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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 14, 1999
Date of Report (Date of earliest event reported)
R.J. REYNOLDS TOBACCO HOLDINGS, INC.
(Exact name of registrant as specified in charter)
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Delaware 1-6388 56-0950247
(State or other jurisdiction (Commission (IRS employer
of incorporation) file no.) identification no.)
401 North Main Street
Winston-Salem, NC 27102
(Address of principal executive offices) (Zip code)
(336) 741-5000
Registrant's telephone number,
including area code
1301 Avenue of the Americas
New York, NY 10019
(Former name or address, if changed since last report)
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Item 5. Other Events.
On June 14, 1999, the registrant's former parent RJR Nabisco Holdings
Corp. completed the distribution of 100% of the common stock of the registrant
R.J. Reynolds Tobacco Holdings, Inc. to record holders of the common stock of
RJR Nabisco Holdings Corp. as of May 27, 1999, the record date for the
distribution. This document refers to R.J. Reynolds Tobacco Holdings, Inc. as
RJR. The distribution is intended to be tax-free for United States federal
income tax purposes. As a result of the distribution, RJR is now an
independent publicly traded company. For more information about the
distribution, stockholders should refer to the Information Statement of RJR,
which is filed as Exhibit 99.1 to the Registration Statement of RJR on Form
8-A dated May 19, 1999.
RJR issued two press releases on June 15, 1999 which are attached as
Exhibits 99.1 and 99.2 to this document and incorporated into this document by
reference. The press release attached as Exhibit 99.1 announced the completion
of the distribution. The press release attached as Exhibit 99.2 announced the
composition of RJR's board of directors upon completion of the distribution.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
Exhibit
No. Description
- ------- -----------
3.1 Restated Certificate of Incorporation of R.J. Reynolds Tobacco
Holdings, Inc.
3.2 By-Laws of R.J. Reynolds Tobacco Holdings, Inc.
4.1 Rights Agreement dated as of May 18, 1999 between R.J. Reynolds
Tobacco Holdings, Inc. and its rights agent.
10.1 Tax Sharing Agreement dated as of June 14, 1999 among RJR Nabisco
Holdings Corp., R.J. Reynolds Tobacco Holdings, Inc., R.J. Reynolds
Tobacco Company and Nabisco Holdings Corp.
10.2 RJR Nabisco, Inc. 1999 Long Term Incentive Plan.
99.1 Press Release dated June 15, 1999 announcing the completion of the
distribution.
99.2 Press Release dated June 15, 1999 relating to the composition of
RJR's board of directors.
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SIGNATURE
Pursuant to the requirements 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.
R.J. REYNOLDS TOBACCO HOLDINGS, INC.
By: /s/ Charles A. Blixt
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Name: Charles A. Blixt
Title: Executive Vice President
and General Councel
June 15, 1999
Page 3 of 3
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
R.J. REYNOLDS TOBACCO HOLDINGS, INC.
*****
Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware
The undersigned H. Colin McBride, Secretary of R.J. Reynolds Tobacco
Holdings, Inc. (the "Corporation"), certifies as follows:
1. (a) The name of the Corporation is currently R.J. Reynolds
Tobacco Holdings, Inc.
(b) The Corporation was originally incorporated under the name R.J.
Reynolds Industries, Inc. The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
March 4, 1970.
2. The Certificate of Incorporation is hereby amended by striking
out Articles I through VI thereof and by substituting new Articles First through
Ninth which are set forth in the Restated Certificate of Incorporation below.
3. The provisions of the Certificate of Incorporation of the
Corporation as heretofore amended and/or supplemented, and as herein amended,
are hereby restated and integrated into the single instrument entitled "Restated
Certificate of Incorporation of R.J. Reynolds Tobacco Holdings, Inc." set forth
below.
4. The amendments and the restatement of the Restated Certificate of
Incorporation certified herein have been duly adopted by the sole stockholder of
the Corporation in accordance with the provisions of Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware.
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RESTATED
CERTIFICATE OF INCORPORATION
OF
R.J. REYNOLDS TOBACCO HOLDINGS, INC.
(Originally incorporated under the name of
R.J. Reynolds Industries, Inc. on March 4, 1970)
ARTICLE FIRST
The name of the Corporation is R.J. Reynolds Tobacco Holdings, Inc.
ARTICLE SECOND
The address of its registered office in the State of Delaware is 1013
Centre Road, City of Wilmington, County of New Castle, Delaware 19805. The name
of its registered agent at such address is The Prentice-Hall Corporation System,
Inc.
ARTICLE THIRD
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware, as the same exists or may hereafter be amended
(the "DGCL").
ARTICLE FOURTH
The total number of shares of capital stock that the Corporation is
authorized to issue is 340,000,000 shares of which 290,000,000 shares are Common
Stock, par value $.01 each ("Common Stock"), and 50,000,000 shares are Preferred
Stock, par value $.01 each (hereinafter referred to as "Preferred Stock"). The
Corporation may issue the Preferred Stock from time to time in one or more
series with such distinctive designations as may be stated in the resolution or
resolutions providing for the issue of such stock from time to time adopted by
the Board of Directors or a duly authorized committee thereof. The resolution or
resolutions providing for the issue of shares of a particular series shall fix,
subject to applicable laws and the provisions of this ARTICLE FOURTH, for each
such series the number of shares constituting such series and the designations
and powers, preferences and relative participating, optional or other special
rights and qualifications, limitations or restrictions thereof, including,
without limiting the generality of the foregoing, such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or
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exchange, and such other subjects or matters as may be fixed by resolution or
resolutions of the Board of Directors or a duly authorized committee thereof
under the DGCL. The number of authorized shares of any class or classes of stock
may be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock of the Corporation irrespective of the provisions of Section 242(b)(2) of
the DGCL or any corresponding provision hereafter enacted.
The following is a statement of the number, designation, powers,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of the Series A Junior Participating
Preferred Stock (the "Series A Preferred Stock") of the Corporation:
(1) Designation and Number of Shares. The shares of such series shall
be designated as "Series A Junior Participating Preferred Stock, par value $0.01
per share", and the number of shares constituting such series shall be
2,000,000. Such number of shares of the Series A Preferred Stock may be
increased or decreased by resolution of the Board of Directors; provided that no
decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
issuable upon exercise or conversion of outstanding rights, options or other
securities issued by the Corporation.
(2) Dividends and Distributions.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends
payable on January 1, April 1, July 1 and October 1 of each year (each
such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of any share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (i) $1.00 and (ii) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends or other distributions and 100 times the
aggregate per share amount of all non-cash dividends or other
distributions (other than (A) a dividend payable in shares of Common
Stock or (B) a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise)), declared on the Common Stock since
the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred
Stock. If the Corporation shall at any time after May 17, 1999 (the
"Rights
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Declaration Date") pay any dividend on Common Stock payable in shares
of Common Stock or effect a subdivision or combination of the
outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under clause
2(a)(ii) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph 2(a) above
immediately after it declares a dividend or distribution on the Common
Stock (other than as described in clauses 2(a)(ii)(A) and 2(a)(ii)(B)
above); provided that if no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date (or, with respect to the first Quarterly Dividend Payment
Date, the period between the first issuance of any share or fraction of
a share of Series A Preferred Stock and such first Quarterly Dividend
Payment Date), a dividend of $1.00 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is on or
before the record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue and be
cumulative from the date of issue of such shares, or unless the date of
issue is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly
dividend and on or before such Quarterly Dividend Payment Date, in
which case dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares
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of Series A Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall not be more
than 60 days prior to the date fixed for the payment thereof.
(3) Voting Rights. In addition to any other voting rights required by
law, the holders of shares of Series A Preferred Stock shall have the following
voting rights:
(a) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of stockholders of the
Corporation. If the Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of
Common Stock or effect a subdivision or combination of the outstanding
shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such
case the number of votes per share to which holders of shares of Series
A Preferred Stock were entitled immediately prior to such event shall
be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common
Stock shall vote together as a single class on all matters submitted to
a vote of stockholders of the Corporation.
(c) (i) If at any time dividends on any Series A Preferred
Stock shall be in arrears in an amount equal to six quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of
a period (herein called a "default period") which shall extend until
such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend
period on all shares of Series A Preferred Stock then outstanding shall
have been declared and paid or set apart for payment. During each
default period, all holders of Preferred Stock and any other series of
Preferred Stock then entitled as a class to elect directors, voting
together as a single class, irrespective of series, shall have the
right to elect two Directors.
(ii) During any default period, such voting right of
the holders of Series A Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph
3(c)(iii) hereof or
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at any annual meeting of stockholders, and thereafter at
annual meetings of stockholders; provided that neither such
voting right nor the right of the holders of any other series
of Preferred Stock, if any, to increase, in certain cases, the
authorized number of Directors shall be exercised unless the
holders of 10% in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The
absence of a quorum of holders of Common Stock shall not
affect the exercise by holders of Preferred Stock of such
voting right. At any meeting at which holders of Preferred
Stock shall exercise such voting right initially during an
existing default period, they shall have the right, voting as
a class, to elect Directors to fill such vacancies, if any, in
the Board of Directors as may then exist up to two Directors
or, if such right is exercised at an annual meeting, to elect
two Directors. If the number which may be so elected at any
special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make
such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After
the holders of the Preferred Stock shall have exercised their
right to elect Directors in any default period and during the
continuance of such period, the number of Directors shall not
be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights
of any equity securities ranking senior to or pari passu with
the Series A Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised
their right to elect Directors, the Board of Directors may
order, or any stockholder or stockholders owning in the
aggregate not less than 10% of the total number of shares of
Preferred Stock outstanding, irrespective of series, may
request, the calling of a special meeting of holders of
Preferred Stock, which meeting shall thereupon be called by
the President, a Vice President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting
at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph 3(c)(iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such
notice to him at his last address as the same appears on the
books of the Corporation. Such meeting shall be called for a
time not earlier than 20 days and not later than 60 days after
such order or request or in default of the calling of such
meeting within 60 days after such order or request, such
meeting may be called on similar notice by any stockholder or
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stockholders owning in the aggregate not less than 10% of the
total number of shares of Preferred Stock outstanding,
irrespective of series. Notwithstanding the provisions of this
paragraph 3(c)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the
date fixed for the next annual meeting of stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if
applicable, shall continue to be entitled to elect the whole
number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two Directors voting as a
class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided
in paragraph 3(c)(ii) hereof) be filled by vote of a majority
of the remaining Directors theretofore elected by the holders
of the class of stock which elected the Director whose office
shall have become vacant. References in this paragraph 3(c) to
Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors to
fill vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a
class to elect Directors shall cease, (y) the term of any
Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such
number as may be provided for in the certificate of
incorporation or bylaws irrespective of any increase made
pursuant to the provisions of paragraph 3(c)(ii) hereof (such
number being subject, however, to change thereafter in any
manner provided by law or in the certificate of incorporation
or bylaws). Any vacancies in the Board of Directors effected
by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining
Directors.
(d) The Certificate of Incorporation of the Corporation shall
not be amended in any manner (whether by merger or otherwise) so as to
adversely affect the powers, preferences or special rights of the
Series A Preferred Stock without the affirmative vote of the holders of
a majority of the outstanding shares of Series A Preferred Stock,
voting separately as a class.
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(e) Except as otherwise provided herein, holders of Series A
Preferred Stock shall have no special voting rights, and their consent
shall not be required for taking any corporate action.
(4) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on outstanding
shares of Series A Preferred Stock shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and all
such other parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem, purchase or otherwise acquire for value
any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock; provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of stock of the
Corporation ranking junior (as to dividends and upon
dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of Series A Preferred Stock and
all such other parity stock upon such terms as the Board of
Directors, after consideration of the respective annual
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dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for value any shares of
stock of the Corporation unless the Corporation could, under paragraph
4(a), purchase or otherwise acquire such shares at such time and in
such manner.
(5) Reacquired Shares. Any shares of Series A Preferred Stock redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock without designation as to series and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors as permitted by the Certificate of Incorporation or as
otherwise permitted under Delaware Law.
(6) Liquidation, Dissolution and Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $1.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment;
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, or (2) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such other parity stock in proportion to
the total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. If the Corporation shall at any time
after the Rights Declaration Date pay any dividend on Common Stock payable in
shares of Common Stock or effect a subdivision or combination of the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then in each such case the aggregate
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is
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the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(7) Consolidation, Merger, Etc. If the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
or any other property, then in any such case the shares of Series A Preferred
Stock shall at the same time be similarly exchanged for or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash or any other
property, as the case may be, into which or for which each share of Common Stock
is changed or exchanged. If the Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(8) No Redemption. The Series A Preferred Stock shall not be
redeemable.
(9) Rank. The Series A Preferred Stock shall rank junior (as to
dividends and upon liquidation, dissolution and winding up) to all other series
of the Corporation's preferred stock except any series that specifically
provides that such series shall rank junior to the Series A Preferred Stock.
(10) Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
ARTICLE FIFTH
The Board of Directors of the Corporation, acting by majority vote, may
alter, amend or repeal the By-Laws of the Corporation. The stockholders may
adopt, amend or repeal the By-Laws only with the affirmative vote of the holders
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of not less than 80% of the outstanding securities of the Corporation then
entitled to vote thereon, voting together as a single class.
ARTICLE SIXTH
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. Officers of the Corporation shall
be elected by, or in the manner approved by, the Board of Directors.
(2) The Board of Directors shall consist of not less than five nor
more than twelve directors, with the exact number of directors to be determined
from time to time by resolution adopted by the Board of Directors.
(3) The members of the Board of Directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly as may reasonably be possible, of one-third of the total number of
directors constituting the Board of Directors. Each director shall serve for a
term ending on the date of the third annual meeting of stockholders next
following the annual meeting at which such director was elected, provided that
directors initially designated as Class I directors shall serve for a term
ending on the date of the year 2000 annual meeting, directors initially
designated as Class II directors shall serve for a term ending on the date of
the year 2001 annual meeting, and directors initially designated as Class III
directors shall serve for a term ending on the date of the year 2002 annual
meeting. Notwithstanding the foregoing, each director shall hold office until
such director's successor shall have been duly elected and qualified or until
such director's earlier death, resignation or removal. In the event of any
change in the number of directors, the Board of Directors shall apportion any
newly-created directorships among, or reduce the number of directorships in,
such class or classes as shall equalize, as nearly as may reasonably be
possible, the number of directors in each class. In no event will a decrease in
the number of directors shorten the term of any incumbent director.
(4) Initial Directors. The names and mailing addresses of the persons
who are to serve initially as directors in each Class are:
Name Mailing Address
----------------- -----------------------
Class I John T. Chain, Jr. R. J. Reynolds Tobacco
Thomas C. Wajnert Holdings, Inc.
401 North Main Street
Winston-Salem, NC 27102
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Class II A. D. Frazier R. J. Reynolds Tobacco
John G. Medlin, Jr. Holdings, Inc.
Nana Mensah 401 North Main Street
Winston-Salem, NC 27102
Class III Denise Ilitch R. J. Reynolds Tobacco
Andrew J. Schindler Holdings, Inc.
Joseph P. Viviano 401 North Main Street
Winston-Salem, NC 27102
(5) There shall be no cumulative voting in the election of directors.
Election of directors need not be by written ballot unless the By-Laws of the
Corporation so provide. Directors need not be stockholders.
(6) Except as otherwise provided by law, vacancies on the Board of
Directors resulting from death, resignation, removal or otherwise and
newly-created directorships resulting from any increase in the number of
directors shall be filled only by a majority of the directors then in office
(although less than a quorum) or by the sole remaining director and not by the
stockholders, and each director so elected shall hold office for a term that
shall coincide with the term of the Class to which such director shall have been
elected.
(7) Each member of the Board of Directors shall have one vote on all
matters presented to the Board of Directors, and a majority of the total number
of directors at any time shall constitute a quorum for the transaction of
business at that time. The Board of Directors may act by the unanimous written
consent of the directors.
(8) Notwithstanding the foregoing, whenever the holders of one or more
classes or series of Preferred Stock shall have the right, voting separately as
a class or series, to elect directors, the election, term of office, filling of
vacancies, removal and other features of such directorships shall be governed by
the terms of the resolution or resolutions adopted by the Board of Directors
pursuant to ARTICLE FOURTH applicable thereto, and such directors so elected
shall not be subject to the provisions of this ARTICLE SIXTH unless otherwise
provided in such resolution or resolutions.
ARTICLE SEVENTH
(1) To the fullest extent permitted by the DGCL as now in effect or as
hereafter amended, no director or Continuing Director of the Corporation shall
be liable for monetary damages for breach of fiduciary duty.
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(2) Each person who is or was a director or officer of the Corporation
(and the heirs, executors or administrators of such person) who was or is a
party or is threatened to be made a party to, or is involved in any threatened,
pending or completed action, suit or proceeding (including an action, suit or
proceeding by or in right of the Corporation), whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director or officer, of the Corporation or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the Corporation to the fullest extent permitted by the DGCL.
The right to indemnification conferred in this ARTICLE SEVENTH shall also
include the right to be paid by the Corporation the expenses incurred in
connection with any such proceeding in advance of its final disposition to the
fullest extent authorized by the DGCL. The right to indemnification conferred in
this ARTICLE SEVENTH shall be a contract right.
(3) The Corporation may, by action of its Board of Directors, provide
indemnification to such of the employees and agents of the Corporation to such
extent and to such effect as the Board of Directors shall determine to be
appropriate and authorized by the DGCL.
(4) The Corporation shall have power to purchase and maintain
insurance, at its expense, on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss incurred by such person in any such capacity or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify such person in any such capacity and whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the DGCL.
(5) The rights and authority conferred in this ARTICLE SEVENTH shall
not be exclusive of any other right which any person may otherwise have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation or By-laws of the Corporation, agreement, vote of stockholders or
disinterested directors or otherwise.
(6) Neither the amendment nor repeal of this ARTICLE SEVENTH, nor the
adoption of any provision of this Certificate of Incorporation or the By-laws of
the Corporation, nor, to the fullest extent permitted by the DGCL, any
modification of law, shall eliminate or reduce the effect of this ARTICLE
13
<PAGE>
SEVENTH in respect of any acts or omissions occurring prior to such amendment,
repeal, adoption or modification.
ARTICLE EIGHTH
Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken only upon the vote of stockholders at an
annual or special meeting duly noticed and called in accordance with the DGCL
and may not be taken by written consent of stockholders without a meeting.
ARTICLE NINTH
Special meetings of the stockholders may be called by the Board of
Directors, the Chairman of the Board of Directors, the President or the
Secretary of the Corporation and may not be called by any other person.
Notwithstanding the foregoing, whenever holders of one or more classes or series
of Preferred Stock shall have the right, voting separately as a class or series,
to elect directors, such holders may call, pursuant to the terms of the
resolution or resolutions adopted by the Board of Directors pursuant to ARTICLE
FOURTH hereof, special meetings of holders of such Preferred Stock.
14
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this Restated
Certificate of Incorporation as of June 14, 1999.
R.J. REYNOLDS TOBACCO HOLDINGS,
INC.
By: /s/ H. Colin McBride
----------------------------
Name: H. Colin McBride
Title: Senior Vice President,
Secretary and General Counsel
15
EXHIBIT 3.2
R.J. REYNOLDS TOBACCO HOLDINGS, INC.
BY-LAWS
As Amended Effective June 14, 1999
* * * * *
ARTICLE 1
MEETINGS OF STOCKHOLDERS
SECTION 1.01. 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 Corporation's Board of Directors (the "Board") may determine.
SECTION 1.02. Annual and Special Meetings. Annual meetings of
stockholders shall be held, at a date, time and place fixed by the Board and
stated in the notice of meeting, to elect a Board and to transact such other
business as may properly come before the meeting. Special meetings of
stockholders may be called by the persons identified in the Corporation's
Certificate of Incorporation.
SECTION 1.03. 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 1.04. 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.
SECTION 1.05. 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
<PAGE>
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 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 1.06. If the chairman of the meeting shall determine that
any business was not properly submitted in accordance with the terms of
Section 1.06, he or she shall declare to the meeting that such business was
not properly submitted and would not be transacted at that meeting.
SECTION 1.06. 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 prior to the close of business at the principal executive offices of
the Corporation (a) not less than 120 days nor more than 150 days (unless, in
either case, such day is not a business day in which case the immediately
preceding business day) before the first anniversary of the Corporation's 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 such anniversary date, not less than a reasonable time,
as determined by the Board, prior to the date of the applicable annual
meeting. In no event shall the public announcement of a postponement or
adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above.
Nomination of persons for election to the Board may be made by the
Board or any committee designated by the Board 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 or its
designated committee must comply with the procedures set forth in this Section
1.06, and no person shall be eligible for election as a director unless
nominated in accordance with the terms of this Section 1.06.
A stockholder may nominate a person or persons for election to the
Board 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
2
<PAGE>
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
or a committee designated by the Board.
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 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 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 a director by the Board or any
committee designated by the Board shall, upon the request of the Board or such
3
<PAGE>
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.
In addition to the foregoing provisions of this Section 1.06, 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 1.07. 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 1.08. Inspectors of Election. Prior to any meeting of
stockholders, the Board 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 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 2
DIRECTORS
SECTION 2.01. Meetings. Regular meetings of the Board shall be held
at such times and places as may from time to time be fixed by the Board or as
may be specified in a notice of meeting. Special meetings of the Board 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. A meeting of the Board may be held without
notice immediately after the annual meeting of stockholders. No notice shall
be required for any regular meeting of the Board. Notice of the day, hour and
place of holding of each special meeting shall be given by delivering the same
at least two days
4
<PAGE>
before the date of the meeting or by causing the same to be transmitted by
telecopy or telegraph at least one day before the meeting to each director.
SECTION 2.02. Quorum. Except as otherwise provided in the Certificate
of Incorporation, a majority 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, 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.
SECTION 2.03. Executive Committee. The Board, 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, or the Chairman, if the Chief Executive Officer is
not a member of the Board, 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 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, 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 in reference to amending
the Certificate of Incorporation or any preferred stock rights plan, 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. 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 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.
5
<PAGE>
SECTION 2.04. Other Committees of Directors. The Board may, by
resolution adopted by a majority of the Board, designate one or more other
committees to have and exercise such power and authority as the Board 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, 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 3
OFFICERS
SECTION 3.01. Description and Terms. The officers of the Corporation
shall be the Chairman, the Chief Executive Officer, a President, a Treasurer,
a Secretary, who shall have the duty, among other things, to record the
proceedings of the meetings of stockholders and directors in a book kept for
that purpose, and such other additional officers with such titles as the Board
shall determine, all of whom shall be chosen by and serve at the pleasure of
the Board; provided that the Chief Executive Officer may appoint Senior Vice
Presidents, Vice Presidents or Assistant Officers at his or her discretion.
Subject to such limitations as may be imposed by the Board, the Chief
Executive Officer shall have full executive power and authority with respect
to the Corporation. The President, if separate from the Chief Executive
Officer, shall have such powers and authority as the Chief Executive Officer
may determine. If the Chief Executive Officer is absent or incapacitated, the
Executive Committee shall determine the person who 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. 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 may be removed by the Board with or without
cause. Subject to such limitations as the Board 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 limitations as the officer shall specify, and may
revoke such authority at any time.
SECTION 3.02. 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
6
<PAGE>
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 by resolution from time to time
may confer like powers upon any other officer.
ARTICLE 4
GENERAL PROVISIONS
SECTION 4.01. 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 4.02. Fiscal Year. The fiscal year of the Corporation shall
be fixed by the Board.
SECTION 4.03. Certificates of Stock. Any certificates which represent
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 any such certificates, including signatures of officers,
transfer agents and registrars, may be facsimile.
7
EXHIBIT 4.1
EXECUTION COPY
RIGHTS AGREEMENT
dated as of
May 17, 1999
between
R.J. REYNOLDS TOBACCO HOLDINGS, INC.
and
THE BANK OF NEW YORK
as Rights Agent
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
SECTION 1. Definitions.......................................................1
SECTION 2. Appointment of Rights Agent.......................................5
SECTION 3. Issue of Right Certificates.......................................6
SECTION 4. Form of Right Certificates........................................7
SECTION 5. Countersignature and Registration.................................8
SECTION 6. Transfer and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates................8
SECTION 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.....9
SECTION 8. Cancellation of Right Certificates...............................11
SECTION 9. Reservation and Availability of Capital Stock....................11
SECTION 10. Preferred Stock Record Date.....................................12
SECTION 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights........................................13
SECTION 12. Certificate of Adjusted Purchase Price or Number of Shares......21
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power..............................................22
SECTION 14. Fractional Rights and Fractional Shares.........................25
SECTION 15. Rights of Action................................................26
SECTION 16. Agreement of Right Holders......................................26
SECTION 17. Right Certificate Holder Not Deemed a Stockholder
..........................................................27
SECTION 18. Concerning the Rights Agent.....................................28
SECTION 19. Merger or Consolidation or Change of Name of Rights
Agents.....................................................28
SECTION 20. Duties of Rights Agent..........................................29
SECTION 21. Change of Rights Agent..........................................32
SECTION 22. Issuance of New Right Certificates..............................33
SECTION 23. Redemption......................................................33
SECTION 24. Exchange........................................................33
SECTION 25. Notice of Proposed Actions......................................35
SECTION 26. Notices.........................................................36
SECTION 27. Supplements and Amendments......................................36
SECTION 28. Successors......................................................37
SECTION 29. Determinations and Actions by the Board, etc....................37
SECTION 30. Benefits of this Agreement......................................37
SECTION 31. Severability....................................................37
SECTION 32. Governing Law...................................................37
SECTION 33. Counterparts....................................................37
SECTION 34. Descriptive Headings............................................38
<PAGE>
Exhibit A - Form of Certificate of Designation of Preferred Stock
Exhibit B - Form of Right CertificatE
<PAGE>
RIGHTS AGREEMENT
AGREEMENT dated as of May 17, 1999 between R.J. Reynolds Tobacco
Holdings, Inc., a Delaware corporation (the "Company), and The Bank of New
York, a New York banking corporation as Rights Agent (the "Rights Agent"),
W I T N E S S E T H
WHEREAS, on May 17, 1999 the Board of Directors of the Company
authorized and declared a dividend, payable on May 27, 1999 (the "Record
Date"), of preferred stock purchase rights (the "Rights") in an amount such
that one Right is payable with respect to each share of Common Stock (as
hereinafter defined) outstanding at the close of business on June 14, 1999 and
has authorized the issuance, upon the terms and subject to the conditions
hereinafter set forth, of one Right (subject to adjustment) in respect of each
share of Common Stock issued after June 14, 1999, each Right representing the
right to purchase, upon the terms and subject to the conditions hereinafter
set forth, one one-hundredth (subject to adjustment) of a share of Preferred
Stock (as hereinafter defined);
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. The following terms, as used herein, have the
following meanings:
"Acquiring Person" means any Person who, together with all Affiliates
and Associates of such Person, shall at any time after June 14, 1999 be the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, but shall not include an Exempt Person; provided, however, that
(a) if the Board determines in good faith that a Person who would otherwise be
an "Acquiring Person" became the Beneficial Owner of a number of shares of
Common Stock such that the Person would otherwise qualify as an "Acquiring
Person" inadvertently (including, without limitation, because (i) such Person
was unaware that it beneficially owned a percentage of Common Stock that would
otherwise cause such Person to be an "Acquiring Person" or (ii) such Person
was aware of the extent of its Beneficial Ownership of Common Stock but had no
actual knowledge of the consequences of such Beneficial Ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, then such Person shall not be deemed to be or to have become an
"Acquiring Person" for any purposes of this Agreement unless and until such
Person shall have failed to divest itself, as soon as practicable (as
determined, in good faith, by the Board of Directors of the Company), of
Beneficial Ownership
<PAGE>
of a sufficient number of shares of Common Stock so that such Person would no
longer otherwise qualify as an "Acquiring Person"; and (b) no Person shall
become an "Acquiring Person" as the result of any acquisition of shares of
Common Stock by the Company which, by reducing the number of shares of Common
Stock outstanding, increases the proportionate number of shares of Common
Stock beneficially owned by such Person to 15% or more of the shares of Common
Stock then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding
by reason of such share acquisition by the Company and shall thereafter become
the Beneficial Owner of any additional shares of Common Stock (other than
pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Stock or pursuant to a split or subdivision of the
outstanding Common Stock), then such Person shall be deemed to be an
"Acquiring Person" unless upon becoming the Beneficial Owner of such
additional shares of Common Stock such Person does not beneficially own 15% or
more of the shares of Common Stock then outstanding.
"Affiliate" and "Associate" have the respective meanings ascribed to
such terms in Rule 12b-2 under the Exchange Act as in effect on the date
hereof.
A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to have "Beneficial Ownership" of and to "beneficially own", any
securities:
(a) which such Person or any of its Affiliates or Associates,
directly or indirectly, beneficially owns (as determined pursuant to
Rule 13d-3 under the Exchange Act as in effect on the date hereof);
(b) which such Person or any of its Affiliates or Associates,
directly or indirectly, has
(i) the right to acquire (whether such right is
exercisable immediately or only upon the occurrence of
certain events or the passage of time or both) pursuant to
any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and
selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own",
(A) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered
securities are accepted for purchase, (B) securities which
such Person has a right to acquire upon the
2
<PAGE>
exercise of Rights at any time prior to the time that any
Person becomes an Acquiring Person or (C) securities
issuable upon the exercise of Rights from and after the time
that Person becomes an Acquiring Person if such Rights were
acquired by such Person or any of such Person's Affiliates
or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof ("Original Rights") or
pursuant to Section 11(i) or Section 11(p) with respect to
an adjustment to Original Rights; or
(ii) the right to vote (whether such right is
exercisable immediately or only upon the occurrence of
certain events or the passage of time or both) pursuant to
any agreement, arrangement or understanding (whether or not
in writing) or otherwise; provided that a Person shall not
be deemed the "Beneficial Owner" of, or to "beneficially
own", any security under this clause (ii) as a result of an
agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding (A)
arises solely from a revocable proxy or consent given in
response to a public proxy or consent solicitation made
pursuant to the applicable rules and regulations under the
Exchange Act and (B) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(c) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) and with respect
to which such Person or any of its Affiliates or Associates has any
agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except pursuant to a revocable
proxy or consent as described in subparagraph (b)(ii) immediately
above) or disposing of any such securities;
provided, however, that no Person who is an officer, director or employee of
an Exempt Person shall be deemed, solely by reason of such Person's status or
authority as such, to be the "Beneficial Owner" of, to have "Beneficial
Ownership" of or to "beneficially own" any securities that are "beneficially
owned", including, without limitation, in a fiduciary capacity, by an Exempt
Person or by any other such officer, director or employee of an Exempt Person.
"Board" means the Board of Directors of the Company.
3
<PAGE>
"Business Day" means any day other than a Saturday, Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Close of business" on any given date means 5:00 P.M., New York City
time, on such date; provided that if such date is not a Business Day "close of
business" means 5:00 P.M., New York City time, on the next succeeding Business
Day.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Company, except that, when used with reference to any Person other than
the Company, "Common Stock" means the capital stock of such Person with the
greatest voting power, or the equity securities or other equity interest
having power to control or direct the management, of such Person.
"Distribution Date" means the earlier of (a) the close of business on
the tenth day (or such later day as may be designated by action of a majority
of the Board) after the Stock Acquisition Date and (b) the close of business
on the tenth Business Day (or such later day as may be designated prior to the
occurrence of a Section 11(a)(ii) Event by action of the Board) after the date
of the commencement of a tender or exchange offer by any Person if, upon
consummation thereof, such Person would be an Acquiring Person; provided,
however, that if either of such dates occurs after the date of this Agreement
and on or prior to the Record Date, then the Distribution Date shall be the
Record Date.
"Exempt Person" shall mean the Company or any Subsidiary of the
Company, in each case including, without limitation, in its fiduciary
capacity, or any employee benefit plan of the Company or of any Subsidiary of
the Company, or any entity or trustee holding Common Stock for or pursuant to
the terms of any such plan or for the purpose of funding any such plan or
funding other employee benefits for employees of the Company or of any
Subsidiary of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" means the earlier of (a) the Final Expiration Date
and (b) the time at which all Rights are redeemed as provided in Section 23 or
exchanged as provided in Section 24.
"Final Expiration Date" means the close of business on May 27, 2009.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or any other entity or organization.
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"Preferred Stock" means the Series A Junior Participating Preferred
Stock, par value $0.01 per share, of the Company, having the terms set forth
in the form of certificate of designation attached hereto as Exhibit A.
"Purchase Price" means the price (subject to adjustment as provided
herein) at which a holder of a Right may purchase one one-hundredth of a share
of Preferred Stock (subject to adjustment as provided herein) upon exercise of
a Right, which price shall initially be $150.
"Section 11(a)(ii) Event" means any event described in the first
clause of Section 11(a)(ii).
"Section 13 Event" means any event described in clauses (x), (y) or
(z) of Section 13(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Acquisition Date" means the date of the first public
announcement (including the filing of a report on Schedule 13D under the
Exchange Act (or any comparable or successor report)) by the Company or an
Acquiring Person indicating that an Acquiring Person has become such.
"Subsidiary" of any Person means any other Person of which securities
or other ownership interests having ordinary voting power, in the absence of
contingencies, to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned by
such first Person.
"Trading Day" means a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, a
Business Day.
"Triggering Event" means any Section 11(a)(ii) Event or any Section 13
Event.
SECTION 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable upon prior written notice to the Rights Agent. The
Rights Agent shall have no duty to supervise, and shall in no even be liable
for, the acts or omissions of any such Co-Rights Agent. If the
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Company appoints one or more Co-Rights Agents, the respective duties of the
Rights Agent and any Co-Rights Agents shall be as the Company shall determine.
SECTION 3. Issue of Right Certificates. (a) Prior to the Distribution
Date, (i) the Rights will be evidenced (subject to the penultimate sentence of
this Section 3(a)) by the certificates for the Common Stock and not by
separate Right Certificates (as hereinafter defined) and the registered
holders of the Common Stock shall be deemed to be the registered holders of
the associated Rights, and (ii) the Rights will be transferable only in
connection with the transfer of the underlying shares of Common Stock. With
respect to certificates for Common Stock outstanding as of the Record Date,
prior to the Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof together with a
copy of the Summary of Rights. Prior to the Distribution Date (or, if earlier,
the Expiration Date), the surrender for transfer of any certificate for Common
Stock outstanding on the Record Date, with or without a copy of the Summary of
Rights, shall also constitute the transfer of the Rights associated with the
Common Stock represented thereby.
(b) The Company shall give the Rights Agent prompt written notice of
the Distribution Date. As soon as practicable after the Company has notified
the Rights Agent of the occurrence of the Distribution Date, the Rights Agent
will, at the Company's expense, send, by first-class, insured, postage prepaid
mail, to each record holder of the Common Stock as of the close of business on
the Distribution Date (other than any Acquiring Person or any Affiliate or
Associate thereof), at the address of such holder shown on the records of the
Company, one or more Right Certificates evidencing one Right (subject to
adjustment as provided herein) for each share of Common Stock so held. If an
adjustment in the number of Rights per share of Common Stock has been made
pursuant to Section 11 the Company shall, at the time of distribution of the
Right Certificates, make the necessary and appropriate rounding adjustments
(in accordance with Section 14(a)) so that Right Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. From and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(c) Rights shall be issued in respect of all shares of Common Stock
outstanding as of the Record Date or issued (on original issuance or out of
treasury) after the Record Date but prior to the earlier of the Distribution
Date and the Expiration Date. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to
the Expiration Date, the Company (i) shall, with respect to shares of Common
Stock so issued or sold (x) pursuant to the exercise of stock options or under
any employee plan or arrangement or (y) upon the exercise, conversion or
exchange of other securities issued by the Company prior to the Distribution
Date and (ii) may, in any other
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case, if deemed necessary or appropriate by the Board, issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided that no such Right Certificate shall be issued
if, and to the extent that, (i) the Company shall be advised by counsel that
such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Right Certificate would
be issued or (ii) appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.
(d) Certificates issued for Common Stock after the Record Date but
prior to the earlier of the Distribution Date and the Expiration Date shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences certain Rights as set forth in a
Rights Agreement between R.J. Reynolds Tobacco Holdings, Inc. and The
Bank of New York, as Rights Agent, dated as of May 17, 1999 and as
amended from time to time (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of the Company. The
Company will mail to the holder of this certificate a copy of the
Rights Agreement without charge promptly after receipt of a written
request therefor. Under certain circumstances, as set forth in the
Rights Agreement, such Rights may be evidenced by separate
certificates and no longer be evidenced by this certificate, may be
redeemed or exchanged or may expire. As set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or an Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently
held by or on behalf of such Person or by any subsequent holder, may
be null and void.
SECTION 4. Form of Right Certificates. The certificates evidencing
the Rights (and the forms of assignment, election to purchase and certificates
to be printed on the reverse thereof) (the "Right Certificates") shall be
substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law, rule or regulation or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed, or to conform to usage. The Right Certificates shall be in a form
reasonably satisfactory to the Rights Agent. The Right Certificates, whenever
distributed, shall be dated as of the Record Date and show the date of
countersignature.
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SECTION 5. Countersignature and Registration. (a) The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Right Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company whose
manual or facsimile signature is affixed to the Right Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Right Certificates may,
nevertheless, be countersigned by the Rights Agent and issued and delivered
with the same force and effect as though the Person who signed such Right
Certificates had not ceased to be such officer of the Company. Any Right
Certificate may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such Person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the place
for surrender of Right Certificates upon exercise, transfer or exchange, books
for registration and transfer of the Right Certificates. Such books shall show
with respect to each Right Certificate the name and address of the registered
holder thereof, the number of Rights indicated on the certificate and the
certificate number.
SECTION 6. Transfer and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates. (a) At any time after the
Distribution Date and prior to the Expiration Date, any Right Certificate or
Certificates may, upon the terms and subject to the conditions set forth in
this Agreement, be transferred or exchanged for another Right Certificate or
Certificates evidencing a like number of Rights as the Right Certificate or
Certificates surrendered. Any registered holder desiring to transfer or
exchange any Right Certificate or Certificates shall surrender such Right
Certificate or Certificates (with, in the case of a transfer, the form of
assignment and certificate on the reverse side thereof duly executed) to the
Rights Agent at the principal office or offices of the Rights Agent designated
for such purpose. Neither the Rights Agent nor the Company shall be obligated
to take any action whatsoever with respect to the transfer of any such
surrendered Right Certificate or Certificates until the registered holder of
the Rights has complied with the requirements of Section 7(e). Upon
satisfaction of the foregoing requirements, the Rights Agent shall, subject to
Sections 7(d), 14 and 24, countersign and deliver to the Person entitled
thereto a Right Certificate or Certificates as so
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requested. The Company may require payment by the holders of Rights of a sum
sufficient to cover any transfer tax or other governmental charge that may be
imposed in connection with any transfer or exchange of any Right Certificate
or Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate, if mutilated, the Company will issue
and deliver a new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
SECTION 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein, including
Sections 7(d), 7(e), 9(c), 11(a), 23 and 24) in whole or in part at any time
after the Distribution Date and prior to the Expiration Date upon surrender of
the Right Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the Rights Agent at
the principal office or offices of the Rights Agent designated for such
purpose, together with payment (in lawful money of the United States of
America by certified check or bank draft payable to the order of the Company)
of the aggregate Purchase Price with respect to the Rights then to be
exercised and an amount equal to any applicable transfer tax or other
governmental charge.
(b) Upon satisfaction of the requirements of Section 7(a) and
subject to Section 20(k), the Rights Agent shall thereupon promptly (i) (A)
requisition from any transfer agent of the Preferred Stock (or make available,
if the Rights Agent is the transfer agent therefor) certificates for the total
number of one one-hundredths of a share of Preferred Stock to be purchased
(and the Company hereby irrevocably authorizes its transfer agent to comply
with all such requests) or (B) if the Company shall have elected to deposit
the shares of Preferred Stock issuable upon exercise of the Rights with a
depositary agent, requisition from the depositary agent depositary receipts
representing interests in such number of one one-hundredths of a share of
Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the
Company the amount of cash, if any, to be paid in lieu of issuance of
fractional shares in accordance with Section 14 and (iii) after receipt of
such certificates or
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depositary receipts and cash, if any, cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate (with such
certificates or receipts registered in such name or names as may be designated
by such holder). If the Company is obligated to deliver Common Stock, other
securities or assets pursuant to this Agreement, the Company will make all
arrangements necessary so that such other securities and assets are available
for delivery by the Rights Agent, if and when appropriate.
(c) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing the number of Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Right Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14.
(d) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person
(or any such Associate or Affiliate) to holders of equity interests in such
Acquiring Person (or in any such Associate or Affiliate) or to any Person with
whom the Acquiring Person (or any such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(d)
shall become null and void without any further action, and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(d) are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates and Associates or any
transferee of any of them hereunder.
(e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of
any purported transfer pursuant to Section 6 or exercise pursuant to this
Section 7 unless such registered holder (i) shall have completed and signed
the certificate contained in
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the form of assignment or election to purchase, as the case may be, set forth
on the reverse side of the Right Certificate surrendered for such transfer or
exercise, as the case may be, (ii) shall not have indicated an affirmative
response to clause 1 or 2 thereof and (iii) shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
SECTION 8. Cancellation of Right Certificates. All Right Certificates
surrendered for exercise, transfer or exchange shall, if surrendered to the
Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in canceled form, or, if surrendered to the Rights Agent,
shall be canceled by it, and no Right Certificates shall be issued in lieu
thereof except as expressly permitted by this Agreement. The Company shall
deliver to the Rights Agent for cancellation, and the Rights Agent shall
cancel, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company.
SECTION 9. Reservation and Availability of Capital Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available a number of shares of Preferred Stock which are authorized but not
outstanding or otherwise reserved for issuance sufficient to permit the
exercise in full of all outstanding Rights as provided in this Agreement.
(b) So long as the Preferred Stock issuable upon the exercise of
Rights may be listed on any national securities exchange, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all securities reserved for such issuance to be listed on any
such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts (i) to file, as soon as
practicable following the earliest date after the occurrence of a Section
11(a)(ii) Event as of which the consideration to be delivered by the Company
upon exercise of the Rights has been determined in accordance with Section
11(a)(iii), or as soon as is required by law following the Distribution Date,
as the case may be, a registration statement under the Securities Act with
respect to the securities issuable upon exercise of the Rights, (ii) to cause
such registration statement to become effective as soon as practicable after
such filing and (iii) to cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities
Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance
with, the securities or blue sky laws of the various states in connection with
the exercisability of the Rights. The Company may temporarily
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suspend, for a period of time not to exceed 90 days after the date set forth
in clause 9(c)(i), the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement, with
simultaneous written notice to the Rights Agent, stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
Notwithstanding any such provision of this Agreement to the contrary, the
Rights shall not be exercisable for securities in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained,
such exercise therefor shall not be permitted under applicable law or a
registration statement in respect of such securities shall not have been
declared effective. Until it has received notice to the contrary, the Rights
Agent may assume that any Right exercised is permitted to be exercised under
applicable law and shall have no liability for acting in reliance upon such
assumption.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to insure that all one one-hundredths of a share of
Preferred Stock issuable upon exercise of Rights shall, at the time of
delivery of the certificates for such securities (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and other
governmental charges which may be payable in respect of the issuance or
delivery of the Right Certificates and of any certificates for Preferred Stock
upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax or other governmental charge which may be payable in
respect of any transfer involved in the issuance or delivery of any Right
Certificates or of any certificates for Preferred Stock to a Person other than
the registered holder of the applicable Right Certificate, and prior to any
such transfer, issuance or delivery any such tax or other governmental charge
shall have been paid by the holder of such Right Certificate or it shall have
been established to the Company's satisfaction that no such tax or other
governmental charge is due.
SECTION 10. Preferred Stock Record Date. Each Person (other than the
Company) in whose name any certificate for Preferred Stock is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder
of record of such Preferred Stock represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and any
transfer taxes or other governmental charges) was made; provided that if the
date of such surrender and payment is a date upon which the transfer books of
the Company relating to the Preferred Stock are closed, such Person shall be
deemed to have become the
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record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the applicable transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of
a Right Certificate shall not be entitled to any rights of a stockholder of
the Company with respect to shares for which the Rights shall be exercisable,
including the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company except as provided herein.
SECTION 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. (a) (i) If the Company shall at any time after the date
of this Agreement (A) pay a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding Preferred Stock into a
greater number of shares, (C) combine the outstanding Preferred Stock into a
smaller number of shares or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification
in connection with a consolidation or merger involving the Company), the
Purchase Price in effect immediately prior to the record date for such
dividend or the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock or
other capital stock issuable on such date shall be proportionately adjusted so
that each holder of a Right shall (except as otherwise provided herein,
including Section 7(d)) thereafter be entitled to receive, upon exercise
thereof at the Purchase Price in effect immediately prior to such date, the
aggregate number and kind of shares of Preferred Stock or other capital stock,
as the case may be, which, if such Right had been exercised immediately prior
to such date and at a time when the applicable transfer books of the Company
were open, such holder would have been entitled to receive upon such exercise
and by virtue of such dividend, subdivision, combination or reclassification.
If an event occurs which requires an adjustment under both this Section
11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii).
(ii) If any Person, alone or together with its Affiliates and
Associates, shall, at any time after the date of this Agreement,
become an Acquiring Person, then each holder of a Right shall (except
as otherwise provided herein, including Section 7(d)) thereafter be
entitled to receive, upon exercise thereof at the Purchase Price in
effect immediately prior to the first occurrence of a Section
11(a)(ii) Event, in lieu of Preferred Stock, such number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock of the Company (such shares being referred to herein as
the "Adjustment Shares") as shall be equal to the result obtained by
dividing
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(x) the product obtained by multiplying the Purchase
Price in effect immediately prior to the first occurrence of
a Section 11(a)(ii) Event by the number of one
one-hundredths of a share of Preferred Stock for which a
Right was exercisable immediately prior to such first
occurrence (such product being thereafter referred to as the
"Purchase Price" for each Right) by
(y) 50% of the current market price (determined
pursuant to Section 11(d)(i)) per share of Common Stock on
the date of such first occurrence;
provided, however, that the Purchase Price (as so adjusted pursuant
to the foregoing clause (ii)(x)) and the number of Adjustment Shares
so receivable upon exercise of a Right shall, following the
occurrence of such Section 11(a)(ii) Event, be subject to further
adjustment as appropriate in accordance with Section 11(f). From and
after the occurrence of a Section 13 Event, any Rights that
theretofore have not been exercised pursuant to this Section
11(a)(ii) shall thereafter be exercisable only in accordance with
Section 13 and not pursuant to this Section 11(a)(ii).
(iii) If the number of shares of Common Stock which are authorized
by the Company's certificate of incorporation but not outstanding or
reserved for issuance other than upon exercise of the Rights is not
sufficient to permit the exercise in full of the Rights in accordance
with Section 11(a)(ii), the Company shall, with respect to each
Right, make adequate provision to substitute for the Adjustment
Shares, upon payment of the Purchase Price then in effect, (A) (to
the extent available) Common Stock and then, (B) (to the extent
available) such number of one one-hundredths of a share of Preferred
Stock as are then equivalent in value to the value of the Adjustment
Shares, and then, if necessary, (C) other equity or debt securities
of the Company, cash or other assets, a reduction in the Purchase
Price or any combination of the foregoing, having an aggregate value
(based upon the advice of a nationally recognized investment banking
firm) equal to the value of the Adjustment Shares; provided that (x)
the Company may, and (y) if the Company shall not have made adequate
provision as required above to deliver value within 30 days following
the first occurrence of a Section 11(a)(ii) Event (the "Substitution
Period"), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of
the Purchase Price, (1) (to the extent available) Common Stock and
then (2) (to the extent available) one-hundredths of a share of
Preferred Stock and then, if necessary, (3) other equity or debt
securities
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of the Company, cash or other assets or any combination of the
foregoing, having an aggregate value (based upon the advice of a
nationally recognized investment banking firm) equal to the excess of
the value of the Adjustment Shares over the Purchase Price. To the
extent that the Company determines that some action is to be taken
pursuant to the preceding sentence, the Company (X) shall provide,
subject to Section 7(d), that such action shall apply uniformly to
all outstanding Rights and (Y) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to
decide the appropriate form and value of any consideration to be
delivered as referred to in the preceding sentence. If any such
suspension occurs, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Stock shall be the current market
price per share of Common Stock (as determined pursuant to Section
11(d)) on the date of the first occurrence of a Section 11(a)(ii)
Event; any common stock equivalent shall be deemed to have the same
value as the Common Stock on such date; and the value of other
securities or assets shall be determined pursuant to Section
11(d)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
to subscribe for or purchase (for a period expiring within 45 calendar days
after such record date) Preferred Stock (or securities having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into or exercisable for Preferred
Stock (or equivalent preferred stock) at a price per share of Preferred Stock
(or equivalent preferred stock) (in each case, taking account of any
conversion or exercise price) less than the current market price (as
determined pursuant to Section 11(d)) per share of Preferred Stock on such
record date, the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such date by a fraction, the numerator of which shall be the number of shares
of Preferred Stock outstanding on such record date, plus the number of shares
of Preferred Stock which the aggregate price (taking account of any conversion
or exercise price) of the total number of shares of Preferred Stock (and/or
equivalent preferred stock) so to be offered would purchase at such current
market price and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date plus the number of additional
shares of Preferred Stock (and/or equivalent preferred stock) so to be
offered. In case such subscription price may be paid by delivery of
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board,
whose determination shall be described
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in a statement filed with the Rights Agent and shall be conclusive for all
purposes. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed, and if such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be
in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger involving the
Company) of evidences of indebtedness, equity securities other than Preferred
Stock, assets (other than a regular periodic cash dividend out of the earnings
or retained earnings of the Company) or rights, options or warrants (excluding
those referred to in Section 11(b)), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the current market price (as determined pursuant to Section
11(d)) per share of Preferred Stock on such record date, less the value (as
determined pursuant to Section 11(d)(iii)) of such evidences of indebtedness,
equity securities, assets, rights, options or warrants so to be distributed
with respect to one share of Preferred Stock and the denominator of which
shall be such current market price per share of Preferred Stock. Such
adjustment shall be made successively whenever such a record date is fixed,
and if such distribution is not so made, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
(d) (i) For the purpose of any computation hereunder other than
computations made pursuant to Section 11(a)(iii) or 14, the "current market
price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock for the 30
consecutive Trading Days immediately prior to such date; for purposes of
computations made pursuant to Section 11(a)(iii), the "current market price"
per share of Common Stock on any date shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the 10 consecutive
Trading Days immediately following such date; and for purposes of computations
made pursuant to Section 14, the "current market price" per share of Common
Stock for any Trading Day shall be deemed to be the closing price per share of
Common Stock for such Trading Day; provided that if the current market price
per share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities exercisable for or convertible into shares of such Common Stock
(other than the Rights), or (B) any
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subdivision, combination or reclassification of such Common Stock, and prior
to the expiration of the requisite 30 Trading Day or 10 Trading Day period, as
set forth above, after the ex-dividend date for such dividend or distribution,
or the record date for such subdivision, combination or reclassification,
then, and in each such case, the "current market price" shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the shares of Common Stock are not listed
or admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then
in use or, if on any such date the shares of Common Stock are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board. If on any such date no market maker is making a market
in the Common Stock, the fair value of such shares on such date as determined
in good faith by the Board (or, if at the time of such determination there is
an Acquiring Person, by a nationally recognized investment banking firm) shall
be used. If the Common Stock is not publicly held or not so listed or traded,
the "current market price" per share means the fair value per share as
determined in good faith by the Board, or, if at the time of such
determination there is an Acquiring Person, by a nationally recognized
investment banking firm, which determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current
market price" per share of Preferred Stock shall be determined in the
same manner as set forth above for the Common Stock in Section
11(d)(i) (other than the last sentence thereof). If the current
market price per share of Preferred Stock cannot be determined in
such manner, the "current market price" per share of Preferred Stock
shall be conclusively deemed to be an amount equal to 100 (as such
number may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the Common
Stock occurring after the date of this Agreement) multiplied by the
current market price per share of Common Stock (as determined
pursuant to Section 11(d)(i) (other than the last sentence thereof)).
If neither the Common Stock nor the Preferred Stock is publicly
17
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held or so listed or traded, the "current market price" per share of
the Preferred Stock shall be determined in the same manner as set
forth in the last sentence of Section 11(d)(i). For all purposes of
this Agreement, the "current market price" of one one-hundredth of a
share of Preferred Stock shall be equal to the "current market price"
of one share of Preferred Stock divided by 100.
(iii) For the purpose of any computation hereunder, the value of any
securities or assets other than Common Stock or Preferred Stock shall
be the fair value as determined in good faith by the Board, or, if at
the time of such determination there is an Acquiring Person, by a
nationally recognized investment banking firm which determination
shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require
an increase or decrease of at least 1% in the Purchase Price; provided that
any adjustments which by reason of this Section 11(e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the
nearest cent or to the nearest ten-thousandth of a share of Common Stock or
other share or one-millionth of a share of Preferred Stock, as the case may
be.
(f) If at any time, as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a), the holder of any Right shall be entitled
to receive upon exercise of such Right any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Section 11(a), 11(b), 11(c), 11(e), 11(g), 11(h), 11(i), 11(j), 11(k) and
11(m), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made hereunder shall evidence the right to purchase, at the
Purchase Price then in effect, the then applicable number of one
one-hundredths of a share of Preferred Stock and other capital stock of the
Company issuable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
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(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Section 11(b) and 11(c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of one
one-hundredths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one
one-hundredths of a share for which a Right was exercisable immediately prior
to this adjustment by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of one one-hundredths of a share of Preferred Stock issuable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a share of Preferred Stock for which such Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Right Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date
Right Certificates evidencing, subject to Section 14, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at
the option of the Company, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record
of Right Certificates on the record date specified in the public announcement.
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(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price per one
one-hundredth of a share and the number of shares which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the par value, if any, of the number of one
one-hundredths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-hundredths of a
share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock or other
capital stock of the Company, if any, issuable upon such exercise over and
above the number of one one-hundredths of a share of Preferred Stock or other
capital stock of the Company, if any, issuable upon such exercise on the basis
of the Purchase Price in effect prior to such adjustment; provided that the
Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it, in its sole discretion, shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any Preferred Stock at less than the current market price,
issuance wholly for cash of Preferred Stock or securities which by their terms
are convertible into or exercisable for Preferred Stock, stock dividends or
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to the holders of its Preferred Stock, shall not
be taxable to such stockholders.
(n) The Company covenants and agrees that it will not at any time
after the Distribution Date (i) consolidate, merge or otherwise combine with
or (ii) sell or otherwise transfer (and/or permit any of its Subsidiaries to
sell or otherwise transfer), in one transaction or a series of related
transactions, assets or earning
20
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power aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries, taken as a whole, to any other Person or Persons if (x)
at the time of or immediately after such consolidation, merger, combination or
sale there are any rights, warrants or other instruments or securities
outstanding or any agreements or arrangements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger, combination or sale, the stockholders of a
Person who constitutes, or would constitute, the "Principal Party" for the
purposes of Section 13 shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that after the Distribution
Date, it will not, except as permitted by Sections 23, 24 and 27, take (or
permit any Subsidiary to take) any action if at the time such action is taken
it is reasonably foreseeable that such action will substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Notwithstanding anything in this Agreement to the contrary, if
at any time after the date hereof and prior to the Distribution Date the
Company shall (i) pay a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock
into a larger number of shares or (iii) combine the outstanding Common Stock
into a smaller number of shares, the number of Rights associated with each
share of Common Stock then outstanding, or issued or delivered thereafter as
contemplated by Section 3(c), shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Common Stock immediately prior
to such event by a fraction the numerator of which shall be the total number
of shares of Common Stock outstanding immediately prior to the occurrence of
the event and the denominator of which shall be the total number of shares of
Common Stock outstanding immediately following the occurrence of such event.
SECTION 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Sections 11 and 13, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b)
promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in the manner set forth in Section 26. The Rights Agent shall be
fully protected in relying on any
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such certificate and on any adjustment therein contained and shall not be
deemed to have knowledge of such adjustment unless and until it shall have
received such certificate.
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. (a) If, following the occurrence of a Section 11(a)(ii) Event,
directly or indirectly,
(x) the Company shall consolidate with, merge into, or otherwise
combine with, any other Person, and the Company shall not be the
continuing or surviving corporation of such consolidation, merger or
combination,
(y) any Person shall merge into, or otherwise combine with, the
Company, and the Company shall be the continuing or surviving
corporation of such merger or combination and, in connection with
such merger or combination, all or part of the outstanding shares of
Common Stock shall be changed into or exchanged for other stock or
securities of the Company or any other Person, cash or any other
property, or
(z) the Company and/or one or more of its Subsidiaries shall sell
or otherwise transfer, in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries,
taken as a whole, to any other Person or Persons,
then, and in each such case, proper provision shall promptly be made so that
(i) each holder of a Right shall thereafter be entitled to receive,
upon exercise thereof at the Purchase Price in effect immediately
prior to the first occurrence of a Section 11(a)(ii) Event, such
number of duly authorized, validly issued, fully paid and
nonassessable shares of freely tradeable Common Stock of the
Principal Party (as hereinafter defined), not subject to any rights
of call or first refusal, liens, encumbrances or other claims, as
shall be equal to the result obtained by dividing
(A) the product obtained by multiplying the Purchase
Price in effect immediately prior to the first occurrence of
a Section 11(a)(ii) Event by the number of one
one-hundredths of a share of Preferred Stock for which a
Right was exercisable immediately prior to such first
occurrence (such product being thereafter referred to as the
"Purchase Price" for each Right and for all purposes of this
Agreement) by
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(B) 50% of the current market price (determined
pursuant to Section 11(d)(i)) per share of the Common Stock
of such Principal Party on the date of consummation of such
consolidation, merger, combination, sale or transfer;
provided, however, that the Purchase Price (as so adjusted pursuant
to the foregoing clause (i)(A)) and the number of shares of Common
Stock of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance
with Section 11(f) to reflect any events occurring in respect of the
Common Stock of such Principal Party after the occurrence of such
consolidation, merger, sale or transfer;
(ii) the Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, combination, sale or
transfer, all the obligations and duties of the Company pursuant to
this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions
of Section 11 shall apply only to such Principal Party following the
first occurrence of a Section 13 Event; and
(iv) such Principal Party shall take such steps (including the
authorization and reservation of a sufficient number of shares of its
Common Stock to permit exercise of all outstanding Rights in
accordance with this Section 13(a)) in connection with the
consummation of any such transaction as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to the shares of its Common Stock
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" means
(i) in the case of any transaction described in Section 13(a)(x)
or (y), the Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted in such merger,
consolidation or combination, and if no securities are so issued, the
Person that survives or results from such merger, consolidation or
combination; and
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(ii) in the case of any transaction described in Section 13(a)(z),
the Person that is the party receiving the greatest portion of the
assets or earning power transferred pursuant to such transaction or
transactions;
provided that in any such case, (A) if the Common Stock of such Person is not
at such time and has not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, and such Person is a direct
or indirect Subsidiary of another Person the Common Stock of which is and has
been so registered, "Principal Party" shall refer to such other Person; and
(B) in case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
combination, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which are not
outstanding or otherwise reserved for issuance to permit the exercise in full
of the Rights in accordance with this Section 13 and unless prior thereto the
Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
Section 13(a) and 13(b) and providing that, as soon as practicable after the
date of any consolidation, merger, combination, sale or transfer mentioned in
Section 13(a), the Principal Party will:
(i) prepare and file a registration statement under the
Securities Act with respect to the securities issuable upon exercise
of the Rights, and will use its best efforts to cause such
registration statement (A) to become effective as soon as practicable
after such filing and (B) to remain effective (with a prospectus at
all times meeting the requirements of the Securities Act) until the
Expiration Date; and
(ii) deliver to holders of the Rights historical financial s
tatements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
(d) In no event shall the Rights Agent have any liability in respect
of any such Principal Party transactions, including, without limitation, the
propriety thereof. The Rights Agent may rely and be fully protected in relying
upon a certificate of the Company stating that the provisions of this Section
13 have been fulfilled. Notwithstanding anything in this Agreement to the
contrary, the prior
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written consent of the Rights Agent must be obtained in connection with any
supplemental agreement which alters the rights or duties of the Rights Agent.
SECTION 14. Fractional Rights and Fractional Shares. (a) The Company
shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p), or to distribute Right
Certificates which evidence fractional Rights. In lieu of any such fractional
Rights, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the current market
price of a whole Right. For purposes of this Section 14(a), the current market
price of a whole Right shall be the closing price of a Right for the Trading
Day immediately prior to the date on which such fractional Rights would
otherwise have been issuable. The closing price of a Right for any day shall
be the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the Rights are not listed or admitted to trading on
the New York Stock Exchange, on the principal national securities exchange on
which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price, or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights
selected by the Board. If on any such date no such market maker is making a
market in the Rights, the current market price of the Rights on such date
shall be as determined in good faith by the Board, or, if at the time of such
determination there is an Acquiring Person, by a nationally recognized
investment banking firm.
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are multiples of one
one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are multiples of one one-hundredth of a share of
Preferred Stock). In lieu of any such fractional shares of Preferred Stock,
the Company shall pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market price of one one-hundredth of a share
of Preferred Stock. For purposes of this Section 14(b), the current market
price of one one-hundredth of a share of Preferred Stock shall be one
one-hundredth of the closing price of a share of Preferred Stock (as
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<PAGE>
determined pursuant to Section 11(d)) for the Trading Day immediately prior to
the date of such exercise.
(c) Following the occurrence of any Triggering Event or upon any
exchange pursuant to Section 24, the Company shall not be required to issue
fractions of shares of Common Stock upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Common Stock. In
lieu of fractional shares of Common Stock, the Company shall pay to the
registered holders of Right Certificates at the time such Rights are exercised
or exchanged as herein provided an amount in cash equal to the same fraction
of the current market price of a share of Common Stock. For purposes of this
Section 14(c), the current market price of a share of Common Stock shall be
the closing price of a share of Common Stock (as determined pursuant to
Section 11(d)(i)) for the Trading Day immediately prior to the date of such
exercise or exchange.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares
upon exercise of a Right except as permitted by this Section 14.
SECTION 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing Common Stock); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of any certificate
representing Common Stock), without the consent of the Rights Agent or of the
holder of any other Right Certificate (or, prior to the Distribution Date, of
any certificate representing Common Stock), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and will be entitled
to specific performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of any Person
subject to, this Agreement.
SECTION 16. Agreement of Right Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
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<PAGE>
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent
designated for such purposes, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate forms and
certificates fully executed;
(c) subject to Sections 6 and 7, the Company and the Rights Agent
may deem and treat the Person in whose name a Right Certificate (or,
prior to the Distribution Date, a certificate representing shares of
Common Stock) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Right Certificate or the certificate representing
shares of Common Stock made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and neither the Company
nor the Rights Agent, subject to the last sentence of Section 7(d),
shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to
perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling
issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any
governmental authority prohibiting or otherwise restraining
performance of such obligation; provided that the Company must use
its best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
SECTION 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of capital
stock which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate,
as such, any of the rights of a stockholder of the Company or any right to
vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
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SECTION 18. Concerning the Rights Agent. (a) The Company agrees to
pay to the Rights Agent such compensation as shall be agreed to in writing
between the Company and the Rights Agent for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and disbursements and other disbursements
incurred in the execution or administration of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without gross negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights Agent
in connection with the administration of this Agreement or the exercise or
performance of its duties hereunder, including without limitation the costs
and expenses of defending against any claim (whether asserted by the Company,
a holder of Rights, or any other Person) of liability including reasonable
attorney's fees and expenses. The provisions of this Section 18(a) shall
survive the expiration of the Rights and the termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with the administration of this Agreement or the exercise or performance of
its duties hereunder in reliance upon any Right Certificate or certificate for
Common Stock or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
instruction, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed and executed by the
proper Person or Persons, and, where necessary, to be acknowledged.
SECTION 19. Merger or Consolidation or Change of Name of Rights
Agents. (a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust or stock
transfer business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21. In case at the time
such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of a
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may
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<PAGE>
countersign such Right Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall
not have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
SECTION 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations expressly imposed by this Agreement, and no implied
duties or obligations shall be read into this Agreement against the Rights
Agent, upon the following terms and conditions, by all of which the Company
and the holders of Right Certificates, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel of its
selection (who may be legal counsel for the Company), and the opinion
of such counsel shall be full and complete authorization and
protection to the Rights Agent as to any action taken or omitted by
it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any
"Acquiring Person" and the determination of "current market price")
be proved or established by the Company prior to taking, suffering or
omitting to take any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed)
may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President or any
Vice President and by the Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary of the Company and delivered to
the Rights Agent; and such certificate shall be full authorization to
the Rights Agent for any action taken, suffered or omitted in good
faith by it under the provisions of this Agreement in reliance upon
such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.
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(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in
the Right Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements and recitals are
and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent)
or in respect of the validity or execution of any Right Certificate
(except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained
in this Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(d)) or any
adjustment in the terms of the Rights (including the manner, method
or amount thereof) provided for in Sections 3, 11, 13, 23 or 24, or
the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after the Rights Agent's actual
notice of any such adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization
or reservation of any shares of Common Stock or Preferred Stock to be
issued pursuant to this Agreement or any Right Certificate or as to
whether any shares of Common Stock or Preferred Stock will, when
issued, be duly authorized, validly issued, fully paid and
nonassessable, nor shall the Rights Agent be responsible for the
legality of the terms hereof in its capacity as an administrative
agent.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances
as may reasonably be required by the Rights Agent for the carrying
out or performing by the Rights Agent of the provisions of this
Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder
from the Chairman of the Board, the President or any Vice President
or the Secretary or any Assistant Secretary or the Treasurer or any
Assistant Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall
not be liable for any action taken, suffered or omitted to be taken
by it in good faith in
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accordance with instructions of any such officer or for any delay in
acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not the Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act, default, neglect
or misconduct of any such attorneys or agents or for any loss to the
Company or to any holders of Rights resulting from any such act,
default, neglect or misconduct, provided that reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for
believing that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to
the form of assignment or form of election to purchase, as the cases
may be, has either not been completed or indicates an affirmative
response to clause 1 or 2 thereof, the Rights Agent shall not take
any further action with respect to such requested exercise or
transfer without first consulting with the Company.
(l) In addition to the foregoing, the Rights Agent shall be
protected and shall incur no liability for, or in respect of, any
action taken or omitted by it in connection with its administration
of this Agreement if such acts or omissions are in reliance upon (i)
the proper execution of the certification concerning beneficial
ownership appended to the form of assignment and the form of election
to purchase attached hereto unless the Rights Agent shall have actual
knowledge that, as executed, such
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certification is untrue, or (ii) the non-execution of such
certification including, without limitation, any refusal to honor any
otherwise permissible assignment or election by reason of such
non-execution.
(m) The Company agrees to give the Rights Agent prompt written
notice of any event or ownership which would prohibit the exercise or
transfer of the Right Certificates.
SECTION 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights
Agent. If the Company shall fail to make such appointment within a period of
30 days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Company), then the
Rights Agent or any registered holder of any Right Certificate may, at the
expense of the Company, apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of any
state of the United States, in good standing, having a principal office in the
State of New York, which is authorized under such laws to exercise stock
transfer or corporate trust powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (b) an Affiliate of a corporation described in clause 21(a).
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice thereof
in writing with the predecessor Rights Agent and each transfer agent of the
Common Stock and the Preferred Stock, and, subsequent to the Distribution
Date, mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21, or
any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
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SECTION 22. Issuance of New Right Certificates. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by the Board to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares of stock
issuable upon exercise of the Rights made in accordance with the provisions of
this Agreement.
SECTION 23. Redemption. (a) The Board may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth day after the
Stock Acquisition Date (or such later date as a majority of the Board may
designate prior to such time as the Rights are no longer redeemable) and (ii)
the Final Expiration Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $.01 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"); provided that after
any Person has become an Acquiring Person, any redemption of the Rights shall
be effective only if such redemption shall have been approved by a majority of
the Board. Notwithstanding anything in this Agreement to the contrary, the
Rights shall not be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Company's right of redemption hereunder
has expired. The redemption of the Rights may be made effective at such time,
on such basis and with such conditions as the Board in its sole discretion may
establish. The Redemption Price shall be payable, at the option of the
Company, in cash, shares of Common Stock, or such other form of consideration
as the Board shall determine.
(b) Immediately upon the action of the Board electing to redeem the
Rights (or at such later time as the Board may establish for the effectiveness
of such redemption), and without any further action and without any notice,
the right to exercise the Rights will terminate and thereafter the only right
of the holders of Rights shall be to receive the Redemption Price for each
Right so held. The Company shall promptly thereafter give notice of such
redemption to the Rights Agent and the holders of the Rights in the manner set
forth in Section 26; provided that the failure to give, or any defect in, such
notice shall not affect the validity of such redemption. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
SECTION 24. Exchange. (a) At any time after the occurrence of a
Section 11(a)(ii) Event, the Board may, at its option, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to Section 7(d)) for shares of Common Stock at
an
33
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exchange ratio of one share of Common Stock per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such exchange ratio being hereinafter referred to as
the "Exchange Ratio"). Notwithstanding the foregoing, the Board shall not be
empowered to effect such exchange at any time after an Acquiring Person
together with all Affiliates and Associates of such Acquiring Person, becomes
the Beneficial Owner of 50% or more of the shares of Common Stock then
outstanding. From and after the occurrence of a Section 13 Event, any Rights
that theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be exercisable only in accordance with Section 13 and may not be
exchanged pursuant to this Section 24(a). The exchange of the Rights by the
Board may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish.
(b) Immediately upon the effectiveness of the action of the Board
electing to exchange any Rights pursuant to Section 24(a) and without any
further action and without any notice, the right to exercise such Rights will
terminate and thereafter the only right of a holder of such Rights shall be to
receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Company shall
promptly thereafter give notice of such exchange to the Rights Agent and the
holders of the Rights to be exchanged in the manner set forth in Section 26;
provided that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the
exchange of the shares of Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to Section 7(d)) held by
each holder of Rights.
(c) The Company may at its option substitute, and, in the event that
there shall not be sufficient shares of Common Stock issued but not
outstanding or authorized but unissued to permit the exchange of Rights for
Common Stock ordered in accordance with Section 24(a), the Company shall
substitute to the extent of such insufficiency, for each share of Common Stock
that would otherwise be issuable upon exchange of a Right, a number of one-one
hundredths of a share of Preferred Stock such that the current market price
(determined pursuant to Section 11(d)) of such number of one-one hundredths of
a share of Preferred Stock is equal to the current market price (determined
pursuant to Section 11(d)) of one share of Common Stock as of the date of such
exchange.
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SECTION 25. Notice of Proposed Actions. (a) In case the Company shall
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company),
or (ii) to offer to the holders of its Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision or combination of outstanding
shares of Preferred Stock) or (iv) to effect any consolidation or merger with
any other Person, or to effect and/or to permit one or more of its
Subsidiaries to effect any sale or other transfer, in one transaction or a
series of related transactions, of assets or earning power aggregating more
than 50% of the assets or earning power of the Company and its Subsidiaries,
taken as a whole, to any other Person or Persons, or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Right and to the Rights
Agent, to the extent feasible and in accordance with Section 26, a notice of
such proposed action, which shall specify the record date for the purposes of
any such dividend, distribution or offering of rights or warrants, or the date
on which any such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of Preferred Stock, if any such date is
to be fixed, and such notice shall be so given in the case of any action
covered by clause 25(a)(i) or 25(a)(ii) above at least 20 days prior to the
record date for determining holders of the Preferred Stock entitled to
participate in such dividend, distribution or offering, and in the case of any
such other action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of
Preferred Stock, whichever shall be the earlier. The failure to give notice
required by this Section or any defect therein shall not affect the legality
or validity of the action taken by the Company or the vote upon any such
action.
(b) Notwithstanding anything in this Agreement to the contrary,
prior to the Distribution Date a public filing by the Company with the
Securities and Exchange Commission shall constitute sufficient notice to the
holders of securities of the Company, including the Rights, for purposes of
this Agreement and no other notice need be given to such holders.
(c) If a Triggering Event shall occur, then, in any such case, (i)
the Company shall as soon as practicable thereafter give to each holder of a
Right and to the Rights Agent, in accordance with Section 26, a notice of the
occurrence of such event, which shall specify the event and the consequences
of the event to holders of Rights under Section 11(a)(ii) or 13, as the case
may be, and (ii) all
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references in Section 25(a) to Preferred Stock shall be deemed thereafter to
refer to Common Stock or other capital stock, as the case may be.
SECTION 26. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right to or on
the Company shall be sufficiently given or made if sent by first-class mail
(postage prepaid) to the address of the Company indicated on the signature
page hereof or such other address as the Company shall specify in writing to
the Rights Agent. Subject to the provisions of Section 21, any notice or
demand authorized by this Agreement to be given or made by the Company or by
the holder of any Right to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail (postage prepaid) to the address of the
Rights Agent indicated on the signature page hereof or such other address as
the Rights Agent shall specify in writing to the Company. Notices or demands
authorized by this Agreement to be given or made by the Company or the Rights
Agent to the holder of any Right Certificate (or, prior to the Distribution
Date, to the holder of any certificate representing shares of Common Stock)
shall be sufficiently given or made if sent by first-class mail (postage
prepaid) to the address of such holder shown on the registry books of the
Company.
SECTION 27. Supplements and Amendments. For so long as the Rights are
redeemable, the Company may, and the Rights Agent shall if the Company so
directs, supplement or amend any provision of this Agreement in any respect
without the approval of any holders of certificates representing shares of
Common Stock. At any time when the Rights are no longer redeemable, the
Company may, and the Rights Agent shall if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights;
provided, however, that no such supplement or amendment may (a) adversely
affect the interests of the holders of Rights as such (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person), (b) cause this
Agreement again to become amendable other than in accordance with this
sentence, or (c) cause the Rights again to become redeemable. Notwithstanding
the foregoing, after any Person has become an Acquiring Person, any supplement
or amendment shall be effective only if such supplement or amendment has been
approved by a majority of the Board. Upon the delivery of a certificate from
an appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section, the
Rights Agent shall execute such supplement or amendment. Notwithstanding any
other provision hereof, the Rights Agent's consent must be obtained regarding
any amendment or supplement pursuant to this Section 27 which alters the
Rights Agent's rights or duties.
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SECTION 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 29. Determinations and Actions by the Board, etc. For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common
Stock of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) under the Exchange Act as in
effect on the date of this Agreement. The Board shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including the
right and power to (i) interpret the provisions of this Agreement and (ii)
make all determinations deemed necessary or advisable for the administration
of this Agreement (including a determination to redeem or exchange or not to
redeem or exchange the Rights or to amend the Agreement).
SECTION 30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the certificates representing the shares of Common Stock)
any legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the certificates representing the shares of Common
Stock).
SECTION 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
SECTION 32. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State, except that the rights and
obligations of the Rights Agent shall be governed by the laws of the State of
New York.
SECTION 33. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
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deemed to be an original, and all such counterparts shall together constitute
one and the same instrument.
SECTION 34. Descriptive Headings. The captions herein are included for
convenience of reference only, do not constitute a part of this Agreement and
shall be ignored in the construction and interpretation hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
R.J. REYNOLDS TOBACCO HOLDINGS, INC.
By: /s/ William L. Rosoff
-------------------------------
Name: William L. Rosoff
Title: Senior Vice President and
General Counsel
1301 Avenue of the Americas
New York, NY 10019-6013
THE BANK OF NEW YORK, as Rights Agent
By: /s/ Christopher Stevenson
-------------------------------
Name: Christopher Stevenson
Title: Vice President
101 Barclay Street, Floor 12W
New York, NY 10286
Attention: Stock Transfer Administration
EXHIBIT 10.1
TAX SHARING AGREEMENT
dated as of June 14, 1999
among
RJR NABISCO HOLDINGS CORP.
(to be renamed "Nabisco Group Holdings Corp.")
R.J. REYNOLDS TOBACCO HOLDINGS, INC.
(formerly named "RJR Nabisco, Inc.")
NABISCO HOLDINGS CORP.
and
R. J. REYNOLDS TOBACCO COMPANY
<PAGE>
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT dated as of June 14, 1999 among RJR Nabisco
Holdings Corp. (to be renamed "Nabisco Group Holdings Corp."), a Delaware
corporation (together with its successors, "Holdings"), R.J. Reynolds Tobacco
Holdings, Inc. (formerly named "RJR Nabisco, Inc."), a Delaware corporation
(together with its successors, "RJRN"), Nabisco Holdings Corp., a Delaware
corporation (together with its successors, "Nabisco"), and R. J. Reynolds
Tobacco Company, a New Jersey corporation (together with its successors,
"RJRT").
RECITALS
WHEREAS, pursuant to the tax laws of various jurisdictions, Holdings,
certain members of the RJRN Tax Group and certain members of the Nabisco Tax
Group, as defined below, file certain tax returns on an affiliated,
consolidated, combined, unitary or other group basis (including as permitted by
Section 1501 of the Internal Revenue Code of 1986, as amended (the "Code"))
(each such group, a "Consolidated Group");
WHEREAS, the Board of Directors of Holdings has determined that it is
in the best interests of Holdings and its stockholders to cause all of the
outstanding shares of the Class B common stock of Nabisco to be directly held by
Holdings (the "Internal Distribution") and to distribute all of the outstanding
shares of the common stock of RJRN to the holders of the common stock of
Holdings on a pro rata basis (the "Distribution");
WHEREAS, in this Agreement, the parties have set forth certain
representations and covenants that support the treatment of each of the
Distribution and the Internal Distribution as a transaction described in Section
355(a)(1) of the Code;
WHEREAS, in this Agreement, the parties have set forth the rights and
obligations of Nabisco and the other members of the Nabisco Tax Group, RJRN and
the other members of the RJRN Tax Group, and Holdings with respect to the
handling and allocation of certain federal, state, local and other taxes
incurred in Taxable periods beginning prior to the Distribution Date, and
various other tax matters; and
<PAGE>
WHEREAS, Holdings and the Nabisco Tax Group will continue to file
certain tax returns on a Consolidated Group basis following the Distribution,
and, in this Agreement, have set forth their respective rights and obligations
with respect to the handling and allocation of certain federal, state, local and
other taxes incurred in Taxable periods prior and subsequent to the
Distribution;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) As used herein, the following terms have
the following meanings:
"After-Tax Amount" means an additional amount (taking into account any
taxation of such additional amount) necessary to reflect the hypothetical tax
consequences of the receipt or accrual of any payment, using the highest tax
rate (or rates, in the case of an item that affects more than one tax)
applicable to the recipient of such payment for the relevant taxable period,
reflecting for example, the effect of any deductions available for interest paid
or accrued and for appropriate taxes such as State Taxes.
"Business Day" means any day other than a Saturday, a Sunday or one on
which banks are authorized or required by law to close in New York, New York.
"Combined State Taxes" mean any State Tax, the return for which is
filed on an affiliated, consolidated, combined or unitary basis by (i) a group
that includes Holdings and at least one member of the Nabisco Tax Group, or (ii)
a group that includes at least one member of the RJRN Tax Group and at least one
corporation among Holdings and the members of the Nabisco Tax Group.
"Deconsolidation Date" means the date of any Nabisco Deconsolidation.
"Del Monte State Tax" means any State Taxes for which the Nabisco Tax
Group may be liable by reason of an assertion by a Taxing Authority or a Final
Determination that Del Monte Corporation and at least one member of the Nabisco
Tax Group are part of an affiliated, consolidated, combined or unitary group.
2
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"Designated RJRN Affiliate" means RJRT or the member of the RJRN Tax
Group that has been designated as such by RJRN.
"Distribution Agreement" means the Distribution Agreement dated as of
May 12, 1999 among Holdings, RJRN and RJRT.
"Distribution Date" means the Business Day on which the Distribution is
effected.
"Effective Realization" (and the correlative terms, "Effectively
Realized" and "Effectively Realizes") means, with respect to a tax saving, tax
benefit or tax attribute, the earliest to occur of (i) the receipt by any of
Holdings, a member of the Nabisco Tax Group or a member of the RJRN Tax Group of
cash from a Taxing Authority reflecting such tax saving, tax benefit or tax
attribute, or (ii) the application of such tax saving, tax benefit or tax
attribute to reduce (A) the tax liability on a Return of any of such
corporations or of any affiliated, consolidated, combined or unitary group of
which any of such corporations is a member, or (B) any other outstanding tax
liability of any of such corporations or of such group; provided that any
reference in this definition to tax shall include, without limitation, a
reference to a recovery of statutory interest.
"Federal Employment Tax" means the Federal Insurance Contributions Act,
the Federal Unemployment Tax Act and any other federal tax that applies or that
shall apply to a corporation in connection with the payment or provision of
salaries, or the provision of benefits and other remuneration, to employees.
"Federal Tax" means any tax imposed under Subtitle A of the Code.
"Final Determination" means (i) with respect to Federal Taxes, (A) a
"determination" as defined in Section 1313(a) of the Code, or (B) the acceptance
by or on behalf of the IRS of Form 870-AD (or any successor form thereto) as a
final resolution of Tax liability for any Taxable period, except as to items in
respect of which the right of the taxpayer to file a claim for refund or the
right of the IRS to assert a further deficiency has been reserved; (ii) with
respect to Taxes other than Federal Taxes, any final determination of liability
in respect of a Tax that, under applicable law, is not subject to further
appeal, review or modification, through Tax Proceedings or otherwise (including,
without limitation, the expiration of a statute of limitations or a period for
the filing of claims for refunds, amended returns or appeals from adverse
determinations); or (iii) the payment of tax by the corporation among Holdings,
the members of the Nabisco Tax Group and the members of the RJRN Tax Group that
is responsible for payment of such tax under applicable law with respect to any
item that has been disallowed or adjusted by a Taxing Authority and as to which
Holdings has made
3
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a determination that no recoupment would be sought. For the avoidance of doubt,
any determination made by Holdings pursuant to clause (iii) of this definition
shall not preclude Holdings from reversing or otherwise modifying such
determination.
"Holdings Consolidated Group" means (i) Holdings and each direct and
indirect corporate subsidiary (including predecessors and successors thereto)
that is eligible to join with Holdings (A) with respect to Federal Taxes, in the
filing of a consolidated Federal Tax return, (B) with respect to State Taxes, in
the filing of an affiliated, consolidated, combined or unitary State Tax return,
or (C) with respect to other Taxes, in the filing of a Tax return as an
affiliated, consolidated, combined or unitary group, or (ii) the corporations
that are members of a group that (A) files a Tax return as an affiliated,
consolidated, combined or unitary group and (B) includes at least one member of
the Nabisco Tax Group and one member of the RJRN Tax Group. A reference to the
Holdings Consolidated Group in this Agreement shall include a reference to any
affiliated, consolidated, combined or unitary group of which RJRN was the parent
during any taxable period (or portion thereof) ending on or before April 29,
1989.
"Intercompany Interest Rate" means the rate, from time to time, that is
equal to the London Interbank Offered Rate for dollar deposits.
"Intercompany Services Agreement" means the Intercompany Services
Agreement to be dated as of the Distribution Date among Holdings, Nabisco and
RJRN, substantially in the form of Exhibit C to the Distribution Agreement.
"Internal Distribution Date" means May 18, 1999.
"International Tobacco Purchase Agreement" means the Purchase Agreement
dated as of March 9, 1999 among Japan Tobacco Inc., RJRT and RJRN.
"International Tobacco Sale" means (i) the sale to Japan Tobacco Inc.
pursuant to the International Tobacco Purchase Agreement of the capital stock of
the companies listed in Exhibit D to such agreement and of certain other assets,
and (ii) the restructuring transactions and other transactions undertaken in
preparation for such sale.
"IRS" means the Internal Revenue Service.
"Nabisco Combined State Tax Liability" means, with respect to any
taxable period and any jurisdiction, an amount of Combined State Taxes
determined in accordance with the principles set forth in the definition of
Nabisco
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Federal Tax Liability and comparable provisions under applicable law.
"Nabisco Deconsolidation" means any event pursuant to which Nabisco
ceases to be a subsidiary includible in a Consolidated Group filing a
consolidated Federal Tax return of which Holdings is a member.
"Nabisco Federal Tax Liability" means, with respect to any taxable
period, the sum of the Nabisco Tax Group's Federal Tax liability and any
interest, penalties and other additions to such taxes for such taxable period,
computed as if the Nabisco Tax Group were not part of the Holdings Consolidated
Group, but rather were a separate affiliated group of corporations filing a
consolidated Federal Tax return pursuant to Section 1501 of the Code; provided,
however, that transactions with members of the RJRN Tax Group or Holdings shall
be reflected in accordance with applicable provisions of the consolidated return
regulations governing intercompany transactions. Without limiting the generality
of the foregoing, such computation shall be made (i) without regard to the
income, deductions (including, without limitation, net operating loss and
capital loss deductions) and credits in any taxable period of any member of the
Holdings Consolidated Group that is not a member of the Nabisco Tax Group, (ii)
by taking account of any Tax Asset of the Nabisco Tax Group in accordance with
the principles of Section 3.05(d), (iii) with regard to tax carryforwards and
tax carrybacks (including, without limitation, carryforwards and carrybacks of
net operating losses or capital losses) of any member of the Nabisco Tax Group,
but without regard to any carryforwards from a taxable year or portion thereof
ending on or before December 31, 1994 and arising solely due to creating the
Nabisco Tax Group as if it were not part of the Holdings Consolidated Group,
(iv) as though the highest rate of tax specified in Section 11(b) of the Code
were the only rates set forth in that subsection, and (v) by taking account of
the positions, elections and accounting methods reflected in the consolidated
Federal Tax returns, as amended and as finally adjusted, of the Holdings
Consolidated Group.
"Nabisco Tax Group" means, at any time, Nabisco and any direct or
indirect corporate subsidiaries (including predecessors and successors thereto)
of Nabisco that would be eligible, if Nabisco were not a member of a group that
included Holdings or RJRN, to join with Nabisco, (i) with respect to Federal
Taxes, in the filing of a consolidated Federal Tax return, (ii) with respect to
State Taxes, in the filing of an affiliated, consolidated, combined or unitary
State Tax return, or (iii) with respect to other Taxes, in the filing of a Tax
return as an affiliated, consolidated, combined or unitary group.
"Name Change Merger" means such term as it is defined in the
Distribution Agreement.
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"1999 Pre-Distribution Period" means the taxable period from January 1,
1999 through the Distribution Date.
"Post-Deconsolidation Period" means any taxable period (or portion
thereof) beginning after the close of business on the Deconsolidation Date.
"Post-Distribution Period" means any taxable period (or portion
thereof) beginning after the close of business on the Distribution Date.
"Post-1989 Period" means any taxable period (or portion thereof)
beginning after the close of business on December 31, 1989.
"Pre-Deconsolidation Period" means any taxable period (or portion
thereof) ending on or before the close of business on the Deconsolidation Date.
"Pre-Distribution Period" means any taxable period (or portion thereof)
ending on or before the close of business on the Distribution Date.
"Pre-1990 Period" means any taxable period (or portion thereof) ending
on or before the close of business on December 31, 1989.
"Return" means any Tax return, statement, report, form or election
(including, without limitation, estimated Tax returns and reports, extension
requests and forms, and information returns and reports) required to be filed
with any Taxing Authority, in each case as amended and as finally adjusted.
"RJRN Combined State Tax Liability" means, with respect to any taxable
period and any jurisdiction, an amount of Combined State Taxes determined in
accordance with the principles set forth in the definition of RJRN Federal Tax
Liability and comparable provisions under applicable law.
"RJRN Federal Tax Liability" means, with respect to any taxable period,
the sum of the RJRN Tax Group's Federal Tax liability and any interest,
penalties and other additions to such taxes for such taxable period, computed as
if the RJRN Tax Group were not part of the Holdings Consolidated Group, but
rather were a separate affiliated group of corporations filing a consolidated
Federal Tax return pursuant to Section 1501 of the Code; provided, however, that
transactions with members of the Nabisco Tax Group or Holdings shall be
reflected in accordance with applicable provisions of the consolidated return
regulations governing intercompany transactions. Without limiting the generality
of the foregoing, such computation shall be made (i) without regard to the
income, deductions (including, without limitation, net operating loss and
capital loss deductions) and credits in any taxable period of any member of the
Holdings
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Consolidated Group that is not a member of the RJRN Tax Group, (ii) by taking
account of any Tax Asset of the RJRN Tax Group in accordance with the principles
of Section 3.04(d), (iii) with regard to tax carryforwards and tax carrybacks
(including, without limitation, carryforwards and carrybacks of net operating
losses or capital losses) of any member of the RJRN Tax Group, (iv) as though
the highest rate of tax specified in Section 11(b) of the Code were the only
rates set forth in that subsection, (v) by taking account of the positions,
elections and accounting methods reflected in the consolidated Federal Tax
returns, as amended and as finally adjusted, of the Holdings Consolidated Group,
and (vi) without gain, if any, attributable to the Internal Distribution.
"RJRN Tax Group" means, at any time, RJRN and any direct or indirect
corporate subsidiaries (including predecessors and successors thereto) of RJRN,
except for the members of the Nabisco Tax Group, that would be eligible, if RJRN
were not a member of a group that included Holdings, to join with RJRN, (i) with
respect to Federal Taxes, in the filing of a consolidated Federal Tax return,
(ii) with respect to State Taxes, in the filing of an affiliated, consolidated,
combined or unitary State Tax return or (iii) with respect to other Taxes, in
the filing of a Tax return as an affiliated, consolidated, combined or unitary
group.
"State Tax" means any income, franchise or similar tax payable to a
state or local taxing jurisdiction of the United States.
"Tax" (and the correlative term, "Taxable") means (i) any Federal Tax,
or any net income, alternative or add-on minimum, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding (as payor or recipient), payroll, employment, excise, severance,
stamp, capital stock, occupation, property, real property gains, environmental,
windfall, premium, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever (including, without limitation, any
Tobacco Tax), together with any interest thereon and any penalty, addition to
tax or additional amount thereto; (ii) any liability of a corporation for the
payment of any amounts of the type described in clause (i) for any taxable
period resulting from such corporation's being a part of a Consolidated Group
pursuant to the application of Treasury Regulations Section 1.1502-6 (or a
successor thereto) or any similar provision applicable under state, local or
foreign law; or (iii) any liability for the payment of any amounts described in
clause (i) as a result of any express or implied obligation to indemnify any
other person.
"Tax Asset" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction, or any other loss, credit,
deduction or tax attribute that could be applied to reduce any tax (including,
without limitation, deductions, credits, alternative minimum net operating loss
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carryforwards related to alternative minimum taxes or additions to the basis of
property). For the avoidance of doubt, any elimination, reduction or other
change in an overall foreign loss account or excess credit limitation shall not
be considered a Tax Asset.
"Tax Opinion" means the opinion dated as of May 12, 1999 of Davis Polk
& Wardwell regarding the Federal Tax consequences of the Distribution and the
Internal Distribution, together with bring-downs of such opinion to each of the
Internal Distribution Date and the Distribution Date.
"Tax Proceeding" means any Tax audit, dispute or proceeding (whether
administrative or judicial). Without limiting the generality of the foregoing, a
reference to a Tax Proceeding relating to any taxable year shall include a Tax
Proceeding relating to multiple taxable years that include such taxable year,
notwithstanding that other included taxable years may be (i) Post-Distribution
Periods, in the case of the RJRN Tax Group, or (ii) Post-Deconsolidation
Periods, in the case of the Nabisco Tax Group.
"Taxing Authority" means any governmental authority (whether United
States or non-United States, and including, without limitation, any state,
municipality, political subdivision or governmental agency) responsible for the
imposition of any Tax.
"Tobacco Claim" means such term as it is defined in the Distribution
Agreement.
"Tobacco Tax" means (i) any excise, custom duty or other tax, whether
United States or non-United States, (A) levied on or otherwise determined in
whole or in part, directly or indirectly, by the quantity, weight, raw
ingredient or other component content, value, cost or price (whether
intercompany, wholesale, retail, undiscounted, discounted or otherwise) of
cigarettes or other tobacco products, or (B) in connection with the manufacture,
development, import, export, shipment, delivery, transportation, movement,
receipt, distribution, sale, offering for sale, marketing, promotion or
advertisement of cigarette or other tobacco products, or (ii) any claim for
payment of any amounts described in clause (i), together, in the case of each of
clauses (i) and (ii), with any interest thereon and any penalty, addition to tax
or additional amount thereto.
"Two-Year Period" means the period that begins on the date on which the
Internal Distribution shall be effected and that ends on the date that is two
years after the Distribution Date.
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(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Combined State Tax Payment Date 3.02(a)
Corporate Headquarters Expenses 6.04(a)
Employer Group 6.02(a)
Federal Tax Payment Date 3.02(a)
Indemnitee 7.04
Indemnitor 7.04
Pro Forma Combined State Return 3.04(a)
Pro Forma Federal Return 3.04(a)
Pro Forma Returns 3.04(a)
R&D Credits 3.10
Tax Asset Beneficiary 3.06
Tax Asset Provider 3.06
(c) Any term used in this Agreement that is not defined in this
Agreement shall, to the extent the context requires, have the meaning assigned
to it in the Code or in comparable provisions of applicable Tax law.
ARTICLE 2
ADMINISTRATIVE AND COMPLIANCE MATTERS
SECTION 2.01. Sole Tax Sharing Agreement. (a) Except for Sections 7.03,
8.04 and 10.08 of the Distribution Agreement, any and all existing Tax sharing
agreements or arrangements, written or unwritten, among two or more of Holdings,
any member of the Nabisco Tax Group and any member of the RJRN Tax Group
(including, without limitation, the Tax Sharing Agreement dated January 26, 1995
between Holdings and Nabisco) shall be or shall have been terminated as of the
Distribution Date. On and after the Distribution Date, none of Holdings, the
members of the Nabisco Tax Group and the members of the RJRN Tax Group shall
have any rights or liabilities (including, without limitation, any rights and
liabilities that accrued prior to the Distribution Date) under such terminated
agreements and arrangements, and this Agreement shall be the sole Tax sharing
agreement among such corporations.
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(b) This Agreement shall not address the obligations or arrangements,
if any, (i) among members of the RJRN Tax Group, or (ii) among members of the
Nabisco Tax Group.
SECTION 2.02. Designation of Agent. (a) Each member of the RJRN Tax
Group and each member of the Nabisco Tax Group hereby irrevocably authorizes and
designates Holdings as its agent, attorney-in-fact, coordinator and
administrator for the purposes of taking any and all actions with respect to (i)
Taxes for which such member is a member of the Holdings Consolidated Group and
(ii) Federal Employment Taxes of such member, in the case of each of clauses (i)
and (ii) in connection with any taxable year that includes a Pre-Distribution
Period, in the case of the RJRN Tax Group, or in connection with any taxable
year that includes a Pre-Deconsolidation Period, in the case of the Nabisco Tax
Group. In connection with any taxable year that includes a Pre-Distribution
Period, in the case of a member of the RJRN Tax Group, or with any taxable year
that includes a Pre-Deconsolidation Period, in the case of a member of the
Nabisco Tax Group, Holdings shall have the same authority under this Section
2.02(a), with respect to such Taxes as are described in the preceding sentence,
to act on behalf of each member of the RJRN Tax Group and each member of the
Nabisco Tax Group as would such member, were such member acting on its own
behalf, and as would the parent of the Consolidated Group that includes such
member, were such parent acting on behalf of such member. Holdings covenants to
the RJRN Tax Group and the Nabisco Tax Group that it shall be responsible to see
that matters handled pursuant to its exercise of its authority under this
Section 2.02(a) shall be handled promptly and, to the knowledge of Holdings,
appropriately.
(b) Without limiting the generality of Section 2.02(a), Holdings shall
have the authority, with respect to such Taxes and such taxable years as are
described in Section 2.02(a), to take any and all actions necessary, helpful or
incidental to, or otherwise in connection with, (i) the preparation or filing of
any Return or claim for refund (even where an item or Tax Asset giving rise to
an amended Return or claim for refund arises in a Post-Distribution Period, in
the case of the RJRN Tax Group, or in a Post-Deconsolidation Period, in the case
of the Nabisco Tax Group), (ii) the conduct, management, prosecution, defense,
contest, compromise or settlement of (A) any adjustment or deficiency proposed,
asserted or assessed as a result of any audit of any Return or claim for refund,
or (B) any other Tax Proceeding, (iii) the determination of the taxable years
(including, without limitation, taxable years that include a Post-Distribution
Period, in the case of the RJRN Tax Group, or a Post-Deconsolidation Period, in
the case of the Nabisco Tax Group) that a settlement of a Tax Proceeding may
impact and other timing considerations, (iv) the determination as to whether any
refunds shall be received by way of refund, credited against tax liability or
otherwise applied to any tax period, (v) the determination as to the treatment
of
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Tax Assets that are allowed under applicable law to be carried back or carried
forward, (vi) the determination as to whether any Tax elections shall be made or
modified, (vii) the determination as to whether any extensions shall be
requested or granted, (viii) the receipt of confidential information from, or
the provision of such information to, any Taxing Authority, and (ix) the making
of payments to, or collection of refunds from, any Taxing Authority.
(c) Notwithstanding anything in Section 11.07 to the contrary,
Holdings may, in its sole and absolute discretion, delegate (including, without
limitation, pursuant to the Intercompany Services Agreement) at any time all or
a portion of its authority, rights or obligations under this Agreement to any
corporation(s) or any person(s) (including, without limitation, Nabisco and/or
Nabisco, Inc.). Such delegation may be revoked by Holdings in its sole and
absolute discretion.
SECTION 2.03. Preparation of Returns. (a) Holdings shall prepare and
file the Returns (including, without limitation, the consolidated Federal Tax
Returns and Combined State Tax Returns) of the Holdings Consolidated Group for
all taxable years through the taxable year in which a Nabisco Deconsolidation
occurs with the assistance of the members of the Nabisco Tax Group and, in the
case of any taxable year that includes a Pre-Distribution Period, the assistance
of the members of the RJRN Tax Group. In preparing such Returns, Holdings shall
not discriminate among the members of the Holdings Consolidated Group. Without
limiting the generality of Section 2.02, Holdings shall have the right to
determine the manner in which such Returns shall be prepared and filed,
including, without limitation, the manner in which any item of income, gain,
loss, deduction or credit shall be reported thereon.
(b) The Returns of the Holdings Consolidated Group for the taxable
year ended December 31, 1999 shall reflect the inclusion of the members of the
RJRN Tax Group in the Holdings Consolidated Group for the 1999 Pre-Distribution
Period.
SECTION 2.04. Certain Information Furnished By Holdings. Within a
reasonable period of time (as determined by Holdings) following the
Distribution, Holdings shall deliver to each of the Designated RJRN Affiliate
and Nabisco a copy of such Federal Tax and Combined State Tax information on the
International Tobacco Sale and other tax matters as is reasonably necessary for
the preparation by the RJRN Tax Group of Pro Forma Returns pursuant to Section
3.04(a). Such information shall include (i) the amounts of gain or income, if
any (by company and by the type of gain or income), on the dispositions of such
assets as are described in clause (i) of the definition of International Tobacco
Sale in Section 1.01(a), (ii) any rulings or opinions received from, or material
correspondence with, Tax Authorities or independent counsel relating to the
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International Tobacco Sale, (iii) any elections made or to be made in connection
with the International Tobacco Sale (including, without limitation, any Federal
Tax elections pursuant to Treasury Regulations Section 301.7701-2), (iv) foreign
tax credit computations relating to the International Tobacco Sale, (v) pro
forma Federal Tax returns for each of RJRN and RJR Industries, Inc., and (vi)
pro forma Federal Tax returns for the corporations that were sold to Japan
Tobacco Inc. and that were members of the Holdings Consolidated Group for
Federal Tax purposes prior to the International Tobacco Sale.
SECTION 2.05. Allocation. Holdings may, at its option, elect, and the
RJRN Tax Group shall join it in electing (if necessary), to ratably allocate
items (other than extraordinary items) of the RJRN Tax Group in accordance with
relevant provisions of Treasury Regulations Section 1.1502-76. If Holdings makes
such an election, the members of the RJRN Tax Group shall provide to Holdings
such statements as are required under the regulations and other appropriate
assistance.
SECTION 2.06. Certain Other Returns. (a) The members of the RJRN Tax
Group shall be solely responsible for the preparation and filing of (i) their
respective separate State Tax Returns, (ii) Returns filed on behalf of an
affiliated, consolidated, combined or unitary group that includes neither
Holdings nor any member of the Nabisco Tax Group, and (iii) Returns for all
taxable years that begin after the Distribution Date.
(b) The members of the Nabisco Tax Group shall be solely responsible
for the preparation and filing of (i) their respective separate State Tax
Returns, (ii) Returns filed on behalf of an affiliated, consolidated, combined
or unitary group that includes neither Holdings nor any member of the RJRN Tax
Group, and (iii) Returns for all taxable years that begin after the
Deconsolidation Date.
ARTICLE 3
TAX SHARING
SECTION 3.01. General Tax Sharing Principles. (a) The Designated RJRN
Affiliate shall pay to Holdings an amount equal to the RJRN Federal Tax
Liability, as shown on the Pro Forma Federal Return (as defined in Section
3.04(a) below) of the RJRN Tax Group for the 1999 Pre-Distribution Period. For
each taxable year of the Holdings Consolidated Group during which income, loss
or credit against tax of any member of the RJRN Tax Group is includible in a
return relating to a Combined State Tax of the Holdings Consolidated Group, the
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Designated RJRN Affiliate shall pay to Holdings an amount equal to the RJRN
Combined State Tax Liability, as shown on the Pro Forma Combined State Returns
(as defined in Section 3.04(a) below) of the RJRN Tax Group for (i) such taxable
year, if such taxable year ends prior to the Distribution Date, or (ii) the 1999
Pre-Distribution Period, if such taxable year includes the Distribution Date.
(b) For each taxable year of the Holdings Consolidated Group during
which income, loss or credit against tax of any member of the Nabisco Tax Group
is includible in the consolidated Federal Tax return of the Holdings
Consolidated Group, Nabisco shall pay to Holdings an amount equal to the Nabisco
Federal Tax Liability, as shown on the Pro Forma Federal Return of the Nabisco
Tax Group for (i) such taxable year, if such taxable year ends prior to a
Nabisco Deconsolidation, or (ii) the period from the beginning of such taxable
year through the Deconsolidation Date, if a Nabisco Deconsolidation occurs
during such taxable year. For each taxable year of the Holdings Consolidated
Group during which income, loss or credit against tax of any member of the
Nabisco Tax Group is includible in a return relating to a Combined State Tax of
the Holdings Consolidated Group, Nabisco shall pay to Holdings an amount equal
to the Nabisco Combined State Tax Liability, as shown on the Pro Forma Combined
State Returns of the Nabisco Tax Group for (i) such taxable year, if such
taxable year ends prior to a Nabisco Deconsolidation, or (ii) the period from
the beginning of such taxable year through the Deconsolidation Date, if a
Nabisco Deconsolidation occurs during such taxable year.
SECTION 3.02. Estimated Payments by RJRN Tax Group. (a) No later than
20 Business Days prior to each date on which an estimated Federal Tax
installment or an estimated Combined State Tax installment of the Holdings
Consolidated Group is due (including all applicable and valid extensions) (a
"Federal Tax Payment Date" or "Combined State Tax Payment Date", respectively)
with respect to a taxable year during which any member of the RJRN Tax Group is
included in the Holdings Consolidated Group, the Designated RJRN Affiliate shall
(i) determine (under Section 6655(d) of the Code or, if applicable, Section
6655(e) or other provisions of the Code in the case of Federal Taxes, or under
comparable provisions of Combined State Tax law) the estimated amount of the
related installment of the RJRN Federal Tax Liability or of the RJRN Combined
State Tax Liability, respectively (taking into account, without limitation, the
inclusion of the RJRN Tax Group in the Holdings Consolidated Group for the 1999
Pre-Distribution Period, in the case of the taxable year that includes the
Distribution Date), and (ii) deliver a written statement to Holdings reflecting
such determination. No later than two Business Days prior to the Federal Tax
Payment Date or the Combined State Tax Payment Date, as the case may be, the
Designated RJRN Affiliate shall pay to Holdings the amount thus determined.
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(b) Holdings may adjust the determination made by the Designated RJRN
Affiliate under Section 3.02(a) if it notifies the Designated RJRN Affiliate, no
later than 10 Business Days prior to the applicable Federal Tax Payment Date or
Combined State Tax Payment Date, that the Designated RJRN Affiliate's
calculation of any amounts reflected in such determination is incorrect or
incomplete. Any adjustment made by Holdings under this Section 3.02(b) shall be
treated for the purposes of Section 3.02(a) as though it had always been
reflected in the determination made by the Designated RJRN Affiliate. The
Designated RJRN Affiliate shall not be permitted to invoke the dispute
resolution procedures in Section 11.02 until it shall have paid the amounts
reflected on such determination, as adjusted by Holdings.
SECTION 3.03. Estimated Payments by Nabisco Tax Group. (a) No later
than 20 Business Days prior to each Federal Tax Payment Date or Combined State
Tax Payment Date with respect to a taxable year during which any member of the
Nabisco Tax Group is included in the Holdings Consolidated Group, Nabisco shall
(i) determine (under Section 6655(d) of the Code or, if applicable, Section
6655(e) or other provisions of the Code in the case of Federal Taxes, or under
comparable provisions of Combined State Tax law) the estimated amount of the
related installment of the Nabisco Federal Tax Liability or of the Nabisco
Combined State Tax Liability, respectively (taking into account, without
limitation, the inclusion of the Nabisco Tax Group in the Holdings Consolidated
Group only for the period from the beginning of the taxable year through the
Deconsolidation Date, in the case of a taxable year during which a Nabisco
Deconsolidation occurs), and (ii) notify Holdings of such determination. No
later than two Business Days prior to the Federal Tax Payment Date or the
Combined State Tax Payment Date, as the case may be, Nabisco shall pay to
Holdings the amount thus determined.
(b) Holdings may adjust the determination made by Nabisco under
Section 3.03(a) if it notifies Nabisco, no later than 10 Business Days prior to
the applicable Federal Tax Payment Date or Combined State Tax Payment Date, that
Nabisco's calculation of any amounts reflected in such determination is
incorrect or incomplete. Any adjustment made by Holdings under this Section
3.03(b) shall be treated for the purposes of Section 3.03(a) as though it had
always been reflected in the determination made by Nabisco. Nabisco shall not be
permitted to invoke the dispute resolution procedures in Section 11.02 until it
shall have paid the amounts reflected on such determination, as adjusted by
Holdings.
SECTION 3.04. Payment of Taxes at Year-End by RJRN Tax Group. (a) No
later than December 15, 1999, the Designated RJRN Affiliate shall deliver to
Holdings a pro forma Federal Tax return (a "Pro Forma Federal Return") of the
RJRN Tax Group reflecting the RJRN Federal Tax Liability for the 1999 Pre-
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Distribution Period. No later than December 15, 1999, for each Combined State
Tax liability of the Holdings Consolidated Group, the Designated RJRN Affiliate
shall deliver to Holdings a pro forma Combined State Tax Return (each a "Pro
Forma Combined State Return", and, together with the Pro Forma Federal Return,
the "Pro Forma Returns") of the RJRN Tax Group reflecting the related RJRN
Combined State Tax Liability for the 1999 Pre-Distribution Period. The
Designated RJRN Affiliate shall not take any unreasonable position in preparing
such Pro Forma Returns. Each Pro Forma Return shall be delivered together with a
statement showing a calculation of the amount to be paid pursuant to Section
3.04(c) below.
(b) Upon receipt of a Pro Forma Return from the Designated RJRN
Affiliate, Holdings may adjust such return if it determines that the calculation
of the RJRN Federal Tax Liability or the RJRN Combined State Liability, as the
case may be, reflected on such return is incorrect or incomplete. Any adjustment
made by Holdings under this Section 3.04(b) shall be treated for purposes of
Article 3 as though it had always been reflected on such Pro Forma Return. The
Designated RJRN Affiliate shall not be permitted to invoke the dispute
resolution procedures in Section 11.02 until it shall have paid any amounts
required under Section 3.04(c).
(c) No later than two Business Days prior to the due date (including
all applicable and valid extensions) for the Return of the Holdings Consolidated
Group to which a Pro Forma Return described in Section 3.04(a) relates, the
Designated RJRN Affiliate shall pay to Holdings, or Holdings shall pay to the
Designated RJRN Affiliate, as appropriate, an amount equal to the difference, if
any, between the RJRN Federal Tax Liability or the RJRN Combined State Tax
Liability, as the case may be, reflected on such Pro Forma Return for the
taxable period covered thereby and the aggregate amount of the estimated
installments paid by the Designated RJRN Affiliate with respect to such taxable
period in accordance with the principles of Section 3.02.
(d) If a Pro Forma Return of the RJRN Tax Group described in Section
3.04(a) reflects a Tax Asset that may under applicable law be used to reduce a
Federal Tax liability or State Tax liability, in each case for any taxable
period of a member of the Holdings Consolidated Group that is not also a member
of the RJRN Tax Group, Holdings shall pay to the Designated RJRN Affiliate (and,
as appropriate, shall receive payment from Nabisco of) an amount equal to the
actual tax saving produced by such Tax Asset within 30 days of the Effective
Realization of such tax saving, and the Pro Forma Returns of the RJRN Tax Group
and other relevant determinations under this Article 3 shall thereafter reflect
such use. The amount of the tax saving under this Section 3.04(d) or under
Section 3.05(d) for any taxable period shall be the amount of the reduction in
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Federal Taxes or State Taxes that are payable to a Taxing Authority with respect
to such taxable period, as compared to the Federal Taxes or State Taxes that
would have been payable to a Taxing Authority with respect to such taxable
period in the absence of such Tax Asset. Without limiting the generality of the
foregoing, the determination of the tax saving under this Section 3.04(d) or
under Section 3.05(d) shall take into account the application of Section 3.06.
SECTION 3.05. Payment of Taxes at Year-End by Nabisco Tax Group. (a) No
later than 20 Business Days prior to the due date (including all applicable and
valid extensions) for the Holdings Consolidated Group's consolidated Federal Tax
return for a taxable year that begins prior to a Nabisco Deconsolidation,
Nabisco shall deliver to Holdings a Pro Forma Federal Return of the Nabisco Tax
Group reflecting the Nabisco Federal Tax Liability for (i) such taxable year, if
such taxable year ends prior to a Nabisco Deconsolidation, or (ii) the period
from the beginning of such taxable year through the Deconsolidation Date, if a
Nabisco Deconsolidation occurs during such taxable year. No later than 20
Business Days prior to the due date (including all applicable and valid
extensions) for each Combined State return of the Holdings Consolidated Group
for a taxable year that begins prior to a Nabisco Deconsolidation, Nabisco shall
deliver to Holdings a Pro Forma Combined State Return of the Nabisco Tax Group
reflecting the related Nabisco Combined State Tax Liability for (i) such taxable
year, if such taxable year ends prior to a Nabisco Deconsolidation, or (ii) the
period from the beginning of such taxable year through the Deconsolidation Date,
if a Nabisco Deconsolidation occurs during such taxable year. Nabisco shall not
take any unreasonable position in preparing such Pro Forma Returns. Each Pro
Forma Return shall be delivered together with a statement showing a calculation
of the amount to be paid pursuant to Section 3.05(c) below.
(b) Upon receipt of a Pro Forma Return from Nabisco, Holdings may
adjust such return if it determines that the calculation of the Nabisco Federal
Tax Liability or the Nabisco Combined State Liability, as the case may be,
reflected on such return is incorrect or incomplete. Any adjustment made by
Holdings under this Section 3.05(b) shall be treated for the purposes of Article
3 as though it had always been reflected on such Pro Forma Return. Nabisco shall
not be permitted to invoke the dispute resolution procedures in Section 11.02
until it shall have paid any amounts required under Section 3.05(c).
(c) No later than two Business Days prior to the due date for the
Return of the Holdings Consolidated Group that results in the delivery of a Pro
Forma Return pursuant to Section 3.05(a) above, Nabisco shall pay to Holdings,
or Holdings shall pay to Nabisco, as appropriate, an amount equal to the
difference, if any, between the Nabisco Federal Tax Liability or the Nabisco
Combined State Tax Liability, as the case may be, reflected on such Pro Forma
Return for the
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taxable period covered thereby and the aggregate amount of the estimated
installments paid by Nabisco with respect to such taxable period in accordance
with the principles of Section 3.03.
(d) If a Pro Forma Return of the Nabisco Tax Group described in
Section 3.05(a) reflects a Tax Asset that may under applicable law be used to
reduce a Federal Tax liability or a State Tax liability, in each case for any
taxable period of a member of the Holdings Consolidated Group that is not also a
member of the Nabisco Tax Group, Holdings shall pay to Nabisco (and, as
appropriate, shall receive payment from the Designated RJRN Affiliate of) an
amount equal to the actual tax saving (which would be computed in accordance
with Section 3.04(d)) produced by such Tax Asset within 30 days of the Effective
Realization of such tax saving, and the Pro Forma Returns of the Nabisco Tax
Group and other relevant determinations under this Article 3 shall thereafter
reflect such use.
SECTION 3.06. Foreign Tax Credit Considerations. In connection with any
determinations under this Agreement of the tax saving or tax benefit Effectively
Realized by a corporation (the "Tax Asset Beneficiary") from the use of a Tax
Asset of another corporation (the "Tax Asset Provider"), (i) there shall be
taken into account the tax saving or tax benefit from any net increase in the
foreign tax credits that the Tax Asset Beneficiary or any other member of the
Nabisco Tax Group or of the RJRN Tax Group, whichever (if either) includes the
Tax Asset Beneficiary as a member, Effectively Realizes by reason of the use of
such Tax Asset, at the time of the Effective Realization of such tax saving or
tax benefit from the net increase in the foreign tax credits, and (ii) there
shall not be taken into account the tax effect of (A) any net decrease in the
foreign tax credits to which the corporations described in clause (i) may be
entitled by reason of the use of such Tax Asset, or (B) any change in the
foreign tax credits to which any other corporation, including the Tax Asset
Provider, may be entitled by reason of the use of such Tax Asset.
SECTION 3.07. Remittances To Taxing Authorities. (a) In the event that
Holdings makes a cash remittance (other than a mandatory estimated tax payment
or a payment of tax in connection with the filing of a Return at year-end) with
a Taxing Authority to stop the running of interest in whole or in part, Nabisco
and the Designated RJRN Affiliate shall pay to Holdings an amount equal to the
appropriate share of the Nabisco Tax Group or the RJRN Tax Group, respectively,
of the amount to be so remitted no later than two Business Days prior to the
date on which Holdings makes such remittance to such Taxing Authority. For
purposes of this Section 3.07(a), the appropriate share of the Nabisco Tax Group
or the RJRN Tax Group, as the case may be, of any remittance shall be determined
by Holdings. No later than five Business Days prior to the date planned for a
remittance under this Section 3.07(a), Holdings shall notify Nabisco
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and the Designated RJRN Affiliate of (i) such planned date, and (ii) their
respective appropriate shares of such remittance.
(b) Upon the Effective Realization by Holdings, any member of the
Nabisco Tax Group or any member of the RJRN Tax Group of the benefit
attributable to the refund or recoupment of amounts paid by Nabisco or the
Designated RJRN Affiliate under Section 3.07(a), the corporation that
Effectively Realized such benefit shall pay to Nabisco or the Designated RJRN
Affiliate, respectively, the amount of such refund or recoupment, together with
interest, if any, received thereon, within 30 days of Effective Realization
thereof. If and to the extent that any claim for refund or contest relating to
amounts paid under Section 3.07(a) shall be unsuccessful, any payment made by
Nabisco or the Designated RJRN Affiliate under Section 3.07(a) shall be credited
toward any payment obligations of Nabisco or the RJRN Tax Group, respectively,
under Article 3.
SECTION 3.08. Carrybacks from Periods After the Distribution. (a)
Holdings agrees to pay the Designated RJRN Affiliate, within 30 days of
Effective Realization, the actual Federal Tax or Combined State Tax benefit
Effectively Realized by any member of the Holdings Consolidated Group from the
use in any taxable year that includes a Pre-Distribution Period (but that is not
a Pre-1990 Period) of a carryback of any Tax Asset of any member of the RJRN Tax
Group from a Post-Distribution Period. Such tax benefit shall be considered
equal to the excess of (i) the amount of Federal Taxes or Combined State Taxes,
as the case may be, that would have been payable (or the Federal Tax or Combined
State Tax refund actually receivable) by the Holdings Consolidated Group in the
absence of such carryback, over (ii) the amount of Federal Taxes or Combined
State Taxes actually payable (or the Federal Tax or Combined State Tax refund
that would have been receivable). The determination of the tax benefit under
this Section 3.08(a) shall take into account (A) the application of Section
3.06, (B) the receipt by any member of the Holdings Consolidated Group of any
interest on a carryback that results in a tax refund, or (C) the reduction of
any interest otherwise owed by any member of the Holdings Consolidated Group as
a result of a carryback that reduces a tax deficiency.
(b) If, subsequent to the payment by Holdings to the Designated RJRN
Affiliate of an amount pursuant to Section 3.08(a), there shall be (i) a Final
Determination that results in a disallowance or a reduction of the Tax Asset so
carried back or (ii) a reduction in the amount of the tax benefit Effectively
Realized by the Holdings Consolidated Group from such Tax Asset as a result of
the use by the Holdings Consolidated Group of a Tax Asset of Holdings or any
member of the Nabisco Tax Group, the Designated RJRN Affiliate shall repay to
Holdings, within 30 days of such event, any amount that would not have been
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payable by Holdings pursuant to Section 3.08(a) had the amount of the tax
benefit been determined in light of such event. In addition, the RJRN Tax Group
shall hold Holdings and the Nabisco Tax Group harmless from any penalty or
interest payable as a result of any event described in the preceding sentence.
SECTION 3.09. Treatment of Adjustments. (a) If any adjustment is made
in a Return relating to Federal Taxes or Combined State Taxes of the Holdings
Consolidated Group, after the filing thereof, in which income or loss of any
member of the RJRN Tax Group is included, then within 30 days of the time of a
Final Determination of such adjustment, the Designated RJRN Affiliate shall pay
to Holdings, or Holdings shall pay to the Designated RJRN Affiliate, as the case
may be and as appropriate, (i) the difference between (A) all payments actually
made, net of all refunds or recoupments received or otherwise Effectively
Realized, by the Designated RJRN Affiliate (or treated as such) in accordance
with the principles of Article 3 for the taxable year covered by such Return,
and (B) all payments that would have been made by the Designated RJRN Affiliate
(or treated as such) in accordance with the principles of this Article 3 for the
taxable year covered by such Return taking such adjustment into account, and
(ii) related adjustments to penalties and interest. Without limiting the
generality of Section 3.09(a)(ii) or 3.09(b)(ii), the determination of penalties
and interest generally shall take into account the timing and magnitude of the
relevant payments, refunds or recoupments made.
(b) If any adjustment is made in a Return relating to Federal Taxes
or Combined State Taxes of the Holdings Consolidated Group, after the filing
thereof, in which income or loss of any member of the Nabisco Tax Group is
included, then within 30 days of the time of a Final Determination of such
adjustment, Nabisco shall pay to Holdings, or Holdings shall pay to Nabisco, as
the case may be and as appropriate, (i) the difference between (A) all payments
actually made, net of all refunds or recoupments received or otherwise
Effectively Realized, by Nabisco (or treated as such) in accordance with the
principles of Article 3 for the taxable year covered by such Return, and (B) all
payments that would have been made by Nabisco (or treated as such) in accordance
with the principles under Article 3 for the taxable year covered by such Return
taking such adjustment into account, and (ii) related adjustments to penalties
and interest.
(c) Any refunds or credits of tax received or otherwise Effectively
Realized by Holdings, a member of the Nabisco Tax Group or a member of the RJRN
Tax Group, as the case may be, relating to a taxable year that includes a
Pre-Distribution Period, to the extent reflecting a tax saving attributable to
any item of income, loss, credit, deduction or other tax attribute of (i) any
member of the Nabisco Tax Group or of the RJRN Tax Group, in the case of
Holdings, shall be paid to Nabisco or the Designated RJRN Affiliate,
respectively, (ii) Holdings
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or any member of the RJRN Tax Group, in the case of a member of the Nabisco Tax
Group, shall be paid to Holdings (and, as appropriate, forwarded by Holdings to
the Designated RJRN Affiliate), or (iii) Holdings or any member of the Nabisco
Tax Group, in the case of a member of the RJRN Tax Group, shall be paid to
Holdings (and, as appropriate, forwarded by Holdings to Nabisco), in each case
within 30 days of Effective Realization of such tax saving. In addition, any
refunds or credits of tax received or Effectively Realized by Holdings or a
member of the Nabisco Tax Group, as the case may be, relating to a taxable year
that includes a Post-Distribution Period, to the extent reflecting a tax saving
attributable to any item of income, loss, credit, deduction or other tax
attribute of any member of the Nabisco Tax Group or Holdings, respectively,
shall be paid to Nabisco or Holdings, respectively, within 30 days of Effective
Realization of such tax saving. Notwithstanding anything in this Section 3.09(c)
to the contrary, no payment shall be required to the extent such refunds or
credits are attributable to a Tax Asset or an adjustment for which the
corporation that receives or otherwise Effectively Realizes the refund or credit
has previously made payment in accordance with the principles of this Agreement.
(d) For purposes of this Agreement, any income, loss, credit,
deduction or other tax attribute of, any tax liability, refund or credit of tax
or interest of, or any payments by or on behalf of, any member of the Holdings
Consolidated Group (including, without limitation, Holdings or a member of the
Nabisco Tax Group) with respect to a Pre-1990 Period shall be treated as an item
of the RJRN Tax Group. If, with respect to any Pre-1990 Period, Holdings or any
member of the Nabisco Tax Group Effectively Realizes the benefit of a refund of
any statutory interest or any Federal Tax or State Tax, Holdings or Nabisco,
respectively, shall promptly remit to the Designated RJRN Affiliate the amount
of such refund (net of any taxes on the taxable portion, if any, of such refund
for which Holdings or the Nabisco Tax Group, respectively, is liable), together
with any interest received thereon.
SECTION 3.10. Treatment of R&D Credits. For purposes of this Agreement,
if the amount of the research and development credits (the "R&D Credits")
actually allowable to the Holdings Consolidated Group with respect to any
taxable period is less than the sum of (i) the separately computed amount of R&D
Credits of the RJRN Tax Group with respect to such taxable period and (ii) the
separately computed amount of R&D Credits of the Nabisco Tax Group with respect
to such taxable period, in the case of each of clauses (i) and (ii), calculated
as though the relevant tax group were not a part of the Holdings Consolidated
Group (but rather were a separate Consolidated Group), then for purposes of this
Agreement each of the RJRN Tax Group and the Nabisco Tax Group shall be entitled
only to its proportionate share of the actually allowable R&D Credits of the
Holdings Consolidated Group with respect to such taxable period.
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ARTICLE 4
CERTAIN REPRESENTATIONS AND COVENANTS IN CONNECTION WITH THE
DISTRIBUTION AND THE INTERNAL DISTRIBUTION
SECTION 4.01. RJRN Tax Group Representations. RJRN and each other
member of the RJRN Tax Group represent to Holdings and each member of the
Nabisco Tax Group that as of the date of this Agreement there is no plan or
intention to (i) liquidate RJRN or RJRT or merge or consolidate any of such
corporations with any other person subsequent to the Distribution, (ii) sell or
otherwise dispose of the assets of RJRN, RJRT or any other member of the RJRN
Tax Group subsequent to the Distribution, except in the ordinary course of
business, (iii) take any action inconsistent with the information and
representations furnished by RJRN in connection with the Tax Opinion, (iv)
purchase stock of RJRN other than in accordance with the requirements of Revenue
Procedure 96-30 and in conformity with the representations furnished by RJRN in
connection with the Tax Opinion, or (v) enter into any negotiations, agreements
or arrangements with respect to transactions or events (including, without
limitation, stock issuances, pursuant to the exercise of options or otherwise,
option grants, capital contributions or acquisitions, or a series of such
transactions or events, but excluding the Internal Distribution and the
Distribution) that may cause the Distribution and/or the Internal Distribution
to be treated as part of a plan pursuant to which one or more persons acquire
directly or indirectly stock of RJRN, Nabisco or Holdings representing a
"50-percent or greater interest" therein within the meaning of Section 355(d)(4)
of the Code.
SECTION 4.02. Holdings and Nabisco Tax Group Representations. Holdings
and each member of the Nabisco Tax Group represent to each member of the RJRN
Tax Group that as of the date of this Agreement there is no plan or intention to
(i) liquidate Holdings, Nabisco or Nabisco, Inc. or merge or consolidate any of
such corporations with any other person subsequent to the Internal Distribution,
(ii) sell or otherwise dispose of the assets of Holdings, Nabisco, Nabisco, Inc.
or any other member of the Nabisco Tax Group subsequent to the Internal
Distribution, except (A) in the ordinary course of business, or (B) pursuant to
plant rationalization programs, to the extent implemented in a manner consistent
with practice prior to the Distribution, (iii) take any action inconsistent with
the information and representations furnished by Holdings in connection with the
Tax Opinion, (iv) purchase stock of Nabisco or Holdings, other than (A) in
accordance with the requirements of Revenue Procedure 96-30 and in conformity
with the representations furnished by Holdings in connection with the Tax
Opinion (including, without limitation, the purchase by Nabisco on the New York
Stock Exchange of shares of its Class A common stock for delivery upon the
exercise of employee stock options), or (B)
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any payment of cash in lieu of fractional shares in any reverse stock split with
respect to the common stock of Holdings or Nabisco following the Internal
Distribution, or (v) enter into any negotiations, agreements or arrangements
with respect to transactions or events (including stock issuances, pursuant to
the exercise of options or otherwise, option grants, capital contributions or
acquisitions, or a series of such transactions or events, but excluding the
Internal Distribution and the Distribution) that may cause the Internal
Distribution and/or the Distribution to be treated as part of a plan pursuant to
which one or more persons acquire directly or indirectly stock of Nabisco,
Holdings or RJRN representing a "50-percent or greater interest" therein within
the meaning of Section 355(d)(4) of the Code.
SECTION 4.03. Representations of Holdings, RJRN Tax Group and Nabisco
Tax Group. Each of Holdings, the members of the Nabisco Tax Group, RJRN and the
other members of the RJRN Tax Group represents that it is not aware of any plan
or intention by the shareholders or securityholders of Holdings to sell,
exchange, transfer or otherwise dispose of any of their stock or securities in
Holdings or RJRN subsequent to the Distribution.
SECTION 4.04. RJRN Tax Group Covenants. RJRN and each other member of
the RJRN Tax Group covenant to Holdings and each member of the Nabisco Tax Group
that (i) during the Two-Year Period, RJRN and RJRT shall not liquidate or merge
or consolidate with any other person, (ii) during the Two-Year Period, RJRN
shall not sell, exchange, distribute or otherwise dispose of the assets of RJRN,
RJRT or any other member of the RJRN Tax Group, except in the ordinary course of
business, (iii) during the Two-Year Period, RJRT shall continue the active
conduct of the historic trade or business (i.e., the manufacture, distribution
and sale of cigarettes and other tobacco products in the United States), within
the meaning of Section 355 of the Code, conducted throughout the five-year
period prior to the Internal Distribution, (iv) no member of the RJRN Tax Group
shall purchase stock of RJRN, other than in accordance with the requirements of
Revenue Procedure 96-30 and in conformity with the representations furnished by
RJRN in connection with the Tax Opinion, (v) on or after the Distribution Date,
RJRN shall not, nor shall it permit any member of the RJRN Tax Group to, make or
change any tax election, change any accounting method, amend any Return or take
any tax position on any Return, take any action, omit to take any action or
enter into any transaction that results in an increased tax liability or
reduction of any Tax Asset of Holdings or of the Nabisco Tax Group with respect
to any Pre-Distribution Period that is not also a Pre-1990 Period, and (vi)
during the Two-Year Period, RJRN shall not enter into any transaction or make
any change in equity structure (including, without limitation, stock issuances,
pursuant to the exercise of options or otherwise, option grants, capital
contributions or acquisitions, or a series of such transactions or events, but
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excluding the Distribution and the Internal Distribution) that may cause the
Distribution and/or the Internal Distribution to be treated as part of a plan
pursuant to which one or more persons acquire directly or indirectly stock of
RJRN, Nabisco or Holdings representing a "50-percent or greater interest"
therein within the meaning of Section 355(d)(4) of the Code. The RJRN Tax Group
agrees that Holdings and the Nabisco Tax Group shall have no liability for any
Tax resulting from any action referred to in the preceding sentence and agrees
to hold harmless Holdings and the Nabisco Tax Group from any such Tax.
SECTION 4.05. Holdings and Nabisco Tax Group Covenants. Holdings and
each member of the Nabisco Tax Group covenant to each member of the RJRN Tax
Group that (i) during the Two-Year Period, Holdings, Nabisco and Nabisco, Inc.
shall not liquidate or merge or consolidate with any other person, (ii) during
the Two-Year Period, Holdings shall not sell, exchange, distribute or otherwise
dispose of the assets of Holdings, Nabisco, Nabisco, Inc. or any other member of
the Nabisco Tax Group, except (A) in the ordinary course of business, (B)
pursuant to plant rationalization programs, to the extent implemented in a
manner consistent with practice prior to the Distribution, or (C) for an asset,
(I) the gross proceeds of disposition of which do not exceed $10 million, (II)
which, together with all other assets to which this clause (C) has been applied,
would not have aggregate gross proceeds of disposition in excess of $200
million, and (III) which is not part of a plan for the disposition of multiple
assets unless each of the assets covered by such plan would meet the
requirements of this clause (C), (iii) during the Two-Year Period, Nabisco, Inc.
shall continue the active conduct of the historic trade or business (i.e., the
manufacture, distribution and sale of cookies, crackers and other food and snack
products within the United States), within the meaning of Section 355 of the
Code, conducted throughout the five-year period prior to the Internal
Distribution, (iv) during the Two-Year Period, neither any member of the Nabisco
Tax Group nor Holdings shall purchase stock of Nabisco or Holdings other than
(A) in accordance with the requirements of Revenue Procedure 96-30 and in
conformity with the representations furnished by Holdings in connection with the
Tax Opinion (including, without limitation, the purchase by Nabisco on the New
York Stock Exchange of shares of its Class A common stock for delivery upon the
exercise of employee stock options), or (B) any payment of cash in lieu of
fractional shares in any reverse stock split with respect to the common stock of
Nabisco or Holdings following the Internal Distribution, and (v) during the
Two-Year Period, each of Nabisco and Holdings shall not enter into any
transaction or make any change in equity structure (including, without
limitation, stock issuances, pursuant to the exercise of options or otherwise,
option grants, capital contributions or acquisitions, or a series of such
transactions or events, but excluding the Internal Distribution and the
Distribution) that may cause the Internal Distribution and/or the Distribution
to be treated as part of a plan pursuant to which one or more persons acquire
directly or
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indirectly stock of Nabisco, Holdings or RJRN representing a "50-percent or
greater interest" therein within the meaning of Section 355(d)(4) of the Code.
Each of Holdings and Nabisco agrees that the members of the RJRN Tax Group shall
have no liability for any Tax resulting from any action referred to in the
preceding sentence taken by Holdings or any member of the Nabisco Tax Group,
respectively, and agrees to indemnify and hold harmless any member of the RJRN
Tax Group from any such Tax.
SECTION 4.06. Exceptions. Notwithstanding the foregoing, RJRN and the
other members of the RJRN Tax Group shall be permitted to take an action
inconsistent with the covenants contained in Section 4.04, and Holdings and the
members of the Nabisco Tax Group shall be permitted to take an action
inconsistent with the covenants contained in Section 4.05, if, prior to taking
such action the Designated RJRN Affiliate, Holdings or Nabisco, as the case may
be, (i) provides notification, upon determining that it shall pursue such
action, to the other parties to this Agreement of its plans with respect to such
action, and promptly responds to any inquiries made by such parties following
such notification, and (ii) obtains either (A) a ruling from the IRS to the
effect that such action shall not cause the Distribution to be taxable to
Holdings or its shareholders or the Internal Distribution to be taxable to RJRN
or Holdings, or (B) an opinion of Davis Polk & Wardwell (or of an independent
counsel, comparable thereto, that is nationally recognized as an expert in
Federal Tax matters), which opinion and, in the case of counsel other than Davis
Polk & Wardwell, which counsel are acceptable to the parties to which the
relevant covenant(s) in this Agreement have been made, to the same effect as is
set forth in clause (A).
ARTICLE 5
COVENANTS AND OTHER MATTERS FOLLOWING NABISCO DECONSOLIDATION
SECTION 5.01. Certain Nabisco Covenants. Nabisco covenants to Holdings
that upon or after a Nabisco Deconsolidation it shall not, nor shall it cause or
permit any member of the Nabisco Tax Group to, make or change any tax election,
change any accounting method, amend any Return or take any tax position on any
Return, take any action, omit to take any action or enter into any transaction
that results in any increased tax liability or reduction of any Tax Asset of the
Holdings Consolidated Group with respect to any Pre-Deconsolidation Period;
provided, however, that with respect to a Pre-Deconsolidation Period that is
also a Post-1989 Period, for purposes of this Section 5.01, the Holdings
Consolidated Group shall include only those members of the Holdings Consolidated
Group that are not members of the Nabisco Tax Group. Nabisco
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agrees that Holdings and the RJRN Tax Group, as applicable, shall have no
liability for any tax or any increase in indemnification obligations resulting
from any action referred to in the preceding sentence and agrees to hold
harmless such corporations from any such tax or increase in indemnification
obligations.
SECTION 5.02. Carrybacks from Periods Following Nabisco
Deconsolidation. (a) Holdings agrees to pay to Nabisco the actual Federal Tax or
Combined State Tax benefit Effectively Realized by any member of the Holdings
Consolidated Group from the use in any taxable year that includes a
Pre-Deconsolidation Period and that does not include a Pre-1990 Period of a
carryback of any Tax Asset of any member of the Nabisco Tax Group from a taxable
year that includes a Post-Deconsolidation Period. Such tax benefit shall be
considered equal to the excess of (i) the Federal Taxes or Combined State Taxes,
as the case may be, that would have been payable (or the Federal Tax or Combined
State Tax refund actually receivable) by the Holdings Consolidated Group in the
absence of such carryback, over (ii) the amount of Federal Taxes or Combined
State Taxes actually payable (or the Federal Tax or Combined State Tax refund
that would have been receivable). Without limiting the generality of the
foregoing, the determination of the tax benefit under this Section 5.02(a) shall
take into account the application of Section 3.06. Payment of the amount of the
tax benefit under this Section 5.02(a) shall be made within 30 days of the
Effective Realization thereof.
(b) If, subsequent to the payment by Holdings to Nabisco of an amount
under Section 5.02(a), there shall be (i) a Final Determination that results in
a disallowance or a reduction of the Tax Asset so carried back or (ii) a
reduction in the amount of the benefit Effectively Realized by the Holdings
Consolidated Group from such Tax Asset as a result of the use by the Holdings
Consolidated Group of a Tax Asset of Holdings or of the RJRN Tax Group, Nabisco
shall repay to Holdings, within 30 days of such event, any amount that would not
have been payable to Nabisco pursuant to Section 5.02(a) had the amount of the
benefit been determined in light of such events. Nabisco shall hold Holdings
harmless from any penalty or interest payable as a result of any event described
in the preceding sentence.
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ARTICLE 6
DEDUCTIONS AND CERTAIN TAX MATTERS RELATED TO THE DISTRIBUTION
AGREEMENT
SECTION 6.01. Payment of After-Tax Amounts. If any amount paid by RJRN
or Holdings under the Distribution Agreement results in any increased tax
liability or reduction of any Tax Asset of Holdings or any member of the Nabisco
Tax Group, in the case of RJRN, or any member of the RJRN Tax Group, in the case
of Holdings, then the party making such payment shall, in addition to paying any
amounts otherwise owed under the Distribution Agreement, indemnify the recipient
of such payment against and hold it harmless from (i) such increased tax or the
reduction of such Tax Asset, (ii) any interest or penalty attributable to such
increased tax liability or the reduction of such Tax Asset and (iii) the
After-Tax Amount.
SECTION 6.02. Deductions and Certain Taxes Related to Stock Options and
Restricted Stock. (a) The Holdings Consolidated Group shall claim, and for
purposes of this Agreement Holdings shall be entitled to the economic benefit
of, any Federal Tax deductions and State Tax deductions with respect to a
Post-Distribution Period that are attributable to the exercise of options to
purchase the stock of Holdings, of Nabisco or of RJRN or the vesting of
restricted stock of Holdings, of Nabisco or of RJRN, in each case that are held
by a person who (i) at the time the deduction is claimed is an employee of
Holdings, (ii) at the time the deduction is claimed is not employed by any
corporation among Holdings, the members of the RJRN Tax Group and the members of
the Nabisco Tax Group (collectively, the "Employer Group"), but who (A) on the
day before the Distribution Date was an employee of Holdings or (B) on the day
before the Distribution Date was not employed by any corporation in the Employer
Group and was last employed, among the corporations in the Employer Group, by
Holdings, or (iii) notwithstanding anything in Section 6.04 or this Section 6.02
to the contrary except for Section 6.02(b)(iii), has been an employee of
Holdings at any time after the Distribution.
(b) The Holdings Consolidated Group shall claim, and for purposes of
this Agreement the Nabisco Tax Group shall be entitled to the economic benefit
of, any Federal Tax deductions and State Tax deductions with respect to a
Post-Distribution Period that are attributable to the exercise of options to
purchase the stock of Holdings, of Nabisco or of RJRN or the vesting of
restricted stock of Holdings, of Nabisco or of RJRN, in each case that are held
by a person who (i) at the time the deduction is claimed is an employee of a
member of the Nabisco Tax Group, (ii) at the time the deduction is claimed is
not employed by any corporation in the Employer Group, but who (A) on the day
before the
(NY) 17560/178/TAX/tax.sharing.agt.wpd
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Distribution Date was an employee of a member of the Nabisco Tax Group or (B) on
the day before the Distribution Date was not employed by any corporation in the
Employer Group and was last employed, among the corporations in the Employer
Group, by a member of the Nabisco Tax Group, or (iii) in the case of options to
purchase the stock of Nabisco or restricted stock of Nabisco and notwithstanding
anything in Section 6.04 or this Section 6.02 to the contrary, is Mr. Steven F.
Goldstone or Mr. Charles M. Harper.
(c) The RJRN Tax Group shall claim, and for purposes of this Agreement
the RJRN Tax Group shall be entitled to the economic benefit of, any Federal Tax
deductions and State Tax deductions with respect to a Post-Distribution Period
that are attributable to the exercise of options to purchase the stock of
Holdings, of Nabisco or of RJRN or the vesting of restricted stock of Holdings,
of Nabisco or of RJRN, in each case that are held by a person who (i) at the
time the deduction is claimed is an employee of a member of the RJRN Tax Group,
or (ii) at the time the deduction is claimed is not employed by any corporation
in the Employer Group, but who (A) on the day before the Distribution Date was
an employee of a member of the RJRN Tax Group or (B) on the day before the
Distribution Date was not employed by any corporation in the Employer Group and
was last employed, among the corporations in the Employer Group, by a member of
the RJRN Tax Group.
(d) For purposes of this Section 6.02, references to options to
purchase stock of any corporation and references to the restricted stock of any
corporation are limited to options and restricted stock outstanding immediately
after the Distribution.
SECTION 6.03. Certain Employment Taxes. (a) The employer of the person
who exercises stock options or with respect to whom restricted stock vests (or,
if such person is not employed by a corporation in the Employer Group at the
time of such exercise or vesting, the corporation in the Employer Group that
last employed such person) shall timely pay all applicable Federal Employment
Taxes and state employment taxes in connection with such exercise or vesting.
(b) If the payor under Section 6.03(a) of Federal Employment Taxes and
state employment taxes in connection with the exercise of options to purchase
the stock of Nabisco, or the vesting of restricted stock of Nabisco, held by Mr.
Steven F. Goldstone or Mr. Charles M. Harper is not a member of the Nabisco Tax
Group, Nabisco shall pay to such payor an amount equal to such taxes within 30
days of Nabisco's receipt of documentation that such payor has remitted such
taxes to the appropriate Taxing Authorities.
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SECTION 6.04. Deductions Related to Employee Severance and Certain
Other Expenses. (a) The Holdings Consolidated Group shall claim, and for
purposes of this Agreement the Nabisco Tax Group shall be entitled to the
economic benefit of, any Federal Tax deductions and State Tax deductions, as
appropriate, that are attributable to (i) the expenses (except for expenses
related to stock options and restricted stock) arising out of (A) the closing of
the corporate headquarters of RJRN and Holdings, or (B) the severance and
benefit payment obligations to Holdings Employees (as defined in the
Distribution Agreement) arising as a result of the completion of the
Distribution, or (ii) such miscellaneous expenses as are described in Section
10.03(b)(iii) of the Distribution Agreement (collectively, the "Corporate
Headquarters Expenses").
(b) Notwithstanding anything in Section 10.03(b) of the Distribution
Agreement to the contrary, upon the provision by Holdings of not less than 15
days' notice to Nabisco that (i) Holdings is required to make a cash payment of
Corporate Headquarters Expenses to a third party no later than a specified date,
and (ii) the sum of such payment and all prior payments of Corporate
Headquarters Expenses exceeds the amount transferred by RJRN to Holdings
pursuant to Section 10.03(b)(iii) of the Distribution Agreement, Nabisco shall
remit to Holdings cash equal to such excess prior to such specified date.
SECTION 6.05. Deductions Related to Certain Litigation Expenses. The
RJRN Tax Group shall claim, and for purposes of this Agreement RJRN shall be
entitled to the economic benefit of, any Federal Tax deductions and State Tax
deductions, as appropriate, that are attributable to the expenses (including,
without limitation, attorneys' fees, expenses of investigation and other
expenses) incurred in the defense of Tobacco Claims against (i) RJRN, including,
without limitation, Tobacco Claims the defense of which has been assumed by
Holdings pursuant to the Distribution Agreement, or (ii) Holdings, Nabisco,
Nabisco, Inc. or any other Nabisco Indemnitee as such term is defined in the
Distribution Agreement, to the extent that RJRN has agreed under the
Distribution Agreement to indemnify such party against any liabilities in
connection with such Tobacco Claims, provided that, in the case of each of (i)
and (ii), RJRN has satisfied its obligations under the relevant provisions of
the Distribution Agreement.
SECTION 6.06. Indemnification under Article 6. (a) To the extent that
any deduction that is allocated to Holdings under Section 6.02(a) is disallowed
because a Taxing Authority makes a Final Determination that a member of the RJRN
Tax Group or of the Nabisco Tax Group should have claimed such deduction, the
Designated RJRN Affiliate or Nabisco, respectively, shall pay to Holdings an
amount equal to the resulting actual tax benefit Effectively Realized by the
RJRN Tax Group or the Nabisco Tax Group, respectively, within 30 days of the
Effective Realization thereof.
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(b) To the extent that any deduction that is allocated to a member of
the Nabisco Tax Group under Section 6.02(b) or 6.04 is disallowed because a
Taxing Authority makes a Final Determination that Holdings or a member of the
RJRN Tax Group should have claimed such deduction, Holdings or the Designated
RJRN Affiliate, respectively, shall pay to Nabisco an amount equal to the
resulting actual tax benefit Effectively Realized by Holdings or the RJRN Tax
Group, respectively, within 30 days of the Effective Realization thereof.
(c) To the extent that any deduction that is allocated to a member of
the RJRN Tax Group under Section 6.02(c) or 6.05 is disallowed because a Taxing
Authority determines that Holdings or a member of the Nabisco Tax Group should
have claimed such deduction, Holdings or Nabisco, respectively, shall pay to the
Designated RJRN Affiliate an amount equal to the resulting actual tax benefit
Effectively Realized by Holdings or the Nabisco Tax Group, respectively, within
30 days of the Effective Realization thereof.
ARTICLE 7
INDEMNITIES
SECTION 7.01. Indemnification of Holdings and Nabisco Tax Group by RJRN
Tax Group. RJRN, RJRT and each other member of the RJRN Tax Group shall jointly
and severally indemnify Holdings, Nabisco, Nabisco, Inc. and the other members
of the Nabisco Tax Group against and hold them harmless from:
(a) liability for Taxes attributable to any member of the RJRN Tax
Group relating to any taxable period (provided that, for purposes of the
foregoing portion of this Section 7.01(a), Taxes shall refer only to such taxes
as are described in clause (i) of the definition of such term in Section
1.01(a)), including without limitation, (i) any Tax liability resulting from the
International Tobacco Sale, (ii) any Tobacco Tax liability, (iii) any tax
liability of any member of the RJRN Tax Group resulting from the existence of
any excess loss accounts or deferred intercompany gains immediately before the
Distribution, (iv) any Federal Employment Tax of any member of the RJRN Tax
Group and (v) any Puerto Rican tax liability of any member of the RJRN Tax
Group, but excluding any Tax liability resulting from the Internal Distribution
except (A) to the extent the Internal Distribution is taxable by reason of a
breach by RJRN or any other member of the RJRN Tax Group of any representation
or covenant made by any member of the RJRN Tax Group in this Agreement, and (B)
for such amounts as are described in clause (iii) of this Section 7.01(a);
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(b) liability for Taxes relating to any taxable period resulting from
a breach by RJRN or any other member of the RJRN Tax Group of any representation
or covenant made by any member of the RJRN Tax Group in this Agreement;
(c) liability for Taxes relating to any Pre-1990 Period of Holdings,
Nabisco, Nabisco, Inc. or any other member of the Holdings Consolidated Group;
and
(d) liability for Taxes of Del Monte Corporation relating to any
taxable period (or portion thereof) ending on or before the close of business on
January 9, 1990, including, without limitation, (i) any tax liability pursuant
to the Stock Purchase Agreement dated as of September 24, 1989, as amended,
among DMPF Corp., RJR Investments, Inc., DMPF Holdings Corp. and RJRN, and (ii)
any Del Monte State Tax.
SECTION 7.02. Indemnification of RJRN Tax Group by Holdings or Nabisco
Tax Group. (a) Holdings shall indemnify RJRN, RJRT and the other members of the
RJRN Tax Group against and hold them harmless from:
(i) liability for Taxes attributable to Holdings (including,
without limitation, any Federal Employment Tax of Holdings)
relating to a Post-1989 Period, provided that, for purposes of
this Section 7.02(a)(i), (A) Tax shall refer only to such
taxes as are described in clause (i) of the definition of such
term in Section 1.01(a), and (B) any Federal Employment Tax
relating to a Pre- 1990 Period shall be treated as relating to
a Post-1989 Period;
(ii) liability for Taxes relating to any taxable period
resulting from a breach by Holdings of any representation or
covenant made by Holdings in this Agreement;
(iii) liability for Taxes resulting from the Name Change
Merger; and
(iv) liability for Taxes resulting from the Internal
Distribution or from the Distribution, except (A) to the
extent that such liability arises by reason of the breach by
RJRN or any other member of the RJRN Tax Group of any
representation or covenant made by any member of the RJRN Tax
Group in this Agreement, and (B) for such amounts as are
described in Section 7.01(a)(iii).
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(b) Nabisco, Nabisco, Inc. and each other member of the Nabisco Tax
Group shall jointly and severally indemnify RJRN, RJRT and the other members of
the RJRN Tax Group against and hold them harmless from:
(i) liability for Taxes attributable to any member of the
Nabisco Tax Group (including, without limitation, any Federal
Employment Tax of any member of the Nabisco Tax Group)
relating to a Post-1989 Period, provided that, for purposes of
this Section 7.02(b)(i), (A) Tax shall refer only to such
taxes as are described in clause (i) of the definition of such
term in Section 1.01(a), and (B) any Federal Employment Tax
relating to a Pre- 1990 Period shall be treated as relating to
a Post-1989 Period; and
(ii) liability for Taxes relating to any taxable period
resulting from a breach by Nabisco or any other member of the
Nabisco Tax Group of any representation or covenant made by
any member of the Nabisco Tax Group in this Agreement.
SECTION 7.03. Indemnification Between Holdings and Nabisco. (a)
Holdings shall indemnify Nabisco, Nabisco, Inc. and the other members of the
Nabisco Tax Group against and hold them harmless from:
(i) liability for Taxes attributable to Holdings (including,
without limitation, any Federal Employment Tax of Holdings)
relating to a Post-1989 Period, provided that, for purposes of
this Section 7.03(a)(i), (A) Tax shall refer only to such
taxes as are described in clause (i) of the definition of such
term in Section 1.01(a), and (B) any Federal Employment Tax
relating to a Pre- 1990 Period shall be treated as relating to
a Post-1989 Period;
(ii) liability for Taxes resulting from the Name Change
Merger;
(iii) liability for Taxes resulting from the Internal
Distribution or from the Distribution, except (A) the extent
that such liability arises by reason of the breach by (I) RJRN
or any other member of the RJRN Tax Group of any
representation or covenant made by any member of the RJRN Tax
Group in this Agreement, or (II) Nabisco or any other member
of the Nabisco Tax Group of any representation or covenant
made by any member of the Nabisco Tax Group in this Agreement,
(B) for such amounts as are described in Section 7.01(a)(iii),
and (C) for any tax liability of any member of the Nabisco Tax
Group resulting from the existence of any deferred
intercompany gains immediately before the
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Distribution; and
(iv) liability for Taxes relating to any taxable period
resulting from a breach by Holdings of any representation or
covenant made by Holdings in this Agreement.
(b) Nabisco, Nabisco, Inc. and each other member of the Nabisco Tax
Group shall jointly and severally indemnify Holdings against and hold it
harmless from:
(i) liability for Taxes attributable to the Nabisco Tax Group
(including, without limitation, any Federal Employment Tax of
the Nabisco Tax Group) relating to a Post-1989 Period,
provided that, for purposes of this Section 7.03(b)(i), Tax
shall refer only to such taxes as are described in clause (i)
of the definition of such term in Section 1.01(a), and (B) any
Federal Employment Tax relating to a Pre-1990 Period shall be
treated as relating to a Post-1989 Period; and
(ii) liability for Taxes relating to any taxable period
resulting from a breach by Nabisco or any other member of the
Nabisco Tax Group of any representation or covenant made by
any member of the Nabisco Tax Group in this Agreement.
SECTION 7.04. Additional Indemnity Amounts. Each party with
indemnification obligations under Section 7.01, 7.02 or 7.03 (an "Indemnitor")
shall also pay to each party that is indemnified by such Indemnitor under such
provision (an "Indemnitee") all liabilities, losses, damages, assessments,
settlements, judgments, costs or properly documented expenses (including,
without limitation, expenses of investigation and attorneys' fees and expenses)
arising out of or incident to the imposition, assessment or assertion of any
liabilities or damage described in such provision, including, without
limitation, those incurred in the contest in good faith in appropriate
proceedings relating to the imposition, assessment or assertion of any such
liability or damage.
SECTION 7.05. Notice of Claim. The Indemnitee agrees to give prompt
notice to the Indemnitor of the assertion of any claim, or the commencement of
any suit, action or proceeding in respect of which indemnity may be sought under
Section 7.01, 7.02 or 7.03.
SECTION 7.06. Discharge of Indemnity. An Indemnitor shall discharge its
obligations by paying all amounts specified in Sections 7.01, 7.02, 7.03 and
7.04 within 30 days of demand therefor. After a Final Determination of an
obligation
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for which an Indemnitee is to be indemnified, the Indemnitee shall send a
statement to the Indemnitor showing the amount, if any, due under such
provisions. Certain calculation mechanics relating to items described in
Sections 7.01, 7.02 and 7.03 shall be in accordance with the principles of
Article 3. Notwithstanding that an Indemnitor disputes in good faith the fact or
the amount of any obligation under Section 7.01, 7.02 or 7.03, payment
thereunder and under Section 7.04 shall be made within 30 days of demand
therefor.
SECTION 7.07. Certain Effects of Indemnification Obligations. (a) If
(i) (A) an indemnification obligation of the RJRN Tax Group under Section 7.01
arises in respect of an adjustment that makes a Tax Asset allowable to Holdings
or any member of the Nabisco Tax Group in a Post-1989 Period or (B) any other
adjustment for which the RJRN Tax Group is liable under this Agreement makes a
Tax Asset allowable to Holdings or any member of the Nabisco Tax Group in a
Post-1989 Period, and (ii) such Tax Asset would not be allowable but for such
adjustment, then Holdings or Nabisco, respectively, shall pay to the Designated
RJRN Affiliate an amount equal to the actual tax saving produced by such Tax
Asset within 30 days of the Effective Realization of such tax saving, provided
that the RJRN Tax Group has satisfied its obligations under this Agreement in
respect of the adjustment giving rise to such tax saving.
(b) If (i) (A) an indemnification obligation of Holdings or any member
of the Nabisco Tax Group under Section 7.02 or 7.03, as the case may be, arises
in respect of an adjustment that makes a Tax Asset allowable to any member of
the Holdings Consolidated Group in a Pre-1990 Period or to any member of the
RJRN Tax Group in a Post-1989 Period or (B) any other adjustment for which
Holdings or the Nabisco Tax Group is liable under this Agreement makes a Tax
Asset allowable to any member or the RJRN Tax Group, and (ii) such Tax Asset
would not be allowable but for such adjustment, then the Designated RJRN
Affiliate shall pay to Holdings or Nabisco, respectively, an amount equal to the
actual tax saving produced by such Tax Asset within 30 days of the Effective
Realization of such tax saving, provided that Holdings or Nabisco, as the case
may be, has satisfied its obligations under this Agreement in respect of the
adjustment giving rise to such tax saving. Without limiting the generality of
the foregoing, if a Tax Asset is made allowable in a Pre-1990 Period, the amount
to be paid under this Section 7.07(b) shall not exceed the indemnification
obligation that arises in respect of the adjustment that makes such Tax Asset
allowable.
(c) The amount of the tax saving under Section 7.07(a) or under Section
7.07(b) for any taxable period shall be the amount of the reduction in taxes
payable to a Taxing Authority with respect to such taxable period as compared to
the taxes that would have been payable to a Taxing Authority with respect to
such taxable period in the absence of such Tax Asset. Without limiting the
generality
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of the foregoing, the determination of the tax saving under Section 7.07(a) or
under Section 7.07(b) shall take into account the application of Section 3.06.
ARTICLE 8
AUDIT AND OTHER TAX PROCEEDINGS
SECTION 8.01. Control Over Tax Proceedings. (a) Notwithstanding Section
11.02 or anything in this Agreement to the contrary, Holdings shall have full
control over any and all matters with respect to which the Nabisco Tax Group and
the RJRN Tax Group have provided authority to Holdings under Section 2.02,
including, without limitation, any and all matters that would give rise to an
indemnification obligation under Article 7 on the part of any member of the
Nabisco Tax Group or any member of the RJRN Tax Group. Holdings shall have
absolute discretion with respect to any decisions to be made, or any action to
be taken, with respect to any matter described in the preceding sentence.
(b) Without limiting the generality of Section 8.01(a), Holdings may,
in its sole and absolute discretion, settle any Tax Proceeding with respect to
the Taxes over which it has authority under Section 2.02(a) (including, without
limitation, a Tax Proceeding relating to any and all matters that would give
rise to an indemnification obligation under Section 7.01, 7.02 or 7.03). Any
such settlement shall be binding on the parties to this Agreement without
further recourse. Section 11.02 shall not apply with respect to (i) any such
settlement or (ii) any Tax Proceeding with respect to the Taxes over which
Holdings has authority under Section 2.02(a).
SECTION 8.02. Del Monte State Taxes and Certain Other State Taxes.
Holdings shall conduct, and shall have full control over all matters relating
to, any Tax Proceedings in connection with (i) Del Monte State Taxes, or (ii)
any State Tax liability of Holdings or any member of the Nabisco Tax Group
(including, without limitation, tax liabilities that are reflected on (A) a
separate State Tax return, or (B) a Combined State Tax return filed on behalf of
an affiliated, consolidated, combined or unitary group that does not include any
member of the RJRN Tax Group) with respect to any Pre-1990 Period. In its sole
and absolute discretion, Holdings may determine that the RJRN Tax Group shall be
required to conduct such Tax Proceedings following the provision by Holdings of
not less than 180 days' notice to the Designated RJRN Affiliate to such effect.
SECTION 8.03. Federal Employment Taxes. Holdings shall conduct, and
shall have full control over all matters relating to, any Tax Proceedings in
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connection with any Federal Employment Tax for which (i) any member of the
Nabisco Tax Group is liable with respect to a taxable year that begins prior to
a Nabisco Deconsolidation, or (ii) any member of the RJRN Tax Group is liable
with respect to a taxable year that begins prior to the Distribution Date.
ARTICLE 9
COMMUNICATIONS AND COOPERATION
SECTION 9.01. Consult and Cooperate. Holdings, Nabisco, RJRN and RJRT
shall consult and cooperate (and shall cause their respective subsidiaries to
cooperate) fully at such time and to the extent reasonably requested by a party
to this Agreement in connection with all matters subject to this Agreement;
provided that (a) in the case of the companies listed in Exhibit D to the
International Tobacco Purchase Agreement, RJRN and RJRT shall be required to
cause such companies to cooperate only to the extent allowed under the
International Tobacco Purchase Agreement, and (b) for the avoidance of doubt,
any disagreement as to the scope of the consultation and cooperation required
under this Section 9.01 shall be governed by Section 11.02. The cooperation
under this Section 9.01 shall include, without limitation:
(i) the retention and provision on reasonable request of any
information (including, without limitation, any books, records, documentation or
other information) pertaining to Tax matters relating to Holdings, the Nabisco
Tax Group and the RJRN Tax Group, any necessary explanations of information, and
access to personnel, until the expiration of the applicable statute of
limitation (giving effect to any extension, waiver, or mitigation thereof);
(ii) the execution, acknowledgment and delivery of any instrument or
document that may be necessary or helpful in connection with (A) any Return, (B)
any Tax Proceeding or other litigation, investigation or action, or (C) the
carrying out of the parties' respective obligations under this Agreement; and
(iii) the use of the parties' best efforts to obtain any documentation
from a Taxing Authority, another governmental authority or another third party
that may be necessary or helpful in connection with the foregoing.
SECTION 9.02. Provide Information. Holdings, Nabisco and the Designated
RJRN Affiliate shall keep one another fully informed with respect to any
material developments relating to the matters subject to this Agreement.
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SECTION 9.03. Tax Attribute Matters. Holdings, Nabisco and the
Designated RJRN Affiliate shall promptly advise one another with respect to any
proposed Tax adjustments, relating to a Consolidated Group, that are the subject
of a Tax Proceeding or other litigation, investigation or action and that may
materially affect any Tax liability or Tax attribute of the other parties to
this Agreement.
ARTICLE 10
PAYMENTS
SECTION 10.01. Procedure for Making Payments. All payments to be made
under this Agreement shall be made in immediately available funds. Except as
otherwise provided, all payments required to be made under this Agreement shall
be due 30 days after the receipt of notice of such payment or, where no notice
is required, 30 days after (i) the fixing of a tax liability, (ii) the Effective
Realization of a tax saving, tax benefit or tax attribute, (iii) the receipt of
a refund, or (iv) the resolution of a dispute. Unless otherwise indicated, any
payment that is not made when due shall bear interest at the Intercompany
Interest Rate. If, pursuant to a Final Determination, any amount paid by
Holdings, the members of the Nabisco Tax Group or the members of the RJRN Tax
Group under this Agreement results in any increased tax liability or reduction
of any Tax Asset of the recipient of such payment, then, in addition to any
amounts otherwise owed under this Agreement, the payor shall pay the sum of (i)
any interest or penalty attributable to such increased tax liability or to the
reduction of such Tax Asset, and (ii) the After-Tax Amount.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Guarantee. Nabisco shall guarantee the obligations under
this Agreement of each other member of the Nabisco Tax Group. RJRN and RJRT
shall guarantee the obligations under this Agreement of each other member of the
RJRN Tax Group.
SECTION 11.02. Dispute Resolution. If the parties hereto are unable to
resolve any disagreement or dispute relating to this Agreement within 20 days,
such disagreement or dispute shall be resolved by Holdings. Any such resolution
shall be binding on the parties to this Agreement without further recourse.
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SECTION 11.03. Authorization. Each of Holdings, RJRN, Nabisco and RJRT
hereby represents and warrants that (i) it has the power and authority to
execute, deliver and perform this Agreement, (ii) this Agreement has been duly
authorized by all necessary corporate action on the part of such party, (iii)
this Agreement constitutes a legal, valid and binding obligation of such party,
and (iv) the execution, delivery and performance of this Agreement by such party
does not contravene or conflict with any provision or law or of such party's
charter or bylaws or any agreement, instrument or order binding on such party.
SECTION 11.04. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given:
if to Holdings, to:
Nabisco Group Holdings Corp.
f/k/a RJR Nabisco Holdings Corp.
1301 Avenue of the Americas
New York, NY 10019
Attention: Chief Financial Officer
Facsimile: To be determined
if to RJRN and/or RJRT, to:
R.J. Reynolds Tobacco Holdings, Inc.
f/k/a/ RJR Nabisco, Inc.
R. J. Reynolds Tobacco Company
401 North Main Street
Plaza 6
Winston-Salem, NC 27102
Attention: Vice President -- Tax
Facsimile: 336-741-0259
if to Nabisco, to:
Nabisco Holdings Corp.
7 Campus Drive
Parsippany, NJ 07054-0311
Attention: Senior Vice President -- Tax
Facsimile: 973-682-6649
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and, in each case, to:
Nabisco, Inc.
200 DeForest Avenue
East Hanover, NJ 07936
Attention: Stephen Katzman
Vice President -- Tax Audits and Research
Facsimile: 973-503-3568
or any other address or facsimile number as such party may hereafter specify in
writing for this purpose by notice to the other parties to this Agreement. Each
such notice, request or other communication under this Section 11.04 shall be
effective (a) if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section and the appropriate facsimile
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section.
SECTION 11.05. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver
is in writing and signed by the parties that would be affected by such amendment
or waiver.
(b) Without limiting the generality of Section 11.05(a), Holdings and
the Nabisco Tax Group shall have the right, in connection with any of the
matters covered by this Agreement or other tax matters, to make additional
arrangements between themselves without the approval of RJRN or RJRT, so long as
the RJRT Tax Group's rights under this Agreement are not adversely affected by
such additional arrangements.
(c) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement shall be cumulative and not exclusive of any rights
or remedies provided by law.
SECTION 11.06. Expenses. (a) Except as specifically provided otherwise
in this Agreement or in Section 10.03 or 10.08 of the Distribution Agreement,
each party shall bear its own costs and expenses (including, without limitation,
attorneys' fees and other professional fees and expenses).
(b) Without limiting the generality of Section 11.06(a), each party
shall bear the costs and expenses in connection with the preparation for or
conduct of
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litigation (or any other Tax Proceeding that is not a Tax audit) relating to
taxes (i) that are a liability of such party, and/or (ii) against which such
party has an indemnification obligation under Article 7.
SECTION 11.07. Successors and Assigns. The provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties to this
Agreement and their respective successors (whether by merger, acquisition of
assets or otherwise, and, including, without limitation, any successor
succeeding to the tax attributes of a party under Section 381 of the Code) and
assigns, to the same extent as if such successor or assign had been an original
party to this Agreement; provided that, except as set forth in this Agreement,
no party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of each of the other
parties to this Agreement.
SECTION 11.08. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of New York.
SECTION 11.09. Counterparts; Effectiveness; No Third Party
Beneficiaries. (a) This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become
effective upon the consummation of the Distribution, provided that at or before
such time, each party to this Agreement shall have received a counterpart of
this Agreement signed by the other parties. The parties to this Agreement do not
intend that any of its provisions will or do confer any rights, benefits,
remedies, obligations or liabilities under this Agreement upon any person other
than (i) the parties to this Agreement, (ii) other members of the Nabisco Tax
Group and (iii) other members of the RJRN Tax Group, together in each case with
their respective successors and assigns.
(b) All rights and obligations arising under of this Agreement shall
survive until they are fully effectuated or performed. Notwithstanding anything
in this Agreement to the contrary, this Agreement shall remain in effect and its
provisions shall survive for the full period of all applicable statutes of
limitation (giving effect to any extension, waiver or mitigation thereof).
SECTION 11.10. Severability. If any one or more of the provisions of
this Agreement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
in this Agreement shall not in any way be affected or impaired by such holding.
The parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions so that the replacement provisions will be
valid, legal and enforceable and will have an economic effect which comes as
close as
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possible to that of the invalid, illegal or unenforceable provisions.
SECTION 11.11. Specific Performance. Each of RJRN and the other members
of the RJRN Tax Group acknowledges and agrees that damages for a breach or
threatened breach of any of the provisions of this Agreement would be inadequate
and that irreparable harm would occur. In recognition of this fact, each such
corporation agrees that, if there is a breach or threatened breach, in addition
to any damages, any of the other nonbreaching parties to this Agreement, without
posting any bond, shall be entitled to seek and obtain equitable relief in the
form of specific performance, temporary restraining order, temporary or
permanent injunction, attachment or any other equitable remedy that may then be
available to obligate the breaching party to (i) comply with the covenants made
by, and perform other obligations of, it (or, as appropriate, of RJRN) under
this Agreement, or (ii) if the breaching party is unable, for whatever reason,
to comply with such covenants and perform such obligations, to take such other
actions as are necessary, advisable or appropriate to give the other parties to
this Agreement (and the other corporations in the Nabisco Tax Group) the tax
effect and the economic effect that come as close as possible to compliance with
such covenants and performance of such obligations.
SECTION 11.12. Captions. Section captions used in this Agreement are
for convenience only and shall not affect the construction of this Agreement.
40
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IN WITNESS WHEREOF, the parties to this Agreement have caused this Tax
Sharing Agreement to be duly executed by their respective authorized officers as
of the date first above written.
RJR NABISCO HOLDINGS CORP.
By /s/ J. T. Pearson
---------------------------------------
Name: J. T. Pearson
Title: Senior Vice President
-- Taxation
R.J. REYNOLDS TOBACCO HOLDINGS,
INC.
By /s/ J. T. Pearson
---------------------------------------
Name: J. T. Pearson
Title: Senior Vice President
-- Taxation
NABISCO HOLDINGS CORP.
By /s/ Gary Lewbel
---------------------------------------
Name: Gary Lewbel
Title: Senior Vice President -- Tax
R. J. REYNOLDS TOBACCO COMPANY
By /s/ Kenneth J. Lapiejko
---------------------------------------
Name: Kenneth J. Lapiejko
Title: Senior Vice President, Chief
Financial Officer and Treasurer
41
EXHIBIT 10.2
R.J. REYNOLDS TOBACCO HOLDINGS, INC.
1999 LONG TERM INCENTIVE PLAN
1. Purpose of Plan
The R.J. Reynolds Tobacco Holdings, Inc. 1999 Long Term Incentive Plan
is effective June 14, 1999 and is designed:
(a) to promote the long term financial interests and growth of R.J.
Reynolds Tobacco Holdings, Inc. 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) "Base Value" means not less than the Fair Market Value on the date
a Stock Appreciation Right is granted, or, in the case of a Stock Appreciation
Right granted retroactively in tandem with (or in replacement of) an outstanding
stock option, not less than the exercise price of such option;
(b) "Board of Directors" means the Board of Directors of RJR;
(c) "Code" means the Internal Revenue Code of 1986, as amended;
(d) "Committee" means the Compensation Committee of the Board of
Directors;
(e) "Common Stock" or "Share" means common stock of RJR which may be
authorized but unissued, or issued and reacquired;
(f) "Effective Date" shall have the meaning set forth in Section 12;
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended;
<PAGE>
(h) "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;
(i) "Grant Agreement" means an agreement between RJR and a Participant
that sets forth the terms, conditions and limitations applicable to a Grant;
(j) "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, Other Stock Option, Stock Appreciation Right, Restricted
Stock, Performance Units or Performance Shares or any combination of the
foregoing;
(k) "Incentive Stock Options" shall have the meaning set forth in
Section 5(a);
(l) "Other Stock Options" shall have the meaning set forth in Section
5(b);
(m) "Options" shall mean Incentive Stock Options and Other Stock
Options;
(n) "Participant" means any employee, or other person having a unique
relationship with RJR 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 RJR or one of its
Subsidiaries may not be a Participant;
(o) "Performance Units" shall have the meaning set forth in Section
5(e);
(p) "Performance Shares" shall have the meaning set forth in Section
5(f);
(q) "Restricted Stock" shall have the meaning set forth in Section
5(d);
(r) "RJR" means R.J. Reynolds Tobacco Holdings, Inc. and any successors
thereto;
(s) "Stock Appreciation Rights" shall have the meaning set forth in
Section 5(c); and
(t) "Subsidiary" means any corporation or other entity in which RJR has
a significant equity or other interest as determined by the Committee.
3. Administration of Plan
(a) The Plan shall be administered by the Committee or, in lieu of the
2
<PAGE>
Committee, the Board of Directors. 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 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, RJR, and the officers and
directors of RJR 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 Participants, RJR 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 RJR 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
employees, or other persons having a unique relationship with RJR 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 RJR 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 RJR.
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:
3
<PAGE>
(a) Incentive Stock Options - These are stock options within the
meaning of Section 422 of the Code to purchase 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 RJR 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. 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 and (ii) except for
options granted in connection with equitable adjustments made to RJR Nabisco
Holdings Corp. options upon the distribution of Common Stock by RJR Nabisco
Holdings Corp. to its shareholders, may not have an option exercise price less
than the Fair Market Value of Common Stock on the date the option is granted.
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 RJR 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 RJR, or one of its Subsidiaries,
for Participants) and repays the borrowing, all in accordance with any
applicable guidelines of the Committee.
(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 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).
4
<PAGE>
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 at any time. No Stock Appreciation Right granted under this
Plan may be exercised more than 15 years after the date it is granted.
(d) Restricted Stock - Restricted Stock is a Grant of Common Stock or
stock units equivalent to Common Stock subject to such conditions and
restrictions as the Committee shall determine. Any rights to dividends or
dividend equivalents accruing due to a grant of Restricted Stock shall also be
determined by the Committee. Grants of Restricted Stock shall be subject to a
normal minimum vesting schedule of 3 years. The number of shares of Restricted
Stock and the restrictions or conditions on such shares, as the Committee may
determine, shall be set forth in the Grant Agreement or by other Plan rules, and
the certificate for the Restricted Stock shall bear evidence of the restrictions
or conditions.
(e) Performance Units - These are rights, denominated in cash or cash
units, to receive, at a specified future date, payment in cash or stock 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 as set forth in Section 7 and the period over which performance will be
measured.
(f) Performance Shares - These are rights granted in the form of Common
Stock or stock units equivalent to Common Stock 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 at which the Common
Stock is traded on the last day of the specified performance period of a
specified number of shares of Common Stock based on 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
Grants so payable as set forth in Section 7 and the period over which
performance will be measured.
6. Limitations and Conditions
(a) The number of shares available for Grants under this Plan shall be
8 million shares of the authorized Common Stock as of the Effective Date. The
maximum number of Shares subject to Grants of Options and Stock Appreciation
Rights to any one Participant in any calendar year shall not exceed 2 million
shares for each type of Grant, plus any amount of shares that were available
within this limit for such type of Grant for any prior year such limitation was
5
<PAGE>
in effect and which were not covered by Options or Stock Appreciation Rights
granted to such Participant during such year. No more than 3 million shares of
Common Stock may be granted as Incentive Stock Options. The maximum payment that
any one Participant may be paid in respect of any Grant of Performance Units
granted for any specified performance period shall not exceed $10 million. The
maximum payment that any one Participant may receive in respect of any Grant of
Performance Shares granted for any specified performance period shall not exceed
500,000 shares of Common Stock or the cash equivalent thereof. The aggregate
maximum number of shares of Common Stock to which Restricted Stock granted may
relate shall not exceed 3 million shares. Shares related to Grants that are
forfeited, terminated, cancelled, expire unexercised, settled in cash in lieu of
stock, received in full or partial payment of any exercise price 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. A Grant may contain
the right to receive dividends or dividend equivalent payments which may be paid
either currently, credited to a Participant or deemed invested in shares or
share units of Common Stock. Any such crediting of dividends or dividend
equivalents or reinvestment in Shares may be subject to such conditions,
restrictions and contingencies as the Committee shall establish, including the
reinvestment of such credited amounts in Common Stock equivalents. Subject to
the overall limitation on the number of shares of Common Stock that may be
delivered under this Plan, the Committee may use available shares of Common
Stock as the form of payment for compensation, grants or rights earned or due
under any other compensation plans or arrangements of RJR, including the plan of
any entity acquired by RJR.
(b) 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. RJR may adopt other compensation programs, plans or arrangements
as it deems appropriate.
(c) Nothing contained herein shall affect the right of the Corporation
to terminate any Participant's employment at any time or for any reason.
(d) Deferrals of Grant payouts may be provided for, at the sole
discretion of the Committee, in the Grant Agreements.
(e) No benefit under the Plan 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.
(f) 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 RJR
or its Subsidiaries and shall not affect any benefits under any other benefit
6
<PAGE>
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. This Plan shall be
unfunded and shall not create (or be construed to create) a trust or a separate
fund or funds. The Plan shall not establish any fiduciary relationship between
RJR and any Participant or beneficiary of a Participant. To the extent any
person holds any obligation of RJR by virtue of an award granted under this
Plan, such obligation shall merely constitute a general unsecured liability of
RJR and accordingly shall not confer upon such person any right, title or
interest in any assets of RJR.
(g) Unless the Committee determines otherwise, no benefit or promise
under the Plan shall be secured by any specific assets of RJR or any of its
Subsidiaries, nor shall any assets of RJR or any of its Subsidiaries be
designated as attributable or allocated to the satisfaction of RJR's obligations
under the Plan.
7. Performance Factors
The performance factors selected by the Compensation Committee in
respect of Performance Units and Performance Shares shall be based on any one or
more of the following: price of Common Stock or the stock of any affiliate,
shareholder return, return on equity, return on investment, return on capital,
return on invested capital, economic profit, economic value added, net income,
cash net income, free cash flow, earnings per share, cash earnings per share,
operating company contribution or market share. These factors shall have a
minimum performance standard below which no amount will be paid and may have a
maximum performance standard above which no additional payments will be made.
The applicable performance period shall not exceed 10 years.
8. Adjustments
(a) In the event of any stock split, spin-off, stock dividend,
extraordinary cash dividend, stock combination or reclassification,
recapitalization or merger, change in control, or similar event, the Committee
may adjust appropriately the number or kind of shares subject to the Plan and
available for or covered by Grants, share prices related to outstanding Grants
and the other applicable limitations of Section 6(a), and make such other
revisions to outstanding Grants and the LTIP as it deems are equitably required.
(b) In the event of a Change of Control, except as otherwise set forth
in the terms of a Grant:
(i) Options granted pursuant to paragraphs 5(a) or 5(b) hereof
7
<PAGE>
shall become fully vested and exercisable; provided, however, that the Committee
may make a cash payment to Participants (A) in cancellation of such Options as
provided in the applicable Grant Agreements or any amendments or deemed
amendments thereto entered into by RJR and the Participant in such amount as
shall be provided in such Grant Agreements or amendments or (B) in lieu of the
delivery of shares upon exercise, equal to 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
exercised;
(ii) Stock Appreciation Rights shall become fully vested and
exercisable;
(iii) Restricted Stock shall have all restrictions removed;
(iv) Performance Units 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
Performance Units or the value derived from the actual performance as of the
date of the Change of Control;
(v) Performance Shares 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
Performance 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; and
(vi) The Committee shall have authority to establish or 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:
(i) 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 any employee
benefit plans sponsored by RJR, is or becomes the "beneficial owner" (as defined
8
<PAGE>
in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or more of
the combined voting power of RJR's outstanding securities ordinarily having the
right to vote at elections of directors.
(ii) individuals who constitute the Board of Directors on June
14, 1999 (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 RJR's 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 RJR in which such person is named as a nominee of RJR 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 RJR's 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 RJR of a plan or
agreement providing (1) for a merger or consolidation of RJR other than with a
wholly-owned subsidiary and other than a merger or consolidation that would
result in the voting securities of RJR 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 RJR 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 RJR.
If any of the events enumerated in this paragraph (iii) occur, RJR's Board shall
determine the effective date of the Change of Control resulting therefrom for
purposes of this Plan and the Grants hereunder.
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(a) 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. Except as provided in Section 8(a), the
exercise price of any outstanding Option or Stock Appreciation Right may not be
adjusted or amended, whether through amendment, cancellation or replacement,
unless such adjustment or amendment is properly approved by RJR's shareholders.
Likewise, the share and payment limitations set forth in Section 6(a) cannot be
increased, and the minimum Option or Stock Appreciation Right grant price
9
<PAGE>
limitations set forth in Sections 5(a), 5(b) and 5(c) cannot be reduced, in
either case without proper shareholder approval. Subject to the foregoing, RJR's
Board of Directors may amend, suspend or terminate this Plan as it deems
necessary and appropriate to better achieve the Plan's purpose.
10. Foreign Options and Rights
(a) The Committee may make Grants to 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 stock
options may have terms and conditions that differ from Incentive Stock Options
and Other Stock Options for the purpose of complying with the foreign tax laws.
(b) The terms and conditions of stock 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.
11. Withholding Taxes
The Corporation shall have the right to deduct from any payment or
settlement made under the Plan any federal, state or local income or other taxes
required by law to be withheld with respect to such payment.
12. Effective Date and Termination Dates
The Plan was adopted by RJR (and approved by its shareholder) on May
12, 1999. The Plan shall be effective on and as of June 14, 1999, and shall
terminate ten years later, subject to earlier termination by the Board of
Directors pursuant to Paragraph 9. The terms of Grants made on or before the
expiration of the Plan shall extend beyond such expiration. Grants made under
the Plan prior to the Effective Date shall be governed by the terms of the Plan
as in effect on the date such Grant was made.
EXHIBIT 99.1
Letterhead of RJ Reynolds Tobacco Company
Contact: Maura Payne RJRT 99-15
(336) 741-6996 June 15, 1999
SPIN-OFF OF R.J. REYNOLDS TOBACCO COMPANY COMPLETED
WINSTON-SALEM, N.C. - June 15, 1999 - R.J. Reynolds Tobacco Holdings,
Inc. begins operating today as an independent, publicly held company, following
the completion yesterday of the previously announced spin-off from its former
parent company, RJR Nabisco Holdings Corp.
Shares in R.J. Reynolds Tobacco Holdings, Inc. will begin trading on
the New York Stock Exchange (NYSE) today under the symbol "RJR." They have been
trading on the NYSE since June 1 on a "when issued" basis.
On May 12, 1999, the RJR Nabisco board of directors declared a 1-for-3
stock dividend of shares in the domestic tobacco company to RJR Nabisco
shareholders of record as of May 27, 1999. That distribution of shares took
place yesterday afternoon, following the market's closing for the day.
"We are very pleased to be operating once again as a freestanding,
publicly traded company," said Andrew J. Schindler, RJR's president and chief
executive officer. "We are committed to a very clear set of goals: stabilizing
and then growing our earnings and cash flow; providing an attractive return to
our shareholders in the form of competitive and sustainable dividends; and
profitably growing our key brands."
With 1998 annual pro-forma net sales of approximately $5.7 billion, RJR
is the nation's second-largest tobacco company, with about a 25 percent share of
market. The company sells four of the top 10 U.S. cigarette brands: Winston,
Salem, Camel and Doral. It will continue to operate out of its Winston-Salem,
N.C., headquarters with a U.S. workforce of approximately 8,000.
###
EXHIBIT 99.2
Letterhead of RJ Reynolds Tobacco Company
Contact: Barbara Goho RJRT 99-15
(336) 741-6683 June 15, 1999
R.J. Reynolds Tobacco Holdings, Inc. announces
appointments to its Board of Directors
R.J. Reynolds Tobacco Holdings, Inc. has announced the appointment of eight
individuals to its Board of Directors. The R.J. Reynolds Tobacco Holdings, Inc.
Board of Directors will include Andrew J. Schindler, John T. Chain, Jr., A.D.
Frazier, Jr., Denise Ilitch, John G. Medlin, Jr., Nana Mensah, Joseph P. Viviano
and Thomas C. Wajnert.
"I am extremely pleased to have a group of such talented and experienced
individuals join the R.J. Reynolds Tobacco Board of Directors," said Andrew J.
Schindler, president and chief executive officer of R.J. Reynolds Tobacco. "They
have an excellent understanding of our business and bring a wealth of experience
to the RJR board. I am looking forward to working with them."
o John T. Chain, Jr.: Gen. (Ret.) Chain has been the chairman of Thomas Group,
Inc. since May 1998 and has been a member of the board of directors of
Thomas Group since May 1995. He also serves as the president of Quarterdeck
Equity Partners, Inc., an investor in the defense industry. He served as
special assistant to the chairman of Burlington Northern Sante Fe
Corporation from November 1995 to March 1996, and as executive vice
president of Burlington Northern from 1991 to November 1995. For more than
five years prior to that time, he served as a General (Commander-in-Chief,
the Strategic Air Command) in the United States Air Force. Gen. Chain is a
member of the boards of directors of Nabisco Group Holdings, Nabisco,
Northrop Grumman Corporation, Kemper Insurance and Thomas Group.
o A.D. Frazier: Frazier has been president and chief executive officer of
INVESCO, Inc. since April 1997 and was executive vice president from
November 1996 to April 1997. From March 1991 until November 1996, Frazier
was chief operating officer of the Atlanta Committee for the Olympic Games.
From September 1982 to March 1991 he was executive vice president of First
Chicago Corporation, and prior to that was with Citizens and Southern
National Bank from September 1969 to September 1982, where his last position
was executive vice president. Frazier is a member of the boards of directors
of AMVESCAP, PLC (the parent company of INVESCO, Inc.), Magellan Health
Services, Inc., Apache Corporation and Rock-Tenn Company. He is also a
member of the Georgia Board of Corrections.
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o Denise Ilitch: Ilitch, the vice chairwoman of Little Caesar Enterprises,
Inc. since 1997, has served in a variety of corporate positions with her
family's pizza chain for more than 20 years. Since 1996, she also has served
as the president of Olympia Development, L.L.C., the Ilitch family's real
estate and entertainment development company in downtown Detroit. In
addition, she is executive vice president of Ilitch Ventures, Inc., a
privately held company created in 1999 that owns and manages the Ilitch
family's business interests in the food and entertainment industries (Little
Caesar Enterprises, Olympia Entertainment, Olympia Development, the Detroit
Red Wings, the Detroit Tigers, the Detroit Rockers and Olympia Specialty
Foods.) Ilitch also has been president and owner of her own marketing firm,
Bright Lites, Inc. She serves on the board of directors of the Detroit
Branch of the Federal Reserve Bank of Chicago.
o John G. Medlin, Jr.: Medlin is chairman emeritus of Wachovia Corporation and
served as its chairman from 1988 to April 1998 and its chief executive
officer from 1977 until December 1993. Medlin is a member of the boards of
directors of BellSouth Corporation, Burlington Industries, Inc., Media
General, Inc., National Service Industries, Inc., USAirways Group, Inc. and
Wachovia Corporation. From 1983 until 1998, Medlin was a member of the board
of directors of RJR Nabisco, Inc. and predecessor companies.
o Nana Mensah: Mensah has served as president and chief operating officer of
Long John Silver's Restaurants, Inc. since 1997. Previously, Mensah had been
senior vice president - operations and concept development of PepsiCo
Restaurants International since 1994. Prior to that time, he was vice
president - operations for KFC USA, Inc., from 1990 until 1994, and from
1988 to 1990, he was market manager/regional operations director of
Southland Corporation.
o Joseph P. Viviano: Viviano has served as the vice chairman of Hershey Foods
Corporation since January 1999. Previously, Viviano had been president and
chief operating officer of Hershey Foods Corporation from 1994 through 1998.
He is a member of the boards of directors of Hershey Foods Corporation,
Chesapeake Corporation, Huffy Corporation and Harsco Corporation.
o Thomas C. Wajnert: Wajnert has been chairman of Epix Holdings, Inc. since
March 1998 where he is a significant investor and served as chief executive
officer from March 1998 to April 1999. Previously, Wajnert was chairman of
the board of directors from January 1992 until December 1997 and chief
executive officer from November 1984 until December 1997 of AT&T Capital
Corporation. From February 1968 until October 1984, he was employed by U.S.
Leasing International, where he last held the position of executive vice
president. Wajnert serves on the boards of JLG Industries, Inc., CNL Capital
Corporation and Epix Holdings, Inc.
o Andrew J. Schindler: Schindler has served as president and chief executive
officer of Reynolds Tobacco since 1995. Schindler joined RJR in 1974, and
after holding numerous positions, he became senior vice president operations
in July 1989. He was elected executive vice president - operations in 1991.
In May of 1994, Schindler assumed the position of president and chief
operating officer of Reynolds Tobacco. He is vice chairman of the N.C.
Emerging Technology Alliance and a member of the advisory board of Wachovia
Bank of North Carolina, N.A., the North Carolina School of the Arts
Foundation Board, the Wake Forest University Baptist Medical Center Board of
Visitors and the Board of Directors of Winston-Salem Business, Inc.
<PAGE>
The first meeting of the Board is scheduled for July 2.
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