiary" shall mean the legal representatives of the
Participant's estate.
BOARD OR BOARD OF DIRECTORS: The Board of Directors of the Company.
CHANGE IN CONTROL: A change in control of the Company as defined in
paragraph 5.07(b) above.
CHIEF EXECUTIVE OFFICER: Such officer of the Company as shall at the time
have been designated by the Board of Directors to serve as chief executive
officer of the Company.
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COMMITTEE OR COMMITTEE ON OFFICERS' COMPENSATION: The Committee on Officers'
Compensation, or any successor or substituted committee, of the Board of
Directors.
COMMON STOCK: The common stock of the Company, par value $0.625 per share,
or such other class of shares or securities as may be applicable pursuant to an
adjustment made under the Plan.
COMPANY: Borden, Inc., a New Jersey corporation.
COMPENSATION YEAR: A calendar year for which the Plan is in effect in
accordance with the provisions of Section 11 above.
CORPORATE DIVISION: Major units of Borden, Inc., as determined by the chief
executive officer from time to time.
FAIR MARKET VALUE: As applied to a specific date, the average of the highest
and lowest quoted selling prices of Common Stock on sales reported for such
date for New York Stock Exchange issues on the consolidated stock exchange
network or, if Common Stock was not traded on such date, on the next preceding
day on which the Common Stock was so traded, or such other standard as may
reasonably be fixed by the Committee.
INCENTIVE COMPENSATION AMOUNT: As applied to a Compensation Year, the
aggregate amount of the awards determined for such Compensation Year, beginning
in 1994 and continuing through 1998, as set forth in Section 2 of the Plan.
INCENTIVE COMPENSATION GROUP: As applied to a Compensation Year, the
employees for such Compensation Year determined pursuant to paragraph 4.01 of
the Plan.
PARTICIPANT: A member of the Incentive Compensation Group.
PLAN: The Plan set forth in these pages. Any reference to this Plan may be
made by reference to the title "1994 Management Incentive Plan" or by other
suitable identification.
PRETAX INCOME: The pretax income of the continuing operations of the Company.
PRIOR MANAGEMENT INCENTIVE PLANS: Management incentive plans of the Company
that had been approved by its shareholders, namely, the Company's 1969, 1974,
1979, 1984, and 1989 Management Incentive Plans.
SECTION 162(m): Section 162(m) of the Internal Revenue Code of 1986 as
amended by the Revenue Reconciliation Act of 1993 and as it may be further
amended from time to time.
SHARE UNIT: A unit entitling the Participant to receive at a designated time
or times in the future a cash payment equal to the Fair Market Value at such
time or times of one share of Common Stock.
SUBSIDIARY: A corporation or other form of business association of which
shares (or other ownership interests) having 50% or more of the voting power
are owned or controlled, directly or indirectly, by the Company.
15. COMPLIANCE WITH RULE 16b-3 AND SECTION 162(m)
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(a) With respect to employees subject to Section 16(b) of the Securities
Exchange Act of 1934 as amended or Section 162(m), except to the extent that
the Committee determines otherwise, transactions under the Plan are intended
to, and shall, comply with all applicable conditions of Rule 16b-3 and avoid
loss of the deduction referred to in paragraph (1) of Section 162(m), and every
provision of the Plan shall be administered, interpreted and construed to carry
out that intent. Anything in the Plan or elsewhere to the contrary
notwithstanding, to the extent any provision of the Plan or action by the plan
administrators fails to so comply it shall be disregarded to the extent
permitted by law and deemed advisable by the plan administrators concerned with
matters relating to employees subject to Section 16(b) and Section 162(m)
respectively.
(b) Notwithstanding any provision of the Plan to the contrary,
(i) the Plan is intended to give the Committee the authority to
grant incentive awards that qualify as performance-based compensation
under Section 162(m), and if specifically authorized by the Committee
incentive awards that do not so qualify. Every provision of the Plan
shall be administered, interpreted and construed to carry out such
intention and any provision that cannot be so administered,
interpreted and construed shall to that extent be disregarded; and
(ii) any Provision of the Plan that would prevent an incentive
award that the Committee intends to qualify as performance-based
compensation under Section 162(m) from so qualifying shall be
administered, interpreted and construed to carry out such intention
and any provision that cannot be so administered, interpreted and
construed shall to that extent be disregarded.
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<PAGE> 1
EXHIBIT (10)(V)
BORDEN, INC. 02/28/94
1994 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Plan is to cement more closely the many bonds which exist
between the Company and its key employees, to give them an interest in the
Company parallel to that of the shareholders, to increase their proprietary
interest in the Company, to furnish an inducement for them to remain in its
employ, and to assist in attracting, motivating and retaining employees who are
contributing significantly, or are considered, in the opinion of the Committee,
to have the potential to contribute significantly to the success of the Company
or a unit of the Company.
2. ELIGIBILITY AND ADMINISTRATION
(a) Only key employees of the Company may be granted stock options or
restricted stock under the Plan. No key employee shall be disqualified to
receive such an option or restricted stock merely because he is already a
shareholder of the Company nor merely because he is a member of the Board of
Directors of the Company. For all purposes of the Plan, the "Company" shall
mean Borden, Inc.; and employees of subsidiaries shall be deemed to be
employees of the Company. For the purpose of an Incentive Stock Option, a
subsidiary shall mean any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, at the time of the
granting of such option, each of the corporations other than the last
corporation in the chain owns stock having 50% or more of the combined voting
power of all classes of stock in one of the other corporations in such chain.
For all other purposes of the Plan, a subsidiary shall mean a corporation or
other form of business association of which shares (or other ownership
interests) having 50% or more of the voting power are owned or controlled,
directly or indirectly, by the Company.
(b) The key employees to whom options shall be granted and the number of shares
of stock covered by each option shall be designated, by or only in accordance
with the recommendations of, and the Plan shall be administered, interpreted
and construed by, a duly authorized committee of not less than three members of
the Board of Directors of the Company (the "Committee"), each of whom shall be
a "disinterested person" within the meaning of Rule 16b-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended from time
to time, or any law, rule, regulation or other provision that may hereafter
replace such rule ("Rule 16b-3"), and an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code of 1986 as amended by the
Revenue Reconciliation Act of 1993 ("Section 162(m)"). Subject to the
provisions of the Plan, the Committee shall have full authority to administer,
interpret and construe the Plan and options granted thereunder, to determine
the times when options shall be granted and the times when they may be
exercised, to prescribe, amend and rescind rules and regulations of general
application relating to the Plan, to determine the terms and conditions of
options and provisions with reference to the effect of approved leaves of
absence which, in the case of Incentive Stock Options, shall be consistent with
requirements relating to Incentive Stock Options under regulations of
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<PAGE> 2
the United States Treasury Department at the time in effect, and to make all
other determinations necessary or advisable for the administration of the Plan.
The determinations of the Board of Directors of the Company (the "Board") and
of the Committee under the Plan shall be final, conclusive and binding on the
Company and its shareholders and upon all employees eligible to participate in
the Plan and anyone claiming under or through any of them. Anything in this
Plan to the contrary notwithstanding, insofar as this Plan applies to employees
who are not subject to reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended from time to time, and who are not
"covered employees" within the meaning of Section 162(m) with respect to equity
securities of the Company, determinations and interpretations in individual
cases can be made by, or at the direction of the Chief Executive Officer of the
Company.
3. SHARES SUBJECT TO THE PLAN
(a) The shares covered by options and restricted stock grants may be either
authorized but unissued Common Stock of the Company as such stock is
constituted at the time ("Common Stock"); or may be Common Stock previously
issued but then held in the treasury of the Company. In the event of any
change in the stock subject to restricted stock grants or being optioned under
this Plan, or to options granted hereunder, through merger, consolidation, or
reorganization, or in the event of any dividend to holders of such stock
payable in stock of the same class or the issue to such holders of rights to
subscribe to stock of the same class, or in the event of any other change in
the capital structure, the Committee may make such adjustments with respect to
options and restricted stock, or any provision of this Plan, as it deems
equitable to prevent dilution or enlargement of restricted stock and option
rights provided, however, that all adjustments made as a result of the
foregoing in respect of each stock option which is granted as an Incentive
Stock Option shall be made so that such stock option shall continue to be an
Incentive Stock Option as defined in Section 422 of the Internal Revenue Code
of 1986, as amended, or any provision that may hereafter be enacted in lieu
thereof ("Section 422"). Subject to the next preceding sentence, there shall
be reserved for issuance under this Plan, six million (6,000,000) shares of
which no more than 1,000,000 may be issued in the form of restricted stock.
(b) No options, stock appreciation rights (sometimes herein referred to as
"Rights" or "SARs") or shares of restricted stock shall be granted after April
30, 1999. The Plan shall continue in effect in accordance with its terms after
April 30, 1999 with respect to options, SARs, and shares of restricted stock
theretofore granted.
(c) Upon the granting of any option, the Company may set aside and hold in
reserve in a properly designated account an amount of stock equal to that
called for by the option.
(d) Subject to the provisions of paragraph 3(a) above, any shares subject to an
option and any restricted stock granted under the Plan which terminate, are
cancelled or expire for any reason unexercised or are forfeited may, except as
provided in paragraph 4(h)(iii) relating to stock appreciation rights, again be
made subject to an option or restricted stock grant under the Plan, provided,
however, that with respect to an optionee who is subject to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, the number of shares for
use under the Plan for such optionee (a "Section
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<PAGE> 3
16 Person"), shall be in accord with any applicable requirements of Rule 16b-3.
4. FORM AND TERMS OF OPTION
Options shall be evidenced by agreements in such form as the Committee shall
approve and the granting of such options and the form of said agreements to
evidence the same shall comply with and be subject to the following terms and
conditions:
(A) FORM OF OPTION. Any option granted hereunder may, but need not, be an
Incentive Stock Option; provided, however, that any provision of the Plan to
the contrary notwithstanding, the aggregate fair market value (determined at
the time the option is granted) of the shares with respect to which Incentive
Stock Options are exercisable for the first time by the optionee during any
calendar year under all plans of his employer corporation and its parent
corporation (as defined in Section 424(e) of the Internal Revenue Code of 1986,
as amended) and subsidiaries shall not exceed $100,000. Each provision of the
Plan and of each Incentive Stock Option thereunder shall be construed so that
such option shall be an Incentive Stock Option and any provision thereof which
cannot be so construed shall be disregarded.
REPLACEMENT OPTION. Subject to the provisions of paragraph 4(c) below, the
Committee may provide, either at the time of the grant of an option or
subsequently, for the grant of a Replacement Option. Without limiting the
authority of the Committee to make grants hereunder, the Committee may, but
need not, include within any option agreement under this Plan or under the 1984
Plan as Amended, which shall be deemed to be so amended, a provision entitling
the optionee to a further option (a "Replacement Option") in the event the
optionee exercises the option evidenced by the option agreement, in whole or in
part, by surrendering other shares of the Company in accordance with this Plan,
or the 1984 Plan as Amended, as the case may be, and the terms and conditions
of the option agreement. Any such Replacement Option shall be for a number of
shares equal to the number of surrendered shares, shall become exercisable in
the event the purchased shares are held for a minimum period of time
established by the Committee, and shall be subject to such other terms and
conditions as the Committee may determine.
(B) INCENTIVE STOCK OPTION DEFINED. An Incentive Stock Option shall mean an
option intended by the Company to meet the requirements of Section 422 and
regulations of the Treasury Department thereunder.
(C) SHARE LIMITATION. One individual may hold more than one option. Subject
to the provisions of paragraph 3(a) above, no one individual participant may
receive more than, an aggregate of 1,400,000 options during the period
commencing with the effective date as defined herein in Section 7 and ending at
the close of business on April 30, 1999.
(D) PERIOD OF EXERCISE AND PRICE. Options may not run for more than ten years
from the date of grant and, subject to the provision of the last sentence of
this paragraph 4(d), shall entitle the holder to buy shares of Common Stock to
the number therein specified at fair market value, which for purposes of the
Plan shall mean an amount as nearly equal to as practical but not less than
100% of the mean between the highest and lowest selling prices for Common Stock
on the day such option is granted (or on such other valuation day or days as
may be applicable) as reported on the consolidated trading network; provided,
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<PAGE> 4
however, that in the case of an Incentive Stock Option, if the foregoing method
of determining fair market value should be inconsistent with any regulation
adopted by the Treasury Department applicable to Incentive Stock Options, fair
market value shall be determined by the Committee in a manner consistent with
such regulations and shall mean the value as so determined. The purchase price
of shares subject to any option granted under the Plan, shall be payable in
U.S. funds on delivery of the certificates for the purchased stock or, if, to
the extent, and on the terms and conditions specifically authorized by the
option agreement, in whole shares of Common Stock or in a combination of such
funds and such shares, provided that the sum of such funds and the fair market
value of such shares (determined as provided above) on the date of such
exercise shall be not less than the full purchase price.
The holder may from time to time exercise his option in part and retain the
remaining part for a longer period within the option term.
Anything in this paragraph 4(d) or elsewhere in the Plan to the contrary
notwithstanding, in the case of any option grant, the Committee may provide for
an exercise price that varies during the term of the option but not below 100%
of the mean between the highest and lowest selling prices for Common Stock on
the day such option is granted (or on such other valuation day or days as may
be applicable) as reported on the consolidated trading network based upon such
terms, conditions, indexes and standards, if any, as the Committee may
determine. 1
(E) CONSIDERATION.
(i) No option may be exercised in whole or in part unless and until
the individual to whom it was granted shall have remained in the
employ of the Company for a period of time after the date of grant of
such option, but not less than 12 months from the first day of the
month in which the option shall have been granted except in the event
of death, disability, Retirement or a Change in Control, as may have
been prescribed by the Committee in its sole discretion. The
Committee may, at any time, authorize, subject to such terms,
conditions and limitations as the Committee may impose, an option to
be exercised in whole or in part in the event that death, disability,
Retirement or a Change in Control should occur less than 12 months
after the date of grant of such option.
(ii) A "Change in Control" shall be deemed to occur if and when (a)
an offeror other than the Company purchases shares of Common Stock
pursuant to a tender or exchange offer for such shares, (b) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding
securities, (c) the membership of the Board changes as the result of a
contested election, such that
- -----------------------------------------------------
1 These types of options are typically referred to as indexed or premium
priced options. In either case, the option exercise price is adjusted
upward after grant either based on an applicable index, such as the Standard
and Poors 500 Stock Index, or other indexes or in the case of premium priced
options, the exercise price is increased over time by the Committee a
specified percentage or amount above the fair market value at the date of
grant. In either type of option the exercise price would never be less than
the fair market value on the date of grant.
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individuals who were directors at the beginning of any
twenty-four month period (whether commencing before or after the date
of adoption of this Plan) do not constitute a majority of the Board at
the end of such period, or (d) shareholders of the Company approve a
merger, consolidation, sale or disposition of all or substantially all
of the Company's assets, or a plan of partial or complete liquidation.
(iii) "Retirement" means (a) retirement at or after attaining age 65,
and (b) retirement prior to attaining age 65, provided that the
employee is entitled to receive a benefit under a retirement plan of
the Company or of a subsidiary in which such employee participates,
and provided, further, that the Committee, in the case of an employee
subject to the provisions of Section 16(b) of the Securities Exchange
Act of 1934, as amended and in effect at the time ("Section 16(b)"),
or the Chief Executive Officer, in the case of any other employee,
shall have consented to such retirement in advance thereof or
subsequent thereto, with specific reference to this Plan, subject to
fulfillment of any terms, conditions and limitations as the Committee
or the Chief Executive Officer, as the case may be, may have imposed.
(F) TRANSFER, TERMINATION, DEATH, DISABILITY AND RETIREMENT.
(i) Any provision of the Plan to the contrary notwithstanding, any
derivative security issued under the Plan (within the meaning of
paragraph (a) (2) of SEC Rule 16b-3 as amended), including without
limitation any option or stock appreciation right, shall not be
transferable other than by will or the laws of descent and
distribution or to a death beneficiary ("Beneficiary") designated by
the optionee. Any purported transfer of a derivative security to a
Beneficiary by a Section 16 Person, and any purported transfer of an
Incentive Stock Option to a Beneficiary, shall be effective only if
such transfer is, in the opinion of counsel to the Company,
permissible under and consistent with SEC Rule 16b-3 or Section 422 of
the Code, as the case may be. Notwithstanding the foregoing, a
participant may transfer any option or SAR granted under this Plan,
other than an Incentive Stock Option or any SAR that is linked to an
Incentive Stock Option, to members of his immediate family (defined as
his children, grandchildren and spouse) or to one or more trusts for
the benefit of such family members or partnerships in which such
family members are the only partners if (and only if) the instrument
evidencing such option or SAR expressly so provides (or is amended to
so provide) and the participant does not receive any consideration for
the transfer; provided that any such transferred option or SAR shall
continue to be subject to the same terms and conditions that were
applicable to such option or SAR immediately prior to its transfer
(except that such transferred option or SAR shall not be further
transferable by the transferee during the transferee's lifetime) and
provided, further, that the foregoing provisions of this sentence
shall not apply to any Section 16 Person unless and until SEC Rule
16b-3 as amended in SEC Release No. 34-28869 becomes
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effective with respect to the Plan. If in the opinion of
counsel, should the transfer of an instrument under this Plan
disqualify the instrument as an exempt performance-based instrument
under Section 162(m), or should the transfer of any instrument under
this Plan cause the instrument, or the Plan, to be non-exempt under
Rule 16b-3, then the transfer shall not be made. Options, SARs and
unvested restricted stock shall terminate or be forfeited, as the case
may be, upon the grantee leaving the company except upon death,
disability or Retirement provided, however, that the Committee may in
its discretion provide at any time on or after the date of grant of an
option granted under the Plan, while such option and any related stock
appreciation right is exercisable, that if the optionee is terminated
by the Company without cause within two (2) years following a Change
in Control of the Company, the optionee shall have a period of ninety
(90) days following such termination (but not beyond the expiration
date of the option or SAR) within which to exercise such option or SAR
unless the optionee is otherwise entitled to exercise the option or
SAR for a longer period of time. The Company may at any time
terminate the employment of any option holder with or without cause
and, subject to the proviso in the next preceding sentence, upon such
termination any such option or the unexercised portion shall be
cancelled without any liability on the part of the Company.
(ii) The holder of an option granted under the Plan may exercise his
option, after Retirement or commencement of disability, subject to the
terms, conditions and limitations provided in the option and in any
consent by the Committee or Chief Executive Officer to retirement
prior to attaining age 65, for the period specified in his option,
which may not extend beyond two years following commencement of
disability (whether or not he is then an employee of the Company) and
the balance of the original option term following the date of
Retirement; provided, however, that if the holder retires at or after
attaining age 55, the Committee may in its discretion provide, at any
time on or prior to such retirement, that the holder may exercise any
option granted to him under the Plan, or the 1984 Plan as Amended
during a specified period extending not beyond the term of the option,
and the 1984 Plan as Amended shall be deemed to conform to the
foregoing provisions of this sentence applicable to options granted
thereunder. On the death of the option holder while he is in the
employ of the Company or within two years following commencement of
disability or following Retirement, while the option is exercisable,
such option may be exercised, subject to the terms, conditions and
limitations provided in the option, by his heirs, executors, or
administrators or permitted assignees or transferees at any time
within the period specified in his option but not more than one year
following the date of death. In no event may an option be so
exercised after the expiration of the original term thereof.
(G) CONDITIONS OF EXERCISE.
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(i) No option may be exercised by the holder thereof if, at the time,
the exercise of such option and the issuance of stock thereunder would
be contrary to law or the regulations of any duly constituted
authority having jurisdiction of the subject matter.
(ii) Appropriate provision shall be made for all taxes the Company
determines to be required to be withheld under the laws or other
regulations of any governmental authority, whether Federal, state or
local and whether domestic or foreign, in connection with the exercise
of any option or stock appreciation right granted under the Plan. The
Committee may provide, in an option agreement or otherwise, that in
the event that an optionee is required to pay to the Company any
amount to be withheld for taxes in connection with the exercise of an
option under the Plan, the optionee may satisfy such obligation, in
whole or in part, by electing to have the Company withhold a portion
of the shares of Common Stock to be received upon the exercise of the
option, otherwise issuable to the optionee upon such exercise, having
a value equal to the amount to be withheld (or such portion thereof as
the optionee may elect). The value of the shares to be withheld shall
be their fair market value on the date that the amount of tax to be
withheld is to be determined (the "Tax Date"). Any election by an
optionee to have shares withheld under this subsection (ii) shall be
subject to such terms and conditions as the Committee may specify
which may include all or part of the following restrictions:
(aa) the election shall be irrevocable;
(bb) the election shall be subject, in whole or in part, to
the approval of the Committee and to such rules as it may
adopt;
(cc) the election may not be made within six months of the
date of grant of the option being exercised (except that this
limitation shall not apply in the event that the death or
disability of the optionee occurs prior to the expiration of
such six-month period); and
(dd) in the case of a Section 16 Person, the election must be
made either (a) not less than six months prior to the Tax
Date, or (b) during the period beginning on the third business
day following the date of release for publication of the
Company's quarterly or annual summary statements of sales and
earnings and ending on the twelfth business day following such
date (a "window period").
(H) STOCK APPRECIATION RIGHTS AND LIMITED
STOCK APPRECIATION RIGHTS.
Stock appreciation rights and limited stock appreciation rights ("LSARs") may
be granted in connection with all or any part of any stock option granted under
this Plan, at the time of the grant of such option. Stock appreciation rights
shall, upon their exercise, entitle the holder of the related option, to the
extent unexercised, to surrender the related option, in whole or in part, and
to receive a number of shares of Common
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Stock or cash, or a combination of such shares and cash, determined as
hereinafter set forth.
A limited stock appreciation right is a form of stock appreciation right that
differs from a stock appreciation right by the fact that a limited stock
appreciation right is exercisable only upon or following a Change in Control.
In all other respects, LSARs shall have the same terms, provisions, and
conditions that are applicable to stock appreciation rights in the Plan.
(i) Stock appreciation rights shall be subject to such terms and
conditions, not inconsistent with the Plan under which the related
stock option shall have been or shall be granted, as shall from time
to time be determined by the Committee and to the following terms and
conditions:
(aa) Stock appreciation rights shall in no event be
exercisable except at such time or times and to the extent
that the option to which they relate shall be exercisable.
(bb) Upon exercise of a stock appreciation right, the holder
thereof shall be entitled to receive such number of the shares
of the Common Stock as may be authorized by the Committee, the
aggregate value of which shall not exceed the amount by which
the fair market value per share of such stock on the date of
such exercise shall exceed the option price per share of the
related option multiplied by the number of shares in respect
of which the stock appreciation right shall have been
exercised. For purposes of the preceding sentence, the "fair
market value per share" of Common Stock on the date of
exercise of the stock appreciation right shall mean an amount
as nearly equal to as practical but not more than 100% of the
mean between the highest and lowest selling prices for Common
Stock on the day such stock appreciation right is exercised as
reported on the consolidated trading network; provided that
with respect to exercises of stock appreciation rights by a
Section 16 Person during a Window Period or during the
thirty-day period following a Change in Control (a "Change in
Control Period"), the Committee may, at any time, prescribe,
by rule of general application, such other measure of fair
market value per share as the Committee may, in its
discretion, determine but not in excess of the highest daily
mean between the highest and lowest selling prices for Common
Stock during such Window Period or such Change in Control
Period as reported on the consolidated trading network and, in
the case of stock appreciation rights that relate to an
Incentive Stock Option, not in excess of the maximum amount
that may be paid under the Treasury Regulations under Section
422 without disqualifying such option as an Incentive Stock
8
<PAGE> 9
Option under Section 422 and provided further that any
such measure of fair market value per share determined by the
Committee may be used with respect to the exercise of stock
appreciation rights notwithstanding that the expiration date of
such Rights, though after the exercise date, is before the end
of the applicable Window Period, Change in Control Period or
other measuring period used. All or any part of the obligation
arising out of an exercise of stock appreciation rights may be
settled by the payment of cash equal to the aggregate value of
the shares (or a fraction of a share) that would otherwise be
delivered under the preceding provisions of this paragraph.
Any provision of the Plan to the contrary notwithstanding, in
the case of an exercise of stock appreciation rights by a
Section 16 Person, the Committee shall have sole discretion to
determine, in each case or by rule of general application or
otherwise, whether such exercise shall be settled in the form
of shares of Common Stock or cash, or cash and shares of such
Common Stock.
(cc) Any election by a holder of stock appreciation
rights to receive cash in full or partial settlement of stock
appreciation rights, as well as any exercise by him of his
stock appreciation rights for such cash, shall be made only in
compliance with any applicable provision of Rule 16b-3
exempting such election or exercise from the operation of
Section 16(b).
(ii) To the extent that a stock appreciation right shall be exercised,
the stock option in connection with which such stock appreciation
right shall have been granted shall be deemed to have been exercised
for the purpose of the maximum limitation as to the number of shares
that may be purchased under the plan under which such option was
granted.
(iii) Following the death of the holder of an option granted under the
Plan and irrespective of whether stock appreciation rights shall have
been granted in connection with his option, the Company may, in its
discretion, upon the request of the then holder of an exercisable
option and in consideration for the surrender of such option, pay the
amount by which the fair market value per share on the date of such
request (determined in the manner applicable to stock appreciation
rights) of the stock subject to such option shall exceed the option
price per share multiplied by the number of shares as to which the
request is made; provided that no such payment or surrender shall be
made in respect of any
A-9
<PAGE> 10
Incentive Stock Option under Section 422 unless the fair market
value per share of Common Stock on the date thereof (determined in
accordance with the Treasury Regulations under Section 422) exceeds
the option price per share and provided further that in no event shall
such payment in respect of any Incentive Stock Option under Section
422 exceed the maximum amount that may be paid under the Treasury
Regulations under Section 422 without disqualifying such option as an
Incentive Stock Option under Section 422. The number of shares
subject to an option so surrendered shall be charged against the
maximum limitation as to the number of shares that may be purchased
under the Plan.
5. RESTRICTED STOCK
(A) STOCK AND ADMINISTRATION. Shares of restricted stock may be issued either
alone or in addition to other grants under the Plan. The Committee shall
determine the key employees of the Company to whom, and the time or times at
which, grants of restricted stock will be made, the number of shares to be
granted, the time or times within which such grants may be subject to
forfeiture, and all other conditions of the grants. In addition to any other
conditions or restrictions to be imposed in connection with the grant of any
restricted stock, the Committee may determine to condition such grant upon the
attainment of performance goals. The Committee may also require a cash payment
as a condition to the receipt of any Common Stock subject to a restricted stock
grant. The provisions of restricted stock grants need not be the same with
respect to each recipient. Subject to the provisions of paragraph 3(a) above,
shares of restricted stock previously granted, but which are forfeited pursuant
to paragraph (c) of this Section 5, shall be available for future grants under
the Plan.
(B) GRANTS AND CERTIFICATES. The prospective recipient of a grant of shares
of restricted stock shall not, with respect to such grant, be deemed to have
become a participant, or have any rights with respect to such grant, until and
unless such recipient shall have executed an agreement or other instrument
evidencing the grant and containing such terms and conditions, including for
vesting or retention of the shares, as the Committee may impose and delivered a
fully executed copy thereof to the Company, and otherwise complied with the
then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in respect
of shares of restricted stock granted under the Plan. Such
certificate shall be registered in the name of the participant, and
may bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such grant, substantially in the following
form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Borden, Inc. 1994 Stock Option Plan and an
agreement entered into between the registered owner and Borden, Inc.
Copies of such Plan and agreement are on file in the offices of
Borden, Inc., 180 East Broad Street, Columbus, OH 43215."
(ii) The Committee may require that the stock certificates evidencing
such shares be held in custody by the Company or an unrelated
custodian until the restrictions thereon shall have lapsed, and may
require, as a condition of any restricted stock grant, that the
participant shall have delivered a stock power, endorsed in blank,
relating to the stock covered by such grant.
10
<PAGE> 11
(C) RESTRICTIONS AND CONDITIONS. The shares of restricted stock granted
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of the Plan and the grant agreements,
during a period set by the Committee commencing with the date of such
grant (the "Restriction Period"), the participant shall not be
permitted to sell, transfer, pledge, assign or otherwise encumber
shares of restricted stock granted under the Plan. Within these
limits the Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section 5, the
participant shall have, with respect to the shares of restricted
stock, all of the rights of a shareholder of the Company, including
the right to vote the shares and the right to receive any cash
dividends. The Committee, in its sole discretion, may permit or
require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional restricted stock or
otherwise reinvested. Certificates for shares of unrestricted stock
shall be delivered to the participant promptly after, and only after,
the period of forfeiture shall expire without forfeiture in respect of
such shares of restricted stock.
(iii) Subject to the provisions of paragraph (c)(iv) of this Section
5, if the participant ceases to be employed by the Company for any
reason during the Restriction Period, all shares still subject to
restrictions shall be forfeited by the participant and reacquired by
the Company.
(iv) In the event of a participant's retirement, disability, or
death, or in cases of special circumstances, the Committee may, in its
sole discretion, when it finds that a waiver would be in the best
interests of the Company, waive in whole or in part any or all
remaining restrictions with respect to such participant's shares of
restricted stock.
6. AMENDMENT AND DISCONTINUANCE
The Board of Directors may amend, from time to time, or discontinue this Plan,
provided that, without the approval of the shareholders of the Company, no
amendment shall be made which (a) increases the aggregate number of shares of
Common Stock that may be purchased upon exercise of options or granted as
restricted stock under the Plan, or increases the number of shares that may be
received by any one individual pursuant to paragraph 4(c) herein, (b) permits
any option to be exercised more than ten years after the date it was granted,
(c) permits any option or restricted stock to be granted after April 30, 1999,
(d) materially increases benefits accruing to participants under the Plan, or
(e) amends any provision of this paragraph 6. No amendment or discontinuance
of this Plan by the Committee, the Board of Directors or the shareholders of
the Company shall, without the consent of the employee, adversely affect any
option or restricted stock theretofore granted to him. Subject to the foregoing
and the requirements of Section 162(m), the Board may, in accordance with the
recommendation of the Committee and without further action on the part of the
11
<PAGE> 12
shareholders of the Company or the consent of participants, amend the
Plan, (a) to permit or facilitate qualification of options thereafter granted
under the Plan as "incentive stock options" within the meaning of Section 422
of the Internal Revenue Code of 1986 as amended, and (b) to preserve the
employer deduction under Section 162(m).
7. EFFECTIVE DATE
This Plan shall be effective upon its adoption by the Board of Directors of the
Company, subject to the approval of the Plan by the affirmative vote of the
holders of a majority of the outstanding voting stock of the Company present or
represented and entitled to vote at the 1994 Annual Meeting of Shareholders or
any adjournment thereof.
8. LAWS OF FOREIGN JURISDICTIONS
The Committee may, from time to time, adopt, amend and terminate, under the
Plan, such options, plans, programs or arrangements, containing terms,
conditions, limitations and restrictions not inconsistent with the intent and
objectives of the Plan, as it may deem necessary or desirable to make
available, tax or other benefits of the laws of any foreign jurisdiction, to
individuals subject thereto who are eligible key employees of the Company.
9. COMPLIANCE WITH RULE 16B-3 AND SECTION 162(M)
With respect to employees subject to Section 16(b) or Section 162(m),
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 and avoid loss of the deduction referred to in
paragraph (1) of Section 162(m). Anything in the Plan or elsewhere to the
contrary notwithstanding, to the extent any provision of the Plan or action by
the plan administrators fails to so comply or avoid the loss of such deduction,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the plan administrators concerned with matters relating to
employees subject to Section 16(b) and Section 162(m) respectively.
12
<PAGE> 1
EXHIBIT 10 (vi)
BORDEN, INC.
EXECUTIVE FAMILY SURVIVOR PROTECTION PLAN
Amended as of January 1, 1987
Conformed through December 9, 1993
<PAGE> 2
FOREWORD
Effective as of January 1, 1981, Borden, Inc. has adopted the Borden, Inc.
Executive Family Survivor Protection Plan (the "Plan") for the benefit of
certain of its executives. The purpose of the Plan is to provide certain
executives and retired executives with additional protection for their eligible
surviving dependents in the event of death during their active careers or after
retirement, and additional protection in the event of disability during their
active careers.
<PAGE> 3
INDEX
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
ONE DEFINITIONS 1
TWO PARTICIPATION 3
THREE DEATH AND DISABILITY BENEIFTS 4
FOUR EVENTS CAUSING LOSS OF COVERAGE 9
FIVE ADMINISTRATION 10
SIX AMENDMENT AND TERMINATION 12
</TABLE>
<PAGE> 4
SECTION ONE
Definitions
-----------
The following definitions shall apply:
1.1 "Borden ERIP" means the Borden, Inc. Employees Retirement Income
Plan.
1.2 "Borden RSP" means the Borden, Inc. Retirement Savings Plan.
1.3 "Chief Executive Officer" means the Chief Executive Officer of
the Corporation.
1.4 "Core Management Group" means the Executive Employees designated
as members of the Core Management Group of the Corporation by the
Chief Executive Officer.
1.5 "Corporate Group" means the Corporation and any of its
subsidiaries.
1.6 "Corporation" means Borden, Inc. and any successor to such
corporation by merger, purchase or otherwise.
1.7 "Effective Date" means January 1, 1981.
1.8 "Executive Employee" means an individual employed by a member of
the Corporate Group in a key executive or managerial position and
who is in the group designated by the Chief Executive Officer as
the ROSE group.
1.9 "Final Average Pay" means an amount equal to the highest average
which can be produced by averaging an Executive Employee's
compensation (as hereinafter defined) for any five consecutive
calendar years within the last ten calendar years prior to his or
her death or earlier retirement. For this purpose, compensation
shall mean the total compensation paid in a calendar year to an
Executive Employee by the Corporate Group before reduction for
Tax-Deferred contributions under the Borden, Inc. Retirement
Savings Plan and for Elective Salary Deferrals (as defined in the
Borden, Inc. Executives Supplemental Pension Plan), exclusive of
incentive bonuses deferred from earlier years at the election of
the Executive Employee and specifically excluding Long Term
Incentive Earnings. In computing the highest average, any
incentive bonuses included in compensation shall be averaged
separately from the balance of such compensation.
1
<PAGE> 5
1.10 "Minor Child or Children" with respect to a Participant means
each person who is the natural or legally adopted son or daughter
of the Participant or of his or her Spouse and who has not yet
attained his or her eighteenth birthday.
1.11 "Participant" means each Executive Employee who is an Active or
Retired Participant in accordance with the provisions of Section
Two of the Plan.
1.12 "Plan" means this Executive Family Survivor Protection Plan as
from time to time in effect.
1.13 "Spouse" means the spouse who is legally married to the
Participant at the earlier of the death of the Participant or the
Participant's retirement.
2
<PAGE> 6
SECTION TWO
Participation
-------------
2.1 Active Participant
------------------
An Executive Employee shall become an Active Participant covered
under this Plan only if he or she is so designated by the Chief
Executive Officer. Such designation shall be evidenced by a
written statement to the Active Participant summarizing the
coverage provided under the Plan for such Active Participant.
Each Executive Employee designated an Active Participant shall
remain an Active Participant until the earlier of (i) the date as
of which his or her coverage under the Plan has been terminated
at the direction of the Chief Executive Officer (which can be
done at any time at his or her discretion) or (ii) the date his
or her employment with the Corporate Group terminates.
2.2 Retired Participant
-------------------
An Active Participant who retires on or after the Effective Date
and on or after his or her sixty-fifth birthday shall become a
Retired Participant. An Active Participant who retires before
his or her sixty-fifth birthday shall become a Retired
Participant only if so specifically designated by the Chief
Executive Officer in writing and such designation remains in
effect after his or her retirement. Such designation shall be
completely at the discretion of the Chief Executive Officer who
may take into consideration any of the following circumstances:
the length of service of the Active Participant, whether such
early retirement is voluntary or involuntary, whether it is
anticipated that the Active Participant will engage in
competitive employment, how close to normal retirement the Active
Participant is at the time of his or her retirement, and any
other relevant circumstances. The listing of considerations
which may be considered by the Chief Executive Officer is not
intended to require or imply that all or any of them shall be
considered in any particular case.
3
<PAGE> 7
SECTION THREE
Death and Disability Benefits
-----------------------------
3.1 Death of Active Participant
---------------------------
(a) Lump Sum Benefits
Upon the death after June 30, 1986 of an Active
Participant who at such time was a member of the Core
Management Group, or upon the death after December
31, 1986 of any other Active Participant, his or her
beneficiary, as designated under the
Basic/Supplemental Life portions of the Borden, Inc.
Total Family Protection Plan ("Group Life Plan"), or,
if no such beneficiary exists, the beneficiary under
the High Limit Accidental Death and Dismemberment
portion of the Borden, Inc. Total Family Protection
Plan, shall be entitled to receive a lump sum payment
equal to one times the Participant's Annual Earnings,
as defined in the Group Life Plan, rounded to the
next higher $100 if not already a multiple of $100.
(b) Monthly Benefits
Upon the death of an Active Participant prior to
attaining age 65, his or her surviving Spouse shall
be entitled to a monthly benefit commencing on the
first day of the month next following the Active
Participant's death and payable through the month in
which the death of the surviving Spouse or remarriage
of such surviving Spouse occurs. Upon the death of
an Active Participant on or after attaining age 65,
his or her surviving Spouse shall be entitled to a
monthly benefit commencing on the first day of the
month next following the Active Participant's death
and payable through the month in which the death of
the surviving spouse occurs. If at any time on or
after the Active Participant's death there is no
surviving Spouse entitled to receive a benefit but
there are one or more Minor Children of the Active
Participant, an amount equal to fifty percent of the
benefit which was or would have been payable to the
Active Participant's Spouse entitled to receive a
benefit shall be divided equally among the Minor
Children, and such fifty percent of the benefit shall
be payable through the month in which the last of the
Minor Children reach their majority or decease. The
share of any child who reaches majority shall
thereafter be divided equally among any remaining
Minor Children.
4
<PAGE> 8
The amount of monthly benefit payable to the
surviving Spouse shall be equal to one-twelfth of a
percentage of the Active Participant's Final Average
Pay, such percentage depending on the age at which
the Active Participant's death occurs and whether the
Active Participant was a member of the Core
Management Group as follows:
<TABLE>
<CAPTION>
Percentage of Final Average Pay
Active Participants in Other Active
Core Management Group Participants
--------------------- ------------
<S> <C> <C>
Before age 55 25% 20%
After age 55 and before age 56 25% 20%
After age 56 and before age 57 24% 19%
After age 57 and before age 58 23% 18%
After age 58 and before age 59 22% 17%
After age 59 and before age 60 21% 16%
After age 60 and before age 61 20% 15%
After age 61 and before age 62 19% 14%
After age 62 and before age 63 18% 13%
After age 63 and before age 64 17% 12%
After age 64 and before age 65 16% 11%
After age 65 15% 10%
</TABLE>
3.2 Death of Retired Participant
----------------------------
(a) Lump Sum Benefits
Upon the death of a Retired Participant who at time
of retirement was a member of the Core Management
Group, his or her beneficiary, as designated under
the Group Life Plan, shall be entitled to receive a
lump sum payment equal to the difference between the
amount which would have been payable under the terms
of the Group Life Plan as in effect on June 30, 1986,
and the amount actually payable under the terms of
the Group Life Plan as in effect after June 30, 1986.
(b) Monthly Benefits
Unless waived in accordance with subsection (c)
below, upon the death of a Retired Participant who
was an Active Participant and had attained the age of
60 as of June 30, 1986, his or her surviving Spouse
shall be entitled to a monthly benefit in accord with
this paragraph commencing on the first day of the
month next following the Retired Participant's death.
If the Retired Participant retired prior to attaining
age 65, the monthly benefit shall be payable through
the earlier of the
5
<PAGE> 9
month in which the death of the surviving Spouse
or the remarriage of such the surviving Spouse
occurs. If the Retired Participant retired on or
after attaining age 65, the monthly beneift shall
be payable through the month in which the death of
the surviving Spouse occurs. If at any time on or
after the Retired Participant's death there is no
surviving Spouse or the Spouse has remarried
entitled to receive a benefit but there are one or
more Minor Children, an amount equal to fifty
percent of the benefit which was or would have
been payable to the Retired Participant's Spouse
entitled to receive a benefit shall be divided
equally among the Minor Children, and such fifty
percent of the benefit shall be payable through
the month in which the last of the Minor Children
reach their majority or decease. The share of any
child who reaches majority shall thereafter be
divided equally among any remaining Minor
Children.
The amount of monthly benefit payable to the
surviving Spouse shall be equal to fifteen percent of
the Retired Participant's Final Average Pay if such
Retired Participant was a member of the Core
Management Group and ten percent of the Retired
Participant's Final Average Pay if not a member of
the Core Management Group.
(c) Waiver of Coverage
An Active Participant who is age 60 or older as of
June 30, 1986 may elect in writing, prior to such
date, to waive the coverage described in subsection
(b) above. If such waiver is elected, such
Participant shall be eligible for the benefits
described in Section 3.4.
3.3 Disability of Active Participant
--------------------------------
Upon the disability of an Active Participant such that he or she
is entitled to benefits under the Borden, Inc. Long Term
Disability Benefits Plan ("LTD Plan"), a benefit shall be payable
under this Plan, in the same manner and under the same conditions
as that payable under Schedule I of the LTD Plan. The amount of
benefit payable under this Plan shall be the difference between
the benefit payable under the LTD Plan and what would have been
payable under the LTD Plan had the maximums referred to in
Schedule I been as follow:
6
<PAGE> 10
<TABLE>
<CAPTION>
where stated where stated
maximum is maximum is
$3,000 $2,250
----------- -----------
<S> <C> <C>
If Active Participant
is a member of the
Core Management Group $6,000 $4,500
All other Participants $4,000 $3,000
</TABLE>
3.4 Survivor Accumulation Account
-----------------------------
All Active Participants who are under the age of 60 as of June
30, 1986, and all Active Participants who, in accordance with
subsection 3.3(c), elect to waive the coverage described in
subsection 3.3(b) shall be entitled to have Survivor Accumulation
Credits established on their behalf. The Credits shall be equal
to 1% (2% for periods of employment as a member of the Core
Management Group) of Compensation as recognized under the Borden
RSP, credited on a monthly basis. The aggregate amount of
Credits, together with "deemed earnings" on such Credits, to the
extent vested, shall be paid to the participant or his or her
beneficiary, as applicable, from the general assets of the
Corporation in accordance with Section 5.1 in a lump sum at the
time of the Participant's termination of employment. "Deemed
earnings" for Survivor Accumulation Credits shall be earnings at
the rate of investment return on Fund A under the Borden RSP. A
bookkeeping account ("Survivor Accumulation Account") shall be
maintained for each affected Participant to record the amount of
such Survivor Accumulation Credits. Vesting in the Survivor
Accumulation Account shall be the same as if such Account were a
benefit under Section A3.2 of the Borden ERIP.
7
<PAGE> 11
3.5 Medical Accumulation Account
----------------------------
An Active Participant who is a member of the Core Management
Group shall be entitled to have Medical Accumulation Credits
established on his or her behalf, unless he or she shall have
elected to participate in the Corporation's Executive Health Care
Plan. The Credits shall be equal to $350 for each month as an
Active Participant and member of the Core Management Group. The
aggregate amount of Credits, together with "deemed earnings" on
such Credits, shall be paid to the participant or his or her
beneficiary, as applicable, from the general assets of the
Corporation in accordance with Section 5.1 in a lump sum at the
time of the Participant's termination of employment. "Deemed
earnings" for Medical Accumulation Credits shall be earnings at
the rate of investment return on Fund A under the Borden RSP. A
bookkeeping account ("Medical Accumulation Account") shall be
maintained for each affected Participant to record the amount of
such Medical Accumulation Credits. Participants shall always be
100% vested in the value of their Medical Accumulation Account.
8
<PAGE> 12
SECTION FOUR
Events Causing Loss of Coverage or Benefits
-------------------------------------------
4.1 Loss of Coverage for Retired Participants
-----------------------------------------
Coverage under the Plan of a Retired Participant shall be
contingent upon such Retired Participant's:
(i) refraining, after the expiration of a period of
thirty days from the mailing to him or her of written
notice from the Corporation of a direction to do so,
from engaging in the operation or management of a
business, whether as owner, stockholder, partner,
officer, employee or otherwise, which at the time of
his or her retirement shall be in competition with
any member of the Corporate Group;
(ii) refraining from disclosing to unauthorized persons
information relative to the business of any member of
the Corporate Group which he or she shall have reason
to believe is confidential; and
(iii) refraining from otherwise acting or conducting
himself or herself in a manner which a reasonable
business person would find to be inimical or contrary
to the best interests of the Corporate Group.
In the event that the Retired Participant shall fail to comply
with the provisions of this Section 4.1, his or her coverage
under this Plan shall cease and no benefits shall be payable upon
the death of such Retired Participant.
4.2 Remarriage of Surviving Spouse
------------------------------
All monthly benefit payments to the surviving spouse of a
Participant who either died or retired prior to attaining age
65 shall cease upon the remarriage of such Spouse. If there are
Minor Children of the Participant at the time of such
disqualifying remarriage payments shall be made to such Minor
Children in accordance with the provisions of Section 3.1 and 3.2
until they reach their majority or decease.
9
<PAGE> 13
SECTION FIVE
Administration
--------------
5.1 Payment of Benefits
-------------------
All benefits payable under the Plan shall be paid by the
Corporation from the general assets of the Corporation; provided,
however, that:
(a) The Corporation shall make no provision for the
funding of any benefits payable hereunder.
(b) In the event that the Corporation shall decide to
establish an advance accrual reserve on its books
against the future expense of benefit payments, such
reserve shall not under any circumstances be deemed
to be an asset of this Plan but, at all times, shall
remain a part of the general assets of the
Corporation, subject to claims of the Corporation's
creditors.
(c) Subject to the provisions of subsections (d) and (e)
below, a person entitled to a benefit hereunder shall
have a claim upon the Corporation only to the extent
of the monthly payments thereof, if any, due up to
and including the then current month and shall not
have a claim against the Corporation for any
subsequent monthly payment unless and until such
payment shall become due and payable.
(d) Notwithstanding any other provision hereof, all
benefits which are being paid, or are then payable
hereunder, the amount of all Survivor Accumulation
Accounts and Medical Accumulation Accounts, and the
value of reversionary annuities with respect to then
Retired Participants shall become immediately due and
payable to a surviving Spouse or Minor Children or to
the Active or Retired Participant, as applicable, in
a lump sum if: (i) the Corporation refuses to make
any payments due hereunder; (ii) the Corporation
makes a general assignment for the benefit of
creditors; (iii) any proceedings under the Bankruptcy
Act are instituted by the Corporation or, if
instituted against the Corporation, is consented to
or acquiesced in by it or remains undismissed for 60
days; or (iv) a receiver or trustee in bankruptcy is
appointed for the Corporation. In addition, in the
event of any such proceeding by or against the
Corporation under the Bankruptcy Act, or any such
assignment, a surviving Spouse, Minor Child or Active
or Retired Participant shall be entitled to prove a
claim for any unpaid portion of the benefit provided
hereunder and,
10
<PAGE> 14
if the claim is not discharged in full in any
such proceeding, or assignment, it will survive any
discharge of the Corporation under any such proceeding
or assignment. The present actuarial value of the
Accrued Supplemental Benefit shall be calculated on the
basis of the 1976-80 GAM Mortality Table and an
interest rate, compounded monthly, equal to the yield
of the most recently issued 30-year maturity U.S.
Treasury issue as reported as of the business day on
which the valuation is performed as published in the
Midwest edition of the WALL STREET JOURNAL. If the
valuation is not performed on a business day, the
immediately preceding business day report shall be used
for the purposes of determining the interest rate to be
used in the valuation.
(e) In the event of the application of subsection (d)
above, a representative of the affected surviving
Spouses, Minor Children and Active and Retired
Participants (collectively) shall be appointed to
pursue their respective claims against the
Corporation.
5.2 Plan Administration
-------------------
The Corporation shall be the "Administrator" of the Plan within
the meaning of the Employee Retirement Income Security Act of
1974 and shall have the exclusive right to interpret the Plan.
The decisions, actions and records of the Corporation shall be
conclusive and binding upon the Corporation, the Corporate Group,
and all persons having or claiming to have any right or interest
in or under the Plan.
11
<PAGE> 15
SECTION SIX
Amendment and Termination
-------------------------
6.1 Amendment of the Plan
---------------------
The Plan may be wholly or partially amended or otherwise modified
at any time by the Board of Directors.
6.2 Termination of the Plan
-----------------------
The Plan may be terminated at any time by the Board of Directors.
6.3 No Impairment Benefits
----------------------
Notwithstanding the provisions of Sections 6.1 and 6.2, no
amendment or termination of the Plan shall impair the rights to
benefits hereunder for surviving Spouses or Minor Children or
Active Participants in receipt of (or entitled to) benefits at
the date of amendment or termination and the rights to benefits
with respect to those who are Retired Participants at the date of
such amendment or termination.
12
<PAGE> 1
EXHIBIT 10 (vii)
BORDEN, INC.
EXECUTIVES EXCESS BENEFITS PLAN
Amended and Restated as of January 1, 1988
As amended through December 9, 1993
<PAGE> 2
FOREWORD
Effective as of January l, 1976, Borden, Inc. adopted the Borden, Inc.
Executives Excess Benefits Plan (the "Plan") for the benefit of certain of its
executives. The Plan has been amended from time to time thereafter.
Effective as of January 1, 1988 the Plan has been further amended, and has been
restated as set forth herein.
It is intended that the Plan be an "excess benefits plan" as that term is
defined in Section 3(36) of the Employee Retirement Income Security Act of
1974.
The purpose of the Plan is to (a) provide retired participants and their joint
annuitants and beneficiaries under the Borden, Inc. Employees Retirement Income
Plan ("Borden ERIP") and the Borden, Inc. Retirement Savings Plan ("Borden
RSP") with the amount of company-provided benefits that are not provided under
the Borden ERIP and/or Borden RSP because such amounts exceed the limitations
imposed by Section 415 of the Internal Revenue Code, and (b) effective May 1,
1986 through December 31, 1987, provide for elective salary deferrals by
participants in the Borden RSP who are in the Core Management Group and whose
tax deferrals under the Borden RSP are limited by reason of limitations imposed
by Section 415 of the Internal Revenue Code.
Except to the extent otherwise indicated, and except to the extent otherwise
inappropriate, the Borden ERIP and the Borden RSP and the provisions thereof
are hereby incorporated by reference.
<PAGE> 3
SECTION ONE
Definitions
-----------
1.1 Except to the extent otherwise indicated herein, and except to
the extent otherwise inappropriate in the context, the
definitions contained in Section Al of the Borden ERIP and
Section I of the Borden RSP are applicable under the Plan.
1.2 "Accrued ERIP Benefit" means the amount of retirement income
payable to or with respect to a participant on termination of
employment, or earlier date requiring payment under this Plan,
under the Borden ERIP.
1.3 "Accrued Excess Benefit" means the excess, if any, of (i) the
retirement income payable to or with respect to a participant
under the Borden ERIP which would have been accrued by the
participant had the limitation on benefits imposed by Section
C9 of the Borden ERIP not been applicable over (ii) the
participant's Accrued ERIP Benefit.
1.4 "Board of Directors" means the Board of Directors of the
Corporation.
1.5 "Borden ERIP" means the Borden, Inc. Employees Retirement
Income Plan.
1.6 "Borden RSP" means the Borden, Inc. Retirement Savings Plan.
1.7 "Core Management Group" means individuals employed by the
Corporation or a subsidiary thereof in a key executive or
managerial position who are designated as members of the Core
Management Group of the Corporation by the Chief Executive
Officer.
1.8 "Corporation" means Borden, Inc. and any successor to such
corporation by merger, purchase or otherwise.
1.9 "Plan" means the Borden, Inc. Executives Excess Benefits Plan
as from time to time in effect.
- 1 -
<PAGE> 4
SECTION TWO
Participation
-------------
Participation in the Plan shall be limited to:
(a) those participants in the Borden ERIP and their joint
annuitants and beneficiaries who, as a result of the limits on
benefits that may be paid under the Borden ERIP (Section C9)
by reason of Section 415 of the Internal Revenue Code, receive
or will receive a lesser amount of retirement income under the
Borden ERIP than otherwise would be paid or payable in the
absence of such limitations,
(b) those participants and their beneficiaries in the Borden RSP
who, as a result of the limits on amounts that may be
contributed under the Borden RSP (Section 4.3) by reason of
Section 415 of the Internal Revenue Code, receive a smaller
matching Employer contribution under the Borden RSP with
respect to their actual contributions thereunder than
otherwise would be paid or payable in the absence of such
limitation, and
(c) those participants in the Borden RSP who are members of the
Core Management Group and who made salary deferral elections
for calendar years before 1988 for amounts which would have
been Tax Deferred Contributions under Section 3.2 of the
Borden RSP but for the limitations imposed by Section 4.3 of
the Borden RSP by reason of Section 415 of the Internal
Revenue Code, and the beneficiaries of such participants.
- 2 -
<PAGE> 5
SECTION THREE
Amount of Excess Benefits and Excess Contributions
--------------------------------------------------
3.1 Excess Benefits
---------------
The aggregate amount, if any, of retirement income payable
under the Borden ERIP to a participant therein, or to his or
her joint annuitant or beneficiary, which is not paid under
the Borden ERIP on account of the limitations on benefits
imposed by Section C9 of the Borden ERIP, shall be termed an
"Excess Benefit" and shall be paid directly to such
participant, or to his or her joint annuitant or beneficiary,
as applicable, from the general assets of the Corporation in
accordance with Section 3.3.
3.2 Excess Contributions
--------------------
(a) Excess Company Contributions Account
The aggregate amount, if any, of matching Employer
contributions which would have been contributed with
respect to a participant pursuant to Section 4.1 of
the Borden RSP on account of the participant's actual
contributions thereto but for the limitation imposed
by Section 4.3 of the Borden RSP, together with
"deemed earnings" on such contributions, shall be
termed Excess Company Contributions and shall be paid
to the participant or his or her beneficiary, as
applicable, from the general assets of the
Corporation in accordance with Section 3.3. "Deemed
earnings" for Excess Company Contributions shall be
earnings at the rate of investment return on Fund A
under the Borden RSP. A bookkeeping account ("Excess
Company Contributions Account") shall be maintained
for each affected participant to record the amount of
such Excess Company Contributions.
(b) Excess Salary Deferrals Account
The aggregate of the amounts, if any, of salary
deferral elected by a participant in the RSP who is a
member of the Core Management Group pursuant to a
salary reduction agreement or agreements for amounts
which would otherwise have been Tax Deferred
Contributions on the participant's behalf pursuant to
Section 3.2 of the Borden RSP for calendar years
before 1988 but for the limitation imposed by Section
4.3 of the Borden RSP, together with "deemed
earnings" on such amounts, shall be termed Excess
Salary Deferrals and shall be paid to the participant
or his or her beneficiary, as applicable, from the
- 3 -
<PAGE> 6
general assets of the Corporation in accordance
with Section 3.3. "Deemed earnings" for Excess
Salary Deferrals shall be earnings at the rate of
investment return on Fund A under the Borden RSP. A
bookkeeping account ("Excess Salary Deferrals
Account") shall be maintained for each affected
participant to record the amount of such Excess
Salary Deferrals.
(c) Excess Contributions Account
The term Excess Contributions Account shall
mean the sum of a participant's Excess Company
Contributions Account, if any, and that participant's
Salary Deferrals Account, if any.
3.3 General Provisions
------------------
(a) The Corporation shall make no provision for the
funding of any Excess Benefits or Excess
Contributions Accounts payable hereunder that (i)
would cause the Plan to be a funded plan for purposes
of section 404(a)(5) of the Internal Revenue Code of
1986, as amended ("Code"), or Title I of the Employee
Retirement Income Security Act of 1974 ("ERISA") or
(ii) would cause the Plan to be other than an
"unfunded and unsecured promise to pay money or other
property in the future" under Treasury Regulations
section 1.83-3(e); and shall have no obligation to
make any arrangement for the accumulation of funds to
pay any amounts under this Plan. Subject to the
restrictions of the preceding sentence and paragraph
(c) below, the Corporation, in its sole discretion,
may establish a grantor trust described in Treasury
Regulations sections 1.677(a)-1(d) to accumulate
funds to pay amounts under this Plan, provided that
the assets of the trust shall be required to be used
to satisfy the claims of the Corporation's general
creditors in the event of the Corporation's
bankruptcy or insolvency.
(b) In the event that the Corporation shall decide to
establish an advance accrual reserve on its books
against the future expense of Accrued Excess Benefit
payments or Excess Contributions Accounts, such
reserve shall not under any circumstances be deemed
to be an asset of this Plan but, at all times, shall
remain a part of the general assets of the
Corporation, subject to claims of the Corporation's
creditors.
(c) A person entitled to any amount under this Plan shall
be a general unsecured creditor of the Corporation
with respect to such amount. Furthermore:
(i) Subject to the provisions of subsections (e),
(f), (g) and (h)
- 4 -
<PAGE> 7
below, a person entitled to an Accrued
Excess Benefit shall have a claim upon the
Corporation only to the extent of the monthly
payments thereof, if any, due up to and
including the then current month and shall
not have a claim against the Corporation for
any subsequent monthly payment unless and
until such payment shall become due and
payable; and
(ii) Subject to the provisions of subsections (e),
(f) and (h) below, a person entitled to
Excess Contributions shall have a claim upon
the Corporation only to the extent of the
Excess Contributions Account, and the amount
of such Account shall be paid to the
participant or beneficiary in the same manner
as the distribution of the participant's
accounts under the Borden RSP.
(d) In the event that the Borden ERIP shall be terminated
in accordance with Section C6 thereof, Accrued Excess
Benefits shall continue to be paid directly by the
Corporation but only to the same extent and for the
same duration as that part of the payee's benefit
from the Pension Fund of the Borden ERIP, which is
directly related to such Accrued Excess Benefit, is
continued to be provided by the assets of the Pension
Fund of the Borden ERIP; but such continued payment
of Accrued Excess Benefit shall still be subject to
the conditions specified in subsections (a), (b) and
(c) above.
In the event that the Borden RSP shall be terminated
in accordance with Section 13 thereof, Excess
Contributions Accounts shall be paid directly by the
Corporation in the same manner as the distribution of
the participant's accounts under the Borden RSP.
(e) Notwithstanding any other provision hereof, there
shall become immediately due and payable to or with
respect to a participant a lump sum equal to the
Excess Contributions Account plus the present
actuarial value (determined as hereinafter provided)
of the participant's Accrued Excess Benefit if: (i)
the Corporation refuses to make any payments due
hereunder to any participant, unless refusal to make
payment to a particular participant is based on facts
and circumstances with respect to such participant
which reasonably justifies such refusal, based on the
participant engaging in conduct harmful to the
interest of the Corporation; (ii) the Corporation
makes a general assignment for the benefit of
creditors; (iii) any proceedings under the Bankruptcy
Act are instituted by the Corporation, or if
instituted against the Corporation, is consented to
or acquiesced in by it or remains undismissed for 60
days; or (iv) a receiver or trustee in
- 5 -
<PAGE> 8
bankruptcy is appointed for the Corporation.
In addition, in the event of any such proceeding by
or against the Corporation under the Bankruptcy Act,
or any such assignment, a participant or his or her
joint annuitant or beneficiary shall be entitled to
prove a claim for any unpaid portion of the benefit
provided hereunder and, if the claim is not
discharged in full in any such proceeding, or
assignment, it will survive any discharge of the
Corporation under any such proceeding or assignment.
The present actuarial value of the Accrued
Supplemental Benefit shall be calculated on the basis
of the 1976-80 Basic GAM Mortality Table and an
interest rate, compounded monthly, equal to the yield
of the most recently issued 30-year maturity U.S
Treasury issue as reported as of the business day on
which the valuation is performed as published in the
Midwest edition of the Wall Street Journal. If the
valuation is not performed on a business day, the
immediately preceding business day report shall be
used for the purposes of determining the interest
rate to be used in the valuation.
(f) In the event of the application of subsection (e)
above, the affected participants (or, in the case of
deceased participants, their joint annuitants and
beneficiaries) (the "Claimants") shall appoint a
single representative to pursue their respective
claims against the Corporation. Such representative
shall be a person or entity selected by, or agreed
upon, by Claimants with unpaid benefits under the
Plan equal to more than fifty percent (50%) of the
total amount of unpaid benefits under the Plan.
(g) A participant's Accrued Excess Benefit shall be paid
to the participant in the same form and at the same
time as the participant's Accrued ERIP Benefit.
(h) The participant's beneficiary or joint annuitant
under this Plan with respect to his or her Accrued
Excess Benefit shall be the person who is entitled to
benefit payments under the Borden ERIP on account of
the death of the participant.
The participant's beneficiary under this Plan with
respect to his or her Excess Contributions Account
shall be the person who is entitled to benefit
payments under the Borden RSP on account of the death
of the participant.
(i) A participant's benefit in the Plan shall be vested
to the same extent that his or her corresponding
benefit under the Borden ERIP or Borden RSP is
vested. The minimum benefit under the Plan shall
equal the value of the vested accrued benefit as of
December 31, 1993.
- 6 -
<PAGE> 9
SECTION FOUR
Administration
--------------
4.1 Plan Administrator
------------------
The Corporation shall be the "administrator" of the Plan
within the meaning of ERISA.
4.2 Pension Committee
-----------------
Subject to the provisions of Section 4.1, the Pension
Committee of the Board of Directors shall be vested with the
general administration of the Plan. The Pension Committee
shall have the exclusive right to interpret the Plan. The
decisions, actions and records of the Pension Committee shall
be conclusive and binding upon the Corporation and all persons
having or claiming to have any right or interest in or under
the Plan.
The Pension Committee may delegate to such officers, employees
or departments of the Corporation such authority, duties, and
responsibilities of the Pension Committee as it, in its sole
discretion, considers necessary or appropriate for the proper
and efficient operation of the Plan, including, without
limitation, (i) interpretation of the Plan, (ii) approval and
payment of claims, and (iii) establishment of procedures for
administration of the Plan.
- 7 -
<PAGE> 10
SECTION FIVE
Amendment and Termination
-------------------------
5.1 Amendment of the Plan
---------------------
Subject to the provisions of Section 5.3, the Plan may be
wholly or partially amended or otherwise modified at any time
by the Board of Directors.
5.2 Termination of the Plan
-----------------------
Subject to the provisions of Section 5.3, the Plan may be
terminated at any time by the Board of Directors.
5.3 No Impairment of benefits
-------------------------
Notwithstanding the provisions of Sections 5.1 and 5.2, no
amendment to or termination of the Plan shall impair any
rights to benefits which have accrued hereunder.
- 8 -
<PAGE> 11
BORDEN, INC.
SPECIAL RETIREMENT WINDOW PROGRAM
The Borden, Inc. Special Retirement Window Program (SRWP) is a non-qualified
plan that has been designed and adopted to provide special benefits for certain
employees who have elected to retire under the Borden, Inc. Employees
Retirement Income Plan (ERIP) as of November 1, 1985. Such special benefits
and those employees to whom they will be paid are as specified on the schedule
and copies of employee communications attached hereto.
The SRWP is designed to operate in conjunction with the ERIP and, in connection
with the adoption of the SRWP, the ERIP was amended to provide special
provisions applicable to those employees who elected to retire under the SRWP.
3.3 General Provisions
------------------
(a) The Corporation shall make no provision for the
funding of any Excess Benefits or Excess
Contributions Accounts payable hereunder that (i)
would cause the Plan to be a funded plan for purposes
of section 404(a)(5) of the Internal Revenue Code of
1986, as amended ("Code"), or Title I of the Employee
Retirement Income Security Act of 1974 ("ERISA") or
(ii) would cause the Plan to be other than an
"unfunded and unsecured promise to pay money or other
property in the future" under Treasury Regulations
section 1.83-3(e); and shall have no obligation to
make any arrangement for the accumulation of funds to
pay any amounts under this Plan. Subject to the
restrictions of the preceding sentence and paragraph
(c) below, the Corporation, in its sole discretion,
may establish a grantor trust described in Treasury
Regulations sections 1.677(a)-1(d) to accumulate
funds to pay amounts under this Plan, provided that
the assets of the trust shall be required to be used
to satisfy the claims of the Corporation's general
creditors in the event of the Corporation's
bankruptcy or insolvency.
(c) A person entitled to any amount under this Plan shall
be a general unsecured creditor of the Corporation
with respect to such amount. Furthermore:
(i) Subject to the provisions of subsections (e),
(f), (g) and (h) below, a person entitled to
an Accrued Excess Benefit shall have a claim
upon the Corporation only to the extent of
the monthly payments thereof, if any, due up
to and including the then current month and
shall not have a claim against the
Corporation for any subsequent monthly
payment unless and
- 9 -
<PAGE> 12
until such payment shall become due and
payable; and
(ii) Subject to the provisions of subsections (e),
(f) and (h) below, a person entitled to
Excess Contributions shall have a claim upon
the Corporation only to the extent of the
Excess Contributions Account, and the amount
of such Account shall be paid to the
participant or beneficiary in the same manner
as the distribution of the participant's
accounts under the Borden RSP.
- 10 -
<PAGE> 13
Schedule 1
WHEREAS, Richard Walrack was employed in the
Corporate Group as a result of the acquisition of the Meadow Gold Dairies from
the Beatrice Companies on December 16, 1986; and
WHEREAS, Mr. Walrack also had a continuing employment
consulting agreement with the Beatrice Company dated June 26, 1984, which
continued from December 16, 1986 through August 31, 1989; and
WHEREAS, Mr. Walrack also had another employment
agreement dated December 3, 1985 with Beatrice U.S. Foods (Foods) which
guaranteed that his re-employment in the Dairy Unit of Foods would not affect
his status under the 1984 agreement; and
WHEREAS, Beatrice, in connection with the acquisition
of Meadow Gold Dairies, did not disclose to Borden the existence of either of
the above described agreements and transferred to the Company's pension plan an
amount woefully inadequate to fund Mr. Walrack's pension; and
WHEREAS, Mr. Walrack has asserted through legal
action pension rights from Beatrice:
NOW, THEREFORE, Mr. Richard Walrack is excluded as a
Participant of this Plan for any and all purposes.
- 11 -
<PAGE> 1
Exhibit 10(viii)
BORDEN, INC.
EXECUTIVES SUPPLEMENTAL PENSION PLAN
Amended and Restated as of December 9, 1993
<PAGE> 2
FOREWORD
Effective as of January 30, 1973, Borden, Inc. adopted the Borden, Inc.
Executives Supplemental Pension Plan (the "Plan") for the benefit of certain of
its executives. The Plan has been amended from time to time thereafter.
Effective as of January 1, 1988, January 1, 1989 and December 9, 1993 the Plan
has been further amended, and has been restated herein.
The purposes of the Plan as amended and restated January 1, 1988 are (a) to
provide retired participants and their joint annuitants and beneficiaries under
the Borden, Inc. Employees Retirement Income Plan ("Borden ERIP") with the
amount of retirement income that is not provided under the Borden ERIP by
reason of the participant having been granted a deferred award under the
Management Incentive Plan and having elected to defer compensation under this
Plan, (b) to permit Executive Employees' and certain other managerial employees
to elect to have payment of a portion of current compensation deferred until a
later year and to provide a "matching credit" with respect to all or a portion
of such deferred compensation, and (c) to provide retired participants and
their joint annuitants and beneficiaries under the Borden ERIP with the amount
of retirement income that is not provided under the Borden ERIP by reason of
the limit on recognized compensation required by Section 401(a)(17) of the
Internal Revenue Code.
It is intended that the Plan be a deferred compensation plan for "a select
group of management or highly compensated employees," as that term is used in
the Employee Retirement Income Security Act of 1974.
Except to the extent otherwise indicated, and except to the extent otherwise
inappropriate, the Borden ERIP and the Borden RSP, and the provisions thereof,
hereby are incorporated by reference.
<PAGE> 3
SECTION ONE
-----------
Definitions
-----------
1.1 Except to the extent otherwise indicated herein, and except to the
extent otherwise inappropriate in the context, the definitions
contained in Section A1 of the Borden ERIP are applicable under
the Plan.
1.2 "Accrued Regular Benefit" means the amount of retirement income
payable to or with respect to a participant on termination of
employment, or earlier date requiring payment under this Plan,
under the ERIP and Borden Excess Benefits Plan.
1.3 "Accrued Supplemental Benefit" means the excess, if any, of (i)
the retirement income payable to or with respect to a participant
under the Borden ERIP and Borden Excess Benefits Plan (to the
extent applicable) which would have been accrued by the
participant had the amount of deferred awards under the Management
Incentive Plan, Deferred Compensation, and Excluded Compensation
been recognized as "Compensation" under the Borden ERIP over (ii)
the participant's Accrued Regular Benefit.
1.4 "Board of Directors" means the Board of Directors of the
Corporation.
1.5 "Borden Excess Benefits Plan" means the Borden, Inc. Excess
Benefits Plan.
1.6 "Borden ERIP" means the Borden, Inc. Employees Retirement Income
Plan.
1.7 "Borden RSP" means the Borden, Inc. Retirement Savings Plan and
effective January 1, 1989 the Borden, Inc. Consolidated Retirement
Savings and Employee Stock Ownership Plan.
1.8 "Corporation" means Borden, Inc. and any successor to such
corporation by merger, purchase or otherwise.
1.9 "Deferred Compensation" means (i) the amount of an Executive
Employee's compensation for a year after 1987 that such Executive
Employee has deferred until a later year pursuant to an election
under Section 2.2 of this Plan, and/or (ii) the amount of an
Executive Employee's Elective Salary Deferral for the 1987
calendar year, and/or (iii) the amount of Excluded Compensation
deferred by a Highly Paid Executive under Section 2.2 of this
Plan.
- 1 -
<PAGE> 4
1.10 "Elective Salary Deferral" means the amount of salary deferral
elected by an Executive Employee pursuant to a salary reduction
agreement for 1987 for amounts which would otherwise have been Tax
Deferred Contributions pursuant to Section 3.2 of the Borden RSP
but for the $7,000 limit in such Section.
1.11 "Excluded Compensation" means that part of total compensation paid
to a Highly Paid Executive earned from the Corporation which (i)
if the year is 1989, exceeds $200,000 or (ii) if the year is
subsequent to 1989, exceeds the dollar limit for such year under
Section 401(a)(17) of the Internal Revenue Code of 1986 as from
time to time amended.
1.12 "Executive Employee" means an individual employed by the
Corporation or a subsidiary thereof in a key executive or
managerial position and who is in the group designated by the
Chief Executive Officer as the ROSE group.
1.13 "Highly Paid Executive" means an individual employed by the
Corporation or a subsidiary thereof in a key executive or
managerial position who during the calendar year is not an
Executive Employee but earns Excluded Compensation.
1.14 "New Executive" means an individual employed by the Corporation or
a subsidiary thereof in a key executive or managerial position
designated by the Chief Executive Officer of the Corporation for
participation in the benefit described in Section 3.3.
1.15 "Management Incentive Plan" means the Borden, Inc. Management
Incentive Plan and any other executive incentive plan that
provides for deferred awards, other than the Long-Term Performance
Improvement Program.
1.16 "Pension Committee" means the Pension Committee of the Board of
Directors.
1.17 "Plan" means the Borden, Inc. Executives Supplemental Pension Plan
as from time to time in effect.
- 2 -
<PAGE> 5
SECTION TWO
-----------
Participation
-------------
2.1 Eligibility to Participate
--------------------------
Participation in the Plan shall be limited to:
(a) those participants in the Borden ERIP and their joint
annuitants and beneficiaries who as a result of the
participant having been granted a deferred award
under the Management Incentive Plan or having elected
Deferred Compensation receive, or will receive, a
lesser amount of retirement income under the Borden
ERIP than otherwise would be paid or payable in the
absence of such deferrals;
(b) those Executive Employees who elect Deferred
Compensation;
(c) those Highly Paid Executives who elect Deferred
Compensation;
(d) those participants in the Borden ERIP who have
Excluded Compensation, and their joint annuitants and
beneficiaries; and
(e) New Executives.
2.2 Election of Deferred Compensation
---------------------------------
Elections of Deferred Compensation shall be made only by Executive
Employees or Highly Paid Executives and shall be on forms
furnished by the Pension Committee. A Deferred Compensation
election shall apply only to compensation (as defined below) for
the particular year specified in the election, and (i) for
Executive Employees shall specify the percentage of such
compensation to be deferred under the election, which percentage
may be any whole percentage that is not greater than twenty-five
percent (25%) and (ii) for Highly Paid Executive shall be the
"Matchable Portion" as defined in the Borden RSP of Excluded
Compensation. For purposes of the preceding sentence, the term
"compensation" means the total earned income that would be
currently payable to the participant but for his or her Deferred
Compensation election hereunder, and shall include Tax Deferred
Contributions under the Borden RSP, salary reduction Employer
Contributions under the Borden, Inc. Flexible Benefits Plan and
incentive bonuses earned under the corporate management incentive
compensation programs which are paid in the first year in which
such bonuses are payable, but shall exclude incentive bonuses
earned under the Long Term Incentive Payment Plan. A Deferred
Compensation election with respect to compensation for a
- 3 -
<PAGE> 6
particular calendar year (i) must be made before January 1 of
such calendar year, (ii) for Executive Employees, must specify
(from the available alternatives) the date such Deferred
Compensation is to be paid (or commence to be paid) and the number
of annual installments (not to exceed 10) in which such Deferred
Compensation is to be paid, and (iii) once made, cannot be changed
or revoked. Deferred Compensation for Highly Paid Executives is
payable only as a lump sum after termination of employment.
Subject to such conditions regarding continued employment as may
be imposed by the Corporation, Executive Employees, during the
month of December 1992, may change any prior election in respect
of the date Deferred Compensation is to be paid (or commence to be
paid) and the number of annual installments (not to exceed 10) in
which such Deferred Compensation is to be paid. Once made, such
election shall be irrevocable.
A separate subaccount shall be maintained under the participant's
"Participant Deferred Account" (see Section 3.3(b)) with respect
to Deferred Compensation for each calendar year for which the
participant makes a Deferred Compensation election.
- 4 -
<PAGE> 7
SECTION THREE
-------------
Amount of Supplemental Benefits and Supplemental Contributions
--------------------------------------------------------------
3.1 Supplemental Benefits
---------------------
The aggregate amount, if any, of retirement income payable under
the Borden ERIP to a participant therein, or to his or her joint
annuitant or beneficiary, which is not paid under the Borden ERIP
as a result of the fact that the amount of deferred awards under
the Management Incentive Plan, Deferred Compensation, and Excluded
Compensation are not recognized as "Compensation" under the Borden
ERIP, shall be termed a "Supplemental Benefit" and shall be paid
directly to such participant, or to his or her joint annuitant or
beneficiary, as applicable, from the general assets of the
Corporation in accordance with Section 3.4.
3.2 Grandfather Benefit
-------------------
(a) The amount described below in Section 3.2(b) less the
amount payable under the Borden ERIP shall be termed
a "Grandfather Benefit". Participants who are
Executive Employees designated as members of the
Corporation's Core Management Group on July 1, 1992,
who have attained age 55, whose combined age and
years of service at termination of employment (in
years and completed months) with the Corporation
equal or exceed 85 and who do not qualify for a
benefit under Section A3.7 of the Borden ERIP are
eligible for this Grandfather Benefit. Executive
Employees who are designated as members of the
Corporation's Core Management Group after July 1,
1992 who otherwise would be eligible for this benefit
shall only be so when such eligibility is authorized
in writing by the Chief Executive Officer of the
Corporation. Executive Employees not terminated "for
cause" as defined in their Core Arrangement who are
otherwise eligible for this benefit but whose
combined age and years of service at Termination is
less than 85 shall be eligible for this benefit if
such combined age and years of service (in years and
completed months) at Termination equal or exceed 80.
The combination of age and service which equal or
exceed 80 shall be determined at the end of the
calendar year of the termination as if the employee
were actively employed throughout the year in which
the termination occurred. The Grandfather Benefit
shall be paid directly to such participant, or to his
or her joint annuitant or beneficiary, as applicable,
from the general assets of the Corporation in
accordance with Section 3.4.
- 5 -
<PAGE> 8
(b) The amount is as follows:
(i) For service under the Borden ERIP prior to
January 1, 1988, one and one-half percent
(1.5%) of the portion of the Employee's
Average Final Compensation in excess of the
estimated age 65 Social Security Benefit in
effect on January 1, 1988 multiplied by the
years and months of credited Service (as
defined in the Borden ERIP) completed as of
December 31, 1987; plus
(ii) For service under the Borden ERIP after
December 31, 1987 through December 31, 1996,
one percent (1%) of each year's earnings up
to that year's taxable Social Security Wage
Base plus one and one-half percent (1.5%) of
each year's earning in excess of that year's
taxable Social Security Wage Base.
"Average Final Compensation" is the average
of the participant's highest five consecutive
years of earnings with the Corporation during
the participant's last ten (10) calendar
years of employment with the Corporation
prior to January 1, 1988. For this purpose,
any incentive bonuses which are included in
Compensation shall be averaged separately
from the balances of such Compensation.
3.3 Supplemental Contributions
--------------------------
(a) Supplemental Company Contributions
The excess, if any, of (i) the amount of matching
Employer contributions which would have been made on
behalf of a participant pursuant to Section 4.1 of
the Borden RSP had the participant's Deferred
Compensation been contributed by the participant to
the Borden RSP over (ii) the amount of matching
Employer contributions actually made on behalf of the
participant to the Borden RSP, together with "deemed
earnings" on such excess, shall be termed
"Supplemental Company Contributions" and shall be
paid to the participant or his or her beneficiary, as
applicable, from the general assets of the
Corporation in accordance with Section 3.4. For all
plan years after 1988, the Supplemental Company
Contributions shall be in the form of cash and common
shares of the Corporation in the same proportion as
matching employer contributions are made to Fund A
and D, respectively, under the Borden RSP provided,
however, that for plan years after 1991 for officers
of the Corporation subject to the reporting and
holding requirements of Section 16 of the Securities
and Exchange
- 6 -
<PAGE> 9
Commission Act such contributions shall be in
the form of cash. "Deemed earnings" for Supplemental
Company Contributions for cash and common stock shall
be earnings at the rate of investment return during
the comparable period of time for Fund A (cash) and
Fund D (stock), respectively, under the Borden RSP.
A bookkeeping account ("Supplemental Company
Contributions Account") shall be maintained for each
affected participant to record the amount of such
Supplemental Company Contributions.
(b) Deferred Compensation
The aggregate of the amounts of Deferred Compensation
and "deemed earnings" on such amounts (referred to as
"Deferred Amounts") shall be paid to the participant
or his or her beneficiary, as applicable, from the
general assets of the Corporation in accordance with
Section 3.3. "Deemed earnings" with respect to
Deferred Compensation shall be earnings at the rate
of investment return on Fund A under the Borden RSP.
A bookkeeping account ("Participant Deferred
Account") shall be maintained for each affected
participant to record the amount of such Deferred
Compensation and deemed earnings thereon.
(c) Supplemental Match
The excess, if any, of (i) the amount of Matching
Employer Contributions which would have been made on
behalf of a participant who is a New Executive
pursuant to Section 4.1 of the Borden RSP had the
participant had more than twelve months of service
with the Corporation over (ii) the amount of Matching
Employer Contributions actually made on behalf of the
participant to the Borden RSP, together with "deemed
earnings" on such excess, shall be termed
"Supplemental Match" and shall be paid to the
participant or his or her beneficiary, as applicable,
from the general assets of the Corporation in
accordance with Section 3.3. For all plan years
after 1988, the Supplemental Match shall be in the
form of cash and common shares of the Corporation in
the same proportion as matching employer
contributions are made to Fund A and D, respectively,
under the Borden RSP provided, however, that for plan
years after 1991 for officers of the Corporation
subject to the reporting and holding requirements of
Section 16 of the Securities and Exchange Commission
Act such contributions shall be in the form of cash.
"Deemed earnings" for Supplemental Match for cash and
common stock shall be earnings at the rate of
investment return during the comparable period of
time for Fund A (cash) and Fund D (stock),
respectively, under the Borden RSP. A bookkeeping
account ("Supplemental Match
- 7 -
<PAGE> 10
Account") shall be maintained for each affected
participant to record the amount of such Supplemental
Match.
3.4 General Provisions
------------------
(a) The Corporation shall make no provision for the
funding of any Supplemental Benefits, Grandfather
Benefits, Supplemental Company Contributions
Accounts, Supplemental Match Accounts or Participant
Deferred Accounts payable hereunder that (i) would
cause the Plan to be a funded plan for purposes of
section 404(a)(5) of the Internal Revenue Code of
1986, as amended, or Title I of the Employee
Retirement Income Security Act of 1974, as amended,
or (ii) would cause the Plan to be other than an
"unfunded and unsecured promise to pay money or other
property in the future" under Treasury Regulations
section 1.83-3(e); and shall have no obligation to
make any arrangement for the accumulation of funds to
pay any amounts under this Plan. Subject to the
restrictions of the preceding sentence, the
Corporation, in its sole discretion, may establish a
grantor trust described in Treasury Regulations
sections 1.677(a)-1(d) to accumulate funds to pay
amounts under this Plan, provided that the assets of
the trust shall be required to be used to satisfy the
claims of the Corporation's general creditors in the
event of the Corporation's bankruptcy or insolvency.
(b) In the event that the Corporation shall decide to
establish an advance accrual reserve on its books
against the future expense of paying Supplemental
Benefits, Grandfather Benefits, Supplemental Company
Contributions Accounts, Supplemental Match Accounts
or Participant Deferred Accounts, such reserve shall
not under any circumstances be deemed to be an asset
of this Plan but, at all times, shall remain a part
of the general assets of the Corporation, subject to
claims of the Corporation's creditors.
(c) A person entitled to any amount under this Plan shall
be a general unsecured creditor of the Corporation
with respect to such amount. Furthermore:
(i) Subject to the provisions of subsections (e),
(f), (g) and (h) below, a person entitled to
a Supplemental Benefit or Grandfather Benefit
shall have a claim upon the Corporation only
to the extent of the monthly payments
thereof, if any, due up to and including the
then current month and shall not have
- 8 -
<PAGE> 11
a claim against the Corporation for any
subsequent monthly payment unless and until
such payment shall become due and payable;
(ii) Subject to the provisions of subsections (e),
(f) and (h) below, a person entitled to
Supplemental Company Contributions shall have
a claim upon the Corporation only to the
extent of the Supplemental Company
Contributions Account, and the amount of such
Account shall be paid to the participant or
beneficiary in the same manner and at the
same time as the distribution of the
participant's accounts under the Borden RSP;
(iii) Subject to the provisions of subsections (e),
(f) and (h) below, a person entitled to
Deferred Amounts shall have a claim upon the
Corporation only to the extent of the
Participant Deferred Account and the amount
of such Account shall be paid to the
participant or beneficiary in accordance with
the terms of the participant's Deferred
Compensation election or elections under
Section 2.2; and
(iv) Subject to the provisions of subsections (e),
(f) and (h) below, a person entitled to
Supplemental Match shall have a claim upon
the Corporation only to the extent of the
Supplemental Match Account, and the amount of
such Account shall be paid to the participant
or his or her beneficiary, as applicable, in
the same manner and at the same time as the
distribution of the participant's accounts
under the Borden RSP.
(d) In the event that the Borden ERIP shall be terminated
in accordance with Section C6 thereof, Supplemental
Benefits and Grandfather Benefits shall continue to
be paid directly by the Corporation but only to the
same extent and for the same duration as that part of
the payee's benefit from the Pension Fund of the
Borden ERIP, which is directly related to such
Supplemental Benefit or Grandfather Benefit, is
continued to be provided by the assets of the Pension
Fund of the Borden ERIP; but such continued payment
of Supplemental Benefits or Grandfather Benefits
shall still be subject to the conditions specified in
subsections (a), (b) and (c) above.
In the event that the Borden RSP shall be terminated
in accordance with Section 13 thereof, Supplemental
Company Contributions Accounts shall be paid directly
by the Corporation in the same manner as the
distribution of the participant's accounts under the
Borden RSP.
- 9 -
<PAGE> 12
(e) Notwithstanding any other provision hereof, there
shall become immediately due and payable to or with
respect to a participant a lump sum equal to the
Supplemental Company Contributions Account plus the
Supplemental Match Account plus the Participant
Deferred Account plus the present actuarial value
(determined as hereinafter provided) of the
participant's Accrued Supplemental Benefit and
Grandfather Benefit if: (i) the Corporation refuses
to make any payments due hereunder to any
participant, unless refusal to make payment to a
particular participant is based on facts and
circumstances with respect to such participant which
reasonably justifies such refusal, based on the
participant engaging in conduct harmful to the
interests of the Corporation; (ii) the Corporation
makes a general assignment for the benefit of
creditors; (iii) any proceedings under the Bankruptcy
Act are instituted by the Corporation or, if
instituted against the Corporation, is consented to
or acquiesced in by it or remains undismissed for 60
days; or (iv) a receiver or trustee in bankruptcy is
appointed for the Corporation. In addition, in the
event of any such proceeding by or against the
Corporation under the Bankruptcy Act, or any such
assignment, a participant or his or her joint
annuitant or beneficiary shall be entitled to prove a
claim for any unpaid portion of the benefit provided
hereunder and, if the claim is not discharged in full
in any such proceeding, or assignment, it will
survive any discharge of the Corporation under any
such proceeding or assignment. The present actuarial
value of the Accrued Supplemental Benefit and
Grandfather Benefit shall be calculated on the basis
of the 1976-80 GAM Mortality Table and an interest
rate, compounded monthly, equal to the yield of the
most recently issued 30-year maturity U.S. Treasury
issue as reported as of the business day on which the
valuation is performed as published in the Midwest
edition of the WALL STREET JOURNAL. If the valuation
is not performed on a business day, the immediately
preceding business day report shall be used for the
purposes of determining the interest rate to be used
in the valuation.
(f) In the event of the application of subsection (e)
above, the affected participants (or, in the case of
deceased participants, their joint annuitants and
beneficiaries) (the "Claimants") shall appoint a
single representative to pursue their respective
claims against the Corporation. Such representative
shall be a person or entity selected by, or agreed
upon, by Claimants with unpaid benefits under the
Plan equal to more than fifty percent (50%) of the
total amount of unpaid benefits under the Plan.
- 10 -
<PAGE> 13
(g) A participant's Supplemental Benefit and Grandfather
Benefit shall be paid to the participant in the same
form and at the same time as the participant's
Accrued Regular Benefit.
(h) The participant's beneficiary under this Plan with
respect to his or her Participant Deferred Account
shall be the person or persons designated as
beneficiary by the participant by filing with the
Pension Committee a written beneficiary designation
on a form provided by, or acceptable to, such Pension
Committee. In the event the participant does not
make an effective designation of a beneficiary with
respect to his or her Participant Deferred Account,
the participant's beneficiary with respect to his or
her Participant Deferred Account shall be the
beneficiary of such participant's beneficiary under
the Borden RSP.
The participant's beneficiary or joint annuitant
under this Plan with respect to his or her
Supplemental Benefit shall be the person who is
entitled to benefit payments under the Borden ERIP on
account of the death of the participant.
The participant's beneficiary under this Plan with
respect to his or her Supplemental Company
Contributions Account and Supplemental Match Account
shall be the person who is entitled to benefit
payments under the Borden RSP on account of the death
of the participant.
(i) Wherever in this Section Three reference is made to
"Supplemental Benefits" or "Accrued Supplemental
Benefits" such terms shall be deemed to include any
special supplemental benefits payable pursuant to
Appendix A.
(j) If the amount credited to the Participant's
Deferred Account is $10,000 or less at the time he or
she retires or otherwise terminates employment, then
the Participant shall be paid, as soon as practicable
after termination of employment, an amount equal to
the amount in the Participant's Deferred Account as
of his or her termination of employment.
(k) A participant's benefit in the Plan shall be vested
to the same extent that his or her corresponding
benefit under the Borden ERIP or Borden RSP is
vested. The minimum benefit under the Plan shall
equal the value of the vested accrued benefit as of
December 31, 1993.
ESPP12.93
- 11 -
<PAGE> 14
APPENDIX A
Benefits payable after termination of active employment to the following
executives under written employment agreements dated as indicated:
- Anthony S. D'Amato
December 3, 1990 as amended September 24, 1991,
June 22, 1993 and September 30, 1993.
- Ervin R. Shames, June 24, 1993
- Robert Allen, August 24, 1993
- George Morris, August 25, 1993
<PAGE> 15
APPENDIX B
Special Supplemental Benefits
for Named Individuals
With regard to the individuals named below, certain benefits which cannot be
provided under the Borden ERIP are hereinafter provided under the Plan.
1. R.J. Ventres
Mr. Ventres' prior period of employment with Borden, from October
9, 1957 to October 10, 1974, resulted in a vested annual benefit,
payable at age 65 from the Borden ERIP, of $10,617.84. The period
of such prior service is to be treated, in the circumstances
listed below, under the Plan as if it had been contiguous with Mr.
Ventres' rehire date of July 9, 1979. Any benefits which would
otherwise be payable under the benefit formulas of the Borden ERIP
as in effect at Mr. Ventres' date of termination of employment,
with respect to such period of prior service, which are in excess
of the aforementioned vested annual benefit shall be payable from
the Plan in the same manner and form as Mr. Ventres elects with
regard to such aforementioned vested annual benefit.
The special treatment of the foregoing paragraph shall apply in
case of retirement at or after age 65, involuntary early
retirement not due to malfeasance, and death during active
employment. The special treatment of the foregoing paragraph
shall not be applicable in case of voluntary early retirement,
voluntary resignation from the Corporation prior to age 65, or
termination by the Corporation due to malfeasance. Circumstances
not specifically enumerated shall be treated in a manner
consistent with those which are enumerated.
2. If any of the employees listed below, who were covered under the
Supreme Ice Cream Supplement to the Meadow Gold Pension Plan,
retire or otherwise terminate their employment with vested rights
under the Meadow Gold Pension Plan prior to April 1, 1988, or
under the Employees Retirement Income Plan after March 31, 1988,
and elect the 50% survivor form of benefit, a monthly benefit
equal to the reduction applied to the otherwise payable monthly
benefit under the aforementioned Plans shall be payable from this
Plan, in the same manner and under the same conditions as such 50%
survivor benefit under such Plans. If any of the employees listed
below elects a form of benefit other than the 50% survivor form,
no benefits shall be payable under this Plan.
13
<PAGE> 16
<TABLE>
<CAPTION>
Employee Social Security # Employee Social Security #
-------- ----------------- -------- -----------------
<S> <C> <C> <C>
Alford, E.J. ###-##-#### Peacock, G. ###-##-####
Forehand, S. ###-##-#### Preston, S.D. ###-##-####
Holman, J.R. ###-##-#### Russell, S.T. ###-##-####
Johnson, H. ###-##-#### Sallas, B.J. ###-##-####
Lincoln, J. ###-##-#### Trotter, L.H. ###-##-####
Mathis, V. ###-##-#### Walker, V.N. ###-##-####
Parrish, H. ###-##-####
</TABLE>
- 14 -
<PAGE> 1
EXHIBIT 10 (xi)
BORDEN, INC.
SUPPLEMENTAL BENEFIT TRUST AGREEMENT
THIS TRUST AGREEMENT, as amended through December 9, 1993, by and between
BORDEN, INC., a corporation organized and existing under the laws of the State
of New Jersey (the "Corporation") and WACHOVIA BANK OF NORTH CAROLINA, N.A., a
national banking association organized and existing under the laws of the
United States (the "Trustee").
WITNESSETH:
WHEREAS, the Corporation has established various supplemental benefit plans for
the benefit of certain employees of the Corporation; and
WHEREAS, the Corporation desires to establish a trust (the "Trust") under this
Trust Agreement to aid it in meeting its obligations under certain of these
Plans (such plans being set forth on Exhibits A, B and C hereto as amended from
time to time and referred to herein collectively as "Plans" and singly as a
"Plan"), and
WHEREAS, the Trust is intended to be a "grantor trust" with the corpus and
income thereof treated as assets and income of the Corporation for federal
income tax purposes under the Internal Revenue Code of 1986, as amended; and
WHEREAS, the Corporation intends that the existence of the Trust shall not
alter the characterization of said Plans as unfunded plans for purposes of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and shall
not be construed to provide income to any participant or beneficiary under the
Plans prior to actual payment of benefits thereunder;
NOW, THEREFORE, the Corporation and the Trustee agree as follows:
<PAGE> 2
ARTICLE I
Establishment of Trust and Plans
--------------------------------
1.1 The Corporation hereby establishes the Trust with the Trustee
consisting of such sums of money and such property acceptable to the
Trustee as from time to time shall be paid or delivered to the
Trustee. All such money and property, all investments made therewith
and proceeds thereof, less the payments or other distributions which,
at the time of reference, shall have been made by the Trustee, as
authorized herein, shall be held by the Trustee in trust for the
purpose of paying benefits to participants under the Plans, in
accordance with the provisions of this Trust Agreement and shall at
all times be subject to the claims of general creditors of the
Corporation as provided in Article VIII.
1.2 The Corporation has heretofore established the Plans listed on
Exhibits A, B, and C. The Plans were established in order to provide
certain employees, as well as their beneficiaries, with certain forms
of compensation and other benefits. Prior to a Change in Control (but
not after a Change in Control), the Corporation may, from time to
time, add to or delete from the list of Plans on Exhibit A, B, or C
that are covered by this Trust Agreement.
1.3 Certain Plans of the Corporation are identified in Paragraph 1 of
Exhibit B hereto (hereinafter referred to as "Exhibit B Plans") as
well as on Exhibits A and C. In the event any stock of the
Corporation is contributed to the Trust for the purpose of funding
distributions under one or more Exhibit B plans, the provisions set
forth in Exhibit B shall (in the event of any conflict) supersede the
provisions otherwise set forth in this Trust Agreement. Except to the
extent of any such conflict, however, all provisions of this Trust
Agreement shall apply to Exhibit B Plans.
1.4 The Trust is revocable by the Corporation until such time as a Change
in Control occurs, at which time the Trust shall become irrevocable.
Prior to the occurrence of a Change in Control, the Corporation
reserves the power to alter, amend, revoke, or annul the Trust or this
Trust Agreement. After the occurrence of a Change in Control, the
Corporation shall not have the power to alter, amend, revoke or annul
the Trust or this Trust Agreement. After the occurrence of a Change
in Control, (i) the assets of the Trust shall be held for the
exclusive purpose of providing benefits to Participants and their
beneficiaries under the Plans and defraying expenses of this Trust in
accordance with the provisions of this Trust Agreement and (ii) except
as provided in Article VII or VIII, no part of the property held in
Trust shall be recoverable by or for the Corporation.
2
<PAGE> 3
1.5 It is intended that the Corporation shall be treated as the owner of
the assets of the Trust pursuant to Sections 671-679 of the Internal
Revenue Code of 1986, as amended, and the terms of this Trust
Agreement shall be so construed. Furthermore, it is intended that
distributions from the Trust to a Participant shall be deductible by
the Corporation to the same extent, at the same time, and in the same
manner as if made directly by the Corporation.
1.6 The Trustee hereby represents that a "Chinese Wall", as that term is
commonly understood in the banking community, exists between its trust
department and its banking department and accepts the Trust
established under this Trust Agreement on the terms and subject to the
provisions set forth herein.
ARTICLE II
Definitions
-----------
2.1 Unless the context of the Trust Agreement otherwise requires or unless
otherwise defined herein, the terms defined in the Plans shall have
the same meaning when used herein as the meanings given to those terms
in the Plans.
(a) The term "Benefit" shall mean any benefit payable to a
Participant under a Plan.
(b) The term "Change in Control" shall mean the occurrence of one
of the following events:
(1) When any "person" (as such term is used in sections
13(d)(3) and 14(d)(2) of the Exchange Act) becomes
the "beneficial owner" (as such term is used in Rule
13d-3 under the Exchange Act) of securities of the
Corporation representing 20 percent or more of the
combined voting power of the Corporation's then
outstanding securities; or
(2) When there is an election of persons constituting 30
percent or more of the total membership of the Board
of Directors who had not been recommended for such
election by the immediately preceding Board of
Directors or its nominating committee; or
(3) When the shareholders of the Corporation approve a
merger, consolidation, sale, or disposition of all or
substantially all of the assets of the Corporation or
a plan of partial or complete liquidation.
3
<PAGE> 4
(c) The term "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
(d) The term "Exchange Act" shall mean the Securities Exchange Act
of 1934.
(e) The term "Insolvent" shall mean the condition of the
Corporation in the event that it either is unable to pay its
debts as they come due or is subject to a pending proceeding
as a debtor under the federal Bankruptcy Code.
(f) The term "Participant" shall mean an employee of the
Corporation, or any beneficiary of such an employee, who
becomes entitled to receive Benefits under a Plan.
(g) The term "Payment Schedule" shall mean the list of
Participants who are eligible for Benefits and the amount of,
or the method of calculating such Benefits.
(h) The term "Required Funding Amount" shall mean the amount
determined pursuant to the provisions of Section 3.4 to fund
the obligations of the Corporation under the plans.
(i) The term "Separate Account" shall mean any account established
with respect to a Plan in accordance with the provisions of
Section 3.3.
(j) The term "Trust Assets" shall mean all property held by the
Trustee pursuant to the terms of this Trust Agreement.
(k) The term "Trust Fund" shall mean all assets held by the
Trustee in accordance with the terms and provisions of this
Trust Agreement.
(l) The term "Valuation Date" shall mean the last business day of
each calendar year quarter.
2.2 Where necessary or appropriate to the meaning hereof, the singular
shall be deemed to include the plural, the masculine to include the
feminine, and the feminine to include the masculine.
4
<PAGE> 5
ARTICLE III
General Duties of Parties; Contributions and Accounts
-----------------------------------------------------
3.1 The Corporation shall provide the Trustee with a copy of each of the
Plans and any amendments to such Plans.
3.2 Except as hereinafter provided, the Corporation may make contributions
to the Trust from time to time as it shall determine in its sole
discretion; provided, however, that the Corporation shall be required
to contribute the Required Funding amount as required for those Plans
listed in Exhibits A & B as soon as practicable but in any event
within 30 days following a Change in Control. If the Corporation
fails to contribute the Required Funding Amount upon the occurrence of
a Change in Control, the Trustee is empowered (but not required) to
bring suit against the Corporation to require specific performance of
such obligation to contribute. If the Trustee fails to bring suit
within a reasonable period, any Participant may bring suit in the name
of the Trustee against the Corporation for such specific performance.
3.3 The Trustee shall establish and maintain a Separate Account for each
Plan and, if deemed appropriate, separate sub-accounts for each
Participant pursuant to directions received from the Corporation which
shall be made in accordance with the provisions of each Plan and in a
manner consistent with the provisions of Section 3.4. The Trustee
shall allocate contributions received from the Corporation among such
Separate Accounts and sub-accounts pursuant to directions of the
Corporation; provided, however, that if the Corporation makes
contributions to the Plans due to a Change in Control, such
allocations shall be based upon the calculations made with respect to
each Plan for purposes of determining the Required Funding Amount
under Section 3.4.
3.4 As of each Valuation Date after a Change in Control with respect to
which the Corporation contributes the Required Funding Amount, the
Trustee shall determine if the Trust Assets as of such date are less
than the Required Funding Amount as of such date utilizing guidelines
set forth on Exhibit D. As of each such Valuation Date the Required
Funding Amount shall be the amount determined by the Trustee as
required to fund the Payment Schedule with respect to each of the
Plans listed in Exhibit A and B as well as an amount deemed to be
appropriate by the Trustee, after consultation with the Corporation,
to pay for the expenses and compensation of the Trustee in connection
with the administration of the Trust. If such Trust Assets are less
than the Required Funding Amount, the Corporation shall contribute to
the Trust the amount by which the Required Funding Amount exceeds the
value of the Trust Assets. Any such additional contributions shall be
allocated to the Plans based upon the portion of the
5
<PAGE> 6
Required Funding Amount applicable to each Plan.
3.5 If the Corporation by resolution of its Board of Directors in the
event of a Change in Control, decides to fund in this Trust the Plans
listed in Exhibit C, then the provisions of Sections 3.2 and 3.4 above
shall include Exhibit C wherever Exhibits A & B are mentioned.
3.6 The Corporation shall provide the Trustee with information concerning
Participants and the Benefits to which they are eligible. The Trustee
may engage an insurance company, a third-party administrator, or other
agent, including the Corporation, to administer the payment of
Benefits. The Trustee may also engage an actuary in conjunction with
its duties to determine the Required Funding Amount or any other of
its responsibilities hereunder.
3.7 The Trustee may hold, invest and reinvest the Separate Accounts and
sub-accounts as a consolidated single fund. The Trust Fund shall be
valued by the Trustee as of each Valuation Date at current market
values, as determined by the Trustee. Such valuation shall reflect
cash contributions, income of the Trust Fund, gains or losses
(including gains or losses not yet realized), distributions and
expenses incurred following the preceding quarter. The amount of any
net increase or decrease in the value of the Trust Fund shall be
allocated among Separate Accounts in accordance with their respective
balances as of the preceding Valuation Date reduced by any Benefit
payments charged to such Separate Accounts since the preceding
Valuation Date. The Trustee shall maintain the record of the value of
each Separate Account and sub-account based on the aggregate amount of
the Trust Fund and the information provided by the Corporation as to
its contributions and allocations with respect to each Separate
Account and sub-account.
ARTICLE IV
Distributions from Trust Fund
-----------------------------
4.1 Prior to a Change in Control, distributions from the Trust Fund shall
be made by the Trustee to the Participants at the direction of the
Corporation. To the maximum extent permitted by applicable law, the
Trustee shall be fully protected in making such distributions,
provided that any amount so paid at any time shall not exceed the
amount then in the Participant's sub-account. Any amounts so paid
shall be reduced by the amount of income tax withholding required by
law. In making such withholdings the Trustee may rely on the rates
provided by the Corporation in any Payment Schedule and shall forward
without delay the amounts withheld to the Corporation who shall pay
such amounts to the
6
<PAGE> 7
appropriate governmental authorities. Notwithstanding the
provisions of this Trust, the Corporation shall remain obligated to
pay the Benefits under the Plans. To the extent the amount in a
Participant's sub-account is not sufficient to pay any Benefit when
due, the Corporation shall pay any remaining Benefit due a Participant
directly. Nothing in this Trust Agreement shall relieve the
Corporation of its liabilities to pay Benefits except to the extent
such liabilities are met by application of Trust Assets.
4.2 Prior to a Change in Control, the Corporation shall deliver a Payment
Schedule to the Trustee which the Corporation shall update from time
to time. After a Change in Control the Trustee shall pay Benefits in
accordance with the most recent Payment Schedule delivered to it prior
to the Change in Control.
4.3 Following a Change in Control, a Participant who believes that he or
she is entitled to a Benefit under a Plan may apply in writing
directly to the Trustee for payment of such Benefit. Such application
shall advise the Trustee of the circumstances which entitle such
Participant to payment of such Benefit. The Trustee shall, in such
case, reach its own independent determination as to the Participant's
entitlement of Benefit, even though the Trustee may be informed from
another source (including the Corporation) that payments are not due
under a Plan or the a distribution should no be made. If the Trustee
so desires, it may, in its sole discretion, make such additional
inquiries and/or take such additional measures as it deems necessary
in order to enable it to determine whether a Benefit is due and
payable, including, but not limited to, interviewing appropriate
persons, requesting affidavits, soliciting oral or written testimony
under oath, or holding a hearing or other proceeding, provided,
however, that if the application is for monies due under a written
employment agreement the Trustee shall endeavor to make its
determination as to entitlement within thirty (30) days after its
receipt of such application. If such determination and payment are
not made within thirty (30) days, and if such application is supported
by a sworn affidavit of entitlement setting forth facts which on their
face would support such an entitlement, and if the application is
accompanied by the Participant's promise to repay any monies finally
determined not to be due the Participant, then the Trustee shall make
such payment within thirty (30) days after its receipt of the
application and shall thereafter continue such payments as are claimed
due until a final determination of non-entitlement is made. The
Trustee may engage its own counsel or other experts to assist it in
making determinations under this Trust Agreement. The cost of such
counsel or other expert assistance, and any other costs reasonably
incurred by the Trustee in making its determination, shall be borne
by the Corporation. If the Corporation fails to pay any such costs
when due, the Trustee may use the assets of the Trust Fund to pay
such costs and the Corporation shall reimburse the Trust Fund for
such payments.
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<PAGE> 8
The Trustee shall not be liable to the Trust or the Corporation for
any payments made pursuant to this section based on its independent
determinations pursued with reasonable diligence nor shall it be
liable for the failure of a Participant to repay monies paid prior to
its independent determination where such payments are made pursuant to
the provisions of this section.
4.4 Notwithstanding any other provision of this Trust Agreement other than
Article VIII, if any amounts held in the Trust Fund are found in a
"determination" (within the meaning of Section 1313(a) of the Code) to
have been includible in gross income of a Participant prior to payment
of such amounts from the Trust, the Trustee shall, as soon as
practicable, pay such amounts to such Participant and charge the
Participant's sub-account accordingly. For purposes of this Section
4.4, the Trustee shall be entitled to rely on an affidavit by a
Participant and a copy of the determination to the effect that a
determination described in the preceding sentence has occurred.
ARTICLE V
Investment and Administration of Trust Fund
--------------------------------------------
5.1 The Trustee shall invest and reinvest the Trust Fund, without
distinction as to principal and income, in a manner consistent with an
investment policy and guideline that it shall invest the Trust Fund in
a fashion which has the primary priority of preservation of principal
and liquidity of the Trust Fund and, second, to the extent consistent
with these goals, which maximizes the income of the Trust Fund. The
Trustee is expressly authorized to invest the Trust Fund or any
portion thereof in short-term money market instruments, including
deposits with itself and/or United States Treasury or Agency
obligations as it may deem, in its discretion, appropriate to
implement said investment policy and guideline, notwithstanding any
other investment provisions contained herein. The Trustee shall have
the sole power and responsibility for the investment and reinvestment
of the Trust Fund. The Trustee is authorized to invest and reinvest
the Trust Fund in stocks, both common and preferred, bonds, notes,
debentures, mortgages, equipment lease certificates, registered
investment company stock, real estate investment trusts, common trust
funds of which it is the trustee, certificates of deposit, banker's
acceptances, obligations of the United States Government, its agencies
and authorities, or of any state or local governmental authority or
agency, or in any other kind of investment, without regard to whether
or not such investment is an authorized or appropriate investment for
trustees under any state laws applicable hereto. The Trustee may hold
uninvested such cash as it considers to be required for current
expenditures. The Trustee may register, hold, or retain any real or
personal property, investments or instruments, or certificates
8
<PAGE> 9
representing same (including, without limitation, stocks, bonds
or other securities) in its own name or in the name of its nominee, or
may keep same unregistered and may retain same in such condition that
title or interest may pass by delivery.
Notwithstanding the foregoing provisions of this Section 5.1 prior to
a Change in Control, the Corporation may from time to time appoint and
designate in a writing delivered to the Trustee one or more (i)
investment managers to manage the investment of all or any part of the
Trust Assets, or (ii) insurance companies and/or contracts with or
under which Trust Assets may be deposited. Any contributions in kind
during such a period shall be held by the Trustee without a duty to
maximize income on that portion of the Trust Assets. Upon the
occurrence of a Change in Control, the Trustee shall have the sole
investment responsibility of the Trust Assets and any appointment of
an investment manager theretofore shall be considered terminated.
5.2 The Trustee shall be entitled to such compensation and fees for its
services under this Trust Agreement as shall be set forth in its
regular schedule of compensation and fees for trust services in effect
at the time such compensation or fee is payable unless the Corporation
and Trustee otherwise agree. Such compensation, fees and
reimbursement shall be paid to the Trustee by the Corporation
directly; but if the Corporation shall fail to do so, the Trustee
shall be entitled to withdraw all amounts to which it is entitled from
the Trust Fund, to the extent the Trust Fund is sufficient, and to the
extent the Trust Fund is not sufficient, the additional amounts due
shall constitute a lien against the Trust Fund. If the Trustee is
paid from the Trust Fund, the Corporation shall reimburse the Trust
Fund for any such payments.
5.3 The Trustee shall accept for deposit in the Trust Fund all
contributions made by the Corporation under this Trust Agreement and
shall promptly acknowledge receipt of same. Prior to a Change in
Control the Trustee shall have no responsibility to determine or to
question the accuracy or correctness of any amounts so contributed and
shall have no responsibility or liability for any failure of the
Corporation to make contributions to the Trust Fund or any
insufficiency of assets in the Trust Fund to pay Benefits when due.
5.4 In addition to the powers elsewhere conferred upon the Trustee under
this Trust Agreement, the Trustee shall have the power and authority
to:
(a) Sell, transfer, mortgage, pledge, lease or otherwise dispose
of, or grant options with respect to, all or any portion of
the Trust Fund assets at public or private sale;
(b) Borrow funds to the extent temporarily required to make any
payment or investment authorized by this Trust Agreement;
9
<PAGE> 10
(c) Except as provided in Section 5.5, exercise all rights of
ownership with respect to all stocks, securities and other
property owned by the Trust, including, without limitation,
the power and authority to exercise voting rights, to
participate in reorganizations, recapitalizations,
consolidations, mergers and similar transactions, and to
exercise any options, subscription rights and conversion
privileges;
(d) Perform all acts which the Trustee shall deem necessary or
appropriate to perform its duties and discharge its
responsibilities under this Trust Agreement.
5.5 Notwithstanding any other provision contained herein, in the event
that the Trust Fund is invested in stock of the Corporation which is
allocated to sub-accounts of Participants, prior to each annual or
special meeting, the Corporation shall cause to be sent to each
Participant whose sub-account is so credited, a copy of the proxy
solicitation material therefore, together with a form requesting that
each Participant give to the Trustee his confidential instructions
with respect to the manner in which such shares of stock of the
Corporation as are credited to his sub-account shall be voted by the
Trustee. Upon receipt of such instructions, the Trustee shall vote
the shares as instructed. Instructions received from individual
Participants by the Trustee shall be held in the strictest confidence,
shall not be divulged or released to any other person, including
officers or employees of the Corporation. The Trustee shall not vote
stock of the Corporation so allocated with respect to which it does
not receive instructions. As of each Valuation Date and each date of
record for any annual or special Corporation shareholder meeting, the
Trustee shall report to the Corporation any Corporation stock holdings
allocated to any sub-accounts.
5.6 The Trustee shall keep accurate and detailed accounts and records of
all investments, receipts and disbursements, and other transactions of
the Trust. All accounts, books and records of the Trust shall be
open, at all reasonable times, to inspection or audit by Participants
and by any person designated by the Corporation.
5.7 The Trustee shall furnish to the Corporation within 60 days after each
valuation, and in the event the Trust is terminated or a successor
Trustee is appointed, within 60 days after such event, and at such
other times as may be requested by the Corporation a statement of
transactions which sets forth all opening and closing balances,
purchases, sales, receipts, disbursements and other transactions
involving the Trust since the date of the last statement of
transactions of the Trustee (or covering such other period as may be
specified by the Corporation). Such statement of transactions shall
contain an exact description and the cost shown on the books of the
Trust and the fair market value as of the date shown on the books of
the Trust and the fair market value as of the date of the
10
<PAGE> 11
statement of transactions, of all assets of the Trust.
5.8 The Trustee may consult with any legal counsel, including counsel to
the Trustee, and (except following a Change in Control) counsel to the
Corporation, with respect to the construction of this Trust Agreement,
its duties hereunder, or any act which it proposes to take or omit,
and shall not be liable for any action taken or omitted in good faith
pursuant to such advice. Expenses of such counsel shall be deemed to
be expenses of management and administration of the Trust.
5.9 The Corporation shall certify to the Trustee the name or names of any
person or persons authorized to act for the Corporation. Such
certification shall be signed by an appropriate officer. Until the
Corporation notifies the Trustee, in a similarly signed notice, that
any such person is no longer authorized to act for the Corporation,
the Trustee may continue to rely upon the authority of such person.
The Trustee may rely upon any certificate, notice or direction of the
Corporation which the Trustee reasonably believes to have been signed
by a duly authorized officer or agent of the Corporation.
Communications to the Trustee shall be sent in writing to the
Trustee's office at 301 North Main Street, Winston-Salem, North
Carolina 27150 or to such other address as the Trustee may specify.
No communication shall be binding upon the Trustee until it is
received by the Trustee and unless it is in writing and signed by an
authorized person.
Communications to the Corporation shall be sent in writing to the
Corporation's principal office at 277 Park Avenue, New York, New York
10172 Attn: Corporate Secretary, or to such other address as the
Corporation may specify. No communication shall be binding upon the
Corporation until it is received by the Corporation.
5.10 The Corporation at any time may employ as agent (to perform any act,
keep any records or accounts, or make any computations required of the
Corporation by this Trust Agreement or the Plans) the corporation or
association serving as Trustee hereunder. Nothing done by said
corporation or association as such agent shall affect its
responsibilities or liability as Trustee hereunder.
ARTICLE VI
Resignation and Removal of Trustee
----------------------------------
6.1 The Trustee may resign upon 90 days' prior written notice to the
Corporation,
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<PAGE> 12
except that any such resignation shall not be effective until
the Corporation has appointed in writing a successor trustee, which
must be a bank or trust company, acceptable to both the Trustee and
the Corporation, and such successor has accepted the appointment in
writing. The Corporation shall make a good faith effort, following
receipt of notice of resignation from the Trustee, to find and appoint
a successor trustee who will adhere to the obligations imposed on such
successor under the terms of this Trust Agreement, and in particular,
but without limitation, the obligation to exercise judgement
independent of the Corporation in the circumstances described in
Section 4.3, and the Trustee shall condition its acceptance of such
successor on the obtaining from such successor of a written statement
that (i) the successor has read the Trust Agreement and understands
its obligations thereunder, and (ii) that a "Chinese Wall", as that
term is commonly understood in the banking community, exists between
the successor's trust department and its banking department.
6.2 Subject to the provisions of Section 6.1 and the following paragraph,
the Corporation may remove the Trustee upon 90 days' prior written
notice to the Trustee, except that any such removal shall not be
effective until (i) the close of such notice period, (ii) delivery by
the Corporation to the Trustee of an instrument in writing appointing
a successor trustee, which must be a bank or trust company, and (iii)
the acceptance of such appointment in writing executed by such
successor.
Following a Change in Control, the Trustee may be removed by the
Corporation, subject to the foregoing provisions, only with the
written consent of a majority of Participants who, at the time such
removal is sought, are listed on the Payment Schedule. Upon its
receipt by the Trustee of a written notice of removal, the Trustee
shall be responsible for securing such consents in a timely fashion
and, unless ordered by a court of a competent jurisdiction, shall not
reveal to the Corporation or to any other person any information
concerning such consents, except whether the required majority has
been achieved. Any notice sent to Participants by the Trustee
canvassing the Participants as to their consent to removal of the
Trustee, shall include (i) the name and address of the proposed
successor, (ii) an acknowledgement that the successor has read the
Trust Agreement and understands its obligations thereunder, and (iii)
that a "Chinese Wall", as that term is commonly understood in the
banking community, exists between the successor's trust department and
its banking department.
6.3 All of the provisions set forth herein with respect to the Trustee
shall relate to each successor with the same force and effect as if
such successor had been originally names as the Trustee hereunder.
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<PAGE> 13
6.4 Upon the resignation or removal of the Trustee and appointment of a
successor, the Trustee shall transfer and deliver the Trust Fund to
such successor. Following the effective date of the appointment of
the successor, the Trustee's responsibility hereunder shall be limited
to managing the assets in its possession and transferring such assets
to the successor, and settling its final account. Neither the Trustee
nor the successor shall be liable for the acts of the other.
ARTICLE VII
Duration and Termination of Trust
---------------------------------
7.1 The Trust shall continue until all Benefits under the Plans have been
paid. After all such Benefits have been paid, the Trust shall
terminate.
7.2 If the Trust terminates pursuant to the provisions of Section 7.1, the
Trustee shall liquidate the Trust Fund and, after its final account
has been settled, shall distribute to the Corporation the net balance
of any assets of the Trust remaining after all Benefits and expenses
have been paid. Upon making such distribution, the Trustee shall be
relieved from all further liability. The powers of the Trustee
hereunder shall continue so long as any assets of the Trust Fund
remain in its hands.
ARTICLE VIII
Claims of Corporation's Creditors
---------------------------------
8.1 In the event that the Corporation becomes Insolvent, the assets of the
Trust shall be held for the benefit of the general creditors of the
Corporation (hereinafter referred to as "Bankruptcy Creditors"). The
Corporation, by its chief executive officer and its Board of
Directors, shall promptly notify the Trustee in the event that the
Corporation becomes Insolvent.
8.2 If at any time the Corporation or a person claiming to be a creditor
or the Corporation alleges in writing to the Trustee that the
Corporation has become Insolvent, the Trustee shall within 30 days
independently determine whether the Corporation is Insolvent and,
pending such determination, the Trustee shall discontinue payments of
Benefits under the Plans and this Trust Agreement, and shall hold the
Trust Fund for the benefit of Bankruptcy Creditors. The Trustee shall
resume payments of Benefits under the Plans and this Trust Agreement
only after the Trustee has determined that the Corporation is not
Insolvent (or is no
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<PAGE> 14
longer Insolvent, if the Trustee initially determined that the
Corporation to be Insolvent) or upon receipt of an order of a court of
competent jurisdiction requiring such payments. In determining
whether the Corporation is Insolvent, the Trustee may rely
conclusively upon, and shall be protected in relying upon, court
records showing that the Corporation is Insolvent, or a current report
or statement from a nationally recognized credit reporting agency
showing that the Corporation is Insolvent. The Trustee shall have no
duty or obligation to ascertain whether the Corporation is Insolvent
unless and until it receives a writing that the Corporation is
Insolvent as described in the first sentence of this Section 8.2.
If the Trustee determines that the Corporation is Insolvent, the
Trustee shall as soon as practicable thereafter invest all of the
assets of the Trust Fund in short-term federal government securities
or in a common fund invested in such securities. The Trustee shall
hold the Trust Fund for the benefit of the Corporation's Bankruptcy
Creditors, and shall disburse assets from the Trust Fund only to
satisfy such claims as a court of competent jurisdiction shall direct.
If the Trustee discontinues payment of Benefits pursuant to the first
paragraph of this Section 8.2 and subsequently resumes such payments,
the first payment to a Participant following such discontinuance shall
include an aggregate amount equal to the differences between the
payments which would have been made to such Participant under this
Trust Agreement but for this Section 8.2 and the aggregate payments
actually made to such Participant by the Corporation pursuant to the
Plans during any such period of discontinuance, plus interest on such
amount at a rate equivalent to the net rate of return earned by the
Trust Fund during the period of such discontinuance. In the event
that upon resumption of payments pursuant to the preceding sentence
the assets of the Trust Fund are insufficient to pay Benefits in full,
including Benefit payments discontinued under this paragraph, Benefit
payments to Participants shall be prorated so as to equitably
apportion assets of the Trust among all affected Participants.
8.3 In the event that an amount is paid from the Trust Fund to Bankruptcy
Creditors of the Corporation, the Trustee shall demand that the
Corporation deposit into the Trust Fund a sum equal to the amount paid
by the Trust Fund to such Bankruptcy Creditors and, if such payment is
not made within 90 days of such demand the Trustee shall take such
action as it deems prudent or advisable to recover payment.
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<PAGE> 15
ARTICLE IX
Miscellaneous
-------------
9.1 The Corporation acknowledges and agrees that it is the owner of the
Trust for income tax purposes and that, as such, all income,
deductions and credits of the Trust Fund belong to the Corporation and
shall be included in the Corporation's income tax returns. However,
except as necessary to satisfy the obligation upon a distribution to
withhold taxes and to pay over such withheld amounts to the
appropriate taxing authorities, neither the Corporation nor the Trust
shall have any obligation or liability for the payment of any income,
estate, gift, or employment taxes payable by a Participant, or the
estate of a Participant, with respect to Benefits or a sub- account
maintained with respect to such benefits.
9.2 Nothing contained in this Trust Agreement shall modify, or be
interpreted or construed to modify, the terms of any of the Plans.
9.3 This Trust is created and accepted in the State of North Carolina; and
all questions pertaining to the validity or construction of this Trust
Agreement and the acts and transactions of the parties hereto and
their respective successors shall be determined in accordance with the
laws of such state, except as to matters governed by federal law.
9.4 Nothing contained in this Trust Agreement shall create, or be
construed or interpreted to create, any new or additional obligations
on the part of the Corporation to retain any person in its employ or
interfere in any way with the right of the Corporation to discharge
any employee.
9.5 After a Change in Control, any dispute between a Participant and or
the Corporation and the Trustee with respect to the interpretation or
application of the provisions of this Trust Agreement regarding
amounts payable from the Trust under a Plan shall be determined
exclusively by binding arbitration in the city in which the principal
office of the Trustee is located in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court of competent
jurisdiction. All fees and expenses of such arbitration shall be paid
by the Corporation and in the event that the Corporation refuses to so
pay, the Trustee shall pay such fees and expenses as an expense of the
Trust.
9.6 If any Participant to whom a benefit is payable under a Plan is unable
to care for his affairs because of illness or accident, any payment
due from the Trust (unless prior claims therefore shall have been made
by a duly qualified guardian or other legal representative) may be
paid to the spouse, parent, adult child, brother, or
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<PAGE> 16
sister of the Participant, or any other individual in
accordance with the terms of such Plan.
9.7 In the event that any provision of this Trust Agreement be determined
by a court of competent jurisdiction to be unlawful or unenforceable,
such determination shall not adversely affect the remaining provisions
of this Trust Agreement, or the application of the remaining
provisions, unless it shall make impossible the maintenance or
operation of the Trust for its intended purposes. To the extent any
provision of this Trust Agreement is determined to be unlawful or
unenforceable, this Trust Agreement shall be construed to be carried
out to the fullest extent possible in a lawful and enforceable manner.
9.8 Corporation contributions to the Trust shall not constitute, or be
deemed to be, salary or wages due Participants.
9.9 No contributions to the Trust Fund, and no Separate Account or
sub-account under the Trust Fund, shall be subject, in any manner, to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge by, or with respect to, a Participant, and any
attempt to do so shall be void; nor shall any such contributions,
Separate Account, or sub-account be, in any manner, liable for or
subject to the debts, contracts, liabilities, engagements or torts of
any Participant.
9.10 This Trust Agreement may be executed in any number of counterparts,
each of which shall be considered an original; and said counterparts
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Corporation and the Trustee have entered into this
Trust Agreement as of the date first above written.
BORDEN, INC. ("Corporation")
<TABLE>
<S> <C>
By S/S Allan L. Miller Title: Senior V.P. - Chief Administrative Officer
---------------------------- -------------------------------------------
And S/S James A. King Title: Asst. General Counsel
--------------------------- -------------------------
WACHOVIA BANK OF NORTH CAROLINA, N.A. ("Trustee")
By S/S Joe O. Long Title: Senior Vice President
------------------------- -------------------------
And Title:
----------------------------- -------------------------
</TABLE>
SBTA93
16
<PAGE> 17
EXHIBIT A
Plans Covered: (Reference Section 1.2)
1. Borden, Inc. Executives Excess Benefits Plan. All benefits
under the Plan.
2. Borden, Inc. Executives Supplemental Pension Plan. All
benefits under the Plan.
3. Borden, Inc. Executive Family Survivor Protection Plan. All
benefits under the Plan.
4. Borden, Inc. 1989 Management Incentive Plan*
5. Borden, Inc. 1984 Management Incentive Plan*
6. Borden, Inc. Profit Center Management Incentive Plan*
7. Borden, Inc. Corporate Staff Incentive Plan*
8. Written contractual agreements entered into at the time of
hire of senior executies to supplement either pension or
saving plan benefits beyond that provided for in the Borden,
Inc. Executives Excess Benefits Plan or the Borden, Inc.
Executives Supplemental Pension Plan.
*Numbers 4 through 7 above only to the extent of awards granted and
deferred in the form of phantom shares or actual shares of Borden,
Inc.
<PAGE> 18
EXHIBIT B
1. The Plans of the Corporation that shall constitute Exhibit B Plans are
as follows:
Borden, Inc. 1989 Management Incentive Plan,
Borden, Inc. 1984 Management Incentive Plan,
Borden, Inc. Profit Center Management Incentive Plan,
Borden, Inc. Corporate Staff Incentive Plan, and
Borden, Inc. Executive Supplemental Pension Plan, but only to
the extent that shares of common stock of the Corporation are
to be provided as Supplementary Company contributions under
Section 3.2(a) of the Plan.
2. Notwithstanding any language in Article VIII to the contrary, any
stock of the Corporation held as a Trust Asset for the purpose of
funding distributions under one or more Exhibit B Plans shall, as of
the date such distribution is to be made to a Participant under said
Plan and from thence forward, be held for the sole benefit of the
Participant, legal and equitable title to such stock shall pass to the
Participant and such stock shall not be subject to the claims of any
creditor of the Company, unless (i) the events described in Sections
8.1 or 8.2 of the Trust Agreement shall have occurred prior to the
date of the proposed distributions, and (ii) the Corporation's
Insolvency or the Trustee's determination of the Corporation's status
(as the case may be) shall be continuing as of the date of the
proposed distribution; provided, however, that any such distributions
shall be subject to reduction by the amount of income tax withholding
required by law. Promptly after such date the Trustee shall
distribute such stock to the Participant, reduced as heretofore
provided for income tax withholding, or, if the Participant directs,
dispose of such stock in accordance with the provisions of Paragraph 4
of this Exhibit B.
3. Notwithstanding any language to the contrary in Section 5.1, 5.4, or
5.5 of the Trust Agreement or the instructions of any investment
manager appointed pursuant to Section 5.1 of the Trust Agreement, the
Trustee shall not be permitted to sell, transfer, mortgage, pledge,
lease or otherwise dispose of, or grant options with respect to, any
stock of the Corporation held as a Trust Asset for the purpose of
funding distributions under one or more Exhibit B Plans, except as
provided in Paragraph 4 of this Exhibit B.
<PAGE> 19
4. Subject to the terms of the applicable Exhibit B Plan, the Trustee, if
directed by the Participant, shall be permitted to sell, transfer, or
otherwise dispose of the stock to which reference is made in
Paragraphs 2 and 3 of this Exhibit B only on and after the date such
stock would otherwise be distributed to a Participant. If the Trustee
disposes of such stock, the proceeds of such sale, reduced by the
amount of income tax withholding required by law, shall be promptly
distributed to the Participant.
- 2 -
<PAGE> 20
EXHIBIT C
Plans Covered: (Reference Section 1.2)
9. Borden, Inc. Total Family Protection Plan, but only to the extent of
providing future medical and life benefits for any retiree of the
Corporation and his or her beneficiaries and for any employee (and his
or her beneficiaries) eligible to retire on the date of the Change In
Control and only to the extent such benefits are not already funded
under the Borden, Inc. Employees Retirement Income Plan.
10. Employment Contracts and arrangements of Borden, Inc. (hereinafter,
"Employment Contracts") as follows:
- The Core Management Arrangements dated March 15, 1988 or
later for Core Management members appointed after that
date.
- The agreement of June 22, 1993 with A. S. D'Amato.
- The agreement of June 24, 1993 with Ervin R. Shames.
11. The Borden, Inc. 1984 Stock Option Plan, as Amended*
12. The Borden, Inc. 1994 Stock Option Plan, as Amended*
*Numbers 11 and 12 above only to the extent of providing funding for
Stock Appreciation Rights outstanding as of a Change in Control.
<PAGE> 21
EXHIBIT D
Funding Guidelines: (Reference Section 3.4)
1. Borden, Inc. Executives Excess Benefits Plan
a. With regard to Excess Benefits as defined in Section 3.1, the
following actuarial assumptions:
(i) The 1996 GAM Mortality Table (1983 GAM Mortality
Table projected to 1996 with Scale H), blended 80%
males, 20% females, and
(ii) An interest rate, compounded monthly, equal to the
yield of the most recently issued 30-year maturity
U.S. Treasury issue as of the business day on which
the valuation is performed as published in the
Midwest edition of the WALL STREET JOURNAL, if the
valuation is not performed on a business day, the
immediately preceding business day yield shall be
used.
(iii) Commencement of benefits at the earliest permissible
date as set forth in the Plan or, if later, the date
as of which the valuation is performed.
b. With regard to Excess Contributions as defined in Section 3.2,
the assumption that the Excess Contributions Account is
payable in a lump sum on the date as of which the valuation is
performed.
2. Borden, Inc. Executives Supplemental Pension Plan
a. With regard to Deferred Compensation as defined in Sections
1.9 and 3.2(b), the assumption that the Participant Deferred
Account is payable on the date as of which the valuation is
performed.
b. With regard to Supplemental Benefits as defined in Section 3.1
and Special Supplemental Benefits described in Appendix A and
Appendix B, paragraph 1, the following actuarial assumptions:
(i) The 1996 GAM Mortality Table (1983 GAM Mortality
Table projected to 1996 with Scale H), blended 80%
males, 20% females, and
<PAGE> 22
(ii) An interest rate, compounded monthly, equal to the
yield of the most recently issued 30-year maturity
U.S. Treasury issue as of the business day on which
the valuation is performed as published in the
Midwest edition of the WALL STREET JOURNAL, if the
valuation is not performed on a business day, the
immediately preceding business day yield shall be
used, and
(iii) Commencement of benefits at the earliest permissible
date as set forth in the Plan or, if later, the date
as of which the valuation is performed.
c. With regard to Supplemental Company Contributions as defined
in Section 3.2(a), the assumption that the Supplemental
Company Contributions Account is payable in a lump sum on the
date as of which the valuation is performed.
3. Borden, Inc. Executive Family Survivor Protection Plan
a. With regard to Lump Sum Benefits as defined in Sections 3.1(a)
and 3.2(a), the following actuarial assumptions:
(i) The 1996 GAM Mortality Table (1983 GAM Mortality
Table projected to 1996 with Scale H), blended 80%
males, 20% females, and
(ii) An interest rate, compounded monthly, equal to the
yield of the most recently issued 30-year maturity
U.S. Treasury issue as of the business day on which
the valuation is performed as published in the
Midwest edition of the WALL STREET JOURNAL, if the
valuation is not performed on a business day, the
immediately preceding business day yield shall be
used.
b. With regard to Monthly Benefits as defined in Sections 3.1(b)
and 3.2(b), the following actuarial assumptions:
(i) The 1996 GAM Mortality Table (1983 GAM Mortality
Table projected to 1996 with Scale H), blended 80%
males, 20% females, and
(ii) An interest rate, compounded monthly, equal to the
yield of the most recently issued 30-year maturity
U.S. Treasury issue as of the business day on which
the valuation is performed as published in the
Midwest edition of the WALL STREET JOURNAL, if the
valuation is not performed on a business day, the
immediately preceding business
- 2 -
<PAGE> 23
day yield shall be used,
(iii) No re-marriage assumption,
(iv) Where marital status is unavailable, an assumption
that medical coverage for more than only the employee
implies that the employee is married, and that no
medical coverage or medical coverage for the employee
only implies that the employee is unmarried, and
(v) Where the employee is, or is assumed to be, married
and spouse's birth date is unavailable, an assumption
that the male of a couple is three years older than
the female of the couple.
c. With regard to Disability Benefits as defined in Section 3.3,
(i) An interest rate, compounded monthly, equal to the
yield of the most recently issued 30-year maturity
U.S. Treasury issue as of the business day on which
the valuation is performed as published in the
Midwest edition of the WALL STREET JOURNAL, if the
valuation is not performed on a business day, the
immediately preceding business day yield shall be
used, and
(ii) Rates of recovery and death according to the 1964
Commissioner's Disability Table, adjusted for the
first year after disability based on recent
experience of large insurance companies as reported
in the Transactions of the Society of Actuaries.
d. With regard to the Survivor Accumulation Account as defined in
Section 3.4, the assumption that the Survivor Accumulation
Account is payable in a lump sum on the date as of which the
valuation is performed.
e. With regard to the Medical Accumulation Account as defined in
Section 3.4, the assumption that the Medical Accumulation
Account is payable in a lump sum on the date as of which the
valuation is performed.
4.-7. Incentive Plans listed in Exhibit A. The number of Borden, Inc.
shares of common stock equal to the number of shares equivalents or
actual shares deferred and previously granted plus, where the deferral
provides for accumulation, accumulated dividends since grant.
- 3 -
<PAGE> 24
8. Supplements to pension or saving plan benefits. The assumptions for
pension and savings plan benefits are those contained above in Section
2(b) and 2(c) respectively.
9. Borden, Inc. Total Family Protection Plan
a. With regard to Life Insurance benefits,
(i) The 1996 GAM Mortality Table (1983 GAM Mortality
Table projected to 1996 with Scale H), blended 80%
males, 20% females, and
(ii) An interest rate, compounded monthly, equal to the
yield of the most recently issued 30-year maturity
U.S. Treasury issue of the business day on which the
valuation is performed as published in the Midwest
edition of the WALL STREET JOURNAL, if the valuation
is not performed on a business day, the immediately
preceding business day yield shall be used,
b. With regard to Medical benefits,
(i) The 1996 GAM Mortality Table (1983 GAM Mortality
Table projected to 1996 with Scale H), blended 80%
males, 20% females, and
(ii) An interest rate, compounded monthly, equal to the
yield of the most recently issued 30-year maturity
U.S. Treasury issue as of the business day on which
the valuation is performed as published in the
Midwest edition of the WALL STREET JOURNAL, if the
valuation is not performed on a business day, the
immediately preceding business day yield shall be
used.
(iii) Current costs based on the prior two calendar years'
actual claim experience,
(iv) An annualized medical care trend rate of 2% in excess
of the interest rate assumption and
(v) Where coverage is for more than only the employee and
spouse's birth date is unavailable, an assumption
that the male of a couple is three years older than
the female of the couple.
- 4 -
<PAGE> 25
10. Employment Contracts. In respect of persons who are parties to or
beneficiaries under each Employment Contract (as defined in Exhibit
C), the sum of the following amounts:
a. Three Year Salary and Bonus. The sum of thirty-six times the
sum of the highest monthly base salary paid to each Core
member since the inception date of their Core Arrangement,
plus three times the sum of the higher of the standard annual
bonus or the last annual bonus awarded for the year prior to
the Change in Control for each individual in the Core
Management Group, plus three times the sum of the higher of
the standard LTPIP allocation or the last LTPIP award for the
year prior to the Change in Control for each individual in the
Core Management Group.
b. Benefits and Perquisites. Seventy percent (70%) of the base
annual salary referred to in paragraph a. above.
c. Excise Tax. The sum of a. through b. above multiplied by
twenty percent (20%).
d. Enforcement Fund. The sum of one-half the current base annual
salary for all Core Management Group members as of the date of
the Change in Control.
11.&12. Stock Option Plans listed in Exhibit C. The sum of
the Market Price less the option price but not less than zero
of Borden, Inc. common shares for each outstanding option SAR
grant multiplied by the number of option SAR's outstanding in
each such grant. "Market Price" to be the average of the high
and low trade reported on the consolidated network on the
Friday after the Change in Control.
EFSPP12.93
- 5 -
<PAGE> 1
Exhibit 10(xiv)(c)
SUPPLEMENT TO EMPLOYMENT AGREEMENT
----------------------------------
This SUPPLEMENT TO EMPLOYMENT AGREEMENT (this "Sup-
plement") is made and entered into as of the 9th day of Decem-
ber, 1993 (the "Effective Date") by and between Borden, Inc.
(the "Corporation"), a New Jersey corporation, and Anthony S.
D'Amato ("Executive").
WHEREAS, Executive and the Corporation entered into
an Employment Agreement dated as of December 3, 1990, as
amended as of September 24, 1991 and further amended as of June
22, 1993, and as supplemented by the letter agreement dated
September 30, 1993 (as amended and supplemented, the "Employ-
ment Agreement"); and
WHEREAS, the Board of Directors of the Corporation
has determined to terminate the Executive's employment without
cause as of the Effective Date, and the parties desire to sup-
plement the terms and conditions of the Employment Agreement
relating to the cessation of Executive's employment by the Cor-
poration and to deal with related matters in this Supplement;
NOW, THEREFORE, in consideration of the mutual cov-
enants set forth below and other good and valuable consider-
ation, the receipt and sufficiency of which are hereby mutually
acknowledged, the parties hereto represent, warrant, covenant
and agree as follows:
1. Executive and the Corporation confirm that as of
the Effective Date, notwithstanding any public statements to
the contrary or any resignations executed by the Executive,
Executive's employment by the Corporation and each of its sub-
sidiaries including, without limitation, as Chairman, Chief
Executive Officer and Director of the Corporation has been ter-
minated by the Corporation without Cause and that such termina-
tion of employment is a "Termination" as defined in paragraph
5.03(a) of the Employment Agreement.
2. The Corporation shall pay all of the base salary
accrued to the Executive but unpaid through the Effective Date
on or before December 20, 1993, and shall, in accordance with
its existing policies, reimburse Executive for all expenses
incurred by him prior to the Effective Date promptly after sub-
mission thereof.
3. The payments made pursuant to Section
3.01(h)(i)(A) of the Employment Agreement shall be paid on the
first day of each month, in advance; provided that the payment
for the period from December 10, 1993 through December 31, 1993
<PAGE> 2
shall be made on or before December 20, 1993, to the extent not
previously paid.
4. To the extent that the Executive is called upon
to satisfy his obligations to the Corporation pursuant to Sec-
tion 3.01(b)(ii) of ths Employment Agreement, the Corporation
shall pay all expenses incurred by the Executive in connection
therewith including, but not limited to, transportation, meals,
lodging and legal fees and expenses.
5. In the event of a Change of Control prior to the
Terminal Date, the Corporation shall make s lump sum payment to
the Executive, or in the event of his death, his legal repre-
sentative, equal to the amounts payable but not yet paid pursu-
ant to Section 3.01(b)(i)(A); provided that for purposes of
determining the Executive's benefits under any benefit plans of
the Corporation, the Executive's compensation for the year of
the Change of Control and any relevant year thereafter shall be
deemed to be $900,000.
B. Section 3.01(b)(i) of the Employment Agreement
shall be amended by deleting the following text:
"mitigated by deducting any compensation and
pension benefits that the Executive may earn during
the same period for personal services to others, and
. . . and further offset by
(II) 50% of social security benefits payable to
or on behalf of the Executive for the period in which
he or his legal repressntatives are receiving such
payments,
Provided, however, that in no event shall the Execu-
tive (or his survivor) receive any pension service
credit for any period aftsr the death of the Execu-
tive. The foregoing offsets shall be calculated and
determined by the Corporation's actuaries and compen-
sation counsel."
Section 3.01(b)(i) is further amended by adding
the following tsxt at the end thsreof:
"Notwithstanding the foregoing, if there is a prepay-
ment or an accelerated payment of an accrued benefit relating
to the Executive's physical or mental incapacity that would
have been paid at a later date, such amount shall not be offset
hereunder."
-2-
<PAGE> 3
7. Sections 3.01(c) and (d) shall be deleted in
their entirety.
8. The Executive shall have no duty to mitigate dam-
ages to the Corporation as a result of this termination not to
make any effort to seek other employment. Accordingly, Section
6 of the Employment Agreement shall be deleted in its entirety.
9. The entire unvested portion of any and all stock
options or restricted stock held by the Executive shall immedi-
ately become fully vested and exercisable. Each such option
shall be exercisable until ths earlier of (i) October 31, 2o02
or (ii) the expiration of the option in accordance with its
terms.
10. In consideration for the Executive's waiver of
certain rights under the Employment Agreement, on or before
December 20, 1993, the Corporation shall pay Executive
$757,000. This amount shall not constitute pensionable income
nor shall it be taken into account in determining amounts pay-
able to the Executive under the Corporation's benefit plans.
11. The Corporation shall promptly pay or reimburse
Executive for all legal and other reasonable fess and consult-
ing expenses incurred by him in connection with the preparation
and negotiation of this Supplement.
12. Section 8 of the Employment Agreement shall be
amended by changing the notice address for the Executive as
follows:
To the Executive: Anthony S. D'Amato
250 Beacon Street
Boston, MA 02116
With a copy to: Kenneth J. Novack, Esq.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
13. The Corporation intends to provide Executive
with continuing benefits through the Terminal Date consistent
with Executive's long service to the Corporation, including his
service as its Chairman and Chief Executive Officer. Accord-
ingly, without limiting the generality of the foregoing, the
corporation shall provide Executive with ths following benefits
through October 31, 1997, or such earlier date specified below:
-3-
<PAGE> 4
(a) Corporation-paid annual physical examinations.
(b) Up to $15,000 per year for financial, tax and
estate planning and counseling.
(c) $15,000 per year will be ressrved from the
Borden Foundation budget for Executive to designate grant re-
cipients. Notwithstanding Executive's designation of grant
recipients, the funds of the Borden Foundation will continue to
be administered in accordance with regular Foundation guide-
lines.
(d) The Corporation will continue for Executive the
matching benefit program available to current active directors
for their own gifts to higher education or health institutions.
(e) Until February 28, 1994 the Corporation shall
permit Executive to continue to use his office located in North
Andover, Massachusetts. Thereafter, for two years after the
Effective Date, the corporation will pay for an office in a
location designated by Executive and secretarial support at an
expense not to exceed $30,000 per annum.
(f) The Corporation shall pay the dues and expenses
(but not initiation fees) for the membership in and use of one
country club and one luncheon club of the Executive's choice.
(g) Liability and umbrella insurance benefits compa-
rable to that provided to activs senior executives of the Cor-
poration, at the Corporation's expense.
14. Executive shall continue to have the exclusive
use of the apartments he currently uses in New York until the
earlier of the end of the lease term or August 31, 1994, and
Columbus through March 31, 1994. The Executive may, prior to
August 31, 1994, at his option acquire at book value any furni-
ture and furnishings locatsd in any of the Corporation's apart-
ments or offices used by the Executive immediatley prior to the
Effective Date. The Executive may at his option acquire, at a
price consistent with the Corporation's past practice for ter-
minated exscutives, ownership of the 1992 Cadillac Seville Ex-
ecutive is currently using in Columbus and the 1990 Buick Ex-
ecutive is currently using in North Andover. Until October 31,
1997, the Corporation shall provide Executive with a car and
chauffeur whenever he, in the greater New York City metropoli-
tan area, is engaged in business, public or educational activi-
ties on behalf of, or related to, the Corporation.
The Corporation shall pay all reasonable expenses
incurred by Executive in connection with Executive's removing
-4-
<PAGE> 5
his personal effscts from the Corporation offices and apart-
ments in New York and Columbus, including Executive's travel
expenses related thereto.
15. The Corporation has no present intention of
modifying so as to reduce the entitlement of Executive to in-
demnification under its By-Laws and, if it should do so, no
such modification shall rssult in Executive's entitlement to
indemnification being on terms and conditions which differ from
the entitlement to indemnification of other persons who were
directors and officsrs as of ths Effective Date. For three
years following the Effective Date, the Corporation shall main-
tain in effect for the benefit of the Executive, Directors and
Officers Liability Insurance with respect to matters occurring
prior to the Effective Date no less favorable than for other
directors and officers of the Corporation who held office im-
mediately prior to the Effective Date.
16. All capitalized terms used but not defined
hersin shall have the meanings givsn in the Employment Agres-
ment. Except as modified hereby, the Employment Agreement
shall continue in full force and effect; provided, however,
that if the terms of the Employment Agreement and this supple-
ment conflict, the terms of this Supplement shall govern.
17. The parties agree to take all action reasonably
necessary to effectuate the intent of this Supplement.
18. The Corporation represents that the execution
and delivery of this Supplement has been duly authorized by the
Corporation's Board of Directors, or an authorized committee
thereof, and constitutes its legal, valid and binding obliga-
tion, enforceable against it in accordance with its terms.
19. This Supplement may be executed in counterparts.
-5-
<PAGE> 6
IN WITNESS WHEREOF the parties hereto have executed
this Supplement as of the day and year first above written.
CORPORATION:
BORDEN, INC.
BY:__________________________
EXECUTIVE:
_____________________________
Anthony S. D'Amato
-6-
<PAGE> 1
Exhibit 10 (xiv)(e)
Description of Amended Employment Agreement with E.R. Shames
- -------------------------------------------------------------
The Employment Agreement with Mr. Shames, as amended, provides for a base
salary of $800,000; a guaranteed annual incentive for 1993 of $200,000; 30,000
shares of restricted stock, one quarter of which vest each year over the next
four years, beginning July 1, 1994; a 200,000 share option grant in 1993 at
$17.75 per share; and an option for 150,000 shares at $14.50 per share
consisting of a 100,000 share option originally promised for 1994 and
accelerating to 1994 a 50,000 share option originally promised for 1995. In
addition, the agreement provides for grants on July 1, 1994 and January 2, 1995,
at market prices on those dates, of performance vesting options on 250,000
shares each grant, which can be exercised only after one year from the date of
grant and only after an average stock price of $21.50 and $25.00 respectively is
maintained for 20 consecutive trading days. The restricted stock and option
grants are contingent upon shareholder approval of the 1994 Stock Option Plan
and, in the event such Plan is not approved by shareholders, the agreement
provides Mr. Shames with the economic equivalent of stock awards, other than the
performance vesting options. The agreement further provides that, if Mr. Shames
purchases stock at any one time prior to February 22, 1995, he shall receive
options to purchase two-times the number of shares purchased at the purchase
price, up to a maximum of 100,000 option shares. Finally, the agreement
provides a supplemental pension benefit beginning at age 65 of $100,000
annually, continuing for the number of years of completed service, and for
payment, upon termination by the Company other than for cause, of a minimum
annual compensation of $950,000 for three years following such termination.
<PAGE> 1
Exhibit 10 (xiv)(g)
Description of Amendment to Agreement with R.J. Ventres
- -------------------------------------------------------
The Agreement with Mr. R. J. Ventres, former Chairman and CEO, which is
filed with the Company's 1991 Form 10-K Annual Report, was amended on December
22, 1993 to provide that the annual compensation provided for in the Agreement
would cease as of the end of April, 1994.
EX10XVII.EGB
<PAGE> 1
Exhibit 10(xiv)(i)
February 25, 1993
Jon G. Hettinger
Borden, Inc.
180 East Broad Street
Columbus, Ohio
Dear Jon:
This letter will confirm our discussions concerning your decision
to resign your positions with the Company, by mutual agreement. It
will also serve to cover various related matters so there will be
no future confusion regarding them.
1. The time between now and May 31, 1993, will serve as a notice
period during which you will either take vacation or perform
special assignments as requested. Commencing June 1, 1993,
through May 31, 1994, you will be an employee on limited
service, but will accrue no vacation rights during that
period. During this notice and limited service period, you
will receive your regular salary of $15,416.67 semi-monthly
(less normal deductions). Should you, prior to June 1, 1994,
accept other employment or embark upon a business venture as
a principal, your employment status with the Company will
cease at that time but, subject to your obligations under
paragraph 13 below, the payments under this paragraph 1 shall
continue.
In the event that by June 1, 1994, you have not secured other
employment or embarked upon a business venture as a principal,
your salary and status as a limited employee will be continued
until the earlier of (a) your commencement of employment; (b)
your commencement of a business venture as a principal; or (c)
September 1, 1994.
2. Effective immediately, you will resign your position as an
officer and Executive Vice president of Borden, Inc. by
signing the attached resignation letter.
<PAGE> 2
2
Jon G. Mettinger
February 25, 1993
3. You understand that you will not participate in the annual
Management Incentive plan, the 1992-94 long-term cycle or the
1993-1995 cycle. However, the stock options which you now
hold will continue to be in effect until the date payments
cease under paragraph 1 above, or until such earlier time as
you are employed by another company.
4. The Company will extend your Core benefits until August 31,
1993, i.e., country club dues and luncheon club dues (but not
expenses for non-Borden related items), and financial
counseling and home/auto insurance reimbursement. Your
parking privileges, medical accumulation and survivor income
capital account will continue through May 31, 1993. Your
umbrella insurance benefit will continue through December 31,
1993. You will assume responsibility for your car phone
expenses at the beginning of its next billing cycle.
5. Your other regular employee benefits (medical, life, pension
and savings plan) will continue until the earlier of the date
payments cease under paragraph 1 above , or the date on which
you commence other employment or commence a business venture
as a principal. However, you will not be eligible for salary
continuance, long-term or short-term disability after May 31,
1993.
6. As special consideration to assist you in locating a new
position, and to defray the expenses you will incur for
office, telephone and secretarial assistance, the Company will
pay you a lump sum amount of $12,000, as soon as practicable.
In addition, you will be permitted $10,000 for personal travel
expenses or outplacement counseling in connection with a job
search. Requests for reimbursement for these latter items
should be submitted on a regular expense form with
accompanying receipts.
You presently have Company computer equipment in your home.
If the present value of that equipment is less than $4,000,
you will retain it. If the value exceeds $4,000, the Company
will provide you with computer equipment up to that value.
You will promptly return to the Company all of its books,
records, files, equipment or other property now in your
possession.
<PAGE> 3
Jon G. Hettinger 3
February 25, 1993
7. You will transfer to the Company the equity in your golf
memberships at the Muirfield Golf Club and the New Albany
Country Club as soon as practicable, but no later than August
31, 1993. You will transfer the equity in your membership in
The Golf Club as of October 1, 1994, or, if you prefer, pay to
the Company its value as of that time.
8. In the event you decide to embark upon a business venture as
a principal, the Company will, upon your request, pay all of
the monies due you under paragraph 1 above, less $100,000, in
a lump sum. The balance of $100,000 will be paid to you on
May 31, 1994, or earlier if mutually agreed.
9. Under the Management Incentive Plan, you may have elected to
defer incentive awards. Deferred awards under the Plan, if
any, will be paid to you consistent with the provisions of the
Plan upon the completion of your limited service.
10. You acknowledge executing a Security and Invention Agreement
on May 2, 1973 (copy attached), and you agree to comply with
the terms and conditions of that Agreement
11. Because of the unusual arrangement being provided to you, we
will expect and you agree, that you will conduct yourself in
a manner which does not disparage Borden, Inc., its employees,
officers, subsidiaries, and affiliates, and which is not
contrary to the best interest of these organizations. The
Company, through its Core Management and officers, will not
disparage you. This obligation will not be construed to
prohibit the Company from making truthful statements about its
business; nor shall it prohibit you from making truthful
statements responsive to any statements made by the Company.
12. You agree to be available, as reasonably necessary and upon
reasonable notice, with no expense to yourself (expenses
include transportation, meals and lodging) for legal
proceedings, whether administrative, civil, or criminal, if
any, which are already pending or which may arise in the
future with respect to events which occurred during your
employment with Borden, Inc. You further agree to assist and
cooperate with Borden, Inc. in any such proceedings.
<PAGE> 4
4
Jon G. Hettinger
February 25, 1993
13. As a former Executive Vice President and officer of Borden,
Inc., your knowledge of our customers, markets and plans in
all facets of the business is extensive and a valuable asset.
Accordingly, you agree that until August 31, 1994, you Will
not engage, without prior written consent of the Chief
Executive Officer (not to be unreasonably withheld), directly
or indirectly on your own account, or as agent, employee,
partner, major stockholder or otherwise, in any of the
following activities with respect to any product or service
sold by Borden, Inc., its subsidiaries or affiliates
(hereinafter "the Company") in any unit in which you were
employed or for which you had any responsibility during the
past two (2) years, or any product or service similar to,
competitive with, or intended to compete with any product or
service:
a) Sell, manufacture, distribute or solicit
orders for any such product or service in any
geographical area for which you were
responsible as a representative of the Company
at any time during the two (2) years preceding
this agreement or engage in any such
activities in any other area where they result
in or involve the shipment or delivery of such
product to, or performance of such service in,
any geographical area in which you acted as an
employee of the Company at any time during
such two (2) year period.
b) In any geographical area, solicit, sell or
contact with a view to selling, any such
product or service, any person, firm or
corporation from whom you solicited any order
directly or indirectly or otherwise dealt with
on behalf of the Company at any time during
the two (2) year period set forth above.
14. This agreement is personal and not assignable by you. In the
event of your death during the term hereof, this agreement
shall terminate as of the last day of the month during which
your death occurred and your designated beneficiary, which may
be a trust, or if none is so designated, your estate will be
paid all monies due up through the month of your death, and,
in addition, the balance of any of the pay due as noted in
paragraph 1 above. If that death occurs while you are still
in an "employee" staus, your widow would be entitled to the
benefits applicable to widows under the benefit plans in which
you are participating at the time of your death.
<PAGE> 5
Jon G. Hettinger 5
February 25, 1993
15. In the event of a material breach of your obligation not to
compete under this agreement you understand and agree to pay
to Borden, Inc., any monies received under this agreement up
to $400,000, and acknowledge that no further sums would be due
hereunder. This remedy is in addition to any remedy Borden,
Inc. has to specifically enforce your agreement and is not to
be construed as a limitation on its right to recover any
greater amount of damage Borden can prove.
16. We agree that this agreement and its attachments supersedes
any and all other agreements relating to your employment with
the Company including, but not limited to, your Core
Arrangement, Team Agreement and Supplemental Benefits
Agreement. This agreement shall be governed by the laws of
the State of Ohio and shall inure to the benefit of the
successors and assigns of Borden, Inc. Any provision of the
agreement deemed by a court to be too broad to be legally
enforced shall be modified but only to the extent required to
be so legally enforceable.
17. In consideration of these foregoing benefits provided to you,
you hereby release and discharge Borden, Inc., its
subsidiaries and affiliates, their officers, employees and
agents from any and all current liabilities, claims for money,
employment, re-employment, reinstatement and for any and all
causes of action whatsoever which you may now have against
them including those arising out of your employment, the
termination thereof, or discrimination based on age,
disability, race, sex or other reasons, except any vested
pension rights which you may have acquired or as specifically
noted herein; provided, however, that this release shall not
be construed to prevent you from pursuing any rights you may
have under the terms of any employee benefit plan to which you
are a party and under ERISA; any rights you have to COBRA
benefits; any rights you have to unemployment compensation;
and any rights you have to enforce the terms of this letter.
18. You affirm that you are entering into this agreement and
release voluntarily in order to receive payments and other
benefits described above. You understand that the Company
would not make these payments or extend these benefits to you
without your voluntary consent to this agreement.
19. In making your decision, you recognize that you have the right
to seek advice and counsel from others, including that of an
attorney if you so choose. You acknowledge that you have 21
days within which to consider this offer.
<PAGE> 6
6
Jon G. Hettinger
February 25, 1993
20. You have seven calendar days from the date you sign this
Agreement to cancel it in writing. You also understand that
this Agreement will not bind you or the Company until after
the seven-day period you have to cancel. No payments will be
made under this Agreement until it becomes binding. You maY
cancsl this Agreement by signing the cancellation notice below
(or by any other written signed notice) and delivering it to
Borden, Inc. within seven days of your signing this Agreement.
I believe that this completely and accurately describes our
understanding and ask that you indicate your agreement by signing
the original of this letter and returning it to me. I wish you
every success in your future endeavors.
For: Borden, Inc.
By: ______________________
A. S. D'Amato
Attachment
READ, UNDERSTOOD AND AGREED:
___________________________ ________________
Jon G. Hettinger DATE
CANCELLATION NOTICE
(To cancel this Agreement, sign below and
deliver this copy of the Agreement to the
Company within seven (7) days of the date
you signed the Agreement.)
I hereby cancel this Agreement.
____________ _______________________
(Date) (Signature).
<PAGE> 1
Exhibit 10(xiv)(j)
B O R D E N, I N C.
December 23, 1993
George J. Waydo
Borden, Inc.
180 East Broad Street
Columbus Ohio
Dear George:
This letter will confirm our mutual agreement concerning your
continued employment and future termination. It will also serve
to cover various related matters so there will be no future
confusion regarding them.
1. Effective immediately, you are relieved of your Snacks
and International Foods day-to-day responsibilities.
Your new title will be Vice President, Borden, Inc. In
this new position, which reports directly to the
President, Chief Executive Officer, your primary
responsibility will be to sell Borden Japan, and you
will diligently devote your efforts to this project.
You may also be assigned responsibility for other
International portfolio actions, or other special
assignments.
2. You will continue in these assignments through April
30, 1994. These assignments may, by mutual consent, be
extended. If no extension is made, your termination
date will be April 30, 1994. Your employment may not
be terminated prior to that date for any reason other
than for "cause" and your employment shall be deemed to
have been terminated for "cause" only if termination of
employment by the Company shall have taken place as a
direct result of an act or acts (i) of dishonesty
constituting a felony and resulting or intended to
result directly or indirectly in gain or personal
enrichment at the expense of the Company to which you
are not legally entitled, (ii) such as to cause
intentional material harm to the Company, (iii)
materially impairing the reputation of the Company,
(iv) materially interfering with the operations of the
Company, or (v) that materially breach this agreement.
<PAGE> 2
George J. Waydo
Page 2.
Anything in this paragraph 2 or elsewhere in this
agreement to the contrary notwithstanding, your
employment shall in no event be considered to have been
terminated by the Company for "cause" if termination of
your employment took place (i) as the result of bad
judgement or an act of ordinary negligence on your
part, (ii) because of an act or omission believed by
you in good faith to have been in or not opposed to the
interests of the Company, or (iii) because of an act or
omission in respect of which a determination could
properly be made that you met the applicable standard
of conduct prescribed for indemnification or
reimbursement or payment of expenses under (A) the by-
laws of the Company, (B) the laws of the State of New
Jersey, or (C) the directors' and officers' liability
insurance of the Company, in each case either as in
effect at the time of this agreement or in effect at
the time of such act or omission.
To aid you during this four-month assignment, and any
subsequent extension, you will have the assistance of
Ms. Judy Moehl and, the time of Mr. Michael Miller
necessary to work on the Japan project only. Mr.
Miller will otherwise report to Mr. Dan O'Riordan. If
either of these employees should transfer or terminate
during the four months or extended period, we will
provide comparable skilled assistance. You may
continue to use your present office during this period,
plus any authorized extension of employment.
3. Following termination, you will be paid all monies due you
from your Medical and Survivor Accumulation Accounts, and
your Executive Supplemental Pension Plan, in accordance with
those plans. To assist you in understanding this agreement
a schedule of your estimated benefit amounts is attached.
Parking privileges, will be extended 3 months following
termination. Reimbursement on any unpaid 1994 financial
counselling, regular club dues for the Columbus Athletic
Club and the Catawba Island Club, and home/auto insurance is
available to you through December 31, 1994. You agree to
then return these club memberships/sale receipts to Borden,
Inc. promptly after December 31, 1994. Your umbrella
insurance benefit will continue through December 31, 1994.
Borden, Inc. will provide you with notice and termination
pay totaling $352,000. Payments will be at the gross rate
of $14,667 semi-monthly for 12 months following termination.
Statutory taxes and deductions for any monies due Borden,
Inc. will be made from these payments.
<PAGE> 3
George J. Waydo
Page 3.
In the event you embark upon a business venture as a
principal, the Company will, upon your request, pay any
remaining monies due you under this paragraph 3 in a
lump sum less $50,000. The balance of $50,000 will be
paid to you on the last day of your severance period,
i.e. April 30, 1995 if your employment is not extended.
4. Effective immediately, you will resign your position as an
officer of Coco Lopez U.S.A., Inc.
5. You understand that you will not participate in the annual
Management Incentive Plan, the 1992-94 long-term cycle or
the 1993-95 cycle, unless your active employment is extended
through December 31, 1994.
6. Your other regular employee benefits (medical, life, pension
and savings plan) will cease on your termination date except
that, if you wish, Borden will extend your active
medical/dental coverage only, including prescription drugs,
for 12 months, at normal contributions. You would then be
eligible for COBRA for an additional six months. At that
time you would be eligible to convert to the conversion
policies then offered to terminating employees generally.
We are agreeable, as an option to this medical
extension which you must elect prior to your
termination date, to pay Metropolitan Life Insurance
Corporation up to $30,000 to convert you to a private
medical plan similar to Borden's, if such a conversion
plan is available upon your termination. In such
event, you would be responsible to make necessary
premium payments following the conversion. The
proposed policy provides that it will be renewed until
the earliest of: (a) the Medicare eligibility date of
you or your spouse whoever is younger; (b) that
person's 65th birthday; or (c) the date Metropolitan
refuses to renew this policy. Metropolitan cannot
refuse renewal on an individual basis. Metropolitan
can refuse renewal only on a class basis or on a
statewide basis. If Metropolitan refuses to renew your
policy, however, they will continue to pay benefits for
a total disability that started before the termination
date until the earliest of: (a) the end of the
disability, (b) the end of the calendar year, or (c)
the date the Maximum Aggregate Benefit ($1,000,000) is
incurred.
<PAGE> 4
George J. Waydo
Page 4.
In the event you become disabled while under your present
disability plans and prior to your termination date, any
monies paid you as Salary Continuance and Long-Term
Disability will be deducted from the notice and termination
pay described above.
7. As special consideration to assist you with travel expense
in locating a new position following termination, and to
defray the expenses you will incur for office, telephone and
secretarial assistance, the Company will reimburse you on an
accountable basis for job search costs. Requests for
reimbursement for these items should be submitted on a
regular expense form with accompanying receipts. As further
consideration to you, Borden, Inc. will provide additional
monies to you in the form of cash or benefits to include but
not be limited to such categories as career-testing,
training, relocation, outplacement firm assistance,
medical/dental payments, or additional notice pay. Where
required by law, statutory deductions will be made from
these monies. The total for these reimbursements, cash or
benefits under this paragraph 7 will not exceed $50,000 over
30 months from date of termination.
8. You have until your termination date to exercise eligible
stock options within the terms of the options.
9. Under the Management Incentive plan, you may have elected to
defer incentive awards. Deferred awards under the plan, if
any, will be paid to you consistent with the provisions of
the Plan.
10. You acknowledge executing a Security and Invention
Agreement, and you agree to comply with the terms and
conditions of that Agreement.
11. Because of the unusual arrangement being provided to you, we
will expect and you agree, that you will conduct yourself in
a manner which does not disparage Borden, Inc., its
employees, officers, subsidiaries, and affiliates, and which
is not contrary to the best interest of these organizations.
The Company, through its Core Management and officers, will
not disparage you. This obligation will not be construed to
prohibit the Company from making truthful statements about
its business; nor shall it prohibit you from making truthful
statements responsive to any statements made by the Company
or in response to legal process.
12. You agree to be available, as reasonably necessary and upon
reasonable notice, with no expense to yourself, for legal
proceedings, whether administrative, civil or criminal, if
any, which are already pending or which may arise in the
future with respect to events which occurred during your
employment with Borden, Inc. You further agree to assist
and cooperate with Borden, Inc. in any such proceedings.
<PAGE> 5
George J. Waydo
Page 5.
13. As a former Executive Vice President end officer of Borden,
Inc., your knowledge of our customers, markets and plans in
all facets of the business is extensive and a valuable
asset. Accordingly, you agree that for 12 months following
your termination, you will not engage, without prior written
consent of the Chief Executive Officer (not to be
unreasonably withheld), directly or indirectly on your own
account, or as agent, employee,partner, major stockholder or
otherwise, in any of the following activities with respect
to any product or service sold by Borden, Inc., its
subsidiaries or affiliates (hereinafter "the Company") in
any unit in which you were employed or for which you had
responsibility during the past two (2) years, or any product
or service similar to, competitive with, or intended to
compete with any product or service:
a) Sell, manufacture, distribute or solicit orders for any
such product or service in any geographical area for
which you were responsible as a representative of the
Company at any time during the two (2) years
preceding this agreement or engage in any
such activities in any other area where they
result in or involve the shipment or delivery
of such product to, or performance of any
service in, any geographical area in which
you acted as an employee of the Company at
any time during such two (2) year period.
b) In any geographical area, solicit, sell or contact,
with a view to selling any such product or service, any
person, firm or corporation from whom you solicited any
order directly or indirectly or otherwise dealt with on
behalf of the Company at any time during the two(2)
year period set forth above.
14. This agreement is personal and not assignable by you. In
the event of your death during the term hereof, this
agreement shall terminate as of the last day of the month
during which your death occurred and your designated
beneficiary (which may be a trust, or if none is so
designated, your estate) will be paid all monies due up
through the month of your death and, in addition, the
balance of any of the pay due as noted in paragraph 3 above.
If that death occurs while you are still in an "employee"
status, your widow would be entitled to the benefits
applicable to widows under the benefits plans in which you
are participating at the time of your death.
<PAGE> 6
George J. Waydo
Page 6.
15. In the event of a material breach of your obligation not to
compete under this agreement, you understand and agree to
pay to Borden, Inc., any monies received under this
agreement up to $400,000, and acknowledge that no further
sums would be due you hereunder. This remedy is in addition
to any remedy Borden, Inc. has to specifically enforce your
agreement and is not to be construed as a limitation on its
right to recover any greater amount of damage Borden can
prove.
16. We both agree that this agreement and its attachments
supersedes any and all other agreements relating to your
employment with the Company including, but not limited to,
your Core Arrangement (dated March 15, 1988), Team Agreement
and Supplemental Benefits Agreement. This agreement shall
be governed by the laws of the State of Ohio and shall inure
to the benefit of the successors and assigns of Borden, Inc.
Any provision of the agreement deemed by a court to be too
broad to be legally enforced shall be modified but only to
the extent required to be so legally enforceable. If during
your continued active employment any individual or group
acquires 15% of the Common Stock of the Company (excluding
for this purpose any acquisition of such Common Stock by the
Company) and such stock is held for 30 days, the CEO, solely
at his discretion, and based on your performance relative to
selling Borden Japan, may permit you to qualify for the
employment extension arrangement outlined in 2 (a) of your
cancelled Core Arrangement letter dated March 15, 1988.
17. In consideration of these foregoing benefits provided to
you, you hereby release and discharge Borden, Inc., its
subsidiaries and affiliates, their officers, employees and
agents from any and all current liabilities, claims for
money, employment, re-employment, reinstatement and for any
and all causes of action whatsoever which you may now have
against them including those arising out of your employment,
the termination thereof, or discrimination based on age,
disability, race, sex or other reasons, except any vested
pension rights which you may have acquired; provided,
however, that this release shall not be construed as
preventing you from pursuing any rights you have to enforce
the terms of this agreement.
18. You affirm that you are entering into this agreement and
release voluntarily in order to receive payments and other
benefits described above. You understand that the Company
would not make these payments or extend these benefits to
you without your voluntary consent to this agreement.
19. In making your decision, you recognize that you have the
right to seek advice and counsel from others, including that
of an attorney if you so choose. You acknowledge that you
have until January 28, 1994 to consider this offer.
<PAGE> 7
George J. Waydo
Page 7.
20. You have seven calendar days from the date you sign this
agreement to cancel it in writing. You also understand that
this agreement will not bind you or the Company until after
the seven-day period you have to cancel. No payments will
be made under this agreement until it becomes binding. You
may cancel this agreement by signing the cancellation notice
below (or by any other written signed notice) and delivering
it to Borden, Inc. within seven days of your signing this
agreement.
George, I believe this completely and accurately describes our
understanding and ask that you indicate your agreement by signing
the original of this agreement and returning it to me.
For Borden, Inc.
/S/ Allan L. Miller
By: ______________________________
Allan L. Miller
Attachment
READ, UNDERSTOOD AND AGREED:
/S/ George J. Waydo December 23, 1993
___________________________ __________________
George J. Waydo Date
CANCELLATION NOTICE
(To cancel this agreement, sign below and deliver this
copy of the agreement to the Company within seven (7)
days of the date you signed the agreement).
I HEREBY CANCEL THIS AGREEMENT.
______________________ _____________________
(DATE) (SIGNATURE)
<PAGE> 1
EXHIBIT 12
BORDEN, INC.
RATIO OF EARNINGS TO FIXED CHARGES
----------------------------------
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(LOSS) INCOME FROM CONTINUING
OPERATIONS $ (56.9) $ (38.7) $ 279.9 $ 291.5 $ (39.3)
INTEREST EXPENSE 125.1 116.6 167.0 155.5 128.8
INTEREST PORTION OF RENTS 22.0 21.5 22.2 20.9 19.7
TAXES ON INCOME (27.2) 14.2 151.3 168.8 76.0
MINORITY INTEREST IN INCOME
OF CONSOLIDATED SUBSIDIARIES 40.7 39.7 2.8 2.8 .8
UNDISTRIBUTED INCOME OF
EQUITY AFFILIATES (11.3) (8.7) (17.4) (12.4) (4.0)
AMORTIZATION OF CAPITALIZED
INTEREST 4.6 4.4 4.7 4.3 4.2
------- ------- ------- ------- -------
$ 97.0 $ 149.0 $ 610.5 $ 631.4 $ 186.2
======= ======= ======= ======= =======
GROSS INTEREST:
INTEREST EXPENSE $ 125.1 $ 116.6 $ 167.0 $ 155.5 $ 128.8
CAPITALIZED INTEREST 1.2 3.1 9.8 4.5 2.2
INTEREST PORTION OF RENTS 22.0 21.5 22.2 20.9 19.7
------- ------- ------- ------- -------
$ 148.3 $ 141.2 $ 199.0 $ 180.9 $ 150.7
======= ======= ======= ======= =======
RATIO OF EARNINGS TO FIXED
CHARGES * 1.1:1 3.1:1 3.5:1 1.2:1
======= ======= ======= ======= =======
<FN>
* For the year ended December 31, 1993, fixed charges exceeded earnings by
$51.3 million.
</TABLE>
<PAGE> 1
1993 FINANCIAL REVIEW
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
In December 1993 the Company recorded a pretax charge of $752.3 million to
provide for a business divestiture and restructuring program. The program
involves the divestment of North American snacks, seafood, jams and jellies,
and other businesses not specified for competitive reasons, for which a pretax
charge of $637.4 million, $490.0 million after tax, was recorded for estimated
losses on disposal. The businesses to be divested had 1993 net sales of $1.194
billion, or 17.8% of total 1993 sales. The program also involves an
organizational restructuring designed to achieve cost reductions for which a
pretax charge of $114.9 million was recorded. See the Restructuring Charges
section below for further discussion.
These actions were considered necessary as a result of continued declines
in operating results of the discontinued operations and the need to reduce the
Company's overhead in light of the downsizing.
The operating results for the businesses being divested and the estimated
losses on disposal have been segregated and reported net of tax as discontinued
operations for all three years presented in the Consolidated Statements of
Income.
The Company anticipates that the sale of these businesses will be
completed by the end of 1994. Proceeds from the sale of the operations will be
used primarily to reduce debt.
The 1993 divestment and restructuring program, which is being implemented
by a largely new management team, is intended to reverse the deterioration in
the Company's operating performance during recent years. Management anticipates
that the divestment portion of the program will favorably impact overall 1994
and subsequent results by the elimination of losses from discontinued
operations and, to a lesser extent, due to cost reductions from the
restructuring portion of the program. Although there can be no assurance as to
the final results of the restructuring program, 1994 results from continuing
operations are expected to improve over 1993, after a marginally profitable
first quarter. The success of the restructuring program will require the
completion of many steps, including achieving multiple divestments at
anticipated prices, reducing costs throughout the Company, and reversing the
poor sales and income performance of domestic dairy and pasta. Based on early
1994 results, the franchises and cost positions of our dairy and pasta
businesses appear to be strengthening. However, the economic improvement from
these businesses has been less than previously anticipated.
Net assets of $222.2 million related to the discontinued operations have
been segregated in the December 31, 1993 Consolidated Balance Sheet. This
amount consists primarily of working capital, property, plant and equipment,
and intangibles, net of the estimated losses on disposal.
Also in fourth quarter 1993, the Company recorded a pretax charge of $94.1
million for asset writedowns and changes in accounting estimates primarily
relating to the cost of consumer and trade promotions. In addition, fourth
quarter 1993 results include a pretax gain of $14.8 million on the sale of a
European packaging operation. The charge is recorded in cost of goods sold and
in marketing, general and administrative expenses in the Consolidated Statement
of Income, while the gain on the sale is included in other income.
In 1993 the Company adopted Statement of Financial Accounting Standard
(SFAS) No. 112, "Employers' Accounting for Postemployment Benefits,"
retroactive to January 1, 1993. The cumulative effect of the accounting change
reduced first quarter and 1993 net income by $18.0 million, or $.13 per share.
First quarter operating results have been restated for the cumulative effect of
the change. The accounting change had no significant effect on 1993 income
before cumulative effect of accounting changes.
As a result of the charges and the effect of the accounting changes, the
Company reported a restated 1993 net loss of $630.7 million, or $4.47 per
share, compared to a restated 1992 net loss of $364.4 million, or $2.54 per
share. The 1992 results include a restated pretax restructuring charge of
$377.2 million to cover costs of a companywide restructuring program.
18
<PAGE> 2
During 1992 the Company adopted SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and No. 109 "Accounting for
Income Taxes." These accounting changes reduced 1992 net income before the
cumulative effect of accounting changes by $8.1 million, or $.06 per share. The
cumulative effect of the accounting changes as of January 1, 1992 reduced 1992
net income by $229.0 million, or $1.60 per share.
Net income for 1991 was $294.9 million, or $2.00 per share, and included a
restructuring charge of $71.6 million, $44.0 million after tax, or $.30 per
share.
RESTATEMENT AND RECLASSIFICATION
Following communications with the Securities and Exchange Commission concerning
the 1992 restructuring charge, the Company has reclassified and restated $264.8
million of the 1992 restructuring charge. Of this amount, $145.5 million was
reclassified from restructuring into operating expense in the 1992 financial
statements and had no effect on the net 1992 results of operations. The
reclassification included marketing, environmental and litigation accruals and
asset writeoffs. The remaining $119.3 million was reversed to 1992 income. It
included $59.8 million of business integration, marketing and data system
reorganization costs which were recorded as 1993 expenses and $59.5 million of
1992 restructuring programs that have been cancelled.
In connection with the 1992 restatement, a loss of $17.2 million, $10.8
million after tax, relating to debt retirement costs was reclassified out of
restructuring and presented as an extraordinary item.
As a result of the restatement the 1993 net loss increased $37.1 million,
or $0.26 per share, and the 1992 net loss decreased $75.2 million, or $0.53 per
share, $86.0 million, or $0.60 per share, before extraordinary item, as
compared to the originally reported results. Shareholders' equity increased by
$38.1 million and $75.2 million at December 31, 1993 and 1992, respectively.
RESTRUCTURING CHARGES
Following is a schedule of restructuring reserve balances at the end of the
last three years by major component and the amounts charged to income:
<TABLE>
<CAPTION>
Balances at December 31,
Charge to -----------------------------
(In millions) Income 1993 1992 1991
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 RESTRUCTURING:
Business
Re-engineering . . . . . $ 90.6 $ 89.0
Business Divestitures . . . 16.3 16.3
Closure and
Consolidation . . . . . . 8.0 8.0
------ ------ ------ ------
114.9 113.3 0.0 0.0
------ ------ ------ ------
1992 RESTRUCTURING:
Business
Re-engineering . . . . . 46.4 6.8 $ 44.1
Business Divestitures . . . 161.5 11.8 71.7
Closure and
Consolidation . . . . . . 169.3 14.0 73.6
------ ------ ------ ------
377.2 32.6 189.4 0.0
------ ------ ------ ------
1991 RESTRUCTURING:
Business
Re-engineering . . . . . 27.8 $ 14.0
Closure and
Consolidation . . . . . . 43.8 11.0
------ ------ ------ ------
71.6 0.0 0.0 25.0
------ ------ ------ ------
Total Reserves . . . . . . $563.7 $145.9 $189.4 $ 25.0
====== ====== ====== ======
- ---------------------------------------------------------------------------------
</TABLE>
The 1993 restructuring charge of $114.9 million consists of three parts.
The business re-engineering is primarily $76.5 million of severance and other
personnel costs relating to the reduction of approximately 1,800 employees as a
result of an administrative downsizing. Additionally, it includes $14.1 million
to reorganize dairy operations by closing certain administrative centers and
writing off certain assets. Business divestitures represents an increase in the
estimated costs to divest an international operation which was provided for in
the 1992 restructuring reserve. The change in estimate for this divestiture is
primarily related to the additional time required to dispose of the operation
which is now expected to occur in mid-1994 and recent unfavorable exchange
rates. Closure and consolidation costs of $8.0 million were provided for the
expected loss on divestiture of a small operation.
The 1992 restructuring charge of $377.2 million, includes $79.4 million
related to discontinued operations which is included in the loss from
discontinued opera-
19
<PAGE> 3
tions in the Consolidated Statements of Income. The charge includes changes in
estimates of $19.8 million for idle property and workers' compensation costs
associated with locations closed in the 1989 and 1991 restructuring reserves.
The 1992 reserve has a balance of $32.6 million at December 31, 1993. The $6.8
million reserve balance for business re-engineering costs represents relocation
costs for personnel, while the charges of $37.3 million in 1993 were comprised
of data system write-offs, personnel relocation costs, packaging write-offs and
packaging standardization. The business divestitures balance of $11.8 million
is related to final costs associated with the divestitures of Deran, Laura
Scudder's, Southwest Snacks and an international operation. Business
divestiture charges of $59.9 million in 1993 primarily related to these
divestitures and to the operating losses of an international operation which is
being sold as part of the 1992 restructuring program and is expected to be sold
in 1994. The $14.0 million balance for closures and consolidations relates to
several facilities which are in the process of being closed. The 1993 charges
totaled $59.6 million and relate to closures of individual facilities, carrying
costs of property held for sale and workers' compensation claims for closed
facilities. All of the 1992 restructuring charges will be completed during
1994.
The 1991 restructuring charge of $71.6 million, of which $4.4 million
relates to discontinued operations, had a balance of $25.0 million at December
31, 1991. This program, which was completed in 1992, covered business
reorganization costs, as well as severance, relocation and other
employee-related expenses.
Cash spending in 1993 relating to the 1993 and 1992 restructuring programs
was $62.4 million. The 1993 pretax income benefit from the 1992 restructuring
approximated the amount of spending. Cash spending in 1993 of $10.8 million
related to discontinued operations and will produce no future income benefits.
Of the remaining $113.3 million 1993 reserve, $98.3 million represents cash
charges, the majority of which are expected to be incurred in 1994. Personnel
and related costs are expected to be reduced in excess of $75.0 million
annually beginning in late 1994 because of the employee terminations from the
1993 and 1992 restructuring programs. There are no significant offsetting
expenses to these savings.
RESULTS OF CONTINUING OPERATIONS
A three year comparison of division sales and operating income is presented on
page 21.
Net sales in 1993 decreased 6.2% to $5.506 billion from $5.872 billion in
1992. Net sales in 1992 decreased 0.9% from $5.924 billion in 1991.
The 1991-1993 restructuring charges are allocated by division as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
- --------------------------------------------------------------------------
<S> <C> <C> <C>
North American Foods . . . . . . . $ 22.1 $ 161.5 $ 29.8
International Foods . . . . . . . . 16.3 54.2 18.9
Packaging and Industrial Products . 55.0 12.5
------- ------- ------
38.4 270.7 61.2
Not allocable to divisions . . . . 76.5 27.1 6.0
------- ------- ------
114.9 297.8 67.2
Income tax effect . . . . . . . . . 37.5 65.0 26.0
------- ------- ------
Charges, net of tax . . . . . . . . $77.4 $ 232.8 $ 41.2
======= ======= ======
- --------------------------------------------------------------------------
</TABLE>
The loss from continuing operations was $56.9 million in 1993 and $38.7
million in 1992, versus income of $279.9 million in 1991. Excluding the
charges, income from continuing operations was $20.5 million, $194.1 million
and $321.1 million in 1993, 1992 and 1991, respectively.
Division operating income included pretax restructuring charges of $38.4
million, $270.7 million and $61.2 million in 1993, 1992 and 1991, respectively.
1993 division operating income decreased 17.0% to $194.3 million from $234.0
million in 1992, while 1992 decreased 61.9% from $614.7 million in 1991.
Excluding the charges, 1993 operating results decreased 53.9% and 1992 results
decreased 25.3% from the respective prior years.
A significant portion of the Company's operating income is generated by
foreign operations and can be affected by currency fluctuations. Most of this
exposure is attributable to the translation of income generated by these
foreign operations in their functional currency; functional currency operating
results are not hedged. When appropriate, the Company will hedge cash flow
transaction exposures, including hedging of cash flows related to exports or
imports denominated in currencies different from the functional currency of the
operating unit.
The effect of changes in foreign currency exchange rates adversely
impacted sales and division operating income in 1993 compared to 1992. Had
exchange rates remained unchanged from the prior year, sales and operating
income in 1993 would have been approximately $140 million and $30 million
higher, respectively. The effect of changes in foreign currency exchange rates
was not significant when comparing 1992 to 1991 results.
20
<PAGE> 4
BORDEN, INC.
THREE YEAR COMPARISON OF DIVISION SALES AND OPERATING INCOME
<TABLE>
<CAPTION>
Year Ended
(Dollars in millions) December 31, 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DIVISION SALES
North American Foods . . . . . . . . . . . . . $2,671.5 48% $3,039.0 52% $3,085.9 52%
International Foods . . . . . . . . . . . . . . 930.4 17 951.9 16 967.0 16
Packaging and Industrial Products . . . . . . . 1,904.4 35 1,880.8 32 1,871.2 32
-------- --- -------- --- -------- ---
Total . . . . . . . . . . . . . . . . . . . $5,506.3 100% $5,871.7 100% $5,924.1 100%
======== === ======== === ======== ===
DIVISION OPERATING INCOME (LOSS)
North American Foods . . . . . . . . . . . . . $ (24.4) (12)% $ 49.8 21% $ 337.3 55%
International Foods . . . . . . . . . . . . . . 51.0 26 41.8 18 90.5 15
Packaging and Industrial Products . . . . . . . 167.7 86 142.4 61 186.9 30
-------- --- -------- --- -------- ---
Total . . . . . . . . . . . . . . . . . . . 194.3 100% 234.0 100% 614.7 100%
=== === ===
Discontinued operations, net of tax . . . . . . (555.8) (85.9) 15.0
Other income and expense not allocable to
divisions and income taxes . . . . . . . . (269.2) (512.5) (334.8)
-------- -------- --------
Net income (loss) . . . . . . . . . . . . $ (630.7) $ (364.4) $ 294.9
======== ======== ========
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Management's Discussion and Analysis--Results of Continuing Operations for
restructuring charges included in division operating income.
During 1993 the Company was reorganized into three operating divisions:
North American Foods, International Foods, and Packaging and Industrial
Products. North American Foods is comprised of niche grocery, pasta and sauce,
and dairy products, while International Foods includes international milk
powder, European bakery products and several European grocery and pasta
businesses. Packaging and Industrial Products includes primarily
wallcoverings, adhesives and resins, and plastic films and packaging.
North American Food's 1993 sales decreased 12.1% to $2.672 billion from
$3.039 billion in 1992 due primarily to volume declines in fluid milk, ice
cream and pasta; the divestitures of Laura Scudder's, Southwest Snacks and
Deran candy; and decreases in most niche grocery products. The volume declines
were due to increased competition from low-priced branded and private label
products, the adjusting of promotions to reduce "trade loading," as well as
pricing and customer service issues in dairy and pasta, respectively. Operating
results decreased to a loss of $24.4 million compared to operating income of
$49.8 million in 1992. These amounts include charges of $22.1 million in 1993
and $161.5 million in 1992. Excluding both charges, 1993 operating income
decreased substantially compared to 1992 primarily as a result of volume
declines and higher raw milk, cream and wheat costs which could not be fully
recovered in product pricing due to the competitive environment.
The Division's 1992 sales decreased 1.5% from $3.086 billion in 1991
primarily as a result of the MCP Foods divestiture and decreased Canadian
sales, partially offset by increased fluid milk sales. Operating income in
1992 decreased 85.2% from $337.3 million in 1991. Operating income in 1991
included a $29.8 million charge. Excluding the 1992 and 1991 charges,
operating income decreased 42.4% compared to 1991, due to higher raw milk
costs, strong price competition from private label and regional milk
processors, declines in Canadian operations and higher raw material costs for
pasta, partially offset by improvements in several niche grocery products.
International Foods 1993 sales decreased 2.3% to $930 million from $952
million in 1992. However, excluding acquisitions and divestitures, sales
increased slightly as a result of increases in international milk powder,
partially offset by decreases in the European grocery and pasta businesses.
Operating income increased 22.0% to $51.0
21
<PAGE> 5
million from $41.8 million in 1992. Operating income in 1993 and 1992 includes
a $16.3 million and $54.2 million charge, respectively. Excluding both charges,
1993 operating income decreased 29.9% from 1992 as a result of the negative
impact of foreign exchange rate fluctuations as well as declines in the
European grocery and pasta, and Puerto Rican businesses. The effect of foreign
exchange rate fluctuations negatively impacted 1993 operating income by 13.4%.
The Division's 1992 sales decreased 1.6% from $967 million in 1991 as a
result of the divestitures of the Sooner and Crecspan snacks businesses,
partially offset by increases in international milk powder and European bakery
products. Operating income in 1992 decreased 53.8% from $90.5 million in 1991.
Operating income in 1991 included an $18.9 million charge. Excluding the 1992
and 1991 charges, operating income decreased 12.2% compared to 1991, due
primarily to the Sooner and Crecspan divestitures as well as declines in
international milk powder.
Packaging and Industrial Product's 1993 sales increased 1.3% to $1.904
billion from $1.881 billion in 1992 primarily as a result of increases in the
North American operations of forest products adhesives, resins and
wallcoverings, partially offset by decreases in most of the European
businesses. Operating income increased 17.8% to $167.7 million from $142.4
million in 1992. Operating income in 1992 includes a $55.0 million charge.
Excluding the charge, 1993 operating income decreased 15.0% compared to 1992 as
a result of the negative impact of foreign exchange rate fluctuations and the
continuing effects of the European recession on European packaging and resins,
partially offset by improvements in North American adhesives and resins and
worldwide wallcoverings. The effect of foreign exchange rate changes negatively
impacted 1993 operating income by 9.6%.
The Division's 1992 sales increased 0.5% from $1.871 billion in 1991
primarily as a result of increases in worldwide wallcoverings, forest products
adhesives and industrial resins, offset by the divestiture of the Lambiotte and
TRL specialty adhesives businesses in France. Operating income in 1992
decreased 23.8% from $186.9 million in 1991. Operating income in 1991 included
a $12.5 million charge. Excluding the 1992 and 1991 charges, operating income
decreased 1.0% compared to 1991 as declines in North American plastic film and
packaging and decreased income from Borden Chemicals and Plastics Limited
Partnership were mostly offset by improvements in Latin American operations,
forest products adhesives and industrial resins.
Interest expense in 1993 increased as a result of increased average debt
levels. Interest expense in 1992 decreased from the prior year due to lower
average debt levels and lower interest rates. Minority interest recorded in the
income statement increased in 1992 as a result of the limited partner interest
in T.M.I. Associates, L.P., a limited partnership in which the Company has a
77.28% general partner interest, being included for a full year as compared to
a short period in 1991.
An income tax benefit of $27.2 million was recorded in 1993 compared to
expenses of $14.2 million in 1992 and $151.3 million in 1991. The low effective
tax rate in both 1993 and 1992 reflects certain restructuring expenses with
reduced tax benefits. In August 1993 the passage of the Omnibus Budget
Reconciliation Act of 1993 increased the statutory corporate tax rate to 35%.
This increase had an immaterial impact on the provision for income taxes.
The 1993 income tax benefit from continuing operations, discontinued
operations and loss on disposal of discontinued operations was $210.8 million.
An $11.0 million tax benefit was also recorded with the adoption of SFAS No.
112 and $6.4 million with the extraordinary loss on debt retirement. The net
deferred tax asset at December 31, 1993 was $222.3 million. In order to realize
the net deferred asset the Company will need to generate approximately $635.0
million of future taxable income before the expiration of the carryforward
periods. The deferred tax benefits are expected to be fully utilized through
the benefits which the divestiture and restructuring program will have on
future operating results. Currently, there are no operating loss carryforwards
for domestic income tax purposes, and future carryforwards which arise will
have a 15 year life from the year of the loss.
RESULTS OF DISCONTINUED OPERATIONS
Net sales for discontinued operations decreased 6.1% in 1993 to $1.194 billion
from $1.271 billion in 1992 primarily as a result of decreases in North
American snacks. Losses from discontinued operations in 1993 were $65.8 million
compared to $85.9 million in 1992. Results for 1992 included a $50.4 million
after tax charge for restructuring. Excluding the 1992 charge, 1993 results
declined primarily as a result of volume declines and price discounting caused
by competitive pressures in North American snacks. Net sales in 1992 decreased
3.1% from $1.311 billion in 1991 primarily as a result of
22
<PAGE> 6
BORDEN, INC.
decreases in North American snacks. Income from discontinued operations was
$15.0 million in 1991. Excluding the 1992 charge and a 1991 after tax charge of
$2.8 million, the 1992 loss from discontinued operations was $35.5 million
compared to income of $17.8 million in 1991. The decrease was primarily the
result of intense price competition and heavy promotional spending in North
American snacks and declines in clam products.
FINANCIAL POSITION
The Company's financial position was impacted by several events in 1993. Equity
was reduced by the accruals for the loss on disposal of discontinued
operations, restructuring, changes in accounting estimates and asset
writedowns, and the adoption of SFAS No. 112. However, there were no cash
outlays for these charges in 1993. While most of the cash outlays for
restructuring will occur in 1994, the divestment and restructuring program is
expected to generate significantly greater cash than it will use. In 1994 cash
flow from operations, together with capital expenditures and divestment
proceeds, is projected to exceed $400 million, subject to the successful
completion of the divestment program. Equity was also reduced by $92.3 million
to record a minimum pension liability. This is a non-cash adjustment
representing the excess of accumulated benefits over plan assets and accrued
pension expense.
In the fourth quarter of 1993, the Company negotiated an amendment to a
covenant in the T.M.I. Associates, L.P. partnership agreement which required
the Company to maintain a ratio of adjusted debt to adjusted capitalization, as
defined, of 60% or less. The amended covenant requires a ratio no greater than
67.5% from December 1993 through June 1994, 65.0% in September 1994 and 60.0%
in December 1994. The ratio was 62.4% at December 31, 1993.
Borden borrows domestically at commercial paper rates and has credit
agreements with domestic and foreign lending institutions of $520.0 million to
support commercial paper borrowings. The credit agreements bear interest, if
used, at approximately the prime rate, or less, in effect at the date of use.
Additional unused lines of credit totaling $222.7 million at December 31, 1993
were available for use by foreign subsidiaries. At December 31, 1993 the
Company also had available $250.0 million in registered but unissued
securities under shelf registration statements.
During 1993 and January 1994 the Company's long-term debt and commercial
paper ratings were downgraded to BBB and A-2 by Standard & Poor's and to Baa2
and P-2 by Moody's. This action marginally increased the Company's cost of
borrowing but has not adversely impacted the Company's ability to borrow. If
required, management believes that additional funding could be obtained at
competitive rates and terms.
In order to improve its financial position, the Company cut its quarterly
common stock dividend during 1993 from $0.30 to $0.15 and sold $400.0 million
of accounts receivable in December 1993. Proceeds from the sale were used to
repay debt. The receivables were sold under terms of an agreement expiring in
1996 which enables the Company to periodically sell up to $400.0 million of
accounts receivable. In January 1994, the Company announced that the common
stock dividend would be further reduced to a quarterly rate of $0.075 per
share.
The Company expects its financial position and cash flows to improve in
1994 as a result of the restructuring and divestment program and the reduction
in the quarterly common stock dividend. Although the Company's current ratio at
December 31, 1993 was less than 1.0 to 1, current maturities of debt can
generally be refinanced, and operating and divestment cash sources are expected
to be sufficient to meet the Company's other current liabilities. Current
maturities of long-term debt coming due during 1994 aggregate approximately
$132 million.
As discussed in Note 6 to the financial statements, the Internal Revenue
Service has proposed adjustments to the Company's income tax returns for the
period 1989-1990 relating to capital losses that resulted in $46 million of
reduced income tax expense. The Company disagrees with the position of the
Service, will contest the proposed adjustment and believes it has meritorious
support for its position.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities in 1993, 1992 and 1991 were $152.3
million, $292.9 million and $348.8 million, respectively. Cash provided from
operating activities decreased in each of the last two years due primarily to
declines in operating results and spending in connection with the 1992
restructuring program. Capital expenditures decreased 38.2% from 1992 to $177.0
million in 1993, while 1992 capital expenditures of $286.2 million decreased
23.9% from 1991. These decreases were primarily the result of the completion in
1992 of capital expenditures relating to the 1989 reconfiguration program.
Capital expenditures in 1994 are expected to approximate $200 million.
23
<PAGE> 7
During 1993 the Company acquired a U.S. dairy operation for a total cost
of $9.5 million. The Company acquired a bakery operation, a foodservice
operation, a foundry resin operation and a rigid plastics operation in 1992 for
a total cost of $20.1 million. During 1991 the Company acquired four operations
for a total cost of $29.5 million. The 1991 acquisitions included a clam
products operation, two bakery operations and a pasta operation.
Short-term debt decreased $536.2 million in 1993. The decrease in
short-term debt was primarily the result of the proceeds from the sale of
receivables being used to repay commercial paper.
At December 31, 1991 the Company had $500.5 million of short-term
borrowings from the T.M.I. Associates, L.P. which were used primarily to retire
commercial paper and long-term debt. During 1992 commercial paper and
additional borrowings from the T.M.I. Associates, L.P. were used to further
reduce long-term debt. Short-term debt increased $255.5 million in 1992
compared to a decrease of $310.4 million in 1991, and long-term debt decreased
$266.1 million in 1992 compared to $244.2 million in 1991.
In 1993, 1992 and 1991 long-term debt financing provided $274.6 million,
$45.2 million and $223.1 million, respectively. The 1993 financing includes
proceeds from a $250.0 million issuance of 30-year, 77/8% debentures which were
used primarily to repay short term commercial paper. Long-term debt financing
in 1991 included proceeds from a $200.0 million issuance of 30-year, 9.2%
debentures which were used primarily to repay short-term commercial paper.
In 1992 the Company issued ten-year zero-coupon convertible bonds. The
bonds issued had an aggregate value of $235.0 million and carry an effective
interest rate of 5.74%. The bonds were issued in exchange for 7 million shares
of the Company's common stock which were retired. The bonds will be convertible
after five years into 5.95 million common shares. In connection with this
transaction, the underwriter received an option under which it will have the
right to receive additional Borden shares or, at the Company's option, a cash
payment if the market price of Borden stock does not meet specific targets
during the fourth year the bonds are outstanding. This non-cash transaction is
not reflected in the amounts above or in the Consolidated Statement of Cash
Flows.
DESCRIPTION OF BUSINESS AND BUSINESS SEGMENTS
Borden is engaged primarily in manufacturing, processing, purchasing and
distributing a broad range of products. The Company's operations are divided
into two major industry segments: the foods segment, and the non-food consumer
and industrial segment. Borden management is organized into three operating
divisions: North American Foods, International Foods, and Packaging and
Industrial Products. Corporate departments provide certain centralized services
for all operating units. The Company's executive and administrative offices are
located in Columbus, Ohio. Production facilities are located throughout the
United States and in many foreign countries. Certain businesses included in the
discussions below have been selected for divestiture.
The foods segment currently includes the following businesses: pasta and
pasta sauces, bakery products, processed cheese, individual portion and
foodservice sized condiments, salty snacks, sweetened condensed milk, non-dairy
creamer, reconstituted lemon and lime juices, bouillon, confections, jams and
jellies, seafood, dehydrated soups, homogenized milk, whole milk powder, ice
cream, sherbet, yogurt, cottage cheese, frozen novelties, low-fat dairy
products, milk-based products for foodservice trade, and fruit drinks.
The non-food consumer and industrial segment currently includes
wallcoverings, consumer adhesives, transparent wrapping film, adhesives for the
forest products industry, foundry and industrial resins, and flexible and rigid
packaging.
Domestic products for the foods segment are marketed primarily through
food brokers and distributors, and to a lesser extent, directly to wholesalers,
retail stores, foodservice businesses, food processors, institutions and
governmental agencies. Domestic products for the non-food consumer and
industrial segment are sold throughout the United States to industrial users
and, in the case of consumer products, by in-house and independent sales forces
to distributors, wholesalers, jobbers and retailers. To the extent practicable,
international distribution tech-niques parallel those used in the United
States. However, raw materials, production considerations, pricing competition,
government policy toward industry and foreign investment, and other factors may
vary substantially from country to country for both industry segments.
24
<PAGE> 8
BORDEN, INC.
The Company's businesses in both industry segments must deal with intense
competition on local and national levels, both in the United States and in
foreign markets. Total advertising and promotion expense in support of Borden
products was $735.5 million in 1993, $698.0 million in 1992 and $603.3 million
in 1991.
The primary raw materials used by the foods segment businesses are milk,
flour, potatoes, corn, vegetable oils and tomato products. The primary raw
materials used by the non-food consumer and industrial segment businesses are
polyvinyl chloride resins, methanol, phenol and formaldehyde. Raw materials are
generally available from numerous sources in sufficient quantities but are
subject to price fluctuations which cannot always be passed on to the Company's
customers. Long-term purchase agreements are used in certain circumstances to
assure availability of adequate raw material supplies at guaranteed prices.
Research and development expenditures were $31.9 million in 1993, $30.8
million in 1992 and $30.3 million in 1991. The development and marketing of new
food and packaging and industrial products are carried out at the division
level and integrated with quality controls for existing product lines.
Working capital for both segments is generally funded through operations
or short-term borrowings.
A breakdown of the Company's sales, operating profit and other information
between the foods and non-food consumer and industrial business segments is
presented on page 26.
Segment operating profit is total revenue less operating expenses. In
computing segment operating profit, none of the following items have been
deducted from revenue: general corporate expenses, interest expense and
Federal, state and local income taxes.
Identifiable assets by segment are those assets that are used in the
segment's continuing operations. Corporate assets consist primarily of cash and
equivalents, prepaid expenses and fixed assets.
As of December 31, 1993 the Company operated 75 domestic food
manufacturing and processing facilities in 34 states and Puerto Rico. The most
significant of these facilities are an Illinois plant producing Cracker Jack,
bouillon and dehydrated soup; an Alabama plant producing Bama jams and jellies
and ReaLemon lemon juice; the Arizona, Massachusetts, Michigan, Minnesota, and
Missouri pasta plants; the California, Pennsylvania and Mississippi foodservice
plants; the Missouri and Pennsylvania snacks plants; and dairy facilities
located in much of the country. In addition, the Company operated 48 foreign
food manufacturing and processing facilities located principally in Canada,
Latin America and Western Europe.
As of December 31, 1993 the Company operated 38 domestic non-food consumer
and industrial manufacturing and processing facilities in 20 states, the most
significant being the Resinite plants in Georgia, Massachusetts and Texas; the
Proponite plant in Massachusetts; the forest products adhesives plants in
Oregon and North Carolina; and a specialty resins plant in Kentucky. In
addition, the Company operated 58 foreign non-food consumer and industrial
manufacturing and processing facilities located principally in Brazil, Canada,
the Far East and Western Europe.
The Company's manufacturing and processing facilities are generally well
maintained and effectively utilized. Substantially all facilities are owned by
the Company.
ENVIRONMENTAL
Borden is actively engaged in complying with environmental protection laws, as
well as various Federal and state statutes and regulations relating to
manufacturing, processing and distributing its many products. In this
connection, the Company incurred capital expenditures of $4.3 million in 1993
compared to $16.6 million in 1992 and $11.3 million in 1991. The Company
estimates that it will spend $10.9 million for environmental control facilities
during 1994.
Under the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) or similar state environmental laws, the Company has
potential liability, along with a large number of others, at various waste
sites designated for cleanup. The Company believes the realistic range of
liability under CERCLA and other environmental statutes and regulations, taking
into account its established accruals for estimated liability, would not have a
material adverse effect on the Company's financial position or operating
results.
25
<PAGE> 9
<TABLE>
<CAPTION>
BUSINESS SEGMENTS
Year Ended
(In millions) December 31, 1993* 1992** 1991***
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES Foods . . . . . . . . . . . . . . . . . . . $3,673.8 $4,055.5 $4,119.5
Non-food consumer and industrial . . . . . 1,832.5 1,816.2 1,804.6
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . $5,506.3 $5,871.7 $5,924.1
- ----------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT Foods . . . . . . . . . . . . . . . . . . . $ 22.7 $ 92.4 $ 428.8
Non-food consumer and industrial . . . . . 171.6 141.6 185.9
-------- -------- --------
Total segments . . . . . . . . . . . . . . 194.3 234.0 614.7
General corporate expense, net . . . . . . (153.3) (141.9) (16.5)
Interest expense . . . . . . . . . . . . . (125.1) (116.6) (167.0)
-------- -------- --------
Pretax (loss) income from
continuing operations . . . . . . . . . . $ (84.1) $ (24.5) $ 431.2
- ----------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS Foods . . . . . . . . . . . . . . . . . . . $2,085.6 $3,496.9 $3,689.5
Non-food consumer and industrial . . . . . 1,114.3 1,395.4 1,438.1
-------- -------- --------
Total segments . . . . . . . . . . . . . . 3,199.9 4,892.3 5,127.6
Discontinued operations . . . . . . . . . . 222.2
Corporate assets . . . . . . . . . . . . . 449.6 353.7 333.7
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . $3,871.7 $5,246.0 $5,461.3
- ----------------------------------------------------------------------------------------------------------------------
DEPRECIATION Foods . . . . . . . . . . . . . . . . . . . $ 163.7 $ 165.7 $ 157.2
AND AMORTIZATION Non-food consumer and industrial . . . . . 48.7 49.8 46.2
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES Foods . . . . . . . . . . . . . . . . . . . $ 102.3 $ 202.9 $ 303.4
Non-food consumer and industrial . . . . . 59.1 74.6 66.0
- ----------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC Net sales United States . . . . . . . . . . . . . . . $3,620.9 $3,928.7 $3,903.2
INFORMATION Europe . . . . . . . . . . . . . . . . . . 914.8 979.2 1,083.2
Other . . . . . . . . . . . . . . . . . . . 970.6 963.8 937.7
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . $5,506.3 $5,871.7 $5,924.1
======== ======== ========
Operating profit United States . . . . . . . . . . . . . . . $ 82.7 $ 155.1 $ 421.4
Europe . . . . . . . . . . . . . . . . . . 73.7 54.4 92.1
Other . . . . . . . . . . . . . . . . . . . 37.9 24.5 101.2
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . $ 194.3 $ 234.0 $ 614.7
======== ======== ========
Identifiable assets United States . . . . . . . . . . . . . . . $2,408.0 $3,534.4 $3,602.6
Europe . . . . . . . . . . . . . . . . . . 695.2 858.0 1,027.4
Other . . . . . . . . . . . . . . . . . . . 546.3 853.6 831.3
Discontinued operations . . . . . . . . . . 222.2
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . $3,871.7 $5,246.0 $5,461.3
======== ======== ========
- ----------------------------------------------------------------------------------------------------------------------
<FN>
* The $38.4 restructuring and other charges to segment operating profit in 1993 is allocated as follows: $38.4 for the foods
segment; and $22.1 for U.S. operations, and $16.3 for other foreign operations. The remainder of the restructuring charge not
allocable to operating profit: $76.5 is included in general corporate expense.
** The $270.7 restructuring charge to segment operating profit in 1992 is allocated as follows: $215.7 for the foods segment
and $55.0 for the non-food consumer and industrial segment; and $165.9 for U.S. operations, $38.1 for European operations
and $66.7 for other foreign operations. The remainder of the restructuring charge not allocable to operating profit: $27.1 is
included in general corporate expense and $79.4 is related to discontinued operations.
*** The $61.2 restructuring charge to segment operating profit in 1991 is allocated as follows: $48.7 for the foods segment and
$12.5 for the non-food consumer and industrial segment; and $34.5 for U.S. operations, $7.4 for European operations and
$19.3 for other foreign operations. The remainder of the restructuring charge not allocable to operating profit: $6.0 is
included in general corporate expense and $4.4 is related to discontinued operations.
</TABLE>
26
<PAGE> 10
BORDEN, INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Year Ended
(In millions except per share data) December 31, 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE Net sales . . . . . . . . . . . . . . . . . $5,506.3 $5,871.7 $5,924.1
- -----------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES Cost of goods sold . . . . . . . . . . . . 4,078.6 4,301.9 4,268.5
Marketing, general and
administrative expenses 1,223.7 1,163.6 1,023.9
Restructuring charges . . . . . . . . . . . 114.9 297.8 67.2
Interest expense . . . . . . . . . . . . . 125.1 116.6 167.0
Equity in income of affiliates . . . . . . (16.0) (19.4) (24.0)
Minority interest . . . . . . . . . . . . . 40.7 39.7 2.8
Other (income) and expense, net . . . . . . 23.4 (4.0) (12.5)
Income taxes . . . . . . . . . . . . . . . (27.2) 14.2 151.3
---------- ---------- --------
5,563.2 5,910.4 5,644.2
---------- ---------- --------
- -----------------------------------------------------------------------------------------------------------------------
EARNINGS (Loss) income from continuing operations . (56.9) (38.7) 279.9
Discontinued operations:
(Loss) income from operations . . . . . . (65.8) (85.9) 15.0
Loss on disposal . . . . . . . . . . . . (490.0)
---------- ---------- --------
(Loss) income before extraordinary item and
cumulative effect of accounting changes . (612.7) (124.6) 294.9
Extraordinary loss on early retirement
of debt . . . . . . . . . . . . . . . . . (10.8)
Cumulative effect of change in accounting for:
Postemployment benefits . . . . . . . . . (18.0)
Postretirement benefits other than pensions (189.0)
Income taxes . . . . . . . . . . . . . . (40.0)
Net (loss) income . . . . . . . . . . . . . $ (630.7) $ (364.4) $ 294.9
========== ========== ========
SHARE DATA (Loss) income from continuing operations . $ (.40) $ (.27) $ 1.90
Discontinued operations:
(Loss) income from operations . . . . . . (.47) (.60) .10
Loss on disposal . . . . . . . . . . . . . (3.47)
(Loss) income before extraordinary item and ---------- --------- --------
cumulative effect of accounting changes . (4.34) (.87) 2.00
Extraordinary loss on early retirement
of debt . . . . . . . . . . . . . . . . . (.07)
Cumulative effect of change in accounting for:
Postemployment benefits . . . . . . . . . (.13)
Postretirement benefits other than pensions (1.32)
Income taxes . . . . . . . . . . . . . . (.28)
Net (loss) income per common share . . . . $ (4.47) $ (2.54) $ 2.00
========= ========= ========
Cash dividends paid per common share . . . $ 0.90 $ 1.185 $ 1 .12
Average number of common shares
outstanding during the period . . . . . . 141.0 143.4 147.6
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
27
<PAGE> 11
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(In millions except share and per share data) December 31, 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT ASSETS Cash and equivalents . . . . . . . . . . . . . . . . . . . $ 100.3 $ 186.0
Accounts receivable (less allowance for doubtful
accounts of $8.9 and $10.3, respectively) . . . . . . . . 334.7 889.6
Inventories:
Finished and in process goods . . . . . . . . . . . . . . 319.4 400.9
Raw materials and supplies . . . . . . . . . . . . . . . 171.0 240.2
Other current assets . . . . . . . . . . . . . . . . . . . 142.6 210.8
Net assets of discontinued operations . . . . . . . . . . . 222.2
-------- --------
1,290.2 1,927.5
-------- --------
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS AND Investments in and advances to affiliated companies . . . . 91.3 96.1
OTHER ASSETS Deferred income taxes . . . . . . . . . . . . . . . . . . . 225.4
Other assets . . . . . . . . . . . . . . . . . . . . . . . 126.6 255.8
-------- --------
443.3 351.9
-------- --------
- --------------------------------------------------------------------------------------------------------------------------
PROPERTY AND Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.5 125.6
EQUIPMENT Buildings . . . . . . . . . . . . . . . . . . . . . . . . . 609.6 815.5
Machinery and equipment . . . . . . . . . . . . . . . . . . 1,949.3 2,389.5
-------- --------
2,664.4 3,330.6
Less accumulated depreciation . . . . . . . . . . . . . . . (1,327.7) (1,542.5)
-------- --------
1,336.7 1,788.1
-------- --------
- --------------------------------------------------------------------------------------------------------------------------
INTANGIBLES Intangibles resulting from business acquisitions
(net of accumulated amortization of $189.8
and $222.9, respectively) . . . . . . . . . . . . . . . . 801.5 1,178.5
-------- --------
- --------------------------------------------------------------------------------------------------------------------------
$3,871.7 $5,246.0
======== ========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
28
<PAGE> 12
BORDEN, INC.
<TABLE>
<CAPTION>
December 31, 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES Debt payable within one year . . . . . . . . . . . . . . . $ 410.6 $ 706.6
Accounts and drafts payable . . . . . . . . . . . . . . . . 433.3 589.7
Restructuring reserve . . . . . . . . . . . . . . . . . . . 145.9 139.4
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 56.5 55.1
Other current liabilities . . . . . . . . . . . . . . . . . 325.2 317.0
-------- --------
1,371.5 1,807.8
-------- --------
- --------------------------------------------------------------------------------------------------------------------------
OTHER Long-term debt . . . . . . . . . . . . . . . . . . . . . . 1,240.8 1,329.9
Deferred income taxes . . . . . . . . . . . . . . . . . . . 47.1 66.8
Non-pension postemployment benefit obligations . . . . . . 353.8 317.7
Other long-term liabilities . . . . . . . . . . . . . . . . 103.8 79.3
Minority interest . . . . . . . . . . . . . . . . . . . . . 508.8 518.2
-------- --------
2,254.3 2,311.9
-------- --------
- --------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' Common stock - $0.625 par value
EQUITY Authorized 480,000,000 shares
Issued 194,983,374 shares . . . . . . . . . . . . . . . . 121.9 121.9
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . 88.1 83.0
Accumulated translation adjustment . . . . . . . . . . . . (171.1) (128.3)
Minimum pension liability . . . . . . . . . . . . . . . . . (95.5) (3.2)
Retained earnings . . . . . . . . . . . . . . . . . . . . . 835.1 1,592.5
-------- --------
778.5 1,665.9
Less common stock in treasury
(at cost) - 53,625,339 shares and
54,342,642 shares, respectively . . . . . . . . . . . . . (532.6) (539.6)
-------- --------
245.9 1,126.3
-------- --------
- --------------------------------------------------------------------------------------------------------------------------
$3,871.7 $5,246.0
======== ========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 13
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
(In millions) December 31, 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM Net (loss) income . . . . . . . . . . . . . . . $(630.7) $ (364.4) $ 294.9
OPERATING ACTIVITIES Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization . . . . . . . . 224.0 227.6 216.9
Loss on disposal of discontinued
operations . . . . . . . . . . . . . . . . 637.4
Change in accounting estimates . . . . . . . 94.1
Restructuring . . . . . . . . . . . . . . . . 52.5 316.5 (65.0)
Non-pension postemployment
benefit obligation . . . . . . . . . . . . 36.1 317.7
Net changes in assets and liabilities:
Trade receivables . . . . . . . . . . . . . 47.8 (30.3) 19.9
Inventories . . . . . . . . . . . . . . . . 21.2 1.0 7.6
Trade payables . . . . . . . . . . . . . . (0.5) (4.4) (15.1)
Current and deferred taxes . . . . . . . . (242.4) (175.3) 63.4
Other assets . . . . . . . . . . . . . . . (34.2) (9.6) (99.0)
Other, net . . . . . . . . . . . . . . . . (132.9) 14.1 (74.8)
Discontinued operations . . . . . . . . . 79.9
------- -------- --------
152.3 292.9 348.8
------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM Capital expenditures . . . . . . . . . . . . . (177.0) (286.2) (376.0)
INVESTING ACTIVITIES Divestiture of businesses . . . . . . . . . . . 53.4 123.0 94.1
Purchase of businesses . . . . . . . . . . . . (9.5) (20.1) (29.5)
------- -------- --------
(133.1) (183.3) (311.4)
------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (Decrease) increase in short-term debt . . . . (536.2) 255.5 (310.4)
FINANCING ACTIVITIES Reduction in long-term debt . . . . . . . . . . (128.7) (266.1) (244.2)
Minority interest . . . . . . . . . . . . . . . 500.0
Long-term debt financing . . . . . . . . . . . 274.6 45.2 223.1
Sale of receivables . . . . . . . . . . . . . . 400.0
Dividends paid . . . . . . . . . . . . . . . . (126.7) (170.4) (165.0)
Issuance of stock under stock options
and benefits and awards plans . . . . . . . . 12.1 3.9 7.2
Acquisition of treasury stock . . . . . . . . . (1.6)
------- -------- --------
(104.9) (131.9) 9.1
------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and equivalents . . (85.7) (22.3) 46.5
Cash and equivalents at beginning of year . . . 186.0 208.3 161.8
-------- ---------- ----------
Cash and equivalents at end of year . . . . . . $ 100.3 $ 186.0 $ 208.3
======= ======== ========
- ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL
DISCLOSURES OF Interest paid . . . . . . . . . . . . . . . . . $ 133.3 $ 130.4 $ 177.5
CASH FLOW INFORMATION Taxes paid . . . . . . . . . . . . . . . . . . 20.5 67.1 102.6
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
30
<PAGE> 14
BORDEN, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated Minimum
Common Paid-In Translation Pension Retained Treasury
(In millions) Stock Capital Adjustment Liability Earnings Stock
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1990 . . . . . . $126.2 $310.4 $ (32.2) $(17.9) $1,997.4 $(542.3)
Net income . . . . . . . . . . . . . . 294.9
Cash dividends . . . . . . . . . . . . (165.0)
Translation adjustments . . . . . . . . (19.1)
Treasury stock purchased . . . . . . . (1.6)
Stock issued for preferred series B
converted, exercised options and
benefits and awards plans . . . . . . 4.5 2.7
Minimum pension liability adjustment . 16.5
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1991 . . . . . . 126.2 314.9 (51.3) (1.4) 2,127.3 (541.2)
Net loss . . . . . . . . . . . . . . . (364.4)
Cash dividends . . . . . . . . . . . . (170.4)
Translation adjustments . . . . . . . . (77.0)
Stock issued for preferred series B
converted, exercised options and
benefits and awards plans . . . . . . 2.3 1.6
Stock purchased and retired . . . . . . (4.3) (234.2)
Minimum pension liability adjustment . (1.8)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1992 . . . . . . 121.9 83.0 (128.3) (3.2) 1,592.5 (539.6)
Net loss . . . . . . . . . . . . . . . (630.7)
Cash dividends . . . . . . . . . . . . (126.7)
Translation adjustments . . . . . . . . (42.8)
Stock issued for preferred series B
converted, exercised options and
benefits and awards plans . . . . . . 5.1 7.0
Minimum pension liability adjustment . (92.3)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 . . . . . . $121.9 $ 88.1 $(171.1) $(95.5) $ 835.1 $(532.6)
====== ====== ======= ====== ======== =======
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
31
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share data)
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Significant accounting policies followed by the Company, as summarized below,
are in conformity with generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the
accounts of Borden, Inc. and its subsidiaries, after elimination of material
intercompany accounts and transactions. The Company's proportionate share of
the net earnings of unconsolidated 20% to 50% owned companies is included in
income. The carrying value of these companies approximates Borden's interest in
their underlying net assets. Investments of less than 20% ownership are
carried at cost.
CASH AND EQUIVALENTS/STATEMENTS OF CASH FLOWS--The Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents. The effect of exchange rate changes on cash flows is
not material.
INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
determined using the average cost and first-in, first-out methods.
PROPERTY AND EQUIPMENT--Land, buildings and machinery and equipment are carried
at cost.
Depreciation is recorded on the straight-line basis by charges to costs
and expenses at rates based on estimated useful lives of properties (average
rates for buildings 3.3%; machinery and equipment 6.8%).
Major renewals and betterments are capitalized. Maintenance, repairs and
minor renewals are expensed as incurred. When properties are retired or
otherwise disposed of, related cost and accumulated depreciation are removed
from the accounts.
INTANGIBLES--The excess of purchase price over net tangible assets of
businesses acquired is carried as intangibles in the consolidated balance
sheets. It is the Company's policy to carry intangibles arising prior to
November 1, 1970 at cost, while those arising after that date are amortized on
a straight-line basis over not more than forty years. The carrying value of
intangibles is evaluated periodically in relation to the operating performance
and future undiscounted cash flows of the underlying businesses. Adjustments
are made if the sum of expected future net cash flows is less than book value.
REVENUE RECOGNITION--Revenues are recognized when products are shipped.
ADVERTISING AND PROMOTION EXPENSE--Production costs of future media advertising
are deferred until the advertising occurs. All other advertising and promotion
costs are expensed when incurred or expensed ratably over the year in relation
to sales.
INCOME TAXES--In 1992 the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 109 "Accounting for Income Taxes," which requires the use
of the liability method of accounting for deferred income taxes.
The provision for income taxes includes Federal, foreign, state and local
income taxes currently payable and those deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities. A substantial portion of the undistributed earnings of foreign
subsidiaries has been reinvested and is not expected to be remitted to the
parent company. Accordingly, no Federal income taxes have been provided on such
earnings, and at December 31, 1993, the cumulative amount of reinvested income
was approximately $555.0. The determination of the tax effect relating to such
reinvested income is not practicable.
PENSION AND RETIREMENT SAVINGS PLANS--Substantially all of the Company's
employees are covered under one of the Company's pension plans or one of the
union-sponsored plans to which the Company contributes.
Substantially all domestic and Canadian salaried and nonbargaining hourly
employees participate in the Company's retirement savings plans. The Company's
cost of providing the retirement savings plans represents its matching of
eligible contributions made by partici-
32
<PAGE> 16
BORDEN, INC.
pating employees and is recognized as a charge to income in the year the cost
is incurred.
NON-PENSION POSTEMPLOYMENT BENEFITS--The Company provides certain health and
life insurance benefits for eligible retirees and their dependents. In 1992 the
Company adopted SFAS No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions" whereby the cost of postretirement benefits is accrued
during employees' working careers. The cost of providing these benefits was
previously recognized as a charge to income in the period the benefits were
paid. The Company elected to immediately recognize this obligation rather than
amortize it over future periods.
The Company provides certain other postemployment benefits to qualified
former or inactive employees. In 1993 the Company adopted, effective January 1,
1993, SFAS No. 112 "Employers' Accounting for Postemployment Benefits." The
standard requires that the cost of benefits provided to former or inactive
employees after employment, but before retirement, be accrued when it is
probable that a benefit will be provided. The cost of providing these benefits
was previously recognized as a charge to income in the period the benefits were
paid.
FOREIGN CURRENCY TRANSLATIONS--Assets and liabilities of foreign affiliates are
generally translated at current exchange rates, and related translation
adjustments are reported as a component of shareholders' equity. Income
statement accounts are translated at the average rates during the period. For
entities in highly inflationary countries, a combination of current and
historical rates are used in translating assets and liabilities and related
exchange adjustments are included in net income.
EARNINGS PER SHARE--Earnings per common share are computed based on the
weighted average number of common shares outstanding.
FINANCIAL INSTRUMENTS--The Company uses forward exchange contracts and currency
swaps to hedge certain net foreign investments, firm commitments and
transactions denominated in foreign currencies. Gains and losses on forward
contracts are deferred and offset against foreign exchange gains or losses on
the underlying hedged item. Premiums on currency swaps which hedge net foreign
investments are recorded in the accumulated translation adjustment account to
offset translation adjustments.
The Company uses interest rate swaps to manage interest rate risk. The
interest differentials from these swaps are recorded in interest expense.
The fair values of financial instruments are estimated based on quotes
from brokers or current rates offered for instruments with similar
characteristics.
2. DISCONTINUED OPERATIONS AND RESTRUCTURING CHARGES
In December 1993 the Company recorded a pretax charge of $752.3 to provide for
a comprehensive divestiture and restructuring program which includes the
divestment of North American snacks, seafood, jams and jellies and other
businesses.
The results below for the businesses being divested have been reported
separately as discontinued operations in the Consolidated Statements of Income.
<TABLE>
<CAPTION>
1993 1992 1991
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $1,193.8 $1,270.9 $1,311.0
(Loss) income before income taxes (102.0) (131.0) 29.7
Income tax (benefit) expense (36.2) (45.1) 14.7
Net (loss) income from
discontinued operations (65.8) (85.9) 15.0
- --------------------------------------------------------------------------
</TABLE>
The estimated loss on disposal of the discontinued operations is $637.4,
$490.0 after tax, which includes a provision for anticipated operating losses
until disposal.
The Company anticipates that the sale or closure of all the operations
will be completed by the end of 1994. The Company intends to use net proceeds
from the sale of the operations primarily to reduce debt.
Net assets of $222.2 related to the discontinued operations have been
segregated in the December 31, 1993 Consolidated Balance Sheet. This amount
consists of the assets and liabilities of the businesses to be disposed less
the estimated losses on disposal of $637.4.
33
<PAGE> 17
The restructuring of the Company's operations represent an integral part
of the comprehensive program. In connection with this program the Company
recorded a pretax charge of $114.9 for organizational restructuring, including
severance costs. The charge includes a $16.3 increase in the estimated costs to
divest of an international operation which was provided for in the 1992
restructuring reserve. The change in estimate for this divestiture is primarily
related to the additional time required to dispose of the operation and recent
unfavorable exchange rates. In 1993 charges of $1.6 were incurred. Of the
remaining $113.3 reserve at December 31, 1993, $98.3 represents cash charges
the majority of which are expected to be incurred in 1994.
The 1992 results include a restated restructuring charge of $377.2, of
which $79.4 relates to discontinued operations and is included in the loss from
discontinued operations in the Consolidated Statements of Income. The
restructuring charge includes changes in estimates of $19.8 for idle property
carrying costs and workers' compensation costs associated with locations closed
in the 1989 and 1991 restructuring reserves. The 1992 restructuring program
included projects to relocate personnel, write off obsolete assets, provide for
anticipated losses on divestitures and provide for costs to close facilities.
The cumulative charges to the 1992 restructuring reserve were $344.6, of
which $91.6 were cash charges, leaving a balance of $32.6 at December 31, 1993.
Of the $189.4 reserve balance at December 31, 1992, $50.0 was included in other
long-term liabilities due to their non-current nature.
In fourth quarter 1991 the Company recorded a $71.6 charge, of which $4.4
related to discontinued operations, which reduced net income by $44.0. The
charge covered business reorganization costs as well as severance, relocation
and other employee-related expenses. Spending related to this charge was
substantially completed in 1992.
3. RESTATEMENT AND RECLASSIFICATION
Following communications with the Securities and Exchange Commission concerning
the 1992 restructuring charge, the Company has reclassified and restated $264.8
of the 1992 restructuring charge. Of this amount, $145.5 was reclassified from
restructuring into cost of goods sold and marketing, general and administrative
expense in the 1992 financial statements and had no effect on the net 1992
results of operations. The reclassification included marketing, environmental
and litigation accruals and asset writeoffs. The remaining $119.3 was reversed
to 1992 income. It included $59.8 of business integration, marketing and data
system reorganization costs which were recorded as 1993 expenses and $59.5 of
1992 restructuring programs that have been cancelled.
In connection with the 1992 restatement, a loss of $17.2, $10.8 after tax,
relating to debt retirement costs was reclassified out of restructuring and
presented as an extraordinary item.
As a result of the restatement the 1993 net loss increased $37.1, or $0.26
per share, and the 1992 net loss decreased $75.2, or $0.53 per share, $86.0, or
$0.60 per share, before extraordinary item, as compared to the originally
reported results. Shareholders' equity increased by $38.1 and $75.2 at December
31, 1993 and 1992, respectively.
Results for 1992 and 1991 have been restated for discontinued operations.
Certain amounts in the consolidated financial statements have been reclassified
for comparative purposes.
4. ACCOUNTS RECEIVABLE
During 1993 the Company entered into an agreement which expires in 1996 that
enables the Company to periodically sell up to $400.0 of accounts receivable
without recourse. In December 1993 $400.0 of accounts receivable were sold.
Accounts receivable include tax refund receivables of $103.3 and $50.7 at
December 31, 1993 and 1992, respectively.
34
<PAGE> 18
BORDEN, INC.
5. DEBT, LEASE OBLIGATIONS AND RELATED COMMITMENTS
Debt outstanding at December 31, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
1993 1992
------------------- -------------------
Due Due
Within Within
Long-Term One Year Long-Term One Year
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 5/8% Canadian Dollar
Notes due 1993 $ 44.8
16 1/2% Australian Dollar
Notes due 1994 $ 66.8 $77.9
9 7/8% Notes due 1997 $ 78.1 78.1
Medium Term
Notes, Series A
(at an average
rate of 7.8% and
7.7%, respectively) 100.0 50.0 150.0 35.0
Zero-Coupon
Convertible Bonds
due 2002 257.6 243.4
9.2% Debentures
due 2021 117.1 117.0
7.875% Debentures
due 2023 250.0
Sinking fund
debentures:
8 3/8% due 2016 78.5 78.5
9 1/4% due 2019 48.7 48.7
Commercial paper
(at an average
rate of 3.6% and
4.0%, respectively) 200.0 400.0
Industrial Revenue
Bonds (at an average
rate of 8.4% and
8.7%, respectively) 55.2 0.3 55.4 0.2
Other (at an average
rate of 9.1% and
9.7%, respectively) 55.6 14.8 80.9 6.3
- ---------------------------------------------------------------------
Total current maturities
of long-term debt 131.9 86.3
Short-term debt:
Commercial paper
(at an average
rate of 3.6% and 4.0%,
respectively) 59.0 439.0
Other (primarily foreign
bank loans at an
average rate of 5.4%
and 9.8%, respectively) 219.7 181.3
- ---------------------------------------------------------------------
Total debt $1,240.8 $410.6 $1,329.9 $706.6
======== ====== ======== ======
- ---------------------------------------------------------------------
</TABLE>
During 1992 the Company issued ten-year zero-coupon convertible bonds. The
bonds issued had an aggregate value of $235.0 and carry an effective interest
rate of 5.74%. The bonds were issued in exchange for 7 million shares of the
Company's common stock which were retired. This noncash transaction is not
reflected in the Consolidated Statement of Cash Flows.
At December 31, 1993 and 1992 the Company had interest rate swap
agreements covering $400.0 of commercial paper. These agreements, which mature
from 1995 to 2000, effectively replace variable interest rates on the
commercial paper with a fixed rate of 9.9% in 1993 and 1992. The Company had
other interest rate swaps with a notional amount of $504.3 at December 31, 1993
and $549.7 at December 31, 1992. The aggregate fair value of all interest rate
swaps was a liability (i.e., the amount that would have to be paid to terminate
all swaps) of $73.1 at December 31, 1993 and $54.1 at December 31, 1992.
The aggregate fair value of the Company's outstanding debt was $1,828.8 at
December 31, 1993 and $2,120.9 at December 31, 1992.
The Company uses currency swap agreements to convert the 16 1/2% Australian
Dollar Notes into a 11.1% Canadian Dollar obligation.
The Company is exposed to credit loss in the event of nonperformance by
the other parties to the swap agreements. However, the Company does not
anticipate nonperformance by the counterparties.
At December 31, 1993 and 1992 $200.0 and $400.0, respectively, of
commercial paper is classified as long-term debt since the Company has both the
intent and ability, through its credit facilities, to maintain such amounts for
more than one year.
Aggregate maturities of long-term debt and minimum annual rentals under
operating leases at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
LONG-TERM MINIMUM RENTALS ON
DEBT OPERATING LEASES
- ---------------------------------------------------------
<S> <C> <C>
1994 $131.9 $ 58.9
1995 257.7 44.0
1996 51.0 32.0
1997 112.4 25.1
1998 1.6 16.7
1999 and beyond 818.1 66.0
- ---------------------------------------------------------
</TABLE>
The average amount of short-term commercial paper outstanding was $341.7
during 1993 and $409.0 during
35
<PAGE> 19
1992, and the average amount of other short-term debt was $189.7 during
1993 and $193.9 during 1992. The respective weighted average interest
rates for short-term commercial paper and other short-term debt were 3.3%
and 7.4% during 1993 and 3.7% and 9.8% during 1992. Maximum month-end
borrowings were $440.0 in 1993 and $485.0 in 1992 for short-term
commercial paper, and $219.7 in 1993 and $270.8 in 1992 for other
short-term debt. The Company had unused credit agreements of $742.7 at
December 31, 1993, of which $520.0 was in support of commercial paper
borrowings and $222.7 was available for borrowing.
The Company capitalizes interest related to the cost of acquiring
certain fixed assets. The total interest costs incurred and the portions
capitalized were $126.2 and $1.1 in 1993, $151.1 and $3.1 in 1992, and
$208.2 and $9.8 in 1991.
6. INCOME TAXES
In 1992 the Company adopted SFAS No. 109 which requires the use of the
liability method of accounting for deferred income taxes. The cumulative
effect as of January 1, 1992 of the change was a deferred tax expense of
$40.0, or $.28 per share. The effect of the accounting change in 1992 was
to increase net income by $3.1, or $.02 per share.
Comparative analysis of the provisions for income taxes from continuing
and discontinued operations and the loss on disposal of discontinued
operations follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT
Federal $ (28.7) $ 5.6 $ 25.8
State and Local (.3) 5.9 7.1
Foreign 27.1 47.3 50.1
-------- ------- --------
(1.9) 58.8 83.0
-------- ------- --------
- ---------------------------------------------------------------------------------------------------------------------
DEFERRED
Federal (175.2) (80.6) 57.5
State and Local (32.1) (8.2) 8.1
Foreign (1.6) (.9) 17.4
--------- --------- --------
(208.9) (89.7) 83.0
--------- --------- --------
- ---------------------------------------------------------------------------------------------------------------------
$ (210.8) $ (30.9) $ 166.0
========= ========= ========
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The 1993 income tax benefit of $210.8 was comprised of $27.2 from
continuing operations, $36.2 from losses of discontinued operations and
$147.4 from loss on disposal of discontinued operations.
The 1992 tax benefit of $30.9 consists of a tax expense of $14.2 from
continuing operations and a tax benefit of $45.1 from discontinued
operations. The tax expense related to continuing operations reflects
write offs of intangibles and other assets with reduced tax basis in
connection with certain businesses divested under the 1992 restructuring
program.
The 1991 tax expense of $166.0 includes $151.3 from continuing
operations and $14.7 from discontinued operations.
The deferred tax provisions in 1993, 1992 and 1991 include $(196.6),
$(116.3), and $11.4, respectively, for the tax effects of costs and
expenses related to the restructuring programs and the disposal of
discontinued operations which are deductible for income tax purposes
subsequent to their recognition for book purposes, when the assets are
disposed of or expenditures incurred. The deferred tax provisions in 1993,
1992 and 1991 also reflect the tax effects of accelerated depreciation of
$13.7, $11.7 and $15.5, respectively, and pension contributions with tax
effects of $6.0, $6.2 and $10.4, respectively.
Reconciliations of the differences between income taxes computed at
Federal statutory tax rates and consolidated provisions for income taxes
are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes computed at
Federal statutory tax rate $ (280.0) $(52.8) $ 156.7
State tax provision, net of
Federal benefits (22.6) (2.2) 10.0
Foreign tax differentials .1 1.7 2.8
Capital loss benefit (17.9) (11.7)
Restructuring programs 4.3 40.0
Loss on disposal of discontinued
operations 81.3
Other -- net 6.1 .3 8.2
- ----------------------------------------------------------------------------------------------------------------------
Provisions for income taxes $ (210.8) $(30.9) $ 166.0
========= ======= =======
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The domestic and foreign components of (loss) income before income
taxes, extraordinary loss and cumulative effect of accounting changes are
as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ (878.9) $(195.3) $ 276.1
Foreign 55.4 39.8 184.8
- ----------------------------------------------------------------------------------------------------------------------
$ (823.5) $(155.5) $ 460.9
========= ======== =======
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 20
BORDEN, INC.
The net current and non-current components of deferred income taxes
recognized in the balance sheet at December 31, 1993 and 1992 follow:
<TABLE>
<CAPTION>
1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Net current assets $ 44.0 $ 41.3
Net non-current asset (liabilities) 178.3 (66.8)
- ------------------------------------------------------------------------------------------
Net asset (liability) $ 222.3 $ (25.5)
======= =======
- ------------------------------------------------------------------------------------------
</TABLE>
The tax effects of the significant temporary differences which comprise
the deferred tax assets and liabilities at December 31, 1993 and 1992
follow:
<TABLE>
<CAPTION>
1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Non-pension postemployment benefit
obligations $ 131.7 $ 118.4
Restructuring and other reserves 140.1 113.8
Divestiture reserve 147.4
Accrued expenses and other reserves 50.8 56.7
Foreign property, plant and equipment 14.1 12.8
Minimum pension liability 58.5 1.9
Loss and credit carryforwards 108.6 42.9
Other 7.3 24.3
------- -------
Gross deferred tax assets 658.5 370.8
Valuation allowance (58.7) (42.9)
----- -----
599.8 327.9
LIABILITIES
Property, plant and equipment 236.5 212.5
Certain foreign intangibles 26.4 23.9
Deferred gain on sale of partnership interest 21.0 20.5
Pension and health plan contributions 26.5 22.9
Prepaid expenses and deferred charges 52.4 50.8
Other 14.7 22.8
----- -----
Gross deferred tax liabilities 377.5 353.4
- -----------------------------------------------------------------------------------------
Net asset $ 222.3 $ (25.5)
======= =======
- -----------------------------------------------------------------------------------------
</TABLE>
The net change in valuation allowances of $15.8 in 1993 and $42.9 in
1992 primarily relates to loss carryforwards of foreign operations which
are not expected to be realized.
The Internal Revenue Service is examining the Company's tax returns for
the period 1989-1990 and has proposed adjustments to the utilization of
certain capital losses that resulted in $46.0 of reduced income tax
expense. Full disallowance of the contested items would result in a net
charge to earnings of $52.0 including interest. The Company disagrees with
the position of the Service, will contest the proposed adjustment and
believes it has meritorious support for its position.
7. MINORITY INTEREST
In 1991 three wholly owned subsidiaries of the Company contributed
$1,700.5 in assets to T.M.I. Associates, L.P., a Delaware limited
partnership (the Partnership), in exchange for a 77.28% general partner
interest in the Partnership. The contributed assets consisted of selected
trademarks which are licensed to the Company pursuant to exclusive
long-term license agreements, a long-term note guaranteed by the Company
and cash. Additionally, an outside investor contributed $500.0 in cash to
the Partnership in exchange for a 22.72% limited partner interest. The
Partnership, whose purpose is to invest in and manage a portfolio of
assets, is a separate and distinct legal entity from the Company. For
financial reporting purposes the Partnership's assets, liabilities and
earnings are consolidated with those of the Company, and the limited
partner's interest in the Partnership is included in the Company's
financial statements as minority interest.
8. PENSION AND RETIREMENT
SAVINGS PLANS
For substantially all salaried employees, the Company's pension plans
provide benefits generally based on compensation and credited service. For
hourly employees, the plans provide benefits based on specified amounts
per year of credited service.
Following are the components of the net pension expense (credit)
recognized by the Company:
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits
earned during the period $ 13.4 $ 13.7 $ 13.1
Interest cost on the projected
benefit obligation 45.6 46.3 47.4
Actual return on plan assets (20.0) (18.9) (93.7)
Net amortization and deferral (34.2) (42.6) 33.5
- ----------------------------------------------------------------------------------------------------------------------
Net pension expense (credit) $ 4.8 $ (1.5) $ .3
======== ======= =======
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average rates used to determine net periodic pension
expense were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 8.8% 8.5% 9.3%
Rate of increase in future
compensation levels 5.4 5.3 5.9
Expected long-term rate of
return on plan assets 10.2 10.1 10.9
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 21
Most employees not covered by the Company's plans are covered by collectively
bargained agreements which are generally effective for periods from one to five
years. Under Federal pension law, there would be continuing liability to these
pension trusts if the Company ceased all or most participation in any such
trust, and under certain other specified conditions. Operations were charged
$5.8, $7.0 and $7.6 in 1993, 1992 and 1991, respectively, for payments to
pension trusts on behalf of employees not covered by the Company's plans.
The funded status of the plans and amounts included in the Company's balance
sheets at December 31, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
-------------------------- --------------------------
Plan Assets Accumulated Plan Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Plan Assets Benefits Plan Assets
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets at fair value $ 134.3 $ 378.2 $ 509.7 $ 17.6
Actuarial present
value of:
Vested benefit
obligations (106.0) (456.2) (466.2) (32.6)
Accumulated
benefit
obligations (108.8) (474.5) (483.0) (35.6)
------- ------- ------- ------
Projected benefit
obligations (128.4) (484.1) (506.0) (40.3)
------- ------- ------- ------
Plan assets greater
(less) than projected
benefit obligation 5.9 (105.9) 3.7 (22.7)
Unrecognized prior
service (benefit) cost (1.6) (7.5) (13.3) 1.4
Unrecognized loss 37.3 187.2 121.8 7.9
Unrecognized net
transition (asset)
obligation (0.5) (15.5) (19.1) 1.6
Minimum liability
adjustment (156.3) (8.0)
- ------------------------------------------------------------------------------------
Net pension
asset (liability) $ 41.1 $ (98.0) $ 93.1 $(19.8)
====== ======= ====== ======
- ------------------------------------------------------------------------------------
</TABLE>
The weighted average discount rates and rates of increase in future
compensation levels used in determining the projected benefit obligation were
7.6% and 4.5%, respectively, as of December 31, 1993, and 8.8% and 5.4%,
respectively, as of December 31, 1992.
Plan assets consist primarily of equity securities and corporate
obligations, including Company common stock. At December 31, 1993 and 1992 the
plans held 2,185,000 and 1,885,000 shares of Company common stock,
respectively, with a market value of $37.1 and $54.0, on which dividends of
$1.7 and $2.2 were received.
In accordance with SFAS No. 87 the Company recorded an additional minimum
pension liability for underfunded plans, representing the excess of accumulated
benefits over plan assets and accrued pension costs, of $148.3 and $0.7 at
December 31, 1993 and 1992, respectively. This liability, which had no effect
on income, was offset by reducing intangible assets by $0.6 and $2.1 in 1993
and 1992 and reducing equity by $92.3 and $1.8, net of income taxes, in 1993
and 1992, respectively.
Charges to operations for matching contributions under the Company's
retirement savings plans in 1993, 1992 and 1991 amounted to $16.1, $20.6 and
$21.6, respectively. Eligible salaried and hourly non-bargaining employees may
contribute up to 5% of their pay (7% for certain longer service salaried
employees), which is matched 100% by the Company. The 1993 expense was reduced
as a result of the temporary suspension of the Company match in the fourth
quarter.
9. NON-PENSION POSTEMPLOYMENT BENEFITS
The Company provides certain health and life insurance benefits for eligible
domestic retirees and their dependents. In 1992 the Company adopted SFAS No.
106 whereby the cost of postretirement benefits is accrued during employees'
working careers. The Company elected to immediately recognize this obligation
rather than amortize it over future periods. The cost of providing these
benefits was previously recognized as a charge to income in the period the
benefits were paid.
The cumulative effect of the change as of January 1, 1992 was to decrease
net income by $189.0, or $1.32 per share, after deferred tax benefit of $111.0.
The effect of the accounting change in 1992 was to reduce net income by $11.2,
or $.08 per share.
Participants who are not eligible for Medicare are provided with the same
medical benefits as active employees, while those who are eligible for Medicare
are provided with supplemental benefits. The postretirement medical benefits
are contributory for retirements after 1983; the postretirement life insurance
benefit is noncontributory.
In 1993 the Company amended the postretirement benefit plan for most
employees primarily to reduce, and over several years eliminate, the Company
subsidy of retiree medical benefits. This plan amendment reduced the
accumulated postretirement benefit obligation by $74.8 million and is being
amortized over future years.
38
<PAGE> 22
BORDON, INC.
The components of net postretirement benefit expense for the year ended
December 31, 1993 and 1992 follow:
<TABLE>
<CAPTION>
1993 1992
- -------------------------------------------------------------------------
<S> <C> <C>
Service cost $ 4.9 $ 7.3
Interest cost 22.6 23.8
Net amortization and deferral (5.6)
- -------------------------------------------------------------------------
Net postretirement benefit expense $ 21.9 $ 31.1
====== ======
- -------------------------------------------------------------------------
</TABLE>
The status of the Company's unfunded postretirement benefit obligation at
December 31, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1993 1992
- -------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $(186.9) $(193.6)
Fully eligible active plan participants (33.9) (43.4)
Other active plan participants (33.5) (71.2)
- -------------------------------------------------------------------------
(254.3) (308.2)
- -------------------------------------------------------------------------
Unrecognized prior service benefit (73.0) (4.3)
Unrecognized loss (gain) 1.6 (5.2)
- -------------------------------------------------------------------------
Accrued postretirement benefit liability $(325.7) $(317.7)
======= =======
- -------------------------------------------------------------------------
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation at December 31, 1993 and 1992 was 7.5% and 8.5%,
respectively.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation at December 31, 1993 was 14.4% for 1994,
gradually declining to 5.5% in 2009 and thereafter. The comparable assumptions
for the prior year were 15.0% and 6.5%. A one-percentage point increase in the
health care cost trend rate would increase the accumulated postretirement
benefit obligation as of December 31, 1993 by $25.4 and the sum of the service
and interest costs in 1993 by $4.5.
The health and life insurance benefits expense for retired employees on a
pay-as-you-go basis was $14.4 in 1991.
The Company provides certain other postemployment benefits, primarily
medical and life insurance benefits for long-term disabled employees, to
qualified former or inactive employees. In 1993 the Company adopted, SFAS No.
112 effective January 1, 1993. The standard requires that the cost of benefits
provided to former or inactive employees after employment, but before
retirement, be accrued when it is probable that a benefit will be provided. The
cost of providing these benefits was previously recognized as a charge to
income in the period the benefits were paid. The amounts of such charges were
not significant in the prior years.
The cumulative effect of the change as of January 1, 1993 was to decrease
net income by $18.0, or $.13 per share, after deferred tax benefit of $11.0.
The current year effect of the change was not significant.
10. SHAREHOLDERS' EQUITY
The Company has authorized 10,000,000 shares of no-par preferred series B
stock. At December 31, 1993 and 1992 6,989 and 7,324 shares, respectively were
issued and outstanding. Each share of the 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 common shares, and is redeemable at the
Company's option at $39. At December 31, 1993 46,128 common shares were
reserved for conversion of preferred series B stock.
Under a Preferred Share Purchase Rights Plan, each outstanding share of
common stock has one preferred stock purchase right (Right) which entitles
shareholders to purchase, under certain circumstances, one-hundredth of a share
of Series C Junior Participating Preferred Stock at an exercise price of $175,
subject to adjustment. The Rights may only be exercised if a person or group
acquires 20% or more of the Company's common stock, or announces a tender or
exchange offer for 20% or more of the common stock. In the event of certain
business combinations, each holder of a Right may be entitled to purchase, at
the exercise price, that number of shares of common stock of the acquiring
company, which would have a market value of two times the exercise price of the
Right.
Following is an analysis of common shares reserved for stock options under
the Company's 1974 and 1984 Stock Option Plans as Amended:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
- ---------------------------------------------------------------------------------
<S> <C> <C>
AT DECEMBER 31, 1990 3,659,859 $ 4.23-36.06
Grants 898,650 32.06
Exercises (226,155) 4.78-36.06
Expirations and cancellations (35,890) 8.22-36.06
- ---------------------------------------------------------------------------------
AT DECEMBER 31, 1991 4,296,464 $ 4.78-36.06
Grants 603,325 27.31-33.38
Exercises (133,636) 4.78-31.56
Expirations and cancellations (257,050) 26.81-36.06
- ---------------------------------------------------------------------------------
AT DECEMBER 31, 1992 4,509,103 $ 8.22-36.06
Grants 263,350 27.56
Exercises (30,970) 9.62-27.85
Expirations and cancellations (545,375) 17.75-36.06
- ---------------------------------------------------------------------------------
AT DECEMBER 31, 1993 4,196,108 $ 9.62-36.06
========= ============
- ---------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 23
At December 31, 1993 3,960,758 options were exercisable. The Company's
1984 Stock Option Plan as Amended expired in April 1993 and no further options
were granted thereafter.
The Board of Directors has approved the Company's 1994 Stock Option Plan
subject to shareholder approval at the annual meeting. Subject to shareholder
approval, 280,000 options and 30,000 restricted stock awards were granted in
1993 under the Plan.
11. FOREIGN AFFILIATES
Realized and unrealized net foreign exchange losses aggregating $38.1, $22.8
and $11.6 were charged against net income in 1993, 1992 and 1991, respectively.
At December 31, 1993 and 1992 the Company had foreign currency contracts
and swaps aggregating $285.4 and $531.9, respectively, which expire within
three years. The aggregate fair value of these financial instruments at
December 31, 1993 and 1992 was $45.5 and $55.0, which represents a gain in the
value of these contracts. These gains offset an equal amount of deferred
foreign currency translation losses at year end.
12. OPERATIONS BY INDUSTRY SEGMENT
Information about the Company's industry and geographic segments is provided on
pages 24-26 and is an integral part of the consolidated financial statements.
13. SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs $133.6 $134.4 $134.1
Depreciation and amortization
(including amortization of $39.2,
$47.1 and $48.1, respectively) 224.0 227.6 216.9
Advertising and promotions
(including promotions of $531.9,
$519.6 and $468.0, respectively) 735.5 698.0 603.3
Research and development 31.9 30.8 30.3
Rent 81.3 82.3 86.2
- -----------------------------------------------------------------------------
</TABLE>
14. COMMITMENTS
A wholly owned subsidiary as general partner of Borden Chemicals and Plastics
Limited Partnership (BCP) has certain fiduciary responsibilities to BCP's
unitholders. The Company believes that such responsibilities will not have a
material adverse effect on its financial condition.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1993 Quarters* First Second Third Fourth**
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,297.6 $1,352.5 $1,386.4 $1,469.8
- -------------------------------------------------------------------------------------
Gross profit 351.1 355.1 363.5 358.0
- -------------------------------------------------------------------------------------
Income from continuing
operations 43.7 30.5 8.5 (139.6)
- -------------------------------------------------------------------------------------
Discontinued operations:
Loss from operations (16.5) (12.0) (17.9) (19.4)
Loss on disposal (490.0)
- -------------------------------------------------------------------------------------
Net income (loss) 9.2 18.5 (9.4) (649.0)
- -------------------------------------------------------------------------------------
Per share of common stock:
Income from continuing
operations .31 .22 .06 (.99)
Discontinued operations:
Loss from operations (.11) (.09) (.13) (.14)
Loss on disposal (3.47)
Net income (loss) .07 .13 (.07) (4.60)
Dividends 0.300 0.300 0.150 0.150
Market price range:
Low 24 1/8 17 5/8 14 3/4 14 3/8
High 29 1/8 27 19 5/8 19 5/8
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1992 Quarters* First Second Third Fourth
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,397.8 $1,439.3 $1,531.8 $1,502.8
- -------------------------------------------------------------------------------------
Gross profit 369.1 389.9 395.3 415.5
- -------------------------------------------------------------------------------------
Income from continuing
operations 62.5 78.3 (214.1) 34.6
- -------------------------------------------------------------------------------------
Discontinued operations:
Loss from operations (4.0) 1.0 (70.9) (12.0)
- -------------------------------------------------------------------------------------
Net income (loss) (181.3) 79.3 (285.0) 22.6
- -------------------------------------------------------------------------------------
Per share of common stock:
Income from continuing
operations .42 .54 (1.52) .24
Discontinued operations:
Loss from operations (.03) .01 (.50) (.08)
Net income (loss) (1.23) .55 (2.02) .16
Dividends 0.285 0.300 0.300 0.300
Market price range:
Low 31 3/8 29 1/2 26 1/4 26 1/4
High 34 7/8 34 3/4 31 1/8 29 1/2
- -------------------------------------------------------------------------------------
* Quarterly 1993 income before restatement was $32.4, or $.23 per share, in the first quarter, $27.7, or $.20 per share, in the
second quarter, and $0.2, or $.00 per share, in the third quarter.
Quarterly 1992 income before restatement was ($170.5), or ($1.15) per share, in the first quarter, $79.3, or $.55 per share,
in the second quarter, ($376.8), or ($2.68) per share, in the third quarter and $28.4, or $.20 per share, in the fourth quarter.
** Fourth quarter 1993 results include a pretax gain of $14.8, $11.1 after tax, on the sale of a European packaging operation.
</TABLE>
The 1993 and 1992 quarterly earnings per share amounts do not add to the
annual amounts as a result of differences in average shares outstanding between
the quarterly and annual calculations. Quarterly results have been restated to
reflect discontinued operations and the effect of accounting changes.
40
<PAGE> 24
BORDEN, INC.
REPORT OF MANAGEMENT
The management of Borden, Inc. is responsible for the preparation of all
information, including the financial statements and related notes, included in
this Annual Report to Shareholders. The financial statements have been prepared
in conformity with generally accepted accounting principles appropriate in the
circumstances, and include amounts based on the best judgment of management.
Financial information included elsewhere in this Annual Report is consistent
with these financial statements.
In recognition of its responsibility for the integrity and objectivity of
data in the financial statements, management maintains a system of internal
accounting controls. This system includes an organizational structure with
clearly defined lines of responsibility and delegation of authority. To assure
the effective administration of internal controls, employees are carefully
selected and trained, written policies and procedures are developed and
disseminated, and appropriate communication channels are provided to foster an
environment conducive to the effective functioning of controls.
The system is supported by an internal auditing function that operates
worldwide and reports its findings to management throughout the year. The
Company's independent accountants are engaged to express an opinion on the
year-end financial statements. They objectively and independently review the
performance of management in carrying out its responsibility for reporting
operating results and financial condition. With the coordinated support of the
internal auditors, they review and test the system of internal accounting
controls and the data contained in the financial statements.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets regularly with independent accountants, management and
internal auditors to review the work performed and to ensure that each is
properly discharging its responsibilities. The independent accountants and the
internal auditors independently have full and free access to the Committee,
without the presence of management, to discuss the results of their
examinations, the adequacy of internal accounting controls and the quality of
financial reporting.
E. R. Shames G. P. Morris
President and Vice President and
Chief Executive Officer Chief Strategic Officer
REPORT OF INDEPENDENT
ACCOUNTANTS
Price Waterhouse
The Huntington Center
41 South High Street
Columbus, OH 43215
March 20, 1994
Board of Directors and
Shareholders of Borden, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and of cash flows
present fairly in all material respects, the financial position of Borden, Inc.
and its subsidiaries at December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
The 1992 consolidated financial statements have been revised as described
in Note 3. Further, as discussed in Note 9 to the consolidated financial
statements, in 1993 the Company changed its method of accounting for
postemployment benefits to conform with Statement of Financial Accounting
Standards No. 112.
41
<PAGE> 25
BORDEN, INC.
FIVE YEAR SELECTED FINANCIAL DATA
(All dollar and share amounts in millions--except per share data)
<TABLE>
<CAPTION>
For the Years 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS
Net sales . . . . . . . . . . . . . . . . . . . . . $ 5,506.3 $ 5,871.7 $ 5,924.1 $ 6,272.6 $ 6,391.5
Net (loss) income . . . . . . . . . . . . . . . . . (630.7) (364.4) 294.9 319.6 (16.6)
Percent of net income to sales . . . . . . . . . . * * 5.0% 5.1% *
- ----------------------------------------------------------------------------------------------------------------------------------
Net (loss) income per common share . . . . . . . . $ (4.47) $ (2.54) $ 2.00 $ 2.16 $ (0.11)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends:
Common share . . . . . . . . . . . . . . . . . . $ 0.90 $ 1.185 $ 1.12 $ 1.035 $ 0.90
Preferred series B share . . . . . . . . . . . . 1.32 1.32 1.32 1.32 1.32
- ----------------------------------------------------------------------------------------------------------------------------------
Average number of common shares
outstanding during the year . . . . . . . . . . 141.0 143.4 147.6 147.9 148.2
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATISTICS
Capital expenditures . . . . . . . . . . . . . . . $ 177.0 $ 286.2 $ 376.0 $ 331.1 $ 244.0
Inventories . . . . . . . . . . . . . . . . . . . . 490.4 641.1 655.4 665.5 664.0
Property, plant and equipment, net . . . . . . . . 1,336.7 1,788.1 1,903.7 1,706.8 1,441.5
Depreciation and amortization . . . . . . . . . . . 224.0 227.6 216.9 197.3 186.0
Total assets . . . . . . . . . . . . . . . . . . . 3,871.7 5,246.0 5,461.3 5,284.3 4,824.9
Current assets . . . . . . . . . . . . . . . . . . 1,290.2 1,927.5 1,921.2 2,026.1 2,011.4
Current liabilities . . . . . . . . . . . . . . . . 1,371.5 1,807.8 1,413.7 1,847.0 1,466.4
Working capital . . . . . . . . . . . . . . . . . . (81.3) 119.7 507.5 179.1 545.0
Current ratio . . . . . . . . . . . . . . . . . . . 0.9:1 1.1:1 1.4:1 1.1:1 1.4:1
Long-term debt . . . . . . . . . . . . . . . . . . $ 1,240.8 $ 1,329.9 $ 1,345.8 $ 1,339.8 $ 1,440.6
Total debt to adjusted total capitalization . . . . 69% 55% 41% 53% 51%
Shareholders' equity . . . . . . . . . . . . . . . $ 245.9 $ 1,126.3 $ 1,974.5 $ 1,841.6 $ 1,689.4
Liquidating value of preferred stock . . . . . . . (.2) (.2) (.2) (.2) (.2)
Equity per common share at year end . . . . . . . . 1.74 8.01 13.39 12.50 11.41
Return on average shareholders' equity . . . . . . * * 15.6% 18.3% *
- ----------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' DATA
Outstanding common shares at year end . . . . . . . 141.4 140.6 147.5 147.3 148.0
- ----------------------------------------------------------------------------------------------------------------------------------
Market price of common stock:
At year end . . . . . . . . . . . . . . . . . . $ 17 $ 28 5/8 $ 32 5/8 $ 29 7/8 $ 34 3/8
Range during year . . . . . . . . . . . . . . . 29 1/8-14 3/8 34 7/8-26 1/4 38 3/4-27 1/2 37 7/8-27 38 5/8-27 3/4
- ----------------------------------------------------------------------------------------------------------------------------------
Number of common shareholders . . . . . . . . . . . 40,927 38,953 39,234 39,010 39,098
- ----------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE DATA
Payroll . . . . . . . . . . . . . . . . . . . . . . $ 1,116.4 $ 1,123.8 $ 1,133.6 $ 1,135.5 $ 1,070.2
Average number of employees . . . . . . . . . . . . 39,500 41,900 44,400 46,300 46,500
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
Results for 1989 and 1990 have been restated to consistently present marketing expenses.
*Not meaningful because of net loss.
</TABLE>
44
<PAGE> 1
EXHIBIT 22
Page 1 of 4
BORDEN, INC.
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
The percentage of State of other
voting securities jurisdiction of
owned, or other incorporation
Subsidiaries of Registrant basis of control or organization
- -------------------------- ------------------ ---------------
<S> <C> <C>
Albadoro S.p.A. 100 Italy
Monder Aliment S.p.A. 100 Italy
Alisa, S.A. 95 Colombia
BCP Management, Inc. 100 Delaware
BDS Two, Inc. 100 Delaware
BDS Three, Inc. 100 Delaware
BDH One, Inc. 100 Delaware
Borden Realty UK Limited 100 United Kingdom
Borden Redevelopment Corp 100 Missouri
Borden, S.A. 100 Panama
Broex, S.A. 50 Panama
Gallina Blanca, S.A. 50 Spain
Paty Produtos Alimenticios Ltda. 100 Brazil
Borden U.K. Holdings, Ltd. 100 New Jersey
Borden U.K. Limited 100 United Kingdom
Borden (Bray) Ltd. 100 Ireland
Borden Decorative Products Limited 100 United Kingdom
Borden Wallcoverings Pension
Trustees Limited 100 United Kingdom
Crown Wallcoverings-Borden Pension
Trustee Ltd. 100 United Kingdom
Borden Peterlee, Limited 100 United Kingdom
Borden UK Common Investment Fund
Trustees Limited 100 United Kingdom
Humbrol Limited 100 United Kingdom
Gregg Foods of Garden Grove, Inc. 100 Delaware
Harris Ocean Fresh Company 100 South Carolina
International Gourmet Specialties Company 100 New Jersey
International Packaging Corporation S.A. 100 Luxembourg
C&F Immobilien-Verwaltungs GMBH 100 Germany
Cofin Folien Gmbh 100 Germany
Cofin Hellas, S.A. 100 Greece
Fiap France, S.A. 100 France
Interbusco Ltd. 50 United Kingdom
Pami Immobiliere, S.A. 100 France
Jays Foods, Inc. 100 Illinois
</TABLE>
<PAGE> 2
EXHIBIT 22
Page 2 of 4
BORDEN, INC.
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
The percentage of State of other
voting securities jurisdiction of
owned, or other incorporation
Subsidiaries of Registrant basis of control or organization
- -------------------------- ------------------ ---------------
<S> <C> <C>
Meadow Gold Dairies Holding Company 100 Delaware
Meadow Gold Dairies, Inc. 100 Delaware
Merlino's Macaroni, Inc. 100 Washington
Orleans Food Company 100 Delaware
Pastas Alimenticias La Imperial, S.A. 100 Panama
Alimentos Nutritivos S.A. 100 Panama
Naxos S.A. 100 Panama
Re-Mi Foods, Inc. 100 Delaware
Starflake Foods Company, Inc. 100 New York
Suministros Generales y Miel Espanola, S.A. 50 Spain
Preparados Alimenticios, S.A. 50 Spain
Superior Dairies, Inc. 100 Texas
Wholesome Dairy, Inc. 100 Texas
BDH Two, Inc. 100 Delaware
BDS One, Inc. 100 Delaware
BFE Corp. 100 Delaware
BFI Ltd., L.P. 100 Delaware
Borden Australia (Pty.) Ltd. 100 Australia
Borden Belgium, N.V. 100 Belgium
Bordex (Belgium) S.A. 100 Belgium
Borden Company A/S, The 100 Denmark
Cocio Chokolademaelk A/S 100 Denmark
Borden Ost A/S 100 Denmark
Borden Company Limited, The 100 Canada
Borden Company Limited The 100 Ireland
Borden Foods Limited 100 Ireland
Borden International Packaging Ltd. 70 Ireland
Borden Exports Limited 100 Ireland
Humpty Dumpty Foods Limited 100 Ontario
Borden De Costa Rica S.A. 100 Costa Rica
Borden Espana, S.A. 100 Spain
Borden France, S.A. 100 France
Borden Barnier S.A. 100 France
Borden Export Products S.A. 100 France
Borden Packaging France S.A. 100 France
Borden Plastics S.A. 100 France
</TABLE>
<PAGE> 3
EXHIBIT 22
Page 3 of 4
BORDEN, INC.
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
The percentage of State or other
voting securities jurisdiction of
owned, or other incorporation
Subsidiaries of Registrant: basis of control or organization
- --------------------------- ---------------- ---------------
<S> <C> <C>
Borden International (Europe) Ltd. 100 Delaware
Borden International Inc. 100 Delaware
Borden International Philippines, Inc. 98 Philippines
Borden Japan, Inc. 100 Japan
Borden (Nederland), B.V. 100 Netherlands
Bordex, B.V. 100 Netherlands
Borden Thermoforming, B.V. 100 Netherlands
Business Inflight Services B.V. 50 Netherlands
Thompack, B.V. 100 Netherlands
Borden (NZ) Limited 100 New Zealand
Borden (Proprietary) Limited 100 South Africa
Babelegi Processing (Pty.) Ltd. 100 South Africa
Borden Foods (Pty.) Ltd. 100 South Africa
Borden Puerto Rico, Inc. 100 New York
Borden Scandanavia A/S 100 Norway
Borges, GmbH 100 Germany
Compania Casco S.A. Industrial y Commercial 99 Argentina
Compania Colombiana de Alimentos Lacteos, S.A. 100 Colombia
Compania Internacional de Ventas, S.A. 100 Panama
Adria Produtos Alimenticios Ltda. 100 Brazil
The Wenham Corp., S.A. 100 Uruguay
Alba Amazonia S.A. Industrias Quimicas 100 Brazil
Alba Nordeste Industries Quimica Ltda. 100 Brazil
Vicaplast Industria e Comercio de
Plastico Ltda. 100 Brazil
Alba Quimica Industria e Comercio Ltda. 100 Brazil
Bexley Finance, S.A. 100 Panama
Bexley Comercio e Participacao Ltda. 100 Brazil
Borden Chemical (M.) Sdn. Bhd. 100 Malaysia
Compania Chiricana de Leche, S.A. 96.8 Panama
Compania Quimica Borden, S.A. 100 Panama
Compania Quimica borden Ecuatoriana, S.A. 83.3 Ecuador
Fabrica de Productos Borden, S.A. 100 Panama
F.I.A.P. Fabrica Italiana Articoli
Plastici S.p.A. 100 Italy
Cistefra S.r.l. 100 Italy
FIAP Deutschland GmbH 100 Germany
FIAP Hellas Ltd. 100 Greece
Maite S.p.A. 100 Italy
Metur S.r.l. 100 Italy
Termofin S.p.a. 100 Italy
</TABLE>
<PAGE> 4
EXHIBIT 22
Page 4 of 4
BORDEN, INC.
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
The percentage of State or other
voting securities jurisdiction of
owned, or other incorporation
Subsidiaries of Registrant: basis of control or organization
- --------------------------- ---------------- ---------------
<S> <C> <C>
Food and Snack Holdings (Singapore) Pte. Ltd. 50 Singapore
Borden Foods (Malaysia) Sdn. Bhd. 50 Malaysia
Gun Ei Borden International Resin Co. Ltd. 50 Japan
Helados Borden, S.A. 100 Panama
Hitachi Borden Chemical Products, Inc. 50 Japan
industrias la Famosa, Inc. 100 New Jersey
Coco Lopez U.S.A., Inc. 100 Maryland
Codoveca C. por A. 100 Dominican Republic
Productos del Tropico C. Por A. 100 Dominican Republic
Italcolor, S.A. 100 Uruguay
Marshland Energy, Inc. 100 New Jersey
Nedrob Affiliates, Inc. 100 Delaware
Nutrinsa, S.A. 100 Ecuador
One Nedrob, Inc. 100 Delaware
Orchard Corporation of Hong Kong, The 100 Hong Kong
Productos Borden, inc. 100 New Jersey
Chevy Chase, Inc. 100 Puerto Rico
Frozen Desserts, Inc. 100 Delaware
Qihe Dairy Corp. Ltd 50 Republic of China
Resinite (South Africa) Pty. Ltd. 100 South Africa
Snacks Distributors, Inc. 100 New Jersey
T.M.I. Associates, L.P. 77.28 Delaware
Wilhelm Weber, GmbH 100 Germany
Grossbackerei Kamps Gmbh 100 Germany
Kamps Backwaren Service Gmbh 100 Germany
Grossbackerei Nuschelberg Gmbh 100 Germnay
W. Klemme, GmbH and Co. K.G. 50 Germany
Lecker Baecker Gmbh 100 Germany
Nur Hier Grossbackerei GmbH 100 Germany
Stefansback Backwaren GmbH 100 Germany
Weber-FSV Kft 50 Hungary
Zeelandia Investerings Partnership 95.2 New York
T.K. Partner, Inc. 100 Delaware
Zip Corporation 100 Delaware
Zcan Investments Ltd. 100 Canada
</TABLE>
NOTE: The above subsidiaries have been included in Borden's Consolidated
Financial Statements on a consolidated or equity basis as appropriate.
The names of certain subsidiaries, active and inactive, included in the
Consolidated Financial Statements and of certain other subsidiaries not
included therein, are omitted since when considered in the aggregate as a
single subsidiary they do not constitute a significant subsidiary.
