<PAGE>
PROSPECTUS SUPPLEMENT FILED PURSUANT TO 424(B)(5)
(TO PROSPECTUS DATED JULY 17,1995) REGISTRATION NUMBER 33-60803
RJR NABISCO, INC.
[LOGO]
$150,000,000 8 1/4% NOTES DUE 2004
$200,000,000 8 1/2% NOTES DUE 2007
--------------
RJR Nabisco, Inc. ("RJRN" or the "Company") is concurrently offering its
8 1/4% Notes Due 2004 (the "Seven Year Notes") and 8 1/2% Notes Due 2007 (the
"Ten Year Notes", and together with the Seven Year Notes, the "Notes"). Interest
on the Notes will be payable semi-annually on January 1 and July 1 of each year,
beginning January 1, 1998. The Seven Year Notes and the Ten Year Notes will be
redeemable as a whole or in part at the option of the Company at any time, at a
redemption price equal to the greater of (i) 100% of the principal amount of
such Notes and (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the date of redemption
on a semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate (as defined herein) plus 15 basis points in the
case of the Seven Year Notes or 25 basis points in the case of the Ten Year
Notes, plus, in each case, accrued interest thereon to the date of redemption.
SEE "RISK FACTORS", COMMENCING ON PAGE S-6, FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE NOTES.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
Per Seven Year Note............... 99.425% .625% 98.8%
Total............................. $ 149,137,500 $ 937,500 $ 148,200,000
Per Ten Year Note................. 99.279% .65% 98.629%
Total............................. $ 198,558,000 $ 1,300,000 $ 197,258,000
</TABLE>
(1) Plus accrued interest, if any, from July 1, 1997.
(2) The Company has agreed to indemnify the several Underwriters against certain
liabilities under the Securities Act of 1933. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $300,000.
-------------------
The Notes are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Simpson
Thacher & Bartlett, counsel for the Underwriters. It is expected that the Notes
will be ready for delivery in New York, New York on or about July 1, 1997
through the book-entry facilities of The Depository Trust Company ("DTC")
against payment therefor in immediately available funds.
------------------------
THE MANAGERS FOR THE OFFERING OF THE SEVEN YEAR NOTES ARE:
MERRILL LYNCH & CO. MORGAN STANLEY DEAN WITTER
CHASE SECURITIES INC. DEUTSCHE MORGAN GRENFELL
ABN AMRO SECURITIES (USA), INC.
BT SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
THE MANAGERS FOR THE OFFERING OF THE TEN YEAR NOTES ARE:
MORGAN STANLEY DEAN WITTER MERRILL LYNCH & CO.
CHASE SECURITIES INC. DEUTSCHE MORGAN GRENFELL
BANCAMERICA SECURITIES, INC.
CITICORP SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON
UBS SECURITIES
-------------------
The date of this Prospectus Supplement is June 26, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and also are available for inspection and
copying at the regional offices of the Commission located at Seven World Trade
Center, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a web
site at http://www.sec.gov containing reports, proxy statements and other
information regarding registrants, including the Company, that file
electronically with the Commission. Such reports, proxy statements and other
information also can be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005, on which exchange certain of the
Company's securities are listed.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Notes.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF NOTES TO STABILIZE THEIR PRICE, THE
PURCHASE OF NOTES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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<PAGE>
THE COMPANY
The operating subsidiaries of the Company comprise one of the largest
tobacco and food companies in the world. In the United States, the tobacco
business is conducted by R. J. Reynolds Tobacco Company ("RJRT"), a wholly-owned
subsidiary of the Company and the second largest manufacturer of cigarettes, and
the food business is conducted by Nabisco Holdings Corp. ("Nabisco Holdings")
through its wholly-owned subsidiary, Nabisco, Inc. ("Nabisco"), the largest
manufacturer and marketer of cookies and crackers. The Company owns
approximately 80.5% of the economic interest and approximately 97.6% of the
voting power of Nabisco Holdings. Tobacco operations outside the United States
are conducted by R.J. Reynolds International ("Reynolds International"), and
food operations outside the United States are conducted by Nabisco
International, Inc. ("Nabisco International") and Nabisco Ltd, subsidiaries of
Nabisco. RJRT's and Reynolds International's tobacco products are sold around
the world under a variety of brand names. Food products are sold in the United
States, Canada, Latin America, certain European countries and certain other
international markets.
RJRT's largest selling cigarette brands in the United States include
WINSTON, DORAL, CAMEL, SALEM, MONARCH and VANTAGE. RJRT's other cigarette
brands, including MORE, NOW, BEST VALUE, STERLING, MAGNA and CENTURY, are
marketed to meet a variety of smoker preferences. RJRT has also introduced
ECLIPSE, a cigarette featuring 90% reduced second hand smoke. All RJRT brands
are marketed in a variety of styles. Reynolds International operates in over 170
markets around the world and is the second largest of two international
cigarette producers that have significant positions in the American Blend
segment of the international tobacco market.
Nabisco is one of the largest food businesses in the world. Through its
domestic divisions, Nabisco manufactures and markets cookies, crackers, snack
foods, hard and bite-size candy, gum, nuts, hot cereals, margarine, pet foods,
dry-mix dessert products and other grocery products under established and well-
known trademarks, including OREO, CHIPS AHOY!, SNACKWELL'S, NEWTONS, RITZ,
PREMIUM, LIFE SAVERS, PLANTERS, A.1., GREY POUPON, MILK-BONE, CREAM OF WHEAT,
FLEISCHMANN'S and BLUE BONNET. Nabisco International is a leading producer of
biscuits, powdered dessert and drink mixes, baking powder, pasta, juices, milk
products and other grocery items as well as industrial yeast and bakery
ingredients in many of the 17 Latin American countries in which it has
operations. Nabisco Ltd conducts Nabisco's Canadian operations through a biscuit
division, a grocery division and a food service division. Excluding private
label brands, the biscuit division produced nine of the top ten cookies and nine
of the top ten crackers in Canada in 1996.
The principal executive offices of the Company are located at 1301 Avenue of
the Americas, New York, New York 10019; its telephone number is (212) 258-5600.
S-3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the three months ended March 31,
1997 and for each of the last five years is as follows:
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
MARCH 31, -------------------------------------
1997 1996 1995 1994
----------------- ----- ----- -----
(DOLLARS IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges.............................. 2.7 2.4 2.3 2.2
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Ratio of earnings to fixed charges.............................. 1.1 2.0
</TABLE>
For purposes of these computations, earnings consist of income (loss) before
extraordinary items plus income taxes and fixed charges less minority interest
in the pre-tax income of Nabisco Holdings. Income (loss) before extraordinary
items includes amortization of trademarks and goodwill and depreciation expense.
Fixed charges consist of interest on indebtedness, amortization of debt issuance
costs, capitalized interest and that portion of operating rental expense
representative of the interest factor.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes will be used to
retire commercial paper in order to extend the average maturity of the Company's
outstanding indebtedness. As of June 24, 1997, the Company's commercial paper
bore interest at a blended rate of 5.99% and had an average maturity of
approximately three weeks.
RECENT DEVELOPMENTS
Following several months of negotiations among tobacco companies, state
attorneys general, representatives of the public health community and
plaintiff's lawyers, on June 20, 1997, counsel representing RJRT and certain
other parties signed a Memorandum of Understanding (the "Memorandum") that sets
forth concepts for federal legislation and a contractual protocol to resolve a
variety of litigation and regulatory issues concerning tobacco. The Memorandum
is subject to any necessary approvals by the various states and the Boards of
Directors of RJRT and the other participating tobacco companies. See Exhibit 2
to the Company's Current Report on Form 8-K dated June 20, 1997 and incorporated
herein by reference for the complete text of the Memorandum. The discussion
below is qualified in its entirety by reference to the more detailed information
contained in such Form 8-K.
RJRT can provide no assurance that legislation to implement the Memorandum
will be enacted or that it will be enacted without modification that is
materially adverse to the tobacco industry, particularly in light of the complex
legal and factual issues involved and the need to reconcile the views of many
competing interests. It is not certain that any proposed legislation that
emerges from this process will be acceptable to RJRT. If enacted, the
legislation could face challenges on the grounds, among others, that the federal
government lacks the authority to regulate the tobacco industry or limit its
liability in the manner contemplated by the Memorandum. Regardless of the
legislative outcome, the negotiation and signing of the Memorandum could affect
other federal, state and local regulation of the tobacco industry, alter the
climate for pending litigation against RJR Nabisco Holdings Corp. ("Holdings"),
RJRN, RJRT and other tobacco companies and affect the number of new smoking and
health claims filed against the industry.
The Memorandum requires the tobacco companies to make an initial $10 billion
payment and subsequent annual multi-billion dollar payments. Based on
discussions with other manufacturers who were participants in the negotiations
which led to the Memorandum, RJRT believes that its share of the initial payment
will be approximately $600 million and that subsequent payments will be
allocated within the
S-4
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industry based on market share. However, the financial effects of this
legislation and the related contractual protocol are difficult to predict. They
depend, among other things, on (i) the means and timing of the payments actually
required of RJRT by the legislation; (ii) the means used to finance these
payments; (iii) the impact of increased cigarette prices and other aspects of
the legislation and the contractual protocol on domestic cigarette consumption;
(iv) the effect of the legislation and the contractual protocol on the
consumption of tobacco products and the regulatory and litigation environment
outside the United States; (v) their effect, if any, on public attitudes toward
smoking and the tobacco industry; and (vi) their impact on RJRT's competitive
position in the tobacco industry.
Despite these uncertainties, RJRN believes that implementation of the
Memorandum would increase the costs and reduce the consumption of RJRT's tobacco
products in the United States and that it could have a significant negative
effect on the business of RJRT and the stated financial position of RJRN and
RJRT. On the other hand, the proposals contemplated by the Memorandum offer a
measure of relief from certain litigation that could otherwise materially affect
the results of operations or cash flows of RJRN in particular quarterly or
annual periods or its financial condition. In evaluating any legislation to
resolve tobacco issues, RJRN and RJRT will continue to weigh carefully the
potential benefits, principally greater regulatory and litigation certainty and
a reduction in aggregate contingency risk, against the resulting monetary,
regulatory and other costs. See "Risk Factors--Exposure to Tobacco-Related
Litigation and Regulation" and "--Holding Company Structure".
S-5
<PAGE>
RISK FACTORS
The following factors and other information described elsewhere or
incorporated by reference herein should be carefully considered by prospective
investors in connection with their decision to invest in the Notes.
EXPOSURE TO TOBACCO-RELATED LITIGATION AND REGULATION
LITIGATION
Various legal actions, proceedings and claims are pending or may be
instituted against RJRT or its affiliates (including, with increasing frequency,
RJRN) or indemnitees, including those claiming that lung cancer and other
diseases as well as addiction have resulted from the use of or exposure to
RJRT's tobacco products. As of June 24, 1997, 336 active cases were pending
against RJRT and/or affiliates or indemnitees, 332 in the United States, one in
Canada, two in Puerto Rico and one in Guam. New cases are being filed at a
higher rate than previously experienced, prompted in part by the Memorandum and
reports of discussions leading to the Memorandum. See "Recent Developments". For
example, between March 31, 1997 and June 24, 1997, 111 new cases were filed or
served against RJRT and/or its affiliates or indemnitees. By comparison, in the
entire second quarter of 1996, only 44 new actions were filed or served.
The plaintiffs in these actions seek recovery on a variety of legal
theories, including, among others, strict liability in tort, design defect,
negligence, special duty, voluntary undertaking, breach of warranty, failure to
warn, fraud, misrepresentation, unfair trade practices, conspiracy, aiding and
abetting, unjust enrichment, anti-trust, Racketeering Influenced and Corrupt
Organization Act ("RICO"), indemnity and common law public nuisance. Punitive
damages, often in amounts ranging into the hundreds of millions or even billions
of dollars, are specifically pleaded in a number of cases in addition to
compensatory and other damages. Seven of the 332 cases active in the United
States as of June 24, 1997 involve alleged non-smokers claiming injuries
resulting from exposure to environmental tobacco smoke. Forty-eight of the
active cases seek, inter alia, recovery of health care costs incurred by third
parties to treat individuals suffering from diseases or conditions allegedly
related to tobacco. The health care cost recovery actions have been filed
primarily on behalf of states, but also on behalf of counties, cities,
taxpayers, unions and others. Thirty-four cases purport to be class actions on
behalf of thousands of individuals. Purported classes include individuals
claiming to be addicted to cigarettes, individuals and their estates claiming
illness and death from cigarette smoking, Blue Cross/Blue Shield subscribers
claiming reimbursement for premiums paid and flight attendants alleging personal
injury from exposure to environmental tobacco smoke in their workplace. The
flight attendant case, the first purported class action to be tried, commenced
trial on June 2, 1997.
There has been a significant increase in the number of cases scheduled for
trial either against RJRT or other members of the cigarette industry. As of June
24, 1997, RJRT had 15 cases scheduled for trial in 1997 in addition to one class
action currently ongoing in Florida and one trial that has been successfully
completed. The 15 cases scheduled for trial include three attorneys general
cases and two class actions.
Litigation is subject to many uncertainties, and it is possible that some or
all of the tobacco-related legal actions, proceedings or claims could be decided
against RJRT or its affiliates or indemnitees. Determinations of liability or
adverse rulings against other cigarette manufacturers that are defendants in
similar actions, even if such rulings are not final, could adversely affect the
litigation against RJRT or its affiliates or indemnitees and could encourage an
increase in the number of such claims.
Although it is impossible to predict the outcome of such events on pending
litigation and the rate at which new lawsuits are filed against RJRT and RJRN, a
significant increase in litigation and/or in adverse outcomes for tobacco
defendants could have an adverse effect on RJRT and RJRN. RJRT and RJRN each
believe that they have a number of valid defenses to any such actions and intend
to defend vigorously all such actions in which they are named defendants.
RJRN believes that, notwithstanding the quality of defenses available to it
and RJRT in litigation matters, it is possible that the results of operations or
cash flows of RJRN in particular quarterly or annual
S-6
<PAGE>
periods or the financial condition of RJRN could be materially affected by the
outcome of certain pending litigation matters (including litigation costs).
Management is unable to predict the outcome of the litigation or to derive a
meaningful estimate of the amount or range of any possible loss in any
particular quarterly or annual period or in the aggregate.
EFFECT OF MEMORANDUM
LITIGATION. If enacted, the federal legislation provided for in the
Memorandum would settle the present governmental, parens patriae and class
actions and would bar similar actions from being maintained in the future. The
legislation would also settle all addiction/dependence claims. However, until
then the Memorandum provides that no stay applications will be made in pending
governmental actions without mutual consent of the parties. RJRT is currently in
discussions concerning certain state attorney general actions scheduled to be
tried this year with regard to the postponement or settlement of such actions
pending the enactment of the legislation contemplated by the Memorandum. No
assurance can be given that a postponement or settlement will be achieved, or,
if achieved, the terms thereof.
The Memorandum preserves the rights of individuals to sue the tobacco
industry and does not alter existing legal doctrine regarding the types of tort
claims that can be brought. However, claimants could seek punitive damages only
with respect to claims based upon conduct taking place after enactment of the
legislation contemplated by the Memorandum. Except with respect to already
pending actions, third-party payor (and similar) claims could be maintained only
on a subrogated basis.
The Memorandum contemplates that RJRT and other participating tobacco
manufacturers would enter into a joint sharing agreement for civil liabilities.
In general, annual payments for judgments and settlements arising from tort
actions would be subject to a cap, with any excess above the cap rolled forward
to the next year. Industry payments up to the cap would partially reduce the
annual payments otherwise due from the industry. The tobacco companies would
remain fully responsible for their defense costs in all tort actions. The
Memorandum does not address payment of plaintiffs' counsel fees in the actions
that would be settled. For information concerning the industry's monetary
liability and uncertainties and contingencies related to the Memorandum, see
"Recent Developments" above.
REGULATION. If enacted, the legislation contemplated by the Memorandum
would impose extensive restrictions on the advertising and marketing of
tobacco-related products. It would also seek to expand existing restrictions on
underage access to tobacco products by, among other things, requiring any entity
that sells directly to consumers to obtain and maintain a federal license and
abide by certain minimum federal standards. In addition, the legislation would
implement a "look back" provision that would require the tobacco industry to pay
substantial economic surcharges if certain required reductions in underage use
of tobacco products are not met. Finally, the tobacco companies would submit to
comprehensive regulation by the Food and Drug Administration ("FDA"), which
would include FDA authority to reduce or eliminate nicotine from cigarettes at
certain times and under certain circumstances, and consent to the regulation of
smoking at work and in public by the Occupational Safety and Health
Administration.
For additional information on current regulation, legislation and litigation
relating to the cigarette industry and RJRT, see "Recent Developments" in this
Prospectus Supplement, and RJRN's annual report on Form 10-K for the year ended
December 31, 1996 under "Business--Tobacco--Legislation and Other Matters
Affecting the Cigarette Industry" and "--Litigation Affecting the Cigarette
Industry" and RJRN's quarterly report on Form 10-Q for the quarter ended March
31, 1997 under Part II. Item 1 "Legal Proceedings", Part I. Item 1 "Financial
Statements--Note 2 to the Consolidated Condensed Financial Statements" and Part
I. Item 2 "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Tobacco," all of which are incorporated herein by
reference.
HOLDING COMPANY STRUCTURE
The operations of RJRN are conducted through its subsidiaries and,
therefore, RJRN is substantially dependent on the earnings and cash flow of its
subsidiaries to meet its debt obligations, including its obligations with
respect to the Notes. Because the assets of its subsidiaries constitute
effectively all of the
S-7
<PAGE>
assets of RJRN, and because these subsidiaries do not guarantee the payment of
principal of and interest on the Notes, claims of holders of the Notes will be
effectively subordinated to the claims of creditors of RJRN's subsidiaries,
including Nabisco and RJRT, with respect to the assets of such subsidiaries.
Under the legislation contemplated by the Memorandum, if enacted, these claims
of creditors would include all monetary amounts due under such legislation and
all residual liabilities for smoking and health claims. Such claims would
receive priority in any bankruptcy or reorganization proceeding of RJRT.
RANKING
The Notes will be unsubordinated and unsecured obligations of RJRN ranking
PARI PASSU with all existing and future unsubordinated and unsecured obligations
of RJRN. At March 31, 1997, RJRN had approximately $5.1 billion of debt that is
PARI PASSU with the Notes and no debt that is, by its terms, senior or
subordinated to the Notes. At the same date, subsidiaries of RJRN had
approximately $5.2 billion of debt (excluding intercompany debt).
LEVERAGE AND DEBT SERVICE
At March 31, 1997, RJRN, on a consolidated basis, had outstanding total
debt, total stockholder's equity and total capital of approximately $10.3
billion, $11.7 billion and $22.0 billion, respectively. Accordingly, RJRN's
ratios of total debt to total stockholder's equity and total debt to total
capital were .88 to 1 and .47 to 1, respectively. All amounts and ratios are
expressed on a consolidated basis.
The ratios of total debt to total stockholder's equity of RJRN may continue
to have the effect, generally, of restricting the flexibility of RJRN in
responding to changing business and economic conditions insofar as they affect
the financial condition and financing requirements of RJRN and its subsidiaries.
RESTRICTIONS IN CREDIT AGREEMENTS
RJRN is a party to certain credit agreements (the "RJRN Credit Agreements")
that impose operating and financial restrictions on RJRN and its subsidiaries by
limiting the ability of RJRN and its subsidiaries to incur indebtedness, engage
in transactions with stockholders and affiliates, create liens, sell or dispose
of certain assets including stock of Nabisco and Nabisco Holdings and engage in
certain mergers or consolidations.
Nabisco Holdings and Nabisco are parties to certain credit agreements (the
"Nabisco Credit Agreements") that limit the amount of dividends, loans, advances
and other payments by Nabisco Holdings and its subsidiaries to RJRN and its
subsidiaries, subject to certain exceptions. In particular, dividends and
distributions by Nabisco Holdings and Nabisco to third parties, including RJRN,
are generally limited to $300 million plus 50% of Nabisco Holdings' cumulative
consolidated net income since January 1, 1995. Nabisco Holdings currently pays
regular quarterly dividends on its shares of common stock, including the
213,250,000 shares held by RJRN, of $.175 per share or $.70 per share on an
annualized basis. RJRN does not believe that the provisions of the Nabisco
Credit Agreements will limit the ability of Nabisco Holdings to pay its
anticipated regular quarterly dividends.
S-8
<PAGE>
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements
the description of the general terms and provisions of the Notes set forth in
the accompanying Prospectus under "Description of Debt Securities."
The Seven Year Notes will be limited to an aggregate principal amount of
$150,000,000 and the Ten Year Notes will be limited to an aggregate principal
amount of $200,000,000. The Notes will be issued in fully registered form only
in the form of global notes registered in the name of Cede & Co., the nominee of
DTC. Beneficial interests in the Notes will be shown on, and transfers thereof
will be offered only through, records maintained by DTC and its participants.
See "Description of Debt Securities--Global Securities" in the accompanying
Prospectus. The Notes will not be issued in definitive form except in the
circumstances described under such caption in the Prospectus.
The Seven Year Notes will mature on July 1, 2004, and the Ten Year Notes
will mature on July 1, 2007. Interest on the Notes will be payable semi-annually
on January 1 and July 1 of each year commencing January 1, 1998 until maturity
at the respective annual interest rates shown on the cover page hereof. Interest
on the Notes will accrue from July 1, 1997. Interest will be payable to the
persons in whose names the Notes are registered at the close of business on the
preceding December 15 and June 15, respectively, by check mailed to the address
of such person as it appears on the security register for the Company or, at the
option of the Company, by wire transfer as provided in the Indenture. Payment of
principal at maturity will be made upon presentation of the Notes, and the Notes
may be presented for registration of transfer and exchange, at the office of the
Company in New York, New York. The Company has designated the corporate trust
office of the Trustee, currently located at 111 Wall Street, New York, New York,
10034, as its office for such purposes.
The Seven Year Notes and the Ten Year Notes will be redeemable as a whole or
in part, at the option of the Company at any time, at a redemption price equal
to the greater of (i) 100% of the principal amount of such Notes and (ii) the
sum of the present values of the remaining scheduled payments of principal and
interest thereon discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus 15 basis points in the case of the Seven Year Notes or 25 basis points
in the case of the Ten Year Notes, plus, in each case, accrued interest thereon
to the date of redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with the
Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption
date.
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<PAGE>
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan Stanley & Co. Incorporated, Chase Securities Inc. and
Deutsche Morgan Grenfell Inc. and their respective successors; provided,
however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date interest will cease to accrue on the Notes or portions
thereof called for redemption.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the several Underwriters named below, and
each of the Underwriters (for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley & Co. Incorporated are acting as joint lead
managers in the case of the Seven Year Notes and for whom Morgan Stanley & Co.
Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting
as joint lead managers in the case of the Ten Year Notes) has severally agreed
to purchase the principal amount of Seven Year Notes and Ten Year Notes set
forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF SEVEN YEAR PRINCIPAL AMOUNT
UNDERWRITER NOTES OF TEN YEAR NOTES
- ---------------------------------------------------------------- ------------------ -------------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ......................................... $ 50,250,000 $ 67,000,000
Morgan Stanley & Co. Incorporated............................... 50,250,000 67,000,000
Chase Securities Inc. .......................................... 17,250,000 23,000,000
Deutsche Morgan Grenfell Inc. .................................. 17,250,000 23,000,000
ABN AMRO Securities (USA), Inc.................................. 5,000,000 --
BancAmerica Securities, Inc. ................................... -- 5,000,000
BT Securities Corporation ...................................... 5,000,000 --
CIBC Wood Gundy Securities Corp................................. 5,000,000 --
Citicorp Securities, Inc. ...................................... -- 5,000,000
Credit Suisse First Boston Corporation ......................... -- 5,000,000
UBS Securities LLC ............................................. -- 5,000,000
------------------ -------------------
Total................................................. $ 150,000,000 $ 200,000,000
------------------ -------------------
------------------ -------------------
</TABLE>
Under the terms of the Underwriting Agreements, the Underwriters are
committed to take and pay for all of the Notes, if any are taken.
The Underwriters propose to offer the Notes directly to the public at the
initial public offering price set forth on the cover page hereof and in part to
certain securities dealers at such price less a concession of .375% of the
principal amount of the Seven Year Notes and .4% of the principal amount of the
Ten Year Notes. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of .25% of the principal amount of the Notes to certain
brokers and dealers. After the Notes are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
joint lead managers.
In the Underwriting Agreements, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof. Each series of Notes is
a new issue of securities with no established trading market. The Company does
not intend to apply for listing of either series of Notes on any national
securities exchange. The Company has been advised by the Underwriters that the
Underwriters intend to make a market in the Notes. However, the Underwriters are
not obligated to do so and may discontinue market-making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Notes.
In connection with the offerings of the Notes, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Underwriters may overallot in connection with the
offerings of the Notes, creating a syndicate short position. In addition, the
Underwriters may bid for, and purchase, Notes in the open market to cover
syndicate shorts or to stabilize
S-11
<PAGE>
the price of the Notes. Finally, the underwriting syndicate may reclaim selling
concessions allowed for distributing the Notes in the offerings of the Notes, if
the syndicate repurchases previously distributed Notes in syndicate covering
transactions, stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Notes above independent market
levels. The Underwriters are not required to engage in any of these activities,
and may end any of them at any time.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future investment or commercial banking
services to the Company and its affiliates, for which such Underwriters or their
affiliates have received and will receive customary fees and commissions.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Robert F.
Sharpe, Jr., Esq., Senior Vice President and General Counsel of the Company. Mr.
Sharpe holds options to purchase in the aggregate less than 0.1% of the common
stock of Holdings, which owns all of the capital stock of the Company. Certain
legal matters in connection with the Notes will be passed upon for the Company
by Davis Polk & Wardwell, New York, New York.
Certain other legal matters in connection with the Notes will be passed upon
for the Underwriters by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York. Simpson Thacher & Bartlett has
in the past and may continue to provide legal services to the Company and its
affiliates.
S-12
<PAGE>
[LOGO]
RJR NABISCO, INC.
DEBT SECURITIES
------------------
RJR Nabisco, Inc. (the "Company") may offer from time to time its debt
securities in one or more series (the "Debt Securities") with an aggregate
initial public offering price of up to $1,044,945,000 (or the equivalent in
foreign denominated currency or units based on or relating to currencies,
including European Currency Units). The Company will offer Debt Securities to
the public on terms determined by market conditions. Debt Securities may be
issuable in registered form without coupons or in bearer form with or without
coupons attached. Securities may be sold for U.S. dollars, foreign denominated
currency or currency units; principal of and any interest on Debt Securities
likewise may be payable in U.S. dollars, foreign denominated currency or
currency units--in each case, as the Company specifically designates. See
"Description of Debt Securities."
The Debt Securities will be general obligations of the Company and will rank
PARI PASSU with all other senior indebtedness of the Company. Because the
Company is a holding company, however, the Debt Securities will effectively be
subordinated to the claims of creditors of the Company's subsidiaries. See
"Description of Debt Securities--Ranking."
The accompanying Prospectus Supplement sets forth the specific designation,
aggregate principal amount, purchase price, maturity, interest rate (or manner
of calculation thereof), time of payment of interest (if any), listing (if any)
on a securities exchange and any other specific terms of the Debt Securities and
the name of and compensation to each dealer, underwriter or agent (if any)
involved in the sale of the Debt Securities. The managing underwriters with
respect to each series sold to or through underwriters will be named in the
accompanying Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Debt Securities may be offered directly to purchasers or through
underwriters or through agents designated from time to time, as set forth in the
accompanying Prospectus Supplement. Net proceeds to the Company will be the
purchase price in the case of a dealer, the public offering price less discount
in the case of an underwriter, the purchase price less commission in the case of
an agent--in each case, less other expenses attributable to issuance and
distribution. See "Plan of Distribution" for possible indemnification
arrangements for dealers, underwriters and agents.
------------------------
The date of this Prospectus is July 17, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and also are available for inspection and copying at the regional
offices of the Commission located at Seven World Trade Center, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. Such reports, proxy statements and other information
also can be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which exchange certain of the Company's
securities are listed.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Debt
Securities. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by the Company
(File No. 1-6388) pursuant to the Exchange Act are incorporated by reference and
shall be deemed a part hereof:
(a) Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
as amended by Form 10-K/A,
(b) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1995,
(c) Current Reports on Form 8-K filed by the Company on May 18, 1995, May
24, 1995, and May 25, 1995, and
(d) All documents filed by the Company pursuant to sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Debt Securities.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of the documents incorporated herein by reference (excluding exhibits
unless such exhibits are specifically incorporated by reference into such
documents) may be obtained upon request without charge by persons, including
beneficial owners, to whom this Prospectus is delivered. Requests should be made
to RJR Nabisco, Inc., Attention: Investor Relations Department, 1301 Avenue of
the Americas, New York, New York 10019, telephone number (212) 258-5600.
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OPEN MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
THE COMPANY
The operating subsidiaries of the Company comprise one of the largest
tobacco and packaged food companies in the world. In the United States, the
tobacco business is conducted by R. J. Reynolds Tobacco Company ("RJRT"), the
second largest manufacturer of cigarettes, and the packaged food business is
conducted by Nabisco Holdings Corp. ("Nabisco Holdings") through its wholly
owned subsidiary, Nabisco, Inc. ("Nabisco"), the largest manufacturer and
marketer of cookies and crackers. The Company owns approximately 80.5% of the
economic interest and approximately 97.6% of the voting power of Nabisco
Holdings. Tobacco operations outside the United States are conducted by R. J.
Reynolds Tobacco International, Inc. ("Tobacco International") and packaged food
operations outside the United States are conducted by Nabisco International,
Inc. ("Nabisco International") and Nabisco Ltd., subsidiaries of Nabisco. RJRT's
and Tobacco International's tobacco products are sold around the world under a
variety of brand names. Food products are sold in the United States, Canada,
Latin America and certain other international markets.
RJRT's largest selling cigarette brands in the United States include
WINSTON, DORAL, CAMEL, SALEM, VANTAGE and MONARCH. RJRT's other cigarette
brands, including NOW, MORE, BEST VALUE, STERLING, MAGNA and CENTURY, are
marketed to meet a variety of smoker preferences. All RJRT brands are marketed
in a variety of styles. Tobacco International operates in over 160 markets
around the world and is the second largest of two international cigarette
producers that have significant positions in the American Blend segment of the
international tobacco market.
Nabisco's domestic operations represent one of the largest packaged food
businesses in the world. Through its domestic divisions, Nabisco manufactures
and markets cookies, crackers, snack foods, hard and bite-size candy, gum, nuts,
hot cereals, margarine, pet foods, dry-mix dessert products and other grocery
products under established and well-known trademarks, including OREO, CHIPS
AHOY!, NEWTONS, SNACKWELL'S, RITZ, PREMIUM, LIFE SAVERS, PLANTERS, A.1., GREY
POUPON, MILK-BONE, CREAM OF WHEAT, FLEISCHMANN'S and BLUE BONNET. Nabisco
International is also a leading producer of biscuits, baking powder, powdered
desserts industrial yeasts and processed milk products in many of the 17 Latin
American countries in which it has operations. Nabisco Ltd. conducts Nabisco's
Canadian operations through a biscuit division and a grocery division. Excluding
private label brands, the biscuit division produced nine of the top ten cookies
and nine of the top ten crackers in Canada in 1994.
The principal executive offices of the Company are located at 1301 Avenue of
the Americas, New York, New York 10019; its telephone number is (212) 258-5600.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the three months ended March 31,
1995 and for each of the periods in the five-year period ended December 31, 1994
are as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992
----------------- ----- ----- --------------------
<CAPTION>
(DOLLARS IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.................... 2.5 2.2 1.1 2.0
Deficiency in the coverage of fixed charges by
earnings before fixed charges....................... -- -- -- -- --
<CAPTION>
<S> <C> <C>
1991 1990
----- ---------
<S> <C> <C>
Ratio of earnings to fixed charges.................... 1.3 --
Deficiency in the coverage of fixed charges by
earnings before fixed charges....................... -- $ 143
</TABLE>
For purposes of these computations, earnings before fixed charges consist of
income (loss) before extraordinary item plus income taxes and fixed charges.
Income (loss) before extraordinary item includes amortization of trademarks and
goodwill and depreciation expense. Fixed charges consist of interest on
indebtedness, amortization of debt issuance costs, capitalized interest and that
portion of operating rental expense representative of the interest factor.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities will be used for
general corporate purposes, which may include refinancings of indebtedness,
working capital, capital expenditures, acquisitions and repurchases and
redemptions of securities. Pending such uses, proceeds may be used to repay
indebtedness under the Company's revolving credit facility or for short-term
liquid investments.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Amended and Restated Indenture
dated as of July 24, 1995 (the "Indenture") between the Company and Citibank,
N.A., as trustee (the "Trustee"). The Indenture is included as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the Indenture and the Debt Securities do not
purport to be complete and such summaries are subject to the detailed provisions
of the Indenture to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein, and for
other information regarding the Debt Securities. Numerical references in
parentheses below are to sections in the Indenture. Wherever particular sections
or defined terms of the Indenture are referred to, such sections or defined
terms are incorporated herein by reference as part of the statement made, and
the statement is qualified in its entirety by such reference. Any Debt
Securities offered by this Prospectus and the accompanying Prospectus Supplement
are referred to herein as the "Offered Debt Securities."
GENERAL
The Indenture does not limit the amount of additional indebtedness that the
Company may incur; however, the Indenture does limit the amount of additional
Funded Debt (as hereinafter defined) that may be incurred by Restricted
Subsidiaries (as hereinafter defined) of the Company to 10% of Consolidated Net
Worth (as hereinafter defined). The Debt Securities will rank PARI PASSU with
all other unsubordinated indebtedness of the Company.
The Indenture provides that Debt Securities may be issued from time to time
in one or more series and may be denominated and payable in foreign currencies
or units based on or relating to foreign currencies, including European Currency
Units ("ECUs"). Special United States federal income tax considerations
applicable to any Debt Securities so denominated are described in the relevant
Prospectus Supplement.
4
<PAGE>
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Offered Debt Securities (to the extent such
terms are applicable to such Offered Debt Securities): (i) the specific
designation, aggregate principal amount, purchase price and denomination; (ii)
the currency or units based on or relating to currencies in which such Offered
Debt Securities are demoninated and/or in which principal of, premium, if any,
and/or any interest on such Offered Debt Securities will or may be payable;
(iii) any date of maturity; (iv) interest rate or rates (or the method by which
such rate will be determined), if any; (v) the dates on which any such interest
will be payable; (vi) the place or places where the principal of, premium, if
any, and any interest on the Offered Debt Securities will be payable; (vii) any
redemption, repayment or sinking fund provisions; (viii) whether the Offered
Debt Securities will be issuable in registered form or bearer form ("Bearer Debt
Securities") or both and, if Bearer Debt Securities are issuable, any
restrictions applicable to the exchange of one form for another and to the
offer, sale and delivery of Bearer Debt Securities; (ix) any applicable United
States federal income tax consequences, including whether and under what
circumstances the Company will pay additional amounts on Offered Debt Securities
held by a person who is not a U.S. person (as defined in the Prospectus
Supplement) in respect of any tax, assessment or governmental charge withheld or
deducted and, if so, whether the Company will have the option to redeem such
Offered Debt Securities rather than pay such additional amounts; and (x) any
other specific terms of the Offered Debt Securities, including any additional
events of default or covenants provided for with respect to such Offered Debt
Securities, and any terms which may be required by or be advisable under
applicable laws or regulations.
Debt Securities may be presented for exchange and registered Debt Securities
may be presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Debt Securities and the Prospectus Supplement.
Subject to the limitations provided in the Indenture, such services will be
provided without charge, other than any tax or other governmental charge payable
in connection therewith. Debt Securities in bearer form and the coupons, if any,
appertaining thereto will be transferable by delivery.
Debt Securities will bear interest at a fixed rate (a "Fixed Rate Security")
or a floating rate (a "Floating Rate Security"). Debt Securities bearing no
interest or interest at a rate that at the time of issuance is below the
prevailing market rate will be sold at a discount below their stated principal
amount. Special United States federal income tax considerations applicable to
any such discounted Debt Securities or to certain Debt Securities issued at par
which are treated as having been issued at a discount for United States federal
income tax purposes are described in the relevant Prospectus Supplement.
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on any
interest payment date, to be determined by reference to one or more currency
exchange rates, commodity prices, equity indices or other factors. Holders of
such Debt Securities may receive a principal amount on any principal payment
date, or a payment of interest on any interest payment date, that is greater
than or less than the amount of principal or interest otherwise payable on such
dates, depending upon the value on such dates of the applicable currency,
commodity, equity index or other factors. Information as to the methods for
determining the amount of principal or interest payable on any date, the
currencies, commodities, equity indices or other factors to which the amount
payable on such date is linked and certain additional tax considerations will be
set forth in the applicable Prospectus Supplement.
RANKING
The Debt Securities, when issued, will rank PARI PASSU in right of payment
with the senior indebtedness of the Company and senior in right of payment to
any future subordinated debt of the Company. However, claims of holders of the
Debt Securities will be effectively subordinated to the claims of holders of the
debt of the Company's subsidiaries, including Nabisco, with respect to the
assets of such subsidiaries. The amount of debt which is PARI PASSU with the
Debt Securities and the amount of debt to which holders of the Debt Securities
are effectively subordinated as of the end of the most recently completed fiscal
quarter is included in the accompanying Prospectus Supplement or incorporated
herein by reference.
5
<PAGE>
The Debt Securities may, under certain circumstances, be equally and ratably
secured with other senior indebtedness of the Company. See "Certain Covenants of
the Company--Restrictions on Liens."
GLOBAL SECURITIES
The registered Debt Securities of a series may be issued in the form of one
or more fully registered global Debt Securities (a "Registered Global Security")
that will be deposited with a depositary (a "Depositary"), with the Trustee, as
custodian for a Depositary, or with a nominee for a Depositary identified in the
Prospectus Supplement relating to such series and registered in the name of the
Depositary or a nominee thereof. In such case, one or more Registered Global
Securities will be issued in a denomination or aggregate denominations equal to
the portion of the aggregate principal amount of outstanding registered Debt
Securities of the series to be represented by such Registered Global Security or
Registered Global Securities. Unless and until it is exchanged in whole or in
part for Debt Securities in definitive registered form, a Registered Global
Security may not be transferred except as a whole by the Depositary for such
Registered Global Security to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor of such Depositary or a
nominee of such successor. The Depositary currently accepts only Debt Securities
that are denominated in U.S. dollars.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global Security
will be described in the Prospectus Supplement relating to such series. The
Company anticipates that the following provisions will apply to all depositary
arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the Depositary
for such Registered Global Security will credit, on its book-entry registration
and transfer system, the participants' accounts with the respective principal
amounts of the Debt Securities represented by such Registered Global Security
beneficially owned by such participants. The accounts to be credited will be
designated by any dealers, underwriters or agents participating in the
distribution of such Debt Securities. Ownership of beneficial interests in such
Registered Global Security will be shown on, and the transfer of such ownership
interests will be effected only through, records maintained by the Depositary
for such Registered Global Security (with respect to interests of participants)
and on the records of participants (with respect to interests of persons holding
through participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to own, transfer or
pledge beneficial interests in Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in a Registered Global Security will not be entitled to have the Debt
Securities represented by such Registered Global Security registered in their
names, and will not receive or be entitled to receive physical delivery of such
Debt Securities in definitive form and will not be considered the owners or
holders thereof under the Indenture. Accordingly, each person owning a
beneficial interest in a Registered Global Security must rely on the procedures
of the Depositary for such Registered Global Security and, if such person is not
a participant, on the procedures of the participant through which such person
owns its interest, to exercise any rights of a holder under the Indenture. The
Company understands that under existing industry practices, if the Company
requests any action of holders or if any owner of a beneficial interest in a
Registered Global Security desires to give or take any action which a holder is
entitled to give or take under the Indenture, the Depositary for such Registered
Global Security would authorize the participants
6
<PAGE>
holding the relevant beneficial interests to give or take such action, and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instruction of
beneficial owners holding through them.
Payments of principal of, premium, if any, and any interest on Debt
Securities represented by a Registered Global Security registered in the name of
a Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owner of such Registered Global Security.
None of the Company, the Trustee or any other agent of the Company or agent of
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in such Registered Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium, if any, or any interest in respect of such Registered Global Security,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in such Registered Global
Security as shown on the records of such Depositary. The Company also expects
that payments by participants to owners of beneficial interests in such
Registered Global Security held through such participants will be governed by
standing customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such participants.
If the Depositary for any Debt Securities represented by a Registered Global
Security notifies the Company that it is at any time unwilling or unable to
continue as Depositary or ceases to be a clearing agency registered under the
Exchange Act, and a successor Depositary registered as a clearing agency under
the Exchange Act is not appointed by the Company within 90 days, the Company
will issue such Debt Securities in definitive form in exchange for such
Registered Global Security. In addition, the Company may at any time and in its
sole discretion determine not to have any of the Debt Securities of a series
represented by one or more Registered Global Securities and, in such event, will
issue Debt Securities of such series in definitive form in exchange for all of
the Registered Global Security or Registered Global Securities representing such
Debt Securities. Any Debt Securities issued in definitive form in exchange for a
Registered Global Security will be registered in such name or names as the
Depositary shall instruct the Trustee. It is expected that such instructions
will be based upon directions received by the Depositary from participants with
respect to ownership of beneficial interests in such Registered Global Security.
The Debt Securities of a series may also be issued in the form of one or more
bearer global Securities (a "Bearer Global Security") that will be deposited
with a common depositary for Euro-clear and CEDEL, or with a nominee for such
depositary identified in the Prospectus Supplement relating to such series. The
specific terms and procedures, including the specific terms of the depositary
arrangement, with respect to any portion of a series of Debt Securities to be
represented by a Bearer Global Security will be described in the Prospectus
Supplement relating to such series.
CERTAIN COVENANTS OF THE COMPANY
The following restrictions apply to each series of Debt Securities unless
the terms of such series of Debt Securities provided otherwise.
RESTRICTIONS ON LIENS. The Indenture provides that the Company will not,
and will not permit any Restricted Subsidiary to, mortgage or pledge as security
for any indebtedness any shares of stock, indebtedness or other obligations of a
Subsidiary (as hereinafter defined) or any Principal Property (as hereinafter
defined) of the Company or a Restricted Subsidiary, whether such shares of
stock, indebtedness or other obligations of a Subsidiary or Principal Property
is owned at the date of the Indenture or thereafter acquired, unless the Company
secures or causes such Restricted Subsidiary to secure the outstanding Debt
Securities equally and ratably with all indebtedness secured by such mortgage or
pledge,
7
<PAGE>
so long as such indebtedness shall be so secured. This covenant does not apply
in the case of: (a) the creation of any mortgage, pledge or other lien or any
shares of stock, indebtedness or other obligations of a Subsidiary or any
Principal Property acquired after the date of the Indenture (including
acquisitions by way of merger or consolidation) by the Company or a Restricted
Subsidiary contemporaneously with such acquisition, or within 120 days
thereafter, to secure or provide for the payment or financing of any part of the
purchase price thereof, or the assumption of any mortgage, pledge or other lien
upon any shares of stock, indebtedness or other obligations of a Subsidiary or
any Principal Property acquired after the date of Indenture existing at the time
of such acquisition, or the acquisition of any shares of stock, indebtedness or
other obligations of a Subsidiary or any Principal Property subject to any
mortgage, pledge or other lien without the assumption thereof, PROVIDED that
every such mortgage, pledge or lien referred to in this clause (a) shall
attached only to the shares of stock, indebtedness or other obligations of a
Subsidiary or any Principal Property so acquired and fixed improvements thereon;
(b) any mortgage, pledge or other lien on any shares of stock, indebtedness or
other obligations of a Subsidiary or any Principal Property existing at the date
of the Indenture; (c) any mortgage, pledge or other lien on any shares of stock,
indebtedness or other obligations of a Subsidiary or any Principal Property in
favor of the Company or any Restricted Subsidiary; (d) any mortgage, pledge or
other lien on Principal Property being constructed or improved securing loans to
finance such construction or improvements; (e) any mortgage, pledge or other
lien on shares of stock, indebtedness or other obligations of a Subsidiary or
any Principal Property incurred in connection with the issuance of tax exempt
governmental obligations; and (f) any renewal of or substitution for any
mortgage, pledge or other lien permitted by any of the preceding clauses (a)
through (e), PROVIDED, in the case of a mortgage, pledge or other lien permitted
under clause (a), (b) or (d), the debt secured is not increased nor the lien
extended to any additional assets. (SECTION 3.6(A)) Notwithstanding the
foregoing, the Company or any Restricted Subsidiary may create or assume liens
in addition to those permitted by clauses (a) through (f), and renew, extend or
replace such liens, PROVIDED that at the time of such creation, assumption,
renewal, extension or replacement, and after giving effect thereto, Exempted
Debt (as hereinafter defined) does not exceed 10% of Consolidated Net Worth.
(SECTION 3.6(B))
RESTRICTIONS ON SALE AND LEASE-BACK TRANSACTIONS. The Indenture provides
that the Company will not, and will not permit any Restricted Subsidiary to,
sell or transfer, directly or indirectly, except to the Company or a Restricted
Subsidiary, any Principal Property as an entirety, or any substantial portion
thereof, with the intention of taking back a lease of such property, except a
lease for a period of three years or less at the end of which is intended that
the use of such property by the lessee will be discontinued; PROVIDED that,
notwithstanding the foregoing, the Company or any Restricted Subsidiary may sell
any such Principal Property and lease it back for a longer period (a) if the
Company or such Restricted Subsidiary would be entitled, pursuant to the
provisions of Section 3.6(a) of the Indenture described above under "Certain
Covenants of the Company--Restrictions on Liens," to create a mortgage on the
property to be leased securing Funded Debt in an amount equal to the
Attributable Debt (as hereinafter defined) with respect to such sale and
lease-back transaction without equally and ratably securing the outstanding Debt
Securities or (b) if (i) the Company promptly informs the Trustee of such
transaction, (ii) the net proceeds of such transaction are at least equal to the
fair value (as determined by board resolution of the Company) of such property
and (iii) the Company causes an amount equal to the net proceeds of the sale to
be applied to the retirement, within 120 days after receipt of such proceeds, of
Funded Debt incurred or assumed by the Company or a Restricted Subsidiary
(including the Debt Securities); PROVIDED further that, in lieu of applying all
of or any part of such net proceeds to such retirement, the Company may, within
75 days after such sale, deliver or cause to be delivered to the applicable
trustee for cancellation either debentures or notes evidencing Funded Debt of
the Company (which may include the outstanding Debt Securities) or of a
Restricted Subsidiary previously authenticated and delivered by the applicable
trustee, and not theretofore tendered for sinking fund purposes or called for a
sinking fund or otherwise applied as a credit against an obligation to redeem or
retire such notes or debentures. If the Company so delivers debentures or notes
to the applicable trustee with an Officers' Certificate, the amount of cash
which the Company will be required to apply to the retirement of Funded Debt
will be reduced by an amount equal
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to the aggregate of the then applicable optional redemption prices (not
including any optional sinking fund redemption prices) of such debentures or
notes, or if there are no such redemption prices, the principal amount of such
debentures or notes, PROVIDED, that in the case of debentures or notes which
provide for an amount less than the principal amount thereof to be due and
payable upon a declaration of the maturity thereof, such amount of cash shall be
reduced by the amount of principal of such debentures or notes that would be due
and payable as of the date of such application upon a declaration of
acceleration of the maturity thereof pursuant to the terms of the indenture
pursuant to which such debentures or notes were issued. (SECTION 3.7(A))
Notwithstanding the foregoing, the Company or any Restricted Subsidiary may
enter into sale and lease-back transactions in addition to those permitted in
this paragraph and without any obligation to retire any outstanding Debt
Securities or other Funded Debt, PROVIDED that at the time of entering into such
sale and lease-back transactions and after giving effect thereto, Exempted Debt
does not exceed 10% of Consolidated Net Worth. (SECTION 3.7(B))
RESTRICTIONS ON FUNDED DEBT OF RESTRICTED SUBSIDIARIES. The Indenture
provides that the Company will not permit any Restricted Subsidiary (a) to
create, assume or permit to exist any Funded Debt other than (i) Funded Debt
secured by a mortgage, pledge or lien which is permitted to such Restricted
Subsidiary under the provisions described above under the "Certain Covenants of
the Company--Restrictions on Liens," (ii) Funded Debt owed to the Company or any
Restricted Subsidiary, (iii) Funded Debt of a corporation existing at the time
it becomes a Restricted Subsidiary, (iv) Funded Debt existing on the date of the
Indenture, (v) Funded Debt created in connection with the issuance of tax exempt
governmental obligations or (vi) renewals, extensions or replacements of the
foregoing, or (b) to guarantee, directly or indirectly through any arrangement
which is substantially the equivalent of a guarantee, any Funded Debt except for
(i) guarantees existing on the date of the Indenture, (ii) guarantees which, on
the date of the Indenture, a Restricted Subsidiary is obligated to give (iii)
guarantees of Funded Debt secured by a mortgage, pledge or lien which is
permitted to such Restricted Subsidiary under the provisions described above
under "Certain Covenants of the Company--Restrictions on Liens" or (iv)
renewals, extensions or replacements of the foregoing. (SECTION 3.8(A))
Notwithstanding the foregoing, any Restricted Subsidiary may create, assume or
guarantee Funded Debt in addition to that permitted in this paragraph, and
renew, extend or replace such Funded Debt, PROVIDED that at the time of such
creation, assumption, guarantee, renewal, extension or replacement, and after
giving effect thereto, Exempted Debt does not exceed 10% of Consolidated Net
Worth. (SECTION 3.8(B))
The Indenture does not contain provisions which would afford the holders of
the Debt Securities protection in the event of a decline in the Company's credit
quality resulting from a change of control transaction, a highly leveraged
transaction or other similar transactions involving the Company.
CERTAIN DEFINITIONS
The term "Attributable Debt" as defined in the Indenture means, when used in
connection with a sale and lease-back transaction, at any date as of which the
amount thereof is to be determined, the product of (a) the net proceeds from
such sale and lease-back transaction multiplied by (b) a fraction, the numerator
of which is the number of full years of the term of the lease relating to the
property involved in such sale and lease-back transaction (without regard to any
options to renew or extend such term) remaining at the date of the making of
such computation and the denominator of which is the number of full years of the
term of such lease measured from the first day of such term.
The term "Consolidated Net Worth" as defined in the Indenture means, at any
date of determination, the consolidated stockholder's equity of the Company, as
set forth on the then most recently available consolidated balance sheet of the
Company and its consolidated Subsidiaries; PROVIDED that if at such date Nabisco
Holdings, including its successors and assigns, is a consolidated Subsidiary of
the Company, such calculation shall be increased by (i) the amount of the
minority interest in Nabisco Holdings, including its successors and assigns, as
set forth on the then most recently available consolidated balance sheet of the
Company and its consolidated Subsidiaries, and reduced by (ii) the consolidated
stockholders' equity of
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Nabisco Holdings, including its successors and assigns, as set forth on the then
most recently available consolidated balance sheet of Nabisco Holdings and its
consolidated subsidiaries; PROVIDED FURTHER that if at such date Nabisco
Holdings, including its successors and assigns, is not a consolidated Subsidiary
of the Company, such calculation shall be reduced by the amount of the Company's
investment in Nabisco Holdings, including its successors and assigns, if any, as
set forth on the then most recently available consolidated balance sheet of the
Company and its consolidated Subsidiaries.
The term "Exempted Debt" as defined in the Indenture means the sum, without
duplication, of the following items outstanding as of the date Exempted Debt is
being determined: (i) indebtedness of the Company and the Restricted
Subsidiaries incurred after the date of the Indenture and secured by liens
created, assumed or otherwise incurred or permitted to exist pursuant to Section
3.6(b) of the Indenture described above under "Certain Covenants of the
Company--Restrictions on Liens"; (ii) Attributable Debt of the Company and the
Restricted Subsidiaries in respect of all sale and lease-back transactions with
regard to any Principal Property entered into pursuant to Section 3.7(b) of the
Indenture described above under "Certain Covenants of the Company--Restrictions
on Sale and Lease-Back Transactions"; and (iii) Funded Debt of Restricted
Subsidiaries created, assumed, guaranteed or otherwise incurred or permitted to
exist pursuant to Section 3.8(b) of the Indenture described above under "Certain
Covenants of the Company--Restrictions on Funded Debt of Restricted
Subsidiaries".
The term "Funded Debt" as defined in the Indenture means all indebtedness
for money borrowed, including purchase money indebtedness, having a maturity of
more than one year from the date of its creation or having a maturity of less
than one year but by its terms being renewable or extendible, at the option of
the obligor in respect thereof, beyond one year from its creation.
The terms "Principal Property" as defined in the Indenture means land, land
improvements, buildings and associated factory and laboratory equipment owned or
leased pursuant to a capital lease and used by the Company or a Restricted
Subsidiary primarily for processing, producing, packaging or storing its
products, raw materials, inventories, or other materials and supplies and
located within the United States of America and having an acquisition cost plus
capitalized improvements in excess of 2% of Consolidated Net Worth, as of the
date of such determination, but not including any such property financed through
the issuance of tax exempt governmental obligations, or any such property that
has been determined by board resolution of the Company not to be of material
importance to the respective businesses conducted by the Company or such
Restricted Subsidiary effective as of the date such resolution is adopted.
The term "Restricted Subsidiary" as a defined in the Indenture means any
Subsidiary organized and existing under the laws of the United States of America
and the principal business of which is carried on within the United States of
America which owns or is a lessee pursuant to a capital lease of any Principal
Property and in which the investment of the Company and all its Subsidiaries
exceeds 5% of Consolidated Net Worth as of the date of such determination other
than (i) each Subsidiary the major part of whose business consists of finance,
banking, credit, leasing, insurance, financial services or other similar
operations, or any combination thereof; (ii) each Subsidiary formed or acquired
after the date of the Indenture for the purpose of acquiring the business or
assets of another person and which does not acquire all or any substantial part
of the business or assets of the Company or any Restricted Subsidiary; and (iii)
Nabisco Holdings, each subsidiary of Nabisco Holdings and each of their
successors and assigns. However, the Board of Directors of the Company may
declare any such Subsidiary to be a Restricted Subsidiary. The principal
Restricted Subsidiary as of the date hereof is RJRT.
The term "Subsidiary" as defined in the Indenture means any corporation of
which at least a majority of all outstanding stock having by the terms thereof
ordinary voting power in the election of directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation has or might have voting power by reason of the happening of
any contingency) is at the time, directly or indirectly, owned by the Company,
or by one or more Subsidiaries of the Company or by the Company and one or more
Subsidiaries.
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RESTRICTIONS ON MERGERS AND SALES OF ASSETS
Nothing contained in the Indenture or in the Debt Securities will prevent
any consolidation or merger of the Company into any other corporation or
corporations (whether or not affiliated with the Company), or successive
consolidations or mergers to which the Company or its successor will be a party,
or will prevent any sale, lease or conveyance of the property of the Company, as
an entirety or substantially as an entirety; PROVIDED that upon any such
consolidation, merger, sale, lease or conveyance to which the Company is a party
and in which the Company is not the surviving corporation, the due and punctual
performance and observance of all of the covenants and conditions of the
Indenture to be performed or observed by the Company and the due and punctual
payment of the principal of and interest on all of the Debt Securities,
according to their tenor, shall be expressly assumed by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee, by
the corporation formed by such consolidation, or into which the Company shall
have been merged, or which shall have acquired such property. (SECTION 9.1)
EVENTS OF DEFAULT
An Event of Default with respect to any series of Debt Securities is defined
under the Indenture as being: (a) default in payment of any principal of the
Debt Securities of such series when the same shall become due and payable,
either at maturity, upon any redemption, by declaration or otherwise; (b)
default for 30 days in payment of any interest on any Debt Securities of such
series; (c) default in the payment of any sinking fund installment on the Debt
Securities of such series when the same shall become due and payable; (d)
default for 90 days after written notice in the observance or performance of any
other covenant or agreement in respect of the Debt Securities of such series;
(e) certain events of bankruptcy, insolvency or reorganization; and (f) any
other Event of Default provided in a supplemental indenture or board resolution
relating to such securities. (SECTION 5.1)
The Indenture provides that (a) if an Event of Default due to the default in
payment of principal of, premium, if any, or any interest on, any series of Debt
Securities or due to the default in the performance or breach of any other
covenant or warranty of the Company applicable to the Debt Securities of such
series but not applicable to all outstanding Debt Securities shall have occurred
and be continuing, either the Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of each affected series then outstanding
(voting as a single class) by notice in writing may then declare the principal
of all Debt Securities of all such affected series and interest accrued thereon
to be due and payable immediately; and (b) if an Event of Default due to a
default in the performance of any other of the covenants or agreements in the
Indenture applicable to all outstanding Debt Securities or due to certain events
of bankruptcy, insolvency and reorganization of the Company shall have occurred
and be continuing, either the Trustee or the holders of not less than 25% in
principal amount of all Debt Securities then outstanding (treated as one class)
by notice in writing may declare the principal of all Debt Securities and
interest accrued thereon to be due and payable immediately, but upon certain
conditions such declarations may be annulled and past defaults may be waived
(except a continuing default in payment of principal of, premium, if any, or any
interest on such Debt Securities) by the holders of a majority in principal
amount of the Debt Securities of all affected series then outstanding. (SECTION
5.1)
The Indenture contains a provision entitling the Trustee, subject to the
duty of the trustee during a default to act with the required standard of care,
to be indemnified by the holders of Debt Securities before proceeding to
exercise any right or power under the Indenture at the request of such holders.
(SECTION 5.6) Subject to such provisions in the Indenture for the
indemnification of the Trustee and certain other limitations, the holders of a
majority in aggregate principal amount of the Debt Securities of each affected
series then outstanding (with each such series voting as a separate class) may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee. (SECTION 5.9)
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The Indenture provides that no holder of Debt Securities may institute any
action against the Company under the Indenture (except actions for payment of
overdue principal or interest) unless such holder previously shall have given to
the Trustee written notice of default and continuance thereof and unless the
holders of not less than 25% in aggregate principal amount of the Debt
Securities of each affected series then outstanding (treated as a single class)
shall have requested the Trustee to institute such action and shall have offered
the Trustee reasonable indemnity, the Trustee shall not have instituted such
action within 60 days of such request and the Trustee shall not have received
direction inconsistent with such written request by the holders of a majority in
principal amount of the Debt Securities of each affected series (treated as one
class). (SECTION 5.6 AND SECTION 5.7)
The Indenture contains a covenant that the Company will file annually, not
more than four months after the end of its fiscal year, with the Trustee a
certificate that no default existed or a certificate specifying any default that
existed. (SECTION 3.5)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides with respect to each series of Debt Securities that,
except to the extent the terms of such series of Debt Securities provide
otherwise, the Company may elect (a) to be released from any and all obligations
(except for the obligations to register the transfer or exchange of the Debt
Securities of such series and the Company's right of optional redemption, to
replace mutilated, destroyed, lost or stolen Debt Securities of such series,
rights of holders of Debt Securities to receive payments of principal thereof
and interest thereon, upon the original stated due dates therefor (but not upon
acceleration), to maintain an office or agency in respect of the Debt Securities
of such series and to hold moneys for payment in trust) with respect to Debt
Securities of any series for which the exact amount of principal and interest
due can be determined at the time of the deposit with the Trustee as described
below and all the Debt Securities of such series are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption ("one-year defeasance"), (b) to defease and be discharged from any
and all obligations with respect to the Debt Securities of such series on the
91st day after the deposit with the Trustee as described below (except for the
obligations set forth as exceptions in the preceding clause (a)) ("legal
defeasance") or (c) to be released from its obligations with respect to the Debt
Securities of such series (except for the obligations set forth as exceptions in
the preceding clause (a) and the obligations to compensate and indemnify the
Trustee, to appoint a successor Trustee, to repay certain moneys held by the
Paying Agent and to return certain unclaimed moneys held by the Trustee and to
comply with the Trust Indenture Act of 1939, as amended) ("covenant
defeasance"), upon the deposit with the Trustee, in trust for such purpose, of
cash or, in the case of Debt Securities payable in U.S. dollars, U.S. Government
Obligations (as defined in the Indenture) which through the payment of principal
and interest in accordance with their terms will insure the availability of
monies sufficient, or a combination thereof, sufficient in the opinion of a
nationally recognized firm of independent accountants, to pay the principal of,
premium, if any, and any interest on the Debt Securities of such series, and any
mandatory sinking fund thereon, on the due date thereof. Such a trust may
(except with respect to one-year defeasance or to the extent the terms of the
Debt Securities of such series otherwise provide) only be established, if among
other things, the Company has delivered to the Trustee an opinion of counsel (as
specified in the Indenture) to the effect that the Holders of the Debt
Securities of such series will not recognize income, gain or loss for Federal
income tax purposes as a result of such legal defeasance or covenant defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same time as would have been the case if such legal defeasance
or covenant defeasance had not occurred. Such opinion, in the case of legal
defeasance under clause (b) above, must (except to the extent the terms of the
Debt Securities of the relevant series otherwise provide) refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable Federal
income tax law occurring after the date of the Indenture. The Prospectus
Supplement may further describe the provisions, if any, permitting such legal
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defeasance or covenant defeasance with respect to the Offered Debt Securities of
the series to which such Prospectus Supplement relates. (SECTION 10.1)
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee may enter into
supplemental indentures without the consent of the holders of Debt Securities
to: (a) secure any Debt Securities, (b) evidence the assumption by a successor
corporation of the obligations of the Company, (c) add covenants for the
protection of the holders of one or more series of Debt Securities or to add
Events of Default, (d) cure any ambiguity or correct any inconsistency in the
Indenture or to make other changes not materially adverse to the interest of
Holders of the Debt Securities, (e) establish the forms or terms of Debt
Securities of any series, (f) provide for uncertificated Debt Securities, (g)
evidence the acceptance of appointment by a successor trustee or (h) comply with
the Trust Indenture Act of 1939, as amended. (SECTION 8.1)
The Indenture also contains provisions permitting the Company (when
authorized by a board resolution) and the Trustee, with the consent of the
holders of not less than a majority in aggregate principal amount of Debt
Securities of all series then outstanding and affected (voting as one class), to
add any provisions to, or change in any manner or eliminate any of the
provisions of, the Indenture or modify in any manner the rights of the holders
of the Debt Securities of each series so affected; PROVIDED that the Company and
the Trustee may not, without the consent of the holder of each outstanding Debt
Security affected thereby, (a) extend the final maturity of any Debt Security,
or reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any amount payable on the redemption
thereof or change the currency in which the principal thereof (including any
amount in respect of original issue discount), or any interest thereon is
payable, or reduce the amount of the principal of any original issue discount
security payable upon acceleration or provable in bankruptcy, or alter certain
provisions of the Indenture relating to the Debt Securities issued thereunder
not denominated in U.S. dollars or impair the right to institute suit for the
enforcement of any payment on any Debt Security when due or any right of
repayment at the option of the holder of a Debt Security or (b) reduce the
aforesaid percentage in principal amount of Debt Securities of any series, the
consent of the holders of which is required for any such modification. (SECTION
8.2)
CONCERNING THE TRUSTEE
The Company and its subsidiaries maintain ordinary banking relationships
with Citibank, N.A. and its affiliates and a number of other banks. Citibank,
N.A. and its affiliates along with a number of other banks have extended credit
facilities to the Company and its subsidiaries.
PLAN OF DISTRIBUTION
The Company may offer the Debt Securities directly to purchasers or to or
through underwriters, dealers or agents. Any such underwriter(s), dealer(s) or
agent(s) involved in the offer and the sale of the Debt Securities in respect of
which this Prospectus is delivered will be named in the Prospectus Supplement.
The Prospectus Supplement with respect to such Debt Securities will also set
forth the terms of the offering of such Debt Securities, including the purchase
price of such Debt Securities and the proceeds to the Company from such sale,
any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchanges on which
such Debt Securities may be listed.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Prospectus Supplement will
describe the method of distribution of the Debt Securities.
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If underwriters are used in an offering of Debt Securities, the name of each
managing underwriter, if any, and any other underwriters and the terms of the
transaction, including any underwriting discounts and other items constituting
compensation of the underwriters and dealers, if any, will be set forth in the
Prospectus Supplement relating to such offering and the Debt Securities will be
acquired by the underwriters for their own accounts and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time. It is anticipated
that any underwriting agreement pertaining to any Debt Securities will (1)
entitle the underwriters to indemnification by the Company against certain civil
liabilities under the Securities Act, or to contribution with respect to
payments which the underwriters may be required to make in respect thereof, (2)
provide that the obligations of the underwriters will be subject to certain
conditions precedent and (3) provide that the underwriters will be obligated to
purchase all Debt Securities offered in a particular offering if any such Debt
Securities are purchased.
If a dealer is used in an offering of Debt Securities, the Company will sell
such Debt Securities to the dealer, as principal. The dealer may then resell
such Debt Securities to the public at varying prices to be determined by such
dealer at the time of resale. The name of the dealer and the terms of the
transaction will be set forth in the Prospectus Supplement relating thereto.
If an agent is used in an offering of Debt Securities, the agent will be
named, and the terms of the agency will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in such Prospectus
Supplement, an agent will act on a best efforts basis for the period of its
appointment.
Dealers and agents named in a Prospectus Supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the Debt Securities
described therein and, under agreements which may be entered into with the
Company, may be entitled to indemnification by the Company against certain civil
liabilities under the Securities Act. Underwriters, dealers and agents may be
customers of, engage in transactions with, or perform services for, the Company
in the ordinary course of business.
Offers to purchase Debt Securities may be solicited, and sales thereof may
be made, by the Company directly to institutional investors or others, who may
be deemed to be underwriters within the meaning of the Securities Act with
respect to any resales thereof. The terms of any such offer will be set forth in
the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other agents of the Company to solicit offers by certain
institutional investors to purchase Debt Securities from the Company pursuant to
contracts providing for payment and delivery at a future date. Institutional
investors with which such contracts may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such purchasers must be
approved by the Company. The obligations of any purchaser under any such
contract will not be subject to any conditions except that (1) the purchase of
the Debt Securities shall not at the time of delivery be prohibited under the
laws of any jurisdiction to which such purchaser is subject and (2) if the Debt
Securities are also being sold to underwriters, the Company shall have sold to
such underwriters the Debt Securities not subject to delayed delivery.
Underwriters and other agents will not have any responsibility in respect of the
validity or performance of such contracts.
The anticipated date of delivery of Debt Securities will be set forth in the
Prospectus Supplement relating to each offering.
LEGAL MATTERS
The validity of the Debt Securities will be passed upon for the Company by
Robert F. Sharpe, Jr. Esq., Senior Vice President Law and General Counsel of the
Company. Mr. Sharpe holds options to purchase in
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the aggregate less than 0.1% of the common stock of RJR Nabisco Holdings Corp.,
which owns all of the capital stock of the Company.
EXPERTS
The consolidated financial statements and financial statement schedules
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated by reference herein, and have been
so incorporated by reference in reliance upon such report given upon the
authority of that firm as experts in accounting and auditing.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DO THEY CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. NO ACTION HAS BEEN OR
WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR BY ANY UNDERWRITER THAT
WOULD PERMIT A PUBLIC OFFERING OF THE SECURITIES OFFERED HEREBY OR POSSESSION OR
DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN ANY
JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED
STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS COME ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM
THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE
SECURITIES OFFERED HEREBY AND THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS.
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<S> <C>
Available Information.......................... S-2
The Company.................................... S-3
Ratio of Earnings to Fixed Charges............. S-4
Use of Proceeds................................ S-4
Recent Developments............................ S-4
Risk Factors................................... S-6
Description of Notes........................... S-9
Underwriting................................... S-11
Legal Matters.................................. S-12
PROSPECTUS
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Company.................................... 3
Ratio of Earnings to Fixed Charges............. 4
Use of Proceeds................................ 4
Description of Debt Securities................. 4
Plan of Distribution........................... 13
Legal Matters.................................. 14
Experts........................................ 15
</TABLE>
[LOGO]
RJR NABISCO, INC.
$150,000,000
8 1/4% NOTES DUE 2004
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
CHASE SECURITIES INC.
DEUTSCHE MORGAN GRENFELL
ABN AMRO SECURITIES (USA), INC.
BT SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
--------------
$200,000,000
8 1/2% NOTES DUE 2007
MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
DEUTSCHE MORGAN GRENFELL
BANCAMERICA SECURITIES, INC.
CITICORP SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON
UBS SECURITIES
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PROSPECTUS SUPPLEMENT
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JUNE 26, 1997
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