SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1994
RJR NABISCO HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-10215 13-3490602
(State or other jurisdiction of (Commission file number) (I.R.S. EmployerIdentification No.)
incorporation or organization)
RJR NABISCO, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-6388 56-0950247
(State or other jurisdiction of (Commission file number) (I.R.S. EmployerIdentification No.)
incorporation or organization)
1301 Avenue of the Americas
New York, New York 10019-6013
(212) 258-5600
(Address, including zip code, and telephone number,
including area code, of the principal executive offices of
RJR Nabisco Holdings Corp.
and RJR Nabisco, Inc.)
Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for
such shorter period that the Registrants were required to file such reports), and (2) have been
subject to such filing requirements for the past 90 days. YES X , NO .
-- ---
Indicate the number of shares outstanding of each of the Registrants' classes of common stock as
of the latest practicable date: April 30, 1994:
RJR Nabisco Holdings Corp.: 1,138,606,937 shares of common stock, par value $.01 per share
RJR Nabisco, Inc.: 2,566.07515 shares of common stock, par value $1,000 per share
</TABLE>
<PAGE>
INDEX
<TABLE><CAPTION>
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
<S> <C>
Consolidated Condensed Statements of Income - Three Months
Ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Condensed Statements of Cash Flows - Three Months
Ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Condensed Balance Sheets - March 31, 1994
and December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . . 4-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . 18-19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE>
PART I
------
Item 1. Financial Statements.
RJR Nabisco Holdings Corp.
RJR Nabisco, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in Millions Except Per Share Amounts)
<TABLE><CAPTION>
Three Months Three Months
Ended Ended
March 31, 1994 March 31, 1993
-------------------- ------------------------
Holdings RJRN Holdings RJRN
-------- ---- -------- ----
<S> <C> <C> <C> <C>
Net sales* . . . . . . . . . . . . . . . . . . . . . . . . $ 3,572 $ 3,572 $ 3,736 $3,736
------- ------- ------- ------
Costs and expenses (Note 1)*:
Cost of products sold 1,572 1,572 1,534 1,534
Selling, advertising, administrative and general expenses 1,212 1,207 1,364 1,361
Amortization of trademarks and goodwill 156 156 155 155
------- ------- ------- ------
Operating income . . . . . . . . . . . . . . . . . . . 632 637 683 686
Interest and debt expense (Note 5) . . . . . . . . . . . . (291) (291) (320) (302)
Other income (expense), net . . . . . . . . . . . . . . . . (12) (17) 7 (2)
------- ------- ------- ------
Income before income taxes . . . . . . . . . . . . . . 329 329 370 382
Provision for income taxes . . . . . . . . . . . . . . . . 135 135 160 164
------- ------- ------- ------
Income before extraordinary item . . . . . . . . . . . 194 194 210 218
Extraordinary item - gain (loss) on early extinguishments of
debt, net of income taxes (Note 4) . . . . . . . . . . . 1 1 (47) (40)
------- ------- ------- ------
Net income . . . . . . . . . . . . . . . . . . . . . 195 195 163 178
Less preferred stock dividends . . . . . . . . . . . . . . 33 - 6 -
------- ------- ------- ------
Net income applicable to common stock . . . . . . . . . $ 162 $ 195 $ 157 $ 178
======= ======= ======= ======
Net income (loss) per common and common equivalent share:
Income before extraordinary item . . . . . . . . . . . . $ 0.12 $ 0.15
Extraordinary item . . . . . . . . . . . . . . . . . . . - (0.03)
------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 0.12 $ 0.12
======= =======
Dividends per share of Series A Preferred Stock (Note 8) . $ 0.835 $ 0.835
======= =======
Average number of common and common equivalent shares
outstanding (in thousands) (Note 2) . . . . . . . . . . . 1,365,468 1,358,223
--------- ---------
____________________
* Excludes excise taxes of $850 million and $868 million for the three months
ended March 31, 1994 and 1993, respectively.
See Notes to Consolidated Condensed Financial Statements
- 1 -
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
</TABLE>
<TABLE><CAPTION>
Three Months Three Months
Ended Ended
March 31, 1994 March 31, 1993
-------------------- -----------------------
Holdings RJRN Holdings RJRN
-------- ---- -------- ----
<S> <C> <C> <C> <C>
Net cash flows from operating activities
(Note 6) . . . . . . . . . . . . . . . . . . . $ 216 $ 259 $ 306 $ 274
------- ------- ------- -------
Cash flows from (used in) investing activities:
Capital expenditures (107) (107) (115) (115)
Proceeds from dispositions of businesses . . - - 453 453
Acquisition of businesses (55) (55) (14) (14)
Other, net . . . . . . . . . . . . . . . . . 1 1 2 2
------- ------- ------- -------
Net cash flows from (used in) investing
activities . . . . . . . . . . . . . . . . (161) (161) 326 326
------- ------- ------- -------
Cash flows from (used in) financing activities:
Proceeds from issuance of long-term debt . . 8,036 8,036 4,908 4,908
Repayments of long-term debt . . . . . . . . (8,001) (8,001) (5,277) (5,165)
Financing and advisory fees paid (1) (1) (8) (8)
Increase in notes payable . . . . . . . . . . 72 72 36 36
Proceeds from issuance of common stock . . . 3 - - -
Dividends paid . . . . . . . . . . . . . . . (83) - (57) -
Dividends paid to parent . . . . . . . . . . - (19) - (29)
Other, net . . . . . . . . . . . . . . . . . 19 (81) 33 (75)
------- ------- ------- -------
Net cash flows from (used in) financing
activities . . . . . . . . . . . . . . . 45 6 (365) (333)
------- ------- ------- -------
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . . . . (8) (8) (4) (4)
------- ------- ------- -------
Net change in cash and cash equivalents . . 92 96 263 263
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . 215 205 99 96
------- ------- ------- -------
Cash and cash equivalents at end of period . . $ 307 $ 301 $ 362 $ 359
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Condensed Financial Statements
- 2 -
<PAGE>
<TABLE><CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Millions)
March 31, 1994 December 31, 1993
---------------------- ---------------------
Holdings RJRN Holdings RJRN
-------- ---- -------- ----
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 307 $ 301 $ 215 $ 205
Accounts and notes receivable, net 996 992 856 847
Inventories (Note 3) 2,674 2,674 2,700 2,700
Prepaid expenses and excise taxes 381 381 374 374
--------- --------- --------- ---------
Total current assets . . . . . . . . . . . . . . . . 4,358 4,348 4,145 4,126
--------- --------- --------- ---------
Property, plant and equipment - at cost . . . . . . . 7,292 7,292 7,166 7,166
Less accumulated depreciation . . . . . . . . . . . . (2,094) (2,094) (1,998) (1,998)
--------- --------- --------- ---------
Net property, plant and equipment 5,198 5,198 5,168 5,168
--------- --------- --------- ---------
Trademarks, net . . . . . . . . . . . . . . . . . . . 8,665 8,665 8,727 8,727
Goodwill, net . . . . . . . . . . . . . . . . . . . . 12,759 12,759 12,851 12,851
Other assets and deferred charges . . . . . . . . . . 424 421 404 400
--------- ---------- ---------- ---------
$ 31,404 $ 31,391 $ 31,295 $ 31,272
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 354 $ 354 $ 301 $ 301
Accounts payable 333 333 515 515
Accrued liabilities 2,694 2,651 2,751 2,705
Current maturities of long-term debt (Note 5) 248 248 142 142
Income taxes accrued 394 394 234 234
--------- --------- --------- ---------
Total current liabilities . . . . . . . . . . . . . 4,023 3,980 3,943 3,897
--------- --------- --------- ---------
Long-term debt (less current maturities) (Notes 5 and 9) 12,001 12,001 12,005 12,005
Other noncurrent liabilities . . . . . . . . . . . . 2,498 2,312 2,503 2,353
Deferred income taxes . . . . . . . . . . . . . . . . 3,710 3,637 3,774 3,701
Commitments and contingencies (Note 7)
Stockholders' equity (Notes 8 and 9):
ESOP convertible preferred stock (15,537,969 shares
issued and outstanding at March 31, 1994) . . . 249 - 249 --
Series A convertible preferred stock (52,500,000
shares issued and outstanding at March 31, 1994). 2 - 2 --
Series B preferred stock (50,000 shares issued and
outstanding at March 31, 1994) . . . . . . . . . . . . 1,250 - 1,250 --
Common stock (1,138,587,737 shares issued and
outstanding at March 31, 1994) . . . . . . . . . . . . 11 - 11 --
Paid-in capital 8,703 9,857 8,778 9,877
Retained earnings (accumulated deficit) (688) (264) (883) (459)
Receivable from ESOP (200) - (211) --
Other stockholders' equity (155) (132) (126) (102)
--------- --------- --------- ---------
Total stockholders' equity . . . . . . . . . . . 9,172 9,461 9,070 9,316
--------- --------- --------- ---------
$ 31,404 $ 31,391 $ 31,295 $ 31,272
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
- 3 -
<PAGE>
RJR Nabisco Holdings Corp.
RJR Nabisco, Inc.
Notes to Consolidated Condensed Financial Statements
Note 1 - Interim Reporting and Results of Operations
For interim reporting purposes, certain costs and expenses
are charged to operations in proportion to the estimated total annual
amount expected to be incurred.
Certain prior year amounts have been reclassified to conform to
the 1994 presentation.
In management's opinion, the accompanying unaudited
consolidated condensed financial statements (the "Consolidated
Condensed Financial Statements") of RJR Nabisco Holdings Corp.
("Holdings") and RJR Nabisco, Inc. ("RJRN" and collectively with
Holdings, the "Registrants") contain all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement
of the results for the interim periods presented.
During the first quarter of 1994, Holdings' net income was
increased by a $20 million after-tax net benefit consisting of a
pre-tax credit of $43 million ($41 million after-tax) related to
the return of excess assets held in a trust that was established to
fund certain payments related to employee compensation arrangements and
a pre-tax charge of $32 million ($21 million after-tax) related to
the settlement of certain benefits under a Supplemental Executive
Retirement Plan maintained by Holdings.
Note 2 - Earnings Per Share
Earnings per share is based on the weighted average number of
shares of Holdings' common stock, par value $.01 per share, ("Common
Stock") and $.835 depositary shares ("Series A Depositary Shares")
outstanding during the period and Common Stock assumed to be
outstanding to reflect the effect of dilutive warrants and options.
Holdings' other potentially dilutive securities are not included in
the earnings per share calculation because the effect of excluding
interest and dividends on such securities for the period would
exceed the earnings allocable to the Common Stock into which such
securities would be converted. Accordingly, Holdings' earnings per
share and fully diluted earnings per share are the same.
Note 3 - Inventories
The major classes of inventory are shown in the table below:
<TABLE><CAPTION>
March 31, 1994 December 31, 1993
-------------- -----------------
<S> <C> <C>
Finished products . . . . . . . . $ 786 $ 771
Leaf tobacco . . . . . . . . . . 1,375 1,458
Raw materials . . . . . . . . . . 226 208
Other . . . . . . . . . . . . . . 287 263
-------- --------
$ 2,674 $ 2,700
======= =======
</TABLE>
- 4 -
<PAGE>
Note 4 - Extraordinary Item
The early extinguishments of debt of Holdings and RJRN resulted in
the following extraordinary gains or losses:
<TABLE><CAPTION>
Three Months Three Months
Ended Ended
March 31, 1994 March 31, 1993
-------------------- --------------------
Holdings RJRN Holdings RJRN
-------- ---- -------- ----
<S> <C> <C> <C> <C>
Cash paid below (in excess of) net carrying amount
(book value) of debt extinguished . . . . . . . $ 1 $ 1 $ (67) $ (57)
Write-off of debt issuance costs . . . . . . . . . - - (4) (4)
---- ---- ------- ------
Extraordinary item - gain (loss) on early
extinguishments of debt before income taxes . . 1 1 (71) (61)
(Provision) benefit for income taxes . . . . . . . - - 24 21
---- ---- ---- ----
Extraordinary item - gain (loss) on early
extinguishments of debt, net of income taxes . $ 1 $ 1 $ (47) $ (40)
=== === ====== ======
</TABLE>
Note 5 - Long-term Debt and Interest Expense
Long-term debt consisted of the following:
<TABLE><CAPTION>
March 31, 1994 December 31, 1993
-------------------- --------------------
<S> <C> <C>
Debentures and notes . . . . . . . . . . . . . . . $ 8,061 $ 8,095
Foreign currency debt . . . . . . . . . . . . . . . 527 595
Revolving credit facility . . . . . . . . . . . . . 960 328
Commercial paper . . . . . . . . . . . . . . . . . 379 913
Other indebtedness . . . . . . . . . . . . . . . . 311 266
Subordinated debentures and notes:
Subordinated debentures . . . . . . . . . . . . 280 280
Subordinated discount debentures . . . . . . . 1,454 1,393
Other subordinated indebtedness . . . . . . . . 277 277
Less current maturities . . . . . . . . . . . . . . (248) (142)
--------- ---------
$ 12,001 $ 12,005
======== ========
</TABLE>
Consolidated interest and debt expense for Holdings consisted
of the following:
<TABLE><CAPTION>
Three Months
Ended
March 31,
--------------
1994 1993
---- ----
<S> <C> <C>
Cash interest . . . . . . . . . . . . . . . . . . . $ 222 $ 224
Non-cash interest and debt expense . . . . . . . . 69 96
------ ------
$ 291 $ 320
===== =====
</TABLE>
- 5 -
<PAGE>
Note 5 - Long-term Debt and Interest Expense (continued)
Based on RJRN's intention and ability to continue to refinance,
for more than one year, the amount of its domestic commercial paper
borrowings outstanding either in the commercial paper market or
with additional borrowings under RJRN's $6.5 billion revolving credit
facility (as amended from time to time, the "1991 Credit Agreement"),
commercial paper borrowings of $379 million have been included in
"Long-term debt" as of March 31, 1994.
Certain financing agreements to which Holdings is a party
and debt instruments of RJRN directly or indirectly restrict the
payment of dividends by Holdings. The 1991 Credit Agreement,
together with RJRN's $1 billion revolving credit facility (as
amended from time to time, the "1993 Credit Agreement" and together
with the 1991 Credit Agreement, the "Credit Agreements"), which
contain restrictions on the payment of cash dividends or other
distributions by Holdings in excess of certain specified amounts, and
the indentures relating to certain of RJRN's debt securities, which
contain restrictions on the payment of cash dividends or other
distributions by RJRN to Holdings in excess of certain specified
amounts, or for certain specified purposes, effectively limit the
payment of dividends on the Common Stock. In addition, the
declaration and payment of dividends is subject to the discretion
of the board of directors of Holdings and to certain limitations under
Delaware law. The Credit Agreements and the indentures under which
certain debt securities of RJRN have been issued also impose
certain operating and financial restrictions on Holdings and
its subsidiaries. These restrictions limit the ability of Holdings
and its subsidiaries to incur indebtedness, engage in transactions
with stockholders and affiliates, create liens, sell certain assets
and certain subsidiaries' stock, engage in certain mergers or
consolidations and make investments in unrestricted subsidiaries.
Note 6 - Supplemental Cash Flows Information
A reconciliation of net income to net cash flows from operating
activities follows:
<TABLE><CAPTION>
Three Months Three Months
Ended Ended
March 31, 1994 March 31, 1993
-------------------- --------------------
Holdings RJRN Holdings RJRN
-------- ---- -------- ----
<S> <C> <C> <C> <C>
Cash flows from (used in) operating activities:
Net income $ 195 $ 195 $ 163 $ 178
----- ----- ----- -----
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation of property, plant and equipment . . . . 110 110 109 109
Amortization (principally intangibles) . . . . . . . 174 174 174 174
Deferred income tax benefit . . . . . . . . . . . . . (33) (33) (53) (87)
Non-cash interest and debt expense . . . . . . . . . 69 69 96 78
Extraordinary item - (gain) loss on early
extinguishments of debt before income taxes . . (1) (1) 71 61
Changes in working capital items, net . . . . . . . . (228) (184) (214) (159)
Other, net . . . . . . . . . . . . . . . . . . . . . (70) (71) (40) (80)
----- ----- ----- ------
Total adjustments . . . . . . . . . . . . . . . 21 64 143 96
------ ------ ----- ------
Net cash flows from operating activities $ 216 $ 259 $ 306 $ 274
====== ====== ===== ======
</TABLE>
- 6 -
<PAGE>
Note 7 - Contingencies
Various legal actions, proceedings and claims are pending or may be
instituted against R.J. Reynolds Tobacco Company ("RJRT") or its
affiliates or indemnities, including those claiming that lung cancer
and other diseases have resulted from the use of or exposure to RJRT's
tobacco products. During 1993, 16 new actions were filed or served
against RJRT and/or its affiliates or indemnities and 18 such actions
were dismissed or otherwise resolved in favor of RJRT and/or its
affiliates or indemnities. A total of 35 such actions in the United
States, one in Puerto Rico and one against RJRT's Canadian subsidiary
were pending on December 31, 1993. As of May 9, 1994, 43 active cases
were pending against RJRT and/or its affiliates or indemnities, 41 in
the United States, one in Puerto Rico and one in Canada. Four of the
41 active cases in the United States involve alleged non-smokers
claiming injuries resulting from exposure to environmental tobacco
smoke. One of such cases is currently scheduled for trial on November
28, 1994 and if tried, will be the first such case to reach trial. Six
of the active cases purport to be class actions on behalf of thousands
of individuals.
The plaintiffs in these actions seek recovery on a variety of legal
theories, including strict liability in tort, design defect,
negligence, breach of warranty, failure to warn, fraud,
misrepresentation, unfair trade practices and conspiracy. Punitive
damages, often in amounts totaling many millions of dollars, are
specifically pleaded in 20 cases in addition to compensatory and other
damages. The defenses raised by RJRT and/or its affiliates, where
applicable, include preemption by the Federal Cigarette Labeling and
Advertising Act, as amended (the "Cigarette Act") of some or all such
claims arising after 1969; the lack of any defect in the product;
assumption of the risk; comparative fault; lack of proximate cause;
and statutes of limitations or repose. Juries have found for
plaintiffs in two smoking and health cases, but in one such case,
which has been appealed by both parties, no damages were awarded. The
jury awarded plaintiffs $400,000 in the other such case, Cipollone v.
------------
Liggett Group, Inc., et. al., which award was overturned on appeal and
----------------------------
the case was subsequently dismissed.
On June 24, 1992, the United States Supreme Court in Cipollone held
---------
that claims that tobacco companies failed to adequately warn of the
risks of smoking after 1969 and claims that their advertising and
promotional practices undermined the effect of warnings after that
date were preempted by the Cigarette Act. The Court also held that
claims of breach of express warranty, fraud, misrepresentation and
conspiracy were not preempted. The Supreme Court's decision was
announced through a plurality opinion, and further definition of how
Cipollone will apply to other cases must await rulings in those cases.
---------
Certain legislation proposed in recent years in Congress, among
other things, would eliminate any such preemptive effect on common law
damage actions for personal injuries. RJRT is unable to predict
whether such legislation will be enacted, if so, in what form, or
whether such legislation would be intended by Congress to apply
retroactively. The Supreme Court's Cipollone decision itself, or the
---------
passage of such legislation, could increase the number of cases filed
against cigarette manufacturers, including RJRT.
RJRT understands that a grand jury investigation being conducted in
the Eastern District of New York is examining possible violations of
criminal law in connection with activities relating to the Council for
Tobacco Research-USA, Inc., of which RJRT is a sponsor. RJRT is unable
to predict the outcome of this investigation.
RJRT recently received a civil investigative demand from the U.S.
Department of Justice requesting broad documentary information from
RJRT. Although the request appears to focus on tobacco industry
activities in connection with product development efforts, it also
requests general information concerning contacts with competitors.
RJRT is unable to predict the outcome of this investigation.
- 7 -
<PAGE>
Note 7 - Contingencies (continued)
Litigation is subject to many uncertainties, and it is possible
that some of the legal actions, proceedings or claims could be decided
against RJRT or its affiliates or indemnities. Determinations of
liability or adverse rulings against other cigarette manufacturers
that are defendants in similar actions, even if such rulings are not
final, could adversely affect the litigation against RJRT and its
affiliates or indemnities and increase the number of such claims.
Although it is impossible to predict the outcome of such events or
their effect on RJRT, a significant increase in litigation activities
could have an adverse effect on RJRT. RJRT believes that it has a
number of valid defenses to any such actions, including but not
limited to those defenses based on preemption under the Cipollone
decision, and RJRT intends to defend vigorously all such actions.
The Registrants believe that the ultimate outcome of all pending
litigation matters should not have a material adverse effect on either
of the Registrants' financial position; however, it is possible that
the results of operations or cash flows of the Registrants in a
particular quarterly or annual period could be materially affected by
the ultimate outcome of certain pending litigation matters. Management
is unable to derive a meaningful estimate of the amount or range of
such possible loss in any particular quarterly or annual period or in
the aggregate.
Note 8 - Stockholders' Equity
Retained earnings (accumulated deficit) at March 31, 1994 includes
non-cash expenses related to accumulated trademark and goodwill
amortization of approximately $3.171 billion.
Dividends per Series A Depositary Share are equal to one-fourth of
the amount of dividends per share of Series A Conversion Preferred
Stock, par value $.01 per share, ("Series A Preferred Stock") of
Holdings. Because Series A Preferred Stock mandatorily converts into
Common Stock of Holdings, dividends on shares of Series A Preferred
Stock are reported similar to common equity dividends.
Note 9 - Subsequent Events
On May 6, 1994, Holdings completed the issuance of 26,675,000
shares of Series C Conversion Preferred Stock, par value .01 per
share, ("Series C Preferred Stock") in connection with the sale of
266,750,000 depositary shares ("Series C Depositary Shares") at $6.50
per depositary share (the "Series C Preferred Stock Offering").
Approximately $900 million of the net proceeds from the Series C
Preferred Stock Offering will be applied to the redemption of RJRN's
subordinated debentures as discussed below. The remaining net proceeds
may be used for general corporate purposes which may include
refinancings of indebtedness, working capital, capital expenditures,
acquisitions and repurchases or redemptions of securities. In
addition, such proceeds may be used to facilitate one or more
significant corporate transactions, such as a joint venture, merger,
acquisition, divestiture, asset swap, spin-off and/or
recapitalization, that would result in the separation of the tobacco
and food businesses of Holdings. Pending such uses, proceeds are being
used to repay indebtedness under the 1991 Credit Agreement and for
short-term liquid investments.
RJRN has called for redemption on May 15, 1994 substantially all of
its approximately $2 billion in outstanding subordinated debentures.
The subordinated debentures to be redeemed consist of the Subordinated
Discount Debentures due May 15, 2001 (the "Subordinated Discount
Debentures"), the 15% Payment-in-Kind Subordinated Debentures due May
15, 2001 (the "15% Subordinated Debentures") and the 131/2%
Subordinated Debentures due May 15, 2001 (the "131/2% Subordinated
Debentures") at premiums of 1071/2%, 1071/2% and 106 3/4%, respectively.
Approximately $1.2 billion principal or accreted amount of such
debentures will be refinanced with proceeds of debt securities
maturing after 1998 that were issued during 1993. Such proceeds had
been used to temporarily reduce indebtedness under the 1991 Credit
Agreement. In addition, the redemption of such debentures will be
funded with approximately $900 million of net proceeds from the Series
C Preferred Stock Offering.
____________________
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion and analysis of Holdings' financial condition
and results of operations should be read in conjunction with the historical
financial information included in the Consolidated Condensed Financial
Statements.
<TABLE><CAPTION>
Results of Operations
Summarized financial data for Holdings is as follows:
Three Months
Ended
March 31,
(Dollars in Millions) 1994 1993 % Change
---- ---- --------
<S> <C> <C> <C>
Net Sales:
RJRT $ 1,134 $ 1,405 (19)%
Tobacco International 727 699 4
Total Tobacco 1,861 2,104 (12)
Total Food 1,711 1,632 5
-------- -------
$ 3,572 $ 3,736 (4)
======= =======
Operating Company Contribution*:
RJRT $ 393 $ 50 (21)%
Tobacco International 179 159 13
------ ------
Total Tobacco 572 659 (13)
Total Food 230 203 13
Corporate (14) (24) 42
------- ------
$ 788 $ 838 (6)
====== ======
Operating Income:
RJRT $ 302 $ 409 (26)%
Tobacco International 169 149 13
------- ------
Total Tobacco 471 558 (16)
Total Food 175 149 17
Corporate (14) (24) 42
------- -------
$ 632 $ 683 (7)
====== ======
</TABLE>
____________________
* Operating income before amortization of trademarks and goodwill.
- 9 -
<PAGE>
- Tobacco
The tobacco line of business is conducted by RJRT and R.J. Reynolds
Tobacco International, Inc. ("Tobacco International").
Holdings' worldwide tobacco business experienced continued net sales
growth in its international business that was more than offset by a
significant sales decline in the domestic business, resulting in
reported net sales of $1.86 billion in the first quarter of 1994, a
decline of 12% from the first quarter of 1993 level of $2.10 billion.
Overall volume increased 2% in the first quarter of 1994 compared to
the first quarter of 1993. Operating company contribution for the
worldwide tobacco business of $572 million in the first quarter of
1994 declined 13% from the first quarter of 1993 level of $659
million, reflecting sharp reductions for the domestic business which
were partially offset by gains in the international business.
Operating income for the worldwide tobacco business in the first
quarter of 1994 of $471 million declined 16% from $558 million in the
first quarter of 1993, reflecting the lower operating company
contribution.
Net sales for RJRT amounted to $1.13 billion in the first quarter
of 1994, a decline of 19% from the first quarter of 1993 level of
$1.41 billion, primarily reflecting the impact of industry-wide price
reductions on full price brands ($264 million) that went into effect
during the second half of 1993. Although overall domestic volume
declined 9% in the first quarter of 1994 compared to the first quarter
of 1993 primarily as a result of a decline in the savings segment, net
sales for the saving segment were down 5% as the impact of the lower
savings segment volume was offset in part by higher selling prices for
that segment. RJRT's operating company contribution was $393 million
in the first quarter of 1994, a 21% decline from the first quarter of
1993 level of $500 million due to the price reductions on the full
price brands which more than offset the cost savings achieved from
previously announced restructuring programs and lower marketing
expenses. Operating company contribution in the savings segment was
flat in the first quarter of 1994 as compared to the first quarter of
1993 as the impact of lower savings segment volume was offset by the
higher selling prices in that segment. RJRT's operating income was
$302 million in the first quarter of 1994, a decline of 26% from $409
million in the first quarter of 1993. The decline in operating income
reflected the lower RJRT operating company contribution.
During recent years, the lower price segment of the domestic
cigarette market has grown significantly and the full price segment
has declined. This overall trend was mitigated by the reduction in
price in the full price segment and the increased list prices on lower
priced brands during the second half of 1993 but consumers remain
sensitive to price changes. Although not the case in the first quarter
of 1994, RJRT has experienced substantial increased volume in recent
years in the lower price segment, but the earnings attributable to
these sales have not been sufficient to offset decreased earnings from
declining sales of RJRT's full price brands. During the first quarter
of 1994, RJRT's margins improved from the fourth quarter of 1993 due
to lower marketing expenses as well as the cost savings achieved from
previously announced restructuring programs. RJRT's domestic cigarette
volume of non-full price brands as a percentage of total domestic
volume was 42% in the first quarter of 1994 versus 34% for the
domestic cigarette market. For the full year, RJRT's domestic
cigarette volume of non-full price brands as a percentage of total
domestic volume was 44% in 1993, 35% in 1992 and 25% in 1991 versus
37%, 30% and 25%, respectively, for the domestic cigarette market.
- 10 -
<PAGE>
- Tobacco (continued)
In March 1994, OSHA announced proposed regulations that would
restrict smoking in the workplace to designated smoking rooms that are
separately exhausted to the outside. Although RJRT cannot predict the
form of any regulations that may be finally adopted by OSHA, if the
proposed regulations are adopted, RJRT expects that many employers who
have not already done so would prohibit smoking in the workplace
rather than make expenditures necessary to establish designated
smoking areas to accommodate smokers. Because many employers currently
do not permit smoking in the workplace, RJRT cannot predict the effect
of any regulations that may be adopted, but incremental restrictions
on smokers could have an adverse effect on cigarette sales and RJRT.
During February 1994, the Commissioner of the U.S. Food and Drug
Administration (the "FDA"), which historically has refrained from
asserting jurisdiction over most cigarette products, stated that he
intended to cause the FDA to work with the U.S. Congress to resolve
the regulatory status of cigarettes under the Food, Drug and Cosmetic
Act. RJRT is unable to predict the outcome of any Congressional
deliberations or the likelihood that the FDA will assert jurisdiction
over cigarettes in some manner. Were the FDA to assert jurisdiction
in a manner that materially restricts the availability of cigarettes
to consumers, it would likely have a significant adverse effect on
RJRT.
It is not possible to determine what additional federal, state or
local legislation or regulations relating to smoking or cigarettes
will be enacted or to predict any resulting effect thereof on RJRT,
Tobacco International or the cigarette industry generally but such
legislation or regulations could have an adverse effect on RJRT,
Tobacco International or the cigarette industry generally.
For a description of certain litigation affecting RJRT and its
affiliates, see Note 7 to the Consolidated Condensed Financial
Statements.
Tobacco International recorded net sales of $727 million in the
first quarter of 1994, an increase of 4% from the first quarter of
1993 level of $699 million, due to an overall volume increase
reflecting market share gains in most key markets with particularly
strong performance from operations in Western Europe, the former
Soviet Union and Canada and favorable pricing in Western and Eastern
Europe, offset in part by unfavorable foreign currency developments.
Tobacco International's operating company contribution rose to $179
million in the first quarter of 1994, an increase of 13% compared to
the first quarter of 1993 level of $159 million due to the volume
gains and favorable pricing which was partially offset by unfavorable
product mix and foreign currency developments. Tobacco International's
operating income was $169 million in the first quarter of 1994, an
increase of 13% from the 1993 level of $149 million. The increase in
operating income reflects the increase in Tobacco International's
operating company contribution.
- 11 -
<PAGE>
- Food
Holdings' food business is conducted by Nabisco Foods Group
("Nabisco"), which is comprised of Nabisco Biscuit Company, the
LifeSavers Division, the Planters Division, the Specialty Products
Company, the Fleischmann's Division, the Food Service Division and
Nabisco Brands Ltd, (collectively the "North American Group") and
Nabisco International.
Nabisco reported net sales of $1.71 billion in the first quarter of
1994, an increase of 5% from the first quarter of 1993 level of $1.63
billion, with the North American Group up 6% and Nabisco International
down 3%. The North American Group increase was primarily attributable
to the Nabisco Biscuit Company as a result of volume increases
reflecting the success of new product introductions in the U.S.
biscuit market, including fat free and low fat cookies and crackers.
The Nabisco International decrease was primarily the result of lower
volume from its Brazilian and Mexican operations that more than offset
the favorable impact from recent acquisitions.
Nabisco's operating company contribution of $230 million in the
first quarter of 1994 was 13% higher than the first quarter of 1993
level of $203 million with the North American Group up 19% and Nabisco
International down 15%. The North American Group increase was
primarily due to the gain in net sales and savings from productivity
programs, including previously announced restructuring programs. The
Nabisco International decrease in operating company contribution was
primarily due to the decrease in net sales.
Nabisco's operating income was $175 million in the first quarter of
1994, an increase of 17% from the first quarter of 1993 level of $149
million, as a result of the gain in operating company contribution.
During April 1994, Nabisco International acquired seventy-one
percent of Establecimiento Modelo Terrabusi S.A., Argentina's second
largest cookie and cracker business. During May 1994, Nabisco
International acquired the remaining 50% interest in each of Royal
Brands S.A. in Spain and Royal Brands Portugal.
Interest and Debt Expense
Consolidated interest and debt expense of $291 million in the first
quarter of 1994 decreased 9% from the corresponding 1993 period,
primarily as a result of refinancings that were completed during 1993,
lower effective interest rates and the impact of lower market interest
rates.
Net Income
Holdings' net income of $195 million in the first quarter of 1994
includes an after-tax extraordinary gain of $1 million related to the
repurchase of debt during 1994. Excluding the extraordinary gain in
1994, as well as a similar extraordinary item which resulted in a loss
in the first quarter of 1993 of $47 million, Holdings would have
reported net income of $194 million for the first quarter of 1994, a
decrease of $16 million from the comparable period last year primarily
as a result of lower domestic tobacco operating income that more than
offset the impact of lower interest expense and a $20 million after-
tax net benefit (primarily reflected at Corporate) related to certain
employee compensation arrangements.
- 12 -
<PAGE>
Liquidity and Financial Condition
- March 31, 1994
Free cash flow, which represents cash available for the repayment
of debt and certain other corporate purposes before the consideration
of any debt and equity financing transactions, acquisition
expenditures and divestiture proceeds, was $46 million and $161
million for the first three months of 1994 and 1993, respectively. The
decrease in free cash flow for 1994 primarily reflects lower domestic
tobacco operating company contribution, higher working capital
requirements and higher dividend payments.
The components of free cash flow are as follows:
<TABLE><CAPTION>
Three Months
Ended
March 31,
----------------
1994 1993
---- ----
(In Millions)
<S> <C> <C>
Operating income . . . . . . . . . . . . . . . . . . . . . . . $ 632 $ 683
Amortization of intangibles . . . . . . . . . . . . . . . . 156 155
----- -----
Operating company contribution . . . . . . . . . . . . . . . . 788 838
Depreciation and other amortization . . . . . . . . . . . . 128 128
Increase in operating working capital . . . . . . . . . . . (335) (313)
Capital expenditures . . . . . . . . . . . . . . . . . . . (107) (115)
Change in other assets and liabilities . . . . . . . . . . (59) (51)
------ ------
Operating cash flow* . . . . . . . . . . . . . . . . . . . . . 415 487
Taxes Paid . . . . . . . . . . . . . . . . . . . . . . . . (42) (53)
Interest paid . . . . . . . . . . . . . . . . . . . . . . . (183) (189)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (83) (57)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . (61) (27)
------ ------
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . $ 46 $ 161
====== =====
</TABLE>
____________________
____________________
* Operating cash flow, which is used as an internal management
measurement for evaluating business performance, includes, in
addition to net cash flows from (used in) operating activities as
recorded in the Consolidated Condensed Statement of Cash Flows,
proceeds from the sale of capital assets less capital
expenditures, and is adjusted to exclude income taxes and items
of a financial nature (such as interest paid, interest income,
and other miscellaneous financial income or expense items).
____________________
- 13 -
<PAGE>
Liquidity and Financial Condition (continued)
At March 31, 1994, Holdings had an outstanding total debt level
(notes payable and long-term debt, including current maturities) and a
total capital level (total debt and stockholders' equity) of
approximately $12.6 billion and $21.8 billion, respectively, each of
which approximated the corresponding amount at December 31, 1993.
Holdings' ratio of total debt to total stockholders' equity at the end
of both periods was 1.4-to-1. RJRN's ratio of total debt to common
equity at the end of both periods was 1.3-to-1. In addition, total
current liabilities and long-term debt of RJRN's subsidiaries as of
March 31, 1994 was approximately $3.4 billion.
Holdings' effective interest rate on its consolidated long-term
debt increased from 8.4% at December 31, 1993 to 8.6% at March 31,
1994 as a result of higher market interest rates. Future effective
interest rates may vary as a result of RJRN's ongoing management of
interest rate exposure and changing market interest rates as well as
refinancing activities and changes in the ratings assigned to RJRN's
debt securities by independent rating agencies.
Management expects to consider opportunities to improve Holdings'
and its subsidiaries' capital and/or cost structure as they arise.
Such opportunities, if pursued, could involve further acquisitions
from time to time of substantial amounts of securities of Holdings or
its subsidiaries through open market purchases, redemptions, privately
negotiated transactions, tender or exchange offers or otherwise and/or
the issuance from time to time of additional securities by Holdings or
its subsidiaries. Acquisitions of securities at prices above their
book value, together with the accelerated amortization of deferred
financing fees attributable to the acquired securities, would reduce
reported net income, depending upon the extent of such acquisitions.
Nonetheless, Holdings' and its subsidiaries' ability to take advantage
of such opportunities is subject to restrictions in the Credit
Agreements and in certain of their debt indentures. As is further
discussed below, RJRN has called for redemption on May 15, 1994
substantially all of its approximately $2 billion in outstanding
subordinated debentures and on May 6, 1994, Holdings completed the
issuance of 26,675,000 shares of Series C Preferred Stock in
connection with the sale of 266,750,000 Series C Depositary Shares.
For a discussion of recent developments affecting the tobacco business
and the potential effect on RJRT's cash flow, see Results of
Operations - Tobacco.
In addition, management currently is reviewing and expects to
continue to review various corporate transactions, including, but not
limited to, joint ventures, mergers, acquisitions, divestitures, asset
swaps, spin-offs and recapitalizations. Although Holdings has
discussed and continues to discuss various transactions with third
parties, no assurance may be given that any transaction will be
announced or completed. It is likely that Holdings' tobacco and food
businesses would be separated should certain of the foregoing
transactions be consummated. As a result of Holdings' issuance of
Series C Preferred Stock in connection with the sale of Series C
Depositary Shares discussed below, Holdings believes that its ability
to accomplish one or more of the foregoing transactions may be
enhanced due to an increase in its stockholders' equity.
On May 6, 1994, Holdings completed the issuance of 26,675,000
shares of Series C Preferred Stock in connection with the sale of
266,750,000 Series C Depositary Shares at $6.50 per depositary share
pursuant to the Series C Preferred Stock Offering. Approximately $900
million of the net proceeds from the Series C Preferred Stock Offering
will be applied to the redemption of RJRN's subordinated debentures
- 14 -
<PAGE>
Liquidity and Financial Condition (continued)
discussed below. The remaining net proceeds may be used for general
corporate purposes which may include refinancings of indebtedness,
working capital, capital expenditures, acquisitions and repurchases or
redemptions of securities. In addition, such proceeds may be used to
facilitate one or more significant corporate transactions as described
above. Pending such uses, proceeds are being used to repay
indebtedness under the 1991 Credit Agreement and for short-term liquid
investments.
The 1991 Credit Agreement is a $6.5 billion revolving bank credit
facility that provides for the issuance of up to $800 million of
irrevocable letters of credit. Availability under the 1991 Credit
Agreement is reduced by an amount equal to the stated amount of such
letters of credit outstanding, by commercial paper borrowings in
excess of $1 billion and by amounts borrowed under such facility. At
March 31, 1994, approximately $389 million stated amount of letters of
credit was outstanding and $960 million was borrowed under the 1991
Credit Agreement. Accordingly, the amount available under the 1991
Credit Agreement at March 31, 1994 was $5.151 billion.
Availability under the 1993 Credit Agreement, which matures on
April 3, 1995 and provides a back-up line of credit to support
domestic commercial paper issuances of up to $1 billion, is reduced by
an amount equal to the aggregate amount of domestic commercial paper
outstanding. At March 31, 1994, approximately $379 million of domestic
commercial paper was outstanding. Accordingly, $621 million was
available under the 1993 Credit Agreement at March 31, 1994.
The aggregate of consolidated indebtedness and interest rate
arrangements subject to fluctuating interest rates approximated $4.3
billion at March 31, 1994. This represents a decrease of $1.2 billion
from the year-end 1993 level of $5.5 billion, primarily due to
Holdings' on-going management of its interest rate exposure.
Certain financing agreements to which Holdings is a party and debt
instruments of RJRN directly or indirectly restrict the payment of
dividends by Holdings. The Credit Agreements, which contain
restrictions on the payment of cash dividends or other distributions
by Holdings in excess of certain specified amounts, and the indentures
relating to certain of RJRN's debt securities, which contain
restrictions on the payment of cash dividends or other distributions
by RJRN to Holdings in excess of certain specified amounts, or for
certain specified purposes, effectively limit the payment of dividends
on the Common Stock. In addition, the declaration and payment of
dividends is subject to the discretion of the board of directors of
Holdings and to certain limitations under Delaware law. The Credit
Agreements and the indentures under which certain debt securities of
RJRN have been issued also impose certain operating and financial
restrictions on Holdings and its subsidiaries. These restrictions
limit the ability of Holdings and its subsidiaries to incur
indebtedness, engage in transactions with stockholders and affiliates,
create liens, sell certain assets and certain subsidiaries' stock,
engage in certain mergers or consolidations and make investments in
unrestricted subsidiaries. The Registrants believe that they are
currently in compliance with all covenants and restrictions in the
Credit Agreements and their other indebtedness.
Capital expenditures were $107 million for the first three months
of 1994. The current level of expenditures planned for 1994 is
expected to be in the range of approximately $550 million to $600
million (approximately 60% Food and 40% Tobacco), which will be funded
primarily by cash flows from operating activities. Management expects
that its capital expenditure program will continue at a level
sufficient to support the strategic and operating needs of the
Registrants' businesses.
- 15 -
<PAGE>
Liquidity and Financial Condition (continued)
RJRN has called for redemption on May 15, 1994 substantially all of
its approximately $2 billion in outstanding subordinated debentures.
The subordinated debentures to be redeemed consist of the Subordinated
Discount Debentures, the 15% Subordinated Debentures and the 131/2%
Subordinated Debentures at premiums of 1071/2%, 1071/2% and 1063/4%,
respectively. Approximately $1.2 billion principal or accreted amount
of such debentures will be refinanced with proceeds of debt securities
maturing after 1998 that were issued during 1993. Such proceeds had
been used to temporarily reduce indebtedness under the 1991 Credit
Agreement. In addition, the redemption of such debentures will be
funded with approximately $900 million of net proceeds from the Series
C Preferred Stock Offering. The redemption will result in an after-tax
extraordinary charge in the second quarter of 1994 of approximately
$150 million. Furthermore, after considering the additional
indebtedness under the 1991 Credit Agreement, such redemption would
result in an annual net interest savings of approximately $233 million
(approximately $151 million after-tax) based on the interest rate in
effect as of May 11, 1994 of 5.8% under the 1991 Credit Agreement. The
redemption will not materially impact liquidity because the net
interest savings will be offset by dividends to be paid on the Series
C Preferred Stock (approximately $160 million).
The amount of cash outlays incurred during the first quarter of
1994 in connection with the restructuring program announced in 1993
was primarily offset by the after-tax cash savings realized from the
restructuring program during such period.
____________________
- 16 -
<PAGE>
PART II
-------
Item 1. Legal Proceedings.
Tobacco-Related Litigation
During 1994 and through the date of this report nine new actions
have been filed or served against RJRT and/or its affiliates or
indemnities, including six actions purporting to be class actions, and
five actions were dismissed or otherwise resolved in favor of RJRT and
or its affiliates or indemnities without trial. As of May 9, 1994, 43
active cases were pending against RJRT and/or its affiliates or
indemnities, 41 in the United States, one in Puerto Rico and one in
Canada. Four of the alleged class actions (two of which have been
consolidated into one action) are based on, among other things,
claims that cigarette manufacturers manipulated levels of nicotine
in cigarettes to addict smokers. One such action is based upon a
claim that the tobacco manufacturers improperly failed to disclose
ingredients in their products and one challenges an RJRT
advertising campaign alleging that it is directed toward children.
____________________
The Registrants believe that the ultimate outcome of all pending
litigation matters should not have a material adverse effect on either
of the Registrants' financial position; however, it is possible that
the results of operations or cash flows of the Registrants in a
particular quarterly or annual period could be materially affected by
the ultimate outcome of certain pending litigation matters. Management
is unable to derive a meaningful estimate of the amount or range of
such possible loss in any particular quarterly or annual period or in
the aggregate.
- 17 -
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The matters indicated below were voted upon at the annual meeting
of stockholders of Holdings held on May 4, 1994. Holders of Common
Stock, Series A Conversion Preferred Stock, par value $.01 per share,
("Series A Preferred Stock"), and ESOP Convertible Preferred Stock,
par value $.01 per share, and stated value $16 per share ("ESOP
Preferred Stock"), were entitled to vote upon the proposals to elect
directors and ratify the appointment of auditors, as well as on four
stockholder proposals. At the meeting, there were entitled to vote
1,138,538,697 shares of Common Stock, 52,500,000 shares of Series A
Preferred Stock and 15,576,577 shares of ESOP Preferred Stock.
(a) Election of Fifteen Directors.
<TABLE><CAPTION>
Name Votes For Votes Withheld Abstentions
---- --------- -------------- -----------
<S> <C> <C> <C>
John T. Chain, Jr. 1,136,620,875 3,741,066 3,638,464
John L. Clendenin 1,136,626,863 3,735,079 3,638,464
James H. Greene, Jr. 1,136,586,498 3,775,443 3,638,464
H. John Greeniaus 1,136,608,883 3,753,058 3,638,464
Charles M. Harper 1,136,574,288 3,787,653 3,638,464
James W. Johnston 1,136,644,370 3,717,571 3,638,464
Henry R. Kravis 1,136,528,858 3,833,083 3,638,464
John G. Medlin, Jr. 1,136,652,691 3,709,250 3,638,464
Paul E. Raether 1,136,592,908 3,769,034 3,638,464
Lawrence R. Ricciardi 1,136,662,712 3,699,229 3,638,464
Rozanne L. Ridgway 1,136,666,267 3,695,674 3,638,464
Clifton S. Robbins 1,136,576,959 3,784,982 3,638,464
George R. Roberts 1,135,692,799 4,669,142 3,638,464
Scott M. Stuart 1,136,583,922 3,778,020 3,638,464
Michael T. Tokarz 1,136,598,372 3,763,569 3,638,464
</TABLE>
- 18 -
<PAGE>
(b) Ratification of Appointment of Deloitte & Touche as Independent
Auditors.
For: 1,135,109,399
Against: 3,261,149
Abstain: 1,991,393
(c) Stockholder Proposal on Cigarette Sales to Minors.
For: 25,092,534
Against: 831,021,506
Abstain: 79,554,641
Broker Non-Votes:204,693,259
(d) Stockholder Proposal on Facilitating Tobacco Farmers' Economic
Conversion.
For: 18,639,014
Against: 841,966,628
Abstain: 75,063,039
Broker Non-Votes:204,693,259
(e) Stockholder Proposal on Warning Labels for Advertising and
Promotional Items.
For: 86,540,512
Against: 837,066,527
Abstain: 12,061,643
Broker Non-Votes:204,693,259
(f) Stockholder Proposal on Legislative Activity and Research
Funding.
For: 22,621,357
Against: 835,383,791
Abstain: 77,663,534
Broker Non-Votes:204,693,259
- 19 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
4.1 Registrants agree to furnish copies of any instruments
defining the rights of holders of long-term debt of the
Registrants and their consolidated subsidiaries that does not
exceed 10 percent of the total assets of the Registrants and
their consolidated subsidiaries to the Securities and Exchange
Commission upon request.
*4.2 Second Amendment to Credit Agreement dated as of April 5,
1993 among RJR Nabisco Holdings Corp., RJR Nabisco, Inc. and the
lending institutions party thereto.
*10.1 Restated and Amended Stock Option Plan for Directors and Key
Employees of RJR Nabisco Holdings Corp. dated as of March 1,
1994.
*10.2 Amendment No. 1 dated March 8, 1994 to Employment Agreement
dated May 27, 1993 by and among RJR Nabisco Holdings Corp., RJR
Nabisco, Inc. and Charles M. Harper.
*10.3 Performance Unit Program under RJR Nabisco Holdings Corp.
1990 Long Term Incentive Plan.
*10.4 Form of Performance Unit Agreement between RJR Nabisco
Holdings Corp. and the grantee named therein (1994 Grant - 1
Year Period).
*10.5 Form of Performance Unit Agreement between RJR Nabisco
Holdings Corp. and the grantee named therein (1994 Grant - 3
Year Period).
*11.1 RJR Nabisco Holdings Corp. Computation of Earnings Per Share
for the three months ended March 31, 1994 and 1993.
*12.1 RJR Nabisco, Inc. Computation of Ratio of Earnings to Fixed
Charges for the three months ended March 31, 1994.
____________________
*Filed herewith
.
(b) Reports on Form 8-K
-------------------
A current report on Form 8-K dated April 21, 1994 was filed
by the Registrants on April 25, 1994 reporting first quarter 1994
operating results. Such report was amended on Form 8-K/A on April
27, 1994.
- 20 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
(Registrants)
Date: May 12, 1994 /s/ Stephen R. Wilson
-----------------------------------
Stephen R. Wilson,
Executive Vice President and
Chief Financial Officer
/s/ Robert S. Roath
-----------------------------------
Robert S. Roath,
Senior Vice President and
Controller
- 21 -
<PAGE>
EXHIBIT INDEX
Exhibit No.Page
---------------
4.1 Registrants agree to furnish copies of any
instruments defining the rights of holders of long-
term debt of the Registrants and their consolidated
subsidiaries that does not exceed 10 percent of the
total assets of the Registrants and their
consolidated subsidiaries to the Securities and
Exchange Commission upon request.
4.2 Second Amendment to Credit Agreement dated as of
April 5, 1993 among RJR Nabisco Holdings Corp., RJR
Nabisco, Inc. and the lending institutions party
thereto.
10.1 Restated and Amended Stock Option Plan for Directors
and Key Employees of RJR Nabisco Holdings Corp. dated
as of March 1, 1994.
10.2 Amendment No. 1 dated March 8, 1994 to Employment
Agreement dated May 27, 1993 by and among RJR Nabisco
Holdings Corp., RJR Nabisco, Inc. and Charles M.
Harper.
10.3 Performance Unit Program under RJR Nabisco Holdings
Corp. 1990 Long Term Incentive Plan.
10.4 Form of Performance Unit Agreement between RJR
Nabisco Holdings Corp. and the grantee named therein
(1994 Grant - 1 Year Period).
10.5 Form of Performance Unit Agreement between RJR
Nabisco Holdings Corp. and the grantee named therein
(1994 Grant - 3 Year Period).
11.1 RJR Nabisco Holdings Corp. Computation of Earnings
Per Share for the three months ended March 31, 1994
and 1993.
12.1 RJR Nabisco, Inc. Computation of Ratio of Earnings to
Fixed Charges for the three months ended March 31,
1994.
SECOND AMENDMENT
----------------
SECOND AMENDMENT (this "Amendment"), dated as of
March 28, 1994, among RJR NABISCO HOLDINGS CORP., a
Delaware corporation ("Holdings"), RJR NABISCO, INC., a
Delaware corporation (the "Borrower") and the lending
institutions party to the Credit Agreement referred to
below (the "Banks"). All capitalized terms used herein and
not otherwise defined herein shall have the respective
meanings provided such terms in the Credit Agreement
referred to below.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Holdings, the Borrower and the Banks are
parties to a Credit Agreement, dated as of April 5, 1993,
as amended, modified and supplemented to the date hereof
(as so amended, modified and supplemented, the "Credit
Agreement"); and
WHEREAS, the parties to the Credit Agreement wish
to further amend the Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendment to Credit Agreement.
-----------------------------
1. Effective April 4, 1994, the definition of
"Maturity Date" appearing in Section 10 of the Credit
Agreement shall be amended to read in its entirety as
follows:
"Maturity Date" shall mean April 3, 1995.
II. Conditions Precedent to Amendment Effective Date.
------------------------------------------------
1. This Amendment shall become effective on the
date (the "Amendment Effective Date") which is the later of
(i) April 4, 1994 and (ii) the date when each of the
following conditions shall have been met to the
satisfaction of the Agent:
(a) Execution of Amendment. On or prior to the
-----------------------
Amendment Effective Date (i) Holdings, the Borrower and
each of the Banks shall have signed a copy hereof (whether
the same or different copies) and shall have delivered
(including by way of
<PAGE>
facsimile transmission) the same to the Payments
Administrator at the Payments Administrator's Office.
(b) Officer's Certificate. The Payments
-----------------------
Administrator shall have received a certificate dated the
Amendment Effective Date signed by an appropriate officer
of each of Holdings and the Borrower attaching the
resolutions of the Board of Directors of Holdings and the
Borrower, as the case may be, in each case in form and
substance satisfactory to the Agent.
(c) Opinions of Counsel. The Payments
-----------------------
Administrator shall have received an opinion addressed to
the Agent, the Co-Agent and each of the Banks and dated the
Amendment Effective Date from counsel to Holdings and the
Borrower reasonably satisfactory to the Agent, which opin-
ion shall be in form and substance satisfactory to the
Agent and shall cover such matters incident to the
transactions contemplated herein as the Agent may
reasonably request.
(d) No Default; Representations and Warranties.
-------------------------------------------
On the Amendment Effective Date, and also after giving
effect to this Amendment, (i) there shall exist no Default
or Event of Default and (ii) all representations and
warranties contained in the Credit Agreement and in the
other Credit Documents shall be true and correct in all
material respects.
III. General Provisions
------------------
1. This Amendment is limited as specified and
shall not constitute a modification, acceptance or waiver
of any other provision of the Credit Agreement or any other
Credit Document.
2. This Amendment may be executed in any number
of counterparts and by the different parties hereto on
separate counterparts, each of which counterparts when
executed and delivered shall be an original, but all of
which shall together constitute one and the same
instrument. A complete set of counterparts shall be lodged
with Holdings and the Payments Administrator.
3. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
* * *
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto
has caused a counterpart of this Amendment to be duly
executed and delivered as of the date first above written
RJR NABISCO HOLDINGS CORP.
By /s/ John Delucca
------------------------------------
Title: Senior Vice President and
Treasurer
RJR NABISCO, INC.
By /s/ John Delucca
------------------------------------
Title: Senior Vice President and
Treasurer
CHEMICAL BANK
By /s/ Robert Kellas
------------------------------------
Title: Vice President
BANKERS TRUST COMPANY
By /s/ Robert R. Telesca
------------------------------------
Title: Assistant Vice President
<PAGE>
ABN AMRO BANK N.V.
By /s/ Laura G. Fazio
------------------------------------
Title: Vice President
By /s/ Margaret P. Hannahoe
------------------------------------
Title: Assistant Vice President
ARAB BANK PLC
By /s/ Peter R. Boyadjian
------------------------------------
Title: Vice President
BANCA COMMERCIALE ITALIANA
By /s/ Jenifer Casalvieri
------------------------------------
Title: Assistant Vice President
By /s/ Edward C. Bermant
------------------------------------
Title: First Vice President
BANCA NAZIONALE DELL'AGRICOLTURA,
NEW YORK BRANCH
By /s/ Giuseppe Magaletti
------------------------------------
Title: Executive Vice President
By /s/ Domenico P. Loschiavo
------------------------------------
Title: Vice President
<PAGE>
BANCO CENTRAL HISPANOAMERICANO,
S.A.
By /s/ Francisco Alcon
------------------------------------
Title: Executive Vice President &
General Manager
BANK BRUSSELS LAMBERT
By /s/ Eric Hollanders
------------------------------------
Title: Senior Vice President
By /s/ Craig Hallsteen
------------------------------------
Title: Vice President
BANK OF AMERICA N.T. & S.A.
By /s/ Daniel D. McCready
------------------------------------
Title: Vice President
BANK OF HAWAII
By /s/ Scott G. Balke
------------------------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Ken Sneider
------------------------------------
Title: Vice President
<PAGE>
THE BANK OF NOVA SCOTIA
By /s/ Terry K. Fryett
------------------------------------
Title: Vice President
THE BANK OF TOKYO TRUST
COMPANY
By /s/ Michael C. Irwin
------------------------------------
Title: Vice President
BANQUE PARIBAS
By /s/ Mary T. Finnegan
------------------------------------
Title: Vice President
By /s/ Stanley P. Berkman
------------------------------------
Title: Senior Vice President
BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By /s/ Kenneth Schult
------------------------------------
Title: Vice President
<PAGE>
CANADIAN IMPERIAL BANK OF
COMMERCE
By /s/ E. Lindsay Gordon
------------------------------------
Title: Authorized Signatory
THE CHASE MANHATTAN BANK, N.A.
By /s/ Elyse O'Hora
------------------------------------
Title: Managing Director
CITIBANK, N.A.
By /s/ Judith C. Fishlow
------------------------------------
Title: Vice President
CONTINENTAL BANK, N.A.
By /s/ Kathryn Robinson
------------------------------------
Title: Vice President
CREDIT LYONNAIS CAYMAN
ISLAND BRANCH
By /s/ Alain Papiasse
------------------------------------
Title: Authorized Signatory
<PAGE>
CREDIT LYONNAIS NEW YORK
BRANCH
By /s/ Alain Papiasse
------------------------------------
Title: Senior Vice President and
Deputy General Manager
CREDIT SUISSE
By /s/ Scott E. Zoellner
------------------------------------
Title: Associate
By /s/ Michael C. Mast
------------------------------------
Title: Member of Senior Management
THE DAI-ICHI KANGYO BANK,
LIMITED, NEW YORK BRANCH
By /s/ Timothy White
------------------------------------
Title: Assistant Vice President
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN
ISLANDS BRANCH
By /s/ Christopher S. Hall
------------------------------------
Title: Vice President
By /s/ Robert B. Landis
------------------------------------
Title: Managing Director
<PAGE>
FIRST FIDELITY BANK,
NATIONAL ASSOCIATION, NEW JERSEY
By /s/ Grace Vallacchi
------------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Thomas P. Farrell
------------------------------------
Title: Vice President
THE FUJI BANK, LIMITED
By /s/ Katsunori Nozawa
------------------------------------
Title: Vice President
GULF INTERNATIONAL BANK B.S.C.
By /s/ Abdel-Fattah Tahoun
------------------------------------
Title: Vice President
By /s/ Haytham F. Khalil
------------------------------------
Title: Assistant Vice President
<PAGE>
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.P.A
By /s/ Cathy R. Lesse
------------------------------------
Title: Vice President
LLOYDS BANK, PLC
By /s/ Paul D. Briamonte
------------------------------------
Title: Vice President
By /s/ Ted Walser
------------------------------------
Title: Senior Vice President
MIDLAND BANK PLC
By /s/ John Howker
------------------------------------
Title: Executive Director
J.P. MORGAN DELAWARE
By /s/ David J. Morris
------------------------------------
Title: Vice President
NATIONSBANK, N.A.
By /s/ Steven G. Schneider
------------------------------------
Title: Senior Vice President
<PAGE>
THE NIPPON CREDIT BANK, LTD.
By /s/ Laurie A. Ravit
------------------------------------
Title: Assistant Vice President
ROYAL BANK OF CANADA
By /s/ Linda M. Murrer
------------------------------------
Title: Senior Manager
THE SANWA BANK LIMITED-
NEW YORK BRANCH
By /s/ Stephen C. Small
------------------------------------
Title: Vice President
SOCIETE GENERALE
By /s/ James Nangle
------------------------------------
Title: First Vice President
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By /s/ Yoshinori Kawamura
------------------------------------
Title: Joint General Manager
<PAGE>
SWISS BANK CORPORATION
By /s/ Jerome J. Goodman
------------------------------------
Title: Director
By /s/ Marcia L. Thatcher
------------------------------------
Title: Director
THE TORONTO-DOMINION BANK
By /s/ Debbie A. Greene
------------------------------------
Title: Manager Credit Administration
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ Chris J. Karlin
------------------------------------
Title: Vice President
UNION BANK OF SWITZERLAND
By /s/ Peter B. Yearley
------------------------------------
Title: Vice President
By /s/ James P. Kelleher
------------------------------------
Title: Assistant Treasurer
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By /s/ Robert D. Dunbar
------------------------------------
Title: Vice President
By /s/ Sal Battinelli
------------------------------------
Title: Vice President
STOCK OPTION PLAN FOR DIRECTORS AND KEY EMPLOYEES
OF
RJR NABISCO HOLDINGS CORP. AND SUBSIDIARIES
(As Amended and Restated Effective March 1, 1994)
RJR Nabisco Holdings Corp., a Delaware corporation,
hereby adopts this amendment and restatement of the Stock
Option Plan for Directors and Key Employees of RJR Nabisco
Holdings Corp. and Subsidiaries. The purposes of this Plan
are as follows:
(1) To further the growth, development and
financial success of Holdings by providing additional
incentives to certain of its Directors and key Employees who
have been or will have or be given responsibility for the
management or administration of Holdings' business affairs
by assisting them to become owners of capital stock of
Holdings and thus to benefit directly from its growth,
development and financial success.
(2) To enable Holdings to obtain and retain the
services of, and business relationships with, the type of
professional, technical and managerial Employees and
Directors considered essential to the long range success of
Holdings by providing and offering them an opportunity to
become owners of capital stock of Holdings under Options.
ARTICLE I
DEFINITIONS
Section 1.1 - General
Whenever the following terms are used in this Plan
they shall have the meaning specified below unless the
context clearly indicates to the contrary.
Section 1.2 - Board
"Board" shall mean the Board of Directors of
Holdings.
Section 1.3 - Code
"Code" shall mean the Internal Revenue Code of
1986, as amended.
<PAGE>
Section 1.4 - Committee
"Committee" shall mean the Compensation Committee
of the Board or any other committee appointed by the Board
pursuant to Section 7.1.
Section 1.5 - Common Stock
"Common Stock" shall mean the Common Stock, par
value $0.01 per share, of Holdings.
Section 1.6 - Director
"Director" shall mean a member of the Board.
Section 1.7 - Eligible Director
"Eligible Director" shall mean a Director who (i)
has never been an employee or officer of Holdings or any
Subsidiary and (ii) has never been an employee or officer of
any entity which owns at least 25% of the outstanding Common
Stock, or any affiliate thereof.
Section 1.8 - Employee
"Employee" shall mean any employee (as defined in
accordance with the regulations and revenue rulings then
applicable under Section 3401(c) of the Code) of Holdings,
or of any corporation which is then a Subsidiary, whether
such employee is so employed at the time this Plan is
adopted or becomes so employed subsequent to the adoption of
this Plan or any other person providing goods or services to
Holdings or its subsidiaries, as the Committee may determine
in its discretion.
Section 1.9 - Holdings
"Holdings" shall mean RJR Nabisco Holdings Corp.,
a Delaware Corporation.
Section 1.10 - Option
"Option" shall mean an option granted under the
Plan to purchase Common Stock. Options include only options
which are not intended to be "incentive stock options" under
Section 422 of the Code.
2
<PAGE>
Section 1.11 - Option Price
"Option Price" shall have the meaning given in
Sections 4.2 and 5.2, as appropriate.
Section 1.12 - Optionee
"Optionee" shall mean an Employee or Director to
whom an Option is granted under the Plan.
Section 1.13 - Plan
"Plan" shall mean the Stock Option Plan for
Directors and Key Employees of RJR Nabisco Holdings Corp.
and its Subsidiaries.
Section 1.14 - Secretary
"Secretary" shall mean the Secretary of Holdings.
Section 1.15 - Subsidiary
"Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with Holdings if
each of the corporations, or if each group of commonly
controlled corporations, other than the last corporation in
an unbroken chain then owns stock possessing 50% or more of
the total combined voting power of all classes of stock in
one of the other corporations in such chain.
3
<PAGE>
ARTICLE II
SHARES SUBJECT TO PLAN
Section 2.1 - Shares Subject to Plan
The shares of stock subject to Options shall be
shares of Common Stock. The aggregate number of shares of
Common Stock which may be issued upon exercise of Options
shall not exceed 30,000,000.
Section 2.2 - Unexercised Options
If any Option expires or is canceled without
having been fully exercised, the number of shares subject to
such Option but as to which such Option was not exercised
prior to its expiration or cancellation may again be
optioned hereunder, subject to the limitations of Section
2.1.
4
<PAGE>
ARTICLE III
GRANTING OF OPTIONS
Section 3.1 - Eligibility
Any Eligible Director or key Employee of Holdings
or of any Subsidiary shall be eligible to be granted
Options.
Section 3.2 - Granting of Options to Eligible Directors
Each Eligible Director shall be granted an Option
to purchase an aggregate of 30,000 shares of Common Stock.
Such Option shall be granted as soon as practicable
following the Director's election to serve on the Board and
shall be subject to the terms and conditions set forth in
Article IV.
Section 3.3 - Granting of Options to Employees
The Committee shall from time to time, in its
absolute discretion:
(i) Determine which Employee are key Employees and
select from among the key Employees (including those to
whom Options have been previously granted under the
Plan) such of them as in its opinion shall be granted
Options; and
(ii) Determine the number of shares to be subject
to such Options granted to such selected key Employees;
and
(iii) Determine the terms and conditions of
such Options, consistent with the Plan; and
(iv) Establish such conditions as to the manner of
exercise of such Options as it may deem necessary,
including but not limited to requiring Optionees to
enter into agreements regarding transferability and
other restrictions with respect to shares issuable upon
exercise of such Options.
5
<PAGE>
ARTICLE IV
TERMS OF OPTIONS FOR ELIGIBLE DIRECTORS
Section 4.1 - Formula Plan
With respect to Options granted to Eligible
Directors, the Plan is intended to qualify as a
nondiscretionary formula plan, within the meaning of Rule
16b-3 (and any other applicable rule) promulgated by the
Securities and Exchange Commission under Section 16(b) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as such rule or its equivalent or successor
is then in effect ("Rule 16b-3"). The terms of such Options
shall be consistent with the terms of this Article IV. To
the extent that any provision of the Plan is not consistent
with the "formula plan" requirements of Rule 16b-3, then
such provision shall not apply to Options granted to
Eligible Directors. The grant of such Options may be
evidenced by a Stock Option Agreement, which shall be
executed by the Optionee and an authorized officer of
Holdings and which shall incorporate the terms and
conditions of this Article IV.
Section 4.2 - Option Price
The exercise price of each share of Common Stock
subject to an Option granted pursuant to this Article IV
shall be equal to the average of the high and low trading
prices of Common Stock (as reported on the New York Stock
Exchange consolidated tape) on the date of grant.
Section 4.3 - Commencement of Exercisability
Options granted pursuant to this Article IV shall
not be exercisable prior to six months after the date of
grant, and thereafter shall be exercisable in full, subject
to applicable securities regulations.
Section 4.4 - Expiration of Option
The Option shall expire and may not be exercised
to any extent after the expiration of ten years from the
date the Option was granted.
6
<PAGE>
ARTICLE V
TERMS OF OPTIONS FOR KEY EMPLOYEES
Section 5.1 - Option Agreement
Options granted to key Employees shall be
evidenced by a written Stock Option Agreement, which shall
be executed by the Optionee and an authorized officer of
Holdings and which shall contain the terms and conditions of
this Article V and such other terms and conditions as the
Committee shall determine, consistent with the Plan.
Section 5.2 - Option Price
(a) The price per share of the Common Stock
subject to each Option granted pursuant to this Article V
shall be set by the Committee. The price per share may be
less than the fair market value of such shares on the date
such Option is granted; provided that in no event shall the
price per share be less than fifty (50%) percent of the fair
market value of such shares on the date such Option is
granted.
(b) For the purpose of Section 5.2(a), the fair
market value of a share of Common Stock on the date the
Option is granted shall be the fair market value established
by the Committee acting in good faith.
Section 5.3 - Commencement of Exercisability
Subject to the provisions of Section 8.2, Options
granted pursuant to this Article V shall become exercisable
at such times and in such installments (which may be
cumulative) as the Committee shall provide in the terms of
each individual Option; provided, however, that by a
resolution adopted after an Option is granted the Committee
may, on such terms and conditions as it may determine to be
appropriate and subject to Section 8.2, accelerate the time
at which such Option or any portion thereof may be
exercised.
Section 5.4 - Expiration of Options
(a) No Option may be exercised to any extent by
anyone after, and every Option shall expire no later than,
the expiration of ten (10) years and one (1) day from the
date the Option was granted.
7
<PAGE>
(b) Subject to the provisions of Section 5.4(a),
the Committee shall provide, in the terms of each individual
Option, when such Option expires and becomes unexercisable.
Section 5.5 - No Right to Continue in Employment
Nothing in this Plan or in any Stock Option
Agreement hereunder (i) shall confer upon any Optionee who
is an Employee any right to continue in the employ of
Holdings or any of its Subsidiaries or (ii) shall interfere
with or restrict in any way the rights of Holdings and its
Subsidiaries, which are hereby expressly reserved, to
terminate the employment of any Optionee at any time for any
reason whatsoever, with or without good cause.
Section 5.6 - Merger, Consolidation, Exchange,
Acquisition, Liquidation or Dissolution
In its absolute discretion, and on such terms and
conditions as it deems appropriate, coincident with or after
the grant of any Option pursuant to this Article V, the
Committee may provide that such Option cannot be exercised
after the merger or consolidation of Holdings into another
corporation, the exchange of all or substantially all of the
assets of Holdings for the securities of another
corporation, the acquisition by another person of 80% or
more of Holdings' then outstanding shares of voting stock or
the recapitalization, reclassification, liquidation or
dissolution of Holdings, and if the Committee so provides,
it may, in its absolute discretion and on such terms and
conditions as it deems appropriate, also provide, either by
the terms of such Option or by a resolution adopted prior to
the occurrence of such merger, consolidation, exchange,
acquisition, recapitalization, reclassification, liquidation
or dissolution, that, for some period of time prior to such
event, such Option shall be exercisable as to all shares
subject thereto, notwithstanding anything to the contrary in
Section 5.3 and/or in any installment provisions of such
Option (but subject to the provisions of Section 5.4(a)) and
that, upon the occurrence of such event, such Option shall
terminate and be of no further force or effect; provided,
however, that the Committee may also provide, in its
absolute discretion, that even if the Option shall remain
exercisable after any such event, from and after such event,
any such Option could have been exercised immediately prior
to such event.
8
<PAGE>
ARTICLE VI
EXERCISE OF OPTIONS
Section 6.1 - Persons Eligible to Exercise
During the lifetime of the Optionee, only he or
his guardian may exercise an Option granted to him, or any
portion thereof. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when
such portion becomes unexercisable under Section 4.4, 5.4 or
5.6, be exercised by his personal representative or by any
person empowered to do so under the deceased Optionee's will
or under the then applicable laws of descent and
distribution.
Section 6.2 - Partial Exercise
At any time and from time to time prior to the
time when any exercisable Option or exercisable portion
thereof expires or becomes unexercisable under Section 4.4,
5.4, or 5.6, such Option or portion thereof may be exercised
in whole or in part; provided, however, that Holdings shall
not be required to issue fractional shares. With respect to
Options granted to key Employees, the Committee may, in the
Stock Option Agreement, require any partial exercise to be
with respect to a specified minimum number of shares.
Section 6.3 - Manner of Exercise
An exercisable Option, or any exercisable portion
thereof, may be exercised solely by delivering to the
Secretary or his office all of the following prior to the
time when such Option or such portion becomes
unexercisable:
(a) Notice in writing signed by the Optionee or
other person then entitled to exercise such Option or
portion thereof, stating that such Option or portion
thereof is exercised;
(b) Full payment of the Option Price (in cash, by
check or by a combination thereof) for the shares with
respect to which such Option or portion thereof is
thereby exercised, together with payment or arrangement
for payment of any federal income or other tax required
to be withheld by Holdings with respect to such
shares;
(c) Such representations and documents as the
Committee reasonably deems necessary or advisable to
effect compliance with all applicable provisions of the
Securities Act of 1933, as amended and any other
federal, state or foreign
9
<PAGE>
securities laws or regulations. The Committee may, in
its absolute discretion, also take whatever additional
actions it deems appropriate to effect such compliance,
including, without limitation, placing legends on share
certificates and issuing stop-transfer orders to
transfer agents and registrars; and
(d) In the event that the Option or portion
thereof shall be exercised pursuant to Section 6.1 by
any person or persons other than the Optionee,
appropriate proof of the right of such person or
persons to exercise the Option or portion thereof.
Section 6.4 - Rights as Stockholders
The holders of Options shall not be, nor have any
of the rights or privileges of, stockholders of Holdings in
respect of any shares purchasable upon the exercise of any
part of an Option unless and until certificates representing
such shares have been issued by Holdings to such holders.
Section 6.5 - Transfer Restrictions
The Committee, in its absolute discretion, may
impose such restrictions on the transferability of the
shares purchasable upon the exercise of an Option as it
deems appropriate, and any such restriction shall be set
forth in the respective Stock Option Agreement and may be
referred to on the certificates evidencing such shares.
10
<PAGE>
ARTICLE VII
ADMINISTRATION
Section 7.1 - Compensation Committee
The Plan shall be administered by the Compensation
Committee of the Board. In its absolute discretion, the
Board may appoint a different committee comprised of two or
more Directors to administer all or a portion of the Plan.
To the extent required to avoid liability under Section 16
of the Exchange Act, no person shall be eligible to serve on
the Committee unless he is then a "disinterested person"
within the meaning of Rule 16b-3. Appointment of Committee
members shall be effective upon acceptance of appointment.
Committee members may resign at any time by delivering
written notice to the Board. Vacancies in the Committee
shall be filled by the Board.
Section 7.2 - Duties and Powers of Committee
It shall be the duty of the Committee to conduct
the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to
interpret the Plan and the Options and to adopt such rules
for the administration, interpretation, and application of
the Plan as are consistent therewith and to interpret, amend
or revoke any such rules. Any such interpretations and
rules shall be consistent with the basic purpose of the Plan
to grant Options, including Incentive Stock Options and,
with respect to Options granted to Eligible Directors, shall
be consistent with the designation of this Plan as a
nondiscretionary formula plan within the meaning of Rule
16b-3. In its absolute discretion, the Board may at any
time and from time to time exercise any and all rights and
duties of the Committee under the Plan. The Committee may
act either by vote at a telephonic or other meeting or by a
memorandum or other written instrument signed by a majority
of the Committee.
Section 7.3 - Compensation; Professional Assistance; Good
Faith Actions
Members of the Committee shall not receive
compensation for their services as members but all expenses
and liabilities they incur in connection with the
administration of the Plan shall be borne by Holdings. the
Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee,
Holdings and the Officers and Directors of Holdings shall be
entitled to rely upon the advice, opinions or valuations of
any such persons. All actions taken and all interpretations
and determinations made by the Committee in good faith shall
be final and binding upon all Optionees, Holdings and all
other interested persons. No member of the Committee shall
be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan
or the Options, and all members of the Committee shall be
fully protected by Holdings with respect to any such action,
determination or interpretation.
11
<PAGE>
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 - Options Not Transferable
No Option or interest or right therein shall be
subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other
means, whether such disposition be voluntary or involuntary
or by operation of law or by judgment, levy, attachment,
garnishment or any other legal or equitable proceeding
(including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect; provided,
however, that nothing in this Section 8.1 shall prevent
transfers by will or by the applicable laws of descent and
distribution.
Section 8.2 - Amendment, Suspension or Termination of the
Plan
(a) The Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or
from time to time by the Board. However, without approval
of Holdings' stockholders given within 12 months before or
after the action by the Board or the Committee, no action of
the Committee or the Board may, except as provided in
Section 8.3, increase any limit imposed in Section 2.1 on
the maximum number of shares which may be issued upon
exercise of Options, reduce the minimum option price
requirements in Section 4.2 or 5.2(a) or extend the limit
imposed in this Section 8.2 on the period during which
Options may be granted. Except as expressly permitted by
the terms of the Plan, neither the amendment, suspension nor
termination of the Plan shall, without the consent of the
holder of the Option, alter or impair any rights or
obligations under any Option theretofore granted. No Option
may be granted during any period of suspension nor after
termination of the Plan, and in no event may any Option be
granted under this Plan after the expiration of ten years
from the date the Plan is adopted or the date the
stockholders of Holdings approve this Plan, if earlier.
(b) Notwithstanding anything in Section 8.2(a) to
the contrary, in no event may the provisions of Section 3.2
or Article IV be amended more frequently than once in six
months, except as necessary to comport with changes to the
Code, the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder.
Section 8.3 - Adjustments in Outstanding Options
In the event that the outstanding shares of Common
Stock subject to Options are, from time to time, changed
into or exchanged for a different number or kind of shares
of Holdings or other securities of Holdings by reason of a
merger,
12
<PAGE>
consolidation, recapitalization, reclassification, stock
split-up, stock dividend, combination of shares, or
otherwise, the Committee shall make an appropriate and
equitable adjustment in the aggregate number of shares which
may be issued pursuant to Section 2.1 hereof and the number
and kind of shares or other consideration as to which all
outstanding Options, or portions thereof then unexercised,
shall be exercisable. Any such adjustment made by the
Committee shall be final and binding upon all Optionees,
Holdings and all other interested persons.
Section 8.4 - Effect of Plan Upon Other Options and
Compensation Plans
Nothing in this Plan shall be construed to limit
the right of Holdings or any of its Subsidiaries (a) to
establish any other forms of incentives or compensation for
employees of Holdings or any of its Subsidiaries or (b) to
grant or assume options otherwise than under this Plan in
connection with any proper corporate purpose, including, but
not by way of limitation, the grant or assumption of options
in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock
or assets of any corporation, firm or association.
Section 8.5 - Titles
Titles are provided herein for convenience only
and are not to serve as a basis for interpretation or
construction of the Plan.
Section 8.6 - Pronouns
The masculine pronoun shall include the feminine
and neuter and the singular shall include the plural, where
the context so indicates.
I hereby certify that this amendment and
restatement of the Plan was duly adopted by the Board of
Directors of RJR Nabisco Holdings Corp. on March 1, 1994.
Executed as of this day of , 1994.
-------------- -----------
-----------------------------
Secretary
Corporate Seal
13
1994 AMENDMENT
TO
EMPLOYMENT AGREEMENT
This is an amendment to the Employment Agreement (the
"Agreement") made the 27th day of May 1993 by and among RJR
Nabisco Holdings Corp., a Delaware corporation ("Holdings"), RJR
Nabisco, Inc., a Delaware corporation and an indirect subsidiary
of Holdings (the "Company") and Charles M. Harper ("Executive").
Recitals
In consideration of Executive being given the opportunity to
receive an increased amount of compensation for the fiscal year
ending December 31, 1994 and Holdings and the Company being able
to further incentivise the performance of Executive, it is agreed
by and between the parties as follows:
a) Section 3.1 of the Agreement shall be amended in its
entirety for the fiscal year ending December 31, 1994
as follows:
"3.1 Salary. The Company shall pay executive a
Base Salary at the rate of $600,000 per annum for
the period ending December 31, 1994."
Nothing in this Amendment shall cause Section 3.1 of
the Agreement to be amended for the fiscal years ending
December 31, 1995, 1996 or 1997, or the obligation of
the Company to increase the Base Salary rate 6% each
January 1 of such years compounded annually from a base
of $1,200,000 in 1993.
b) Sections 3.2(a), (b) and (c) of the Agreement shall be
amended in their entirety as follows:
"3.2 Annual Bonus. In addition to his Base
Salary, executive shall be entitled for the fiscal
year ending December 31, 1994 to be granted
Performance Units pursuant to the Performance Unit
Agreement appended hereto as Attachment 1. This
award shall be in lieu of any award under the
Company's Annual Incentive Award Plan for the
fiscal year ending December 31, 1994.
Nothing in this Amendment shall cause Sections 3.2(a),
(b) or (c) of the Agreement to be amended for the
fiscal year ending December 31, 1995, 1996 or 1997.
RJR NABISCO HOLDINGS CORP.
By_____________________________
President
RJR NABISCO, INC.
By_____________________________
President
Date: March 8, 1994
_____________________________ _______________________________
Charles M. Harper
RJR NABISCO HOLDINGS CORP.
PERFORMANCE UNIT PROGRAM
[Effective January 1, 1994]
1. Relationship to 1990 Long-Term Incentive Plan
The Performance Unit Program (the "Program") sets
forth the terms and conditions of Performance Units
under the 1990 Long-Term Incentive Plan ("LTIP").
Capitalized terms used herein shall, unless otherwise
indicated, have the same meaning as in the LTIP. In the
case of any inconsistency between the provisions of the
Program and those of the LTIP, the provisions of the
LTIP shall govern.
2. Definitions
For the purpose of the Program, the following shall
have the meaning shown:
(a) Date of Grant - The date on which the
Committee awards a Grant to a Participant for
the applicable Performance Period, which
generally will be within 90 days following the
commencement of such period. Participants may
have different Dates of Grant for the same
Performance Period.
(b) Initial Grant Value - The value assigned to
a Performance Unit at the time of grant which
shall be one dollar per unit or such other value
designated by the Committee.
(c) Market Price - The average of the highest
price and lowest price at which the Common Stock
shall have been sold on the applicable date as
reflected on the New York Stock Exchange
consolidated tape and reported in The Wall
Street Journal.
(d) Payment Value - The value of the Performance
Unit at the end of the Performance Period as
determined by the Performance measures.
(e) Performance Measures - The performance
objectives for the Company designated by the
Committee as the applicable Performance Measures
for the relevant Performance Period. At its
discretion, the Committee may make reasonable
adjustments in the Performance Measures for any
Performance Period to reduce the Payment Value
of Performance Units for such Performance Period
if it determines that conditions so warrant;
provided, however, the Performance Measures must
include a minimum performance standard for the
Company below which no payment will be made and
a maximum performance level above which no
increased
<PAGE>
payment will be made. Performance Measures
shall determine the Payment Value of the
Performance Units when payment is made.
(f) Performance Period - A period of one, two,
three or four consecutive calendar years as
determined by the Committee.
(g) Performance Units - Awards of Performance
Units shall be credited to a Performance Unit
Account to be maintained for each Participant.
Each Performance Unit shall have an Initial
Grant Value of one dollar, which value can be
increased or decreased over the Performance
Period as determined by the Performance
Measures. If any Performance Units awarded
under the Program shall be forfeited, cancelled,
or not earned because of Performance Measures,
such Performance Units may again be awarded
under the Program.
The Committee may substitute other forms of
awards (such as Performance Shares, restricted
shares or stock options) for Performance Units
if, in the opinion of the Committee, such
substitution would result in more favorable tax
consequences to the Participants or to the
Company or for other reasons which, in the
opinion of the Committee, make such a
substitution desirable. Notwithstanding the
foregoing provisions of this paragraph, the
Committee shall not substitute any other form of
award for Performance Units unless, in the
opinion of the Committee, such substitution
would not result in any significant increase in
the cost of the Plan, or otherwise adversely
affect the Company.
3. Performance Periods and Grants
(a) For each Performance Period the Committee may
select and make Grants of Performance Units to
Participants, as it shall determine, at any
time, but no later than the first twelve months
of such period.
(b) Each Grant to a Participant will have a
Initial Grant Value of one dollar per unit and a
Performance Measure to determine the payment
value.
(c) Prior to the end of the first year of any
Performance Period, the Committee will establish
Performance Measures for such period. Subject
to the limitations set forth in the LTIP, the
Committee, at any time or from time to time, may
adjust Performance Measures for the Performance
Period to reduce the Payment Value of
Performance Units for such Performance Period if
the Committee determines that business
conditions warrant such action. Such business
conditions include, but are not limited to,
changes in the economy, changes in law or
government regulations or changes in generally
accepted accounting principles.
<PAGE>
(d) Grants made by the Committee shall be subject
to the provisions of the Program and to such
other terms and conditions, not inconsistent
with the Program and the LTIP, as are set forth
in a Performance Unit Agreement entered into by
the Company and the Participant.
(e) New Participants entering the Program during a
Performance Period may receive a Grant of
prorated number of Performance Units based on
the number of months remaining in the
Performance Period.
4. Determination of Performance Units Earned
After the end of each Performance Period, the
Committee shall determine the payment value of
Performance Units earned by each Participant with
respect to such Performance Period in accordance with
the following:
(a) If the target Performance Measures are exactly
attained the Payment Value of each Performance
Unit shall be equal to the Initial Grant Value.
If the minimum Performance Measures established
by the Committee are not attained, the Payment
Value of each Performance Unit shall be zero.
If the maximum Performance Measures established
by the Committee are attained or exceeded, a
Participant shall be deemed to have earned the
maximum Payment Value for each Performance Unit
established by the Committee for the applicable
cycle, which may be up to 250% of the Initial
Grant Value.
(b) If the Performance Measures attained are other
than at target, and exceed the minimum
Performance Measures but are less than the
maximum Performance Measures, the Payment Value
of Performance Units deemed to have been earned
by a Participant shall be determined in
accordance with an adjustment scale established
by the Committee for such Performance Period as
set forth in the Performance Unit Agreement. In
applying such scale, percentages shall be
rounded off to the nearest whole percentage.
(c) Notwithstanding anything in Sections 4(a) and
4(b) to the contrary, the Committee may, in its
absolute discretion, reduce the Payment Value of
Performance Units from the amount otherwise
determined under Sections 4(a) and 4(b).
(d) If a Participant's employment terminates
because of death, disability or retirement under
a retirement plan of the Company or a subsidiary
of the Company prior to the end of a Performance
Period, the number of Performance Units such
Participant shall be deemed to have earned shall
be determined as though such Participant's
employment had continued to the end of the
Performance Period, subject to achievement of
the
<PAGE>
Performance Measures for such period, multiplied
by a fraction, the numerator of which is the
number of months such Participant was employed
during the Performance Period (including the
month during which employment terminated) and
the denominator of which is the total number of
months in the Performance Period. Such prorated
award shall be paid at the end of the
performance period, and each Performance Unit
shall have a Payment Value as described above.
(e) If a Participant's employment terminates prior
to the end of a Performance Period for any
reason other than those set forth in Section
4(d), all of his Performance Units for such
period shall be cancelled, except to the extent
that at the time of termination the Participant
has an employment or termination agreement with
the Company or one of its subsidiaries which
includes non-cancellation of some or all
Performance Units.
5. Payment
(a) No payments will be made to Participants
prior to the end of a Performance Period
(except under such circumstances as the
Committee deems appropriate). Unless the
individual Performance Unit Agreement
provides otherwise, payments shall be made
for Performance Unit wholly in cash in the
amount of the Payment Value for each
Performance Unit. Payment of Performance
Units shall be made as soon as practicable
after the end of the Performance Period
which determines a Participant's right to
receive such payment.
(b) A Participant shall not have any of the
rights or privileges of a holder of Common
Stock with respect to Performance Units.
(c) Any payment made with respect to a
Participant who has died shall be paid, at
the end of the applicable award period, to
the beneficiary designated by the
Participant to receive the proceeds of any
group life insurance coverage provided for
the Participant by the Company or a
subsidiary of the Company. A Participant
who has not designated such beneficiary, or
who desires to designate a different
beneficiary, may file with the Company a
written designation of a beneficiary under
the Program, which designation may be
changed or revoked only by the Participant.
If no designation of beneficiary has been
made under such life insurance coverage or
filed with the Company under the Program,
distribution shall be made to the
Participant's spouse, if surviving;
otherwise in equal shares to the surviving
children of the Participant, if any;
otherwise to the Participant's estate.
<PAGE>
6. Deferral
(a) Each Participant who is on a United
States payroll may elect in any Performance
Period in which he is a Participant on the
last day of the Performance Period to have
all or any portion of his award for that
Performance Period deferred, except that any
award to a Participant payable as a result
of death, disability, involuntary
termination or approved leave of absence,
may not be deferred. An election to defer
shall be in writing, signed by the
Participant and delivered to the Company
before December 31 of the last year of the
Performance Period. The election shall be
irrevocable and shall specify the percentage
of the award (from 0% to 100%) which will be
paid (i) in January following the year in
which the Participant's death, retirement,
long-term disability or other termination of
employment occurs and/or (ii) in January of
a designated future year; provided, however,
if the Participant's employment with the
Company terminates prior to January of such
designated future year, the award will be
paid as if the Participant had only elected
to defer payment under sub-Section (i)
herein; further provided, in no event may an
award deferred by means of a stock credit be
paid within six months of the date of
deferral.
(b) Unless the individual Performance Unit
Agreement provides otherwise, awards may be
deferred by cash credit, Common Stock
credit, or a combination of the two as the
Participant may elect in writing at the same
time as the election to defer under Section
6(a)(i). If a Participant fails to make an
election as to mode of deferral, he shall be
deemed to have elected deferral by means of
a cash credit. Cash credits and Common
Stock credits shall be recorded in accounts
established in Participants' names on the
books of the Company or the subsidiary
employing the Participant. At the direction
of the Company, any accounts established in
a Participant's name for this Program may be
consolidated on the books of the Company or
subsidiary employing the Participant.
(i) If the deferral is wholly or partly
by means of a cash credit, the
Participant's cash credit account
shall be credited, as of the date
that payment of the award would
otherwise have been made, with the
dollar amount of the portion of the
award deferred by means of a cash
credit. In addition, the
Participant's cash credit account
shall be credited as of the last day
of each calendar quarter with an
interest equivalent in an amount
determined by applying to the current
balance in the
<PAGE>
account the interest rate for the
immediately preceding quarter which,
when annualized, shall be the average
prime rate of Morgan Guaranty Trust
Company of New York during such
immediately preceding quarter.
Interest shall be credited for the
actual number of days in the quarter
and shall be calculated based upon a
365-day year.
(ii) If the deferral is wholly or partly
by means of a Common Stock credit,
the Participant's stock credit
account shall be credited, as of the
date that payment of the award would
otherwise have been made, with a
Common Stock equivalent for the
number of shares of Common Stock
(including fractions of a share) that
could have been purchased with the
portion of the award deferred by
means of a stock credit at the Market
Price on the date that payment of the
award would otherwise have been made.
As of the date any dividend is paid
to shareholders of Common Stock, the
Participant's stock credit account
shall also be credited with an
additional Common Stock equivalent
for the number of shares of Common
Stock.
(c) Payment of deferred awards will be made
in a single distribution in cash unless the
Committee otherwise provides; provided,
however, if the Participant elects in
writing before December 31 of the year in
which he retires and is eligible for an
immediate benefit under a retirement plan of
the Company or its subsidiary, or in which
his employment terminates under a disability
plan of the Company or its subsidiaries,
payment will be made in substantially equal
annual installments (not to exceed ten)
commencing the January following such
retirement or termination of employment due
to disability. The amount of each
installment shall be product of multiplying
the deferred credit account balance by a
fraction, the numerator of which is one, and
the denominator of which is the total number
of installments elected minus the number of
installments previously paid. All
installments shall be made in cash only.
(d) If at any time the number of
outstanding shares of Common Stock shall be
increased as the result of any stock
dividend, subdivision or reclassification of
shares, the number of shares of Common Stock
to which each Participant's stock credit
account is equivalent shall be increased in
the same proportion as the outstanding
number of shares of Common Stock is
increased, or if the number of outstanding
shares of Common Stock shall at any
<PAGE>
time be decreased as the result of any
combination or reclassification of shares,
the number of shares of Common Stock to
which each Participant's stock credit
account is equivalent shall be decreased in
the same proportion as the outstanding
number of shares of Common Stock is
decreased. In the event the Company shall
at any time be consolidated with or merged
into any other corporation and holders of
the Company's Common Stock receive common
shares of the resulting or surviving
corporation, there shall be credited to each
Participant's stock credit account, in place
of the shares then credited thereto, a stock
equivalent determined by multiplying the
number of common shares of stock given in
exchange for a share of Common Stock upon
such consolidation or merger, by the number
of shares of Common Stock to which the
Participant's account is then equivalent.
If in such a consolidation or merger,
holders of the Company's Common Stock shall
receive any consideration other than common
shares of the resulting or surviving
corporation, the Committee, in its sole
discretion, shall determine the appropriate
change in Participant's accounts.
(e) In the event of the death of a
Participant, whether before or after
termination of employment, any cash credit
account and Common Stock credit account to
which he was entitled, including any award
approved after the Participant's death as to
which an election to defer was made, shall
be distributed in cash (unless the Committee
otherwise provides) to such person or
persons or the survivors thereof, including
corporations, unincorporated associations or
trusts, as the Participant may have
designated. The distributee may be the
beneficiary designated by the Participant
for purposes of the Company's life insurance
plan or any other distributee designated by
the Participant; provided, however, that all
such other designations shall be in writing,
signed by the Participant and delivered to
the Committee. A Participant may from time
to time revoke or change any such
designation by written notice to the
Committee. If there is no unrevoked
designation on file at the time of the
Participant's death, or if the person or
persons designated therein shall have all
predeceased the Participant or otherwise
ceased to exist, such distributions shall be
made to the Participant's surviving spouse,
if any; or in the absence of a surviving
spouse, in accordance with the Participant's
will; or, in the absence of a will, to the
administrator of the Participant's estate.
If the person or persons designated therein
shall survive the Participant, but shall die
before receiving all of such distributions,
the balance payable to such deceased
distributee shall, unless the Participant's
designation provides otherwise, be
distributed in accordance with the deceased
<PAGE>
distributee's will or in the absence of a
will to the administrator of the deceased
distributee's estate.
7. Tax Withholding
Any taxes required to be withheld by Federal, state
or local law upon delivery of Common Stock to a
Participant without restrictions shall be paid by the
Participant at or before the time of delivery.
8. Amendment or Termination
The Committee shall have the power to amend, suspend
or terminate the Program at any time except that no
action can be taken that would not be permitted by the
LTIP or that would materially adversely affect the
rights of Participants with respect to outstanding
Grants.
9. Cancellation of Units
In addition to cancellation by forfeiture as a
result of failure to complete the requisite period of
employment or failure to earn payment by meeting minimum
relevant Performance Measures, the Committee may, prior
to the end of a Performance Period, cancel Performance
Units with the consent of an employee holding such
Performance Units. In the event of any cancellation,
all rights of the former holder of such cancelled
Performance Units in respect of such cancelled
Performance Units shall terminate, and such Performance
Units shall be available for further grant in accordance
with the LTIP.
10. Miscellaneous
(a) Except as determined by the Committee, no
person shall have any right to receive a Grant.
A Grant of Performance Units does not give a
Participant the right to be retained as an
employee of the Company or otherwise affect the
Company's right to terminate such Participant's
employment.
(b) The Company, the Board of Directors, the
Committee, the officers and other employees of
the Company shall not be liable for any action
taken in good faith in interpreting and
administering the Program.
(c) Performance Units are subject to the
requirement that, if at any time the Committee
determines, in its sole discretion, that the
listing, registration, or qualification of
shares of Common Stock issuable pursuant to the
Program, is required by any securities exchange
or under any state or Federal law, or the
consent or approval of any governmental
regulatory body is necessary or desirable as a
condition or, or in connection with,
<PAGE>
the issue of shares of Common Stock, no
distribution pursuant to the Program shall be
made in whole or in part, unless listing,
registration, qualification, consent or approval
has been effected or obtained free of any
conditions not acceptable to the Committee.
(d) For purposes of the Program, a Participant on
Company approved leave of absence and a person
employed, with the consent of the Company, by a
subsidiary of the Company, will be considered as
being in the employ of the Company. A
Participant on salary continuation after his or
her release from active service will not be
considered as being in the employ of the
Company.
(e) The Program shall be governed by the subject
to the laws of the State of Delaware.
11. Finality of Determination
The Committee shall have the power to interpret the
Program and all interpretations, determinations and
actions by the Committee shall be final, conclusive and
binding upon all parties.
12. Effective Date
The Program shall become effective as of January 1,
1994.
Performance Unit
1994
Special - One Year
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
PERFORMANCE UNIT PROGRAM
PERFORMANCE UNIT AGREEMENT
DATE OF GRANT: MARCH 1, 1994
W I T N E S S E T H:
1. Grant. Pursuant to the provisions of the 1990 Long Term
Incentive Plan and the Performance Unit Program thereunder
(collectively, the "Plan"), RJR Nabisco Holdings Corp. (the
"Company") on the above date has granted to
J. W. Johnston (the "Grantee"),
subject to the terms and conditions which follow and the terms
and conditions of the Plan,
490 Performance Units.
A copy of the Plan is attached and made a part of this agreement
with the same effect as if set forth in the Agreement itself.
The Initial Grant Value of each Performance Unit shall be one
thousand dollars. All capitalized terms used herein shall have
the meaning set forth in the Plan, unless the context requires a
different meaning.
2. Adjustment of Value of Performance Units. For the
Performance Period commencing on January 1, 1994 and ending
December 31, 1994, the Committee has determined that the
Performance Measures shall be those identified in the grid
attached as Exhibit A. The value of each Performance Unit shall
be as determined in the grid attached as Exhibit A; provided,
however, the Payment Value determined in Exhibit A may be reduced
by the Committee in its discretion. The Grantee specifically
agrees that this award of Performance Units is in lieu of any
award under the Annual Incentive Award Plan for the fiscal year
ending December 31, 1994.
<PAGE>
3. Payment of Performance Units. Unless deferred pursuant
to the provisions of the Plan, or as otherwise determined by the
Committee, units so earned will be paid only in cash as soon as
practicable following the close of the Company's books at the end
of the Performance Period. Payment Value for tax and other
calculations shall be determined in accordance with the
provisions of the Plan, Exhibit A and the discretion of the
Committee to reduce the Payment Value. Except as provided in the
Plan, no units will be earned or paid unless the Grantee has been
a full-time employee of the Company throughout the Performance
Period.
4. Deferral. Deferral of a payment of Performance Units
shall be pursuant to the provisions of the Plan; provided,
however, in no event, may a deferred award be paid within six
months of the date of deferral.
5. Transferability. Other than as specifically provided in
the Plan with regard to the death of the Grantee, this Agreement
and any benefit provided or accruing hereunder shall not be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge; and any
attempt to do so shall be void. No such benefit shall, prior to
receipt thereof by the Grantee, be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or
torts of the Grantee.
6. No Right to Employment. Neither the execution and
delivery of this Agreement nor the granting of the Performance
Units evidenced hereby shall constitute any agreement or
understanding, express or implied, on the part of the Company or
its subsidiaries to employ the Grantee for any specific period or
in any specific capacity or shall prevent the Company or its
subsidiaries from terminating the Grantee's employment at any
time with or without cause. "Termination of employment" under
the Plan and this Agreement means termination from active
employment; it does not mean the termination of pay and benefits
at the end of salary continuation (or other form of severance pay
or pay in lieu of salary).
7. Notices. Any notices required to be given hereunder to
the Company shall be addressed to The Secretary, RJR Nabisco
Holdings, Inc., 1301 Avenue of the Americas, New York, NY
10019-6013 and any notice required to be given hereunder to the
Grantee shall be sent to the Grantee's address as shown on the
records of the Company.
8. Grantee. In consideration of the grant, the Grantee
specifically agrees that the Committee shall have the exclusive
power to interpret the Plan and this Agreement and to adopt such
rules for the administration, interpretation and application of
the Plan and Agreement as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all
interpretation and determinations made by the Committee shall be
final, conclusive, and binding upon the Grantee, the Company and
all other interested persons. No member of the Committee shall
be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the
Agreement. The Committee may delegate its interpretive authority
to an officer or officers of the Company.
<PAGE>
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, and the Grantee have executed this Agreement as of the
Date of Grant first above written.
RJR NABISCO HOLDINGS CORP.
By___________________________
Authorized Signatory
________________________________________________
GRANTEE
Grantee's Taxpayer Identification Number:
_______________________________________ Date:________________________
Grantee's Home Address:
_______________________________________
_______________________________________
_______________________________________
Performance Unit
1994
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
PERFORMANCE UNIT PROGRAM
PERFORMANCE UNIT AGREEMENT
DATE OF GRANT: MARCH 1, 1994
W I T N E S S E T H:
1. Grant. Pursuant to the provisions of the 1990 Long Term
Incentive Plan and the Performance Unit Program thereunder
(collectively, the "Plan"), RJR Nabisco Holdings Corp. (the
"Company") on the above date has granted to
Name (the "Grantee"),
subject to the terms and conditions which follow and the terms
and conditions of the Plan, a target of
Pugrant Performance Units.
A copy of the Plan is attached and made a part of this agreement
with the same effect as if set forth in the Agreement itself.
The Initial Grant Value of each Performance Unit shall be one
dollar. All capitalized terms used herein shall have the meaning
set forth in the Plan, unless the context requires a different
meaning.
2. Adjustment of Value of Performance Units. For the
three-year Performance Period commencing on January 1, 1994, the
Committee has determined that the Performance Measure shall be
operating company contribution attained during such Performance
Period. The value of each Performance Unit shall be as
determined in the grid attached as Exhibit A; provided, however,
the Payment Value determined in Exhibit A may be reduced by the
Committee in its discretion.
3. Payment of Performance Units. Unless deferred pursuant
to the provisions of the Plan, or as otherwise determined by the
Committee, units so earned will be paid only in cash as soon as
practicable following the close of the Company's books at the end
of the Performance Period. Payment Value for tax and other
calculations shall be determined in accordance with the
provisions of the Plan, Exhibit A and the discretion of the
Committee to reduce the Payment
<PAGE>
Value. Except as provided in the Plan, no units will be earned
or paid unless the Grantee has been a full-time employee of the
Company throughout the Performance Period.
4. Deferral. Deferral of a payment of Performance Units
shall be pursuant to the provisions of the Plan; provided,
however, in no event, may a deferred award be paid within six
months of the date of deferral.
5. Transferability. Other than as specifically provided in
the Plan with regard to the death of the Grantee, this Agreement
and any benefit provided or accruing hereunder shall not be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge; and any
attempt to do so shall be void. No such benefit shall, prior to
receipt thereof by the Grantee, be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or
torts of the Grantee.
6. No Right to Employment. Neither the execution and
delivery of this Agreement nor the granting of the Performance
Units evidenced hereby shall constitute any agreement or
understanding, express or implied, on the part of the Company or
its subsidiaries to employ the Grantee for any specific period or
in any specific capacity or shall prevent the Company or its
subsidiaries from terminating the Grantee's employment at any
time with or without cause. "Termination of employment" under
the Plan and this Agreement means termination from active
employment; it does not mean the termination of pay and benefits
at the end of salary continuation (or other form of severance pay
or pay in lieu of salary).
7. Notices. Any notices required to be given hereunder to
the Company shall be addressed to The Secretary, RJR Nabisco
Holdings, Inc., 1301 Avenue of the Americas, New York, NY
10019-6013 and any notice required to be given hereunder to the
Grantee shall be sent to the Grantee's address as shown on the
records of the Company.
8. Grantee. In consideration of the grant, the Grantee
specifically agrees that the Committee shall have the exclusive
power to interpret the Plan and this Agreement and to adopt such
rules for the administration, interpretation and application of
the Plan and Agreement as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all
interpretation and determinations made by the Committee shall be
final, conclusive, and binding upon the Grantee, the Company and
all other interested persons. No member of the Committee shall
be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the
Agreement. The Committee may delegate its interpretive authority
to an officer or officers of the Company.
<PAGE>
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, and the Grantee have executed this Agreement as of the
Date of Grant first above written.
RJR NABISCO HOLDINGS CORP.
By___________________________
Authorized Signatory
________________________________________________
GRANTEE
Grantee's Taxpayer Identification Number:
_______________________________________ Date:________________________
Grantee's Home Address:
_______________________________________
_______________________________________
_______________________________________
EXHIBIT 11.1
<TABLE>
RJR NABISCO HOLDINGS CORP.
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Millions Except Per Share Amounts)
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1994 March 31, 1993
---------------------- ---------------------
Fully Fully
Primary Diluted (A) Primary Diluted (A)
---------------------- ---------------------
<S> <C> <C> <C> <C>
Average number of common and common equivalent shares
outstanding during the period (in thousands):
Common Stock and Series A Depositary Shares issued and
outstanding at beginning of period................................ 1,348,011 1,348,011 1,344,649 1,344,649
Average number of shares of common stock issued during the
period (including shares of common stock issued during the
period through the exercise of options and/or
conversion of redeemable convertible preferred stock)............. 464 464 34 34
Average number of shares related to value of restricted stock
earned during the period.......................................... - - - -
Average number of stock warrants and options outstanding during
the period and shares issuable under performance shares granted... 16,993 16,993 13,540 13,540
Shares issuable upon conversion of redeemable convertible
preferred stock................................................... - - - 11,203
Shares issuable upon conversion of ESOP convertible preferred
stock............................................................. - 15,560 - 15,625
Shares issuable upon conversion of senior converting debentures..... - - - 16,553
---------- ---------- ---------- ----------
Average number of common and common equivalent shares
outstanding during the period..................................... 1,365,468 1,381,028 1,358,223 1,401,604
========== ========== ========== ==========
Income (loss) applicable to common stock:
Income before extraordinary item.................................... $ 194 $ 194 $ 210 $ 210
Interest on senior converting debentures (net of income taxes)...... - - - 13
Preferred stock dividends........................................... (33) (29) (6) -
Income tax benefit on ESOP preferred stock dividends................ - - - -
---------- ---------- ---------- ----------
Income before extraordinary item applicable to common stock......... 161 165 204 223
Extraordinary item.................................................. 1 1 (47) (47)
---------- ---------- ---------- ----------
Net income applicable to common stock............................... $ 162 $ 166 $ 157 $ 176
========== ========== ========== ==========
Income (loss) per common and common equivalent share:
Income before extraordinary item.................................... $ 0.12 $ 0.12 $ 0.15 $ 0.16
Extraordinary item.................................................. - - (0.03) (0.03)
---------- ---------- ---------- ----------
Net income.......................................................... $ 0.12 $ 0.12 $ 0.12 $ 0.13
========== ========== ========== ==========
<FN>
(A) For purposes of this Exhibit, the calculations of fully diluted earnings per share include common stock equivalents
and other potentially dilutive securities that produce an anti-dilutive result.
</TABLE>
<TABLE><CAPTION>
EXHIBIT 12.1
RJR NABISCO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
Three Months
Ended
March 31, 1994
--------------
Earnings before fixed charges:
<S> <C>
Income before extraordinary item . . . . . . . . . . . . . . . $ 194
Provision for income taxes . . . . . . . . . . . . . . . . . . 135
-----
Income before income taxes . . . . . . . . . . . . . . . . . . 329
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 286
Amortization of debt issuance costs . . . . . . . . . . . . . . 5
Interest portion of rental expense . . . . . . . . . . . . . . 13
------
Earnings before fixed charges . . . . . . . . . . . . . . . . . . . $ 633
=====
Fixed charges:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . $ 286
Amortization of debt issuance costs . . . . . . . . . . . . . . 5
Interest portion of rental expense . . . . . . . . . . . . . . 13
Capitalized interest . . . . . . . . . . . . . . . . . . . . . 3
-------
Total fixed charges . . . . . . . . . . . . . . . . . . $ 307
=====
Ratio of earnings to fixed charges . . . . . . . . . . . . . . . . 2.1
======
</TABLE>
