[DRAFT FEBRUARY 20, 1996]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
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RJR NABISCO HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
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DELAWARE 1-10215 13-3490602
(State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification No.)
incorporation or organization)
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RJR NABISCO, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 1-6388 56-0950247
(State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification No.)
incorporation or organization)
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1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(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.)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH
EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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RJR NABISCO HOLDINGS CORP.
Common Stock, par value $.01 per
share New York
Series B Depositary Shares New York
Series C Depositary Shares New York
RJR NABISCO, INC.
8.30% Senior Notes due April 15, 1999 New York
8% Notes due January 15, 2000 New York
8% Notes Due 2001 New York
8 5/8% Notes due 2002 New York
7 5/8% Notes due September 15, 2003 New York
8.75% Senior Notes due April 15, 2004 New York
8 3/4% Notes due 2005 New York
8 3/4% Notes due 2007 New York
9 1/4% Debentures due 2013 New York
SUBSIDIARIES OF THE REGISTRANTS
RJR NABISCO HOLDINGS CAPITAL TRUST I
10% Trust Originated Preferred
Securities New York
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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
1934 DURING 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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANTS' KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF RJR
NABISCO HOLDINGS CORP. ON JANUARY 31, 1996 WAS APPROXIMATELY $8.9 BILLION.
CERTAIN DIRECTORS OF RJR NABISCO HOLDINGS CORP. ARE CONSIDERED AFFILIATES FOR
PURPOSES OF THIS CALCULATION BUT SHOULD NOT NECESSARILY BE DEEMED AFFILIATES FOR
ANY OTHER PURPOSE. NONE OF THE VOTING STOCK OF RJR NABISCO, INC. IS HELD BY ANY
NON-AFFILIATE.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANTS' CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: JANUARY 31, 1996:
RJR NABISCO HOLDINGS CORP.: 272,973,182 SHARES OF COMMON STOCK, PAR VALUE, $.01
PER SHARE RJR NABISCO, INC.: 3,021.86513 SHARES OF COMMON STOCK, PAR
VALUE $1,000 PER SHARE
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RJR NABISCO, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(A)
AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
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DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE DEFINITIVE PROXY STATEMENT OF RJR NABISCO HOLDINGS CORP. TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO REGULATION 14A OF
THE SECURITIES EXCHANGE ACT OF 1934 ON OR PRIOR TO APRIL 30, 1996 ARE
INCORPORATED BY REFERENCE INTO PART III OF THIS REPORT.
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INDEX
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PART I
Item 1. Business.................................................................... 1
(a) General Development of Business..................................... 1
(b) Financial Information about Industry Segments....................... 2
(c) Narrative Description of Business................................... 3
Tobacco........................................................... 3
Food.............................................................. 13
Other Matters..................................................... 18
(d) Financial Information about Foreign and Domestic Operations
and Export Sales.................................................. 18
Item 2. Properties.................................................................. 18
Item 3. Legal Proceedings........................................................... 18
Item 4. Submission of Matters to a Vote of Security Holders......................... 19
Executive Officers of the Registrants....................................... 20
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder Matters....... 23
Item 6. Selected Financial Data..................................................... 24
Item 7. Management's Discussion and Analysis of Financial Condition and 26
Results of Operations.....................................................
Item 8. Financial Statements and Supplementary Data................................. 41
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................... 41
PART III
Item 10. Directors and Executive Officers of the Registrants......................... 42
Item 11. Executive Compensation...................................................... 42
Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 42
Item 13. Certain Relationships and Related Transactions.............................. 42
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............ 43
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PART I
ITEM 1. BUSINESS
(a) General Development of Business
The operating subsidiaries of RJR Nabisco Holdings Corp. ("RJRN Holdings")
and its wholly-owned subsidiary, RJR Nabisco, Inc. ("RJRN") (collectively the
"Registrants"), comprise one of the largest tobacco and food companies in the
world. In the United States, the tobacco business is conducted by R. J. Reynolds
Tobacco Company ("RJRT"), the second largest manufacturer of cigarettes, and the
packaged food business is conducted by Nabisco Holdings Corp. ("Nabisco
Holdings") through its wholly-owned subsidiary, Nabisco, Inc. ("Nabisco"), the
largest manufacturer and marketer of cookies and crackers. Outside the United
States, the tobacco operations are conducted by R. J. Reynolds Tobacco
International, Inc. and beginning on January 1, 1996, R.J. Reynolds
International (collectively "Reynolds International"), and the food operations
are conducted by Nabisco International, Inc. ("Nabisco International") and
Nabisco Ltd (formerly Nabisco Brands Ltd). RJRT's and Reynolds International's
tobacco products are sold around the world under a variety of brand names.
Nabisco's food products are sold in the United States, Canada, Latin America,
certain European countries and certain other international markets. For
financial information with respect to RJRN's industry segments, lines of
business and operations in various geographic locations, see Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 16 to the consolidated financial statements, and the
related notes thereto, of RJRN Holdings and RJRN as of December 31, 1995 and
1994 and for each of the years in the three-year period ended December 31, 1995
(the "Consolidated Financial Statements").
RJRN Holdings was organized as a Delaware corporation in 1988 at the
direction of Kohlberg Kravis Roberts & Co., L.P. ("KKR"), a Delaware limited
partnership, to effect the acquisition of RJRN, which was completed on April 28,
1989 (the "Acquisition"). As a result of the Acquisition, RJRN became an
indirect, wholly owned subsidiary of RJRN Holdings. After a series of holding
company mergers completed on December 17, 1992, RJRN became a direct, wholly
owned subsidiary of RJRN Holdings. The business of RJRN Holdings is conducted
through RJRN.
RJRN was incorporated as a holding company in 1970. RJRT can trace its
origins back to its formation in 1875. Activities were confined to the tobacco
industry until the 1960's, when diversification led to investments in
transportation, energy and food. With the acquisition of Del Monte Corporation
("Del Monte") in 1979 (which was sold in 1989), RJRN began to concentrate its
focus on consumer products. This strategy led to the acquisition of Nabisco
Holdings Corp. (formerly Nabisco Brands, Inc.) in 1985.
In recent years subsidiaries of RJRN Holdings and RJRN have completed a
number of acquisitions and have divested certain businesses. In 1995, these
acquisitions included (i) certain trademark and other assets of Kraft Foods'
U.S. and Canadian margarine and tablespreads business; (ii) certain trademarks
and other assets of Primo Foods Limited, a Canadian manufacturer of dry pasta,
canned tomatoes and pasta and pizza sauces; (iii) a 50% interest in Royal
Beech-Nut (pty) Ltd., a South African subsidiary of Del Monte Royal Foods, Ltd;
(iv) the assets of Avare and Gumz, two Brazilian milk product companies; (v)
O.y. P.c. Rettig Ab, Finland's second largest tobacco company and (vi) a
significant interest and management control of the Tanzania Tobacco Company. The
1995 divestitures included (i) the sale of the Ortega Mexican Food business
and (ii) the sale of New York Style Bagel Chip business.
In 1994, acquisitions included (i) the KNOX gelatin brand; (ii) an
approximately 99% interest in Establecimiento Modelo Terrabusi S.A., Argentina's
second largest biscuit and pasta maker; (iii) a 76% interest in the Yelets
tobacco processing plant in Russia; (iv) a controlling interest in a cigarette
manufacturer in the Krasnodar region of southern Russia; and (v) a 90% interest
in Shimkent Confectionery Enterprises and a site for a new cigarette factory in
Kazakhstan.
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RJRN will continue to assess its businesses to evaluate their consistency
with strategic objectives. Although RJRN may acquire and/or divest additional
businesses in the future, no other decisions have been made with respect to any
such acquisitions or divestitures. RJRN Holdings' and RJRN's credit agreement,
dated as of April 28, 1995, as amended (the "1995 RJRN Credit Agreement"), and
credit agreement, dated as of April 28, 1995, as amended (the "RJRN Commercial
Paper Facility" and, together with the 1995 RJRN Credit Agreement, the "New
RJRN Credit Agreements"), prohibit the sale of all or any substantial portion of
certain assets of RJRN Holdings or its subsidiaries.
On January 26, 1995, Nabisco Holdings completed the initial public offering
of 51,750,000 shares of its Class A Common Stock at an initial offering price of
$24.50 per share. Nabisco used all of the approximately $1.2 billion of net
proceeds from the initial public offering to repay a portion of its initial
borrowing under its credit agreement, dated as of December 6, 1994 (the "1994
Nabisco Credit Agreement"). RJRN owns 100% of the outstanding Class B Common
Stock of Nabisco Holdings, which represents approximately 80.5% of the economic
interest in Nabisco Holdings and approximately 97.6% of the total voting power
of Nabisco Holdings' outstanding common stock. In connection with the offering,
RJRN Holdings, RJRN and Nabisco Holdings entered into agreements to exchange
certain services, to establish tax sharing arrangements and to provide RJRN with
certain preemptive and registration rights with respect to Nabisco Holdings and
Nabisco securities.
In 1995, RJRN and Nabisco engaged in a series of related transactions that
were designed, among other things, to enable Nabisco to obtain long term debt
financing independent of RJRN and to repay its intercompany debt to RJRN.
Specifically, on April 28, 1995, Nabisco Holdings and Nabisco entered into a
credit agreement with various financial institutions (as amended, the "1995
Nabisco Credit Agreement") to replace the 1994 Nabisco Credit Agreement. Among
other things, the 1995 Nabisco Credit Agreement was designed to permit Nabisco
to prepay intercompany debt and incur long-term debt, to increase Nabisco's
committed facility from $1.5 billion to $3.5 billion and to extend its term from
364 days to five years. On June 5, 1995, RJRN and Nabisco consummated offers to
exchange approximately $1.8 billion aggregate principal amount of newly issued
notes and debentures (the "New Notes") of Nabisco for the same amount of notes
and debentures (the "Old Notes") issued by RJRN (the "Exchange Offers"). As part
of the transaction, RJRN returned to Nabisco approximately $1.8 billion of
intercompany notes that had been issued by Nabisco and were held by a
non-Nabisco affiliate of RJRN. The New Notes issued by Nabisco in the Exchange
Offers have interest rates, principal amounts, maturities and redemption
provisions identical to the corresponding Old Notes issued by RJRN. Nabisco
subsequently borrowed approximately $2.4 billion under the 1995 Nabisco Credit
Agreement to (a) repay or repurchase an additional $2.1 billion of intercompany
notes of Nabisco and its subsidiaries; (b) repay approximately $125 million of
outstanding borrowings under the 1994 Nabisco Credit Agreement; (c) repay
approximately $89 million of an intercompany note from Nabisco to Nabisco
Holdings; and (d) pay a $79 million dividend to Nabisco Holdings. Nabisco
Holdings used the payments it received to repay the balance of a $168 million
intercompany note to RJRN. Concurrently with the Exchange Offers, RJRN also
obtained consents to certain indenture modifications from holders of the Old
Notes and holders of approximately $3.58 billion of its other outstanding debt
securities (the "Consent Solicitations").
During 1994, the percentage voting power of RJRN Holdings held by
partnerships affiliated with KKR (the "KKR Partnerships") decreased
substantially and in 1995 the KKR Partnerships divested their remaining
interests in RJRN Holdings voting securities primarily in connection with the
acquisition of Borden, Inc. by certain of the KKR Partnerships.
(b) Financial Information about Industry Segments
During 1995, 1994 and 1993, RJRN's industry segments were tobacco and food.
For information relating to industry segments for the years ended December
31, 1995, 1994 and 1993, see Note 16 to the Consolidated Financial Statements.
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(c) Narrative Description of Business
TOBACCO
The tobacco line of business is conducted by RJRT and Reynolds
International, which manufacture, distribute and sell cigarettes. Cigarettes are
manufactured in the United States by RJRT and in over 40 foreign countries and
territories by Reynolds International and subsidiaries or licensees of RJRT and
are sold throughout the United States and in more than 170 markets around the
world. In 1995, approximately 58% of total tobacco segment net sales (after
deducting excise taxes) and approximately 69% of total tobacco segment operating
income (before amortization of trademarks and goodwill) were attributable to
domestic tobacco operations.
DOMESTIC TOBACCO OPERATIONS
The domestic tobacco business is conducted by RJRT which is the second
largest cigarette manufacturer in the United States. RJRT's largest selling
cigarette brands in the United States include WINSTON, DORAL, CAMEL, SALEM,
MONARCH and VANTAGE. RJRT's other cigarette brands, including MORE, NOW, BEST
VALUE, STERLING, MAGNA and CENTURY, are marketed to meet a variety of smoker
preferences. All RJRT brands are marketed in a variety of styles. Based on data
collected for RJRT by an independent market research firm, RJRT had an overall
share of retail consumer cigarette sales during 1995 of 27%, a decrease of
approximately 1 share point from 1994. During 1995, RJRT and the largest
domestic cigarette manufacturer, Philip Morris Incorporated, together sold, on a
shipment basis, approximately 72% of all cigarettes sold in the United States.
In November 1994, RJRT confirmed press reports that it was developing
ECLIPSE, a cigarette that primarily heats rather than burns tobacco and thereby
substantially reduces second-hand smoke. The cigarette remains under development
and RJRT continues to assess a possible market introduction of an ECLIPSE
cigarette.
A primary long-term objective of RJRT is to increase earnings and cash flow
through selective marketing investments in its key brands and continual
improvements in its cost structure and operating efficiency. Marketing programs
for full-price brands are designed to build brand awareness and add value to the
brands by building brand loyalty among current adult smokers and attracting
adult smokers of competitive brands. In 1995, these efforts included the
continuation and refinement of conversion, continuity and relationship-building
programs such as the CAMEL Genuine Taste Mission, the expanded regional
introduction of the SALEM Preferred line extension and the introduction of a
line of cigarette brands from a new operating unit, Moonlight Tobacco. RJRT
believes it is essential to compete in all segments of the cigarette market, and
accordingly it offers a range of lower-priced brands including DORAL, MONARCH
and BEST VALUE, intended to appeal to more cost-conscious adult smokers. For a
discussion on competition in the tobacco business, see "Business--Tobacco--
Competition" in this Item 1.
RJRT's domestic manufacturing facilities, consisting principally of
factories and leaf storage facilities, are located in or near Winston-Salem,
North Carolina and are owned by RJRT. Cigarette production is conducted at the
Tobaccoville cigarette manufacturing plant (approximately two million square
feet) and the Whitaker Park cigarette manufacturing complex (approximately one
and one-half million square feet). RJRT believes that its cigarette
manufacturing facilities are among the most technologically advanced in the
United States. RJRT also has significant research and development facilities in
Winston-Salem, North Carolina.
RJRT's cigarettes are sold in the United States primarily to chain stores,
other large retail outlets and through distributors to other retail and
wholesale outlets. Except for McLane Company, Inc., which represented
approximately 13% of RJRT's sales, no RJRT customers accounted for more than 10%
of sales for 1995. RJRT distributes its cigarettes primarily to public
warehouses located throughout the United States that serve as local distribution
centers for RJRT's customers.
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RJRT's products are sold to adult smokers primarily through retail outlets.
RJRT employs a decentralized marketing strategy that permits its sales force to
be flexible in responding to local market dynamics by designing individual
in-store programs to fit varying consumption patterns. RJRT uses print media,
billboards, point-of-sale displays and other methods of advertising. Since 1971,
television and radio advertising of cigarettes has been prohibited in the United
States.
INTERNATIONAL TOBACCO OPERATIONS
Reynolds International operates in over 170 markets around the world.
Although overall foreign cigarette sales (excluding China, in which production
data indicates an approximate 2% per annum growth rate) have increased at a rate
of only 1% per annum in recent years, Reynolds International believes that the
American Blend segment, in which Reynolds International primarily competes, is
growing significantly faster. Although Reynolds International is the second
largest of two international cigarette producers that have significant positions
in the American Blend segment, its share of sales in this segment is
approximately one-third of the share of Philip Morris International Inc., the
largest American Blend producer.
Reynolds International has strong brand presence in Western Europe and is
well established in its other key markets in the Middle East/Africa, Asia and
Canada. Reynolds International is aggressively pursuing development
opportunities throughout the world.
Reynolds International markets nearly 100 brands of which WINSTON, CAMEL and
SALEM, all American Blend cigarettes, are its international leaders. WINSTON,
Reynolds International's largest selling international brand, has a significant
presence in Puerto Rico and has particular strength in the Western Europe and
Middle East/Africa regions. CAMEL is sold in approximately 140 markets worldwide
and is Reynolds International's second largest selling international brand.
SALEM is the world's largest selling menthol cigarette and is particularly
strong in Far East markets. Reynolds International also markets a number of
local brands in various foreign markets. None of Reynolds International's
customers accounted for more than 10% of sales in 1995.
More than 20% of Reynolds International's 1995 volume was U.S.-made product,
with the remainder manufactured outside the U.S. Reynolds International brands
are manufactured in owned or joint-venture facilities in 19 locations outside
the United States, and through licensing agreements in about 20 other countries.
Reynolds International owned or joint-venture manufacturing locations include
Canada, the Canary Islands, China, the Czech Republic, Finland, Germany, Hong
Kong, Hungary, Indonesia, Kazakhstan, Malaysia, Poland, Portugal, Romania,
Russia, Switzerland, Tanzania, Turkey, Ukraine and Vietnam.
Certain of Reynolds International's foreign operations are subject to local
regulations that set import quotas, restrict financing flexibility, affect
repatriation of earnings or assets and limit advertising. In recent years,
certain trade barriers for cigarettes, particularly in Asia and Eastern Europe,
have been liberalized. This may provide opportunities for all international
cigarette manufacturers, including Reynolds International, to expand operations
in such markets; however, there can be no assurance that the liberalizing trends
will be maintained or extended or that Reynolds International will be successful
in pursuing such opportunities.
RAW MATERIALS
In its domestic production of cigarettes, RJRT primarily uses domestic
burley and flue cured leaf tobaccos purchased at domestic auction. RJRT also
purchases oriental tobaccos, grown primarily in Turkey and Greece, and certain
other non-domestic tobaccos. Reynolds International uses a variety of tobacco
leaf from both United States and international sources. RJRT and Reynolds
International believe there is a sufficient supply of tobacco in the worldwide
tobacco market to satisfy their current production requirements.
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Tobacco leaf is an agricultural commodity subject in the United States to
government production controls and price supports that can affect market prices
substantially. The tobacco leaf price support program is subject to
Congressional review and may be changed at any time. In addition, Congress
enacted the Omnibus Budget Reconciliation Act of 1993, which assesses financial
penalties against manufacturers if cigarettes produced in the United States do
not contain at least 75% (by weight) domestically grown flue cured and burley
tobaccos. In December 1994, Congress enacted the Uruguay Round Agreements Act to
replace this domestic content requirement with a tariff rate quota system that
keys tariffs to import volumes. The tariff rate quotas have been established by
the United States with overseas tobacco producers and became effective on
September 13, 1995. Compliance with domestic content restrictions increased raw
material costs slightly in 1994 but these costs were down slightly in 1995
during the period when the domestic content requirement was not applicable.
COMPETITION
Generally, the markets in which RJRT and Reynolds International conduct
their businesses are highly competitive, with a number of large participants.
Competition is conducted on the basis of brand recognition, brand loyalty,
quality and price. For most of RJRT's and Reynolds International's brands,
substantial advertising and promotional expenditures are required to maintain or
improve a brand's market position or to introduce a new brand. Anti-smoking
groups have undertaken activities designed to inhibit cigarette sales, the form
and content of cigarette advertising and the testing and introduction of new
cigarette products.
Because television and radio advertising for cigarettes is prohibited in the
United States and brand loyalty has tended to be higher in the cigarette
industry than in other consumer product industries, established cigarette brands
in the United States have a competitive advantage. RJRT has repositioned or
introduced brands designed to appeal to adult smokers of the largest selling
cigarette brand in the United States, but there can be no assurance that such
efforts will be successful.
In addition, increased selling prices and taxes on cigarettes have resulted
in additional price sensitivity of cigarettes at the consumer level and in a
proliferation of discounted brands in the savings segment of the market.
Generally, sales of cigarettes in the savings segment are not as profitable as
those in other segments.
LEGISLATION AND OTHER MATTERS AFFECTING THE CIGARETTE INDUSTRY
The advertising, sale and use of cigarettes has been under attack by
government and health officials in the United States and in other countries for
many years, principally due to claims that cigarette smoking is harmful to
health. This attack has resulted in: a number of substantial restrictions on the
marketing, advertising and use of cigarettes; diminishing social acceptability
of smoking; and activities by anti-smoking groups designed to inhibit cigarette
sales, the form and content of cigarette advertising and the testing and
introduction of new cigarette products. Together with manufacturers' price
increases in recent years and substantial increases in state and federal excise
taxes on cigarettes, this has had and will likely continue to have an adverse
effect on cigarette sales.
Cigarettes are subject to substantial excise taxes in the United States and
to similar taxes in many foreign markets. The federal excise tax per pack of 20
cigarettes was last increased in January 1993 to its current rate of 24 cents
per pack. In addition, all states and the District of Columbia impose excise
taxes at levels ranging from a low of 2.5 cents to a high of 81.5 cents per pack
of cigarettes. Increases in these state excise taxes could also have an adverse
effect on cigarette sales. In 1994, five states enacted excise tax increases
ranging from 7.5 cents to 50 cents per pack. In 1995, the cigarette excise tax
in four states was increased by amounts which ranged from 5 cents to 24 cents
per pack. In one state, a temporary 10 cent tax, scheduled to expire in 1995,
was extended through 1997.
In January 1993, the U.S. Environmental Protection Agency (the "EPA")
released a report on the respiratory effects of environmental tobacco smoke
("ETS") which concludes that ETS is a known
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human lung carcinogen in adults and in children causes increased respiratory
tract disease and middle ear disorders and increases the severity and frequency
of asthma. RJRT has joined other parties from the tobacco and distribution
industries in a lawsuit against the EPA seeking a determination that the EPA did
not have the statutory authority to regulate ETS, and that, given the current
body of scientific evidence and the EPA's failure to follow its own guidelines
in making the determination, the EPA's classification of ETS was arbitrary and
capricious.
In February 1994, the Commissioner of the U.S. Food and Drug Administration
(the "FDA"), which historically has refrained from asserting jurisdiction over
cigarette products, stated that he intended to cause the FDA to work with the
U.S. Congress to resolve the regulatory status of cigarettes under the Food,
Drug and Cosmetic Act. During the second quarter of 1994, hearings were held in
this regard, and RJRT and other members of the United States cigarette industry
were asked to provide voluntarily certain documents and other information to
Congress. In August 1995, the Commissioner of the FDA, with the support of the
Clinton Administration, announced that he was asserting jurisdiction over
cigarettes and certain other tobacco products and issued a notice and request
for comments on proposed regulations. The proposed regulations would prohibit or
impose stringent limits on a broad range of sales and marketing practices,
including bans on sampling, sponsorship by brand name, and distribution of
non-tobacco items carrying brand names. The FDA's proposed rule would also limit
advertising in print and on billboards to black and white text, impose new
labeling language, and require cigarette manufacturers to fund a $150
million-a-year campaign to discourage minors from using tobacco products. RJRT
and other cigarette manufacturers have submitted responses to the proposed
rules.
The purported purpose of the FDA's assertion of jurisdiction was to curb the
use of tobacco products by underage youth. RJRT believes, however, that the
assertion of jurisdiction and the scope of the proposed rules would materially
restrict the availability of cigarettes and RJRT's ability to market its
cigarette products to adult smokers. RJRT, together with the other four major
domestic cigarette manufacturers and an advertising agency, filed suit on the
day of the Commissioner's announcement in the U.S. District Court for the Middle
District of North Carolina seeking to enjoin the FDA's assertion of jurisdiction
(Coyne Beahm v. United States Food & Drug Administration). Similar suits have
been filed in the same court by manufacturers of smokeless tobacco products, by
operators of retail stores and by advertising interests. RJRT is unable to
predict whether or when the FDA will adopt final rules asserting jurisdiction
over cigarettes or the scope of such final rules if adopted, but such rules
could have an adverse effect on cigarette sales and RJRT. It is also unable to
predict the outcome of the litigation seeking to enjoin the FDA's rulemaking.
In March 1994, the U.S. Occupational Safety and Health Administration
("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 or timing 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. RJRT submitted comments on the proposed
regulations during the comment period which closed in February 1996. 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.
In July 1994, an amendment to a Florida statute became effective which
allows the state of Florida to bring an action in its own name against the
tobacco industry to recover amounts paid by the state under its Medicaid program
to treat illnesses statistically associated with cigarette smoking. The amended
statute does not require the state to identify the individual who received
medical care, permits a lawsuit to be filed as a class action, and eliminates
the comparative negligence and assumption of risk defenses. The Florida statute
is being challenged on state and federal constitutional grounds in a
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lawsuit brought by Philip Morris Companies Inc., Associated Industries of
Florida, Publix Supermarkets, and National Association of Convenience Stores in
June 1994. On June 26, 1995, the trial court judge granted in part the
plaintiffs' motion for summary judgment finding portions of the statute
unconstitutional. Both plaintiffs and defendants appealed this decision which
the Florida supreme court accepted for direct appeal. Oral argument was heard on
November 6, 1995.
The Florida House and Senate passed a bill that would repeal the Florida
statute retroactively which was vetoed by the Governor. The Florida House and
Senate have indicated that they are considering action to override that veto.
Similar legislation, without Florida's elimination of defenses, has been
introduced in the Massachusetts and New Jersey legislatures. RJRT is unable to
predict whether other states will enact similar legislation and whether lawsuits
will be filed under these statutes or their outcome, if filed. A suit against
the tobacco industry was filed under the Florida statute on February 21, 1995.
See "Business--Tobacco--Litigation Affecting the Cigarette Industry" below in
this Item 1.
Legislation imposing various restrictions on public smoking has also been
enacted in forty-eight states and many local jurisdictions, and many employers
have initiated programs restricting or eliminating smoking in the workplace.
Seventeen states have enacted legislation designating a portion of increased
cigarette excise taxes to fund either anti-smoking programs, health care
programs or cancer research. Federal law prohibits smoking on all domestic
airline flights of six hours duration or less and the U.S. Interstate Commerce
Commission has banned smoking on buses transporting passengers inter-state.
Certain common carriers have imposed additional restrictions on passenger
smoking.
A number of foreign countries have also taken steps to discourage cigarette
smoking, to restrict or prohibit cigarette advertising and promotion and to
increase taxes on cigarettes. Such restrictions are, in some cases, more onerous
than restrictions imposed in the United States. In June 1988, Canada enacted a
ban on cigarette advertising, which was struck down on grounds of
constitutionality by the Supreme Court of Canada in 1995.
In 1990, RJRT and other U.S. cigarette manufacturers, through The Tobacco
Institute, announced a tobacco industry initiative to assist retailers in
enforcing minimum age laws on the sale of cigarettes, to support the enactment
of state laws requiring the adult supervision of cigarette vending machines in
places frequented by minors, to seek the uniform establishment of 18 as the
minimum age for the purchase of cigarettes in all states, to distribute
informational materials to assist parents in combatting peer pressure on their
children to smoke and to limit voluntarily certain cigarette advertising and
promotional practices. In 1995, wholesalers, retailers and the tobacco industry
including RJRT formed the Coalition for Responsible Tobacco Retailing and
launched a new program (We Card) focused on stopping underage access to
cigarettes. In 1992, the Alcohol, Drug Abuse and Mental Health Act was signed
into law. This act requires states to adopt a minimum age of 18 for purchases of
tobacco products and to establish a system to monitor, report and reduce the
illegal sale of tobacco products to minors in order to continue receiving
federal funding for mental health and drug abuse programs. In January, 1996,
regulations implementing this legislation were announced by the Department of
Health and Human Services.
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In 1964, the Report of the Advisory Committee to the Surgeon General of the
U.S. Public Health Service concluded that cigarette smoking was a health hazard
of sufficient importance to warrant appropriate remedial action. Since 1966,
federal law has required a warning statement on cigarette packaging. Since 1971,
television and radio advertising of cigarettes has been prohibited in the United
States. Cigarette advertising in other media in the United States is required to
include information with respect to the "tar" and nicotine yield content of
cigarettes, as well as a warning statement.
During the past three decades, various laws affecting the cigarette industry
have been enacted. In 1984, Congress enacted the Comprehensive Smoking Education
Act (the "Smoking Education Act"). Among other things, the Smoking Education
Act: (i) establishes an interagency committee on smoking and health that is
charged with carrying out a program to inform the public of any dangers to human
health presented by cigarette smoking; (ii) requires a series of four health
warnings to be printed on cigarette packages and advertising on a rotating
basis; (iii) increases type size and area of the warning required in cigarette
advertisements; and (iv) requires that cigarette manufacturers provide annually,
on a confidential basis, a list of ingredients used in the manufacture of
cigarettes to the Secretary of Health and Human Services. The warnings currently
required on cigarette packages and advertisements (other than billboards) are as
follows: (i) "Surgeon General's Warning: Smoking Causes Lung Cancer, Heart
Disease, Emphysema, And May Complicate Pregnancy"; (ii) "Surgeon General's
Warning: Quitting Smoking Now Greatly Reduces Serious Risks To Your Health";
(iii) "Surgeon General's Warning: Smoking By Pregnant Women May Result in Fetal
Injury, Premature Birth, and Low Birth Weight"; and (iv) "Surgeon General's
Warning: Cigarette Smoke Contains Carbon Monoxide." Similar warnings are
required on outdoor billboards. In 1990, the Fire Safe Cigarette Act of 1990 was
enacted, which directed the Consumer Product Safety Commission to conduct and
oversee research begun under the direction of the Cigarette and Little Cigar
Fire Safety Act of 1984 to assess the practicability of developing a performance
standard to reduce cigarette ignition propensity. The Commission presented a
final report to Congress in 1993 describing the results of the research. The
Commission concluded that, while "it is practicable to develop a performance
standard to reduce cigarette ignition propensity, it is unclear that such a
standard would effectively address the number of cigarette-ignited fires." The
Commission further found that additional work would be required before the
actual development of a performance standard. Nevertheless, the Commission
reported that a test method developed by the National Institute of Standards and
Technology was valid and reliable within reasonable limits and could be suitable
for use in a performance standard. Although RJRT cannot predict whether further
legislation on this subject may be enacted, some form of regulation of
cigarettes based on their propensity to ignite soft furnishings may result.
Since the initial report in 1964, the Secretary of Health, Education and
Welfare (now the Secretary of Health and Human Services) and the Surgeon General
have issued a number of other reports which purport to find the nicotine in
cigarettes addictive and to link cigarette smoking and exposure to cigarette
smoke with certain health hazards, including various types of cancer, coronary
heart disease and chronic obstructive lung disease. These reports have
recommended various governmental measures to reduce the incidence of smoking.
In addition to the foregoing, legislation and regulations potentially
detrimental to the cigarette industry, generally relating to the taxation of
cigarettes and regulation of advertising, labeling, promotion, sale and smoking
of cigarettes, have been proposed from time to time at various levels of the
federal government. During the last Congress, the Clinton administration and
federal legislators introduced bills that would have significantly increased the
federal excise tax on cigarettes, eliminated the deductibility of the cost of
tobacco advertising, banned smoking in public buildings and on any scheduled
airline flight, and given the Food and Drug Administration authority to reduce
and eliminate nicotine in tobacco products. This legislation was not enacted.
It is not possible to determine what additional federal, state, local or
foreign legislation or regulations relating to smoking or cigarettes will be
enacted or to predict any resulting effect thereof on
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RJRT, Reynolds International or the cigarette industry generally, but such
legislation or regulations could have an adverse effect on RJRT, Reynolds
International or the cigarette industry generally.
LITIGATION AFFECTING THE CIGARETTE INDUSTRY
Various legal actions, proceedings and claims are pending or may be
instituted against RJRT or its affiliates or indemnitees, including those
claiming that lung cancer and other diseases have resulted from the use of or
exposure to RJRT's tobacco products. During 1995, 101 new actions were filed or
served against RJRT and/or its affiliates or indemnitees and 22 such actions
were dismissed or otherwise resolved in favor of RJRT and/or its affiliates or
indemnitees without trial. A total of 132 such actions in the United States and
two against RJRT's Canadian subsidiary were pending on December 31, 1995. As of
February 16, 1996, 144 active cases were pending against RJRT and/or its
affiliates or indemnitees, 142 in the United States and two in Canada. The
United States cases are in 22 states and are distributed as follows: 90 in
Florida; 10 in Louisiana; 5 in Texas; 4 in each of Indiana, Kansas and
Tennessee; 3 in each of Mississippi, California, Pennsylvania; 2 in each of
Alabama, Colorado, Massachusetts and Minnesota; and one in each of Missouri,
Nevada, New Hampshire, New Jersey, New York, North Carolina, Rhode Island,
South Carolina and West Virginia. Of the 142 active cases in the United
States, 116 are pending in state court and 26 in federal court.
Five of the 142 active cases in the United States involve alleged
non-smokers claiming injuries resulting from exposure to environmental tobacco
smoke. Six cases, which are described more specifically below, purport to be
class actions on behalf of thousands of individuals. Purported classes include
individuals claiming to be addicted to cigarettes and flight attendants alleging
personal injury from exposure to environmental tobacco smoke in their workplace.
Four of the active cases were brought by state attorneys general seeking, inter
alia, recovery of the cost of Medicare funds paid by their states for treatment
of citizens allegedly suffering from tobacco related diseases or conditions. In
addition, one case was brought by the State of Florida seeking similar rulings
under a special state statute.
The plaintiffs in these actions seek recovery on a variety of legal
theories, including strict liability in tort, design defect, negligence, breach
of warranty, failure to warn, fraud, misrepresentation, unfair trade practices,
conspiracy, unjust enrichment, indemnity and common law public nuisance.
Punitive damages, often in amounts ranging into the hundreds of 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 in which RJRT was not
a defendant, 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, 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 Supreme 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 and, if so, in what form, or whether such legislation would be
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intended by Congress to apply retroactively. The passage of such legislation
could increase the number of cases filed against cigarette manufacturers,
including RJRT.
Set forth below are descriptions of the class action lawsuits, a suit in
which plaintiffs seek to act as private attorneys general, actions brought by
state attorneys general in Massachusetts, Minnesota, Mississippi and West
Virginia, an action brought by the State of Florida and pending investigations
relating to RJRT's tobacco business.
In 1991, Broin v. Philip Morris Company, a purported class action against
certain tobacco industry defendants, including RJRT, was brought by flight
attendants claiming to represent a class of 60,000 individuals, alleging
personal injury caused by exposure to environmental tobacco smoke in their
workplace. In December 1994, the Florida state court certified a class
consisting of "all non-smoking flight attendants who are or have been employed
by airlines based in the United States and are suffering from diseases and
disorders caused by their exposure to secondhand cigarette smoke in airline
cabins." The defendants appeal of this certification to the Florida Third
District Court of Appeal was denied on January 3, 1995. A motion for rehearing
has been filed.
In March 1994, Castano v. The American Tobacco Company, a purported class
action, was filed in the United States District Court for the Eastern District
of Louisiana against tobacco industry defendants, including RJRT, seeking
certification of a class action on behalf of all United States residents who
allegedly are or claim to be addicted, or are the legal survivors of persons who
allegedly were addicted, to tobacco products manufactured by defendants. The
complaint alleges that cigarette manufacturers manipulated the levels of
nicotine in their tobacco products to induce addiction in smokers. Plaintiffs'
motion for certification of the class was granted in part on February 17, 1995.
The district court certified core liability issues (fraud, negligence, breach of
warranty, both express and implied, intentional tort, strict liability and
consumer protection statutes), and punitive damages. Not certified were issues
of injury-in-fact, proximate cause, reliance, affirmative defenses, and
compensatory damages. In July 1995, the Fifth Circuit Court of Appeals agreed to
hear defendants' appeal of this class certification. A decision is expected in
1996.
In March 1994, Lacey v. Lorillard Tobacco Company, a purported class action,
was filed in Circuit Court, Fayette County, Alabama against three cigarette
manufacturers, including RJRT. Plaintiff, who claims to represent all smokers
who have smoked or are smoking cigarettes manufactured and sold by defendants in
the state of Alabama, seeks compensatory and punitive damages not to exceed
$48,500 per class member and injunctive relief arising from defendants' alleged
failure to disclose additives used in their cigarettes. In April 1994,
defendants removed the case to the United States District Court for the Northern
District of Alabama.
In May 1994, Engle v. R.J. Reynolds Tobacco Company, was filed in Circuit
Court, Eleventh Judicial District, Dade County, Florida against tobacco
manufacturers, including RJRT, and other members of the industry, by plaintiffs
who allege injury and purport to represent a class of all United States citizens
and residents who claim to be addicted, or who claim to be legal survivors of
persons who allegedly were addicted, to tobacco products. On October 28, 1994, a
state court judge in Miami granted plaintiffs' motion to certify the class. The
defendants appealed that ruling to the Florida Third District Court of Appeal
which, on January 31, 1996, decided to certify a class limited to Florida
citizens or residents. The defendants are considering seeking a rehearing.
In September 1994, Granier v. American Tobacco Company, a purported class
action apparently patterned after the Castano case, was filed in the United
States District Court for the Eastern District of Louisiana against tobacco
industry defendants, including RJRT. Plaintiffs seek certification of a class
action on behalf of all residents of the United States who have used and
purportedly became addicted to tobacco products manufactured by defendants. The
complaint alleges that cigarette manufacturers manipulated the levels of
nicotine in tobacco products for the purpose of addicting
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consumers. By agreement of the parties, all action in this case is stayed
pending determination of the motion for class certification in the Castano
case.
In January 1995, a purported class action was filed in the Ontario Canada
Court of Justice against RJR-MacDonald, Inc. and two other Canadian cigarette
manufacturers. The lawsuit, then captioned Le Tourneau, v. Imperial Tobacco
Company, seeks certification of a class of persons who have allegedly become
addicted to the nicotine in cigarettes or who had such alleged addiction
heightened or maintained through the use of cigarettes, and who have allegedly
suffered loss, injury, and damage in consequence, together with persons with
Family Law Act claims in respect to the claims of such allegedly addicted
persons, and the estates of such allegedly addicted persons. Theories of
recovery pleaded include negligence, strict liability, failure to warn, deceit,
negligent misrepresentation, breach of implied warranty and conspiracy. The
relief sought consists of damages of one million dollars for each of the three
named plaintiffs, punitive damages, funding of nicotine addiction rehabilitation
centers, interest and costs. On June 2, 1995, the plaintiffs, on consent, were
granted leave to file an amended statement of claim to remove Le Tourneau as
representative plaintiff and add two additional representative plaintiffs. The
case is now captioned Caputo v. Imperial Tobacco Limited.
In June 1994, in Mangini v. R.J. Reynolds Tobacco Company, the California
Supreme Court ruled that the plantiffs' claim that an RJRT advertising campaign
constitutes unfair competition under the California Business and Professions
Code was not preempted by the Cigarette Act. The plantiffs are acting as private
attorneys general. This opinion allows the plaintiffs to pursue their lawsuit
which had been dismissed at the trial court level. The defendants' Petition for
Certiorari to the United States Supreme Court was denied in December 1994. The
case has been remanded to the trial court.
In June 1994, in Moore v. The American Tobacco Company, RJRN and RJRT were
named along with other industry members as defendants in an action brought by
the Mississippi state attorney general on behalf of the state to recover state
funds paid for health care and medical and other assistance to state citizens
allegedly suffering from diseases and conditions allegedly related to tobacco
use. This suit, which was brought in Chancery (non-jury) Court, Jackson County,
Mississippi also seeks an injunction from "promoting" or "aiding and abetting"
the sale of cigarettes to minors. Both actual and punitive damages are sought in
unspecified amounts. Motions by the defendants to dismiss the case or to
transfer it to circuit (jury) court were denied on February 21, 1995 and the
case will proceed in Chancery Court. RJRN and other industry holding companies
have been dismissed from the case.
In August 1994, RJRT and other U.S. cigarette manufacturers were named as
defendants in an action instituted on behalf of the state of Minnesota and of
Blue Cross and Blue Shield of Minnesota to recover the costs of medical expenses
paid by the state and by Blue Cross/Blue Shield that were incurred in the
treatment of diseases allegedly caused by cigarette smoking. The suit, Minnesota
v. Philip Morris, alleges consumer fraud, unlawful and deceptive trade
practices, false advertising and restraint of trade, and it seeks injunctive
relief and money damages, trebled for violations of the state antitrust law.
Motions by the defendants to dismiss all claims of Blue Cross/Blue Shield and
certain substantive claims of the State of Minnesota, and by plaintiffs to
strike certain of the defendants' defenses, were denied on May 19, 1995. An
intermediate appeals court declined to hear the defendants' appeal from the
ruling denying the motion to dismiss all claims of Blue Cross/Blue Shield on the
ground that it lacks standing to bring the action, but the Minnesota Supreme
Court has agreed to do so. Oral argument was heard January 29, 1996 and a
decision is pending.
In September 1994, the Attorney General of West Virginia filed suit against
RJRT, RJRN and twenty-one additional defendants in state court in West Virginia.
The lawsuit, McGraw v. American Tobacco Company, is similar to those previously
filed in Mississippi and Minnesota. It seeks recovery for medical expenses
incurred by the state in the treatment of diseases statistically associated with
cigarette smoking and requests an injunction against the promotion and sale of
cigarettes and tobacco products to minors. The lawsuit also seeks a declaration
that the state of West Virginia, as plaintiff, is
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not subject to the defenses of
statute of repose, statute of limitations, contributory negligence, comparative
negligence, or assumption of the risk. On May 3, 1995, the judge granted
defendants' motion to dismiss eight of the ten causes of action pleaded. The
defendants have filed motions to dismiss the remaining two counts. On October
20, 1995, at a hearing on the defendants' joint motion to prohibit prosecution
of the action due to plaintiff's unlawful retention of counsel under a
contingent fee arrangement, in a ruling from the bench, the contingent fee
agreement between the West Virginia Attorney General and private attorneys
preparing the case was held to be void on the grounds that the Attorney General
has no constitutional, legislative, or statutory authority for entering into
such an agreement.
On February 21, 1995, the state of Florida filed a suit under a special
state statute against RJRT and RJRN, along with other industry members, their
holding companies and other entities. The state is seeking Medicaid
reimbursement under various theories of liability and injunctive relief to
prevent the defendants from engaging in consumer fraud and to require that
defendants: disclose and publish all research conducted directly or indirectly
by the industry; fund a corrective public education campaign on the issues of
smoking and health in Florida; prevent the distribution and sale of cigarettes
to minors under the age of eighteen; fund clinical smoking cessation programs in
the state of Florida; dissolve the Council for Tobacco Research and the Tobacco
Institute or divest ownership, sponsorship, or membership in both; and disgorge
all profits from sales of cigarettes in Florida. On defendants' motion, the case
was stayed until July 7, 1995 and that stay has been extended pending appeals by
the plaintiffs and the defendants in connection with the constitutional
challenge to the Florida statute discussed above. See "Business--Tobacco--
Legislation and Other Matters Affecting the Cigarette Industry" in this Item 1.
On November 28, 1995, RJRT and other domestic cigarette manufacturers filed
petitions for declaratory judgment in Massachusetts (Federal Court) and Texas
(State Court, Austin Texas) as to potential Medicaid reimbursement suits that
had been threatened by the Attorneys General of those states. On January 22,
1996, a similar petition for declaratory judgement was filed in Maryland (State
Court).
On December 19, 1995, the Commonwealth of Massachusetts filed suit against
cigarette manufacturers including RJRT and additional defendants including trade
associations and wholesalers, seeking reimbursement of Medicaid and other costs
incurred by the state in providing health care to citizens allegedly suffering
from diseases or conditions purportedly caused by cigarette smoking. The
complaint also seeks orders requiring the manufacturing defendants to disclose
and disseminate prior research; fund a corrective campaign and smoking cessation
program; disclose nicotine yields of their products; and pay restitution.
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 received a civil investigative demand dated January 11, 1994 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.
-------------------
Litigation is subject to many uncertainties, and it is possible that some of
the tobacco-related legal actions, proceedings or claims could be decided
against RJRT or its affiliates or indemnitees. Determinations of liability or
adverse rulings against other cigarette manufacturers that are defendants in
similar actions, even if such rulings are not final, could adversely affect the
litigation against RJRT or
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its affiliates or indemnitees and increase the number of such claims. Although
it is impossible to predict the outcome of such events or their effect on RJRT,
a significant increase in litigation activities could have an adverse effect
on RJRT. RJRT believes that it has a number of valid defenses to any such
actions, including but not limited to those defenses based on preemption
under the Cipollone decision, and RJRT intends to defend vigorously all such
actions.
RJRN Holdings and RJRN believe that the ultimate outcome of all pending
litigation matters should not have a material adverse effect on the financial
position of either RJRN Holdings or RJRN; however, it is possible that the
results of operations or cash flows of RJRN Holdings or RJRN in particular
quarterly or annual periods or the financial condition of RJRN Holdings and RJRN
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 any possible loss in any particular quarterly or annual
period or in the aggregate.
FOOD
The food line of business is conducted by operating subsidiaries of Nabisco
Holdings. RJRN owns 100% of the outstanding Class B Common Stock of Nabisco
Holdings, which represents approximately 80.5% of the economic interest in
Nabisco Holdings and approximately 97.6% of the total voting power of Nabisco
Holdings' outstanding common stock. Nabisco's businesses in the United States
are comprised of the Nabisco Biscuit, Specialty Products, LifeSavers, Planters,
Food Service and Fleischmann's companies (collectively, the "Domestic Food
Group"). Nabisco's businesses outside the United States are conducted by Nabisco
Ltd and Nabisco International (collectively, the "International Food Group").
Nabisco Ltd was recently shifted from the Domestic Food Group (formerly the
North American Food Group) to the International Food Group.
Food products are sold under trademarks owned or licensed by Nabisco and
brand recognition is considered essential to their successful marketing. None of
Nabisco's customers accounted for more than 10% of sales for 1995.
DOMESTIC FOOD GROUP OPERATIONS
Nabisco Biscuit Company. Nabisco Biscuit Company is the largest manufacturer
and marketer in the United States cookie and cracker industry with nine of the
ten top selling brands, each of which had annual net sales of over $100 million
in 1995. Overall, in 1995, Nabisco Biscuit had a 40.8% share of the domestic
cookie category and a 55.3% share of the domestic cracker category, in the
aggregate more than three times the share of its closest competitor. Leading
Nabisco Biscuit cookie brands include OREO, CHIPS AHOY!, NEWTONS and
SNACKWELL'S. Leading Nabisco Biscuit cracker brands include RITZ, PREMIUM,
NABISCO HONEY MAID GRAHAMS, WHEAT THINS and TRISCUIT.
OREO and CHIPS AHOY! are the two largest selling cookies in the United
States. OREO, the leading sandwich cookie, is Nabisco Biscuit's largest selling
cookie brand. Line extensions such as OREO DOUBLE STUF, FUDGE COVERED OREO and
Reduced Fat OREO continue to increase the brand's appeal to targeted consumer
groups. CHIPS AHOY! is the leader in the chocolate chip cookie segment with line
extensions such as CHUNKY CHIPS AHOY! and CHEWY CHIPS AHOY! broadening its
appeal and adding incremental sales.
NEWTONS, the oldest Nabisco Biscuit cookie brand, is the fourth leading
cookie brand in the United States. The introduction of FAT FREE FIG and APPLE
NEWTONS in 1992, FAT FREE CRANBERRY, STRAWBERRY and RASPBERRY NEWTONS in 1993
and FAT FREE REDUCED CALORIE CRANBERRY and BLUEBERRY, as well as NEWTONS
COBBLERS in 1995 have expanded the appeal of NEWTONS and added incremental
sales.
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Nabisco Biscuit's cracker business is led by RITZ, the largest selling
cracker in the United States, as well as RITZ BITS, RITZ BITS SANDWICHES
and REDUCED FAT RITZ successful product line extensions which, together with
RITZ, accounted for 13.2% of cracker sales in the United States in 1995. In
addition, PREMIUM, the oldest Nabisco cracker brand and the leader in the
saltine cracker segment, is joined by NABISCO HONEY MAID GRAHAMS, WHEAT THINS
and TRISCUIT to comprise, along with RITZ, five of the six largest selling
cracker brands in the United States.
In 1992, Nabisco Biscuit became the leading manufacturer and marketer of no
fat/reduced fat cookies and crackers with the introduction of the SNACKWELL'S
line, which is now the third largest cookie brand in the U.S. Nabisco Biscuit
also acquired Stella D'oro, a leading producer of breadsticks, breakfast
biscuits, specialty cakes, pastries and snacks. This line of specialty items
gave Nabisco Biscuit access to new areas within supermarkets, further
broadening Nabisco's cookie and cracker portfolio.
Nabisco Biscuit's other cookie and cracker brands, which include NUTTER
BUTTER, NILLA WAFERS, BARNUM'S ANIMAL CRACKERS, BETTER CHEDDARS, HARVEST CRISPS,
CHICKEN IN A BISKIT and CHEESE NIPS, compete in consumer niche segments. Many
are the first or second largest selling brands in their respective segments.
In 1994, Nabisco entered the breakfast snack aisle with the launch of
SNACKWELL'S cereal bars and granola bars and the repositioning of TOASTETTES
toaster pastries.
Nabisco Biscuit's products are manufactured in 14 Nabisco Biscuit owned
bakeries and in 16 facilities with which Nabisco Biscuit has production
agreements. These facilities are located throughout the United States. Nabisco
Biscuit is in the process of modernizing certain of its facilities. Nabisco
Biscuit also operates a flour mill in Toledo, Ohio which supplies over 85% of
its flour needs.
Nabisco Biscuit's products are sold to major grocery and other large retail
chains through Nabisco Biscuit's direct store delivery system. The system is
supported by a distribution network utilizing 10 major distribution warehouses
and 129 shipping branches where shipments are consolidated for delivery to
approximately 119,000 separate delivery points. Nabisco believes this
sophisticated distribution and delivery system provides it with a significant
service advantage over its competitors.
Specialty Products Company. The Specialty Products Company manufactures and
markets a broad range of food products, with sauces and condiments, pet snacks,
hot cereals and dry mix desserts representing the largest categories. Many of
its products are first or second in their product categories. Well-known brand
names include A.1. steak sauces, GREY POUPON mustards, MILK-BONE pet snacks,
CREAM OF WHEAT hot cereals and ROYAL desserts. In September 1995, Specialty
Products exited the Mexican food category, with the sale of its Ortega Mexican
food business.
Specialty Products' primary entries in the sauce and condiment segments are
A.1. and A.1. BOLD steak sauces, the leading lines of steak sauces, and GREY
POUPON mustards, which include the leading Dijon mustard. Specialty Products
also markets REGINA wine vinegar, the leader in its segment of the vinegar
market.
Specialty Products is the second largest manufacturer of pet snacks in the
United States with MILK-BONE dog biscuits. MILK-BONE products include MILK-BONE
ORIGINAL BISCUITS, FLAVOR SNACKS, DOG TREATS and BUTCHER'S CHOICE.
Specialty Products participate in the dry mix dessert category with ROYAL
and SNACKWELL'S brand gelatins and puddings. Specialty Products also
participates in the non-dessert gelatin category with KNOX unflavored gelatins
and has lines of regional products including COLLEGE INN broths, VERMONT MAID
syrup, MY-T-FINE puddings, DAVIS baking powder and BRER RABBIT
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molasses and syrup.
Nabisco, through the Specialty Products Company, manufactures hot cereals,
participating in the cook-on-stove and mix-in-bowl segments of the category.
CREAM OF WHEAT, the leading wheat-based hot cereal, and CREAM OF RICE
participate in the cook-on-stove segment and eight varieties of INSTANT CREAM OF
WHEAT participate in the mix-in-bowl segment. Quaker Oats Company is the most
significant participant in the hot cereal category.
Specialty Products manufactures its products in four plants as well as in
six facilities with which it has production agreements. Specialty Products
sells to retail grocery chains through independent brokers and to drugstores,
mass merchandisers and other major retail outlets through a direct sales
force. The products are sold and distributed by Nabisco's Sales & Integrated
Logistics Group.
LifeSavers Company. The LifeSavers Company manufactures and markets
non-chocolate candy and gum primarily for sale in the United States. LifeSavers'
well-known brands include LIFE SAVERS candy, BREATH SAVERS sugar free mints,
BUBBLE YUM bubble gum, FRUIT STRIPE gum, CARE*FREE sugarless gum, NOW & LATER
fruit chewy taffy and GUMMI SAVERS fruit chewy candy. LIFE SAVERS is the largest
selling non-chocolate candy brand in the United States, with a 1995 share of
4.9% of the non-chocolate candy category. BREATH SAVERS is the largest selling
sugar free breath mint in the United States and BUBBLE YUM is the largest
selling chunk bubble gum in the United States. LifeSavers' products are
seasonally strongest in the fourth quarter.
LifeSavers sells its products in the United States primarily to grocery
stores, drug stores, mass merchandisers, convenience stores, membership club
stores and food service, military and vending machine suppliers. The products
are sold and distributed by Nabisco's Sales & Integrated Logistics Group.
LifeSavers currently owns and operates four manufacturing facilities.
Planters Company. The Planters Company produces and/or markets nuts and
snacks largely for sale in the United States, primarily under the PLANTERS
trademark. Planters is the clear leader in the packaged nut category, with a
market share of seven times that of its nearest competitor. Planters' products
are commodity oriented and are seasonally strongest in the fourth quarter.
Planters sells its products in the United States primarily to grocery
stores, drug stores, mass merchandisers, convenience stores, membership club
stores and food service, military and vending machine suppliers. The products
are sold and distributed by Nabisco's Sales & Integrated Logistics Group.
Planters currently owns and operates two manufacturing facilities.
Food Service Company. The Food Service Company sells through non-grocery
channels a variety of specially packaged food products of the Domestic Food
Group, including cookies, crackers, hot cereals, sauces and condiments for the
food service and vending machine industry. Food Service is also a leading
regional supplier of premium frozen pies to in-store supermarket bakeries,
wholesale clubs and food service accounts through Plush Pippin. The Food
Service products are distributed by Nabisco's Sales & Integrated Logistics
Group.
Fleischmann's Company. The Fleischmann's Company manufactures and markets
various margarines and spreads as well as no-fat egg products and non-fat
chocolate yogurt.
Fleischmann's is the second largest margarine producer in the United
States. Fleischmann's participates in all segments of the margarine category,
with the FLEISCHMANN'S, BLUE BONNET and MOVE OVER BUTTER brands. Fleischmann's
Company strengthened its position in the margarine category in 1995, with the
purchase of the Kraft margarine business which includes the PARKAY, TOUCH OF
BUTTER and CHIFFON brands acquired from Kraft Foods, Inc. in October, 1995.
Fleischmann's margarines are currently manufactured in two owned facilities and
in six facilities
15
<PAGE>
with which Fleischmann's has production agreements. Fleischmann's is the
market leader in the healthy packaged egg category with EGG BEATERS and in
1995, introduced SNACKWELL'S Nonfat Chocolate Yogurt. Distribution for
Fleischmann's is principally direct from plant to retailer warehouses through
Nabisco's Sales & Integrated Logistics Group and with respect to the 1995
acquired products, for a temporary period through Kraft's distribution system.
Sales & Integrated Logistics Group. The Sales & Integrated Logistics Group
handles sales and distribution for the Specialty Products, LifeSavers, Planters
and Fleischmann's Companies and distribution for the Food Service Company. It
sells to retail grocery chains through independent brokers and a direct sales
force, and to drug stores, mass merchandisers and other major retail outlets
through its direct sales force. The products are distributed from twenty-one
distribution centers located throughout the United States.
INTERNATIONAL FOOD GROUP OPERATIONS
Nabisco Ltd. Nabisco Ltd conducts Nabisco's Canadian operations through a
biscuit division, a grocery division and a food service division. Excluding
private label brands, the biscuit division produced nine of the top ten cookies
and nine of the top ten crackers in Canada in 1995. Nabisco Ltd's cookie and
cracker brands in Canada include OREO, CHIPS AHOY!, FUDGEE-O, PEEK FREANS,
DAD'S, DAVID, PREMIUM PLUS, RITZ, TRISCUIT and STONED WHEAT THINS. These
products are manufactured in five bakeries in Canada and are sold through a
direct store delivery system, utilizing 11 sales offices and distribution
centers and a combination of public and private carriers. Nabisco Ltd also
markets a variety of single-serve cookies, crackers and salty snacks under such
brand names as MINI OREO, RITZ BITS SANDWICHES and CRISPERS.
Nabisco Ltd's grocery division produces and markets canned fruits and
vegetables, fruit juices and drinks and pet snacks. The grocery division is the
leading canned fruit producer in Canada and is the second largest canned
vegetable producer in Canada. Canned fruits, vegetables, soups and fruit juices
and drinks are marketed under the DEL MONTE trademark, pursuant to a license
from the Del Monte Corporation, and under the AYLMER trademark. The grocery
division also markets MILK-BONE pet snacks and MAGIC baking powder, each a
leading brand in Canada. Nabisco Ltd's grocery division operated six
manufacturing facilities in 1995, five of which were devoted to canned products,
principally fruits and vegetables, and one of which produced pet snacks. The
grocery division's products are sold directly to retail chains and are
distributed through five regional warehouses. In 1995, Nabisco Ltd acquired the
PRIMO brand of dry pasta, canned tomatoes and other Italian food products which
are manufactured in two facilities and sold and distributed by a direct store
delivery system.
In 1995, Nabisco Ltd re-entered the margarine and tablespread business with
its acquisition of the PARKAY, TOUCH OF BUTTER and CHIFFON brands from Kraft
Canada Inc. These products are currently manufactured and distributed under
agreements with Kraft Canada.
Nabisco Ltd's food service division sells a variety of specially packaged
food products including cookies, crackers and canned fruits and vegetables as
well as condiments to non-grocery outlets. The food service division has its own
sales and marketing organization and sources product from Nabisco Ltd's other
divisions.
Nabisco International. Nabisco International is a leading producer of
biscuits, powdered dessert and drink mixes, baking powder, pasta, milk products
and other grocery items, industrial yeast and bakery ingredients. Nabisco
International also exports a variety of Domestic Food Group products to markets
in Europe and Asia from the United States and is one of the largest
multinational packaged food businesses in Latin America.
16
<PAGE>
Nabisco International manufactures and markets biscuits and crackers under
the NABISCO brand, yeast, baking powder and bakery ingredients under the
FLEISCHMANN'S and ROYAL brands, desserts and drink mixes under the ROYAL brand,
processed milk products under the GLORIA brand and canned fruits and vegetables
under the DEL MONTE brand pursuant to a license from the Del Monte Corporation.
Nabisco International's largest market is Brazil, where it operates 16 plants.
Nabisco International is the market leader in powdered desserts in Spain and
most of Latin America, in the yeast category in Brazil and certain other Latin
American countries, in biscuits in Peru, Spain, Venezuela and Uruguay, and in
canned vegetables in Venezuela. Nabisco International also maintains a strong
position in the processed milk category in Brazil and expanded its market share
through the 1995 acquisitions of Avare and Gumz. In Argentina, Nabisco
International acquired 71% of Establecimiento Modelo Terrabusi S.A. in April
1994 and increased its interest in the Argentine biscuit and pasta company to
approximately 99% in October and November 1994. Nabisco International has
operations in 17 Latin American countries.
Nabisco International significantly increased its presence in Europe through
its 1993 and 1994 100% acquisition of Royal Brands S.A. in Spain and Royal
Brands Portugal. Nabisco International's products in Spain include biscuits
marketed under the ARTIACH and MARBU trademarks, powdered dessert mixes marketed
under the ROYAL trademark and various other foods, including canned meats and
juices.
Nabisco International reentered the South African market through the
acquisition of 50% of Royal Beech-Nut (Pty) Ltd., which it previously owned.
Royal Beech-Nut markets baking powder and powdered dessert mixes under the ROYAL
brand, chewing gum under the BEECHIES and CARE*FREE brands and candy under the
LIFESAVERS and BEECH-NUT brands.
Nabisco International's grocery products are sold to retail outlets through
its own sales forces and independent wholesalers and distributors. Industrial
yeast and bakery products are sold to the bakery trade through Nabisco
International's own sales forces and independent distributors.
RAW MATERIALS
Various agricultural commodities constitute the principal raw materials used
by Nabisco in its food businesses. These raw materials are purchased on the
commodities market and through supplier contracts. Prices of agricultural
commodities tend to fluctuate due to various seasonal, climatic and economic
factors which generally also affect Nabisco's competitors. Nabisco believes that
all of the raw materials for its products are in plentiful supply and are
readily available from a variety of independent suppliers.
COMPETITION
Generally, the markets in which the Domestic Food Group and the
International Food Group conduct their business are highly competitive.
Competition consists of large domestic and international companies, local and
regional firms and generic and private label products of food retailers.
Competition is conducted on the basis of brand recognition, brand loyalty,
quality and price. Substantial advertising and promotional expenditures are
required to maintain or improve a brand's market position or to introduce a
new product.
The trademarks under which the Domestic Food Group and the International
Food Group market their products are generally registered in the United States
and other countries in which such products are sold and are generally renewable
indefinitely. Nabisco and certain of its subsidiaries have from time to time
granted various parties exclusive licenses to use one or more of their
trademarks in particular
17
<PAGE>
locations. Nabisco does not believe that such licensing arrangements have a
material effect on the conduct of its domestic or international business.
OTHER MATTERS
ENVIRONMENTAL MATTERS
The U.S. Government and various state and local governments have enacted or
adopted laws and regulations concerning protection of the environment. The
regulations promulgated by the Environmental Protection Agency and other
governmental agencies under various statutes have resulted in, and will likely
continue to result in, substantial expenditures for pollution control, waste
treatment, plant modification and similar activities.
In April 1995, RJRN Holdings was named a potentially responsible party (a
"PRP") with certain third parties under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") with respect to a superfund
site at which a former subsidiary of RJRN had operations. Certain subsidiaries
of the Registrants have also been named as PRPs with third parties or may have
indemnification obligations under CERCLA with respect to an additional thirteen
sites.
RJRN Holdings' subsidiaries have been engaged in a continuing program to
assure compliance with U.S., state and local laws and regulations. Although it
is difficult to identify precisely the portion of capital expenditures or other
costs attributable to compliance with environmental laws and to estimate the
cost of resolving these CERCLA matters, RJRN Holdings and RJRN do not expect
such expenditures or other costs to have a material adverse effect on the
financial condition of either RJRN Holdings or RJRN.
EMPLOYEES
At December 31, 1995, RJRN Holdings together with its subsidiaries had
approximately 76,000 full time employees. None of RJRT's operations are
unionized. Most of the unionized workers at Nabisco's operations are represented
under a national contract with the Bakery, Confection and Tobacco Workers Union,
which was ratified in September 1992 and which will expire in September 1996.
Other unions represent the employees of a number of Nabisco's operations and
several of Reynolds International's operations are unionized. RJRN believes that
its relations with these employees and with their unions are good.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales
For information about foreign and domestic operations and export sales for
the years 1993 through 1995, see "Geographic Data" in Note 16 to the
Consolidated Financial Statements.
ITEM 2. PROPERTIES
For information pertaining to the RJRN Holdings' and RJRN's assets by lines
of business and geographic areas as of December 31, 1995 and 1994, see Note 16
to the Consolidated Financial Statements.
For information on properties, see Item 1.
ITEM 3. LEGAL PROCEEDINGS
In the fourth quarter of 1995, purported RJRN Holdings stockholders for
themselves and derivatively for RJRN Holdings and Nabisco Holdings filed three
putative class and derivative actions in the Court of Chancery of the State of
Delaware in and for New Castle County against members of
18
<PAGE>
RJRN Holdings Board of Directors. The actions were consolidated in December
1995. The plaintiffs allege, among other things, that the individual
defendants breached their fiduciary duty and wasted corporate assets by
undertaking the Exchange Offer and Consent Solicitations completed by RJRN
and Nabisco in June 1995 and by amending, in August 1995, RJRN Holdings By-Law
provisions concerning the calling of shareholder meetings and procedures for
shareholder action by written consent. The plaintiffs allege that management
took these and other actions to wrongfully obstruct a spin-off of Nabisco, to
enrich the defendants at the expense of RJRN Holdings, its shareholders and
Nabisco Holdings and to entrench the defendants in the management and control
of RJRN Holdings. RJRN Holdings believes that these allegations are without
merit and is defending the consolidated action vigorously.
For information about other litigation and legal proceedings, see
"Business--Tobacco--Litigation Affecting the Cigarette Industry" and "Other
Matters--Environmental Matters" in Item 1.
------------------------
Litigation is subject to many uncertainties, and it is possible that some of
the tobacco-related legal actions, proceedings or claims could be decided
against RJRT or its affiliates or indemnitees. Determinations of liability or
adverse rulings against other cigarette manufacturers that are defendants in
similar actions, even if such rulings are not final, could adversely affect the
litigation against RJRT or its affiliates or indemnitees and 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.
RJRN Holdings and RJRN believe that the ultimate outcome of all pending
litigation matters should not have a material adverse effect on the financial
position of either RJRN Holdings or RJRN; however, it is possible that the
results of operations or cash flows of RJRN Holdings or RJRN in particular
quarterly or annual periods or the financial condition of RJRN Holdings and RJRN
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 any possible loss in any particular quarterly or annual
period or in the aggregate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In January, 1996, Brooke Group Ltd. commenced a solicitation of consents
from the shareholders of RJRN Holdings to (i) a non-binding resolution seeking
the immediate spin-off of the shares of Nabisco Holdings, and (ii) certain
changes to the By-laws of RJRN Holdings which would allow holders of not less
than 25% of its Common Stock to require a special meeting and would delete By-
law provisions establishing certain administrative procedures for actions by
written consent. The consent solicitation closed on February 15, 1996. A
ministerial review of the validity of the consents by an independent inspector
of elections had not been completed as of February 22, 1996. On February 20,
1996, however, Brooke Group Ltd. declared that it had received consents from
holders of 50.4 percent of the voting stock with respect to a spin-off and
53.8 percent of such holders with respect to By-law changes.
19
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANTS
EXECUTIVE OFFICERS OF RJRN HOLDINGS
The executive officers of RJRN Holdings are Charles M. Harper (Chairman of
the Board), Steven F. Goldstone (Chief Executive Officer and President), Gerald
I. Angowitz (Senior Vice President, Human Resources and Administration), John J.
Delucca (Senior Vice President and Treasurer), Robert S. Roath (Senior Vice
President and Chief Financial Officer), Richard G. Russell (Senior Vice
President and Controller), Robert F. Sharpe Jr. (Senior Vice President and
General Counsel), and H. Colin McBride (Vice President, Assistant General
Counsel and Secretary). Mr. Roath is married to Jo-Ann Ford who was, until
December 31, 1995, Senior Vice President, Law and Secretary. The following table
sets forth certain information regarding such officers.
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED BUSINESS EXPERIENCE DURING THE PAST
NAME AGE DIRECTOR FIVE YEARS AND OTHER INFORMATION
---- --- -------- -----------------------------------
<S> <C> <C> <C>
Charles M. Harper 68 1993 Chairman since May 1993; Chief Executive Officer, May
1993-December 1995. For more than five years prior
thereto, Chairman and, until 1992, Chief Executive
Officer of ConAgra, Inc. Member of the Board of
Directors of Nabisco Holdings, Nabisco, ConAgra,
Inc., E.I. du Pont de Nemours and Company, Norwest
Corp., Peter Kiewit Sons', Inc. and Valmont
Industries, Inc.
Steven F. Goldstone 50 1995 Chief Executive Officer since December 1995; President
since October 1995; prior thereto General Counsel,
March 1995-January 1996; previously Senior Partner
with law firm of Davis, Polk & Wardwell until October
1995 and for more than five years prior thereto.
Gerald I. Angowitz 46 -- Senior Vice President of Human Resources and
Administration, March 1995-Present; prior thereto,
Vice President of Human Resources, January 1994-March
1995; Vice President of Employee Benefits, January
1992-December 1993; Senior Director of Benefits
Planning and Analysis, June 1991-December 1991;
previously Principal of the consulting firm of Kwasha
Lipton, 1989-1991.
John J. Delucca 52 -- Senior Vice President and Treasurer, September 1993-
Present; Treasurer of Nabisco Holdings, October 1994-
February 1995; prior thereto, Managing Director and
Chief Financial Officer, Hascoe Associates,
1991-1993; President and Chief Financial Officer,
Lexington Group, 1990-1991; Senior Vice President,
Finance and Managing Director, Trump Group,
1988-1990.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED BUSINESS EXPERIENCE DURING THE PAST
NAME AGE DIRECTOR FIVE YEARS AND OTHER INFORMATION
---- --- -------- -----------------------------------
<S> <C> <C> <C>
Robert S. Roath 53 -- Senior Vice President and Chief Financial Officer, May
1995-Present; prior thereto, Senior Vice President
and Controller, 1991-May 1995; Vice President and
Controller, 1990-1991; previously Vice President and
Corporate Controller, Colgate-Palmolive Company,
1988-1990.
Richard G. Russell 50 -- Senior Vice President and Controller, May 1995-Present;
previously Partner at the accounting firm of Deloitte
& Touche LLP for more than five years.
Robert F. Sharpe Jr. 43 -- Senior Vice President and General Counsel, January
1996-Present; previously Vice President, Tyco
International Ltd., July 1994-January 1996; Vice
President, Assistant General Counsel and Secretary,
RJRN Holdings and RJRN, 1989-July 1994.
H. Colin McBride 50 -- Vice President, Assistant General Counsel and
Secretary, December 1995-Present; previously Vice
President and Assistant General Counsel for more than
five years.
</TABLE>
EXECUTIVE OFFICERS OF RJRN HOLDINGS OR ITS SUBSIDIARIES NOT LISTED ABOVE
Set forth below are the names, ages, positions and offices held and a brief
account of the business experience during the past five years of certain
executive officers of RJRN Holdings or its subsidiaries, other than those listed
above.
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED BUSINESS EXPERIENCE DURING THE PAST
NAME AGE DIRECTOR FIVE YEARS AND OTHER INFORMATION
---- --- -------- -----------------------------------
<S> <C> <C> <C>
H. John Greeniaus 51 1992 Vice Chairman since June 1995; President and Chief
Executive Officer of Nabisco Holdings and of
Nabisco since October 1994; prior thereto,
Chairman and Chief Executive Officer of Nabisco,
1993-1994, and President and Chief Executive
Officer of Nabisco, 1987-1993. Member of the Board
of Directors of Nabisco Holdings and Nabisco.
James W. Johnston 49 1992 Vice Chairman since June 1995; Chairman of RJRT
since 1989, Chairman of R.J. Reynolds Tobacco
Worldwide since October 1993 and Chairman of
Reynolds International since October 1993; Chief
Executive Officer of RJRT, 1989-July 1995. Member
of the Board of Directors of Sealy Corporation and
Wachovia Corporation.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED BUSINESS EXPERIENCE DURING THE PAST
NAME AGE DIRECTOR FIVE YEARS AND OTHER INFORMATION
---- --- -------- -----------------------------------
<S> <C> <C> <C>
Pierre de Labouchere 41 -- Chief Executive Officer and President of Reynolds
International, December 1995-Present; prior
thereto, President of Eastern Europe, Middle East
and Africa Region, Reynolds International,
1994-December 1995; Regional Vice
President--European and Special Markets, Reynolds
International, 1991-1994; Vice
President--Scandinavia and Tax-Free Europe,
Reynolds International, 1987-1991.
Andrew J. Schindler 51 -- President and Chief Executive Officer of RJRT since
July 1995; previously President and Chief
Operating Officer of RJRT, May 1994-June 1995;
Executive Vice President--Operations, RJRT,
1991-1994; Senior Vice President-Operations, RJRT,
1989-1991.
J. Thomas Pearson 54 -- Senior Vice President, Taxation, 1988-Present.
Huntley R. Whitacre 53 -- Senior Vice President of Investor Relations, August
1995-Present; prior thereto, Vice President of
Investor Relations for more than five years.
Jason H. Wright 35 -- Senior Vice President of Worldwide Communications,
February 1994-Present; prior thereto, Vice
President of Worldwide Communications, 1993-1994;
Vice President of Financial Communications,
1990-1993.
Jeffrey A. Kuchar 41 -- Vice President and General Auditor, 1993-Present;
prior thereto, Director of Finance and Business
Development, Specialty Products Company, Nabisco,
1993; Director of Financial Planning, Specialty
Products Company, Nabisco, 1992-1993; Assistant
Corporate Controller, 1987-1991.
</TABLE>
22
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of RJRN Holdings, par value $.01 per share (the "Common
Stock"), is listed and traded on the New York Stock Exchange (the "NYSE"). Since
completion of the Acquisition there has been no public trading market for the
common stock of RJRN.
As of January 31, 1996, there were approximately 65,000 record holders of
the Common Stock. All of the common stock of RJRN is owned by RJRN Holdings.
The Common Stock closing price on the NYSE for February 20, 1996 was $32 5/8.
The following table sets forth, for the calendar periods indicated, the high
and low sales prices per share for the Common Stock on the NYSE Composite Tape,
as reported in the Wall Street Journal:
HIGH LOW
---- ---
1995:
First Quarter*.................................. $ 32 1/2 $25
Second Quarter*................................. 31 1/4 25 1/4
Third Quarter................................... 33 1/4 26 3/8
Fourth Quarter.................................. 33 3/8 27 7/8
HIGH LOW
---- ---
1994:
First Quarter*.................................. $ 40 5/8 $28 1/8
Second Quarter*................................. 35 27 1/2
Third Quarter*.................................. 35 5/8 28 1/8
Fourth Quarter*................................. 36 1/4 26 9/16
- ------------
* Adjusted to reflect a one-for-five reverse stock split
The Board of Directors of RJRN Holdings declared an initial quarterly cash
dividend of $.375 per share payable on April 1, 1995. During 1995, RJRN Holdings
continued to pay such a quarterly cash dividend on the Common Stock, adjusted to
take into account the one-for-five reverse split of the Common Stock described
below. Cash dividends paid by RJRN to RJRN Holdings are set forth in the
Consolidated Statements of Cash Flows in the Consolidated Financial Statements.
The operations of RJRN Holdings and RJRN are conducted through RJRN's
subsidiaries and, therefore, RJRN Holdings and RJRN are dependent on the
earnings and cash flow of RJRN's subsidiaries to satisfy their respective
obligations and other cash needs. Certain Nabisco credit facilities limit the
amount of dividends, distributions and advances by Nabisco Holdings and its
subsidiaries to RJRN Holdings and its non-Nabisco subsidiaries. Moreover, the
New RJRN Credit Agreements and certain policies adopted by the Board of
Directors of RJRN Holdings limit the payment by RJRN Holdings of dividends on
the Common Stock in excess of certain specific amounts. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Financial Condition" and "RJRN Holdings' Board of
Directors Policies" and Note 11 to the Consolidated Financial Statements. RJRN
Holdings does not believe that the provisions of the New RJRN Credit Agreements
or its adopted policies concerning distributions to stockholders will limit its
ability to pay its anticipated quarterly dividends.
A one-for-five reverse split of the Common Stock of RJRN Holdings was
approved by its stockholders on April 12, 1995. The reverse stock split resulted
in a dividend and earnings per share five times higher with a corresponding
reduction in the number of shares outstanding.
RJRN Holdings has indicated that, under normal circumstances, it does not
plan to issue additional equity securities for purposes of balance sheet
improvement.
23
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data of RJR Nabisco Holdings Corp.
("RJRN Holdings") presented below as of December 31, 1995 and 1994 and for each
of the years in the three-year period ended December 31, 1995 was derived from
the consolidated financial statements of RJRN Holdings (the "Consolidated
Financial Statements"), which have been audited by Deloitte & Touche LLP,
independent auditors. In addition, the consolidated financial data of RJRN
Holdings presented below as of December 31, 1993, 1992 and 1991 and for each of
the years in the two year period ended December 31, 1992 was derived from the
audited consolidated financial statements of RJRN Holdings as of December 31,
1993, 1992 and 1991 and for the years ended December 31, 1992 and 1991, which
are not presented herein. The data should be read in conjunction with the
Consolidated Financial Statements, related notes and other financial information
included herein.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
RESULTS OF OPERATIONS
Net sales....................................... $16,008 $15,366 $15,104 $15,734 $14,989
------- ------- ------- ------- -------
Cost of products sold........................... 7,468 6,977 6,640 6,326 6,088
Selling, advertising, administrative and
general expenses.............................. 5,412 5,210 5,731 5,788 5,358
Amortization of trademarks and goodwill......... 636 629 625 616 609
Restructuring expense........................... 154 -- 730 106 --
------- ------- ------- ------- -------
Operating income(1)........................... 2,338 2,550 1,378 2,898 2,934
Interest and debt expense....................... (899) (1,065) (1,209) (1,449) (2,217)
Other income (expense), net(2).................. (173) (110) (58) 7 (69)
------- ------- ------- ------- -------
Income before income taxes.................... 1,266 1,375 111 1,456 648
Provision for income taxes...................... 580 611 114 680 280
------- ------- ------- ------- -------
Income (loss) before minority interest in
income of Nabisco........................... 686 764 (3) 776 368
Minority interest in income of Nabisco.......... (59) -- -- -- --
------- ------- ------- ------- -------
Income (loss) before extraordinary item....... 627 764 (3) 776 368
Extraordinary item--loss on early
extinguishments of debt, net of income taxes
and minority interest......................... (16) (245) (142) (477) --
------- ------- ------- ------- -------
Net income (loss)............................... 611 519 (145) 299 368
Preferred stock dividends(3).................... 110 131 68 31 173
------- ------- ------- ------- -------
Net income (loss) applicable to common stock.... $ 501 $ 388 $ (213) $ 268 $ 195
------- ------- ------- ------- -------
------- ------- ------- ------- -------
PER SHARE DATA
Income (loss) before extraordinary item per
common and common equivalent share(4)(5)...... $ 1.58 $ 2.06 $ (0.26) $ 2.73 $ 1.10
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Dividends per share of Common Stock............. $ 1.50 -- -- -- --
Dividends per share of Series A Preferred
Stock(4)...................................... -- $ 2.92 $ 3.34 $ 3.34 $ 0.49
Dividends per share of Series C Preferred
Stock(4)...................................... $ 6.01 $ 3.94 -- -- --
BALANCE SHEET DATA
(AT END OF PERIODS)
Working capital(6).............................. $ 436 $(1,231) $ 202 $ 730 $ 165
Total assets.................................... 31,518 31,408 31,295 32,041 32,131
Total debt(6)................................... 9,847 11,149 12,448 14,218 14,531
RJRN Holdings' obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely junior subordinated
debentures(3)................................. 954 -- -- -- --
Stockholders' equity(3)(4)(7)................... 10,329 10,908 9,070 8,376 8,419
</TABLE>
(Footnotes on following page)
24
<PAGE>
(Footnotes from preceding page)
- ------------
(1) The 1995 amount includes approximately $49 million for the consolidation and
relocation of the international tobacco headquarter's operations and certain
of its sales facilities. The 1992 amount includes a gain of $98 million on
the sale of the ready-to-eat cold cereal business.
(2) The 1995 amount includes approximately $103 million for fees and expenses
incurred in connection with certain debt refinancings by RJRN, Nabisco
Holdings and Nabisco.
(3) On September 21, 1995, RJR Nabisco Holdings Capital Trust I (the "Trust")
exchanged approximately $949 million of its preferred securities (the "Trust
Preferred Securities"), representing undivided interests in 97% of the
assets of the Trust, for 37,956,060 of the 50,000,000 Series B Depositary
Shares (the "Series B Depositary Shares") outstanding, each representing
one-tenth of a share of the 50,000 outstanding shares of RJRN Holdings'
Series B Cumulative Preferred Stock, par $.01 per share (the "Series B
Preferred Stock"). RJRN Holdings retired the exchanged shares, leaving
12,043.94 shares of the Series B Preferred Stock outstanding. The sole
asset of the Trust is junior subordinated debentures of RJRN Holdings.
Upon redemption of the junior subordinated debentures, which have a final
maturity of December 31, 2044, the Trust Preferred Securities will be
mandatorily redeemed. The outstanding junior subordinated debentures have
an aggregate principal amount of approximately $978 million and an annual
interest rate of 10%.
(4) On November 8, 1991, RJRN Holdings issued 52,500,000 shares of Series A
Conversion Preferred Stock, par value $.01 per share ("Series A Preferred
Stock"), and sold 210,000,000 $.835 depositary shares (the "Series A
Depositary Shares"), each of which represented one-quarter of a share of
Series A Preferred Stock. On May 6, 1994, RJRN Holdings issued 26,675,000
shares of Series C Conversion Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock"), and sold 266,750,000 Series C Depositary Shares
(the "Series C Depositary Shares"), each of which represented one-tenth of a
share of Series C Preferred Stock. On November 15, 1994, each outstanding
Series A Depositary Share converted into one share of RJRN Holdings' Common
Stock.
(5) The loss before extraordinary item per common and common equivalent share
reported for the year ended December 31, 1993 would have increased by $.82
per share if the weighted average number of shares of Series A Depositary
Shares outstanding during the period had been excluded from the earnings per
share calculation.
(6) Working capital at December 31, 1994 included $1.35 billion of borrowings
under the 1994 Nabisco Credit Agreement, a substantial portion of which was
used in connection with the refinancing of certain debt. On January 26,
1995, such borrowings were substantially reduced through the application of
approximately $1.2 billion of net proceeds received from the initial public
offering of 51,750,000 shares of Nabisco Holdings' Class A Common Stock.
(7) RJRN Holdings' stockholders' equity at December 31 of each year from 1995 to
1991 includes non-cash expenses related to accumulated trademark and
goodwill amortization of $4.280 billion, $3.644 billion, $3.015 billion,
$2.390 billion and $1.774 billion respectively.
See Notes to Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The operating subsidiaries of RJR Nabisco Holdings Corp. ("RJRN Holdings")
and its wholly-owned subsidiary, RJR Nabisco, Inc. ("RJRN"), comprise one of the
largest tobacco and food companies in the world. In the United States, the
tobacco business is conducted by R. J. Reynolds Tobacco Company ("RJRT"), the
second largest manufacturer of cigarettes, and the packaged food business is
conducted by Nabisco Holdings Corp. ("Nabisco Holdings") through its
wholly-owned subsidiary, Nabisco, Inc. ("Nabisco"), the largest manufacturer and
marketer of cookies and crackers (the "Domestic Food Group"). Outside the United
States, the tobacco operations are conducted by R.J. Reynolds Tobacco
International, Inc. and beginning on January 1, 1996, R.J. Reynolds
International (collectively "Reynolds International"), and the food operations
are conducted by Nabisco International, Inc. and Nabisco Ltd (collectively, the
"International Food Group").
The following is a discussion and analysis of the consolidated financial
condition and results of operations of RJRN Holdings. The discussion and
analysis should be read in connection with the consolidated financial statements
and the related notes thereto of RJRN Holdings as of December 31, 1995 and 1994
and for each of the years in the three year period ended December 31, 1995 (the
"Consolidated Financial Statements").
RESULTS OF OPERATIONS
Summarized financial data for RJRN Holdings is as follows:
<TABLE>
<CAPTION>
% CHANGE FROM
PRIOR YEAR
-------------
1995 1994 1993 1995 1994
------- ------- ------- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net Sales:
RJRT............................................. $ 4,480 $ 4,570 $ 4,949 (2 )% (8)%
Reynolds International........................... 3,234 3,097 3,130 4 % (1)%
------- ------- -------
Total Tobacco.................................... 7,714 7,667 8,079 1 % (5)%
------- ------- -------
Domestic Food Group.............................. 6,020 5,729 5,491 5 % 4%
International Food Group......................... 2,274 1,970 1,534 15 % 28%
------- ------- -------
Total Food....................................... 8,294 7,699 7,025 8 % 10%
------- ------- -------
$16,008 $15,366 $15,104 4 % 2%
------- ------- -------
------- ------- -------
Operating Company Contribution(1):
RJRT............................................. $ 1,420 $ 1,450 $ 1,173 (2 )% 24%
Reynolds International........................... 643 755 644 (15 )% 17%
------- ------- -------
Total Tobacco.................................... 2,063 2,205 1,817 (6 )% 21%
------- ------- -------
Domestic Food Group.............................. 890 935 813 (5 )% 15%
International Food Group......................... 239 177 136 35 % 30%
------- ------- -------
Total Food....................................... 1,129 1,112 949 2 % 17%
Headquarters..................................... (64) (138) (33) 54 % --%
------- ------- -------
$ 3,128 $ 3,179 $ 2,733 (2 )% 16%
------- ------- -------
------- ------- -------
Operating Income:
RJRT............................................. $ 954 $ 1,085 $ 453 (12 )% 140%
Reynolds International........................... 546 716 413 (24 )% 73%
------- ------- -------
Total Tobacco.................................... 1,500 1,801 866 (17 )% 108%
------- ------- -------
Domestic Food Group.............................. 687 730 478 (6 )% 53%
International Food Group......................... 215 157 100 37 % 57%
------- ------- -------
Total Food....................................... 902 887 578 2 % 53%
Headquarters..................................... (64) (138) (66) 54 % (109) %
------- ------- -------
$ 2,338 $ 2,550 $ 1,378 (8 )% 85%
------- ------- -------
------- ------- -------
</TABLE>
(Footnotes on following page)
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INDUSTRY SEGMENTS
The percentage contributions of each of RJRN Holdings' industry segments to
net sales and operating company contribution during the last five years were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales:
Total Tobacco................................... 48 % 50 % 53 % 57 % 57 %
Total Food...................................... 52 50 47 43 43
---- ---- ---- ---- ----
100 % 100 % 100 % 100 % 100 %
---- ---- ---- ---- ----
---- ---- ---- ---- ----
Operating Company Contribution(1)(2):
Total Tobacco................................... 65 % 66 % 66 % 74 % 75 %
Total Food...................................... 35 34 34 26 25
---- ---- ---- ---- ----
100 % 100 % 100 % 100 % 100 %
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
- ------------
(1) Operating company contribution represents operating income before
amortization of trademarks and goodwill and exclusive of restructuring
expenses. Restructuring expenses amounted to $154 million for 1995
(RJRT-$100 million, Reynolds International-$54 million) and $730 million for
1993 (RJRT-$355 million, Reynolds International-$189 million, Domestic Food
Group-$132 million, International Food Group-$21 million and
Headquarters-$33 million.)
(2) Contributions by industry segments were computed without effects of
Headquarters' expenses.
TOBACCO
The tobacco business is conducted by RJRT and Reynolds International.
1995 vs. 1994. The worldwide tobacco business reported net sales of $7.71
billion in 1995, an increase of 1% from the 1994 level of $7.67 billion. The net
sales increase in 1995 resulted primarily from a higher proportion of domestic
full price sales, higher selling prices worldwide and favorable foreign currency
developments that more than offset the impact of an overall worldwide tobacco
volume decline. Worldwide tobacco volume for 1995 decreased 2% from the prior
year. Operating company contribution for the worldwide tobacco business of $2.06
billion in 1995 declined 6% from the 1994 level of $2.20 billion due to lower
operating company contribution at both the domestic tobacco business and the
international tobacco business. Operating income for the worldwide tobacco
business in 1995 of $1.50 billion declined 17% from the 1994 level of $1.80
billion, reflecting the lower operating company contribution and a 1995
restructuring expense related to the domestic and international tobacco
businesses of $100 million and $54 million, respectively.
Net sales for RJRT amounted to $4.48 billion in 1995, a decline of 2% from
the 1994 level of $4.57 billion. The decline in net sales in 1995 resulted
primarily from an overall volume loss of 5% (approximately $320 million),
partially offset by a higher proportion of full price sales (approximately $140
million) and higher selling prices in both the full price and savings segments
(approximately $67 million). RJRT's volume declined slightly in the full price
segment during 1995 despite an industry average increase of approximately 2%
due to the pattern of wholesale purchases and the erosion of market share of
certain brands during the first six months of 1995. However, RJRT's share of
full price segment stablized during the third and fourth quarters of 1995.
RJRT's volume in the savings segment declined by 13% during 1995 which exceeded
industry average, reflecting an erosion of market share of certain brands in the
segment due to RJRT's decision to be more selective in its participation in that
segment. RJRT's full price volume as a percentage of total volume in 1995 and
1994 amounted to 63% and 60%, respectively. Comparable figures for the domestic
cigarette market in 1995 and 1994 amounted to 70% and 67%, respectively.
RJRT's operating company contribution was $1.42 billion in 1995, a 2%
decline from the 1994 level of $1.45 billion, as lower manufacturing costs
(approximately $67 million), the higher proportion
27
<PAGE>
of full price sales (approximately $118 million), reduced merchandising costs
(approximately $13 million), lower administrative expenses (approximately $14
million) and higher selling prices (approximately $67 million) were more than
offset by the decline in overall volume (approximately $196 million) and an
increase in marketing expenses (approximately $97 million). RJRT's operating
income was $954 million in 1995, a decline of 12% from the 1994 level of $1.09
billion. The decline in operating income for 1995 reflected the lower RJRT
operating company contribution and a restructuring expense in 1995 of $100
million.
Reynolds International recorded net sales of $3.23 billion in 1995, an
increase of 4% from the 1994 level of $3.10 billion. The increase in net sales
for 1995 primarily resulted from favorable foreign currency developments
(approximately $113 million) and higher pricing (approximately $42 million),
offset in part by unfavorable mix (approximately $17 million). Overall volume
increased by 1%. Reynolds International's operating company contribution of $643
million in 1995 decreased 15% from the 1994 level of $755 million primarily due
to costs and expenses incurred in connection with the consolidation and
relocation of its headquarter's operations and certain sales facilities
(approximately $49 million), trade stock realignment (approximately $22
million), write-off of certain export receivables (approximately $16 million),
higher administrative costs (approximately $19 million), higher promotional and
selling expenses (approximately $25 million), higher manufacturing costs
(approximately $13 million) and unfavorable mix (approximately $10 million),
which were partially offset by higher pricing (approximately $42 million). The
decline in operating income for 1995 reflected the lower Reynolds International
operating company contribution and a restructuring expense in 1995 of $54
million.
1994 vs. 1993. Despite declines in net sales for both the domestic and
international tobacco businesses, the worldwide tobacco business reported profit
gains for 1994. RJRT's net sales decline resulted principally from overall lower
pricing and volume which more than offset the impact of a higher proportion of
sales from full price brands. Reynolds International's net sales decline was
primarily attributable to a reduction in trade inventory levels and price
repositioning in Canada and Puerto Rico which more than offset higher selling
prices and volume. Overall, net sales from the worldwide tobacco business
amounted to $7.67 billion in 1994, a decline of 5% from the 1993 level of $8.08
billion. Worldwide volume for 1994 was flat compared to 1993. Operating company
contribution for the worldwide tobacco business grew to $2.21 billion in 1994
from $1.82 billion in 1993, an increase of 21% that resulted from improved
margins in both the domestic and international businesses. Operating income for
the worldwide tobacco business rose to $1.80 billion in 1994, an increase of
108% from the 1993 level of $866 million, as a result of the increase in
operating company contribution discussed above and the 1993 restructuring
expense of $544 million.
Net sales for RJRT amounted to $4.57 billion in 1994, a decrease of 8% from
the 1993 level of $4.95 billion. The decrease primarily reflects the impact of
industry-wide price reductions on full price brands (approximately $500 million)
which went into effect during the second half of 1993, lower volume in the
savings segment (approximately $60 million) primarily due to RJRT's decision to
be more selective in its participation in that segment and lower volume in the
full price segment (approximately $300 million) primarily due to increased
competitor activities during the second half of 1994. These factors more than
offset the impact of a higher proportion of sales from full price brands
(approximately $400 million), higher selling prices in the savings segment
(approximately $60 million) and higher selling prices in the full price segment
during the fourth quarter of 1994 as compared to the fourth quarter of 1993
(approximately $40 million). RJRT's full price volume as a percentage of total
volume amounted to 60% in 1994 versus 56% in 1993. RJRT's operating company
contribution was $1.45 billion in 1994, a 24% increase from the 1993 level of
$1.17 billion, as reduced promotional and selling expenses (approximately $650
million) more than offset the decline in net sales. RJRT's operating income was
$1.09 billion in 1994, an increase of 140% from the 1993 level of $453 million.
The increase in operating income for 1994 from the prior year reflects the
increase in RJRT's operating company contribution discussed above and the 1993
restructuring expense of $355 million.
Reynolds International recorded net sales of $3.10 billion in 1994, a
decrease of 1% from the 1993 level of $3.13 billion. The net sales decrease for
1994 primarily resulted from a reduction in trade
28
<PAGE>
inventory levels (approximately $75 million), repositioning of prices in Canada
and Puerto Rico to enhance brand competitiveness (approximately $60 million),
and unfavorable foreign exchange developments, primarily in Europe and the
Middle East (approximately $30 million), which were offset in part by higher
selling prices throughout Reynolds International's markets (approximately $70
million) and an increase in volume in certain regions (approximately $60
million). Reynolds International's operating company contribution rose to $755
million in 1994, an increase of 17% compared to the 1993 level of $644 million.
The increase in operating company contribution for 1994 was due to lower product
costs in all regions (approximately $100 million), reduced promotional expenses
(approximately $70 million), the higher selling prices (approximately $70
million) and higher volume (approximately $15 million), which more than offset
price repositioning in Canada and Puerto Rico (approximately $50 million), the
reduction in trade inventories (approximately $30 million), higher operating
expenses to support expansion of business activity primarily in Eastern Europe
(approximately $30 million) and unfavorable foreign exchange developments
(approximately $20 million). Reynolds International's operating income was $716
million in 1994, an increase of 73% from the 1993 level of $413 million. The
increase in operating income reflects the increase in Reynolds International's
operating company contribution discussed above and the 1993 restructuring
expense of $189 million.
1995 Governmental Activity
Congress enacted legislation effective January 1, 1994 (the Omnibus Budget
Reconciliation Act of 1993) that assesses financial penalties against
manufacturers if cigarettes produced in the United States do not contain at
least 75% (by weight) domestically grown flue cured and burley tobaccos. In
December 1994, Congress enacted the Uruguay Round Agreements Act to replace this
domestic content requirement with a tariff rate quota system that keys tariffs
to import volumes. The tariff rate quotas have been established by the United
States with overseas tobacco producers and became effective on September 13,
1995. Domestic content requirements and tariff rate quotas increased raw
material costs slightly in 1994 but these costs were down slightly in 1995
during the period when the domestic content requirement was not applicable.
In February 1994, the Commissioner of the U.S. Food and Drug Administration
(the "FDA"), which historically has refrained from asserting jurisdiction over
cigarette products, stated that he intended to cause the FDA to work with the
U.S. Congress to resolve the regulatory status of cigarettes under the Food,
Drug and Cosmetic Act. During the second quarter of 1994, hearings were held in
this regard, and RJRT and other members of the United States cigarette industry
were asked to provide voluntarily certain documents and other information to
Congress. In August 1995, the Commissioner of the FDA, with the support of the
Clinton Administration, announced that he was asserting jurisdiction over
cigarettes and certain other tobacco products and issued a notice and request
for comments on proposed regulations. The proposed regulations would prohibit or
impose stringent limits on a broad range of sales and marketing practices,
including bans on sampling, sponsorship by brand name, and distribution of
non-tobacco items carrying brand names. The FDA's proposed rule would also limit
advertising in print and on billboards to black and white text, impose new
labeling language, and require cigarette manufacturers to fund a $150
million-a-year campaign to discourage minors from using tobacco products. RJRT
and other cigarette manufacturers have submitted responses to the proposed
rules.
The purported purpose of the FDA's assertion of jurisdiction was to curb the
use of tobacco products by underage youth. RJRT believes that the assertion of
jurisdiction and the scope of the proposed rules would materially restrict the
availability of cigarettes and RJRT's ability to market its cigarette products
to adult smokers. RJRT, together with the other four major domestic cigarette
manufacturers and an advertising agency, filed suit on the day of the
Commissioner's announcement in the U.S. District Court for the Middle District
of North Carolina seeking to enjoin the FDA's assertion of jurisdiction (Coyne
Beahm v. United States Food & Drug Administration). Similar suits have been
filed in the same court by manufacturers of smokeless tobacco products, by
operators of retail stores and by advertising interests. RJRT is unable to
predict whether the FDA will adopt final rules asserting
29
<PAGE>
jurisdiction over cigarettes or the scope of such final rules, if adopted. It is
also unable to predict the outcome of the litigation seeking to enjoin the FDA's
rulemaking.
In March 1994, the U.S. Occupational Safety and Health Administration
("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 or timing 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. RJRT submitted comments on the proposed
regulations during the comment period which closed in February, 1996. 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.
In July 1994, an amendment to a Florida statute became effective which
allows the state of Florida to bring an action in its own name against the
tobacco industry to recover amounts paid by the state under its Medicaid program
to treat illnesses statistically associated with cigarette smoking. The amended
statute does not require the state to identify the individual who received
medical care, permits a lawsuit to be filed as a class action and eliminates the
comparative negligence and assumption of risk defenses. The Florida statute is
being challenged on state and federal constitutional grounds in a lawsuit
brought by Philip Morris Companies Inc., Associated Industries of Florida,
Publix Supermarkets, and National Association of Convenience Stores in June
1994. On June 26, 1995, the trial court judge granted in part the plaintiffs'
motion for summary judgment finding portions of the act unconstitutional. Both
plaintiffs and defendants appealed this decision which the Florida supreme court
accepted for direct appeal. Oral argument was heard on November 6, 1995.
The Florida House and Senate passed a bill that would repeal the Florida
statute retroactively which was vetoed by the Governor. The Florida House and
Senate have indicated that they are considering action to override that veto.
Similar legislation, without Florida's elimination of defenses, has been
introduced in the Massachusetts and New Jersey legislatures. RJRT is unable to
predict whether other states will enact similar legislation and whether lawsuits
will be filed under these statutes or their outcome, if filed. A suit against
the tobacco industry under the Florida statute was filed on February 21, 1995.
Various states and local jurisdictions have enacted legislation imposing
restrictions on public smoking, increasing excise taxes and designating a
portion of the increased cigarette excise taxes to fund anti-smoking programs,
health care programs or cancer research. Many employers have also initiated
programs restricting or eliminating smoking in the workplace.
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, Reynolds International or the
cigarette industry generally, but such legislation or regulations could have an
adverse effect on RJRT, Reynolds International or the cigarette industry
generally.
For a description of certain litigation affecting RJRT and its affiliates,
see Item 1, "Business-- Tobacco-- Litigation Affecting the Cigarette Industry"
and Note 12 to the Consolidated Financial Statements.
FOOD
The food business is conducted by the Domestic Food Group and the
International Food Group. The Domestic Food Group is comprised of the Nabisco
Biscuit, Specialty Products, LifeSavers, Planters, Food Service and
Fleischmann's companies.
1995 vs. 1994. Nabisco Holdings reported net sales of $8.29 billion in 1995,
an increase of 8% from the 1994 level of $7.70 billion, with the Domestic Food
Group up 5% and the International Food Group up 15%. The Domestic Food Group's
increase was primarily attributable to volume gains at
30
<PAGE>
Nabisco Biscuit (approximately $228 million), reflecting new product
introductions and product line extensions, volume gains at Food Service
(approximately $37 million), volume gains at Fleischmann's (approximately $18
million) and the impact of the October, 1995 acquisition of the Parkay margarine
brand (approximately $64 million), which were offset in part by volume declines
at Planters (approximately $40 million) and the impact of the September, 1995
sale of the Ortega brand (approximately $39 million). The International Food
Group's net sales increase for 1995 was primarily due to improved results in
Brazil (approximately $120 million), reflecting a continuation of the country's
economic recovery, the favorable impact of recent business acquisitions
(approximately $112 million) and the favorable performance from businesses in
Iberia, Canada and Venezuela (approximately $65 million), partially offset by
lower net sales in Mexico (approximately $30 million) due to the devaluation of
the peso.
Nabisco Holdings' operating company contribution was $1.13 billion in 1995,
an increase of 2% from the 1994 level of $1.11 billion, with the International
Food Group higher by 35% and the Domestic Food Group lower by 5%. The 1995
period includes a net pre-tax gain of $11 million from the sale of the Ortega
Mexican food ($18 million gain) and New York Style Bagel Chip ($7 million loss)
businesses, and the favorable impact of recent business acquisitions
(approximately $18 million). Excluding these items and the results of operations
from the business disposals in both years, Nabisco Holdings' operating
company contribution was $14 million lower than the 1994 level, with the
International Food Group higher by 32% and the Domestic Food Group lower by 8%.
The Domestic Food Group's adjusted operating company contribution decrease for
1995 (approximately $70 million) reflects investment spending behind new
product initiatives and intense competitive conditions in biscuits and nuts.
The International Food Group's adjusted operating company contribution
increase for 1995 (approximately $56 million) was primarily due to the profit
impact of increased sales in Brazil, Iberia, Canada and Venezuela
(approximately $34 million).
Nabisco Holdings' operating income was $902 million in 1995, an increase of
2% from the 1994 level of $887 million, as a result of the changes in operating
company contribution discussed above.
1994 vs. 1993. Nabisco Holdings reported net sales of $7.70 billion in 1994,
an increase of 10% from the 1993 level of $7.03 billion, with the Domestic Food
Group up 4% and the International Food Group up 28%. The Domestic Food Group's
increase was primarily attributable to significant volume gains at Nabisco
Biscuit, reflecting the success of new product introductions and product line
extensions in the U.S. biscuit market (approximately $215 million) and volume
increases from Specialty Products (approximately $13 million). The International
Food Group's increase was primarily the result of the favorable impact of recent
acquisitions (approximately $345 million) and improved business conditions in
Brazil (approximately $70 million) as a result of its second-half 1994 economic
recovery.
Nabisco Holdings' operating company contribution was $1.11 billion in 1994,
an increase of 17% from the 1993 level of $949 million, with the Domestic Food
Group up 15% and the International Food Group up 30%. The Domestic Food Group's
increase for 1994 was primarily due to the increase in net sales (approximately
$40 million) and savings from productivity programs (approximately $135
million), including previously established restructuring programs, which were
offset in part by competitive pricing pressures (approximately $35 million) and
the absence of a 1993 gain on the sale of certain assets (approximately $17
million). The International Food Group's increase in operating company
contribution for 1994 was primarily due to recent acquisitions (approximately
$40 million) and strong results in Canada (approximately $7 million), partially
offset by unfavorable business results in Mexico (approximately $7 million). The
devaluation of the Mexican peso was not material to earnings in 1994.
Nabisco Holdings' operating income was $887 million in 1994, an increase of
53% from the 1993 level of $578 million, as a result of the increase in
operating company contribution discussed above and the 1993 restructuring
expense of $153 million.
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<PAGE>
RESTRUCTURING EXPENSE
RJRN Holdings recorded a pre-tax restructuring expense of $154 million in
the fourth quarter of 1995 ($104 million after tax) related to a program
announced on October 13, 1995 to reorganize its worldwide tobacco operations.
The 1995 restructuring program was primarily undertaken in order to streamline
operations and improve profitability. The 1995 restructuring program was
implemented in the latter part of 1995 and will be substantially completed
during 1996. A significant portion of the 1995 restructuring program will be a
cash expense. The major components of the 1995 restructuring program were
workforce reductions totaling 1,260 employees (approximately $132 million), the
rationalization and closing of facilities relating to the international tobacco
operations (approximately $8 million) and equipment and lease abandonments at
the domestic tobacco operations (approximately $14 million). At December 31,
1995, approximately $102 million of severance pay and benefits remained to be
paid. Anticipated annual future cash savings from the plan are estimated to be
in excess of approximately $70 million after tax.
RJRN Holdings recorded a pre-tax restructuring expense of $730 million in
the fourth quarter of 1993 ($467 million after tax) related to a program
announced on December 7, 1993. The 1993 restructuring program was undertaken to
respond to a changing consumer product business environment and to streamline
operations and improve profitability. The 1993 program, which was implemented in
the latter part of 1993 and substantially completed during 1995, consisted of
workforce reductions, reassessment of raw material sourcing and production
arrangements, contract termination costs, abandonment of leases and the
rationalization and closing of manufacturing and sales facilities. Approximately
75% of the restructuring program required cash outlays. At December 31, 1995,
approximately $21 million for severance pay and benefits remained to be paid.
During 1994, a change in the estimated cost of the 1993 restructuring
program resulted in a credit to income of $23 million related to changes in the
number of workforce reductions and an increase in cost of $21 million associated
with the rationalization and abandonment of manufacturing and sales facilities.
The net adjustment during 1994 of the above changes was reflected in selling,
advertising, administrative and general expenses.
INTEREST AND DEBT EXPENSE
1995 vs. 1994. RJRN and Nabisco manage interest rate exposure by adjusting
their mix of floating rate debt and fixed rate debt. As part of managing such
interest rate exposure, RJRN and Nabisco enter into various interest rate
arrangements from time to time.
Following adoption of a policy change in 1994, RJRN canceled all of its
financial interest rate arrangements with optionality. During 1994, as part of
its current strategy to manage interest rate exposure, RJRN effectively
neutralized the effects of any future changes in market interest rates on the
remainder of its outstanding interest rate swaps, options, caps and other
financial instruments through the purchase of offsetting positions. Net
unrealized gains and losses on the remaining interest rate instruments at the
time such instruments were neutralized are being amortized as additional
interest expense during 1995, 1996 and 1997 of approximately $39 million,
$28 million and $5 million, respectively.
During 1995, Nabisco began managing its own interest rate exposure. As
part of managing its interest rate exposure, Nabisco entered into interest rate
swaps and caps to effectively fix a portion of its interest rate exposure on its
floating rate debt. The impact of these agreements was not significant.
Consolidated interest and debt expense amounted to $899 million in 1995, a
decrease of 16% from 1994. The decline is primarily due to refinancings
completed during 1994 and repayments of debt with the proceeds from the
issuances of preferred stock during 1994 and Nabisco Holdings Class A Common
Stock during the first quarter of 1995. These factors more than offset the
impact of higher market interest rates.
1994 vs. 1993. Consolidated interest and debt expense of $1.06 billion in
1994 decreased 12% from 1993, primarily as a result of refinancings of debt
during 1993 and 1994 and lower debt levels resulting primarily from the
application of proceeds from the issuance of preferred stock. These factors
more than offset the impact of higher market interest rates during 1994,
including the effects thereof on RJRN's interest rate instruments described
below.
As mentioned above, RJRN entered into interest rate arrangements to manage
its interest rate exposure. The impact on interest expense from the utilization
of interest rate instruments by RJRN in 1994 resulted in additional interest
expense of $22 million, which includes $45 million associated with the written
instruments. The impact of interest rate instrument utilization in 1993
included gains which lowered interest expense by approximately $70 million.
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<PAGE>
OTHER INCOME (EXPENSE), NET
Consolidated other income (expense), net for 1995 includes a pre-tax charge
of approximately $103 million for fees and expenses incurred in connection with
(i) the exchange of approximately $1.8 billion aggregate principal amount of
newly issued notes and debentures (the "New Notes") of Nabisco for the same
amount of notes and debentures (the "Old Notes") issued by RJRN (the "Exchange
Offers") and (ii) the solicitation of consents by RJRN to certain indenture
modifications from holders of the Old Notes and holders of approximately $3.58
billion of its other outstanding debt securities (the "Consent Solicitations").
The Exchange Offers, the Consent Solicitations and certain related transactions
were designed, among other things, to enable Nabisco to obtain long-term debt
financing independent of RJRN and to repay its intercompany debt to RJRN.
INCOME TAXES
RJRN Holdings' provision for income taxes for 1993 was increased by $96
million as a result of the enactment of certain federal tax legislation during
the third quarter of 1993 which increased federal corporate income tax rates to
35% from 34%, retroactively to January 1, 1993. The components of this increase
to RJRN Holdings' provision for income taxes included an $86 million non-cash
charge resulting primarily from the remeasurement of the balance of deferred
federal income taxes at the date of enactment of the new federal tax legislation
for the change in the income tax rates, and a $10 million charge resulting from
the increase in current federal income taxes accrued for the change in the
income tax rates and other effects of the new tax legislation. Also during 1993,
RJRN Holdings' provision for income taxes was decreased by a $108 million credit
primarily resulting from a change in the functional currency, for U.S. federal
income tax purposes, relating to foreign branch operations.
NET INCOME
1995 vs. 1994. RJRN Holdings reported net income of $611 million in 1995,
$92 million higher than the $519 million reported in 1994. The increase in net
income for 1995 primarily reflects the impact in 1995 of lower interest and debt
expense and a lower amount of loss from early extinguishment of debt which more
than offset the impact in 1995 of lower operating company contribution, the
domestic and international tobacco restructuring expenses, the fees and expenses
incurred in connection with the Exchange Offers and the Consent Solicitations
and the minority interest in income of Nabisco.
1994 vs. 1993. RJRN Holdings' net income of $519 million in 1994 includes an
after-tax extraordinary loss of $245 million related to the repurchase and
redemption of debt during the year. Excluding the extraordinary loss in 1994, as
well as a similar extraordinary item which resulted in a $142 million after-tax
loss in 1993, RJRN Holdings would have reported net income of $764 million for
33
<PAGE>
1994, an increase of $767 million from 1993. The increase resulted primarily
from the improvement in operating company contribution by both the Tobacco and
Food operations, the impact of lower interest expense and the 1993 restructuring
expense of $730 million, offset in part by a $65 million charge related to the
realignment of Headquarters' functions at the holding company discussed below.
During the fourth quarter of 1994, RJRN Holdings approved and adopted a plan
to realign Headquarters' functions, transferring certain responsibilities to the
operating companies and significantly streamlining the holding company. The plan
reflected expectations of a lower level of financings and other activities at
the holding company as RJRN Holdings concludes the post-LBO period. The costs
and expenses associated with this decision resulted in a charge of approximately
$65 million before tax, a significant portion of which was a cash expense. The
majority of the charge was related to accrued employee termination benefits for
the 25% of Headquarters' employees terminated (approximately $40 million). This
cost was incurred pursuant to a continuing plan for employee termination
benefits that provided for the payment of specified amounts of severance and
benefits to terminated employees. The remainder of the charge (approximately $25
million) was related to the abandonment of leases of certain corporate office
facilities as a result of the realignment and streamlining and the reduced need
for office space. The plan was implemented in the first quarter of 1995 and was
substantially completed during 1995. At December 31, 1995, approximately $14
million of severance pay and benefits remained to be paid.
RJRN Holdings' net income (loss) applicable to its common stock for 1995,
1994 and 1993 of $501 million, $388 million and ($213) million, respectively,
includes a deduction for preferred stock dividends of $110 million, $131 million
and $68 million, respectively.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS No. 121").
SFAS No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to those assets to
be held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. SFAS No. 121 requires that (i) long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable and (ii) long-lived
assets and certain identifiable intangibles to be disposed of generally be
reported at the lower of carrying amount or fair value less cost to sell. SFAS
No. 121 is effective for financial statements for fiscal years beginning after
December 15, 1995. The adoption of the SFAS No. 121 is not expected to
materially effect the financial position or results of operations of RJRN
Holdings and RJRN.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS No. 123"). SFAS No. 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS No. 123
encourages all entities to adopt a fair value based method of accounting for
stock-based compensation plans in which compensation cost is measured at the
date the award is granted based on the value of the award and is recognized over
the employee service period. However, SFAS No. 123 allows an entity to continue
to use the intrinsic value based method prescribed by Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25"),
with proforma disclosures of net income and earnings per share as if the fair
value based method had been applied. APB No. 25 requires compensation expense to
be recognized over the employee service period based on the excess, if any, of
the quoted marked price of the stock at the date the award is granted or other
measurement date, as applicable, over an amount an employee must pay to acquire
the stock. SFAS No. 123 is effective for financial statements for fiscal years
beginning after December 15, 1995. RJRN Holdings and RJRN currently plan to
continue to apply the methods prescribed by APB No. 25.
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<PAGE>
LIQUIDITY AND FINANCIAL CONDITION
DECEMBER 31, 1995
Net cash flows from operating activities for 1995 were $1.67 billion, a
decrease of $89 million from the 1994 level of $1.75 billion. The decrease in
net cash flows from operating activities reflects lower income before
extraordinary item which more than offsets the impact of lower working capital
requirements and lower interest paid.
The components of net cash flows from operating activities are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1994
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income.............................................................. $ 611 $ 519
------ ------
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation of property, plant and equipment......................... 482 454
Amortization (principally intangibles)................................ 689 698
Deferred income tax benefit........................................... (172) (11)
Non-cash interest and debt expense.................................... 15 119
Extraordinary item--loss on early extinguishments of debt............. 29 377
Increase in accounts and notes receivable............................. (351) (69)
Decrease in inventories............................................... 159 111
Increase in prepaid expenses and excise taxes......................... (61) (18)
(Increase) decrease in other assets and deferred charges.............. 9 (55)
Decrease in accounts payable and accrued liabilities.................. (2) (363)
Increase in income taxes accrued...................................... 54 26
Increase (decrease) in other noncurrent liabilities................... 123 (37)
Other, net............................................................ 80 3
------ ------
Total adjustments................................................. 1,054 1,235
------ ------
Net cash flows from operating activities.............................. $1,665 $1,754
------ ------
------ ------
</TABLE>
35
<PAGE>
Free cash flow, another measure used by management to evaluate liquidity and
financial condition and 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, resulted in inflows of $348 million and $769 million for 1995 and
1994, respectively. The lower level of free cash flow in 1995 compared with 1994
primarily reflects lower operating company contribution, higher operating
working capital requirements, capital expenditures, tax and dividend payments
and the payment of fees and expenses for the Exchange Offers and the Consent
Solicitations, which more than offset the impact of lower interest paid.
The components of free cash flow are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1995 1994
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
OPERATING INCOME......................................................... $2,338 $2,550
Amortization of intangibles............................................ 636 629
Restructuring expense.................................................. 154 --
------ ------
OPERATING COMPANY CONTRIBUTION........................................... 3,128 3,179
Depreciation and other amortization.................................... 535 522
Increase in operating working capital.................................. (563) (414)
Capital expenditures................................................... (744) (670)
Change in other assets and liabilities................................. 125 12
------ ------
OPERATING CASH FLOW*..................................................... 2,481 2,629
Taxes paid............................................................. (566) (496)
Interest paid.......................................................... (788) (986)
Dividends paid......................................................... (598) (395)
Other, net............................................................. (181) 17
------ ------
FREE CASH FLOW........................................................... $ 348 $ 769
------ ------
------ ------
</TABLE>
- ------------
* Operating cash flow, which is used internally to evaluate business
performance, includes, in addition to net cash flows from (used in) operating
activities as recorded in the Consolidated Statement of Cash Flows, proceeds
from the sale of capital assets less capital expenditures, and is adjusted to
exclude income taxes paid and items of a financial nature (such as interest
paid, interest income, and other miscellaneous financial income or expense
items).
------------
During 1995, RJRN Holdings, RJRN, Nabisco Holdings and Nabisco entered into
a series of transactions designed to refinance long-term debt, lower debt
levels, manage interest rate exposure and refinance certain preferred
securities. At December 31, 1995, the effective interest rate on RJRN Holdings'
consolidated long-term debt increased to 8.0% from 7.7% at December 31, 1994,
primarily due to a lower proportion of consolidated indebtedness subject to
floating interest rates and higher average market interest rates for 1995.
Future effective interest rates may vary as a result of RJRN's and Nabisco's
ongoing management of their respective interest rate exposure, changing market
interest rates, refinancing activities and changes in the ratings assigned to
RJRN's and Nabisco's debt securities by independent rating agencies. RJRN
Holdings' total debt (notes payable and long-term debt, including current
maturities) and total capital (total debt, obligations on redeemable preferred
securities of subsidiary trust and total stockholders' equity) levels at
December 31, 1995 amounted to approximately $9.8 billion and $21.1 billion,
respectively, of which total debt and total capital were approximately $1.3
billion and $927 million lower, respectively, than the corresponding amounts at
December 31, 1994. The lower debt and capital levels were primarily due to the
application of approximately $1.2 billion of net proceeds from the Nabisco
Holdings' initial public offering to repay debt. RJRN Holdings' ratio of total
debt and obligations on redeemable preferred securities of subsidiary trust to
total stockholders' equity at December 31, 1995 and 1994 was 1.0-to-1.
36
<PAGE>
RJRN's ratio of total debt to common equity was 0.8-to-1.0 at December 31, 1995
compared with 1.0-to-1 at December 31, 1994.
Currently, RJRN and its subsidiaries have four principal committed credit
facilities. On April 28, 1995, RJRN Holdings and RJRN entered into a new $2.75
billion three year revolving bank credit agreement with various financial
institutions (as amended, the "1995 RJRN Credit Agreement") and a new $750
million 364 day credit facility to support RJRN commercial paper (as amended,
the "RJRN Commercial Paper Facility," and together with the 1995 RJRN Credit
Agreement, the "New RJRN Credit Agreements"). Among other things, the New RJRN
Credit Agreements were designed to remove restrictions on the ability of Nabisco
Holdings and its subsidiaries to incur or prepay debt and allow RJRN to reduce
the aggregate amount of commitments under its banking facilities from $6 billion
to $3.5 billion by replacing its $5.0 billion revolving bank credit facility
dated December 1, 1991 (as amended, the "1991 RJRN Credit Agreement"), and its
$1.0 billion commercial paper facility dated as of April 5, 1993 (as amended and
together with the 1991 RJRN Credit Agreement, the "Old RJRN Credit Agreements").
On April 28, 1995, Nabisco Holdings and Nabisco entered into a credit
agreement with various financial institutions (as amended, the "1995 Nabisco
Credit Agreement") to replace the credit agreement dated as of December 6, 1994
between Nabisco and various financial institutions (the "1994 Nabisco Credit
Agreement"). Among other things, the 1995 Nabisco Credit Agreement was designed
to permit Nabisco to prepay intercompany debt and incur long-term debt, to
increase Nabisco's committed facility from $1.5 billion to $3.5 billion and to
extend its term from 364 days to five years. On November 3, 1995, the 1995
Nabisco Credit Agreement was amended to, among other things, reduce the
committed facility to $2.0 billion from $3.5 billion. Also on November 3, 1995,
Nabisco Holdings and Nabisco entered into a 364 day credit facility (the
"Nabisco Commercial Paper Facility," and together with the 1995 Nabisco Credit
Agreement, the "1995 Nabisco Credit Agreements") for $1.5 billion primarily to
support the issuance of Nabisco commercial paper borrowings.
The 1995 RJRN Credit Agreement provides for the issuance of up to $800
million of irrevocable letters of credit. Availability is reduced by the
aggregate amount of borrowings outstanding and letters of credit issued under
the 1995 RJRN Credit Agreement and by the amount of outstanding RJRN commercial
paper in excess of $750 million. At December 31, 1995, there were no borrowings
outstanding and approximately $496 million stated amount of letters of credit
issued under the 1995 RJRN Credit Agreement and approximately $224 million in
RJRN commercial paper outstanding. Accordingly, the amount available under the
1995 RJRN Credit Agreement at December 31, 1995 was approximately $2.3 billion.
The RJRN Commercial Paper Facility provides a 364 day back-up line of credit
to support RJRN commercial paper issuances of up to $750 million. Availability
is reduced by an amount equal to the aggregate amount of outstanding RJRN
commercial paper. At December 31, 1995, there was approximately $224 million of
RJRN commercial paper outstanding, leaving approximately $526 million available
under the facility to support the issuance of additional RJRN commercial paper.
The 1995 Nabisco Credit Agreement provides for the issuance of up to $300
million of irrevocable letters of credit. Availability is reduced by the
aggregate amount of borrowings outstanding and letters of credit issued under
the 1995 Nabisco Credit Agreement and by the amount of outstanding Nabisco
commercial paper in excess of $1.5 billion. At December 31, 1995, there were no
borrowings outstanding and no letters of credit issued under the 1995 Nabisco
Credit Agreement and approximately $1.3 billion in Nabisco commercial paper
outstanding. Accordingly, the amount available under the 1995 Nabisco Credit
Agreement at December 31, 1995 was approximately $2.0 billion.
The Nabisco Commercial Paper Facility is a 364 day facility that primarily
supports Nabisco commercial paper issuances of up to $1.5 billion. Availability
is reduced by an amount equal to the aggregate amount of outstanding Nabisco
commercial paper. At December 31, 1995, there was
37
<PAGE>
approximately $1.3 billion of Nabisco commercial paper outstanding, leaving
approximately $200 million available under the facility to support the issuance
of additional Nabisco commercial paper.
On January 26, 1995, Nabisco Holdings completed the initial public offering
of 51,750,000 shares of its Class A Common Stock, par value $.01 per share
("Class A Common Stock"), at an initial offering price of $24.50 per share.
Nabisco used all of the approximately $1.2 billion of net proceeds from the
initial public offering to repay a portion of its borrowings under the 1994
Nabisco Credit Agreement. The completion of Nabisco Holdings' initial public
offering and the corresponding reduction in RJRN's proportionate economic
interest in Nabisco Holdings from 100% to approximately 80.5% resulted in an
adjustment of approximately $401 million to the carrying amount of RJRN's
investment in Nabisco Holdings. Such adjustment was reflected as additional
paid-in capital by RJRN Holdings and RJRN.
On April 1, July 1 and October 1, 1995 and January 1, 1996, RJRN Holdings
paid a quarterly dividend on its common stock, par value $.01 per share (the
"Common Stock"), of $.375 per share. RJRN Holdings expects to continue to pay a
quarterly cash dividend on the Common Stock equal to $.375 per share or $1.50
per share on an annualized basis. RJRN Holdings believes that its ability to pay
these dividends will not be limited by the restrictions under the New RJRN
Credit Agreements and the 1995 Nabisco Credit Agreements or by the policies of
its Board of Directors described below.
On April 12, 1995, the stockholders of RJRN Holdings approved a one-for-five
reverse stock split and the corresponding reduction in the number of authorized
shares of Common Stock from 2,200,000,000 to 440,000,000. Accordingly, the rates
at which shares of ESOP Convertible Preferred Stock, par value $.01 per share,
and Series C Conversion Preferred Stock, par value $.01 per share, will convert
into shares of Common Stock have been proportionately adjusted.
On June 5, 1995, RJRN and Nabisco consummated the Exchange Offers. As part
of the transaction, RJRN returned to Nabisco approximately $1.8 billion of
intercompany notes that had been issued by Nabisco and were held by a
non-Nabisco affiliate of RJRN. The New Notes issued by Nabisco in the Exchange
Offers have interest rates, principal amounts, maturities and redemption
provisions identical to the corresponding Old Notes issued by RJRN. Nabisco
subsequently borrowed approximately $2.4 billion under the 1995 Nabisco Credit
Agreement to (a) repay or repurchase an additional $2.1 billion of intercompany
notes of Nabisco and its subsidiaries; (b) repay approximately $125 million of
outstanding borrowings under the 1994 Nabisco Credit Agreement; (c) repay
approximately $89 million of an intercompany note from Nabisco to Nabisco
Holdings; and (d) pay a $79 million dividend to Nabisco Holdings. Nabisco
Holdings used the payments it received to repay the balance of a $168 million
intercompany note to RJRN. Concurrently with the Exchange Offers, RJRN
consummated the Consent Solicitations. The Exchange Offers, the Consent
Solicitations and certain related transactions were designed, among other
things, to enable Nabisco to obtain long-term debt financing independent of RJRN
and to repay its intercompany debt to RJRN.
On June 5, 1995, RJRN applied the approximately $2.3 billion that it
received from Nabisco and Nabisco Holdings in repayment of the intercompany
notes to repay a portion of its borrowings under the 1991 RJRN Credit Agreement.
RJRN used an additional approximately $330 million of borrowings under the 1995
RJRN Credit Agreement to repay the balance of its obligations under the Old RJRN
Credit Agreements and to pay certain expenses associated with the Exchange
Offers, the Consent Solicitations and related transactions.
On June 28, 1995 Nabisco issued $400 million principal amount of 6.70% Notes
Due 2002, $400 million principal amount of 6.85% Notes Due 2005 and $400 million
principal amount of 7.55% Debentures Due 2015. On July 14, 1995, Nabisco issued
$400 million principal amount of 7.05% Notes Due 2007. The net proceeds from the
issuance of such debt securities were used to repay a portion of the borrowings
under the 1995 Nabisco Credit Agreement.
On July 1 and October 1, 1995 and January 1, 1996, Nabisco Holdings paid a
quarterly dividend on its common stock of $.1375 per share. Nabisco Holdings
expects to continue to pay a quarterly cash
38
<PAGE>
dividend on its common stock equal to $.1375 per share or $.55 per share on an
annualized basis (approximately $146 million). RJRN would receive approximately
$117 million of the annualized Nabisco Holdings dividend.
On July 17, 1995, Nabisco redeemed its outstanding 8 5/8% Sinking Fund
Debentures Due March 15, 2017 at a price of $1,051.75 for each $1,000 principal
amount of debentures, plus accrued interest. The aggregate redemption price and
accrued interest on these debentures was approximately $442 million. The
redemption resulted in an extraordinary loss of approximately $29 million ($16
million after tax and minority interest).
On July 24, 1995, RJRN issued $400 million aggregate principal amount of 8%
Notes Due 2001 and $250 million aggregate principal amount of 8 3/4% Notes Due
2007 under a $1.0 billion debt shelf registration statement filed during 1995.
Approximately $352 million of debt securities remains unissued under the shelf
as of December 31, 1995. The net proceeds from the issuance of these securities
have been or will be used to repay borrowings under the 1995 RJRN Credit
Agreement, to retire RJRN commercial paper and for general corporate purposes.
On September 21, 1995, RJRN Holdings issued approximately $978 million
aggregate principal amount of its 10% Junior Subordinated Debentures due 2044
(the "Junior Subordinated Debentures") to a newly formed controlled affiliate,
RJR Nabisco Holdings Capital Trust I (the "Trust"). The Trust, in turn,
exchanged approximately $949 million of its preferred securities (the "Trust
Preferred Securities"), representing undivided interests in 97% of the assets of
the Trust, for 37,956,060 of the 50,000,000 Series B Depositary Shares (the
"Series B Depositary Shares") outstanding, each representing one-tenth of a
share of the 50,000 outstanding shares of RJRN Holdings' Series B Cumulative
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"). RJRN
Holdings retired the exchanged shares, leaving 12,043.94 shares of the Series B
Preferred Stock outstanding. The sole asset of the Trust is the Junior
Subordinated Debentures. Upon redemption of the Junior Subordinated
Debentures, which have a final maturity of December 31, 2044, the Trust
Preferred Securities will be mandatorily redeemed. The transaction resulted
in a charge of approximately $5 million to RJRN Holdings' paid in capital as
the fair value of the Trust Preferred Securities issued exceeded the book
carrying value of the retired Series B Preferred Stock.
On November 14, 1995, Nabisco filed a shelf registration statement with the
Securities and Exchange Commission for $1.0 billion of debt.
At December 31, 1995, RJRN had outstanding interest rate instruments with a
notional principal amount of $0, net.
At December 31, 1995, Nabisco had outstanding fixed interest rate swaps with
an aggregate notional principal amount of $1.0 billion and expiration dates
occurring within six months. Also at December 31, 1995, Nabisco had outstanding
interest rate caps with an aggregate notional principal amount of $1.0 billion,
all with future effective dates commencing within six months and with expiration
dates one year thereafter.
At December 31, 1995, the aggregate amount of consolidated indebtedness
subject to floating interest rates approximated $642 million. This represents a
decrease of $3.7 billion from the year end 1994 level of $4.3 billion, primarily
due to the application of approximately $1.2 billion of the net proceeds from
the Nabisco Holdings' initial public offering to repay a portion of Nabisco's
borrowing under the 1994 Nabisco Credit Agreement, Nabisco's interest rate
instruments entered into during 1995 and the issuance of $1.6 billion of fixed
rate debt by Nabisco and $650 million of fixed rate debt by RJRN to refinance
bank and commercial paper borrowings.
As a result of the level of market interest rates at December 31, 1995 and
1994 compared with the interest rates associated with RJRN Holdings'
consolidated debt obligations, the estimated fair value amounts of RJRN
Holdings' long-term debt reflected in its Consolidated Balance Sheets is higher
by $246 million and lower by $444 million than the carrying amounts (book
values) of such debt at December 31, 1995 and 1994, respectively. For additional
disclosures concerning the fair value of
39
<PAGE>
RJRN Holdings' consolidated indebtedness as well as the fair value of its
interest rate arrangements at December 31, 1995 and 1994, see Notes 11 and 12 to
the Consolidated Financial Statements.
The payment of dividends and the making of distributions by RJRN Holdings to
its stockholders are subject to direct and indirect restrictions under certain
financing agreements and debt instruments of RJRN Holdings and RJRN and their
subsidiaries. The New RJRN Credit Agreements generally restrict cumulative
common and preferred dividends and distributions by RJRN Holdings after April
28, 1995 to $1 billion, plus 50% of cumulative consolidated net income, as
defined in the New RJRN Credit Agreements, after January 1, 1995, plus the
aggregate cash proceeds of up to $250 million in any twelve month period from
issuances of equity securities. The New RJRN Credit Agreements and certain other
financing agreements also limit the ability of RJRN Holdings and its
subsidiaries to incur indebtedness, engage in transactions with stockholders and
affiliates, create liens, sell or dispose of certain assets and certain
subsidiaries' stock, issue certain equity securities and engage in certain
mergers or consolidations.
Among other things, the 1995 Nabisco Credit Agreements generally restrict
common and preferred dividends and distributions after April 28, 1995 by Nabisco
Holdings to its stockholders, including RJRN, to $300 million plus 50% of
Nabisco Holdings' cumulative consolidated net income, as defined in the 1995
Nabisco Credit Agreements, after January 1, 1995. In general, loans and advances
by Nabisco Holdings and its subsidiaries to RJRN are effectively subject to a
$100 million limit and may only be extended to RJRN's foreign subsidaries. The
1995 Nabisco Credit Agreements also limit the ability of Nabisco Holdings and
its subsidiaries to incur indebtedness, engage in transactions with stockholders
and affiliates, create liens, sell or dispose of certain assets and certain
subsidiaries' stock and engage in certain mergers or consolidations. These
restrictions have not had and are not expected to have a material effect on the
ability of Nabisco Holdings to pay its anticipated dividends, or on the ability
of RJRN to meet its obligations.
Management of RJRN Holdings and its subsidiaries are continuing to review
various strategic transactions, including but not limited to, acquisitions,
divestitures, mergers and joint ventures. No assurance may be given that any
such transactions will be announced or completed.
RJRN Holdings has indicated that, under normal circumstances, it does not
plan to issue additional equity securities for purposes of balance sheet
improvement.
Capital expenditures were $744 million, $670 million and $615 million for
1995, 1994 and 1993, respectively. The current level of expenditures planned for
1996 is expected to be in the range of approximately $700 million to $750
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 RJRN Holdings' operating subsidiaries.
RJRN Holdings' subsidiaries have operations in many countries, utilizing
many different functional currencies in its foreign subsidiaries and branches.
Significant foreign currency net investments are located in Germany, Canada,
Hong Kong, Brazil, Argentina and Spain. Changes in the strength of these
countries' currencies relative to the U.S. dollar result in direct charges or
credits to equity for non-hyperinflationary countries and direct charges or
credits to the income statement for hyperinflationary countries. Translation
gains or losses resulting from foreign-denominated borrowings that are accounted
for as hedges of certain foreign currency net investments, also result in
charges or credits to equity. RJRN Holdings' subsidiaries also have significant
exposure to foreign exchange sale and purchase transactions in currencies other
than its functional currency. The exposures include the U.S. dollar, German
mark, Japanese yen, Swiss franc, Hong Kong dollar, Singapore dollar and
cross-rate exposure among the French franc, British pound, Italian lira and the
German mark. These exposures are managed to minimize the effects of foreign
currency transactions on its cash flows.
40
<PAGE>
RJRN HOLDINGS' BOARD OF DIRECTORS POLICIES
In November 1994, the Board of Directors of RJRN Holdings adopted a policy
stating that RJRN Holdings will limit, until December 31, 1998, the aggregate
amount of cash dividends on its capital stock. Under this policy, during that
period RJRN Holdings will not pay any extraordinary cash dividends and will
limit the aggregate amount of its cash dividends, cash distributions and
repurchases for cash of capital stock and subordinated debt to an amount equal
to the sum of $500 million plus (i) 65% of RJRN Holdings' cumulative
consolidated net income before extraordinary gains or losses and restructuring
charges subsequent to December 31, 1994 and (ii) net cash proceeds of up to $250
million in any year from the sale of capital stock of RJRN Holdings or its
subsidiaries (other than proceeds from the Nabisco Holdings initial public
offering) to the extent used to repay, purchase or redeem debt or preferred
stock.
Also in November 1994, the Board of Directors of RJRN Holdings adopted a
policy providing that RJRN Holdings will not declare a dividend or distribution
to its stockholders of the shares of capital stock of a subsidiary before
December 31, 1996. RJRN Holdings has also adopted a policy setting forth its
intention not to make such a distribution prior to December 31, 1998 if that
distribution would cause the ratings of the senior indebtedness of RJRN to be
reduced from investment grade to non-investment grade or if, after giving effect
to such distribution, any publicly-held senior indebtedness of the distributed
company would not be rated investment grade. The Board of Directors of RJRN
Holdings is committed to effecting a spin-off of Nabisco Holdings at the
appropriate time. There is no assurance that any such distribution will take
place. Additional policies provide that an amount equal to the net cash proceeds
from any issuance and sale of equity by RJRN Holdings or from any sale outside
the ordinary course of business of material assets owned or used by subsidiaries
in the tobacco business, in each case before December 31, 1998, will be used
either to repay, purchase or redeem consolidated indebtedness or to acquire
properties, assets or businesses to be used in existing or new lines of business
and that an amount equal to the net cash proceeds of any secondary sale of
shares of Nabisco Holdings before December 31, 1998 will be used to repay,
purchase or redeem consolidated debt. No assurance can be given that RJRN
Holdings will issue or sell any equity or sell any material assets outside the
ordinary course of business.
ENVIRONMENTAL MATTERS
The U.S. Government and various state and local governments have enacted or
adopted laws and regulations concerning protection of the environment. The
regulations promulgated by the Environmental Protection Agency and other
governmental agencies under various statutes have resulted in, and will likely
continue to result in, substantial expenditures for pollution control, waste
treatment, plant modification and similar activities.
In April 1995, RJRN Holdings was named a potentially responsible party (a
"PRP") with certain third parties under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") with respect to a superfund
site at which a former subsidiary of RJRN had operations. Certain subsidiaries
of RJRN Holdings and RJRN have also been named as PRPs with third parties or may
have indemnification obligations under CERCLA with respect to an additional
thirteen sites.
RJRN Holdings' and RJRN's subsidiaries have been engaged in a continuing
program to assure compliance with U.S., state and local laws and regulations.
Although it is difficult to identify precisely the portion of capital
expenditures or other costs attributable to compliance with environmental laws
and to estimate the cost of resolving these CERCLA matters, RJRN Holdings and
RJRN do not expect such expenditures or other costs to have a material adverse
effect on the financial condition of either RJRN Holdings or RJRN.
-------------------------
The foregoing discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements which reflect Management's current views with respect to future
events and financial performance. These forward-looking statements are
subject to certain risks and uncertainties, including, but not limited to, the
effects on financial performance and future events, competitive pricing for
products, success of new product innovations and acquisitions, local economic
conditions and the effects of currency fluctuations in countries in which RJRN
Holdings and its subsidiaries do business, domestic and foreign government
regulation, ratings of RJRN Holdings' or its subsidiaries' securities and,
in the case of the tobacco business, litigation. For additional information
concerning factors affecting future events and policies and RJRN Holdings'
performance, see Part I, Items 1 through 3 and Part II Item 5 of this report.
Due to such uncertainties and risks, readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only as of the date
hereof.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to the Index to Financial Statements and Financial Statement Schedules
on page 47 for the required information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
41
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Item 10 is hereby incorporated by reference to RJRN Holdings' Definitive
Proxy Statement to be filed with the Securities and Exchange Commission on or
prior to April 30, 1996. Reference is also made regarding the executive officers
of the Registrants to "Executive Officers of the Registrants" following Item 4
of Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
Item 11 is hereby incorporated by reference to RJRN Holdings' Definitive
Proxy Statement to be filed with the Securities and Exchange Commission on or
prior to April 30, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 12 is hereby incorporated by reference to RJRN Holdings' Definitive
Proxy Statement to be filed with the Securities and Exchange Commission on or
prior to April 30, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13 is hereby incorporated by reference to RJRN Holdings' Definitive
Proxy Statement to be filed with the Securities and Exchange Commission on or
prior to April 30, 1996.
42
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
(a) 1. The financial statements listed in the accompanying Index to Financial
Statements and Financial Statement Schedules are filed as part of this report.
2. The financial statement schedules listed in the accompanying Index to Financial
Statements and Financial Statement Schedules are filed as part of this report.
3. The exhibits listed in the accompanying Index to Exhibits are filed as part of
this report.
(b) Reports on Form 8-K filed in Fourth Quarter 1995
None.
(c) Exhibits
See Exhibit Index.
(d) Financial Statement Schedules.
See Index to Financial Statements and Financial Statement Schedules.
</TABLE>
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York on February 22, 1996.
RJR NABISCO HOLDINGS CORP.
By: /s/ STEVEN F. GOLDSTONE
................................
(Steven F. Goldstone)
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on February 22, 1996.
SIGNATURE TITLE
--------- -----
/s/ CHARLES M. HARPER Chairman of the Board and
................................ Director
(Charles M. Harper)
President and Chief Executive
/s/ STEVEN F. GOLDSTONE Officer (principal executive
................................ officer)
(Steven F. Goldstone)
Senior Vice President and Chief
/s/ ROBERT S. ROATH Financial Officer (principal
................................ financial officer)
(Robert S. Roath)
/s/ RICHARD G. RUSSELL Senior Vice President and
................................ Controller (principal
(Richard G. Russell) accounting officer)
* Director
................................
(John T. Chain, Jr.)
* Director
................................
(Julius L. Chambers)
* Director
................................
(John L. Clendenin)
* Director
................................
(H. John Greeniaus)
* Director
................................
(Ray J. Groves)
* Director
................................
(James W. Johnston)
* Director
................................
(John G. Medlin, Jr.)
* Director
................................
(Rozanne L. Ridgway)
*By: /s/ ROBERT F. SHARPE, JR.
.............................
(Robert F. Sharpe, Jr.)
Attorney-in-Fact
44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York on February 22, 1996.
RJR NABISCO, INC.
By: /s/ STEVEN F. GOLDSTONE
................................
(Steven F. Goldstone)
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on February 22, 1996.
SIGNATURE TITLE
--------- -----
/s/ CHARLES M. HARPER Chairman of the Board and
................................ Director
(Charles M. Harper)
President and Chief Executive
/s/ STEVEN F.GOLDSTONE Officer (principal executive
................................ officer)
(Steven F. Goldstone)
Senior Vice President and Chief
/s/ ROBERT S. ROATH Financial Officer (principal
................................ financial officer)
(Robert S. Roath)
/s/ RICHARD G. RUSSELL Senior Vice President and
................................ Controller (principal
(Richard G. Russell) accounting officer)
* Director
................................
(John T. Chain, Jr.)
* Director
................................
(Julius L. Chambers)
* Director
................................
(John L. Clendenin)
* Director
................................
(H. John Greeniaus)
* Director
................................
(Ray J. Groves)
* Director
................................
(James W. Johnston)
* Director
................................
(John G. Medlin, Jr.)
* Director
................................
(Rozanne L. Ridgway)
*By: /s/ ROBERT F. SHARPE, JR.
..............................
(Robert F. Sharpe, Jr.)
Attorney-in-Fact
45
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
46
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
FINANCIAL STATEMENTS
Report of Deloitte & Touche LLP, Independent Auditors........................ F-1
Consolidated Statements of Income and Retained Earnings--Years Ended December
31, 1995, 1994 and 1993.................................................... F-2
Consolidated Statements of Cash Flows--Years Ended December 31, 1995,
1994 and 1993.............................................................. F-3
Consolidated Balance Sheets--December 31, 1995 and 1994...................... F-4
Notes to Consolidated Financial Statements................................... F-5-F-45
FINANCIAL STATEMENT SCHEDULES
For the years ended December 31, 1995, 1994 and 1993:
Schedule I --Condensed Financial Information of Registrants................... S-1-S-8
Schedule II --Valuation and Qualifying Accounts................................ S-9
</TABLE>
47
<PAGE>
REPORT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
RJR Nabisco Holdings Corp.:
RJR Nabisco, Inc.:
We have audited the accompanying consolidated balance sheets of RJR Nabisco
Holdings Corp. ("RJRN Holdings") and RJR Nabisco, Inc. ("RJRN") as of December
31, 1995 and 1994, and the related consolidated statements of income and
retained earnings and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the financial statement schedules of
RJRN Holdings and RJRN as of December 31, 1995 and 1994, and for each of the
three years in the period ended December 31, 1995 as listed in the accompanying
index to financial statements and financial statement schedules. These financial
statements and financial statement schedules are the responsibility of the
companies' management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of RJRN Holdings and
RJRN at December 31, 1995 and 1994, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
January 29, 1996
(February 16, 1996 as
to Note 12)
F-1
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
----------------------- --------------------- ---------------------
RJRN RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN HOLDINGS RJRN
---------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET SALES (NOTE 2)............... $ 16,008 $ 16,008 $ 15,366 $ 15,366 $ 15,104 $ 15,104
---------- ---------- -------- ---------- -------- ----------
Costs and expenses (Note 2):
Cost of products sold........... 7,468 7,468 6,977 6,977 6,640 6,640
Selling, advertising,
administrative and general
expenses...................... 5,412 5,412 5,210 5,198 5,731 5,723
Amortization of trademarks and
goodwill...................... 636 636 629 629 625 625
Restructuring expense .......... 154 154 -- -- 730 730
---------- ---------- -------- ---------- -------- ----------
OPERATING INCOME............ 2,338 2,338 2,550 2,562 1,378 1,386
Interest and debt expense (Notes
9 and 11)...................... (899) (872) (1,065) (1,065) (1,209) (1,186)
Other income (expense), net (Note
2)............................. (173) (175) (110) (121) (58) (88)
---------- ---------- -------- ---------- -------- ----------
Income before income
taxes..................... 1,266 1,291 1,375 1,376 111 112
Provision for income taxes (Note
4)............................. 580 594 611 614 114 116
---------- ---------- -------- ---------- -------- ----------
INCOME (LOSS) BEFORE
MINORITY INTEREST IN
INCOME OF NABISCO......... 686 697 764 762 (3) (4)
Minority interest in income of
Nabisco........................ (59) (59) -- -- -- --
---------- ---------- -------- ---------- -------- ----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM............... 627 638 764 762 (3) (4)
Extraordinary item--loss on early
extinguishments of debt, net of
income taxes and minority
interest (Note 5).............. (16) (16) (245) (245) (142) (135)
---------- ---------- -------- ---------- -------- ----------
NET INCOME (LOSS)........... 611 622 519 517 (145) (139)
Less preferred stock dividends... 110 -- 131 -- 68 --
---------- ---------- -------- ---------- -------- ----------
Net income (loss) applicable
to common stock......... 501 622 388 517 (213) (139)
Retained earnings (accumulated
deficit) at beginning of
period......................... (364) 16 (883) (459) (738) (320)
Common stock and other
dividends...................... (569) -- (262) -- (178) --
Dividends paid to parent and
charged to retained earnings... -- (267) -- (42) -- --
Amounts reclassified to paid-in
capital........................ 432 -- 393 -- 246 --
---------- ---------- -------- ---------- -------- ----------
RETAINED EARNINGS (ACCUMULATED
DEFICIT) AT END OF PERIOD (NOTE
14)............................ $ -- $ 371 $ (364) $ 16 $ (883) $ (459)
---------- ---------- -------- ---------- -------- ----------
---------- ---------- -------- ---------- -------- ----------
Net income (loss) per common and
common equivalent share (Note
3):
Income (loss) before
extraordinary item............ $ 1.58 -- $ 2.06 -- $ (0.26) --
Extraordinary item.............. (0.05) -- (0.79) -- (0.53) --
---------- ---------- -------- ---------- -------- ----------
Net income (loss)........... $ 1.53 -- $ 1.27 -- $ (0.79) --
---------- ---------- -------- ---------- -------- ----------
---------- ---------- -------- ---------- -------- ----------
Dividends per share of Common
Stock (Note 13)................ $ 1.50 -- -- -- -- --
Dividends per share of Series A
Preferred Stock (Note 13)...... -- -- $ 2.92 -- $ 3.34 --
Dividends per share of Series C
Preferred Stock (Note 13)...... $ 6.01 -- $ 3.94 -- -- --
Average number of common and
common equivalent shares
outstanding (in thousands)
(Note 3)....................... 326,643 -- 307,625 -- 269,839 --
---------- ---------- -------- ---------- -------- ----------
---------- ---------- -------- ---------- -------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
----------------- ------------------ ------------------
RJRN RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN HOLDINGS RJRN
-------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
(NOTE 6)................................. $ 1,665 $ 1,699 $ 1,754 $ 1,719 $ 1,769 $ 1,604
-------- ------- -------- -------- -------- --------
CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES:
Capital expenditures..................... (744 ) (744) (670) (670) (615) (615)
Divestitures of businesses............... 162 162 -- -- 450 450
Acquisitions of businesses............... (429 ) (429) (510) (510) (128) (128)
Net proceeds from issuance of subsidiary
common stock............................ 1,201 1,201 -- -- -- --
Other, net............................... 75 75 39 39 32 32
-------- ------- -------- -------- -------- --------
Net cash flows from (used in) investing
activities............................ 265 265 (1,141) (1,141) (261) (261)
-------- ------- -------- -------- -------- --------
CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES:
Net borrowings (repayments) under credit
agreements............................. (3,100 ) (3,100) 2,911 2,911 (2,614) (2,614)
Net proceeds from the issuance
(repayments) of commercial paper....... 644 644 (49) (49) 342 342
Proceeds from issuance of other long-term
debt................................... 2,324 2,324 16 16 1,965 1,965
Repayments of other long-term debt....... (1,285 ) (1,285) (4,666) (4,666) (1,977) (1,429)
Increase (decrease) in notes payable..... (44 ) (44) 18 18 (24) (24)
Proceeds from issuance of Common Stock... 13 -- 54 -- 9 --
Proceeds from issuance of Series B
Preferred Stock......................... -- -- -- -- 1,250 --
Proceeds from issuance of Series C
Preferred Stock......................... -- -- 1,734 -- -- --
Dividends paid on Common Stock........... (307 ) -- -- -- -- --
Dividends paid on Nabisco Holdings'
common stock........................... (15 ) (15) -- -- -- --
Dividends paid on Series A Preferred
Stock................................... -- -- (175) -- (175) --
Dividends paid on Series B Preferred
Stock................................... (97 ) -- (116) -- (33) --
Dividends paid on Series C Preferred
Stock................................... (160 ) -- (85) -- -- --
Dividends paid on ESOP Preferred Stock... (19 ) -- (19) -- (20) --
Dividends paid on redeemable Convertible
Preferred Stock......................... -- -- -- -- (13) --
Repurchase of preferred stock............ -- -- (3) -- (105) --
Repurchases and cancellations of common
stock and stock options................ (2 ) -- (1) -- (1) --
Retirements of ESOP preferred stock...... (5 ) -- (4) -- (1) --
Financing and advisory fees paid......... (114 ) (114) (60) (6) (48) (9)
Capital contributions from/issuance of
common stock to parent................. -- -- -- 1,680 -- 1,214
Dividends paid to parent................. -- (267) -- (42) -- (48)
Other, net--including intercompany
transfers............................... 44 (288) 46 (230) 63 (621)
-------- ------- -------- -------- -------- --------
Net cash flows used in financing
activities............................ (2,123 ) (2,145) (399) (368) (1,382) (1,224)
-------- ------- -------- -------- -------- --------
Effect of exchange rate changes on cash
and cash equivalents..................... 4 4 (6) (6) (10) (10)
-------- ------- -------- -------- -------- --------
Net change in cash and cash
equivalents........................... (189 ) (177) 208 204 116 109
Cash and cash equivalents at beginning of
period................................... 423 409 215 205 99 96
-------- ------- -------- -------- -------- --------
Cash and cash equivalents at end of
period................................... $ 234 $ 232 $ 423 $ 409 $ 215 $ 205
-------- ------- -------- -------- -------- --------
-------- ------- -------- -------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
----------------- -----------------
RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN
-------- ------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 6)............................ $ 234 $ 232 $ 423 $ 409
Accounts and notes receivable, net (Note 6)................... 1,334 1,327 934 934
Inventories (Note 7).......................................... 2,489 2,489 2,580 2,580
Prepaid expenses and excise taxes............................. 503 503 426 426
-------- ------- -------- -------
TOTAL CURRENT ASSETS...................................... 4,560 4,551 4,363 4,349
-------- ------- -------- -------
Property, plant and equipment--at cost......................... 8,386 8,386 7,767 7,767
Less accumulated depreciation.................................. (2,696) (2,696) (2,333) (2,333)
-------- ------- -------- -------
Net property, plant and equipment (Note 8).................... 5,690 5,690 5,434 5,434
-------- ------- -------- -------
Trademarks, net of accumulated amortization of $1,745 and
$1,491, respectively.......................................... 8,265 8,265 8,506 8,506
Goodwill, net of accumulated amortization of $2,502 and $2,124,
respectively.................................................. 12,536 12,536 12,681 12,681
Other assets and deferred charges.............................. 467 466 424 423
-------- ------- -------- -------
$ 31,518 $31,508 $ 31,408 $31,393
-------- ------- -------- -------
-------- ------- -------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (Note 9)........................................ $ 268 $ 268 $ 296 $ 296
Accounts payable.............................................. 755 755 548 548
Accrued liabilities (Note 10)................................. 2,649 2,490 2,532 2,488
Current maturities of long-term debt (Note 11)................ 150 150 1,970 1,970
Income taxes accrued (Note 4)................................. 302 302 248 248
-------- ------- -------- -------
TOTAL CURRENT LIABILITIES................................. 4,124 3,965 5,594 5,550
-------- ------- -------- -------
Long-term debt (less current maturities) (Note 11)............. 9,429 9,429 8,883 8,883
Other noncurrent liabilities................................... 3,016 2,365 2,235 1,836
Deferred income taxes (Note 4)................................. 3,666 3,596 3,788 3,714
Commitments and contingencies (Note 12)
RJRN Holdings' obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely junior
subordinated debentures (Note 11)* 954 -- -- --
Stockholders' equity (Notes 13 and 14):
ESOP convertible preferred stock--14,990,677 and 15,315,130
shares issued and outstanding at December 31, 1995 and 1994,
respectively................................................ 240 -- 245 --
Series B preferred stock--12,044 and 50,000 shares issued and
outstanding at December 31, 1995 and 1994, respectively...... 301 -- 1,250 --
Series C convertible preferred stock--26,675,000 shares issued
and outstanding at December 31, 1995 and 1994............... 3 -- 3 --
Common stock--272,807,942 and 272,331,377 shares issued and
outstanding at December 31, 1995 and 1994, respectively...... 3 -- 3 --
Paid-in capital............................................... 10,110 11,958 10,157 11,558
Cumulative translation adjustments............................ (176) (176) (164) (164)
Retained earnings (accumulated deficit)....................... -- 371 (364) 16
Receivable from ESOP.......................................... (137) -- (186) --
Loans receivable from employees............................... (7) -- (14) --
Unamortized value of restricted stock......................... (8) -- (22) --
-------- ------- -------- -------
TOTAL STOCKHOLDERS' EQUITY................................ 10,329 12,153 10,908 11,410
-------- ------- -------- -------
$ 31,518 $31,508 $ 31,408 $31,393
-------- ------- -------- -------
-------- ------- -------- -------
</TABLE>
- ------------
* The sole asset of the subsidiary trust is the junior subordinated debentures
of RJRN Holdings. Upon redemption of the junior subordinated debentures, which
have a final maturity of December 31, 2044, the preferred securities will be
mandatorily redeemed. The outstanding junior subordinated debentures have an
aggregate principal amount of approximately $978 million and an annual
interest rate of 10%.
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This Summary of Significant Accounting Policies is presented to assist in
understanding the consolidated financial statements of RJR Nabisco Holdings
Corp. ("RJRN Holdings") and RJR Nabisco, Inc. ("RJRN") (the "Consolidated
Financial Statements") included in this report. These policies conform to
generally accepted accounting principles.
Consolidation
Consolidated Financial Statements include the accounts of RJRN Holdings and
RJRN and their subsidiaries.
Cash Equivalents
Cash equivalents include all short-term, highly liquid investments that are
readily convertible to known amounts of cash and so near maturity (three months
or less) that they present an insignificant risk of changes in value because of
changes in interest rates.
Inventories
Inventories are stated at the lower of cost or market. Various methods are
used for determining cost. The cost of U.S. tobacco inventories is determined
principally under the LIFO method. The cost of remaining inventories is
determined under the FIFO, specific lot and weighted average methods. In
accordance with recognized trade practice, stocks of tobacco, which must be
cured for more than one year, are classified as current assets.
Depreciation
Property, plant and equipment are depreciated principally by the
straight-line method over the estimated useful lives of the assets as follows:
13-25 years for land improvements, 20-50 years for buildings and leasehold
improvements and 3-20 years for machinery and equipment.
Trademarks and Goodwill
Values assigned to trademarks are amortized on the straight-line method over
a 40 year period. Goodwill is also amortized on the straight-line method over a
40 year period.
In evaluating the value and future benefits of trademarks and goodwill, the
recoverability from operating income is measured. Under this approach, the
carrying value of goodwill and trademarks would be reduced if it is probable
that management's best estimate of future operating income before amortization
of trademarks and goodwill from related operations, on an undiscounted basis,
will be less than the carrying amount of trademarks and goodwill over the
remaining amortization period.
Other Income (Expense), Net
Interest income, gains and losses on foreign currency transactions and other
items of a financial nature are included in "Other income (expense), net".
Income Taxes
Income taxes are calculated for RJRN on a separate return basis.
Excise Taxes
Excise taxes are excluded from "Net sales" and "Cost of products sold".
F-5
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Reclassifications and Restatements
Certain prior years' amounts have been reclassified to conform to the 1995
presentation. In addition, financial data of the prior years has been restated
and financial data of the current year presented to give effect to the
one-for-five reverse stock split discussed in Note 3 to the Consolidated
Financial Statements.
Advertising
Advertising costs are generally expensed as incurred.
Interest Rate Arrangements
When interest rate swaps and purchased options and other interest rate
arrangements effectively hedge interest rate exposures, the differential to be
paid or received is accrued and recognized in interest expense and may change as
market interest rates change. If an arrangement is terminated or effectively
terminated prior to maturity, then the realized or unrealized gain or loss is
effectively recognized over the remaining original life of the agreement if the
hedged item remains outstanding, or immediately, if the underlying hedged
instrument does not remain outstanding. If the arrangement is not terminated or
effectively terminated prior to maturity, but the underlying hedged instrument
is no longer outstanding, then the unrealized gain or loss on the related
interest rate swap, option or other interest rate arrangement is recognized
immediately. In addition, for written options and other financial instruments
(or components thereof) having a risk profile substantially similar to written
options, changes in market value result in the current recognition of any
related gains or losses.
Foreign Currency Arrangements
Forward foreign exchange contracts and other hedging arrangements
entered into generally mature at the time the hedged foreign currency
transactions are settled. Gains or losses on forward foreign exchange
transactions are determined by changes in market rates and are generally
included at settlement in the basis of the underlying hedged transaction. To the
extent that the underlying hedged foreign currency transaction does not occur,
gains and losses are recognized immediately.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. See Note 12
to the Consolidated Financial Statements for discussion of significant
commitments and contingencies.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS No. 121").
SFAS No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to those assets to
be held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. SFAS No. 121 requires that (i) long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
F-6
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
carrying amount of an asset may not be recoverable and (ii) long-lived assets
and certain identifiable intangibles to be disposed of generally be reported at
the lower of carrying amount or fair value less cost to sell. SFAS No. 121 is
effective for financial statements for fiscal years beginning after December 15,
1995. The adoption of the SFAS No. 121 is not expected to materially effect the
financial position or results of operations of RJRN Holdings and RJRN.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS No. 123"). SFAS No. 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS No. 123
encourages all entities to adopt a fair value based method of accounting for
stock-based compensation plans in which compensation cost is measured at the
date the award is granted based on the value of the award and is recognized over
the employee service period. However, SFAS No. 123 allows an entity to continue
to use the intrinsic value based method prescribed by Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25"),
with proforma disclosures of net income and earnings per share as if the fair
value based method had been applied. APB No. 25 requires compensation expense to
be recognized over the employee service period based on the excess, if any, of
the quoted marked price of the stock at the date the award is granted or other
measurement date, as applicable, over an amount an employee must pay to acquire
the stock. SFAS No. 123 is effective for financial statements for fiscal years
beginning after December 15, 1995. RJRN Holdings and RJRN currently plan to
continue to apply the methods prescribed by APB No. 25.
NOTE 2--OPERATIONS
Net sales and cost of products sold exclude excise taxes of $3.832 billion,
$3.578 billion and $3.757 billion for 1995, 1994 and 1993, respectively.
Consolidated other income (expense), net for 1995 includes a pre-tax charge
of approximately $103 million for fees and expenses incurred in connection with
(i) the exchange of approximately $1.8 billion aggregate principal amount of
newly issued notes and debentures (the "New Notes") of Nabisco, Inc. ("Nabisco")
for the same amount of notes and debentures (the "Old Notes") issued by RJRN
(the "Exchange Offers") and (ii) the solicitation of consents by RJRN to certain
indenture modifications from holders of the Old Notes and holders of
approximately $3.58 billion of its other outstanding debt securities (the
"Consent Solicitations"). The Exchange Offers, the Consent Solicitations and
certain related transactions were designed, among other things, to enable
Nabisco to obtain long-term debt financing independent of RJRN and to repay its
intercompany debt to RJRN.
RJRN Holdings recorded a pre-tax restructuring expense of $154 million in
the fourth quarter of 1995 ($104 million after tax) related to a program
announced on October 13, 1995 to reorganize its worldwide tobacco operations.
The 1995 restructuring program was primarily undertaken in order to streamline
operations and improve profitability. The 1995 restructuring program was
implemented in the latter part of 1995 and will be substantially completed
during 1996. A significant portion of the 1995 restructuring program will be a
cash expense. The major components of the 1995 restructuring program were work
force reductions totaling 1,260 employees (approximately $132 million), the
rationalization and closing of facilities relating to the international tobacco
operations (approximately $8 million) and equipment and lease abandonments at
the domestic tobacco operations (approximately
F-7
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--OPERATIONS--(CONTINUED)
$14 million). At December 31, 1995, approximately $102 million of severance pay
and benefits remained to be paid. Anticipated annual future cash savings from
the plan are estimated to be in excess of approximately $70 million after tax.
During the fourth quarter of 1994, RJRN Holdings approved and adopted a plan
to realign Headquarters' functions, transferring certain responsibilities to the
operating companies and significantly streamlining the holding company. The plan
reflected expectations of a lower level of financings and other activities at
the holding company as RJRN Holdings concludes the post-LBO period. The costs
and expenses associated with this decision resulted in a charge of approximately
$65 million before tax, a significant portion of which was a cash expense. The
majority of the charge was related to accrued employee termination benefits for
the 25% of Headquarters' employees terminated (approximately $40 million). This
cost was incurred pursuant to a continuing plan for employee termination
benefits that provided for the payment of specified amounts of severance and
benefits to terminated employees. The remainder of the charge (approximately $25
million) was related to the abandonment of leases of certain corporate office
facilities as a result of the realignment and streamlining and the reduced need
for office space. The plan was implemented in the first quarter of 1995 and was
substantially completed during 1995. At December 31, 1995, approximately $14
million of severance pay and benefits remained to be paid.
RJRN Holdings recorded a pre-tax restructuring expense of $730 million in
the fourth quarter of 1993 ($467 million after tax) related to a program
announced on December 7, 1993. The 1993 restructuring program was undertaken to
respond to a changing consumer product business environment and to streamline
operations and improve profitability. The 1993 program, which was implemented in
the latter part of 1993 and substantially completed during 1995, consisted of
workforce reductions, reassessment of raw material sourcing and production
arrangements, contract termination costs, abandonment of leases and the
rationalization and closing of manufacturing and sales facilities. Approximately
75% of the restructuring program required cash outlays. At December 31, 1995,
approximately $21 million for severance pay and benefits remained to be paid.
During 1994, a change in the estimated cost of the 1993 restructuring
program resulted in a credit to income of $23 million related to changes in
the number of workforce reductions and an increase in cost of $21 million
associated with the rationalization and abandonment of manufacturing and sales
facilities. The net adjustment during 1994 of the above changes was reflected
in selling, advertising, administrative and general expenses.
NOTE 3--EARNINGS PER SHARE
Earnings per share is based on income applicable to the consolidated group,
including the portion of income of Nabisco Holdings Corp. ("Nabisco Holdings")
applicable to the consolidated group based on RJRN's approximately 80.5%
economic ownership interest in Nabisco Holdings and Nabisco Holdings' primary
earnings per share. Earnings per share is also based on the weighted average
number of shares of RJRN Holdings' common stock, par value $.01 per share (the
"Common Stock"), $.835 Depositary Shares ("Series A Depositary Shares") and
Series C Depositary Shares ("Series C Depositary Shares") outstanding during the
period and Common Stock assumed to be outstanding to reflect the effect of
dilutive options. RJRN 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
F-8
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--EARNINGS PER SHARE--(CONTINUED)
converted. Accordingly, RJRN Holdings' earnings per share and fully diluted
earnings per share are the same. The net loss per common and common equivalent
share reported for the year ended December 31, 1993 would have increased by $.91
per share if the weighted average number of shares of Series A Depositary Shares
outstanding during the period had been excluded from the earnings per share
calculation.
Net income per common and common equivalent share, including the average
number of common and common equivalent shares outstanding, reflects a
one-for-five reverse stock split approved by the RJRN Holdings' stockholders on
April 12, 1995.
NOTE 4--INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
----------------- ---------------- ----------------
RJRN RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN HOLDINGS RJRN
-------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Current:
Federal................................ $525 $540 $401 $466 $295 $366
Foreign and other...................... 227 227 221 221 169 169
-------- ---- -------- ---- -------- ----
752 767 622 687 464 535
-------- ---- -------- ---- -------- ----
Deferred:
Federal................................ (190) (191) (40) (102) (298) (367)
Foreign and other...................... 18 18 29 29 (52) (52 )
-------- ---- -------- ---- -------- ----
(172) (173) (11) (73 ) (350) (419)
-------- ---- -------- ---- -------- ----
Provision for income taxes............... $580 $594 $611 $614 $114 $116
-------- ---- -------- ---- -------- ----
-------- ---- -------- ---- -------- ----
</TABLE>
F-9
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--INCOME TAXES--(CONTINUED)
The components of the deferred income tax liability disclosed on the
Consolidated Balance Sheet at December 31, 1995 and 1994 included the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------ ------------------
RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Deferred tax assets:
Pension liabilities............................ $ (101) $ (101) $ (88) $ (88)
Other postretirement liabilities............... (338) (338) (326) (326)
Restructuring and other accrued liabilities.... (142) (142) (226) (226)
-------- ------ -------- ------
Total deferred tax assets................ (581) (581) (640) (640)
-------- ------ -------- ------
Deferred tax liabilities:
Property and equipment......................... 1,008 1,008 1,049 1,049
Trademarks..................................... 2,765 2,765 2,784 2,784
Other.......................................... 427 357 531 457
-------- ------ -------- ------
Total deferred tax liabilities........... 4,200 4,130 4,364 4,290
-------- ------ -------- ------
Net deferred tax liabilities before
valuation allowance.............................. 3,619 3,549 3,724 3,650
Valuation allowance............................ 47 47 64 64
-------- ------ -------- ------
Net deferred income taxes...................... $3,666 $3,596 $3,788 $3,714
-------- ------ -------- ------
-------- ------ -------- ------
</TABLE>
Pre-tax income (loss) for domestic and foreign operations is shown in the
following table:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------------ ------------------ ------------------
RJRN RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN HOLDINGS RJRN
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Domestic (includes U.S. exports)....... $ 782 $ 807 $ 867 $ 868 $ (169) $ (168)
Foreign................................ 484 484 508 508 280 280
-------- ------ -------- ------ -------- ------
Pre-tax income......................... $1,266 $1,291 $1,375 $1,376 $ 111 $ 112
-------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------
</TABLE>
F-10
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--INCOME TAXES--(CONTINUED)
The differences between the provision for income taxes and income taxes
computed at statutory U.S. federal income tax rates are explained as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
----------------- ---------------- ------------------
RJRN RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN HOLDINGS RJRN
-------- ------ -------- ----- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Income taxes computed at statutory
U.S. federal income tax rates....... $443 $ 452 $ 481 $ 481 $ 39 $ 39
State taxes, net of federal
benefit........................... 52 52 54 54 23 23
Goodwill amortization............... 125 125 124 124 125 125
Federal rate change impact on
deferred income taxes............... -- -- -- -- 86 86
Decrease in deferred tax amounts,
primarily for a change in the
functional currency relating to
foreign branch operations......... -- -- -- -- (108) (108)
Taxes on foreign operations at rates
different than statutory U.S.
federal rate...................... (4) (4) (6) (6) (14) (14)
FSC income exclusion................ (15) (15) (14) (14) (14) (14)
Other items, net.................... (21) (16) (28) (25) (23) (21)
-------- ------ -------- ----- -------- -------
Provision for income taxes.......... $580 $ 594 $ 611 $ 614 $ 114 $ 116
-------- ------ -------- ----- -------- -------
-------- ------ -------- ----- -------- -------
Effective tax rate.................. 45.8% 46.0% 44.5% 44.7% 102.7% 103.8%
-------- ------ -------- ----- -------- -------
-------- ------ -------- ----- -------- -------
</TABLE>
At December 31, 1995, there was $1.752 billion of accumulated and
undistributed income of foreign subsidiaries. These earnings are intended by
management to be reinvested abroad indefinitely. Accordingly, no applicable U.S.
federal deferred income taxes or foreign withholding taxes have been provided
nor is a determination of the amount of unrecognized U.S. federal deferred
income taxes practicable.
RJRN Holdings' provision for income taxes for 1993 was increased by $96
million as a result of the enactment of certain federal tax legislation during
the third quarter of 1993 which increased federal corporate income tax rates to
35% from 34%, retroactively to January 1, 1993. The components of this increase
to RJRN Holdings' provision for income taxes included an $86 million non-cash
charge resulting primarily from the remeasurement of the balance of deferred
federal income taxes at the date of enactment of the new federal tax legislation
for the change in the income tax rates, and a $10 million charge resulting from
the increase in current federal income taxes accrued for the change in the
income tax rates and other effects of the new tax legislation. Also during 1993,
RJRN Holdings' provision for income taxes was decreased by a $108 million credit
primarily resulting from a change in the functional currency, for U.S. federal
income tax purposes, relating to foreign branch operations.
F-11
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--INCOME TAXES--(CONTINUED)
During 1993, $101 million of previously recognized deferred income tax
benefits for operating loss carryforwards ($36 million), minimum tax credit
carryforwards ($44 million) and other carryforward items ($21 million) were
realized for federal tax purposes.
NOTE 5--EXTRAORDINARY ITEM
Early extinguishment of debt resulted in the following extraordinary losses:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
--------------- ---------------- ----------------
RJRN RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN HOLDINGS RJRN
-------- ---- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Cash paid in excess of net carrying amount (book
value) of debt extinguished....................... $(21) $(21) $ (348) $(348) $ (206) $(196)
Write-off of debt issuance costs.................. (8) (8 ) (29) (29) (12) (12)
-------- ---- -------- ----- -------- -----
Extraordinary item--loss on early extinguishment
of debt before income taxes..................... (29) (29 ) (377) (377) (218) (208)
Benefit for income taxes.......................... 10 10 132 132 76 73
-------- ---- -------- ----- -------- -----
Extraordinary item--loss on early estinguishment
of debt, net of income taxes, before minority
interest........................................ (19) (19 ) (245) (245) (142) (135)
Minority interest................................. (3) (3 ) -- -- -- --
-------- ---- -------- ----- -------- -----
Extraordinary item--loss on early extinguishment
of debt, net of income taxes and minority
interest........................................ $(16) $(16) $ (245) $(245) $ (142) $(135)
-------- ---- -------- ----- -------- -----
-------- ---- -------- ----- -------- -----
</TABLE>
See Note 11 to the Consolidated Financial Statements for further discussion
of early extinguishments of debt.
F-12
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--SUPPLEMENTAL CASH FLOWS INFORMATION
A reconciliation of net income (loss) to net cash flows from operating
activities follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------------ ------------------ ------------------
RJRN RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN HOLDINGS RJRN
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING
ACTIVITIES:
Net income (loss)..................... $ 611 $ 622 $ 519 $ 517 $ (145) $ (139)
-------- ------ -------- ------ -------- ------
Adjustments to reconcile net income
(loss) to net cash flows from
operating activities:
Depreciation of property, plant and
equipment......................... 482 482 454 454 448 448
Amortization (principally
intangibles)............................ 689 689 698 698 701 701
Deferred income tax benefit......... (172) (173) (11) (73) (350) (419)
Non-cash interest and debt
expense........................... 15 15 119 119 295 273
Extraordinary item--loss on early
extinguishments of debt................. 29 29 377 377 218 208
(Increase) decrease in accounts and
notes receivable.................. (351) (344) (69) (61) 75 84
Decrease in inventories............. 159 159 111 111 80 80
Increase in prepaid expenses and
excise taxes...................... (61) (61) (18) (18) (37) (37)
(Increase) decrease in other assets
and deferred charges.............. 9 9 (55) (57) (4) 43
Increase (decrease) in accounts
payable and accrued liabilities... (2) (22) (363) (363) 308 312
Increase (decrease) in income taxes
accrued........................... 54 54 26 51 (53) 54
Increase (decrease) in other
noncurrent liabilities............ 123 122 (37) (37) 215 24
Other, net.......................... 80 118 3 1 18 (28)
-------- ------ -------- ------ -------- ------
Total adjustments............... 1,054 1,077 1,235 1,202 1,914 1,743
-------- ------ -------- ------ -------- ------
Net cash flows from operating
activities........................ $1,665 $1,699 $1,754 $1,719 $1,769 $1,604
-------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------
</TABLE>
Cash payments for income taxes and interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
---------------- ---------------- ------------------
RJRN RJRN RJRN
HOLDINGS RJRN HOLDINGS RJRN HOLDINGS RJRN
-------- ---- -------- ---- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Income taxes paid, net of refunds.......... $583 $583 $496 $496 $ 408 $ 408
Interest paid.............................. $788 $784 $986 $986 $ 912 $ 912
</TABLE>
F-13
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--SUPPLEMENTAL CASH FLOWS INFORMATION--(CONTINUED)
Cash equivalents at December 31, 1995 and 1994, valued at cost (which
approximates market value), totaled $115 million and $364 million, respectively,
and consisted principally of domestic and Eurodollar time deposits and
certificates of deposit.
At December 31, 1995 and 1994, cash of $17 million and $60 million,
respectively, was held in escrow as collateral for letters of credit issued in
connection with certain foreign currency debt.
On February 7, 1990, RJRN entered into an arrangement in which it agreed to
sell for cash substantially all of its subsidiaries' domestic trade accounts
receivable generated during a five-year period to a financial institution.
Pursuant to amendments entered into in 1992, the length of the receivable
program was extended an additional year. During 1995, the arrangement was
further amended to October 1996 for only domestic trade accounts receivable
generated by Nabisco. The accounts receivable have been and will continue to be
sold with limited recourse at purchase prices reflecting the rate applicable to
the cost to the financial institution of funding its purchases of accounts
receivable and certain administrative costs. During 1995, 1994 and 1993, total
proceeds of approximately $8.0 billion, $7.9 billion and $8.2 billion,
respectively, were received in connection with this arrangement. The amount of
total proceeds received applicable to Nabisco's domestic trade accounts
receivable generated during 1995, 1994 and 1993 were approximately $5.5
billion, $5.3 billion and $4.9 billion, respectively. At December 31, 1995 and
1994, the accounts receivable balance has been reduced by approximately $418
million and $391 million, respectively, due to the receivables sold.
For information regarding certain non-cash financing activities, see Notes
11 and 13 to the Consolidated Financial Statements.
NOTE 7--INVENTORIES
The major classes of inventory are shown in the table below:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Finished products........................................ $ 755 $ 771
Leaf tobacco............................................. 1,152 1,299
Raw materials............................................ 231 206
Other.................................................... 351 304
------------ ------------
$2,489 $2,580
------------ ------------
------------ ------------
</TABLE>
At December 31, 1995 and 1994, approximately $1.0 billion and $1.2 billion,
respectively, of domestic tobacco inventories was valued under the LIFO method.
The current cost of LIFO inventories at December 31, 1995 and 1994 was greater
than the amount at which these inventories were carried on the Consolidated
Balance Sheets by $146 million and $141 million, respectively.
For the years ended December 31, 1995, 1994 and 1993, net income was
increased by $29 million, $10 million and $6 million, respectively, as a result
of LIFO inventory liquidations. The LIFO liquidations resulted from programs to
reduce leaf durations consistent with forecasts of future operating
requirements.
F-14
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--PROPERTY, PLANT AND EQUIPMENT
Components of property, plant and equipment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Land and land improvements............................... $ 319 $ 323
Buildings and leasehold improvements..................... 1,899 1,856
Machinery and equipment.................................. 5,615 5,056
Construction-in-process.................................. 553 532
------------ ------------
8,386 7,767
Less accumulated depreciation............................ (2,696) (2,333)
------------ ------------
Net property, plant and equipment.................... $ 5,690 $ 5,434
------------ ------------
------------ ------------
</TABLE>
NOTE 9--NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Notes payable to banks................................... $ 268 $ 296
------------ ------------
------------ ------------
</TABLE>
Weighted average interest rate for notes payable consisted of the following:
<TABLE>
<S> <C> <C>
Notes payable to banks................................... 5.05% 9.77%
--- ---
--- ---
</TABLE>
NOTE 10--ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Marketing and advertising................................ $ 532 $ 553
Payroll and employee benefits............................ 424 380
Excise taxes............................................. 277 260
Accrued interest......................................... 254 189
Other.................................................... 1,162 1,150
------------ ------------
$2,649 $2,532
------------ ------------
------------ ------------
</TABLE>
NOTE 11--LONG-TERM DEBT AND INTEREST AND DEBT EXPENSE
Interest and debt expense consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash interest..................................... $884 $ 946 $ 914
Non-cash interest and debt expense................ 15 119 295
----- ------ ------
$899 $1,065 $1,209
----- ------ ------
----- ------ ------
</TABLE>
F-15
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--LONG-TERM DEBT AND INTEREST AND DEBT EXPENSE--(CONTINUED)
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- -------------------
DUE DUE DUE DUE
WITHIN AFTER WITHIN AFTER
ONE YEAR ONE YEAR(1) ONE YEAR ONE YEAR
-------- ----------- -------- --------
<S> <C> <C> <C> <C>
Nabisco Holdings Long-term Debt:
7.75% debentures with annual sinking fund payments
through 2003....................................... $ 3 $ 38 $ -- $ --
6.11-8.3% Notes due 1996 through 2015................ 5 2,937 -- --
1994 Nabisco Credit Agreement........................ -- -- 1,350 --
1995 Nabisco Credit Agreement, variable interest
(varies with prime rate and LIBOR--weighted average
interest rate of 6.0% at December 31, 1995), due
April 28, 2000(2).................................. -- -- -- --
Nabisco commercial paper, variable interest (varies
with LIBOR - weighted average interest rate of 6.0%
at December 31, 1995)(3)........................... -- 1,289 -- --
Other indebtedness................................... 16 91 13 139
-------- ----------- -------- --------
Total Nabisco Holdings long-term debt............ 24 4,355 1,363 139
-------- ----------- -------- --------
RJRN Long-term Debt:
8.625% debentures with annual sinking fund payments
through 2017 (net of $59 million of such debentures
held by RJRN on December 31, 1994 for future
sinking fund requirements)......................... -- 32 400 634
5.56-9.25% Notes, due 1996 through 2013.............. 117 4,121 200 4,932
5.375-10% foreign currency debt, due 2000 to 2001.... -- 548 -- 500
1991 RJRN Credit Agreement........................... -- -- -- 1,750
1995 RJRN Credit Agreement, variable interest (varies
with prime rate and LIBOR--weighted average
interest rate of 6.09% at December 31, 1995), due
December 31, 1997(4)............................... -- -- -- --
RJRN commercial paper, variable interest (varies with
LIBOR - weighted average interest rate of 6.27% at
December 31, 1995)(5)................................ -- 224 -- 864
Other indebtedness................................... 9 149 7 64
-------- ----------- -------- --------
Total RJRN long-term debt........................ 126 5,074 607 8,744
-------- ----------- -------- --------
Total long-term debt............................. $150 $ 9,429 $1,970 $8,883
-------- ----------- -------- --------
-------- ----------- -------- --------
</TABLE>
- ------------
(1) The payment of debt through December 31, 2000 is due as follows (in
millions): 1997--$61; 1998--$31; 1999--$1,944 and 2000--$1,319.
(2) Nabisco maintains a revolving credit facility of $2.0 billion (as amended,
the "1995 Nabisco Credit Agreement"), of which $2.0 billion is unused at
December 31, 1995. Availability of the unused portion is reduced by the
aggregate amount of letters of credit issued under the 1995 Nabisco Credit
Agreement and by the amount of outstanding Nabisco commercial paper in
excess of $1.5 billion. At December 31, 1995, there were no letters of
credit issued under the 1995 Nabisco Credit Agreement. A commitment fee of
.15% per annum is payable on the total facility.
(3) Nabisco maintains a 364-day revolving credit facility primarily to support
Nabisco commercial paper issuances of up to $1.5 billion (the "Nabisco
Commercial Paper Facility"). Availability is reduced
F-16
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--LONG-TERM DEBT AND INTEREST AND DEBT EXPENSE--(CONTINUED)
by an amount equal to the aggregate amount of outstanding Nabisco commercial
paper. A commitment fee of .1% per annum is payable on the total facility.
(4) RJRN maintains a revolving credit facility of $2.75 billion (as amended, the
"1995 RJRN Credit Agreement"), of which $2.75 billion was unused at December
31, 1995. Availability of the unused portion is reduced by $496 million for
the extension of irrevocable letters of credit issued under the 1995 RJRN
Credit Agreement and by the amount of outstanding RJRN commercial paper in
excess of $750 million. A commitment fee of .225% per annum is payable on
the total facility.
(5) RJRN maintains a 364-day back-up line of credit to support RJRN commercial
paper issuances of up to $750 million (as amended, the "RJRN Commercial
Paper Facility"), which expires in April 1996. Availability is reduced by an
amount equal to the aggregate amount of outstanding RJRN commercial paper. A
commitment fee of .175% per annum is payable on the total facility.
-------------------
Based on RJRN's and Nabisco's intention and ability to continue to
refinance, for more than one year, the amount of their respective commercial
paper borrowings in the commercial paper market or with additional borrowings
under their respective credit agreements, domestic commercial paper borrowings
have been included under "Long-term debt."
During 1993, RJRN repurchased for approximately $1.0 billion in cash certain
of its subordinated debentures consisting of $153 million aggregate principal
amount of its 15% Payment-in-Kind Debentures due May 15, 2001 (the "15%
Subordinated Debentures"), $82 million aggregate principal amount of its 13 1/2%
Subordinated Debentures due May 15, 2001 (the "13 1/2% Subordinated Debentures")
and $768 million aggregate principal amount (approximately $671 million accreted
amount) of its Subordinated Discount Debentures due May 15, 2001 (the
"Subordinated Discount Debentures"). The principal or accreted amounts of such
debentures was refinanced from proceeds of debt securities maturing after 1998,
including debt securities issued during 1993. The purchase of most of such
amount had been temporarily funded with borrowings under RJRN's revolving credit
facility (as amended, the "1991 RJRN Credit Agreement").
The remaining portion of a participation in an employee stock ownership plan
established by RJRN Holdings (the "ESOP") was repurchased on January 15, 1993
for cash, plus accrued and unpaid interest thereon.
RJRN Holdings redeemed on May 1, 1993, 100% of the aggregate principal
amount of its outstanding Senior Converting Debentures due 2009 (the "Converting
Debentures") at a price of $1,000 for each $1,000 principal amount of Converting
Debentures, plus accrued and unpaid interest thereon, for the period from
February 9, 1989 through April 30, 1993, of $937.54 for each $1,000 principal
amount of Converting Debentures.
During 1993, RJRN issued $750 million principal amount of 8% Notes due 2000,
$500 million principal amount of 8 3/4% Notes due 2005 and $500 million
principal amount of 9 1/4% Debentures due 2013. Also during 1993, RJRN issued
medium-term notes maturing in the years 1995-1998 having an aggregate initial
offering price of approximately $230 million. The net proceeds from the sale of
these debt securities and the Series B Preferred Stock Offering (as hereinafter
defined) were used for general corporate purposes, which included refinancings
of indebtedness, working capital, capital expenditures, acquisitions and
repurchases and redemptions of securities. Pending such uses, proceeds were used
to repay indebtedness under the 1991 RJRN Credit Agreement or for short-term
liquid investments.
A portion of the net proceeds collected from the sale of RJRN Holdings'
ready-to-eat cold cereal business during 1992 was used on February 5, 1993 to
redeem $216 million principal amount of
F-17
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--LONG-TERM DEBT AND INTEREST AND DEBT EXPENSE--(CONTINUED)
RJRN's 9 3/8% Sinking Fund Debentures due 2016 (the "9 3/8% Debenture") at a
price of $1,065.63 for each $1,000 principal amount of 9 3/8% Debentures, plus
accrued and unpaid interest thereon.
On May 15, 1994, RJRN redeemed substantially all of its approximately $2
billion in outstanding subordinated debentures. The subordinated debentures
redeemed consisted of the Subordinated Discount Debentures, the 15% Subordinated
Debentures and the 13 1/2% Subordinated Debentures at redemption prices of 107
1/2%, 107 1/2% and 106 3/4%, respectively, plus accrued interest. Approximately
$1.2 billion principal or accreted amount of such debentures was 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
RJRN Credit Agreement. In addition, the redemption of such debentures was funded
with approximately $900 million of net proceeds from the sale of 266,750,000
Series C Depositary Shares completed on May 6, 1994 in connection with the
issuance of 26,675,000 shares of Series C Conversion Preferred Stock, par value
$.01 per share ("Series C Preferred Stock").
On November 30, 1994, RJRN redeemed $1.5 billion of 10 1/2% Senior Notes due
1998 (the "10 1/2% Senior Notes"); $373.5 million of 8 3/8% Sinking Fund
Debentures due 2017 and approximately $24.8 million of 7 3/8% Sinking Fund
Debentures due 2001. On December 2, 1994, RJRN redeemed $100 million of the 13
1/2% Subordinated Debentures. The redemption price for the 10 1/2% Senior Notes
was equal to $1,071 plus accrued interest for each $1,000 principal amount of
notes. The redemption price for the 8 3/8% Sinking Fund Debentures due 2017 was
equal to $1,054.44 plus accrued interest for each $1,000 principal amount of
debentures. The redemption price for the 7 3/8% Sinking Fund Debentures due 2001
was equal to $1,005.60 plus accrued interest for each $1,000 principal amount of
debentures. The redemption price for the 13 1/2% Subordinated Debentures was
equal to $1,067.50 plus accrued interest for each $1,000 principal amount of
debentures. These redemptions were funded with borrowings under the 1991 RJRN
Credit Agreement, internally generated cash flow, and, in the case of the 8 3/8%
Sinking Fund Debentures due 2017, proceeds from RJRN Holdings' Series C
Preferred Stock Offering (as hereinafter defined).
On December 7, 1994, Nabisco borrowed $1.35 billion under its credit
agreement dated as of December 6, 1994 (the "1994 Nabisco Credit Agreement") to
repay a portion of Nabisco's intercompany indebtedness to RJRN. RJRN used the
proceeds of the repayment to reduce borrowings under the 1991 RJRN Credit
Agreement.
On January 26, 1995, Nabisco Holdings completed the initial public offering
of 51,750,000 shares of its Class A Common Stock, par value $.01 per share
("Class A Common Stock"), at an initial offering price of $24.50 per share.
Nabisco used all of the approximately $1.2 billion of net proceeds from the
initial public offering to repay a portion of its borrowings under the 1994
Nabisco Credit Agreement.
On April 28, 1995, RJRN entered into the 1995 RJRN Credit Agreement and the
RJRN Commercial Paper Facility (together with the 1995 RJRN Credit Agreement,
the "New RJRN Credit Agreements"). Among other things, the New RJRN Credit
Agreements were designed to remove restrictions on the ability of Nabisco
Holdings and its subsidiaries to incur or prepay debt and to allow RJRN to
reduce the aggregate amount of commitments under its banking facilities from $6
billion to $3.5 billion by replacing its 1991 RJRN Credit Agreement and its $1.0
billion commercial paper
F-18
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--LONG-TERM DEBT AND INTEREST AND DEBT EXPENSE--(CONTINUED)
facility dated as of April 5, 1993 (as amended and together with the 1991 RJRN
Credit Agreement, the "Old RJRN Credit Agreements").
On April 28, 1995, Nabisco Holdings and Nabisco entered into the 1995
Nabisco Credit Agreement with various financial institutions to replace the 1994
Nabisco Credit Agreement. Among other things, the 1995 Nabisco Credit Agreement
was designed to permit Nabisco to prepay intercompany debt and incur long-term
debt, to increase Nabisco's committed facility from $1.5 billion to $3.5 billion
and to extend its term from 364 days to five years. On November 3, 1995, the
1995 Nabisco Credit Agreement was amended to, among other things, reduce the
committed facility to $2.0 billion from $3.5 billion. Also on November 3, 1995,
Nabisco Holdings and Nabisco entered into a 364 day credit facility (the
"Nabisco Commercial Paper Facility" and together with the 1995 Nabisco Credit
Agreement, the "1995 Nabisco Credit Agreements") for $1.5 billion primarily to
support the issuance of commercial paper borrowings.
On June 5, 1995, RJRN and Nabisco consummated the Exchange Offers. As part
of the transaction, RJRN returned to Nabisco approximately $1.8 billion of
intercompany notes that had been issued by Nabisco and were held by a
non-Nabisco affiliate of RJRN. The New Notes issued by Nabisco in the Exchange
Offers have interest rates, principal amounts, maturities and redemption
provisions identical to the corresponding Old Notes issued by RJRN. Nabisco
subsequently borrowed approximately $2.4 billion under the 1995 Nabisco Credit
Agreement to (a) repay or repurchase an additional $2.1 billion of intercompany
notes of Nabisco and its subsidiaries; (b) repay approximately $125 million of
outstanding borrowings under the 1994 Nabisco Credit Agreement; (c) repay
approximately $89 million of an intercompany note from Nabisco to Nabisco
Holdings; and (d) pay a $79 million dividend to Nabisco Holdings. Nabisco
Holdings used the payments it received to repay the balance of a $168 million
intercompany note to RJRN. Concurrently with the Exchange Offers, RJRN
consummated the Consent Solicitations. The Exchange Offers, the Consent
Solicitations and certain related transactions were designed, among other
things, to enable Nabisco to obtain long-term debt financing independent of RJRN
and to repay its intercompany debt to RJRN.
On June 5, 1995, RJRN applied the approximately $2.3 billion that it
received from Nabisco and Nabisco Holdings in repayment of the intercompany
notes to repay a portion of its borrowings under the 1991 RJRN Credit Agreement.
RJRN used an additional approximately $330 million of borrowings under the 1995
RJRN Credit Agreement to repay the balance of its obligations under the Old RJRN
Credit Agreements and to pay certain expenses associated with the Exchange
Offers, the Consent Solicitations and the related transactions.
On June 28, 1995, Nabisco issued $400 million principal amount of 6.70%
Notes Due 2002, $400 million principal amount of 6.85% Notes Due 2005 and $400
million principal amount of 7.55% Debentures Due 2015. On July 14, 1995, Nabisco
issued $400 million principal amount of 7.05% Notes Due 2007. The net proceeds
from the issuance of such debt securities were used to repay a portion of the
borrowings under the 1995 Nabisco Credit Agreement.
On July 17, 1995, Nabisco redeemed its outstanding 8 5/8% Sinking Fund
Debentures Due March 15, 2017 at a price of $1,051.75 for each $1,000 principal
amount of debentures, plus accrued interest. The aggregate redemption price and
accrued interest on these debentures was approximately $442 million. The
redemption resulted in an extraordinary loss of approximately $29 million ($16
million after tax and minority interest).
F-19
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--LONG-TERM DEBT AND INTEREST AND DEBT EXPENSE--(CONTINUED)
On July 24, 1995, RJRN issued $400 million aggregate principal amount of 8%
Notes Due 2001 and $250 million aggregate principal amount of 8 3/4% Notes Due
2007 under a $1.0 billion debt shelf registration statement. Approximately $352
million of debt securities remains unissued under the shelf as of December 31,
1995. The net proceeds from the issuance of these securities have been or will
be used to repay borrowings under the 1995 RJRN Credit Agreement, to retire RJRN
commercial paper and for general corporate purposes.
On September 21, 1995, RJRN Holdings issued approximately $978 million
aggregate principal amount of its 10% Junior Subordinated Debentures due 2044
(the "Junior Subordinated Debentures") to a newly formed controlled affiliate,
RJR Nabisco Holdings Capital Trust I (the "Trust"). The Trust, in turn,
exchanged approximately $949 million of its preferred securities (the "Trust
Preferred Securities"), representing undivided interests in 97% of the assets of
the Trust, for 37,956,060 of the 50,000,000 Series B Depositary Shares (the
"Series B Depositary Shares") outstanding, each representing one-tenth of a
share of the 50,000 outstanding shares of RJRN Holdings' Series B Cumulative
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"). RJRN
Holdings retired the exchanged shares, leaving 12,043.94 shares of the Series B
Preferred Stock outstanding. The transaction resulted in a charge of
approximately $5 million to RJRN Holdings' paid-in capital as the fair value of
the Trust Preferred Securities issued, which was the book carrying value
assigned to these securities, exceeded the book carrying value of the retired
Series B Preferred Stock. The difference between the assigned value of the
Trust Preferred Securities and its redemption value will be amortized to
interest expense over its term. The sole asset of the Trust is the Junior
Subordinated Debentures. Upon maturity or redemption of the Junior Subordinated
Debentures, which have a final maturity of December 31, 2044, the Trust
Preferred Securities will be mandatorily redeemed. The Junior Subordinated
Debentures are redeemable at the option of RJRN Holdings, in whole or in part,
on or after August 19, 1998, at a redemption price equivalent to $25 per Junior
Subordinated Debenture to be redeemed, plus accrued and unpaid interest
thereon, to the redemption date. Upon the repayment of the Junior Subordinated
Debentures, whether at maturity, upon redemption or otherwise, the proceeds
thereof will be promptly applied to redeem the Trust Preferred Securities.
Holders of Trust Preferred Securities have no right to require the Trust to
redeem the Trust Preferred Securities at the option of the holders. Cash
distributions on the Trust Preferred Securities are cumulative at an annual
rate of 10% of the liquidation amount of $25 per security and are payable
quarterly in arrears, but only to the extent that interest payments are made on
the Junior Subordinated Debentures. Cash distributions in arrears for more than
one quarter will bear interest at 10% of the liquidation amount per security
compounded quarterly.
On November 14, 1995, Nabisco filed a shelf registration statement with the
Securities and Exchange Commission for $1.0 billion of debt.
At December 31, 1995, RJRN had outstanding interest rate instruments with a
notional principal amount of $0, net. (See Note 12 to the Consolidated Financial
Statements for additional disclosures regarding interest rate arrangements).
At December 31, 1995, Nabisco had outstanding fixed interest rate swaps with
an aggregate notional principal amount of $1.0 billion and expiration dates
occurring within six months. Also at December 31, 1995, Nabisco had outstanding
interest rate caps with an aggregate notional principal amount of $1.0 billion,
all with future effective dates commencing within six months and with expiration
dates one year thereafter. (See Note 12 to the Consolidated Financial Statements
for additional disclosures regarding interest rate arrangements).
F-20
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--LONG-TERM DEBT AND INTEREST AND DEBT EXPENSE--(CONTINUED)
The estimated fair value of RJRN Holdings' consolidated long-term debt as of
December 31, 1995 and 1994 was approximately $10.1 billion and $10.7 billion,
respectively, based on available market quotes, discounted cash flows and book
values, as appropriate. The estimated fair value is higher by $246 million and
lower by $444 million than the carrying amounts (book values) of RJRN Holdings'
long-term debt at December 31, 1995 and 1994, respectively, as a result of the
level of market interest rates at December 31, 1995 and 1994 compared with the
interest rates associated with RJRN Holdings' debt obligations. Considerable
judgment was required in interpreting market data to develop the estimates of
fair value. In addition, the use of different market assumptions and/or
estimation methodologies may have had a material effect on the estimated fair
value amounts. Accordingly, the estimated fair value of RJRN Holdings'
consolidated long-term debt as of December 31, 1995 and 1994 is not necessarily
indicative of the amounts that RJRN Holdings could realize in a current market
exchange.
The payment of dividends and the making of distributions by RJRN Holdings to
its stockholders are subject to direct and indirect restrictions under certain
financing agreements and debt instruments of RJRN Holdings and RJRN and their
subsidiaries. The New RJRN Credit Agreements generally restrict cumulative
common and preferred dividends and distributions by RJRN Holdings after April
28, 1995 to $1 billion, plus 50% of cumulative consolidated net income, as
defined in the New RJRN Credit Agreements, after January 1, 1995, plus the
aggregate cash proceeds of up to $250 million in any twelve month period from
issuances of equity securities. The New RJRN Credit Agreements and certain other
financing agreements also limit the ability of RJRN Holdings and its
subsidiaries to incur indebtedness, engage in transactions with stockholders and
affiliates, create liens, sell or dispose of certain assets and certain
subsidiaries' stock, issue certain equity securities and engage in certain
mergers or consolidations.
Among other things, the 1995 Nabisco Credit Agreements generally restrict
common and preferred dividends and distributions after April 28, 1995 by Nabisco
Holdings to its stockholders, including RJRN, to $300 million plus 50% of
Nabisco Holdings' cumulative consolidated net income, as defined in the 1995
Nabisco Credit Agreement, after January 1, 1995. In general, loans and advances
by Nabisco Holdings and its subsidiaries to RJRN are effectively subject to a
$100 million limit and may only be extended to RJRN's foreign subsidiaries. The
1995 Nabisco Credit Agreements also limit the ability of Nabisco Holdings and
its subsidiaries to incur indebtedness, engage in transactions with stockholders
and affiliates, create liens, sell or dispose of certain assets and certain
subsidiaries' stock and engage in certain mergers or consolidations. These
restrictions have not had and are not expected to have a material effect on the
ability of Nabisco Holdings to pay its anticipated dividends, or on the ability
of RJRN to meet its obligations.
In November 1994, the Board of Directors of RJRN Holdings adopted a policy
stating that RJRN Holdings will limit, until December 31, 1998, the aggregate
amount of cash dividends on its capital stock. Under this policy, during that
period RJRN Holdings will not pay any extraordinary cash dividends and will
limit the aggregate amount of its cash dividends, cash distributions and
repurchases for cash of capital stock and subordinated debt to an amount equal
to the sum of $500 million plus (i) 65% of RJRN Holdings' cumulative
consolidated net income before extraordinary gains or losses and restructuring
charges subsequent to December 31, 1994 and (ii) net cash proceeds of up to $250
million in any year from the sale of capital stock of RJRN Holdings or its
subsidiaries (other than
F-21
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--LONG-TERM DEBT AND INTEREST AND DEBT EXPENSE--(CONTINUED)
proceeds from the Nabisco Holdings initial public offering) to the extent used
to repay, purchase or redeem debt or preferred stock.
Also in November 1994, the Board of Directors of RJRN Holdings adopted a
policy providing that RJRN Holdings will not declare a dividend or distribution
to its stockholders of the shares of capital stock of a subsidiary before
December 31, 1996. RJRN Holdings has also adopted a policy setting forth its
intention not to make such a distribution prior to December 31, 1998 if that
distribution would cause the ratings of the senior indebtedness of RJRN to be
reduced from investment grade to non-investment grade or if, after giving effect
to such distribution, any publicly-held senior indebtedness of the distributed
company would not be rated investment grade. The Board of Directors of RJRN
Holdings is committed to effecting a spin-off of Nabisco Holdings at the
appropriate time. There is no assurance that any such distribution will take
place. Additional policies provide that an amount equal to the net cash proceeds
from any issuance and sale of equity by RJRN Holdings or from any sale outside
the ordinary course of business of material assets owned or used by subsidiaries
in the tobacco business, in each case before December 31, 1998, will be used
either to repay, purchase or redeem consolidated indebtedness or to acquire
properties, assets or businesses to be used in existing or new lines of business
and that an amount equal to the net cash proceeds of any secondary sale of
shares of Nabisco Holdings before December 31, 1998 will be used to repay,
purchase or redeem consolidated debt. No assurance can be given that RJRN
Holdings will issue or sell any equity or sell any material assets outside the
ordinary course of business.
NOTE 12--COMMITMENTS AND CONTINGENCIES
TOBACCO-RELATED LITIGATION
Various legal actions, proceedings and claims are pending or may be
instituted against R.J. Reynolds Tobacco Company ("RJRT") or its affiliates
or indemnitees, including those claiming that lung cancer and other diseases
have resulted from the use of or exposure to RJRT's tobacco products. During
1995, 101 new actions were filed or served against RJRT and/or its affiliates or
indemnitees and 22 such actions were dismissed or otherwise resolved in favor of
RJRT and/or its affiliates or indemnitees without trial. A total of 132 such
actions in the United States and two against RJRT's Canadian subsidiary were
pending on December 31, 1995. As of February 16, 1996, 144 active cases were
pending against RJRT and/or its affiliates or indemnitees, 142 in the United
States and two in Canada. The United States cases are in 22 states and are
distributed as follows: 90 in Florida; 10 in Louisiana; 5 in Texas; 4 in each of
Indiana, Kansas and Tennessee; 3 in each of Mississippi, California and
Pennsylvania; 2 in each of Alabama, Colorado, Massachusetts and Minnesota; and
one in each of Missouri, Nevada, New Hampshire, New Jersey, New York, North
Carolina, Rhode Island, South Carolina and West Virginia. Of the 142 active
cases in the United States, 116 are pending in state court and 26 in federal
court.
Five of the 142 active cases in the United States involve alleged
non-smokers claiming injuries resulting from exposure to environmental tobacco
smoke. Six cases, which are described more specifically below, purport to be
class actions on behalf of thousands of individuals. Purported classes include
individuals claiming to be addicted to cigarettes and flight attendants alleging
personal injury from exposure to environmental tobacco smoke in their workplace.
Four of the active cases were brought by state attorneys general seeking, inter
alia, recovery of the cost of Medicare funds paid by their states for
F-22
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
treatment of citizens allegedly suffering from tobacco related diseases or
conditions. In addition, one case was brought by the State of Florida seeking
similar rulings under a special state statute.
The plaintiffs in these actions seek recovery on a variety of legal
theories, including strict liability in tort, design defect, negligence, breach
of warranty, failure to warn, fraud, misrepresentation, unfair trade practices,
conspiracy, unjust enrichment, indemnity and common law public nuisance.
Punitive damages, often in amounts ranging into the hundreds of 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 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 in
which RJRT was not a defendant, 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., 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 Supreme 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 and, if so, in what form, or whether such legislation would be
intended by Congress to apply retroactively. The passage of such legislation
could increase the number of cases filed against cigarette manufacturers,
including RJRT.
Set forth below are descriptions of the class action lawsuits, a suit in
which plaintiffs seek to act as private attorneys general, actions brought by
state attorneys general in Massachusetts, Minnesota, Mississippi and West
Virginia, an action brought by the State of Florida and pending investigations
relating to RJRT's tobacco business.
In 1991, Broin v. Philip Morris Company, a purported class action
against certain tobacco industry defendants, including RJRT, was brought by
flight attendants claiming to represent a class of 60,000 individuals, alleging
personal injury caused by exposure to environmental tobacco smoke in their
workplace. In December 1994, the Florida state court certified a class
consisting of "all non-smoking flight attendants who are or have been employed
by airlines based in the United States and are suffering from diseases and
disorders caused by their exposure to secondhand cigarette smoke in airline
cabins." The defendants appeal of this certification to the Florida Third
District Court of Appeal was denied on January 3, 1995. A motion for rehearing
has been filed.
In March 1994, Castano v. The American Tobacco Company, a purported class
action, was filed in the United States District Court for the Eastern District
of Louisiana against tobacco industry defendants, including RJRT, seeking
certification of a class action on behalf of all United States
F-23
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
residents who allegedly are or claim to be addicted, or are the legal survivors
of persons who allegedly were addicted, to tobacco products manufactured by
defendants. The complaint alleges that cigarette manufacturers manipulated the
levels of nicotine in their tobacco products to induce addiction in smokers.
Plaintiffs' motion for certification of the class was granted in part on
February 17, 1995. The district court certified core liability issues (fraud,
negligence, breach of warranty, both express and implied, intentional tort,
strict liability and consumer protection statutes), and punitive damages. Not
certified were issues of injury-in-fact, proximate cause, reliance, affirmative
defenses, and compensatory damages. In July 1995, the Fifth Circuit Court of
Appeals agreed to hear defendants, appeal of this class certification. A
decision is expected in 1996.
In March 1994, Lacey v. Lorillard Tobacco Company, a purported class action,
was filed in Circuit Court, Fayette County, Alabama against three cigarette
manufacturers, including RJRT. Plaintiff, who claims to represent all smokers
who have smoked or are smoking cigarettes manufactured and sold by defendants in
the state of Alabama, seeks compensatory and punitive damages not to exceed
$48,500 per class member and injunctive relief arising from defendants' alleged
failure to disclose additives used in their cigarettes. In April 1994,
defendants removed the case to the United States District Court for the Northern
District of Alabama.
In May 1994, Engle v. R.J. Reynolds Tobacco Company, was filed in Circuit
Court, Eleventh Judicial District, Dade County, Florida against tobacco
manufacturers, including RJRT, and other members of the industry, by plaintiffs
who allege injury and purport to represent a class of all United States citizens
and residents who claim to be addicted, or who claim to be legal survivors of
persons who allegedly were addicted, to tobacco products. On October 28, 1994, a
state court judge in Miami granted plaintiffs' motion to certify the class. The
defendants appealed that ruling to the Florida Third District Court of Appeal
which, on January 31, 1996, decided to certify a class limited to Florida
citizens or residents. The defendants are considering seeking a rehearing.
In September 1994, Granier v. American Tobacco Company, a purported class
action apparently patterned after the Castano case, was filed in the United
States District Court for the Eastern District of Louisiana against tobacco
industry defendants, including RJRT. Plaintiffs seek certification of a class
action on behalf of all residents of the United States who have used and
purportedly became addicted to tobacco products manufactured by defendants. The
complaint alleges that cigarette manufacturers manipulated the levels of
nicotine in tobacco products for the purpose of addicting consumers. By
agreement of the parties, all action in this case is stayed pending
determination of the motion for class certification in the Castano case.
F-24
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
In January 1995, a purported class action was filed in the Ontario Canada
Court of Justice against RJR-MacDonald, Inc. and two other Canadian cigarette
manufacturers. The lawsuit, then captioned Le Tourneau v. Imperial
Tobacco Company seeks certification of a class of persons who have
allegedly become addicted to the nicotine in cigarettes or who had such alleged
addiction heightened or maintained through the use of cigarettes, and who have
allegedly suffered loss, injury, and damage in consequence, together with
persons with Family Law Act claims in respect to the claims of such allegedly
addicted persons, and the estates of such allegedly addicted persons. Theories
of recovery pleaded include negligence, strict liability, failure to warn,
deceit, negligent misrepresentation, implied warranty and conspiracy. The relief
sought consists of damages of one million dollars for each of the three named
plaintiffs, punitive damages, funding of nicotine addiction rehabilitation
centers, interest and costs. On June 2, 1995, the plaintiffs, on consent, were
granted leave to file an amended statement of claim to remove Le Tourneau as
representative plaintiff and add two additional representative plaintiffs. The
case is now captioned Caputo v. Imperial Tobacco Limited.
In June 1994, in Mangini v. R.J. Reynolds Tobacco Company, the California
Supreme Court ruled that the plantiffs' claim that an RJRT advertising campaign
constitutes unfair competition under the California Business and Professions
Code was not preempted by the Cigarette Act. The plantiffs are acting as private
attorneys general. This opinion allows the plaintiffs to pursue their lawsuit
which had been dismissed at the trial court level. The defendants' Petition for
Certiorari to the United States Supreme Court was denied in December 1994. The
case has been remanded to the trial court.
In June 1994, in Moore v. The American Tobacco Company, RJRN and RJRT were
named along with other industry members as defendants in an action brought by
the Mississippi state attorney general on behalf of the state to recover state
funds paid for health care and medical and other assistance to state citizens
allegedly suffering from diseases and conditions allegedly related to tobacco
use. This suit, which was brought in Chancery (non-jury) Court, Jackson County,
Mississippi also seeks an injunction from "promoting" or "aiding and abetting"
the sale of cigarettes to minors. Both actual and punitive damages are sought in
unspecified amounts. Motions by the defendants to dismiss the case or to
transfer it to circuit (jury) court were denied on February 21, 1995 and the
case will proceed in Chancery Court. RJRN and other industry holding companies
have been dismissed from the case.
In August 1994, RJRT and other U.S. cigarette manufacturers were named as
defendants in an action instituted on behalf of the state of Minnesota and of
Blue Cross and Blue Shield of Minnesota to recover the costs of medical expenses
paid by the state and by Blue Cross/Blue Shield that were incurred in the
treatment of diseases allegedly caused by cigarette smoking. The suit, Minnesota
v. Philip Morris, alleges consumer fraud, unlawful and deceptive trade
practices, false advertising and restraint of trade, and it seeks injunctive
relief and money damages, trebled for violations of the state antitrust law.
Motions by the defendants to dismiss all claims of Blue Cross/Blue Shield and
certain substantive claims of the State of Minnesota, and by plaintiffs to
strike certain of the defendants' defenses, were denied on May 19, 1995. An
intermediate appeals court declined to hear the defendants' appeal from the
ruling denying the motion to dismiss all claims of Blue Cross/Blue Shield on the
ground that it lacks standing to bring the action, but the Minnesota Supreme
Court has agreed to do so. Oral argument was heard January 29, 1996 and a
decision is pending.
In September 1994, the Attorney General of West Virginia filed suit against
RJRT, RJRN and twenty-one additional defendants in state court in West Virginia.
The lawsuit, McGraw v. American
F-25
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Tobacco Company, is similar to those previously filed in Mississippi and
Minnesota. It seeks recovery for medical expenses incurred by the state in the
treatment of diseases statistically associated with cigarette smoking and
requests an injunction against the promotion and sale of cigarettes and tobacco
products to minors. The lawsuit also seeks a declaration that the state of West
Virginia, as plaintiff, is not subject to the defenses of statute of repose,
statute of limitations, contributory negligence, comparative negligence, or
assumption of the risk. On May 3, 1995, the judge granted defendants' motion to
dismiss eight of the ten causes of action pleaded. The defendants have filed
motions to dismiss the remaining two counts. On October 20, 1995, at a hearing
on the defendants' joint motion to prohibit prosecution of the action due to
plaintiff's unlawful retention of counsel under a contingent fee arrangement, in
a ruling from the bench, the contingent fee agreement between the West Virginia
Attorney General and private attorneys preparing the case was held to be void on
the grounds that the Attorney General has no constitutional, legislative, or
statutory authority for entering into such an agreement.
On February 21, 1995, the state of Florida filed a suit against RJRT and
RJRN, along with other industry members, their holding companies and other
entities. The state is seeking Medicaid reimbursement under various theories of
liability and injunctive relief to prevent the defendants from engaging in
consumer fraud and to require that defendants: disclose and publish all research
conducted directly or indirectly by the industry; fund a corrective public
education campaign on the issues of smoking and health in Florida; prevent the
distribution and sale of cigarettes to minors under the age of eighteen; fund
clinical smoking cessation programs in the state of Florida; dissolve the
Council for Tobacco Research and the Tobacco Institute or divest ownership,
sponsorship, or membership in both; and disgorge all profits from sales of
cigarettes in Florida. On defendants' motion, the case was stayed until July 7,
1995 and that stay has been extended pending appeals by the plaintiffs and the
defendants in connection with the constitutional challenge to the Florida
statute discussed below.
The suit by the state of Florida was brought under a statute which was
amended effective July 1994 to allow the state to bring an action in its own
name against the tobacco industry to recover amounts paid by the state under its
Medicaid program to treat illnesses statistically associated with cigarette
smoking. The amended statute does not require the state to identify the
individual who received medical care, permits a lawsuit to be filed as a class
action and eliminates the comparative negligence and assumption of risk
defenses. The Florida statute was challenged on state and federal constitutional
grounds in a lawsuit brought by Philip Morris Companies Inc., Associated
Industries of Florida, Publix Supermarkets and National Association of
Convenience Stores in June 1994. On June 26, 1995 the trial court judge granted
in part the plaintiffs' motion for summary judgment finding portions of the
statute unconstitutional. Both plaintiffs and defendants appealed this decision
which the Florida Supreme Court accepted for a direct appeal. Oral argument was
heard on November 6, 1995.
The Florida House and Senate passed a bill that would repeal the Florida
statute retroactively which, on June 15, 1995, was vetoed by the Governor. The
Florida House and Senate have indicated that they are considering action to
override that veto. Similar legislation, without Florida's elimination of
defenses, has been introduced in the Massachusetts and New Jersey legislatures.
RJRT is unable to predict whether legislation will be enacted in these states,
whether other states will introduce and enact similar legislation, whether
lawsuits will be filed under statutes, if enacted, or the outcome of any such
lawsuits, if filed.
F-26
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
On November 28, 1995, RJRT and other domestic cigarette manufacturers filed
petitions for declaratory judgment in Massachusetts (Federal Court) and Texas
(State Court, Austin Texas) as to potential Medicaid reimbursement suits that
had been threatened by the Attorneys General of those states. On January 22,
1996, a similar petition for declaratory judgement was filed in Maryland (State
Court).
On December 19, 1995, the Commonwealth of Massachusetts filed suit against
cigarette manufacturers including RJRT and additional defendants including trade
associations and wholesalers, seeking reimbursement of Medicaid and other costs
incurred by the state in providing health care to citizens allegedly suffering
from diseases or conditions purportedly caused by cigarette smoking. The
complaint also seeks orders requiring the manufacturing defendants to disclose
and disseminate prior research; fund a corrective campaign and smoking cessation
program; disclose nicotine yields of their products; and pay restitution.
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 received a civil investigative demand dated January 11, 1994 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.
-------------------
Litigation is subject to many uncertainties, and it is possible that some of
the tobacco-related legal actions, proceedings or claims could be decided
against RJRT or its affiliates or indemnitees. Determinations of liability or
adverse rulings against other cigarette manufacturers that are defendants in
similar actions, even if such rulings are not final, could adversely affect the
litigation against RJRT or its affiliates or indemnitees and 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.
RJRN Holdings and RJRN believe that the ultimate outcome of all pending
litigation matters should not have a material adverse effect on the financial
position of either RJRN Holdings or RJRN; however, it is possible that the
results of operations or cash flows of RJRN Holdings or RJRN in particular
quarterly or annual periods or the financial condition of RJRN Holdings and RJRN
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 any possible loss in any particular quarterly or annual
period or in the aggregate.
F-27
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
COMMITMENTS
At December 31, 1995, other commitments totalled approximately $777 million,
principally for minimum operating lease commitments, the purchase of leaf
tobacco inventories, the purchase of machinery and equipment and other
contractual arrangements.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND SIGNIFICANT CONCENTRATIONS
OF CREDIT RISK
Certain financial instruments with off-balance sheet risk have been entered
into by RJRN and Nabisco to manage their interest rate and foreign currency
exposures.
RJRN and Nabisco have each adopted policies to utilize interest rate
instruments that will adjust the mix of floating rate debt and fixed rate debt
on a one for one basis.
Interest Rate Arrangements
During 1995, Nabisco began managing its own interest rate exposure by
adjusting its mix of floating rate debt and fixed rate debt. As part of managing
its interest rate exposure, Nabisco entered into interest rate swaps and caps
during 1995 to effectively fix a portion of its interest rate exposure on its
floating rate debt. The impact of these arrangements was not significant. At
December 31, 1995, Nabisco had outstanding fixed interest rate swaps with an
aggregate notional principal amount of $1.0 billion and expiration dates within
six months. Also at December 31, 1995, Nabisco had outstanding interest rate
caps with an aggregate notional principal amount of $1.0 billion, all with
future effective dates commencing within six months and with expiration dates
one year thereafter.
RJRN also manages its interest rate exposure by adjusting its mix of
floating rate debt and fixed rate debt. During 1994, RJRN cancelled all of its
financial interest rate arrangments with optionality. Such cancelled instruments
increased 1994 interest expense by $45 million. Also during 1994, as part of its
current strategy to manage interest rate exposure, RJRN effectively neutralized
the effects of any future changes in market interest rates on the remainder of
its outstanding interest rate swaps, options, caps and other financial
instruments through the purchase of offsetting positions. Net unrealized gains
and losses on the remaining interest rate instruments at the time such
instruments were neutralized are currently being amortized to interest expense
through 1997. As a result of the 1994 activity, the net notional principal
amount of outstanding interest rate instruments has been $0. The impact to
interest expense from the utilization of interest rate instruments by RJRN has
resulted in additional interest expense during 1995 and 1994 of approximately
$39 million and $22 million (which included the $45 million stated above),
respectively, and lower interest expense during 1993 of approximately $70
million. In addition, additional interest expense will be recorded during 1996
and 1997 of approximately $28 million and $5 million, respectively, in
connection with the 1994 activity. At December 31, 1995, RJRN had outstanding
interest rate swaps, options, caps and other interest rate arrangements with
F-28
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
financial institutions having a total gross notional principal amount of $2.8
billion and a net notional amount of $0. These arrangements entered into by RJRN
mature as follows:
<TABLE>
<CAPTION>
GROSS NOTIONAL PRINCIPAL AMOUNT
------------------------------------------
TYPE OF INSTRUMENT 1996 1997 1998 TOTAL
------------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
(AMOUNTS IN MILLIONS)
Variable rate pay swaps......................... $ 600 $ 750 $ 50 $1,400
Fixed rate pay swaps............................ 600 750 50 1,400
------ ------ ------ ------
$1,200 $1,500 $ 100 $2,800
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
Foreign Currency Arrangements
RJRN Holdings' subsidiaries have operations in many countries, utilizing
many different functional currencies in its foreign subsidiaries and branches.
Significant foreign currency net investments are located in Germany, Canada,
Hong Kong, Brazil, Argentina and Spain. Changes in the strength of these
countries' currencies relative to the U.S. dollar result in direct charges or
credits to equity for non-hyperinflationary countries and direct charges or
credits to the income statement for hyperinflationary countries. Translation
gains or losses resulting from foreign-denominated borrowings that are accounted
for as hedges of certain foreign currency net investments, also result in
charges or credits to equity. RJRN Holdings' subsidiaries also have significant
exposure to foreign exchange sale and purchase transactions in currencies other
than its functional currency. The exposures include the U.S. dollar, German
mark, Japanese yen, Swiss franc, Hong Kong dollar, Singapore dollar, Spanish
peseta and cross-rate exposure among the French franc, British pound, Italian
lira and the German mark. These exposures are managed to minimize the effects
of foreign currency transactions on its cash flows.
At December 31, 1995 and 1994, RJRN had outstanding forward foreign exchange
contracts with banks to purchase or sell an aggregate notional principal amount
of $959 million and $713 million, respectively. The weighted average maturity
of the arrangements outstanding at December 31, 1995 approximated four months.
Such contracts were primarily entered into to hedge future commitments. The
purpose of RJRN's foreign currency hedging activities is to protect RJRN from
risk that the eventual dollar cash flows resulting from transactions with
international parties will be adversely affected by changes in exchange rates.
At December 31, 1995 and 1994, Nabisco had outstanding forward foreign
exchange contracts with banks to purchase or sell an aggregate notional
principal amount of $142 million and $94 million, respectively. Such contracts
were primarily entered into to hedge future commitments. The purpose of
Nabisco's foreign currency hedging activities is to protect Nabisco from risk
that the eventual dollar cash flows resulting from transactions with
international parties will be adversely affected by changes in exchange rates.
The above interest rate and foreign currency arrangements entered into by
RJRN and Nabisco involve, to varying degrees, elements of market risk as a
result of potential changes in future interest and foreign currency exchange
rates. To the extent that the financial instruments entered into remain
outstanding as effective hedges of existing interest rate and foreign currency
exposure, the impact of
F-29
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
such potential changes in future interest and foreign currency exchange rates on
the financial instruments entered into would offset the related impact on the
items being hedged. Also, RJRN and Nabisco may be exposed to credit losses in
the event of non-performance by the counterparties to these financial
instruments. However, RJRN and Nabisco continually monitor their positions and
the credit ratings of their counterparties and therefore, do not anticipate
any non-performance.
There are no significant concentrations of credit risk with any individual
counterparties or groups of counterparties as a result of any financial
instruments entered into including those financial instruments discussed above.
SUMMARY FINANCIAL INSTRUMENTS FAIR VALUE INFORMATION
At December 31, 1995 and 1994, the carrying amounts and estimated fair
values of financial instruments entered into by RJRN and Nabisco were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------------- ----------------------------
ASSETS/(LIABILITIES) ASSETS/(LIABILITIES)
---------------------------- ----------------------------
RJRN FINANCIAL INSTRUMENTS CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
-------------------------- -------------- ---------- -------------- ----------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C>
Interest rate swaps:
Variable rate pay swaps................... $ (1) $ - $ - $ (76)
-------------- ---------- -------------- ----------
Fixed rate pay swaps...................... $ (11) $ (44) $ - $ 4
-------------- ---------- -------------- ----------
Forward foreign exchange contracts.......... $ 2 $ 9 $ (1) $ (4)
-------------- ---------- -------------- ----------
NABISCO FINANCIAL INSTRUMENTS
- --------------------------------------------
Interest rate swaps:
Fixed rate pay swaps...................... $ - $ (2) $ - $ -
-------------- ---------- -------------- ----------
Interest rate caps.......................... $ 3 $ 1 $ - $ -
-------------- ---------- -------------- ----------
Forward foreign exchange contracts.......... $ - $ - $ - $ -
-------------- ---------- -------------- ----------
</TABLE>
F-30
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--CAPITAL STOCK AND PAID-IN CAPITAL
The changes in Common Stock and paid-in capital are shown as follows:
<TABLE><CAPTION>
1995 1994
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------- ----------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Common Stock--$0.01 par value--authorized 440,000,000 shares at
December 31, 1995:
Balance at beginning of year.................................... 272,331,377 $ 3 227,602,258 $ 2
Shares issued during the period................................. 543,787 -- 2,781,575 --
Conversion of Series A Preferred Stock.......................... -- -- 42,000,000 1
Shares repurchased and
cancelled..................................................... (67,222) -- (52,456) --
----------- ------- ----------- -------
Balance at end of year...................................... 272,807,942 $ 3 272,331,377 $ 3
----------- ------- ----------- -------
----------- ------- ----------- -------
Paid-in capital:
Balance at beginning of year.................................... $10,157 $ 8,787
Shares issued during the period, net of stock issuance costs.... 13 1,754
Tax benefits recorded on shares issued to management, dividends
on restricted stock and dividends on ESOP shares allocated.... 4 9
Shares and stock options repurchased and cancelled.............. (2) (1)
Fees and other expenses......................................... (30) --
Gain on sale of subsidiary common stock......................... 401 --
Amounts reclassified from retained earnings..................... (432) (393)
Other........................................................... (1) 1
------- -------
Balance at end of year...................................... $10,110 $10,157
------- -------
------- -------
<CAPTION>
1993
-----------------------
SHARES AMOUNT
----------- -------
<S> <C> <C>
Common Stock--$0.01 par value--authorized 440,000,000 shares at
December 31, 1995:
Balance at beginning of year.................................... 226,929,708 $ 2
Shares issued during the period................................. 738,582 --
Conversion of Series A Preferred Stock.......................... -- --
Shares repurchased and cancelled................................ (66,032) --
----------- -------
Balance at end of year...................................... 227,602,258 $ 2
----------- -------
----------- -------
Paid-in capital:
Balance at beginning of year.................................... $ 9,057
Shares issued during the period, net of stock issuance costs.... (16)
Tax benefits recorded on shares issued to management, dividends
on restricted stock and dividends on ESOP shares allocated.... 3
Management shares and stock options repurchased and cancelled... (2)
Fees and other expenses......................................... --
Gain on sale of subsidiary common stock......................... --
Amounts reclassified from retained earnings..................... (246)
Other........................................................... (9)
-------
Balance at end of year...................................... $ 8,787
-------
-------
</TABLE>
At December 31, 1995, RJRN Holdings' outstanding classes of capital stock
consisted of the following: the Common Stock, the Series B Preferred Stock, the
Series C Preferred Stock and the ESOP Convertible Preferred Stock, stated value
of $16.00 per share and par value of $.01 per share (the "ESOP Preferred
Stock"). In addition, RJRN Holdings had its Cumulative Convertible Preferred
Stock, stated value of $25 per share and par value of $.01 per share (the
"Cumulative Convertible Preferred Stock"), outstanding until the fourth quarter
of 1993 and its Series A Conversion Preferred Stock, par value $.01 per share
(the "Series A Preferred Stock"), outstanding until the fourth quarter of 1994.
All of the classes of preferred stock of RJRN Holdings rank senior to the Common
Stock as to dividends and preferences in liquidation. RJRN Holdings' charter
authorized 150,000,000 preferred shares at December 31, 1995 and 1994.
On November 1, 1990, RJRN Holdings issued and/or registered 72,032,000
shares of the Cumulative Convertible Preferred Stock. The Cumulative Convertible
Preferred Stock paid cash dividends at a rate of 11.5% of stated value per
annum, payable quarterly in arrears commencing January 15, 1991. The Cumulative
Convertible Preferred Stock was convertible after May 1, 1991 into shares of
Common Stock at a conversion price of $45 of stated value per share of Common
Stock. Holders of the Cumulative Convertible Preferred Stock converted 379
shares of the stock into 210 shares of Common Stock during 1992 and another
123,523 shares into 68,595 shares of Common Stock during 1993. On December 6,
1993, the outstanding Cumulative Convertible Preferred Stock was redeemed at a
redemption price of $27.0125 per share plus accrued and unpaid dividends.
F-31
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--CAPITAL STOCK AND PAID-IN CAPITAL--(CONTINUED)
On April 10, 1991, the ESOP borrowed $250 million from RJRN Holdings (the
"ESOP Loan") to purchase 15,625,000 shares of ESOP Preferred Stock. The ESOP
Loan, which was renegotiated in 1993, has a final maturity in 2006 and bears
interest at the rate of 8.2% of its stated value per annum. At December 31,
1995, the ESOP Preferred Stock is convertible into 2,998,135 shares of Common
Stock, subject to adjustment in certain events, and bears cumulative dividends
at a rate of 7.8125% of stated value per annum at least until April 10, 1999,
payable semi-annually in arrears commencing January 2, 1992, when, as and if
declared by the board of directors of RJRN Holdings. The ESOP Preferred Stock is
redeemable at the option of RJRN Holdings, in whole or in part, at any time on
or after April 10, 1999, at an initial optional redemption price of $16.25 per
share. The initial optional redemption price declines thereafter on an annual
basis in the amount of $.125 a year to $16 per share on April 10, 2001, plus
accrued and unpaid dividends. Holders of ESOP Preferred Stock have voting rights
with respect to certain matters submitted to a vote of the holders of the Common
Stock. Effective January 1, 1992, RJRN's matching contributions to eligible
employees under its Capital Investment Plan are being made in the form of ESOP
Preferred Stock. RJRN's matching contribution obligation in respect of each
participating employee is equal to $.50 for every pre-tax dollar contributed by
the employee, up to 6% of the employee's pay. The shares of ESOP Preferred Stock
are allocated at either the floor value of $16 a share or the fair market value
of one-fifth of a share of Common Stock, whichever is higher. During 1995, 1994
and 1993, approximately $23 million, $22 million and $29 million, respectively,
was contributed to the ESOP by RJRN or RJRN Holdings and approximately $19
million, $19 million and $20 million, respectively, of ESOP dividends were used
to service the ESOP's debt to RJRN Holdings.
On November 8, 1991, RJRN Holdings issued 52,500,000 shares of Series A
Preferred Stock and sold 210,000,000 Series A Depositary Shares, each of which
represented one-quarter of a share of Series A Preferred Stock. Each share of
Series A Preferred Stock paid cash dividends at a rate of $3.34 per annum,
payable quarterly in arrears commencing February 18, 1992. On November 15, 1994,
the 210,000,000 Series A Depository Shares converted automatically into
42,000,000 shares of Common Stock.
On August 18, 1993, RJRN Holdings issued 50,000 shares of Series B Preferred
Stock, and sold 50,000,000 Series B Depositary Shares at $25 per Series B
Depositary Share ($1.25 billion) in connection with such issuance (the "Series B
Preferred Stock Offering"). Each share of Series B Preferred Stock bears
cumulative cash dividends at a rate of $2,312.50 per annum, or $2.3125 per
Series B Depositary Share, and is payable quarterly in arrears commencing
December 1, 1993. Each Series B Depositary Share represents .001 ownership
interest in a share of Series B Preferred Stock of RJRN Holdings. At RJRN
Holdings' option, on or after August 19, 1998, RJRN Holdings may redeem shares
of the Series B Preferred Stock (and the Depositary will redeem the number of
Series B Depositary Shares representing the shares of Series B Preferred Stock)
at a redemption price equivalent to $25 per Series B Depositary Share plus
accrued and unpaid dividends thereon. RJRN Holdings' ability to redeem the
Series B Preferred Stock is subject to certain restrictions in its credit
agreements. On September 21, 1995, RJRN Holdings retired approximately 76% of
the outstanding Series B Preferred Stock in connection with the exchange of
approximately $949 million amount of Trust Preferred Securities for 37,956,060
of the 50,000,000 Series B Depositary Shares. (See Note 11 to the Consolidated
Financial Statements.)
On May 6, 1994, RJRN 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
F-32
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--CAPITAL STOCK AND PAID-IN CAPITAL--(CONTINUED)
depositary share. Approximately $900 million of the net proceeds from the sale
of the Series C Depositary Shares was applied to the redemption of RJRN's
subordinated debentures on May 15, 1994. The remaining proceeds from the sale of
the Series C Depositary Shares were used to repay indebtedness under the 1991
RJRN Credit Agreement and for short-term liquid investments until they were
applied to redeem certain of RJRN's sinking fund debentures. Each share of
Series C Preferred Stock bears cumulative cash dividends at a rate of $6.012
per annum, or $.6012 per Series C Depositary Share, payable quarterly in
arrears. Each Series C Depositary Share represents a one-tenth ownership
interest in a share of Series C Preferred Stock of RJRN Holdings. Each share of
Series C Preferred Stock will mandatorily convert into two shares of Common
Stock on May 15, 1997, subject to adjustment in certain events, plus accrued
and unpaid dividends thereon. In addition, at RJRN Holdings' option, RJRN
Holdings may redeem shares of the Series C Preferred Stock (and the Depositary
will redeem the number of Series C Depositary Shares representing such shares
of Series C Preferred Stock) at a redemption price to be paid in shares of
Common Stock (or, following certain circumstances, other consideration), plus
accrued and unpaid dividends. The optional redemption price declines from
$112.286 per share by $.01656 per share on each day following May 6, 1994 to
$95.246 per share on March 15, 1997 and is $94.25 thereafter.
The completion on January 26, 1995 of the Nabisco Holdings' initial public
offering of 51,750,000 shares of its Class A Common Stock and the corresponding
reduction in RJRN's proportionate economic interest in Nabisco Holdings from
100% to approximately 80.5% resulted in an adjustment of approximately $401
million to the carrying amount of RJRN's investment in Nabisco Holdings. Such
adjustment was reflected as additional paid-in capital by RJRN Holdings and
RJRN.
On April 1, July 1 and October 1, 1995 and January 1, 1996, RJRN Holdings
paid a quarterly dividend on the Common Stock of $.375 per share. RJRN Holdings
expects to continue to pay at least a quarterly cash dividend on the Common
Stock equal to $.375 per share or $1.50 per share on an annualized basis.
On April 12, 1995, the stockholders of RJRN Holdings approved a one-for-five
reverse stock split and the corresponding reduction in the number of authorized
shares of Common Stock from 2,200,000,000 to 440,000,000. Accordingly, the rates
at which shares of ESOP Preferred Stock and Series C Preferred Stock convert
into shares of Common Stock were proportionately adjusted.
On July 1 and October 1, 1995 and January 1, 1996, Nabisco Holdings paid a
quarterly dividend on its common stock of $.1375 per share. Nabisco Holdings
expects to continue to pay a quarterly cash dividend on its common stock equal
to at least $.1375 per share or $.55 per share on an annualized basis
(approximately $146 million). RJRN would receive approximately $117 million of
the annualized Nabisco Holdings dividend.
F-33
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--CAPITAL STOCK AND PAID-IN CAPITAL--(CONTINUED)
The changes in stock options are shown as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------- ---------------------------- ----------
OPTIONS PRICE OPTIONS PRICE OPTIONS
----------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year:
Stock Option Plan...................... 3,754,672 $25.00-52.25 4,648,022 $25.00-52.25 5,071,189
Long Term Incentive Plan............... 12,411,651 22.60-57.80 12,926,527 22.60-57.80 3,930,920
Options granted:
Stock Option Plan...................... 14,400 30.00 32,160 34.40 --
Long Term Incentive Plan............... 12,823,060 26.88-32.25 355,400 27.50-37.20 9,842,620
Options exercised:
Stock Option Plan...................... (153,960) 25.00 (918,947) 25.00-28.75 (223,209)
Long Term Incentive Plan............... (14,137) 22.82-29.69 (7,171) 27.80 --
Options repurchased and cancelled:
Stock Option Plan...................... (2,340,491) 25.00-34.38 (6,563) 25.00-56.25 (199,958)
Long Term Incentive Plan............... (11,639,260) 22.82-54.69 (863,105) 27.80-50.65 (847,013)
----------- ----------- ----------
Balance at end of year:
Stock Option Plan...................... 1,274,621 25.00-52.25 3,754,672 25.00-52.25 4,648,022
Long Term Incentive Plan............... 13,581,314 22.60-57.80 12,411,651 22.60-57.80 12,926,527
----------- ----------- ----------
14,855,935 22.60-57.80 16,166,323 22.60-57.80 17,574,549
----------- ----------- ----------
----------- ----------- ----------
<CAPTION>
PRICE
------------
<S> <C>
Balance at beginning of year:
Stock Option Plan...................... $25.00-52.25
Long Term Incentive Plan............... 37.50-57.80
Options granted:
Stock Option Plan...................... --
Long Term Incentive Plan............... 22.60-45.65
Options exercised:
Stock Option Plan...................... 25.00
Long Term Incentive Plan............... --
Options repurchased and cancelled:
Stock Option Plan...................... 25.00-42.75
Long Term Incentive Plan............... 27.80-50.00
Balance at end of year:
Stock Option Plan...................... 25.00-52.25
Long Term Incentive Plan............... 22.60-57.80
22.60-57.80
</TABLE>
At December 31, 1995, options were exercisable as to 3,437,549 shares,
compared with 8,794,841 shares at December 31, 1994, and 4,003,608 shares at
December 31, 1993. As of December 31, 1995, options for 7,374,069 shares of
Common Stock were available for future grant.
To provide an incentive to attract and retain key employees responsible for
the management and administration of the business affairs of RJRN Holdings and
its subsidiaries, on June 15, 1989 the board of directors of RJRN Holdings
adopted the Stock Option Plan for Directors and Key Employees of RJR Nabisco
Holdings Corp. and Subsidiaries (the "Stock Option Plan") pursuant to which
options to purchase Common Stock may be granted. On June 16, 1989, the Stock
Option Plan was approved by the written consent of the holders of a majority of
the Common Stock. Non-employee directors or key employees of RJRN Holdings or
any subsidiary of RJRN Holdings are eligible to be granted options under the
Stock Option Plan. A maximum of 6,000,000 shares of Common Stock (which may be
adjusted in the event of certain capital changes) may be issued under the Stock
Option Plan. The options to key employees granted under the Stock Option Plan
generally vest over a three year period and the exercise price of such options
is generally the fair market value of the Common Stock on the date of grant. On
March 1, 1994, the Stock Option Plan was amended to satisfy the requirements of
a nondiscretionary formula plan for stock option grants to directors. Each
eligible director is, upon becoming a director, granted an option under the
Stock Option Plan to purchase 6,000 shares of Common Stock. The options have an
exercise price equal to the fair market value of the Common Stock on the date
of grant. They cannot be exercised for six months following the date of grant
but, thereafter, are exercisable for ten years from the date of grant. In
addition, each eligible director receives an annual grant of stock options
which is made on the date of the director's election or re-election to the
Board of Directors. The annual grant is intended to deliver a predetermined
value, and the number of shares of Common Stock subject to the option is
determined based on an internal valuation methodology. In 1995 and 1994, each
eligible director received a stock option to purchase 1,400 shares and 1,180
shares, respectively, of Common Stock. The annually granted stock options have
a ten year term and vest over three years (33% on the first and second
anniversaries of the date of grant and 34% on the third anniversary).
F-34
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--CAPITAL STOCK AND PAID-IN CAPITAL--(CONTINUED)
On August 1, 1990, the board of directors of RJRN Holdings adopted the 1990
Long Term Incentive Plan (the "1990 LTIP") which was approved on such date by
the written consent of the holders of a majority of the Common Stock. The 1990
LTIP authorizes grants of incentive awards ("Grants") in the form of "incentive
stock options" under Section 422 of the Internal Revenue Code, other stock
options, stock appreciation rights, restricted stock, purchase stock, dividend
equivalent rights, performance units, performance shares or other stock-based
grants. Awards under the 1990 LTIP may be granted to key employees of, or other
persons having a unique relationship to, RJRN Holdings and its subsidiaries.
Directors who are not also employees of RJRN Holdings and its subsidiaries are
ineligible for Grants. A maximum of 21,000,000 shares of Common Stock (which may
be adjusted in the event of certain capital changes) may be issued under the
1990 LTIP pursuant to Grants. The 1990 LTIP also limits the amount of shares
which may be issued pursuant to "incentive stock options" and the amount of
shares subject to Grants which may be issued to any one participant. As of
December 31, 1995, purchase stock, stock options other than incentive stock
options, restricted stock, performance shares, performance units and other
stock-based grants have been granted under the 1990 LTIP. The options granted
before July 1, 1993 under the 1990 LTIP generally will vest over a three year
period ending each December 31. Options granted on and after July 1, 1993, vest
over a three year period beginning from the date of grant. The exercise prices
of outstanding LTIP options are between $22.60 and $57.80 per share. On April
27, 1995, employees of RJRN, RJRT and R.J. Reynolds Tobacco International, Inc.
("Reynolds International") with outstanding stock options under the LTIP and the
Stock Option Plan were permitted to elect to surrender 100% of their outstanding
LTIP and Stock Option Plan stock options (less the stock options permitted to be
exchanged for Nabisco LTIP options, as described below) in exchange for a new
grant of options under the LTIP. Options to purchase 8,389,656 shares of Common
Stock were surrendered and 8,389,656 were reissued pursuant to this program.
These options have an exercise price of $27.00 and are 100% vested but not
exercisable for three years. On April 27, 1995 and on June 13, 1995, certain key
employees were granted premium options to purchase shares of Common Stock. These
options have an exercise price that is 10% above the fair market value on the
date of the grant ($29.70 and $28.88, respectively) and vest over a three year
period. In connection with the purchase stock grants awarded during 1995, 1994
and 1993, 16,529 shares, 0 shares and 124,444 shares, respectively, of Common
Stock were purchased and options to purchase a specified number of shares were
granted upon the optionee purchasing a stated dollar amount of Common Stock. In
addition, an arrangement was made in 1995 to enable a purchaser to borrow on a
secured basis from RJRN Holdings the price of the stock purchased. The current
annual interest rate on the 1995 arrangement, which was set in December 1995 at
the then applicable federal rate for long-term loans, is 6.26%. These borrowings
plus accrued interest and taxes must generally be repaid within two years
following termination of active employment. During 1995 and 1994, 30,000 shares
and 884,100 shares, respectively, of Common Stock were awarded in connection
with restricted stock grants made. These shares are subject to restrictions that
will lapse 3 years from the date of grant (or earlier under certain
circumstances). Other stock-based awards were made in 1995 and 1994 under the
1990 LTIP to individuals who previously acquired certain purchase stock under
the 1990 LTIP. Under this program, such individuals receive grants of Common
Stock or cash at the Company's election on either three or four annual grant
dates beginning July 1994 and ending either July 1, 1996 or July 1, 1997. The
fair market value of Common Stock to be awarded on each grant date is equal to
the excess, if any, of (i) 33% or 25%, respectively, of the maximum amount the
individual could have borrowed to acquire purchase stock, over (ii) the then
fair market value of the same percentage of such individual's purchase stock.
The grant is increased by the amount of presumed borrowing costs and the
F-35
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--CAPITAL STOCK AND PAID-IN CAPITAL--(CONTINUED)
amount necessary to hold the individual harmless from income taxes due as a
result of the grant. No grant will be made on a grant date if, on such grant
date, the amount determined under clause (ii) above equals or exceeds the amount
determined in clause (i) above.
In connection with the initial public offering of shares of Nabisco Holdings
in January 1995, the board of directors of Nabisco Holdings adopted the Nabisco
Holdings Corp. 1994 Long Term Incentive Plan (the "Nabisco LTIP") which is
substantially similar to the LTIP except that stock-based awards are denominated
in shares of Class A Common Stock of Nabisco Holdings. On January 19, 1995,
January 27, 1995 and March 31, 1995, employees of Nabisco with outstanding
stock options under the LTIP and the Stock Option Plan were permitted to elect
to surrender 100% of their outstanding LTIP and the Stock Option Plan stock
options in exchange for the grant of options under the Nabisco LTIP. Charles M.
Harper, as chairman of the board of directors of Nabisco Holdings, was permitted
to surrender 50% of his outstanding LTIP options on January 19, 1995 in exchange
for Nabisco LTIP options. Options to purchase a total of 5,119,884 shares of
Common Stock were surrendered pursuant to this program. Also on March 31, 1995
and for one employee on June 16, 1995, employees of RJRN with outstanding stock
options under the LTIP and the Stock Option Plan were permitted to elect to
surrender 20% of their outstanding LTIP and Stock Option Plan stock options in
exchange for the grant of options under the Nabisco LTIP. Options to purchase a
total of 103,319 shares of Common Stock were surrendered pursuant to this
program. Also on January 19, 1995, RJRN Holdings purchased one-half of Mr.
Harper's restricted LTIP purchase shares (62,222 shares) at the then fair market
value ($28.125 per share), and he used the proceeds to acquire similarly
restricted shares of Class A Common Stock of Nabisco Holdings.
NOTE 14--RETAINED EARNINGS AND CUMULATIVE TRANSLATION ADJUSTMENTS
Retained earnings (accumulated deficit) at December 31, 1995, 1994 and 1993
includes non-cash expenses related to accumulated trademark and goodwill
amortization of $4.280 billion, $3.644 billion and $3.015 billion, respectively.
The changes in cumulative translation adjustments are shown as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period......................... $ (164) $ (102) $ (47)
Translation and other adjustments.................... (12) (62) (55)
------ ------ ------
Balance at end of period............................... $ (176) $ (164) $ (102)
------ ------ ------
------ ------ ------
</TABLE>
NOTE 15--RETIREMENT BENEFITS
RJRN and its subsidiaries sponsor a number of non-contributory defined
benefit pension plans covering most U.S. and certain foreign employees. Plans
covering regular full-time employees in the tobacco operations as well as the
majority of salaried employees in the corporate groups and food operations
provide pension benefits that are based on credits, determined by age, earned
throughout an employee's service and final average compensation before
retirement. Plan benefits are offered as lump sum or annuity options. Plans
covering hourly as well as certain salaried employees in the corporate groups
and food operations
F-36
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 15--RETIREMENT BENEFITS--(CONTINUED)
provide pension benefits that are based on the employee's length of service and
final average compensation before retirement. RJRN's policy is to fund the cost
of current service benefits and past service cost over periods not exceeding 30
years to the extent that such costs are currently tax deductible. Additionally,
RJRN and its subsidiaries participate in several (i) multi-employer plans, which
provide benefits to certain union employees, and (ii) defined contribution
plans, which provide benefits to certain employees in foreign countries.
Employees in foreign countries who are not U.S. citizens are covered by various
post-employment benefit arrangements, some of which are considered to be defined
benefit plans for accounting purposes.
A summary of the components of pension expense for RJRN-sponsored plans
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Defined benefit pension plans:
Service cost--benefits earned during the period......... $ 69 $ 97 $ 76
Interest cost on projected benefit obligation........... 265 256 255
Less actual return on plan assets....................... (555) (17) (388)
Net amortization and deferral........................... 308 (245) 122
------ ------ ------
Total............................................... 87 91 65
Multi-employer and other defined contribution plans....... 39 36 32
------ ------ ------
Total pension expense............................... $ 126 $ 127 $ 97
------ ------ ------
------ ------ ------
</TABLE>
The principal plans used the following actuarial assumptions for accounting
purposes:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Weighted average discount rate................. 7.00% 8.75%
Rate of increase in compensation levels........ 5.00% 5.00%
Expected long-term rate of return on assets.... 9.50% 9.50%
</TABLE>
F-37
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 15--RETIREMENT BENEFITS--(CONTINUED)
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheets at December 31, 1995 and 1994 for RJRN's defined
benefit pension plans.
<TABLE>
<CAPTION>
U.S. PLANS FOREIGN PLANS
------------------------------------------------------------------------ --------------------------------
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1995
----------------------------------- ----------------------------------- --------------------------------
PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE
ASSETS EXCEEDED ACCUMULATED ASSETS EXCEEDED ACCUMULATED ASSETS EXCEEDED ACCUMULATED
ACCUMULATED BENEFITS EXCEEDED ACCUMULATED BENEFITS EXCEEDED ACCUMULATED BENEFITS
BENEFITS ASSETS(1) BENEFITS ASSETS(1) BENEFITS EXCEEDED ASSETS
--------------- ------------------ --------------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Actuarial
present value
of:
Vested
benefits..... $ 216 $2,823 $ 2,318 $ 89 $ 154 $ 231
Non-vested
benefits..... 16 23 26 2 6 30
----- ----- ----- --- --- ---
Accumulated
benefit
obligation.. 232 2,846 2,344 91 160 261
Effect of
future
salary
increases... 29 355 252 8 46 51
----- ----- ----- --- --- ---
Projected
benefit
obligation.. 261 3,201 2,596 99 206 312
Plan assets at
fair market
value......... 254 2,704 2,542 40 178 127
----- ----- ----- --- --- ---
Plan assets in
excess of
(less than)
projected
benefit
obligation.... (7) (497) (54) (59) (28) (185)
Unrecognized
net (gain)
loss.......... 6 157 (256) (6) 13 31
Unrecognized
prior service
cost.......... 1 (15) (30) (6) (6) 21
----- ----- ----- --- --- ---
Net pension
liabilities
recognized in
the
Consolidated
Balance
Sheets........ $ 0 $ (355) $ (340) $(71) $ (21) $(133)
----- ----- ----- --- --- ---
----- ----- ----- --- --- ---
<CAPTION>
DECEMBER 31, 1994
--------------------------------
PLANS WHOSE PLANS WHOSE
ASSETS EXCEEDED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEEDED ASSETS
--------------- ---------------
<S> <C> <C>
Actuarial
present value
of:
Vested
benefits..... $ 143 $ 187
Non-vested
benefits..... 5 25
--- ---
Accumulated
benefit
obligation.. 148 212
Effect of
future
salary
increases... 39 40
--- ---
Projected
benefit
obligation.. 187 252
Plan assets at
fair market
value......... 170 106
--- ---
Plan assets in
excess of
(less than)
projected
benefit
obligation.... (17) (146)
Unrecognized
net (gain)
loss.......... 6 29
Unrecognized
prior service
cost.......... (7) 23
--- ---
Net pension
liabilities
recognized in
the
Consolidated
Balance
Sheets........ $ (18) $ (94)
--- ---
--- ---
</TABLE>
- ------------
(1) Of the net pension liability, $(292) million and $2 million were related
to qualified plans at December 31, 1995 and 1994, respectively.
At December 31, 1995, approximately 97 percent of the plans' assets were
invested in listed stocks and bonds and other highly liquid investments. The
balance consisted of various income producing investments.
In addition to providing pension benefits, RJRN provides certain health care
and life insurance benefits for retired employees and their dependents.
Substantially all of its regular full-time employees, including certain
employees in foreign countries, may become eligible for those benefits if they
reach retirement age while working for RJRN. Effective January 1, 1992, RJRN
adopted Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions ("SFAS No. 106").
Under SFAS No. 106, RJRN is required to accrue the costs for retirees' health
and other postretirement benefits other than pensions and recognize the unfunded
and unrecognized accumulated benefit obligation for these benefits. RJRN had
previously accrued a liability for postretirement benefits other than pensions
and as a result, SFAS No. 106 did not have a material impact on the financial
statements of either RJRN Holdings or RJRN.
F-38
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 15--RETIREMENT BENEFITS--(CONTINUED)
Net postretirement health and life insurance benefit cost consisted of the
following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Service cost--benefits earned during the period........ $ 18 $ 17 $ 16
Interest cost on accumulated postretirement benefit
obligation........................................... 62 62 60
--- --- ---
Net postretirement health care and life insurance
costs.............................................. $ 80 $ 79 $ 76
--- --- ---
--- --- ---
</TABLE>
RJRN's postretirement health and life insurance benefit plans currently are
not funded. The status of the plans was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit
obligation:
Retirees......................................................... $ 696 $638
Fully eligible active plan participants.......................... 124 95
Other active plan participants................................... 255 216
Unrecognized actuarial amounts..................................... (62) 49
------------ -----
Accrued postretirement health care and life insurance costs........ $1,013 $998
------------ -----
------------ -----
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 8% in 1995 and 7% in 1996 gradually
declining to 5% by the year 2000 and remaining at that level thereafter. A one
percentage point increase in the assumed health care cost trend rate for each
year would increase the accumulated postretirement benefit obligation as of
December 31, 1995 and the aggregate of the service and interest cost components
of the net postretirement benefit cost for the year then ended by approximately
$54.5 million and $4.7 million, respectively.
The assumed discount rate used in determining the accumulated postretirement
benefit obligation was 7% and 8.75% as of December 31, 1995 and 1994,
respectively.
Effective January 1, 1993, RJRN adopted Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Postemployment Benefits ("SFAS No.
112"). Under SFAS No. 112, RJRN is required to accrue the costs for
preretirement postemployment benefits provided to former or inactive employees
and recognize an obligation for these benefits. The adoption of SFAS No. 112 did
not have a material impact on the financial statements of either RJRN Holdings
or RJRN.
F-39
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16--SEGMENT INFORMATION
Industry Segment Data
RJRN is engaged principally in the manufacture, distribution and sale of
tobacco products, cookies, crackers and other food products. Cigarettes are
manufactured in the United States by RJRT and in over 40 foreign countries and
territories by Reynolds International and subsidiaries or licensees of RJRT and
are sold throughout the United States and in more than 170 markets around the
world including Western Europe, the Middle East, Africa, Asia and Canada. RJRN,
through its 80.5% owned subsidiary Nabisco Holdings, also manufactures and
markets cookies, crackers, non-chocolate candy and gum products, nuts and
snacks, various margarines and spreads and other specialty products under
several brand names in the United States, Canada, Europe, Asia and Latin
America. See the Management's Discussion and Analysis of Financial Condition and
Results of Operations, appearing elsewhere herein, for further discussion of
RJRN's operations. Summarized financial information for these operations is
shown in the following tables.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales:
Tobacco.............................................. $ 7,714 $ 7,667 $ 8,079
Food................................................. 8,294 7,699 7,025
------------ ------------ ------------
Consolidated net sales............................. $ 16,008 $ 15,366 $ 15,104
------------ ------------ ------------
------------ ------------ ------------
Operating income:
Tobacco(1)(2)........................................ $ 1,500 $ 1,801 $ 866
Food(1)(2)........................................... 902 887 578
Headquarters (2)..................................... (64) (138) (66)
------------ ------------ ------------
Consolidated operating income...................... $ 2,338 $ 2,550 $ 1,378
------------ ------------ ------------
------------ ------------ ------------
Capital expenditures:
Tobacco.............................................. $ 231 $ 215 $ 224
Food................................................. 513 455 391
------------ ------------ ------------
Consolidated capital expenditures.................. $ 744 $ 670 $ 615
------------ ------------ ------------
------------ ------------ ------------
Depreciation expense:
Tobacco.............................................. $ 236 $ 228 $ 237
Food................................................. 244 218 206
Headquarters......................................... 2 8 5
------------ ------------ ------------
Consolidated depreciation expense.................. $ 482 $ 454 $ 448
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Assets: DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
Tobacco............................................. $19,226 $19,420
Food................................................ 12,239 11,803
Headquarters(3)..................................... 53 185
-------- --------
Consolidated assets............................... $31,518 $31,408
-------- --------
-------- --------
</TABLE>
- ------------
(1) Includes amortization of trademarks and goodwill for Tobacco and Food for
the year ended December 31, 1995, of $409 million and $227 million,
respectively; for the year ended December 31, 1994, of $404 million and $225
million, respectively; and for the year ended December 31, 1993, of $407
million and $218 million, respectively.
(Footnotes continued on following page)
F-40
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16--SEGMENT INFORMATION--(CONTINUED)
(Footnotes continued from preceding page)
(2) The 1995 and 1993 amounts include the effects of a restructuring expense at
Tobacco (1995-- $154 million; 1993--$544 million), Food (1993--$153 million)
and Headquarters (1993--$33) (See Note 2 to the Consolidated Financial
Statements).
(3) Cash and cash equivalents for the domestic tobacco operations are included
in Headquarters' assets.
Geographic Data
The following tables show certain financial information relating to RJRN's
continuing operations in various geographic areas.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales:
United States (including U.S. export sales).......... $ 11,295 $ 11,144 $ 11,570
Europe............................................... 2,184 1,934 1,671
Other geographic areas............................... 3,261 3,039 2,794
Less transfers between geographic areas(1)........... (732) (751) (931)
------------ ------------ ------------
Consolidated net sales............................. $ 16,008 $ 15,366 $ 15,104
------------ ------------ ------------
------------ ------------ ------------
Operating income:(2)
United States........................................ $ 1,749 $ 2,090 $ 1,211
Europe............................................... 299 272 40
Other geographic areas............................... 354 326 193
Headquarters......................................... (64) (138) (66)
------------ ------------ ------------
Consolidated operating income(3)................... $ 2,338 $ 2,550 $ 1,378
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
Assets:
United States......................................... $25,606 $26,447
Europe................................................ 2,663 2,141
Other geographic areas................................ 3,171 2,749
Headquarters.......................................... 78 71
-------- --------
Consolidated assets................................. $31,518 $31,408
-------- --------
-------- --------
Liabilities of RJRN Holdings' operations located in
foreign countries..................................... $ 2,100 $ 1,725
-------- --------
-------- --------
</TABLE>
- ------------
(1) Transfers between geographic areas (which consist principally of tobacco
transferred principally from the United States to Europe) are generally made
at fair market value.
(2) The 1995 and 1993 amounts include the effects of restructuring expenses of
$154 million and $730 million, respectively (see Note 2 to the Consolidated
Financial Statements).
(3) Includes amortization of trademarks and goodwill of $636 million, $629
million and $625 million for the 1995, 1994 and 1993 periods, respectively.
F-41
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 17--CONDENSED FINANCIAL INFORMATION OF NABISCO HOLDINGS CORP.
The food segment of RJRN Holdings is conducted through the operating
subsidiaries of Nabisco Holdings. Nabisco Holdings' domestic operations consist
of Nabisco Biscuit, Specialty Products, LifeSavers, Planters, Food Service and
Fleischmann's Companies (the "Domestic Food Group"). Nabisco Holdings'
operations outside the United States consists of Nabisco International, Inc. and
Nabisco Ltd (collectively, the "International Food Group").
Consolidated condensed financial information of Nabisco Holdings at December
31, 1995 and 1994, and for each of the years in the three year period ended
December 31, 1995 is as follows:
NABISCO HOLDINGS CORP.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES
Domestic Food Group................................... $6,020 $5,729 $5,491
International Food Group.............................. 2,274 1,970 1,534
------ ------ ------
8,294 7,699 7,025
------ ------ ------
Costs and expenses:
Costs of products sold................................ 4,776 4,295 3,831
Selling, advertising, administrative and general
expenses............................................ 2,389 2,292 2,245
Amortization of trademarks and goodwill................. 227 225 218
Restructuring expense................................... -- -- 153
------ ------ ------
OPERATING INCOME.................................... 902 887 578
Interest expense........................................ (349) (376) (416)
Other income (expense), net............................. (17) (20) (19)
------ ------ ------
Income before income taxes.......................... 536 491 143
Provision for income taxes.............................. 222 224 51
------ ------ ------
INCOME BEFORE EXTRAORDINARY ITEM.................... 314 267 92
Extraordinary item--loss on early extinguishment of
debt, net of income taxes............................. (19) -- --
------ ------ ------
NET INCOME.......................................... $ 295 $ 267 $ 92
------ ------ ------
------ ------ ------
</TABLE>
F-42
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 17--CONDENSED FINANCIAL INFORMATION OF NABISCO HOLDINGS CORP.--(CONTINUED)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES............... $ 657 $ 499 $ 539
------------ ------------ ------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures................................. (513) (455) (391)
Acquisitions of businesses........................... (291) (449) (128)
Divestitures of businesses........................... 162 -- 463
Other, net........................................... 14 18 15
------------ ------------ ------
Net cash flows used in investing activities...... (628) (886) (41)
------------ ------------ ------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Increase (decrease) in notes payable................. 27 (52) --
Repayment of intercompany debt, net.................. (2,361) -- --
Net proceeds from the issuance of commercial paper... 1,284 -- --
Proceeds from issuance of other long-term debt....... 1,587 1,353 8
Changes in intercorporate indebtedness, net.......... -- 570 (265)
Repayments of other long-term debt................... (1,817) (12) (35)
Net proceeds from issuance of common stock........... 1,201 -- --
Dividends paid on common stock....................... (73) -- --
Dividends and distributions to parent................ -- (1,338) --
Other................................................ -- -- (130)
------------ ------------ ------
Net cash flows from (used in) financing
activities..................................... (152) 521 (422)
------------ ------------ ------
Effect of exchange rate changes on cash and cash
equivalents.......................................... (1) (1) (2)
------------ ------------ ------
Net change in cash and cash equivalents.......... $ (124) $ 133 $ 74
Cash and cash equivalents at beginning of period....... 245 112 38
------------ ------------ ------
Cash and cash equivalents at end of period............. $ 121 $ 245 $ 112
------------ ------------ ------
------------ ------------ ------
</TABLE>
F-43
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 17--CONDENSED FINANCIAL INFORMATION OF NABISCO HOLDINGS CORP.--(CONTINUED)
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 121 $ 245
Accounts and notes receivable, net............................... 523 346
Deferred income taxes............................................ 64 83
Inventories...................................................... 865 783
Prepaid expenses................................................. 51 42
------------ ------------
TOTAL CURRENT ASSETS........................................... 1,624 1,499
------------ ------------
Property, plant and equipment, net................................. 3,132 2,873
Trademarks, net.................................................... 3,977 4,088
Goodwill, net...................................................... 3,477 3,380
Other assets and deferred charges.................................. 93 46
------------ ------------
TOTAL ASSETS................................................... $ 12,303 $ 11,886
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.................................................... $ 76 $ 37
Accounts payable................................................. 511 356
Accrued liabilities.............................................. 882 783
Intercompany payable with RJRN................................... -- 78
1994 Nabisco Credit Agreement.................................... -- 1,350
Current maturities of long-term debt*............................ 24 310
Income taxes accrued............................................. 131 48
------------ ------------
TOTAL CURRENT LIABILITIES...................................... 1,624 2,962
------------ ------------
Long-term debt (less current maturities)*.......................... 4,355 3,943
Other noncurrent liabilities....................................... 724 772
Deferred income taxes.............................................. 1,356 1,329
Stockholders' equity............................................... 4,244 2,880
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................... $ 12,303 $ 11,886
------------ ------------
------------ ------------
</TABLE>
- --------------
* The 1994 amounts for current and non-current maturities of long-term debt
include intercompany indebtedness with RJRN or one of its subsidiaries of
approximately $297 million and $3.8 billion, respectively.
F-44
<PAGE>
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 18--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations and per
share data for RJRN Holdings for the quarterly periods of 1995 and 1994:
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------ ------ ------ ------
<S> <C> <C> <C> <C>
1995
Net sales................................................. $3,540 $4,081 $4,063 $4,324
Operating income.......................................... 620 644 641 433
Income before extraordinary item.......................... 198 153 232 44
Net income................................................ 198 153 216 44
Per share data: (1)
Income before extraordinary item........................ $ .51 $ .37 $ .61 $ .10
Net income.............................................. .51 .37 .56 .10
Common Stock dividends declared......................... -- .375 .375 .375
Market price of Common Stock............................
--high................................................ 32 1/2 31 1/4 33 1/4 33 3/8
--low................................................. 25 25 1/4 26 3/8 27 7/8
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------ ------ ------ ------
<S> <C> <C> <C> <C>
1994
Net sales................................................. $3,572 $3,784 $3,966 $4,044
Operating income.......................................... 632 675 678 565
Income before extraordinary item.......................... 194 192 216 162
Net income................................................ 195 46 216 62
Per share data: (1)
Income before extraordinary item........................ $ .12 $ .11 $ .11 $ .08
Net income.............................................. .12 .01 .11 .02
Market price of Common Stock............................
--high................................................ 40 5/8 35 35 5/8 36 1/4
26
--low................................................. 28 1/8 27 1/2 28 1/8 9/16
</TABLE>
- ------------
(1) Earnings per share is computed independently for each of the periods
presented; therefore, the sum of the earnings per share amounts for the
quarters may not equal the total for the year.
----------------------------
F-45
<PAGE>
SCHEDULE I
RJR NABISCO HOLDINGS CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Administrative expenses................................ $ -- $ (12) $ (8)
Interest and debt expense.............................. (29) -- (23)
Other income (expense), net............................ 2 11 30
------------ ------------ ------------
Loss before income taxes......................... (27) (1) (1)
Benefit for income taxes............................... (15) (3) (2)
------------ ------------ ------------
Income (loss) before equity in income (loss) from
subsidiaries................................... (12) 2 1
Equity in income (loss) from subsidiaries, net of
income taxes......................................... 639 762 (4)
------------ ------------ ------------
Income (loss) before extraordinary item.......... 627 764 (3)
Extraordinary item--loss on early extinguishments of
debt, net of income taxes (including equity in
extraordinary losses from subsidiaries of $16 and
$135 for 1995 and 1993, respectively)................ (16) (245) (142)
------------ ------------ ------------
Net income (loss)................................ 611 519 (145)
Less preferred stock dividends......................... 110 131 68
------------ ------------ ------------
Net income (loss) applicable to common stock..... 501 388 (213)
Retained earnings (accumulated deficit) at beginning of
period............................................... (364) (883) (738)
Common stock and other dividends....................... (569) (262) (178)
Amounts reclassified to paid-in capital................ 432 393 246
------------ ------------ ------------
Retained earnings (accumulated deficit) at end of
period............................................... $ -- $ (364) $ (883)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Condensed Financial Information.
S-1
<PAGE>
SCHEDULE I
RJR NABISCO HOLDINGS CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss).................................... $ 611 $ 519 $ (145)
------------ ------------ ------------
Adjustments to reconcile net income (loss) to net
cash flows from (used in) operating activities:
Deferred income tax provision...................... 1 62 69
Non-cash interest and debt expense................. -- -- 22
Extraordinary item--loss on early extinguishments
of debt.......................................... -- -- 10
Equity in (income) loss from subsidiaries,
net of income taxes.............................. (623) (517) 139
Other, net......................................... (23) (29) 70
------------ ------------ ------------
Total adjustments.............................. (645) (484) 310
------------ ------------ ------------
Net cash flows from (used in) operating
activities....................................... (34) 35 165
------------ ------------ ------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Dividends received from subsidiary................... 267 42 48
Investment in subsidiary............................. -- (1,680) (1,214)
------------ ------------ ------------
Net cash flows from (used in) investing
activities....................................... 267 (1,638) (1,166)
------------ ------------ ------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (NOTE
A):
Repayments of long-term debt......................... -- -- (548)
Proceeds from issuance of Common Stock............... 13 54 9
Proceeds from issuance of Series B Preferred Stock... -- -- 1,250
Proceeds from issuance of Series C Preferred Stock... -- 1,734 --
Dividends paid on Common Stock....................... (307) -- --
Dividends paid on Series A Preferred Stock........... -- (175) (175)
Dividends paid on Series B Preferred Stock........... (97) (116) (33)
Dividends paid on Series C Preferred Stock........... (160) (85) --
Dividends paid on ESOP Preferred Stock............... (19) (19) (20)
Dividends paid on redeemable Convertible Preferred
Stock.............................................. -- -- (13)
Repurchase of preferred stock........................ -- (3) (105)
Repurchases and cancellations of common stock and
stock options...................................... (2) (1) (1)
Retirement of ESOP preferred stock................... (5) (4) (1)
Financing and advisory fees paid..................... -- (54) (39)
Other, net--including intercompany transfers......... 332 276 684
------------ ------------ ------------
Net cash flows from (used in) financing
activities....................................... (245) 1,607 1,008
------------ ------------ ------------
Net change in cash and cash equivalents............ (12) 4 7
Cash and cash equivalents at beginning of period....... 14 10 3
------------ ------------ ------------
Cash and cash equivalents at end of period............. $ 2 $ 14 $ 10
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Condensed Financial Information.
S-2
<PAGE>
SCHEDULE I
RJR NABISCO HOLDINGS CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 2 $ 14
Accounts and notes receivable, net............................... 7 --
------------ ------------
TOTAL CURRENT ASSETS....................................... 9 14
------------ ------------
Investment in subsidiary........................................... 12,182 11,410
Other assets and deferred charges.................................. 1 1
------------ ------------
$ 12,192 $ 11,425
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities......................... $ 159 $ 44
------------ ------------
TOTAL CURRENT LIABILITIES.................................. 159 44
------------ ------------
Intercompany payable, net.......................................... 651 399
Deferred income taxes.............................................. 70 74
Junior Subordinated Debentures (Note B)............................ 983 --
Commitments and contingencies (Note C)
Stockholders' equity (Note D):
ESOP convertible preferred stock--14,990,677 and 15,315,130
shares issued and outstanding at December 31, 1995 and 1994,
respectively................................................... 240 245
Series B preferred stock--12,044 and 50,000 shares issued and
outstanding at December 31, 1995 and 1994, respectively........ 301 1,250
Series C convertible preferred stock--26,675,000 shares issued
and outstanding at December 31, 1995 and 1994.................. 3 3
Common stock--272,807,942 and 272,331,377 shares issued and
outstanding at December 31, 1995 and 1994, respectively........ 3 3
Paid-in capital.................................................. 10,110 10,157
Cumulative translation adjustments............................... (176) (164)
Retained earnings (accumulated deficit).......................... -- (364)
Receivable from ESOP............................................. (137) (186)
Loans receivable from employees.................................. (7) (14)
Unamortized value of restricted stock............................ (8) (22)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY................................. 10,329 10,908
------------ ------------
$ 12,192 $ 11,425
------------ ------------
------------ ------------
</TABLE>
See Notes to Condensed Financial Information.
S-3
<PAGE>
SCHEDULE I
RJR NABISCO HOLDINGS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
NOTE A--SUPPLEMENTAL CASH FLOWS
INFORMATION
For information regarding certain non-cash financing activities, see Notes
11 and 13 to the Consolidated Financial Statements.
NOTE B--JUNIOR SUBORDINATED DEBENTURES
On September 21, 1995, RJRN Holdings issued approximately $978 million
aggregate principal amount of its Junior Subordinated Debentures to the Trust.
The Trust, in turn, exchanged approximately $949 million of its Trust Preferred
Securities for 37,956,060 of the 50,000,000 Series B Depositary Shares
outstanding, each representing one-tenth of a share of the 50,000 outstanding
shares of Series B Preferred Stock. RJRN Holdings retired the exchanged shares,
leaving 12,043.94 shares of the Series B Preferred Stock outstanding. See Note
11 to the Consolidated Financial Statements for additional information regarding
this transaction.
The obligations of RJRN Holdings under the Junior Subordinated Debentures
are unsecured obligations and will be subordinate and junior in right of payment
to all senior indebtedness of RJRN Holdings, but senior to all future stock
issuances and to any future guarantee entered into by RJRN Holdings in respect
of its capital stock. As of December 31, 1995, RJRN Holdings had no senior
indebtedness other than its guarantee of RJRN's obligations under the New RJRN
Credit Agreements. The payment of distributions out of moneys held by the Trust
and payments on liquidation of the Trust and the redemption of Trust Preferred
Securities are guaranteed by RJRN Holdings on a subordinated basis. RJRN
Holdings' guarantee is subordinate and junior in right of payment to any senior
indebtedness of RJRN Holdings and to the Junior Subordinated Debentures, and
senior to all capital stock now or hereafter issued by RJRN Holdings and to any
guarantee now or hereafter entered into by RJRN Holdings in respect of its
capital stock.
Interest on the Junior Subordinated Debentures is payable quarterly in
arrears. RJRN Holdings has the right to extend the interest payment period under
certain circumstances. RJRN Holdings has the right to redeem the Junior
Subordinated Debentures, in whole or in part, on or after August 19, 1998, upon
not less than 30 nor more than 60 days notice. Certain covenants of RJRN
Holdings applicable to the Junior Subordinated Debentures limit the ability of
RJRN Holdings to declare or pay any dividends on, or redeem, purchase, acquire
or make a distribution or liquidation payment with respect to any of its common
or preferred stock, or make any guarantee payment, if RJRN Holdings is in
default of any of its payments or guarantees with respect to the Junior
Subordinated Debentures.
NOTE C--COMMITMENTS AND CONTINGENCIES
RJRN Holdings has guaranteed the indebtedness of RJRN under the New RJRN
Credit Agreements.
For disclosure of additional contingent liabilities, see Note 12 to the
Consolidated Financial Statements.
NOTE D--STOCKHOLDERS' EQUITY
RJRN Holdings' stockholders approved a one-for-five reverse split of the
Common Stock on April 12, 1995. For additional information, see Note 13 to the
Consolidated Financial Statements.
S-4
<PAGE>
SCHEDULE I
RJR NABISCO, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Administrative expenses................................ $ 1 $ (99) $ (7)
Restructuring expense.................................. -- -- (33)
Interest and debt expense.............................. (614) (1,009) (1,105)
Other income (expense), net............................ 922 1,153 1,391
------------ ------------ ------------
Income before income taxes....................... 309 45 246
Provision (benefit) for income taxes................... 80 (17) 40
------------ ------------ ------------
Income before equity in income (loss) from
subsidiaries......................................... 229 62 206
Equity in income (loss) from subsidiaries, net of
income taxes......................................... 409 700 (210)
------------ ------------ ------------
Income (loss) before extraordinary item.......... 638 762 (4)
Extraordinary item-loss on early extinguishments of
debt net of income taxes (including equity in
extraordinary losses from subsidiary of $16 million
for 1995............................................. (16) (245) (135)
------------ ------------ ------------
Net income (loss)...................................... 622 517 (139)
Retained earnings (accumulated deficit) at beginning of
period............................................... 16 (459) (320)
Dividends paid to parent and charged to retained
earnings ............................................ (267) (42) --
------------ ------------ ------------
Retained earnings (accumulated deficit) at end of
period............................................... $ 371 $ 16 $ (459)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Condensed Financial Information.
S-5
<PAGE>
SCHEDULE I
RJR NABISCO, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ----------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss)................................. $ 622 $ 517 $ (139)
------------ ------- ------------
Adjustments to reconcile net income (loss) to net
cash flows from (used in) operating activities:
Deferred income tax provision (benefit)......... (146) (56) (154)
Non-cash interest and debt expense.............. 13 117 264
Extraordinary item-loss on early extinguishments
of debt....................................... 29 377 208
Equity in (income) loss from subsidiaries,
net of income taxes........................... (409) (700) 210
Other, net...................................... (301) (375) (107)
------------ ------- ------------
Total adjustments........................... (814) (637) 421
------------ ------- ------------
Net cash flows from (used in) operating
activities.................................... (192) (120) 282
------------ ------- ------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures.............................. -- (1) (1)
------------ ------- ------------
Net cash flows used in investing activities..... -- (1) (1)
------------ ------- ------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (NOTE
A):
Net borrowings (repayments) under the credit
agreements.................................... (1,750) 1,561 (2,614)
Net proceeds from the issuance (repayment) of
commercial paper................................ (640) (49) 342
Proceeds from issuance of other long-term debt.... 666 -- 1,942
Repayments of long-term debt...................... (800) (4,648) (1,376)
Financing and advisory fees paid.................. (29) (6) (9)
Dividends paid to parent.......................... (267) (42) (48)
Other, net--including intercompany transfers...... 2,977 3,294 1,518
------------ ------- ------------
Net cash flows from (used in) financing
activities.................................... 157 110 (245)
------------ ------- ------------
Net change in cash and cash equivalents......... (35) (11) 36
Cash and cash equivalents at beginning of period.... 40 51 15
------------ ------- ------------
Cash and cash equivalents at end of period.......... $ 5 $ 40 $ 51
------------ ------- ------------
------------ ------- ------------
</TABLE>
See Notes to Condensed Financial Information.
S-6
<PAGE>
SCHEDULE I
RJR NABISCO, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 5 $ 40
Accounts and notes receivable.................................... 81 13
Prepaid expenses................................................. 2 2
------------ ------------
TOTAL CURRENT ASSETS....................................... 88 55
------------ ------------
Intercompany receivable, net....................................... 11,944 12,875
Investment in subsidiaries......................................... 5,962 8,794
Property, plant and equipment, net................................. 8 11
Other assets and deferred charges.................................. 86 147
------------ ------------
$ 18,088 $ 21,882
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued liabilities......................... $ 264 $ 346
Current maturities of long-term debt............................. 117 600
Income taxes accrued............................................. 36 74
------------ ------------
TOTAL CURRENT LIABILITIES.................................. 417 1,020
------------ ------------
Long-term debt (less current maturities)........................... 4,945 8,683
Other noncurrent liabilities....................................... 16 62
Deferred income taxes.............................................. 557 707
Commitments and contingencies (Note B).............................
Stockholder's equity:
Paid-in capital.................................................. 11,958 11,558
Cumulative translation adjustments............................... (176) (164)
Retained earnings................................................ 371 16
------------ ------------
TOTAL STOCKHOLDER'S EQUITY................................. 12,153 11,410
------------ ------------
$ 18,088 $ 21,882
------------ ------------
------------ ------------
</TABLE>
See Notes to Condensed Financial Information.
S-7
<PAGE>
SCHEDULE I
RJR NABISCO, INC.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
NOTE A--SUPPLEMENTAL CASH FLOWS
INFORMATION
For information regarding certain non-cash financing activities, see Notes
11 and 13 to the Consolidated Financial Statements.
NOTE B--COMMITMENTS AND CONTINGENCIES
For disclosure of contingent liabilities, see Note 12 to the Consolidated
Financial Statements.
S-8
<PAGE>
SCHEDULE II
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------------------------------------------------------
ADDITIONS
--------------------
(1) (2)
CHARGED CHARGED
BALANCE AT TO COSTS TO OTHER BALANCE AT
BEGINNING AND ACCOUNTS DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES (A) (B) PERIOD(C)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Those valuation and qualifying accounts
which are deducted in the balance sheet
from the assets to which they apply:
Year ended December 31, 1995:
For discounts and doubtful accounts...... $ 63 $ 8 $ -- $(23) $ 48
Other assets............................. 53 33 2 (45) 43
----- --- --- ----- -----
$116 $ 41 $ 2 $(68) $ 91
----- --- --- ----- -----
----- --- --- ----- -----
Year ended December 31, 1994:
For discounts and doubtful accounts...... $ 59 $ 16 $ 1 $(13) $ 63
Other assets............................. 46 34 8 (35) 53
----- --- --- ----- -----
$105 $ 50 $ 9 $(48) $116
----- --- --- ----- -----
----- --- --- ----- -----
Year ended December 31, 1993:
For discounts and doubtful accounts...... $ 84 $ 23 $ 8 $(56) $ 59
Other assets............................. 38 26 -- (18) 46
----- --- --- ----- -----
$122 $ 49 $ 8 $(74) $105
----- --- --- ----- -----
----- --- --- ----- -----
</TABLE>
- ------------
(A) Miscellaneous adjustments.
(B) Principally charges against the accounts.
(C) Excludes valuation allowance accounts for deferred tax assets.
S-9
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO.
- ---------
<TABLE>
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of RJR Nabisco
Holdings Corp., filed October 1, 1990 (incorporated by reference to
Exhibit 3.1 to Amendment No. 4, filed on October 2, 1990, to the
Registration Statement on Form S-4 of RJR Nabisco Holdings Corp.,
Registration No. 33-36070, filed on July 25, 1990, as amended (the
"Form S-4, Registration No. 33-36070")).
3.1(a) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed January 29, 1991
(incorporated by reference to Exhibit 3.1(a) to Amendment No. 3, filed
on January 31, 1991, to the Registration Statement on Form S-4 of RJR
Nabisco Holdings Corp., Registration No. 33-38227).
3.1(b) Certificate of Designation of ESOP Convertible Preferred Stock, filed
April 10, 1991 (incorporated by reference to Exhibit 3.1(b) to
Amendment No. 2, filed on April 11, 1991, to the Registration Statement
on Form S-1 of RJR Nabisco Holdings Corp., Registration No. 33-39532,
filed on March 20, 1991).
3.1(c) Certificate of Designation of Series A Conversion Preferred Stock,
filed November 7, 1991 (incorporated by reference to Exhibit 3.1(c) to
Amendment No. 3, filed on November 1, 1991, to the Registration
Statement on Form S-1 of RJR Nabisco Holdings Corp., Registration No.
33-43137, filed October 2, 1991 (the "Form S-1, Registration No.
33-43137")).
3.1(d) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed December 16, 1991
(incorporated by reference to Exhibit 3.1(d) of the Annual Report on
Form 10-K of RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group,
Inc., RJR Nabisco Capital Corp. and RJR Nabisco, Inc. for the fiscal
year ended December 31, 1991, File Nos. 1-10215, 1-10214, 1-10248 and
1-6388 (the "1991 Form 10-K")).
3.1(e) Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed April 6, 1993
(incorporated by reference to Exhibit 3.3 of the Quarterly Report on
Form 10-Q of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the
fiscal quarter ended March 31, 1993, filed April 30, 1993 (the "March
1993 Form 10-Q")).
3.1(f) Certificate of Designation of Series B Cumulative Preferred Stock,
filed August 16, 1993 (incorporated by reference to Exhibit 3.1(f) o
the Annual Report on Form 10-K of RJR Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the fiscal year ended December 31, 1993, File Nos.
1-10215 and 1-6388, filed on February 24, 1994 (the "1993
Form 10-K").
3.1(g) Certificate of Designation of Series C Conversion Preferred Stock
(incorporated by reference to Exhibit 4.1(h) to the Registration
Statement on Form S-3 of RJR Nabisco Holdings Corp., Registration No.
33-52381 filed on February 2, 1994, as amended ("Form S-3 Registration
No. 33-52381").
3.1(h) Certificate of Elimination of Cumulative Convertible Preferred Stock of
RJR Nabisco Holdings Corp., filed July 7, 1994 (incorporated by
reference to Exhibit 4.1 of the Quarterly Report on Form 10-Q of RJR
Nabisco Holdings Corp. and RJR Nabisco, Inc. for the fiscal quarter
ended June 30, 1994 (the "June 1994 Form 10-Q")).
3.1(i) Certificate of Retirement of Series A Conversion Preferred Stock of RJR
Nabisco Holdings Corp., filed effective November 21, 1994 (incorporated
by reference to Exhibit 3.1(j) of the Registrants' Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, File Nos. 1-10215
and 1-6388, filed on February 23, 1995 (the "1994 Form 10-K").
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
3.1(j) A composite of the Amended and Restated Certificate of Incorporation of
RJR Nabisco Holdings Corp., as amended to November 21, 1994
(incorporated by reference to Exhibit 3.1(j) of the 1994 Form 10-K).
3.1(k) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp. filed April 12, 1995
(incorporated by reference to Exhibit 3.1 of the Registrants' report on
Form 10-Q for the quarter ended March 31, 1995 (the "March 1995 10-Q").
3.1(l) Composite of the Amended and Restated Certificate of Incorporation of
RJR Nabisco Holdings Corp. as amended to and including April 12, 1995
(incorporated by reference to Exhibit 3.1(a) of the March 1995 10-Q).
3.1(m)* Certificate of Retirement of certain shares of Series B Cumulative
Preferred Stock, filed October 11, 1995.
3.2 Amended and Restated By-Laws of RJR Nabisco Holdings Corp., as amended,
effective January 20, 1994 (incorporated by reference to Exhibit 3.2 to
the 1993 Form 10-K).
3.2(a) Amended and Restated By-laws of RJR Nabisco Holdings Corp., as amended
effective August 21, 1995 (incorporated by reference to Exhibit 3.1 to
the Registrants' Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1995, filed October 31, 1995 (the "September 1995
10-Q")).
3.2(b) Amended and Restated By-laws of RJR Nabisco, Inc., as amended effective
August 8, 1995 (incorporated by reference to Exhibit 3.2 of the
September 1995 10-Q).
3.2(c)* RJR Nabisco Holdings Corp. By-Laws as Amended Effective October 11,
1995.
3.2(d)* RJR Nabisco Holdings Corp. By-Laws as Amended Effective December 5,
1995.
3.3 Restated Certificate of Incorporation of RJR Nabisco, Inc.
(incorporated by reference to Exhibit 3.9 to Amendment No. 2, filed on
May 12, 1989, to the Registration Statement on Form S-1 of RJR Holdings
Capital Corp., RJR Holdings Corp., RJR Holdings Group, Inc. and RJR
Nabisco, Inc., Registration No. 33-27891, filed on April 4, 1989 (the
"Form S-1, Registration No. 33-27891")).
3.3(a) Certificate of Amendment of the Certificate of Incorporation of RJR
Nabisco, Inc., filed September 22, 1989 (incorporated by reference to
Exhibit 3.7(b) to the Registration Statement on Form S-1 of RJR
Holdings Capital Corp., RJR Holdings Corp., RJR Holdings Group, Inc.
and RJR Nabisco, Inc., Registration No. 33-31937, filed on November 3,
1989, as amended (the "Form S-1, Registration No. 33-31937")).
3.3(b) Certificate of Change of Location of Registered Office and of
Registered Agent of RJR Nabisco, Inc., filed July 5, 1990 (incorporated
by reference to Exhibit 3.7(b) of the Annual Report on Form 10-K of RJR
Nabisco Holdings Corp., RJR Nabisco Holdings Group, Inc., RJR Nabisco
Capital Corp. and RJR Nabisco, Inc. for the year ended December 31,
1990, File Nos. 1-10215, 1-10214, 1-10248 and 1-6388 (the "1990 Form
10-K")).
3.3(c) Certificate of Amendment of the Amended and Restated Certificate of
Incorporation of RJR Nabisco, Inc., filed May 13, 1994 (incorporated by
reference to the June 30, 1994 Form 10-Q).
3.3(d) A composite of the Certificate of Incorporation of RJR Nabisco, Inc.,
as amended to May 13, 1994 (incorporated by reference to Exhibit 3.3(d)
of the 1994 Form 10-K).
3.4 Amended and Restated By-laws of RJR Nabisco, Inc., as amended,
effective January 20, 1994 (incorporated by reference to Exhibit 3.4 of
the 1993 Form 10-K).
3.4(a)* RJR Nabisco, Inc. By-Laws as Amended Effective October 11, 1995.
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3.4(b)* RJR Nabisco, Inc. By-Laws as Amended Effective December 5, 1995.
4.1 Amended and Restated Indenture, dated as of July 24, 1995, between RJR
Nabisco, Inc. and Citibank, N.A., dated as of July 24, 1995
(incorporated by reference to Exhibit 4.1 to the Quarterly Report on
Form 10-Q of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the
fiscal quarter ended June 30, 1995 (the "Second Quarter 1995 10-Q")).
4.2 Indenture (the "TOPrS Indenture"), dated as of September 21, 1995,
between RJR Nabisco Holdings Corp. and the Bank of New York
(incorporated by reference to Exhibit 4.1 to the Registration Statement
on Form S-4 of RJR Nabisco Holdings Corp. and RJR Nabisco Holdings
Capital Trust I, Registration Nos. 33-60415 and 33-60415-01, filed June
20, 1995 (the "TOPrS Registration Statement")).
4.3 Form of First Supplemental Indenture to the TOPrS Indenture
(incorporated by reference to Exhibit 4.2 to the TOPrS Registration
Statement).
4.4 Form of Amended and Restated Declaration of Trust of RJR Nabisco
Holdings Capital Trust I (incorporated by reference to Exhibit 4.5 to
the TOPrS Registration Statement).
4.5 Form of Preferred Security of RJR Nabisco Holdings Capital Trust I
(included in Exhibit 4.4 above).
4.6 Form of Junior Subordinated Debenture (included in Exhibit 4.2 above).
4.7 Form of Guarantee Agreement with respect to Preferred Securities
between RJR Nabisco Holdings Corp. and the Bank of New York as the
Guarantee Trustee (incorporated by reference to Exhibit 4.8 to the
TOPrS Registration Statement).
4.8 Indenture, dated as of June 5, 1995, between Nabisco, Inc. and
Citibank, N.A., (incorporated by reference to Exhibit 4.1 to Amendment
No. 1 to the Registration Statement on Form S-4 of Nabisco, Inc.,
Registration No. 33-90224, filed March 29, 1995).
4.9 The Registrants agree to furnish copies of any instrument 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
Commission upon request.
10.1 Credit Agreement (the "Three Year Credit Agreement"), dated as of April
28, 1995, among RJR Nabisco Holdings Corp., RJR Nabisco, Inc. and
various lending institutions (incorporated by reference to Exhibit 10.1
to the Second Quarter 1995 10-Q).
10.2 Credit Agreement (the "364 Day Credit Agreement"), dated as of April
28, 1995, among RJR Nabisco Holdings Corp., RJR Nabisco, Inc. and
various lending institutions (incorporated by reference to Exhibit 10.2
to the Second Quarter 1995 10-Q).
10.3 Agreement and Waiver to the Three Year Credit Agreement and the 364 Day
Credit Agreement, dated as of July 27, 1995 (incorporated by reference
to Exhibit 10.5 to the Second Quarter 1995 10-Q).
10.4 First Amendment, dated as of September 12, 1995, to the Three Year
Credit Agreement and the 364 Day Credit Agreement (incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of RJR
Nabisco Holdings Corp. and RJR Nabisco, Inc. for the fiscal quarter
ended September 30, 1995).
10.5 Credit Agreement (the "Nabisco Credit Agreement"), dated as of April
28, 1995, among Nabisco Holdings Corp., Nabisco, Inc. and various
lending institutions (incorporated by reference to Exhibit 4.3 to
Amendment No. 1 filed June 16, 1995 to the Registration Statement on
Form S-3 of Nabisco, Inc., Registration No. 33-93214, filed June 7,
1995).
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10.6 First Amendment to the Nabisco Credit Agreement, dated as of July 24,
1995 (incorporated by reference to Exhibit 10.4 to the Second Quarter
1995 10-Q).
*10.7 Second Amendment, dated as of November 3, 1995, to the Nabisco Credit
Agreement.
*10.8 Credit Agreement (the "Nabisco Commercial Paper Facility"), dated as of
November 3, 1995, among Nabisco Holdings Corp., Nabisco, Inc. and
various lending institutions.
10.9 Retirement Plan for Directors of RJR Nabisco, Inc. as amended and
restated on January 1, 1989 (incorporated by reference to Exhibit 10(a)
to the Annual Report on Form 10-K for the fiscal year ended December
31, 1988, file number 1-6388, filed on March 9, 1989, as amended
through April 14, 1989 (the "1988 Form 10-K")).
10.10 Retirement Trust Agreement, made as of October 12, 1988, between RJR
Nabisco, Inc. and Wachovia Bank and Trust Company, N.A. (incorporated
by reference to Exhibit 10.6 to the Registration Statement on Form S-4
of RJR Holdings Corp. and RJR Holdings Group, Inc., Registration No.
33-27894, filed April 5, 1989, as amended (the "Form S-4, Registration
No. 33-27894")).
10.11 Form of Employment Agreement containing Change of Control provision
(incorporated by reference to Exhibit 10.8 to the Form S-4,
Registration No. 33-27894).
10.12 Special Addendum to Form of Employment Agreement filed as Exhibit
10.22, dated December 20, 1988 (incorporated by reference to Exhibit
10(d)(ii) to the 1988 Form 10-K).
10.13 Form of Agreement containing Gross-Up provisions, dated January 27,
1989 (incorporated by reference to Exhibit 10(d)(iii) to the 1988 Form
10-K).
10.14 Trust Agreement between RJR Nabisco, Inc. and Wachovia Bank and Trust
Company, N.A., Trustee, dated January 27, 1989 (incorporated by
reference to Exhibit 10(d)(iv) to the 1988 Form 10-K).
10.15 Form of Employment Agreement Without Change of Control provision
(incorporated by reference to Exhibit 10.16 to the Form S-4,
Registration No. 33-27894).
10.16 Special Addendum, dated December 20, 1988 (incorporated by reference to
Exhibit 10(d)(ii) to the 1988 Form 10-K).
10.17 Master Trust Agreement, as amended and restated as of October 12, 1988,
between RJR Nabisco, Inc. and Wachovia Bank and Trust Company, N.A.
(incorporated by reference to Exhibit 10.18 to the Form S-4,
Registration No. 33-27894).
10.18(a) Amendment No. 1 to Master Trust Agreement, dated January 27, 1989
(incorporated by reference to Exhibit 10(g)(ii) to the 1988 Form 10-K).
10.18(b) Amendment No. 2 to Master Trust Agreement, dated January 27, 1989
(incorporated by reference to Exhibit 10(g)(iii) to the 1988 Form
10-K).
10.19 Excess Benefit Master Trust Agreement, as amended and restated as of
October 12, 1988, between RJR Nabisco, Inc. and Wachovia Bank and Trust
Company, N.A. (incorporated by reference to Exhibit 10.21 to the Form
S-4, Registration No. 33-27894).
10.19(a) Amendment No. 1 to Excess Benefit Master Trust Agreement, dated January
27, 1989 (incorporated by reference to Exhibit 10(h)(ii) to the 1988
Form 10-K).
10.20 Supplemental Benefits Plan of RJR Nabisco, Inc. and Participating
Companies, as amended on October 12, 1988 (incorporated by reference to
Exhibit 10.25 to the Form S-4, Registration No. 33-27894).
10.21(a) Amendment to Supplemental Benefits Plan, dated November 23, 1988
(incorporated by reference to Exhibit 10(k)(ii) to the 1988 Form 10-K).
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10.21(b) Amendment No. 2 to Supplemental Benefits Plan, dated January 27, 1989
(incorporated by reference to Exhibit 10(k)(iii) to the 1988 Form
10-K).
10.22 Additional Benefits Plan of RJR Nabisco, Inc. and Participating
Companies, effective October 12, 1988 (incorporated by reference to
Exhibit 10.28 to the Form S-4, Registration No. 33-27894).
10.22(a) Amendment to Additional Benefits Plan, dated October 28, 1988
(incorporated by reference to Exhibit 10(l)(ii) to the 1988 Form 10-K).
10.22(b) Amendment to Additional Benefits Plan, dated November 23, 1988
(incorporated by reference to Exhibit 10(1)(iii) to the 1988 Form
10-K).
10.22(c) Amendment to Additional Benefits Plan No. 3, dated January 27, 1989
(incorporated by reference to Exhibit 10(1)(iv) to the 1988 Form 10-K).
10.23 RJR Nabisco, Inc. Supplemental Executive Retirement Plan, as amended on
July 21, 1988 (incorporated by reference to Exhibit 10.32 to the Form
S-4, Registration No. 33-27894).
10.24(a) Amendment to Supplemental Executive Retirement Plan, dated November 23,
1988 (incorporated by reference to Exhibit 10(m)(ii) to the 1988 Form
10-K).
10.24(b) Amendment No. 2 to Supplemental Executive Retirement Plan, dated
January 27, 1989 (incorporated by reference to Exhibit 10(m)(iii) to
the 1988 Form 10-K).
10.24(c) Amendment to Supplemental Executive Retirement Plan, dated April 10,
1993 (incorporated by reference to the 1993 Form 10-K).
10.25 Form of Common Stock Subscription Agreement between RJR Holdings Corp.
and the purchaser named therein (incorporated by reference to Exhibit A
to Post-Effective Amendment No. 2, filed on August 21, 1989, to the
Form S-1, Registration No. 33-29401 (the "Post-Effective Amendment No.
2 to the Form S-1, Registration No. 33-29401")).
10.26 Form of Non-Qualified Stock Option Agreement between RJR Holdings Corp.
and the optionee named therein (incorporated by reference to Exhibit B
to Post-Effective Amendment No. 2 to the Form S-1, Registration No.
33-29401).
10.27 Non-Qualified Stock Option Agreement, dated December 31, 1993, between
RJR Nabisco Holdings Corp. and Charles M. Harper (incorporated by
reference to the 1993 Form 10-K).
10.27(a) Non-Qualified Stock Option Agreement, dated December 31, 1994, between
RJR Nabisco Holdings Corp. and Charles M. Harper (incorporated by
reference to Exhibit 10.18(a) of 1994 Form 10-K).
10.28 Employment Agreement, dated May 27, 1993, by and among RJR Nabisco
Holdings Corp., RJR Nabisco, Inc. and Charles M. Harper (incorporated
by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q of
RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the fiscal quarter
ended June 30, 1993, filed August 3, 1993 (the "June 1993 Form 10-Q")).
10.29 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 dated as of March 1, 1994 (incorporated by reference
to Exhibit 10.2 of the Quarterly Report on Form 10-Q of RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc. for the fiscal quarter ended March
31, 1994 filed May 12, 1994 (the "March 1994 Form 10-Q").
10.30 Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and Charles M. Harper (incorporated by reference to
Exhibit 10.2 of the June 1993 Form 10-Q).
10.31* First 1995 Amendment (dated February 15, 1995) to Employment Agreement
dated May 27, 1993 between RJR Nabisco Holdings Corp. and Charles M.
Harper.
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10.32* Second 1995 Amendment (dated April 13, 1995) to Employment Agreement
dated May 27, 1993 between RJR Nabisco Holdings Corp. and Charles M.
Harper.
10.33* Restated and Amended Employment Agreement (dated December 5, 1995) by
and among RJR Nabisco Holdings Corp., RJR Nabisco, Inc. and Charles M.
Harper.
10.34* Amendment dated April 13, 1995 to Non-Qualified Stock Option Agreements
dated May 31, 1993, December 31, 1993, and December 31, 1994 between
RJR Nabisco Holdings Corp. and Charles M. Harper.
10.35* Non-Qualified Stock Option Agreement dated January 19, 1995 between
Nabisco Holdings Corp. and Charles M. Harper.
10.36* Non-Qualified Stock Option Agreement dated June 13, 1995 between RJR
Nabisco Holdings Corp. and Charles M. Harper.
10.37* Non-Qualified Stock Option Agreement dated December 31, 1995 between
RJR Nabisco Holdings Corp. and Charles M. Harper.
10.38* Engagement Agreement (dated March 3, 1995) between RJR Nabisco Holdings
Corp. and Steven F. Goldstone.
10.39* Employment Agreement (dated October 1, 1995) by and among RJR Nabisco
Holdings Corp., RJR Nabisco, Inc. and Steven F. Goldstone.
10.40* Amended and Restated Employment Agreement (dated December 5, 1995) by
and among RJR Nabisco Holdings Corp., and RJR Nabisco, Inc. and Steven
F. Goldstone.
10.41* Non-Qualified Stock Option Agreement (dated December 5, 1995) between
RJR Nabisco Holdings Corp. and Steven. F. Goldstone.
10.42* Contingent Performance Share Agreement (dated December 5, 1995) between
RJR Nabisco Holdings Corp. and Steven F. Goldstone.
10.43* Secured Promissory Note (dated December 5, 1995) of Steven F. Goldstone
in favor of RJR Nabisco Holdings Corp.
10.44* Amendment dated December 5, 1995 to Employment Agreement between RJR
Nabisco Holdings Corp. and Andrew J. Schindler.
10.45* Participation Agreement--RJR Nabisco, Inc. Supplemental Executive
Retirement Plan for Andrew J. Schindler dated December 28, 1995.
10.46* Amended and Restated Employment Agreement, dated as of September 1,
1993, by and among R.J. Reynolds Tobacco Company, R.J. Reynolds Tobacco
International Inc., RJR Nabisco Holdings Corp., RJR Nabisco, Inc. and
Mr. James W. Johnston (incorporated by reference to Exhibit 10.2 to the
September 1993 Form 10-Q).
*10.46(a) Letter Agreement dated July 26, 1995, regarding Amended and Restated
Employment Agreement with James W. Johnston.
*10.46(b) Letter Agreement dated December 21, 1995, regarding Amended and
Restated Employment Agreement with James W. Johnston.
10.47 Equity Securities Purchase Agreement dated as of July 15, 1990 between
RJR Nabisco Holdings Corp. and Whitehall Associates, L.P. (incorporated
by reference to Exhibit 4.4 to the Form S-4, Registration No.
33-36070).
10.48 Consulting Agreement, dated February 14, 1995, among RJR Nabisco
Holdings Corp., Nabisco Holdings Corp. and Eugene R. Croisant
(incorporated by reference to Exhibit 10.32 of 1994 Form 10-K).
10.49 Registration Rights Agreement (Common Stock), dated as of July 15,
1990, between RJR Nabisco Holdings Corp. and Whitehall Associates, L.P.
(incorporated by reference to Exhibit 4.5 to the Form S-4, Registration
No. 33-36070).
10.50 Amended and Restated RJR Nabisco Holdings Corp. 1990 Long Term
Incentive Plan (incorporated by reference to Exhibit 10.2 to the March
1993 Form 10-Q).
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10.51 Form of Purchase Stock Agreement between RJR Nabisco Holdings Corp. and
purchaser named therein (1991 Grant) (incorporated by reference to
Exhibit 4.3 to the Registration Statement on Form S-8 of RJR Nabisco
Holdings Corp., Registration No. 33-39791, filed on April 5, 1991 (the
"Form S-8, Registration No. 33-39791").
10.52 Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and the senior executive optionee named therein (1991
Grant) (incorporated by reference to Exhibit 4.4(a) to Form S-8,
Registration No. 33-39791).
10.53 Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and the executive or management optionee named therein
(1991 Grant) (incorporated by reference to Exhibit 4.4(b) to Form S-8,
Registration No. 33-39791).
10.54 Form of Secured Promissory Note of purchaser named therein in favor of
RJR Nabisco Holdings Corp. (1991 Grant) (incorporated by reference to
Exhibit 4.5 to Form S-8, Registration No. 33-39791).
10.54(a) Form of Amendment and Exchange of Secured Promissory Note, dated July
1, 1993 (1991 Grant) (incorporated by reference to Exhibit 10.33(a) to
the 1993 Form 10-K).
10.55 Form of Purchase Stock Agreement between RJR Nabisco Holdings Corp. and
the purchaser named therein (1992 Grant) (incorporated by reference to
Exhibit 10.34 of the 1991 Form 10-K).
10.56 Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and the senior executive optionee named therein (1992
Grant/cycle) (incorporated by reference to Exhibit 10.35 of the 1991
Form 10-K).
10.56 Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and the senior executive optionee named therein (1992
Grant/5-year) (incorporated by reference to Exhibit 10.36 of the 1991
Form 10-K).
10.58 Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and the executive or management optionee named therein
(1992 Grant) (incorporated by reference to Exhibit 10.37 of the 1991
Form 10-K).
10.59 Form of Restated Non-Qualified Stock Option Agreement under the 1990
Long Term Incentive Plan, between RJR Nabisco Holdings Corp. and the
optionee named therein (incorporated by reference to Exhibit 10.38 to
the 1993 Form 10-K).
10.60 Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and the optionee name therein (1993 Grant) (incorporated
by reference to Exhibit 10.39 of the 1992 Form 10-K).
10.61 Performance Share Program under RJR Nabisco Holdings Corp. 1990 Long
Term Incentive Plan (incorporated by reference to Exhibit 10.40 of the
1992 Form 10-K).
10.62 Form of Performance Share Agreement between RJR Nabisco Holdings Corp.
and the grantee named therein (1993 Grant) (incorporated by reference
to Exhibit 10.41 of the 1992 Form 10-K).
10.63 Restricted Stock Program under the 1990 Long Term Incentive Plan
(incorporated by reference to Exhibit 10.42 to the 1993 Form 10-K).
10.64 Form of Restricted Stock Agreement under the 1990 Long Term Incentive
Plan between RJR Nabisco Holdings Corp. and the grantee named therein
(1993 Grant) (incorporated by reference to Exhibit 10.1 the March 1993
Form 10-Q).
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10.65 Form of Executive Equity Program Agreement under the 1990 Long Term
Incentive Plan, between RJR Nabisco Holdings Corp. and the grantee
named therein (3 year) (incorporated by reference to Exhibit 10.44 to
the 1993 Form 10-K).
10.66 Form of Executive Equity Program Agreement under the 1990 Long Term
Incentive Plan, between RJR Nabisco Holdings Corp. and the grantee
named therein (4 year) (incorporated by reference to Exhibit 10.45 to
the 1993 Form 10-K).
10.67 Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and the Consultant named therein (1991 Grant)
(incorporated by reference to Exhibit 10.42 of the 1992 Form 10-K).
10.68 Form of Secured Promissory Note of purchaser named therein in favor of
RJR Nabisco Holdings Corp. (1992 Grant) (incorporated by reference to
Exhibit 10.38 of the 1991 Form 10-K).
10.68(a) Form of Amendment and Exchange of Secured Promissory Note, dated July
1, 1993 (1992 Grant) (incorporated by reference to Exhibit 10.47(a) to
the 1993 Form 10-K).
10.69 Registration Rights Agreement (Preferred Stock), dated as of July 15,
1990, between RJR Nabisco Holdings Corp. and Whitehall Associates, L.P.
(incorporated by reference to Exhibit 4.6 to the Form S-4, Registration
No. 33-36070).
10.70 Preferred Stock Exchange Agreement dated as of October 1, 1990 between
RJR Nabisco Holdings Corp. and Whitehall Associates, L.P. (incorporated
by reference to Exhibit 4.8 to the Form S-4, Registration No.
33-36070).
10.71 Restated and Amended Stock Option Plan for Directors and Key Employees
of RJR Nabisco Holdings Corp. dated as of October 4, 1994 (incorporated
by reference to Exhibit 10.55 of 1994 Form 10-K).
10.72 Performance Unit Program under RJR Nabisco Holdings Corp. 1990 Long
Term Incentive Plan (incorporated by reference to Exhibit 10.3 to the
March 1994 Form 10-Q).
10.73 Form of Performance Unit Agreement between RJR Nabisco Holdings Corp.
and the grantee named therein (1994 Grant--3 Year Period) (incorporated
by reference to Exhibit 10.4 to the March 1994 Form 10-Q).
10.74 Form of Performance Unit Agreement between RJR Nabisco Holdings Corp.
and the grantee named therein (1994 Grant--3 Year Period) (incorporated
by reference to Exhibit 10.5 to the March 1994 10-Q).
10.75* Amendment to Non-Qualified Stock Option Agreements dated prior to
October 11, 1995.
10.76* Restated and Amended RJR Nabisco Holdings Corp. 1990 Long Term
Incentive Plan dated as of December 5, 1995.
10.77* Form of Non-Qualified Stock Option Agreement dated April 27, 1995
between RJR Nabisco Holdings Corp. and the grantee named therein
(Reissued options).
10.78* Form of Non-Qualified Stock Option Agreement dated April 27, 1995
between RJR Nabisco Holdings Corp. and the grantee named therein
(Premium options).
10.79* Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp. and the grantee named therein.
10.80* Form of Performance Unit Agreement between RJR Nabisco Holdings Corp.
and the grantee named therein (1995 Grant--3 Year Period).
10.81* Form of Performance Unit Agreement between RJR Nabisco Holdings Corp.
and the grantee named therein (1995 Grant--1 Year Period).
10.82* Amendment dated July 10, 1995 to Executive Equity Program Agreement
under the 1990 Long Term Incentive Plan between RJR Nabisco Holdings
Corp. and the grantee named therein.
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10.83* Form of Employment Agreement dated October 11, 1995.
10.84* Form of Employment Agreement dated November 1, 1995.
10.85* Restated and Amended Stock Option Plan for Directors and Key
Employees of RJR Nabisco Holdings Corp. dated as of
December 5, 1995.
10.86* Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp., and Director named therein (Election version).
10.87* Form of Non-Qualified Stock Option Agreement between RJR Nabisco
Holdings Corp., and Director named therein (Annual version).
*11. RJR Nabisco Holdings Corp. Computation of Earnings Per Share for the
years ended December 31, 1995, 1994, 1993.
*12.1 RJR Nabisco Holdings Corp. Computation of Ratio of Earnings to Fixed
Charges/Deficiency in the Coverage of Fixed Charges by Earnings
before Fixed Charges for each of the periods within the five year
period ended December 31, 1995.
*12.2 RJR Nabisco, Inc. Computation of Ratio of Earnings to Fixed
Charges/Deficiency in the Coverage of Fixed Charges by Earnings
before Fixed Charges for each of the periods within the five year
period ended December 31, 1995.
*21. Subsdiaries of the Registrants.
*23. Consent of Independent Auditors.
*24. Powers of Attorney.
*27.1 Financial Data Schedule of RJR Nabisco Holdings Corp.
*27.2 Financial Data Schedule of RJR Nabisco, Inc.
</TABLE>
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* Filed herewith.
Exhibit 3.1(m)
CERTIFICATE OF RETIREMENT
OF CERTAIN SHARES OF
SERIES B CUMULATIVE PREFERRED STOCK
OF
RJR NABISCO HOLDINGS CORP.
(PURSUANT TO SECTION 243 OF THE
DELAWARE GENERAL CORPORATION LAW)
In accordance with Section 243 of the General Corporation Law of the State
of Delaware, RJR Nabisco Holdings Corp., a Delaware corporation (the
"Corporation"), does hereby certify that the following resolutions respecting
its Series B Cumulative Preferred Stock were duly adopted by the Corporation's
Board of Directors:
RESOLVED, that, following the exchange of 37,956.060 (Thirty-Seven Thousand
Nine Hundred Fifty-Six and Sixty One-Thousandths) shares of the Corporation's
Series B Cumulative Preferred Stock (the "Series B Cumulative Preferred Stock")
for the Corporation's 10% Junior Subordinated Debentures due 2044 on September
21, 1995 (the "Exchange Date"), such shares of Series B Cumulative Preferred
Stock will be retired and the reissuance of any such shares of Series B
Cumulative Preferred Stock as part of such series of Preferred Stock will be
prohibited under the Corporation's Amended and Restated Certificate of
Incorporation; and
RESOLVED, that, upon such retirement of 37,956.060 shares of Series B
Cumulative Preferred Stock effective on the Exchange Date, the officers of the
Corporation are hereby authorized, empowered and directed to file with the
Secretary of State of the State of Delaware a certificate pursuant to Section
243 of the General Corporation Law of the State of Delaware setting forth these
resolutions in order to reduce accordingly the number of authorized shares of
Series B Cumulative Preferred Stock.
IN WITNESS WHEREOF, RJR Nabisco Holdings Corp. has caused this Certificate to be
signed by Jo-Ann Ford, its Senior Vice President & Secretary, and attested by
Suzanne P. Jenney, its Assistant Secretary, this 11th day of October, 1995.
By: /s/ Jo-Ann Ford
-----------------------
Jo-Ann Ford
Senior Vice President & President
ATTEST:
/s/ Suzanne P. Jenney
- -----------------------
Suzanne P. Jenney
Assistant Secretary
Exhibit 3.2(c)
RJR NABISCO HOLDINGS CORP.
BY-LAWS
As Amended Effective October 11, 1995
ARTICLE I
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of stockholders of the
-----------------
Corporation shall be held at such place either within or without the State of
Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings. Annual meetings of
---------------------------
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors
and to transact such other business as may properly come before the meeting.
Special meetings of stockholders may be called by the Chairman for any
purpose, shall be called by the Chairman or the Secretary if directed by the
Board of Directors, and may not be called by or at the request of any other
person.
Section 3. Notice. Except as otherwise provided by law or by the
------
Certificate of Incorporation, written notice shall be given to each
stockholder entitled to vote at least 10 and not more than 60 days before
each meeting of stockholders, such notice to include the time, date and place
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called.
Section 4. Quorum. At any meeting of stockholders, the holders of
------
record, present in person or by proxy, of a majority of the Corporation's
stock issued and outstanding and entitled to vote shall constitute a quorum
for the transaction of business, except as otherwise provided by law or by
the Certificate of Incorporation. In the absence of a quorum, any officer
entitled to preside at or to act as secretary of the meeting shall have power
to adjourn the meeting from time to time until a quorum is present.
<PAGE>
Section 5. Conduct of Meeting and Order of Business. The Chairman
----------------------------------------
or, in his absence, the President, shall act as chairman at all meetings of
stockholders. The Secretary of the Corporation or, in his or her absence, an
Assistant Secretary shall act as secretary at all meetings of stockholders.
The chairman of the meeting shall have the right and authority to determine
and maintain the rules, regulations and procedures for the proper conduct of
the meeting, including but not limited to restricting entry to the meeting
after it has commenced, maintaining order and the safety of those in
attendance, opening and closing the polls for voting, dismissing business not
properly submitted, and limiting time allowed for discussion of the business
of the meeting.
Business to be conducted at annual meetings of stockholders shall be
limited to that properly submitted to the meeting either by or at the
direction of the Board of Directors or by any stockholder of the Corporation
who shall be entitled to vote at such meeting and who complies with the
notice requirements set forth in Section 6 of this Article I. If the
chairman of the meeting shall determine that any business was not properly
submitted in accordance with the terms of Section 6 of this Article I, he
shall declare to the meeting that such business was not properly submitted
and would not be transacted at that meeting.
Section 6. Advance Notice of Stockholder Proposals. In order to
---------------------------------------
properly submit any business to an annual meeting of stockholders, a
stockholder must give timely notice in writing to the Secretary of the
Corporation. To be considered timely, a stockholder's notice must be
delivered either in person or by United States certified mail, postage
prepaid, and received at the principal executive offices of the Corporation
(a) not less than 120 days nor more than 150 days before the first
anniversary date of the Corporation's proxy statement in connection with the
last annual meeting of stockholders or (b) if no annual meeting was held in
the previous year or the date of the applicable annual meeting has been
changed by more than 30 days from the date contemplated at the time of the
previous year's proxy statement, not less than a reasonable time, as
determined by the Board of Directors, prior to the date of the applicable
annual meeting.
Nomination of persons for election to the Board of Directors may be
made by the Board of Directors or any committee designated by the Board of
Directors or by any stockholder entitled to vote for the election of
directors at the applicable meeting of stockholders. However, nominations
other than those made by the Board of Directors or its designated committee
must comply with the procedures set forth in this Section 6, and no person
shall be eligible for election as a director unless nominated in accordance
with the terms of this Section 6.
2
<PAGE>
A stockholder may nominate a person or persons for election to the
Board of Directors by giving written notice to the Secretary of the
Corporation in accordance with the procedures set forth above. In addition
to the timeliness requirements set forth above for notice to the Corporation
by a stockholder of business to be submitted at an annual meeting of
stockholders, with respect to any special meeting of stockholders called for
the election of directors, written notice must be delivered in the manner
specified above and not later than the close of business on the seventh day
following the date on which notice of such meeting is first given to
stockholders.
The Secretary of the Corporation shall deliver any stockholder
proposals and nominations received in a timely manner for review by the Board
of Directors or a committee designated by the Board of Directors.
A stockholder's notice to submit business to an annual meeting of
stockholders shall set forth (i) the name and address of the stockholder,
(ii) the class and number of shares of stock beneficially owned by such
stockholder, (iii) the name in which such shares are registered on the stock
transfer books of the Corporation, (iv) a representation that the stockholder
intends to appear at the meeting in person or by proxy to submit the business
specified in such notice, (v) any material interest of the stockholder in the
business to be submitted and (vi) a brief description of the business desired
to be submitted to the annual meeting, including the complete text of any
resolutions to be presented at the annual meeting, and the reasons for
conducting such business at the annual meeting. In addition, the stockholder
making such proposal shall promptly provide any other information reasonably
requested by the Corporation.
In addition to the information required above to be given by a
stockholder who intends to submit business to a meeting of stockholders, if
the business to be submitted is the nomination of a person or persons for
election to the Board of Directors then such stockholder's notice must also
set forth, as to each person whom the stockholder proposes to nominate for
election as a director, (a) the name, age, business address and, if known,
residence address of such person, (b) the principal occupation or employment
of such person, (c) the class and number of shares of stock of the
Corporation which are beneficially owned by such person, (d) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors or is otherwise required
by the rules and regulations of the Securities and Exchange Commission
promulgated under the Securities Exchange Act of 1934, as amended, (e) the
written consent of such person to be named in the proxy statement as a
nominee and to serve as a director if elected and (f) a description of all
arrangements or understandings between such stockholder and each nominee and
any other person
3
<PAGE>
or persons (naming such person or persons) pursuant to which the nomination
or nominations are to be made by such stockholder.
Any person nominated for election as director by the Board of
Directors or any committee designated by the Board of Directors shall, upon
the request of the Board of Directors or such committee, furnish to the
Secretary of the Corporation all such information pertaining to such person
that is required to be set forth in a stockholder's notice of nomination.
Notwithstanding the foregoing provisions of this Section 6, a
stockholder who seeks to have any proposal included in the Corporation's
proxy statement shall comply with the requirements of Regulation 14A under
the Securities Exchange Act of 1934, as amended.
Section 7. Voting. Except as otherwise provided by law or by the
------
Certificate of Incorporation, all matters submitted to a meeting of
stockholders shall be decided by vote of the holders of record, present in
person or by proxy, of a majority of the Corporation's stock issued and
outstanding and entitled to vote.
A proxy shall be executed in writing by the stockholder or by his
duly authorized attorney-in-fact and shall be delivered to the secretary of
the meeting at or prior to the time designated by the chairman of the
meeting. No stockholder may designate more than four persons to act on his
behalf at a meeting of stockholders.
Section 8. Inspectors of Election. Prior to any meeting of
----------------------
stockholders, the Board of Directors shall appoint one or more inspectors to
act at the meeting and make a written report thereof in accordance with the
Delaware General Corporation Law. The Board of Directors may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath to execute faithfully the duties of inspector with
strict impartiality and according to the best of his ability.
Section 9. Record Date for Action by Written Consent; Inspectors and
----------------------------------------------------------
Effectiveness.
--------------
(a) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of
4
<PAGE>
Directors, and which date shall not be more than 10 days after the
date upon which the resolution fixing the record date is adopted by
the Board of Directors. Any stockholder of record seeking to have
the stockholders authorize or take corporate action by written
consent shall, by written notice to the Secretary, request the
Board of Directors to fix a record date. The Board of Directors
shall promptly, but in all events within 10 days after the date on
which such a request is received, adopt a resolution fixing the
record date. If no record date has been fixed by the Board of
Directors within 10 days of the date on which such a request is
received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is required by applicable
law, shall be the first date on which a signed written consent
-
setting forth the action taken or proposed to be taken is delivered
to the Corporation by delivery to its registered office in the
State of Delaware, its principal place of business or to any
officer or agent of the Corporation having custody of the book in
which proceedings of meetings of stockholders are recorded, to the
attention of the Secretary of the Corporation. Delivery made to
the Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by applicable law, the
record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close
of business on the date on which the Board of Directors adopts the
resolution taking such prior action.
(b) In the event of the delivery, in the manner provided
by Section 9(a), to the Corporation of the requisite written
consent or consents to take corporate action and/or any related
revocation or revocations, the Corporation shall engage nationally
recognized independent inspectors of elections for the purpose of
promptly performing a ministerial review of the validity of the
consents and revocations. For the purpose of permitting the
inspectors to perform such review, no action by written consent
without a meeting shall be effective until such date as the
independent inspectors certify to the Corporation that the consents
delivered to the Corporation in accordance with Section 9(a)
represent at least the minimum number of votes that would be
necessary to take the corporate action. Nothing contained in this
paragraph shall in any way be construed to suggest or imply that
the Board of Directors or any stockholder shall
5
<PAGE>
not be entitled to contest the validity of any consent or
revocation thereof, whether before or after such certification by
the independent inspectors, or to take any other action (including,
without limitation, the commencement, prosecution or defense of any
litigation with respect thereto, and the seeking of injunctive
relief in such litigation).
(c) Every written consent shall bear the date of signature
of each stockholder who signs the consent and no written consent
shall be effective to take the corporate action referred to therein
unless, within 60 days of the earliest dated written consent
delivered in accordance with Section 9(a), a written consent or
consents signed by a sufficient number of stockholders to take such
action are delivered to the Corporation in the manner prescribed in
Section 9(a).
ARTICLE II
DIRECTORS
---------
Section 1. Number, Election and Removal of Directors. The number of
-----------------------------------------
Directors that shall constitute the Board of Directors shall be not less than
one nor more than seventeen. The first Board of Directors shall consist of
three Directors. Thereafter, within the limits specified above, the number
of Directors shall be determined by the Board of Directors or by the
stockholders. The Directors shall be elected by the stockholders at their
annual meeting and shall serve until the next annual meeting of stockholders
and until their successors are elected and shall qualify. Vacancies and
newly created directorships resulting from any increase in the number of
Directors may be filled by a majority of the Directors then in office,
although less than a quorum, or by the sole remaining Director or by the
stockholders, and any Director so chosen shall serve until the next annual
meeting of stockholders and until his successor shall be elected and shall
qualify. A Director may be removed with or without cause by the
stockholders.
Section 2. Meetings. Regular meetings of the Board of Directors
--------
shall be held at such times and places as may from time to time be fixed by
the Board of Directors or as may be specified in a notice of meeting.
Special meetings of the Board of Directors may be held at any time upon the
call of the Chairman and shall be called by the Chairman or the Secretary if
directed by the Board of
6
<PAGE>
Directors. A meeting of the Board of Directors may be held without notice
immediately after the annual meeting of stockholders. Notice need not be
given of regular or special meetings of the Board of Directors.
Section 3. Quorum. One-third of the total number of Directors shall
------
constitute a quorum for the transaction of business. If a quorum is not
present at any meeting of the Board of Directors, the Directors present may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until such a quorum is present. Except as otherwise provided
by law, the Certificate of Incorporation of the Corporation, these By-Laws or
any contract or agreement to which the Corporation is a party, the act of a
majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors.
Section 4. Executive Committee. The Board of Directors, by
-------------------
resolution adopted by a majority of the entire Board, may appoint from among
its members an Executive Committee consisting of the Chairman and at least
two other Directors. Meetings of the Executive Committee shall be held
without notice at such dates, times and places as shall be determined by the
Executive Committee. The Executive Committee shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation that are permitted by law to be
exercised by a committee of the Board of Directors, including the power to
declare dividends, to authorize the issuance of stock and to adopt a
certificate of ownership and merger of parent corporation and subsidiary or
subsidiaries; provided, however, that the Executive Committee shall not have
the power or authority of the Board of Directors in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or
consolidation with respect to the Corporation, recommending to the
stockholders the sale, lease or exchange of all or substantially all the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, amending the
By-Laws of the Corporation or adopting a certificate of ownership and merger
of the Corporation (other than a certificate of ownership and merger of
parent corporation and subsidiary or subsidiaries). The majority of the
members of the Executive Committee shall constitute a quorum. Minutes shall
be kept of the proceedings of the Executive Committee, which shall be
reported at meetings of the Board of Directors. The Executive Committee may,
to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors of the
Corporation, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other
7
<PAGE>
class or classes of stock of the Corporation or fix the number of shares of
any series of stock or authorize the increase or decrease of the shares of
any series.
Section 5. Other Committees of Directors. The Board of Directors
-----------------------------
may, by resolution adopted by a majority of the Board of Directors, designate
one or more other committees to have and exercise such power and authority as
the Board of Directors shall specify. In the absence or disqualification of
a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another Director to act at the meeting in
place of any such absent or disqualified member.
ARTICLE III
OFFICERS
--------
Section 1. Description and Terms. The officers of the Corporation
---------------------
shall be the Chairman, who shall be the Chief Executive Officer of the
Corporation, two Vice Chairmen, a President, a Secretary, a Treasurer and
such other additional officers with such titles as the Board of Directors
shall determine, all of whom shall be chosen by and serve at the pleasure of
the Board of Directors; provided that the Chairman may appoint Senior Vice
Presidents, Vice Presidents or Assistant Officers at his discretion. Subject
to such limitations as may be imposed by the Board of Directors, the Chairman
shall have full executive power and authority with respect to the
Corporation. Each Vice Chairman and the President shall have such powers and
authority as the Chairman may determine. If the Chairman is absent or
incapacitated, the President shall have all the power and authority of the
Chairman. Other officers shall have the usual powers and shall perform all
the usual duties incident to their respective offices. All officers shall be
subject to the supervision and direction of the Board of Directors. The
authority, duties or responsibilities of any officer of the Corporation may
be suspended by the Chairman with or without cause. Any officer elected or
appointed by the Board of Directors may be removed by the Board of Directors
with or without cause. Subject to such limitations as the Board of Directors
may provide, each officer may further delegate to any other officer or any
employee or agent of the Corporation such portions of his or her authority as
the officer shall deem appropriate, subject to such limitation as the officer
shall specify, and may revoke such authority at any time.
8
<PAGE>
Section 2. Stockholder Consents and Proxies. The Chairman, each
--------------------------------
Vice Chairman, the President, the Secretary and the Treasurer, or any one of
them, shall have the power and authority on behalf of the Corporation to
execute any stockholders' consents or proxies and to attend and act and vote
in person or by proxy at any meetings of stockholders of any corporation in
which the Corporation may own stock, and at any such meetings shall possess
and may exercise any and all of the rights and powers incident to the
ownership of such stock which as the owner thereof the Corporation might have
possessed and executed if present. The Board of Directors by resolution from
time to time may confer like powers upon any other officer.
ARTICLE IV
INDEMNIFICATION
---------------
To the fullest extent permitted by the Delaware General Corporation
Law, the Corporation shall indemnify any current or former Director or
officer of the Corporation and may, at the discretion of the Board of
Directors, indemnify any current or former employee or agent of the
Corporation against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with any threatened, pending or completed action, suit or
proceeding brought by or in the right of the Corporation or otherwise, to
which he was or is a party or is threatened to be made a party by reason of
his current or former position with the Corporation or by reason of the fact
that he is or was serving, at the request of the Corporation, as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
9
<PAGE>
ARTICLE V
GENERAL PROVISIONS
------------------
Section 1. Notices. Whenever any statute, the Certificate of
-------
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice to be given in writing by mail, addressed to such
Director or stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Such notice shall be deemed to
have been given when it is deposited in the United States mail. Notice to
Directors may also be given by telegram or facsimile transmission or be
delivered personally or by telephone.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by the Board of Directors.
Section 3. Certificates of Stock. Certificates representing shares
---------------------
of the Corporation shall be signed by the Chairman and by the Secretary or an
Assistant Secretary. Any and all signatures on such certificates, including
signatures of officers, transfer agents and registrars, may be facsimile.
10
Exhibit 3.2(d)
RJR NABISCO HOLDINGS CORP.
BY-LAWS
As Amended Effective December 5, 1995
ARTICLE I
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of stockholders of the
-----------------
Corporation shall be held at such place either within or without the State of
Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings. Annual meetings of
---------------------------
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting.
Special meetings of stockholders may be called by the Chairman or the Chief
Executive Officer for any purpose, shall be called by the Chairman, the Chief
Executive Officer or the Secretary if directed by the Board of Directors, and
may not be called by or at the request of any other person.
Section 3. Notice. Except as otherwise provided by law or by the
------
Certificate of Incorporation, written notice shall be given to each stockholder
entitled to vote at least 10 and not more than 60 days before each meeting of
stockholders, such notice to include the time, date and place of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called.
Section 4. Quorum. At any meeting of stockholders, the holders of
------
record, present in person or by proxy, of a majority of the Corporation's stock
issued and outstanding and entitled to vote shall constitute a quorum for the
transaction of business, except as otherwise provided by law or by the
Certificate of Incorporation. In the absence of a quorum, any officer entitled
to preside at or to act as secretary of the meeting shall have power to adjourn
the meeting from time to time until a quorum is present.
<PAGE>
Section 5. Conduct of Meeting and Order of Business. The Chairman or,
----------------------------------------
at the Chairman's request, the Chief Executive Officer, shall act as chairman at
all meetings of stockholders. The Secretary of the Corporation or, in his or
her absence, an Assistant Secretary shall act as secretary at all meetings of
stockholders. The chairman of the meeting shall have the right and authority to
determine and maintain the rules, regulations and procedures for the proper
conduct of the meeting, including but not limited to restricting entry to the
meeting after it has commenced, maintaining order and the safety of those in
attendance, opening and closing the polls for voting, dismissing business not
properly submitted, and limiting time allowed for discussion of the business of
the meeting.
Business to be conducted at annual meetings of stockholders shall be
limited to that properly submitted to the meeting either by or at the direction
of the Board of Directors or by any stockholder of the Corporation who shall be
entitled to vote at such meeting and who complies with the notice requirements
set forth in Section 6 of this Article I. If the chairman of the meeting shall
determine that any business was not properly submitted in accordance with the
terms of Section 6 of this Article I, he or she shall declare to the meeting
that such business was not properly submitted and would not be transacted at
that meeting.
Section 6. Advance Notice of Stockholder Proposals. In order to
---------------------------------------
properly submit any business to an annual meeting of stockholders, a stockholder
must give timely notice in writing to the Secretary of the Corporation. To be
considered timely, a stockholder's notice must be delivered either in person or
by United States certified mail, postage prepaid, and received at the principal
executive offices of the Corporation (a) not less than 120 days nor more than
150 days before the first anniversary date of the Corporation's proxy statement
in connection with the last annual meeting of stockholders or (b) if no annual
meeting was held in the previous year or the date of the applicable annual
meeting has been changed by more than 30 days from the date contemplated at the
time of the previous year's proxy statement, not less than a reasonable time, as
determined by the Board of Directors, prior to the date of the applicable annual
meeting.
Nomination of persons for election to the Board of Directors may be
made by the Board of Directors or any committee designated by the Board of
Directors or by any stockholder entitled to vote for the election of directors
at the applicable meeting of stockholders. However, nominations other than
those made by the Board of Directors or its designated committee must comply
with the procedures set forth in this Section 6, and no person shall be eligible
for election as a director unless nominated in accordance with the terms of this
Section 6.
2
<PAGE>
A stockholder may nominate a person or persons for election to the
Board of Directors by giving written notice to the Secretary of the Corporation
in accordance with the procedures set forth above. In addition to the
timeliness requirements set forth above for notice to the Corporation by a
stockholder of business to be submitted at an annual meeting of stockholders,
with respect to any special meeting of stockholders called for the election of
directors, written notice must be delivered in the manner specified above and
not later than the close of business on the seventh day following the date on
which notice of such meeting is first given to stockholders.
The Secretary of the Corporation shall deliver any stockholder
proposals and nominations received in a timely manner for review by the Board of
Directors or a committee designated by the Board of Directors.
A stockholder's notice to submit business to an annual meeting of
stockholders shall set forth (i) the name and address of the stockholder, (ii)
the class and number of shares of stock beneficially owned by such stockholder,
(iii) the name in which such shares are registered on the stock transfer books
of the Corporation, (iv) a representation that the stockholder intends to appear
at the meeting in person or by proxy to submit the business specified in such
notice, (v) any material interest of the stockholder in the business to be
submitted and (vi) a brief description of the business desired to be submitted
to the annual meeting, including the complete text of any resolutions to be
presented at the annual meeting, and the reasons for conducting such business at
the annual meeting. In addition, the stockholder making such proposal shall
promptly provide any other information reasonably requested by the Corporation.
In addition to the information required above to be given by a
stockholder who intends to submit business to a meeting of stockholders, if the
business to be submitted is the nomination of a person or persons for election
to the Board of Directors then such stockholder's notice must also set forth, as
to each person whom the stockholder proposes to nominate for election as a
director, (a) the name, age, business address and, if known, residence address
of such person, (b) the principal occupation or employment of such person, (c)
the class and number of shares of stock of the Corporation which are
beneficially owned by such person, (d) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors or is otherwise required by the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended, (e) the written consent of such person to be named in the
proxy statement as a nominee
3
<PAGE>
and to serve as a director if elected and (f) a description of all arrangements
or understandings between such stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder.
Any person nominated for election as director by the Board of Directors
or any committee designated by the Board of Directors shall, upon the request of
the Board of Directors or such committee, furnish to the Secretary of the
Corporation all such information pertaining to such person that is required to
be set forth in a stockholder's notice of nomination.
Notwithstanding the foregoing provisions of this Section 6, a
stockholder who seeks to have any proposal included in the Corporation's proxy
statement shall comply with the requirements of Regulation 14A under the
Securities Exchange Act of 1934, as amended.
Section 7. Voting. Except as otherwise provided by law or by the
------
Certificate of Incorporation, all matters submitted to a meeting of stockholders
shall be decided by vote of the holders of record, present in person or by
proxy, of a majority of the Corporation's stock issued and outstanding and
entitled to vote.
A proxy shall be executed in writing by the stockholder or by his or
her duly authorized attorney-in-fact and shall be delivered to the secretary of
the meeting at or prior to the time designated by the chairman of the meeting.
No stockholder may designate more than four persons to act on his or her behalf
at a meeting of stockholders.
Section 8. Inspectors of Election. Prior to any meeting of
----------------------
stockholders, the Board of Directors shall appoint one or more inspectors to act
at the meeting and make a written report thereof in accordance with the Delaware
General Corporation Law. The Board of Directors may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath to execute faithfully the duties of inspector with strict
impartiality and according to the best of his or her ability.
Section 9. Record Date for Action by Written Consent; Inspectors and
----------------------------------------------------------
Effectiveness.
-------------
(a) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing
4
<PAGE>
without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which
date shall not be more than 10 days after the date upon which the
resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by written consent shall, by
written notice to the Secretary, request the Board of Directors to fix
a record date. The Board of Directors shall promptly, but in all
events within 10 days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record
date has been fixed by the Board of Directors within 10 days of the
date on which such a request is received, the record date for
determining stockholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the Board of
Directors is required by applicable law, shall be the first date on
which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of
business or to any officer or agent of the Corporation having custody
of the book in which proceedings of meetings of stockholders are
recorded, to the attention of the Secretary of the Corporation.
Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action
by the Board of Directors is required by applicable law, the record
date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business
on the date on which the Board of Directors adopts the resolution
taking such prior action.
(b) In the event of the delivery, in the manner provided by
Section 9(a), to the Corporation of the requisite written consent or
consents to take corporate action and/or any related revocation or
revocations, the Corporation shall engage nationally recognized
independent inspectors of elections for the purpose of promptly
performing a ministerial review of the validity of the consents and
revocations. For the purpose of permitting the inspectors to perform
such review, no action by written consent without a meeting shall be
effective until such date as the independent inspectors certify to the
Corporation that the consents delivered to the Corporation in
5
<PAGE>
accordance with Section 9(a) represent at least the minimum number of
votes that would be necessary to take the corporate action. Nothing
contained in this paragraph shall in any way be construed to suggest
or imply that the Board of Directors or any stockholder shall not be
entitled to contest the validity of any consent or revocation thereof,
whether before or after such certification by the independent
inspectors, or to take any other action (including, without
limitation, the commencement, prosecution or defense of any litigation
with respect thereto, and the seeking of injunctive relief in such
litigation).
(c) Every written consent shall bear the date of signature of
each stockholder who signs the consent and no written consent shall be
effective to take the corporate action referred to therein unless,
within 60 days of the earliest dated written consent delivered in
accordance with Section 9(a), a written consent or consents signed by
a sufficient number of stockholders to take such action are delivered
to the Corporation in the manner prescribed in Section 9(a).
ARTICLE II
DIRECTORS
---------
Section 1. Number, Election and Removal of Directors. The number of
-----------------------------------------
Directors that shall constitute the Board of Directors shall be not less than
one nor more than seventeen. The first Board of Directors shall consist of
three Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors or by the stockholders.
The Directors shall be elected by the stockholders at their annual meeting and
shall serve until the next annual meeting of stockholders and until their
successors are elected and shall qualify. Vacancies and newly created
directorships resulting from any increase in the number of Directors may be
filled by a majority of the Directors then in office, although less than a
quorum, or by the sole remaining Director or by the stockholders, and any
Director so chosen shall serve until the next annual meeting of stockholders and
until his or her successor shall be elected and shall qualify. A Director may
be removed with or without cause by the stockholders.
6
<PAGE>
Section 2. Meetings. Regular meetings of the Board of Directors shall
--------
be held at such times and places as may from time to time be fixed by the Board
of Directors or as may be specified in a notice of meeting. Special meetings of
the Board of Directors may be held at any time upon the call of the Chairman or
the Chief Executive Officer and shall be called by the Chairman, the Chief
Executive Officer or the Secretary if directed by the Board of Directors. A
meeting of the Board of Directors may be held without notice immediately after
the annual meeting of stockholders. Notice need not be given of regular or
special meetings of the Board of Directors.
Section 3. Quorum. One-third of the total number of Directors shall
------
constitute a quorum for the transaction of business. If a quorum is not present
at any meeting of the Board of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until such a quorum is present. Except as otherwise provided by law,
the Certificate of Incorporation of the Corporation, these By-Laws or any
contract or agreement to which the Corporation is a party, the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors.
Section 4. Executive Committee. The Board of Directors, by resolution
-------------------
adopted by a majority of the entire Board, may appoint from among its members an
Executive Committee consisting of the Chief Executive Officer, if such officer
is a member of the Board of Directors, or the Chairman, if the Chief Executive
Officer is not a member of the Board of Directors, and at least two other
Directors. Meetings of the Executive Committee shall be held without notice at
such dates, times and places as shall be determined by the Executive Committee.
The Executive Committee shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation that are permitted by law to be exercised by a committee of the
Board of Directors, including the power to declare dividends, to authorize the
issuance of stock and to adopt a certificate of ownership and merger of parent
corporation and subsidiary or subsidiaries; provided, however, that the
Executive Committee shall not have the power or authority of the Board of
Directors in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation with respect to the Corporation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
amending the By-Laws of the Corporation or adopting a certificate of ownership
and merger of the Corporation (other than a certificate of ownership and merger
of parent corporation and
7
<PAGE>
subsidiary or subsidiaries). The majority of the members of the Executive
Committee shall constitute a quorum. Minutes shall be kept of the proceedings
of the Executive Committee, which shall be reported at meetings of the Board of
Directors. The Executive Committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors of the Corporation, fix any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series.
Section 5. Other Committees of Directors. The Board of Directors may,
-----------------------------
by resolution adopted by a majority of the Board of Directors, designate one or
more other committees to have and exercise such power and authority as the Board
of Directors shall specify. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or she or they constitute a quorum,
may unanimously appoint another Director to act at the meeting in place of any
such absent or disqualified member.
ARTICLE III
OFFICERS
--------
Section 1. Description and Terms. The officers of the Corporation
---------------------
shall be the Chairman, the Chief Executive Officer, one or more Vice Chairmen, a
President, a Secretary, a Treasurer and such other additional officers with such
titles as the Board of Directors shall determine, all of whom shall be chosen by
and serve at the pleasure of the Board of Directors; provided that the Chief
Executive Officer may appoint Senior Vice Presidents, Vice Presidents or
Assistant Officers at his or her discretion. The Chairman shall be an employee
of the Corporation. There shall be an office of the Chief Executive Officer,
which shall consist of the Chief Executive Officer, such Vice Chairmen and such
other officers as shall be designated by the Chief Executive Officer. Subject
to such limitations as may be imposed by the Board of Directors, the Chief
Executive Officer shall have full executive power and authority with respect to
the Corporation. Each Vice Chairman and the President shall have such powers
and authority as the Chief Executive Officer may determine. If the Chief
Executive Officer is absent or
8
<PAGE>
incapacitated, the President or, in the President's absence or incapacitation,
the Chairman or such other person as shall be designated by the Chairman shall
have all the power and authority of the Chief Executive Officer. Other officers
shall have the usual powers and shall perform all the usual duties incident to
their respective offices. All officers shall be subject to the supervision and
direction of the Board of Directors. The authority, duties or responsibilities
of any officer of the Corporation may be suspended by the Chief Executive
Officer with or without cause. Any officer elected or appointed by the Board of
Directors may be removed by the Board of Directors with or without cause.
Subject to such limitations as the Board of Directors may provide, each officer
may further delegate to any other officer or any employee or agent of the
Corporation such portions of his or her authority as the officer shall deem
appropriate, subject to such limitation as the officer shall specify, and may
revoke such authority at any time.
Section 2. Stockholder Consents and Proxies. The Chairman, the Chief
--------------------------------
Executive Officer, each Vice Chairman, the President, the Secretary and the
Treasurer, or any one of them, shall have the power and authority on behalf of
the Corporation to execute any stockholders' consents or proxies and to attend
and act and vote in person or by proxy at any meetings of stockholders of any
corporation in which the Corporation may own stock, and at any such meetings
shall possess and may exercise any and all of the rights and powers incident to
the ownership of such stock which as the owner thereof the Corporation might
have possessed and executed if present. The Board of Directors by resolution
from time to time may confer like powers upon any other officer.
ARTICLE IV
INDEMNIFICATION
---------------
To the fullest extent permitted by the Delaware General Corporation
Law, the Corporation shall indemnify any current or former Director or officer
of the Corporation and may, at the discretion of the Board of Directors,
indemnify any current or former employee or agent of the Corporation against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with any
threatened, pending or completed action, suit or proceeding brought by or in the
right of the Corporation or otherwise, to which he or she was or is a party or
is threatened to be made a party by reason of his or her current or former
position with the
9
<PAGE>
Corporation or by reason of the fact that he or she is or was serving, at the
request of the Corporation, as a director, officer, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise.
10
<PAGE>
ARTICLE V
GENERAL PROVISIONS
------------------
Section 1. Notices. Whenever any statute, the Certificate of
-------
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice is to be given in writing by mail, addressed to such
Director or stockholder at his or her address as it appears on the records of
the Corporation, with postage thereon prepaid. Such notice shall be deemed to
have been given when it is deposited in the United States mail. Notice to
Directors may also be given by telegram or facsimile transmission or be
delivered personally or by telephone.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by the Board of Directors.
Section 3. Certificates of Stock. Certificates representing shares of
---------------------
the Corporation shall be signed by the Chairman or the Chief Executive Officer
and by the Secretary or an Assistant Secretary. Any and all signatures on such
certificates, including signatures of officers, transfer agents and registrars,
may be facsimile.
11
Exhibit 3.4(a)
RJR NABISCO, INC.
BY-LAWS
As Amended Effective October 11, 1995
ARTICLE I
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stockholders of the
------------------
Corporation shall be held at such place either within or without the State of
Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings. Annual meetings of
----------------------------
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting.
Special meetings of the stockholders may be called by the Chairman for any
purpose and shall be called by the Chairman or the Secretary if directed by the
Board of Directors or requested in writing by the holders of not less than 25%
of the common stock of the Corporation. Each such stockholder request shall
state the purpose of the proposed meeting.
Section 3. Notice. Except as otherwise provided by law or by the
-------
Certificate of Incorporation, at least 10 and not more than 60 days before each
meeting of stockholders, written notice of the time, date and place of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given to each stockholder.
Section 4. Quorum. At any meeting of stockholders, the holders of
-------
record, present in person or by proxy, of a majority of the Corporation's issued
and outstanding common stock shall constitute a quorum for the transaction of
business, except as otherwise provided by law or by the Certificate of
Incorporation. In the absence of a quorum, any officer entitled to preside at
or to act as secretary of the meeting shall have power to adjourn the meeting
from time to time until a quorum is present.
<PAGE>
Section 5. Voting. Except as otherwise provided by law or by the
-------
Certificate of Incorporation, all matters submitted to a meeting of stockholders
shall be decided by vote of the holders of record, present in person or by
proxy, of a majority of the Corporation's issued and outstanding common stock.
The date and time of the opening and closing of the polls for each matter upon
which stockholders will vote shall be announced at the meeting.
Section 6. Inspectors of Election. Prior to any meeting of the
-----------------------
stockholders, the Board of Directors shall appoint one or more inspectors to act
at the meeting and make a written report thereof in accordance with the Delaware
General Corporation Law. The Board of Directors may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath to execute faithfully the duties of inspector with strict impartiality
and according to the best of his ability.
ARTICLE II
DIRECTORS
---------
Section 1. Number, Election and Removal of Directors. The number of
------------------------------------------
Directors that shall constitute the Board of Directors shall be not less than
one nor more than seventeen. The first Board of Directors shall consist of
three Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors or by the stockholders.
The Directors shall be elected by the stockholders at their annual meeting and
shall serve until the next annual meeting of the stockholders and until their
successors are elected and shall qualify. Vacancies and newly created
directorships resulting from any increase in the number of Directors may be
filled by a majority of the Directors then in office, although less than a
quorum, or by the sole remaining Director or by the stockholders, and any
Director so chosen shall serve until the next annual meeting of the stockholders
and until his successor shall be elected and shall qualify. A Director may be
removed with or without cause by the stockholders.
Section 2. Meetings. Regular meetings of the Board of Directors shall
---------
be held at such times and places as may from time to time be fixed by the Board
of Directors or as may be specified in a notice of meeting. Special meetings of
the Board of Directors may be held at any time upon the call of the Chairman and
shall be called by the Chairman or the Secretary if directed by the Board of
Directors. A meeting of the Board of Directors may be held without notice
2
<PAGE>
immediately after the annual meeting of the stockholders. Notice need not be
given of regular or special meetings of the Board of Directors.
Section 3. Quorum. One-third of the total number of Directors shall
-------
constitute a quorum for the transaction of business. If a quorum is not present
at any meeting of the Board of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until such a quorum is present. Except as otherwise provided by law,
the Certificate of Incorporation of the Corporation, these By-Laws or any
contract or agreement to which the Corporation is a party, the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors.
Section 4. Executive Committee. The Board of Directors, by resolution
--------------------
adopted by a majority of the entire Board, may appoint from among its members an
Executive Committee consisting of the Chairman and at least two other Directors.
Meetings of the Executive Committee shall be held without notice at such dates,
times and places as shall be determined by the Executive Committee. The
Executive Committee shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation that are permitted by law to be exercised by a committee of the
Board of Directors, including the power to declare dividends, to authorize the
issuance of stock and to adopt a certificate of ownership and merger of parent
corporation and subsidiary or subsidiaries; provided, however, that the
Executive Committee shall not have the power or authority of the Board of
Directors in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation with respect to the Corporation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
amending the By-Laws of the Corporation or adopting a certificate of ownership
and merger of the Corporation (other than a certificate of ownership and merger
of parent corporation and subsidiary or subsidiaries). The majority of the
members of the Executive Committee shall constitute a quorum. Minutes shall be
kept of the proceedings of the Executive Committee, which shall be reported at
meetings of the Board of Directors. The Executive Committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors of the Corporation, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorized the
increase or decrease of the shares of any series.
3
<PAGE>
Section 5. Other Committees of Directors. The Board of Directors may,
------------------------------
by resolution adopted by a majority of the Board of Directors, designate one or
more other committees to have and exercise such power and authority as the Board
of Directors shall specify. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another Director to act at the meeting in place of any such
absent or disqualified member.
ARTICLE III
OFFICERS
--------
Section 1. Description and Terms. The officers of the Corporation
---------------------
shall be the Chairman, who shall be the Chief Executive Officer of the
Corporation, two Vice Chairmen, a President, a Secretary, a Treasurer and such
other additional officers with such titles as the Board of Directors shall
determine, all of whom shall be chosen by and serve at the pleasure of the
Board; provided that the Chairman may appoint Senior Vice Presidents, Vice
Presidents or Assistant Officers at his discretion. Subject to such limitations
as may be imposed by the Board of Directors, the Chairman shall have full
executive power and authority with respect to the Corporation. Each Vice
Chairman and the President shall have such powers and authority as the Chairman
may determine. If the Chairman is absent or incapacitated, the President shall
have all the power and authority of the Chairman. Other officers shall have the
usual powers and shall perform all the usual duties incident to their respective
offices. All officers shall be subject to the supervision and direction of the
Board of Directors. The authority, duties or responsibilities of any officer of
the Corporation may be suspended by the Chairman with or without cause. Any
officer elected or appointed by the Board of Directors may be removed by the
Board of Directors with or without cause. Subject to such limitations as the
Board of Directors may provide, each officer may further delegate to any other
officer or any employee or agent of the Corporation such portions of his
authority as the officer shall deem appropriate, subject to such limitation as
the officer shall specify, and may revoke such authority at any time.
Section 2. Stockholder Consents and Proxies. The Chairman, each Vice
---------------------------------
Chairman, the President, the Secretary and the Treasurer, or any one of them,
shall have the power and authority on behalf of the Corporation to execute any
stockholders' consents or proxies and to attend and act and vote in person or by
proxy at any meetings of the stockholders of any corporation in which the
Corporation may own stock, and at any such meetings shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
4
<PAGE>
stock which as the owner thereof the Corporation might have possessed and
executed if present. The Board of Directors, by resolutions from time to time,
may confer like powers upon any other officer.
ARTICLE IV
INDEMNIFICATION
---------------
To the fullest extent permitted by the Delaware General Corporation
Law, the Corporation shall indemnify any current or former Director or officer
of the Corporation and may, at the discretion of the Board of Directors,
indemnify any current or former employee or agent of the Corporation against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding brought by or in the
right of the Corporation or otherwise, to which he was or is a party or is
threatened to be made a party by reason of his current or former position with
the Corporation or by reason of the fact that he is or was serving, at the
request of the Corporation, as a director, officer, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise.
ARTICLE V
GENERAL PROVISIONS
------------------
Section 1. Notices. Whenever any statute, the Certificate of
--------
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notices may be given in writing by mail, addressed to such
Director or stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Such notice shall be deemed to have
been given when it is deposited in the United States mail. Notice to Directors
may also be given by telegram or facsimile transmission or be delivered
personally or by telephone.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
------------
fixed by the Board of Directors.
5
Exhibit 3.4(b)
RJR NABISCO, INC.
BY-LAWS
As Amended Effective December 5, 1995
ARTICLE I
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stockholders of the
------------------
Corporation shall be held at such place either within or without the State of
Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings. Annual meetings of
----------------------------
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting.
Special meetings of the stockholders may be called by the Chairman or the Chief
Executive Officer for any purpose and shall be called by the Chairman, the Chief
Executive Officer or the Secretary if directed by the Board of Directors or
requested in writing by the holders of not less than 25% of the common stock of
the Corporation. Each such stockholder request shall state the purpose of the
proposed meeting.
Section 3. Notice. Except as otherwise provided by law or by the
-------
Certificate of Incorporation, at least 10 and not more than 60 days before each
meeting of stockholders, written notice of the time, date and place of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given to each stockholder.
Section 4. Quorum. At any meeting of stockholders, the holders of
-------
record, present in person or by proxy, of a majority of the Corporation's issued
and outstanding common stock shall constitute a quorum for the transaction of
business, except as otherwise provided by law or by the Certificate of
Incorporation. In the absence of a quorum, any officer entitled to preside at
or to act as secretary of the meeting shall have power to adjourn the meeting
from time to time until a quorum is present.
<PAGE>
Section 5. Voting. Except as otherwise provided by law or by the
-------
Certificate of Incorporation, all matters submitted to a meeting of stockholders
shall be decided by vote of the holders of record, present in person or by
proxy, of a majority of the Corporation's issued and outstanding common stock.
The date and time of the opening and closing of the polls for each matter upon
which stockholders will vote shall be announced at the meeting.
Section 6. Inspectors of Election. Prior to any meeting of the
-----------------------
stockholders, the Board of Directors shall appoint one or more inspectors to act
at the meeting and make a written report thereof in accordance with the Delaware
General Corporation Law. The Board of Directors may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath to execute faithfully the duties of inspector with strict
impartiality and according to the best of his or her ability.
ARTICLE II
DIRECTORS
---------
Section 1. Number, Election and Removal of Directors. The number of
------------------------------------------
Directors that shall constitute the Board of Directors shall be not less than
one nor more than seventeen. The first Board of Directors shall consist of
three Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors or by the stockholders.
The Directors shall be elected by the stockholders at their annual meeting and
shall serve until the next annual meeting of the stockholders and until their
successors are elected and shall qualify. Vacancies and newly created
directorships resulting from any increase in the number of Directors may be
filled by a majority of the Directors then in office, although less than a
quorum, or by the sole remaining Director or by the stockholders, and any
Director so chosen shall serve until the next annual meeting of the stockholders
and until his or her successor shall be elected and shall qualify. A Director
may be removed with or without cause by the stockholders.
Section 2. Meetings. Regular meetings of the Board of Directors shall
---------
be held at such times and places as may from time to time be fixed by the Board
of Directors or as may be specified in a notice of meeting. Special meetings of
the Board of Directors may be held at any time upon the call of the Chairman or
the Chief Executive Officer and shall be called by the Chairman, the Chief
Executive
2
<PAGE>
Officer or the Secretary if directed by the Board of Directors. A meeting of
the Board of Directors may be held without notice immediately after the annual
meeting of the stockholders. Notice need not be given of regular or special
meetings of the Board of Directors.
Section 3. Quorum. One-third of the total number of Directors shall
-------
constitute a quorum for the transaction of business. If a quorum is not present
at any meeting of the Board of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until such a quorum is present. Except as otherwise provided by law,
the Certificate of Incorporation of the Corporation, these By-Laws or any
contract or agreement to which the Corporation is a party, the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors.
Section 4. Executive Committee. The Board of Directors, by resolution
--------------------
adopted by a majority of the entire Board, may appoint from among its members an
Executive Committee consisting of the Chief Executive Officer, if such officer
is a member of the Board of Directors, or the Chairman, if the Chief Executive
Officer is not a member of the Board of Directors, and at least two other
Directors. Meetings of the Executive Committee shall be held without notice at
such dates, times and places as shall be determined by the Executive Committee.
The Executive Committee shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation that are permitted by law to be exercised by a committee of the
Board of Directors, including the power to declare dividends, to authorize the
issuance of stock and to adopt a certificate of ownership and merger of parent
corporation and subsidiary or subsidiaries; provided, however, that the
Executive Committee shall not have the power or authority of the Board of
Directors in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation with respect to the Corporation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
amending the By-Laws of the Corporation or adopting a certificate of ownership
and merger of the Corporation (other than a certificate of ownership and merger
of parent corporation and subsidiary or subsidiaries). The majority of the
members of the Executive Committee shall constitute a quorum. Minutes shall be
kept of the proceedings of the Executive Committee, which shall be reported at
meetings of the Board of Directors. The Executive Committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by
3
<PAGE>
the Board of Directors of the Corporation, fix any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the Corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorized the increase or decrease of the
shares of any series.
Section 5. Other Committees of Directors. The Board of Directors may,
------------------------------
by resolution adopted by a majority of the Board of Directors, designate one or
more other committees to have and exercise such power and authority as the Board
of Directors shall specify. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or she or they constitute a quorum,
may unanimously appoint another Director to act at the meeting in place of any
such absent or disqualified member.
ARTICLE III
OFFICERS
--------
Section 1. Description and Terms. The officers of the Corporation
----------------------
shall be the Chairman, the Chief Executive Officer, one or more Vice Chairmen, a
President, a Secretary, a Treasurer and such other additional officers with such
titles as the Board of Directors shall determine, all of whom shall be chosen by
and serve at the pleasure of the Board of Directors; provided that the Chief
Executive Officer may appoint Senior Vice Presidents, Vice Presidents or
Assistant Officers at his or her discretion. The Chairman shall be an employee
of the Corporation. There shall be an office of the Chief Executive Officer,
which shall consist of the Chief Executive Officer, such Vice Chairmen and such
other officers as shall be designated by the Chief Executive Officer. Subject
to such limitations as may be imposed by the Board of Directors, the Chief
Executive Officer shall have full executive power and authority with respect to
the Corporation. Each Vice Chairman and the President shall have such powers
and authority as the Chief Executive Officer may determine. If the Chief
Executive Officer is absent or incapacitated, the President or, in the
President's absence or incapacitation, the Chairman or such other person as
shall be designated by the Chairman shall have all the power and authority of
the Chief Executive Officer. Other officers shall have the usual powers and
shall perform all the usual duties incident to their respective offices. All
officers shall be subject to the supervision and direction of the Board of
Directors. The authority, duties or responsibilities of any officer of
4
<PAGE>
the Corporation may be suspended by the Chief Executive Officer with or without
cause. Any officer elected or appointed by the Board of Directors may be
removed by the Board of Directors with or without cause. Subject to such
limitations as the Board of Directors may provide, each officer may further
delegate to any other officer or any employee or agent of the Corporation such
portions of his or her authority as the officer shall deem appropriate, subject
to such limitation as the officer shall specify, and may revoke such authority
at any time.
Section 2. Stockholder Consents and Proxies. The Chairman, the Chief
---------------------------------
Executive Officer, each Vice Chairman, the President, the Secretary and the
Treasurer, or any one of them, shall have the power and authority on behalf of
the Corporation to execute any stockholders' consents or proxies and to attend
and act and vote in person or by proxy at any meetings of the stockholders of
any corporation in which the Corporation may own stock, and at any such meetings
shall possess and may exercise any and all of the rights and powers incident to
the ownership of such stock which as the owner thereof the Corporation might
have possessed and executed if present. The Board of Directors, by resolutions
from time to time, may confer like powers upon any other officer.
ARTICLE IV
INDEMNIFICATION
---------------
To the fullest extent permitted by the Delaware General Corporation
Law, the Corporation shall indemnify any current or former Director or officer
of the Corporation and may, at the discretion of the Board of Directors,
indemnify any current or former employee or agent of the Corporation against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with any
threatened, pending or completed action, suit or proceeding brought by or in the
right of the Corporation or otherwise, to which he or she was or is a party or
is threatened to be made a party by reason of his or her current or former
position with the Corporation or by reason of the fact that he or she is or was
serving, at the request of the Corporation, as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
5
<PAGE>
ARTICLE V
GENERAL PROVISIONS
------------------
Section 1. Notices. Whenever any statute, the Certificate of
--------
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notices may be given in writing by mail, addressed to such
Director or stockholder at his or her address as it appears on the records of
the Corporation, with postage thereon prepaid. Such notice shall be deemed to
have been given when it is deposited in the United States mail. Notice to
Directors may also be given by telegram or facsimile transmission or be
delivered personally or by telephone.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
------------
fixed by the Board of Directors.
6
Exhibit 10.7
SECOND AMENDMENT TO NABISCO CREDIT AGREEMENT
--------------------------------------------
SECOND AMENDMENT (this "Amendment"), dated as of November 3, 1995,
among NABISCO HOLDINGS CORP., a Delaware corporation ("Holdings"), NABISCO,
INC., a New Jersey corporation (the "Borrower") and the various lending
institutions (the "Banks") party to the Credit Agreement referred to below. All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings provided such terms in the Credit Agreement.
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 28, 1995 (as amended, modified or supplemented to
the date hereof, the "Credit Agreement"); and
WHEREAS, Holdings, the Borrower and the Banks wish to amend the Credit
Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to the Credit Agreement.
----------------------------------
1. Section 1.14 of the Credit Agreement is hereby amended by deleting
the word "and" at the end of clause (i) appearing therein and inserting a comma
in lieu thereof and inserting the following immediately after the end of clause
(ii) appearing therein:
"and (iii) in the event that such Replaced Bank is a party to the 364
DF Credit Agreement, the Borrower shall also take the actions
specified in Section 1.14 of the 364 DF Credit Agreement and replace
such Bank as a Bank thereunder."
2. Section 6 of the Credit Agreement is hereby amended by inserting
the phrase ", subject to the exceptions set forth in Section 5.02," immediately
following the phrase "Section 6" appearing in the preamble of said Section.
<PAGE>
3. Section 8.04(a) of the Credit Agreement is hereby amended by
inserting the phrase ", to the extent that the aggregate outstanding principal
amount of Indebtedness permitted pursuant to this clause (a)(i) shall not exceed
$500,000,000" immediately after the phrase "Replacement Receivables Facility"
appearing therein.
4. Section 8.07 of the Credit Agreement is hereby amended by deleting
said Section in its entirety and inserting in lieu thereof the following new
Section 8.07:
"8.07 Consolidated Net Worth. Holdings will not permit
----------------------
Consolidated Net Worth at any time to be less than an amount equal to
the sum of (x) $3,750,000,000 plus (y) the sum of 25% of Consolidated
Net Income, if positive, for each prior fiscal year of Holdings, if
any, ending after January 1, 1996.".
5. Section 8.08 of the Credit Agreement is hereby amended by deleting
said Section in its entirety and inserting in lieu thereof the following new
Section 8.08:
"8.08 Fixed Charge Coverage Ratio. Holdings will not permit the
---------------------------
ratio of (i) Adjusted Operating Income to (ii) Consolidated Fixed Charges
for any Test Period to be less than 1.15 to 1.00.".
6. Section 8.09 of the Credit Agreement is hereby amended by deleting
said Section in its entirety and inserting in lieu thereof the following new
Section 8.09:
"8.09 Leverage Ratio. Holdings will not permit the ratio of (i)
--------------
Adjusted Consolidated Debt to (ii) Adjusted Operating Income for any Test
Period to be more than 3.70 to 1.00.".
7. Section 8.10 of the Credit Agreement is hereby amended by deleting
said Section in its entirety and inserting in lieu thereof the following new
Section 8.10:
"8.10 Cash Interest Coverage Ratio. Holdings will not permit the
----------------------------
ratio of (i) Adjusted Operating Income to (ii) Consolidated Cash Interest
Expense for any Test Period to be less than 3.00 to 1.00.".
8. Section 9.04(a) of the Credit Agreement is hereby amended by
inserting the following clause immediately after the phrase "(determined without
regard to whether any notice or lapse of time is required" contained therein:
", provided that the existence of any Event of Default under this
Section 9.04(a)(ii) with respect to Indebtedness outstanding under the 364
DF Credit Agreement shall be determined after giving effect to any notice
or lapse of time provided to the Borrower in the 364 DF Credit Agreement".
-2-
<PAGE>
9. Section 10 of the Credit Agreement shall be amended by (a)
deleting the definitions "Applicable Facility Fee Percentage", "Commercial Paper
Outstandings" and "Cumulative Consolidated Net Income" contained therein in
their entirety and (b) inserting the following definitions in appropriate
alphabetical order:
"Applicable Facility Fee Percentage" shall mean, at any time during a
period set forth the percentage set forth below opposite such period below:
Applicable Facility
Period Fee Percentage
------ --------------
NIG Period .225%
Minimum Investment .175%
Grade Period
Increased
Investment Grade .150%
Period
Maximum Investment .125%
Grade Period
"Commercial Paper Outstandings" shall mean, at any time during a CP
Period, an amount equal to (I) the sum of (x) the face amount of all
commercial paper previously issued by Holdings and/or any of its
Subsidiaries at a discount and outstanding at such time plus (y) the
----
principal amount of all commercial paper previously issued by Holdings
and/or any of its Subsidiaries on an interest bearing basis and outstanding
at such time, in each case that will be refinanced, if necessary, pursuant
to a CP Refinancing Borrowing less (II) the Commercial Paper Outstandings
at such time as defined in the 364 DF Credit Agreement, provided that the
--------
Commercial Paper Outstandings that may be refinanced pursuant to CP
Refinancing Borrowings shall not exceed at any time an amount equal to (i)
$1,500,000,000 less (ii) the then aggregate principal amount of all Loans
made pursuant to CP Refinancing Borrowings.
"Consolidated Net Income" shall mean, for any period, for any Person
the consolidated net income of such Person and its Subsidiaries, determined
in accordance with GAAP, for such period.
"Cumulative Consolidated Net Income" shall mean, at any time for any
determination thereof, the sum of (i) Consolidated Net Income of Holdings
for the period (taken as one accounting period) commencing January 1, 1995
and ending on the last day of the last fiscal quarter of Holdings then
ended plus (ii) all losses
-3-
<PAGE>
from debt retirement deducted in determining the Consolidated Net Income of
Holdings for the period referred to in clause (i) above.
"364 DF Credit Agreement" shall mean the Credit Agreement, dated as of
November 3, 1995, among Holdings, the Borrower and the lending institutions
party thereto relating to initial commitments aggregating $1,500,000,000,
as the same may be modified, supplemented or amended from time to time.
10. Section 10 of the Credit Agreement shall be further amended by
deleting the phrase "one rating level" appearing in the definition "Maximum
Investment Grade Rating" and inserting in lieu thereof the phrase "at least one
or more levels".
11. Section 10 of the Credit Agreement shall be further amended by
deleting the following phrase appearing in the definition "Replacement
Receivables Facility" in its entirety:
"(i) the aggregate amount of available credit to Hanover under such
facility does not exceed the aggregate amount available to Hanover under
the Hanover Facility or the Replacement Receivables Facility, as the case
may be, being replaced or refinanced and (ii)".
12. Section 12.04(b)(A) of the Credit Agreement is hereby amended by
(a) inserting the phrase "(I) in the event of an assignment relating to this
Agreement only," immediately prior to the amount "$10,000,000" contained in the
first sentence thereof, (b) inserting the following phrase immediately after the
word "zero" appearing at the end of the first sentence thereof:
"and (II) in the event of an assignment relating this Agreement and the 364
DF Credit Agreement, $5,000,000, provided, that the aggregate amount of
--------
such assignment under this Agreement and the 364 DF Credit Agreement is at
least $10,000,000, except to the extent that after giving effect to any
such assignment the assigning Bank shall have reduced its Commitment
hereunder to zero";
and (c) inserting the following phrase immediately prior to the phrase "by (I)"
appearing in the third sentence thereof:
"(provided, that in the event of simultaneous assignments relating to this
Agreement and the 364 DF Credit Agreement, the fees for such assignment
shall total $2,500)".
-4-
<PAGE>
13. Section 12.07(a) of the Credit Agreement is hereby amended by
inserting "(i)" immediately after the phrase "provided further that" and
-------- -------
inserting the following at the end of said Section:
"and (ii) in the event that the Indebtedness and related receivables under
the Hanover Facility or under any Replacement Receivables Facility are no
longer given off-balance sheet treatment, any such Indebtedness, the
interest expense or discount thereon and related receivables under the
Hanover Facility or any Replacement Receivables Facility shall continue to
receive off-balance sheet treatment for purposes of determining compliance
with Section 8."
II. Miscellaneous Provisions
------------------------
1. In order to induce the Banks to enter into this Amendment, each
Credit Party hereby (i) makes each of the representations, warranties and agree-
ments contained in Section 6 of the Credit Agreement and (ii) represents and
warrants that there exists no Default or Event of Default, in each case on the
Amendment Date (as defined below), both before and after giving effect to this
Amendment.
2. 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.
3. 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.
4. 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.
5. This Amendment shall become effective on the date (the "Amendment
Date") when (i) the Borrower shall have given notice to the Payments
Administrator pursuant to Section 3.02 of the Credit Agreement of a reduction in
the Total Unutilized Commitment such that, after giving effect thereto, the
Total Commitment shall equal an amount not greater than $2,000,000,000 and (ii)
each of the Credit Parties 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 facsimile transmission) the same to White & Case, 1155 Avenue of the
Americas, New York, New York 10036, Attention: Eric F. Leicht, Esq.
-5-
<PAGE>
(Facsimile No.: (212) 354-8113). After transmitting its executed signature page
as provided above, each of the Banks shall deliver executed hard copies of this
Amendment to White & Case, 1155 Avenue of the Americas, New York, New York
10036, Attention: Eric F. Leicht, Esq.
6. From and after the Amendment Date, all references to the Credit
Agreement in the Credit Agreement and the other Credit Documents shall be deemed
to be references to such Credit Agreement as modified hereby.
* * *
-6-
<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.
NABISCO HOLDINGS CORP.
By /s/ Frank Suozzi
-----------------------------------------
Title: Vice President & Treasurer
NABISCO, INC.
By /s/ Frank Suozzi
------------------------------------------
Title: Vice President & Treasurer
<PAGE>
SENIOR MANAGING AGENTS
BANKERS TRUST COMPANY
By /s/ Mary Kay Coyle
--------------------------------
Title: Managing Director
THE CHASE MANHATTAN BANK, N.A.
By /s/ Patricia B. Bril
----------------------------------
Title: Managing Director
CHEMICAL BANK
By /s/ Robert Gaynor
----------------------------------
Title: Vice President
CITIBANK, N.A.
By /s/ Steven R. Victorin
--------------------------------
Title: Attorney in Fact
THE FUJI BANK, LIMITED
By /s/ Katsunori Nozawa
--------------------------------
Title: Vice President &
Manager
<PAGE>
MANAGING AGENTS
ABN AMRO BANK N.V. NEW YORK BRANCH
By /s/ Frances Logan
---------------------------------
Title: Vice President
By /s/ Janet T. Marple
---------------------------------
Title: Assistant Vice
President
BANK OF AMERICA NT & SA
By /s/ David Noda
---------------------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Russel Gorman
---------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ Terry K. Fryett
------------------------------
Title: Authorized Signatory
BANQUE PARIBAS
By /s/ Mary T. Finnegan
---------------------------------
Title: Group Vice President
By /s/ John J. McCormick III
---------------------------------
Title: Assistant Vice President
<PAGE>
CIBC, INC.
By /s/ Judy Domkowski
------------------------------
Title: Authorized Signatory
CREDIT LYONNAIS - CAYMAN ISLAND
BRANCH
By /s/ Mark Campellone
------------------------------
Title: Authorized Signature
CREDIT LYONNAIS - NEW YORK BRANCH
By /s/ Mark Campellone
--------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LIMITED,
NEW YORK BRANCH
By /s/ Bertram H. Tang
---------------------------------
Title: Assistant Vice President
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCHES
By /s/ Robert M. Wood, Jr.
-------------------------------
Title: Vice President
By /s/ James Fox
-------------------------------
Title: Assistant Vice President
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LIMITED - NEW YORK BRANCH
By /s/ Junri Oda
----------------------------------
Title: Senior Vice President &
Senior Manager
MIDLAND BANK PLC
By /s/ Mark J. Rakov
---------------------------------
Title: Authorized Signatory
THE MITSUBISHI BANK, LIMITED-NEW
YORK BRANCH
By /s/ Paula Mueller
------------------------------
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By /s/ Adam J. Silver
------------------------------
Title: Associate
THE SAKURA BANK, LTD.
By /s/ Masahiro Nakajo
--------------------------------
Title: Senior Vice President &
Manager
THE SANWA BANK LIMITED
By /s/ Stephen Small
--------------------------------
Title: Vice President & Area
Manager
<PAGE>
SOCIETE GENERALE
By /s/ Robert Petersen
---------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED NEW YORK
BRANCH
By /s/ Yoshinori Kawamura
---------------------------------
Title: Joint General Manager
THE TOKAI BANK, LIMITED
By /s/ Stuart M. Schulman
----------------------------------
Title: Senior Vice President
LEAD MANAGERS
BANCA COMMERCIALE ITALIANA NEW YORK
BRANCH
By /s/ Charles Dougherty
---------------------------------
Title: Vice President
By /s/ Julia M. Welch
----------------------------------
Title: Assistant Vice President
THE BANK OF TOKYO TRUST COMPANY
By /s/ Michael C. Irwin
---------------------------------
Title: Vice President
<PAGE>
THE LTCB TRUST COMPANY
By /s/ Rene O. LeBlanc
--------------------------------------
Title: Senior Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/ Patricia Loret de Mola
--------------------------------------
Title: Senior Vice President
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED - NEW YORK
BRANCH
By /s/ Gerard Machado
--------------------------------------
Title: Vice President & Manager
NATIONSBANK, N.A.
By /s/ James T. Gilland
--------------------------------------
Title: Senior Vice President
ROYAL BANK OF CANADA
By /s/ David A. Barsalou
--------------------------------------
Title: Senior Manager
WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Samuel P. Moss
--------------------------------------
Title: Senior Vice President
<PAGE>
MANAGERS
BAYERISCHE VEREINSBANK AG
NEW YORK BRANCH
By /s/ Marianne Weinzinger
--------------------------------------
Title: Vice President
By /s/ Walter H. Eckmeier
--------------------------------------
Title: Vice President
CREDIT SUISSE
By /s/ Edward E. Barr
--------------------------------------
Title: Associate
By /s/ Michael C. Mast
--------------------------------------
Title: Member of Senior Management
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By /s/ Alan S. Bookspan
--------------------------------------
Title: Vice President
By /s/ Robert G. Carino
--------------------------------------
Title: Vice President
YASUDA TRUST & BANKING
COMPANY, LIMITED
By /s/ Rohn M. Laudenschlager
--------------------------------------
Title: Senior Vice President
<PAGE>
CO-MANAGERS
ASAHI BANK
By /s/ Tomohiko Kareko
--------------------------------------
Title: Senior Deputy General
Manager
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND"
By /s/ Johannes F. Breukhoven
--------------------------------------
Title: Vice President
By /s/ Ian Reece
--------------------------------------
Title: Vice President & Manager
TORONTO DOMINION (NEW YORK), INC.
By /s/ Reg Waylen
--------------------------------------
Title: Director
UNION BANK OF SWITZERLAND
NEW YORK BRANCH
By /s/ Peter B. Yearley
--------------------------------------
Title: Vice President
By /s/ James P. Kelleher
--------------------------------------
Title: Assistant Vice President
OTHER BANKS
ARAB BANK PLC - GRAND CAYMAN
BRANCH
By /s/ Peter Boyadjian
--------------------------------------
Title: Senior Vice President
<PAGE>
BANCA CASSA DI RISPARMIO DI
TORINO S.P.A.
By /s/ J. Slade Carter, Jr.
--------------------------------------
Title: Vice President
By /s/ Robert P. DeSantes
--------------------------------------
Title: Vice President & Head
of Corporate Banking
BANCO DI ROMA S.P.A.
By /s/ Ralph L. Riehle
--------------------------------------
Title: First Vice President
By /s/ Luca Balestra
--------------------------------------
Title: Assistant Vice President
BANCO CENTRAL HISPANOAMERICANO,
S.A.
By /s/ Francisco Alcon
--------------------------------------
Title: Executive Vice President
& General Manager
BAYERISCHE LANDESBANK
GIROZENTRALE
By /s/ Bert von Stuelpnagel
--------------------------------------
Title: Executive Vice President
& Manager
By /s/ Peter Obermann
--------------------------------------
Title: Senior Vice President
<PAGE>
FIRST FIDELITY BANK,
NATIONAL ASSOCIATION
By /s/ Grace Vallacchi
--------------------------------------
Title: Vice President
By /s/ Wendell Jones
--------------------------------------
Title: Vice President
THE HOKKAIDO TAKUSHOKU BANK, LTD.
By /s/ Hiromoto Ishizuka
--------------------------------------
Title: Vice President
KREDIETBANK N.V.
By /s/ Armen Karozichian
--------------------------------------
Title: Vice President
By /s/ Robert Snauffer
--------------------------------------
Title: Vice President
NORDDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By /s/ Stephen K. Hunter
--------------------------------------
Title: Senior Vice President
By /s/ Stephanie Hoevermann
--------------------------------------
Title: Vice President
THE NORINCHUKIN BANK
By /s/ Kenichi Yoshikubo
--------------------------------------
Title: Joint General Manager
<PAGE>
THE NORTHERN TRUST COMPANY
By /s/ Lawson E. Whiting
--------------------------------------
Title: Commercial Banking Officer
THE ROYAL BANK OF SCOTLAND PLC
By /s/ David Dougan
--------------------------------------
Title: Vice President
SWISS BANK CORPORATION
NEW YORK BRANCH
By /s/ William S. Lutkins
--------------------------------------
Title: Associate Director Credit
Risk Management
By /s/ H. Clark Worthley
--------------------------------------
Title: Associate Director
THE TOYO TRUST & BANKING CO.,
LTD. - NEW YORK BRANCH
By /s/ Hiroyuki Fukuro
--------------------------------------
Title: Vice President
VIA BANQUE
By /s/ Jean-Louis Simon
--------------------------------------
Title: DGA
By /s/ Frederic Fournier
--------------------------------------
Title: S.S. Directeur
<PAGE>
THE CHUO TRUST & BANKING CO.,
LTD. - NEW YORK AGENCY
By /s/ Kunio Kimura
--------------------------------------
Title: Deputy General Manager
CREDITO ITALIANO, S.P.A.
By /s/ Harmon P. Butler
--------------------------------------
Title: First Vice President
By /s/ Saiyed A. Abbas
--------------------------------------
Title: Assistant Vice President
GULF INTERNATIONAL BANK B.S.C.
By /s/ Haytham F. Khalil
--------------------------------------
Title: Assistant Vice President
By /s/ Abdel-Fattah Tahoun
--------------------------------------
Title: Senior Vice President
THE NIPPON CREDIT BANK, LTD.,
By /s/ Hideaki Mori
--------------------------------------
Title: Vice President & Manager
STANDARD CHARTERED BANK
By /s/ Brian S. Taylor
--------------------------------------
Title: Assistant Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ Douglas A. Rich
--------------------------------------
Title: Vice President
SUMITOMO BANK OF CALIFORNIA
By /s/ Shuji Ito
--------------------------------------
Division Manager
Exhibit 10.8
=======================================================================
CREDIT AGREEMENT
AMONG
NABISCO HOLDINGS CORP.,
NABISCO, INC.
AND
BANKERS TRUST COMPANY,
THE CHASE MANHATTAN BANK, N.A.,
CHEMICAL BANK,
CITIBANK, N.A.
AND
THE FUJI BANK, LIMITED,
AS SENIOR MANAGING AGENTS
AND
VARIOUS LENDING INSTITUTIONS
---------------------------------
Dated as of November 3, 1995
---------------------------------
$1,500,000,000
=======================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . 1
1.01 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Amount of Each Borrowing; Maximum Number of Borrowings . 2
1.03 Notice of Borrowing of Revolving Loans . . . . . . . . . . . . . 2
1.04 Competitive Bid Borrowings . . . . . . . . . . . . . . . . . . . 3
1.05 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . 5
1.06 Notes; Register . . . . . . . . . . . . . . . . . . . . . . . . 6
1.07 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.08 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . 7
1.09 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . 8
1.11 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . 9
1.12 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.13 Change of Lending Office . . . . . . . . . . . . . . . . . . . . 12
1.14 Replacement of Banks . . . . . . . . . . . . . . . . . . . . . . 12
1.15 Notice of Certain Costs . . . . . . . . . . . . . . . . . . . . 13
1.16 Commitment Increases . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . 14
2.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.02 Voluntary Reduction of Commitments . . . . . . . . . . . . . . . 15
2.03 Mandatory Reduction of Commitments, etc. . . . . . . . . . . . . 15
SECTION 3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . 15
3.02 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . 16
3.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . 16
3.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4. Conditions Precedent to the Effective Date . . . . . . . . . . 19
4.01 Execution of Agreement . . . . . . . . . . . . . . . . . . . . . 19
4.02 Notes; Effectiveness of Second Amendment . . . . . . . . . . . . 19
4.03 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . 19
4.04 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
Page
----
4.05 Corporate Proceedings . . . . . . . . . . . . . . . . . . . . . 19
4.06 Organizational Documentation, etc. . . . . . . . . . . . . . . . 19
4.07 Adverse Change, etc. . . . . . . . . . . . . . . . . . . . . . . 20
4.08 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.09 Fees, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5. Conditions Precedent to Loans . . . . . . . . . . . . . . . . . 20
5.01 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.02 No Default; Representations and Warranties . . . . . . . . . . . 20
5.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6. Representations, Warranties and Agreements . . . . . . . . . . 21
6.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . 21
6.02 Corporate Power and Authority . . . . . . . . . . . . . . . . . 21
6.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . 22
6.06 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . 22
6.07 Investment Company Act . . . . . . . . . . . . . . . . . . . . . 23
6.08 True and Complete Disclosure . . . . . . . . . . . . . . . . . . 23
6.09 Financial Condition; Financial Statements . . . . . . . . . . . 23
6.10 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . 23
6.11 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 24
6.12 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.13 Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.14 Pollution and Other Regulations . . . . . . . . . . . . . . . . 24
6.15 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 25
7.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . 25
7.02 Books, Records and Inspections . . . . . . . . . . . . . . . . . 27
7.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . 27
7.05 Consolidated Corporate Franchises . . . . . . . . . . . . . . . 27
7.06 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . 28
7.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.08 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.09 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . 29
7.10 Commercial Paper and Competitive Bid Loan Outstandings . . . . . 29
SECTION 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 29
8.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . . 29
8.02 Consolidation, Merger, Sale of Assets, etc. . . . . . . . . . . 30
8.03 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.04 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(ii)
<PAGE>
Page
----
8.05 Limitation on Restricted Payments . . . . . . . . . . . . . . . 33
8.06 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 34
8.07 Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . 34
8.08 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . 34
8.09 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.10 Cash Interest Coverage Ratio . . . . . . . . . . . . . . . . . . 34
SECTION 9. Events of Default . . . . . . . . . . . . . . . . . . . . . . 34
9.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . . 34
9.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . 35
9.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . 36
9.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.07 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.08 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 11. The Senior Managing Agents . . . . . . . . . . . . . . . . . . 57
11.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.02 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . 57
11.03 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . 57
11.04 Reliance by Senior Managing Agents . . . . . . . . . . . . . . 58
11.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . 58
11.06 Non-Reliance on Senior Managing Agents and Other Banks . . . . 59
11.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 59
11.08 Senior Managing Agents in Their Individual Capacities . . . . . 60
11.09 Successor Senior Managing Agents . . . . . . . . . . . . . . . 60
SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 60
12.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . . . 60
12.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . 61
12.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . 62
12.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . 64
12.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . 65
12.07 Calculations; Computations . . . . . . . . . . . . . . . . . . 65
12.08 Governing Law; Submission to Jurisdiction; Venue . . . . . . . 66
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.10 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . 67
12.11 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . 67
12.12 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.13 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . 67
12.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 68
(iii)
<PAGE>
Page
----
12.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 68
SECTION 13. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
13.01 The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . 68
13.02 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.03 Nature of Liability . . . . . . . . . . . . . . . . . . . . . . 69
13.04 Independent Obligation . . . . . . . . . . . . . . . . . . . . 69
13.05 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 70
13.06 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
13.07 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . 70
13.08 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
13.09 Limitation on Enforcement . . . . . . . . . . . . . . . . . . . 71
ANNEX I -- List of Banks and Commitments
ANNEX II -- Bank Addresses
ANNEX III -- Schedule of Material Subsidiaries
ANNEX IV -- Certain Litigation
ANNEX V -- Specified Permitted Existing Debt
EXHIBIT A -- Form of Note
EXHIBIT B-1 -- Form of Opinion of General Counsel
of the Borrower
EXHIBIT B-2 -- Form of Opinion of White & Case,
Special Counsel to the Banks
EXHIBIT C-1 -- Notice of Assignment
EXHIBIT C-2 -- Form of Assignment Agreement
EXHIBIT C-3 -- Agreement of Commitment Increase
EXHIBIT D -- Form of Confidentiality Agreement
(iv)
<PAGE>
CREDIT AGREEMENT, dated as of November 3, 1995, among NABISCO HOLDINGS
CORP., a Delaware corporation ("Holdings"), NABISCO, INC., a New Jersey cor-
poration (the "Borrower"), and the lending institutions listed from time to time
on Annex I hereto (each, a "Bank" and, collectively, the "Banks"). Unless
otherwise defined herein, all capitalized terms used herein and defined in
Section 10 are used herein as so defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available the credit facility provided for
herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
--------------------------
1.01 Commitments. (a) Subject to and upon the terms and conditions
-----------
herein set forth, each Bank severally agrees to make a loan or loans (each, a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower,
which Revolving Loans:
(i)shall be made at any time and from time to time on and after
the Effective Date and prior to the Commitment Expiry Date;
(ii)may, at the option of the Borrower, be incurred and
maintained as, and/or converted into, Reference Rate Loans or Eurodollar
Loans, provided that all Revolving Loans made by all Banks pursuant to the
--------
same Borrowing shall, unless otherwise specifically provided herein, con-
sist entirely of Revolving Loans of the same Type;
(iii)may be repaid and reborrowed in accordance with the provi-
sions hereof; and
(iv)shall not exceed for any Bank at any time of incurrence
thereof and after giving effect thereto and the use of the proceeds thereof
that aggregate principal amount which, when added to the product of (x)
such Bank's Percentage and (y) the sum of (I) the aggregate outstanding
principal amount of all Competitive Bid Loans then outstanding and (II)
Commercial Paper Outstandings at such time, equals the Commitment of such
Bank at such time.
<PAGE>
(b) Subject to and upon the terms and conditions herein set forth,
each Bank severally agrees that the Borrower may incur a loan or loans (each, a
"Competitive Bid Loan" and, collectively, the "Competitive Bid Loans") pursuant
to a Competitive Bid Borrowing from time to time on and after the Effective Date
and prior to the date which is the third Business Day preceding the date which
is 14 days prior to the Commitment Expiry Date, provided, that after giving
--------
effect to any Competitive Bid Borrowing and the use of the proceeds thereof, the
aggregate outstanding principal amount of Competitive Bid Loans when combined
with the aggregate outstanding principal amount of all Revolving Loans then
outstanding and the aggregate Commercial Paper Outstandings at such time shall
not exceed the Total Commitment at such time. Within the foregoing limits and
subject to the conditions set out in Section 1.04, Competitive Bid Loans may be
repaid and reborrowed in accordance with the provisions hereof.
1.02 Minimum Amount of Each Borrowing; Maximum Number of Borrowings.
--------------------------------------------------------------
The aggregate principal amount of each Borrowing of Revolving Loans shall not be
less than the Minimum Borrowing Amount. More than one Borrowing may be incurred
on any date; provided that at no time shall there be outstanding more than eight
--------
Borrowings of Eurodollar Loans under this Agreement.
1.03 Notice of Borrowing of Revolving Loans. (a) Whenever the Bor-
--------------------------------------
rower desires to incur Revolving Loans hereunder, it shall give the Payments
Administrator at the Payments Administrator's Office (x) prior to 11:00 A.M.
(New York time) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Revolving
Loans constituting Eurodollar Loans and (y) prior to 11:00 A.M. (New York time)
prior written notice (or telephonic notice promptly confirmed in writing) on the
date of each Borrowing of Revolving Loans constituting Reference Rate Loans. E-
ach such notice (each, a "Notice of Borrowing") shall be irrevocable and shall
specify: (i) the aggregate principal amount of the Revolving Loans to be made
pursuant to such Borrowing; (ii) the date of Borrowing (which shall be a
Business Day); and (iii) whether the respective Borrowing shall consist of
Reference Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest
Period to be initially applicable thereto. The Payments Administrator shall
promptly give each Bank written notice (or telephonic notice promptly confirmed
in writing) of each proposed Borrowing of Revolving Loans, of such Bank's
proportionate share thereof and of the other matters covered by the Notice of
Borrowing.
(b) Without in any way limiting the obligation of the Borrower to
confirm in writing any notice it may give hereunder by telephone, the Payments
Administrator may act prior to receipt of written confirmation without liability
upon the basis of such telephonic notice, believed by the Payments Administrator
in good faith to be from the Chairman, Chief Financial Officer or Treasurer of
the Borrower, or from any other person designated in writing to the Payments
Administrator by the Chief Financial Officer or
-2-
<PAGE>
Treasurer of the Borrower as a person entitled to give telephonic notices under
this Agreement on behalf of the Borrower. In each such case the Borrower hereby
waives the right to dispute the Payments Administrator's record of the terms of
any such telephonic notice.
1.04 Competitive Bid Borrowings. (a) Whenever the Borrower desires
--------------------------
to incur a Competitive Bid Borrowing, it shall deliver to the Payments
Administrator at the Payments Administrator's Office, prior to 11:00 A.M. (New
York time) (x) at least four Business Days prior to the date of such proposed
Competitive Bid Borrowing, in the case of a Spread Borrowing, and (y) at least
one Business Day prior to the date of such proposed Competitive Bid Borrowing,
in the case of an Absolute Rate Borrowing, a written notice (a "Notice of
Competitive Bid Borrowing"), which notice shall specify in each case (i) the
date (which shall be a Business Day) and the aggregate amount of the proposed
Competitive Bid Borrowing, (ii) the maturity date for repayment of each and
every Competitive Bid Loan to be made as part of such Competitive Bid Borrowing
(which maturity date may be (A) one, two, three or six months after the date of
such Competitive Bid Borrowing in the case of a Spread Borrowing, and (B)
between 7 and 180 days, inclusive, after the date of such Competitive Bid
Borrowing in the case of an Absolute Rate Borrowing, provided that in no event
--------
shall the maturity date of any Competitive Bid Borrowing be later than the third
Business Day preceding the Commitment Expiry Date), (iii) the interest payment
date or dates relating thereto, (iv) whether the proposed Competitive Bid
Borrowing is to be an Absolute Rate Borrowing or a Spread Borrowing, and if a
Spread Borrowing, the Interest Rate Basis, and (v) any other terms to be applic-
able to such Competitive Bid Borrowing. The Payments Administrator shall
promptly notify each Bidder Bank of each such request for a Competitive Bid
Borrowing received by it from the Borrower by telecopying to each such Bidder
Bank a copy of the related Notice of Competitive Bid Borrowing.
(b) Each Bidder Bank shall, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Competitive Bid Loans to the
Borrower as part of such proposed Competitive Bid Borrowing at a rate or rates
of interest (which shall be a specified Spread over or under the Interest Rate
Basis in the case of a Spread Borrowing or an Absolute Rate in the case of an
Absolute Rate Borrowing) specified by such Bank in its sole discretion and
determined by such Bank independently of each other Bank, by notifying the
Payments Administrator (which shall give prompt notice thereof to the Borrower)
before 10:00 A.M. (New York time) on the date (the "Reply Date") which is (x) in
the case of an Absolute Rate Borrowing, the date of such proposed Competitive
Bid Borrowing and (y) in the case of a Spread Borrowing, three Business Days
before the date of such proposed Competitive Bid Borrowing, of the minimum
amount and maximum amount of each Competitive Bid Loan which such Bank would be
willing to make as part of such proposed Competitive Bid Borrowing (which
amounts may, subject to the proviso to Section 1.01(b), exceed such Bank's
Commitment), the rate or rates of interest therefor and such Bank's lending
office with respect to such Competitive Bid Loan, provided that
--------
-3-
<PAGE>
if the Payments Administrator in its capacity as a Bank shall, in its sole
discretion, elect to make any such offer, it shall notify the Borrower of such
offer before 9:30 A.M. (New York time) on the Reply Date. Any Bidder Bank not
giving the Payments Administrator the notice specified in the preceding sentence
shall not be obligated to, and shall not, make any Competitive Bid Loan as part
of such Competitive Bid Borrowing.
(c) The Borrower shall, in turn, before 11:00 A.M. (New York time)
(x) on the Reply Date in the case of a proposed Absolute Rate Borrowing and (y)
on the Business Day following the Reply Date in the case of a proposed Spread
Borrowing, either:
(i) cancel such Competitive Bid Borrowing by giving the Payments
Administrator notice to such effect, or
(ii) accept one or more of the offers made by any Bidder Bank or
Banks by giving notice (in writing or by telephone confirmed in
writing) to the Payments Administrator of the amount of each
Competitive Bid Loan (which amount shall be equal to or greater than
the minimum amount, and equal to or less than the maximum amount,
notified to the Borrower by the Payments Administrator on behalf of
such Bidder Bank for such Competitive Bid Borrowing) to be made by
each Bidder Bank as part of such Competitive Bid Borrowing, and reject
any remaining offers made by Banks by giving the Payments
Administrator notice to that effect, provided that (x) acceptance of
--------
offers may only be made on the basis of ascending Absolute Rates (in
the case of an Absolute Rate Borrowing) or Spreads (in the case of a
Spread Borrowing), commencing with the lowest rate so offered and (y)
if offers are made by two or more Bidder Banks at the same rate and
acceptance of all such equal offers would result in a greater
principal amount of Competitive Bid Loans being accepted than the
aggregate principal amount requested by the Borrower, the Borrower
shall then have the right to accept one or more such equal offers in
their entirety and reject the other equal offer or offers or to
allocate acceptance among all such equal offers (but giving effect to
the minimum and maximum amounts specified for each such offer), as the
Borrower may elect in its sole discretion, provided further that in no
----------------
event shall the aggregate principal amount of the Competitive Bid
Loans accepted by the Borrower as part of a Competitive Bid Borrowing
exceed the amount specified by the Borrower in the related Notice of
Competitive Bid Borrowing.
(d) If the Borrower notifies the Payments Administrator that such
Competitive Bid Borrowing is cancelled, the Payments Administrator shall give
prompt notice thereof to the Bidder Banks and such Competitive Bid Borrowing
shall not be made.
-4-
<PAGE>
(e) If the Borrower accepts one or more of the offers made by any
Bidder Bank or Banks, the Payments Administrator shall in turn promptly notify
(x) each Bidder Bank that has made an offer of the date and aggregate amount of
such Competitive Bid Borrowing and whether or not any offer or offers made by
such Bidder Bank have been accepted by the Borrower and (y) each Bidder Bank
that is to make a Competitive Bid Loan as part of such Competitive Bid Borrowing
of the amount of each Competitive Bid Loan to be made by such Bidder Bank.
(f) On the last Business Day of each calendar quarter, the Payments
Administrator shall notify the Banks of the aggregate principal amount of
Competitive Bid Loans outstanding at such time.
1.05 Disbursement of Funds. (a) No later than 1:00 P.M. (New York
---------------------
time) on the date of each Borrowing, each Bank will make available its pro rata
--- ----
portion, if any, of each Borrowing requested to be made on such date in the
manner provided below.
(b) Each Bank shall make available all amounts it is to fund under
any Borrowing in U.S. dollars and immediately available funds to the Payments
Administrator at the Payments Administrator's Office and the Payments Adminis-
trator will make available to the Borrower by depositing to its account at the
Payments Administrator's Office the aggregate of the amounts so made available
in U.S. dollars and the type of funds received. Unless the Payments Admin-
istrator shall have been notified by any Bank prior to the date of any such
Borrowing that such Bank does not intend to make available to the Payments
Administrator its portion of the Borrowing or Borrowings to be made on such
date, the Payments Administrator may assume that such Bank has made such amount
available to the Payments Administrator on such date of Borrowing, and the
Payments Administrator, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Payments Administrator by such Bank and the Payments
Administrator has made available same to the Borrower, the Payments
Administrator shall be entitled to recover such corresponding amount from such
Bank. If such Bank does not pay such corresponding amount forthwith upon the
Payments Administrator's demand therefor, the Payments Administrator shall
promptly notify the Borrower, and the Borrower shall immediately pay such corre-
sponding amount to the Payments Administrator. The Payments Administrator shall
also be entitled to recover from such Bank or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Payments Administrator to the
Borrower to the date such corresponding amount is recovered by the Payments
Administrator, at a rate per annum equal to (x) if paid by such Bank, the
overnight Federal Funds Rate or (y) if paid by the Borrower, the then applicable
rate of interest, calculated in accordance with Section 1.09, for the respective
Loans.
-5-
<PAGE>
(c) Nothing in this Section 1.05 shall be deemed to relieve any Bank
from its obligation to fulfill its commitments hereunder or to prejudice any
rights which the Borrower may have against any Bank as a result of any default
by such Bank hereunder.
1.06 Notes; Register. (a) The Borrower's obligation to pay the
---------------
principal of, and interest on, the Revolving Loans made by each Bank shall,
except as provided in Sections 1.14 and 12.04, be evidenced by a promissory note
duly executed and delivered by the Borrower substantially in the form of Exhibit
A with blanks appropriately completed in conformity herewith (each, a "Note"
and, collectively, the "Notes").
(b) The Note issued to each Bank shall: (i) be payable to the order
of such Bank and be dated the Effective Date; (ii) be in a stated principal
amount equal to the Commitment of such Bank and be payable in the principal
amount of the Revolving Loans evidenced thereby; (iii) mature on the Maturity
Date; and (iv) bear interest as provided in the appropriate clause of Section
1.09 in respect of the Reference Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby.
(c) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of its Note endorse on the reverse side thereof the outstanding
principal amount of Revolving Loans evidenced thereby. Failure to make any such
notation or any error in any such notation shall not affect the Borrower's
obligations in respect of such Revolving Loans.
(d) The Payments Administrator shall maintain at the Payments
Administrator's Office a register for the recordation of the names and addresses
of the Banks, the Commitments of the Banks from time to time, and the principal
amount of the Revolving Loans and Competitive Bid Loans owing to each Bank from
time to time, together with the maturity and interest rates applicable to each
such Competitive Bid Loan and other terms applicable thereto (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error. The Register shall be available for inspection by the
Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
1.07 Conversions. The Borrower shall have the option to convert on
-----------
any Business Day all or a portion equal to at least the Minimum Borrowing Amount
of the outstanding principal amount of Revolving Loans of one Type into a
Borrowing or Borrowings of another Type, provided that: (i) no partial
--------
conversion of Eurodollar Loans shall reduce the outstanding principal amount of
Eurodollar Loans made pursuant to a single Borrowing to less than the Minimum
Borrowing Amount; (ii) Reference Rate Loans may only be converted into
Eurodollar Loans if no Event of Default is in existence on the date of the
conversion; and (iii) Borrowings resulting from conversions pursuant to this
Section 1.07 shall be limited in number as provided in Section 1.02. Each such
conversion shall
-6-
<PAGE>
be effected by the Borrower by giving the Payments Administrator at the Payments
Administrator's Office prior to 11:00 A.M. (New York time) at least three
Business Days' (or one Business Day's in the case of a conversion into Reference
Rate Loans) prior written notice (or telephonic notice promptly confirmed in
writing) (each, a "Notice of Conversion") specifying the Revolving Loans to be
so converted, the Type of Revolving Loans to be converted into and, if to be
converted into Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Payments Administrator shall give each Bank notice as promptly as
practicable of any such proposed conversion affecting any of its Revolving
Loans.
1.08 Pro Rata Borrowings. All Borrowings of Revolving Loans under
-------------------
this Agreement shall be loaned by the Banks pro rata on the basis of their
--- ----
Percentages; provided, that the Borrower may make a Borrowing from an existing
--------
Bank or a New Bank which agrees to a commitment increase pursuant to Section
1.16 on a non-pro-rata basis in an amount equal to such Bank's or New Bank's
Percentage of the Total Commitment (after giving effect to any such commitment
increase). It is understood that no Bank shall be responsible for any default
by any other Bank in its obligation to make Loans hereunder and that each Bank
shall be obligated to make the Loans provided to be made by it hereunder,
regardless of the failure of any other Bank to fulfill its commitments
hereunder.
1.09 Interest. (a) The unpaid principal amount of each Reference
--------
Rate Loan shall bear interest from the date of the Borrowing thereof until
maturity (whether by acceleration or otherwise) at a rate per annum which shall
at all times be the Reference Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum which shall at all times be the
Applicable Eurodollar Margin plus the relevant Eurodollar Rate.
(c) The unpaid principal amount of each Competitive Bid Loan shall
bear interest from the date the proceeds thereof are made available to the
Borrower until maturity (whether by acceleration or otherwise) at the rate or
rates per annum specified by a Bidder Bank or Banks, as the case may be,
pursuant to Section 1.04(b) and accepted by the Borrower pursuant to Section
1.04(c).
(d) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to 2% in excess of the Reference Rate in effect from time to time; provided that
--------
each Eurodollar Loan and Competitive Bid Loan shall bear interest after maturity
(whether by acceleration or otherwise) until the end of the Interest Period then
applicable thereto at a rate per annum equal to 2% in excess of the rate of
interest applicable thereto at maturity.
-7-
<PAGE>
(e) Interest on each Loan shall accrue from and including the date of
any Borrowing to but excluding the date of any repayment thereof and shall be
payable: (i) in respect of each Reference Rate Loan, quarterly in arrears on the
15th day of each January, April, July and October; (ii) in respect of any
Competitive Bid Loan, at such times as specified in the Notice of Competitive
Bid Borrowing relating thereto; (iii) in respect of each Eurodollar Loan, on the
last day of each Interest Period applicable thereto and, in the case of an
Interest Period in excess of three months, on each date occurring at three month
intervals after the first day of such Interest Period; (iv) in respect of each
Loan (other than a Reference Rate Loan), on any prepayment (on the amount
prepaid); and (v) in respect of each Loan, at maturity (whether by acceleration
or otherwise) and, after such maturity, on demand.
(f) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(g) The Payments Administrator, upon determining the interest rate
for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly
notify the Borrower and the Banks thereof.
1.10 Interest Periods. At the time the Borrower gives a Notice of
----------------
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 11:00 A.M. (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Payments Administrator written notice (or telephonic notice promptly confirmed
in writing) of the Interest Period applicable to such Borrowing, which Interest
Period shall, at the option of the Borrower, be a one, two, three or six month
period. Notwithstanding anything to the contrary contained above:
(i) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conversion from a Borrowing of Reference Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period expires;
(ii) if any Interest Period relating to a Borrowing of Eurodollar
Loans or a Spread Borrowing priced by reference to the Eurodollar Rate
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month;
-8-
<PAGE>
(iii) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period in respect of
--------
a Eurodollar Loan or a Spread Borrowing priced by reference to the
Eurodollar Rate would otherwise expire on a day which is not a Business Day
but is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day; and
(iv) no Interest Period in respect of Eurodollar Loans shall
extend beyond the Maturity Date.
Notwithstanding the foregoing, if an Event of Default is in existence at the
time any Interest Period in respect of any Eurodollar Loans is to expire, such
Eurodollar Loans may not be continued as Eurodollar Loans but instead shall be
automatically converted on the last day of such Interest Period into Reference
Rate Loans. If upon the expiration of any Interest Period in respect of
Eurodollar Loans, the Borrower has failed to elect a new Interest Period to be
applicable thereto as provided above, the Borrower shall be deemed to have
elected to convert such Borrowing into a Borrowing of Reference Rate Loans
effective as of the expiration date of such current Interest Period.
1.11 Increased Costs, Illegality, etc. (a) In the event that (x) in
---------------------------------
the case of clause (i) below, the Majority SMA or (y) in the case of clauses
(ii) and (iii) below, any Bank shall have determined (which determination shall,
absent manifest error, be final and conclusive and binding upon all parties
hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising on or after the date
of this Agreement affecting the interbank Eurodollar market, adequate and
fair means do not exist for ascertaining the applicable interest rate on
the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans or Competitive Bid Loans because of (x) any change
since the date of this Agreement (or, in the case of any such cost or
reduction with respect to any Competitive Bid Loan, since the date of the
making of such Competitive Bid Loan) in any applicable law, governmental
rule, regulation, guideline or order (or in the interpretation or
administration thereof and including the introduction of any new law or
governmental rule, regulation, guideline or order) (such as, for example,
but not limited to, a change in official reserve requirements, but, in all
events, excluding reserves required under Regulation D to the extent
included in the compu-
-9-
<PAGE>
tation of the Eurodollar Rate) and/or (y) other circumstances affecting the
interbank Eurodollar market; or
(iii) at any time, that the making or continuance of any Loan
(other than Reference Rate Loans) has become unlawful by compliance by such
Bank in good faith with any law, governmental rule, regulation, guideline
or order (or would conflict with any such governmental rule, regulation,
guideline or order not having the force of law even though the failure to
comply therewith would not be unlawful), or, in the case of a Eurodollar
Loan, has become impracticable as a result of a contingency occurring after
the date of this Agreement which materially and adversely affects the
interbank Eurodollar market;
then, and in any such event, such Bank (or the Majority SMA, in the case of
clause (i) above) shall on such date give notice (if by telephone confirmed in
writing) to the Borrower and to the Payments Administrator of such determination
(which notice the Payments Administrator shall promptly transmit to each of the
other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar Loans
shall no longer be available until such time as the Payments Administrator
notifies the Borrower and the Banks that the circumstances giving rise to such
notice by the Majority SMA no longer exist, and any Notice of Borrowing or
Notice of Conversion given by the Borrower with respect to Eurodollar Loans
which have not yet been incurred shall be deemed rescinded by the Borrower, (y)
in the case of clause (ii) above, the Borrower shall pay to such Bank, upon
written demand therefor, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Bank in its sole discretion shall determine) as shall be required to compensate
such Bank for such increased costs or reductions in amounts receivable hereunder
(a written notice as to the additional amounts owed to such Bank, showing in
reasonable detail the basis for the calculation thereof, submitted to the
Borrower by such Bank shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section 1.11(b) as promptly
as possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan or Competitive Bid Loan is
affected by the circumstances described in Section 1.11(a)(ii) (for Eurodollar
Loans only) or (iii), the Borrower may (and in the case of a Eurodollar Loan or
Competitive Bid Loan affected pursuant to Section 1.11(a)(iii) shall) either (x)
if the affected Eurodollar Loan or Competitive Bid Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Payments
Administrator telephonic notice (confirmed promptly in writing) thereof as
promptly as practicable after the Borrower was notified by a Bank pursuant to
Section 1.11(a)(ii) or (iii), (y) if the affected Eurodollar Loan is then
outstanding, upon at least three Business Days' notice to the Payments
Administrator, require the affected Bank to convert each such Eurodollar Loan
into a Reference Rate Loan or (z) if the affected
-10-
<PAGE>
Competitive Bid Loan is then outstanding, prepay such Competitive Bid Loan in
full, provided that if more than one Bank is affected in a similar manner at any
--------
time, then all such similarly affected Banks must be treated the same pursuant
to this Section 1.11(b).
(c) If after the date hereof, the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by a Bank or its parent with any request
or directive made or adopted after the date hereof regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's or its parents' capital or assets as a consequence of such Bank's
commitments or obligations hereunder to a level below that which such Bank or
its parent could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Bank's or its parent's policies with
respect to capital adequacy), then from time to time, within 15 days after
demand by such Bank (with a copy to the Payments Administrator), the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank or its parent for such reduction. Each Bank, upon determining in good
faith that any additional amounts will be payable pursuant to this Section
1.11(c), will give prompt written notice thereof to the Borrower, which notice
shall set forth in reasonable detail the basis of the calculation of such addi-
tional amounts, although the failure to give any such notice shall not, subject
to Section 1.15, release or diminish any of the Borrower's obligations to pay
additional amounts pursuant to this Section 1.11(c) upon receipt of such notice.
1.12 Compensation. The Borrower shall compensate each Bank, upon its
------------
written request (which request shall set forth in reasonable detail the basis
for requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its Eurodollar Loans or Competitive Bid Loans but
excluding any loss of anticipated profit with respect to such Loans) which such
Bank may sustain: (i) if for any reason (other than a default by such Bank or
the Payments Administrator) a Borrowing of Eurodollar Loans or Competitive Bid
Loans accepted by the Borrower in accordance with Section 1.04(c)(ii) does not
occur on a date specified therefor in a Notice of Borrowing, Notice of
Competitive Bid Borrowing or Notice of Conversion (whether or not withdrawn by
the Borrower or deemed withdrawn pursuant to Section 1.11); (ii) if any
repayment or conversion of any of its Eurodollar Loans or any repayment of
Competitive Bid Loans occurs on a date which is not the last day of an Interest
Period applicable thereto; (iii) if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by the
Borrower; or (iv) as a consequence of (x) any other default by the Borrower to
repay its Eurodollar Loans or Competitive Bid Loans when required by the terms
of this Agreement or (y) an
-11-
<PAGE>
election made pursuant to Section 1.11(b). Calculation of all amounts payable
to a Bank under this Section 1.12 in respect of Eurodollar Loans shall be made
as though that Bank had actually funded its relevant Eurodollar Loan through the
purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an
amount equal to the amount of that Loan, having a maturity comparable to the
relevant Interest Period and through the transfer of such Eurodollar deposit
from an offshore office of that Bank to a domestic office of that Bank in the
United States of America; provided, however, that each Bank may fund each of its
-------- -------
Eurodollar Loans in any manner it sees fit and the foregoing assumption shall be
utilized only for the calculation of amounts payable under this Section 1.12.
1.13 Change of Lending Office. Each Bank agrees that, upon the
------------------------
occurrence of any event giving rise to the operation of Section 1.11(a)(ii) or
(iii) or 3.04 with respect to such Bank, it will, if requested by the Borrower,
use reasonable efforts (subject to overall policy considerations of such Bank)
to designate another lending office for any Loans affected by such event;
provided, that such designation is made on such terms that such Bank and its
- --------
lending office suffer no economic, legal or regulatory disadvantage, with the
object of avoiding the consequence of the event giving rise to the operation of
any such Section. Nothing in this Section 1.13 shall affect or postpone any of
the obligations of the Borrower or the right of any Bank provided in Section
1.11 or 3.04.
1.14 Replacement of Banks. If (x) any Bank becomes a Defaulting Bank
--------------------
or otherwise defaults in its obligations to make Loans, (y) any Bank refuses to
give timely consent to proposed changes, waivers, discharges or terminations
with respect to this Agreement which have been approved by the Required Banks or
(z) any Bank is owed increased costs under Section 1.11 or Section 3.04 which in
the judgment of the Borrower are material in amount and which are not otherwise
requested generally by the other Banks, the Borrower shall have the right, if no
Event of Default then exists and, in the case of a Bank described in clause (z)
above, such Bank has not withdrawn its request for such compensation or changed
its applicable lending office with the effect of eliminating or substantially
decreasing (to a level which in the judgment of the Borrower is not material)
such increased cost, to replace such Bank (the "Replaced Bank") with one or more
other Eligible Transferee or Transferees (collectively, the "Replacement Bank")
reasonably acceptable to the Majority SMA, provided that (i) at the time of any
--------
replacement pursuant to this Section 1.14, the Replacement Bank shall enter into
one or more Assignment Agreements pursuant to which the Replacement Bank shall
acquire all of the Commitment and outstanding Loans of the Replaced Bank and, in
connection therewith, shall pay to (x) the Replaced Bank in respect thereof an
amount equal to the sum of (a) an amount equal to the principal of, and all
accrued interest on, all outstanding Loans of the Replaced Bank and (b) an
amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced
Bank pursuant to Section 2.01, (ii) all obligations of the Borrower owing to the
Replaced Bank (other than those specifically described in clause (i) above in
respect of which the
-12-
<PAGE>
assignment purchase price has been, or is concurrently being, paid) shall be
paid in full to such Replaced Bank concurrently with such replacement and (iii)
in the event that such Replaced Bank is a party to the Nabisco Credit Agreement,
the Borrower shall also take the actions specified in Section 1.14 of the
Nabisco Credit Agreement and replace such Bank as a Bank thereunder. Upon the
execution of the respective assignment documentation, the payment of amounts
referred to in clauses (i) and (ii) above and, if so requested by the
Replacement Bank, delivery to the Replacement Bank of the appropriate Note
executed by the Borrower, the Replacement Bank shall become a Bank hereunder and
the Replaced Bank shall cease to constitute a Bank hereunder, except with
respect to indemnification provisions under this Agreement, which shall survive
as to such Replaced Bank.
1.15 Notice of Certain Costs. Notwithstanding anything in this
-----------------------
Agreement to the contrary, to the extent any notice required by Section 1.11 is
given by any Bank more than 180 days after the occurrence of the event giving
rise to the additional cost, reduction in amounts or other additional amounts of
the type described in such Section, such Bank shall not be entitled to compensa-
tion under Section 1.11 for any such amounts incurred or accruing prior to the
giving of such notice to the Borrower.
1.16 Commitment Increases. (a) The Banks hereby acknowledge and
--------------------
agree that the Borrower may at any time prior to the Commitment Expiry Date, but
no more than once during any calendar quarter, increase the Total Commitment
under this Agreement, in incremental amounts of $10,000,000, by an aggregate
amount not in excess of $500,000,000 for all such increases by either requesting
a Bank or Banks to increase its Commitment or Commitments (provided that no Bank
shall be required to agree to any such increase) or by requesting a financial
institution that is an Eligible Transferee to become a party to this Agreement
(such institution, a "New Bank"), provided that (i) no Event of Default has
--------
occurred and is continuing at the time of any such increase, (ii) the Credit
Rating shall be either an Increased Investment Grade Rating or a Maximum
Investment Grade Rating at the time of any such increase, (iii) the Borrower
shall deliver a notice of such increase to the Payments Administrator describing
(x) the amount of such increase and the Total Commitment after giving effect to
such increase and (y) the Bank(s) or New Bank(s) agreeing to such increase and
the amount of each such entity's Commitment after giving effect to such
increase, and (iv) the Borrower and each such Bank or New Bank shall deliver an
Agreement of Commitment Increase to the Payments Administrator. Any such Total
Commitment increase will become effective upon (A) in the case of New Banks
only, the payment to the Payments Administrator of a nonrefundable fee of $2,500
and (B) in all cases, the recording by the Payments Administrator of such
addition to the Total Commitment in the Register, the Payments Administrator
hereby agreeing to effect such recordation no later than three Business Days
after its receipt of an Agreement of Commitment Increase. Upon the effective-
ness of any additional Commitment pursuant to this Section 1.16, (x) the New
Bank, if any, will become a "Bank" for all purposes of this
-13-
<PAGE>
Agreement and the other Credit Documents with a Commitment as so recorded by the
Payments Administrator in the Register and (y) the Borrower shall issue to the
respective Bank or New Bank a new Note. The Payments Administrator will prepare
on the last Business Day of each calendar quarter during which an increase has
become effective pursuant to this Section 1.16 a new Annex I hereto giving
effect to all such increases effected during such quarter and will promptly
provide same to the Borrower and each of the Banks.
(b) If the Total Commitment is increased pursuant to Section 1.16(a)
at a time when Loans are outstanding, then the Borrower shall take all such
actions as appropriate to repay and reborrow Loans (but without any obligation
to repay Eurodollar Loans other than on the last day of an Interest Period
applicable thereto and without regard to the provisions of the first sentence of
Section 1.08), so that, as soon as practicable, the outstanding principal amount
of the Loans of each Non-Defaulting Bank equals such Bank's Percentage of the
aggregate outstanding principal amount of all Loans of all Non-Defaulting Banks.
SECTION 2. Fees; Commitments.
-----------------
2.01 Fees. (a) The Borrower agrees to pay the Payments
----
Administrator a facility fee (the "Facility Fee") for the account of each Non-
Defaulting Bank for the period from and including the Effective Date to but not
including the Termination Date computed for each day at a rate equal to the
Facility Fee Percentage for such day multiplied by the then Commitment of such
Bank (or if after the date the Total Commitment has terminated, on the then
aggregate outstanding principal amount of Loans made by such Bank). Such
Facility Fee shall be due and payable quarterly in arrears on the 15th day of
each January, April, July and October and on the Termination Date.
(b) The Borrower agrees to pay to the Payments Administrator a
utilization fee (the "Utilization Fee") for the account of the Banks pro rata on
--- ----
the basis of their respective Adjusted Percentages, computed for each day during
a Utilization Period at a rate equal to the Applicable Utilization Fee
Percentage for such day multiplied by the daily average Total Adjusted
Utilization Amount for such Utilization Period. Such Utilization Fee shall be
due and payable in arrears on the 15th day of the month following the end of
each Utilization Period and on the Termination Date.
(c) The Borrower shall pay the Payments Administrator for the account
of each Senior Managing Agent and each Bank the fees specified in the accepted
commitment letter, or related fee letter, executed by such Senior Managing Agent
or such Bank, as the case may be, when and as due.
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<PAGE>
(d) All computations of Fees shall be made in accordance with Section
12.07(b).
2.02 Voluntary Reduction of Commitments. Upon at least three
----------------------------------
Business Days' prior written notice (or telephonic notice confirmed in writing)
to the Payments Administrator at the Payments Administrator's Office (which
notice the Payments Administrator shall promptly transmit to each of the Banks),
the Borrower shall have the right, without premium or penalty, to terminate the
Total Unutilized Commitment, in part or in whole (or, to the extent that at such
time there are no Loans outstanding, to terminate the Total Commitment, in
whole); provided, that (x) any such termination shall apply to proportionately
--------
and permanently reduce the Commitment of each of the Banks and (y) any partial
reduction pursuant to this Section 2.02 shall be in the amount of at least
$50,000,000.
2.03 Mandatory Reduction of Commitments, etc. (a) The Total
----------------------------------------
Commitment (and the Commitment of each Bank) shall be terminated on the
Expiration Date unless the Effective Date has occurred on or before such date.
(b) On the date which is the earlier of (x) 30 days after any date on
which a Change of Control occurs and (y) the date on which any Indebtedness of
the Borrower in excess of $100,000,000 individually or $250,000,000 in the
aggregate is required to be repurchased as a result of any such Change of
Control, the Total Commitment shall be reduced to zero.
(c) The Total Commitment shall terminate on the Commitment Expiry
Date.
SECTION 3. Payments.
--------
3.01 Voluntary Prepayments. The Borrower shall have the right to
---------------------
prepay Revolving Loans in whole or in part from time to time on the following
terms and conditions: (i) the Borrower shall give the Payments Administrator at
the Payments Administrator's Office written notice (or telephonic notice
promptly confirmed in writing) of its intent to make such prepayment, the amount
of such prepayment and (in the case of Eurodollar Loans) the specific
Borrowing(s) pursuant to which made, which notice shall be given by the Borrower
no later than 11:00 A.M. (New York time) one Business Day prior to such
prepayment and shall promptly be transmitted by the Payments Administrator to
each of the Banks; (ii) each partial prepayment of any Borrowing shall be in an
aggregate principal amount of at least $25,000,000, provided that no partial
--------
prepayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce
the outstanding Revolving Loans made pursuant to such Borrowing to an amount
less than the Minimum Borrowing Amount for Eurodollar Loans; and (iii) each
prepayment in respect of any Revolving Loans made pursuant to a Borrowing shall
be applied pro rata among such Revolving Loans, provided
--- ---- --------
-15-
<PAGE>
that at the Borrower's election in connection with any prepayment pursuant to
this Section 3.01, such prepayment shall not be applied to any Revolving Loan of
a Defaulting Bank at any time when the aggregate amount of Revolving Loans of
any Non-Defaulting Bank exceeds such Non-Defaulting Bank's Percentage of all
Revolving Loans then outstanding. The Borrower shall not have the right to
voluntarily prepay any Competitive Bid Loans.
3.02 Mandatory Prepayments.
---------------------
(A) Requirements. If on any date prior to the Commitment Expiry Date
------------
the sum of the outstanding principal amount of Revolving Loans made by Non-
Defaulting Banks and Competitive Bid Loans and the aggregate amount of
Commercial Paper Outstandings (all the foregoing, collectively, the "Aggregate
Outstandings") exceeds the Adjusted Total Commitment as then in effect, the
Borrower shall repay on such date the principal of the Revolving Loans in an
amount equal to such excess. If, after giving effect to the prepayment of all
outstanding Revolving Loans, the Aggregate Outstandings exceed the Adjusted
Total Commitment then in effect, the Borrower shall repay on such date the
principal of Competitive Bid Loans in an aggregate amount equal to such excess,
provided that no Competitive Bid Loan shall be prepaid pursuant to this sentence
- --------
unless the Bank that made same consents to such prepayment.
(B) Application. With respect to each prepayment of Loans required
-----------
by this Section 3.02, the Borrower may designate the Types of Loans which are to
be prepaid and the specific Borrowing(s) pursuant to which made, provided
--------
that: (i) if any prepayment of Eurodollar Loans made pursuant to a single
Borrowing shall reduce the outstanding Revolving Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount for Eurodollar
Loans, such Borrowing shall immediately be converted into Reference Rate Loans;
(ii) each prepayment of any Loans made pursuant to a Borrowing shall be applied
pro rata among such Loans; and (iii) notwithstanding the provisions of the pre-
- --- ----
ceding clause (ii), no prepayment made pursuant to Section 3.02(A) of Revolving
Loans shall be applied to the Revolving Loans of any Defaulting Bank. In the
absence of a designation by the Borrower as described in the preceding sentence,
the Payments Administrator shall, subject to the above, make such designation in
its sole discretion with a view, but no obligation, to minimize breakage costs
owing under Section 1.12.
3.03 Method and Place of Payment. (a) Except as otherwise
---------------------------
specifically provided herein, all payments under this Agreement shall be made to
the Payments Administrator for the ratable account of the Banks entitled
thereto, not later than 1:00 P.M. (New York time) on the date when due and shall
be made in immediately available funds and in lawful money of the United States
of America at the Payments Administrator's Office, it being understood that
written, telex or facsimile transmission notice by the Borrower to the Payments
Administrator to make a payment from the funds in the Borrower's account at the
Payments Administrator's Office shall constitute the making of such
-16-
<PAGE>
payment to the extent of such funds held in such account. The Payments
Administrator will thereafter cause to be distributed on the same day (if pay-
ment was actually received by the Payments Administrator prior to 2:00 P.M. (New
York time) on such day) like funds relating to the payment of principal or
interest or Fees ratably to the Banks entitled thereto. If and to the extent
that any such distribution shall not be so made by the Payments Administrator in
full on the same day (if payment was actually received by the Payments Adminis-
trator prior to 2:00 P.M. (New York time) on such day), the Payments Administra-
tor shall pay to each Bank its ratable amount thereof and each such Bank shall
be entitled to receive from the Payments Administrator, upon demand, interest on
such amount at the overnight Federal Funds Rate for each day from the date such
amount is paid to the Payments Administrator until the date the Payments Admin-
istrator pays such amount to such Bank.
(b) Any payments under this Agreement which are made later than 1:00
P.M. (New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
3.04 Net Payments. (a) All payments made by the Borrower hereunder
------------
will be made without setoff or counterclaim. The Borrower will pay, prior to
the date on which penalties attach thereto, all present and future income, stamp
and other taxes, levies, or costs and charges whatsoever imposed, assessed,
levied or collected on or in respect of a Loan and/or the recording,
registration, notarization or other formalization thereof and/or any payments of
principal, interest or other amounts made on or in respect of a Loan (all such
taxes, levies, costs and charges being herein collectively called "Taxes";
provided that Taxes shall not include taxes imposed on or measured by the
- --------
overall net income of that Bank (or any alternative tax imposed generally by any
relevant jurisdiction in lieu of a tax on net income) by the United States of
America or any political subdivision or taxing authority thereof or therein,
taxes imposed under Section 884 of the Code or taxes on or measured by the
overall net income (or any alternative tax imposed generally by any relevant
jurisdiction in lieu of a tax on net income) of that Bank or any foreign office,
branch or subsidiary of that Bank by any foreign country or subdivision thereof
in which that Bank or that office, branch or subsidiary is doing business). The
Borrower shall also pay such additional amounts equal to increases in taxes
payable by that Bank described in the foregoing proviso which increases are
attributable to payments made by the Borrower described in the immediately
preceding sentence of this Section. Promptly after the date on which payment of
any such Tax is due pursuant to applicable law, the Borrower will, at the
request of that Bank, furnish to that Bank evidence, in form and substance
satisfactory to that Bank, that the Borrower has met its obligation under this
Section 3.04. The Borrower will indemnify each Bank against, and reimburse each
Bank on demand for,
-17-
<PAGE>
any Taxes, as determined by that Bank in its good faith and reasonable
discretion. Such Bank shall provide the Borrower with appropriate receipts for
any payments or reimbursements made by the Borrower pursuant to this Section
3.04.
(b) Each Bank which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for Federal income tax purposes
agrees to provide to the Borrower on or prior to the Effective Date, or in the
case of a Bank that is an assignee or transferee of an interest under this
Agreement pursuant to Section 1.14 or Section 12.04 (unless the respective Bank
was already a Bank hereunder immediately prior to such assignment or transfer
and such Bank is in compliance with the provisions of this Section 3.04(b)), on
the date of such assignment or transfer to such Bank, two accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001 (or succes-
sor forms) certifying to such Bank's entitlement to a complete exemption from
United States withholding tax with respect to payments to be made under this
Agreement or any Note. Each Bank that is a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes,
but that is not a corporation (as such term is defined in Section 7701(a)(3) of
the Code) for such purposes, agrees to provide to the Borrower on or prior to
the Effective Date, or in the case of a Bank that is an assignee or transferee
of an interest under this Agreement pursuant to Section 1.14 or Section 12.04
(unless the respective Bank was already a Bank hereunder immediately prior to
such assignment or transfer and such Bank is in compliance with the provisions
of this Section 3.04(b)), on the date of such assignment to such Bank, two
accurate and complete original signed copies of Internal Revenue Service Form W-
9 (or successor form). In addition, each such Bank agrees that from time to
time after the Effective Date, when a lapse in time or change in circumstances
renders the previous certification obsolete or inaccurate in any material
respect, it will deliver to the Borrower two new accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001, as the case may be,
and such other forms as may be required in order to confirm or establish the
entitlement of such Bank to a continued exemption from United States withholding
tax with respect to payments under this Agreement or any Note, or it shall
immediately notify the Borrower and the Administrative Agent of its inability to
deliver any such form. Notwithstanding anything to the contrary contained in
Section 3.04(a), (x) the Borrower shall be entitled, to the extent it is
required to do so by law, to deduct or withhold income or other similar taxes
imposed by the United States (or any political subdivision or taxing authority
thereof or therein) from interest, fees or other amounts payable hereunder for
the account of any Bank which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for United States federal income tax
purposes and which has not provided to the Borrower such forms that establish a
complete exemption from such deduction or withholding and (y) the Borrower shall
not be obligated pursuant to Section 3.04(a) to pay a Bank in respect of income
or similar taxes imposed by the United States or any additional amounts with
respect thereto if such Bank has not provided to the Borrower the Internal
Revenue Service forms required to be provided to the Borrower pursuant to this
Section 3.04(b).
-18-
<PAGE>
SECTION 4. Conditions Precedent to the Effective Date. This
------------------------------------------
Agreement shall become effective on the date (the "Effective Date") on which the
following conditions shall have been satisfied:
4.01 Execution of Agreement. Each of Holdings, the Borrower and each
----------------------
of the Banks shall have signed a copy of this Agreement (whether the same or
different copies) and shall have delivered same to the Payments Administrator
or, in the case of the Banks, shall have given to the Payments Administrator
telephonic (confirmed in writing), written, telex or facsimile notice (actually
received) at such office that the same has been signed and mailed to it.
4.02 Notes; Effectiveness of Second Amendment. On the Effective
----------------------------------------
Date, (i) there shall have been delivered to the Payments Administrator for the
account of each Bank the appropriate Note executed by the Borrower in the
amount, maturity and as otherwise provided herein, and (ii) the Second Amendment
shall have become effective.
4.03 Officers' Certificate. On the Effective Date, the Payments
---------------------
Administrator shall have received certificates dated such date signed by an
appropriate officer of each of Holdings and the Borrower stating that all of the
applicable conditions set forth in Sections 4.02, 4.07 and 4.09 exist as of such
date.
4.04 Opinions of Counsel. On the Effective Date, the Payments
-------------------
Administrator shall have received an opinion, or opinions, in form and substance
satisfactory to each Senior Managing Agent, addressed to each of the Banks and
dated the Effective Date, from (i) James A. Kirkman III, Esq., General Counsel
of Holdings and the Borrower, which opinion shall cover the matters contained in
Exhibit B-1 hereto and (ii) White & Case, special counsel to the Banks, which
opinion shall cover the matters contained in Exhibit B-2 hereto.
4.05 Corporate Proceedings. On the Effective Date, all corporate and
---------------------
legal proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Credit Documents shall
be satisfactory in form and substance to each Senior Managing Agent, and the
Payments Administrator shall have received all information and copies of all
certificates, documents and papers, including records of corporate proceedings
and governmental approvals, if any, which any Senior Managing Agent reasonably
may have requested in connection therewith, such documents and papers where
appropriate to be certified by proper corporate or governmental authorities.
4.06 Organizational Documentation, etc. On the Effective Date, the
----------------------------------
Banks shall have received copies of the Certificate of Incorporation and By-Laws
of each Credit
-19-
<PAGE>
Party, certified as true and complete by an appropriate corporate officer or
governmental authority.
4.07 Adverse Change, etc. On the Effective Date, (x) nothing shall
--------------------
have occurred which has a material adverse effect on the ability of either
Credit Party to perform its obligations to the Banks and (y) there shall have
been no material adverse change in the operations, business, property, assets or
financial condition of Holdings and its Subsidiaries taken as a whole from that
of Holdings and its Subsidiaries taken as a whole on December 31, 1994. None of
the Pro Forma Events shall be deemed such a material adverse change.
4.08 Litigation. On the Effective Date, except as set forth in
----------
Annex IV hereto, there shall be no actions, suits or proceedings pending or
threatened with respect to Holdings or any of its Subsidiaries that (i) are
reasonably likely to have a material adverse effect on the business, properties,
assets, operations, financial condition or prospects of Holdings and its Subsid-
iaries taken as a whole or (ii) are reasonably likely to have a material adverse
effect on the rights or remedies of the Banks or on the ability of either Credit
Party to perform its obligations to the Banks hereunder or under any other
Credit Document to which it is a party.
4.09 Fees, etc. On the Effective Date, the Borrower shall have paid
----------
to each Senior Managing Agent and each Bank all costs, fees and expenses payable
to the Senior Managing Agents or the Banks, to the extent then due.
SECTION 5. Conditions Precedent to Loans. The obligation of each
-----------------------------
Bank to make any Loans is subject, at the time of the making of each such Loan,
to the satisfaction of the following conditions at such time:
5.01 Effectiveness. The Effective Date shall have occurred.
-------------
5.02 No Default; Representations and Warranties. At the time of the
------------------------------------------
making of each Loan and also after giving effect thereto (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents (other than, in the case of a
CP Refinancing Borrowing, in Section 6.04 and the last sentence of Section 6.09)
shall be true and correct in all material respects with the same effect as
though such representations and warranties had been made on and as of the date
of such Loan.
5.03 Notice of Borrowing. Prior to the making of each Revolving
-------------------
Loan, the Payments Administrator shall have received a Notice of Borrowing
meeting the requirements of Section 1.03(a). Prior to the making of each
Competitive Bid Loan, the Payments Administrator shall have received a Notice of
Competitive Bid Borrowing meeting the requirements of Section 1.04(a).
-20-
<PAGE>
The acceptance of the benefits of each Loan shall constitute a representation
and warranty by each Credit Party to each of the Banks that all of the
applicable conditions specified above in Section 5 exist as of that time. All
of the certificates, legal opinions and other documents and papers referred to
in Section 4, unless otherwise specified, shall be delivered to the Payments
Administrator at the Payments Administrator's Office for the account of each of
the Banks and, except for the Notes, in sufficient counterparts for each of the
Banks and shall be satisfactory in form and substance to each Senior Managing
Agent.
SECTION 6. Representations, Warranties and Agreements. In order to
------------------------------------------
induce the Banks to enter into this Agreement and to make the Loans as provided
for herein, each of Holdings and the Borrower makes the following
representations and warranties to and agreements with the Banks, all of which
shall survive the execution and delivery of this Agreement and the making of the
Loans (with the making of each Loan being deemed to constitute a representation
and warranty that the matters specified in this Section 6, subject to the
exceptions set forth in Section 5.02, are true and correct in all material
respects on and as of the date hereof and as of the date of each such Loan
unless such representation and warranty expressly indicates that it is being
made as of any specific date):
6.01 Corporate Status. Each of Holdings and each of its Material
----------------
Subsidiaries (i) is a duly organized and validly existing corporation or other
entity in good standing under the laws of the jurisdiction of its organization
and has the corporate or other organizational power and authority to own its
property and assets and to transact the business in which it is engaged and (ii)
has duly qualified and is authorized to do business and is in good standing in
all jurisdictions where it is required to be so qualified and where the failure
to be so qualified would have a material adverse effect on the operations, bus-
iness, properties, assets or financial condition of Holdings and its
Subsidiaries taken as a whole.
6.02 Corporate Power and Authority. Each Credit Party has the
-----------------------------
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Credit Documents to which it is a party. Each Credit Party has duly
executed and delivered each Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Person enforceable in accordance with its terms.
6.03 No Violation. Neither the execution, delivery and performance
------------
by either Credit Party of the Credit Documents to which it is a party
(including, without limitation, the incurrence of Loans by the Borrower
hereunder) nor compliance with the terms and provisions thereof, nor the
consummation of the transactions contemplated therein (i) will contravene any
applicable provision of any law, statute, rule, regulation, order,
-21-
<PAGE>
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of Holdings or any of its
Subsidiaries pursuant to the terms of any material indenture, mortgage, deed of
trust, agreement or other instrument to which Holdings or any of its
Subsidiaries is a party or by which it or any of its property or assets is bound
or to which it may be subject or (iii) will violate any provision of the
Certificate of Incorporation or By-Laws of Holdings or any of its Subsidiaries.
6.04 Litigation. Except as set forth on Annex IV, there are no
----------
actions, suits or proceedings pending or threatened with respect to Holdings or
any of its Subsidiaries (i) that are reasonably likely to have a material
adverse effect on the business, properties, assets, operations, financial
condition or prospects of Holdings and its Subsidiaries taken as a whole or (ii)
that are reasonably likely to have a material adverse effect on the rights or
remedies of the Banks or on the ability of either Credit Party to perform its
obligations to them hereunder and under the other Credit Documents to which it
is a party.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all
-----------------------------------
Loans shall be utilized by the Borrower for general corporate purposes of
Holdings and/or its Subsidiaries (including, without limitation, the refinancing
of Indebtedness and financing acquisitions permitted hereunder). The proceeds
of CP Refinancing Borrowings may only be utilized to pay when due Commercial
Paper Outstandings.
(b) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
At the time of the making of each Loan, not more than 25% of the value of the
assets of the Borrower or Holdings and its Subsidiaries on a consolidated basis
subject to the restrictions contained in Sections 8.02 and 8.03 will constitute
Margin Stock. Notwithstanding the foregoing provisions of this Section 6.05, no
proceeds of any Loan will be utilized to purchase any Margin Stock in a
transaction, or as part of a series of transactions, the result of which is the
ownership by Holdings and/or its Subsidiaries (including, without limitation,
the Borrower) of 5% or more of the capital stock of a corporation unless the
Board of Directors of such corporation has approved such transaction prior to
any public announcement of the purchase, or the intent to purchase, any such
Margin Stock.
6.06 Governmental Approvals. No order, consent, approval, license,
----------------------
authorization or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery
-22-
<PAGE>
and performance of any Credit Document or (ii) the legality, validity, binding
effect or enforceability of any Credit Document.
6.07 Investment Company Act. Neither Holdings nor any of its
----------------------
Subsidiaries is an "investment company" or a company "controlled" by an "invest-
ment company," within the meaning of the Investment Company Act of 1940, as
amended.
6.08 True and Complete Disclosure. All factual information (taken as
----------------------------
a whole) heretofore or contemporaneously furnished by or on behalf of either
Credit Party or any of its Subsidiaries in writing to any Senior Managing Agent
or any Bank for purposes of or in connection with this Agreement or any
transaction contemplated herein is, and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of such Persons in
writing to any Bank will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any material fact necessary to make such information (taken as
a whole) not misleading at such time in light of the circumstances under which
such information was provided. The projections and pro forma financial
information contained in such materials were based on good faith estimates and
assumptions believed by such Persons to be reasonable at the time made, it being
recognized by the Banks that such projections as to future events are not to be
viewed as facts and that actual results during the period or periods covered by
any such projections may differ from the projected results.
6.09 Financial Condition; Financial Statements. The consolidated
-----------------------------------------
balance sheet of each of Holdings and its Subsidiaries and the Borrower and its
Subsidiaries at December 31, 1994 and the related consolidated statements of
income and cash flows for the fiscal years ended as of said dates, which
statements have been examined by Deloitte & Touche, independent certified public
accountants, who delivered an unqualified opinion in respect thereof, copies of
which have heretofore been furnished to each Bank, present fairly the
consolidated financial position of each of Holdings and the Borrower, as the
case may be, at the dates of said statements and the results of operations for
the periods covered thereby. All such financial statements have been prepared
in accordance with GAAP consistently applied except to the extent provided in
the notes to said financial statements. There has been no material adverse
change in the operations, business, property, assets or financial condition of
Holdings and its Subsidiaries taken as a whole or of the Borrower and its Sub-
sidiaries taken as a whole from that of Holdings and its Subsidiaries or the
Borrower and its Subsidiaries, as the case may be, on December 31, 1994.
6.10 Tax Returns and Payments. Each of Holdings and its Subsidiaries
------------------------
has filed all federal income tax returns and all other material tax returns,
domestic and foreign, required to be filed by it and has paid all material taxes
and assessments payable by it which have become due, other than those not yet
delinquent, those contested in good faith and those for which RJRN is
indemnifying the Borrower pursuant to the Tax Sharing
-23-
<PAGE>
Agreement. Holdings and each of its Subsidiaries have paid, or have provided
adequate reserves (in the good faith judgment of the management of Holdings) for
the payment of, all federal, state and foreign income taxes applicable for all
prior fiscal years and for the current fiscal year to the date hereof.
6.11 Compliance with ERISA. Each Plan is in substantial compliance
---------------------
with ERISA and the Code; no Reportable Event has occurred with respect to any
Plan; no Plan is insolvent or in reorganization, no Plan has an Unfunded Current
Liability, and no Plan has an accumulated or waived funding deficiency or
permitted decreases in its funding standard account within the meaning of
Section 412 of the Code; none of Holdings, any of its Subsidiaries or any ERISA
Affiliate has incurred any material liability to or on account of a Plan
pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201 or
4204 of ERISA or Section 4971 or 4975 of the Code; no proceedings have been
instituted to terminate any Plan; no condition exists which presents a material
risk to Holdings or any of its Subsidiaries of incurring a liability to or on
account of a Plan pursuant to the foregoing provisions of ERISA and the Code,
except to the extent that all events described in the preceding clauses of this
Section 6.11 and then in existence would not, in the aggregate, be likely to
have a material adverse effect on the business, operations or financial
condition of Holdings and its Subsidiaries taken as a whole. With respect to
Plans that are multiemployer plans (within the meaning of Section 3(37) of
ERISA) and Plans which are not currently maintained or contributed to by
Holdings, any of its Subsidiaries or any ERISA Affiliate, the representations
and warranties in this Section are made to the best knowledge of Holdings.
6.12 Subsidiaries. Annex III hereto lists each Material Subsidiary
------------
of Holdings (and the direct and indirect ownership interest of Holdings
therein), in each case existing on the Effective Date. All ownership
percentages referred to in Annex III are calculated without regard to directors'
or nominees' qualifying shares.
6.13 Patents, etc. Holdings and each of its Subsidiaries have
-------------
obtained all material patents, trademarks, servicemarks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their respective businesses as presently
conducted and as proposed to be conducted.
6.14 Pollution and Other Regulations. Holdings and each of its
-------------------------------
Subsidiaries are in material compliance with all material laws and regulations
relating to pollution and environmental control, equal employment opportunity
and employee safety in all domestic jurisdictions in which Holdings and each of
its Subsidiaries is presently doing business, and Holdings will comply and cause
each of its Subsidiaries to comply with all such laws and regulations which may
be imposed in the future in jurisdictions in which Holdings or such Subsidiary
may then be doing business other than in each case those the non-compliance
-24-
<PAGE>
with which would not have a material adverse effect on the business, assets,
properties or financial condition of Holdings and its Subsidiaries taken as a
whole.
6.15 Properties. Holdings and each of its Subsidiaries have good
----------
title to all properties owned by Holdings or such Subsidiary and a valid
leasehold interest in all properties leased by Holdings or such Subsidiary, in
each case, that are necessary for the operation of their respective businesses
as presently conducted and as proposed to be conducted, free and clear of all
Liens, other than as permitted by this Agreement.
SECTION 7. Affirmative Covenants. Holdings hereby covenants and
---------------------
agrees that on the Effective Date and thereafter, for so long as this Agreement
is in effect and until the Commitments have terminated and the Loans, together
with interest, Fees and all other Obligations incurred hereunder, are paid in
full:
7.01 Information Covenants. Holdings will furnish to each Bank:
---------------------
(a) Annual Financial Statements. As soon as available and in any
---------------------------
event within 100 days after the close of each fiscal year of Holdings, to
the extent prepared to comply with SEC requirements, a copy of the SEC Form
10-Ks filed by Holdings and the Borrower with the SEC for such fiscal year,
or, if no such Form 10-K was so filed by Holdings and the Borrower for such
fiscal year, the consolidated balance sheet of Holdings and its
Subsidiaries and of the Borrower and its Subsidiaries, as at the end of
such fiscal year and the related consolidated statements of income and
retained earnings and of cash flows for such fiscal year, setting forth
comparative consolidated figures as of the end of and for the preceding
fiscal year, and examined by independent certified public accountants of
recognized national standing whose opinion shall not be qualified as to the
scope of audit or as to the status of Holdings or the Borrower or any of
their respective Subsidiaries as a going concern, together in any event
with a certificate of such accounting firm stating that in the course of
its regular audit of the business of Holdings and the Borrower, which audit
was conducted in accordance with generally accepted auditing standards,
such accounting firm has obtained no knowledge of any Default or Event of
Default which has occurred and is continuing or, if in the opinion of such
accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(b) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within 55 days after the close of each of the first three quarterly
accounting periods in each fiscal year of Holdings, to the extent prepared
to comply with SEC requirements, a copy of the SEC Form 10-Qs filed by
Holdings and the Borrower with the SEC for each such quarterly period, or,
if no such Form 10-Q was so filed by Holdings and the Borrower with respect
to any such quarterly period, the consol-
-25-
<PAGE>
idated balance sheet of Holdings and its Subsidiaries and of the Borrower
and its Subsidiaries, as at the end of such quarterly period and the
related consolidated statements of income for such quarterly period and for
the elapsed portion of the fiscal year ended with the last day of such
quarterly period, and the related consolidated statement of cash flows for
the elapsed portion of the fiscal year ended with the last day of such
quarterly period, and in each case setting forth comparative consolidated
figures as of the end of and for the related periods in the prior fiscal
year or, in the case of such consolidated balance sheet, for the last day
of the prior fiscal year, all of which shall be certified by the Chief
Financial Officer, Controller, Chief Accounting Officer or other Authorized
Officer of Holdings or the Borrower, as the case may be, subject to changes
resulting from audit and normal year-end audit adjustments.
(c) Officer's Certificates. At the time of the delivery of the
----------------------
financial statements provided for in Section 7.01(a) and (b), a certificate
of the Chief Financial Officer, Controller, Chief Accounting Officer or
other Authorized Officer of Holdings to the effect that no Default or Event
of Default exists or, if any Default or Event of Default does exist,
specifying the nature and extent thereof, which certificate shall set forth
the calculations required to establish whether Holdings and its Subsid-
iaries were in compliance with the provisions of Sections 8.03(e), 8.04(h),
8.05, 8.07, 8.08, 8.09 and 8.10 as at the end of such fiscal period or
year, as the case may be.
(d) Notice of Default or Litigation. Promptly, and in any event
-------------------------------
within three Business Days after any senior financial or legal officer of
either Credit Party obtains knowledge thereof, notice of (x) the occurrence
of any event which constitutes a Default or Event of Default which notice
shall specify the nature thereof, the period of existence thereof and what
action Holdings proposes to take with respect thereto and (y) any
litigation or governmental proceeding pending against or affecting Holdings
or any of its Subsidiaries which is likely to have a material adverse
effect on the business, properties, assets, financial condition or
prospects of Holdings and its Subsidiaries taken as a whole or the ability
of either Credit Party to perform its obligations hereunder or under any
other Credit Document.
(e) Credit Rating Changes. Promptly after any senior financial or
---------------------
legal officer of either Credit Party obtains knowledge thereof, notice of
any change in the Applicable Credit Rating assigned by either Rating
Agency.
(f) Other Information. Promptly upon transmission thereof, copies of
-----------------
any filings and registrations with, and reports to, the Securities and
Exchange Commission or any successor thereto (the "SEC") by Holdings, the
Borrower or any of their respective Subsidiaries (other than amendments to
any registration
-26-
<PAGE>
statement (to the extent such registration statement, in the form it
becomes effective, is delivered to the Banks), exhibits to any registration
statement and any registration statements on Form S-8) and copies of all
financial statements, proxy statements, notices and reports that Holdings,
the Borrower or any of their respective Subsidiaries shall send to analysts
or the holders of any publicly issued debt of Holdings and/or any of its
Subsidiaries in their capacity as such holders (in each case to the extent
not theretofore delivered to the Banks pursuant to this Agreement) and,
with reasonable promptness, such other information or documents (financial
or otherwise) as any Senior Managing Agent on its own behalf or on behalf
of the Required Banks may reasonably request from time to time.
7.02 Books, Records and Inspections. Holdings will, and will cause
------------------------------
each of its Subsidiaries to, permit, upon reasonable notice to the Chief
Financial Officer, Controller or any other Authorized Officer of the Borrower,
officers and designated representatives of any Senior Managing Agent or the
Required Banks to visit and inspect any of the properties or assets of Holdings
and any of its Subsidiaries in whomsoever's possession, and to examine the books
of account of Holdings and any of its Subsidiaries and discuss the affairs,
finances and accounts of Holdings and of any of its Subsidiaries with, and be
advised as to the same by, its and their officers and independent accountants,
all at such reasonable times and intervals and to such reasonable extent as any
Senior Managing Agent or the Required Banks may desire.
7.03 Insurance. Holdings will, and will cause each of its
---------
Subsidiaries to, at all times be covered by or maintain in full force and effect
insurance in such amounts, covering such risks and liabilities and with such
deductibles or self-insured retentions as are in accordance with normal industry
practice.
7.04 Payment of Taxes. Holdings will pay and discharge, and will
----------------
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which material
penalties attach thereto, and all lawful claims which, if unpaid, might become a
Lien or charge upon any properties of Holdings or any of its Subsidiaries,
provided that neither Holdings nor any Subsidiary shall be required to pay any
- --------
such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves (in the
good faith judgment of the management of Holdings) with respect thereto in
accordance with GAAP.
7.05 Consolidated Corporate Franchises. Holdings will do, and will
---------------------------------
cause each of its Material Subsidiaries to do, or cause to be done, all things
necessary to preserve and keep in full force and effect its existence, rights
and authority, provided that any transaction permitted by Section 8.02 will not
--------
constitute a breach of this Section 7.05.
-27-
<PAGE>
7.06 Compliance with Statutes, etc. Holdings will, and will cause
------------------------------
each Subsidiary to, comply with all applicable statutes, regulations and orders
of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls) other than those
the non-compliance with which would not have a material adverse effect on the
business, properties, assets or financial condition of Holdings and its
Subsidiaries taken as a whole or on the ability of either Credit Party to
perform its obligations under any Credit Document to which it is a party.
7.07 ERISA. As soon as possible and, in any event, within 10 days
-----
after Holdings or any of its Subsidiaries knows or has reason to know of the
occurrence of any of the following, Holdings will deliver to each of the Banks a
certificate of the Chief Financial Officer, Treasurer or Controller of Holdings
setting forth details as to such occurrence and the action, if any, which
Holdings, such Subsidiary or an ERISA Affiliate is required or proposes to take,
together with any notices required or proposed to be given to or filed with or
by Holdings, such Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant
(other than notices relating to an individual participant's benefits) or the
Plan administrator with respect thereto: that a Reportable Event has occurred,
that an accumulated funding deficiency has been incurred or an application may
be or has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including any required installment
payments) or an extension of any amortization period under Section 412 of the
Code with respect to a Plan, that a Plan which has an Unfunded Current Liability
has been or may be terminated, reorganized, partitioned or declared insolvent
under Title IV of ERISA, that a Plan has an Unfunded Current Liability giving
rise to a lien under ERISA or the Code, that proceedings may be or have been
instituted to terminate a Plan which has an Unfunded Current Liability, that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan, or that Holdings, any of its Subsidiaries or
any ERISA Affiliate will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination of or withdrawal from a
Plan under Section 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or with respect
to a Plan under Section 4971 or 4975 of the Code or Section 409 or 502(i) or
502(l) of ERISA. Upon request of a Bank, Holdings will deliver to such Bank a
complete copy of the annual report (Form 5500) of each Plan required to be filed
with the Internal Revenue Service. In addition to any certificates or notices
delivered to the Banks pursuant to the first sentence hereof, copies of any
notices received by Holdings or any of its Subsidiaries shall be delivered to
the Banks no later than 10 days after the later of the date such notice has been
filed with the Internal Revenue Service or the PBGC, given to Plan participants
(other than notices relating to an individual participant's benefits) or
received by Holdings or such Subsidiary.
-28-
<PAGE>
7.08 Good Repair. Holdings will, and will cause each of its Subsidi-
-----------
aries to, ensure that its properties and equipment used or useful in its
business in whomsoever's possession they may be, are kept in good repair,
working order and condition, normal wear and tear excepted, and that from time
to time there are made in such properties and equipment all needful and proper
repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto, to the extent and in the manner customary for companies in
similar businesses.
7.09 End of Fiscal Years; Fiscal Quarters. Holdings will, for
------------------------------------
financial reporting purposes, cause (i) each of its and the Borrower's fiscal
years to end on December 31 of each year, (ii) each of its and the Borrower's
fiscal quarters to end on March 31, June 30, September 30 and December 31 of
each year and (iii) each of the Subsidiaries of the Borrower to maintain the
accounting periods maintained by such Subsidiary on the Effective Date,
consistent with the past practice and procedures of each such Subsidiary,
provided that any of the foregoing fiscal or reporting periods may be changed if
- --------
(x) Holdings gives the Banks 30 days' prior written notice of such proposed
change and (y) prior to effecting such change Holdings and the Majority SMA
shall have agreed upon adjustments, if any, to Sections 8.03(e), 8.04(h), 8.05,
8.07, 8.08, 8.09 and 8.10 (and the definitions used therein) the sole purpose of
which shall be to give effect to the proposed change in fiscal or accounting
periods (it being understood and agreed that to the extent that Holdings and the
Majority SMA cannot agree on appropriate adjustments to such Sections (or that
no adjustments are necessary), the proposed change may not be effected).
7.10 Commercial Paper and Competitive Bid Loan Outstandings. On the
------------------------------------------------------
date of the delivery by the Borrower of any Notice of Borrowing or Notice of
Competitive Bid Borrowing at any time when the Borrower shall have knowledge
that a mandatory prepayment is required pursuant to Section 3.02(A) of this
Agreement and, in any event, on the last Business Day of each fiscal quarter of
the Borrower, the Borrower will furnish to the Payments Administrator (with an
information copy to each of the other Senior Managing Agents) a statement
setting forth the aggregate amount of Commercial Paper Outstandings and the
aggregate outstanding principal amount of Competitive Bid Loans at such time.
SECTION 8. Negative Covenants. Holdings hereby covenants and agrees
------------------
that on the Effective Date and thereafter, for so long as this Agreement is in
effect and until the Commitments have terminated and the Loans, together with
interest, Fees and all other Obligations incurred hereunder, are paid in full:
8.01 Changes in Business. Except as otherwise permitted by Section
-------------------
8.02, Holdings and its Subsidiaries, taken as a whole, will not substantively
alter the character
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of their business from that conducted by Holdings and its Subsidiaries taken as
a whole at the Effective Date.
8.02 Consolidation, Merger, Sale of Assets, etc. Holdings will not,
-------------------------------------------
and will not permit any Subsidiary to, wind up, liquidate or dissolve its
affairs, or enter into any transaction of merger or consolidation, sell or
otherwise dispose of all or a substantial part of its property or assets or
agree to do any of the foregoing at any future time, except that:
(a) so long as no Event of Default would result therefrom, the
Borrower may merge or consolidate with Holdings or any Wholly-Owned
Subsidiary of Holdings, provided that the surviving corporation, if not the
--------
Borrower, executes and delivers agreements assuming the obligations of the
Borrower under this Agreement and the Notes, which assumption agreements
and all related actions and documentation shall be in form and substance
satisfactory to the Senior Managing Agents; and
(b) any Subsidiary of Holdings may be merged or consolidated with or
into, or be liquidated into, any Person (other than Holdings, unless the
Borrower has merged into or consolidated with Holdings) and any such
Subsidiary may convey, lease, sell or transfer all or any part of its
business, properties and assets to any such Person, provided that if any
--------
such transaction involves a Material Subsidiary, after giving effect to
such transaction, no Event of Default would result therefrom.
Notwithstanding anything to the contrary contained in this Section 8.02, no
Restricted Sale shall be permitted.
8.03 Liens. Holdings will not, and will not permit any of its
-----
Subsidiaries to, (x) create, incur, assume or suffer to exist any Lien in
respect of Indebtedness upon any property or assets of any kind (real or
personal, tangible or intangible) of Holdings or any such Subsidiary whether now
owned or hereafter acquired or (y) assign any right to receive income as
security for the payment of Indebtedness, except:
(a) (i) Liens and assignments under the Hanover Facility or under any
Replacement Receivables Facility, and (ii) other Liens existing on the
Effective Date securing Indebtedness outstanding on April 28, 1995 in an
aggregate principal amount not exceeding $150,000,000 and Liens securing
extensions, renewals or refinancings of any of the Indebtedness referred to
in this clause (a)(ii) to the extent that any such Indebtedness (x) is not
increased from that outstanding at the time of any such extension, renewal
or refinancing and (y) is not secured by Liens on any additional assets;
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<PAGE>
(b) Liens encumbering customary initial deposits and margin deposits,
and other Liens incurred in the ordinary course of business and which are
within the general parameters customary in the industry, securing
obligations under Permitted Commodities Agreements;
(c) Liens securing reimbursement obligations of the Borrower and its
Subsidiaries with respect to trade letters of credit incurred in the
ordinary course of business, which are to be repaid in full not more than
one year after the date originally incurred to finance the purchase of
goods by the Borrower or any of its Subsidiaries, provided that such Liens
--------
shall attach only to documents or other property relating to such letters
of credit and the products and proceeds thereof;
(d) Liens (x) arising pursuant to purchase money mortgages securing
Indebtedness (and any extensions, renewals or refinancings of such
Indebtedness to the extent not increasing the outstanding principal amount
thereof), representing the purchase price (or financing of the purchase
price within 180 days after the respective purchase) of assets acquired
after the Effective Date, provided that (i) any such Liens attach only to
--------
the assets so purchased and (ii) the Indebtedness (including any such
permitted extensions, renewals or refinancings) secured by any such Lien
does not exceed 100%, nor is less than 70%, of the purchase price of the
property being purchased and (y) existing on specific tangible assets at
the time acquired by Holdings or any of its Subsidiaries or on assets of a
Person at the time such Person first becomes a Subsidiary (together with
Liens securing any extensions, renewals or refinancings of the Indebtedness
secured thereby to the extent not increasing the outstanding principal
amount thereof), provided that (i) any such Liens were not created at the
--------
time of or in contemplation of the acquisition of such assets or Person by
Holdings and/or its Subsidiaries, (ii) in the case of any such acquisition
of a Person, any such Lien attaches only to a specific tangible asset of
such Person and not assets of such Person generally and (iii) the
Indebtedness secured by any such Lien does not exceed 100% of the fair
market value of the asset to which such Lien attaches, determined at the
time of the acquisition of such asset or at the time such Person first
becomes a Subsidiary, as the case may be; and
(e) Liens and assignments not otherwise permitted by the foregoing
clauses (a) through (d) securing any Indebtedness of Holdings and/or its
Subsidiaries, provided that the aggregate principal amount of Indebtedness
--------
on a consolidated basis secured by Liens permitted by this clause (e) shall
not exceed an amount equal to 7-1/2% of Consolidated Net Worth at any time.
8.04 Indebtedness. Holdings will not permit any of its Subsidiaries
------------
(other than the Borrower) to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
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<PAGE>
(a) (i) Indebtedness under the Hanover Facility or any Replacement
Receivables Facility to the extent that the aggregate outstanding principal
amount of Indebtedness permitted pursuant to this clause (a)(i) shall not
exceed $500,000,000 and (ii) other Specified Permitted Existing Debt and
any extensions, renewals or refinancings of any of the Indebtedness
referred to in this clause (a)(ii), either by the original obligor
thereunder or by another Subsidiary to the extent that such Indebtedness is
not increased from that outstanding at the time of any such extension,
renewal or refinancing;
(b) Obligations under letters of credit described in Section 8.03(c);
(c) Indebtedness in respect of Permitted Currency Agreements and
Permitted Commodities Agreements;
(d) Obligations of Subsidiaries of the Borrower under letters of
credit incurred in the ordinary course of business in connection with the
purchase of products or goods for use in the day-to-day operations of the
Borrower and its Subsidiaries consistent with the Borrower's past practices
or then current industry practices;
(e) Indebtedness secured by Liens permitted by Section 8.03(d);
(f) (i) Indebtedness owing by any such Subsidiary to Holdings or any
Wholly-Owned Subsidiary of Holdings and (ii) Indebtedness of any such
Subsidiary (x) consisting of Contingent Obligations in respect of, or (y)
constituting reimbursement obligations under letters of credit issued in
support of, obligations of any Subsidiary of Holdings (other than the
Borrower) to the extent such other obligations are permitted by this
Agreement;
(g) Indebtedness of any such Subsidiary in any manner guaranteeing or
intended to guarantee, whether directly or indirectly, any leases,
dividends or other monetary obligations of any Person in which such
Subsidiary has an ownership interest, provided that the aggregate maximum
--------
stated or determinable amount (or, if not stated or determinable, the
maximum reasonably anticipated liability in respect of such Indebtedness as
determined in good faith by such Subsidiary) of all Indebtedness permitted
pursuant to this clause (g) shall not exceed at any time an amount in
excess of $150,000,000; and
(h) Indebtedness not otherwise permitted by the foregoing clauses (a)
through (g), provided that the aggregate outstanding principal amount of
--------
Indebtedness on a consolidated basis incurred pursuant to this clause (h)
shall not exceed an amount equal to 7-1/2% of Consolidated Net Worth at any
time.
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<PAGE>
8.05 Limitation on Restricted Payments. Neither Holdings nor the
---------------------------------
Borrower will (A) declare or pay any dividends (other than dividends payable
solely in its capital stock) or return any capital to its stockholders or
authorize or make any other distribution, payment or delivery of property or
cash to its stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for consideration, any shares of any class of
its capital stock now or hereafter outstanding (or any warrants for or options
or stock appreciation rights in respect of any of such shares), or set aside any
funds for any of the foregoing purposes, or permit any of its Subsidiaries to
purchase or otherwise acquire for consideration any shares of any class of the
capital stock of Holdings or the Borrower now or hereafter outstanding (or any
options or warrants or stock appreciation rights issued by Holdings or the
Borrower with respect to its capital stock) (all of the foregoing, "Dividends"),
or (B) purchase or otherwise acquire for consideration any shares of any class
of the capital stock of any RJRN Entity (now or hereafter outstanding) (or any
options or warrants or stock appreciation rights issued by any RJRN Entity with
respect to its capital stock) or permit any of its Subsidiaries to do any of the
foregoing or (C) make any loan or advance to, or investment in, any RJRN Entity,
or permit any of its Subsidiaries to do any of the foregoing (all of clauses
(A), (B) and (C), collectively, "Restricted Payments"), provided that, except
--------
with respect to the following clauses (i) and (v), so long as no Event of
Default then exists:
(i) each of Holdings and the Borrower may (x) pay cash in lieu of
issuing fractions of shares of its common stock at a time when it issues
shares of its common stock upon the exercise of any warrants or options or
upon the conversion or redemption of any convertible or redeemable
preferred or preference stock and (y) repurchase its common stock and
preferred stock (and/or options or warrants in respect thereof) pursuant
to, and in accordance with the terms of, management and/or employee stock
plans;
(ii) Holdings may declare and pay, or otherwise effect, any other
Dividend and the Borrower may declare and pay, or otherwise effect, any
other Dividend to Persons other than Holdings, provided that the aggregate
--------
amount of any such Dividend at the time declared, when added to all
Dividends theretofore declared pursuant to this clause (ii) after April 28,
1995, shall not exceed an amount equal to the sum of (x) $300,000,000 plus
(y) 50% of Cumulative Consolidated Net Income determined at the time of the
declaration thereof, provided that such Dividend is paid within 45 days of
--------
the making of such declaration;
(iii) the Borrower and any of its Subsidiaries may make additional
loans and advances to one or more RJRN Entities that is a Foreign
Subsidiary, provided that the aggregate principal amount of such loans and
--------
advances made pursuant to this clause (iii) shall not exceed $100,000,000
at any time;
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<PAGE>
(iv) the Borrower may pay Dividends to Holdings; and
(v) each of Holdings and the Borrower may issue and exchange
shares of any class or series of its common stock now or hereafter
outstanding for shares of any other class or series of its common stock at
the time outstanding.
8.06 Transactions with Affiliates. Holdings will not, and will not
----------------------------
permit any Subsidiary to, enter into any transaction or series of transactions,
whether or not in the ordinary course of business, with any Affiliate (other
than a Nabisco Entity) other than on terms and conditions substantially as
favorable to Holdings or such Subsidiary as would be obtainable by Holdings or
such Subsidiary at the time in a comparable arm's-length transaction with a
Person other than an Affiliate; provided, that the foregoing restrictions shall
--------
not apply to: (i) customary fees paid to members of the Board of Directors of
Holdings and of its Subsidiaries and (ii) the RJRN Agreements.
8.07 Consolidated Net Worth. Holdings will not permit Consolidated
----------------------
Net Worth at any time to be less than an amount equal to the sum of (x)
$3,750,000,000 plus (y) the sum of 25% of Consolidated Net Income, if positive,
for each prior fiscal year of Holdings, if any, ending after January 1, 1996.
8.08 Fixed Charge Coverage Ratio. Holdings will not permit the ratio
---------------------------
of (i) Adjusted Operating Income to (ii) Consolidated Fixed Charges for any Test
Period to be less than 1.15 to 1.00.
8.09 Leverage Ratio. Holdings will not permit the ratio of (i)
--------------
Adjusted Consolidated Debt to (ii) Adjusted Operating Income for any Test Period
to be more than 3.70 to 1.00.
8.10 Cash Interest Coverage Ratio. Holdings will not permit the
----------------------------
ratio of (i) Adjusted Operating Income to (ii) Consolidated Cash Interest
Expense for any Test Period to be less than 3.00 to 1.00.
SECTION 9. Events of Default. Upon the occurrence of any of the
-----------------
following specified events (each, an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment when
--------
due of any principal of the Loans or (ii) default, and such default shall
continue for five or more days, in the payment when due of any interest on the
Loans or any Fees or any other amounts owing hereunder or under any Note; or
9.02 Representations, etc. Any representation, warranty or statement
---------------------
made or deemed made by either Credit Party herein or in any other Credit
Document or in any
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<PAGE>
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of
which made or deemed made; or
9.03 Covenants. Either Credit Party shall (a) default in the due
---------
performance or observance by it of any term, covenant or agreement contained in
Section 7.10 or 8, or (b) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 9.01,
9.02 or clause (a) of this Section 9.03) contained in this Agreement and such
default shall continue unremedied for a period of at least 30 days after notice
to the Borrower by any Senior Managing Agent or the Required Banks; or
9.04 Default Under Other Agreements. (a) Holdings or any of its
------------------------------
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) in excess of $75,000,000 individually or
$150,000,000 in the aggregate, for Holdings and its Subsidiaries, beyond the
period of grace, if any, provided in the instrument or agreement under which
such Indebtedness was created or (ii) default in the observance or performance
of any agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause (determined without regard to whether any notice or lapse of time is
required, provided that the existence of any Event of Default under this Section
--------
9.04(a)(ii) with respect to Indebtedness outstanding under the Nabisco Credit
Agreement shall be determined after giving effect to any notice or lapse of time
provided to the Borrower in the Nabisco Credit Agreement), any such Indebtedness
to become due prior to its stated maturity; or (b) any such Indebtedness shall
be declared to be due and payable, or required to be prepaid other than by a
regularly scheduled required prepayment or as a mandatory prepayment (unless
such required prepayment or mandatory prepayment results from a default or an
event of the type that constitutes an Event of Default), prior to the stated
maturity thereof, provided that to the extent Holdings or any of its
--------
Subsidiaries incurs (including pursuant to a committed facility not borrowed
thereunder but with commitments aggregating) or issues Indebtedness in an
aggregate principal amount of at least $100,000,000 at any time that contains
any default covering any action, failure to act and/or other circumstances of or
affecting any Affiliate of Holdings (other than the Borrower and its
Subsidiaries) not included as Events of Default hereunder (other than any of the
foregoing relating solely to Holdings and its Subsidiaries), then this Section
9.04 shall be deemed to be automatically amended to include such defaults
effective as of the date of the incurrence or issuance of such Indebtedness (it
being agreed that the Borrower and Holdings will cooperate with the Senior
Managing Agents to obtain an amendment to this Agreement, in form and substance
satisfactory to the Majority SMA, formalizing the inclusion of such defaults
under this Agreement); or
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<PAGE>
9.05 Bankruptcy, etc. Holdings or any of its Material Subsidiaries
----------------
(each, a "Designated Party") shall commence a voluntary case concerning itself
under Title 11 of the United States Code entitled "Bankruptcy," as now or
hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against a Designated Party and the petition is not
controverted within 10 days after service of notice of such case on such
Designated Party, or is not dismissed within 60 days after commencement of the
case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of a Designated Party;
or a Designated Party commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to a Designated Party; or there is commenced against a
Designated Party any such proceeding which remains undismissed for a period of
60 days; or a Designated Party is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or a Designated Party suffers any appointment of any custodian or the like for
it or any substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or a Designated Party makes a general assignment for
the benefit of creditors; or any corporate action is taken by a Designated Party
for the purpose of effecting any of the foregoing; or
9.06 ERISA. (a) A single-employer plan (as defined in Section 4001
-----
of ERISA) maintained or contributed to by Holdings or any of its Subsidiaries or
any ERISA Affiliate shall fail to maintain the minimum funding standard required
by Section 412 of the Code for any plan year or part thereof or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code or shall provide security to induce the issuance of such
waiver or extension, (b) any Plan is or shall have been terminated or the
subject of termination proceedings under ERISA or an event has occurred
entitling the PBGC to terminate a Plan under Section 4042(a) of ERISA, (c) any
Plan shall have an Unfunded Current Liability, (d) Holdings or any of its
Subsidiaries or any ERISA Affiliate has incurred or is likely to incur a
material liability to or on account of a termination of or a withdrawal from a
Plan under Section 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA, (e)
Holdings or any of its Subsidiaries has incurred, after the Effective Date,
liabilities (after giving effect to any reserves applicable thereto and
maintained on the Effective Date) pursuant to one or more employee welfare
benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to
retired employees (other than as required by Section 601 of ERISA) or employee
pension benefit plans (as defined in Section 3(2) of ERISA) (except in each case
solely as a result of a change in estimate or adjustment of liabilities existing
on the Effective Date upon the adoption or implementation of Financial
Accounting Statement 106), or (f) Holdings or any of its Subsidiaries or any
ERISA Affiliate has incurred a liability under Section 409, 502(i) or 502(l) of
ERISA or Section 4971 or 4975 of the Code; and there shall result from any such
event or events described in the preceding clauses of this Section 9.06 the
imposition of a Lien upon the
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<PAGE>
assets of Holdings or any of its Subsidiaries, the granting of a security
interest, or a liability or a material risk of incurring a liability, which
Lien, security interest or liability would have a material adverse effect upon
the business, operations or financial condition of Holdings and its Subsidiaries
taken as a whole; or
9.07 Judgments. One or more judgments or decrees shall be entered
---------
against Holdings or any of its Material Subsidiaries involving a liability of
$75,000,000 or more in the case of any one such judgment or decree and
$150,000,000 or more in the aggregate for all such judgments and decrees for
Holdings and its Material Subsidiaries (to the extent not paid or fully covered
by insurance) and any such judgments or decrees shall not have been vacated,
discharged or stayed or bonded pending appeal within 60 days from the entry
thereof; or
9.08 Guaranty. The Guaranty or any provision thereof shall cease to
--------
be in full force or effect, or the Guarantor or any Person acting by or on
behalf of the Guarantor shall deny or disaffirm the Guarantor's obligations
under the Guaranty or the Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to the Guaranty;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, any Senior Managing Agent shall, upon the written
request of the Required Banks, by written notice to Holdings and the Borrower,
take any or all of the following actions, without prejudice to the rights of any
Senior Managing Agent or any Bank to enforce its claims against the Borrower,
except as otherwise specifically provided for in this Agreement (provided that
--------
if an Event of Default specified in Section 9.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by any
Senior Managing Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon the Commitment of each Bank shall forthwith
terminate immediately and any Facility Fee and Utilization Fee theretofore
accrued shall forthwith become due and payable without any other notice of any
kind and (ii) declare the principal of and any accrued interest in respect of
all Loans and all Obligations owing hereunder and thereunder to be, whereupon
the same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by Holdings
and the Borrower.
Notwithstanding anything contained in the foregoing paragraph, if at
any time within 60 days after an acceleration of the Loans pursuant to the
preceding paragraph, the Borrower shall pay all arrears of interest and all pay-
ments on account of principal which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Defaults (other than non-payment of the principal of and accrued
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<PAGE>
interest on the Loans, in each case which is due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section 12.11, then Non-
Defaulting Banks holding at least 66-2/3% of the Adjusted Total Commitment
(which Banks shall include in any event the Majority SMA), by written notice to
Holdings and the Borrower, may at their option rescind and annul the
acceleration and its consequences; but such action shall not affect any subse-
quent Event of Default or Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind the Banks to a decision
which may be made at the election of the aforesaid percentage of the Banks and
are not intended to benefit the Borrower and do not grant the Borrower the right
to require the Banks to rescind or annul any acceleration hereunder, even if the
conditions set forth herein are met.
SECTION 10. Definitions. As used herein, the following terms shall
-----------
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Absolute Rate" shall mean an interest rate (rounded to the nearest
.0001) expressed as a decimal.
"Absolute Rate Borrowing" shall mean a Competitive Bid Borrowing with
respect to which the Borrower has requested that the Banks offer to make
Competitive Bid Loans at Absolute Rates.
"Adjusted Consolidated Debt" shall mean the sum (without duplication)
of (i) notes payable, (ii) the current maturities of long-term debt, (iii) long-
term debt and (iv) all other amounts representing liabilities with respect to
pay-in-kind interest to the extent included in "Other Liabilities," all as
determined for Holdings and its Subsidiaries in accordance with GAAP, it being
understood that determinations of the amounts specified in clauses (i), (ii),
(iii) and (iv) shall be made on a consistent basis with the methodology utilized
by Holdings to determine such amounts on the Effective Date.
"Adjusted Operating Income" shall mean for any period (x) the
consolidated operating income of Holdings and its Subsidiaries for such period
plus (y) the sum of the consolidated depreciation expense and consolidated
amortization expense of Holdings and its Subsidiaries for such period, all as
determined in accordance with GAAP, it being understood that the determination
of the amount specified in clauses (x) and (y) shall be made on a consistent
basis with the methodology utilized by Holdings to determine such amount on the
Effective Date, provided that (i) for the purposes of Section 8.08 only, for any
--------
Test Period during which Consolidated Fixed Charges includes cash taxes paid as
a result of any extraordinary sale of assets, Adjusted Operating Income shall
include a portion of the gross cash proceeds received by Holdings and/or its
Subsidiaries as a result of such extraordinary sale of assets equal to the
percentage of such gross cash proceeds determined by dividing the cash taxes
paid during such Test Period as a result of such sale by the
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<PAGE>
aggregate cash taxes payable as a result of such sale and (ii) for the purposes
only of Section 8.09, for any Test Period during which any acquisition of any
Person or business occurs, Adjusted Operating Income shall give pro forma effect
--- -----
to such acquisition as if it occurred on the first day of such Test Period.
"Adjusted Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank such Bank's Percentage and (y) at a time when a Bank
Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non-Defaulting Bank, the percentage determined by dividing
such Bank's Commitment at such time by the Adjusted Total Commitment at such
time, it being understood that all references herein to Commitments at a time
when the Total Commitment has been terminated shall be references to the
Commitments in effect immediately prior to such termination.
"Adjusted Total Commitment" shall mean at any time the Total
Commitment less the aggregate Commitments of all Defaulting Banks.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power (i) to
vote 20% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Aggregate Outstandings" shall have the meaning provided in Section
3.02(A).
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"Agreement of Commitment Increase" shall mean an agreement in the form
of Exhibit C-3, appropriately completed.
"Applicable Credit Rating" shall mean the highest rating level (a
rating level being, e.g., each of BBB-, BBB and BBB+, in the case of S&P)
----
assigned by each Rating Agency to any of the Long Term Debt Issues of Holdings
or the Borrower.
"Applicable Eurodollar Margin" shall mean, (x) at any time prior to
the Commitment Expiry Date, .275% and (y) at any time on and after the
Commitment Expiry Date in respect of each Interest Period commencing during a
period set forth below, the percentage set forth below opposite such period
below:
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<PAGE>
Applicable
-----------
Period Eurodollar Margin
------ -----------------
NIG Period .625%
Minimum Investment .375%
Grade Period
Increased
Investment Grade .275%
Period
Maximum Investment .225%
Grade Period
"Applicable Utilization Fee Percentage" shall mean, at any time during
a period set forth below, the percentage set forth opposite such period below:
Applicable
-----------
Period Utilization Fee Percentage
------ --------------------------
NIG Period .250%
Minimum Investment .125%
Grade Period
Increased
Investment Grade 0%
Period
Maximum Investment 0%
Grade Period
"Assignment Agreement" shall have the meaning provided in Section
12.04(b)(A).
"Authorized Officer" shall mean any senior officer of Holdings or the
Borrower, as the case may be, designated as such in writing to the Senior
Managing Agents by Holdings or the Borrower, in each case to the extent
acceptable to the Majority SMA.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing or (ii) a
Bank having notified any Senior Managing Agent and/or the Borrower that it does
not intend to comply with its
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obligations under Section 1.01(a), in the case of either (i) or (ii) as a result
of the appointment of a receiver or conservator with respect to such Bank at the
direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" shall mean, for any day, the average of the publicly
announced prime rates, base rates and/or reference rates on such date of BTCo,
Chase, Chemical and Citibank.
"Bidder Bank" shall mean each Bank that has notified in writing (and
has not withdrawn such notice) the Payments Administrator that it desires to
participate generally in the bidding arrangements relating to Competitive Bid
Borrowings.
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement and shall also include any Person which is the surviving
corporation after giving effect to any transaction permitted by Section 8.02
involving the Borrower.
"Borrowing" shall mean and include (i) the incurrence of one Type of
Revolving Loan by the Borrower from all of the Banks on a pro rata basis on a
--- ----
given date (or resulting from conversions on a given date), having in the case
of Eurodollar Loans the same Interest Period, provided that Reference Rate Loans
--------
incurred pursuant to Section 1.11(b) shall be considered part of any related
Borrowing of Eurodollar Loans and (ii) a Competitive Bid Borrowing.
"BTCo" shall mean Bankers Trust Company and any successor corporation
thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking insti-
tutions are authorized by law or other governmental actions to close and (ii)
with respect to all notices and determinations in connection with, and payments
of principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is, or is required to be, accounted for as a capital lease
on the balance sheet of that Person.
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<PAGE>
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of Holdings or any of its Subsidiaries in each case taken at the
amount thereof accounted for as liabilities in accordance with GAAP.
"Change of Control" shall mean and include (a) at any time Continuing
Directors shall not constitute a majority of the Board of Directors of Holdings
or the Borrower; and/or (b) any Person or group (as such term is defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than RJRN, Holdings and its Subsidiaries, shall acquire,
directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3
and 13d-5 under the Exchange Act) of 30% or more, on a fully diluted basis, of
the economic or voting interest in Holdings' capital stock; and/or (c) Holdings
shall own less than 80% on a fully diluted basis of (x) the economic interest of
the common stock of the Borrower or (y) the voting interest of the capital stock
of the Borrower.
"Chase" shall mean The Chase Manhattan Bank, N.A. and any successor
corporation thereto by merger, consolidation or otherwise.
"Chemical" shall mean Chemical Bank and any successor corporation
thereto by merger, consolidation or otherwise.
"Citibank" shall mean Citibank, N.A. and any successor corporation
thereto by merger, consolidation or otherwise.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Commercial Paper Outstandings" shall mean, at any time, an amount
equal to the lesser of (i) the sum of (x) the face amount of all commercial
paper previously issued by Holdings and/or any of its Subsidiaries at a discount
and outstanding at such time plus (y) the principal amount of all commercial
----
paper previously issued by Holdings and/or any of its Subsidiaries on an
interest bearing basis and outstanding at such time, and (ii) the remainder, if
any, of (x) the Total Commitment at such time less (y) the then aggregate
principal amount of all Loans outstanding at such time.
"Commitment" shall mean, with respect to each Bank, the amount set
forth opposite such Bank's name in Annex I hereto, as the same may be increased
from time to time pursuant to Section 1.16 and/or reduced from time to time
pursuant to Section 2.02, 2.03, 9 and/or 12.04(b)(A).
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<PAGE>
"Commitment Expiry Date" shall mean the date which is 364 days after
the Effective Date.
"Commodities Agreement" shall mean any forward contract, futures
contract, option contract or similar agreement or arrangement, in each case
intended to protect the Persons entering into same from fluctuations in the
price of, or shortage of supply of, commodities.
"Competitive Bid Borrowing" shall mean a Borrowing of Competitive Bid
Loans pursuant to Section 1.04 with respect to which the Borrower has requested
that the Banks offer to make Competitive Bid Loans at Absolute Rates.
"Competitive Bid Loans" shall have the meaning provided in Section
1.01(b).
"Consolidated Capital Expenditures" shall mean, for any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including in all events all amounts expended or capitalized under Capital
Leases but excluding any amount representing capitalized interest) by Holdings
and its Subsidiaries during that period that, in conformity with GAAP, are or
are required to be included as additions during such period to property, plant
or equipment reflected in the consolidated balance sheet of Holdings and its
Subsidiaries, provided that Consolidated Capital Expenditures shall in any event
--------
exclude (x) additions to property, plant and equipment reflected on the
consolidated balance sheet of Holdings and its Subsidiaries that result from the
acquisition of any Person (including through the purchase of the capital stock
or ownership interests of such Person or through merger or consolidation) and
(y) expenditures made in connection with the replacement, substitution or
restoration of assets (i) to the extent financed from insurance proceeds paid on
account of the loss of or damage to the assets being replaced or restored or
(ii) with awards of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced.
"Consolidated Cash Interest Expense" shall mean, for any period, (i)
consolidated interest expense of Holdings and its Subsidiaries, but excluding,
however, to the extent included in consolidated interest expense, (x) non-cash
interest expense and (y) amortization of debt issuance cost plus (ii) cash
dividends paid on all preferred stock of Holdings and its Subsidiaries (except
to the extent paid to Holdings or a Wholly-Owned Subsidiary of Holdings) during
such period, it being understood that the determination of the amounts specified
in clauses (i)(x) and (i)(y) shall be made on a consistent basis with the
methodology utilized by Holdings to determine such amounts on the Effective
Date.
"Consolidated Fixed Charges" shall mean, for any period, the sum,
without duplication, of the amounts for such period of (i) Consolidated Cash
Interest Expense, (ii)
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cash taxes paid during such period, and (iii) Consolidated Capital Expenditures,
all as determined on a consolidated basis for Holdings and its Subsidiaries in
accordance with GAAP, it being understood that the determination of the amounts
specified in clause (iii) shall be made on a consistent basis with the method-
ology utilized by Holdings to determine such amount on the Effective Date.
"Consolidated Net Income" shall mean, for any period, for any Person
the consolidated net income of such Person and its Subsidiaries, determined in
accordance with GAAP, for such period.
"Consolidated Net Worth" shall mean, as at any date of determination,
the stockholders' equity of Holdings as determined in accordance with GAAP and
as would be reflected on a consolidated balance sheet of Holdings prepared as of
such date, it being understood that the determination of such amounts shall be
made on a consistent basis with the methodology utilized by Holdings to
determine such amount on the Effective Date.
"Contingent Obligations" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other monetary obligations ("primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property con-
stituting direct or indirect security therefor, (b) to advance or supply funds
(i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold harmless
the owner of such primary obligation against loss in respect thereof, provided
--------
however that the term Contingent Obligation shall not include endorsements of
- -------
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
lesser of (x) the maximum stated or determinable amount of such Contingent
Obligation and (y) the stated or determinable amount of the primary obligation
in respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Continuing Director" shall mean, at any date, an individual (x) who
is a member of the Board of Directors of Holdings or the Borrower, as the case
may be, on the date of this Agreement, (y) who, as at such date, has been a
member of such Board of Directors for at least the twelve preceding months, or
(z) who has been nominated to be a
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member of such Board of Directors by a majority of the other Continuing
Directors then in office.
"Corporate Agreement" shall mean the Corporate Agreement, dated as of
January 26, 1995, between Holdings and RJRN.
"CP Refinancing Borrowing" shall mean any Borrowing of Revolving
Loans, any of the proceeds of which are to be utilized to repay Commercial Paper
Outstandings, to the extent such Borrowing is identified as such by the Borrower
in the Notice of Borrowing given in respect of such Borrowing.
"Credit Documents" shall mean this Agreement and the Notes.
"Credit Party" shall mean each of Holdings and the Borrower.
"Credit Rating" shall mean (i) the Applicable Credit Rating assigned
by each Rating Agency, if such Applicable Credit Ratings are the same or (ii) if
the Applicable Credit Ratings assigned by the Rating Agencies differ, the higher
of the Applicable Credit Ratings assigned by the Rating Agencies, provided that
--------
in the event the Applicable Credit Rating of any Rating Agency shall be more
than one rating level above the Applicable Credit Rating of the other Rating
Agency, the Credit Rating shall be one level below the higher Applicable Credit
Rating.
"Cumulative Consolidated Net Income" shall mean, at any time for any
determination thereof, the sum of (i) Consolidated Net Income of Holdings for
the period (taken as one accounting period) commencing January 1, 1995 and
ending on the last day of the last fiscal quarter of Holdings then ended plus
(ii) all losses from debt retirement deducted in determining Consolidated Net
Income of Holdings for the period referred to in clause (i) above.
"Currency Agreement" shall mean any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement designed to protect the Persons entering into same
against fluctuations in currency values.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Designated Party" shall have the meaning provided in Section 9.05.
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<PAGE>
"Dividends" shall have the meaning provided in Section 8.05.
"Effective Date" shall have the meaning provided in Section 4.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in SEC
Regulation D), provided that Eligible Transferee shall not include any Person
--------
(or any Affiliate thereof) who competes with Holdings and its Subsidiaries in
the cookie, cracker, snack food or candy business.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with Holdings, a Subsidiary or a Credit Party would be
deemed to be a "single employer" within the meaning of Section 414(b), (c), (m)
or (o) of the Code.
"Eurodollar Loans" shall mean each Revolving Loan bearing interest at
the rates provided in Section 1.09(b).
"Eurodollar Rate" shall mean with respect to each Interest Period for
a Eurodollar Loan (or for a Spread Borrowing priced by reference to the
Eurodollar Rate), (i) the arithmetic average (rounded to the nearest 1/100 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by each Reference Bank for dollar deposits of amounts in same day funds
comparable to the outstanding principal amount of the Eurodollar Loan of such
Reference Bank for which an interest rate is then being determined with matur-
ities comparable to the Interest Period to be applicable to such Eurodollar Loan
(or in the case of such Spread Borrowing, the arithmetic average of the offered
rates for deposits in U.S. dollars for the applicable Interest Period (or the
period closest to such applicable Interest Period) which appear on the Reuters
Screen LIBO Page), determined as of 10:00 A.M. (New York time) on the date which
is two Business Days prior to the commencement of such Interest Period, divided
(and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D),
provided, that if one or more of the Reference Banks fails to provide the
- --------
Payments Administrator with its aforesaid rate for an Interest Period applicable
to Eurodollar Loans, then the Eurodollar
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<PAGE>
Rate for such Interest Period shall be determined based on the rate or rates
provided to the Payments Administrator by the other Reference Bank or Banks.
"Event of Default" shall have the meaning provided in Section 9.
"Exchange Agreement" shall mean the Exchange Agreement, dated as of
April 26, 1995, among Holdings, the Borrower and RJRN.
"Expiration Date" shall mean December 31, 1995.
"Facility Fee" shall have the meaning provided in Section 2.01(a).
"Facility Fee Percentage" shall mean .100%.
"Federal Funds Rate" shall mean for any period, a fluctuating interest
rate equal for each day during such period to the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by the Payments Administrator from three Federal Funds
brokers of recognized standing selected by the Payments Administrator.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 2.01.
"Foreign Subsidiary" shall mean each Subsidiary of RJRN (other than
any Nabisco Entity) doing business primarily outside the United States or any
state or territory thereof.
"Fuji" shall mean The Fuji Bank, Limited and any successor corporation
thereto by merger, consolidation or otherwise.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that determinations in accordance with GAAP for purposes of Section 8,
including defined terms as used therein, shall be made pursuant to Section
12.07(a).
"Guarantor" for purposes of Section 13 of this Agreement shall mean
Holdings, to the extent not merged or consolidated with the Borrower in
accordance with Section 8.02.
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"Guaranty" shall mean the guaranty of Holdings set forth in Section
13, as the same may be supplemented, amended or modified from time to time.
"Hanover" shall mean one or more special purpose, Wholly-Owned
Subsidiaries of the Borrower engaged exclusively in the business of purchasing
and financing domestic trade accounts receivable generated by the Borrower and
its Subsidiaries.
"Hanover Facility" shall mean a receivables purchase facility among
Hanover, Corporate Asset Funding Company, Inc., CIESCO L.P., Citibank, N.A.
and/or Citicorp North America, Inc. governed by documentation (including the
receivables purchase agreements between Hanover and the Borrower) in effect on
the Effective Date as such documentation may be amended from time to time (other
than to the extent any such amendment changes the non-recourse nature of such
facility in respect of the Borrower). References to the Hanover Facility shall
include any liquidity facility relating to the receivables purchase facility
referred to in the preceding sentence.
"Hedging Agreements" shall mean and include Commodities Agreements,
Currency Agreements and Interest Rate Agreements.
"Holdings" shall have the meaning provided in the first paragraph of
this Agreement and shall also include any Person which is the surviving
corporation after giving effect to any transaction permitted by Section 8.02
involving Holdings.
"Increased Investment Grade Period" shall mean any period during which
the Credit Rating at all times is the Increased Investment Grade Rating.
"Increased Investment Grade Rating" shall mean the rating assigned by
each Rating Agency which is one rating level above the Minimum Investment Grade
Rating, it being understood that as of the date of this Agreement the "Increased
Investment Grade Rating" of S&P is BBB and the "Increased Investment Grade
Rating" of Moody's is Baa2.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money, (ii) the deferred purchase price of assets or
services which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person, (iii) the face amount of all letters of credit
issued for the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price for goods or ser-
vices whether or not delivered or accepted, i.e., take-or-pay and similar
----
obligations, (vii) all obligations of such Person under Hedging Agreements,
(viii) all Contingent Obligations of such
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Person, and (ix) the outstanding unreimbursed purchase price paid to Hanover in
respect of the purchase of receivables from it pursuant to the Hanover Facility,
provided that Indebtedness shall not include (x) trade payables and accrued
- --------
expenses, in each case arising in the ordinary course of business and (y) any
obligation of the Borrower or any Subsidiary thereof to purchase products,
services and produce utilized in its business pursuant to the RJRN Agreements or
agreements entered into in the ordinary course of business on a basis consistent
with Holdings' past practices or then current industry practices, and provided
--------
further, that (a) for the purposes of Section 9.04, the amount of Indebtedness
- -------
represented by any Hedging Agreement shall be at any time the unrealized net
loss position, if any, of the Borrower and/or its Subsidiaries thereunder on a
marked to market basis determined no more than one month prior to such time and
(b) for the purposes of determining the Indebtedness permitted to be secured by
Section 8.03(e) or outstanding under Section 8.04(h), the amount of Indebtedness
included in such determination that is attributable to all Hedging Agreements
secured or permitted thereunder, as the case may be, shall be the Net
Termination Value, if any, of all such Hedging Agreements.
"Interest Period" shall mean with respect to (i) any Revolving Loan
constituting a Eurodollar Loan, the interest period applicable thereto as
determined pursuant to Section 1.10 and (ii) any Competitive Bid Loan, the
period from the date of the making thereof to the maturity date thereof as
specified in the respective Notice of Competitive Bid Borrowing.
"Interest Rate Agreement" shall mean any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
futures contract, interest rate option contract or other similar agreement or
arrangement.
"Interest Rate Basis" shall mean the Eurodollar Rate and/or such other
basis for determining an interest rate as the Borrower and the Payments
Administrator may agree upon from time to time.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement (other than
customary negative pledge clauses) to give any of the foregoing, any conditional
sale or other title retention agreement or any lease in the nature thereof).
"Loan" shall mean any Competitive Bid Loan or Revolving Loan.
"Long Term Debt Issues" shall mean, with respect to each of Holdings
and the Borrower, each issuance of long-term senior debt of such Person which
ranks on a parity, as to payment and security, with the Guaranty or the Loans,
as the case may be.
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"Majority SMA" shall mean, at any time, at least one-half in number of
the Senior Managing Agents.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Subsidiary" shall mean and include, at any time, the
Borrower and each other Subsidiary of Holdings to the extent that (x) the aggre-
gate consolidated book value of the assets of such Subsidiary is equal to or
more than $300,000,000 or (y) the revenues of such Subsidiary during its then
most recently ended fiscal year were equal to or more than $200,000,000.
"Maturity Date" shall mean the date which is the third anniversary of
the Commitment Expiry Date.
"Maximum Investment Grade Period" shall mean any period during which
the Credit Rating is, or is at any level above, the Maximum Investment Grade
Rating.
"Maximum Investment Grade Rating" shall mean the rating assigned by
each Rating Agency which is at least one or more levels above the Increased
Investment Grade Rating, it being understood that as of the date of this
Agreement the lowest "Maximum Investment Grade Rating" of S&P is BBB+ and the
lowest "Maximum Investment Grade Rating" of Moody's is Baa1.
"Minimum Borrowing Amount" shall mean $25,000,000.
"Minimum Investment Grade Period" shall mean any period during which
the Credit Rating is at all times the Minimum Investment Grade Rating.
"Minimum Investment Grade Rating" shall mean the lowest rating level
established as investment grade by each Rating Agency, it being understood that
as of the date of this Agreement the "Minimum Investment Grade Rating" of S&P is
BBB- and the "Minimum Investment Grade Rating" of Moody's is Baa3.
"Moody's" shall mean Moody's Investors Service, Inc., or any successor
corporation thereto.
"Nabisco Biscuit Division" shall mean the portion of the business of
Holdings and its Subsidiaries engaged in the manufacture and sale of crackers
and cookies in the United States.
"Nabisco Credit Agreement" shall mean the Credit Agreement, dated as
of April 28, 1995, among Holdings, the Borrower, various lending institutions
party thereto
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and the Senior Managing Agents, as the same may be amended, modified or
supplemented from time to time.
"Nabisco Entity" shall mean Holdings and its Subsidiaries.
"Net Termination Value" shall mean at any time, with respect to all
Hedging Agreements for which a Net Termination Value is being determined, the
excess, if positive, of (i) the aggregate of the unrealized net loss position of
the Borrower and/or its Subsidiaries under each of such Hedging Agreements on a
marked to market basis determined no more than one month prior to such time less
(ii) the aggregate of the unrealized net gain position of the Borrower and/or
its Subsidiaries under each of such Hedging Agreements on a marked to market
basis determined no more than one month prior to such time.
"NIG Period" shall mean any period during which the Credit Rating is
at all times below the Minimum Investment Grade Rating.
"Non-Defaulting Bank" shall mean and include each Bank other than a
Defaulting Bank.
"Note" shall have the meaning provided in Section 1.06(a).
"Notice of Borrowing" shall have the meaning provided in Section 1.03.
"Notice of Competitive Bid Borrowing" shall have the meaning provided
in Section 1.04.
"Notice of Conversion" shall have the meaning provided in Section
1.07.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
any Senior Managing Agent, the Payments Administrator or any Bank pursuant to
the terms of this Agreement or any other Credit Document.
"Payments Administrator" shall mean Citibank, provided that if
--------
Citibank shall cease to constitute a Senior Managing Agent hereunder, the
remaining Senior Managing Agents shall have the option to appoint one of such
remaining Senior Managing Agents as the Payments Administrator.
"Payments Administrator's Office" shall mean the office of the
Payments Administrator located at 399 Park Avenue, New York, New York 10043, or
such other office in New York City as the Payments Administrator may hereafter
designate in writing as such to the other parties hereto.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean at any time for each Bank, the percentage
obtained by dividing such Bank's Commitment by the Total Commitment, provided
--------
that at any time when the Total Commitment shall have been terminated each
Bank's Percentage shall be the percentage obtained by dividing such Bank's
outstanding Revolving Loans by the aggregate outstanding Revolving Loans.
"Permitted Commodities Agreement" shall mean any Commodities Agreement
entered into in the ordinary course of business by any Subsidiary of the
Borrower to the extent consistent with the practices of the Borrower and its
Subsidiaries prior to the Effective Date or with then current practices in the
industry.
"Permitted Currency Agreement" shall mean any Currency Agreement
entered into in the ordinary course of business by any Subsidiary of the
Borrower to the extent consistent with the practices of the Borrower and its
Subsidiaries prior to the Effective Date or with then current practices in the
industry, provided that no domestic Subsidiary (other than domestic Subsidiaries
--------
of the Borrower all or substantially all of the business and operations of which
are conducted outside the United States) may be an obligor under or a guarantor
of any such Currency Agreements entered into after the Effective Date.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as defined
in Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribution of), or at any time during the five
calendar years preceding the date of this Agreement was maintained or
contributed to by (or to which there was an obligation to contribution of), the
Borrower, a Subsidiary or an ERISA Affiliate.
"Pro Forma Events" shall mean, with respect to the financial
statements of the Credit Parties, the transactions and events in the Refinancing
leading to the adjustments set forth in the pro forma balance sheets referred to
in Section 6.09 of the Nabisco Credit Agreement.
"Rating Agency" shall mean each of S&P and Moody's.
"Reference Banks" shall mean BTCo, Chase, Chemical and Citibank.
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"Reference Rate" shall mean, at any time, the higher of (x) the rate
which is 1/2 of 1% in excess of the Federal Funds Rate and (y) the Base Rate as
in effect from time to time.
"Reference Rate Loan" shall mean each Revolving Loan bearing interest
at the rates provided in Section 1.09(a).
"Refinancing" shall have the meaning provided such term in the Nabisco
Credit Agreement.
"Register" shall have the meaning provided in Section 1.06(d).
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Replacement Receivables Facility" shall mean any receivables purchase
facility that replaces or refinances the Hanover Facility or any prior
Replacement Receivables Facility, together with any liquidity facility relating
thereto, to the extent the Liens created thereunder, and under any related
purchase agreements between Hanover, on the one hand, and the Borrower on the
other hand, do not attach to any assets not subject to the Liens created under
the Hanover Facility or the Replacement Receivables Facility, as the case may
be, being replaced or refinanced. References to the Replacement Receivables
Facility shall include any liquidity facility relating to the receivables
purchase facility referred to in the preceding sentence.
"Reply Date" shall have the meaning provided in Section 1.04(b).
"Reportable Event" shall mean an event described in Section 4043(b) of
ERISA with respect to a Plan as to which the 30-day notice requirement has not
been waived by the PBGC.
"Required Banks" shall mean at any time either (A) (i) the Majority
SMA plus (ii) Non-Defaulting Banks (including any of the Senior Managing Agents)
holding more than 50% of the Adjusted Total Commitment (or, if the Total
Commitment has been terminated, of the aggregate principal amount of Loans held
by Non-Defaulting Banks), or (B) Non-Defaulting Banks holding more than 66-2/3%
of the Adjusted Total Commitment (or,
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if the Total Commitment has been terminated, of the aggregate principal amount
of Loans held by Non-Defaulting Banks).
"Restricted Payments" shall have the meaning provided in Section 8.05.
"Restricted Sales" shall mean and include the sale or other
disposition, whether such sale or disposition is of capital stock or assets, by
Holdings or any of its Subsidiaries to any Person other than the Borrower or a
Wholly-Owned Subsidiary of the Borrower in one or more transactions of all or
substantially all or any substantial portion of the assets (other than (i)
inventory and equipment to the extent sold or disposed of in the ordinary course
of business and (ii) receivables pursuant to the Hanover Facility or under any
Replacement Receivables Facility) of the Nabisco Biscuit Division as constituted
on the Effective Date, provided that Restricted Sales shall not include any
--------
issuance by Holdings or the Borrower of its capital stock.
"Revolving Loan" shall have the meaning provided in Section 1.01(a).
"RJRN" shall mean RJR Nabisco, Inc., a Delaware corporation.
"RJRN Agreements" shall mean, collectively, the Corporate Agreement,
the Services Agreement, the Tax Sharing Agreement and the Exchange Agreement.
"RJRN Entity" shall mean RJRN Holdings and each Subsidiary of RJRN
other than Holdings and any of its Subsidiaries.
"RJRN Holdings" shall mean RJR Nabisco Holdings Corp., a Delaware
corporation.
"S&P" shall mean Standard & Poor's Ratings Group, or any successor
corporation thereto.
"SEC" shall have the meaning provided in Section 7.01(e).
"SEC Regulation D" shall mean Regulation D as promulgated under the
Securities Act of 1933, as amended, as the same may be in effect from time to
time.
"Second Amendment" shall mean the Second Amendment, dated as of
November 3, 1995, to the Nabisco Credit Agreement.
"Senior Managing Agent" shall mean and include BTCo, Chase, Chemical,
Citibank and Fuji, and any successor to any thereof appointed pursuant to
Section 11.09.
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"Services Agreement" shall mean the Intercompany Services and
Operating Agreement, dated as of January 26, 1995, between Holdings and RJRN.
"Specified Permitted Existing Debt" shall mean the Indebtedness
existing as of April 28, 1995 as described in Annex IV and such other
Indebtedness of Subsidiaries of the Borrower existing as of April 28, 1995 and
not so listed in an aggregate principal amount not to exceed $10,000,000.
"Spread" shall mean a percentage per annum (rounded to the nearest
.0001%) in excess of, or less than, an Interest Rate Basis.
"Spread Borrowing" shall mean a Competitive Bid Borrowing with respect
to which the Borrower has requested the Banks to make Competitive Bid Loans at a
Spread over or under a specified Interest Rate Basis.
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries has more than a 50% equity interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of Holdings.
"Tax Sharing Agreement" shall mean the agreement, dated as of January
26, 1995, as amended on March 23, 1995, between Holdings and RJRN.
"Taxes" shall have the meaning provided in Section 3.04(a).
"Termination Date" shall mean the first date after the Effective Date
on which the Total Commitment is zero and there are no outstanding Loans.
"Test Period" shall mean for any determination under Section 8.08,
8.09 or 8.10 the four consecutive fiscal quarters of Holdings then last ended.
"Total Adjusted Utilization Amount" at any time shall mean the Total
Utilization Amount at such time less the aggregate principal amount of all Loans
made by Defaulting Banks outstanding at such time.
"Total Commitment" shall mean the sum of the Commitments of each Bank.
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"Total Unutilized Commitment" shall mean the excess of (x) the Total
Commitment over (y) the sum of (i) the aggregate outstanding principal amount of
all Revolving Loans and Competitive Bid Loans and (ii) at any time on or prior
to the Commitment Expiry Date, the Commercial Paper Outstandings.
"Total Utilization Amount" shall mean at any time the sum of (i) the
aggregate outstanding principal amount of all Revolving Loans and Competitive
Bid Loans plus (ii) at any time on or prior to the Commitment Expiry Date, the
Commercial Paper Outstandings.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Reference Rate Loan or Eurodollar
----
Loan.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the present value of the accrued benefits under such Plan as of
the close of its most recent plan year, determined in accordance with Statement
of Financial Accounting Standards No. 35, based upon the actuarial assumptions
used by such Plan's actuary in the most recent annual valuation of such Plan,
exceeds the fair market value of the assets allocable thereto, determined in
accordance with Section 412 of the Code.
"Utilization Fee" shall have the meaning provided in Section 2.01(b).
"Utilization Period" shall mean each calendar quarter (or portion
thereof) ending on or prior to the Termination Date to the extent that during
such period the average daily Total Utilization Amount exceeds (x) at all times
on or prior to the Commitment Expiry Date, 50% of the average daily Total
Commitment and (y) at all times thereafter, 50% of the Total Commitment on the
Commitment Expiry Date.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' or nominees' qualifying shares, is
directly or indirectly owned by such Person. Establecimiento Modelo Terrabusi
SAIC, an Argentine corporation, shall be deemed a Wholly-Owned Subsidiary of the
Credit Parties so long as at least 95% of its capital stock is owned, directly
or indirectly, by the Borrower.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
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SECTION 11. The Senior Managing Agents.
--------------------------
11.01 Appointment. Each Bank hereby irrevocably designates and
-----------
appoints BTCo, Chase, Chemical, Citibank and Fuji as Senior Managing Agents
(such term to include any of the Senior Managing Agents acting as Payments
Administrator) of such Bank to act as specified herein and in the other Credit
Documents, and each such Bank hereby irrevocably authorizes BTCo, Chase,
Chemical, Citibank, Fuji, as the Senior Managing Agents for such Bank, to take
such action on its behalf under the provisions of this Agreement and the other
Credit Documents and to exercise such powers and perform such duties as are
expressly delegated to the respective Senior Managing Agents by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Each Senior Managing Agent agrees to act
as such upon the express conditions contained in this Section 11.
Notwithstanding any provision to the contrary elsewhere in this Agreement, no
Senior Managing Agent shall have any duties or responsibilities, except those
expressly set forth herein or in the other Credit Documents, or any fiduciary
relationship with any Bank, and no implied covenants, functions, responsibil-
ities, duties, obligations or liabilities shall be read into this Agreement or
otherwise exist against any Senior Managing Agent. The provisions of this
Section 11 are solely for the benefit of the Senior Managing Agents and the
Banks, and no Credit Party shall have any rights as a third party beneficiary of
any of the provisions hereof, provided that Holdings shall have the rights
--------
granted to it pursuant to Section 11.09. In performing its functions and duties
under this Agreement, each Senior Managing Agent shall act solely as agent of
the Banks and does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for either Credit Party.
11.02 Delegation of Duties. Each Senior Managing Agent may execute
--------------------
any of its duties under this Agreement or any other Credit Document by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. No Senior Managing Agent
shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 11.03.
11.03 Exculpatory Provisions. No Senior Managing Agent nor any of
----------------------
its officers, directors, employees, agents, attorneys-in-fact or affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement (except for its or
such Person's own gross negligence or willful misconduct) or (ii) responsible in
any manner to any of the Banks for any recitals, statements, representations or
warranties made by Holdings, any Subsidiary or any of their respective officers
contained in this Agreement, any other Credit Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by any Senior Managing Agent under or in connection with, this Agreement or any
other Credit Document or for any failure of Holdings or any Subsidiary or any of
their respective
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officers to perform its obligations hereunder or thereunder. No Senior Managing
Agent shall be under any obligation to any Bank to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement, or to inspect the properties, books or records of
Holdings or any Subsidiary. No Senior Managing Agent shall be responsible to
any Bank for the effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Credit Document or for
any representations, warranties, recitals or statements made herein or therein
or made in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by any Senior Managing Agent
to the Banks or by or on behalf of the Borrower to any Senior Managing Agent or
any Bank or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or of
the existence or possible existence of any Default or Event of Default.
11.04 Reliance by Senior Managing Agents. Each Senior Managing Agent
----------------------------------
shall be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, facsimile transmission, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Credit Parties), independent accountants and other
experts selected by such Senior Managing Agent. Each Senior Managing Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Credit Document unless it shall first receive such advice
or concurrence of the Required Banks as it deems appropriate or it shall first
be indemnified to its satisfaction by the Banks against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. Each Senior Managing Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Credit Documents in accordance with a request of the Required Banks (or to
the extent specifically provided in Section 12.11, all the Banks), and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Banks.
11.05 Notice of Default. No Senior Managing Agent shall be deemed to
-----------------
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Senior Managing Agent has received notice from a Bank or
the Borrower or Holdings referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default." In the
event that any Senior Managing Agent receives such a notice, such Senior
Managing Agent shall give prompt notice thereof to the Banks. Each Senior
Managing Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Banks, provided that,
--------
unless and until a Senior Managing Agent shall have received such
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directions, such Senior Managing Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the Banks.
11.06 Non-Reliance on Senior Managing Agents and Other Banks. Each
------------------------------------------------------
Bank expressly acknowledges that no Senior Managing Agent nor any of its offi-
cers, directors, employees, agents, attorneys-in-fact or affiliates have made
any representations or warranties to it and that no act by any Senior Managing
Agent hereafter taken, including any review of the affairs of Holdings or any
Subsidiary, shall be deemed to constitute any representation or warranty by any
Senior Managing Agent to any Bank. Each Bank represents to each Senior Managing
Agent that it has, independently and without reliance upon any Senior Managing
Agent or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of Holdings and its Subsidiaries and made its own
decision to make its Loans hereunder and enter into this Agreement. Each Bank
also represents that it will, independently and without reliance upon any Senior
Managing Agent or any other Bank, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other condition, prospects
and creditworthiness of Holdings and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Banks by
the Payments Administrator hereunder, no Senior Managing Agent shall have any
duty or responsibility to provide any Bank with any credit or other information
concerning the business, operations, assets, property, financial and other
conditions, prospects or creditworthiness of Holdings or any Subsidiary which
may come into the possession of such Senior Managing Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
11.07 Indemnification. The Banks agree to indemnify each Senior
---------------
Managing Agent in its capacity as such ratably according to their aggregate
Commitments (or, if the Total Commitment has been terminated, their aggregate
Commitments as in effect immediately prior to such termination), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, incurred by or
asserted against such Senior Managing Agent in its capacity as such in any way
relating to or arising out of this Agreement or any other Credit Document, or
any documents contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted to be taken by any Senior
Managing Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by
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Holdings or any of its Subsidiaries, provided that no Bank shall be liable to
--------
any Senior Managing Agent for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from such Senior Managing Agent's
gross negligence or willful misconduct. If any indemnity furnished to any
Senior Managing Agent for any purpose shall, in the opinion of such Senior
Managing Agent, be insufficient or become impaired, such Senior Managing Agent
may call for additional indemnity and cease, or not commence, to do the acts
indemnified against until such additional indemnity is furnished. The
agreements in this Section 11.07 shall survive the payment of all Obligations.
11.08 Senior Managing Agents in Their Individual Capacities. Each
-----------------------------------------------------
Senior Managing Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with Holdings and its Subsidiaries
as though such Senior Managing Agent were not a Senior Managing Agent hereunder.
With respect to the Loans made by it and all Obligations owing to it, each
Senior Managing Agent shall have the same rights and powers under this Agreement
as any Bank and may exercise the same as though it were not a Senior Managing
Agent, and the terms "Bank" and "Banks" shall include each Senior Managing Agent
in its individual capacity.
11.09 Successor Senior Managing Agents. Any Senior Managing Agent
--------------------------------
may resign as a Senior Managing Agent upon 20 days' notice to the Banks,
provided that prior to, and as a condition of, the last remaining Senior
- --------
Managing Agent so resigning, the Required Banks shall appoint from among the
Banks a successor Senior Managing Agent for the Banks subject to prior approval
by Holdings (such approval not to be unreasonably withheld), whereupon such
successor agent shall succeed to the rights, powers and duties of the Senior
Managing Agents, and the term "Senior Managing Agents" shall include such
successor agent effective upon its appointment, and the resigning Senior
Managing Agent's rights, powers and duties as a Senior Managing Agent shall be
terminated, without any other or further act or deed on the part of such former
Senior Managing Agent or any of the parties to this Agreement. After any
retiring Senior Managing Agent's resignation hereunder as a Senior Managing
Agent, the provisions of this Section 11 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was a Senior Managing Agent
under this Agreement.
SECTION 12. Miscellaneous.
-------------
12.01 Payment of Expenses, etc. The Borrower agrees to: (i) pay all
-------------------------
reasonable out-of-pocket costs and expenses of (x) the Senior Managing Agents,
whether or not the transactions herein contemplated are consummated, in
connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of White & Case but
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of no other counsel) and (y) each Senior Managing Agent and each of the Banks in
connection with the enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and disbursements of counsel for each Senior Managing Agent and for each of
the Banks); (ii) pay and hold each of the Banks harmless from and against any
and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iii)
indemnify each Bank, its officers, directors, employees, representatives and
agents from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses incurred by any of them as a result of,
or arising out of, or in any way related to, or by reason of, any investigation,
litigation or other proceeding (whether or not any Bank is a party thereto)
related to the entering into and/or performance of any Credit Document or the
use of the proceeds of any Loans hereunder or the consummation of any other
transactions contemplated in any Credit Document, including, without limitation,
the reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding any such los-
ses, liabilities, claims, damages or expenses to the extent incurred by reason
of the gross negligence or willful misconduct of the Person to be indemnified).
12.02 Right of Setoff. In addition to any rights now or hereafter
---------------
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Bank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to either Credit Party or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by such Bank (including, without
limitation, by branches and agencies of such Bank wherever located) to or for
the credit or the account of either Credit Party against and on account of the
Obligations and liabilities of such Credit Party to such Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations of such Credit Party purchased by such
Bank pursuant to Section 12.06(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other Credit
Document, irrespective of whether or not such Bank shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured.
12.03 Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile transmission or cable communication)
and mailed, telegraphed, telexed, telecopied, cabled or delivered, if to a
Credit Party, at the address specified opposite its signature below; if to any
Bank, at its address specified for such Bank on Annex II hereto; or, at such
other address as shall be designated by any party in a written notice to the
other
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parties hereto. All such notices and communications shall be telegraphed,
telexed, telecopied, or cabled or sent by overnight courier, and shall be
effective when received.
12.04 Benefit of Agreement. (a) This Agreement shall be binding
--------------------
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto, provided that no Credit Party may assign or
--------
transfer any of its interests hereunder, except to the extent any such
assignment results from the consummation of a transaction permitted under
Section 8.02, without the prior written consent of the Banks, and provided
--------
further, that the rights of each Bank to transfer, assign or grant participa-
- -------
tions in its rights and/or obligations hereunder shall be limited as set forth
below in this Section 12.04, provided that nothing in this Section 12.04 shall
--------
prevent or prohibit any Bank from pledging its rights under this Agreement
and/or its Loans and/or Note hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
(b) Each Bank shall have the right to transfer, assign or grant
participations in all or any part of its remaining rights and obligations
hereunder on the basis set forth below in this clause (b).
(A) Assignments. Each Bank may assign pursuant to an Assignment
-----------
Agreement substantially in the form of Exhibit C-2 hereto (each, an
"Assignment Agreement") all or a portion of its rights and obligations
hereunder pursuant to this clause (b)(A) to (x) one or more Banks or (y)
one or more other Eligible Transferees, provided that any such assignment
--------
pursuant to clause (y) above shall be in the aggregate amount of at least
(I) in the event of an assignment relating to this Agreement only,
$10,000,000, except to the extent that after giving effect to any such
assignment the assigning Bank shall have reduced its Commitment to zero and
(II) in the event of an assignment relating to this Agreement and the
Nabisco Credit Agreement, $5,000,000, provided that the aggregate amount of
--------
such assignment under this Agreement and the Nabisco Credit Agreement is at
least $10,000,000, except to the extent that after giving effect to any
such assignment the assigning Bank shall have reduced its Commitment
hereunder to zero. Any assignment to another Bank pursuant to this clause
(b)(A) will become effective upon the payment to the Payments Administrator
by (I) either the assigning or the assignee Bank or (II) in the case of an
assignment pursuant to Section 1.14, the Replacement Bank, of a
nonrefundable assignment fee of $2,500 and the recording by the Payments
Administrator of such assignment, and the resultant effects thereof on the
Commitments of the assigning Bank and the assignee Bank, in the Register,
the Payments Administrator hereby agreeing to effect such recordation no
later than five Business Days after its receipt of a written notification
by the assigning Bank and the assignee Bank of the proposed assignment,
provided that the Payments Administrator shall not be required to, and
--------
shall not, so record any assignment in
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the Register on or after the date on which any proposed amendment,
modification or supplement in respect of this Agreement has been circulated
to the Banks for approval until the earlier of (x) the effectiveness of
such amendment, modification or supplement in accordance with Section 12.11
or (y) 30 days following the date on which such proposed amendment,
modification or supplement was circulated to the Banks. Assignments
pursuant to this clause (b)(A) to any Person not theretofore a Bank
hereunder will only be effective if the Payments Administrator shall have
received a written notice in the form of Exhibit C-1 hereto from the
assigning Bank and the assignee Bank and payment of a nonrefundable
assignment fee of $2,500 to the Payments Administrator (provided, that in
--------
the event of simultaneous assignments relating to this Agreement and the
Nabisco Credit Agreement, the fees for such assignments shall total $2,500)
by (I) either the assigning or the assignee Bank or (II) in the case of an
assignment pursuant to Section 1.14, the Replacement Bank. No later than
five Business Days after its receipt of such written notice, the Payments
Administrator will record such assignment, and the resultant effects
thereof on the Commitment of the assigning Bank, in the Register, at which
time such assignment shall become effective, provided that the Payments
--------
Administrator shall not be required to, and shall not, so record any
assignment in the Register on or after the date on which any proposed
amendment, modification or supplement in respect of this Agreement has been
circulated to the Banks for approval until the earlier of (x) the
effectiveness of such amendment, modification or supplement in accordance
with Section 12.11 or (y) 30 days following the date on which such proposed
amendment, modification or supplement was circulated to the Banks. Upon
the effectiveness of any assignment pursuant to this clause (b)(A), (x) the
assignee will become a "Bank" for all purposes of this Agreement and the
other Credit Documents with a Commitment as so recorded by the Payments
Administrator in the Register, and to the extent of such assignment, the
assigning Bank shall be relieved of its obligations hereunder with respect
to the portion of its Commitment being assigned and (y) if such assignment
occurs after the Effective Date, the Borrower shall issue new Notes (in
exchange for the Note of the assigning Bank) to the assigning Bank (to the
extent such Bank's Commitment is not reduced to zero as a result of such
assignment) and to the assignee Bank, in each case to the extent requested
by the assigning Bank or assignee Bank, as the case may be, in conformity
with the requirements of Section 1.06 to the extent needed to reflect the
revised Commitments of such Banks. The Payments Administrator will prepare
on the last Business Day of each calendar quarter during which an
assignment has become effective pursuant to this clause (b)(A) a new Annex
I giving effect to all such assignments effected during such quarter and
will promptly provide same to the Borrower and each of the Banks.
(B) Participations. Each Bank may transfer, grant or assign
--------------
participations in all or any part of such Bank's interests and obligations
hereunder pursuant to this
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clause (b)(B) to any Eligible Transferee, provided that (i) such Bank shall
--------
remain a "Bank" for all purposes of this Agreement and the transferee of
such participation shall not constitute a Bank hereunder and (ii) no
participant under any such participation shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document
except to the extent such amendment or waiver would (x) extend the final
scheduled maturity of any of the Loans or the Commitment in which such
participant is participating or (y) reduce the interest rate (other than as
a result of waiving the applicability of any post-default increases in
interest rates) or Fees applicable to any of the Loans or Commitments or
postpone the payment of any thereof or (z) release the Guaranty. In the
case of any such participation, the participant shall not have any rights
under this Agreement or any of the other Credit Documents (the
participant's rights against the granting Bank in respect of such partici-
pation to be those set forth in the agreement with such Bank creating such
participation) and all amounts payable by the Borrower hereunder shall be
determined as if such Bank had not sold such participation, provided that
--------
such participant shall be entitled to receive additional amounts under
Sections 1.11, 1.12 and 3.04 on the same basis as if it were a Bank. In
addition, each agreement creating any participation must include an
agreement by the participant to be bound by the provisions of Section 12.14
and such participant shall have executed a confidentiality agreement in the
form of Exhibit D hereto.
(c) Notwithstanding any other provisions of this Section 12.04, no
transfer or assignment of the interests or obligations of any Bank hereunder or
any grant of participations therein shall be permitted if such transfer, assign-
ment or grant would require the Borrower or the Guarantor to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
State.
(d) Each Bank initially party to this Agreement hereby represents,
and each Person that becomes a Bank pursuant to an assignment permitted by the
preceding clause (b)(A) will upon its becoming party to this Agreement repre-
sent, that it is an Eligible Transferee which makes loans in the ordinary course
of its business and that it will make or acquire Loans for its own account in
the ordinary course of such business, provided that subject to the preceding
--------
clauses (a) through (c), the disposition of any promissory notes or other evid-
ences of or interests in Indebtedness held by such Bank shall at all times be
within its exclusive control.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the
------------------------------
part of any Senior Managing Agent, Payments Administrator or any Bank in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between either Credit Party and any Senior
Managing Agent or any Bank shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further
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exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which any Senior Managing
Agent or any Bank would otherwise have. No notice to or demand on either Credit
Party in any case shall entitle either Credit Party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Senior Managing Agents or the Banks to any other or further action
in any circumstances without notice or demand.
12.06 Payments Pro Rata. (a) The Payments Administrator agrees that
-----------------
promptly after its receipt of each payment from or on behalf of either Credit
Party in respect of any Obligations of such Credit Party, it shall, except as
otherwise provided in this Agreement (or to the extent waived by any Bank),
distribute such payment to the Banks pro rata based upon their respective
--- ----
shares, if any, of the Obligations with respect to which such payment was
received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Fees, of a sum which with respect to the related sum or sums
received by other Banks is in a greater proportion than the total of such
Obligations then owed and due to such Bank bears to the total of such
Obligations then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
to such Banks in such amount as shall result in a proportional participation by
all of the Banks in such amount, provided that if all or any portion of such
--------
excess amount is thereafter recovered from such Bank, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
12.07 Calculations; Computations. (a) The financial statements to
--------------------------
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Banks), provided that, except as otherwise specifically
--------
provided herein, all computations determining compliance with Section 8,
including definitions used therein, shall utilize accounting principles and pol-
icies in effect at the time of the preparation of, and in conformity with those
used to prepare, the historical financial statements delivered to the Banks
pursuant to Section 6.09, provided that in the event GAAP shall be modified from
--------
that in effect at the time of the preparation of such financial statements, the
Borrower shall be entitled to utilize GAAP, as so modified, for purposes of such
computations to the extent that (x) the Borrower gives the Banks 30 days' prior
written notice of such proposed modification and (y) prior thereto
-65-
<PAGE>
the Borrower and the Majority SMA shall have agreed upon adjustments, if any, to
Sections 8.03(e), 8.04(h), 8.05, 8.07, 8.08, 8.09 and 8.10 (and the definitions
used therein) the sole purpose of which shall be to give effect to such proposed
change (it being understood and agreed that to the extent that the Borrower and
the Majority SMA cannot agree on appropriate adjustments to such Sections (or
that no adjustments are necessary), the proposed change may not be effected),
and provided further, (i) that if at any time the computations determining
----------------
compliance with Section 8 utilize accounting principles different from those
utilized in the financial statements furnished to the Banks, such financial
statements shall be accompanied by reconciliation work-sheets and (ii) in the
event that the Indebtedness and related receivables under the Hanover Facility
or under any Replacement Receivables Facility are no longer given off-balance
sheet treatment, any such Indebtedness, the interest expense or discount thereon
and related receivables under the Hanover Facility or any Replacement
Receivables Facility shall continue to receive off-balance sheet treatment for
purposes of determining compliance with Section 8.
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
12.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS
------------------------------------------------
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Credit Party hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Credit Party further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the respective Credit Party at its address for notices pursuant to
Section 12.03, such service to become effective 30 days after such mailing.
Each Credit Party hereby irrevocably appoints Nabisco International, Inc.,
located at 345 Park Avenue, New York, New York 10154 as its agent for service of
process in respect of any such action or proceeding. Nothing herein shall
affect the right of any Senior Managing Agent or any Bank to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against either Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Credit Document brought in the courts referred to in the preceding
clause (a) and hereby further irrevocably waives and agrees not to plead or
claim in any such court that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
-66-
<PAGE>
12.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with Holdings and the
Payments Administrator.
12.10 Headings Descriptive. The headings of the several sections and
--------------------
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.11 Amendment or Waiver. Except for deemed amendments provided for
-------------------
in Section 9.04, neither this Agreement nor any other Credit Document nor any
terms hereof or thereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination is in writing signed by the
Required Banks, provided that (x) no such change, waiver, discharge or
--------
termination shall, without the consent of each Bank (other than a Defaulting
Bank) with Obligations being directly affected thereby, (i) extend the scheduled
final maturity of any Loan or Note, or any portion thereof, or reduce the rate
or extend the time of payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates) thereon or Fees or
reduce the principal amount thereof, or increase the Commitment of any Bank over
the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Commitment
shall not constitute a change in the terms of the Commitment of any Bank), (ii)
release the Guaranty, (iii) amend, modify or waive any provision of this
Section, or Section 1.11, 1.12, 3.04, 9.01, 11.07, 12.01, 12.02, 12.04, 12.06,
12.07(b) or 12.14, (iv) reduce any percentage specified in, or otherwise modify,
the definition of Required Banks or (v) consent to the assignment or transfer by
either Credit Party of any of its rights and obligations under this Agreement;
and (y) the financial covenants set forth in Sections 8.03(e), 8.04(h), 8.05,
8.07, 8.08, 8.09 and 8.10 (and the defined terms used therein) may be adjusted
with the consent of Holdings, the Borrower and the Majority SMA to the extent
provided in Sections 7.09 and 12.07(a). No provision of Section 11 may be
amended or modified without the consent of any Senior Managing Agent adversely
affected thereby.
12.12 Survival. All indemnities set forth herein including, without
--------
limitation, in Section 1.11, 1.12, 3.04, 11.07 or 12.01 shall survive the
execution and delivery of this Agreement and the making of the Loans, the
repayment of the Obligations and the termination of the Total Commitment.
12.13 Domicile of Loans. Subject to Section 12.04, each Bank may
-----------------
transfer and carry its Loans at, to or for the account of any branch office,
subsidiary or affiliate of such Bank, provided that the Borrower shall not be
--------
responsible for costs arising under Section 1.11, 1.12 or 3.04 resulting from
any such transfer (other than a transfer
-67-
<PAGE>
pursuant to Section 1.13) to the extent not otherwise applicable to such Bank
prior to such transfer.
12.14 Confidentiality. Subject to Section 12.04, each Bank shall
---------------
hold all non-public information furnished by or on behalf of Holdings or the
Borrower in connection with such Bank's evaluation of whether to become a Bank
hereunder or obtained pursuant to the requirements of this Agreement, which has
been identified as such by Holdings ("Confidential Information"), in accordance
with its customary procedure for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any event
may make disclosure reasonably required by any bona fide transferee or
participant (which shall be an Eligible Transferee) in connection with the
contemplated transfer of any Loans or participations therein or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process or to such Bank's attorneys, affiliates or independent auditors,
provided that, unless specifically prohibited by applicable law or court order,
- --------
each Bank shall notify Holdings of any request by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Bank by such governmental agency)
for disclosure of any such non-public information prior to disclosure of such
information, and provided further, that in no event shall any Bank be obligated
----------------
or required to return any materials furnished by Holdings or any Subsidiary.
Each Bank agrees that it will not provide to prospective assignees, transferees
or participants any of the Confidential Information unless such Person has
executed a Confidentiality Agreement in the form of Exhibit D.
12.15 Waiver of Jury Trial. Each of the parties to this Agreement
--------------------
hereby irrevocably waives all right to a trial by jury in any action, proceeding
or counterclaim arising out of or relating to this Agreement, the other Credit
Documents or the transactions contemplated hereby or thereby.
SECTION 13. Guaranty.
--------
13.01 The Guaranty. In order to induce the Banks to enter into this
------------
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by the Guarantor from the proceeds of the Loans, the
Guarantor hereby agrees with the Banks as follows: the Guarantor hereby
unconditionally and irrevocably guarantees as primary obligor and not merely as
surety the full and prompt payment when due, whether upon maturity, by
acceleration or otherwise, of any and all indebtedness of the Borrower to the
Banks. If any or all of the indebtedness of the Borrower to the Banks becomes
due and payable hereunder, the Guarantor unconditionally promises to pay such
indebtedness to the Banks, or order, on demand, together with any and all
expenses which may be incurred by the Senior Managing Agents or the Banks in
collecting any of the indebtedness. The word "indebtedness" is used in this
Section 13 in its most
-68-
<PAGE>
comprehensive sense and includes any and all advances, debts, obligations and
liabilities of the Borrower arising in connection with this Agreement and any
other Credit Document, in each case, heretofore, now, or hereafter made,
incurred or created, whether voluntarily or involuntarily, absolute or
contingent, liquidated or unliquidated, determined or undetermined, whether or
not such indebtedness is from time to time reduced, or extinguished and
thereafter increased or incurred, whether the Borrower may be liable
individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.
13.02 Bankruptcy. Additionally, the Guarantor unconditionally and
----------
irrevocably guarantees the payment of any and all indebtedness of the Borrower
to the Banks whether or not due or payable by the Borrower upon the occurrence
in respect of the Borrower of any of the events specified in Section 9.05, and
unconditionally promises to pay such indebtedness to the Banks, or order, on
demand, in lawful money of the United States.
13.03 Nature of Liability. The liability of the Guarantor hereunder
-------------------
is exclusive and independent of any security for or other guaranty of the
indebtedness of the Borrower whether executed by the Guarantor, any other
guarantor or by any other party, and the liability of the Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, or (b) any other continuing or
other guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the indebtedness of the Borrower, or (c) any payment on or in
reduction of any such other guaranty or undertaking, or (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, or (e)
any payment made to the Senior Managing Agents or the Banks on the indebtedness
which the Senior Managing Agents or such Banks repay the Borrower pursuant to
court order in any bankruptcy, reorganization, arrangement, moratorium or other
debtor relief proceeding, and the Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding.
13.04 Independent Obligation. The obligations of the Guarantor
----------------------
hereunder are independent of the obligations of any other guarantor or the
Borrower, and a separate action or actions may be brought and prosecuted against
the Guarantor whether or not action is brought against any other guarantor or
the Borrower and whether or not any other guarantor or the Borrower be joined in
any such action or actions. The Guarantor waives, to the fullest extent
permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by the Borrower or
other circumstance which operates to toll any statute of limitations as to the
Borrower shall operate to toll the statute of limitations as to the Guarantor.
-69-
<PAGE>
13.05 Authorization. The Guarantor authorizes the Senior Managing
-------------
Agents and the Banks without notice or demand (except as shall be required by
applicable statute and cannot be waived), and without affecting or impairing its
liability hereunder, from time to time to (a) renew, compromise, extend,
increase, accelerate or otherwise change the time for payment of, or otherwise
change the terms of, the indebtedness or any part thereof in accordance with
this Agreement, including any increase or decrease of the rate of interest
thereon, (b) take and hold security from any guarantor or any other party for
the payment of this guaranty or the indebtedness and exchange, enforce, waive
and release any such security, (c) apply such security and direct the order or
manner of sale thereof as the Senior Managing Agents and the Banks in their
discretion may determine and (d) release or substitute any one or more
endorsers, guarantors, the Borrower or other obligors.
13.06 Reliance. It is not necessary for the Senior Managing Agents
--------
or the Banks to inquire into the capacity or powers of the Borrower or its
Subsidiaries or the officers, directors, partners or agents acting or purporting
to act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
13.07 Subordination. Any indebtedness of the Borrower now or
-------------
hereafter held by the Guarantor is hereby subordinated to the indebtedness of
the Borrower to the Senior Managing Agents and the Banks; and such indebtedness
of the Borrower to the Guarantor, if any Senior Managing Agent, after an Event
of Default has occurred, so requests, shall be collected, enforced and received
by the Guarantor as trustee for the Banks and be paid over to the Banks on
account of the indebtedness of the Borrower to the Banks, but without affecting
or impairing in any manner the liability of the Guarantor under the other
provisions of this Guaranty. Prior to the transfer by the Guarantor of any note
or negotiable instrument evidencing any indebtedness of the Borrower to the
Guarantor, the Guarantor shall mark such note or negotiable instrument with a
legend that the same is subject to this subordination.
13.08 Waiver. (a) The Guarantor waives any right (except as shall
------
be required by applicable statute and cannot be waived) to require the Senior
Managing Agents or the Banks to (a) proceed against the Borrower, any other
guarantor or any other party, (b) proceed against or exhaust any security held
from the Borrower, any other guarantor or any other party or (c) pursue any
other remedy in the Senior Managing Agents' or the Banks' power whatsoever. The
Guarantor waives any defense based on or arising out of any defense of the
Borrower, any other guarantor or any other party other than payment in full of
the indebtedness, including, without limitation, any defense based on or arising
out of the disability of the Borrower, any other guarantor or any other party,
or the unenforceability of the indebtedness or any part thereof from any cause,
or the cessation from any cause of the liability of the Borrower other than
payment in full of the
-70-
<PAGE>
indebtedness. The Senior Managing Agents and the Banks may, at their election,
foreclose on any security held by the Senior Managing Agents or the Banks by one
or more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Senior Managing
Agents and the Banks may have against the Borrower or any other party, or any
security, without affecting or impairing in any way the liability of the
Guarantor hereunder except to the extent the indebtedness has been paid. The
Guarantor waives any defense arising out of any such election by the Senior
Managing Agents and the Banks, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
the Guarantor against the Borrower or any other party or any security. Until
all indebtedness of the Borrower to the Banks shall have been paid in full, the
Guarantor shall not have any right of subrogation, and waives any right to
enforce any remedy which the Senior Managing Agents and the Banks now have or
may hereafter have against the Borrower, and waives any benefit of, and any
right to participate in, any security now or hereafter held by the Senior
Managing Agents and the Banks.
(b) The Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. The Guarantor assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the indebtedness and
the nature, scope and extent of the risks which the Guarantor assumes and incurs
hereunder, and agrees that the Senior Managing Agents and the Banks shall have
no duty to advise the Guarantor of information known to them regarding such cir-
cumstances or risks.
13.09 Limitation on Enforcement. The Banks agree that this Guaranty
-------------------------
may be enforced only by the action of a Senior Managing Agent acting upon the
instructions of the Required Banks and that no Bank shall have any right
individually to seek to enforce or to enforce this Guaranty, it being understood
and agreed that such rights and remedies may be exercised by each Senior
Managing Agent for the benefit of the Banks upon the terms of this Agreement.
* * *
-71-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the
date first above written.
Address:
- --------
Parsippany Plaza I NABISCO HOLDINGS CORP.
7 Campus Drive
P.O. Box 311
Parsippany, NJ 07054-0311 By /s/ Frank Suozzi
Attention: Frank Suozzi -----------------------------------
Telephone: (201) 682-7300 Title: Vice President & Treasurer
Telecopy: (201) 539-9150
Parsippany Plaza I NABISCO, INC.
7 Campus Drive
P.O. Box 311
Parsippany, NJ 07054-0311 By /s/ Frank Suozzi
Attention: Frank Suozzi -----------------------------------
Telephone: (201) 682-7300 Title: Vice President & Treasurer
Telecopy: (201) 539-9150
<PAGE>
SENIOR MANAGING AGENTS
BANKERS TRUST COMPANY
By /s/ Mary Kay Coyle
----------------------------------
Title: Managing Director
THE CHASE MANHATTAN BANK, N.A.
By /s/ Patricia B. Bril
----------------------------------
Title: Managing Director
CHEMICAL BANK
By /s/ Robert Gaynor
----------------------------------
Title: Vice President
CITIBANK, N.A.
By /s/ Steven R. Victorin
----------------------------------
Title: Attorney in Fact
THE FUJI BANK LIMITED
By /s/ Katsunori Nozawa
-----------------------------------
Title: Vice President & Manager
<PAGE>
MANAGING AGENTS
ABN AMRO BANK N.V.
NEW YORK BRANCH
By /s/ Frances Logan
---------------------------------
Title: Vice President
By /s/ Janet T. Marple
---------------------------------
Title: Assistant Vice President
BANK OF AMERICA NT & SA
By /s/ David Noda
---------------------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Russell Gorman
---------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ Terry K. Fryett
---------------------------------
Title: Authorized Signatory
BANQUE PARIBAS
By /s/ Mary T. Finnegan
---------------------------------
Title: Group Vice President
By /s/ John J. McCormick III
---------------------------------
Title: Assistant Vice President
<PAGE>
CIBC, INC.
By /s/ Judy Domkowski
---------------------------------
Title: Authorized Signatory
CREDIT LYONNAIS - CAYMAN
ISLAND BRANCH
By /s/ Mark Campellone
---------------------------------
Title: Authorized Signature
CREDIT LYONNAIS - NEW YORK
BRANCH
By /s/ Mark Campellone
---------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK,
LIMITED, NEW YORK BRANCH
By /s/ Bertram H. Tang
---------------------------------
Title: Assistant Vice President
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCHES
By /s/ Robert M. Wood, Jr.
---------------------------------
Title: Vice President
By /s/ James Fox
---------------------------------
Title: Assistant Vice President
<PAGE>
THE INDUSTRIAL BANK OF
JAPAN, LIMITED - NEW YORK BRANCH
By /s/ Junri Oda
---------------------------------
Title: Senior Vice President
& Senior Manager
MIDLAND BANK PLC
By /s/ Mark J. Rakov
---------------------------------
Title: Authorized Signatory
THE MITSUBISHI BANK, LIMITED-NEW
YORK BRANCH
By /s/ Paula Mueller
---------------------------------
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Adam J. Silver
---------------------------------
Title: Associate
THE SAKURA BANK, LTD.
By /s/ Masahiro Nakajo
---------------------------------
Title: Senior Vice President & Manager
THE SANWA BANK LIMITED
By /s/ Yasuhiro Maeda
---------------------------------
Title: Vice President & Area Manager
<PAGE>
SOCIETE GENERALE
By /s/ Robert Petersen
----------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By /s/ Yoshinori Kawamura
----------------------------------
Title: Joint General Manager
THE TOKAI BANK, LIMITED
By /s/ Stuart M. Schulman
----------------------------------
Title: Senior Vice President
LEAD MANAGERS
BANCA COMMERCIALE ITALIANA
NEW YORK BRANCH
By /s/ Charles Dougherty
----------------------------------
Title: Vice President
By /s/ Julia M. Welch
----------------------------------
Title: Assistant Vice President
THE BANK OF TOKYO TRUST
COMPANY
By /s/ Michael C. Irwin
----------------------------------
Title: Vice President
<PAGE>
THE LTCB TRUST COMPANY
By /s/ Rene O. LeBlanc
-----------------------------------
Title: Senior Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/ Patricia Loret de Mola
-----------------------------------
Title: Senior Vice President
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED - NEW YORK
BRANCH
By /s/ Gerard Machado
------------------------------------
Title: Vice President & Manager
NATIONSBANK, N.A.
By /s/ James T. Gilland
------------------------------------
Title: Senior Vice President
ROYAL BANK OF CANADA
By /s/ David A. Barsalou
-------------------------------------
Title: Senior Manager
WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Samuel P. Moss
-------------------------------------
Title: Senior Vice President
<PAGE>
MANAGERS
BAYERISCHE VEREINSBANK AG
NEW YORK BRANCH
By /s/ Marianne Weinzinger
--------------------------------------
Title: Vice President
By /s/ Walter H. Eckmeier
--------------------------------------
Title: Vice President
CREDIT SUISSE
By /s/ Edward E. Barr
--------------------------------------
Title: Associate
By /s/ Michael C. Mast
--------------------------------------
Title: Member of Senior Management
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By /s/ Alan S. Bookspan
--------------------------------------
Title: Vice President
By /s/ Robert G. Carino
--------------------------------------
Title: Vice President
YASUDA TRUST & BANKING
COMPANY, LIMITED
By /s/ Rohn M. Laudenschlager
--------------------------------------
Title: Senior Vice President
<PAGE>
CO-MANAGERS
ASAHI BANK
By /s/ Tomohiko Kareko
--------------------------------------
Title: Senior Deputy General Manager
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND"
By /s/ Dana W. Hemenway
--------------------------------------
Title: Vice President
By /s/ Ian Reece
--------------------------------------
Title: Vice President & Manager
TORONTO DOMINION (NEW YORK), INC.
By /s/ Reg Waylen
--------------------------------------
Title: Director
UNION BANK OF SWITZERLAND
NEW YORK BRANCH
By /s/ Peter B. Yearley
--------------------------------------
Title: Vice President
By /s/ James P. Kelleher
--------------------------------------
Title: Assistant Vice President
OTHER BANKS
ARAB BANK PLC - GRAND CAYMAN
BRANCH
By /s/ Peter Boyadjian
--------------------------------------
Title: Senior Vice President
<PAGE>
BANCA CASSA DI RISPARMIO DI
TORINO S.P.A.
By /s/ J. Slade Carter, Jr.
--------------------------------------
Title: Vice President
By /s/ Robert P. DeSantes
--------------------------------------
Title: Vice President & Head of
Corporate Banking
BANCA DI ROMA S.P.A.
By /s/ Ralph L. Riehle
--------------------------------------
Title: First Vice President
By /s/ Luca Balestra
--------------------------------------
Title: Assistant Vice President
BANCO CENTRAL HISPANOAMERICANO,
S.A.
By /s/ Francisco Alcon
--------------------------------------
Title: Executive Vice President &
General Manager
BAYERISCHE LANDESBANK GIROZENTRALE
By /s/ Bert yon Stuelpnagel
--------------------------------------
Title: Executive Vice President &
Manager
By /s/ Peter Obermann
--------------------------------------
Title: Senior Vice President
<PAGE>
FIRST FIDELITY BANK,
NATIONAL ASSOCIATION
By /s/ Grace Vallacchi
--------------------------------------
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.P.A.
By /s/ Robert S. Wurster
--------------------------------------
Title: First Vice President
By /s/ Wendell Jones
--------------------------------------
Title: Vice President
KREDIETBANK N.V.
By /s/ Armen Karozichian
--------------------------------------
Title: Vice President
By /s/ Robert Snauffer
--------------------------------------
Title: Vice President
NORDDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By /s/ Stephen K. Hunter
--------------------------------------
Title: Senior Vice President
By /s/ Stephanie Hoevermann
--------------------------------------
Title: Vice President
THE NORINCHUKIN BANK
By /s/ Kenichi Yoshikubo
--------------------------------------
Title: Joint General Manager
<PAGE>
THE NORTHERN TRUST COMPANY
By /s/ Lawson E. Whiting
--------------------------------------
Title: Commercial Banking Officer
THE ROYAL BANK OF SCOTLAND PLC
By /s/ David Dougan
--------------------------------------
Title: Vice President
SWISS BANK CORPORATION
NEW YORK BRANCH
By /s/ William S. Lutkins
--------------------------------------
Title: Associate Director Credit Risk
Management
By /s/ H. Clark Worthley
--------------------------------------
Title: Associate Director
THE TOYO TRUST & BANKING CO.,
LTD. - NEW YORK BRANCH
By /s/ Hiroyuki Fukuro
--------------------------------------
Title: Vice President
VIA BANQUE
By /s/ Jean-Louis Simon
--------------------------------------
Title: DGA
By /s/ Frederic Fournier
--------------------------------------
Title: S.S. Directeur
<PAGE>
THE CHUO TRUST & BANKING CO.,
LTD. - NEW YORK AGENCY
By /s/ Kunio Kimura
--------------------------------------
Title: Deputy General Manager
CREDITO ITALIANO, S.P.A.
By /s/ Harmon P. Butler
--------------------------------------
Title: First Vice President
By /s/ Saiyed A. Abbas
--------------------------------------
Title: Assistant Vice President
GULF INTERNATIONAL BANK B.S.C.
By /s/ Haytham F. Khalil
--------------------------------------
Title: Assistant Vice President
By /s/ Abdel-Fattah Tahoun
--------------------------------------
Title: Senior Vice President
THE NIPPON CREDIT BANK, LTD.
By /s/ Hideaki Mori
--------------------------------------
Title: Vice President & Manager
STANDARD CHARTERED BANK
By /s/ Brian S. Taylor
--------------------------------------
Title: Assistant Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ Douglas A. Rich
--------------------------------------
Title: Vice President
<PAGE>
SUMITOMO BANK OF CALIFORNIA
By /s/ Shuji Ito
----------------------------------
Title: Vice President & Assistant
Division Manager
<PAGE>
ANNEX I
LIST OF BANKS AND COMMITMENTS
Bank Commitment
Senior Managing Agents
----------------------
Bankers Trust Company 46,242,857.14
The Chase Manhattan Bank, N.A. 50,528,571.43
Chemical Bank 50,528,571.43
Citibank, N.A. 45,171,428.59
The Fuji Bank, Limited 50,528,571.43
Managing Agents
---------------
ABN AMRO Bank N.V. 37,875,000.00
New York Branch
Bank of America NT & SA 37,875,000.00
The Bank of New York 37,875,000.00
The Bank of Nova Scotia 37,875,000.00
Banque Paribas 37,875,000.00
CIBC, Inc. 37,875,000.00
Credit Lyonnais, 37,875,000.00
New York Branch and
Cayman Island Branch
Dai-Ichi Kangyo Bank, Limted, 37,875,000.00
New York Branch
Deutsche Bank AG, 37,875,000.00
New York Branch and/or
Cayman Islands Branches
<PAGE>
ANNEX I
Page 2
The Industrial Bank of Japan, Limited 41,687,717.77
New York Branch
Midland Bank PLC 37,875,000.00
The Mitsubishi Bank, Limited, 37,875,000.00
New York Branch
Morgan Guaranty Trust Company 37,875,000.00
of New York
The Sakura Bank, Ltd. 37,875,000.00
The Sanwa Bank Limited 37,875,000.00
Societe Generale 37,875,000.00
The Sumitomo Bank, Limited 43,232,142.86
New York Branch
The Tokai Bank, Limited 37,875,000.00
Lead Managers
-------------
Banca Commerciale Italiana, 27,053,571.43
New York Branch
Bank of Tokyo Trust Company 27,053,571.43
LTCB Trust Company 27,053,571.43
The Mitsubishi Trust and Banking 27,053,571.43
Corporation
The Mitsui Trust and Banking 27,053,571.43
Company, Limited - New York Branch
NationsBank, N.A. 27,053,571.43
<PAGE>
ANNEX I
Page 3
Royal Bank of Canada 27,053,571.43
Wachovia Bank of Georgia, N.A. 24,910,714.29
Managers
--------
Bayerische Vereinsbank AG, 21,428,571.43
New York Branch
Credit Suisse 21,428,571.43
Westdeutsche Landesbank Girozentrale, 21,428,571.43
New York Branch
Yasuda Trust and Banking 21,428,571.43
Company, Limited
Co-Managers
-----------
Asahi Bank 16,071,428.57
Cooperatieve Centrale Raiffeisen-Boerenleenbank 16,071,428.57
B.A., "Rabobank Nederland"
Toronto Dominion (New York), Inc. 20,241,413.64
Union Bank of Switzerland 16,071,428.57
New York Branch
Other
-----
Arab Bank PLC-Grand Cayman Branch 10,714,285.71
Banca Cassa di Risparmio 10,714,285.71
di Torino S.p.A.
Banca di Roma S.p.A. 10,714,285.71
<PAGE>
ANNEX I
Page 4
Banco Central Hispanoamericano S.A. 10,714,285.71
Bayerische Landesbank Girozentrale 10,714,285.71
First Fidelity Bank, 10,714,285.71
National Association
Istituto Bancario San Paolo 12,064,459.93
di Torino S.p.A.
Kredietbank, N.V. 10,714,285.71
Norddeutsche Landesbank Girozentrale, 10,714,285.71
New York Branch and/or
Cayman Islands Branch
The Norinchukin Bank 16,274,265.80
The Northern Trust Company 10,714,285.71
Royal Bank of Scotland PLC 10,714,285.71
Swiss Bank Corporation, 10,714,285.71
New York Branch
The Toyo Trust & Banking Co., Ltd., 10,714,285.71
New York Branch
Via Banque 6,428,571.43
The Chuo Trust & Banking Co., Ltd., 5,357,142.86
New York Agency
Credito Italiano S.p.A. 5,357,142.86
Gulf International Bank B.S.C. 5,357,142.86
The Nippon Credit Bank, Ltd. 5,357,142.86
Standard Chartered Bank 5,357,142.86
<PAGE>
ANNEX I
Page 5
United States National 5,357,142.86
Bank of Oregon
Sumitomo Bank of California 2,142,857.14
<PAGE>
ANNEX II
BANK ADDRESSES
Senior Managing Agents
----------------------
BANKERS TRUST COMPANY
130 Liberty Street
1 Bankers Trust Plaza, 33rd Floor
New York, NY 10006
Attn.: Ms. Mary Kay Coyle
Tel: (212) 250-9094
Fax: (212) 250-7218
THE CHASE MANHATTAN BANK, N.A.
One Chase Plaza, 5th Floor
New York, NY 10081
Attn.: Ms. Patricia Bril
Tel: (212) 552-6233
Fax: (212) 552-1457
CHEMICAL BANK
270 Park Avenue, 9th Floor
New York, NY 10017
Attn.: Ms. Nancy Mistretta
Tel: (212) 270-4732
Fax: (212) 270-6041
CITIBANK, N.A.
399 Park Avenue
New York, NY 10043
Attn.: Ms. Jolie Eisner
Tel: (212) 559-3498
Fax: (212) 793-7712
THE FUJI BANK, LIMITED
New York Branch
Two World Trade Center, 79th Floor
New York, NY 10048
Attn.: Mr. Vincent Ingato
Tel: (212) 898-2051
Fax: (212) 912-0516
<PAGE>
ANNEX II
Page 2
Managing Agents
---------------
ABN AMRO BANK N.V.
New York Branch
500 Park Avenue
New York, NY 10022
Attn.: Mr. Thomas T. Rogers
Tel: (212) 446-4122
Fax: (212) 832-7129
BANK OF AMERICA NT & SA
335 Madison Avenue, 5th floor
New York, New York 10017
Attn.: Mr. David Noda
Tel: (212) 503-7948
Fax: (212) 503-7771
THE BANK OF NEW YORK
One Wall Street, 22nd Floor
New York, NY 10286
Attn.: Mr. Vincent P. O'Leary
Tel: (212) 635-6801
Fax: (212) 635-6999
THE BANK OF NOVA SCOTIA
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn.: Mr. Terry K. Fryett
Tel: (212) 225-5035
Fax: (212) 225-5090
BANQUE PARIBAS
787 Seventh Avenue, 37th Floor
New York, NY 10019
Attn.: Mr. Stanley P. Berkman
Tel: (212) 841-2247
Fax: (212) 841-2333
<PAGE>
ANNEX II
Page 3
CIBC, INC.
425 Lexington Avenue, 6th Floor
New York, NY 10017
Attn.: Ms. Judy Domkowski
Tel: (212) 856-3509
Fax: (212) 856-3991
CREDIT LYONNAIS
New York Branch and Cayman Island Branch
1301 Avenue of the Americas
New York, NY 10019
Attn.: Ms. Andrea Griffis
Tel: (212) 261-7325
Fax: (212) 459-3179
THE DAI-ICHI KANGYO BANK, LIMITED
New York Branch
One World Trade Center, 48th Floor
New York, NY 10048
Attn.: Mr. Timothy White
Tel: (212) 432-6629
Fax: (212) 524-0579
DEUTSCHE BANK AG
New York Branch and/or
Cayman Islands Branches
31 West 52nd Street
New York, NY 10019
Attn.: Mr. Robert B. Landis
Tel: (212) 474-8214
Fax: (212) 474-8212
THE INDUSTRIAL BANK OF JAPAN, LIMITED
New York Branch
245 Park Avenue
New York, NY 10167-0037
Attn.: Mr. Mikihide Katsumata
Tel: (212) 309-6452
Fax: (212) 682-2870
<PAGE>
ANNEX II
Page 4
MIDLAND BANK PLC
140 Broadway, 4th Floor
New York, NY 10005
Attn.: Mr. Mark Rakov
Tel: (212) 658-5113
Fax: (212) 658-5109
THE MITSUBISHI BANK, LIMITED
New York Branch
Two World Financial Center
225 Liberty Street
New York, NY 10281
Attn.: Mr. J. Bruce Meredith
Tel: (212) 667-2883
Fax: (212) 667-3562
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
60 Wall Street, 22nd Floor
New York, NY 10260
Attn.: Ms. Deborah Brodheim
Tel: (212) 648-8063
Fax: (212) 648-5018
THE SAKURA BANK, LTD.
277 Park Avenue, 45th Floor
New York, NY 10172
Attn.: Mr. Stephen A. Santora
Tel: (212) 756-6813
Fax: (212) 888-7651
THE SANWA BANK LIMITED
55 East 52nd Street
New York, NY 10055
Attn.: Mr. Stephen C. Small
Tel: (212) 339-6201
Fax: (212) 754-1304
SOCIETE GENERALE
1221 Avenue of the Americas
New York, NY 10020
Attn.: Ms. Jan Wertlieb
Tel: (212) 278-6881
Fax: (212) 278-7430
<PAGE>
ANNEX II
Page 5
THE SUMITOMO BANK, LIMITED
New York Branch
277 Park Avenue
New York, NY 10172
Attn.: Mr. Harry Oashi
Tel: (212) 224-4130
Fax: (212) 224-5188
THE TOKAI BANK, LIMITED
55 East 52nd Street
New York, NY 10055
Attn.: Mr. Stuart M. Schulman
Tel: (212) 339-1117
Fax: (212) 754-2170
Lead Managers
-------------
BANCA COMMERCIALE ITALIANA
New York Branch
One William Street
New York, NY 10004
Attn.: Mr. Charles Dougherty
Tel: (212) 607-3656
Fax: (212) 809-2124
THE BANK OF TOKYO TRUST COMPANY
1251 Avenue of the Americas
New York, NY 10116-3138
Attn.: Mr. Michael C. Irwin
Tel: (212) 782-4316
Fax: (212) 782-6445
LTCB TRUST COMPANY
165 Broadway
New York, NY 10006
Attn.: Mr. Rene LeBlanc
Tel: (212) 335-4591
Fax: (212) 608-2371
<PAGE>
ANNEX II
Page 6
THE MITSUBISHI TRUST AND BANKING CORPORATION
520 Madison Avenue
25th Floor
New York, NY 10022
Attn.: Ms. Bea Kossodo
Tel: (212) 891-8363
Fax: (212) 593-4691
THE MITSUI TRUST AND BANKING COMPANY, LIMITED
New York Branch
One World Financial Center
21st Floor
200 Liberty Street
New York, NY 10281
Attn.: Mr. Garard Machado
Tel: (212) 341-0369
Fax: (212) 945-4170 or 4171
NATIONSBANK, N.A.
767 Fifth Avenue
23rd Floor
New York, NY 10153
Attn.: Mr. James T. Gilland
Tel: (212) 407-5330
Fax: (212) 751-6909
ROYAL BANK OF CANADA
Financial Square, 24th Floor
New York, NY 10005-3531
Attn.: Mr. David A. Barsalou
Tel: (212) 428-6418
Fax: (212) 428-6459
WACHOVIA BANK OF GEORGIA, N.A.
191 Peachtree Street N.E. MC370
Atlanta, GA 30303
Attn.: Ms. Jane C. Deaver
Tel: (404) 332-5219
Fax: (404) 332-6898
<PAGE>
ANNEX II
Page 7
Managers
--------
BAYERISCHE VEREINSBANK AG
New York Branch
335 Madison Avenue, 19th Floor
New York, NY 10017
Attn.: Ms. Marianne Weinzinger
Tel: (212) 210-0352
Fax: (212) 880-9724
CREDIT SUISSE
12 East 49th Street
Corporate Banking Tower 49
New York, NY 10017
Attn.: Mr. Edward E. Barr
Tel: (212) 238-5415
Fax: (212) 238-5439
WESTDEUTSCHE LANDESBANK GIROZENTRALE
New York Branch
1211 Avenue of the Americas
23rd Floor
New York, NY 10036
Attn.: Mr. Alan Bookspan
Tel: (212) 852-6023
Fax: (212) 852-6307
YASUDA TRUST AND BANKING COMPANY, LIMITED
666 Fifth Avenue
Suite 801
New York, NY 10103
Attn.: Mr. Neil T. Chau
Tel: (212) 373-5711
Fax: (212) 373-5796
<PAGE>
ANNEX II
Page 8
Co-Managers
-----------
ASAHI BANK
One World Trade Center
Suite 6011
New York, NY 10048
Attn.: Mr. Doug Price
Tel: (212) 912-7037
Fax: (212) 432-1135
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK "RABOBANK NEDERLAND"
245 Park Avenue
36th Floor
New York, NY 10167
Attn.: Mr. Johannes Breukhoven
Tel: (212) 916-7886
Fax: (212) 916-7837
TORONTO DOMINION (NEW YORK), INC.
31 West 52nd Street
New York, NY 10019-6101
Attn.: Mr. W. Reg Waylen
Tel: (212) 468-0564
Fax: (212) 262-1926
UNION BANK OF SWITZERLAND
New York Branch
299 Park Avenue
New York, NY 10171
Attn.: Mr. Peter Yearley
Tel: (212) 821-3339
Fax: (212) 821-3383
<PAGE>
ANNEX II
Page 9
Other Banks
-----------
ARAB BANK PLC,
Grand Cayman Branch
520 Madison Avenue, 2nd Floor
New York, NY 10022-4237
Attn.: Mr. Peter Boyadjian
Tel: (212) 715-9702
Fax: (212) 593-4632
BANCA CASSA DI RISPARMIO DI TORINO S.P.A.
500 Park Avenue
New York, NY 10022
Attn.: J. Slade Carter
Tel: (212) 980-4862
Fax: (212) 980-0809
BANCA DI ROMA S.P.A.
34 East 51st Street
New York, NY 10022
Attn.: Mr. Ralph L. Riehle
Tel: (212) 407-1772
Fax: (212) 407-1740
BANCO CENTRAL HISPANOAMERICANO, S.A
245 Park Avenue
New York, NY 10176
Attn.: Mr. John Estruch
Tel: (212) 557-8370
Fax: (212) 557-8349
BAYERISCHE LANDESBANK GIROZENTRALE
560 Lexington Avenue
New York, NY 10022
Attn.: Ms. Joanne Cicino
Tel: (212) 310-9834
Fax: (212) 310-9868
<PAGE>
ANNEX II
Page 10
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
550 Broad Street - 5th Floor
Newark, NJ 07102
Attn.: Ms. Grace Vallacchi
Tel: (201) 565-3381
Fax: (201) 565-6681
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A.
245 Park Avenue - 35th Floor
New York, NY 10167
Attn.: Mr. Wendell Jones
Tel: (212) 692-3140
Fax: (212) 599-5303
KREDIETBANK N.V.
125 West 55th Street
10th Floor
New York, NY 10019
Attn.: Ms. Diane Grimmig
Tel: (212) 541-0600
Fax: (212) 956-5580
NORDDEUTSCHE LANDESBANK GIROZENTRALE
New York Branch and/or
Cayman Islands Branch
1270 Avenue of the Americas
New York, NY 10020
Attn.: Ms. Stephanie Hoevermann
Tel: (212) 332-8606
Fax: (212) 332-8660
THE NORINCHUKIN BANK
New York Branch
245 Park Avenue
29th Floor
New York, NY 10167
Attn.: Masashi Ishikawa
Tel: (212) 949-7188
Fax: (212) 986-9293
<PAGE>
ANNEX II
Page 11
THE NORTHERN TRUST COMPANY
50 South LaSalle Streeet (B-11)
Chicago, IL 60675
Attn.: Mr. Michael Bryan
Tel: (312) 444-3541
Fax: (312) 444-3508
THE ROYAL BANK OF SCOTLAND PLC
Wall Street Plaza
88 Pine Street, 26th Floor
New York, NY 10005-1801
Attn.: Mr. David Dougan
Tel: (212) 269-1700
Fax: (212) 480-0791
SWISS BANK CORPORATION
New York Branch
222 Broadway, 4th Floor
New York, NY 10038
Attn.: Mr. William Lutkins
Tel: (212) 574-3093
Fax: (212) 574-4395
THE TOYO TRUST & BANKING CO., LTD.
New York Branch
437 Madison Avenue
New York, NY 10022
Attn.: Mr. Yamauchi
Tel: (212) 371-3535
Fax: (212) 371-4963
VIA BANQUE
10 Rue Volney
Paris, France 75022
Attn.: Mr. Jean Louis Simon
Tel: 33-14-926-2626
Fax: 33-14-926-2926
<PAGE>
ANNEX II
Page 12
THE CHUO TRUST & BANKING CO., LTD. - NEW YORK AGENCY
2 World Trade Center
Suite 8322
New York, NY 10048
Attn.: Mr. Eric Seeley
Tel: (212) 938-0214
Fax: (212) 466-1140
CREDITO ITALIANO S.P.A.
375 Park Avenue
New York, NY 10152
Attn.: Mr. Saiyed A. Abbas
Tel: (212) 546-9630
Fax: (212) 546-9675
GULF INTERNATIONAL BANK B.S.C.
380 Madison Avenue
21st Floor
New York, NY 10017
Attn.: Mr. Haytham F. Khalil
Tel: (212) 922-2322
Fax: (212) 922-2339
THE NIPPON CREDIT BANK, LTD.
245 Park Avenue, 30th Floor
New York, NY 10167
Attn.: Mr. Yashide Yahiro
Tel: (212) 984-1236
Fax: (212) 490-3895
STANDARD CHARTERED BANK
160 Water Street
2nd Floor
New York, NY 10038-4995
Attn.: Mr. Brian Taylor
Tel: (212) 612-0225
Fax: (212) 612-0242
<PAGE>
ANNEX II
Page 13
THE UNITED STATES NATIONAL BANK OF OREGON
555 S.W. Oak Street
Suite 400 PL-4
Portland, OR 97204
Attn.: Mr. Chris J. Karlin
Tel: (503) 275-4940
Fax: (503) 275-4267
SUMITOMO BANK OF CALIFORNIA
320 California Street
San Francisco, CA 94104
Attn.: Mr. Shuji Ito
Tel: (415) 445-8109
Fax: (415) 421-7813
<PAGE>
NABISCO
ANNEX III
MATERIAL SUBSIDIARIES
---------------------
1. Nabisco Iberis, S. L.
2. Establecimoemto Modelo Terrabusi SAIC
3. Nabisco Ltd
4. Produto alimenticios Fleischmann e Royal Ltds
5. Nabisco Brands Company
6. Nabisco Group Ltd.
7. Various intermediate holding companies between the Borrower and the
four companies above.
<PAGE>
NABISCO
ANNEX IV
CERTAIN LITIGATION
-------------------
As described on page 36 of the Annual Report on Form 10-K of Nabisco
Holdings Corp. for the fiscal year ended December 31, 1994 that was filed
with the Securities and Exchange Commission.
<PAGE>
<TABLE><CAPTION>
NABISCO
ANNEX V
EXISTING SUBSIDIARY DEBT
-------------------------
(In Millions)
O/S BAL
12/31/94
------------------
<S> <C> <C>
DOMESTIC DEBT
-------------
GUARANTEES OF INDEBTEDNESS
--------------------------
J. B. Williams 6% IRB 02/01/2004 $4.0
Julius Wile 8 5/8 IRB 08/01/2010 2.7
-----------------
TOTAL DOMESTIC SUBSIDIARY DEBT $6.7
TOTAL INTL SUBSIDIARY DEBT (See attached schedule) $80.1
-----------------
INTERCO DEBT: NAB SUBS TO RN (See attached schedule) $337.8
-----------------
TOTAL NABISCO INDEBTEDNESS $424.6
=================
"Balance as of 3/31/95 may be repaid in consummation of the Refinancings.
</TABLE>
<PAGE>
<TABLE><CAPTION>
NABISCO INTERNATIONAL CREDIT FACILITIES
IN MILLIONS (totals may not add exactly due to rounding)
13-Apr-95 USD EQUIV
O/S
COMPANY NAME LENDER CUR 4th Qtr. 94 FACILITY TYPE
<S> <C> <C> <C> <C>
F & R PERU, S.A. BANCO DE CREDITO USD $1.4 S/T BANK LINE
F & R PERU, S.A. CITIBANK USD $3.6 S/T BANK LINE
FLEISCHMANN ARGENTINA BANCO ROBERTS ARA $0.1 S/T BANK LINE
FLEISCHMANN ARGENTINA BANK OF BOSTON ARA $0.3 S/T BANK LINE
FLEISCHMANN E ROYAL BANCO DO BRASIL BCZ $1.7 S/T BANK LINE
FLEISCHMANN E ROYAL BANK OF BOSTON BCZ $1.3 CAPITALIZED LEASES
FLEISCHMANN E ROYAL BANK OF TOKYO BCZ $1.1 S/T BANK LINE
FLEISCHMANN E ROYAL CHEMICAL BANK BCZ $0.4 CAPITALIZED LEASES
FLEISCHMANN E ROYAL CITIBANK BCZ $0.3 CAPITALIZED LEASES
FLEISCHMANN E ROYAL CITIBANK BCZ $0.7 S/T BANK LINE
FLEISCHMANN E ROYAL DEUTSCHE BCZ $0.9 S/T BANK LINE
FLEISCHMANN E ROYAL IBM LEASING CO. BCZ $2.2 CAPITALIZED LEASES
FLEISCHMANN E ROYAL MITSUBISHI BANK BCZ $0.3 S/T BANK LINE
FLEISCHMANN E ROYAL SUMITOMO BANK BCZ $1.1 S/T BANK LINE
FLEISCHMANN E ROYAL UNIBANCO BCZ $3.0 S/T BANK LINE
FLEISCHMANN E ROYAL VOTORANTIM BCZ $0.7 S/T BANK LINE
FLEISCHMANN URUGUAYA BANK OF BOSTON UYP $2.5 S/T BANK LINE
IRACEMA BAMERINDUS BCZ $1.2 S/T BANK LINE
IRACEMA NACIONAL BCZ $1.1 S/T BANK LINE
LANCE S.A. DE C.V. BANCO SERFIN MEX $1.5 S/T BANK LINE
LANCE S.A. DE C.V. BANK OF AMERICA USD $4.5 S/T BANK LINE
LANDERS Y CIA S.A. BANCO DE BOGOTA COP $0.2 S/T BANK LINE
LANDERS Y CIA S.A. BANCO UNION COLOMBIANO COP $0.3 S/T BANK LINE
MEX HOLDINGS II S.A.
DE C.V. DEUTSCHE BANK AG USD $21.6 LONG TERM DEBT
MEX HOLDINGS II S.A.
DE C.V. INVERSIONES WESTMINSTER MEX $0.9 S/T BANK LINE
NABISCO BRANDS, LTD CANADA UFE ASSURANCE CO. CAD2 $0.1 LONG TERM DEBT
NABISCO I. I. ECUADOR BANCO CONTINENTAL USD $0.6 S/T BANK LINE
NABISCO I. I. ECUADOR BANCO PICHINCHA USD $3.6 S/T BANK UNE
NABISCO I. I. ECUADOR BANCO POPULAR USD $2.8 S/T BANK LINE
PASBINC - TRIN. ROYAL BANK OF TRIN. & T. TTD $0.1 S/T BANK UNE
TERRABUSI-ARGENTINA VARIOUS LENDERS ARA $20.0 LONG TERM DEBT
WEST INDIES YEAST CO. MUTUAL SECURITY BANK LIMITED JMD $0.1 LONG TERM DEBT
CANADA SHORT TERM LINES
FUNGIBLE SHORT TERM LINES
GRAND TOTALS: $80.1
</TABLE>
<PAGE>
OFFSHORE NOTES PAYABLE TO RJRN ENTITIES
---------------------------------------
(In Millions)
<TABLE><CAPTION>
MATURITY TOTAL AT
BORROWER ISSUER/LENDER FACILITY TYPE DATE 3/31/95*
__________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Nabisco Argentina SA, RJ Reynolds Oversea Finance Co. Term Intercompany 4/14/96 80.7
Nabisco Investments S.A. RJ Reynolds Oversea Finance Co. Term Intercompany 4/14/96 41.2
Nabisco Espana, S.L. RJRT SA Term Intercompany 5/25/96 87.2**
Nabisco Espana, S.L. RJRT BV Revolving intercompany 6/30/95 40.7
Nabisco International S.A. RJ Reynolds Oversea Finance Co. Revolving intercompany 5/27/95 47.0
Produtos Alimenticos Fleischman
(R) Royal Ltda RJ Reynolds Oversea Finance Co. Medium Term Notes 9/22/01 10.9
Produtos Alimenticos Fleischman
(R) Royal Ltda RJ Reynolds Oversea Finance Co. Medium Term Note 4/23/97 16.0
Produtos Alimenticos Fleischman
(R) Royal Ltda RJ Reynolds Oversea Finance Co. Medium Term Notes 12/30/02 12.0
Produtos Alimenticos Fleischman
(R) Royal Ltda RJ Reynolds Oversea Finance Co. Medium Term Notes 12/30/02 2.1
------
337.8
======
</TABLE>
* Total includes accrued interest.
**Denominated in Spanish Pesetas.
<PAGE>
EXHIBIT A
---------
FORM OF NOTE
------------
$________________ New York, New York
____________, 1995
FOR VALUE RECEIVED, NABISCO, INC., a New Jersey corporation (the
"Borrower"), hereby promises to pay to the order of _________________________
(the "Bank"), in lawful money of the United States of America in immediately
available funds, at the Payments Administrator's Office (as defined in the
Agreement referred to below) initially located at _______________, New York,
New York _____, on the Maturity Date (as defined in the Agreement) the
principal sum of _______________ DOLLARS or, if less, the then unpaid principal
amount of all Revolving Loans (as defined in the Agreement) made by the Bank
pursuant to the Agreement.
The Borrower also promises to pay interest on the unpaid
principal amount of each Revolving Loan in like money at said office from
the date such Revolving Loan is made until paid at the rates and at the
times provided in Section 1.09 of the Agreement referred to below.
This Note is one of the Notes referred to in the Credit
Agreement, dated as of November 3, 1995, among Nabisco Holdings Corp., the
Borrower, the financial institutions from time to time party thereto
(including the Bank) and Bankers Trust Company, The Chase Manhattan Bank,
N.A., Chemical Bank, Citibank, N.A., and The Fuji Bank, Limited, as Senior
Managing Agents (as from time to time in effect, the "Agreement"), and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Guaranty (as defined in the Agreement). As provided in the
Agreement, this Note is subject to voluntary and mandatory prepayment, in
whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note
may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice
of any kind in connection with this Note.
<PAGE>
EXHIBIT A
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
NABISCO, INC.
By_____________________________
Title:
<PAGE>
EXHIBIT B-1
-----------
[FORM OF OPINION OF JAMES A. KIRKMAN III, ESQ.]
To: The Senior Managing Agents and various
lending institutions (collectively, the
"Banks") party to the Credit Agreement
referred to below.
re Credit Agreement, dated as of November 3, 1995
(the "Credit Agreement"), among Nabisco
Holdings Corp. ("Holdings"), Nabisco, Inc.
(the "Borrower"), the Senior Managing Agents and the Bank
----------------------------------------------------------
Ladies and Gentlemen:
I am General Counsel of Holdings and the Borrower (the "Nabisco
Corporations") and in such capacity, I have acted as counsel to the Nabisco
Corporations in connection with the Credit Agreement. I or attorneys on my
staff or on the legal staffs of Holdings' subsidiaries are familiar with
the organization and operations of the Nabisco Corporations and the
Material Subsidiaries identified by name on Annex III to the Credit
Agreement (collectively, the "Corporations") and, except for federal,
state, local and foreign tax matters, their legal affairs are encompassed
by my duties as General Counsel for the Nabisco Corporations. This opinion
is being delivered to you pursuant to Section 4.04(i) of the Credit
Agreement. Terms used herein which are defined in the Credit Agreement
shall have the respective meanings set forth in the Credit Agreement unless
otherwise defined herein.
I or attorneys on my staff have reviewed the Credit Documents.
In addition, in connection with this opinion, I or attorneys on my staff
have examined the originals or certified, conformed or reproduction copies
of records, agreements, instruments and other documents, and have made such
other investigations, as I have deemed necessary in connection with the
opinions expressed herein. For the purposes of this opinion, I or
attorneys on my staff have assumed, with your permission, the genuineness
of all signatures (other than those of the Corporations) and the
authenticity and regularity of all documents examined by me or them and
that the parties to the Credit Documents other than the Corporations have
the corporate power and authority to enter into and perform each of the
Credit Documents and that each of the Credit Documents has been or will be
duly authorized, executed and delivered by each such other party.
<PAGE>
EXHIBIT B-1
Page 2
As to questions of fact relevant to this opinion, I have relied
upon certificates of officers and representatives of the Corporations or of
public officials.
Based upon and subject to the foregoing, and subject to the
qualifications and exceptions set forth herein, I am of the opinion that:
1. Each of the Corporations (i) is a duly incorporated and
validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and
authority to own its property and assets and to transact the business
in which it is engaged and (ii) has duly qualified and is authorized
to do business and is in good standing in all jurisdictions where it
is required to be so qualified and where the failure to be so
qualified would have a material adverse effect on the operations,
business, properties, assets, or financial condition of Holdings and
its Subsidiaries taken as a whole.
2. With respect to the qualification of the Corporations located
outside the United States to carry on the business conducted by them
in such jurisdictions, I have made no independent examination but,
relying on my knowledge of the procedure of such Corporations in main-
taining their own legal staffs or retaining local attorneys in such
jurisdictions to supervise the important legal aspects of their busi-
ness, I have no reason to believe that such Corporations are not
properly qualified to conduct their foreign operations.
3. Each Nabisco Corporation has the corporate power and
authority to execute and deliver each of the Credit Documents to which
it is a party and to perform its obligations thereunder. Each Nabisco
Corporation has duly authorized each Credit Document to which it is a
party and has duly executed and delivered each such Credit Document.
Each such Credit Document constitutes the legal, valid and binding
obligation of each Nabisco Corporation, enforceable against it in
accordance with its terms.
4. Neither the execution or delivery by any Nabisco Corporation
of the Credit Documents to which it is a party, nor compliance with
the terms and provisions thereof, nor the consummation of the
transactions contemplated therein, (a) will contravene any applicable
provision of any law, statute, rule or regulation of any State of the
United States or the United States (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System) or any order, writ, injunction or decree of any court
or governmental instrumentality of any such State or the United
States, (b) will conflict with, or result in
<PAGE>
EXHIBIT B-1
Page 3
any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any material
Lien upon any of the property or assets of Holdings or any of its
Subsidiaries pursuant to the terms of any material indenture, mort-
gage, deed of trust, agreement, or other material instrument to which
Holdings or any of its Subsidiaries is a party or by which it or any
of its property or assets is bound or to which it may be subject or
(c) will violate any provision of the Articles or Certificate of
Incorporation or By-Laws of any Corporation.
5. To the best of my knowledge and the knowledge of attorneys on
my staff and except as set forth in Annex IV to the Credit Agreement,
there are no actions, suits or proceedings pending or threatened with
respect to Holdings or any of its Subsidiaries (a) that are reasonably
likely to have a material adverse effect on the business, properties,
assets, operations or financial condition of Holdings and its
Subsidiaries taken as a whole, or (b) that could reasonably be
expected to have a material adverse effect on the rights or remedies
of the Banks or on the ability of any Nabisco Corporation to perform
its obligations to the Banks under the Credit Documents.
6. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption
by, any governmental or public body or authority, or any subdivision
thereof in the States in which the Corporations conduct business, is
required to be obtained or made by any Corporation to authorize or is
required in connection with (i) the execution, delivery and perform-
ance of any Credit Document or (ii) the legality, validity, binding
effect or enforceability of any Credit Document.
7. No Corporation is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
8. All governmental and third party approvals in connection with
the transactions contemplated by the Credit Documents and otherwise
referred to in the Credit Documents have been obtained and remain in
effect.
My opinion in paragraph 3 above as to the enforceability of the
agreements referred to therein is subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, general principles of
equity, whether such enforceability is considered in a proceeding in
<PAGE>
EXHIBIT B-1
Page 4
equity or at law, and to the discretion of the court before which any
proceeding therefor may be brought. My opinion in paragraph 4 above as to
compliance with certain laws, statutes, rules or regulations is based upon
a review of those laws, statutes, rules and regulations which, in my
experience, are normally applicable to transactions of the type contem-
plated by the Credit Documents.
I have not been requested to render and, with your permission, I
express no opinion as to the applicability to the obligations of any
Nabisco Corporation under the Credit Agreement of Section 548 of the
Bankruptcy Code and Article 10 of the New York Debtor & Creditor Law
relating to fraudulent transfers and obligations. I understand, without
independent verification, that the Banks have satisfied themselves on the
basis of, among other things, the financial information furnished to the
Banks and their knowledge of the credit facilities available to the Nabisco
Corporations, that none of the Nabisco Corporations is insolvent or will be
rendered insolvent by the transactions contemplated by the Credit Agreement
and that, after giving effect to such transactions, none of the Nabisco
Corporations will be left with unreasonably small capital with which to
engage in its anticipated business and that none of the Nabisco
Corporations will have intended to incur, or will have believed it has
incurred, debts beyond its ability to pay as such debts mature.
This opinion is rendered only to the Senior Managing Agents and
the Banks (collectively, the "Addressed Parties") and is solely for their
benefit in connection with the above transactions. This opinion may not be
relied upon by any Addressed Party for any other purpose, or relied upon by
any other person, firm or corporation for any purpose, without my prior
written consent.
Very truly yours,
<PAGE>
EXHIBIT B-2
-----------
[FORM OF OPINION OF WHITE & CASE]
To: The Senior Managing Agents and various
lending institutions (collectively, the
"Banks") party to the Credit Agreement
referred to below.
re Credit Agreement, dated as of November 3,
1995 (the "Credit Agreement"), among
Nabisco Holdings Corp. ("Holdings"), Nabisco, Inc.
(the "Borrower"), the Senior Managing Agents and the Banks
----------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to the Banks party to the Credit
Agreement in connection with the execution and delivery of the Credit
Agreement. This opinion is delivered to you pursuant to Section 4.04(ii)
of the Credit Agreement. Terms used herein which are defined in the Credit
Agreement shall have the respective meanings set forth in the Credit
Agreement unless otherwise defined herein.
In connection with this opinion, we have examined the originals,
or certified, conformed or reproduction copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the
basis for the opinions hereinafter expressed. In stating our opinion, we
have assumed the genuineness of all signatures on original or certified
copies, the authenticity of documents submitted to us as originals and the
conformity to original or certified copies of all copies submitted to us as
certified or reproduction copies.
We have also assumed, for purposes of the opinions expressed
herein, that the parties to the Credit Agreement have the corporate power
and authority to enter into and perform the Credit Agreement and that the
Credit Agreement has been duly authorized, executed and delivered by each
such party.
Based upon the foregoing, and subject to the limitations set
forth herein, we are of the opinion that the Credit Agreement constitutes
the legal, valid and binding obligation of each of Holdings and the
Borrower, enforceable in accordance with its terms except to the extent
that enforcement may be limited by applicable bankruptcy, insolvency,
<PAGE>
EXHIBIT B-2
Page 2
reorganization or other similar laws affecting creditors' rights generally
and by equity principles (regardless of whether enforcement is sought in
equity or at law).
We have not been requested to render and, with your permission,
we express no opinion as to the applicability to the obligations of
Holdings or the Borrower under the Credit Agreement of Section 548 of the
Bankruptcy Code and Article 10 of the New York Debtor & Creditor Law
relating to fraudulent transfers and obligations. We understand, without
independent verification, that the Banks have satisfied themselves on the
basis of, among other things, the financial information furnished to the
Banks and their knowledge of the credit facilities available to Holdings
and the Borrower, that neither Holdings nor the Borrower is insolvent or
will be rendered insolvent by the transactions contemplated by the Credit
Agreement and that, after giving effect to such transactions, neither
Holdings nor the Borrower will be left with unreasonably small capital with
which to engage in its anticipated business and that neither Holdings nor
the Borrower will have intended to incur, or will have believed it has
incurred, debts beyond its ability to pay as such debts mature.
This opinion is limited to the federal law of the United States
of America and the law of the State of New York.
Very truly yours,
<PAGE>
EXHIBIT C-1
-----------
NOTICE OF ASSIGNMENT
--------------------
[DATE]
Citibank, N.A.,
as Payments Administrator
______________________________
New York, New York __________
Attention: _____________________
re: Credit Agreement, dated as of November 3, 1995,
among Nabisco Holdings Corp., Nabisco, Inc.,
various financial institutions from time to time
party thereto and the Senior Managing Agents (as
the same may be amended, modified or supplemented
from time to time, the "Credit Agreement")
-------------------------------------------------
1. Reference is made to the above-referenced Credit Agreement.
All terms defined in the Credit Agreement shall have the same meanings when
used herein.
2. [NAME OF ASSIGNOR] ("Assignor") has sold to [NAME OF
ASSIGNEE] ("Assignee") an assignment in the aggregate amount of $________.
3. The Assignee hereby elects to become party to, and be bound
by each of the provisions of, the Credit Agreement as a "Bank" with [a
Commitment] [outstanding Loans] equal to the amount set forth in clause 2
above.
4. Assignee hereby confirms that it has executed and returned to
the Borrower a confidentiality agreement in the form set forth as Exhibit D
to the Credit Agreement.
5. Assignee hereby makes, as to itself, the representations set
forth in Section 12.04(d) of the Credit Agreement, and agrees, to the
extent not a U.S. Person, to deliver the required forms to the Borrower.
<PAGE>
EXHIBIT C-1
Page 2
6. The Assignee's address for purposes of notices under the
Credit Agreement is:
[INSERT ADDRESS]
--------------------------------------
---------------------------------------
---------------------------------------
Very truly yours,
[NAME OF ASSIGNOR]
By________________________
Title:
[NAME OF ASSIGNEE]
By________________________
Title:
<PAGE>
EXHIBIT C-2
-----------
FORM OF ASSIGNMENT AGREEMENT
----------------------------
ASSIGNMENT AGREEMENT (the "Assignment Agreement"), dated as of
___________, 19__, between ________________ ("Assignor") and ________________
("Assignee"). All capitalized terms used herein and not otherwise defined
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, Assignor is a party to a Credit Agreement, dated as of
November 3, 1995 (as amended to the date hereof, the "Credit Agreement"),
among Nabisco Holdings Corp. ("Holdings"), Nabisco, Inc. (the "Borrower"),
various financial institutions (including Assignor) and the Senior Managing
Agents;
WHEREAS, Assignor has [a Commitment of $_____ under the Credit
Agreement pursuant to which it has made outstanding Loans of
$__________]1/ [made outstanding Loans under the Credit Agreement of $____
-
]2/;
- - -
WHEREAS, Assignor and Assignee wish Assignor to assign to
Assignee, among other things, its rights under the Credit Agreement with
respect to a portion of its [Commitment and of its]3/ outstanding Loans;
-
and
WHEREAS, Assignor and Assignee wish Assignee to assume the
obligations of Assignor under the Credit Agreement to the extent of the
rights so assigned;
- --------------------
1/ Insert only in Assignment and Assumption Agreements executed prior to
- - the Commitment Expiry Date.
2/ Insert only in Assignment and Assumption Agreements executed after the
- - Commitment Expiry Date.
3/ Insert only in Assignment and Assumption Agreements executed prior to
- - the Commitment Expiry Date.
<PAGE>
EXHIBIT C-2
Page 2
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
1. Assignment. Assignor hereby assigns to Assignee, without
----------
recourse, or representation or warranty (other than as expressly provided
herein) and subject to Section 4(b) hereof, that percentage listed on Annex
I hereto as the "Assignee's Share" ("Assignee's Share") of all of
Assignor's rights, title and interest arising under the Credit Agreement
indicated in Item 5 of Annex I hereto, including, without limitation, all
or a portion of the Assignor's Commitment, if any, and all rights and
obligations with respect to Assignee's Share of the Loans heretofore made
by the Assignor under the Credit Agreement. The dollar amount of
Assignee's Share of Assignor's Commitment and outstanding Loans is set
forth in Item 5(c) of Annex I hereto.
2. Assumption. Assignee hereby assumes from Assignor all of
----------
Assignor's obligations arising under the Credit Agreement relating to
Assignee's Share of [Assignor's Commitment and of]4/ the Loans. It is
-
the intent of the parties hereto that Assignor shall be released from all
of its obligations under the Credit Agreement relating to Assignee's Share
pursuant to Section 12.04(b)(A) of the Credit Agreement.
3. Assignments; Participations. Assignee may assign all or any
---------------------------
part of the rights granted to it hereunder, provided that such assignment
--------
complies with the provisions of Sections 12.04(b)(A) and 12.04(c) of the
Credit Agreement. Assignee may sell or grant participations in all or any
part of the rights granted to it hereunder in accordance with the
provisions of Sections 12.04(b)(B) and 12.04(c) of the Credit Agreement.
4. Payment of Interest and Fees to Assignee. (a) Interest is
----------------------------------------
payable by the Borrower in respect of Assignee's Share of the Loans at the
rates set forth in Section 1.09 of the Credit Agreement, the Facility Fee
is payable by the Borrower in respect of the Assignee's Share of the daily
average Commitment of the Assignor (or after the termination of the Total
Commitment, of the Loans) at the rate set forth in Section 2.01(a) of the
Credit Agreement and Utilization Fees are payable by the Borrower, under
certain circumstances, at the rate set forth in Section 2.01(b) of the
Credit Agreement, in each case, subject to the
- --------------------
4/ Insert only in Assignment and Assumption Agreements
- -
executed prior to the Commitment Expiry Date.
<PAGE>
EXHIBIT C-2
Page 3
terms and conditions set forth in the Credit Agreement (Facility Fees and
Utilization Fees being hereinafter referred to as the "Fees").5/
-
(b) Notwithstanding anything to the contrary contained in this
Assignment Agreement, if and when Assignor receives or collects any payment
of interest on any Loan attributable to Assignee's Share or any payment of
Fees attributable to Assignee's Share which, in any such case, are required
to be paid to Assignee pursuant to clause (a) above, Assignor shall dis-
tribute to Assignee such payment but only to the extent such interest or
Fee accrued after the Assignment Effective Date (as hereinafter defined).
(c) Notwithstanding anything to the contrary contained in this
Assignment Agreement, if and when Assignee receives or collects any payment
of interest on any Loan or any payment of Fees which, in any such case, is
required to be paid to Assignor pursuant to clause (a) above, Assignee
shall distribute to Assignor such payment.
5. Payments on Assignment Effective Date. In consideration of
-------------------------------------
the assignment by Assignor to Assignee of Assignee's Share of Assignor's
Commitment and/or Loans as set forth above, [(a)] Assignee agrees to pay to
Assignor on or prior to the Assignment Effective Date an amount specified
by Assignor in writing on or prior to the Assignment Effective Date which
represents Assignee's Share of the principal amount of the respective Loans
made by Assignor pursuant to the Credit Agreement and outstanding on the
Assignment Effective Date [and (b) Assignor agrees to pay to Assignee
within three Business Days after the Assignment Effective Date the
Assignment Facility Fee specified in Annex I hereto].6/
-
6. Effectiveness. (a) This Assignment Agreement shall become
-------------
effective on the date (the "Assignment Effective Date") on which (i)
Assignor and Assignee shall have signed a copy hereof (whether the same or
different copies) and, in the case of
- --------------------
5/ In the event that the Assignor and Assignee agree that
- -
the rate of interest or Fees payable to the Assignee shall be lower than
the rate or rates paid by the Borrower, with the Assignor being entitled
to any excess, appropriate modifications may be made to Section 4(a)
hereof. Any such modified Section 4(a) hereof must provide, however,
that the Borrower and the Payments Administrator shall direct the entire
amount of such interest or Fees to the Assignee, and that such fee sharing
arrangement shall be effectuated through payments between the Assignee and
the Assignor.
6/ Include the bracketed language in Section 5 hereof if
- -
an Assignment Facility Fee is to be paid.
<PAGE>
EXHIBIT C-2
Page 4
Assignee, shall have delivered same to Assignor, (ii) Assignee shall have
paid to Assignor the amount set forth in Section 5[(a)] hereof and (iii)
Assignor and Assignee shall have executed and delivered to the Payments
Administrator a written notice of the assignment contained herein in the
form of Exhibit C-1 to the Credit Agreement to the extent required by
Section 12.04(b)(A) thereof and the Payments Administrator shall have
recorded the assignment contained herein in the Register.
(b) It is agreed that all interest on any Loan attributable to
Assignee's Share and all Fees attributable to Assignee's Share, which, in
each case, accrues on and after the Assignment Effective Date shall be paid
directly to the Assignee.
7. Amendment of Credit Agreement. In accordance with the
-----------------------------
requirements of Section 12.04(b)(A) of the Credit Agreement, on the
Assignment Effective Date the Credit Agreement shall be amended by deeming
the signature of Assignee herein as a signature to the Credit Agreement.
For purposes of Section 12.04(b)(A) of the Credit Agreement, the Assignee
shall be deemed a "Bank" for all purposes under the Credit Agreement, and
shall be subject to and shall benefit from all of the rights and
obligations of a Bank under the Credit Agreement and the address of the
Assignee for notice purposes shall be as set forth opposite its signature
below.
8. Representations and Warranties. Each of the Assignor and the
------------------------------
Assignee represents and warrants to the other party as follows:
(a) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment Agreement and to
fulfill its obligations under, and to consummate the transactions
contemplated by, this Assignment Agreement;
(b) the making and performance by it of this Assignment
Agreement and all documents required to be executed and delivered by
it hereunder do not and will not violate any law or regulation of the
jurisdiction of its incorporation or any other law or regulation
applicable to it;
(c) this Assignment Agreement has been duly executed and
delivered by it and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms; and
(d) all consents, licenses, approvals, authorizations,
exemptions, registrations, filings, opinions and declarations from or
with any agency, department, administrative authority, statutory
corporation or judicial entity necessary for the
<PAGE>
EXHIBIT C-2
Page 5
validity or enforceability of its obligations under this Assignment
Agreement have been obtained, and no governmental authorizations other
than any already obtained are required in connection with its
execution, delivery and performance of this Assignment Agreement.
9. Expenses. The Assignor and the Assignee agree that each
--------
party shall bear its own expenses in connection with the preparation and
execution of this Assignment Agreement.
10. Foreign Withholding. If the Assignee is organized under the
-------------------
laws of any jurisdiction other than the United States or any state or other
political subdivision thereof (a) it represents and warrants to the
Payments Administrator and the Borrower that under applicable law and
treaties no taxes will be required to be withheld by the Payments
Administrator or the Borrower with respect to any payments to be made to
Assignee in respect of the Loans and (b) it agrees that it will (i) furnish
the Payments Administrator and the Borrower, concurrently with the
execution of this Assignment Agreement, either U.S. Internal Revenue
Service Form 4224, U.S. Internal Revenue Service Form 1001 or U.S.
Internal Revenue Service Form W-9 (wherein Assignee claims entitlement to
complete exemption from U.S. federal withholding tax on all payments under
the Credit Agreement) and, upon the expiration or obsolescence of any pre-
viously delivered form, with a new U.S. Internal Revenue Service Form 4224,
Form 1001 or Form W-9 and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and com-
pleted by Assignee and (ii) comply from time to time with all applicable
U.S. laws and regulations with regard to the aforementioned withholding tax
exemption.
11. Miscellaneous. (a) Assignor shall not be responsible to
-------------
Assignee for the execution (by any party other than the Assignor),
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Credit Documents or for any representations,
warranties, recitals or statements made therein or in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents made or furnished or made available by
Assignor to Assignee or by or on behalf of either Credit Party to Assignor
or Assignee in connection with the Credit Documents and the transactions
contemplated thereby. Assignor shall not be required to ascertain or
inquire as to the performance or observance of any of the terms, condi-
tions, provisions, covenants or agreements contained in any of the Credit
Documents or as to the use of the proceeds of the Loans or as to the
existence or possible existence of any Default or Event of Default.
<PAGE>
EXHIBIT C-2
Page 6
(b) Assignee represents and warrants that it has made its own
independent investigation of the financial condition and affairs of each
Credit Party in connection with the making of the Loans and the assignment
to Assignee hereunder of Assignee's Share of [Assignor's Commitment and
of]7/ Assignor's Loans and has made and shall continue to make its own
-
appraisal of the creditworthiness of each Credit Party. Assignor shall
have no duty or responsibility either initially or on a continuing basis to
make any such investigation or any such appraisal on behalf of Assignee or
to provide Assignee with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans
or at any time or times thereafter and shall further have no responsibility
with respect to the accuracy of, or the completeness of, any information
provided to Assignee, whether by Assignor or by or on behalf of each Credit
Party.
(c) THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
(d) No term or provision of this Assignment Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by both parties.
(e) This Assignment Agreement may be executed in one or more
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
(f) The Assignor may at any time or from time to time grant to
others assignments or participations in its Commitment or the Loans but not
in the portions thereof assigned to Assignee pursuant to this Assignment
Agreement. The Assignor represents and warrants that it has not at any
time prior to the Assignment Effective Date encumbered or assigned the
portion of its Commitment or Loans being assigned hereunder.
(g) All payments hereunder or in connection herewith shall be
made in U.S. Dollars and in immediately available funds, if payable to the
Assignor, to the account of the Assignor at its office as designated in
Annex I hereto, and, if payable to the Assignee, to the account of the As-
signee, as designated in Annex I hereto.
- --------------------
7/ Insert only in Assignment and Assumption Agreements executed prior to
- -
the Commitment Expiry Date.
<PAGE>
EXHIBIT C-2
Page 7
(h) This Assignment Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns. Neither of the parties hereto may assign or transfer any of its
rights or obligations under this Assignment Agreement without the prior
consent of the other party. The preceding sentence shall not limit the
right of the Assignee to assign all or part of Assignee's Share of
[Assignor's Commitment and/or] outstanding Loans assigned under this
Assignment Agreement in the manner contemplated by the Credit Agreement,
subject to the provisions of Section 3 hereof.
(i) All representations and warranties made herein and
indemnities provided for herein shall survive the consummation of the
transaction contemplated hereby.
(j) The Assignor shall promptly provide the Assignee with copies
of the documents received in connection with the transactions contemplated
by the Credit Documents and this Assignment Agreement.
* * *
<PAGE>
EXHIBIT C-2
Page 8
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment Agreement as of the date first above written.
[NAME OF ASSIGNOR]
By_________________________
Title:
[NAME OF ASSIGNEE]
By__________________________
Title:
<PAGE>
ANNEX I
to
Assignment Agreement
--------------------
1. Borrower: Nabisco, Inc.
--------
2. Date of Credit Agreement: As of November 3, 1995
------------------------
3. Assignee:
--------
4. Date of Assignment Agreement: ________________, 19__
----------------------------
5. Amount of Assignment:
--------------------
[Commitment Loans
---------- -----
a. Assignor's outstanding
[Commitment/]Loans............... $__________ $_________
b. Assignee's Share................... __________% _________%
c. Amount of Assignee's Share..... $__________]1/$_______
-
[6. Assignment Facility Fee: (__% of Assignee's [Commitment][Loan]
-----------------------
Amount) $___]
7. Notice and Payment Instructions:
-------------------------------
Assignor: ________________________________
________________________________
________________________________
Attention:
Assignee: ________________________________
________________________________
________________________________
Attention:
- --------------------
1/ Insert only in Assignment and Assumption Agreements executed prior to
- -
the Commitment Expiry Date.
<PAGE>
ANNEX I
Page 2
Accepted and Agreed:
[NAME OF ASSIGNOR]
By___________________________
Title:
[NAME OF ASSIGNEE]
By___________________________
Title:
<PAGE>
EXHIBIT C-3
-----------
FORM OF AGREEMENT OF COMMITMENT INCREASE
----------------------------------------
AGREEMENT OF COMMITMENT INCREASE (the "Agreement"), dated as of
___________, 19__, between Nabisco, Inc. (the "Borrower") and ________________
(the "[New] Bank"). All capitalized terms used herein and not otherwise defined
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, the Borrower [is a] [and the Bank are] party to a Credit
Agreement, dated as of November 3, 1995 (as amended to the date hereof, the
"Credit Agreement"), among Nabisco Holdings Corp. ("Holdings"), the
Borrower, various financial institutions from time to time party thereto
[(including the Bank)] and the Senior Managing Agents;
[WHEREAS, the Borrower has requested the Bank to increase its
Commitment of $________ under the Credit Agreement to $________; and
WHEREAS, the Bank, pursuant to the terms and conditions hereof,
desires to increase its Commitment of $________ under the Credit Agreement
to $________;]
[WHEREAS, the Borrower has requested the New Bank to become a
party to the Credit Agreement with a Commitment of $________ thereunder;
and
WHEREAS, New Bank wishes to become party to, and be bound by each
of the provisions of, the Credit Agreement as a "Bank" with a Commitment
equal to the amount set forth in the previous recital;]
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
1. Commitment. [The New Bank hereby agrees to become party to,
----------
and be bound by, each of the provisions of the Credit Agreement with a
Commitment equal to $__________. Upon the Agreement Effective Date (as
defined below), the New Bank shall become a "Bank" for all purposes of the
Credit Agreement and the other Credit Documents
<PAGE>
EXHIBIT C-3
Page 2
with the Commitment, and the information contained in Annex I hereto, as so
recorded by the Payments Administrator in the Register.] [From and after
the Agreement Effective Date (as defined below), the Bank hereby agrees to
increase its Commitment of $__________ under the Credit Agreement to
$__________.]
2. Note. Upon the Agreement Effective Date (as defined below),
----
the Borrower hereby agrees to execute a Note in favor of the [Bank] [New
Bank] in an aggregate principal amount equal to the [Bank's] [New Bank's]
Commitment of $_________[, and upon receipt of such Note the Bank shall
deliver the Note currently in its possession to the Borrower marked
"cancelled"].
3. Assignments; Participations. The [Bank] [New Bank] may
---------------------------
assign all or any part of the rights granted to it hereunder, provided that
--------
such assignment complies with the provisions of Sections 12.04(b)(A) and
12.04(c) of the Credit Agreement. The [Bank] [New Bank] may sell or grant
participations in all or any part of the rights granted to it hereunder in
accordance with the provisions of Sections 12.04(b)(B) and 12.04(c) of the
Credit Agreement.
[4. Payment of Interest and Fees to New Bank. Interest is
----------------------------------------
payable by the Borrower in respect of New Bank's pro rata share of the
--- ----
Loans at the rates set forth in Section 1.09 of the Credit Agreement, the
Facility Fee is payable by the Borrower in respect of the New Bank's daily
average Commitment (or after termination of the Total Commitment, of its
pro rata share of the outstanding Loans) at the rate set forth in Section
- --- ----
2.01(a) of the Credit Agreement and Utilization Fees are payable by the
Borrower, under certain circumstances, at the rate set forth in Section
2.01(b) of the Credit Agreement, in each case, subject to the terms and
conditions set forth in the Credit Agreement (Facility Fees and Utilization
Fees being hereinafter referred to as the "Fees").]
5. Effectiveness. [(a)] This Agreement shall become effective
-------------
on the date (the "Agreement Effective Date") on which (i) Borrower and the
[Bank] [New Bank] shall have signed a copy hereof (whether the same or
different copies) and delivered same to the Payments Administrator, [and]
(ii) [the New Bank shall have paid a nonrefundable fee of $2,500 to the
Payments Administrator as required by Section 1.16 of the Credit Agreement
and (iii)] the Payments Administrator shall have recorded the [Bank's] [New
Bank's] Commitment in the Register.
[(b) By its execution of this Agreement, the New Bank shall be
deemed a "Bank" for all purposes under the Credit Agreement, and shall be
subject to and shall benefit from all of the rights and obligations of a
Bank under the Credit Agreement and the
<PAGE>
EXHIBIT C-3
Page 3
address of the New Bank for notice purposes shall be as set forth opposite
its signature below.]
6. Representations and Warranties. (i) Each of the Borrower and
------------------------------
the [Bank] [New Bank] represents and warrants to the other party as
follows:
(a) it has full power and authority, and has taken all action
necessary, to execute and deliver this Agreement and to fulfill its
obligations under, and to consummate the transactions contemplated by,
this Agreement;
(b) the making and performance by it of this Agreement and all
documents required to be executed and delivered by it hereunder do not
and will not violate any law or regulation of the jurisdiction of its
incorporation or any other law or regulation applicable to it;
(c) this Agreement has been duly executed and delivered by it
and constitutes its legal, valid and binding obligation, enforceable
in accordance with its terms; and
(d) all consents, licenses, approvals, authorizations,
exemptions, registrations, filings, opinions and declarations from or
with any agency, department, administrative authority, statutory
corporation or judicial entity necessary for the validity or enforce-
ability of its obligations under this Agreement have been obtained,
and no governmental authorizations other than any already obtained are
required in connection with its execution, delivery and performance of
this Agreement.
(ii) [New Bank represents and warrants as follows:
(a) it has made its own independent investigation of the
financial condition and affairs of each Credit Party in connection with
the making of the Loans and its agreement to make a Commitment hereunder
and has made and shall continue to make its own appraisal of the credit-
worthiness of each Credit Party; and
(b) it is an Eligible Transferee which makes loans in the
ordinary course of its business, and it will make or acquire Loans for
its own account in the ordinary course of such business, provided, that
--------
subject to Section 12.04(a) through (c) of the Credit Agreement, the
disposition of any promissory notes or other
<PAGE>
EXHIBIT C-3
Page 4
evidences of or interests in Indebtedness held by the New Bank shall
at all times be within its exclusive control.
(iii)] The Borrower represents and warrants as follows:
(a) no Event of Default has occurred and is continuing on the
date hereof; and
(b) the Credit Rating of the Borrower is [an Increased
Investment Grade Rating] [a Maximum Investment Grade Rating] on the date
hereof.
7. Expenses. The Borrower and the [Bank] [New Bank] agree that
--------
each party shall bear its own expenses in connection with the preparation
and execution of this Agreement.
[8. Foreign Withholding. If the New Bank is organized under the
-------------------
laws of any jurisdiction other than the United States or any state or other
political subdivision thereof (a) it represents and warrants to the
Payments Administrator and the Borrower that under applicable law and
treaties no taxes will be required to be withheld by the Payments
Administrator or the Borrower with respect to any payments to be made to
New Bank in respect of the Loans and (b) it agrees that it will (i) furnish
the Payments Administrator and the Borrower, concurrently with the
execution of this Agreement, either U.S. Internal Revenue Service Form
4224, U.S. Internal Revenue Service Form 1001 or U.S. Internal Revenue
Service Form W-9 (wherein New Bank claims entitlement to complete exemption
from U.S. federal withholding tax on all payments under the Credit
Agreement) and, upon the expiration or obsolescence of any previously
delivered form, with a new U.S. Internal Revenue Service Form 4224, Form
1001 or Form W-9 and comparable statements in accordance with applicable
U.S. laws and regulations and amendments duly executed and completed by New
Bank and (ii) comply from time to time with all applicable U.S. laws and
regulations with regard to the aforementioned withholding tax exemption.]
9. Miscellaneous.
-------------
(a) THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(b) No term or provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by both parties.
<PAGE>
EXHIBIT C-3
Page 5
(c) This Agreement may be executed in one or more counterparts,
each of which shall be an original but all of which, taken together, shall
constitute one and the same instrument.
(d) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Neither of the parties hereto may assign or transfer any of its rights or
obligations under this Agreement without the prior consent of the other
party. The preceding sentence shall not limit the right of the [Bank] [New
Bank] to assign all or part of its Commitment and outstanding Loans in the
manner contemplated by the Credit Agreement, subject to the provisions of
Section 3 hereof.
(e) All representations and warranties made herein and
indemnities provided for herein shall survive the consummation of the
transaction contemplated hereby.
[(f) The Borrower shall promptly provide the New Bank with
copies of the documents received in connection with the transactions
contemplated by the Credit Documents and this Agreement.]
* * *
<PAGE>
EXHIBIT C-3
Page 6
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
NABISCO, INC.
By_________________________
Title:
[NAME OF [BANK] [NEW BANK]]
By__________________________
Title:
Acknowledged this
____day of _______, 199_:
CITIBANK, N.A.,
as Payments Administrator
By ___________________________________________________
<PAGE>
ANNEX I
-------
1. Borrower: Nabisco, Inc.
--------
2. Date of Credit Agreement: As of November , 1995.
------------------------ --
3. Name of [New] Bank:
------------------
4. Date of Agreement of Commitment Increase: ________________, 19__.
----------------------------------------
5. Commitment: $___________
----------
6. Notice:
------
________________________________
________________________________
________________________________
Attention:
7. Payment Instructions:
--------------------
________________________________
________________________________
________________________________
Attention:
Reference:
<PAGE>
EXHIBIT D
---------
FORM OF CONFIDENTIALITY AGREEMENT
---------------------------------
[DATE]
[Insert Name and Address of
the New Bank, Prospective Assignee
or Holder of a Participation]
Ladies and Gentlemen:
In connection with the financing of the credit facilities (the
"Nabisco Facilities"), Nabisco Holdings Corp. ("Holdings") may from time to
time provide to you information (the "Confidential Information") regarding,
among other things, Holdings, Nabisco, Inc. ("Nabisco") and the Nabisco
Facilities.
As used herein, the term "Material" means any information
concerning Holdings and/or its subsidiaries which is furnished by or on
behalf of Holdings (including, without limitation, the Confidential
Information), provided that the term "Material" does not include
information which was or becomes generally available to the public or
becomes available on a non-confidential basis, in each case other than from
a source which is bound by a confidentiality agreement with Holdings.
We are prepared to provide you with Materials as necessary or
pursuant to the information provisions under the credit agreements (the
"Credit Agreements"), among Holdings, Nabisco and various financial
institutions from time to time party thereto. Pursuant to Section 12.14 of
the Credit Agreements, you, as a prospective assignee or holder of a
participation in the Loans (as defined in the Credit Agreements) are
required to enter into this Confidentiality Agreement (the "Agreement")
before receiving the Confidential Information and the other Materials.
Such Materials will be made available to you upon your execution of this
Agreement. In consideration thereof, you agree that the Confidential
Information and the other Materials will be kept confidential, in
accordance with your customary procedure for handling confidential
information and in accordance with safe and sound banking practices, and
not be used by you except in connection with the Nabisco Facilities and the
financing thereof discussed above.
<PAGE>
EXHIBIT D
Page 2
You and your affiliates, directors, officers, employees and
representatives agree to be bound by the terms of this Agreement. This
Agreement shall inure to the benefit of Holdings.
In this connection, we acknowledge that you may make disclosure
of the Confidential Information and the Materials to your attorneys and
independent auditors. In addition, you may make disclosure as required or
requested by any governmental agency or representative thereof or pursuant
to legal process, and we acknowledge that you are subject to bank
regulatory agencies and may be required to provide the Confidential
Information and the Materials to, or otherwise make them available for
review by, the representatives of such agencies, provided that, unless
--------
specifically prohibited by applicable law or court order, you shall notify
Holdings of any request by any governmental agency or representative
thereof (other than any such request in connection with an examination of
your financial condition by such governmental agency) for disclosure of any
such non-public information prior to disclosure of such information. You
also agree to request confidential treatment of the Confidential
Information and the Materials to the extent permitted by law.
Please indicate your agreement to the foregoing at the place
provided below.
Very truly yours,
[Insert Name of Lender]
By___________________________
Title:
The foregoing is agreed to as of
the date of this letter.
By___________________________
Title:
Exhibit 10.31
1995 AMENDMENT
TO
EMPLOYMENT AGREEMENT
This is an amendment, dated as entered below, to the Employment Agreement
(the "Agreement") which was made the 271h 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, 1995,
and Holdings and the Company being able to provide more effective incentives to
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, 1995, 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, 1995."
Nothing in this Amendment shall cause Section 3.1 of the
Agreement to be amended for the fiscal years ending December
31, 1996 or 1997, or to remove 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, 1995, to be granted Performance
Units pursuant to the Performance Unit Agreement
appended hereto as Attachment 1. The value of
Performance Units shall be determined by Cash Net
Income for 1995, as specified in the Performance Unit
Agreement and attachments thereto. For this purpose,
"Cash Net Income" means Cash Net Income from
continuing operations, determined without regard to
the effect of any unanticipated major financial or
corporate event or any change in accounting standards
that may be required or permitted by the Financial
Accounting Standards Board. This award shall be in
lieu of any award under the Company's Annual
Incentive Award Plan for the fiscal year ending
December 31, 1995.
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, 1996 or 1997.
RJR NABISCO HOLDINGS CORP.
BY /s/
----------------------------
Executive Vice President
RJR NABISCO HOLDINGS CORP.
BY /s/
----------------------------
Executive Vice President
BY /s/ Charles M. Harper
----------------------------
Executive Vice President
Date: 2-15-95
--------
Exhibit 10.32
SECOND 1995 AMENDMENT
TO
EMPLOYMENT AGREEMENT
This is a Second 1995 Amendment, dated as entered below, to the Employment
Agreement (the "Agreement") which was made the 27th of May 1993 by and among RJR
Nabisco Holdings Corp., ("Holdings"), a Delaware corporation, RJR Nabisco. Inc.
(the "Company"), a Delaware corporation, and Charles M. Harper ("Executive ....
Nothing in this Second 1995 Amendment shall affect the validity of the previous
1995 Amendment to the Agreement made February 15, 1995.
Recitals
--------
In consideration of Executive being given the added security of increased
severance in the event of Executive's termination without Cause, and Holdings
and the Company being able to provide further incentives to the performance of
Executive through this additional security, it is agreed by and among the
parties as follows:
a) Subsection 6.1 is amended to delete the term "Expiration Date"
wherever it appears and to substitute in each instance in its
place "the third anniversary of the date his employment
terminated."
b) Section 10 is amended to (i) delete the reference to "Mr. Paul
E. Raether" and insert in its place "Mr. Gerald I. Angowitz",
and (ii) delete the reference to and address of
Alvin H. Brown, Esq.
RJR Nabisco Holdings Corp.
BY /s/
----------------------------
RJR NABISCO HOLDINGS CORP.
BY /s/
----------------------------
BY /s/ Charles M. Harper
----------------------------
Date: 4/13/95
--------
Exhibit 10.33
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, dated as of the 5th day of December, 1995, by and among RJR
Nabisco Holdings Corp., a Delaware corporation ("Holdings"), RJR Nabisco, Inc.,
a Delaware corporation and a direct subsidiary of Holdings (the "Company") and
Charles M. Harper ("Executive") amends and restates that certain agreement by
and among Holdings, the Company and Executive made the 27th day of May, 1993, as
amended February 15, 1995, and April 13, 1995, (the "Initial Agreement"). This
Agreement reflects the fact that Executive has ceased to serve as Chief
Executive Officer of Holdings and the Company and will continue to serve in the
executive positions of Chairman of the Boards of Holdings and the Company, This
Agreement will (i) following a Change of Control (as defined in Exhibit E),
supersede the Executive's participation in the RJR Nabisco Holdings Corp.
Headquarters Continuing Excellence Recognition Program (the "Headquarters
Program") and (ii) be in lieu of Executive's participation in the RJR Nabisco
Holdings Corp. 1995 Employee Protection Program (the "1995 Program"), but will
in no event provide lesser benefits to Executive in the event of the termination
of Executive's employment following a Change of Control than would otherwise be
available under the 1995 Program.
<PAGE>
RECITALS
--------
In order to induce Executive to continue in his current position as Chairman
of the Boards of Holdings and the Company, Holdings and the Company desire to
provide Executive with compensation and other benefits under the conditions set
forth in this Agreement. Executive is willing to continue employment as Chairman
of the Boards of Holdings and the Company, and to perform services for Holdings
and the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
-----------
1.1 Subject to the terms and conditions of this Agreement, Holdings
agrees to employ Executive during the term hereof as Chairman of the Boards of
Holdings and the Company. In such capacities, Executive shall have the customary
powers, responsibilities and authorities of a chairman of the board of
corporations of the size, type and nature of Holdings and the Company,
respectively, as such powers, responsibilities and authorities have existed and
continue to exist on the date hereof at Holdings and the Company. Executive's
principal office shall be at the principal executive offices of Holdings and the
Company in New York, New York, as well as Omaha, Nebraska, and Executive shall
commute between such offices of Holdings and the Company as he reasonably
determines.
2
<PAGE>
1.2 Holdings and the Company shall, throughout the term hereof, cause
the election of Executive as Chairman of the Board of Directors of Holdings (the
"Holdings Board") and the Board of Directors of the Company (the "Board") (and
sometimes, collectively, the "Boards").
1.3 Subject to the terms.and conditions set forth herein, Executive
agrees to continue to serve in the executive positions of Chairman of the Boards
of Holdings and the Company and shall devote his working time and efforts, to
the best of his ability, experience and talent, to the performance of the
services, duties and responsibilities in connection therewith including, without
limitation, consideration of strategic issues relating to Holdings and the
Company and consultation with and advice to the Chief Executive Officer of
Holdings and the Company with respect to such issues. Nothing in this Agreement
shall preclude Executive from engaging, consistent with his duties and
responsibilities hereunder, in charitable and community affairs, from managing
his personal investments, from continuing to serve on the boards of directors
listed on Exhibit A or from serving (subject to approval of the Holdings Board)
as a member of boards of directors of other companies.
2. Term of Employment.
-------------------
Executive's employment with Holdings and the Company commenced on May
31, 1993, (the "Commencement Date") and, unless terminated or extended in
accordance herewith or
3
<PAGE>
as otherwise provided herein, shall continue through December 5, 1998 (the
"Expiration Date").
3. Compensation.
------------
3.1 Salary. Except as set forth below, while Executive is employed
------
by Holdings and the Company the Company shall pay Executive a base salary
("Base Salary"). Effective January 1, 1996, the annual rate of Base Salary shall
be FIVE HUNDRED THOUSAND DOLLARS ($500,000) per annum. Base Salary shall be
payable in accordance with the ordinary payroll practices of the Company. Except
as may otherwise be agreed in writing by the parties, Executive's rate of Base
Salary shall be increased on January 1 of each of 1997 and 1998 to the greater
of an amount equal to $500,000 plus 6% per year, compounded annually, from
January 1, 1996, or the amount specified by the Holdings Board. Notwithstanding
the foregoing, for the fiscal year ending December 31, 1995, the Executive's
Base Salary is payable at the annual rate of $600,000 per annum.
3.2 Annual Bonus. (a) Except as set forth in Section 3.2(c), in
------------
addition to his Base Salary, Executive shall be entitled while employed by
Holdings and the Company to be granted an annual incentive bonus (any annual
bonus paid or accrued hereunder, a "Bonus") in respect of each fiscal year of
the Company ("Fiscal Year") as determined by the Holdings Board in its sole
discretion. As provided in the Company' s Annual Incentive Award Plan ("AIAP")
and subject to Section 6(e) of the AIAP, with respect to the
4
<PAGE>
Fiscal Year in which Executive's "Retirement Date" (as provided in Section 5
herein) occurs if Executive shall be a Participant in the AIAP with respect to
such Fiscal Year, Executive shall receive a Bonus scored at target and prorated
for the number of months Executive was actively employed by Holdings and the
Company during such Fiscal Year.
(b) The Bonus for each Fiscal Year shall be paid in cash when bonuses
are paid generally to other senior executives of the Company for such Fiscal
Year, but no later than May 1 of the next Fiscal Year. However, payment shall be
deferred if, no later than March 1 of the Fiscal Year to which such Bonus
relates, Executive shall deliver notice to the Company of his intent to defer
payment of the Bonus for such Fiscal Year to a later date, on terms mutually
agreeable to Executive and Company.
(c) For the Fiscal Year ending December 31, 1995, Sections 3.2(a) and
(b) shall have no force or effect and the right of Executive to any bonus
payments hereunder shall be governed by this Section 3.2(c). In addition to Base
Salary, for the. fiscal year ending December 31, 1995 Executive has been granted
Performance Units under the Company's 1990 Long Term Incentive Plan ("LTIP")
pursuant to the Performance Unit Agreement dated February 15, 1995, between the
Company and Executive, the form of which is attached hereto as Exhibit D (the
"Performance Unit Agreement"). The value of such Performance Units shall be
5
<PAGE>
determined by Cash Net Income for 1995, as specified in the Performance Unit
Agreement and attachments thereto; provided that following a Change of Control,
the Committee (as defined in the LTIP) shall not exercise its discretion under
Sections 2 and 3 of the Performance Unit Agreement or otherwise to reduce the
Payment Value per unit below the Initial Grant Value (all as defined in the
Performance Unit Agreement). For purposes of this Section 3.2(c), "Cash Net
Income" means Cash Net Income from continuing operations, determined without
regard to the effect of any unanticipated major financial or corporate event or
any change in accounting standards that may be required or permitted by the
Financial Accounting Standards Board. Such Performance Units shall be in lieu of
any award under the AIAP for the Fiscal Year ending December 31, 1995. Nothing
in this Section 3.2(c) shall affect the provisions of Sections 3.2(a) or (b)
hereof for any Fiscal Year other than the Fiscal Year ending December 31, 1995.
3.3 Compensation Plans and Proprams. Executive shall participate
-------------------------------
while employed by Holdings and the Company in any compensation plan or program,
whether annual or long term, maintained by Holdings or the Company on terms
comparable to those applicable to other senior management of Holdings or the
Company.
3.4 Special Bonus Payments. Upon a Change of Control, the Company
----------------------
shall pay to Executive a special cash bonus payment equal to the sum of (a)
Executive's AIAP
6
<PAGE>
Vested Amount as of such Change of Control, Executive's PS Vested Amount as of
such Change of Control, and Executive's PU Vested Amount as of such Change of
Control (all as defined in Exhibit E); (b) any additional premium amounts
required under Exhibit F hereto; and (c) any additional funding amounts required
to fully fund the SERP Benefit (as defined in Section 5) accrued to the date of
such Change of Control under Section 5 hereof. Notwithstanding the foregoing, in
the event that following a Change of Control any performance period relating to
any award under the AIAP or of Performance Units or Performance Shares under the
LTIP (as such terms are defined therein) within which such Change of Control
occurred is completed prior to Executive's termination of employment with
Holdings and the Company, upon such completion Executive shall be entitled to
payment in respect of each such award of an amount, if any, equal to the excess
of the value of such award based on actual performance for such performance
period over the AIAP Vested Amount, PU Vested Amount or PS Vested Amount, as the
case may be, previously paid to Executive upon such Change of Control in respect
of such AIAP award, Performance Units or Performance Shares.
4. Employee Benefits.
-----------------
4.1 Employee Benefit Plans and programs. The Company and Holdings
------------------------------------
shall provide Executive until Executive's termination of employment with
Holdings and the Company coverage under all employee benefit programs, plans
7
<PAGE>
and practices (commensurate with the positions of Chairman of the Boards of
Holdings and the Company and to the extent possible under any employee benefit
plan), in accordance with the terms thereof, which Holdings and the Company make
available to their senior executive officers, including, but not limited to (a)
retirement, pension and profit sharing (other than the SERP, as defined in
Section 5) and (b) medical, dental, hospitalization, short and long term
disability, accidental death and dismemberment and travel accident coverage. It
is understood that the provisions of Section 4.1(c) of the Initial Agreement
relating to life insurance have been amended and restated by the letter
agreement dated June 20, 1995, attached as Exhibit C hereto, which letter
agreement is incorporated herein by this reference.
4.2 Vacation and Fringe Benefits. Executive shall be entitled to the
----------------------------
number of vacation days customarily accorded senior executives of the Company.
In addition, Executive shall be entitled to the perquisites and fringe benefits
accorded from time to time to senior executives of the Company as well as the
other perquisites and benefits currently accorded Executive by Holdings and the
Company, including but not limited to, a car and driver, use of a Company
aircraft for commuting between Executive's residences and the various offices of
Holdings and the Company and use of a Company or Holdings provided apartment in
New York, New York. Such apartment and its furnishings
8
<PAGE>
shall be subject to the reasonable approval of Executive. Holdings or the
Company shall pay to Executive an additional amount such that after payment by
Executive of all applicable Federal, State and local taxes (computed at the
maximum marginal rates) Executive retains a sufficient amount to pay all such
taxes incurred by Executive as a result of the provision of a car and driver and
the use of a Company aircraft and of a Company or Holdings-provided apartment as
provided herein.
4.3 Directors and Officers Liability. The Company and Holdings shall
--------------------------------
indemnify Executive and provide Executive with Directors and Officers Liability
coverage and shall maintain the indemnification and directors' and officers'
liability insurance coverage, at levels of coverage and protection no less
favorable than was provided by the Company or Holdings as of May 1, 1993, for
any director or officer of Holdings or the Company. The Directors and Officers
coverage and indemnification provided herein shall continue, as to Executive,
throughout the period of any applicable statute of limitations or through the
continuation of any period during which any applicable statute of limitations
may be tolled.
5. Supplemental Pension. The obligations under Section 5 of the
--------------------
Initial Agreement to provide to Executive a pension benefit (the "SERP Benefit")
in lieu of the pension benefit to which Executive would otherwise be entitled
under the Company's Supplemental Executive Retirement Plan
9
<PAGE>
("SERP") has been funded for the estimated SERP Benefit accrued through the
Expiration Date of this Agreement by the purchase of annuities held in the
Excess Benefit Master Trust Agreement by and between RJR Nabisco, Inc. and
Wachovia Bank and Trust Company, N.A., dated February 5, 1988, as amended
through January 27, 1989, (the "1988 Secular Trust"). Such annuities are to be
delivered to Executive upon his Retirement Date. Executive's "Retirement Date"
for purposes of delivery of the foregoing annuities under this Section 5 shall
be the date of his termination of employment with the Company for any reason. It
is understood that extensions in the Expiration Date of this Agreement, in the
interest rate assumptions, in tax rates, in Executive's tax status as determined
by state or local taxing authorities, and in other actuarial factors or
considerations as of Executive's Retirement Date may affect the adequacy of such
funding of the SERP Benefit. Periodically, upon any extensions in the Expiration
Date, and in all events immediately prior to or promptly following the
Retirement Date, an actuarial calculation shall be performed to determine if any
additional funding through the purchase of an annuity on a tax grossed up-basis
(as described in the SERP acknowledgment executed by Executive and attached
hereto as Exhibit F (the "Acknowledgment")) is required as of the Retirement
Date to deliver the full benefit to which Executive is entitled pursuant to
Section 5 of the Initial Agreement, Exhibit B thereto and hereto and the
10
<PAGE>
Acknowledgment, all of which are incorporated herein by this reference, as such
benefit may be increased pursuant to Section 6.1(a)(v) if applicable. If such
additional funding is required, the Company shall promptly (i) purchase such
additional annuities and (ii) pay to Executive an additional amount such that
after payment by Executive of all applicable Federal, State and local taxes
(computed at the maximum marginal rates) Executive retains a sufficient amount
to pay all such taxes incurred by Executive as a result of the purchase of such
additional annuities. Nothing herein shall adversely affect the validity of the
Acknowledgment.
6. Termination of Employment.
-------------------------
6.1 Termination Not For Cause or For Good Reason. (a) The Company and
--------------------------------------------
Holdings may terminate Executive's employment at any time for any reason, and
Executive may terminate his employment at any time for any reason. If
Executive's employment is terminated by the Company or Holdings other than for
Cause (as hereinafter defined) prior to the Expiration Date or if Executive
terminates his employment for Good Reason (as hereinafter defined) prior to the
Expiration Date, the Company shall pay to Executive (x) if such termination is
prior to, or more than twenty-four months after a Change of Control,
compensation until the Expiration Date (or, if earlier, until his date of
death), payable monthly at a monthly rate equal to the amounts set forth in
clauses (i) and (ii) below, or (y) if such
11
<PAGE>
termination occurs during the twenty-four month period following a Change of
Control and prior to the Expiration Date, then upon such termination a lump sum
payment, discounted to its present value, based on a notional payment period
equal to the number of months, including partial months, in the period beginning
on the date of such termination of employment and ending on the Expiration Date
(the "Balance of the Term"), assuming equal monthly payments and a discount rate
equal to the product of (I) the Treasury bond yield for instruments having a
term approximately equal to the Balance of the Term as published in the New York
Times on the first of the month in which the termination occurs and (II) 100%
minus the aggregate applicable Federal, state and local taxes then imposed on
Executive's employment income computed at the maximum applicable marginal rates,
in cash in an amount equal to the sum of the amounts set forth in clauses (i)
and (ii) below times the number of whole and partial months in the Balance of
the Term:
(i) Executive's Base Salary at its then current monthly rate (or
following a Change of Control, if higher, the rate in effect
immediately prior to such Change of Control); and
(ii) the product of (x) the highest annual Bonus paid or accrued
by the Company to or for Executive since the commencement of
his employment on May 27, 1993 times (y) a fraction (A) the
numerator of which is one (1) and (B) the denominator of
which is twelve (12).
In addition, Executive shall be entitled to receive:
(iii) Executive's full Base Salary through the date of termination
at the rate in effect at the time notice of termination is
given, AIAP Vested Amount
12
<PAGE>
as of the date of termination, and, except as set forth below, all
other amounts to which Executive is entitled under any compensation
or benefit plan of the Company including, but not limited to, the
AIAP and LTIP, and all unpaid amounts, as of the date of such
termination, in respect of any bonus, including any Bonus for any
Fiscal Year ending before such termination which would have been
payable had the Executive remained in employment until the date such
bonus would otherwise have been paid and including any bonus under
Section 3.4, at the times such payments are due under the terms of
such plans or, in the event such termination occurs during the
twenty-four month period following a Change of Control, upon such
termination;
(iv) any payment deferred by Executive, together with any applicable
interest or other accruals thereon;
(v) the benefits under Section 5 hereof shall be paid out in accordance
with their terms; provided, however, that Executive shall,for
-------- -------
employed purposes of Section 5, be deemed to have remained employed
by the Company and Holdings for the lesser of (i) the period equal
to the Balance of the Term or (ii) the period between his date of
termination and his date of death, at the compensation level in
effect on the date of termination or if such termination occurs
during the twenty-four month period following a Change of Control,
at the compensation level in effect immediately prior to such Change
of Control if higher;
(vi) continued coverage under Holdings' and the Company's employee benefit
programs, plans and practices described in Section 4.1 and 4.2 hereof
(other than the use of a Company or Holdings- provided apartment or
Company aircraft) for a period equal to the Balance of the Term, or
Holdings or the Company will provide for equivalent coverage (on an
after-tax basis), subject to any applicable coordination of benefits
rules; provided that (A) in the case of any plan meeting the
requirements of Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), in the event of a termination of employment
prior to or more than twenty-four months following a Change of
Control, such coverage shall be provided only to the extent
consistent with such requirements and (B) in the event of such
termination during the twenty-four month period following a Change
of Control, such
13
<PAGE>
coverage shall not be less favorable in the aggregate than that in
effect immediately prior to such Change of Control;
(vii) such payments under applicable plans or programs, including but not
limited to those described in Section 3.3 and 4.3 and payment for
accrued vacation, as may be determined pursuant to the terms of such
plans or programs and this Agreement;
(viii) the immediate right to exercise all Options granted pursuant to
Section 7.1 and the immediate lapse of transfer restrictions on the
Purchased Stock as described in Section 7.2;
(ix) if Executive's termination occurs prior to March 1, 1996 and prior to
a Change of Control, any applicable additional benefits and
protections provided under the Headquarters Program;
(x) if Executive's termination occurs during the twenty-four month period
following a Change of Control, all cash payments to be made hereunder
upon a termination of employment shall be made not later than 15
business days following the date of termination, and in addition
Executive shall receive, to the extent not already provided herein:
(A) a lump sum cash payment equal to the sum of Executive's AIAP
Vested Amount, PS Vested Amount and PU Vested Amount (each as defined
in Exhibit (E)) all as of the date of termination;
(B) a lump sum cash payment equal to the value of the annual
credit under the RJR Nabisco. Inc. Flexible Perquisites Program (the
"Perquisites Program") to which Executive was entitled immediately
prior to such termination or, if higher, to which Executive was
entitled immediately prior to the Change of Control, in each case
multiplied by a fraction, the numerator of which is the number of
whole and partial months in the Balance of the Term and the
denominator of which is twelve reducedby such credits as would
otherwise be applied to the continued benefits under Section 6.1(a)
(vi) above;
(C) use of the automobile assigned to Executive immediately
prior to the Change of Control for a period equal to the Balance of
the Term and, at the end of such period, the transfer
14
<PAGE>
of ownership of such automobile to Executive plus such amount in cash
that after payment of all applicable Federal, state and local taxes
thereon, computed at the maximum marginal rates, is equal to all such
taxes, so computed, imposed in connection with such transfer;
(D) in addition to and upon the expiration of the benefits
provided pursuant to Section 6.1(a) (vi) above, MedChoice Retiree
Medical benefits as in effect at the time of such expiration for other
retirees and as amended from time to time thereafter at the minimum
level of Company subsidy or, if greater, the subsidy level based on
all years of service (actual and imputed) credited for purposes of the
SERP Benefit; and
(E) if the Company fails to provide any of the benefits under
Section 6.1(a) (vi) or Section 6.1(a)(x) (D) above, reimbursement for
the actual cost of Executive's obtaining comparable benefits within 15
business days after the date Executive gives the Company written
notice that he incurred such costs plus such additional amount that
after payment of all applicable Federal, state and local taxes
thereon, computed at the maximum applicable marginal rates, is equal
to all such taxes, so computed, imposed with respect to such
reimbursement.
(b) For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express prior written consent):
(i) (A) The assignment to Executive of duties materially
inconsistent with Executive's position (including duties,
responsibilities, status, titles or offices as set forth in
Section 1 hereof); (B) any elimination or reduction of
Executive's duties or responsibilities; or (C) any removal
of Executive from or any failure to elect or reelect
Executive to the positions of Chairman of Holdings and the
Company (including the failure to elect Executive to the
positions of Chairman of the ultimate controlling entity in
connection with any merger, acquisition or other
extraordinary corporate transaction that includes Holdings
or the Company), except in connection with the termination
of Executive's employment for Cause, Permanent Disability
(as hereinafter defined) or as a result of Executive's death
or by Executive
15
<PAGE>
other than for Good Reason or except as a result of a change
in the By-laws of Holdings or the Company which change is
not approved by the Holdings Board provided Executive is
promptly restored to such position or positions;
(ii) A reduction in Executive's Base Salary from the level
required hereunder at the time in question, as the same may
be or may be required to be increased from time to time
during the term or pursuant to the terms of this Agreement,
or the failure to provide Executive with an annual incentive
bonus opportunity pursuant to Section 3.2;
(iii) The failure by the Company or Holdings to obtain the
specific assumption of this Agreement by any successor or
assign of Holdings or the Company or any person acquiring
substantially all of the Company's or Holdings' assets;
(iv) Any material breach by the Company or Holdings of any
provision of this Agreement or any agreements entered into
pursuant thereto;
(v) Requiring Executive to be based at any office or location
other than those described in Section 1 above, except for
travel reasonably required in the performance of the
Executive's responsibilities; or
(vi) During the twenty-four month period following a Change of
Control, (A) the failure to continue in effect any
compensation plan in which Executive participates at the
time of the Change of Control, including but not limited to
the LTIP, the AIAP, the Perquisites Program, or any
substitute plans adopted prior to the Change of Control,
unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan providing Executive with
substantially similar benefits) has been made with respect
to such plan in connection with the Change of Control, or
the failure to continue Executive's participation therein on
substantially the same basis, both in terms of the amount of
benefits provided and the level of his participation
relative to other participants, as existed at the time of
the Change of Control; or (B) the failure to continue to
provide Executive with benefits at least as favorable in the
aggregate as those enjoyedby him under any of the Company's
pension, life insurance, medical, health and accident,
disability, deferred compensation or
16
<PAGE>
savings plans in which he was participating at the time of
the Change of Control, the taking of any action which would
directly or indirectly materially reduce any of such
benefits or deprive Executive of any material fringe benefit
enjoyed by him at the time of the Change of Control, or the
failure to provide him with the number of paid vacation days
to which he was entitled on the basis of the Company's
practice with respect to him as in effect at the time of the
Change of Control.
(c) (i) Anything in this Agreement to the contrary
notwithstanding, in the event that it is determined that any
payment or distribution by Holdings or the Company to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, other than any payment pursuant to this Section
6.1(c), (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then Executive shall be
entitled to receive from Holdings or the Company, within 15 days
following the determination described in Section 6.1(c)(ii)
below, an additional payment ("Excise Tax Adjustment Payment") in
an amount such that after payment by Executive of all applicable
Federal, state and local taxes (computed at the maximum marginal
rates and including any interest or penalties imposed with
respect to such taxes),
17
<PAGE>
including any Excise Tax, imposed upon the Excise Tax Adjustment
Payment, Executive retains an amount of the Excise Tax Adjustment
Payment equal to the Excise Tax imposed upon the Payments.
(ii) All determinations required to be made under this
Section 6.1(c), including whether an Excise Tax Adjustment
Payment is required and the amount of such Excise Tax Adjustment
Payment, shall be made by Ernst & Young, Winston-Salem, North
Carolina, or such other national accounting firm as the Company
or Holdings may designate prior to a Change of Control, which
shall provide detailed supporting calculations to the Company and
the Executive within 15 business days of the date of termination
of Executive's employment. Except as hereinafter provided, any
determination by Ernst & Young, Winston-Salem, North Carolina, or
such other national accounting firm as the Company or Holdings
may designate prior to a Change of Control, shall be binding upon
the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination hereunder, it is possible that (x) certain
Excise Tax Adjustment Payments will not have been made by the
Company which should have been made (an "Underpayment"), or (y)
certain Excise Tax Adjustment Payments will have been made which
should not have been made (an "Overpayment"), consistent with
18
<PAGE>
the calculations required to be made hereunder. In the event of
an Underpayment, such Underpayment shall be promptly paid by
Holdings or the Company to or for the benefit of the Executive.
In the event that the Executive discovers that an Overpayment
shall have occurred, the amount thereof shall be promptly repaid
to Holdings or the Company.
(d) Except as provided in this Agreement, if Executive is a
participant in the LTIP or any other stock award plan of the
Company, Holdings, or any of their affiliates and has outstanding
awards thereunder, the treatment of such awards shall be governed
by the terms of such applicable plans and awards.
6.2 Permanent Disability. If prior to the Expiration Date
--------------------
the Executive becomes totally and permanently disabled (as defined in
the Company's Long-Term Disability Plan applicable to senior executive
officers ("LTD Plan") as in effect on May 27, 1993 ("Permanent
Disability")) Holdings or the Company or Executive may terminate his
employment on written notice thereof and
(a) Executive shall continue to receive until the
Expiration Date (or, if earlier, the end of his
Permanent Disability or his death) amounts equal to no
less than 50% of Executive's then annual Base Salary
(or, if higher, 50% of $500,000 plus 6% per year,
compounded annually, from January 1, 1996, to the
January 1 immediately preceding such termination);
provided, however, that any such payments shall be
reduced but not below zero, by any benefits payable
during such period to Executive under the LTD Plan;
19
<PAGE>
(b) the benefits under Section 5 hereof shall be paid out
in accordance with their terms;
(c) all unpaid amounts, as of the date of such termination,
in respect of any bonus, including any bonus for any
Fiscal Year ending before such termination which would
have been payable had Executive remained in employment
until the date such bonus would otherwise have been
paid and including any bonus under Section 3.4, shall
be paid;
(d) any payment deferred by Executive, together with any
applicable interest or other accruals thereon shall be
paid;
(e) Executive shall continue to be covered under Holdings'
and the Company's employee benefit programs, plans and
practices described in Section 4.1 (in the case of any
plan meeting the requirements of Section 401(a) of the
Code, only to the extent consistent with such
requirements) hereof until the Expiration Date (or, if
earlier, the end of his Permanent Disability or his
death) or Holdings or the Company will provide for
equivalent coverage on an after-tax basis; provided
that if Executive is provided with similar coverage by
a successor employer, any such coverage by Holdings or
the Company shall cease;
(f) Executive shall have such rights to payments under
applicable plans or programs, including but not limited
to those described in Sections 3.3 and 4.3, as may be
determined pursuant to the terms of such plans or
programs and this Agreement; and
(g) all Options granted pursuant to Section 7.1 shall
become immediately exercisable, and the transfer
restrictions on the Purchased Stock as described in
Section 7.2 shall thereupon lapse.
6.3 Death. In the event of Executive's death prior to the
-----
Expiration Date, (i) the Executive's estate or designated
beneficiaries shall receive payment of Executive's then annual Base
Salary (or, if higher, 50% of
20
<PAGE>
$500,000 plus 6% per year, compounded annually, from January 1, 1993,
to the January 1 immediately preceding such termination) for a period
of three months after the date of death; (ii) Executive's estate or
designated beneficiary shall receive a bonus equal to the highest
annual bonus paid or accrued to or for Executive since the
commencement of his employment on May 27, 1993, or if higher the bonus
opportunity for the Fiscal Year in which such termination occurs
(computed in the same manner as under Section 6.1(a)(ii) hereof)
multiplied by a fraction, the numerator of which is the number of days
during which Executive was employed by the company in the Fiscal Year
in which death occurred, and the denominator of which is 365; (iii)
all unpaid amounts, as of the date of such termination, in respect of
any bonus, including any Bonus for any Fiscal Year ending before such
termination which would have been payable had Executive remained in
employment until the date such bonus would otherwise have been paid
and including any bonus under Section 3.4, shall be paid; (iv) any
payment deferred by Executive, together with any applicable interest
or other accruals thereon shall be paid; (v) the benefits under
Section 5 hereof shall be paid out in accordance with the terms of
that Section; (vi) any death benefits provided under the employee
benefit programs, plans and practices described in Section 4.1 hereof
shall be payable in accordance with their terms; (vii) Executive's
estate or designated beneficiary shall have such other rights to
21
<PAGE>
payments under applicable plans or programs, including but not limited
to those described in Sections 3.2(c) (for 1995 or thereafter, as may
be agreed), 3.3, 4.1, 4.2 and 4.3, as may be determined pursuant to
the terms of such plans or programs and this Agreement; and (viii) all
Options granted pursuant to Section 7.1 shall become immediately
exercisable, and the transfer restrictions on the Purchased Shares as
described in Section 7.2 shall thereupon lapse.
6.4 Voluntary Resignation; Discharqe for Cause. If
------------------------------------------
Executive resigns voluntarily, other than for Good Reason or Permanent
Disability, or the Company and Holdings terminate the employment of
Executive at any time for Cause, the transfer restrictions on the
Purchased Shares as described in Section 7.2 shall thereupon lapse and
the Company's and Holdings' obligations under this Agreement to make
any further payments to Executive shall thereupon cease and terminate
except with respect to obligations pursuant to Section 5 hereof, the
terms of any applicable plans, including those described in Sections
3.2(c) (for 1995, and thereafter as may be agreed), 3.3, 4.1, 4.2 and
4.3 hereof and all unpaid amounts, as of the date of such termination,
in respect of any bonus, including any Bonus for any Fiscal Year
ending prior to such termination which would have been payable had
Executive remained in employment until the date such bonus would
otherwise have been paid and including any bonus under Section 3.4,
and any payment deferred by Executive, together with any applicable
interest or other
22
<PAGE>
accruals thereon. The term "Cause" shall be limited to (a) action by
Executive involving willful malfeasance in connection with his
employment having a material adverse effect on Holdings or the
Company, (b) any action by Executive involving willful gross
misconduct having a material adverse effect on Holdings or the Company
(other than an effect that could not reasonably constitute grounds for
dismissal under the circumstances), (c) violation by the Executive of
the restrictions placed upon transfer of Shares (as defined
hereinafter) by Section 7.2 hereof, (d) substantial and continuing
willful refusal by Executive in breach of this Agreement to perform
his duties hereunder, which refusal has a material adverse effect on
Holdings or the Company or (e) Executive being convicted of (i) a
felony under the laws of the United States or any state or (ii) a
felony under the laws of any other country or political subdivision
thereof involving moral turpitude; provided that no action or refusal
to perform shall be deemed willful if done in the reasonable belief
that such action or refusal was in the best interests of the Company
or Holdings. Termination of Executive pursuant to Section 6.4 shall be
communicated by a Notice of Termination given within one year
after.the Holdings Board both (i) had knowledge of conduct or an event
allegedly constituting Cause and (ii) had reason to believe that such
conduct or event could be grounds for Cause. For purposes of this
Agreement a "Notice of Termination" shall mean delivery to Executive
of a copy of a resolution duly
23
<PAGE>
adopted by the affirmative vote of not less than three-quarters of the
entire membership of Holdings Board at a meeting of the Holdings Board
called and held for the purposes (after reasonable notice to the
Executive ("Preliminary Notice") and reasonable opportunity for
Executive, together with the Executive's counsel, to be heard before
the Holdings Board prior to such vote), finding that in the good faith
opinion of the Holdings Board, Executive was guilty of conduct set
forth in the second sentence of this Section 6.4 and specifying the
particulars thereof in detail. Upon the receipt of the Preliminary
Notice, Executive shall have 14 days in which to appear with counsel
or take such other action as he desires on his behalf, and such 14-day
period is hereby agreed to by the parties as a reasonable opportunity
for Executive to be heard. The Holdings Board shall no later than 30
days after the receipt of the Preliminary Notice by Executive
communicate its findings to Executive. A failure by the Holdings Board
to make its findings of Cause or to communicate its conclusions within
such 30-day period shall be deemed to be a finding that Executive was
not guilty of the conduct described in the second sentence of this
Section 6.4. Where the Holdings Board has made such findings that,
based upon conduct described in clause (a), (b), (c) or (d) above,
Cause exists the Executive shall have 30 days in which to cure such
conduct, to the extent such cure is possible. Any termination of
Executive's employment (other
24
<PAGE>
than by death or Permanent Disability) within 30 days after the date
that the Preliminary Notice has been given to Executive shall be
deemed to be a termination for Cause; provided, however, that if
during such period Executive voluntarily terminates other than for
Good Reason or the Company terminates Executive other than for Cause,
and either (A) Executive cured his conduct, as permitted in the
preceding sentence of this Section 6.4, or (B) Executive is found (or
is deemed to be found) not guilty of the conduct described in the
second sentence of this Section 6.4, such termination shall not be
deemed to be for Cause.
7. Stock and Option Arrangements.
-----------------------------
7.1 Options. Subject to the terms and conditions
-------
hereinafter set forth, in consideration of Executive's entering into
this Agreement, Holdings has caused the actions described in
paragraphs (a), (b) and (c) below to be authorized and taken and shall
cause the actions described in paragraph (d) below to be taken:
(a) the granting to Executive on the Commencement Date of
an option or options (the "Initial Options") to
purchase an aggregate of 8,000,000 shares of Common
Stock, par value $.01 per share, of Holdings (the
"Common Stock") (subsequently adjusted as described in
paragraph (c) below) at an exercise price equal to the
lower of the closing price, as reported on the New York
Stock Exchange (the "NYSE"), on the day immediately
prior to the signing of the Initial Agreement or on
Friday, May 21, 1993; provided that the exercise price
of the Initial Options was not permitted to be less
than 50% of the Fair Market Value (as defined in the
LTIP) of the Common Stock on the date such Initial
Options were granted. The Initial Options shall be
vested and exercisable in four equal annual
installments on
25
<PAGE>
May 31, 1994, May 31, 1995, May 31, 1996 and May 31,
1997;
(b) the granting to Executive on each of December 31, 1993
and December 31, 1994 of options (the "1993 and 1994
Options") to purchase an aggregate on each such date of
750,000 shares of Common Stock (subsequently adjusted
as described in paragraph (c) below) at an exercise
price equal to the Fair Market Value (as defined in the
Stock Option Plan for Directors and Key Employees of
RJR Nabisco Holdings Corp. and Subsidiaries, as amended
(the "Stock Option Plan")) of such shares as of the
business day immediately preceding the date of grant;
(c) the cancellation on January 19, 1995 of one-half of
the Initial Options and one-half of the 1993 and 1994
Options in exchange for an equivalent number of options
to purchase shares of Nabisco Holdings Corp.
("Nabisco") Class A common stock (the "Nabisco
Options"), which Nabisco Options are fully vested and
have a 15 year term from the date of grant and the
adjustment of the Initial Options and the 1993 and 1994
Options to reflect the 1 for 5 reverse stock split as
of April 13, 1995, and to make certain other changes in
the terms of such Options as of April 13, 1995, and
October 11, 1995; and
(d) the granting to Executive on each of December 31, 1995
and December 31, 1996 on which Executive remains
employed by the Company of an Option or Options (the
"Additional Options" and, together with the Initial
Options, the 1993 and 1994 Options and the Nabisco
Options, the "Options") to purchase an aggregate on
each such date of 150,000 shares of Common Stock at an
exercise price equal to the Fair Market Value (as
defined in the Stock Option Plan) of such shares as of
the business day immediately preceding the date of
grant, pursuant to the terms of the Stock Option Plan
and non-qualified stock option agreements containing
terms and conditions substantially similar to those
applicable to the Initial Options as the same have been
amended as described above, and having the vesting
provisions set forth in paragraph (e) below; provided
that the exercise price of the Additional Options shall
not be less than 50% of such Fair Market Value of the
Common Stock on the date each such Additional Option is
granted; and provided further that the number and type
of securities represented by such Additional Options
26
<PAGE>
will be subject to adjustment as if Section 1.4 of the
Option Agreement had been applicable thereto.
(e) The 1993 and 1994 Options and each respective grant of
the Additional Options shall be vested and exercisable
as follows:
================================================================================
Percentage of Total
Shares as to Which
Date Option Becomes Option is Vested And
Grant Date Vested and Exercisable Excercisable
---------- ---------------------- --------------------
December 31, 1993 May 31, 1994 25%
----------------------------------------------------------------------------
May 31, 1995 50%
----------------------------------------------------------------------------
May 31, 1996 75%
----------------------------------------------------------------------------
May 31, 1997 100%
----------------------------------------------------------------------------
December 31, 1994 May 31, 1995 33 1/3
----------------------------------------------------------------------------
May 31, 1996 66 2/3
----------------------------------------------------------------------------
May 31, 1997 100%
----------------------------------------------------------------------------
December 31, 1995 May 31, 1996 50%
----------------------------------------------------------------------------
May 31, 1997 100%
----------------------------------------------------------------------------
December 31, 1996 May 31, 1997 100%
================================================================================
(f) As provided in the April 13, 1995, amendment to
Executive's outstanding stock option awards, upon
Executive's "Retirement Date" (as provided in Section 5
herein) all Options subject to said April 13, 1995,
amendment shall become 100% vested and exercisable.
7.2 Purchased Stock and Transfer Restrictions.
-----------------------------------------
(a) In consideration for Holdings' and the Company's entering into
this Agreement, subject to the terms and conditions hereinafter set
forth, Executive purchased from Holdings 662,222 shares of Common
Stock at a price of $5.625 per share, the closing price of such
shares, as reported on the NYSE, on Friday, May 21, 1993, one-half of
which shares were repurchased by Holdings in December, 1994, subject
to the proceeds of such repurchase being applied by Executive
27
<PAGE>
to the acquisition of shares of Nabisco Class A Common Stock ("Nabisco
Shares") in the initial Public Offering of such Nabisco Shares, (such
purchased Common Stock of Holdings and such purchased Nabisco Shares,
the "Purchased Stock"). All of the Purchased Stock is subject to the
transfer restrictions set forth below. Executive agrees and
acknowledges that he will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of
any of such shares of Purchased Stock (any such act being herein
referred to as a "transfer") so long as Executive remains employed by
Holdings or any of its subsidiaries, except for such transfers as may
be permitted by the Holdings Board or the Board of Directors of
Nabisco, as the case may be, and that any transfers made, whether
permitted to be made during such period or made thereafter, will be
made fully in compliance with applicable securities and other laws. No
transfer of any such shares in violation hereof shall be made or
recorded on the books of Holdings and any such transfer shall be void
and of no effect.
(b) The certificate or certificates representing the Purchased Stock
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE
PROVISIONS OF THE EMPLOYMENT AGREEMENT BETWEEN RJR NABISCO
HOLDINGS CORP. ("HOLDINGS") AND THE PERSON NAMED ON THE FACE
HEREOF (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
HOLDINGS)."
28
<PAGE>
Holdings agrees that, upon request after the termination of Executive's
employment by Holdings and all of its subsidiaries, it shall cause such
certificates representing shares of Common Stock and shall use its
reasonable best efforts to cause such certificates representing Nabisco
Shares to be exchanged for certificates that do not bear such legend.
(c) Executive agrees and acknowledges that in connection with any
transfer of shares of Purchased Stock or shares of Common Stock or Nabisco
Shares issued upon exercise of any Options (collectively, the "Shares"),
whether during the term hereof or thereafter, he shall provide Holdings or
Nabisco, as the case may be, with such customary certificates, opinions and
other documents as Holdings or Nabisco may reasonably request to assure
that Executive has complied fully with applicable securities and other
laws, to the extent such compliance is within the control of Executive.
(d) The provisions of this Section 7.2 shall apply, to the full extent
set forth herein with respect to the Purchased Stock or the Shares as the
case may be, and to any and all shares of capital stock of Holdings or
Nabisco or any capital stock, partnership units or any other securities or
evidence of indebtedness or assets (other than cash dividends) which may be
issued in respect of, in exchange for, upon conversion of or in
substitution of, the Purchased Stock or other Shares, by reason of any
stock
29
<PAGE>
dividend, split, reverse split, combination, recapitalization, liquidation,
reclassification, merger, consolidation or otherwise.
8. Expenses. The Executive is authorized to incur reasonable expense in
---------
carrying out his duties and responsibilities under this Agreement,
including expenses for travel and similar items related to such duties and
responsibilities. The Company shall reimburse Executive for all such
expenses upon presentation by Executive from time to time of an itemized
account of such expenditures.
9. No Obligation to Mitigate Damages. The Executive shall not be
----------------------------------
required to mitigate damages or the amount of any payment provided for
under this Agreement by seeking other employment or otherwise nor will (a)
any payments under any Section hereof be subject to offset in respect of
any claims which the Company may have against Executive or (b) except as
otherwise provided in Section 6.1(a)(vi) or Section 6.2(e), the amount of
any payment or benefit provided for in Section 6 be reduced by any
compensation earned as a result of Executive's employment with another
employer.
10. Notices. All notices or communications hereunder shall be in
--------
writing, addressed as follows:
To the Company or Holdings:
Mr. Gerald I. Angowitz
c/o RJR Nabisco Holdings Corp.
1301 Avenue of the Americas
New York, New York 10019
Fax: 212-969-9012
30
<PAGE>
To the Executive:
Mr. Charles M. Harper
Suite 1500
One Central Park Plaza
Omaha, Nebraska 68102
Fax: 402-595-7116
With a copy to:
Bruce C. Rohde, Esq.
McGrath, North, Mullin & Katz, P.C.
Suite 1400
One Central Park Plaza
Omaha, Nebraska 68102
Fax: 402-633-1504
Any such notice or communication shall be sent both via fax and
certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in
a notice duly delivered as described above), and the actual date of fax
shall determine the time at which notice was given.
11. Separability; Leqal Fees; Arbitration. If any provision of this
---------------------------------------
Agreement shall be declared to be invalid or unenforceable, in whole or in
part, such invalidity or unenforceability shall not affect the remaining
provisions hereof which shall remain in full force and effect. In addition,
the Company shall reimburse Executive for reasonable legal fees incurred in
connection with entering into this Agreement and shall also pay to
Executive as incurred all legal and accounting fees and expenses incurred
by Executive in seeking to obtain or enforce any right or benefit provided
by this Agreement or any other
31
<PAGE>
compensation-related plan, agreement or arrangement of the Company, unless
Executive's claim is found by an arbitral tribunal of competent
jurisdiction to have been frivolous. Any good faith controversy or claim
arising out of or relating to this Agreement or the breach of this
Agreement (other than Section 14 hereof) that cannot be resolved by
Executive and the Company, including any dispute as to the calculation of
Executive's benefits or any payments hereunder shall be submitted to
arbitration in Winston-Salem, North Carolina in accordance with Delaware
law and the procedures of the Judicial Arbitration and Mediation Services,
Inc. ("JAMS"). The determination of the JAMS arbitrator shall be conclusive
and binding on the Company and Executive and judgment may be entered on the
arbitrators award in any court having jurisdiction.
12. Assignment. This contract shall be binding upon and inure to the
-----------
benefit of the heirs and representatives of Executive and the assigns and
successors of Holdings and the Company, but neither this Agreement nor any
rights hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or by Holdings or the Company, except that Holdings or the
Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
businesses of Holdings or the Company.
32
<PAGE>
13. Amendment/Termination.
----------------------
(a) The Agreement may only be amended at any time by mutual written
agreement of the parties hereto.
(b) Company and Holdings represent and warrant they will make
appropriate adjustments and amendments to the number of shares of Purchased
Stock and the number of shares subject to, and the exercise price of,
Options (including, in the case of Options, in the event of a spinoff or
distribution of assets or stock of Holdings or an affiliated entity,
substituting or replacing the shares issuable upon the exercise of Options)
should extraordinary events or transactions occur involving the Company,
Holdings, or an affiliated corporation.
14. Nondisclosure of Confidential Information; Non-Competition.
-----------------------------------------------------------
(a) Executive shall not, without the prior written consent of Holdings or the
Company, divulge, disclose or make accessible to any other person, firm,
partnership or corporation or other entity any Confidential Information
pertaining to the business of Holdings or the Company except (i) while
employed by Holdings or the Company in the business of and for the benefit
of Holdings or the Company or (ii) when required to do so by a court of
competent jurisdiction, by any governmental agency having supervisory
authority over the business of Holdings or the Company, or by any
administrative body or legislative body (including a committee thereof)
with purported or apparent jurisdiction to order Executive to divulge,
disclose or make
33
<PAGE>
accessible such information. For purposes of this Section 14(a),
"Confidential Information" shall mean non-public information concerning
Holdings' or the Company's financial data, strategic business plans,
product development (or other proprietary product data), customer lists,
marketing plans and other proprietary information, except for specific
items which have become publicly available information or otherwise known
to the public other than through a breach by Executive of his fiduciary
duty or any confidentiality agreement, or information known to the
Executive prior to the date of this Agreement. Confidential Information
does not include information the disclosure of which cannot reasonably be
expected to adversely affect the business of Holdings or the Company.
(b) During the period commencing on the date hereof and ending (i) in
the case of a termination described in Section 6.1 hereof, three years
after the date of termination and (ii) in case of a termination described
in Section 6.4 hereof, two years after the date of termination, Executive
covenants and agrees that he will not be an executive officer, board
member, owner, partner, consultant or employee of a food or tobacco company
with annual revenues over $1 billion, if such food or tobacco company is
engaged in a "major business" of Holdings or the Company. A "major
business" for this purpose is each major business segment of the Company
and its subsidiaries on the date hereof that produces products constituting
over 5% of the
34
<PAGE>
annual revenues of Holdings and its subsidiaries. For purposes of this
Section 14, Executive shall be deemed not a shareholder of a company
that would otherwise be a competing entity if Executive's record
and beneficial ownership of the capital stock of such company amount to not
more than one percent of the outstanding capital stock of any such company
subject to the periodic and other reporting requirements of Section 13
or Section 15(d) or the Securities Exchange Act of 1934, as amended.
Executive, Holdings, and Company agree this covenant not to compete is
a reasonable covenant under the circumstances, and further agree
that if in the opinion of any court of competent jurisdiction, such restraint
is not reasonable in any respect, such court shall have the
right, power and authority to excise or modify such provision or provisions
of this covenant as to the court shall appear not reasonable and to enforce
the remainder of the covenant as so amended. Notwithstanding any provision
herein to the contrary, Holdings and Company recognize that Executive is a
substantial stockholder and former Chairman and Chief Executive Officer of
ConAgra, Inc. ("ConAgra") and Executive intends to continue as a Board
member of ConAgra. In the event that Executive no longer serves in any
capacity with Holdings or the Company or any successor to either entity,
Holdings and the Company will not object to his serving on the Board of
ConAgra. The parties also recognize that Holdings and Company do not compete
on the date of this Agreement in businesses with ConAgra which have competitive
35
<PAGE>
sales which exceed the thresholds contained in Sec. 8 of the Clayton Act (15
USC Sec. 19). Accordingly, Company and Holdings do not object to Executive
serving on the Board of ConAgra during and after the termination of this
Agreement and will make no objection to such service. Executive, Company
and Holdings and their advisers shall take all reasonable actions to
support the position stated herein.
(c) Executive agrees that any breach of the covenants contained in this
Section 14 would irreparably injure Holdings and the Company. Accordingly,
Holdings or the Company may, in addition to pursuing any other remedies
they may have in law or in equity, obtain an injunction against Executive
from any court having jurisdiction over the matter, restraining any further
violation of this Agreement by Executive.
15. Beneficiaries/References. Executive shall be entitled to select
-------------------------
(and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death, and may change such election, in
either case by giving the Company written notice hereof. In the event of
Executive's death or a judicial determination of his incompetence,
reference in this Agreement to Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal
representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
36
<PAGE>
16. Survivorship. The respective rights and obligations of the parties
-------------
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section are in addition to the survivorship provisions
of any other section of this Agreement.
17. Representations and Warranties. Holdings and the Company each
-------------------------------
represent and warrant that (a), respectively, they are fully authorized and
empowered to enter into this Agreement, (b) the execution of this Agreement
and the performance of their respective obligations under this Agreement
will not violate or result in a breach of the terms of any material
agreement to which Holdings and/or the Company is a party or by which it is
bound, (c) no approval by any governmental authority or body is required
for them to enter into this Agreement or perform their obligations
hereunder, other than the Securities and Exchange Commission if so required
in connection with the registration or sale of any securities hereunder,
and (d) this Agreement is valid, binding and enforceable against Holdings
and the Company in accordance with its terms, except to the extent affected
or limited by applicable bankruptcy laws or other statutes governing the
rights of creditors and any regulations or interpretations thereof.
Executive represents and warrants that his execution of this Agreement and
his performance of his duties and responsibilities under
37
<PAGE>
this Agreement will not violate or result in a breach of the terms of any
material agreement to which he is a party or by which he is bound.
18. Governing Law. This Agreement shall be construed, interpreted, and
--------------
governed in accordance with laws of Delaware, without reference to rules
relating to conflicts of law.
19. Withholding. The Company and Holdings shall be entitled to withhold
------------
for payment any amount of withholding required by law.
20. Interest on Late Payments. To the extent that any payments required
--------------------------
to be made hereunder upon or following a Change of Control are not made
within the period specified therefor, the Company and Holdings shall be
liable for interest on such delayed payments at the rate of 150% of the
prime rate compounded monthly, as posted by the Morgan Guaranty Trust
Company of New York from time to time.
21. Actuarial Calculations. All required actuarial calculations of
-----------------------
payments to be made hereunder and of annuities to be purchased pursuant to
Section 5 hereof shall be made by Watson Wyatt Worldwide, New York, New
York, or such other national actuarial firm as the Company or Holdings may
designate prior to a Change of Control.
22. Funding. Except as otherwise provided herein, all benefits
--------
hereunder are unfunded and will be paid out of the general assets of the
Company or Holdings. Notwithstanding the foregoing, the Company or Holdings
may choose to
38
<PAGE>
maintain a rabbi trust or trusts for the purpose of paying certain of the
benefits hereunder or under other plans and programs of the Company or
Holdings and, if so, Executive shall be entitled to payments therefrom, if
any, as and to the extent provided in such rabbi trust or trusts.
23. Counterparts. This Agreement may be executed in two or more
-------------
counterparts, each of which will be deemed an original.
RJR NABISCO HOLDINGS CORP.
By: /s/
-------------------------------
RJR NABISCO, INC.
By: /s/
----------------------------------
/s/ Charles M. Harper
----------------------------------
CHARLES M. HARPER
39
<PAGE>
EXHIBIT "A"
ConAgra, Inc.
Valmont Industries, Inc.
Norwest Corp.
Peter Kiewit Sons', Inc.
E.I. DuPont de Nemours and Co.
<PAGE>
EXHIBIT "B"
ESTIMATED SUPPLEMENTAL PENSION ANNUAL BENEFIT
---------------------------------------------
AVERAGE FINAL YEARS OF SERVICE
COMPENSATION 6 10 15
- ------------ - -- --
$ 800,000 213,332 266,666 300,000
- -----------------------------------------------------------
$ 900,000 240,000 300,000 337,500
- -----------------------------------------------------------
$1,000,000 266,666 333,333 375,000
- -----------------------------------------------------------
$1,200,000 320,000 400,000 450,000
- -----------------------------------------------------------
$1,600,000 426,666 533,333 600,000
- -----------------------------------------------------------
$2,000,000 533,332 666,666 750,000
- -----------------------------------------------------------
$2,400,000 640,000 800,000 900,000
- -----------------------------------------------------------
$2,800,000 746,664 933,333 1,050,000
- -----------------------------------------------------------
$3,200,000 853,332 1,066,666 1,200,000
- -----------------------------------------------------------
$3,600,000 960,000 1,200,000 1,350,000
- -----------------------------------------------------------
$4,000,000 1,066,666 1,333,333 1,500,000
- -----------------------------------------------------------
<PAGE>
EXHIBIT "C"
[RJR NABISCO LETTERHEAD]
June 20, 1995
Charles M. Harper
Chairman and Chief Executive Officer
RJR Nabisco, Inc.
1301 Avenue of the Americas
New York, NY 10019
RE: Employment Agreement; Life insurance Provision
Dear Mike:
This letter agreement replaces in its entirety the side letter
agreement dated March 8, 1994 concerning the Company's obligation, under
Section 4.1(c) of your Employment Agreement dated May 27, 1993, to provide
you with "life insurance in the amount of $5,000,000."
As you know, the Company previously made an advance premium deposit
with Northwestern Mutual Life Insurance Company (NML), which at that time
represented the present value of the balance of eight annual premiums to
provide the insurance under Section 4.1(c) of your May 27, 1993 Employment
Agreement.
The Compensation Committee of the Board of Directors at its April 10,
1995 meeting agreed to allow the conversion of this whole life insurance
policy to a joint life/second to die policy with your wife, Joan F. Harper,
as the second life insured by the policy.
In order to achieve increasing the face amount of the policy to
$10,000,000 without increased cost, the Company will agree to the transfer
of the advanced premium deposit from NML to Massachusetts Mutual Life
Insurance Company (Mass. Mutual) from which future premium payments will be
made. The deposit with Mass. Mutual is calculated to pay the premium for
the remaining 6 premiums due on the policy pursuant to Section 4. l(c) of
your May 27, 1993 Employment Agreement. If, and only if, the full sum of the
deposit with Mass. Mutual is used to pay premiums to Mass. Mutual, and
additional premiums are required by Mass. Mutual at any time during your
lifetime to keep $8,000,000 of face value of the policy in force, the
Company will pay such additional premiums. You shall be responsible for any
premium amounts needed to keep the face value of the policy in excess of
$8,000,000. Notwithstanding the foregoing, you further agree that should
you withdraw any of the advance
RJR Nabisco, Inc.
1301 Avenue of the Americas
New York, New York 10019-6013
(212) 258-5600
<PAGE>
premium deposit from Mass Mutual, the Company shall have no obligation to
replace any part of the deposit, and should such withdrawal cause any
diminution in the coverage or a cancellation of the policy, the Company
shall have no obligation to cure the diminution in coverage or
cancellation.
If this correctly states our agreement on the Company's obligation to
provide life insurance coverage to you under Section 4.1 (c) of your
Employment Agreement, please sign a copy of this letter where indicated.
Sincerely,
/s/ Gerald I. Angowitz
----------------------
Gerald I. Angowitz
Senior Vice President,
Human Resources & Administration
Understood and Agreed:
/s/ Charles M. Harper
- ---------------------------
Charles M. Harper
6/20/95
- ---------------------------
Date
<PAGE>
EXHIBIT "D"
Performance Unit
1995
Special - One Year
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN PERFORMANCE UNIT PROGRAM
AMENDED AND RESTATED
PERFORMANCE UNIT AGREEMENT
DATE OF GRANT: FEBRUARY 15, 1995
-----------------
WITNESETH:
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
C.M. Harper (the "Grantee"),
subject to the terms and conditions which follow and the terms and
conditions of the Plan,
2,410 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, 1995 and ending December 31, 1995, the Committee
has determined that the Performance Measure shall be cash net income of the
Company during such Performance Period. The value of each Performance Unit
shall be as determined in the grid attached as Exhibit A may be reduced by
the Committee in its discretion. The Grantee specifically agrees that this
award of Performance Units is in
<PAGE>
lieu of any award under the Annual Incentive Award Plan for the fiscal year
ending December 31, 1995.
3. Payment of Performance Units. Unless deferred pursuant to the
-----------------------------
provisions of the Plan, 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 and 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 Riqht 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
2
<PAGE>
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.
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:
- ---------------------------------
- ---------------------------------
- ---------------------------------
3
<PAGE>
Exhibit D - continued
1995 Performance Unit Program
C.M. Harper
AIAP Target = $2,410,000 Grant = 2,410 Units
Value
CNI Perf. Award Per
Available Rating Value Unit
--------- ------ ---------- ---------
$1,390 150 $3,615,000 $1,500
$1,376 145 $3,494,500 $1,450
$1,362 140 $3,374,000 $1,400
$1,348 135 $3,253,500 $1,350
$1,334 130 $3,133,000 $1,300
$1,320 125 $3,012,500 $1,250
$1,306 120 $2,892,000 $1,200
$1,292 115 $2,771,500 $1,150
$1,278 110 $2,651,000 $1,100
$1,264 105 $2,530,500 $1,050
Plan $1,250 100 $2,410,000 $1,000
$1,225 100 $2,410,000 $1,000
$1,200 100 $2,410,000 $1,000
$1,175 100 $2,410,000 $1,000
$1,150 100 $2,410,000 $1,000
$1,125 100 $2,410,000 $1,000
$1,100 100 $2,410,000 $1,000
$1,100 0 $0 $0
Each unit valued at $1,000 upon Grant
Cash Net Income = millions
Assumes $600,000 annual base salary earnings
4
<PAGE>
EXHIBIT "E"
AIAP Vested Amount means, as of a Change of Control or as of the date
------------------
Executive's employment terminates, as the case may be, an amount equal to
(a) in the case of any bonus opportunity under the AIAP, the value of
Executive's target award under the AIAP for the relevant period in which
such Change of Control or such termination occurs, as the case may be,
multiplied by a fraction, the numerator of which is the number of months
(including partial months) in the period beginning on the first day of the
relevant performance period and ending on the Change of Control or such
termination, as the case may be, and the denominator of which is the number
of months in such performance period; provided that in the event of a
termination of employment following a Change in Control in the year in
which such Change of Control occurs, for purposes of computing the AIAP
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such Change of Control
and the target award shall be that in effect immediately preceding such
Change of Control, or (b) in the case of any annual bonus opportunity in
the form of Performance Units, the PU Vested Amount as of the date of such
termination.
Change of Control means the first to occur of the following events
-----------------
provided such event occurs prior to October 11, 1996 or such later date as
the Boards may specify from time to time:
(a) an individual, corporation, partnership, group, associate
or other entity or "person", as such term is defined in
<PAGE>
Section 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), other than Holdings or any employee
benefit plan(s) sponsored by Holdings or the Company, is
or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
30% or more of the combined voting power of Holdings'
outstanding securities ordinarily having the right to
vote at elections of directors.
(b) individuals who constitute the Holdings Board on October
11, 1995 (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any
person becoming a director subsequent to such date whose
election, or nomination for election by Holdings'
shareholders, was approved by a vote of at least three-
quarters of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy
statement of Holdings in which such person is named as a
nominee of Holdings for director), but excluding for this
purpose any such individual whose initial assumption of
office occurs as a result of either an actual or
threatened election contest (as such terms are used in
Rule 14a-ll of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of an individual,
corporation, partnership, group, associate or other
entity or "person" other than the Holdings Board, shall
be, for purposes of this paragraph (b), considered as
though such person were a member of the Incumbent Board;
(c) the approval by the shareholders of Holdings of a plan or
agreement providing (1) for a merger or consolidation of
Holdings other than with a wholly-owned subsidiary and
other than a merger or consolidation that would result in
the voting securities of Holdings outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of
Holdings or such surviving entity outstanding immediately
after such merger or consolidation, or (2) for a sale,
exchange or other disposition of all or substantially all
of the assets of Holdings. If any of the events
enumerated in this paragraph (c) occurs, the Holdings
Board shall determine the effective date of the Change of
Control resulting therefrom for purposes of the Program.
PS vested Amount means with respect to any award of
----------------
Performance Shares (as defined in the LTIP) Executive holds as of
2
<PAGE>
a Change of Control or as of the date Executive's employment terminates, as
the case may be, an amount equal to the adjusted value of (i) the number of
Performance Shares subject to such award, multiplied by a fraction, the
numerator of which is the number of months (including partial months)
elapsed in the relevant performance period as of such Change of Control
or as of the date of such termination, as the case may be, and the
denominator of which is the number of months in such performance period,
(ii) adjusted by applying target performance with respect to such award;
provided that in the event of a termination of employment following a
Change of Control in the year in which such Change of Control occurs, for
purposes of computing the PS Vested Amount as of the date of such
termination, the performance period shall be deemed to begin on the first
day following such Change of Control and target performance with respect to
such Performance Shares shall be that in effect immediately preceding the
Change of Control.
PU Vested Amount means, for any award of Performance Units (as defined
----------------
in the LTIP) Executive holds as of a Change of Control or as of the date
Executive's employment terminates, as the case may be, an amount equal to
the target value of the number of Performance Units subject to such award
multiplied by a fraction, the numerator of which is the number of months
(including partial months) elapsed in the relevant performance period as of
the Change of Control and the denominator of which is the number of months
in such performance period; provided that
3
<PAGE>
in the event of a termination of employment following a Change of Control
in the year in which such Change of Control occurs, for purposes of
computing the PU Vested Amount as of the date of such termination, the
performance period shall be deemed to begin on the first day following such
Change of Control and the target value of such Performance Units shall be
that in effect immediately preceding the Change of Control.
4
<PAGE>
EXHIBIT F
ACKNOWLEDGMENT
WHEREAS, I am vested in certain supplemental retirement benefits under (i)
the RIR Nabisco, Inc., Supplemental Executive Retirement Plan, as amended
by ancillary agreements, if any, (SERP), (ii) the RJR Nabisco, Inc.,
Supplemental Retirement Plan (SUPP) and (iii) the RIR Nabisco, Inc.,
Additional Benefits Plan (ABP) (collectively, the "Plans") to which funds
are dedicated in a Master Trust Agreement dated January 1, 1987, as amended
through January 27, 1989 (the "Rabbi Trust"); and
WHEREAS, to provide me with greater security and financial flexibility in
the aforementioned benefits, an annuity will be purchased for my benefit
from funds in the Rabbi Trust upon the execution of this Acknowledgment,
and such annuity shall be transferred to the Excess Benefit Master Trust
dated February 5, 1988, as amended through January 27, 1989 (the "Secular
Trust"); and
WHEREAS, the Company desires to deliver said annuity to me with the
federal, state and local income taxes on the present value of the annuity
paid by the Company or the aforementioned Trusts, the amount of the annuity
being reduced to reflect such tax payments; and
NOW, THEREFORE, I hereby agree as follows:
1. The annuity transferred, represents the cash value of my accrued
benefit as of December 31, 1993 under the SERP, SUPP and ABP
delivered on an after-tax basis based on tax rates currently
applicable to me (the "Benefit").
2. Any additional taxes due as a result of the transfer of the
annuity in any tax year prior to my Retirement Date shall be paid
by the Company or the Trusts. My "Retirement Date" is
fixed by the terms of my individual SERP arrangement with
the Company, and shall be deemed to include the date of my death
if death occurs before retirement.
3. The annuity will be delivered to me from the Secular Trust on my
Retirement Date. The annuity delivered at my Retirement Date will
have a lump sum cash-out option.
4. The value of the Benefit including earnings thereon will be an
offset to the after-tax benefits determined at my Retirement Date
under the Plans.
<PAGE>
5. If an annuity instead of a lump sum is elected at retirement, a
portion of the annuity payments to be made during retirement may be
taxable to me, and I will be responsible for the payment of any taxes
on such payments.
IN WITNESS THEREOF, I have executed this Acknowledgment as of
2/3/94
- ------------------------
Date
/s/ Charles M. Harper
------------------------
Printed Name: CHARLES M. HARPER
Exhibit 10.34
AMENDMENT TO
NON-QUALIFIED STOCK OPTION AGREEMENTS
DATED MAY 31, 1993, DECEMBER 31, 1993 AND DECEMBER 31, 1994
The Stock Option Agreements issued pursuant to the RJR Nabisco Holdings
Corp. 1990 Long Term Incentive Plan and dated May 31, 1993, December 31,
1993 and December 31, 1994, respectively, (collectively, "the Agreements")
by and between Charles M. Hatper (the "Optionee"), and RJR Nabisco Holdings
Corp. (the "Company") are hereby amended to provide that the Option under
the Agreement shall immediately become fully exercisable in the event of
the Optionee's retirement pursuant to the terms of Section 5 of the
Optionee's Employment agreement dated the 27th day of May 1993 by and among
the Company, RJR Nabisco, Inc. and the Optionee.
In addition, pursuant to the action of the Company on January 20, 1994
making all vested options exercisable for 15 years after the Grant Date for
any termination of employment except for a termination of employment for
Cause, Section 2.2 of the applicable Agreements is hereby amended to remove
the special expiration periods for termination of employment due to a
termination without Cause or a termination by reason of retirement or
permanent disability.
RJR Nabisco Holdings Corp.
By: /s/
-----------------------------
Authorized Signatory
/s/ Charles M. Harper
- ----------------------
Charles M. Harper
Dated: 4/13/95
Exhibit 10.35
Conversion - CMH
N Option
1995
NABISCO HOLDINGS CORP.
1994 LONG TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
---------------------
DATE OF GRANT: JANUARY 19, 1995
----------------
W I T N E S S E T H:
1. Grant of Option. Subject to (i) the surrender of one half(50%) of
----------------
the unexercised Options issued to Optionee under the Stock Option Plan for
Directors and Key Employees of RJR Nabisco Holdings Corp. and Subsidiaries
and the RJR Nabisco Holdings Corp. 1990 Long Term Incentive Plan
(collectively, the "RJR Plans") (ii) the terms and conditions in this Stock
Option Agreement and (iii) the provisions of the Nabisco Holdings Corp.
1994 Long Term Incentive Plan (the "Plan"), Nabisco Holdings Corp. (the
"Company") on the above date has granted to
Charles M. Harper (the "Optionee"),
the right and option to exercise from the Company a total of
1,090,550 shares
of Common Stock, no par value, of the Company, at the exercise price of
$24.50 per share (the "Option"). A copy of the Plan is attached and made a
part of this agreement with same effect as if set forth in the agreement
itself. All capitalized terms used herein shall have the meaning set forth
in the Plan, unless the context requires a different meaning.
2. Exercise of Option.
------------------
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the Company,
specifying the number of shares to be purchased. The notice of exercise
shall be accompanied by
(i) tender to the Company of cash for the full purchase price of the
shares with respect to which such Option or portion thereof is
exercised; or
--
<PAGE>
(ii) the unsecured, demand borrowing by the Optionee from the Company
on an open account maintained solely for this purpose in the
amount of the full exercise price together with the instruction
from the Optionee to sell the shares exercised on the open market
through a duly registered broker-dealer with which the Company
makes an arrangement for the sale of such shares under the Plan.
This method is known as the "broker-dealer exercise method" and
is subject to the terms and conditions set forth herein, in the
Plan and in guidelines established by the Committee. The Option
shall be deemed to be exercised simultaneously with the sale of
the shares by the broker-dealer. If the shares purchased upon the
exercise of an Option or a portion thereof cannot be sold for a
price equal to or greater than the full exercise price plus
direct costs of the sales, then there is no exercise of the
Option. Election of this method authorizes the Company to deliver
shares to the broker-dealer and authorizes the broker-dealer to
sell said shares on the open market. The broker-dealer will remit
proceeds of the sale to the Company which will remit net proceeds
to the Optionee after repayment of the borrowing, deduction of
costs, if any, and withholding of taxes. The Optionee's borrowing
from the Company on an open account shall be a personal
obligation of the Optionee which shall bear interest at the
published Applicable Federal Rate (AFR) for short-term loans and
shall be payable upon demand by the Company. Such borrowing may
be authorized by telephone or other telecommunications acceptable
to the Company. Upon such borrowing and the exercise of the
Option or portion thereof, title to the shares shall pass to the
Optionee whose election hereunder shall constitute instruction
to the Company to register the shares in the name of the broker-
dealer or its nominee. The Company reserves the right to
discontinue this broker-dealer exercise method at any time for
any reason whatsoever. The Optionee agrees that if this broker-
dealer exercise method under this paragraph is used, the Optionee
promises unconditionally to pay the Company the full balance in
his open account at any time upon demand. Optionee also agrees to
pay interest on the account balance at the AFR for short-term
loans from and after demand.
(b) Notwithstanding provisions for regular exercise, if more than 80%
of the aggregate value of all classes of Company common stock is owned,
directly or indirectly, by RJR Nabisco Holdings Corp. on the date of
exercise then the Company may, in its absolute discretion, make a cash
payment to the Optionee equal to the product of (x) and (y), where (x) is
the excess of the fair market value of Company common stock on the date of
exercise over the exercise price, and (y) is the number of shares subject
to the Option(s) being exercised. Such cash payment shall be in lieu of
delivery of shares.
(c) Subject to Section 2(d) herein, this Option shall be fully vested
on the Date of Grant. To the extent that any of the Option is not
exercised, it shall be not expire, but
-2-
<PAGE>
shall continue to be vested at any time thereafter until this Option shall
terminate, expire or be surrendered. An exercise shall be for whole shares
only.
(d) This Option shall not be exercised prior to 36 months after the
Date of Grant.
3. Rights in Event of Termination of Employment.
---------------------------------------------
Unless optionee is Terminated for Cause (as defined in Section 11
herein) and subject to Section 4 herein, the Option shall remain fully
exercisable as to all shares after termination from active employment.
4. Expiration of Option. The Option shall expire or terminate and may
---------------------
not be exercised to any extent by the Optionee after the first to occur of
the following events:
(a) The fifteenth anniversary of the month containing the Date of
Grant, or such earlier time as the Company may determine is necessary or
appropriate in light of applicable foreign tax laws; or
(b) Immediately upon the Optionee's Termination of Employment for Cause
(as defined in Section 11 herein).
5. Transferability. Other than as specifically provided with regard to
----------------
the death of the Optionee, this option 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 Optionee, be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Optionee.
6. No Right to Employment. Neither the execution and delivery of this
-----------------------
agreement nor the granting of the Option evidenced by this agreement shall
constitute or be evidence of any agreement or understanding express or
implied, on the part of the Company or its subsidiaries to employ the
Optionee for any specific period or shall prevent the Company or its
subsidiaries from terminating the Optionee's employment at any time with or
without
7. Adjustments in Option
---------------------
In the event that the outstanding shares of the Common Stock subject to
the Option are, from time to time, changed into or exchanged for a
different number or kind of shares of the Company or other securities by
reason of a merger, consolidation, recapitalization, reclassification,
stock split, stock dividend, combination of shares, or otherwise, the
Committee shall make an appropriate and equitable adjustment in the number
and kind of shares or other consideration as to which the Option, or
portions thereof then unexercised, shall be exercisable. Any adjustment
made by the Committee shall be final and binding upon the Optionee, the
Company and all other interested person
-3-
<PAGE>
8. Application of Laws. The granting and the exercise of this Option
-------------------
and the obligations of the Company to sell and deliver shares hereunder and
to remit cash under the broker-dealer exercise method shall be subject to
all applicable laws, rules, and regulations and to such approvals of any
governmental agencies as may be required.
9. Taxes. Any taxes required by federal, state, or local laws to be
-----
withheld by the Company (i) on exercise by the Optionee of the Option for
Common Stock, or (ii) at the time an election, if any, is made by the
Optionee pursuant to Section 83(b) of the Internal Revenue Code, as
amended, shall be paid to the Company before delivery of the Common Stock
is made to the Optionee. When the Option is exercised under the broker-
dealer exercise method, the full amount of any taxes required to be
withheld by the Company on exercise of stock options shall be deducted by
the Company from the proceeds.
10. Notices. Any notices required to be given hereunder to the Company
-------
shall be addressed to The Secretary, RJR Nabisco Holdings Corp., 1301
Avenue of the Americas, New York, NY 10019-6013, and any notice required to
be given hereunder to the Optionee shall be sent to the Optionee's address
as shown on the records of the Company.
11. Termination For "Cause." For purposes of this Agreement, the
------------------------
Optionee's employment shall be deemed to have been terminated for "Cause"
only as such term is defined in his Employment Agreement by and among RJR
Nabisco Holdings Corp. and RJR Nabisco, Inc. (the "Employment Agreement").
For purposes of this Stock Option Agreement, the references to "Shares" in
the aforementioned definition shall be deemed to include any shares of
Nabisco Holdings Corp. which are subject to the Transfer Restrictions of
the Employment Agreement.
12. Administration and Interpretation. In consideration of the grant,
---------------------------------
the Optionee 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 interpretations and determinations
made by the Committee shall be final, conclusive, and binding upon the
Optionee, 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.
13. Other Provisions.
----------------
a) Titles are provided herein for convenience only and are
not to serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing executed
by the parties hereto which specifically states that it is amending this
Agreement.
-4-
<PAGE>
c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE
INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF
LAWS.
d) OPTIONEE UNDERSTANDS THAT BY EXECUTING THIS STOCK OPTION
AGREEMENT, (A) HE IS SURRENDERING FOR CANCELLATION ONE HALF (50%) OF HIS
UNEXERCISED OPTIONS, WHETHER EXERCISABLE OR NOT, ISSUED PRIOR TO THE DATE OF
GRANT OF THIS AGREEMENT UNDER (i) THE STOCK OPTION PLAN FOR DIRECTORS AND
KEY EMPLOYEES OF RJR NABISCO HOLDINGS CORP. AND SUBSIDIARIES AND (ii) THE
RJR NABISCO HOLDINGS CORP. 1990 LONG TERM INCENTIVE PLAN (COLLECTIVELY, THE
"RJR PLANS") AND (B) ALL STOCK OPTION AGREEMENTS ISSUED PRIOR TO THE DATE OF
---
GRANT OF THIS AGREEMENT UNDER THE RJR PLANS ARE AMENDED ACCORDINGLY TO
REDUCE THE AMOUNT OF SHARES UNDER SAID AGREEMENTS BY ONE HALF (50%).
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
the Optionee have executed this Agreement as of the date of Grant first
above written.
NABISCO HOLDINGS CORP.
By /s/
-----------------------
Authorized Signatory
/s/
- -------------------------------
Optionee
Optionee's Taxpayer Identitfication Number:
###-##-####
Optionee's Home Address:
6105 Lamplighter Drive
Omaha, NE 68152
-5-
Exhibit 10.36
RN Option P-PS
1995
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
----------------------------
DATE OF GRANT: JUNE 13, 1995
--------------
W I T N E S S E T H:
1. Grant of Option. Pursuant to the provisions of the 1990 Long Term
---------------
Incentive Plan (the "Plan"), RJR Nabisco Holdings Corp. (the "Company") on
the above date has granted to
CHARLES M. HARPER (the "Optionee"),
subject to the terms and conditions which follow and the terms and
conditions of the Plan, the right and option to exercise from the Company
a total of
130,000 shares
of Common Stock, no par value, of the Company, at the exercise price of
$28.875 per share (the "Option"). A copy of the Plan is attached and made a
part of this agreement with same effect as if set forth in the agreement
itself. All capitalized terms used herein shall have the meaning set forth
in the Plan, unless the context requires a different meaning.
2. Exercise of Option.
------------------
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the Company,
specifying the number of shares to be purchased. The notice of exercise
shall be accompanied by
(i) tender to the Company of cash for the full purchase price of the
shares with respect to which such Option or portion thereof is
exercised; or
--
(ii) the unsecured, demand borrowing by the Optionee from the
Company on an open account maintained solely for this purpose in
the amount of the full exercise price together with the
instruction from the Optionee to sell the shares exercised on
the open market through a duly registered broker-dealer with
which the Company makes an arrangement for the sale of such
shares under the Plan. This method is known as the "broker-
dealer exercise method" and is subject to the terms and
conditions set forth herein, in the Plan and in guidelines
established by
<PAGE>
the Committee. The Option shall be deemed to be exercised
simultaneously with the sale of the shares by the broker-dealer.
If the shares purchased upon the exercise of an Option or a
portion thereof cannot be sold for a price equal to or greater
than the full exercise price plus direct costs of the sales, then
there is no exercise of the Option. Election of this method
authorizes the Company to deliver shares to the broker-dealer and
authorizes the broker-dealer to sell said shares on the open
market. The broker-dealer will remit proceeds of the sale to the
Company which will remit net proceeds to the Optionee after
repayment of the borrowing, deduction of costs, if any, and
withholding of taxes. The Optionee's borrowing from the Company
on an open account shall be a personal obligation of the Optionee
which shall bear interest at the published Applicable Federal
Rate (AFR) for short-term loans and shall be payable upon demand
by the Company. Such borrowing may be authorized by telephone or
other telecommunications acceptable to the Company. Upon such
borrowing and the exercise of the Option or portion thereof,
title to the shares shall pass to the Optionee whose election
hereunder shall constitute instruction to the Company to register
the shares in the name of the broker-dealer or its nominee. The
Company reserves the right to discontinue this broker-dealer
exercise method at any time for any reason whatsoever. The
Optionee agrees that if this broker-dealer exercise method under
this paragraph is used, the Optionee promises unconditionally to
pay the Company the full balance in his open account at any time
upon demand. Optionee also agrees to pay interest on the account
balance at the AFR for short-term loans from and after demand.
(b) Subject to Section 2(c) herein, this Option shall be fully vested
on the Date of Grant. To the extent that any of the Option is not
exercised, it shall not expire, but shall continue to be exercisable at any
time thereafter until this Option shall terminate, expire or be
surrendered. An exercise shall be for whole shares only.
(c) This Option shall not be exercised prior to April 27, 1998.
3. Rights in Event of Termination of Employment.
--------------------------------------------
Unless Optionee is Terminated for Cause (as defined in Section 11
herein) and subject to Section 4 herein, the Option shall remain fully
exercisable as to all shares after termination from active employment.
4. Expiration of Option. The Option shall expire or terminate and may
--------------------
not be exercised to any extent by the Optionee after the first to occur of
the following events:
(a) The fifteenth anniversary of the Date of Grant, or such earlier
time as the Company may determine is necessary or appropriate in
light of applicable foreign tax laws; or
(b) Immediately upon the Optionee's Termination of Employment for Cause
(as defined in Section 11 herein).
2
<PAGE>
5. Transferability. Other than as specifically provided with regard to
---------------
the death of the Optionee, this option 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 Optionee, be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Optionee.
6. No Right to Employment. Neither the execution and delivery of this
----------------------
agreement nor the granting of the Option evidenced by this agreement shall
constitute or be evidence of any agreement or understanding, express or
implied, on the part of the Company or its subsidiaries to employ the
Optionee for any specific period or shall prevent the Company or its
subsidiaries from terminating the Optionee's employment at any time with
or without "Cause" (as defined in Section 11 herein).
7. Adjustments in Option. In the event that the outstanding shares of
----------------------
the Common Stock subject to the Option are, from time to time, changed into
or exchanged for a different number or kind of shares of the Company or
other securities by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or
otherwise, the Committee shall make an appropriate and equitable adjustment
in the number and kind of shares or other consideration as to which the
Option, or portions thereof then unexercised, shall be exercisable. Any
adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
8. Application of Laws. The granting and the exercise of this Option
-------------------
and the obligations of the Company to sell and deliver shares hereunder and
to remit cash under the broker-dealer exercise method shall be subject to
all applicable laws, rules, and regulations and to such approvals of any
governmental agencies as may be required.
9. Taxes. Any taxes required by federal, state, or local laws to be
-----
withheld by the Company (i) on exercise by the Optionee of the Option for
Common Stock, or (ii) at the time an election, if any, is made by the
Optionee pursuant to Section 83(b) of the Internal Revenue Code, as
amended, shall be paid to the Company before delivery of the Common Stock
is made to the Optionee. When the Option is exercised under the broker-
dealer exercise method, the full amount of any taxes required to be
withheld by the Company on exercise of stock options shall be deducted by
the Company from the proceeds.
10. Notices. Any notices required to be given hereunder to the Company
-------
shall be addressed to The Secretary, RJR Nabisco Holdings Corp., 1301
Avenue of the Americas, New York, NY 10019-6013, and any notice required to
be given hereunder to the Optionee shall be sent to the Optionee's address
as shown on the records of the Company.
11. Termination For "Cause." For purposes of this Agreement, an
------------------------
Optionee's employment shall be deemed to have been terminated for "Cause"
only as such term is defined in his Employment agreement by and among RJR
Nabisco Holdings Corp., RJR Nabisco, Inc. and the Optionee (the
"Employment Agreement").
3
<PAGE>
12. Administration and Interpretation. In consideration of the grant,
---------------------------------
the Optionee 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 interpretations and determinations
made by the Committee shall be final, conclusive, and binding upon the
Optionee, 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.
13. Other Provisions.
----------------
a) Titles are provided herein for convenience only and are not
to serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing executed
by the parties hereto which specifically states that it is amending this
Agreement.
c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE
INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS
OF LAWS.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
the Optionee have executed this Agreement as of the date of Grant first
above written.
RJR NABISCO HOLDINGS CORP.
By /s/
------------------------
Authorized Signatory
/s/
- -------------------------
Optionee
Optionee's Taxpayer Identification Number:
###-##-####
- --------------------------
Optionee's Home Address:
6105 Lamplighter Drive
- -------------------------
Omaha, NE 68152
- -------------------------
4
Exhibit 10.37
Name of the Optionee: Number of Shares for Which
Option may be Exercised:
Charles M. Harper 150,000
Grant Date: December 31, 1995
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
WITNESSETH:
ARTICLE I
GRANT OF OPTION
SECTION 1.1 Grant of Option.
---------------
Pursuant to the provisions of the RJR Nabisco Holdings Corp.
1990 Long Term Incentive Plan (the "Plan"), and for good and valuable
consideration, on and as of the date hereof(the "Grant date") RJR Nabisco
Holdings Corp. ("Holdings"), in consideration of Optionee's agreement to
purchase the Purchased Stock set forth in the Employment Agreement dated
May 27, 1993, as amended and restated as of December 5, 1995, by and among
Holdings, RJR Nabisco, Inc. and the Optionee (the "Employment Agreement"),
irrevocably grants (the "Grant") to the Optionee above named the option to
purchase any part or all of an aggregate of the number of shares set forth
on the first page hereof of its Common Stock upon the terms and conditions
set forth in this Agreement and has directed the undersigned officer to
execute this Agreement. A copy of the Plan is incorporated by reference and
made a part of this Agreement with the same effect as if set forth in the
Agreement itself. A copy of the Employment Agreement is incorporated by
reference and made a part of this Agreement with the same effect as if set
forth in the Agreement itself. All capitalized terms used below shall have
the meaning set forth in the Plan or the Employment Agreement, as the case
may be, unless the context requires a different meaning.
SECTION 1.2 Exercise Price.
--------------
The exercise price of the shares of Common Stock covered by the
Option shall be $30.75 per share without commission or other charge.
<PAGE>
SECTION 1.3 Consideration to Holdings.
-------------------------
In consideration of the granting of this Option by Holdings, the
Optionee agrees to render faithful and efficient services to the
Corporation, with such duties and responsibilities the Corporation shall
from time to time prescribe, consistent with the terms of the Employment
Agreement. Nothing in this Agreement or in the Plan shall confer upon the
Optionee any right to continue in the employ of the Corporation or shall
interfere with or restrict in any way the rights of the Corporation, which
are hereby expressly reserved, to terminate the employment of the Optionee
at any time for any reason whatsoever, with or without cause, subject to
the terms of the Employment Agreement.
SECTION 1.4 Adjustments in Option.
---------------------
a) In the event of any change in the outstanding Common Stock
by reason of a stock split, spin-off, stock dividend, stock combination or
reclassification, recapitalization or merger, Change of Control, or similar
event, the Committee may adjust appropriately the number of Shares subject
to the Plan and available for or covered by Grants and Share prices related
to outstanding Grants and make such other revisions to outstanding Grants
as it deems are equitably required.
b) In the event of a Change of Control (as defined the Plan)
the Option shall be governed by the terms of the Plan.
ARTICLE II
PERIOD OF EXERCISABILITY
SECTION 2.1 Commencement of Exercisability.
------------------------------
The Option shall become exercisable as follows:
Percentage of Total Shares As
Date Option Becomes Exercisable to Which Option is Exercisable
- ------------------------------- ------------------------------
Grant Date through May 30, 1996 0%
May 31, 1996 - May 30, 1997 50%
May 31, 1997 - thereafter 100%
(a) Notwithstanding the foregoing, the Option shall immediately
become exercisable as to all shares following the termination of
employment of the Optionee for any reason including Retirement,
Death or Disability (all as defined in the Employment
Agreement); provided, however, the Option
2
<PAGE>
shall not become exercisable as to all shares following a
termination of employment by Holdings for Cause or a termination
of employment by the Optionee without Good Reason.
(b) "Termination of employment" as used herein means termination from
active employment; it does not mean termination of payment or
benefits at the end of salary continuation or other form of
severance or pay in lieu of salary.
SECTION 2.2 Expiration of Option.
--------------------
The option may not be exercised to any extent by Optionee and
shall expire or terminate after the first to occur to the following events:
(a) The fifteenth anniversary of the Grant date; or
(b) Immediately upon the Optionee's termination of employment for
Cause; or
(c) If applicable, the date the Option is terminated pursuant to the
Employment Agreement.
ARTICLE III
EXERCISE OF OPTION
SECTION 31.1 Person Eligible to Exercise.
---------------------------
During the lifetime of the Optionee, only the Optionee may
exercise the Option or any portion thereof. After the death of the
Optionee, any exercisable portion of the Option may, prior to the time when
the option becomes unexercisable and expires under Section 2.2, be
exercised by his personal representative or by any person empowered to do
so under the Optionee's will or under the then applicable laws of descent
and distribution.
SECTION 3.2 Partial Exercise.
--------
Any exercisable portion of the option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes unexercisable
and expires under Section 2.2; provided, however, that any partial exercise
shall be for whole shares only.
3
<PAGE>
SECTION 3.3 Manner of Exercise.
------------------
The Option, or any exercisable portion thereof, may be exercised
solely by delivering to the Corporate Secretary of Holdings (the
"Secretary") or his office all of the following prior to the time when the
Option or such portion becomes unexercisable under Section 2.2:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion thereof, stating that
the Option or portion thereof is thereby exercised, such notice
complying with all applicable rules established by the Committee;
(b) Full payment by;
(i) tender to Holdings of cash for the full purchase price of the
shares with respect to which such Option or portion thereof is
exercised;
(ii) The unsecured, demand borrowing by Optionee from Holdings on an
open account maintained solely for this purpose in the amount of
the full exercise price together with the instruction from
Optionee to sell the shares exercised on the open market through
a duly registered broker-dealer with which Holdings makes an
arrangement for the sale of such shares under the Plan. This
method is known as the "broker-dealer exercise method" and is
subject to the terms and conditions set forth herein, in the Plan
and in guidelines established by the Committee. The option shall
be deemed to be exercised simultaneously with the sale of the
shares by the broker-dealer. If the shares purchased upon the
exercise of an Option or a portion thereof cannot be sold for a
price equal to or greater than the full exercise price plus
direct costs of the sales, then there is no exercise of the
Option. Election of this method authorizes Holdings to deliver
shares to the broker-dealer and authorizes the broker-dealer to
sell said shares on the open market. The broker-dealer will remit
proceeds of the sale to Holdings which will remit net proceeds of
the sale to Holdings which will remit net proceeds to Optionee
after repayment of the borrowing, deduction of costs, if any, and
withholding of taxes. Optionee's borrowing from Holdings on an
open account shall be a personal obligation of Optionee which
shall bear interest at the published Applicable Federal Rate
(AFR) for short-term loans and shall be payable upon demand by
Holdings. Such borrowing may be authorized by telephone or other
telecommunications acceptable to Holdings. Upon such borrowing
and the exercise of the Option or portion thereof, title to the
shares shall pass to the Optionee whose election hereunder shall
constitute instruction to Holdings to register the shares in the
name of the broker-dealer or its nominee. Holdings reserves the
right to discontinue this broker-dealer exercise method at
4
<PAGE>
any time for any reason whatsoever. Optionee agrees that if this
broker-dealer exercise method under this Paragraph 3.3 (b)(ii)
hereof is used, Optionee promises unconditionally to pay Holdings
the full balance in his open account at any time upon demand.
Optionee also agrees to pay interest on the account balance at
the AFR for short-term loans from and after demand.
(c) Full payment to Holdings of all amounts which, under federal,
state or local law, it is required to withhold upon exercise of the
Option; and
(d) In the event the Option or portion thereof shall be exercised
pursuant to Section 3.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Option.
(e) This Option shall not be exercisable prior to six months after
the Date of Grant.
SECTION 3.4 Conditions of Issuance of Stock Certificates.
--------------------------------------------
The shares of Common Stock deliverable upon the exercise of the
Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by
Holdings. Such shares shall be duly and validly issued, fully paid and
nonassessable. Holdings shall not be required to issue or deliver any
certificate or certificates for shares of stock purchased upon the exercise
of the Option or portion thereof prior to fulfillment of all of the
following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of Common Stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental
regulatory body, which the Committee shall deem necessary; and
(c) The obtaining of approval or other clearance from any state of
federal governmental agency which the Committee shall determine to be
necessary; and
(d) The payment to Holdings of all amounts which, under federal,
state or local law, it is required to withhold upon exercise of the Option;
and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience.
5
<PAGE>
SECTION 3.5 Rights as Stockholder.
---------------------
The holder of the Option shall not be, nor have any of the rights
or privileges of, a stockholder of Holdings in respect of any shares
purchasable upon the exercise of the Option or any portion thereof unless
and until certificates representing such shares shall have been issued by
Holdings to such holder.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 Administration.
--------------
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the
Optionee, Holdings and all other interested persons, subject to the terms
of the Employment Agreement. 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 this Agreement. 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 and this Agreement.
SECTION 4.2 Option Not Transferable.
-----------------------
Neither the Option nor any interest or right therein or part
thereof shall be liable for the debts, contracts or obligations of the
Optionee or his successors in interest or 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 by judgment, levy, attachment, garnishment or any other
legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect; provided,
however, that this Section 4.2 shall not prevent transfers by will or by,
the applicable laws of descent and distribution.
SECTION 4.3 Shares to Be Reserved; Other Covenants.
--------------------------------------
.1 Holdings shall at all times during the term of the Option
reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of this Agreement; and
.2 Holdings shall take all actions necessary to satisfy the
conditions set forth in clauses (a), (b) and (c) of Section 3.4 hereof so
that such conditions shall remain satisfied so long as any of the Options
remain outstanding.
6
<PAGE>
SECTION 4.4 Notices.
-------
Any notice to be given under the terms of this Agreement to
Holdings shall be addressed to Holdings in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him at the address
appearing beneath his signature on the final page of this Agreement. By a
notice given pursuant to this Section 4.4, either party may hereafter
designate different address for notices to be given to him. Any notice
which is required to be given to the Optionee shall, if the Optionee is
then deceased, be given to the Optionee's personal representative if such
representative has previously informed Holdings of his status and address
by written notice under this Section 4.4. Any notice shall have been deemed
duly given when enclosed in a properly sealed envelope addressed as
aforesaid, deposited (with postage prepaid) in a post office or branch post
office regularly maintained by the United States Postal Service.
SECTION 4.5 Termination for Cause.
---------------------
For purposes of this Agreement, an Optionee's employment shall be
deemed to have been terminated for "Cause" only as such term is defined in
the Employment Agreement.
SECTION 4.6 Titles.
------
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
SECTION 4.7 Applicability of Plan and the Employment Agreement.
--------------------------------------------------
The Option and the shares of Common Stock issued to the Optionee
upon exercise of this Option shall be subject to all of the terms and
provisions of the Plan and the Employment Agreement, to the extent
applicable to this Option and such shares. In the event of any conflict
between the Plan, this Agreement and/or the Employment Agreement, the terms
of the Employment Agreement shall control. Notwithstanding anything to the
contrary contained herein, this Agreement shall be null and void and of no
effect unless the Optionee has purchased the Purchased Stock pursuant to
the Employment Agreement, unless such purchase is not consummated for
reasons beyond the control of Optionee.
SECTION 4.8 Amendment.
---------
This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this
Agreement.
7
<PAGE>
SECTION 4.9 Pronouns.
--------
The masculine pronoun shall include the feminine and neuter, and
the singular the plural, where the context so indicates.
SECTION 4.10 GOVERNING LAW.
-------------
THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE INTERPRETATION,
VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT REGARDLESS OF
THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 4.11 Jurisdiction.
------------
Any suit, action or proceeding against the Optionee with respect
to this Agreement, or any judgment entered by any court in respect of any
thereof, may be brought in any court of competent jurisdiction in the State
of Delaware or New York, as Holdings may elect in its sole discretion, and
the Optionee hereby submits to the non-exclusive jurisdiction of such
courts for the purpose of any such suit, action, proceeding or judgment. By
the execution and delivery of this Agreement, the Optionee appoints The
Prentice-Hall Corporation at its office at 15 Columbus Circle, New York, NY
10023-7773 as his agent upon which process may be served in any such suit,
action or proceeding. Service of process upon such agent, together with
notice of such service given to the Optionee in the manner provided in
section 4.4. hereof, shall be deemed in every respect effective service of
process upon him in any suit, action or proceeding. Nothing herein shall in
any way be deemed to limit the ability of Holdings to serve any such writs,
process or summonses in any other manner permitted by applicable law or to
obtain jurisdiction over the Optionee, in such other manner permitted by
applicable law or to obtain jurisdiction over the Optionee, in such other
jurisdictions, and in such manner, as may be permitted by applicable law.
The Optionee hereby irrevocably waives any objections which he may now or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in any court of
competent jurisdiction in the State of Delaware or New York, and hereby
further irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in any inconvenient forum.
Holdings hereby submits to the jurisdiction of such courts for the purpose
of any such suit, action or proceeding.
SECTION 4.12 Taxes.
-----
Any taxes required by federal, state, or local laws to be
withheld by the Company (i) on exercise by the Optionee of the Option for
Common Stock, or (ii) at the time an election, if any, is made by the
Optionee pursuant to Section 83(b) of the Internal Revenue Code, as
amended, shall be paid to the Company before delivery of the Common Stock
is made to the Optionee. When the Option is exercised under the broker-
dealer
8
<PAGE>
exercise method, the full amount of any taxes required to be withheld by
the Company on exercise of stock options shall be deducted by the Company
from the proceeds.
SECTION 4.13 Signatures.
----------
This Agreement may be executed by Holdings by manual or facsimile
signature of any duly authorized officer of Holdings.
SECTION 4.14 Counterparts.
------------
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
RJR NABISCO HOLDINGS, CORP.
By /s/
--------------------------
/s/ Charles M. Harper
- -------------------------
Charles M. Harper
Optionee's Taxpayer Identification Number:
###-##-####
- --------------------------
Optionee's Address:
Suite 1500
One Central Park Plaza
Omaha, Nebraska 68102
Dated: December 31, 1995
9
Exhibit 10.38
ENGAGEMENT AGREEMENT
This ENGAGEMENT AGREEMENT, made as of the 3rd day of March, 1995,
between RJR Nabisco Holdings Corp. ("RJR") (the "Company"), and Steven F.
Goldstone ("Counsel"), a partner with the law firm of Davis Polk & Wardwell
("DPW").
RECITALS
--------
WHEREAS, Counsel has experience and insight into the business and
various projects of the Company; and
WHEREAS, the Company desires Counsel to perform the duties of General
Counsel to the Company in connection with the business of the Company, and
Counsel is willing to provide such services.
NOW, THEREFORE, in consideration of the promises contained in
this Engagement Agreement, the Company, and Counsel agree as follows:
1. Legal Services
--------------
Counsel agrees to act as General Counsel to the Company in
connection with legal matters concerning the worldwide business of the
Company and its affiliates and various projects relating thereto. Any and
all services Counsel provides to the Company shall only be in his capacity
as General Counsel to the Company. Counsel will he notified of such
requests as they are assigned by the Chairman of RJR. Except as provided
hereinafter, Counsel shall he available to render services upon request
for each Contract Period (as defined hereinafter) during the Tern of this
Engagement Agreement. Counsel shall, during the Term of this Engagement
Agreement, keep his location, address and telephone number consistently
updated with the Company so that he may be reached at any time.
Counsel may remain a partner with DPW during the Term of this
Engagement Agreement, but shall provide no services to the Company in his
capacity as a partner with DPW. Therefore, it
<PAGE>
is recognized that Counsel shall have other commitments, but he shall,
nevertheless, give first priority to the services requested by the Company.
Notwithstanding the foregoing, the Company and Counsel
acknowledge that DPW may be retained from time to time as outside counsel
for legal matters involving the Company. However, in all such engagements
during the pendency of this Engagement Agreement, Counsel shall be serving
in the capacity of General Counsel to the Company and not in the capacity
of outside counsel as a partner with DPW.
2. Fees
----
a) The fee hereunder shall be an annual retainer of $850,000, to be
adjusted as appropriate pursuant to paragrah 2(d) below.
b) Except as provided in paragraph 2(c), as consideration for
personal services Counsel will render under Paragraph 1 and for
Counsel's availability to provide such services each Contract Period,
the Company agrees to pay to Counsel a fee at the quarterly rate of
$212,500 ($850,000 per year) which shall be paid in advance at the
beginning of each calendar quarter during each Contract Period.
c) Payment for the partial calendar quarter March 3, 1995 to March
31, 1995 shall be $106,250 and shall be payable upon execution of
this Engagement Agreement.
d) The fees and required availability of Counsel shall be reviewed
on or before September 1, 1995 by the Company and Counsel to determine,
based on the experience of the parties, whether this Engagement
Agreement should be amended to increase or decrease the fees and the
availability of Counsel.
3. Term
----
(a) The Term of this Engagement Agreement shall be two consecutive 12
month periods ("Contract Periods") commencing March 3, 1995.
(b) Any party may cancel this Engagement Agreement by giving 30 days
written notice.
2
<PAGE>
4. Billing and Reimbursement of Expenses
-------------------------------------
(a) The Company will reimburse Counsel for authorized travel, living
and other business expenses incurred by Counsel for services which
Counsel performs at the Company's request. Counsel will make quarterly
billings to the Company for any travel, living and other business
expenses reimbursable to Counsel hereunder. Travel by air shall be
at the first class rate.
(b) The Company will, as necessary from time to time, provide Counsel
when on site at a Company facility with the use of the Company
office space and secretarial support services.
(c) In connection with Counsel's performance of services, the Company
shall provide Counsel with the same liability, indemnification and
Business Travel Accident insurance programs it affords its officers.
For purposes of Business Travel Accident insurance, the retainer
stated in paragraph 2(a) shall be considered "base salary."
(d) The Company shall ensure that at all times during the term of
this Engagement Agreement Counsel is a "named insured" under its (i)
Directors and Officers Liability Insurance and (ii) Employee
Professional Liability Coverage.
5. Independent Contractor
----------------------
Counsel is an independent contractor in all respects. Except as
otherwise specifically provided herein, Counsel shall not be entitled to
any employee benefits afforded by the Company to its employees or employees
of its affiliates by reason of the services performed under this Engagement
Agreement. The Company shall not deduct from the fees paid under this
Engagement Agreement any taxes, payments for unemployment compensation,
social security or other similar required payments. Such taxes and required
payments shall be the sole responsibility of Counsel. The Company
specifically waives any and all legal claims it may have now, or have in
the future, against DPW for the actions of Counsel arising out of the
services performed under this Engagement Agreement, and shall indemnify DPW
for all costs, including liabilities arising out of, or any legal fees or
expenses incurred, in connection with any litigation brought against DPW
based upon the actions of Counsel arising out of the services performed
under this Engagement Agreement.
3
<PAGE>
6. Non-Disclosure
--------------
Any information disclosed to Counsel by the Company or any of its
affiliates shall be regarded as confidential, and shall be subject to
attorney-client privilege. Such information will be used solely in
connection with work performed by Counsel for the Company, and Counsel
shall not disclose such information to any third party unrelated to the
Company at any time during the term of this Engagement Agreement or
thereafter without the prior written approval of the Company.
7. Miscellaneous
-------------
(a) This is an agreement for the personal services of Counsel.
Counsel's rights and obligations hereunder may not be assigned
by Counsel without prior written consent of the Company.
(b) This Engagement Agreement constitutes the entire agreement of the
parties, and any amendments hereto shall be in writing, signed by all
parties hereto.
(e) This Engagement Agreement shall be governed by the laws of the
State of New York.
(d) No benefit or promise hereunder shall be secured by any specific
assets of the Company. Counsel shall have only the right of an
unsecured general creditor in seeking satisfaction of such benefits
or promises. No benefit or promise hereunder may be assigned or
anticipated in any way.
IN WITNESS WHEREOF, the parties have executed this Engagement Agreement
as of the date first written above.
RJR Nabisco Holdings Corp.
By /s/
------------------------------------
Chairman and Chief Executive Officer
/s/ Steven F. Goldstone
-------------------------------------
Steven F. Goldstone
4
Exhibit 10.39
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT by and among RJR Nabisco Holdings Corp., a
Delaware corporation ("Holdings"), RJR Nabisco, Inc., a Delaware
corporation and a direct subsidiary of Holdings (the "Company") and Steven
F. Goldstone ("Executive") is effective as of October 1, 1995. This
Agreement will (i) following a Change of Control (as defined in Exhibit A),
supersede the Executive's participation in the RJR Nabisco Holdings Corp.
Headquarters Continuing Excellence Recognition Program (the "Headquarters
Program") and (ii) be in lieu of Executive's participation in the RJR
Nabisco Holdings Corp. 1995 Employee Protection Program (the "1995
Program"), but will in no event provide lesser benefits to Executive in the
event of the termination of Executive's employment following a Change of
Control than would otherwise be available under the 1995 Program.
RECITALS
---------
In order to induce Executive to leave his current position and to
accept the position of President, General Counsel and member of the Office
of the Chairman of Holdings and the Company, Holdings and the Company
desire to provide Executive with compensation and other benefits under the
conditions set forth in this Agreement. Executive is willing
<PAGE>
to accept such employment and perform services for Holdings and the Company
on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. Employment.
----------
1.1 Subject to the terms and conditions of this Agreement,
Holdings agrees to employ Executive during the term hereof as President,
General Counsel and member of the Office of Chairman of Holdings and the
Company. Executive shall have the customary powers, responsibilities and
authorities of presidents of corporations of the size, type and nature of
Holdings and Company, and specifically, he shall have responsibility for
all of Holdings' and the Company's staff functions, including finance,
human resources, administration and communications, in addition to
responsibility for Holdings' and the Company's legal affairs as General
Counsel. Executive's principal office shall be at the principal executive
offices of Holdings and the Company in New York, New York.
1.2 Holdings and the Company shall, throughout the term hereof,
cause the election and retention of Executive as President of Holdings and
the Company.
2
<PAGE>
1.3 Subject to the terms and conditions set forth herein,
Executive hereby accepts employment as President, General Counsel and
member of the Office of the Chairman of Holdings and the Company and shall
devote his full working time and efforts, to the best of his ability,
experience and talent, to the performance of the services, duties and
responsibilities in connection therewith. Nothing in this Agreement shall
preclude the Executive from engaging, consistent with his duties and
responsibilities hereunder, in charitable and community affairs, from
managing his personal investments, from continuing to serve on the boards
of directors of any Affiliate (as hereinafter defined) of Holdings or the
Company or from serving, subject to approval of the Holdings Board (as
defined in Exhibit A), as a member of boards of directors of other
companies. The term "Affiliate" shall mean any direct or indirect
subsidiary of Holdings or the Company or any successor thereto. For
purposes of this Agreement, the term "available to Senior Executive
Officers" shall mean that something is available to the senior executive
officers of Holdings or the Company or generally available to all chief
executive officers of the major operating companies of Holdings; provided,
however, such term shall not include the Chairman and Chief Executive
Officer of Holdings or the Company.
3
<PAGE>
1.4 This Agreement supersedes and revokes in their entirety any
and all prior employment or service agreements with Holdings or the
Company, and in particular, that certain Engagement Agreement with Holdings
dated March 3, 1995.
2. Term of Employment.
------------------
Executive's term of employment under this Agreement shall continue in
accordance with the terms hereof until a termination of Executive's
employment.
3. Compensation.
------------
3.1 Salary. The Company shall pay Executive a base salary ("Base
------
Salary") at the rate of $850,000 per annum. Base Salary shall be payable in
accordance with the ordinary payroll practices of the Company. Executive's
rate of Base Salary shall be reviewed for possible increases by the
Chairman and Chief Executive Officer of the Company at least annually and,
once approved by the Board (as defined in Exhibit A), such higher amount
shall constitute Executive's Base Salary.
3.2 Annual Bonus.
-------------
(a) In addition to his Base Salary, Executive shall be entitled,
while he remains employed hereunder, to receive an annual bonus under the
Company's Annual Incentive Award Plan in effect on the date of this
Agreement, as amended from time to time, a copy of which has been given to
4
<PAGE>
Executive, or under any successor plan thereto available to Senior
Executive Officers ("AIAP"), in accordance with the terms thereof. Such
AIAP, in any event, will provide an annual target bonus opportunity to
Executive no less favorable than sixty percent (60%) of his Base Salary
paid or accrued with respect to the related year, subject to the attainment
of the performance goals established from time to time under such AIAP.
(b) For the fiscal year ending December 31, 1995, Executive shall
be deemed to have participated in the AIAP from March 3, 1995.
(c) For fiscal years beginning on and after January 1, 1996,
Executive may be granted Performance Units under the Company's 1990 Long
Term Incentive Plan or a successor plan (the "LTIP") in lieu of a cash
bonus. If such grants are made, each Performance Unit Agreement under the
LTIP to which Executive is a party shall specifically provide that following
a Change of Control the Committee responsible for exercising any discretion
with respect to the award shall not exercise such discretion so as to
reduce the "Payment Value" of such award below the award's "Initial Grant
Value" (as such terms are customarily defined in Performance Unit Agreements
awarded to Senior Executive Officers of the Company under the LTIP prior to
the date hereof).
5
<PAGE>
3.3 Compensation Plans and Programs. Executive shall participate
-------------------------------
in any compensation plan or program, whether annual or long term,
maintained by Holdings or the Company on terms no less favorable than those
available to Senior Executive Officers eligible to participate therein.
3.4 Special Bonus Payments. Upon a Change of Control, the
----------------------
Company shall pay to Executive a special cash bonus payment equal to the
sum of (a) Executive's AIAP Vested Amount as of such Change of Control,
Executive's PS Vested Amount as of such Change of Control, and Executive's
PU Vested Amount as of such Change of Control (all as defined in Exhibit
A); and (b) any additional funding amounts required to fully fund the
Benefit (as defined in Section 5) accrued to the date of such Change of
Control under Section 5 hereof. Notwithstanding the foregoing, in the event
that following a Change of Control any performance period relating to any
award under the AIAP or of Performance Units or Performance Shares under
the LTIP within which such Change of Control occurred is completed prior to
Executive's termination of employment, upon such completion Executive shall
be entitled to payment in respect of each such award of an amount, if any,
equal to the excess of the value of such award based on actual performance
for such performance period over the AIAP Vested Amount, PU Vested Amount
or PS Vested Amount, as the
6
<PAGE>
case may be, previously paid to Executive upon such Change of Control in
respect of such AIAP award, Performance Units or Performance Shares.
4. Employee Benefits.
-----------------
4.1 Employee Benefit Plans and Programs. The Company and
-----------------------------------
Holdings shall provide Executive during the term of his employment
hereunder coverage under all employee benefit programs, plans and practices
(commensurate with his position in the Company and to the extent possible
under any employee benefit plan), in accordance with the terms thereof,
which Holdings and the Company make available to Senior Executive Officers,
including, but not limited to (a) retirement, pension and profit sharing
(including the SERP, as defined in Section 5, subject to the provisions of
Section 5) and (b) medical, dental, hospitalization, short and long term
disability, accidental death and dismemberment and travel accident
coverage.
4.2 Vacation and Fringe Benefits. Executive shall be entitled
----------------------------
to the number of vacation days customarily available to Senior Executive
Officers of the Company. In addition, Executive shall be entitled to the
perquisites and fringe benefits from time to time available to Senior
Executive Officers.
7
<PAGE>
4.3 Directors and Officers Liability Coverage. Executive shall
-----------------------------------------
be entitled to the same level of coverage (as determined from time to time
by the Boards (as defined in Exhibit A)) under such directors' and
officers' liability insurance policies, if any, or other arrangements as
are available to Senior Executive Officers and directors of Holdings and
the Company, to the fullest extent permitted by the existing By-laws of
Holdings and the Company. In any event, Holdings and the Company shall
indemnify and hold Executive harmless, to the fullest extent permitted by
the laws of the States of Holdings' and the Company's incorporations, from
and against all costs, charges and expenses (including reasonable
attorneys' fees) whatsoever incurred or sustained by him or his legal
representatives in connection with any action, suit or proceeding to which
he or his legal representatives may be made a party by reason of his being
or having been a director or officer of Holdings or the Company or any of
their Affiliates. This Section 4.3 shall survive the termination of this
Agreement for any reason.
4.4 Retiree Medical. Upon retirement under Section 5 herein,
---------------
Executive shall be eligible for retiree medical coverage based on (i) the
greater of his actual age or a minimum deemed age of 55 and (ii) the number
of years of
8
<PAGE>
actual and imputed Service with which Executive is credited as Service
under the provisions of Executive's individual SERP arrangement as
described in Section 5.
5. Supplemental Pension.
--------------------
(a) Executive shall become a participant in the Company's
Supplemental Executive Retirement Program ("SERP") upon the execution
of this Agreement and shall accrue a benefit (the "Benefit") under the
SERP formula resulting from his years of actual Service plus 13.5 additional
years of imputed Service. "Average Final Compensation" (as used in the SERP)
shall for the foregoing calculation, or any other SERP calculation made
before October 1, 1998, be an amount equal to the sum of the amounts
described under Section 6.1(a)(i) and Section 6.1(a)(ii) (without reduction
for actual performance). Executive's Benefit shall be forfeited if he
voluntarily leaves employment without Good Reason as defined in Section
6.1(b) or is terminated by the Company for Cause (as defined in Section 6.4)
in either case prior to the earlier of (i) October 1, 1998 or (ii) a Change of
Control. If Executive forfeits the accrued Benefit as described in this 5(a),
the cash value of any annuity securing such Benefit (as described in Section
5(b) below) at the time of such forfeiture, net of all taxes imposed on the
surrender thereof (computed at the maximum marginal rates), shall be
9
<PAGE>
returned by the trustee of the secular trust referred to below to
the Company.
(b) (i) To provide Executive with greater security and financial
flexibility, not later than April 30, 1996 the present value of the after-tax
equivalent of the accrued Benefit shall be secured by the Company's purchase
and delivery to a secular trust for Executive's benefit of an annuity contract
having a lump-sum cash-out option which is the same type of annuity previously
purchased for SERP participants. Executive shall make a timely election under
Section 83(b) (an "83(b) election") of the Internal Revenue Code of 1986, as
amended (the "Code") to be taxed on such transfer and the Company shall pay
to Executive an additional amount such that after payment by Executive of
all applicable Federal, state and local taxes thereon (computed at the
maximum marginal rates) there is retained a sufficient amount to pay all
such taxes incurred by Executive on such transfer.
(ii) For fiscal year 1996 and for each fiscal year or portion thereof
thereafter, during which Executive is actively employed or with respect to which
notional period Executive receives Compensation Continuance (as defined in
Section 6.1(a)), the Company shall purchase and deliver to a secular trust for
Executive's benefit an annuity for the incremental accrued Benefit in respect of
that year not
10
<PAGE>
already secured by such annuities until such time as, and to ensure that,
Executive's maximum Benefit under the SERP has been fully secured by such
purchases and deliveries of annuities. In the event of a Change of Control,
sufficient funds shall be transferred by the Company to a rabbi trust of
which Executive is a beneficiary in order to purchase for Executive an
annuity covering (i) the Benefit accrued to the Change of Control to the
extent not then fully secured by annuities and (ii) the incremental Benefit
to be accrued in respect of the three year period following termination of
employment in the event Executive becomes entitled to Compensation
Continuance (as defined in Section 6.1) after such Change of Control. In
connection with the Company's purchase and delivery to a secular trust for
Executive's benefit of any such additional annuities under this subparagraph
(ii) prior to Executive's Retirement Date, Executive shall make a timely
83(b) election if such purchase and delivery occur prior to the Benefit
becoming non-forfeitable pursuant to Section 5(a). In addition, upon (x) each
such purchase and transfer of additional annuities giving rise to taxes
payable by Executive and (y) the imposition on Executive of any other
Federal, state or local taxes in connection with the maintenance of such
secular trust, the Company or a trust established for such purpose
11
<PAGE>
shall pay to Executive an additional amount such that after payment by
Executive of all applicable Federal, state and local taxes thereon (computed
at the maximum marginal rates) there is retained a sufficient amount to pay
all such taxes incurred by Executive. (iii) The present value of the after-
tax benefits due the Executive under the SERP determined at Executive's
Retirement Date under the SERP will be offset by the after-tax value as of
Executive's Retirement Date of any annuities previously purchased hereunder
including earnings thereon. If an annuity instead of a lump sum is elected
at retirement, a portion of the annuity payments to be made during retirement
may be taxable to Executive, and Executive will be responsible for the
payment of any taxes on such payments. The event of the Executive's
retirement on the Retirement Date, or the delivery of the Benefit on such
date, shall be a termination of employment, but shall not automatically be a
termination under Section 6.1(a) entitling Executive to Compensation
Continuance under this Agreement.
(c) The Company shall, no later than Executive's Retirement Date,
purchase and transfer to Executive such additional annuities as shall be
necessary to fully fund any additional Benefit accrued to Executive's
Retirement Date and any such annuities, to the extent then held in a secular
12
<PAGE>
trust, will be delivered to Executive from such secular trust. The Company
shall pay to Executive at the time of such transfer an additional amount
such that after payment by Executive of all applicable Federal, state and
local taxes thereon (computed at the maximum marginal rates) there is
retained a sufficient amount to pay all such taxes incurred by Executive on
such transfer.
(d) Executive's "Retirement Date" shall be the attainment of age 60
or, if later, the last day of any Compensation Period (as described in
Section 6.1(a)). Executive's Retirement Date shall be deemed to include the
date of Executive's death if death occurs before retirement. Any annuity
delivered to Executive hereunder shall have a lump sum cash-out option.
Executive agrees that a pre-condition to any funding of a Benefit under
this Section 5 is the Executive's execution at such time of funding
acknowledgment waivers reasonably requested by the Company, and Executive's
agreement to place all annuities purchased for Executive in a secular trust
designated by the Company until Executive's Retirement Date.
6. Termination of Employment.
--------------------------
6.1 Termination Not For Cause or For Good Reason.
---------------------------------------------
(a) The Company and Holdings may terminate Executive's
employment at any time for any reason, and
13
<PAGE>
Executive may terminate his employment at any time for Good Reason. If
Executive's employment is terminated by the Company or Holdings other than
for Cause (as hereinafter defined)prior to or more than twenty-four months
after a Change of Control or for any reason (other than death or
disability) during the twenty-four month period following a Change of
Control or Executive terminates his employment for Good Reason (as
hereinafter defined), the Company shall pay to Executive as additional
compensation ("Compensation Continuance") (x) if such termination is prior
to, or more than twenty-four months after, a Change of Control,
compensation until the third anniversary (the "Compensation Period") of the
date his employment terminated (or, if earlier, until his date of death),
payable monthly at an annual rate equal to the amounts set forth in clauses
(i) and (ii) below, or (y) if such termination occurs during the twenty-
four month period following a Change of Control, then upon such termination
a lump sum payment, discounted to its present value, based on a notional
payment period of 3 years assuming equal monthly payments and a discount
rate equal to the product of (i) the three-year Treasury bond yield as
published in the New York Times on the first of the month in which the
termination occurs and (ii) 100% minus the aggregate applicable Federal,
state and local taxes then
14
<PAGE>
imposed on Executive's employment income computed at the maximum applicable
marginal rates, in cash in an amount equal to three (3) times the sum of
the amounts set forth in clauses (i) and (ii) below:
(i) his Base Salary at its then current annual rate or
following a Change of Control, if higher, the rate
in effect immediately prior to such Change of
Control; and
(ii) his target bonus at its then current percentage or
following a Change of Control, if higher, the
percentage in effect immediately prior to such
Change of Control; and computed in the case of any
such bonus opportunity in the form of Performance
Units based on the Initial Grant Value (as defined
in Section 3.2(c)) of such Performance Units.
In addition, Executive, if he is entitled to Compensation Continuance,
shall be entitled to receive:
(iii) Executive's full Base Salary through the date of
termination at the rate in effect at the time
notice of termination is given, AIAP Vested Amount
as of the date of termination, and, except as set
forth below, all other amounts to which Executive
is entitled under any compensation or benefit plan
of the Company including, but not limited to, the
AIAP and LTIP, and all unpaid amounts, as of the
date of such termination, in respect of any bonus,
including any bonus for any Fiscal Year ending
before such termination which would have been
payable had the Executive remained in employment
until the date such bonus would otherwise have been
paid, at the times such payments are due under the
terms of such plans or, following a Change of
Control, upon such termination;
(iv) any payment deferred by Executive, together with
any applicable interest or other accruals thereon;
(v) the benefits under Section 5 hereof shall be paid
out in accordance with their terms; provided,
---------
however,that Executive shall, for purposes of
--------
15
<PAGE>
Section 5, be deemed to have remained employed by the Company and
Holdings for the period ending on the third anniversary of the
date his employment terminated;
(vi) continued coverage under Holdings' and the
Company's employee benefit programs, plans and
practices described in Section 4.1 and 4.2 hereof
until the third anniversary of the date his
employment terminated, or Holdings or the Company
will provide for equivalent coverage (on an after-
tax basis), subject to any applicable coordination
of benefits rules; provided that (A) in the case of
any plan meeting the requirements of Section 401(a)
of the Code, prior to a Change of Control, such
coverage shall be provided only to the extent
consistent with such requirements and (B) in the
event of such a termination following a Change of
Control, the level of such coverage shall not be
less than that in effect immediately prior to such
Change of Control;
(vii) such payments under applicable plans or programs,
including but not limited to those described in
Section 3.3 and 4.3 and payment for accrued
vacation, as may be determined pursuant to the
terms of such plans or programs and this Agreement;
(viii) outplacement counseling services at Company
expense; provided however, this expense shall not
exceed 18% of annualized Base Pay in any calendar
year;
(ix) for the first six (6) months after termination, the
reasonable cost of one secretary and a fully
functional office, such office location to be
determined by Executive as long as the office is
not to be located on the premises of the Company;
(x) if Executive's termination occurs prior to March 1,
1996, any applicable additional benefits and
protections provided under the Headquarters
Program;
(xi) if Executive's termination occurs during the
twenty-four month period following a Change of
Control, all cash payments to be made hereunder
upon a termination of employment shall be made not
16
<PAGE>
later than 15 business days following the date of termination,
and in addition Executive shall receive:
(A) a lump sum cash payment equal to the sum of Executive's
AIAP Vested Amount, PS Vested Amount and PU Vested Amount all as
of the date of termination;
(B) a lump sum cash payment equal to three times the value
of the annual credit under the RJR Nabisco. Inc. Flexible
Perquisites Program (the "Perquisites Program") to which
Executive was entitled immediately prior to such termination or,
if higher, to which Executive was entitled immediately prior to
the Change of Control, reduced by such credits as would otherwise
be applied to the continued benefits under Section 6.1(a)(vi)
above;
(C) use of the automobile assigned to Executive immediately
prior to the Change of Control until the third anniversary of the
date of termination and, at the end of such period, the transfer
of ownership of such automobile to Executive plus such amount in
cash that after payment of all applicable Federal, state and
local taxes thereon, computed at the maximum marginal rates, is
equal to all such taxes, so computed, imposed in connection with
such transfer;
(D) in addition to and upon the expiration of the benefits
provided pursuant to Section 6.1(a) (vi) above, MedChoice Retiree
Medical benefits as may be in effect at the time of such
expiration for other retirees and as amended from time to time
thereafter at the minimum level of Company subsidy or, if
greater, the subsidy level based on his years of actual and
imputed service under the SERP; and
(E) if the Company fails to provide any of the benefits
under Section 6.1(a) (vi) or Section 6.1(a)(xi) (D) above,
reimbursement for the actual cost of Executive's obtaining
comparable benefits within 15 business days after the date
Executive gives the Company written notice that he incurred such
costs plus such additional amount that after
17
<PAGE>
payment of all applicable Federal, state and local taxes thereon,
computed at the maximum applicable marginal rates, is equal to
all such taxes, so computed, imposed with respect to such
reimbursement.
(b) For purposes of this Agreement, "Good Reason" shall mean any
of the following (without Executive's express prior written consent):
(i) (A) The assignment to Executive of duties materially
inconsistent with Executive's position (including duties,
responsibilities, status, titles or offices as set forth in
Section 1 hereof); (B) any elimination or reduction of
Executive's duties or responsibilities as set forth in Section 1;
or (C) any removal of Executive from or any failure to elect or
reelect Executive to the position of President of Holdings and
the Company (including the failure to elect Executive to the
positions of President of the ultimate controlling entity in
connection with any merger, acquisition or other extraordinary
corporate transaction that includes Holdings or the Company),
except in connection with the termination of Executive's
employment for Cause, Permanent Disability (as hereinafter
defined) or as a result of Executive's death or by Executive
other than for Good Reason;
(ii) A reduction in Executive's Base Salary or annual target bonus
opportunity as in effect at the commencement of employment
hereunder or as the same may be increased from time to time
during the term or pursuant to the terms of this Agreement;
(iii) The failure by the Company or Holdings to obtain the specific
assumption of this Agreement by any successor or assign of
Holdings or the Company or any person acquiring substantially all
of the Company's or Holdings' assets;
(iv) Any material breach by the Company or Holdings of any provision
of this Agreement or any agreements entered into pursuant
thereto;
18
<PAGE>
(v) Requiring Executive to be based at any office or location other
than that described in Section 1 above, except for travel
reasonably required in the performance of the Executive's
responsibilities, or
(vi) (A) During the twenty-four month period following a Change of
Control, the failure to continue in effect any compensation plan
in which Executive participates at the time of the Change of
Control, including but not limited to the LTIP, the AIAP, the
Perquisites Program, or any substitute plans adopted prior to the
Change of Control, unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan providing Executive
with substantially similar benefits) has been made with respect
to such plan in connection with the Change of Control, or the
failure to continue Executive's participation therein on
substantially the same basis, both in terms of the amount of
benefits provided and the level of his participation relative to
other participants, as existed at the time of the Change of
Control; or (B) the failure to continue to provide Executive with
benefits at least as favorable in the aggregate as those enjoyed
by him under any of the Company's pension, life insurance,
medical, health and accident, disability, deferred compensation
or savings plans in which he was participating at the time of the
Change of Control, the taking of any action which would directly
or indirectly materially reduce any of such benefits or deprive
Executive of any material fringe benefit enjoyed by him at the
time of the Change of Control, or the failure to provide him with
the number of paid vacation days to which he was entitled on the
basis of the Company's practice with respect to him as in effect
at the time of the Change of Control.
(c) (i) Anything in this Agreement to the contrary
notwithstanding, in the event that it is determined that any payment
or distribution by the Company to or for the benefit of Executive,
whether paid
19
<PAGE>
or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then Executive shall be entitled to
receive from the Company, within 15 days following the determination
described in Section 6.1(c)(ii) below, an additional payment ("Excise
Tax Adjustment Payment") in an amount such that after payment by
Executive of all applicable Federal, state and local taxes (computed
at the maximum marginal rates and including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed
upon the Excise Tax Adjustment Payment, Executive retains an amount of
the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon
the Payments.
(ii) All determinations required to be made under this Section
6.1(c), including whether an Excise Tax Adjustment Payment is required
and the amount of such Excise Tax Adjustment Payment, shall be made by
Ernst & Young, Winston-Salem, North Carolina, or such other
20
<PAGE>
accounting firm as the Company or Holdings may designate prior to a
Change of Control, which shall provide detailed supporting
calculations to the Company and the Executive within 15 business days
of the date of termination of Executive's employment. Except as
hereinafter provided, any determination by Ernst & Young,
Winston-Salem, North Carolina, or such other accounting firm as the
Company or Holdings may designate prior to a Change of Control, shall
be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time
of the initial determination hereunder, it is possible that (x)
certain Excise Tax Adjustment Payments will not have been made by the
Company which should have been made (an "Underpayment"), or (y)
certain Excise Tax Adjustment Payments will have been made which
should not have been made (an "Overpayment"), consistent with the
calculations required to be made hereunder. In the event of an
Underpayment, such Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive. In the event that the
Executive discovers that an Overpayment shall have occurred, the
amount thereof shall be promptly repaid to the Company.
21
<PAGE>
(d) Except as provided in this Agreement, if Executive is a
participant in the LTIP or any other stock award plan of the Company,
Holdings, or any of their affiliates and has outstanding awards
thereunder, the treatment of such awards shall be governed by the
terms of such applicable plans and awards.
6.2 Permanent Disability. The event of the Executive
--------------------
becoming eligible for benefits under the Company's Long Term Disability
Plan is not a termination under Section 6.1(a) entitling Executive to
Compensation Continuance under this Agreement. If, however, Executive
becomes eligible for benefits under the Company's Long Term Disability Plan
during his Compensation Period, the amount of Compensation Continuance
shall be reduced during the Compensation Period by the amount of disability
benefits payable to the Executive. All other provisions of this Agreement
shall remain in effect notwithstanding the Executive's disability
including, without limitation, obligations pursuant to Section 5 hereof,
the terms of any applicable plans, including, but not limited to, those
described in Sections 3.3, 4.1, 4.2, 4.3 and 4.4 hereof, and all unpaid
amounts, as of the date of such disability, in respect of any bonus,
including any bonus payable for any fiscal year ending prior to such
disability, and any payment deferred by Executive,
22
<PAGE>
together with any applicable interest or other accruals thereon. If the
Executive is still disabled upon reaching his Retirement Date under the
SERP, he shall be retired under the SERP with an offset for any disability
payments made to the Executive after such retirement.
6.3 Death. In the event of Executive's death while actively
-----
employed, the Company's and Holdings' obligations under this Agreement
shall cease and terminate except with respect to obligations pursuant to
Section 5 hereof, the terms of any applicable plans, including, but not
limited to, those described in Sections 3.3, 4.1, 4.2, 4.3 and 4.4 hereof,
and all unpaid amounts, as of the date of death, in respect of any bonus,
including any bonus, for any fiscal year ending prior to death which would
have been payable had Executive remained in employment until the date such
bonus would otherwise have been paid shall be paid and any payment deferred
by Executive, together with any applicable interest or other accruals
thereon shall be paid. In the event of Executive's death subsequent to
commencement of his Compensation Period hereunder, the balance of
Compensation Continuance will be paid to his beneficiary in a lump sum.
"Beneficiary" shall mean the Executive's designated beneficiary under his
Executive Program life
23
<PAGE>
insurance. with the SERP. Any survivor benefit shall be paid in accordance
with the SERP.
6.4 Voluntary Resignation; Discharge for Cause.
------------------------------------------
If Executive resigns voluntarily, other than for Good Reason or Permanent
Disability, or the Company and Holdings terminate the employment of
Executive prior to, or more than twenty-four months after, a Change of
Control for Cause, the Company's and Holdings' obligations under this
Agreement to make any further payments to Executive shall thereupon cease
and terminate except with respect to accrued and nonforfeeitable
obligations pursuant to Section 5 hereof, the terms of any applicable
plans, including those described in Sections 3.3, 4.1, and 4.3 hereof and
all unpaid amounts, as of the date of such termination, in respect of any
bonus, including any bonus for any fiscal year ending prior to such
termination which would have been payable had Executive remained in
employment until the date such bonus would otherwise have been paid, and
any payment deferred by Executive, together with any applicable interest or
other accruals thereon. The term "Cause" shall be limited to (a) action by
Executive involving willful malfeasance in connection with his employment
having a material adverse effect on Holdings or the Company, (b) any action
by Executive involving willful gross misconduct having a
24
<PAGE>
material adverse effect on Holdings or the Company (other than an effect
that could not reasonably constitute grounds for dismissal under the
circumstances), (c) substantial and continuing refusal by Executive in
willful breach of this Agreement to perform the duties ordinarily performed
by an Executive occupying his positions, which refusal has a material
adverse effect on Holdings or the Company or (d) Executive being convicted
of (i) a felony under the laws of the United States or any state or (ii) a
felony under the laws of any other country or political subdivision thereof
involving moral turpitude. Termination of Executive pursuant to this
Section 6.4 shall be communicated by a Notice of Termination given within
one year after Holdings Board both (i) had knowledge of conduct or an event
allegedly constituting Cause and (ii) had reason to believe that such
conduct or event could be grounds for Cause. For purposes of this Agreement
a "Notice of Termination" shall mean delivery to Executive of a copy of a
resolution duly adopted by the affirmative vote of not less than three-
quarters of the entire membership of Holdings Board at a meeting of the
Holdings Board called and held for the purposes after reasonable notice to
the Executive ("Preliminary Notice") and reasonable opportunity for
Executive, together with the Executive's counsel, to be heard before the
Holdings Board
25
<PAGE>
prior to such vote), finding that, in the good faith opinion of the
Holdings Board, Executive was guilty of conduct set forth in the second
sentence of this Section 6.4 and specifying the particulars thereof in
detail. Upon the receipt of the Preliminary Notice, Executive shall have 14
days in which to appear with counsel or take such other action as he
desires on his behalf, and such 14-day period is hereby agreed to by the
parties as a reasonable opportunity for Executive to be heard. The Holdings
Board shall no later than 30 days after the receipt of the Preliminary
Notice by Executive communicate its findings to Executive. A failure by the
Holdings Board to make its findings of Cause or to communicate its
conclusions within such 30-day period shall be deemed to be a finding that
Executive was not guilty of the conduct described in the second sentence of
this Section 6.4. Where the Holdings Board has made such findings that,
based upon conduct described in clause (a), (b) or (c) above, Cause exists
the Executive shall have 30 days in which to cure such conduct, to the
extent such cure is possible. Any termination of Executive's employment
(other than by death or Permanent Disability) within 30 days after the date
that the Preliminary Notice has been given to Executive shall be deemed to
be a termination for Cause; provided, however, that if during such period
Executive voluntarily terminates other
26
<PAGE>
than for Good Reason or the Company terminates Executive other than for
Cause, and either (A) Executive cured his conduct, as permitted in the
preceding sentence of this Section 6.4, or (B) Executive is found (or is
deemed to be found) not guilty of the conduct described in the second
sentence of this Section 6.4, such termination shall not deemed to be for Cause.
7. Stock Arrangements. Except as otherwise provided in Section 3.4
-------------------
and Section 6, awards under the LTIP shall be governed by the provisions of the
individual grant agreements made under the LTIP.
8. Expenses. The Executive is authorized to incur reasonable expense
--------
in carrying out his duties and responsibilities under this Agreement,
including expenses for travel and similar items related to such duties and
responsibilities. The Company shall reimburse Executive for all such
expenses upon presentation by Executive from time to time of an itemized
account of such expenditures.
9. No Obligation to mitigate Damaqes. The Executive shall not be
---------------------------------
required to mitigate damages or the amount of any payment provided for
under this Agreement by seeking other employment or otherwise nor will (a)
any payments under Section 6 hereof be subject to offset in respect of any
claims which the Company may have against Executive or (b)
27
<PAGE>
the amount of any payment or benefit provided for in Section 6 be reduced
by any compensation earned as a result of Executive's employment with
another employer.
10. Notices. All notices or communications hereunder shall be in
-------
writing, addressed as follows:
To the Company or Holdings:
Mr. Gerald I. Angowitz
c/o RJR Nabisco Holdings Corp.
1301 Avenue of the Americas
New York, New York 10019
To the Executive:
Mr. Steven F. Goldstone
205 Silver Spring Road
Ridgefield, CT 06877
Any such notice or communication shall be sent certified or
registered mail, return receipt requested, postage prepaid, addressed as
above (or to such other address as such party may designate in a notice
duly delivered as described above), and the actual date of mailing shall
determine the time at which notice was given.
11. Separability; Legal Fees; Arbitration. If any provision of this
-------------------------------------
Agreement shall be declared to be invalid or unenforceable, in whole or in
part, such invalidity or unenforceability shall not affect the remaining
provisions hereof which shall remain in full force and effect. In addition,
the Company shall reimburse Executive for
28
<PAGE>
reasonable legal fees incurred in connection with entering into this
Agreement and shall also pay to Executive as incurred all legal and
accounting fees and expenses incurred by Executive in seeking to obtain or
enforce any right or benefit provided by this Agreement or any other
compensation-related plan, agreement or arrangement of the Company, unless
Executive's claim is found by an arbitral tribunal of competent
jurisdiction to have been frivolous. Any good faith controversy or claim
arising out of or relating to this Agreement or the breach of this
Agreement (other than Section 14 hereof) that cannot be resolved by
Executive and the Company, including any dispute as to the calculation of
Executive's benefits or any payments hereunder shall be submitted to
arbitration in New York City in accordance with New York law and the
procedures of the American Arbitration Association. The determination of
the arbitrator(s) shall be conclusive and binding on the Company and
Executive and judgment may be entered on the arbitrator(s)' award in any
court having jurisdiction.
12. Assignment. This contract shall be binding upon and inure to the
----------
benefit of the heirs and representatives of Executive and the assigns and
successors of Holdings and the Company, but neither this Agreement nor any
rights hereunder shall be assignable or otherwise subject to hypothecation
by
29
<PAGE>
Executive (except by will or by operation of the laws of intestate
succession) or by Holdings or the Company, except that Holdings or the
Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
businesses of Holdings or the Company.
13. Amendment/Termination.
----------------------
(a) The Agreement may only be amended at any time by mutual
written agreement of the parties hereto.
(b) Company and Holdings represent and warrant they will make
appropriate adjustments and amendments to the number of shares subject to,
and the exercise price of, options to purchase Holdings common stock
granted under the LTIP ("Options") (including, in the event of a spinoff or
distribution of assets or stock of Holdings or an affiliated entity,
substituting or replacing the shares issuable upon the exercise of Options)
should extraordinary events or transactions occur involving the Company,
Holdings, or an affiliated corporation.
14. Nondisclosure of Confidential Information; Non-Competition.
-----------------------------------------------------------
(a) Executive shall not, without the prior written consent of Holdings
or the Company, divulge, disclose or make accessible to any other person,
firm, partnership or
30
<PAGE>
corporation or other entity any Confidential Information pertaining to the
business of Holdings or the Company except (i) while employed by Holdings
or the Company in the business of and for the benefit of Holdings or the
Company or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over
the business of Holdings or the Company, or by any administrative body or
legislative body (including a committee thereof) with purported or apparent
jurisdiction to order Executive to divulge, disclose or make accessible
such information. For purposes of this Section 14(a), "Confidential
Information" shall mean non-public information concerning Holdings' or the
Company's financial data, strategic business plans, product development (or
other proprietary product data), customer lists, marketing plans and other
proprietary information, except for specific items which have become
publicly available information or otherwise known to the public other than
through a breach by Executive of his fiduciary duty or any confidentiality
agreement, or information known to the Executive prior to the date of this
Agreement. Confidential Information does not include information the
disclosure of which cannot reasonably be expected to adversely affect the
business of Holdings or the Company.
31
<PAGE>
(b) During the period commencing on the date hereof and ending (i) in
the case of a termination described in Section 6.1 hereof, three years
after the date of termination; and (ii) in case of a termination described
in Section 6.4 hereof, two years after the date of termination, Executive
covenants and agrees that he will not be an executive officer, board
member, owner, partner, consultant or employee of a food or tobacco company
with revenues over $1 billion, if such food or tobacco company is engaged
in a "major business" of Holdings or the Company. A "major business" for
this purpose is each major business segment of the Company and its
subsidiaries on the date hereof that produces products constituting over 5%
of the revenues of Holdings and its subsidiaries. For purposes of this
Section 14, Executive shall be deemed not a shareholder of a company that
would otherwise be a competing entity if Executive's record and beneficial
ownership of the capital stock of such company amount to not more than one
percent of the outstanding capital stock of any such company subject to the
periodic and other reporting requirements of Section 13 or Section 15(d) or
the Securities Exchange Act of 1934, as amended. Executive, Holdings, and
Company agree this covenant not to compete is a reasonable covenant under
the circumstances, and further agree that if in the opinion of
32
<PAGE>
any court of competent jurisdiction, such restraint is not reasonable in
any respect, such court shall have the right, power and authority to excise
or modify such provision or provisions of this covenant as to the court
shall appear not reasonable and to enforce the remainder of the covenant as
so amended.
(c) Executive agrees that any breach of the covenants contained
in this Section 14 would irreparably injure Holdings and the Company.
Accordingly, Holdings or the Company may, in addition to pursuing any other
remedies they may have in law or in equity, obtain an injunction against
Executive from any court having jurisdiction over the matter, restraining
any further violation of this Agreement by Executive.
15. Beneficiaries/References. Executive shall be entitled to select
------------------------
(and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death, and may change such election, in
either case by giving the Company written notice hereof. In the event of
Executive's death or a judicial determination of his incompetence,
reference in this Agreement to Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal
representative. Any reference to the
33
<PAGE>
masculine gender in this Agreement shall include, where appropriate, the
feminine.
16. Survivorship. The respective rights and obligations of the parties
------------
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section are in addition to the survivorship provisions
of any other section of this Agreement.
17. Representations and Warranties. Holdings and the Company each
------------------------------
represent and warrant that (a), respectively, they are fully authorized and
empowered to enter into this Agreement, (b) the execution of this Agreement
and the performance of their respective obligations under this Agreement
will not violate or result in a breach of the terms of any material
agreement to which Holdings and/or the Company is a party or by which it is
bound, (c) no approval by any governmental authority or body is required
for them to enter into this Agreement or perform their obligations
hereunder, and (d) this Agreement is valid, binding and enforceable against
Holdings and the Company in accordance with its terms, except to the extent
affected or limited by applicable bankruptcy laws or other statutes
governing the rights of creditors and any regulations or interpretations
34
<PAGE>
thereof. Executive represents and warrants that his execution of this
Agreement and his performance of his duties and responsibilities under this
Agreement will not violate or result in a breach of the terms of any
material agreement to which he is a party or by which he is bound.
18. Governing Law. This Agreement shall be construed, interpreted,
-------------
and governed in accordance with laws of New York, without reference to
rules relating to conflicts of law.
19. Withholding. The Company and Holdings shall be entitled to
-----------
withhold for payment any amount of withholding required by law.
20. Interest on Late Payments. To the extent that any payments
-------------------------
required to be made hereunder following a Change of Control are not made
within the period specified therefor, the Company and Holdings shall be
liable for interest on such delayed payments at the rate of 150% of the
prime rate compounded monthly, as posted by the Morgan Guaranty Trust
Company of New York from time to time.
21. Actuarial Calculations. All required actuarial calculations of
----------------------
payments to be made hereunder and of annuities to be purchased pursuant to
Section 5 hereof shall be made by Watson Wyatt Worldwide, New York, New
York, or
35
<PAGE>
such other actuarial firm as the Company or Holdings may designate prior to
a Change of Control.
22. Funding. Except as otherwise provided herein, all benefits
-------
hereunder are unfunded and will be paid out of the general assets of the
Company or Holdings. Notwithstanding the foregoing, the Company or Holdings
may choose to maintain a rabbi trust or other trusts for the purpose of
paying certain of the benefits hereunder or under other plans and programs
of the Company or Holdings and, if so, Executive shall be entitled to
payments therefrom, if any, as and to the extent provided in such rabbi
trust or other trusts.
23. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original.
RJR NABISCO HOLDINGS CORP.
By: /s/ Charles M. Harper
-----------------------------------
Chairman and Chief Executive Officer
RJR NABISCO, INC. By:
By: /s/ Charles M. Harper
-----------------------------------
Chairman and Chief Executive Officer
/s/ Steven F. Goldstone
-----------------------------------
STEVEN F. GOLDSTONE
36
<PAGE>
EXHIBIT "A"
AIAP Vested Amount means, as of a Change of Control or as of the date
------------------
Executive's employment terminates, as the case may be, an amount equal to (a
in the case of any bonus opportunity under the AIAP, the value of
Executive's target award under the AIAP for the relevant period in which
such Change of Control or such termination occurs, as the case may be,
multiplied by a fraction, the numerator of which is the number of months
(including partial months) in the period beginning on the first day of the
relevant performance period and ending on the Change of Control or such
termination, as the case may be, and the denominator of which is the number
of months in such performance period; provided that in the event of a
termination of employment following a Change in Control in the year in
which such Change of Control occurs, for purposes of computing the AIAP
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such Change of Control
and the target award shall be that in effect immediately preceding such
Change of Control, or (b) in the case of any annual bonus opportunity in
the form of Performance Units, the PU Vested Amount as of the date of such
termination.
Board means the Board of Directors of the Company.
-----
<PAGE>
Boards means, collectively, the Board and the Holdings Board.
------
Change of Control means the first to occur of the following events
-----------------
provided such event occurs prior to October 11, 1996 or such later
date as the Boards may specify from time to time:
(a) an individual, corporation, partnership, group, associate
or other entity or "person", as such term is defined in
Section 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), other than Holdings or any employee
benefit plan(s) sponsored by Holdings or the Company, is
or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
30% or more of the combined voting power of Holdings'
outstanding securities ordinarily having the right to
vote at elections of directors.
(b) individuals who constitute the Holdings Board on October
11, 1995 (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any
person becoming a director subsequent to such date whose
election, or nomination for election by Holdings'
shareholders, was approved by a vote of at least three-
quarters of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy
statement of Holdings in which such person is named as a
nominee for director, without objection to such
nomination) shall be, for purposes of this paragraph
(ii), considered as though such person were a member of
the Incumbent Board;
(c) the approval by the shareholders of Holdings of a plan or
agreement providing (1) for a merger or consolidation of
Holdings other than with a wholly-owned subsidiary and
other than a merger or consolidation that would result in
the voting securities of Holdings outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of
Holdings or such surviving entity outstanding immediately
after such merger or consolidation, or (2) for a sale,
2
<PAGE>
exchange or other disposition of all or substantially all of the
assets of Holdings. If any of the events enumerated in this
paragraph (c) occurs, the Holdings Board shall determine the
effective date of the Change of Control resulting therefrom for
purposes of the Program.
Holdings Board means the Board of Directors of Holdings.
--------------
PS Vested Amount means with respect to any award of Performance
----------------
Shares (as defined in the LTIP) Executive holds as of a Change of Control
or as of the date Executive's employment terminates, as the case may be, an
amount equal to the adjusted value of (i) the number of Performance Shares
subject to such award, multiplied by a fraction, the numerator of which is
the number of months (including partial months) elapsed in the relevant
performance period as of such Change of Control or as of the date of such
termination, as the case may be, and the denominator of which is the number
of months in such performance period, (ii) adjusted by applying target
performance with respect to such award; provided that in the event of a
termination of employment following a Change of Control in the year in
which such Change of Control occurs, for purposes of computing the PS
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such Change of Control
and target performance with respect to such Performance Shares shall be
that in effect immediately preceding the Change of Control.
3
<PAGE>
PU Vested Amount means, for any award of Performance Units (as
----------------
defined in the LTIP) Executive holds as of a Change of Control or as of the
date Executive's employment terminates, as the case may be, an amount equal
to the target value of the number of Performance Units subject to such
award multiplied by a fraction, the numerator of which is the number of
months (including partial months) elapsed in the relevant performance
period as of the Change of Control and the denominator of which is the
number of months in such performance period; provided that in the event of
a termination of employment following a Change of Control in the year in
which such Change of Control occurs, for purposes of computing the PU
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such Change of Control
and the target value of such Performance Units shall be that in effect
immediately preceding the Change of Control.
4
Exhibit 10.40
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT by and among RJR Nabisco Holdings Corp., a
Delaware corporation ("Holdings"), RJR Nabisco, Inc., a Delaware
corporation and a direct subsidiary of Holdings (the "Company") and Steven
F. Goldstone ("Executive") is effective as of December 5, 1995, and
supersedes and revokes the prior Employment Agreement with Executive dated
as of October 1, 1995. This Agreement will (i) following a Change of
Control (as defined in Exhibit A), supersede the Executive's participation
in the RJR Nabisco Holdings Corp. Headquarters Continuing Excellence
Recognition Program (the "Headquarters Program") and (ii) be in lieu of
Executive's participation in the RJR Nabisco Holdings Corp. 1995 Employee
Protection Program (the "1995 Program"), but will in no event provide
lesser benefits to Executive in the .event of the termination of
Executive's employment following a Change of Control than would otherwise
be available under the 1995 Program.
RECITALS
--------
In order to induce Executive to accept the positions of Chief
Executive Officer and member of the Office of the Chief Executive Officer
of Holdings and the Company and to continue in the office of President of
Holdings and the Company, Holdings and the Company desire to provide
Executive with compensation and other benefits under the conditions set
forth in this Agreement. Executive is willing to accept such
<PAGE>
employment and perform services for Holdings and the Company on the terms
and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. Employment.
-----------
1.1 Subject to the terms and conditions of this Agreement,
Holdings agrees to employ Executive during the term hereof as Chief
Executive Officer, President, and member of the Office of Chairman of
Holdings and the Company. Executive shall have the customary powers,
responsibilities and authorities of Chief Executive Officers of
corporations of the size, type and nature of Holdings and Company, and
specifically, he shall have responsibility for all of Holdings' and the
Company's staff functions, including finance, human resources,
administration and communications, in addition to responsibility for
Holdings. Executive's principal office shall be at the principal executive
offices of Holdings and the Company in New York, New York.
1.2 Holdings and the Company shall, throughout the term hereof,
cause the election and retention of Executive as Chief Executive Officer,
President and a member of the Boards of Directors of Holdings and the
Company.
1.3 Subject to the terms and conditions set forth herein,
Executive hereby (i) accepts employment as Chief Executive Officer,
President and member of the Office of the
2
<PAGE>
Chief Executive Officer of Holdings and the Company and shall devote
his full working time and efforts, to the best of his ability,
experience and talent, to the performance of the services, duties and
responsibilities in connection therewith and (ii) agrees to be a
member of the Boards of Directors of Holdings and the Company. Nothing
in this Agreement shall preclude the Executive from engaging,
consistent with his duties and responsibilities hereunder, in
charitable and community affairs, from managing his personal
investments, from continuing to serve on the boards of directors of
any Affiliate (as hereinafter defined) of Holdings or the Company or
from serving, subject to approval of the Holdings Board (as defined in
Exhibit A), as a member of boards of directors of other companies. The
term "Affiliate" shall mean any direct or indirect subsidiary of
Holdings or the Company or any successor thereto. For purposes of this
Agreement, the term "available to Senior Executive Officers" shall
mean that something is available to the senior executive officers of
Holdings or the Company or generally available to all chief executive
officers of the major operating companies of Holdings.
1.4 This Agreement supersedes and revokes in their entirety
any and all prior employment or service agreements with Holdings or
the Company, and in particular, the Engagement Agreement with Holdings
dated March 3, 1995, and the Employment Agreement dated as of October
1, 1995.
3
<PAGE>
2. Term of Employment.
------------------
Executive's term of employment under this Agreement shall
continue in accordance with the terms hereof until a termination of
Executive's employment.
3. Compensation.
------------
3.1 Salary. The Company shall pay Executive a base salary
------
("Base Salary") at the rate of $1,100,000 per annum. Base Salary shall
be payable in accordance with the ordinary payroll practices of the
Company. Executive's rate of Base Salary shall be reviewed for
possible increases by the Chairman of the Company at least annually
and, once approved by the Board (as defined in Exhibit A), such higher
amount shall constitute Executive's Base Salary.
3.2 Annual Bonus.
------------
(a) In addition to his Base Salary, Executive shall be
entitled, while he remains employed hereunder, to receive an annual
bonus under the Company's Annual Incentive Award Plan in effect on the
date of this Agreement, as amended from time to time, a copy of which
has been given to Executive, or under any successor plan thereto
available to Senior Executive Officers ("AIAP"), in accordance with
the terms thereof. Such AIAP, in any event, will provide an annual
target bonus opportunity to Executive no less favorable than seventy
percent (70%) of his Base Salary paid or accrued with respect to the
related year, subject to the attainment of the performance goals
established from time to time under such AIAP.
4
<PAGE>
(b) For the fiscal year ending December 31, 1995, Executive
shall be deemed to have participated in the AIAP from March 3, 1995,
with a target bonus opportunity of 70% of $850,000.
(c) For fiscal years beginning on and after January 1, 1996,
Executive may be granted Performance Units under the Company's 1990
Long Term Incentive Plan or a successor plan (the "LTIP") in lieu of a
cash bonus under the AIAP pursuant to Section 3.2(a). If such grants
are made, each Performance Unit Agreement under the LTIP to which
Executive is a party shall specifically provide that following a
Change of Control the Committee responsible for exercising any
discretion with respect to any such award shall not exercise such
discretion so as to reduce the "Payment Value" of such award below the
award's "Initial Grant Value" (as such terms are customarily defined
in Performance Unit Agreements awarded to Senior Executive Officers of
the Company under the LTIP prior to the date hereof).
3.3 Compensation Plans and Programs. Executive shall
-------------------------------
participate in any compensation plan or program, whether annual or
long term, maintained by Holdings or the Company on terms no less
favorable than those available to Senior Executive Officers eligible
to participate therein.
3.4 Special Bonus Payments. Upon a Change of Control, the
----------------------
Company shall pay to Executive a special cash
5
<PAGE>
bonus payment equal to the sum of (a) Executive's AIAP Vested Amount
as of such Change of Control, Executive's PS Vested Amount as of such
Change of Control, and Executive's PU Vested Amount as of such Change
of Control (all as defined in Exhibit A); and (b) any additional
funding amounts required to fully fund the Benefit (as defined in
Section 5) accrued to the date of such Change of Control under Section
5 hereof. Notwithstanding the foregoing, in the event that following a
Change of Control any performance period relating to any award under
the AIAP or of Performance Units or Performance Shares under the LTIP
within which such Change of Control occurred is completed prior to
Executive's termination of employment, upon such completion Executive
shall be entitled to payment in respect of each such award of an
amount, if any, equal to the excess of the value of such award based
on actual performance for such performance period over the AIAP Vested
Amount, PU Vested Amount or PS Vested Amount, as the case may be,
previously paid to Executive upon such Change of Control in respect of
such AIAP award, Performance Units or Performance Shares.
4. Employee Benefits.
-----------------
4.1 Employee Benefit Plans and Programs. The Company and
-----------------------------------
Holdings shall provide Executive during the term of his employment
hereunder coverage under all employee benefit programs, plans and
practices (commensurate with his
6
<PAGE>
position in the Company and to the extent possible under any employee
benefit plan), in accordance with the terms thereof, which Holdings
and the Company make available to Senior Executive Officers,
including, but not limited to (a) retirement, pension and profit
sharing (including the SERP, as defined in Section 5, subject to the
provisions of Section 5) and (b) medical, dental, hospitalization,
short and long term disability, accidental death and dismemberment and
travel accident coverage.
4.2 Vacation and Fringe Benefits. Executive shall be
----------------------------
entitled to the number of vacation days customarily available to
Senior Executive Officers of the Company. In addition, Executive shall
be entitled to the perquisites and fringe benefits from time to time
available to Senior -Executive Officers.
4.3 Directors and Officers Liability Coverage. Executive
-----------------------------------------
shall be entitled to the same level of coverage (as determined from
time to time by the Boards (as defined in Exhibit A)) under such
directors' and officers' liability insurance policies, if any, or
other arrangements as are available to Senior Executive Officers and
directors of Holdings and the Company, to the fullest extent permitted
by the existing By-laws of Holdings and the Company. In any event,
Holdings and the Company shall indemnify and hold Executive harmless,
to the fullest extent permitted by the
7
<PAGE>
laws of the States of Holdings' and the Company's incorporations, from
and against all costs, charges and expenses (including reasonable
attorneys' fees) whatsoever incurred or sustained by him or his legal
representatives in connection with any action, suit or proceeding to
which he or his legal representatives may be made a party by reason of
his being or having been a director or officer of Holdings or the
Company or any of their Affiliates. This Section 4.3 shall survive the
termination of this Agreement for any reason.
4.4 Retiree Medical. Upon retirement under Section 5 herein,
---------------
Executive shall be eligible for retiree medical coverage based on (i)
the greater of his actual age or a minimum deemed age of 55 and (ii)
the number of years of actual and imputed Service with which Executive
is credited as Service under the provisions of Executive's individual
SERP arrangement as described in Section 5.
5. Supplemental Pension.
--------------------
(a) Executive is a participant in the Company's Supplemental
Executive Retirement Program ("SERP"). Executive shall accrue a
benefit (the "Benefit") under the SERP formula resulting from (i) his
years of actual Service plus (ii) 13.5 additional years of imputed
Service plus (iii) additional years of imputed service for the period,
if any, with respect to which Executive receives Compensation
8
<PAGE>
Continuance (as defined in Section 6.1(a)). "Average Final
Compensation" (as used in the SERP) shall for the foregoing
calculation, or any other SERP calculation made before October 1,
1998, be an amount equal to the sum of the amounts described under
Section 6.1(a)(i) and Section 6.1(a)(ii) (without reduction for actual
performance). Executive's Benefit shall be forfeited if he voluntarily
leaves employment without Good Reason as defined in Section 6.1(b) or
is terminated by the Company for Cause (as defined in Section 6.4) in
either case prior to the earlier of (i) October 1, 1998 or (ii) a
Change of Control. If Executive forfeits the accrued Benefit as
described in this 5(a), the cash value of any annuity securing such
Benefit (as described in Section 5(b) below) at the time of such
forfeiture, net of all taxes imposed on the surrender thereof
(computed at the maximum marginal rates), shall be returned by
the-trustee of the secular trust referred to below to the Company.
(b) (i) To provide Executive with greater security and financial
flexibility, not later than April 30, 1996 the present value of the
after-tax equivalent of the accrued Benefit as of the date of delivery
of the annuity contract as described herein shall be secured by the
Company's purchase and delivery to a secular trust for Executive's
benefit of an annuity contract having a lump-sum cash-out option which
is the same type of annuity previously purchased for SERP
9
<PAGE>
participants. Executive shall make a timely election under Section
83(b) (an "83(b) election") of the Internal Revenue Code of 1986, as
amended (the "Code") to be taxed on such transfer and the Company
shall pay to Executive at the time of such election an additional
amount such that after payment by Executive of all applicable Federal,
state and local taxes thereon (computed at the maximum marginal rates)
there is retained a sufficient amount to pay all such taxes incurred
by Executive on such transfer.
(ii) For fiscal year 1996 and for each fiscal year or
portion thereof thereafter, during which Executive is actively
employed or with respect to which period Executive receives
Compensation Continuance, the Company shall purchase and deliver to
such secular trust for Executive's benefit an annuity for the
incremental accrued Benefit in respect of that year not already
secured by the prior purchase and delivery of such annuities until
such time as, and to ensure that, Executive's maximum Benefit under
the SERP has been fully secured by such purchases and deliveries of
annuities. In connection with the Company's purchase and delivery to a
secular trust for Executive's benefit of any such additional annuities
under this subparagraph (ii) prior to Executive's Retirement Date,
Executive shall make a timely 83(b) election if such purchase and
delivery occur prior to the Benefit becoming non-forfeitable pursuant
to Section 5(a). In
10
<PAGE>
addition, upon (x) each such purchase and transfer of additional
annuities giving rise to taxes payable by Executive and (y) the
imposition on Executive of any other Federal, state or local taxes in
connection with the maintenance of such secular trust, the Company or
a trust established for such purpose shall pay to Executive an
additional amount such that after payment by Executive of all
applicable Federal, state and local taxes thereon (computed at the
maximum marginal rates) there is retained a sufficient amount to pay
all such taxes incurred by Executive
(iii) The present value of the after-tax benefits due the
Executive under the SERP determined at Executive's Retirement Date
under the SERP will be offset by the after-tax value as of Executive's
Retirement Date of any annuities previously purchased hereunder
including earnings thereon. If an annuity instead. of a lump sum is
elected at retirement, a portion of the annuity payments to be made
during retirement may be taxable to Executive, and Executive will be
responsible for the payment of any taxes on such payments. The event
of the Executive's retirement on the Retirement Date, or the delivery
of the Benefit on such date, shall be a termination of employment, but
shall not automatically be a termination under Section 6.1(a)
entitling Executive to Compensation Continuance under this Agreement.
11
<PAGE>
(c) The Company shall, no later than Executive's Retirement Date,
purchase and transfer to Executive such additional annuities as shall
be necessary to fully fund any additional Benefit accrued to
Executive's Retirement Date and any annuities, to the extent then held
in a secular trust for Executive's benefit, will be delivered to
Executive from such secular trust. The Company shall pay to Executive
at the time of such transfer an additional amount such that after
payment by Executive of all applicable Federal, state and local taxes
thereon (computed at the maximum marginal rates) there is retained a
sufficient amount to pay all such taxes incurred by Executive on such
transfer.
(d) Subject to the following provisions of this Section 5(d),
Executive's "Retirement Date" shall be the attainment of age 60 or, if
later, the last day of any Compensation Period (as described in
Section 6.1(a)). Executive's Retirement Date shall be deemed to
include the date of Executive's death if death occurs before
retirement. Any annuity delivered to Executive hereunder shall have a
lump sum cash-out option. Executive agrees that a pre-condition to any
funding prior to a Change of Control of a Benefit under this Section 5
is the Executive's execution at such time of funding acknowledgment
waivers reasonably requested by the Company, and Executive's agreement
to place all annuities purchased for Executive in a secular trust
designated by the Company until Executive's
12
<PAGE>
Retirement Date. If Executive's employment is terminated by the
Company or Holdings other than for Cause (as hereinafter defined) or
by Executive for Good Reason (as hereinafter defined) prior to or more
than twenty-four months after a Change of Control, the Benefit shall
be payable at the end of Compensation Continuance (the last day of
which shall become his Retirement Date) and shall be calculated as a
lump sum amount equal to the present value of the Benefit as of such
Retirement Date after reduction thereof under the SERP formula to
reflect the payment of such Benefit prior to age 60. If Executive's
employment is terminated for any reason during the twenty-four month
period following a Change of Control, the Benefit shall be payable
upon such termination (which date shall become his Retirement Date)
and shall be calculated as a lump sum amount equal to the present
value of the Benefit as of the third anniversary of such termination
(the "Calculation Date") assuming payment of the Benefit commenced on
the Calculation Date after reduction thereof under the SERP formula in
effect immediately prior to the Change of Control to reflect the
commencement of payment of such Benefit prior to age 60 but without
any actuarial reduction for acceleration of such payment from the
Calculation Date to the Retirement Date.
13
<PAGE>
6. Termination of Employment.
-------------------------
6.1 Termination Not For Cause or For Good Reason.
--------------------------------------------
(a) The Company and Holdings may terminate Executive's
employment at any time for any reason, and Executive may terminate his
employment at any time for any reason. If Executive's employment is
terminated by the Company or Holdings other than for Cause (as
hereinafter defined) or Executive terminates his employment for Good
Reason (as hereinafter defined), the Company shall pay to Executive as
additional compensation ("Compensation Continuance") (x) if such
termination is prior to, or more than twenty-four months after, a
Change of Control, compensation until the third anniversary (the
"Compensation Period") of the date his employment terminated (or, if
earlier, until his date of death), payable monthly at an annual rate
equal to the amounts set forth in clauses (i) and (ii) below, or (y)
if such termination occurs during the twenty-four month period
following a Change of Control, then upon such termination a lump sum
payment, discounted to its present value, based on a notional payment
period of 3 years assuming equal monthly payments and a discount rate
equal to the product of (i) the three-year Treasury bond yield as
published in the New York Times on the first of the month in which the
termination occurs and (ii) 100% minus the
14
<PAGE>
aggregate applicable Federal, state and local taxes then imposed on
Executive's employment income computed at the maximum applicable
marginal rates, in cash in an amount equal to three (3) times the sum
of the amounts set forth in clauses (i) and (ii) below:
(i) his Base Salary at its then current annual rate or following
a Change of Control, if higher, the rate in effect
immediately prior to such Change of Control; and
(ii) his target bonus at its then current percentage or following
a Change of Control, if higher, the percentage in effect
immediately prior to such Change of Control; and computed in
the case of any such bonus opportunity in the form of
Performance Units based on the Initial Grant Value (as
defined in Section 3.2(c)) of such Performance Units
In addition, Executive, if he is entitled to Compensation Continuance,
shall be entitled to receive:
(iii) Executive's full Base Salary through the date of
termination at the rate in effect at the time notice of
termination is given, AIAP Vested Amount as of the date of
termination, and, except as set forth below, all other
amounts to which Executive is entitled under any
compensation or benefit plan of the Company including, but
not limited to, the AIAP and LTIP, and all unpaid amounts,
as of the date of such termination, in respect of any bonus,
including any bonus for any Fiscal Year ending before such
termination which would have been payable had the Executive
remained in employment until the date such bonus would
otherwise have been paid and including any bonus under
Section 3.4, at the times such payments are due under the
terms of such plans or, in the event such termination occurs
during the twenty-four month period following a Change of
Control, upon such termination;
(iv) any payment deferred by Executive, together with any
applicable interest or other accruals thereon;
15
<PAGE>
(v) the benefits under Section 5 hereof shall be paid out in
accordance with their terms; provided, however, that
-----------------
Executive shall, for purposes of Section 5, be deemed to
have remained employed by the Company and Holdings for the
period ending on the third anniversary of the date his
employment terminated at the compensation level in effect on
the date of termination or, if such termination occurs
during the twenty-four month period following a Change of
Control, at the compensation level in effect immediately
prior to such Change of Control if higher;
(vi) continued coverage under Holdings' and the Company's
employee benefit programs, plans and practices described in
Section 4.1 and 4.2 hereof until the third anniversary of
the date his employment terminated, or Holdings or the
Company will provide for equivalent coverage (on an after-
tax basis), subject to any applicable coordination of
benefits rules; provided that (A) in the case of any plan
meeting the requirements of Section 401(a) of the Code,
prior to a Change of Control, such coverage shall be
provided only to the extent consistent with such
requirements and (B) in the event of such a termination
during the twenty-four month period following a Change of
Control, such coverage shall not be less favorable in the
aggregate than that in effect immediately prior to such
Change of Control;
(vii) such payments under applicable plans or programs, including
but not limited to those described in Section 3.3 and 4.3
and payment for accrued vacation, as may be determined
pursuant to the terms of such plans or programs and this
Agreement;
(viii) outplacement counseling services at Company expense;
provided however, this expense shall not exceed 18% of
annualized Base Pay in any calendar year;
(ix) for the first six (6) months after termination, the
reasonable cost of one secretary and a fully functional
office, such office location to be determined by Executive
as long as the office is not to be located on the premises
of the Company;
(x) if Executive's termination occurs prior to March 1, 1996,
and prior to a Change of Control, any
16
<PAGE>
applicable additional benefits and protections provided
under the Headquarters Program;
(xi) if Executive's termination occurs during the twenty-four
month period following a Change of Control, all cash
payments to be made hereunder upon a termination of
employment shall be made not later than 15 business days
following the date of termination, and in addition Executive
shall receive, to the extent not already provided herein,:
(A) a lump sum cash payment equal to the sum of
Executive's AIAP Vested Amount, PS Vested Amount and PU
Vested Amount all as of the date of termination;
(B) a lump sum cash payment equal to three times the
value of the annual credit under the RJR Nabisco. Inc.
Flexible Perquisites Program (the "Perquisites Program") to
which Executive was entitled immediately prior to such
termination or, if higher, to which Executive was entitled
immediately prior to the Change of Control, reduced by such
credits as would otherwise be applied to the continued
benefits under Section 6.1(a)(vi) above;
(C) use of the automobile assigned to Executive
immediately prior to the Change of Control until the third
anniversary of the date of termination and, at the end of
such period, the transfer of.ownership of such automobile to
Executive plus such amount in cash that after payment of all
applicable Federal, state and local taxes thereon, computed
at the maximum marginal rates, is equal to all such taxes,
so computed, imposed in connection with such transfer;
(D) in addition to and upon the expiration of the
benefits provided pursuant to Section 6.1(a) (vi) above,
MedChoice Retiree Medical benefits as may be in effect at
the time of such expiration for other retirees and as
amended from time to time thereafter at the minimum level of
Company subsidy or, if greater, the subsidy level based on
all his years of service (actual and imputed) credited for
purposes of the Benefit; and
17
<PAGE>
(E) if the Company fails to provide any of the benefits
under Section 6.1(a) (vi) or Section 6.1(a) (xi) (D) above,
reimbursement for the actual cost of Executive's obtaining
comparable benefits within 15 business days after the date
Executive gives the Company written notice that he incurred
such costs plus such additional amount that after payment of
all applicable Federal, state and local taxes thereon,
computed at the maximum applicable marginal rates, is equal
to all such taxes, so computed, imposed with respect to such
reimbursement.
(b) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written
consent):
(i) (A) The assignment to Executive of duties materially
inconsistent with Executive's position (including duties,
responsibilities, status, titles or offices as set forth in
Section 1 hereof); (B) any elimination or reduction of
Executive's duties or responsibilities as set forth in
Section 1; or (C) any removal of Executive from or any
failure to elect or reelect Executive to the position of
Chief Executive Officer of Holdings and the Company
(including the failure to elect Executive to the position of
Chief Executive Officer of the ultimate controlling entity
in connection with any merger, acquisition or other
extraordinary corporate transaction that includes Holdings
or the Company), except in connection with the termination
of Executive's employment for Cause, Permanent Disability
(as hereinafter defined) or as a result of Executive's death
or by Executive other than for Good Reason;
(ii) A reduction in Executive's Base Salary or annual target
bonus opportunity from the level required hereunder at the
time in question, as the same may be increased from time to
time during the term or pursuant to the terms of this
Agreement;
(iii) The failure by the Company or Holdings to obtain the
specific assumption of this Agreement by any successor or
assign of Holdings or the Company or any person acquiring
substantially all of the Company's or Holdings' assets;
18
<PAGE>
(iv) Any material breach by the Company or Holdings of any
provision of this Agreement or any agreements entered into
pursuant thereto;
(v) Requiring Executive to be based at any office or location
other than that described in Section 1 above, except for
travel reasonably required in the performance of the
Executive's responsibilities, or
(vi) During the twenty-four month period following a Change of
Control, (A) the failure to continue in effect any
compensation plan in which Executive participates at the
time of the Change of Control, including but not limited to
the LTIP, the AIAP, the Perquisites Program, or any
substitute plans adopted prior to the Change of Control,
unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan providing Executive with
substantially similar benefits) has been made with respect
to such plan in connection with the Change of Control, or
the failure to continue Executive's participation therein on
substantially the same basis, both in terms of the amount of
benefits provided and the level of his participation
relative to other participants, as existed at the time of
the Change of Control; or (B) the failure to continue to
provide Executive with benefits at least as favorable in the
aggregate as those enjoyed by him under any of the Company's
pension, life insurance, medical, health and accident,
disability, deferred compensation or savings plans in which
he was participating at the time of the Change of Control,
the taking of any action which would directly or indirectly
materially reduce any of such benefits or deprive Executive
of any material fringe benefit enjoyed by him at the time of
the Change of Control, or the failure to provide him with
the number of paid vacation days to which he was entitled on
the basis of the Company's practice with respect to him as
in effect at the time of the Change of Control.
(c) (i) Anything in this Agreement to the contrary
notwithstanding, in the event that it is determined that any
payment or distribution by Holdings
19
<PAGE>
or the Company to or for the benefit of Executive, whether paid
or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, other than any payment pursuant
to this Section 6.1(c), (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then Executive
shall be entitled to receive from Holdings or the Company, within
15 days following the determination described in Section 6.1
(c)(ii) below, an additional payment ("Excise Tax Adjustment
Payment") in an amount such that after payment by Executive of
all applicable Federal, state and local taxes (computed at the
maximum marginal rates and including any interest or penalties
imposed with respect to such taxes), including any Excise Tax,
imposed upon the Excise Tax Adjustment Payment, Executive retains
an amount of the Excise Tax Adjustment Payment equal to the
Excise Tax imposed upon the Payments.
(ii) All determinations required to be made under this
Section 6.1(c), including whether an Excise Tax Adjustment
Payment is required and the amount of such Excise Tax Adjustment
Payment, shall be made by Ernst &
20
<PAGE>
Young, Winston-Salem, North Carolina, or such other national
accounting firm as the Company or Holdings may designate prior to
a Change of Control, which shall provide detailed supporting
calculations to the Company and the Executive within 15 business
days of the date of termination of Executive's employment. Except
as hereinafter provided, any determination by Ernst & Young,
Winston-Salem, North Carolina, or such other national accounting
firm as the Company or Holdings may designate prior to a Change
of Control, shall be binding upon the Company and the Executive.
As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination hereunder,
it is possible that (x) certain Excise Tax Adjustment Payments
will not have been made by the Company which should have been
made (an "Underpayment"), or (y) certain Excise Tax Adjustment
Payments will have been made which should not have been made (an
"Overpayment"), consistent with the calculations required to be
made hereunder. In the event of an Underpayment, such
Underpayment shall be promptly paid by Holdings or the Company to
or for the benefit of the Executive. In the event that the
Executive discovers that an Overpayment shall have occurred, the
amount thereof shall be promptly repaid to Holdings or the
Company.
21
<PAGE>
(d) Except as provided in this Agreement, if Executive is a
participant in the LTIP or any other stock award plan of the Company,
Holdings, or any of their affiliates and has outstanding awards
thereunder, the treatment of such awards shall be governed by the
terms of such applicable plans and awards.
6.2 Permanent Disability. The event of the Executive
--------------------
becoming eligible for benefits under the Company's Long Term
Disability Plan is not a termination under Section 6.1(a) entitling
Executive to Compensation Continuance under this Agreement. If,
however, Executive becomes eligible for benefits under the Company's
Long Term Disability Plan during his Compensation Period, the amount
of Compensation Continuance shall be reduced during the Compensation
Period by the amount of disability benefits payable to the Executive.
All other provisions of this Agreement shall remain in effect
notwithstanding the Executive's disability including, without
limitation, obligations pursuant to Section 5 hereof, the terms of any
applicable plans, including, but not limited to, those described in
Sections 3.3, 4.1, 4.2, 4.3 and 4.4 hereof, and all unpaid amounts, as
of the date of such disability, in respect of any bonus, including any
bonus payable for any fiscal year ending prior to such disability and
including any bonus under Section 3.4, and any payment deferred by
Executive,
22
<PAGE>
together with any applicable interest or other accruals thereon. If
the Executive is still disabled upon reaching his Retirement Date
under the SERP, he shall be retired under the SERP with an offset for
any disability payments made to the Executive after such retirement.
6.3 Death. In the event of Executive's death while actively
-----
employed, the Company's and Holdings' obligations under this Agreement
shall cease and terminate except with respect to obligations pursuant
to Section 5 hereof, the terms of any applicable plans, including, but
not limited to, those described in Sections 3.3, 4.1, 4.2, 4.3 and 4.4
hereof, all unpaid amounts, as of the date of death, in respect of any
bonus, including any bonus for any fiscal year ending prior to death
which would have been payable had Executive remained in employment
until the date such bonus would otherwise have been paid, and,
including any bonus under Section 3.4, and any payment deferred by
Executive, together with any applicable interest or other accruals
thereon. In the event of Executive's death subsequent to commencement
of his Compensation Period hereunder, the balance of Compensation
Continuance will be paid to his beneficiary in a lump sum.
"Beneficiary" shall mean the Executive's designated beneficiary under
his Executive Program life insurance. Any survivor benefit shall be
paid in accordance with the SERP.
23
<PAGE>
6.4 Voluntary Resignation; Discharge for Cause. If Executive
------------------------------------------
resigns voluntarily, other than for Good Reason or Permanent
Disability, or the Company and Holdings terminate the employment of
Executive for Cause, the Company's and Holdings' obligations under
this Agreement to make any further payments to Executive shall
thereupon cease and terminate except with respect to accrued and
nonforfeitable obligations pursuant to Section 5 hereof, the terms of
any applicable plans, including those described in Sections 3.3, 4.1,
and 4.3 hereof all unpaid amounts, as of the date of such termination,
in respect of any bonus, including any bonus for any fiscal year
ending prior to such termination which would have been payable had
Executive remained in employment until the date such bonus would
otherwise have been paid and including any bonus under Section 3.4,
and any payment deferred by Executive, together with any applicable
interest or other accruals thereon. The term "Cause" shall be limited
to (a) action by Executive involving willful malfeasance in connection
with his employment having a material adverse effect on Holdings or
the Company, (b) any action by Executive involving willful gross
misconduct having a material adverse effect on Holdings or the Company
(other than an effect that could not reasonably constitute grounds for
dismissal under the circumstances), (c) substantial and continuing
willful refusal by Executive in breach of this Agreement to perform
the duties ordinarily performed by an
24
<PAGE>
Executive occupying his positions, which refusal has a material
adverse effect on Holdings or the Company or (d) Executive being
convicted of (i) a felony under the laws of the United States or any
state or (ii) a felony under the laws of any other country or
political subdivision thereof involving moral turpitude; provided that
no action or refusal to perform shall be deemed willful if done in the
reasonable belief that such action or refusal was in the best
interests of the Company or Holdings. Termination of Executive
pursuant to this Section 6.4 shall be communicated by a Notice of
Termination given within one year after the Holdings Board both (i)
had knowledge of conduct or an event allegedly constituting Cause and
(ii) had reason to believe that such conduct or event could be grounds
for Cause. For purposes of this Agreement a "Notice of Termination"
shall mean delivery to Executive of a copy of a resolution duly
adopted by the affirmative vote of-not less than three-quarters of the
entire membership of Holdings Board at a meeting of the Holdings Board
called and held for the purposes (after reasonable notice to the
Executive ("Preliminary Notice") and reasonable opportunity for
Executive, together with the Executive's counsel, to be heard before
the Holdings Board prior to such vote), finding that, in the good
faith opinion of the Holdings Board, Executive was guilty of conduct
set forth in the second sentence of this Section 6.4 and specifying
the particulars
25
<PAGE>
thereof in detail. Upon the receipt of the Preliminary Notice,
Executive shall have 14 days in which to appear with counsel or take
such other action as he desires on his behalf, and such 14-day period
is hereby agreed to by the parties as a reasonable opportunity for
Executive to be heard. The Holdings Board shall no later than 30 days
after the receipt of the Preliminary Notice by Executive communicate
its findings to Executive. A failure by the Holdings Board to make its
findings of Cause or to communicate its conclusions within such 30-day
period shall be deemed to be a finding that Executive was not guilty
of the conduct described in the second sentence of this Section 6.4.
Where the Holdings Board has made such findings that, based upon
conduct described in clause (a), (b) or (c) above, Cause exists the
Executive shall have 30 days in which to cure such conduct, to the
extent such cure is possible. Any termination of Executive's
employment (other than by death or Permanent Disability) within 30
days after the date that the Preliminary Notice has been given to
Executive shall be deemed to be a termination for Cause; provided,
however, that if during such period Executive voluntarily terminates
other than for Good Reason or the Company terminates Executive other
than for Cause, and either (A) Executive cured his conduct, as
permitted in the preceding sentence of this Section 6.4, or (B)
Executive is found (or is deemed to be found) not guilty of the
conduct described in the second
26
<PAGE>
sentence of this Section 6.4, such termination shall not be deemed to
be for Cause.
7. Stock Arrangements. Except as otherwise provided in
------------------
Section 3.4, Section 6 and Section 13, awards under the LTIP shall be
governed by the provisions of the individual grant agreements made
under the LTIP.
8. Expenses. The Executive is authorized to incur reasonable
--------
expense in carrying out his duties and responsibilities under this
Agreement, including expenses for travel and similar items related to
such duties and responsibilities. The Company shall reimburse
Executive for all such expenses upon presentation by Executive from
time to time of an itemized account of such expenditures.
9. No Obligation to Mitigate Damages. The Executive shall
---------------------------------
not be required to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other employment or
otherwise nor will (a) any payments hereunder be subject to offset in
respect of any claims which the Company may have against Executive or
(b) except as provided in Section 6.1(a)(vi), the amount of any
payment or benefit provided for in Section 6 be reduced by any
compensation earned as a result of Executive's employment with another
employer.
10. Notices. All notices or communications hereunder shall
-------
be in writing, addressed as follows:
27
<PAGE>
To the Company or Holdings:
Mr. Gerald I. Angowitz
c/o RJR Nabisco Holdings Corp.
1301 Avenue of the Americas
New York, New York 10019
To the Executive:
Mr. Steven F. Goldstone
205 Silver Spring Road
Ridgefield, CT 06877
Any such notice or communication shall be sent certified or
registered mail,return receipt requested, postage prepaid, addressed
as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the actual date of
mailing shall determine the time at which notice was given.
11. Separability; Legal Fees; Arbitration. If any provision
-------------------------------------
of this Agreement shall be declared to be invalid or unenforceable, in
whole or in part, such invalidity or unenforceability shall not affect
the remaining provisions hereof which shall remain in full force and
effect. In addition, the Company shall reimburse Executive for
reasonable legal fees incurred in connection with entering into this
Agreement and shall also pay to Executive as incurred all legal and
accounting fees and expenses incurred by Executive in seeking to
obtain or enforce any right or benefit provided by this Agreement or
any other compensation-related plan, agreement or arrangement of the
Company, unless
28
<PAGE>
Executive's claim is found by an arbitral tribunal of competent
jurisdiction to have been frivolous. Any good faith controversy or
claim arising out of or relating to this Agreement or the breach of
this Agreement (other than Section 14 hereof) that cannot be resolved
by Executive and the Company, including any dispute as to the
calculation of Executive's benefits or any payments hereunder shall be
submitted to arbitration in New York City in accordance with New York
law and the procedures of the American Arbitration Association. The
determination of the arbitrator(s) shall be conclusive and binding on
the Company and Executive and judgment may be entered on the
arbitrator(s)' award in any court having jurisdiction.
12. Assignment. This contract shall be binding upon and
----------
inure to the benefit of the heirs and representatives of Executive and
the assigns and successors of Holdings and the Company, but neither
this Agreement nor any rights hereunder shall be assignable or
otherwise subject to hypothecation by Executive (except by will or by
operation of the laws of intestate succession) or by Holdings or the
Company, except that Holdings or the Company may assign this Agreement
to any successor (whether by merger, purchase or otherwise) to all or
substantially all of the stock, assets or businesses of Holdings or
the Company.
29
<PAGE>
13. Amendment/Termination.
---------------------
(a) The Agreement may only be amended at any time by
mutual written agreement of the parties hereto.
(b) Company and Holdings represent and warrant they
will make appropriate adjustments and amendments to the numben of
shares subject to, and the exercise price of, options to purchase
Holdings common stock granted under the LTIP ("Options") (including,
in the event of a spinoff or distribution of assets or stock of
Holdings or an affiliated entity, substituting or replacing the shares
issuable upon the exercise of Options) should extraordinary events or
transactions occur involving the Company, Holdings, or an affiliated
corporation.
14. Nondisclosure of Confidential Information;
------------------------------------------
Non-Competition.
---------------
(a) Executive shall not, without the prior written
consent of Holdings or the Company, divulge, disclose or make
accessible to any other person, firm, partnership or corporation or
other entity any Confidential Information pertaining to the business
of Holdings or the Company except (i) while employed by Holdings or
the Company in the business of and for the benefit of Holdings or the
Company or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority
over the business of Holdings or the Company, or by any
30
<PAGE>
administrative body or legislative body (including a committee
thereof) with purported or apparent jurisdiction to order Executive to
divulge, disclose or make accessible such information. For purposes of
this Section 14(a), "Confidential Information" shall mean non-public
information concerning Holdings' or the Company's financial data,
strategic business plans, product development (or other proprietary
product data), customer lists, marketing plans and other proprietary
information, except for specific items which have become publicly
available information or otherwise known to the public other than
through a breach by Executive of his fiduciary duty or any
confidentiality agreement, or information known to the Executive prior
to the date of this Agreement. Confidential Information does not
include information the disclosure of which cannot reasonably be
expected to adversely affect the business of Holdings or the Company.
(b) During the period commencing on the date hereof and
ending (i) in the case of a termination described in Section 6.1
hereof, three years after the date of termination and (ii) in case of
a termination described in Section 6.4 hereof, two years after the
date of termination, Executive covenants and agrees that he will not
be an executive officer, board member, owner, partner, consultant or
employee of a food or tobacco company with annual revenues
31
<PAGE>
over $1 billion, if such food or tobacco company is engaged in a
"major business" of Holdings or the Company. A "major business" for
this purpose is each major business segment of the Company and its
subsidiaries on the date hereof that produces products constituting
over 5% of the annual revenues of Holdings and its subsidiaries. For
purposes of this Section 14, Executive shall be deemed not a
shareholder of a company that would otherwise be a competing entity if
Executive's record and beneficial ownership of the capital stock of
such company amount to not more than one percent of the outstanding
capital stock of any such company subject to the periodic and other
reporting requirements of Section 13 or Section 15(d) or the
Securities Exchange Act of 1934, as amended. Executive, Holdings, and
Company agree this covenant not to compete is a reasonable covenant
under the circumstances, and further agree that if in the opinion of
any court of competent jurisdiction, such restraint is not reasonable
in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of this covenant as
to the court shall appear not reasonable and to enforce the remainder
of the covenant as so amended.
(c) Executive agrees that any breach of the covenants
contained in this Section 14 would irreparably injure Holdings and the
Company. Accordingly, Holdings or
32
<PAGE>
the Company may, in addition to pursuing any other remedies they may have
in law or in equity, obtain an injunction against Executive from any court
having jurisdiction over the matter; restraining any further violation of
this Agreement by Executive.
15. Beneficiaries/References. Executive shall be entitled to select
------------------------
(and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death, and may change such election, in
either case by giving the Company written notice hereof. In the event of
Executive's death or a judicial determination of his incompetence,
reference in this Agreement to Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal
representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
16. Survivorship. The respective rights and obligations of the
------------
parties hereunder shall survive any termination of this Agreement to the
extent necessary to the intended preservation of such rights and
obligations. The provisions of this Section are in addition to the
survivorship provisions of any other section of this Agreement.
33
<PAGE>
17. Representations and Warranties. Holdings and the Company each
------------------------------
represent and warrant that (a), respectively, they are fully authorized and
empowered to enter into this Agreement, (b) the execution of this Agreement
and the performance of their respective obligations under this Agreement
will not violate or result in a breach of the terms of any material
agreement to which Holdings and/or the Company is a party or by which it is
bound, (c) no approval by any governmental authority or body is required
for them to enter into this Agreement or perform their obligations
hereunder, and (d) this Agreement is valid, binding and enforceable against
Holdings and the Company in accordance with its terms, except to the extent
affected or limited by applicable bankruptcy laws or other statutes
governing the rights of creditors and any regulations or interpretations
thereof. Executive represents and warrants that his execution of this
Agreement and his performance of his duties and responsibilities under this
Agreement will not violate or result in a breach of the terms of any
material agreement to which he is a party or by which he is bound.
18. Governing Law. This Agreement shall be construed, interpreted,
-------------
and governed in accordance with laws of New York, without reference to
rules relating to conflicts of law.
34
<PAGE>
19. Withholding. The Company and Holdings shall be entitled to
-----------
withhold for payment any amount of withholding required by law.
20. Interest on Late Payments. To the extent that any payments
-------------------------
required to be made hereunder upon or following a Change of Control are not
made within the period specified therefor, the Company and Holdings shall
be liable for interest on such delayed payments at the rate of 150% of the
prime rate compounded monthly, as posted by the Morgan Guaranty Trust
Company of New York from time to time.
21. Actuarial Calculations. All required actuarial calculations of
----------------------
payments to be made hereunder and of annuities to be purchased pursuant to
Section 5 hereof shall be made by Watson Wyatt Worldwide, New York, New
York, or such other national actuarial firm as the Company or Holdings may
designate prior to a Change of Control.
22. Funding. Except as otherwise provided herein, all benefits
-------
hereunder are unfunded and will be paid out of the general assets of the
Company or Holdings. Notwithstanding the foregoing, the Company or Holdings
may choose to maintain a rabbi trust or other trusts for the purpose of
paying certain of the benefits hereunder or under other plans and programs
of the Company or Holdings and, if so, Executive shall be entitled to
payments therefrom, if any, as and to the extent provided in such rabbi
trust or other trusts.
35
<PAGE>
23. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original.
RJR NABISCO HOLDINGS CORP.
By: /s/ Charles M. Harper
------------------------------
Chairman
RJR NABICO, INC.
By: /s/ Charles M. Harper
-------------------------------
Chairman
By: /s/ Steven F. Goldstone
-------------------------------
STEVEN F. GOLDSTONE
36
<PAGE>
EXHIBIT "A"
AIAP Vested Amount means, as of a Change of Control or as of the
------------------
date Executive's employment terminates, as the case may be, an amount equal
to (a) in the case of any bonus opportunity under the AIAP, the value of
Executive's target award under the AIAP for the relevant period in which
such Change of Control or such termination occurs, as the case may be,
multiplied by a fraction, the numerator of which is the number of months
(including partial months) in the period beginning on the first day of the
relevant performance period and ending on the Change of Control or such
termination, as the case may be, and the denominator of which is the number
of months in such performance period; provided that in the event of a
termination of employment following a Change in Control in the year in
which such Change of Control occurs, for purposes of computing the AIAP
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such Change of Control
and the target award shall be that in effect immediately preceding such
Change of Control, or (b) in the case of any annual bonus opportunity in
the form of Performance Units, the PU Vested Amount as of the date of such
termination.
Board means the Board of Directors of the Company.
-----
<PAGE>
Boards means, collectively, the Board and the Holdings Board.
------
Change of Control means the first to occur of the following
-----------------
events provided such event occurs prior to October 11, 1996 or such later
date as the Boards may specify from time to time:
(a) an individual, corporation, partnership, group, associate
or other entity or "person", as such term is defined in
Section 14 (d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), other than Holdings or any employee
benefit plan(s) sponsored by Holdings or the Company, is
or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
30% or more of the combined voting power of Holdings'
outstanding securities ordinarily having the right to
vote at elections of directors.
(b) individuals who constitute the Holdings Board on October
11, 1995 (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any
person becoming a director subsequent to such date whose
election, or nomination for election by Holdings'
shareholders, was approved by a vote of at least three-
quarters of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy
statement of Holdings in which such person is named as a
nominee of Holdings for director), but excluding for this
purpose any such individual whose initial assumption of
office occurs as a result of either an actual or
threatened election contest (as such terms are used in
Rule 14a-ll of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of an individual,
corporation, partnership, group, associate or other
entity or "person" other than the Holdings Board, shall
be, for purposes of this paragraph (b), considered as
though such person were a member of the Incumbent Board;
(c) the approval by the shareholders of Holdings of a plan or
agreement providing (1) for a merger or consolidation of
Holdings other than with a wholly-owned subsidiary and
other than a merger or consolidation that would result in
2
<PAGE>
the voting securities of Holdings outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting
securities of Holdings or such surviving entity outstanding
immediately after such merger or consolidation, or (2) for a
sale, exchange or other disposition of all or substantially all
of the assets of Holdings. If any of the events enumerated in
this paragraph (c) occurs, the Holdings Board shall determine the
effective date of the Change of Control resulting therefrom for
purposes of the Program.
Holdings Board means the Board of Directors of Holdings.
--------------
PS Vested Amount means with respect to any award of Performance
----------------
Shares (as defined in the LTIP) Executive holds as of a Change of Control
or as of the date Executive's employment terminates, as the case may be, an
amount equal to the adjusted value of (i) the number of Performance Shares
subject to such award, multiplied by a fraction, the numerator of which is
the number of months (including partial months) elapsed in the relevant
performance period as of such Change of Control or as of the date of such
termination, as the case may be, and the denominator of which is the number
of months in such performance period, (ii) adjusted by applying target
performance with respect to such award; provided that in the event of a
termination of employment following a Change of Control in the year in
which such Change of Control occurs, for purposes of computing the PS
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such
3
<PAGE>
Change of Control and target performance with respect to such Performance
Shares shall be that in effect immediately preceding the Change of Control.
PU Vested Amount means, for any award of Performance Units (as
----------------
defined in the LTIP) Executive holds as of a Change of Control or as of the
date Executive's employment terminates, as the case may be, an amount equal
to the target value of the number of Performance Units subject to such
award multiplied by a fraction, the numerator of which is the number of
months (including partial months) elapsed in the relevant performance
period as of the Change of Control and the denominator of which is the
number of months in such performance period; provided that in the event of
a termination of employment following a Change of Control in the year in
which such Change of Control occurs, for purposes of computing the PU
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such Change of Control
and the target value of such Performance Units shall be that in effect
immediately preceding the Change of Control.
4
Exhibit 10.41
RN Option R
1995
Post Split
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
------------------------
DATE OF GRANT: DECEMBER 5, 1995
----------------
W I T N E S S E T H:
1. Grant of Option. Pursuant to the provisions of the RJR Nabisco
---------------
Holdings Corp. 1990 Long Term Incentive Plan (the "Plan"), RJR Nabisco
Holdings Corp. (the "Company") on the above date has granted to
STEVEN F. GOLDSTONE (the "Optionee"),
subject to the terms and conditions which follow and the terms and
conditions of the Plan, the right and option to exercise from the Company a
total of
200,000 shares
of Common Stock of the Company, at the exercise price of $30.25 per share
(the "Option"). A copy of the Plan is attached and made a part of this
agreement with same effect as if set forth in the agreement itself. All
capitalized terms used herein shall have the meaning set forth in the Plan,
unless the context requires a different meaning.
Optionee's grant is conditioned upon the acquisition of $500,002.25
worth of Purchase Stock at the composite closing price on the Date of Grant
of the Option, and the Grant shall be revoked if Optionee has not acquired
said Purchase Stock within 10 days of the Date of Grant.
2. Exercise of Option.
------------------
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the
Company, specifying the number of shares to be purchased. The
notice of exercise shall be accompanied by
(i) tender to the Company of cash for the full purchase price of the
shares with respect to which such Option or portion thereof is
exercised; or
--
<PAGE>
(ii) the unsecured, demand borrowing by the Optionee from the Company
on an open account maintained solely for this purpose in the
amount of the full exercise price together with the instruction
from the Optionee to sell the shares exercised on the open market
through a duly registered broker-dealer with which the Company
makes an arrangement for the sale of such shares under the Plan.
This method is known as the "broker-dealer exercise method" and
is subject to the terms and conditions set forth herein, in the
Plan and in guidelines established by the Committee. The Option
shall be deemed to be exercised simultaneously with the sale of
the shares by the broker-dealer. If the shares purchased upon the
exercise of an Option or a portion thereof cannot be sold for a
price equal to or greater than the full exercise price plus
direct costs of the sales, then there is no exercise of the
Option. Election of this method authorizes the Company to deliver
shares to the broker-dealer and authorizes the broker-dealer to
sell said shares on the open market. The broker-dealer will remit
proceeds of the sale to the Company which will remit net proceeds
to the Optionee after repayment of the borrowing, deduction of
costs, if any, and withholding of taxes. The Optionee's borrowing
from the Company on an open account shall be a personal
obligation of the Optionee which shall bear interest at the
published Applicable Federal Rate (AFR) for short-term loans and
shall be payable upon demand by the Company. Such borrowing may
be authorized by telephone or other telecommunications acceptable
to the Company. Upon such borrowing and the exercise of the
Option or portion thereof, title to the shares shall pass to the
Optionee whose election hereunder shall constitute instruction to
the Company to register the shares in the name of the broker-
dealer or its nominee. The Company reserves the right to
discontinue this broker-dealer exercise method at any time for
any reason whatsoever. The Optionee agrees that if this broker-
dealer exercise method under this paragraph is used, the Optionee
promises unconditionally to pay the Company the full balance in
his open account at any time upon demand. Optionee also agrees to
pay interest on the account balance at the AFR for short-term
loans from and after demand.
(b) This Option shall be exercisable in three installments. The first
installment shall be exercisable on the 5th of December following
Date of Grant for 33% of the number of shares of Common Stock
subject to this option. Thereafter, on each subsequent December
5th an installment shall become exercisable for 33% and 34%,
respectively, of the number of shares subject to this Option
until the Option has become fully exercisable. To the extent that
any of the above installments is not exercised when it becomes
exercisable, it shall not expire, but shall continue to be
exercisable at any time thereafter until this Option shall
terminate, expire or be surrendered. An exercise shall be for
whole shares only.
(c) This Option shall not be exercised prior to six months after the
Date of Grant.
2
<PAGE>
3. Rights in Event of Termination of Employment.
--------------------------------------------
(a) Unless otherwise provided in a written employment or termination
agreement between the Optionee and the Company, the Option shall not become
exercisable as to any additional shares following the Termination of
Employment of the Optionee for any reason other than a Termination of
Employment because of death, Permanent Disability or Retirement of the
Optionee. In the event of Termination of Employment because of death,
Permanent Disability or Retirement, the Option shall immediately become
exercisable as to all shares.
(b) The Optionee shall be deemed to have a "Permanent Disability" if
he becomes totally and permanently disabled (as defined in RJR Nabisco,
Inc.'s Long Term Disability Plan applicable to senior executive officers
as in effect on the date hereof), or if the Board of Directors or any
committee thereof so determines.
(c) "Retirement" as used herein means retirement at age 65 or over, or
early retirement at age 55 or over with the approval of the Company, which
approval specifically states that the Option shall become fully exercisable
as to all Shares.
(d) "Termination of Employment" as used herein means termination from
active employment; it does not mean termination of payment or benefits at
the end of salary continuation or other form of severance or pay in lieu of
salary.
4. Expiration of Option. The Option shall expire or terminate and may
--------------------
not be exercised to any extent by the Optionee after the first to occur of
the following events:
(a) The fifteenth anniversary of the Date of Grant, or such earlier
time as the Company may determine is necessary or appropriate in light of
applicable foreign tax laws; or
(b) Immediately upon the Optionee's Termination of Employment for
Cause (as defined in Section 11 herein).
5. Transferability. Other than as specifically provided with regard to
---------------
the death of the Optionee, this option 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 Optionee, be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Optionee.
6. No Right to Employment. Neither the execution and delivery of this
----------------------
agreement nor the granting of the Option evidenced by this agreement shall
constitute or be evidence of any agreement or understanding, express or
implied, on the part of the Company or its subsidiaries to employ the
Optionee for any specific period or shall prevent the Company or its
subsidiaries from terminating the Optionee's employment at any time with or
without "Cause" (as defined in Section 11 herein).
3
<PAGE>
7. Adjustments in Option. In the event that the outstanding shares of
---------------------
the Common Stock subject to the Option are, from time to time, changed into
or exchanged for a different number or kind of shares of the Company or
other securities by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or
otherwise, the Committee shall make an appropriate and equitable adjustment
in the number and kind of shares or other consideration as to which the
Option, or portions thereof then unexercised, shall be exercisable. Any
adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
8. Application of Laws. The granting and the exercise of this Option
-------------------
and the obligations of the Company to sell and deliver shares hereunder and
to remit cash under the broker-dealer exercise method shall be subject to
all applicable laws, rules, and regulations and to such approvals of any
governmental agencies as may be required.
9. Taxes. Any taxes required by federal, state, or local laws to be
-----
withheld by the Company (i) on exercise by the Optionee of the Option for
Common Stock, or (ii) at the time an election, if any, is made by the
Optionee pursuant to Section 83(b) of the Internal Revenue Code, as
amended, shall be paid to the Company before delivery of the Common Stock
is made to the Optionee. When the Option is exercised under the broker-
dealer exercise method, the full amount of any taxes required to be
withheld by the Company on exercise of stock options shall be deducted by
the Company from the proceeds.
10. Notices. Any notices required to be given hereunder to the Company
-------
shall be addressed to The Secretary, RJR Nabisco Holdings Corp., 1301
Avenue of the Americas, New York, NY 10019-6013, and any notice required to
be given hereunder to the Optionee shall be sent to the Optionee's address
as shown on the records of the Company.
11. Termination For "Cause." For purposes of this Agreement, an
------------------------
Optionee's employment shall be deemed to have been terminated for "Cause"
only as such term is defined in his Employment Agreement by and among the
Optionee, RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. as amended and
restated from time to time.
12. Administration and Interpretation. In consideration of the grant,
---------------------------------
the Optionee 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 interpretations and determinations
made by the Committee shall be final, conclusive, and binding upon the
Optionee, 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.
4
<PAGE>
13. Other Provisions.
----------------
a) Titles are provided herein for convenience only and are not to
serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this
Agreement.
c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE INTERPRETATION,
VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT REGARDLESS OF THE
LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
the Optionee have executed this Agreement as of the date of Grant first
above written.
RJR NABISCO HOLDINGS CORP
By /s/
------------------------
Authorized Signatory
/s/ Steven F. Goldstone
- -----------------------------
Optionee
Optionee's Taxpayer Identification Number:
###-##-####
- ----------------------
Optionee's Home Address:
205 Silver Spring Road
- ----------------------------
Ridgefield, CT 06877
- ----------------------------
- ----------------------------
5
Exhibit 10.42
Contingent Performance Shares
1995
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
CONTINGENT PERFORMANCE SHARE AGREEMENT
DATE OF GRANT: DECEMBER 5, 1995
----------------
W I T N E S S E T H:
1. Grant. Pursuant to the provisions of the RJR Nabisco Holdings Corp.
-----
1990 Long Term Incentive Plan (the "Plan"), RJR Nabisco Holdings Corp. (the
"Company") on the above date has granted to
STEVEN F. GOLDSTONE (the "Grantee"),
subject to the terms and conditions which follow and the terms and
conditions of the Plan, a total of
200,000 Contingent Performance Shares.
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 Contingent Performance Share shall be the composite closing
price of the Common Stock of the Company on the Date of Grant. All
capitalized terms used herein shall have the meaning set forth in the Plan,
unless the context requires a different meaning.
2. Performance Objective. For the three-year performance period
---------------------
commencing on December 31, 1995 and ending December 31, 1998 (the
"Performance Period"), the Committee has determined that the Performance
Objective shall be the following: the average composite closing price of
Common Stock of the Company must equal or exceed $43.75 for any period of
30 consecutive calendar days during the Performance Period as reported in
the Wall Street Journal for days that Common Stock of the Company is traded
on the New York Stock Exchange. In the event that the Common Stock of the
Company is reduced in value as the result of the spin-off of a subsidiary
("Spin-off Company"), the Performance Objective shall be the following: the
combined average composite closing price of the Common Stock of the Company
and the Spin-off Company must equal or exceed $43.75 for any period of 30
consecutive calendar days during the Performance Period as reported in the
Wall Street Journal for days that the Common Stock of the Company and the
Spin-off Company are traded on the New York Stock Exchange.
<PAGE>
3. Vesting and Payment of Contingent Performance Shares. Should the
----------------------------------------------------
Performance Objective be achieved during the Performance Period either
before or after a Change of Control (as defined in the Plan), the
Contingent Performance Shares shall vest completely and shall be payable to
Grantee, if he is still actively employed on December 31, 1998, as soon as
practicable after December 31, 1998. Notwithstanding the foregoing should
the Performance Objective be achieved during the Performance Period either
before or after a Change of Control and during such Performance Period
Grantee terminates for Good Reason or is terminated by the Company without
Cause, the Performance Shares shall vest completely and shall be payable at
the later of (i) the achievement of the Performance Objective or (ii) such
qualifying termination. Unless otherwise determined by the Committee,
Contingent Performance Shares so earned will be paid in Common Stock.
Payment value for tax and other calculations shall be based on the
composite closing price of Common Stock on the date the Performance Shares
become payable.
4. Deferral. Deferral of a payment of Contingent Performance Shares
--------
shall be pursuant to the provisions of the Plan; provided, however,
deferral for this Grant, unless otherwise determined by the Committee,
shall only be by means of a Common Stock credit, and 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 Shares 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. Change in Common Stock or Corporate Structure. In the event that the
---------------------------------------------
outstanding share of the Common Stock subject to the Contingent Performance
Shares are, from time to time, changed into or exchanged for a different
number or kind of shares of the Company or other securities by reason of a
merger, consolidation, recapitalization, reclassified stock split, stock
dividend, combination of shares, or otherwise, the Committee shall make an
appropriate and equitable adjustment in the number and kind of shares or
other consideration as to which the Contingent Performance Shares shall be
payable, subject to paragraph 2 hereof. Any adjusment made by the Committee
shall be final and binding upon the Grantee, the Company and all other
interested persons.
2
<PAGE>
8. Notices. Any notices required to be given hereunder to the Company
-------
shall be addressed to The Secretary, RJR Nabisco Holdings Corp., 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.
9. 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.
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 /s/
-----------------------
Authorized Signatory
/s/ Steven F. Goldstone
- -------------------------------
GRANTEE
Grantee's Taxpayer Identification Number:
###-##-####
- ----------------------------------
Grantee's Home Address:
205 Silver Spring Road
- --------------------------------
Ridgefield, CT 06877
- --------------------------------
- --------------------------------
3
Exhibit 10.43
LTIP-95
Name of Employee: Steven F. Goldstone Principal of Loan: $500,002.25
Loan Date: December 5, 1995 Number of Shares Purchased: 16,529
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the person named above (the "Employee"), hereby
promises to pay to the order of RJR NABISCO HOLDINGS CORP., a Delaware
corporation (the "Company"), at its office located at 1301 Avenue of the
Americas, New York, New York 10019, or at such other place as the holder
may hereafter designate, the respective principal amount of the loan (the
"Loan") specified above plus accrued interest on the Repayment Date (as
defined below) or on such other dates specified in paragraphs 4 and 5 as
the case may be.
1. Interest.
--------
Except as otherwise provided in paragraphs 4 and 5, interest shall
accrue from and including the loan date specified above (the "Loan Date")
at the lower of (i) the applicable Federal rate for long-term loans on the
Loan Date determined in accordance with Section 1274(d) of the Internal
Revenue Code of 1986, as amended, (the "Code") or (ii) 9%, and interest on
the unpaid principal amount of the Loan shall be compounded semi-annually
but shall not be payable until the Repayment Date or such earlier date on
which the Loan is repaid.
2. Stock Purchase; Use of Proceeds.
-------------------------------
The Employee hereby represents and convenants that the proceeds of the
Loan shall be used exclusively by the Employee to pay for the above
specified number of shares (the "Stock") of Common Stock of the Company, to
be purchased by the Employee on the Loan Date from the RJR Nabisco Holdings
Corp. 1990 Long-Term Incentive Plan.
3. Pledge.
------
(a) In consideration of the principal amount of the Loan loaned to
the Employee by the Company, payment of which, less tax amounts retained by
the Company pursuant to paragraph 6, is hereby acknowledged, the Employee
hereby grants a security interest to the Company in the Stock, duly
endorsed in blank and herewith delivered to the Company, together with any
other securities (including, without limitation, any notes, bonds,
debentures or other indebtedness, any shares of preferred or common stock
and any instruments evidencing such indebtedness or shares) or other non-
cash property distributed on or with respect to the Stock or such other
securities (collectively, the "Distributed Property") and any proceeds from
the sale or other disposition of all or any portion of the Stock or the
Distributed Property. The Employee agrees that the Company shall hold the
Stock and any Distributed
-1-
<PAGE>
Property, which upon receipt by the Employee shall be pledged and delivered
to the Company as security for the repayment of the principal amount of and
interest on the Loan, and shall not encumber or dispose of the Stock or any
Distributed Property except in accordance with the provisions of Paragraph
4 hereof.
(b The Employee represents that there are no restrictions upon the
transfer of the Stock and that the Company has the right to transfer such
Stock free of any other encumbrances and without obtaining the consent of
other stockholders. The Employee agrees that the Stock may not be sold,
tendered, assigned, transferred, pledged or otherwise encumbered to any
person or party other than the Company prior to the repayment of the
principal amount of and interest on the Loan.
(c) Immediately and without further notice, whenever the Loan becomes
immediately due and payable under Paragraph 4 or Paragraph 5, the Company
or its nominee shall have, with respect to the Stock and any Distributed
Property, the right to exercise all other corporate rights and all
conversion, exchange, subscription or other rights, privileges or options
pertaining thereto as if it were the absolute owner thereof, including,
without limitation, the right to exchange any or all of the Stock and any
Distributed Property upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer thereof, or upon the
exercise by such issuer of any right, privilege, or option pertaining to
any of the Stock and any Distributed Property, and, in connection
therewith, to deliver any of the Stock and any Distributed Property to any
committee, depository, transfer agent, registrar or other designated agency
upon such terms and conditions as it may determine, all without liability
except to account for property actually received by it; but the Company
shall have no duty to exercise any of the aforesaid rights, privileges or
options and shall not be responsible for any failure to do so or delay in
so doing.
(d) Unless the Loan shall have become immediately due and payable,
the Employee shall be entitled to receive for his own use cash dividends
paid on the Stock. After the Loan becomes due and payable, the Company may
require any cash dividends subsequently paid to be delivered to the Company
as additional security hereunder or applied toward the satisfaction of the
obligations.
(e) The Employee shall be the stockholder of record of the Stock and
shall have all voting rights as such.
(f) If the Company shall be reorganized, or consolidated or merged
with another corporation, any stock, securities or other property
exchangeable for the Stock pursuant to such reorganization, consolidation
or merger shall be deposited with the Company and shall become subject to
the restrictions and conditions hereof to the same extent as if it had been
the original property pledged hereby.
-2-
<PAGE>
4. Repayment and When Loan Is Due and Payable.
------------------------------------------
(a) Except as otherwise provided in paragraphs 4(a)(ii) and 5, the
Loan shall become due and payable, and the Employee shall repay the
principal amount of and interest on the Loan on the date on which proceeds
from the sale of Stock are received or the date that is the thirtieth
(30th) anniversary of the Loan Date, whichever is earlier (the "Repayment
Date"). Except as provided in paragraph 5, until the principal amount of
and accrued interest on the Loan are repaid in full, Stock shall only be
sold by the Company, acting on behalf of the Employee, on instructions from
the Employee, and:
(i) if the proceeds from the sale of the Stock are greater than the
-------
principal amount of and accrued interest on the Loan, the Company
shall remit the difference, less applicable taxes, to the
Employee; or
(ii) If the proceeds from the first sale of any of the Stock are less
----
than the principal amount of and accrued interest on the Loan,
payment of the balance is due, and must be made with interest as
determined under subsection (i) or (ii) of Paragraph 1 by the
earlier of the thirtieth (30th) anniversary of the Loan Date or
the 730th day after such sale of the Stock. If the Employee fails
to repay the balance due plus interest by such time, the balance
of the principal amount of and accrued interest on the Loan, will
be immediately due and payable and will thereafter accrue
interest at the highest of 1) 120% of the published applicable
Federal rate on the Repayment Date, 2) 120% of the published
applicable Federal rate on the 730th day after the sale of the
Stock, or 3) the published applicable Federal rate on the Loan
Date, which interest shall be compounded semi-annually.
(b) In the event of the Employee's termination of employment with the
Company, he shall, as of the date of termination, be deemed to have
instructed the Company to sell the Stock, pursuant to Paragraph (a) above;
provided, however Company shall sell such number of shares of the Stock as
the Company believes is necessary to yield proceeds sufficient to pay the
principal, accrued interest on the Loan, and related taxes, and shall
deliver the balance of the shares of the Stock, if any, plus the balance of
the proceeds from the sale of the shares of the Stock, if any, to the
Employee or the Employee's estate. If the proceeds of the sale are less
than the principal amount of and the accrued interest on the Loan, the
obligations of sub-Paragraph 4(a)(ii) shall be the responsibility of the
Employee or the Employee's estate.
(c) Upon receipt of instructions from the Employee to sell the Stock,
the Company shall use its reasonable best efforts to sell such Stock in the
market or otherwise as promptly as practicable. Notwithstanding anything to
the contrary contained herein, the Employee acknowledges and agrees that
the Company shall have no liability with respect to any such sale or
purchase or the price obtained in connection therewith and the Employee
agrees to indemnify and hold the Company harmless from any claims relating
thereto.
-3-
<PAGE>
5. Default.
-------
In the event that the Employee defaults in the performance of any of
the terms of this Note, or in the payment when due of the principal of and
accrued interest on the Loan, the Company shall have the rights and
remedies provided in the Uniform Commercial Code then in force in the State
of Delaware and, in this connection, the Company may, upon five days'
notice to the Employee, sent by registered mail, and without liability for
any diminution in price which may have occurred, sell any Stock and any
Distributed Property pledged hereby and not previously sold in such manner
and for such price as the Company may determine. At any bona fide public
sale the Company shall be free to purchase all or any part of such Stock or
Distributed Property. Out of the proceeds of any sale the Company may
retain an amount equal to the principal of and accrued interest on the
Loan, plus the amount of the expenses of the sale and any taxes due, and
shall pay any balance of such proceeds to the Employee. In the event that
the proceeds of any sale are insufficient to cover the principal of and
accrued interest on the Loan plus the expenses of the sale and any taxes
due, the Employee shall remain liable for any deficiency.
6. Taxes.
-----
Any taxes of the Employee required to be paid or withheld by the
Company by federal, state or local laws in relation to the ownership of the
Stock, the grant or sale of the Stock, or the Loan, or otherwise in
connection therewith shall be paid to the Company by the Employee, or
retained from the proceeds of the Loan by the Company, on the date the
Stock is granted.
7. Notices.
-------
Any notices required to be given hereunder to the Company shall be
addressed to the Treasurer, RJR Nabisco Inc., 1301 Avenue of the Americas,
New York, New York, 10019 and any notice required to be given hereunder to
the Employee shall be sent to the Employee's address as shown on the
records of the Company.
8. No Employment.
-------------
Nothing contained herein or in any other agreement entered into by the
Company and the Employee contemporaneously with the execution of this Note,
(i) obligates the Company or any of its parents or subsidiaries to employ
the Employee in any capacity whatsoever or (ii) prohibits or restricts the
Company or any of its parents or subsidiaries from terminating the
employment, if any, of the Employee at any time or for any reason
whatsoever, with or without cause, and the Employee hereby acknowledges and
agrees that neither the Company nor any of its parents or subsidiaries has
made any representations or promises whatsoever to the Employee concerning
the Employee's employment or continued employment by the Company or any of
its parents or subsidiaries. The provisions of this Note shall be
interpreted independently of any other agreement, understanding or course
of dealing between the Employee, on the one hand, and the Company and any
of its parents and subsidiaries, on the other.
-4-
<PAGE>
9. Binding Effect.
--------------
The provisions of this Note shall be binding upon and accrue to the
benefit of the Employee and the Company and their respective heirs, legal
representatives, successors and assigns.
10. Waiver.
------
The Employee and all guarantors and endorsers of this Note severally
irrevocably waive diligence, demand, presentment, notice of nonpayment and
protest, and assent to extensions of the time of payment, surrender or
other indulgence, without notice. Any waiver by the Company of any default
under this Note or any other breach by the Employee of any provision of
this Note shall be in writing and shall not operate as a waiver of any
future default or breach by the Employee.
11. Amendment.
---------
This Note may be amended only by a written instrument signed by the
Company and the Employee.
12. Applicable Law: Jurisdiction.
----------------------------
The laws of the State of Delaware shall govern the interpretation,
validity and performance of the terms of this Note, without reference to
rules relating to conflicts of law. Any suit, action or proceeding against
the Employee with respect to this Note, or any judgment entered by any
court in respect of any hereof, may be brought in any court of competent
jurisdiction in the States of Delaware or New York, as the Company may
elect in its sole discretion, and the Employee hereby submits to the
nonexclusive jurisdiction of such courts for the purpose of any such suit,
action, proceeding or judgment. By the execution and delivery of this Note,
the Employee appoints The Prentice-Hall Corporation System, Inc., 375
Hudson Street, 11th Floor, New York, New York, 10014, as his agent upon
which process may be served in any such suit, action or proceeding. Service
of process upon such agent, together with notice of such service given to
the Employee in the manner provided in Paragraph 13 below shall be deemed
in every respect effect service of process upon him in any suit, action or
proceeding. Nothing herein shall in any way be deemed to limit the ability
of the Company to serve any such writs, process or summonses in any other
manner permitted by applicable law or to obtain jurisdiction over the
Employee, in such other jurisdictions, and in such manner, as may be
permitted by applicable law. The Employee hereby irrevocably waives any
objections which he many now or hereafter have to the laying of the venue
of any suit, action or proceeding arising out of or relating to this Note
brought in any court of competent jurisdiction in the States of Delaware or
New York, and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in
any inconvenient forum. No suit, action or proceeding against the Company
with respect to this Note may be brought in any court, domestic or foreign,
or before any similar domestic or
-5-
<PAGE>
foreign authority other than in a court of competent jurisdiction in the
States of Delaware or New York, and the Employee hereby irrevocably waives
any right which he may otherwise have had to bring such an action in any
other court, domestic or foreign, or before any similar domestic or foreign
authority.
/s/
---------------------------------
Employee
-6-
Exhibit 10.44
[RJR NABISCO LETTERHEAD]
December 5, 1995
Andrew J. Schindler
Dear Andy:
In addition to your other contractual arrangements with the Company and its
affiliates, in the event of a Change of Control of RJR Nabisco Holdings Corp.
(as such Change of Control is defined in the RJR Nabisco Holdings Corp. 1990
Long-Term Incentive Plan), the following shall occur:
1) The Company shall hold you harmless from any golden parachute tax
imposed by any federal, state or local taxing authority as a result of
any of the payments made from the Company. In the event that it is
determined that any payment or distribution by the Company to or for
you (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code or any interest or penalties
with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then you shall be entitled to receive from the
Company an additional payment ("Excise Tax Adjustment Payment") in an
Amount such that after payment by you of all applicable Federal, state
and local taxes (computed at the maximum marginal rates and including
any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Excise Tax Adjustment
Payment, you retain an Amount of the Excise Tax Adjustment Payment
equal to the Excise Tax imposed upon the Payments. You agree to
cooperate fully with the Company in any protester appeal by the
Company in the event of the imposition of golden parachute tax.
2) If you are terminated without Cause following such Change of Control,
the Company shall pay to you as incurred all legal and accounting fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, in seeking to obtain or
enforce any right or benefit provided by any compensation-related
plan, agreement or arrangement of the Company) unless your claim is
found by an arbitral tribunal of competent jurisdiction to have been
frivolous.
3) During the twenty-four month period following a Change of Control, you
shall be entitled to terminate your employment for Good Reason and
receive the severance arrangements under your contractual arrangements
with the
RJR Nabisco, Inc.
1301 Avenue of the Americas
New York, New York 10019-6013
(212) 258-5600
<PAGE>
Company as if you had been terminated by the Company without Cause.
For purposes of this Agreement, "Good Reason" shall mean, without your
express written consent, any of the following occurring following a
Change of Control:
(A) A material reduction in your duties, a material diminution
in your position or a material adverse change in your reporting
relationship from those in effect immediately prior to the Change of
Control;
(B) A reduction in your pay grade or bonus opportunity as in
effect immediately prior to the Change of Control or as the same may
thereafter be increased from time to time during the term of this
Agreement;
(C) The failure to continue in effect any compensation plan in
which you participate at the time of the Change of Control, including
but not limited to the RJR Nabisco Holdings Corp. 1990 Long Term
Incentive Plan ("LTIP") and the RJR Nabisco, Inc. Annual Incentive
Award Plan (the "AIAP"), or any substitute plans adopted prior to the
Change of Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan providing you with
substantially similar benefits) has been made with respect to such
plan in connection with the Change of Control, or the failure to
continue your participation therein on substantially the same basis,
both in terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed at the time
of the Change of Control;
(D) The taking of any action which would directly or indirectly
materially reduce any of the benefits to be provided under the
Retirement or Savings Plans of the Company (unless such reduction is
required by law) or deprive you of any material fringe benefit enjoyed
by you at the time of the Change of Control, or the failure to provide
you with the number of paid vacation days to which you are entitled on
the basis of the Company's practice with respect to you as in effect
at the time of the Change of Control;
(E) Any purported termination of your employment which is not
effected pursuant to a written notice of termination given to you not
less than thirty (30) or more than sixty (60) days prior to the date
of termination; provided further that for purposes of this Agreement,
no such purported termination shall be effective;
(F) Any material breach by Holdings or the Company of any
provision of this Agreement or any other of your contractual
arrangements with the Company; or
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<PAGE>
(G) Requiring you to be based at any office or location more
than 35 miles from the office or location at which you were based
immediately prior to such Change of Control, except for travel
reasonably required in the performance of your responsibilities.
Please indicate your acceptance of the terms of this Agreement by signing
this letter below and returning it to Jerry Angowitz. A copy will be provided to
you.
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
By: /s/ Steven F. Goldstone
----------------------------
Steven F. Goldstone
Chief Executive Officer
Agreed:
- -----------------------
Andrew J. Schindler
- -----------------------
Date
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Exhibit 10.45
[RJR NABISCO LETTERHEAD]
December 28, 1995
Andrew J. Schindler
Re: Participation Agreement-
RJR Nabisco, Inc. Supplemental Executive Retirement Plan
Dear Andy:
You have been approved as a Participant in the RJR Nabisco, Inc.
Supplemental Executive Retirement Plan ("SERP") as modified by this
Participation Agreement.
The SERP has been designed to facilitate succession planning at the
executive level. Part of this planning process involves establishing in advance
a retirement date for Participants on a basis that is mutually agreeable. The
SERP provides a total retirement income that will exceed what you would
otherwise be entitled to receive at such retirement date solely under the
regular pension plan.
In consideration of your participation, it is agreed that your Normal
Retirement Age under the SERP shall be the first day of the month next following
your 60th birthday, unless you become eligible to retire earlier under the SERP
(a "Retirement Date") pursuant to the provisions of SERP Sections 3
(Eligibility) and 5 (Early Retirement); provided however, your Normal Retirement
Age or other Retirement Date shall in any event not occur until the end of any
period of Compensation Continuance under your Employment Agreement.
In the event of a Change of Control (as defined in the RJR Nabisco Holdings
Corp. Long-Term Incentive Plan), your benefit will be funded in a Rabbi Trust.
At the earlier of (i) your Normal Retirement Age or (ii) other Retirement Date,
an annuity shall be purchased from the Rabbi Trust and delivered to you.
Please affirm your agreement to the terms of this letter by signing and
returning to Jerry Angowitz the attached copy of this letter.
Very truly yours,
RJR NABISCO, INC.
By: /s/
--------------------
Chief Executive Officer
Agreed:
/s/ Andrew J. Schindler
- -------------------------
Andrew J. Schindler
Exhibit 10.46(a)
[RJR NABISCO LETTERHEAD]
July 26, 1995
Mr. James W. Johnston
R. J. Reynolds Tobacco Company
401 North Main Street
Winston-Salem, NC 27102
Re: Amended and Restated Employment Agreement Effective as of
September 1, 1993 by and among R.J. Reynolds Tobacco Company (the
"Company"), R.J. Reynolds Tobacco International, Inc.
("International"), RJR Nabisco Holdings Corp. ("Holdings"), RJR
Nabisco, Inc. ("RJR") (the foregoing corporations being jointly,
severally and collectively referred to as "Nabisco") and James W.
Johnston ("Executive")
Dear Jim:
Reference is made to the above captioned agreement ("Agreement").
Nabisco acknowledges that it has advised you (the "Executive" under the
Agreement) that it intends to appoint a new CEO of the Company while
retaining Executive as Non-Executive Chairman of its worldwide tobacco
operations with International reporting directly to Executive but with the
domestic tobacco operations reporting to a new CEO of the Company.
Executive would become Vice Chairman of RJR and of Holdings. Nabisco
acknowledges that such reordering of Executive's responsibilities would
constitute "Good Reason" for Executive to terminate his employment under
the Agreement pursuant to Sections 6.1(d)(i), (vi) and (vii) thereof. All
capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Agreement. In order to induce Executive not to
terminate the Agreement forthwith, Nabisco agrees as follows:
Notwithstanding anything to the contrary contained in the Agreement
and without prejudice to Executive's other rights and options under the
Agreement, termination of Executive's employment under the Agreement by
Executive or Nabisco for any reason at any time prior to March 31, 1996
shall be treated for all purposes under the Agreement, and under any plan,
entitlement, option, incentive, or benefit, including, without limitation
under SERP or LTIP, as a termination by Executive of his employment
under the
<PAGE>
Mr. James W. Johnston
July 26, 1995
Page 2
Agreement for Good Reason. After March 31, 1996 the reordering of
responsibilities as described above shall not constitute "Good Reason" for
Executive to terminate his employment under Section 6.1(d)(i), (vi) and
(vii) of the Agreement; provided, however, this waiver shall not be deemed
a waiver of or an estoppel to his right to terminate for any other reason
constituting Good Reason, including, without limitation, as a result of a
change in Executive's responsibilities constituting Good Reason under the
Agreement other than as described in the introductory paragraph hereof.
If the foregoing accurately reflects our agreement, please acknowledge
same beneath the words "Accepted and Agreed to" at the foot hereof
whereupon this will constitute a binding agreement between us amending the
Agreement as herein specifically set forth. In all other respects the
Agreement is hereby ratified and affirmed.
R.J. Reynolds Tobacco Company
By:
----------------------------
Assistant Secretary
R.J. Reynolds Tobacco
International, Inc.
By:
-----------------------------
Assistant Secretary
RJR Nabisco Holdings Corp.
By:
-----------------------------
Chairman and Chief
Executive Officer
RJR Nabisco, Inc.
By:
-----------------------------
Chairman and Chief Executive
Officer
Accepted and Agreed to:
By: /s/ James W. Johnston
-------------------------
James W. Johnston
Exhibit 10.46(b)
[RJR NABISCO LETTERHEAD]
December 21, 1995
Mr. James W. Johnston,
Chairman
R. J. Reynolds Tobacco Company
401 North Main Street
Winston-Salem, NC 27102
Re: 1) Amended and Restated Employment Agreement Effective as of
September 1, 1993 by and among R.J. Reynolds Tobacco Company
(the "Company"), R.J. Reynolds Tobacco International, Inc.
("International"), RJR Nabisco Holdings Corp. ("Holdings"),
RJR Nabisco, Inc. ("RJR") (the foregoing corporations being
jointly, severally and collectively referred to as
"Nabisco") and James W. Johnston ("Executive")
2) Letter Agreement dated July 26, 1995 between the above-
captioned parties.
Dear Jim:
Reference is made to the above captioned agreement dated September 1, 1993
("Agreement") and the letter agreement dated July 26, 1995 (Letter Agreement").
In the Letter Agreement, Nabisco acknowledged to you (the "Executive") that
certain actions it was taking at that time could constitute Good Reason for
Executive to terminate his employment under the Agreement pursuant to Sections
6.1(d)(i), (vi) and (vii) thereof. All capitalized terms not defined herein
shall have the meanings ascribed to them in the Agreement. Nabisco desires
to extend the period described in the Letter Agreement in addition to other
inducements to Executive not to terminate the Agreement prior to
December 31, 1995, and therefore, Nabisco agrees as follows:
Notwithstanding anything to the contrary contained in the Agreement
and the Letter Agreement and without prejudice to Executive's other rights and
options under the Agreement and the Letter Agreement, termination of Executive's
employment under the Agreement and the Letter Agreement by Executive or Nabisco
for any reason at any time prior to May 15, 1996 shall be treated for all
purposes under the Agreement, and under any plan, entitlement, option, incentive
or benefit, including, without limitation, under SERP or LTIP, as a termination
by Executive of his employment under the Agreement for Good Reason. After
May 15, 1996 the reordering of responsibilities as described in the Letter
Agreement dated July 26, 1995 shall not constitute "Good Reason" for Executive
to terminate his employment under Sections 6.1(d)(i), (vi) and (vii) of the
Agreement;
<PAGE>
Mr. James W. Johnston
December 21, 1995
Page 2
provided, however, this waiver shall not be deemed a waiver of or an
estoppel to his right to terminate for any other reason constituting Good
Reason, including, without limitation, as a result of a change in
Executive's responsibilities constituting Good Reason under the Agreement
other than as described in the introductory paragraph of the Letter
Agreement.
Notwithstanding anything to the contrary contained in the Agreement and
the Letter Agreement, in connection with the above referenced termination, for
SERP benefit calculations, if a termination occurs on or before May 15,
1996 the amount of Average Final Compensation (as defined in the SERP)
shall include, from the AIAP element of Average Final Compensation, actual
performance for AIAP Plan year 1994 and target performance for both AIAP
Plan years 1995 and 1996.
If the foregoing accurately reflects our agreement, please acknowledge
same beneath the words "Accepted and Agreed to" at the foot hereof
whereupon this will constitute a binding agreement between us amending the
Agreement and the Letter Agreement as herein specifically set forth. In all
other respects the Agreement and the Letter Agreement is hereby ratified and
affirmed.
R.J. Reynolds Tobacco Company
By:
----------------------------
Assistant Secretary
R.J. Reynolds Tobacco
International, Inc.
By:
-----------------------------
Assistant Secretary
RJR Nabisco Holdings Corp.
By:
-----------------------------
Chief Executive Officer
RJR Nabisco, Inc.
By:
-----------------------------
Chief Executive Officer
Accepted and Agreed to:
By: /s/ James W. Johnston
--------------------------
James W. Johnston
Exhibit 10.75
Amendment To
Non-Qualified Stock Option Agreements
dated prior to October 11, 1995
All the Stock Option Agreements issued to the undersigned Executive
pursuant to the RJR Nabisco Holdings Corp. 1990 Long Term Incentive Plan
(the "LTIP") and, if applicable, the Stock Option Plan for Directors and
Key Employees of RJR Nabisco Holdings Corp. are, except to the extent
provided by the Committee with respect to a Change of Control (as defined
in the LTIP) occurring after October 11, 1996 or such later date as the
Committee may from time to time designate by resolution, amended as of
October 11, 1995 by adding the following to any section dealing with the
adjustment of options in the event of a corporate transaction:
If, and only if, a Change of Control occurs after April 11, 1996 the
Optionee shall receive in cash in respect of each option and in exchange
for the cancellation of such option, the higher of(i) or (ii) where (i) is
the excess, if any, of the Fair Market Value (as defined in Paragraph 2(i)
of the LTIP) over the option price of such option multiplied by the number
of Shares (as defined in Paragraph 2 (f) of the LTIP) subject to such
option and (ii) is the value of such option using the Black-Scholes method
of valuing such option based on the following assumptions: Fair Market
Value (as so defined in the LTIP), a risk free factor equal to the average
rate for zero coupon United States government issues with a remaining term
equal to the expected term of the option, a dividend yield calculated by
dividing the annual dividend by the Fair Market Value, and volatility of
35.6% (the 4-1/2 year weighted average volatility of the Shares).
RJR NABISCO HOLDINGS CORP.
By: /s/
-----------------------
Authorized Signatory
- ---------------------------
Andrew J. Schindler
Dated: October 11, 1995
Exhibit 10.76
PLAN DOCUMENT
-------------
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
(As Amended and Restated effective December 5, 1995)
1. Purpose of Plan
---------------
The RJR Nabisco Holdings Corp. 1990 Long Term Incentive Plan (the
"Plan") is designed:
(a) to promote the long term financial interests and growth of RJR
Nabisco Holdings Corp. and subsidiaries (the "Corporation") by attracting
and retaining management personnel with the training, experience and
ability to enable them to make a substantial contribution to the success of
the Corporation's business;
(b) to motivate management personnel by means of growth-related
incentives to achieve long range goals; and
(c) to further the identity of interests of participants with those of
the stockholders of the Corporation through opportunities for increased
stock, or stock-based, ownership in the Corporation.
2. Definitions
-----------
As used in the Plan, the following words shall have the following
meanings:
(a) "RJRN" means RJR Nabisco Holdings Corp.;
(b) "Grant" means an award made to a Participant pursuant to the Plan
and described in Paragraph 5, including, without limitation, an award of an
Incentive Stock Option, Stock Option, Stock Appreciation Right, Dividend
Equivalent Right, Restricted Stock, Purchase Stock, Performance Units,
Performance Shares or Other Stock-Based Grant, or any combination of the
foregoing;
(c) "Grant Agreement" means an agreement between RJRN and a
Participant that sets forth the terms, conditions and limitations
applicable to a Grant;
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(d) "Board of Directors" means the Board of Directors of RJRN;
(e) "Committee" means the Compensation Committee of the Board of
Directors;
(f) "Common Stock" or "Share" means common stock of RJRN which may be
authorized but unissued, or issued and reacquired;
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended;
(h) "Key Employee" means a person, including an officer, in the
regular full-time employment of RJRN or one of its Subsidiaries who, in the
opinion of the Committee, is, or is expected, to be primarily responsible
for the management, growth or protection of some part or all of the
business of the Corporation;
(i) "Fair Market Value" means such value of a Share as reported for
stock exchange transactions and/or determined in accordance with any
applicable resolutions or regulations of the Committee in effect at the
relevant time;
(j) "Participant" means a Key Employee, or other person having a
unique relationship with RJRN or one of its Subsidiaries, to whom one or
more Grants have been made and such Grants have not all been forfeited or
terminated under the Plan; provided, however, a non-employee director of
RJRN or one of its Subsidiaries may not be a Participant;
(k) "Subsidiary" means any corporation other than RJRN in an unbroken
chain of corporations beginning with RJRN if each of the corporations other
than the last corporation in the unbroken chain owns 50% or more of the
voting stock in one of the other corporations in such chain.
3. Administration of Plan
----------------------
(a) The Plan shall be administered by the Committee. None of the
members of the Committee shall be eligible to be selected for Grants under
the Plan, or have been so eligible for selection within one year prior
thereto; provided, however, that the members of the Committee shall qualify
to administer the Plan for purposes of Rule 16b-3 (and any other applicable
rule) promulgated under Section 16(b) of the Exchange Act. The Committee
may adopt its own rules of procedure, and the action of a majority of the
Committee, taken at a meeting or taken without a meeting by a writing
signed by such majority, shall constitute action by the Committee. The
Committee shall have the power and authority to administer, construe and
interpret the Plan, to make rules for carrying it
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<PAGE>
out and to make changes in such rules. Any such interpretations, rules, and
administration shall be consistent with the basic purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Corporation its duties under the Plan subject
to such conditions and limitations as the Committee shall prescribe except
that only the Committee may designate and make Grants to Participants who
are subject to Section 16 of the Exchange Act.
(c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, RJRN, and the officers
and directors of RJRN shall be entitled to rely upon the advise, 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 Participants, RJRN 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 Grants, and all members of the Committee shall
be fully protected by RJRN with respect to any such action, determination
or interpretation.
4. Eligibility
-----------
The Committee may from time to time make Grants under the Plan to such
Key Employees, or other persons having a unique relationship with RJRN or
any of its Subsidiaries, and in such form and having such terms, conditions
and limitations as the Committee may determine. No Grants may be made under
this Plan to non-employee directors of RJRN or any of its Subsidiaries.
Grants may be granted singly, in combination or in tandem. The terms,
conditions and limitations of each Grant under the Plan shall be set forth
in a Grant Agreement, in a form approved by the Committee, consistent,
however, with the terms of the Plan; provided, however, such Grant
Agreement shall contain provisions dealing with the treatment of Grants in
the event of the termination, death or disability of a Participant, and may
also include provisions concerning the treatment of Grants in the event of
a change of control of RJRN.
5. Grants
------
From time to time, the Committee will determine the forms and amounts
of Grants for Participants. Such Grants may take the following forms in the
Committee's sole discretion:
(a) Incentive Stock Options - These are stock options within the
-----------------------
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), to purchase
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<PAGE>
Common Stock. In addition to other restrictions contained in the Plan, an
option granted under this Section 5(a), (i) may not be exercised more than
10 years after the date it is granted, (ii) may not have an option price
less than the Fair Market Value of Common Stock on the date the option is
granted, (iii) must otherwise comply with Code Section 422, and (iv) must
be designated as an "Incentive Stock Option" by the Committee. The maximum
aggregate Fair Market Value of Common Stock (determined at the time of each
Grant) with respect to which any Participant may first exercise Incentive
Stock Options under this Plan and any Incentive Stock Options granted to
the Participant for such year under any plans of RJRN or any Subsidiary in
any calendar year is $100,000. Payment of the option price shall be made in
cash or in shares of Common Stock, or a combination thereof, in accordance
with the terms of the Plan, the Grant Agreement, and of any applicable
guidelines of the Committee in effect at the time.
(b) Other Stock Options - These are options to purchase Common Stock
-------------------
which are not designated by the Committee as "Incentive Stock Options". At
the time of the Grant the Committee shall determine, and shall have
contained in the Grant Agreement or other Plan rules, the option exercise
period, the option price, and such other conditions or restrictions on the
grant or exercise of the option as the Committee deems appropriate, which
may include the requirement that the grant of options is predicated on the
acquisition of Purchase Shares under Section 5(e) by the Optionee. In
addition to other restrictions contained in the Plan, an option granted
under this Section 5(b), (i) may not be exercised more than 15 years after
the date it is granted, (ii) may not have an option exercise price less
than 50% of the Fair Market Value of Common Stock on the date the option is
granted, and (iii) may not be exercisable within 6 months of the date of
Grant except in the event of death or disability of a Participant. Payment
of the option price shall be made in cash or in shares of Common Stock, or
a combination thereof, in accordance with the terms of the Plan and of any
applicable guidelines of the Committee in effect at the time. Payment of
the option price may also be made by tender of an amount equal to the full
exercise price which has been borrowed from RJRN or one of its Subsidiaries
if the Participant also authorizes the concurrent sale of the exercised
Common Stock by a broker (through an arrangement established by RJRN, or
one of its Subsidiaries, for Participants) and repays the borrowing, all in
accordance with any applicable guidelines of the Committee. Notwithstanding
the foregoing, the date that any holder of a stock option granted hereunder
without related Stock Appreciation Rights becomes subject to the provisions
of Section 16(b) of the Exchange Act, such individual's right to exercise
such option pursuant to the preceding sentence may be converted into a Stock
Appreciation Right having a base value equal to the exercise price of such
option and exercisable during the same period as such option, except as
provided by law and subject to any applicable guidelines of the Committee.
To the extent any such Stock Appreciation Right is subsequently exercised,
the related option will be cancelled.
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<PAGE>
(c) Stock Appreciation Rights - These are rights that on exercise
-------------------------
entitle the holder to receive the excess of (i) the Fair Market Value of a
share of Common Stock on the date of exercise over (ii) the Fair Market
Value on the date of Grant (the "base value") multiplied by (iii) the
number of rights exercised in cash, stock or a combination thereof as
determined by the Committee. Stock Appreciation Rights granted under the
Plan may, but need not be, granted in conjunction with an option under
Paragraphs 5(a) or 5(b). The Committee, in the Grant Agreement or by other
Plan rules, may impose such conditions or restrictions on the exercise of
Stock Appreciation Rights as it deems appropriate, and may terminate,
amend, or suspend such Stock Appreciation Rights any time. No Stock
Appreciation Right granted under this Plan may be exercised less than 6
months or more than 15 years after the date it is granted except in the
event of death or disability of a Participant. To the extent that any Stock
Appreciation Right that shall have become exercisable, but shall not have
been exercised or cancelled or, by reason of any termination of employment,
shall have become non-exercisable, it shall be deemed to have been
exercised automatically, without any notice of exercise, on the last day of
which it is exercisable, provided that any conditions or limitations on its
exercise are satisfied (other than (i) notice of exercise and (ii) exercise
or election to exercise during the period prescribed) and the Stock
Appreciation Right shall then have value. Such exercise shall be deemed to
specify that, the holder elects to receive cash and that such exercise of a
Stock Appreciation Right shall be effective as of the time of automatic
exercise. Except as provided in Paragraph 5(b) with respect to the
conversion under certain circumstances of a right to exercise Other Stock
Options into a Stock Appreciation Right, Stock Appreciation Rights will be
granted for no consideration.
(d) Restricted Stock - Restricted Stock is Common Stock delivered to a
----------------
Participant with or without payment of consideration with restrictions or
conditions on the Participant's right to transfer or sell such stock;
provided that the price of any Restricted Stock delivered for consideration
and not as bonus stock may not be less than 50% of the Fair Market Value of
Common Stock on the date such Restricted Stock is granted or the price of
such Restricted Stock may be the par value. If a Participant irrevocably
elects in writing in the calendar year preceding a Grant of Restricted
Stock, dividends paid on the Restricted Stock granted may be paid in shares
of Restricted Stock equal to the cash dividend paid on Common Stock. The
number of shares of Restricted Stock and the restrictions or conditions on
such shares shall be as the Committee determines, in the Grant Agreement or
by other Plan rules, and the certificate for the Restricted Stock shall
bear evidence of the restrictions or conditions. No Restricted Stock may
have a restriction period of less than 6 months.
(e) Purchase Stock - Purchase Stock are shares of Common Stock offered
--------------
to a Participant at such price as determined by the Committee, the
acquisition of which will make him eligible to receive under the Plan,
including, but not limited to, Stock Options; provided, however, that the
price of such Purchase Shares may not be less than 50% of
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<PAGE>
the Fair Market Value of the Common Stock on the date such shares of
Purchase Stock are offered.
(f) Dividend Equivalent Rights - These are rights to receive cash
--------------------------
payments from RJRN at the same time and in the same amount as any cash
dividends paid on an equal number of shares of Common Stock to shareholders
of record during the period such rights are effective. The Committee, in
the Grant Agreement or by other Plan rules, may impose such restrictions
and conditions on the Dividend Equivalent Rights, including the date such
rights will terminate, as it deems appropriate, and may terminate, amend, or
suspend such Dividend Equivalent Rights at any time.
(g) performance Units - These are rights to receive at a specified
-----------------
future date, payment in cash of an amount equal to all or a portion of the
value of a unit granted by the Committee. At the time of the Grant, in the
Grant Agreement or by other Plan rules, the Committee must determine the
base value of the unit, the performance factors applicable to the
determination of the ultimate payment value of the unit and the period over
which Corporation performance will be measured. These factors must include
a minimum performance standard for the Corporation below which no payment
will be made and a maximum performance level above which no increased
payment will be made. The term over which Corporation performance will be
measured shall be not less than six months.
(h) Performance Shares - These are rights to receive at a specified
------------------
future date, payment in cash or Common Stock, as determined by the
Committee, of an amount equal to all or a portion of the Fair Market Value
for all days that the Common Stock is traded during the last forty-five
(45) days of the specified period of performance of a specified number of
shares of Common Stock at the end of a specified period based on
Corporation performance during the period. At the time of the Grant, the
Committee, in the Grant Agreement or by Plan rules, will determine the
factors which will govern the portion of the rights so payable and the
period over which Corporation performance will be measured. The factors
will be based on Corporation performance and must include a minimum
performance standard for the Corporation below which no payment will be
made and a maximum performance level above which no increased payment will
be made. The term over which Corporation performance will be measured shall
be not less than six months. Performance Shares will be granted for no
consideration.
(i) Other Stock-Based Grants - The Committee may make other Grants
------------------------
under the Plan pursuant to which shares of Common Stock (which may, but
need not, be shares of Restricted Stock pursuant to Paragraph 5(d)), are or
may in the future be acquired, or Grants denominated in stock units,
including ones valued using measures other than market value. Other Stock-
Based Grants may be granted with or without consideration; provided,
however, that the price of any such Grant made for consideration that
provides
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<PAGE>
for the acquisition of shares of Common Stock or other equity securities of
the Corporation may not be less than 50% of the Fair Market Value of the
Common Stock or such other equity securities on the date of grant of such
Grant. Such Other Stock-Based Grants may be made alone, in addition to or
in tandem with any Grant of any type made under the Plan and must be
consistent with the purposes of the Plan.
6. Limitations and Conditions
--------------------------
(a) The number of Shares available for Grants under this Plan shall be
21 million shares of the authorized Common Stock as of the effective date
of the Plan. The number of Shares subject to Grants under this Plan to any
one Participant shall not be more than 2 million shares. No more than 1% of
the authorized Common Stock as of the effective date of the Plan may be
granted as Incentive Stock Options as described in Paragraph 5(a). Shares
related to Grants that are forfeited, terminated, cancelled, expire
unexercised, settled in cash in lieu of stock or in such manner that all or
some of the Shares covered by a Grant are not issued to a Participant,
shall immediately become available for Grants.
(b) No Grants shall be made under the Plan beyond ten years after the
effective date of the Plan, but the terms of Grants made on or before the
expiration thereof may extend beyond such expiration. At the time a Grant
is made or amended or the terms or conditions of a Grant are changed, the
Committee may provide for limitations or conditions on such Grant.
(c) RJRN shall not be obligated to deliver any Shares until they have
been listed (or authorized for listing upon official notice of issuance)
upon each stock exchange upon which outstanding shares of the same class at
the time are listed nor until there has been compliance with such laws or
regulations as RJRN may deem applicable. RJRN shall use its best efforts to
effect such listing and compliance. No fractional Shares shall be
delivered.
(d) Nothing contained herein shall affect the right of the Corporation
to terminate any Participant's employment at any time or for any reason.
(e) Deferrals of Grant payouts may be provided for, at the sole
discretion of the Committee, in the Grant Agreements.
(f) Except as otherwise prescribed by the Committee, the amounts of
the Grants for any employee of a Subsidiary, along with interest, dividend,
and other expenses accrued on deferred Grants shall be charged to the
Participant's employer during the period for which the Grant is made. If
the Participant is employed by more than one
-7-
<PAGE>
Subsidiary or by both RJRN and a Subsidiary during the period for which the
Grant is made, the Participant's Grant and related expenses will be allocated
between the companies employing the Participant in a manner prescribed by the
Committee.
(g) Other than as specifically provided with regard to the death of a
Participant, no benefit under the Plan shall 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 Participant, be in any manner liable for or subject to
the debts, contracts, liabilities, engagements, or torts of the Participant.
(h) Participants shall not be, and shall not have any of the rights or
privileges of, stockholders of RJRN in respect of any Shares purchaseable in
connection with any Grant unless and until certificates representing any such
Shares have been issued by RJRN to such Participants.
(i) No election as to benefits or exercise of Stock Options, Stock
Appreciation Rights, or other rights may be made during a Participant's lifetime
by anyone other than the Participant except by a legal representative appointed
for or by the Participant.
(j) Except to the extent otherwise provided in any other retirement or
benefit plan, any grant under this Plan shall not be deemed compensation for
purposes of computing benefits or contributions under any retirement plan of
RJRN or its Subsidiaries and shall not affect any benefits under any other
benefit plan of any kind or subsequently in effect under which the availability
or amount of benefits is related to level of compensation. This Plan is not a
"Retirement Plan" or "Welfare Plan" under the Employee Retirement Income
Security Act of 1974, as amended.
(k) Unless the Committee determines otherwise, no benefit or promise under
the Plan shall be secured by any specific assets of RJRN or any of its
Subsidiaries, nor shall any assets of RJRN or any of its Subsidiaries be
designated as attributable or allocated to the satisfaction of RJRN's
obligations under the Plan.
7. Transfers and Leaves of Absence
-------------------------------
For purposes of the Plan: (a) a transfer of a Participant's employment
without an intervening period of separation from RJRN to a Subsidiary or vice
versa, or from one Subsidiary to another, shall not be deemed a termination of
employment, and (b) a Participant who is granted in writing a leave of absence
shall be deemed to have remained in the employ of the Corporation during such
leave of absence.
-8-
<PAGE>
8. ADJUSTMENTS
-----------
(a) In the event of any change in the outstanding Common Stock by reason
of a stock split, spin-off, stock dividend, stock combination or
reclassification, recapitalization or merger, change of control, or similar
event, the Committee may adjust appropriately the number of Shares subject to
the Plan and available for or covered by Grants and Share prices related to
outstanding Grants and make such other revisions to outstanding Grants as it
deems are equitably required.
(b) In the event of a Change of Control (as defined in paragraph 8(c)
hereof):
(i) Stock options granted pursuant to paragraphs 5(a) or 5(b) hereof
shall become fully vested and exercisable; provided; however,
that the Committee may elect to make a cash payment to
Participants in cancellation of such options in such amount as
the Committee in its sole discretion shall determine, which
amount shall not be less than the product of (x) and (y), where
(x) is the excess of the Fair Market Value on the date of
exercise over the exercise price, and (y) is the number of Shares
subject to the stock options being cancelled; and further
provided that no stock option grant shall be exercised less than
6 months after the date it is granted, except as provided in
paragraph 5(b);
(ii) Stock Appreciation Rights granted pursuant to paragraph 5(c)
hereof shall become fully vested and exercisable; provided;
however, that no Stock Appreciation Right may be exercised less
than 6 months after the date it is granted, except as provided in
paragraph 5(c);
(iii) Restricted Stock granted pursuant to paragraph 5(d) hereof shall
have all restrictions removed; provided; however, that no
restricted stock shall become freely transferable less than 6
months after the date it is granted;
(iv) Performance Units granted pursuant to paragraph 5(g) hereof whose
performance period ends after the date of the Change of Control
shall become vested as to a percentage of performance units
granted equal to the number of months (including partial months)
in the performance period before the date of the Change of
Control, divided by the total number of months in the performance
period. The value of the performance units shall be equal to the
greater of the target value of the units or the value derived
from the actual performance as of the date of the Change of
Control;
-9-
<PAGE>
(v) Performance Shares granted pursuant to paragraph 5(h) hereof
whose performance period ends after the date of the Change of
Control shall become vested pro rata as to the number of
performance shares granted equal to the number of months
(including partial months) in the performance period before the
date of Change of Control, divided by the total number of months
in the performance period. The prorated number of shares derived
from the preceding calculation shall be further adjusted by
applying the higher of target or actual performance to the date
of Change of Control;
(vi) All remaining Executive Equity Program awards which have not been
made on the date of Change of Control shall be made to the
promissory note holder together with any tax gross-up to the
grantee for any federal, state or local tax. Assuming that all
previous awards and elective sales of pledged stock have been
applied to reduce the promissory note loan balance, it is
intended that any grant made as a result of a Change of Control
shall fully extinguish the loan balance and satisfy the
promissory note; and
(vii) The Committee shall have authority to revise the terms of any
such Grant or any other Grant as it, in its discretion, deems
appropriate; provided; however, that the Committee may not make
revisions that are adverse to the Participant without the
Participant's consent unless such revision is provided for or
contemplated in the terms of the Grant.
(c) For purposes of the Plan, a "Change of Control" shall mean the first
to occur of the following events or such later date as the Corporation may
specify from time to time:
(i) an individual, corporation, parmership, group, associate or other
entity or "person", as such term is defined inn Section 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Acf'), other
than Holdings or any employee benefit plans sponsored by Holdings
or the Company, is or becomes the "beneficial owner" (as defined
in Rule 13 d-3 under the Exchange Act), directly or indirectly,
of 30% or more of the combined voting power of Holdings'
outstanding securities ordinarily having the fight to vote at
elections of directors.
(ii) individuals who constitute the Holdings Board on October 11, 1995
(the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to such date whose election, or nomination
for election by Holdings'
- 10-
<PAGE>
shareholders, was approved by a vote of at least three-quarters
of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of Holdings
in which such person is named as a nominee of Holdings for
director), but excluding for this purpose any such individual
whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of an individual, corporation,
partnership, group, associate or other entity or "person" other
than the Holdings Board, shall be, for purposes of this paragraph
(ii), considered as though such person were a member of the
Incumbent Board;
(iii) the approval by the shareholders of Holdings of a plan or
agreement providing (1) for a merger or consolidation of Holdings
other than with a wholly-owned subsidiary and other than a merger
or consolidation that would result in the voting securities of
Holdings outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of Holdings or
such surviving entity outstanding immediately after such merger
or consolidation, or (2) for a sale, exchange or other
disposition of all or substantially all of the assets of
Holdings. If any of the events enumerated in this paragraph (iii)
occur, the Holdings Board shall determine the effective date of
the Change of Control resulting therefrom for purposes of the
Program.
9. Amendment and Termination
-------------------------
The Committee shall have the authority to make such amendments to any terms
and conditions applicable to outstanding Grants as are consistent with this Plan
provided that, except for adjustments under Paragraph 8 hereof, no such action
shall modify such Grant in a manner adverse to the Participant without the
Participant's consent except as such modification is provided for or
contemplated in the terms of the Grant.
The Board of Directors may amend, suspend or terminate the Plan except that
no such action, other than an action under Section 8 hereof, may be taken which
would, without shareholder approval, increase the aggregate number of Shares
available for Grants under the Plan, decrease the price of outstanding Options
or Stock Appreciation Rights, change the requirements relating to the Committee
or extend the term of the Plan.
-11-
<PAGE>
10. Foreign Options and Rights
--------------------------
(a) The Committee may make Grants to Key Employees who are subject to the
tax laws of nations other than the United States, which Grants may have terms
and conditions that differ from the terms thereof as provided elsewhere in the
Plan for the purpose of complying with the foreign tax laws. Grants of Options
may have terms and conditions that differ from Incentive Stock Options and Other
Stock Options for the purposes of complying with the foreign tax laws.
(b) The terms and conditions of Options granted under Paragraph 10(a) may
differ from the terms and conditions which the Plan would require to be imposed
upon Incentive Stock Options and Other Stock Options if the Committee determines
that the Grants are desirable to promote the purposes of the Plan for the Key
Employees identified in Paragraph 10(a); provided that the Committee may not
grant such Options or Stock Appreciation Rights that do not comply with the
limitations of Paragraph 6.
11. Withholding Taxes
-----------------
The Corporation shall have the right to deduct from any cash payment made
under the Plan any federal, state or local income or other taxes required by law
to be withheld with respect to such payment. It shall be a condition to the
obligation of the Corporation to deliver shares upon the exercise of an Option
or Stock Appreciation Right, upon payment of Performance units or shares, upon
delivery of Restricted Stock or upon exercise, settlement or payment of any
Other Stock-Based Grant that the Participant pay to the Corporation such amount
as may be requested by the Corporation for the purpose of satisfying any
liability for such withholding taxes. Any Grant Agreement may provide that the
Participant may elect, in accordance with any conditions set forth in such Grant
Agreement, to pay a portion or all of such withholding taxes in shares of Common
Stock.
12. Effective Date and Termination Dates
------------------------------------
The Plan shall be effective on and as of the date of its approval by the
stockholders of RJRN and shall terminate ten years later, subject to earlier
termination by the Board of Directors pursuant to Paragraph 9.
- 12 -
Exhibit 10.77
Conversion - 100%
RN Option
1995
U.K.
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
--------------------------
DATE OF GRANT: APRIL 27, 1995
--------------
W I T N E S S E T H :
1. Grant of Option. Subject to (i) the surrender of all of the unexercised
---------------
Options issued to Optionee under the Stock Option Plan for Directors and Key
Employees of R JR Nabisco Holdings Corp. and Subsidiaries and the R jR Nabisco
Holdings Corp. 1990 Long Term Incentive Plan (collectively, the "R JR Plans"),
(ii) the terms and conditions in this Stock Option Agreement and (iii) the
provisions of the RJR Nabisco 1990 Long Term Incentive Plan (the "Plan"), RJR
Nabisco Holdings Corp. (the "Company") on the above date has granted to
[Firstname] [Lastname] (the "Optionee"),
the right and option to exercise from the Company a total of
[Shares] shares
of Common Stock, of the Company, at the exercise price of $27.00 per share (the
"Option"). A copy of the Plan is attached and made a part of this agreement
with same effect as if set forth in the agreement itself. All capitalized terms
used herein shall have the meaning set forth in the Plan, unless the context
requires a different meaning.
2. Exercise of Option.
-------------------
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the Company,
specifying the number of shares to be purchased. The notice of exercise shall be
accompanied by
(i) tender to the Company of cash for the full purchase price of the
shares with respect to which such Option or portion thereof is
exercised; or
<PAGE>
(ii) the unsecured, demand borrowing by the Optionee from the Company on an
open account maintained solely for this purpose in the amount of the
full exercise price together with the instruction from the Optionee to
sell the shares exercised on the open market through a duly registered
broker-dealer with which the Company makes an arrangement for the
sale of such shares under the Plan. This method is known as the
"broker-dealer exercise method" and is subject to the terms and
conditions set forth herein, in the Plan and in guidelines established
by the Committee. The Option shall be deemed to be exercised
simultaneously with the sale of the shares by the broker-dealer. If
the shares purchased upon the exercise of an Option or a portion
thereof cannot be sold for a price equal to or greater than the full
exercise price plus direct costs of the sales, then there is no
exercise of the Option. Election of this method authorizes the Company
to deliver shares to the broker-dealer and authorizes the
broker-dealer to sell said shares on the open market. The
broker-dealer will remit proceeds of the sale to the Company which
will remit net proceeds to the Optionee after repayment of the
borrowing, deduction of costs, if any, and withholding of taxes. The
Optionee's borrowing from the Company on an open account shall be a
personal obligation of the Optionee which shall bear interest at the
published Applicable Federal Rate (AFR) for short-term loans and shall
be payable upon demand by the Company. Such borrowing may be
authorized by telephone or other telecommunications acceptable to the
Company. Upon such borrowing and the exercise of the Option or portion
thereof, title to the shares shall pass to the Optionee whose election
hereunder shall constitute instruction to the Company to register the
shares in the name of the broker-dealer or its nominee. The Company
reserves the right to discontinue this broker-dealer exercise method
at any time for any reason whatsoever. The Optionee agrees that if
this broker-dealer exercise method under this paragraph is used, the
Optionee promises unconditionally to pay the Company the full balance
in his open account at any time upon demand. Optionee also agrees to
pay interest on the account balance at the AFR for short-term loans
from and after demand.
(b) Subject to Section 2(c) herein, this Option shall be fully vested on
the Date of Grant. To the extent that any of the Option is not exercised, it
shall be not expire, but shall continue to be vested at any time thereafter
until this Option shall terminate, expire or be surrendered. An exercise shall
be for whole shares only.
(c) This Option shall not be exercised prior to 36 months after the Date
of Grant.
3. Rights in Event of Termination Of Employment.
---------------------------------------------
Unless optionee is Terminated for Cause (as defined in Section 11 herein)
and subject to Section 4 herein, the Option shall remain fully vested as to all
shares after termination from active employment.
-2-
<PAGE>
4. Expiration of Option. The Option shall expire or terminate and may not
---------------------
be exercised to any extent by the Optionee after the first to occur of the
following events:
(a) The seventh anniversary of the month containing the Date of Grant, or
such earlier time as the Company may determine is necessary or appropriate in
light of applicable foreign tax laws; or
(b) Immediately upon the Optionee's Termination of Employment for Cause (as
defined in Section 11 herein).
5. Transferability. Other than as specifically provided with regard to
---------------
the death of the Optionee, this option 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 Optionee, be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the Optionee.
6. No Right to Employment. Neither the execution and delivery of this
----------------------
agreement nor the granting of the Option evidenced by this agreement shall
constitute or be evidence of any agreement or understanding, express or implied,
on the part of the Company or its subsidiaries to employ the Optionee for any
specific period or shall prevent the Company or its subsidiaries from
terminating the Optionee's employment at any time with or without "Cause".
7. Adjustments in Option.
----------------------
In the event that the outstanding shares of the Common Stock subject to the
Option are, from time to time, changed into or exchanged for a different number
or kind of shares of the Company or other securities by reason of a merger,
consolidation, recapitalization, reclassification, stock split, stock dividend,
combination of shares, or otherwise, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares or other consideration as
to which the Option, or portions thereof then unexercised, shall be exercisable.
Any adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
8. Application of Laws. The granting and the exercise of this Option and
-------------------
the obligations of the Company to sell and deliver shares hereunder and to remit
cash under the broker-dealer exercise method shall be subject to all applicable
laws, rules, and regulations and to such approvals of any governmental agencies
as may be required.
9. Taxes. Any taxes required by federal, state, or local laws to be
-----
withheld by the Company (i) on exercise by the Optionee of the Option for Common
Stock, or (ii) at the time an election, if any, is made by the Optionee pursuant
to Section 83(b) of the Internal
-3-
<PAGE>
Revenue Code, as amended, shall be paid to the Company before delivery of the
Common Stock is made to the Optionee. When the Option is exercised under the
broker-dealer exercise method, the full amount of any taxes required to be
withheld by the Company on exercise of stock options shall be deducted by the
Company from the proceeds.
10. Notices. Any notices required to be given hereunder to the Company
-------
shall be addressed to The Secretary, RJR Nabisco Holdings Corp., 1301 Avenue of
the Americas, New York, NY 10019-6013, and any notice required to be given
hereunder to the Optionee shall be sent to the Optionee's address as shown on
the records of the Company.
11. Termination For "Cause." For purposes of this Agreement, an Optionee's
----------------------
employment shall be deemed to have been terminated for "Cause" if the
termination results from the Optionee's: (a) criminal conduct, (b) deliberate
continual refusal to perform employment duties on substantially a full time
basis, (c) deliberate and continual refusal to act in accordance with any
specific lawful instructions of an authorized officer or employee more senior
than the Optionee, or (d) deliberate misconduct which could be materially
damaging to the Company or any of its business operations without a reasonable
good faith belief by the Optionee that such conduct was in the best interests of
the Company. A termination of Optionee's employment shall not be deemed for
Cause hereunder unless the senior personnel executive of the Company shall
confirm that any such termination is for Cause as defined hereunder. Any
voluntary termination by the Optionee in anticipation of an involuntary
termination of the Optionee's employment for Cause shall be deemed to be a
termination of Optionee's employment for Cause.
12. Administration and Interpretation. In consideration of the grant, the
---------------------------------
Optionee 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 interpretations and determinations made by the Committee shall be
final, conclusive, and binding upon the Optionee, 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.
13. Other Provisions.
----------------
a) Titles are provided herein for convenience only and are not to
serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this Agreement.
c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE
INTERPRETATION, VALIDITY AND PERFORMANCE OF THE
-4-
<PAGE>
TERMS OF THIS AGREEMENT REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER
PRINCIPLES OF CONFLICTS OF LAWS.
d) OPTIONEE UNDERSTANDS THAT BY EXECUTING THIS STOCK OPTION AGREEMENT,
(A) OPTIONEE IS SURRENDERING FOR CANCELLATION ALL UNEXERCISED OPTIONS, WHETHER
EXERCISABLE OR NOT, ISSUED PRIOR TO TIlE DATE OF GRANT OF THIS AGREEMENT UNDER
(i) THE STOCK OPTION PLAN FOR DIRECTORS AND KEY EMPLOYEES OF RJR NABISCO
HOLDINGS CORP. AND SUBSIDIARIES AND (ii) THE RJR NABISCO HOLDINGS CORP. 1990
LONG TERM INCENTIVE PLAN (COLLECTIVELY, THE "RJR PLANS") AND (B) ALL STOCK
OFFION AGREEMENTS ISSUED PRIOR TO THE DATE OF GRANT OF THIS AGREEMENT UNDER THE
RJR PLANS ARE NULL AND VOID.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
the Optionee have executed this Agreement as of the date of Grant first above
written.
RJR NABISCO HOLDINGS CORP.
By
------------------------
Authorized Signatory
- ------------------------------------
Optionee
Optionee's Taxpayer Identification Number:
- ------------------------
Optionee's Home Address:
- ------------------------
- ------------------------
- ------------------------
-5-
Exhibit 10.78
RN Option P - PS
1995
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
---------------------------
DATE OF GRANT: APRIL 27, 1995
--------------
W I T N E S S E T H :
1. Grant of Option. Pursuant to the provisions of the 1990 Long Term
---------------
Incentive Plan (the "Plan"), RJR Nabisco Holdings Corp. (the "Company") on the
above date has granted to
[NAME] (the "Optionee"),
subject to the terms and conditions which follow and the terms and conditions of
the Plan, the right and option to exercise from the Company a total of
[STOCK_OPTIONS] shares
of Common Stock, no par value, of the Company, at the exercise price of $29.70
per share (the "Option"). A copy of the Plan is attached and made a part of this
agreement with same effect as if set forth in the agreement itself. All
capitalized terms used herein shall have the meaning set forth in the Plan,
unless the context requires a different meaning.
2. Exercise of Option.
------------------
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the Company,
specifying the number of shares to be purchased. The notice of exercise shall be
accompanied by
(i) tender to the Company of cash for the full purchase price of the
shares with respect to which such Option or portion thereof is
exercised; or
(ii) the unsecured, demand borrowing by the Optionee from the Company on an
open account maintained solely for this purpose in the amount of the
full exercise price together with the instruction from the Optionee to
sell the shares exercised on the open market through a duly registered
broker-
<PAGE>
dealer with which the Company makes an arrangement for the sale of
such shares under the Plan. This method is known as the "broker-dealer
exercise method" and is subject to the terms and conditions set forth
herein, in the Plan and in guidelines established by the Committee.
The Option shall be deemed to be exercised simultaneously with the
sale of the shares by the broker-dealer. If the shares purchased upon
the exercise of an Option or a portion thereof cannot be sold for a
price equal to or greater than the full exercise price plus direct
costs of the sales, then there is no exercise of the Option. Election
of this method authorizes the Company to deliver shares to the
broker-dealer and authorizes the broker-dealer to sell said shares on
the open market. The broker-dealer will remit proceeds of the sale to
the Company which will remit net proceeds to the Optionee after
repayment of the borrowing, deduction of costs, if any, and
withholding of taxes. The Optionee's borrowing from the Company on an
open account shall be a personal obligation of the Optionee which
shall bear interest at the published Applicable Federal Rate (AFR) for
short-term loans and shall be payable upon demand by the Company. Such
borrowing may be authorized by telephone or other telecommunications
acceptable to the Company. Upon such borrowing and the exercise of the
Option or portion thereof, title to the shares shall pass to the
Optionee whose election hereunder shall constitute instruction to the
Company to register the shares in the name of the broker-dealer or its
nominee. The Company reserves the right to discontinue this
broker-dealer exercise method at any time for any reason whatsoever.
The Optionee agrees that if this broker-dealer exercise method under
this paragraph is used, the Optionee promises unconditionally to pay
the Company the full balance in his open account at any time upon
demand. Optionee also agrees to pay interest on the account balance at
the AFR for short-term loans from and after demand.
(b) This Option shall be exercisable in three installments. The first
installment shall be exercisable on the 27th of April following Date of Grant
for 33% of the number of shares of Common Stock subject to this option.
Thereafter, on each subsequent April 27th an installment shall become
exercisable for 33% and 34%, respectively, of the number of shares subject to
this Option until the Option has become fully exercisable. To the extent that
any of the above installments is not exercised when it becomes exercisable, it
shall not expire, but shall continue to be exercisable at any time thereafter
until this Option shall terminate, expire or be surrendered. An exercise shall
be for whole shares only.
(c) This Option shall not be exercised prior to six months after the Date
of Grant.
3. Termination of Employment.
-------------------------
(a) The Option shall not become exercisable as to any additional
shares following the Termination of Employment of the Optionee
for any reason
2
<PAGE>
including a Termination of Employment because of Permanent
Disability or Retirement of the Optionee. Notwithstanding the
foregoing, in the event of Termination of Employment because of
death, the Option shall immediately become exercisable as to all
shares.
(b) "Termination of Employment" as used herein means termination from
active employment; it does not mean termination of payment of
severance or benefits at the end of salary continuation or other
form of severance or pay in lieu of salary.
4. Expiration of Option. The Option shall expire or terminate and may
--------------------
not be exercised to any extent by the Optionee after the first to occur of the
following events:
(a) The fifteenth anniversary of the Date of Grant, or such earlier
time as the Company may determine is necessary or appropriate in
light of applicable foreign tax laws; or
(b) Immediately upon the Optionee's Termination of Employment for
Cause (as defined in Section 11 herein).
5. Transferability. Other than as specifically provided with regard to
---------------
the death of the Optionee, this option 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 Optionee, be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the Optionee.
6. No Right to Employment. Neither the execution and delivery of
----------------------
this agreement nor the granting of the Option evidenced by this agreement shall
constitute or be evidence of any agreement or understanding, express or implied,
on the part of the Company or its subsidiaries to employ the Optionee for any
specific period or shall prevent the Company or its subsidiaries from
terminating the Optionee's employment at any time with or without "Cause" (as
defined in Section 11 herein).
7. Adjustments in Option. In the event that the outstanding shares of
---------------------
the Common Stock subject to the Option are, from time to time, changed into or
exchanged for a different number or kind of shares of the Company or other
securities by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or
otherwise, the Committee shall make an appropriate and equitable adjustment in
the number and kind of shares or other consideration as to which the Option, or
portions thereof then unexercised, shall be exercisable. Any adjustment made by
the Committee shall be final and binding upon the Optionee, the Company and all
other interested persons.
3
<PAGE>
8. Application of Laws. The granting and the exercise of this Option
-------------------
and the obligations of the Company to sell and deliver shares hereunder and to
remit cash under the broker-dealer exercise method shall be subject to all
applicable laws, rules, and regulations and to such approvals of any
governmental agencies as may be required.
9. Taxes. Any taxes required by federal, state, or local laws to be
-----
withheld by the Company (i) on exercise by the Optionee of the Option for Common
Stock, or (ii) at the time an election, if any, is made by the Optionee pursuant
to Section 83(b) of the Internal Revenue Code, as amended, shall be paid to the
Company before delivery of the Common Stock is made to the Optionee. When the
Option is exercised under the broker-dealer exercise method, the full amount of
any taxes required to be withheld by the Company on exercise of stock options
shall be deducted by the Company from the proceeds.
10. Notices. Any notices required to be given hereunder to the Company
-------
shall be addressed to The Secretary, RJR Nabisco Holdings Corp., 1301 Avenue of
the Americas, New York, NY 10019-6013, and any notice required to be given
hereunder to the Optionee shall be sent to the Optionee's address as shown on
the records of the Company.
11. Termination For "Cause." For purposes of this Agreement, an
------------------------
Optionee's employment shall be deemed to have been terminated for "Cause" if the
termination results from the Optionee's: (a) criminal conduct, (b) deliberate
continual refusal to perform employment duties on substantially a full time
basis, (c) deliberate and continual refusal to act in accordance with any
specific lawful instructions of an authorized officer or employee more senior
than the Optionee, or (d) deliberate misconduct which could be materially
damaging to the Company or any of its business operations without a reasonable
good faith belief by the Optionee that such conduct was in the best interests of
the Company. A termination of Optionee's employment shall not be deemed for
Cause hereunder unless the senior personnel executive of the Company shall
confirm that any such termination is for Cause as defined hereunder. Any
voluntary termination by the Optionee in anticipation of an involuntary
termination of the Optionee's employment for Cause shall be deemed to be a
termination of Optionee's employment for Cause.
12. Administration and Interpretation. In consideration of the grant,
---------------------------------
the Optionee 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 interpretations and determinations made by the Committee shall be
final, conclusive, and binding upon the Optionee, 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.
4
<PAGE>
13. Other Provisions.
-----------------
a) Titles are provided herein for convenience only and are not
to serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing executed by
the parties hereto which specifically states that it is amending this Agreement.
c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE
INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF
LAWS.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
the Optionee have executed this Agreement as of the date of Grant first above
written.
RJR NABISCO HOLDINGS CORP.
By
-----------------------
Authorized Signatory
- ----------------------------------------
Optionee
Optionee's Taxpayer Identification Number:
- ------------------------------------------
Optionee's Home Address:
- -------------------------------
- -------------------------------
- -------------------------------
5
Exhibit 10.79
RN Option R
1995
Post Split
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
-----------------------------
DATE OF GRANT:
W I T N E S S E T H :
1. Grant of Option. Pursuant to the provisions of the 1990 Long Term
Incentive Plan (the "Plan"), RjR Nabisco Holdings Corp. (the "Company") on the
above date has granted to
(the "Optionee"),
subject to the terms and conditions which follow and the terms and conditions of
the Plan, THE right and option to exercise from the Company a total of
shares
of Common Stock of the Company, at the exercise price of $ per share (the
"Option"). A copy of the Plan is attached and made a part of this agreement with
same effect as if set forth in the agreement itself. All capitalized terms used
herein shall have the meaning set forth in the Plan, unless the context requires
a different meaning.
2. Exercise of Option.
-------------------
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the Company,
specifying the number of shares to be purchased. The notice of exercise shall be
accompanied by
(i) tender to the Company of cash for the full purchase price of the
shares with respect to which such Option or portion thereof is
exercised; or
(ii) the unsecured, demand borrowing by the Optionee from the Company
on an open account maintained solely for this purpose in the
amount of the full exercise price together with the instruction
from the Optionee to sell the shares exercised on the open market
through a duly registered broker-dealer with which the Company
makes an arrangement for the sale of such shares under the Plan.
This method is known as the "broker-dealer
<PAGE>
exercise method" and is subject to the terms and conditions
set forth herein, in the Plan and in guidelines established by
the Committee. The Option shall be deemed to be exercised
simultaneously with the sale of the shares by the
broker-dealer. If the shares purchased upon the exercise of an
Option or a portion thereof cannot be sold for a price equal
to or greater than the full exercise price plus direct costs
of the sales, then there is no exercise of the Option.
Election of this method authorizes the Company to deliver
shares to the broker-dealer and authorizes the broker-dealer
to sell said shares on the open market. The broker-dealer will
remit proceeds of the sale to the Company which will remit net
proceeds to the Optionee after repayment of the borrowing,
deduction of costs, if any, and withholding of taxes. The
Optionee's borrowing from the Company on an open account shall
be a personal obligation of the Optionee which shall bear
interest at the published Applicable Federal Rate (AFR) for
short-term loans and shall be payable upon demand by the
Company. Such borrowing may be authorized by telephone or
other telecommunications acceptable to the Company. Upon such
borrowing and the exercise of the Option or portion thereof,
title to the shares shall pass to the Optionee whose election
hereunder shall constitute instruction to the Company to
register the shares in the name of the broker-dealer or its
nominee. The Company reserves the right to discontinue this
broker-dealer exercise method at any time for any reason
whatsoever. The Optionee agrees that if this broker-dealer
exercise method under this paragraph is used, the Optionee
promises unconditionally to pay the Company the full balance
in his open account at any time upon demand. Optionee also
agrees to pay interest on the account balance at the AFR for
short-term loans from and after demand.
(b) This Option shall be exercisable in three installments. The first
installment shall be exercisable on the first anniversary following Date of
Grant for 33% of the number of shares of Common Stock subject to this option.
Thereafter, on each subsequent anniversary date an installment shall become
exercisable for 33% and 34%, respectively, of the number of shares subject to
this Option until the Option has become fully exercisable. To the extent that
any of the above installments is not exercised when it becomes exercisable, it
shall not expire, but shall continue to be exercisable at any time thereafter
until this Option shall terminate, expire or be surrendered. An exercise shall
be for whole shares only.
(c) This Option shall not be exercised prior to six months after the
Date of Grant.
3. Rights in Event of Termination of Employment.
---------------------------------------------
(a) Unless otherwise provided in a written employment or termination
agreement between the Optionee and the Company, the Option shall
not become exercisable as to any additional shares following the
Termination of Employment of the Optionee for any reason other
than a Termination of Employment because of death, Permanent
Disability or Retirement of the Optionee. In the event of
Termination of Employment because of death,
2
<PAGE>
Permanent Disability or Retirement, the Option shall immediately
become exercisable as to all shares.
(b) The Optionee shall be deemed to have a "Permanent Disability" if
he becomes totally and permanently disabled (as defined in RJR
Nabisco, Inc.'s Long Term Disability Plan applicable to senior
executive officers as in effect on the date hereof), or if the
Board of Directors or any committee thereof so determines.
(c) "Retirement" as used herein means retirement at age 65 or over,
or early retirement at age 55 or over with the approval of the
Company, which approval specifically states that the Option shall
become fully exercisable as to all Shares.
(d) "Termination of Employment" as used herein means termination from
active employment; it does not mean termination of payment or
benefits at the end of salary continuation or other form of
severance or pay in lieu of salary.
4. Expiration of Option. The Option shall expire or terminate and may
not be exercised to any extent by the Optionee after the first to occur of the
following events:
(a) The fifteenth anniversary of the Date of Grant, or such earlier
time as the Company may determine is necessary or appropriate in light of
applicable foreign tax laws; or
(b) Immediately upon the Optionee's Termination of Employment for
Cause (as defined in Section 11 herein).
5. Transferability. Other than as specifically provided with regard to
---------------
the death of the Optionee, this option 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 Optionee, be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Optionee.
6. No Right to Employment. Neither the execution and delivery of this
----------------------
agreement nor the granting of the Option evidenced by this agreement shall
constitute or be evidence of any agreement or understanding, express or implied,
on the part of the Company or its subsidiaries to employ the Optionee for any
specific period or shall prevent the Company or its subsidiaries from
terminating the Optionee's employment at any time with or without "Cause" (as
defined in Section 11 herein).
7. Adjustments in Option.
----------------------
In the event that the outstanding shares of the Common Stock subject to the
Option are, from time to time, changed into or exchanged for a different number
or kind
3
<PAGE>
of shares of the Company or other securities by reason of a merger,
consolidation, recapitalization, reclassification, stock split, stock dividend,
combination of shares, or otherwise, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares or other consideration as
to which the Option, or portions thereof then unexercised, shall be exercisable.
Any adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
8. Application of Laws. The granting and the exercise of this Option
-------------------
and the obligations of the Company to sell and deliver shares hereunder and to
remit cash under the broker-dealer exercise method shall be subject to all
applicable laws, rules, and regulations and to such approvals of any
governmental agencies as may be required.
9. Taxes. Any taxes required by federal, state, or local laws to be
-----
withheld by the Company (i) on exercise by the Optionee oftheOption for Common
Stock, or (ii) at the time an election, if any, is made by the Optionee pursuant
to Section 83(b) of the Internal Revenue Code, as amended, shall be paid to the
Company before delivery of the Common Stock is made to the Optionee. When the
Option is exercised under the broker-dealer exercise method, the full amount of
any taxes required to be withheld by the Company on exercise of stock options
shall be deducted by the Company from the proceeds.
10. Notices. Any notices required to be given hereunder to the Company
-------
shall be addressed to The Secretary, RIR Nabisco Holdings Corp., 1301 Avenue of
the Americas, New York, NY 10019-6013, and any notice required to be given
hereunder to the Optionee shall be sent to the Optionee's address as shown on
the records of the Company.
11. Termination For "Cause." For purposes of this Agreement, an
------------------------
Optionee's employment shall be deemed to have been terminated for "Cause" if the
termination results from the Optionee's: (a) criminal conduct, (b) deliberate
continual refusal to perform employment duties on substantially a full time
basis, (c) deliberate and continual refusal to act in accordance with any
specific lawful instructions of an authorized officer or employee more senior
than the Optionee, or (d) deliberate misconduct which could be materially
damaging to the Company or any of its business operations without a reasonable
good faith belief by the Optionee that such conduct was in the best interests of
the Company. A termination of Optionee's employment shall not be deemed for
Cause hereunder unless the senior personnel executive of the Company shall
confirm that any such termination is for Cause as defined hereunder. Any
voluntary termination by the Optionee in anticipation of an involuntary
termination of the Optionee's employment for Cause shall be deemed to be a
termination of Optionee's employment for Cause.
12. Administration and Interpretation. In consideration of the grant,
---------------------------------
the Optionee 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 interpretations and determinations made by the Committee shall be
final, conclusive, and binding upon the Optionee, the Company and all other
interested persons. No member of the Committee shall be personally liable
4
<PAGE>
for any action, determination or interpretation made in good faith with respect
to the Plan or the Agreement. The Committee may delegate its interpretlye
authority to an officer or officers of the Company.
13. Other Provisions.
-----------------
a) Titles are provided herein for convenience only and are not to
serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing executed by
the parties hereto which specifically states that it is amending this Agreement.
c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE
INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF
LAWS.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the
Optionee have executed this Agreement as of the date of Grant first above
written.
RJR NABISCO HOLDINGS CORP.
By:
------------------------
Authorized Signatory
- -------------------------------
Optionee
Optionee's Taxpayer Identification Number:
- -------------------------------
Optionee's Home Address:
- -------------------------------
- -------------------------------
- -------------------------------
5
Exhibit 10.80
R Performance Unit
1995
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
PERFORMANCE UNIT PROGRAM
PERFORMANCE UNIT AGREEMENT
DATE OF GRANT: FEBRUARY 6, 1995
----------------
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
[AutoMergeField] [AutoMergeField1] (the "Grantee"),
subject to the terms and conditions which follow and the terms and conditions of
the Plan, a target of
[Performance] 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, 1995, the Committee has determined that the
Performance Measure shall be as determined in the attached grid during such
Performance Period. The value of each Performance Unit shall be as determined in
the attached grid; provided, however, the Payment Value 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. Deferrat 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 10.81
Performance Unit
1995
Special - One Year
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
PERFORMANCE UNIT PROGRAM
PERFORMANCE UNIT AGREEMENT
DATE OF GRANT: March 31, 1995
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
(the "Grantee"),
subject to the terms and conditions which follow and the terms and conditions of
the Plan,
Performance Units.
A copy of the Plan is attached and made a pan 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, 1995 and ending December 31, 1995, the Committee has
determined that the Performance Measure 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,
1995, and no other Performance Unit award made in 1995 shall be applicable for
such purpose.
<PAGE>
3. Payment of Performance Units. Unless deferred pursuant to the provisions
----------------------------
of the Plan, or as otherwise determined by the Committee, units 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:
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
Exhibit 10.82
["RJR NABISCO" LETTERHEAD]
November 22, 1995
Andrew J. Schindler
Re: Executive Equity Program (EEP)
Dear Andy:
As you know, in July of 1995 you were asked to make a special election
whereby you agreed not to sell any of your LTIP purchase shares and whereby all
EEP cash grants would be applied to your LTIP Purchase Share Loan balance. A
copy of your election is attached. The Board of Directors has also amended the
Long-Term Incentive Plan (the "LTIP") to provide that upon a Change of Control
(as defined in the LTIP) all remaining Executive Equity Grants would be made at
once together with any tax gross-up for any federal, state and local taxes.
Therefore, taking together the promise made by the Company in your July 1995
EEP election and the EEP provisions of the LTIP, the following commitment is
reaffirmed to you by the Company:
In the event of a Change of Control (i) all remaining Executive Equity
Program ("EEP") grants shall be made to the promissory note holder together with
any gross-up for any federal state or local tax and (ii) after application of
the sale proceeds of LTIP Purchase Shares under the EEP, the loan deficit, if
any, shall be considered fully satisfied.
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
By: /s/ Gerald I. Angowit
-------------------------
Gerald I. Angowit
Senior Vice President,
Human Resources & Administration
RJR Nabisco, Inc.
1301 Avenue of the Americas
New York, New York 10019-6013
(212) 258-5600
<PAGE>
Revised Executive Grant Election for 1995 and 1996
LTIP Purchase Shares
--------------------
1. Do not sell any of my LTIP Purxhase Shares in the 1995 or 1996 EEP
Transactions until such time as I am no longer treated as a SEC
Section 16 reporting executive with respect to Company stock. Any
prior election for the 1995 EEP Transaction relating to my LTIP
Purchase Shares is null and void.
and
---
EEP Cash Grants
---------------
2. Apply any 1995 and 1996 EEP Cash Grants against my loan balance (net
of taxes). Any prior elecetion for the 1995 EEP Transaction relating
to my EEP Cash Grant is null and void.
I undertand that by signing below, I am making the foregoing election
which will apply to the 1995 and 1996 EEP Transaction, and that I am
precluded from making any other elections in those transactions. I am
making this election on the condition that the Company agrees that if any
loan deficit amount results from the fact that I did not sell my LTIP
Purchase Shares and apply the proceeds to the loan in the EEP 1995 or 1996
Transactions, the Company will hold me harmless from such loan deficit
amount and any resultant additional tax liability. My EEP Cash Grant
calculation at each EEP Transaction shall not be in anyway reduced by
reason of my making the foregoing election. I further understand that my
LTIP Purchase Shares will ultimately be sold as soon as practicable after I
am no longer treated as a SEC Section 16 reporting executive with respect
to Company stock. The loan deficit amount, if any, described above will be
calculated at that time.
Name: Andrew J. Schindler Signature:/s/ Andrew J. Schindler
-------------------- -----------------------
SSN: ###-##-#### Date: 7/10/95
------------------- -----------------------
Exhibit 10.83
I
October 11, 1995
[FirstName] [LastName]
Dear [AName]:
RJR Nabisco Holdings Corp. ("Holdings") and RJR Nabisco, Inc. (the
"Company") consider it essential to the best interests of Holdings'
stockholders to foster the continuous employment of key management
personnel of the Company.
In furtherance of the foregoing interests of Holdings and its
stockholders, Holdings and the Company have previously committed, in a
series of letters to you, the most recent of which is dated January 20,
1995 (the "1995 Letter" and, collectively, the "Letters") and in a
protection program for headquarters employees established on July 1, 1994
and implemented as of January 31, 1995 as the RJR Nabisco Holdings Corp.
Headquarters Continuing Excellence Recognition Program (the "Headquarters
Program"), to provide to you certain payments and benefits in the event of
your involuntary separation of employment with the Company other than for
cause.
In light of the success of the 1995 Letter and the Headquarters
Program in retaining and motivating headquarters employees, the Board of
Directors of Holdings (the "Holdings Board") and the Board of Directors of
the Company (the "Board") (and sometimes, collectively, the "Boards") have
determined that further appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of key management
personnel, including yourself, to their assigned duties without distraction
in the face of potentially disturbing circumstances arising from any
possible change of control of Holdings. The Boards have also determined
that it is in the best interest of Holdings and its stockholders to ensure
your continued availability to Holdings in the event of a change of
control.
In order to induce you to remain in the employ of the Company,
Holdings and the Company agree that you shall receive (i) certain payments
and benefits as set forth in this letter agreement (the "Agreement") in the
event your employment with the Company is terminated under the
circumstances described below and (ii) certain other
<PAGE>
payments, as set forth in this Agreement, upon a Change of Control (as
defined in Section 2 below).
This Agreement, when executed by you, will (1) supersede and replace
the 1995 Letter and, following a Change of Control, the Headquarters
Program and (2) will be in lieu of your participation in the RJR Nabisco,
Inc. Salary and Benefit Continuation Program (the "SBC Program") and the
RJR Nabisco Holdings Corp. 1995 Employee Protection Program (the "1995
Program") but will in no event provide lesser benefits to you in the event
of the termination of your employment than would otherwise have been
available under the provisions of the SBC Program or the 1995 Program as
applicable. As a precondition to payment of the benefits provided herein,
you will be required to sign the relevant release of claims against
Holdings and/or the Company, as the case may be, in the form attached
hereto as Exhibit A.
1. Term of Agreement. This Agreement shall be effective as of the date
-----------------
hereof and shall continue in effect as long as you are employed by the
Company or any of its affiliates or successors.
2. Change of Control. For purposes of this Agreement, the term "Change
-----------------
of Control" shall mean the firsl to occur of the following events provided
such event occurs prior to October 11, 1996 or such later date as the
Boards may specify from time to time:
(a) an individual, corporation, partnership, group, associate or
other entity or "person", as such term is defined in Section
14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), other than Holdings or any employee benefit plan(s)
sponsored by Holdings or the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 30% or more of the combined
voting power , the Holdings' outstanding securities ordinarily
having the right to vote at elections of directors.
(b) individuals who constitute the Holdings Board on October 11, 1995
(the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to such date whose election, or nomination
2
<PAGE>
for election by the Holdings' shareholders, was approved by a vote
of at least three-quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the
proxy statement of the Holdings in which such person is named as a
nominee for director, without objection to such nomination) shall
be, for purposes of this paragraph (ii), considered as though such
person were a member of the Incumbent Board;
(c) the approval by the shareholders of the Company of a plan or
agreement providing (1) for a merger or consolidation of Holdings
other than with a wholly-owned subsidiary and other than a merger
or consolidation that would result in the voting securities of
Holdings outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of Holdings or
such surviving entity outstanding immediately after such merger or
consolidation, or (2) for a sale, exchange or other disposition of
all or substantially all of the assets of Holdings. If any of the
events enumerated in this paragraph (c) occurs, the Holdings Board
shall determine the effective date of the Change of Control
resulting therefrom for purposes of this Agreement.
3. Termination of Employment. (a) Definitions.
------------------------- ------------
(i) Disability. You shall be deemed to be Disabled if you become
----------
totally and permanently disabled (as defined in the Company's Long Term
Disability Plan applicable to senior executive officers as in effect on the
date hereof) or, prior to a Change of Control, if the Board or any committee
thereof so determines.
(ii) Retirement. "Retirement" shall mean your retirement on or after
----------
attaining age 55 and with ten or more years of service with the Company or
any affiliate of the Company.
3
<PAGE>
(iii) Cause. (A) Prior to a Change of Control, termination for
-----
"Cause" shall mean termination of your employment resulting from your
(I) criminal conduct, (II) deliberate and continual refusal to perform
employment duties on substantially a full time basis, (III) deliberate
and continual refusal to act in accordance with any specific lawful
instructions of an authorized officer or employee senior to you or
(IV) deliberate misconduct which could be materially damaging to
Holdings or the Company without a reasonable good faith belief by the
Employee that such conduct was in the best interests of Holdings or
the Company. A termination of employment shall not be deemed for Cause
hereunder unless the senior personnel executive of Holdings or the
Company shall confirm that any such termination-is for Cause as
defined above.
(B) Following a Change of Control, termination for "Cause" shall
mean termination of your employment resulting from (I) your willful and
continued failure substantially to perform your duties with Holdings or
the Company (other than as a result of total or partial incapacity due
to physical or mental illness or as a result of a termination by you
for Good Reason) after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially
performed your duties, (II) the willful engaging by you in conduct
which is demonstrably and materially injurious to Holdings or the
Company, monetarily or otherwise or (III) your conviction of (x) a
felony under the laws of the United States or any state or (y) a felony
under the laws of any other country or political sub-division thereof
involving moral turpitude. For purposes of this clause (a)(iii)(B), no
act or failure to act, on your part shall be deemed "willful" unless
done or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest
of Holdings or the Company. Notwithstanding the foregoing, you shall
not be deemed to have been terminated for Cause under this Clause
(a)(iii)(B) unless and until there shall have been delivered
affirmative vote (which cannot be delegated) of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice
to you and an opportunity for you, together with your counsel, to be
heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set
4
<PAGE>
forth above in subclauses (I), (II) or (III) above, specifying the
particulars thereof in detail.
(iv) Good Reason. During the twenty-four month period following
-----------
a Change of Control, you shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, any of the following
occurring following a Change of Control:
(A) A material reduction in your duties, a material
diminution in your position or a material adverse change in your
reporting relationship from those in effect immediately prior to
the Change of Control;
(B) A reduction in your pay grade or bonus opportunity as in
effect immediately prior to the Change of Control or as the same
may thereafter be increased from time to time during the term of
this Agreement;
(C) The failure to continue in effect any compensation plan
in which you participate at the time of the Change of Control,
including but not limited to the RJR Nabisco Holdings Corp. 1990
Long Term Incentive Plan ("LTIP") and the RJR Nabisco, Inc. Annual
Incentive Award Plan (the "AIAP"), or any substitute plans adopted
prior to the Change of Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan providing
you with substantially similar benefits) has been made with
respect to such plan in connection with the Change of Control, or
the failure to continue your participation therein on
substantially the same basis, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants, as existed at the time of the Change of
Control;
(D) The taking of any action which would directly or
indirectly materially reduce any of the benefits to be provided
under Section 6(c) or deprive you of any material fringe benefit
enjoyed by you at the time of the Change of Control, or the
failure to provide you with the number of paid vacation days to
which you are entitled on the basis of the Company's practice with
respect to
5
<PAGE>
you as in effect at the time of the Change of Control;
(E) Any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of subsection (b) below; provided further that for
purposes of this Agreement, no such purported termination shall
be effective;
(F) Any material breach by Holdings or the Company of any
provision of this Agreement including, but not limited to any
provision of Section 6, or any agreements entered into pursuant
hereto; or
(G) Requiring you to be based at any office or location more
than 50 miles from the office or location at which you were based
immediately prior to such Change of Control, except for travel
reasonably required in the performance of your responsibilities.
(b) Notice of Termination. After a Change of Control, any
---------------------
purported termination of your employment by the Company or by you shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this Agreement, after a
Change of Control a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(c) Date of Termination, Etc. Following a Change of Control,
------------------------
"Date of Termination" shall mean (i) if your employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided
that you shall not have returned to the full-time performance of your
duties during such thirty (30) day period), (ii) if your employment is
terminated by reason of your death, the date of your death, and (iii) if
your employment is terminated by reason of your Retirement, for Cause, for
Good Reason or for any other reason (other than Disability or death), the
date specified in the Notice of Termination (which in the case of a
termination for Cause following a Change of Control shall not be less than
thirty (30) nor more than sixty (60) days from the date such Notice of
Termination is given).
6
<PAGE>
4. Compensation Upon Termination.
------------------------------
Upon termination of your employment, subject to your execution of
a release of claims against Holdings and/or the Company (in the relevant
form set forth in Exhibit A if such termination is without Cause or for
Good Reason after a Change of Control), you shall be entitled to the
following benefits:
(a) If your employment shall be terminated by the Company
for Cause, or by you other than following a Change of Control for
Good Reason, the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and any amounts to be paid to you
pursuant to the Company's retirement and other benefit plans of
the Company then in effect, and Holdings and/or the Company shall
have no further obligations to you under this Agreement.
(b) If your employment shall be terminated by reason of your
voluntary Retirement, Disability or death, the Company shall pay
you or your estate, as the case may be, your full base salary
through the Date of Termination at the rate in effect at the time
the Notice of Termination is given or the time of your death, as
the case may be. Benefits to you, your beneficiaries or your
estate, as the case may be, shall be determined in accordance
with the Company's retirement, benefit, disability and insurance
plans and programs in effect at the time of such termination.
(c) If, other than during the twenty-four month period
following a Change of Control, your employment shall be
involuntarily terminated by the Company other than for Cause, you
shall be entitled to the payments and benefits provided below:
(i) The Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the
time the Notice of Termination is given, and, except as set
forth below, all other amounts to which you are entitled
under any compensation or benefit plan of the Company
including, but not limited to, the AIAP and LTIP at the times
such payments are due under the terms of such plans;
(ii) The Company shall pay to you in seventy-two equal
semi-monthly installments an amount
7
<PAGE>
equal to two times the sum of (x) your annual base salary as in
effect immediately prior to such termination and (y) the amount
of your target award under the AIAP as in effect at the time of
such termination;
(iii) The Company shall provide you with the benefits under
the RJR Nabisco, Inc. Flexible Perquisites Program (the
"Perquisites Program") for the thirty-six month period following
such termination;
(iv) The Company shall provide you with the opportunity to
participate in the medical and dental plans as provided under the
SELECT Omnibus Welfare Plan as in effect for active employees
other than the Short and Long Term Disability Plans (or similar
coverage as may be provided for active employees), the core life,
optional life, and accidental death and dismemberment insurance
coverage provided under the SELECT Omnibus Insurance Plan as in
effect for active employees (or similar coverage as may be
provided for active employees), and the Executive Medical Plan as
in effect for active employees until the end of the 36 month
period after such termination, subject to any applicable
coordination of benefits rules.
(v) You shall be paid for any unused vacation for the year
of termination, for vacation accrued to your Date of Termination
for the following calendar year, and/or any accumulated vacation
(if applicable) from previous years, all in accordance with the
normal practice of the Company.
(vi) You shall be entitled to outplacement assistance
pursuant to the Company's normal practice for the 12-month period
following your Date of Termination at an out-of-pocket cost to the
Company not to exceed 18% of annualized Base Pay.
(vii) You shall continue to participate in the Retirement
Plans and Savings Plans, as defined in Exhibit B, for purposes of
benefit accrual and employer matching contribution, as applicable,
for 36 months.
8
<PAGE>
(viii) If you are at least age 55 with at least ten years of
service including any period of severance, you shall be eligible
for MedChoice Retiree Medical benefits as in effect for other
retirees and as amended from time to time thereafter.
(ix) If your Date of Termination occurs prior to March 1,
1996, you shall be entitled to any applicable additional benefits
and protections provided under the Headquarters Program.
(d) If within the twenty-four month period following a Change of
Control your employment by the Company shall be terminated (x) by the
Company other than for Cause and other than because of your death,
Disability or voluntary Retirement or (y) by you for Good Reason, then,
effective as of the Date of Termination, in lieu of any benefits which
you otherwise would be eligible to receive under Section 4 (c) above,
you shall be entitled to the payments and benefits provided below:
(i) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time the
Notice of Termination is given, and, except as set forth below,
all other amounts to which you are entitled under any compensation
or benefit plan of the Company at the time such payments are due
under the terms of such plans, or as otherwise provided herein.
(ii) The Company shall pay to you, not later than 15 business
days following the Date of Termination, a lump sum cash payment
equal to (A) your AIAP Vested Amount, PS Vested Amount and PU
Vested Amount (each as defined in Exhibit B) as of the Date of
Termination plus (B) two (2) times the sum of (I) your annual base
salary as in effect immediately prior to the Change of Control or
the Date of Termination if higher and (II) the amount of your AIAP
target award as in effect at the time of such termination or, if
higher, as in effect immediately prior to the Change of Control
(all as defined in Schedule B). The amount of the payment under
this Section 4(d)(ii)(B) shall be discounted to its present value,
based on a notional payment period of 36 months, assuming equal
semi-monthly payments and a discount rate equal to the product of
(x) the 3-year Treasury bond yield as published
9
<PAGE>
in the New York Times on the first of the month in which the
Termination Date occurs and (y) 100% minus the aggregate
applicable federal, state and local taxes then imposed on your
employment income computed at the maximum applicable marginal
rates.
(iii) (A) The Company shall pay to you a lump sum cash payment
equal to three times the value of the annual credit under the
Perquisites Program to which you were entitled immediately prior
to such termination or, if higher, to which you were entitled
immediately prior to the Change of Control, reduced by such
credits as would otherwise be applied to the continued benefits
under Section 4(d)(iii)(C) below.
(B) You shall be entitled to use the automobile assigned to you
immediately prior to the Change of Control for 36 months following
such termination and, at the end of such 36 month period, ownership of
such automobile shall be transferred to you. At the time of such
transfer, the Company shall pay to you such amount in cash that after
payment of all applicable federal, state and local taxes thereon,
computed at the maximum marginal rates, is equal to all such taxes, so
computed, imposed in connection with such transfer.
(C) The Company shall provide you with benefits equivalent
to those provided under the Perquisites Program immediately prior
to the Change of Control for 36 months following such termination.
(iv) The Company shall provide you with the opportunity to
participate in medical and dental plans and in core life, optional
life, and accidental death and dismemberment insurance coverage no
less favorable in the aggregate than provided under the SELECT
Omnibus Welfare Plan (other than the Short and Long Term
Disability Plans), the SELECT Omnibus Insurance Plan, and the
Executive Medical Plan, as such plans are in effect for active
employees immediately prior to such Change of Control, until the
end of the 36 month period after such termination, subject to any
applicable coordination of benefits rules.
10
<PAGE>
(v) The Company shall pay to you, not later than 15 business
days following the Date of Termination, a lump sum cash payment
for any unused vacation for the year of termination, for vacation
accrued to the Date of Termination for the following calendar
year, and/or any accumulated vacation (if applicable) from
previous years, all in accordance with the normal practice of the
Company immediately prior to such Change of Control.
(vi) (A) You shall receive 36 months of service credit
("Additional Credited Service") under the Retirement Plans and
Savings Plans for purposes of benefit accrual and employer
matching contribution, as applicable, based on the same formula
and matching amount as in effect immediately prior to such Change
of Control.
(B) Within 15 days following the Date of Termination, the
Company shall pay to you in cash a lump sum equal to (x) the
actuarial present value of such portion, if any, of the benefit
resulting from such Additional Credited Service as may not be
accrued under the qualified Retirement Plans and/or Savings Plans
plus (y) the actuarial present value of all accruals as of the
Date of Termination under the non-qualified Retirement Plans and
Savings Plans in which you participate.
(vii) If you have between three and five years of credited
service under the Retirement Plans, including Additional Credited
Service, you shall be deemed to receive further credited service
under the Retirement Plans for purposes of both vesting and
accrual of benefits sufficient to bring you to five years of
credited service. The actuarial present value as of the Date of
Termination of any resulting increase in benefits thereunder,
computed based on the formula in effect immediately prior to such
Change of Control, shall be paid to you within 15 days of the Date
of Termination in cash in a lump sum.
(viii) If you are at least age 50 with at least five years of
service, including Additional Credited Service under Section
4(d)(vi) but not under Section 4(d)(vii), you shall be entitled
(in addition to and upon the expiration of the benefits provided
pursuant to Section 4(d)(iv)) to
11
<PAGE>
MedChoice Retiree Medical benefits as in effect for other
retirees and as amended from time to time thereafter at the
minimum level of Company subsidy or, if greater, the subsidy
level based on actual years of service.
(ix) If you had relocated to New York or New Jersey at the
Company's request during or after 1989, you shall, if you make a
written request within twelve months of your Date of Termination,
be entitled to a moving and relocation benefit to a new job
location in accordance with the terms and limitations of the
Company's relocation program as in effect immediately prior to the
Change of Control.
(x) You shall be entitled to outplacement assistance
pursuant to the Company's normal practice for the 12-month period
following your Date of Termination, in an amount not to exceed 18%
of annualized Base Pay.
(xi) If the Company fails to provide any of the benefits
under Section 4(d)(iv) or Section 4(d)(viii) above, the Company
shall reimburse you for the actual cost of your obtaining
comparable benefits within 15 business days after the date you
give the Company written notice that you incurred such costs plus
such additional amount that after payment of all applicable
Federal, state and local taxes thereon, computed at the maximum
marginal rates, is equal to all such taxes, so computed, imposed
with respect to such reimbursement.
(xii) (A) Anything herein to the contrary notwithstanding, in
the event that it is determined that any payment or distribution
by the Company to or for your benefit, whether paid or payable or
distributed or distributable pursuant to the terms hereof or
otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the" Code") or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then you shall be entitled to receive, within 15
days following the determination described in Section 4(d)(xii)(B)
12
<PAGE>
below, an additional payment ("Excise Tax Adjustment Payment") in
an amount such that after payment by you of all applicable
Federal, state and local taxes (computed at the maximum marginal
rates and including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed upon
the Excise Tax Adjustment Payment, you shall retain an amount of
the Excise Tax Adjustment Payment equal to the Excise Tax imposed
upon the Payments.
(B) All determinations required to be made under this
Section 4(d)(xii), including whether an Excise Tax Adjustment
Payment is required and the amount of such Excise Tax Adjustment
Payment, shall be made by Ernst & Young, Winston-Salem, North
Carolina, or such other accounting firm as the Company may
designate prior to a Change of Control, which shall provide to the
Company and you detailed supporting calculations within 15
business days of the date of your termination of employment.
Except as hereinafter provided, any determination by Ernst &
Young, Winston-Salem, North Carolina, or such other accounting
firm as the Company may designate prior to a Change of Control,
shall be binding upon the Company and you. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination hereunder, it is possible that
(x) Excise Tax Adjustment Payments which should have been made
will not have been made by the Company ("Underpayment"), or (y)
certain Payments will have been made which should not have been
made ("Overpayment"), consistent with the calculations required to
be made hereunder. In the event of an Underpayment, the Company
shall promptly determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the
Company to or for your benefit. In the event that you discover
that an Overpayment shall have occurred, the amount thereof shall
be promptly repaid to the Employer.
(xiii) The Company shall also pay to you as incurred all legal
and accounting fees and expenses incurred by you as a result of
such termination (including all such fees and expenses, if any, in
seeking to obtain or enforce any right or benefit provided by this
Agreement or any other
13
<PAGE>
compensation-related plan, agreement or arrangement of the
Company) unless your claim is found by an arbitral tribunal of
competent jurisdiction to have been frivolous.
5. Special Bonus Payments. Upon a Change of Control, subject to
----------------------
your execution of a release of claims against Holdings and the Company in
the relevant form set forth on Exhibit A, the Company shall pay to you a
special cash bonus payment equal to the sum of your AIAP Vested Amount, your
PS Vested Amount and your PU Vested Amount (all as of the date of the Change
of Control and all as defined in Exhibit B). Notwithstanding the foregoing,
in the event that following a Change of Control any performance period
within which such Change of Control occurred relating to any award under the
AIAP or of Performance Units or Performance Shares under the LTIP (as such
terms are defined therein) is completed prior to your termination of
employment, upon such completion you shall be entitled to payment in respect
of each such award of an amount, if any, equal to the excess of the value of
such award, based on actual performance for such performance period, over
the AIAP Vested Amount, PU Vested Amount or PS Vested Amount, as the case
may be, previously paid to you upon such Change of Control in respect of
such AIAP award, Performance Units or Performance Shares.
6. Successors; Bindinq Agreement; Undertaking. (a) Holdings and
------------------------------------------
the Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Holdings and the Company to expressly assume
and agree to perform this Agreement in the same manner and to the same
extent that Holdings and the Company would be required to perform it if no
such succession had taken place. As used in this Agreement, "Holdings"
and/or the "Company" shall mean Holdings or the Company, respectively, as
hereinbefore defined and any successor to the business and/or assets of
either of them as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. Prior to a Change of Control,
the term "Company" shall also mean any affiliate of the Company to which you
may be transferred and the Company shall cause such successor employer to be
considered the "Company" bound by the terms of this Agreement and this
Agreement shall be amended to so provide. Following a Change of Control the
term "Company" shall not mean any affiliate of the Company to which you may
be transferred unless you shall have previously approved of such transfer in
writing, in which case the Company shall cause such
14
<PAGE>
successor employer to be considered the "Company" bound by the terms of
this Agreement and this Agreement shall be amended to so provide.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
you should die while any amount would still be payable to you hereunder if
you had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there is no such designee, to your
estate.
(c) (i) During the two-year period following a Change of
Control, there shall be no reduction in the benefit formula of the
Retirement Plans or the employer matching contribution amount of the Savings
Plans except as may be required by the Code or the Employee Retirement
Income Security Act of 1974, as amended, ("ERISA"); and
(ii) The Company shall maintain for not less than two years
following a Change of Control programs providing benefits on a basis no less
favorable in the aggregate than provided under the SELECT Omnibus Welfare
Plan, the Executive Medical Plan, the SELECT Omnibus Insurance Plan and the
Perquisites Program, or successor programs, all as in effect for active
employees immediately prior to such Change of Control.
7. Notice. For the purpose of this Agreement, notices and all
------
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed
to the respective addresses set forth on the first page of this Agreement;
provided that all notices to Holdings or the Company shall be directed to
- --------
the attention of the Board with a copy to the Secretaries of the Company and
of Holdings, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
8. Amendments; Waivers; Mitigation; Other Plans. (a) Except as
--------------------------------------------
otherwise specifically provided herein, no provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by you and such officers as
15
<PAGE>
may be specifically designated by the respective Boards. No waiver by any
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
(b) You shall not be required to mitigate the amount of any
payment provided for in Section 4 by seeking other employment or otherwise,
nor except to the extent provided in Section 4(c)(iv) or Section 4(d)(iv),
shall the amount of any payment or benefit provided for in Section 4(c) or
Section (d) hereof be reduced by any compensation earned by you as the
result of employment by another employer or by retirement benefits after
the Date of Termination, or otherwise.
(c) Except as provided in this Agreement, if you are a
participant in the LTIP or any other stock award plan of Holdings or an
affiliate and have outstanding awards thereunder, the treatment of such
awards shall be governed by the terms of such applicable plans and awards.
9. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the substantive law (and not the choice of law
rules) of the State of New York.
10. Validity. If any provision of this Agreement shall be
--------
declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
11. Counterparts. This Agreement may be signed in several
------------
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
12. Arbitration. Following a Change of Control, any dispute or
-----------
controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration in New York, New York in accordance with
the rules of the American Arbitration Association then in effect. The
determination of the arbitrator shall be
16
<PAGE>
conclusive and binding on the parties and judgment may be entered on the
arbitrator's award in any court having jurisdiction.
13. Continued Employment. You agree to be bound by the terms and
--------------------
conditions of this Agreement and to remain in the employ of the Company
during any period following any public announcement by any person of any
proposed transaction or transactions which, if effected, would result in a
Change of Control until a Change of Control has taken place or, in the
opinion of the Holdings Board, such person has abandoned or terminated its
efforts to effect a Change of Control. Subject to the foregoing, nothing
contained in this Agreement shall impair or interfere in any way with your
right to terminate your employment or the right of the Company or any
subsidiary to terminate your employment with or without cause prior to a
Change of Control. Nothing contained in this Agreement shall be construed
as a contract of employment between the Company and you.
14. Payment Obliqations Absolute; Obliqor. Subject to your
-------------------------------------
execution of the relevant release of claims against Holdings and/or the
Company in the form set forth on Exhibit A hereto, following a Change of
Control, Holdings' and the Company's obligations to make all payments and
honor all commitments under this Agreement shall be absolute and
unconditional and shall not be affected by any circumstances including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which Holdings or the Company may have against you. In default of any
payment or provision of benefits hereunder by the Company following a
Change of Control, such payment or benefit shall be the obligation of
Holdings.
15. Interest on Late Payments. To the extent that any payments
-------------------------
required to be made hereunder following a Change of Control are not made
within the period specified therefor, the Company shall be liable for
interest on such delayed payments at the rate of 150% of the prime rate
compounded monthly, as posted by the Morgan Guaranty Trust Company of New
York, from time to time.
16. Withholding. Payments under this Agreement will be subject to
-----------
normal deductions for taxes and other legally required withholding.
17. Actuarial Calculations. All required actuarial calculations
----------------------
of payments to be made hereunder shall be made by Watson Wyatt Worldwide,
New York, New York,
17
<PAGE>
or such other actuarial firm as the Company may designate prior to a Change
of Control.
18. Funding. All benefits hereunder are unfunded and will be paid
-------
out of the general assets of the Company or Holdings. Notwithstanding the
foregoing, the Company or Holdings may choose to maintain a rabbi trust or
trusts for the purpose of paying certain of the benefits hereunder or under
other plans and programs of the Company or Holdings and, if so, you shall
be entitled to payments therefrom, if any, as and to the extent provided in
such rabbi trust or trusts.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
RJR NABISCO HOLDINGS CORP.
By
---------------------------
Name: Steven F. Goldstone
Title: President
RJR NABISCO, INC.
By
------------------------------
Name: Steven F. Goldstone
Title: President
[FirstName LastName]
Agreed to this day of
-----
, 1995
- ---------------
- ---------------------------
18
<PAGE>
EXHIBIT A
FORM OF RELEASE AGREEMENT
-------------------------
[ ] [Incorporation of terms of Employment Contract]
[ ] [Acknowledgment that Release Agreement is the entire
agreement to provide severance benefits.]
[ ] [Description of Benefits to be provided]
[ ] You shall maintain the terms and conditions of this
Agreement in confidence. In addition, you will not
disclose to any other employer or person any trade
secrets or other proprietary, non-public, or
confidential information pertaining to the Company.
You will return all Company information or documents in
whatever form, except information relating to your
personal employee benefits or executive compensation.
In accordance with normal ethical and professional
standards, you will refrain from taking actions or
making statements, written or oral, which defame the
goodwill or reputation of the Company, its directors,
officers, executives and employees or which constitute
willful misconduct under circumstances where it is
reasonable for you to anticipate or to expect that the
natural consequences of such conduct by you will be to
affect adversely the business or reputation of the
Company or its affiliates, or the morale of other
employees.
[ ] a) You agree that you will personally provide
reasonable assistance and cooperation to the Company in
activities related to the prosecution or defense of any
pending or future lawsuits or claims involving the
Company. b) You will promptly notify the Company if
you receive any requests from anyone other than an
employee or agent of the Company for information
regarding the Company or if you become aware of any
potential claim or proposed litigation against the
Company. c) You will refrain from providing any
information related to any claim or potential
litigation against the Company to any non-Company
representatives without either the Company's written
permission or being required to provide information
pursuant to legal process. d) If required by law to
provide sworn testimony regarding any Company-related
matter, you will consult with and have Company-
designated legal counsel present for such testimony.
e) The Company will be responsible for the costs of
such designated counsel and you will bear no cost for
same. f) You will confine your testimony to items
<PAGE>
about which you have knowledge rather than speculation,
unless otherwise directed by legal process. g) You will
cooperate with the Company's attorneys to assist their
efforts, especially on matters you have been privy to,
holding all privileged attorney-client matters in
strictest confidence.
Nothing in sentences c-g of the above paragraph is
intended to apply to governmental or judicial
investigations, including, but not limited to, an
investigation by any agency or department of the
Federal or state government, any hearing before a
committee of the Congress of the United States or of a
state legislature, any investigation or proceeding by
or of a special prosecutor, or any proceeding by or
before a grand jury; provided, however, the Company
will reimburse you for legal expenses including, but
not limited to, the cost of any attorney reasonably
acceptable to the Company and other out-of-pocket
expenses if you are compelled to appear in a
governmental or judicial investigation.
[ ] IN CONSIDERATION OF THE COMPENSATION AND BENEFITS SET
FORTH IN THIS AGREEMENT, YOU VOLUNTARILY, KNOWINGLY AND
WILLINGLY RELEASE AND FOREVER DISCHARGE THE COMPANY,
ITS PARENTS, SUBSIDIARIES AND AFFILIATES, TOGETHER WITH
THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES AND AGENTS, AND EACH OF THEIR PREDECESSORS,
SUCCESSORS AND ASSIGNS, FROM ANY AND ALL CHARGES,
COMPLAINTS, CLAIMS, PROMISES, AGREEMENTS,
CONTROVERSIES, CAUSES OF ACTION AND DEMANDS OF ANY
NATURE WHATSOEVER WHICH AGAINST THEM YOU OR YOUR
EXECUTORS, ADMINISTRATORS, SUCCESSORS OR ASSIGNS EVER
HAD, NOW HAVE OR HEREAFTER CAN, SHALL OR MAY HAVE BY
REASON OF ANY MATTER, CAUSE OR THING WHATSOEVER ARISING
TO THE TIME YOU SIGN THIS AGREEMENT. YOU FURTHER AGREE
THAT YOU WILL NOT SEEK OR BE ENTITLED TO ANY AWARD OF
EQUITABLE OR MONETARY RELIEF IN ANY PROCEEDING OF ANY
NATURE BROUGHT ON YOUR BEHALF ARISING OUT OF ANY OF THE
MATTERS RELEASED BY THIS PARAGRAPH. THIS RELEASE
INCLUDES, BUT IS NOT LIMITED TO, ANY RIGHTS OR CLAIMS
RELATING IN ANY WAY TO YOUR EMPLOYMENT RELATIONSHIP
WITH THE COMPANY, OR THE TERMINATION THEREOF, OR UNDER
ANY STATUTE, INCLUDING THE AGE DISCRIMINATION IN
EMPLOYMENT ACT, TITLE VII OF THE CIVIL RIGHTS ACT, THE
AMERICANS WITH DISABILITIES ACT, THE NEW YORK STATE AND
CITY HUMAN RIGHTS LAWS OR ANY OTHER FEDERAL, STATE OR
LOCAL LAW.
[ ] By signing this Agreement, you represent that you have
not commenced any proceeding against the Company in any
forum (administrative or judicial) concerning your
employment or the termination thereof. You further
acknowledge that you were given sufficient notice under
2
<PAGE>
the Worker Adjustment and Retraining Notification Act
(the "WARN Act") and that the termination of your
employment does not give rise to any claim or right to
notice, or pay or benefits in lieu of notice under the
WARN Act. In the event any WARN Act issue does exist or
arises in the future, you agree and acknowledge that
the payments and benefits set forth in this Agreement
shall be applied to any pay or benefits in lieu of
notice required by the WARN Act, provided that any such
offset shall not impair or affect the validity of any
provision of this Agreement, including the release set
forth in paragraph [ ].
[ ] The Company advises you that you may wish to consult
with an attorney of your choosing prior to signing this
Agreement. You understand and agree that you have the
right and have been given the opportunity to review
this Agreement and, specifically, the release in
paragraph [ ], with an attorney of your choice should
you so desire. You have entered into this Agreement
freely, knowingly and voluntarily.
[ ] You have at least twenty-one days to consider the terms
of this Agreement, although you may sign and return it
sooner if you wish. This Agreement may be revoked by
you for a period of seven (7) consecutive calendar days
after you have signed and dated it, and after such
seven (7) days, it becomes final.
3
<PAGE>
EXHIBIT B
DEFINITIONS
AIAP vested Amount means, as of a Change of Control or as of the
------------------
date your employment terminates after a Change of Control, as the case may
be, an amount equal to the value of your target award under the AIAP for
the relevant performance period in which the Change of Control or such
termination occurs, as the case may be, multiplied by a fraction, the
numerator of which is the number of months (including partial months) in
the period beginning on the first day of the relevant performance period
and ending on the Change of Control or such termination, as the case may
be, and the denominator of which is the number of months in such
performance period; provided that in the event of a termination of
employment following a Change of Control in the year in which a Change of
Control occurs, for purposes of computing the AIAP Vested Amount as of the
date of such termination, the performance period shall be deemed to begin
on the first day following the Change of Control and the target award shall
be that in effect immediately preceding such Change of Control.
PS Vested Amount means, with respect to any award of Performance
----------------
Shares (as defined in the LTIP) you hold as of a Change of Control or as of
the date your employment terminates after a Change of Control, as the case
may be, an amount equal to the adjusted value of (i) the number of
Performance Shares subject to such award, multiplied by a fraction, the
numerator of which is the number of months (including partial months)
elapsed in the relevant performance period as of the Change of Control or
as of the date of such termination, as the case may be, and the denominator
of which is the number of months in such performance period, (ii) adjusted
by applying target performance with respect to such award; provided that in
the event of a termination of employment following a Change of Control in
the year in which such Change of Control occurs, for purposes of computing
the PS Vested Amount as of the date of such termination, the performance
period shall be deemed to begin on the first day following the Change of
Control and target performance with respect to such Performance Shares
shall be that in effect immediately preceding such Change of Control.
PU vested Amount means, with respect to any award of Performance Units
----------------
(as defined in the LTIP) you hold as of a Change of Control or as of the
date your employment terminates, as the case may be, an amount equal to the
target value of the number of Performance Units subject to such award
multiplied by a fraction, the numerator of which
<PAGE>
is the number of months (including partial months) elapsed in the relevant
performance period as of the Change of Control or as of the date of such
termination, as the case may be, and the denominator of which is the number
of months in such performance period; provided that in the event of a
termination of employment following a Change of Control in the year in
which a Change of Control occurs, for purposes of computing the PU Vested
Amount as of the date of such termination, the performance period shall be
deemed to begin on the first day following the Change of Control and the
target value of such Performance Units shall be that in effect immediately
preceding such Change of Control.
Retirement Plans means the Retirement Plan for Employees of RJR
----------------
Nabisco, Inc., the RJR Nabisco, Inc. Additional Benefits Plan, the RJR
Nabisco, Inc., Supplemental Benefits Plan and the RJR Nabisco, Inc.
Supplemental Executive Retirement Plan, and such other plans as the Board
may hereafter determine.
Savinqs Plans means the RJR Nabisco, Inc. Capital Investment
-------------
Plan, the RJR Nabisco, Inc. Additional Benefits Plan and the RJR Nabisco,
Inc. Supplemental Benefits Plans and such other plans as the Board may
hereafter determine.
Year of Service means each completed 12-month period of service
---------------
by you with the Company or any other affiliate of the Company, including
periods of approved leaves of absence, up to the last day of active
employment.
2
Exhibit 10.84
NI
November 1, 1995
[FirstName] [LastName]
Dear [AName]:
RJR Nabisco Holdings Corp. ("Holdings") and RJR Nabisco, Inc. (the
"Company") consider it essential to the best interests of Holdings' stockholders
to foster the continuous employment of key management personnel of the Company.
In furtherance of the foregoing interests of Holdings and its
stockholders, Holdings and the Company have previously committed, in a series of
letters to you, the most recent of which is dated January 20, 1995 (the "1995
Letter" and, collectively, the "Letters") and in a protection program for
headquarters employees established on July 1, 1994 and implemented as of January
31, 1995, as the RJR Nabisco Holdings Corp. Headquarters Continuing Excellence
Recognition Program (the "Headquarters Program"), to provide to you certain
payments and benefits in the event of your involuntary separation of employment
with the Company other than for cause.
In light of the success of the 1995 Letter and the Headquarters Program in
retaining and motivating headquarters employees, the Board of Directors of
Holdings (the "Holdings Board") and the Board of Directors of the Company (the
"Board") (and sometimes, collectively, the "Boards") have determined that
further appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of key management personnel, including
yourself, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from any possible change of control
of Holdings. The Boards have also determined that it is in the best interest of
Holdings and its stockholders to ensure your continued availability to Holdings
in the event of a change of control.
In order to induce you to remain in the employ of the Company,
Holdings and the Company agree that you shall receive (i) certain payments
and benefits as set forth in this letter agreement (the "Agreement") in the
event your employment with the Company is terminated under the
<PAGE>
circumstances described below and (ii) certain other payments, as set forth
in this Agreement, upon a Change of Control (as defined in Section 2
below).
This Agreement, when executed by you, will (1) supersede and
replace the 1995 Letter and, following a Change of Control, the
Headquarters Program and (2) will be in lieu of your participation in the
RJR Nabisco, Inc. Salary and Benefit Continuation Program (the "SBC
Program") and the RJR Nabisco Holdings Corp. 1995 Employee Protection
Program (the "1995 Program") but will in no event provide lesser benefits
to you in the event of the termination of your employment than would
otherwise have been available under the provisions of the SBC Program or
the 1995 Program, as applicable. As a precondition to payment of the
benefits provided herein, you will be required to sign the relevant release
of claims against Holdings and/or the Company, as the case may be, in the
form attached hereto as Exhibit A.
1. Term of Aqreement. This Agreement shall be effective as of the
-----------------
date hereof and shall continue in effect as long as you are employed by the
Company or any of its affiliates or successors.
2. Chanqe Of Control. For purposes of this Agreement, the term
-----------------
"Change of Control" shall mean the first to occur of the following events
provided such event occurs prior to October 11, 1996 or such later date as
the Boards may specify from time to time:
(a) an individual, corporation, partnership, group, associate or
other entity or "person", as such term is defined in Section
14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), other than Holdings or any employee benefit plan(s)
sponsored by Holdings or the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 30% or more of the
combined voting power of the Holdings' outstanding
securities ordinarily having the right to vote at elections
of directors.
(b) individuals who constitute the Holdings Board on October 11,
1995 (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any
person becoming a director subsequent
2
<PAGE>
to such date whose election, or nomination for election by
the Holdings' shareholders, was approved by a vote of at
least three-quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of
the proxy statement of the Holdings in which such person is
named as a nominee for director, without objection to such
nomination) shall be, for purposes of this paragraph (ii),
considered as though such person were a member of the
Incumbent Board;
(c) the approval by the shareholders of the Company of a plan or
agreement providing (1) for a merger or consolidation of
Holdings other than with a wholly-owned subsidiary and other
than a merger or consolidation that would result in the
voting securities of Holdings outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting
power of the voting securities of Holdings or such surviving
entity outstanding immediately after such merger or
consolidation, or (2) for a sale, exchange or other
disposition of all or substantially all of the assets of
Holdings. If any of the events enumerated in this paragraph
(c) occurs, the Holdings Board shall determine the effective
date of the Change of Control resulting therefrom for
purposes of this Agreement.
3. Termination of Employment. (a) Definitions.
------------------------- ------------
(i) Disability. You shall be deemed to be Disabled if you become
----------
totally and permanently disabled (as defined in the Company's Long
Term Disability Plan applicable to senior executive officers as in
effect on the date hereof) or, prior to a Change of Control, if the
Board or any committee thereof so determines.
(ii) Retirement. "Retirement" shall mean your retirement on or
----------
after attaining age 55 and with ten or more years of service with the
Company or any affiliate of the Company.
3
<PAGE>
(iii) Cause. (A) Prior to a Change of Control, termination for
-----
"Cause" shall mean termination of your employment resulting from your
(I) criminal conduct, (II) deliberate and continual refusal to perform
employment duties on substantially a full time basis, (III) deliberate
and continual refusal to act in accordance with any specific lawful
instructions of an authorized officer or employee senior to you or
(IV) deliberate misconduct which could be materially damaging to
Holdings or the Company without a reasonable good faith belief by the
Employee that such conduct was in the best interests of Holdings or
the Company. A termination of employment shall not be deemed for Cause
hereunder unless the senior personnel executive of Holdings or the
Company shall confirm that any such termination is for Cause as
defined above.
(B) Following a Change of Control, termination for "Cause" shall
mean termination of your employment resulting from (I) your willful
and continued failure substantially to perform your duties with
Holdings or the Company (other than as a result of total or partial
incapacity due to physical or mental illness or as a result of a
termination by you for Good Reason) after a written demand for
substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, (II) the willful
engaging by you in conduct which is demonstrably and materially
injurious to Holdings or the Company, monetarily or otherwise or (III)
your conviction of (x) a felony under the laws of the United States or
any state or (y) a felony under the laws of any other country or
political sub-division thereof involving moral turpitude. For purposes
of this clause (a)(iii)(B), no act or failure to act, on your part
shall be deemed "willful" unless done or omitted to be done, by you
not in good faith and without reasonable belief that your action or
omission was in the best interest of Holdings or the Company.
Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause under this Clause (a)(iii)(B) unless and until
there shall have been delivered affirmative vote (which cannot be
delegated) of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board),
finding that in the good faith
4
<PAGE>
opinion of the Board you were guilty of conduct set forth above in
subclauses (I), (II) or (III) above, specifying the particulars
thereof in detail.
(iv) Good Reason. During the twenty-four month period following a
-----------
Change of Control, you shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, any of the following
occurring following a Change of Control:
(A) A material reduction in your duties, a material
diminution in your position or a material adverse change in your
reporting relationship from those in effect immediately prior to
the Change of Control;
(B) A reduction in your pay grade or bonus opportunity as in
effect immediately prior to the Change of Control or as the same
may thereafter be increased from time to time during the term of
this Agreement;
(C) The failure to continue in effect any compensation plan
in which you participate at the time of the Change of Control,
including but not limited to the RJR Nabisco Holdings Corp. 1990
Long Term Incentive Plan ("LTIP") and the RJR Nabisco, Inc.
Annual Incentive Award Plan (the "AIAP"), or any substitute plans
adopted prior to the Change of Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan providing you with substantially similar benefits) has been
made with respect to such plan in connection with the Change of
Control, or the failure to continue your participation therein on
substantially the same basis, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants, as existed at the time of the Change of
Control;
(D) The taking of any action which would directly or
indirectly materially reduce any of the benefits to be provided
under Section 6(c) or deprive you of any material fringe benefit
enjoyed by you at the time of the Change of Control, or the
failure to provide you with the number of paid vacation days to
which you are entitled on the basis of the Company's practice
with respect to
5
<PAGE>
you as in effect at the time of the Change of Control;
(E) Any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of subsection (b) below; provided further that for
purposes of this Agreement, no such purported termination shall
be effective;
(F) Any material breach by Holdings or the Company of any
provision of this Agreement including, but not limited to any
provision of Section 6, or any agreements entered into pursuant
hereto; or
(G) Requiring you to be based at any office or location more
than 50 miles from the office or location at which you were based
immediately prior to such Change of Control, except for travel
reasonably required in the performance of your responsibilities.
(b) Notice of Termination. After a Change of Control, any
---------------------
purported termination of your employment by the Company or by you shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this Agreement, after a
Change of Control a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(c) Date Of Termination, Etc. Following a Change of Control,
------------------------
"Date of Termination" shall mean (i) if your employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided
that you shall not have returned to the full-time performance of your
duties during such thirty (30) day period), (ii) if your employment is
terminated by reason of your death, the date of your death, and (iii) if
your employment is terminated by reason of your Retirement, for Cause, for
Good Reason or for any other reason (other than Disability or death), the
date specified in the Notice of Termination (which in the case of a
termination for Cause following a Change of Control shall not be less than
thirty (30) nor more than sixty (60) days from the date such Notice of
Termination is given).
6
<PAGE>
4. Compensation Upon Termination.
-----------------------------
Upon termination of your employment, subject to your execution of
a release of claims against Holdings and/or the Company (in the relevant
form set forth in Exhibit A if such termination is without Cause or for
Good Reason after a Change of Control), you shall be entitled to the
following benefits:
(a) If your employment shall be terminated by the Company
for Cause, or by you other than following a Change of Control for Good
Reason, the Company shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given and any amounts to be paid to you pursuant to the
Company's retirement and other benefit plans of the Company then in
effect, and Holdings and/or the Company shall have no further
obligations to you under this Agreement.
(b) If your employment shall be terminated by reason of your
voluntary Retirement, Disability or death, the Company shall pay you
or your estate, as the case may be, your full base salary through the
Date of Termination at the rate in effect at the time the Notice of
Termination is given or the time of your death, as the case may be.
Benefits to you, your beneficiaries or your estate, as the case may
be, shall be determined in accordance with the Company's retirement,
benefit, disability and insurance plans and programs in effect at the
time of such termination.
(c) If, other than during the twenty-four month period following
a Change of Control, your employment shall be involuntarily terminated
by the Company other than for Cause, you shall be entitled to the
payments and benefits provided below:
(i) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time the
Notice of Termination is given, and, except as set forth below,
all other amounts to which you are entitled under any
compensation or benefit plan of the Company including, but not
limited to, the AIAP and LTIP at the times such payments are due
under the terms of such plans;
(ii) The Company shall pay to you in seventy-two equal semi-
monthly installments an amount
7
<PAGE>
equal to two times the sum of (x) your annual base salary as in
effect immediately prior to such termination and (y) the amount
of your target award under the AIAP as in effect at the time of
such termination;
(iii) The Company shall provide you with the benefits under
the RJR Nabisco, Inc. Flexible Perquisites Program (the
"Perquisites Program") for the thirty-six month period following
such termination;
(iv) The Company shall provide you with the opportunity to
participate in the medical and dental plans as provided under the
SELECT Omnibus Welfare Plan as in effect for active employees
other than the Short and Long Term Disability Plans (or similar
coverage as may be provided for active employees), the core life,
optional life, and accidental death and dismemberment insurance
coverage provided under the SELECT Omnibus Insurance Plan as in
effect for active employees (or similar coverage as may be
provided for active employees), and the Executive Medical Plan as
in effect for active employees until the end of the 36 month
period after such termination, subject to any applicable
coordination of benefits rules.
(v) You shall be paid for any unused vacation for the year
of termination, for vacation accrued to your Date of Termination
for the following calendar year, and/or any accumulated vacation
(if applicable) from previous years, all in accordance with the
normal practice of the Company.
(vi) You shall be entitled to outplacement assistance
pursuant to the Company's normal practice for the 12-month period
following your Date of Termination at an out-of-pocket cost to
the Company not to exceed 18% of annualized Base Pay.
(vii) You shall continue to participate in the Retirement
Plans and Savings Plans, as defined in Exhibit B, for purposes of
benefit accrual and employer matching contribution, as
applicable, for 36 months.
8
<PAGE>
(viii) If you are at least age 55 with at least ten years of
service including any period of severance, you shall be eligible
for MedChoice Retiree Medical benefits as in effect for other
retirees and as amended from time to time thereafter.
(ix) If your Date of Termination occurs prior to March 1,
1996, you shall be entitled to any applicable additional benefits
and protections provided under the Headquarters Program.
(d) If within the twenty-four month period following a Change of
Control your employment by the Company shall be terminated (x) by the
Company other than for Cause and other than because of your death,
Disability or voluntary Retirement or (y) by you for Good Reason,
then, effective as of the Date of Termination, in lieu of any benefits
which you otherwise would be eligible to receive under Section 4 (c)
above, you shall be entitled to the payments and benefits provided
below:
(i) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time the
Notice of Termination is given, and, except as set forth below,
all other amounts to which you are entitled under any
compensation or benefit plan of the Company at the time such
payments are due under the terms of such plans, or as otherwise
provided herein.
(ii) The Company shall pay to you, not later than 15
business days following the Date of Termination, a lump sum cash
payment equal to (A) your AIAP Vested Amount, PS Vested Amount
and PU Vested Amount (each as defined in Exhibit B) as of the
Date of Termination plus (B) two (2) times the sum of (I) your
annual base salary as in effect immediately prior to the Change
of Control or the Date of Termination if higher and (II) the
amount of your AIAP target award as in effect at the time of such
termination or, if higher, as in effect immediately prior to the
Change of Control (all as defined in Schedule B). The amount of
the payment under this Section 4(d)(ii)(B) shall be discounted to
its present value, based on a notional payment period of 36
months, assuming equal semi-monthly payments and a discount rate
equal to the product of (x) the 3-year Treasury bond yield as
published
9
<PAGE>
in the New York Times on the first of the month in which the
Termination Date occurs and (y) 100% minus the aggregate
applicable federal, state and local taxes then imposed on your
employment income computed at the maximum applicable marginal
rates.
(iii)(A) The Company shall pay to you a lump sum cash
payment equal to three times the value of the annual credit under
the Perquisites Program to which you were entitled immediately
prior to such termination or, if higher, to which you were
entitled immediately prior to the Change of Control, reduced by
such credits as would otherwise be applied to the continued
benefits under Section 4(d)(iii)(C) below.
(B) You shall be entitled to use the automobile assigned to
you immediately prior to the Change of Control for 36 months
following such termination and, at the end of such 36 month
period, ownership of such automobile shall be transferred to you.
At the time of such transfer, the Company shall pay to you such
amount in cash that after payment of all applicable federal,
state and local taxes thereon, computed at the maximum marginal
rates, is equal to all such taxes, so computed, imposed in
connection with such transfer.
(C) The Company shall provide you with benefits equivalent
to those provided under the Perquisites Program immediately prior
to the Change of Control for 36 months following such
termination.
(iv) The Company shall provide you with the opportunity to
participate in medical and dental plans and in core life,
optional life, and accidental death and dismemberment insurance
coverage no less favorable in the aggregate than provided under
the SELECT Omnibus Welfare Plan (other than the Short and Long
Term Disability Plans), the SELECT Omnibus Insurance Plan, and
the Executive Medical Plan, as such plans are in effect for
active employees immediately prior to such Change of Control,
until the end of the 36 month period after such termination,
subject to any applicable coordination of benefits rules.
10
<PAGE>
(v) The Company shall pay to you, not later than 15 business
days following the Date of Termination, a lump sum cash payment
for any unused vacation for the year of termination, for vacation
accrued to the Date of Termination for the following calendar
year, and/or any accumulated vacation (if applicable) from
previous years, all in accordance with the normal practice of the
Company immediately prior to such Change of Control.
(vi) (A) You shall receive 36 months of service credit
("Additional Credited Service") under the Retirement Plans and
Savings Plans for purposes of benefit accrual and employer
matching contribution, as applicable, based on the same formula
and matching amount as in effect immediately prior to such Change
of Control.
(B) Within 15 days following the Date of Termination, the
Company shall pay to you in cash a lump sum equal to (x) the
actuarial present value of such portion, if any, of the benefit
resulting from such Additional Credited Service as may not be
accrued under the qualified Retirement Plans and/or Savings Plans
plus (y) the actuarial present value of all accruals as of the
Date of Termination under the non-qualified Retirement Plans and
Savings Plans in which you participate.
(vii) If you have between three and five years of credited
service under the Retirement Plans, including Additional Credited
Service, you shall be deemed to receive further credited service
under the Retirement Plans for purposes of both vesting and
accrual of benefits sufficient to bring you to 5 years of
credited service. The actuarial present value as of the Date of
Termination of any resulting increase in benefits thereunder,
computed based on the formula in effect immediately prior to such
Change of Control, shall be paid to you within 15 days of the
Date of Termination in cash in a lump sum.
(viii) If you are at least age 50 with at least five years
of service, including Additional Credited Service under Section
4(d)(vi) but not under Section 4(d)(vii), you shall be entitled
(in addition to and upon the expiration of the benefits provided
pursuant to Section 4(d)(iv)) to
11
<PAGE>
MedChoice Retiree Medical benefits as in effect for other
retirees and as amended from time to time thereafter at the
minimum level of Company subsidy or, if greater, the subsidy
level based on actual years of service.
(ix) If you had relocated to New York or New Jersey at the
Company's request during or after 1989, you shall, if you make a
written request within twelve months of your Date of Termination,
be entitled to a moving and relocation benefit to a new job
location in accordance with the terms and limitations of the
Company's relocation program as in effect immediately prior to
the Change of Control.
(x) You shall be entitled to outplacement assistance
pursuant to the Company's normal practice for the 12-month period
following your Date of Termination, in an amount not to exceed
18% of annualized Base Pay.
(xi) If the Company fails to provide any of the benefits
under Section 4(d)(iv) or Section 4(d)(viii) above, the Company
shall reimburse you for the actual cost of your obtaining
comparable benefits within 15 business days after the date you
give the Company written notice that you incurred such costs plus
such additional amount that after payment of all applicable
Federal, state and local taxes thereon, computed at the maximum
marginal rates, is equal to all such taxes, so computed, imposed
with respect to such reimbursement.
(xii)(A) Anything herein to the contrary notwithstanding, in
the event that it is determined that any payment or distribution
by the Company to or for your benefit, whether paid or payable or
distributed or distributable pursuant to the terms hereof or
otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the" Code") or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then you shall be entitled to receive, within 15
days following the determination described in Section
4(d)(xii)(B)
12
<PAGE>
below, an additional payment ("Excise Tax Adjustment Payment") in
an amount such that after payment by you of all applicable
Federal, state and local taxes (computed at the maximum marginal
rates and including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed upon
the Excise Tax Adjustment Payment, you shall retain an amount of
the Excise Tax Adjustment Payment equal to the Excise Tax imposed
upon the Payments.
(B) All determinations required to be made under this
Section 4(d)(xii), including whether an Excise Tax Adjustment
Payment is required and the amount of such Excise Tax Adjustment
Payment, shall be made by Ernst & Young, Winston-Salem, North
Carolina, or such other accounting firm as the Company may
designate prior to a Change of Control, which shall provide to
the Company and you detailed supporting calculations within 15
business days of the date of your termination of employment.
Except as hereinafter provided, any determination by Ernst &
Young, Winston-Salem, North Carolina, or such other accounting
firm as the Company may designate prior to a Change of Control,
shall be binding upon the Company and you. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination hereunder, it is possible that
(x) Excise Tax Adjustment Payments which should have been made
will not have been made by the Company ("Underpayment"), or (y)
certain Payments will have been made which should not have been
made ("Overpayment"), consistent with the calculations required
to be made hereunder. In the event of an Underpayment, the
Company shall promptly determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly
paid by the Company to or for your benefit. In the event that you
discover that an Overpayment shall have occurred, the amount
thereof shall be promptly repaid to the Employer.
(xiii) The Company shall also pay to you as incurred all
legal and accounting fees and expenses incurred by you as a
result of such termination (including all such fees and expenses,
if any, in seeking to obtain or enforce any right or benefit
provided by this Agreement or any other
13
<PAGE>
compensation-related plan, agreement or arrangement of the
Company) unless your claim is found by an arbitral tribunal of
competent jurisdiction to have been frivolous.
5. Special Bonus Payments. Upon a Change of Control, subject to
----------------------
your execution of a release of claims against Holdings and the Company in
the relevant form set forth on Exhibit A, the Company shall pay to you a
special cash bonus payment equal to the sum of (a) a cash payment in
respect of each option you hold under the LTIP equal to the higher of (i)
the excess, if any, of the Fair Market Value (as defined in the LTIP) over
--
the option price of such option multiplied by the number of Shares (as
defined in the LTIP) subject to such option or (ii) the value of such
option using the Black Scholes method of valuing such option, based on the
following assumptions: Fair Market Value (as so defined), a risk free
factor equal to the average rate for zero coupon United States government
issues with a remaining term equal to the expected term of the option, a
dividend yield calculated by dividing the annual dividend by the Fair
Market Value, and volatility of 35.6% (the 4 1/2 year weighted average
volatility of the Shares); and (b) your AIAP Vested Amount, your PS Vested
Amount and your PU Vested Amount (all as of the date of the Change of
Control and all as defined in Exhibit B). Notwithstanding the foregoing, in
the event that following a Change of Control any performance period within
which such Change of Control occurred relating to any award under the AIAP
or of Performance Units or Performance Shares under the LTIP (as such terms
are defined therein) is completed prior to your termination of employment,
upon such completion you shall be entitled to payment in respect of each
such award of an amount, if any, equal to the excess of the value of such
award, based on actual performance for such performance period, over the
AIAP Vested Amount, PU Vested Amount or PS Vested Amount, as the case may
be, previously paid to you upon such Change of Control in respect of such
AIAP award, Performance Units or Performance Shares.
6. Successors: Binding Agreement; Undertaking. (a) Holdings and
------------------------------------------
the Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of Holdings and the Company to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that Holdings and the Company would be required to perform it
if no such succession had taken place. As used in this Agreement,
"Holdings" and/or the "Company" shall mean Holdings or the
14
<PAGE>
Company, respectively, as hereinbefore defined and any successor to the
business and/or assets of either of them as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise. Prior
to a Change of Control, the term "Company" shall also mean any affiliate of
the Company to which you may be transferred and the Company shall cause
such successor employer to be considered the "Company" bound by the terms
of this Agreement and this Agreement shall be amended to so provide.
Following a Change of Control the term "Company" shall not mean any
affiliate of the Company to which you may be transferred unless you shall
have previously approved of such transfer in writing, in which case the
Company shall cause such successor employer to be considered the "Company"
bound by the terms of this Agreement and this Agreement shall be amended to
so provide.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
you should die while any amount would still be payable to you hereunder if
you had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
your devises, legatee or other designee or, if there is no such designee,
to your estate.
(c) (i) During the two-year period following a Change of
Control, there shall be no reduction in the benefit formula of the
Retirement Plans or the employer matching contribution amount of the
Savings Plans except as may be required by the Code or the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA"); and
(ii) The Company shall maintain for not less than two years
following a Change of Control programs providing benefits on a basis no
less favorable in the aggregate than provided under the SELECT Omnibus
Welfare Plan, the Executive Medical Plan, the SELECT Omnibus Insurance Plan
and the Perquisites Program, or successor programs, all as in effect for
active employees immediately prior to such Change of Control.
7. Notice. For the purpose of this Agreement, notices and all
------
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first
15
<PAGE>
page of this Agreement; provided that all notices to Holdings or the
--------
Company shall be directed to the attention of the Board with a copy to the
Secretaries of the Company and of Holdings, or to such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only
upon receipt.
8. Amendments; Waivers; Mitigation; Other Plans. (a) Except as
-------------------- -----------------------
otherwise specifically provided herein, no provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by you and such officers as
may be specifically designated by the respective Boards. No waiver by any
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
(b) You shall not be required to mitigate the amount of any
payment provided for in Section 4 by seeking other employment or otherwise,
nor except to the extent provided in Section 4(c)(iv) or Section 4(d)(iv),
shall the amount of any payment or benefit provided for in Section 4(c) or
Section (d) hereof be reduced by any compensation earned by you as the
result of employment by another employer or by retirement benefits after
the Date of Termination, or otherwise.
(c) Except as provided in this Agreement, if you are a
participant in the LTIP or any other stock award plan of Holdings or an
affiliate and have outstanding awards thereunder, the treatment of such
awards shall be governed by the terms of such applicable plans and awards.
9. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the substantive law (and not the choice of law
rules) of the State of New York.
10. Validity. If any provision of this Agreement shall be
--------
declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the validity or
enforceability of any other provision
16
<PAGE>
of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be signed in several
------------
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
12. Arbitration. Following a Change of Control, any dispute or
-----------
controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration in New York, New York in accordance with
the rules of the American Arbitration Association then in effect. The
determination of the arbitrator shall be conclusive and binding on the
parties and judgment may be entered on the arbitrator's award in any court
having jurisdiction.
13. Continued Employment. You agree to be bound by the terms and
--------------------
conditions of this Agreement and to remain in the employ of the Company
during any period following any public announcement by any person of any
proposed transaction or transactions which, if effected, would result in a
Change of Control until a Change of Control has taken place or, in the
opinion of the Holdings Board, such person has abandoned or terminated its
efforts to effect a Change of Control. Subject to the foregoing, nothing
contained in this Agreement shall impair or interfere in any way with your
right to terminate your employment or the right of the Company or any
subsidiary to terminate your employment with or without cause prior to a
Change of Control. Nothing contained in this Agreement shall be construed
as a contract of employment between the Company and you.
14. Payment Obligations Absolute; Obligor. Subject to your
-------------------------------------
execution of the relevant release of claims against Holdings and/or the
Company in the form set forth on Exhibit A hereto, following a Change of
Control, Holdings' and the Company's obligations to make all payments and
honor all commitments under this Agreement shall be absolute and
unconditional and shall not be affected by any circumstances including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which Holdings or the Company may have against you. In default of any
payment or provision of benefits hereunder by the Company following a
Change of Control, such payment or benefit shall be the obligation of
Holdings.
15. Interest on Late payments. To the extent that any payments
-------------------------
required to be made hereunder following a
17
<PAGE>
Change of Control are not made within the period specified therefor, the
Company shall be liable for interest on such delayed payments at the rate
of 150% of the prime rate compounded monthly, as posted by the Morgan
Guaranty Trust Company of New York, from time to time.
16. Withholding. Payments under this Agreement will be subject
-----------
to normal deductions for taxes and other legally required withholding.
17. Actuarial Calculations. All required actuarial calculations
----------------------
of payments to be made hereunder shall be made by Watson Wyatt Worldwide,
New York, New York, or such other actuarial firm as the Company may
designate prior to a Change of Control.
18. Funding. All benefits hereunder are unfunded and will be
-------
paid out of the general assets of the Company or Holdings. Notwithstanding
the foregoing, the Company or Holdings may choose to maintain a rabbi trust
or trusts for the purpose of paying certain of the benefits hereunder or
under other plans and programs of the Company or Holdings and, if so, you
shall be entitled to payments therefrom, if any, as and to the extent
provided in such rabbi trust or trusts.
18
<PAGE>
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
RJR NABISCO HOLDINGS CORP.
By:
---------------------------
Name: Steven F. Goldstone
Title: President
RJR NABISCO, INC.
By:
---------------------------
Name: Steven F. Goldstone
Title: President
[FirstName] [LastName]
Agreed to this day of
------
, 1995
- ----------------
- -----------------------------
19
<PAGE>
EXHIBIT A
FORM OF RELEASE AGREEMENT
-------------------------
[ ] [Incorporation of terms of Employment Contract]
[ ] [Acknowledgment that Release Agreement is the entire
agreement to provide severance benefits.]
[ ] [Description of Benefits to be provided]
[ ] You shall maintain the terms and conditions of this
Agreement in confidence. In addition, you will not
disclose to any other employer or person any trade
secrets or other proprietary, non-public, or
confidential information pertaining to the Company.
You will return all Company information or documents in
whatever form, except information relating to your
personal employee benefits or executive compensation.
In accordance with normal ethical and professional
standards, you will refrain from taking actions or
making statements, written or oral, which defame the
goodwill or reputation of the Company, its directors,
officers, executives and employees or which constitute
willful misconduct under circumstances where it is
reasonable for you to anticipate or to expect that the
natural consequences of such conduct by you will be to
affect adversely the business or reputation of the
Company or its affiliates, or the morale of other
employees.
[ ] a) You agree that you will personally provide
reasonable assistance and cooperation to the Company in
activities related to the prosecution or defense of any
pending or future lawsuits or claims involving the
Company. b) You will promptly notify the Company if
you receive any requests from anyone other than an
employee or agent of the Company for information
regarding the Company or if you become aware of any
potential claim or proposed litigation against the
Company. c) You will refrain from providing any
information related to any claim or potential
litigation against the Company to any non-Company
representatives without either the Company's written
permission or being required to provide information
pursuant to legal process. d) If required by law to
provide sworn testimony regarding any Company-related
matter, you will consult with and have Company-
designated legal counsel present for such testimony.
e) The Company will be responsible for the costs of
such designated counsel and you will bear no cost for
same. f) You will confine your testimony to items
<PAGE>
about which you have knowledge rather than speculation,
unless otherwise directed by legal process. g) You
will cooperate with the Company's attorneys to assist
their efforts, especially on matters you have been
privy to, holding all privileged attorney-client
matters in strictest confidence.
Nothing in sentences c-g of the above paragraph is
intended to apply to governmental or judicial
investigations, including, but not limited to, an
investigation by any agency or department of the
Federal or state government, any hearing before a
committee of the Congress of the United States or of a
state legislature, any investigation or proceeding by
or of a special prosecutor, or any proceeding by or
before a grand jury; provided, however, the Company
will reimburse you for legal expenses including, but
not limited to, the cost of any attorney reasonably
acceptable to the Company and other out-of-pocket
expenses if you are compelled to appear in a
governmental or judicial investigation.
[ ] IN CONSIDERATION OF THE COMPENSATION AND BENEFITS SET
FORTH IN THIS AGREEMENT, YOU VOLUNTARILY, KNOWINGLY AND
WILLINGLY RELEASE AND FOREVER DISCHARGE THE COMPANY,
ITS PARENTS, SUBSIDIARIES AND AFFILIATES, TOGETHER WITH
THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES AND AGENTS, AND EACH OF THEIR PREDECESSORS,
SUCCESSORS AND ASSIGNS, FROM ANY AND ALL CHARGES,
COMPLAINTS, CLAIMS, PROMISES, AGREEMENTS,
CONTROVERSIES, CAUSES OF ACTION AND DEMANDS OF ANY
NATURE WHATSOEVER WHICH AGAINST THEM YOU OR YOUR
EXECUTORS, ADMINISTRATORS, SUCCESSORS OR ASSIGNS EVER
HAD, NOW HAVE OR HEREAFTER CAN, SHALL OR MAY HAVE BY
REAS0N OF ANY MATTER, CAUSE OR THING WHATSOEVER ARISING
TO THE TIME YOU SIGN THIS AGREEMENT. YOU FURTHER AGREE
THAT YOU WILL NOT SEEK OR BE ENTITLED TO ANY AWARD OF
EQUITABLE OR MONETARY RELIEF IN ANY PROCEEDING OF ANY
NATURE BROUGHT ON YOUR BEHALF ARISING OUT OF ANY OF THE
MATTERS RELEASED BY THIS PARAGRAPH. THIS RELEASE
INCLUDES, BUT IS NOT LIMITED TO, ANY RIGHTS OR CLAIMS
RELATING IN ANY WAY TO YOUR EMPLOYMENT RELATIONSHIP
WITH THE COMPANY, OR THE TERMINATION THEREOF, OR UNDER
ANY STATUTE, INCLUDING THE AGE DISCRIMINATION IN
EMPLOYMENT ACT, TITLE VII OF THE CIVIL RIGHTS ACT, THE
AMERICANS WITH DISABILITIES ACT, THE NEW YORK STATE AND
CITY HUMAN RIGHTS LAWS OR ANY OTHER FEDERAL, STATE OR
LOCAL LAW.
[ ] By signing this Agreement, you represent that you have
not commenced any proceeding against the Company in any
forum (administrative or judicial) concerning your
employment or the termination thereof. You further
acknowledge that you were given sufficient notice under
2
<PAGE>
the Worker Adjustment and Retraining Notification Act
(the "WARN Act") and that the termination of your
employment does not give rise to any claim or right to
notice, or pay or benefits in lieu of notice under the
WARN Act. In the event any WARN Act issue does exist or
arises in the future, you agree and acknowledge that
the payments and benefits set forth in this Agreement
shall be applied to any pay or benefits in lieu of
notice required by the WARN Act, provided that any such
offset shall not impair or affect the validity of any
provision of this Agreement, including the release set
forth in paragraph [ ].
[ ] The Company advises you that you may wish to consult
with an attorney of your choosing prior to signing this
Agreement. You understand and agree that you have the
right and have been given the opportunity to review
this Agreement and, specifically, the release in
paragraph [ ], with an attorney of your choice should
you so desire. You have entered into this Agreement
freely, knowingly and voluntarily.
[ ] You have at least twenty-one days to consider the terms
of this Agreement, although you may sign and return it
sooner if you wish. This Agreement may be revoked by
you for a period of seven (7) consecutive calendar days
after you have signed and dated it, and after such
seven (7) days, it becomes final.
3
<PAGE>
EXHIBIT B
DEFINITIONS
AIAP Vested Amount means, as of a Change of Control or as of the
------------------
date your employment terminates after a Change of Control, as the case may
be, an amount equal to the value of your target award under the AIAP for
the relevant performance period in which the Change of Control or such
termination occurs, as the case may be, multiplied by a fraction, the
numerator of which is the number of months (including partial months) in
the period beginning on the first day of the relevant performance period
and ending on the Change of Control or such termination, as the case may
be, and the denominator of which is the number of months in such
performance period; provided that in the event of a termination of
employment following a Change of Control in the year in which a Change of
Control occurs, for purposes of computing the AIAP Vested Amount as of the
date of such termination, the performance period shall be deemed to begin
on the first day following the Change of Control and the target award shall
be that in effect immediately preceding such Change of Control.
PS Vested Amount means, with respect to any award of Performance
----------------
Shares (as defined in the LTIP) you hold as of a Change of Control or as of
the date your employment terminates after a Change of Control, as the case
may be, an amount equal to the adjusted value of (i) the number of
Performance Shares subject to such award, multiplied by a fraction, the
numerator of which is the number of months (including partial months)
elapsed in the relevant performance period as of the Change of Control or
as of the date of such termination, as the case may be, and the denominator
of which is the number of months in such performance period, (ii) adjusted
by applying target performance with respect to such award; provided that in
the event of a termination of employment following a Change of Control in
the year in which such Change of Control occurs, for purposes of computing
the PS Vested Amount as of the date of such termination, the performance
period shall be deemed to begin on the first day following the Change of
Control and target performance with respect to such Performance Shares
shall be that in effect immediately preceding such Change of Control.
PU Vested Amount means, with respect to any award of Performance
----------------
Units (as defined in the LTIP) you hold as of a Change of Control or as of
the date your employment terminates, as the case may be, an amount equal to
the target value of the number of Performance Units subject to
<PAGE>
such award multiplied by a fraction, the numerator of which is the number
of months (including partial months) elapsed in the relevant performance
period as of the Change of Control or as of the date of such termination,
as the case may be, and the denominator of which is the number of months in
such performance period; provided that in the event of a termination of
employment following a Change of Control in the year in which a Change of
Control occurs, for purposes of computing the PU Vested Amount as of the
date of such termination, the performance period shall be deemed to begin
on the first day following the Change of Control and the target value of
such Performance Units shall be that in effect immediately preceding such
Change of Control.
Retirement Plans means the Retirement Plan for Employees of RJR
---------------
Nabisco, Inc., the RJR Nabisco, Inc. Additional Benefits Plan, the RJR
Nabisco, Inc., Supplemental Benefits Plan and the RJR Nabisco, Inc.
Supplemental Executive Retirement Plan, and such other plans as the Board
may hereafter determine.
Savinqs Plans means the RJR Nabisco, Inc. Capital Investment
-------------
Plan, the RJR Nabisco, Inc. Additional Benefits Plan and the RJR Nabisco,
Inc. Supplemental Benefits Plans and such other plans as the Board may
hereafter determine.
Year of Service means each completed 12-month period of service
---------------
by you with the Company or any other affiliate of the Company, including
periods of approved leaves of absence, up to the last day of active
employment.
2
Exhibit 10.85
STOCK OPTION PLAN FOR DIRECTORS AND KEY EMPLOYEES
OF
RJR NABISCO HOLDINGS CORP. AND SUBSIDIARIES
(As Amended and Restated Effective December 5, 1995)
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 - Affiliated Director
- ----------- -------------------
"Affiliated Director" shall mean a Director who is an employee or
officer of an entity which owns at least 25% of the outstanding Common
Stock, or any affiliate thereof (other than Holdings or any Subsidiary).
<PAGE>
Section 1.3 - Board
- ----------- -----
"Board" shall mean the Board of Directors of Holdings.
Section 1.4 - Code
- ----------- ----
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5 - Committee
- ----------- ---------
"Committee" shall mean the Compensation Committee of the Board or
any other committee appointed by the Board pursuant to Section 7.1.
Section 1.6 - Common Stock
- ----------- ------------
"Common Stock" shall mean the Common Stock, par value $0.01 per
share, of Holdings.
Section 1.7 - Director
- ----------- --------
"Director" shall mean a member of the Board.
Section 1.8 - 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 1.9 - 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 1.10 - Holdings
- ------------ --------
"Holdings" shall mean RJR Nabisco Holdings Corp., a Delaware
Corporation.
2
<PAGE>
Section 1.11 - 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.
Section 1.12 - Option Price
- ------------ ------------
"Option Price" shall have the meaning given in Sections 4.2 and
5.2, as appropriate.
Section 1.13 - Optionee
- ------------ --------
"Optionee" shall mean an Employee or Director to whom an Option
is granted under the Plan.
Section 1.14 - Plan
- ------------ ----
"Plan" shall mean the Stock Option Plan for Directors and Key
Employees of RJR Nabisco Holdings Corp. and Subsidiaries.
Section 1.15 - Secretary
- ------------ ---------
"Secretary" shall mean the Secretary of Holdings.
Section 1.16 - 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.
ARTICLE III
GRANTING OF OPTIONS
-------------------
Section 3.1 - Eligibility
- ----------- -----------
Any Eligible Director, Affiliated Director, or key Employee of
Holdings or of any Subsidiary shall be eligible to be granted Options as
set forth in this Article III.
Section 3.2 - Granting of Options to Directors
- ----------- --------------------------------
(a) Each Eligible Director who is elected to serve on the Board on or
after March 1, 1994 shall be granted an Option to purchase an aggregate
6,000 shares of Common Stock. Such Option shall be granted only once to
each Eligible Director as soon as practicable following the Director's
initial election to serve on the Board and shall be subject to the terms
and conditions set forth in Article IV.
(b) In addition to Options granted pursuant to Section 3.2(a), each
Eligible Director and each Affiliated Director shall receive an annual
grant of an Option to purchase the number of shares of Common Stock
determined pursuant to the following formula (rounded up to the next
multiple of 100):
15,000
---------
(A x .37)
4
<PAGE>
Where "A" equals the final closing price of Common Stock (as reported on the
New York Stock Exchange consolidated tape) on the date of grant, and the
factor ".37" is derived from the growth model projection for the value of
Common Stock.
Such Option shall be granted annually on the date of such Director's
election or re-election to serve on the Board; provided, however, that the
grant for 1994 shall be made on October 4, 1994.
All Options granted pursuant to this Section 3.21(b) 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 Employees 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.
ARTICLE IV
TERMS OF OPTIONS FOR DIRECTORS
------------------------------
Section 4.1 - Formula Plan
- ----------- ------------
With respect to Options granted to Eligible Directors and
Affiliated 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
5
<PAGE>
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 or Affiliated
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 Section 3.2 shall be the final closing price 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 Section 3.2(a) 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. Options granted pursuant to Section 3.2(b) shall be
exercisable in three installments. The first installment shall be
exercisable on the first anniversary of the date of grant for 33% of the
number of shares of Common Stock subject to the Option. Thereafter, on each
subsequent anniversary of the date of grant, an installment shall become
exercisable for 33% and 34%, respectively, of the number of shares subject
to the Option until the Option has become fully exercisable. To the extent
that any of the above installments is not exercised when it becomes
exercisable, it shall not expire, but shall continue to be exercisable at
any time thereafter until the Option shall terminate, expire or be
surrendered. An exercise shall before whole shares only.
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 - Adjustments
- ----------- -----------
(a) In the event of any change in the outstanding Common Stock by
reason of a stock split, spin-off, stock dividend, stock combination or
reclassification, recapitalization or merger, change of control, or similar
event, the Committee may adjust appropriately the number of Shares subject
to the Plan and available for or covered by Grants and Share prices related
to outstanding Grants and make such other revisions to outstanding Grants
as it deems are equitably required.
(b) In the event of a Change of Control (as defined in paragraph
5.6(c) hereof):
(i) Stock options granted pursuant to Section 5 hereof
shall become fully vested and exercisable; provided; however, that the
Committee may elect to make a cash payment to Participants in
cancellation of such options in such amount as the Committee in its
sole discretion shall determine, which amount shall not be less than
the product of (x) and (y), where (x) is the excess of the Fair Market
Value of Common Stock on the date of exercise over the exercise price,
and (y) is the number of Shares subject to the stock options being
cancelled; and further provided that no stock option grant shall be
exercised less than 6 months after the date it is granted.
(ii) The Committee shall have authority to revise the terms
of any such Grant or any other Grant as it, in its discretion, deems
appropriate; provided; however, that the Committee may not make
revisions that are adverse to the Participant without the
Participant's consent unless such revision is provided for or
contemplated in the terms of the Grant.
8
<PAGE>
(c) For purposes of the Plan, a "Change of Control" shall mean
the first to occur of the following events or such later date as the
Corporation may specify from time to time:
(i) an individual, corporation, parmership, group,
associate or other entity or "person", as such term is defined in
Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), other than Holdings or any employee benefit plans sponsored by
Holdings or the Company, is or becomes the "beneficial owner' (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 30% or more of the combined voting power of Holdings' outstanding
securities ordinarily having the right to vote at elections of
directors.
(ii) individuals who constitute the Holdings Board on
October 11, 1995 (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person
becoming a director subsequent to such date whose election, or
nomination for election by Holdings' shareholders, was approved by a
vote of at least three-quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of Holdings in which such person is named as a nominee of
Holdings for director), but excluding for this purpose any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of an individual, corporation, partnership, group,
associate or other entity or "person" other than the Holdings Board,
shall be, for purposes of this paragraph (ii), considered as though
such person were a member of the Incumbent Board;
(iii) the approval by the shareholders of Holdings of a
plan or agreement providing (1) for a merger or consolidation of
Holdings other than with a wholly-owned subsidiary and other than a
merger or consolidation that would result in the voting securities of
Holdings outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of Holdings or such surviving
entity outstanding immediately after such merger or consolidation, or
(2) for a sale, exchange or other disposition of all or substantially
all of the assets of Holdings. If any of the events enumerated in this
paragraph (iii) occur, the Holdings Board shall determine the
effective date of the Change of Control resulting therefrom for
purposes of the Program.
9
<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
10
<PAGE>
applicable provisions of the Securities Act of 1933, as amended and
any other federal, state or foreign 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.
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.
11
<PAGE>
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 or
Affiliated 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.
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
12
<PAGE>
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. Notwithstanding the foregoing, the Committee,
in its absolute discretion, may direct that a Stock Option Agreement
provide that Options granted thereunder may be transferred to a "family
member" of the Optionee or to a trust for the benefit of such family
member. For purposes of the preceding sentence, "family member" with
respect to an Optionee shall include the Optionee's parents, siblings,
children or grandchildren.
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, 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
13
<PAGE>
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
December 5, 1995.
Executed as of this 5th day of December, 1995.
-----------------------------------
Secretary
Corporate Seal
14
Exhibit 10.86
Director's
Option
(Election)
RJR NABISCO HOLDINGS CORP.
STOCK OPTION PLAN FOR DIRECTORS AND KEY EMPLOYEES
STOCK OPTION AGREEMENT
-------------------------
DATE OF GRANT:
W I T N E S S E T H:
1. Grant of Option. Pursuant to the provisions of the Stock Option
---------------
Plan for Directors and Key Employees of RJR Nabisco Holdings Corp. And
Subsidiaries (the "Plan"), RJR Nabisco Holdings Corp. (the "Company") on
the above date has granted to
(the "Optionee"),
subject to the terms and conditions which follow and the terms and
conditions of the Plan, the right and option to exercise from the Company a
total of
6,000 shares
of Common Stock, no par value, of the Company, at the exercise price of $
per share (the "Option"). A copy of the Plan is attached and made a part of
this agreement with same effect as if set forth in the agreement itself.
All capitalized terms used herein shall have the meaning set forth in the
Plan, unless the context requires a different meaning.
2. Exercise of Option.
-------------------
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the
Company, specifying the number of whole shares to be purchased.
The notice of exercise shall be accompanied by tender to the
Company of cash for the full purchase price of the shares with
respect to which such Option or portion thereof is exercised,
together with payment for taxes pursuant to Section 8 herein.
<PAGE>
(b) This Option shall not be exercisable prior to six months after
the Date of Grant, and thereafter, subject to applicable
securities regulations, shall be exercisable in full.
(c) If any shares of the Common Stock are to be disposed of in
accordance with Rule 144 under the Securities Act of 1933 or otherwise, the
Optionee shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition
such documentation as the Company may reasonably request in connection with
such sale and, in the case of a disposition pursuant to Rule 144, shall
deliver to the Company an executed copy of any notice on Form 144 required
to be filed with the SEC.
3. Expiration of Option. The Option shall expire or terminate and may
--------------------
not be exercised to any extent by the Optionee after the tenth anniversary
of the Date of Grant.
4. Transferability. Other than as specifically provided with regard to
---------------
the death of the Optionee, this option 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 Optionee, be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Optionee.
5. Consideration to the Company. In consideration of the granting of
----------------------------
this Option by the Company, the Optionee agrees to render faithful and
efficient services to the Company, with such duties and responsibilities as
shall from time to time prescribe. Nothing in this Agreement or in the Plan
shall confer upon the Optionee any right to continue in the service of the
Company or any Subsidiary as a director or in any other capacity or shall
interfere with or restrict in any way the rights of the Company and its
Subsidiaries and their respective shareholders, which are hereby expressly
reserved, in connection with the removal of the Optionee from the Board of
Directors of the Company or any Subsidiary at any time for any reason
whatsoever, with or without cause, subject to applicable law and the
relevant certificate of incorporation and bylaws.
6. Adjustments in Option. In the event that the outstanding shares of
---------------------
the Common Stock subject to the Option are, from time to time, changed into
or exchanged for a different number or kind of shares of the Company or
other securities by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or
otherwise, the Committee shall make an appropriate and equitable adjustment
in the number and kind of shares or other consideration as to which the
Option, or portions thereof then unexercised, shall be exercisable. Any
adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
-2-
<PAGE>
7. Application Of Laws. The granting and the exercise of this Option
-------------------
and the obligations of the Company to sell and deliver shares hereunder
shall be subject to all applicable laws, rules, and regulations and to such
approvals of any governmental agencies as may be required.
8. Taxes. Any taxes required by federal, state, or local laws to be
-----
withheld by the Company (i) on exercise by the Optionee of the Option for
Common Stock, or (ii) at the time an election, if any, is made by the
Optionee pursuant to Section 83(b) of the Internal Revenue Code, as
amended, shall be paid to the Company before delivery of the Common Stock
is made to the Optionee.
9. Notices. Any notices required to be given hereunder to the Company
-------
shall be addressed to The Secretary, RJR Nabisco Holdings Corp., 1301
Avenue of the Americas, New York, NY 10019-6013, and any notice required to
be given hereunder to the Optionee shall be sent to the Optionee's address
as shown on the records of the Company.
10. Administration and Interpretation. In consideration of the grant,
---------------------------------
the Optionee 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 interpretations and determinations
made by the Committee shall be final, conclusive, and binding upon the
Optionee, 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.
11. Other Provisions.
-----------------
a) Titles are provided herein for convenience only and are
not to serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing
executed by the parties hereto which specifically states that it is
amending this Agreement.
c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE
INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS
OF LAWS.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
the Optionee have executed this Agreement as of the date of Grant first
above written.
-3-
<PAGE>
RJR NABISCO HOLDINGS CORP.
By
----------------------------
Authorized Signatory
- --------------------------------
Optionee
Optionee's Taxpayer Identification Number:
- --------------------------------
Optionee's Home Address:
- --------------------------------
- --------------------------------
- --------------------------------
-4-
Exhibit 10.87
Director's
Option
(Annual)
RJR NABISCO HOLDINGS CORP.
STOCK OPTION PLAN FOR DIRECTORS AND KEY EMPLOYEES
STOCK OPTION AGREEMENT
-----------------------
DATE OF GRANT:
W I T N E S S E T H:
1. Grant of Option. Pursuant to the provisions of the Stock Option
---------------
Plan for Directors and Key Employees of RJR Nabisco Holdings Corp. And
Subsidiaries (the "Plan"), RJR Nabisco Holdings Corp. (the "Company") on
the above date has granted to
(the "Optionee"),
subject to the terms and conditions which follow and the terms and
conditions of the Plan, the right and option to exercise from the Company a
total of
shares
of Common Stock, no par value, of the Company, at the exercise price of $
per share (the "Option"). A copy of the Plan is attached and made a part of
this agreement with same effect as if set forth in the agreement itself.
All capitalized terms used herein shall have the meaning set forth in the
Plan, unless the context requires a different meaning.
2. Exercise of 0ption.
------------------
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the
Company, specifying the number of whole shares to be purchased.
The notice of exercise shall be accompanied by tender to the
Company of cash for the full purchase price of the shares with
respect to which such Option or portion thereof is exercised,
together with payment for taxes pursuant to Section 9 herein.
<PAGE>
(b) This Option shall be exercisable in three installments. The first
installment shall be exercisable on the 1st of April following
Date of Grant for 33% of the number of shares of Common Stock
subject to this option. Thereafter, on each subsequent April 1st,
an installment shall become exercisable for 33% and 34%,
respectively, of the number of shares subject to this Option
until the option has become fully exercisable. To the extent that
any of the above installments is not exercised when it becomes
exercisable, it shall not expire, but shall continue to be
exercisable at any time thereafter until this Option shall
terminate, expire or be surrendered. An exercise shall be for
whole shares only.
(c) This Option shall not be exercisable prior to six months after
the Date of Grant.
(d) If any shares of the Common Stock are to be disposed of in
accordance with Rule 144 under the Securities Act of 1933 or
otherwise, the Optionee shall promptly notify the Company of such
intended disposition and shall deliver to the Company at or prior
to the time of such disposition such documentation as the Company
may reasonably request in connection with such sale and, in the
case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to be
filed with the SEC.
3. Rights in the Event of Resignation or Non-Election to the Board.
---------------------------------------------------------------
Except as may be otherwise provided in this Section 3, after the Optionee's
resignation or non-election to the Board of Directors of the Company (the
"Board"), the Option shall not become exercisable as to any shares in
---
addition to those already exercisable pursuant to the schedule described in
Section 2(b). Notwithstanding the foregoing, if a non-election of the
Optionee to the Board is due to death or Permanent Disability (as defined
in the Company's Long Term Disability Plan), the Option shall immediately
become exercisable as to all shares.
4. Expiration of Option. The Option shall expire or terminate and may
--------------------
not be exercised to any extent by the Optionee after the tenth anniversary
of the Date of Grant.
5. Transferability. Other than as specifically provided with regard to
---------------
the death of the Optionee, this option 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 Optionee, be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Optionee.
-2-
<PAGE>
6. Consideration to the Company. In consideration of the granting of
----------------------------
this Option by the Company, the Optionee agrees to render faithful and
efficient services to the Company, with such duties and responsibilities as
shall from time to time prescribe. Nothing in this Agreement or in the Plan
shall confer upon the Optionee any right to continue in the service of the
Company or any Subsidiary as a director or in any other capacity or shall
interfere with or restrict in any way the rights of the Company and its
Subsidiaries and their respective shareholders, which are hereby expressly
reserved, in connection with the removal of the Optionee from the Board of
Directors of the Company or any Subsidiary at any time for any reason
whatsoever, with or without cause, subject to applicable law and the
relevant certificate of incorporation and bylaws.
7. Adjustments in Option. In the event that the outstanding shares of
---------------------
the Common Stock subject to the Option are, from time to time, changed into
or exchanged for a different number or kind of shares of the Company or
other securities by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or
otherwise, the Committee shall make an appropriate and equitable adjustment
in the number and kind of shares or other consideration as to which the
Option, or portions thereof then unexercised, shall be exercisable. Any
adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
8. Application of Laws. The granting and the exercise of this Option
-------------------
and the obligations of the Company to sell and deliver shares hereunder
shall be subject to all applicable laws, rules, and regulations and to such
approvals of any governmental agencies as may be required.
9. Taxes. Any taxes required by federal, state, or local laws to be
-----
withheld by the Company (i) on exercise by the Optionee of the Option for
Common Stock, or (ii) at the time an election, if any, is made by the
Optionee pursuant to Section 83(b) of the Internal Revenue Code, as
amended, shall be paid to the Company before delivery of the Common Stock
is made to the Optionee.
10. Notices. Any notices required to be given hereunder to the Company
-------
shall be addressed to The Secretary, RJR Nabisco Holdings Corp., 1301 Avenue
of the Americas, New York, NY 10019-6013, and any notice required to be
given hereunder to the Optionee shall be sent to the Optionee's address as
shown on the records of the Company.
11. Administration and Interpretation. In consideration of the grant,
----------------------------------
the Optionee 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 interpretations and determinations
made by the Committee shall be final, conclusive, and binding upon the
Optionee, 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
-3-
<PAGE>
or the Agreement. The Committee may delegate its interpretive authority to
an officer or officers of the Company.
12. Other Provisions.
-----------------
a) Titles are provided herein for convenience only and are not to
serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this
Agreement.
c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE
INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS
OF LAWS.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
the Optionee have executed this Agreement as of the date of Grant first
above written.
RJR NABISCO HOLDINGS CORP.
By
---------------------------
Authorized Signatory
- ---------------------------
Optionee
Optionee's Taxpayer Identification Number:
- ---------------------------
Optionee's Home Address:
- ---------------------------
- ---------------------------
- ---------------------------
-4-
EXHIBIT 11
RJR NABISCO HOLDINGS CORP.
COMPUTATIONS OF EARNINGS PER SHARE
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995(A) 1994(A) 1993(A)
------------------------- ------------------------- --------------------------
PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED PRIMARY(B) FULLY DILUTED
--------- ------------- --------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Average number of common and
common equivalent shares
outstanding during the period (in
thousands):
Common stock issued and
outstanding at beginning of
period (excluding shares
related to value of restricted
stock not earned)............ 325,107 325,107 269,602 269,602 268,930 268,930
Average number of shares of
common stock issued during the
period....................... 223 223 669 669 708 708
Average number of shares related
to value of restricted stock
earned during the period....... 146 146 135 135 201 201
Average number of stock options
outstanding during the period
and shares issuable under
performance shares granted..... 1,167 1,320 2,483 2,726 -- 1,243
Average number of shares issuable
on conversion of redeemable
convertible preferred stock.... -- -- -- -- -- 2,100
Average number of shares issuable
on conversion of senior
converting debentures.......... -- -- -- -- -- 1,110
ESOP convertible preferred
stock........................... -- 3,032 -- 3,094 -- 3,122
Average number of Series C
Depositary Shares issued during
the period(C).................. -- -- 34,736 34,736 -- --
--------- ------------- --------- ------------- ---------- -------------
Average number of common and
common equivalent shares
outstanding during the period
(in thousands)................. 326,643 329,828 307,625 310,962 269,839 277,414
--------- ------------- --------- ------------- ---------- -------------
--------- ------------- --------- ------------- ---------- -------------
Net income (loss) applicable to
common stock:
Income (loss) before
extraordinary item............. $ 627 $ 627 $ 764 $ 764 $ (3 ) $ (3)
Interest on senior converting
debentures (net of income
taxes)......................... -- -- -- -- -- 17
Preferred stock dividends........ (110) (95) (131) (116) (68 ) (43)
Income tax benefit on ESOP
convertible preferred stock
dividends...................... -- (3) -- (2) -- (1)
--------- ------------- --------- ------------- ---------- -------------
Income (loss) before
extraordinary item applicable
to common stock................ 517 529 633 646 (71 ) (30)
Extraordinary item--loss on early
extinguishments of debt, net of
income taxes and minority
interest........................ (16) (16) (245) (245) (142 ) (142)
--------- ------------- --------- ------------- ---------- -------------
Net income (loss) applicable to
common stock................... $ 501 $ 513 $ 388 $ 401 $ (213 ) $ (172)
--------- ------------- --------- ------------- ---------- -------------
--------- ------------- --------- ------------- ---------- -------------
Net income (loss) per common and
common equivalent share:
Income (loss) before
extraordinary item............. $ 1.58 $ 1.60 $ 2.06 $ 2.08 $ (0.26 ) $ (0.11)
Extraordinary item............... (0.05) (0.05) (0.79) (0.78) (0.53 ) (0.51)
--------- ------------- --------- ------------- ---------- -------------
Net income (loss)................ $ 1.53 $ 1.55 $ 1.27 $ 1.30 $ (0.79 ) $ (0.62)
--------- ------------- --------- ------------- ---------- -------------
--------- ------------- --------- ------------- ---------- -------------
</TABLE>
- ------------
(A) The calculations of fully diluted earnings per share are antidilutive;
therefore, primary earnings per share are used for financial statement
purposes. The stockholders of RJRN Holdings approved a one-for-five reverse
split of the Common Stock on April 12, 1995. Approximately, all amounts have
been restated to reflect such reverse split.
(B) The net loss per common and common equivalent share reported for the year
ended December 31, 1993 would have increased by $.91 per share if the
weighted average number of shares of Series A Depositary Shares outstanding
during the period had been excluded from the earnings per share calculation.
(C) Each Series C Depositary Share represents a one-tenth ownership interest in
a share of Series C Preferred Stock of RJRN Holdings.
EXHIBIT 12.1
RJR NABISCO HOLDINGS CORP.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES/
DEFICIENCY IN THE COVERAGE OF FIXED CHARGES BY EARNINGS
BEFORE FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings before fixed charges:
Income (loss) before extraordinary item............... $ 627 $ 764 $ (3) $ 776 $ 368
Provision for income taxes............................ 580 611 114 680 280
------ ------ ------ ------ ------
Income (loss) before income taxes..................... 1,207 1,375 111 1,456 648
Interest and debt expense............................. 899 1,065 1,209 1,359 2,140
Interest portion of rental expense.................... 54 51 52 49 56
------ ------ ------ ------ ------
Earnings before fixed charges(a)........................ $2,160 $2,491 $1,372 $2,864 $2,844
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Fixed charges:
Interest and debt expense............................. $ 899 $1,065 $1,209 $1,359 $2,140
Interest portion of rental expense.................... 54 51 52 49 56
Capitalized interest.................................. 12 11 9 5 10
Preferred stock dividends(b).......................... 411 594 368 307 294
------ ------ ------ ------ ------
Total fixed charges................................. $1,376 $1,721 $1,638 $1,720 $2,500
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Deficiency in the coverage of fixed charges by
earnings before fixed charges....................... $ -- $ -- $ (266) $ -- --
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges...................... 1.6 1.4 -- 1.7 1.1
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
- ------------
(a) Includes non-cash amortization of trademarks and goodwill for each of the
years in the five-year period ended December 31, 1995 of $636 million, $629
million, $625 million, $616 million and $609 million respectively.
(b) Certain preferred stock dividend amounts are presented on a pre-tax
equivalent basis.
EXHIBIT 12.2
RJR NABISCO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES/
DEFICIENCY IN THE COVERAGE OF FIXED CHARGES BY EARNINGS
BEFORE FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings before fixed charges:
Income (loss) before extraordinary item............... $ 638 $ 762 $ (4) $ 783 $ 349
Provision for income taxes............................ 594 614 116 693 301
------ ------ ------ ------ ------
Income (loss) before income taxes..................... 1,232 1,376 112 1,476 650
Interest and debt expense............................. 872 1,065 1,186 1,359 2,140
Interest portion of rental expense.................... 54 51 52 49 56
------ ------ ------ ------ ------
Earnings before fixed charges(a)........................ $2,158 $2,492 $1,350 $2,884 $2,846
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Fixed charges:
Interest and debt expense............................. $ 872 $1,065 $1,186 $1,359 $2,140
Interest portion of rental expense.................... 54 51 52 49 56
Capitalized interest.................................. 12 11 9 5 10
------ ------ ------ ------ ------
Total fixed charges................................. $ 938 $1,127 $1,247 $1,413 $2,206
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges...................... 2.3 2.2 1.1 2.0 1.3
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
- ------------
(a) Includes non-cash amortization of trademarks and goodwill for each of the
years in the five-year period ended December 31, 1995 of $636 million, $629
million, $625 million, $616 million and $609 million respectively.
Exhibit 21
RJR NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
RJR Nabisco Holdings Corp. Oct 25, 1988 Delaware
RJR Nabisco, Inc. Mar 04, 1970 Delaware
ABCO Sp. Z.o.o. ? 1995 Poland
Airco IHC, Inc. Mar 22, 1989 Delaware
AO ISMA (60%)** Nov 09, 1992 Russia
AO Kabisco Jul 05, 1994 Kazakhstan
A/O Nabisco Aug 16, 1994 Russia
AO Vostanovlenniy Tabak (48.46%) Oct 26, 1994 Russia
Arjay Equipment Corporation Nov 08, 1968 Delaware
Arjay Holdings, Inc. May 07, 1984 Delaware
Associated Biscuits ** Mar 29, 1898 England
Avare (I.C.P.A. Cerqeirense Ltda) ? Brazil
Batavia Inc. Jul 31, 1951 New Jersey
Beech-Nut Life Savers (Panama) S.A. Jul 12, 1963 Panama
Beijing Nabisco Food Company
Limited (91.9%) Mar 16, 1995 China
Bisco Services B.V. Dec 22, 1988 Netherlands
Camel Racing Inc.* Jun 22, 1989 Canada
Carnes y Conservas Espanolas,
S.A. (CARCESA) Dec 02, 1975 Spain
Cartera e Inversiones S.A. Mar 05, 1979 Peru
CGM-Cooperation GmbH Jan 15, 1990 Germany
China - American Cigarette Company
Limited (50%)*** May 29, 1984 China
Club - Cigarettenfabrik GmbH **** Aug 27, 1990 Germany
Colophon Company Limited * Jul 09, 1981 Bermuda
Comercial Benut, S.A. de C.V. ** Mar 16, 1977 Mexico
Compania Venezolana de Conservas C.A. Jul 25, 1969 Venezuela
Consiber, S.A. Mar 31, 1979 Spain
Covenco Holding C.A. Nov 26, 1991 Venezuela
Dely, S.A. Dec 18, 1960 Guatemala
Distribuidora Pan Americana, S.A. Oct 22, 1974 Panama
Establecimiento Modelo Terrabusi
S.A. (99.1%) ? Argentina
Exhold Limited Oct 03, 1989 Liberia
Export "A" Inc. Mar 31, 1989 Canada
F.& R. Peru, S.A. Jan 28, 1972 Peru
Fleischmann Argentina S.A. * Dec 13, 1990 Argentina
Fleischmann Corporation, The Nov 02, 1929 Delaware
Fleischmann International, Inc. Nov 20, 1944 Delaware
Fleischmann Peruana Inc. Sep 01, 1939 Delaware
Fleischmann Uruguaya S.A. Mar 09, 1961 Uruguay
* Inactive December 31, 1995
** In Liquidation Page 1
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
RJR NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
Freezer Queen Foods (Canada) Limited Nov 03, 1967 Ontario, Canada
Fulmer Corporation Limited May 15, 1981 Bahamas
Fulmer Two S.A. Jul 01, 1991 Panama
Galletas Artiach, S.A. Jul 23, 1932 Spain
Galletera Tejerias, S.A. ? Venezuela
Gelatinas Ecuatorianas S.A. (66.7%) Nov 21, 1978 Ecuador
GEM: Global Event Management, Ltd. Jun 27, 1991 England
Global Events Management, Inc. Sep 05, 1991 Delaware
Golden Sociedad Anonima Apr 01, 1966 Costa Rica
Grupo Gamesa, S.A. de C.V. (1%) Jul 29, 1981 Mexico
Gumz Alimentos F.A. Industria e Comercio ? Brazil
Hanover Servicing, Inc. Apr 13, 1992 Delaware
Haus Neuerburg GmbH Feb 25, 1977 Germany
Hervin Company, The May 28, 1965 Oregon
Hervin Holdings, Inc. Mar 29, 1988 Delaware
Hickey & Nicholson Tobacco Company,
Ltd., The * Apr 30, 1906 Prnc Ed Is., Can.
Huntley & Palmer Foods Pensions
Limited ? 1967 England
Industria de Colores y Sabores S.A. * Jun 21, 1967 Colombia
Industria de Laticinios Gloria Ltda. * Jan 18, 1978 Brazil
Industrias Alimenticias Maguary S.A. ? Brazil
Iracema Industrias de Caju S.A. Aug 08, 1978 Brazil
Jupiter Produtos Alimenticios Ltda. Mar 02, 1962 Brazil
Landers Centro Americana
Fabricantes de Molinos Marca ------------ ---------
"Corona", S.A. de C.V. (95%) ** Jan 09, 1979 Honduras
Landers Y Cia, S.A. Oct 01, 1951 Colombia
Leite Gloria do Nordeste S.A. May 16, 1968 Brazil
Life Savers Manufacturing, Inc. Apr 21, 1976 Delaware
Loste-McVitie's Distribution
Service, S.A. (50%) Oct 28, 1992 Spain
Lowney Inc. Jan 01, 1983 Federal, Canada
Mahachai Holding Co. Ltd. (49%) Jan 07, 1986 Thailand
Marbu, S.A. Oct 26, 1967 Spain
Merola Finance B.V. May 09, 1995 Netherlands
MEX Holdings, Ltd. Nov 27, 1991 Delaware
Modi RJR Limited (50%) *** Sep 24, 1993 India
Mont Pelrin Inc. May 05, 1954 New Jersey
NABEC, S.A. Nov 17, 1982 Ecuador
* Inactive December 31, 1995
** In Liquidation Page 2
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
RJR NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
Nabisco ** Dec 24, 1908 England
Nabisco Arabia ? Saudi Arabia
Nabisco Argentina S.A. Mar 14, 1994 Argentina
Nabisco Biscuit Manufacturing
(Midwest), Inc.* Dec 21, 1988 New York
Nabisco Biscuit Manufacturing
(West), Inc.* Dec 21, 1988 New York
Nabisco Brands Company Aug 01, 1995 Delaware
Nabisco Brands Holdings Denmark
Limited ? 1989 Liberia
Nabisco Brands Nominees Limited ** Aug 22, 1983 England
Nabisco Brands Trading Limited * Mar 25, 1987 Delaware
Nabisco Brands (U.K.) Limited Apr 05, 1982 Delaware
Nabisco Brazil, Inc. May 10, 1990 Delaware
Nabisco Caribbean Export, Inc. Jun 13, 1984 Delaware
Nabisco Cereals ** Mar 15, 1956 England
Nabisco/Cetus Food Biotechnology
Research Partnership (80%) *** Mar 01, 1984 Delaware
Nabisco China Limited 1995 China
Nabisco Chongqing Food Co., Ltd. Mar 01, 1995 China
Nabisco de Nicaragua, S.A. (60%) Dec 10, 1965 Nicaragua
Nabisco de Puerto Rico, Inc. Sep 21, 1951 New York
Nabisco Direct, Inc. Aug 23, 1995 Delaware
Nabisco Dominicana S.A. Dec 15, 1995 Dom. Repub.
Nabisco England IHC, Inc. Mar 29, 1989 Delaware
Nabisco Enterprises IHC, Inc. Mar 22, 1989 Delaware
Nabisco Foods, Inc. Dec 30, 1991 New Jersey
Nabisco Food (Suzhou) Co. Ltd. ? China
Nabisco Group Ltd. Jun 02, 1995 Delaware
Nabisco Group Pensions Investments Ltd. Jun 07, 1962 England
Nabisco Group Pensions Limited Sep 13, 1977 England
Nabisco Holdings Corp. (80.5%) Apr 21, 1981 Delaware
Nabisco Holdings IHC, Inc. Mar 22, 1989 Delaware
Nabisco Hong Kong Limited Apr 12, 1994 Hong Kong
Nabisco Iberia, S.L. Jul 15, 1993 Spain
Nabisco, Inc. Feb 03, 1898 New Jersey
Nabisco, Inc. Foreign Sales Corporation Dec 17, 1991 US Virgin Is.
Nabisco Indonesia ? Indonesia
* Inactive December 31, 1995
** In Liquidation Page 3
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
RJR NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
Nabisco International, Inc. Jul 29, 1947 Delaware
Nabisco International Limited Dec 11, 1987 Nevada
Nabisco International M.E./Africa (49%) ? Dubai, U.A.E.
Nabisco International Market
Development Group, Inc. Mar 22, 1989 Delaware
Nabisco International, S.A. Nov 26, 1953 Panama
Nabisco Investments, Inc. Mar 22, 1989 Delaware
Nabisco Investments S.A. Mar 14, 1994 Argentina
Nabisco Ltd Jan 01, 1993 Federal, Canada
Nabisco Music Publishers, Inc. Mar 24, 1986 Delaware
Nabisco Music Ventures, Inc. Mar 24, 1986 Delaware
Nabisco (New Zealand) Limited **** Mar 30, 1990 New Zealand
Nabisco Pension Trust Limited Aug 31, 1956 England
Nabisco Royal Argentina Inc. Sep 29, 1934 Delaware
Nabisco Royal Chile Limitada Mar 22, 1978 Chile
Nabisco Royal Colombiana Inc. Jan 03, 1938 Delaware
Nabisco Royal de Honduras S.A. Jul 22, 1982 Honduras
Nabisco Royal del Ecuador, S.A. Sep 16, 1977 Ecuador
Nabisco Royal Inc. Sep 03, 1932 Delaware
Nabisco Royal Panama, S.A. Mar 07, 1979 Panama
Nabisco S.A. de C.V. (99.5%) Jun 15, 1992 Mexico
Nabisco Trading A.G. Aug 02, 1960 Switzerland
Nabisco Venezuela, C.A. Nov 26, 1991 Venezuela
National Biscuit Company **** Jan 17, 1971 Delaware
Northern Brands International, Inc. Dec 10, 1992 Delaware
Nova Zembla Inc. Aug 19, 1975 New Jersey
Outdoor Traders International S.r.l. ** Jan 17, 1991 Italy
Plush Pippin Corporation Aug 06, 1986 Washington
Plush Pippin Restaurants, Inc. Aug 29, 1974 Oregon
Precis One Hundred Limited ** Feb 12, 1982 England
Productos Confitados Salvavidas
de Guatemala, S.A. Jul 03, 1974 Guatemala
Productos Royal S.A.* Dec 27, 1977 Argentina
Produtos Alimenticios Fleischmann e
Royal Ltda. Nov 28, 1964 Brazil
* Inactive December 31, 1995
** In Liquidation Page 4
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
RJR NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
R. J. Reynolds Berhad (60%) Jan 29, 1970 Malaysia
R. J. Reynolds (Cyprus) Limited Feb 20, 1990 Cyprus
R. J. Reynolds-Da Nang Tobacco
Company Limited (70%)*** Jan 24, 1995 Vietnam
R. J. Reynolds Espana, S.L. (50%) Dec 16, 1992 Spain
R. J. Reynolds Europe, Inc. Apr 24, 1992 Delaware
R. J. Reynolds Finance S.A. Sep 17, 1982 Switzerland
R. J. Reynolds, Inc. Oct 09, 1985 Delaware
R. J. Reynolds International B.V. ? 1995 Netherlands
R. J. Reynolds International, Inc. * Dec 13, 1985 Delaware
R. J. Reynolds Italia S.r.l. Feb 09, 1989 Italy
R. J. Reynolds (Korea) Ltd. Mar 09, 1989 Korea
R. J. Reynolds/M.C. Tobacco Company,
Limited (70%) Jul 01, 1982 Japan
R. J. Reynolds Overseas Finance Co. N.V. Oct 21, 1977 Neth. Antilles
R. J. Reynolds (Portugal) Empresa
Comercial de Tabacos, Ltda. (50%) Jul 20, 1980 Portugal
R. J. Reynolds Reklam Ve Pazarlama A.S. Mar 22, 1990 Turkey
R. J. Reynolds Scandinavia A.B. Apr 12, 1969 Sweden
R. J. Reynolds (SEA) Sdn. Bhd. Aug 29, 1992 Malaysia
R. J. Reynolds (Slovakia) Spol. s.r.o. Sep 20, 1993 Slovakia
R. J. Reynolds (Thailand) Inc. Aug 06, 1992 Delaware
R. J. Reynolds Tobacco A.G. Dagmersellen Mar 03, 1966 Switzerland
R. J. Reynolds Tobacco B.V. Sep 24, 1973 Netherlands
R. J. Reynolds Tobacco Company Apr 04, 1899 New Jersey
R. J. Reynolds Tobacco Company Aug 08, 1969 Delaware
R. J. Reynolds Tobacco Company
(Hong Kong), Limited Apr 07, 1970 Hong Kong
R. J. Reynolds Tobacco Company, S.A.E. Apr 27, 1971 Spain
R. J. Reynolds Tobacco Company Sdn. Bhd. Oct 10, 1973 Malaysia
R. J. Reynolds Tobacco Company
(Taiwan), Inc. Apr 14, 1988 Delaware
R. J. Reynolds Tobacco (Croatia) Ltd. * Dec 21, 1992 Croatia
R. J. Reynolds Tobacco Foreign
Sales Corporation Dec 19, 1984 US Virgin Is.
R. J. Reynolds Tobacco France S.A. Aug 21, 1976 France
R. J. Reynolds Tobacco GmbH Nov 30, 1957 Germany
R. J. Reynolds Tobacco Hellas A.E.B.E. Sep 24, 1981 Greece
R. J. Reynolds Tobacco International
(Asia Pacific), Inc. Nov 27, 1978 Delaware
R. J. Reynolds Tobacco International B.V. Sep 02, 1963 Netherlands
R. J. Reynolds Tobacco International
(Hong Kong) Limited Jul 28, 1987 Hong Kong
R. J. Reynolds Tobacco International, Inc. Jan 12, 1976 Delaware
R. J. Reynolds Tobacco International
(Korea), Inc. Jan 17, 1991 Delaware
R. J. Reynolds Tobacco International
(Mexico), Inc. Jun 24, 1981 Delaware
R. J. Reynolds Tobacco International OY Jun 14, 1995 Finland
R. J. Reynolds Tobacco International S.A. Nov 03, 1966 Switzerland
* Inactive December 31, 1995
** In Liquidation Page 5
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
RJR NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
R. J. Reynolds Tobacco - Kazakhstan (80%) Jun 30, 1994 Kazakhstan
R. J. Reynolds Tobacco - Kremenchuk (70%) Jun 10, 1993 Ukraine
R. J. Reynolds Tobacco Limited * Jun 18, 1975 New Zealand
R. J. Reynolds Tobacco - Lviv JSC (70%) Oct 28, 1993 Ukraine
R. J. Reynolds Tobacco (Magyarorszag) Kft Feb 27, 1991 Hungary
R. J. Reynolds Tobacco (MAK)* Jul 25, 1994 Macedonia
R. J. Reynolds Tobacco (Poland) Ltd. Jan 07, 1991 Poland
R. J. Reynolds Tobacco (Romania) Ltd. Jul 06, 1993 Romania
R. J. Reynolds Tobacco Rt Jul 28, 1992 Hungary
R. J. Reynolds Tobacco Spol. s.r.o. Apr 12, 1991 Czech.
R. J. Reynolds Tobacco (UK) Limited Nov 18, 1980 England
R. J. Reynolds Trading Company Sdn. Bhd. Nov 06, 1987 Malaysia
R. J. Reynolds Tutun Sanayi A.S. Jan 21,1993 Turkey
Reynolds Manufacturing (Bulgaria)
Ltd. (67%) * Dec 29, 1993 Bulgaria
Reynolds Manufacturing (Romania)
SRL (97%) Jul 12, 1993 Romania
Reynolds Technologies, Inc. Mar 01, 1994 Delaware
REYTAB Tutun Sanayi ve Ticaret AS Jun 10, 1986 Turkey
Ritz Biscuit Company Limited **** Sep 28, 1989 England
RJR-Armavirtabak (76%) Oct 24, 1994 Russia
RJR (Bulgaria) Ltd. * Oct 27, 1993 Bulgaria
RJR Central Asia Mar 10, 1995 Kazakhstan
RJR Comercial Ltda. * Aug 18, 1977 Brazil
RJR Group, Inc., The Dec 13, 1985 Delaware
RJR Industries, Inc. Dec 29, 1975 Delaware
RJR Industries (U.K.) Limited ** Jun 01, 1982 England
RJR-Macdonald Inc. Sep 12, 1978 Federal, Canada
RJR Marketing and Sales JSC Feb 16, 1995 Russia
RJR Mauritius Private Limited Sep 27, 1993 Mauritius
RJR Merchandise Marketing Company Aug 22, 1994 Delaware
RJR Nabisco & Company *** Mar 20, 1992 Cyprus
RJR Nabisco China Limited Dec 28, 1979 Hong Kong
RJR Nabisco (Cyprus) Limited Mar 29, 1990 Cyprus
RJR Nabisco Holdings Capital
Trust I *** (3%) Jun 20, 1995 Delaware
RJR-Nabisco Industries, Inc. Dec 13, 1985 Delaware
RJR Nabisco (Philippines) Inc. Apr 22, 1992 Philippines
RJR Nabisco Processing, Inc. ** Nov 21, 1994 Delaware
RJR Nabisco Securities Ltd. Sep 28, 1987 Federal, Canada
* Inactive December 31, 1995
** In Liquidation Page 6
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
RJR NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
RJR-Petro (82%) *** May 07, 1992 Russia
RJR Realty Relocation Services, Inc. Nov 01, 1994 N. Carolina
RJR Sales Co. Feb 18, 1993 Delaware
RJR Technical Company May 16, 1991 Delaware
RJR Tobacco Company, Inc. Dec 30, 1982 N. Carolina
RJR Tobacco Consolidated IHC, Inc. Mar 22, 1989 Delaware
RJR Tobacco Eurasia, Inc. May 26, 1994 Delaware
RJR Tobacco Holdings IHC, Inc. Mar 22, 1989 Delaware
RJR Tobacco (Kiev) JSC Apr 09, 1993 Ukraine
RJR Tobacco Russia Dec 05, 1991 Russia
RJR Trade Promotion Co. Feb 18, 1993 Delaware
RJRN Policy Institute, Inc. ** Dec 13, 1985 Delaware
Royal Beech-Nut (Proprietary)
Ltd. (49%) Jan 02, 1945 S. Africa
Royal Brands Portugal Comercio e
Industria Limitada Dec 23, 1916 Portugal
Royal Food Products, S.A. Jul 02, 1976 Tunisia
Royal Holding C.A. Nov 26, 1991 Venezuela
Royal Productos Alimenticios, C.A. Jul 26, 1971 Venezuela
Salem Holidays Sdn. Bhd. Oct 03, 1994 Malaysia
Salem Power Station Sdn. Bhd. * Sep 18, 1993 Malaysia
Salem Servicing, Inc. Jan 12, 1990 Delaware
Salvavidas S. de R.L. de C.V. ** Mar 30, 1967 Mexico
Saria Inc. Mar 09, 1956 New Jersey
S. F. Imports, Inc. May 26, 1994 Delaware
Smiths Foods ** Jul 26, 1922 England
Sports Marketing Enterprises, Inc. **** Apr 14, 1988 N. Carolina
STAR Cooperation GmbH **** Jan 29, 1960 Germany
Stella D'oro Biscuit Co., Inc. Jan 02, 1948 New York
Sunrise Biosystems, Inc. (50%) *** Mar 01, 1994 Delaware
Tanzanian Cigarette Company (50%) ? ?
Tevalca Holding C.A. Nov 26, 1991 Venezuela
Transnational Services, Inc. Jan 06, 1988 Delaware
20th Century Denmark Limited Mar 06, 1990 Liberia
Vantage Arts Inc.* Jun 22, 1989 Canada
WBI (International) S.A. * Nov 22, 1988 Switzerland
West Indies Yeast Company Limited
(72%) Nov 29, 1965 Jamaica
Worldwide Brands, Inc. Oct 18, 1983 Delaware
Worldwide Brands Inc. Sdn. Bhd. Mar 30, 1991 Malaysia
Worldwide Brands International
(Hong Kong) Limited Jan 19, 1988 Hong Kong
Yili-Nabisco Biscuit & Food Company
Limited (51%) *** Jan 29, 1985 China
* Inactive December 31, 1995
** In Liquidation Page 7
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
Nabisco Holdings Corp. Apr 21, 1981 Delaware
Nabisco, Inc. Feb 03, 1898 New Jersey
Airco IHC, Inc. Mar 22, 1989 Delaware
A/O Nabisco Aug 16, 1994 Russia
Associated Biscuits ** Mar 29, 1898 England
Avare (I.C.P.A. Cerqeirense Ltda) ? Brazil
Batavia Inc. Jul 31, 1951 New Jersey
Beech-Nut Life Savers (Panama) S.A. Jul 12, 1963 Panama
Beijing Nabisco Food Company
Limited (91.9%) Mar 16, 1995 China
Bisco Services B.V. Dec 22, 1988 Netherlands
Carnes y Conservas Espanolas,
S.A. (CARCESA) Dec 02, 1975 Spain
Cartera e Inversiones S.A. Mar 05, 1979 Peru
Colophon Company Limited * Jul 09, 1981 Bermuda
Comercial Benut, S.A. de C.V. ** Mar 16, 1977 Mexico
Compania Venezolana de Conservas C.A. Jul 25, 1969 Venezuela
Consiber, S.A. Mar 31, 1979 Spain
Covenco Holding C.A. Nov 26, 1991 Venezuela
Dely, S.A. Dec 18, 1960 Guatemala
Distribuidora Pan Americana, S.A. Oct 22, 1974 Panama
Establecimiento Modelo Terrabusi
S.A. (99.1%) ? Argentina
Exhold Limited Oct 03, 1989 Liberia
F.& R. Peru, S.A. Jan 28, 1972 Peru
Fleischmann Argentina S.A. * Dec 13, 1990 Argentina
Fleischmann Corporation, The Nov 02, 1929 Delaware
Fleischmann International, Inc. Nov 20, 1944 Delaware
Fleischmann Peruana Inc. Sep 01, 1939 Delaware
Fleischmann Uruguaya S.A. Mar 09, 1961 Uruguay
Freezer Queen Foods (Canada) Limited Nov 03, 1967 Ontario, Canada
Fulmer Corporation Limited May 15, 1981 Bahamas
Fulmer Two S.A. Jul 01, 1991 Panama
Galletas Artiach, S.A. Jul 23, 1932 Spain
Galletera Tejerias, S.A. ? Venezuela
Gelatinas Ecuatorianas S.A. (66.7%) Nov 21, 1978 Ecuador
Golden Sociedad Anonima Apr 01, 1966 Costa Rica
Grupo Gamesa, S.A. de C.V. (1%) Jul 29, 1981 Mexico
Gumz Alimentos F.A. Industria e
Comercio ? Brazil
Hanover Servicing, Inc. Apr 13, 1992 Delaware
Hervin Company, The May 28, 1965 Oregon
Hervin Holdings, Inc. Mar 29, 1988 Delaware
Huntley & Palmer Foods Pensions Limited ? 1967 England
* Inactive December 31, 1995
** In Liquidation Page 1
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
Industria de Colores y Sabores S.A. * Jun 21, 1967 Colombia
Industria de Laticinios Gloria Ltda. * Jan 18, 1978 Brazil
Industrias Alimenticias Maguary S.A. ? Brazil
Iracema Industrias de Caju S.A. Aug 08, 1978 Brazil
Jupiter Produtos Alimenticios Ltda. Mar 02, 1962 Brazil
Landers Centro Americana
Fabricantes de Molinos Marca ------------ ----------
"Corona", S.A. de C.V. (95%) ** Jan 09, 1979 Honduras
Landers Y Cia, S.A. Oct 01, 1951 Colombia
Leite Gloria do Nordeste S.A. May 16, 1968 Brazil
Life Savers Manufacturing, Inc. Apr 21, 1976 Delaware
Loste-McVitie's Distribution
Service, S.A. (50%) Oct 28, 1992 Spain
Lowney Inc. Jan 01, 1983 Federal, Canada
Mahachai Holding Co. Ltd. (49%) Jan 07, 1986 Thailand
Marbu, S.A. Oct 26, 1967 Spain
Merola Finance B.V. May 09, 1995 Netherlands
MEX Holdings, Ltd. Nov 27, 1991 Delaware
Mont Pelrin Inc. May 05, 1954 New Jersey
NABEC, S.A. Nov 17, 1982 Ecuador
Nabisco ** Dec 24, 1908 England
Nabisco Arabia ? Saudi Arabia
Nabisco Argentina S.A. Mar 14, 1994 Argentina
Nabisco Biscuit Manufacturing
(Midwest), Inc.* Dec 21, 1988 New York
Nabisco Biscuit Manufacturing
(West), Inc.* Dec 21, 1988 New York
Nabisco Brands Company Aug 01, 1995 Delaware
Nabisco Brands Holdings Denmark Limited ? 1989 Liberia
Nabisco Brands Nominees Limited ** Aug 22, 1983 England
Nabisco Brands Trading Limited * Mar 25, 1987 Delaware
Nabisco Brands (U.K.) Limited Apr 05, 1982 Delaware
Nabisco Brazil, Inc. May 10, 1990 Delaware
Nabisco Caribbean Export, Inc. Jun 13, 1984 Delaware
Nabisco Cereals ** Mar 15, 1956 England
Nabisco/Cetus Food Biotechnology
Research Partnership (80%) *** Mar 01, 1984 Delaware
Nabisco China Limited 1995 China
Nabisco Chongqing Food Co., Ltd. Mar 01, 1995 China
Nabisco de Nicaragua, S.A. (60%) Dec 10, 1965 Nicaragua
Nabisco de Puerto Rico, Inc. Sep 21, 1951 New York
Nabisco Direct, Inc. Aug 23, 1995 Delaware
Nabisco Dominicana S.A. Dec 15, 1995 Dom. Repub.
Nabisco England IHC, Inc. Mar 29, 1989 Delaware
Nabisco Enterprises IHC, Inc. Mar 22, 1989 Delaware
* Inactive December 31, 1995
** In Liquidation Page 2
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
Nabisco Foods, Inc. Dec 30, 1991 New Jersey
Nabisco Food (Suzhou) Co. Ltd. ? China
Nabisco Group Ltd. Jun 02, 1995 Delaware
Nabisco Group Pensions Investments Ltd. Jun 07, 1962 England
Nabisco Group Pensions Limited Sep 13, 1977 England
Nabisco Holdings IHC, Inc. Mar 22, 1989 Delaware
Nabisco Hong Kong Limited Apr 12, 1994 Hong Kong
Nabisco Iberia, S.L. Jul 15, 1993 Spain
Nabisco, Inc. Foreign Sales Corporation Dec 17, 1991 US Virgin Is.
Nabisco Indonesia ? Indonesia
Nabisco International, Inc. Jul 29, 1947 Delaware
Nabisco International Limited Dec 11, 1987 Nevada
Nabisco International M.E./Africa (49%) ? Dubai, U.A.E.
Nabisco International Market
Development Group, Inc. Mar 22, 1989 Delaware
Nabisco International, S.A. Nov 26, 1953 Panama
Nabisco Investments, Inc. Mar 22, 1989 Delaware
Nabisco Investments S.A. Mar 14, 1994 Argentina
Nabisco Ltd Jan 01, 1993 Federal, Canada
Nabisco Music Publishers, Inc. Mar 24, 1986 Delaware
Nabisco Music Ventures, Inc. Mar 24, 1986 Delaware
Nabisco (New Zealand) Limited **** Mar 30, 1990 New Zealand
Nabisco Pension Trust Limited Aug 31, 1956 England
Nabisco Royal Argentina Inc. Sep 29, 1934 Delaware
Nabisco Royal Chile Limitada Mar 22, 1978 Chile
Nabisco Royal Colombiana Inc. Jan 03, 1938 Delaware
Nabisco Royal de Honduras S.A. Jul 22, 1982 Honduras
Nabisco Royal del Ecuador, S.A. Sep 16, 1977 Ecuador
Nabisco Royal Inc. Sep 03, 1932 Delaware
Nabisco Royal Panama, S.A. Mar 07, 1979 Panama
Nabisco S.A. de C.V. (99.5%) Jun 15, 1992 Mexico
Nabisco Trading A.G. Aug 02, 1960 Switzerland
Nabisco Venezuela, C.A. Nov 26, 1991 Venezuela
National Biscuit Company **** Jan 17, 1971 Delaware
Nova Zembla Inc. Aug 19, 1975 New Jersey
Plush Pippin Corporation Aug 06, 1986 Washington
Plush Pippin Restaurants, Inc. Aug 29, 1974 Oregon
Precis One Hundred Limited ** Feb 12, 1982 England
Productos Confitados Salvavidas
de Guatemala, S.A. Jul 03, 1974 Guatemala
Productos Royal S.A.* Dec 27, 1977 Argentina
Produtos Alimenticios Fleischmann
e Royal Ltda. Nov 28, 1964 Brazil
* Inactive December 31, 1995
** In Liquidation Page 3
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
<PAGE>
NABISCO HOLDINGS CORP.
Date of Place of
Name of Subsidiary Incorporation Incorporation
- ----------------------------------------------------------------------------
Ritz Biscuit Company Limited **** Sep 28, 1989 England
RJR Industries (U.K.) Limited ** Jun 01, 1982 England
RJR Nabisco Securities Ltd. Sep 28, 1987 Federal, Canada
Royal Beech-Nut (Proprietary) Ltd. (49%) Jan 02, 1945 S. Africa
Royal Brands Portugal Comercio
e Industria Limitada Dec 23, 1916 Portugal
Royal Food Products, S.A. Jul 02, 1976 Tunisia
Royal Holding C.A. Nov 26, 1991 Venezuela
Royal Productos Alimenticios, C.A. Jul 26, 1971 Venezuela
Salvavidas S. de R.L. de C.V. ** Mar 30, 1967 Mexico
Saria Inc. Mar 09, 1956 New Jersey
Smiths Foods ** Jul 26, 1922 England
Stella D'oro Biscuit Co., Inc. Jan 02,1948 New York
Tevalca Holding C.A. Nov 26, 1991 Venezuela
20th Century Denmark Limited Mar 06, 1990 Liberia
West Indies Yeast Company Limited (72%) Nov 29, 1965 Jamaica
Yili-Nabisco Biscuit & Food Company
Limited (51%) *** Jan 29, 1985 China
* Inactive December 31, 1995
** In Liquidation Page 4
*** Partnership/Joint Venture/Trust SUB-1995
**** Nameholder Revised 1/15/96
EXHIBIT 23
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Nos.
33-39791, 33-39725, 33-40400, 33-40395, 33-40396, 33-66084, 33-54397, 33-54399,
33-54393 and 33-40702 of RJR Nabisco Holdings Corp. on Form S-8 and Registration
Statement No. 33-60803 of RJR Nabisco, Inc. on Form S-3 of our report
dated January 29, 1996 (February 16, 1996 as to Note 12), appearing in this
Annual Report on Form 10-K of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc.
for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
New York, New York
February 21, 1996
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer, or both, of each of RJR NABISCO HOLDINGS CORP. and RJR
NABISCO, INC., each a Delaware corporation (the "Companies"), do hereby
make, constitute and appoint Robert F. Sharpe, Jr., H. Colin McBride,
David F. Sternlieb and Sara L. Silbiger, and each of them, attorneys-in-
fact and agents of the undersigned with full power and authority of
substitution and resubstitution, in any and all capacities, to execute for and
on behalf of the undersigned the ANNUAL REPORT ON FORM 10-K of RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc., for the fiscal year ended December 31,
1995, and any and all amendments or supplements to the foregoing Annual
Report and any other documents and instruments incidental thereto, and to
deliver and file the same, with all exhibits thereto, and all documents and
instruments in connection therewith, with the Securities and Exchange
Commission, and with each exchange on which any class of securities of the
Companies is registered, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every
act and thing that said attorneys-in-fact and agents, and each of them,
deem advisable or necessary to enable the Companies to effectuate the
intents and purposes hereof, and the undersigned hereby fully ratify and
confirm all that said attorneys-in-fact and agents, or any of them, or
their or his or her substitute or substitutes, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed his or her
name, this ___day of ____________, 19__.
/s/ Steven F. Goldstone President and Chief Executive Officer,
- ------------------------------- Director
Steven F. Goldstone
/s/ Robert S. Roath Senior Vice President and Chief
- ------------------------------- Financial Officer
Robert S. Roath
/s/ Richard G. Russell Senior Vice President and Controller
- -------------------------------
Richard G. Russell
<PAGE>
Page 2
/s/ John T. Chain, Jr. Director
- ------------------------------
John T. Chain, Jr.
/s/ Julius L. Chambers Director
- ------------------------------
Julius L. Chambers
/s/ John L. Clendenin Director
- ------------------------------
John L. Clendenin
/s/ H. John Greeniaus Director
- ------------------------------
H. John Greeniaus
/s/ Ray J. Groves Director
- ------------------------------
Ray J. Groves
/s/ Charles M. Harper Chairman of the Board, Director
- ------------------------------
Charles M. Harper
/s/ James W. Johnston Director
- ------------------------------
James W. Johnston
/s/ John G. Medlin, Jr. Director
- ------------------------------
John G. Medlin, Jr.
/s/ Rozanne L. Ridgway Director
- ------------------------------
Rozanne L. Ridgway
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HOLDINGS'
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE BY REFERTENCE TO SUCH FINANCIAL STATEMENTS.
RJR NABISCO HOLDINGS CORP.
(Dollars in Millions Except Per Share Amounts)
</LEGEND>
<CIK> 847903
<NAME> RJR NABISCO HOLDINGS CORP.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 234
<SECURITIES> 0
<RECEIVABLES> 1,334
<ALLOWANCES> 0
<INVENTORY> 2,489
<CURRENT-ASSETS> 4,560
<PP&E> 8,386
<DEPRECIATION> (2,696)
<TOTAL-ASSETS> 31,518
<CURRENT-LIABILITIES> 4,124
<BONDS> 9,429
957
404
<COMMON> 3
<OTHER-SE> 9,919
<TOTAL-LIABILITY-AND-EQUITY> 31,518
<SALES> 16,008
<TOTAL-REVENUES> 16,008
<CGS> 7,468
<TOTAL-COSTS> 13,670
<OTHER-EXPENSES> (173)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (899)
<INCOME-PRETAX> 1,266
<INCOME-TAX> 580
<INCOME-CONTINUING> 627
<DISCONTINUED> 0
<EXTRAORDINARY> (16)
<CHANGES> 0
<NET-INCOME> 611
<EPS-PRIMARY> 1.53
<EPS-DILUTED> 1.55
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RJRN'S
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENT
RJR NABISCO INC.
(Dollars in Millions Except Per Share Amounts)
</LEGEND>
<CIK> 083612
<NAME> RJR NABISCO, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 232
<SECURITIES> 0
<RECEIVABLES> 1,327
<ALLOWANCES> 0
<INVENTORY> 2,489
<CURRENT-ASSETS> 4,551
<PP&E> 8,386
<DEPRECIATION> (2,696)
<TOTAL-ASSETS> 31,508
<CURRENT-LIABILITIES> 3,965
<BONDS> 9,429
0
0
<COMMON> 0
<OTHER-SE> 12,153
<TOTAL-LIABILITY-AND-EQUITY> 31,508
<SALES> 16,008
<TOTAL-REVENUES> 16,008
<CGS> 7,468
<TOTAL-COSTS> 13,670
<OTHER-EXPENSES> (175)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (872)
<INCOME-PRETAX> 1,291
<INCOME-TAX> 594
<INCOME-CONTINUING> 638
<DISCONTINUED> 0
<EXTRAORDINARY> (16)
<CHANGES> 0
<NET-INCOME> 622
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
