Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
Form S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
____________________
RJR NABISCO HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-3490602
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1301 Avenue of the Americas
New York, New York 10019
(Address, including zip code, of registrant's principal executive office)
____________________
NABISCO BRANDS DE PUERTO RICO, INC.
CAPITAL ACCUMULATION PLAN
(Full title of the plan)
____________________
Lawrence R. Ricciardi, Esq.
RJR NABISCO HOLDINGS CORP.
1301 Avenue of the Americas
New York, New York 10019
(212) 258-5600
(Name, address and telephone number, including area code, of agent for
service)
____________________
Copies to:
David J. Sorkin, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
____________________
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Maximum Maximum
Securities to Amount to Offering Aggregate Amount of
be Registered be Price Offering Registration
Registered Per Price Fee(2)
Share(1)
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Common Stock, par value
$.01 per share ......... 15,000 shares $5.8125 $87,187.50 $100.00
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(1) Pursuant to Rule 457 under the Securities Act of 1933 the proposed
maximum offering price per share relating to the Common Stock being
registered has been based on the average of the high and low prices of
the Common Stock reported on the New York Stock Exchange-Composite
Tape on June 24, 1994.
(2) The registration fee relating to the Common Stock being registered is
the minimum fee pursuant to Section 6(b) of the Securities Act of
1933.
In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to
be offered or sold pursuant to the employee benefit plan described herein.
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PART I
Item 1. Plan Information
Not required to be filed with this Registration Statement.
Item 2. Registrant Information and Employee Plan Annual Information
Not required to be filed with this Registration Statement.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed with the Securities and Exchange Commission
(the "Commission") by RJR Nabisco Holdings Corp., a Delaware corporation
("Holdings"), and the Nabisco Brands de Puerto Rico, Inc. Capital Accumulation
Plan (the "Plan") are incorporated as of their respective dates in this
Registration Statement by reference:
A. Holdings' Annual Report on Form 10-K for the year ended December 31,
1993.
B. The Annual Report on Form 11-K of the Plan for the year ended
December 30, 1993.
C. All other reports filed by Holdings pursuant to Sections 13(a) or
15(d) of the Securities Exchange Act of 1934 since December 31, 1993.
D. Description of Holdings' Common Stock contained in Holdings'
Registration Statement on Form 8-A filed with the Commission on
January 31, 1991.
All documents filed by Holdings and the Plan pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the filing
of a post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold are deemed
to be incorporated by reference in this Registration Statement and are a part
hereof from the date of filing such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Certain legal matters in connection with any original issuance Common Stock
offered hereby are being passed upon for Holdings by Simpson Thacher & Bartlett
(a partnership which includes professional corporations), New York, New York. A
member of Simpson Thacher & Bartlett owns shares of Common Stock which represent
less than 0.1% of the currently outstanding shares of Common Stock.
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Item 6. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise.
The indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided that such officer
or director acted in good faith and in a manner he reasonably believed to be in
or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his conduct was illegal. A
Delaware corporation may indemnify officers and directors against expenses
(including attorneys' fees) in connection with the defense or settlement of an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.
In accordance with the Delaware Law, the Certificate of Incorporation of
Holdings contains a provision to limit the personal liability of the directors
of Holdings for violations of their fiduciary duty. This provision eliminates
each director's liability to Holdings or its stockholders for monetary damages
except (i) for any breach of the director's duty of loyalty to Holdings or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware Law providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemption, or (iv) for any transaction
from which a director derived an improper personal benefit. The effect of this
provision is to eliminate the personal liability of directors for monetary
damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence.
Article IV of the By-Laws of Holdings provides for indemnification of the
officers and directors of Holdings to the full extent permitted by applicable
law.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
4.1(a) Amended and Restated Certificate of Incorporation of RJR Nabisco
Holdings Corp., filed October 1, 1990 (incorporated by reference
to Exhibit 3.1 to Amendment No. 4, filed October 2, 1990, to the
Registration Statement on Form S-4 of RJR Nabisco Holdings Corp.,
Registration No. 33-36070, filed July 25, 1990, as amended)
4.1(b) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed January 29,
1991 (incorporated by reference to Exhibit 3.1(a) to Amendment
No. 3, filed January 31, 1991, to the Registration Statement on
Form S-4 of RJR Nabisco Holdings Corp., filed December 14, 1990,
Registration No. 33-38227)
4.1(c) Certificate of Designation of ESOP Convertible Preferred Stock,
filed April 10, 1991 (incorporated by reference to Exhibit 3.1(b)
to Amendment No. 2 filed on April 11, 1991, to the Registration
Statement on Form S-1 of RJR Nabisco Holdings Corp., Registration
No. 33-39532, filed on March 20, 1991).
4.1(d) Certificate of Designation of Series A Conversion Preferred
Stock, filed November 7, 1991 (incorporated by reference to
Exhibit 3.1(c) to Amendment No. 3, filed on November 1, 1991, to
the Registration Statement on Form S-1 of RJR Nabisco Holdings
Corp., Registration No. 33-43137, filed October 2, 1991).
4.1(e) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of RJR Nabisco Holdings Corp., filed December 16,
1991 (incorporated by reference to Exhibit 3.1(d) of the Annual
Report on Form 10-K of RJR Nabisco Holdings Corp., RJR Nabisco
Holdings Group, Inc., RJR Nabisco Capital Corp. and RJR Nabisco,
Inc. for the fiscal year ended December 31, 1991, File Nos.
1-10215, 1-10214, 1-10248 and 1-6388).
4.1(f) Certificate of Amendment to the Amended and Restated Certificate
of Incorporation of RJR Nabisco Holdings Corp. (relating to the
authorization of the issuance of additional shares of Common
Stock) filed April 6, 1993 (incorporated by reference to Exhibit
3.3 of the Quarterly Report on Form 10-Q of RJR Nabisco Holdings
Corp. and RJR Nabisco, Inc. for the fiscal quarter ended March
31, 1993, filed April 30, 1993).
4.1(g) Certificate of Designation of Series B Cumulative Preferred
Stock, filed August 16, 1993 (incorporated by reference to
Exhibit 3.1(g) of the Annual Report on Form 10-K of RJR Nabisco
Holdings Corp. and RJR Nabisco, Inc. for the fiscal year ended
December 31, 1993, File Nos. 1- 10215 and 1-6388 (the "1993 Form
10-K").
4.1(h) Certificate of Designation of Series C Conversion Preferred
Stock, filed May 6, 1994.
4.2 Amended and Restated By-laws of RJR Nabisco Holdings Corp., as
amended, effective January 20, 1994 (incorporated by reference
to Exhibit 3.2 to the 1993 Form 10-K).
4.3 Nabisco Brands de Puerto Rico, Inc. Capital Accumulation Plan.
4.4 RJR Nabisco Puerto Rico Defined Contribution Master Trust
Agreement, as amended and restated July 12, 1993, between RJR
Nabisco, Inc. and Banco Popular de Puerto Rico.
5 Opinion of Simpson Thacher & Bartlett regarding the legality of
any original issuance securities being registered.
23.1 Consent of Deloitte & Touche.
23.2 Consent of Simpson Thacher & Bartlett (included in Exhibit 5).
24 Power of Attorney.
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Item 9. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information set forth in the Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall
not apply to information contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and each filing of the Plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to submit
the Plan and any amendment thereto to the Internal Revenue
Service (the "IRS") in a timely manner and will make all changes
required by the IRS in order to qualify the Plan under Section
401 of the Internal Revenue Code.
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5
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, the registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for
filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New
York, on this 1st day of July, 1994.
RJR NABISCO HOLDINGS CORP.
By: Lawrence R. Ricciardi
-----------------------------
Lawrence R. Ricciardi
Pursuant to the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed by
the following persons in the capacities on July 1, 1994.
Signature Title
--------- -----
* Chairman of the Board
------------------- and Chief Executive Officer
Charles M. Harper (principal executive officer)
and Director
* Executive Vice President and
------------------- Chief Financial Officer
Stephen R. Wilson (principal financial officer)
* Senior Vice President and Controller
----------------- (principal accounting officer)
Robert S. Roath
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* Director
-----------------------
John T. Chain, Jr.
* Director
-----------------------
John L. Clendenin
* Director
-----------------------
James H. Greene, Jr.
* Director
-----------------------
H. John Greeniaus
* Director
-----------------------
James W. Johnston
* Director
-----------------------
Henry R. Kravis
* Director
-----------------------
John G. Medlin, Jr.
* Director
-----------------------
Paul E. Raether
* Director
-----------------------
Lawrence R. Ricciardi
* Director
-----------------------
Rozanne L. Ridgway
* Director
-----------------------
Clifton S. Robbins
* Director
-----------------------
George R. Roberts
* Director
-----------------------
Scott M. Stuart
* Director
-----------------------
Michael T. Tokarz
*By: Jo-Ann Ford
-----------------
Jo-Ann Ford
Attorney-in-Fact
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Pursuant to the requirements of the Securities Act of
1933, the trustees (or other persons who administer the employee
benefit plan) have duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 1st
day of July 1994.
NABISCO BRANDS DE PUERTO RICO, INC.
CAPITAL ACCUMULATION PLAN
H. Colin McBride
------------------------------------
H. Colin McBride
Secretary, RJR Employee
Benefits Committee
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INDEX TO EXHIBITS
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Exhibit Sequentially
Number Description of Exhibit Numbered Page
------- ---------------------- -------------
4.1(a) - Amended and Restated Certificate
of Incorporation of RJR Nabisco
Holdings Corp., filed October 1,
1990 (incorporated by reference
to Exhibit 3.1 to Amendment No.
4, filed October 2, 1990, to the
Registration Statement on Form S-
4 of RJR Nabisco Holdings Corp.,
Registration No. 33-36070, filed
July 25, 1990, as amended)
4.1(b) - Certificate of Amendment to
Amended and Restated Certificate
of Incorporation of RJR Nabisco
Holdings Corp., filed January 29,
1991 (incorporated by reference
to Exhibit 3.1(a) to Amendment
No. 3, filed January 31, 1991, to
the Registration Statement on
Form S-4 of RJR Nabisco Holdings
Corp., filed December 14, 1990,
Registration No. 33-38227)
4.1(c) - Certificate of Designation of ESOP
Convertible Preferred Stock, filed
April 10, 1991 (incorporated by
reference to Exhibit 3.1(b) to
Amendment No. 2 filed on April 11,
1991, to the Registration
Statement on Form S-1 of RJR
Nabisco Holdings Corp.,
Registration No. 33-39532, filed
on March 20, 1991).
4.1(d) - Certificate of Designation of
Series A Conversion Preferred
Stock, filed November 7, 1991
(incorporated by reference to
Exhibit 3.1(c) to Amendment No.
3, filed on November 1, 1991, to
the Registration Statement on
Form S-1 of RJR Nabisco Holdings
Corp., Registration No. 33-43137,
filed October 2, 1991).
4.1(e) - Certificate of Amendment to
Amended and Restated Certificate
of Incorporation of RJR Nabisco
Holdings Corp., filed December 16,
1991 (incorporated by reference to
Exhibit 3.1(d) of the Annual
Report on Form 10-K of RJR Nabisco
Holdings Corp., RJR Nabisco
Holdings Group, Inc., RJR Nabisco
Capital Corp. and RJR Nabisco,
Inc. for the fiscal year ended
December 31, 1991, File Nos.
1-10215, 1-10214, 1-10248 and
1-6388).
4.1(f) - Certificate of Amendment to the
Amended and Restated Certificate
of Incorporation of RJR Nabisco
Holdings Corp. (relating to the
authorization of the issuance of
additional shares of Common Stock)
filed April 6, 1993 (incorporated
by reference to Exhibit 3.3 of
the Quarterly Report on Form 10-Q
of RJR Nabisco Holdings Corp. and
RJR Nabisco, Inc. for the fiscal
quarter ended March 31, 1993,
filed April 30, 1993).
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Exhibit Sequentially
Number Description of Exhibit Numbered Page
------- ---------------------- -------------
4.1(g) - Certificate of Designation of
Series B Cumulative Preferred
Stock, filed August 16, 1993
(incorporated by reference to
Exhibit 3.1(g) of the Annual
Report on Form 10-K of RJR
Nabisco Holdings Corp. and RJR
Nabisco, Inc. for the fiscal
year ended December 31, 1993,
File Nos. 1- 10215 and 1-6388
(the "1993 Form 10-K").
4.1(h) - Certificate of Designation of
Series C Conversion Preferred
Stock, filed May 6, 1994.
4.2 - Amended and Restated By-laws
of RJR Nabisco Holdings Corp.,
as amended, effective January
20, 1994 (incorporated by
reference to Exhibit 3.2 to the
1993 Form 10-K).
4.3 - Nabisco Brands de Puerto Rico,
Inc. Capital Accumulation Plan.
4.4 - RJR Nabisco Puerto Rico Defined
Contribution Master Trust
Agreement, as amended and
restated July 12, 1993, between
RJR Nabisco, Inc. and Banco
Popular de Puerto Rico.
5 - Opinion of Simpson Thacher &
Bartlett regarding the legality
of any original issuance
securities begin registered.
23.1 - Consent of Deloitte & Touche.
23.2 - Consent of Simpson Thacher &
Bartlett (included in Exhibit 5).
24 - Power of Attorney.
RJR NABISCO HOLDINGS CORP.
CERTIFICATE OF DESIGNATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
-------------------------
SERIES C CONVERSION
PREFERRED STOCK
RJR Nabisco Holdings Corp. (the "Corporation"), a
corporation organized and existing under the laws of the State of
Delaware, HEREBY CERTIFIES that pursuant to the provisions of
Section 151 of the General Corporation Law of the State of
Delaware the following resolution was duly adopted by the
Executive Committee of the Board of Directors of the Corporation,
pursuant to authority conferred upon the Board of Directors by
the provisions of the Amended and Restated Certificate of
Incorporation, as amended, of the Corporation (the "Certificate
of Incorporation") and pursuant to authority conferred upon the
Executive Committee of the Board of Directors by Section 141(c)
of the General Corporation Law of the State of Delaware, by the
Certificate of Incorporation, by Article II, Section 4 of the By-
Laws of the Corporation and by the resolutions of the Board of
Directors of the Corporation dated February 23, 1994 and May 4,
1994, at a meeting of the Executive Committee thereof duly held
on April 28, 1994.
WHEREAS, the Board of Directors of the Corporation or
(except with respect to voting rights) a duly authorized
Committee thereof is authorized, within the limitations and
restrictions stated in the Certificate of Incorporation, to fix,
by resolution or resolutions for each series of Preferred Stock
(the "Preferred Stock"), 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
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 General Corporation Law of
the State of Delaware; and
WHEREAS, the Board of Directors of the Corporation on
February 23, 1994 and May 4, 1994 adopted resolutions authorizing
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2
a new series of Preferred Stock designated as Series C Conversion
Preferred Stock and delegating to the Executive Committee of the
Board of Directors the authority to act on behalf of the Board of
Directors in connection with the exercise of the powers set forth
in such resolutions to the fullest extent permitted by
Section 141(c) of the General Corporation Law of the State of
Delaware; and
WHEREAS, it is the desire of the Executive Committee of
the Board of Directors, pursuant to the authority conferred upon
the Executive Committee of the Board of Directors by
Section 141(c) of the General Corporation Law of the State of
Delaware, by the Certificate of Incorporation, by Article II,
Section 4 of the By-Laws of the Corporation and by the resolution
of the Board of Directors of the Corporation dated February 23,
1994, to fix the number of shares constituting a series of
Preferred Stock and the designations and powers, preferences and
relative, participating, optional and other special rights and
qualifications, limitations and restrictions of such series as
set forth below; and
WHEREAS, the Board of Directors of the Corporation on
February 23, 1994 and May 4, 1994 adopted a resolution fixing the
voting rights of such shares of Preferred Stock as set forth in
paragraph (6) below.
NOW, THEREFORE, BE IT RESOLVED, that there is hereby
authorized such series of Preferred Stock on the terms and with
the provisions herein set forth:
(1) Designation. The designation of the series of
Preferred Stock authorized by this resolution shall be "Series C
Conversion Preferred Stock" (the "Series C Preferred Stock")
consisting of 26,675,000 shares.
(2) Rank. The Series C Preferred Stock shall, with
respect to dividend rights and rights upon liquidation,
dissolution and winding up, rank prior to the Common Stock, par
value $0.01 per share (the "Common Stock"), of the Corporation
and on a parity with the Series A Conversion Preferred Stock, par
value $0.01 per share (the "Series A Conversion Preferred
Stock"), the Series B Cumulative Preferred Stock, par value $0.01
per share (the "Series B Cumulative Preferred Stock"), and the
ESOP Convertible Preferred Stock, par value $0.01 per share and
stated value $16.00 per share (the "ESOP Convertible Preferred
Stock"), of the Corporation. All equity securities of the
Corporation to which the Series C Preferred Stock ranks prior,
including the Common Stock, are collectively referred to herein
as the "Junior Securities," all equity securities of the
Corporation with which the Series C Preferred Stock ranks on a
parity, including the Series A Conversion Preferred Stock, the
Series B Cumulative Preferred Stock and the ESOP Convertible
Preferred Stock, are collectively referred to herein as the
"Parity Securities" and all equity securities of the Corporation
<PAGE>
3
(other than convertible debt securities) to which the Series C
Preferred Stock ranks junior, whether with respect to dividends
or upon liquidation, dissolution, winding-up or otherwise, are
collectively referred to herein as the "Senior Securities." The
Series C Preferred Stock shall be subject to the creation of
Junior Securities, Parity Securities and Senior Securities.
(3) Dividends. (a) The holders of outstanding shares
of the Series C Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds
legally available for the payment of dividends, cumulative
preferential cash dividends accruing at the per share rate of
$1.503 per quarter and no more, payable in arrears on each
February 15, May 15, August 15 and November 15, respectively
(each such date being hereinafter referred to as a "Dividend
Payment Date"), commencing on August 15, 1994. If any Dividend
Payment Date shall be or be declared a national or New York State
holiday or if banking institutions in the State of New York shall
be closed because of a banking moratorium or otherwise on such
date, then such dividends shall be paid on the next succeeding
day on which such banks shall be open. Each such dividend will
be payable to holders of record as they appear on the stock books
of the Corporation on such record dates, not less than 10 nor
more than 50 days preceding the payment dates thereof, as shall
be fixed by the Board of Directors. Dividends on the Series C
Preferred Stock shall accrue (whether or not declared) on a daily
basis from the previous Dividend Payment Date, except that the
first dividend shall accrue from the date of issuance of the
Series C Preferred Stock. Accrued and unpaid dividends shall not
bear interest. Dividends will cease to accrue in respect of the
Series C Preferred Stock on the Mandatory Conversion Date (as
defined in paragraph (4)(a)) or on the date of their earlier
redemption or conversion, unless the Corporation shall default in
delivering the shares of Common Stock or other kind of security
or other property and cash, if any, payable by the Corporation
upon such redemption or conversion pursuant to paragraph (4).
Dividends (or cash amounts equal to accrued and unpaid dividends)
payable on the Series C Preferred Stock for any period shorter
than a quarterly dividend period shall be computed on the basis
of a 360-day year of twelve 30-day months.
(b) No full dividends shall be declared by the Board
of Directors or paid or set apart for payment by the Corporation
on any Parity Securities for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or
declared and a sum set apart sufficient for such payment on the
Series C Preferred Stock through the most recent Dividend Payment
Date. If any dividends are not paid or set apart in full, as
aforesaid, upon the shares of the Series C Preferred Stock and
any Parity Securities, all dividends declared upon the Series C
Preferred Stock and any Parity Securities shall be declared pro
rata so that the amount of dividends declared per share on the
Series C Preferred Stock and such Parity Securities shall in all
cases bear to each other the same ratio that accrued dividends
<PAGE>
4
per share on the Series C Preferred Stock and such Parity
Securities bear to each other. Unless full cumulative dividends,
if any, accrued on all outstanding shares of the Series C
Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum set apart sufficient for such payment
through the most recent Dividend Payment Date, no dividend shall
be declared or paid or set aside for payment or other
distribution declared or made upon the Common Stock or upon any
other Junior Securities (other than a dividend or distribution
paid in shares of, or warrants, rights or options exercisable for
or convertible into, Common Stock or any other Junior
Securities), nor shall any Common Stock nor any other Junior
Securities be redeemed, purchased or otherwise acquired for any
consideration, nor may any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such
securities, by the Corporation (other than redemptions and
purchases pursuant to or in accordance with employee stock
subscription agreements entered into between the Corporation and
its subsidiaries' directors, officers and key employees), except
by conversion into or exchange for Junior Securities. Except as
provided in paragraph 4(d), holders of the shares of the Series C
Preferred Stock shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative
dividends as provided in paragraph 3(a).
(c) Subject to the foregoing provisions of this
paragraph (3) and paragraph (4)(d), the Board of Directors may
declare and the Corporation may pay or set apart for payment
dividends and other distributions on any of the Junior Securities
or Parity Securities, and may redeem, purchase or otherwise
acquire out of funds legally available therefor any Junior
Securities, and the holders of the shares of the Series C
Preferred Stock shall not be entitled to share therein.
(d) Any dividend payment made on shares of the Series
C Preferred Stock shall first be credited against the earliest
accrued but unpaid dividend due with respect to shares of the
Series C Preferred Stock.
(e) All dividends paid with respect to shares of the
Series C Preferred Stock pursuant to this paragraph (3) shall be
paid pro rata to the holders entitled thereto.
(f) Holders of shares of the Series C Preferred Stock
shall be entitled to receive the dividends provided for in this
paragraph (3) in preference to and in priority over any dividends
upon any of the Junior Securities.
(4) Redemptions or Conversions. (a) Conversion on
-------------
Mandatory Conversion Date. Unless earlier called for redemption
-------------------------
in accordance with the provisions hereof, on May 15, 1997 (the
"Mandatory Conversion Date"), each outstanding share of the
Series C Preferred Stock shall convert into:
<PAGE>
5
(i) subject to paragraph (4)(b)(vii) and
(4)(d)(vi), shares of Common Stock at the Common Equivalent
Rate (determined as provided in this paragraph (4)) in
effect on the Mandatory Conversion Date; and
(ii) the right to receive an amount in cash equal
to all accrued and unpaid dividends on such share of Series
C Preferred Stock to and including the Mandatory Conversion
Date, whether or not declared, out of funds legally
available for the payment of dividends (and dividends shall
cease to accrue on such share as of the Mandatory Conversion
Date).
Subject to paragraphs 4(b)(i)(D), 4(b)(vii) and
4(d)(vi), the Corporation shall at all times reserve and keep
available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its issued Common
Stock held in its treasury or both, for the purpose of effecting
conversion of the Series C Preferred Stock pursuant to this
paragraph 4(a), the full number of shares of Common Stock then
deliverable upon such conversion of all outstanding shares of
Series C Preferred Stock.
(b) Conversion Upon the Occurrence of Certain Events.
------------------------------------------------
(i) If there shall occur a merger or consolidation of the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) (other than a merger or
consolidation of the Corporation (or following the application of
the terms of paragraph 4(b)(i)(D), the Issuing Entity) with or
into a wholly owned subsidiary of the Corporation (or following
the application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity)) that results in the conversion or exchange of Common
Stock into, or the right to receive, other securities or other
property (whether of the Corporation or any other entity)
("Merger Consideration") (any such merger or consolidation is
referred to herein as a "Merger or Consolidation"), then (subject
to the following provisions of this paragraph (4)(b) and
paragraph 4(c)), each outstanding share of the Series C Preferred
Stock shall, at the option of the Corporation:
(A) (x) immediately prior to the Merger or
Consolidation, convert into, subject to paragraphs
(4)(b)(vii) and (4)(d)(vi), shares of Common Stock at the
Common Equivalent Rate in effect immediately prior to such
Merger or Consolidation; plus
(y) the right to receive an amount in cash
equal to all accrued and unpaid dividends on such share
of the Series C Preferred Stock to and including the
Settlement Date (as defined in paragraph 4(i)(v)),
whether or not declared, out of funds legally available
therefor (and dividends shall cease to accrue on such
share as of the Settlement Date); plus
<PAGE>
6
(z) the right to receive an amount of cash
initially equal to $18.036, declining by $.01656 on
each day following the date of issuance of the Series C
Preferred Stock (computed on the basis of a 360-day
year of twelve 30-day months) to $.996 on March 15,
1997, and equal to zero thereafter, in each case
determined with reference to the Settlement Date, out
of funds legally available therefor;
provided, that if the Call Price (as defined in paragraph
--------
(4)(i)(ii)) on the Settlement Date is less than the sum of
(I) the product of (1) the Current Market Price (as defined
in paragraph (4)(d)(viii)) of a share of Common Stock on the
Settlement Date (which Current Market Price shall be
appropriately adjusted for the purposes of this proviso if
the Corporation has made any antidilution adjustment to the
Common Equivalent Rate pursuant to paragraph 4(d) with
respect to an event which has not occurred as of such
Settlement Date) and (2) the number of shares of Common
Stock issuable upon conversion of a share of Series C
Preferred Stock pursuant to clause 4(b)(i)(A)(x) above, and
(II) the amount of cash to be received with respect to an
outstanding share of Series C Preferred Stock pursuant to
clause 4(b)(i)(A)(z) above, then the number of shares of
Common Stock issuable pursuant to clause 4(b)(i)(A)(x) above
shall be reduced so that the sum referred to above in this
proviso equals the Call Price on the Settlement Date, and
provided, further, that the Corporation (or following the
-------- -------
application of the terms of paragraph 4(b)(i)(D), the
Issuing Entity) may, at its option, deliver on the
Settlement Date, in lieu of some or all of the cash
consideration described in clauses 4(b)(i)(A)(y) and (z)
above, a number of shares of Common Stock (subject to
paragraphs 4(b)(vii) and 4(d)(vi)) to be determined by
dividing the amount of cash consideration that the
Corporation has elected to pay in Common Stock by the
Current Market Price of the Common Stock determined as of
the Settlement Date (which Current Market Price shall be
appropriately adjusted, if necessary, for the purposes of
this proviso if (I) the Corporation has made any
antidilution adjustment to the Common Equivalent Rate
pursuant to paragraph 4(d) with respect to an event which
has not occurred as of such Settlement Date or (II) the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) has distributed
cash or other property pursuant to clause (2) of paragraph
4(d)(iii), shares or other units of securities or assets
pursuant to clause (2) of paragraph 4(d)(iv) or shares of
capital stock of the Spinoff Corporation (as defined in
paragraph 4(d)(v)) pursuant to clause (2) of paragraph
4(d)(v)). Notwithstanding the foregoing terms of this
paragraph 4(b)(i)(A), if there shall have occurred an
adjustment pursuant to paragraph (4)(d)(vi) as a result of a
conversion or exchange or merger or consolidation referred
<PAGE>
7
to in such paragraph prior to the Settlement Date, then with
respect to the exercise of any such option referred to in
this paragraph 4(b)(i)(A) (including the exercise of the
option referred to in the foregoing proviso by the
Corporation (or its successor)), the Corporation shall
deliver out of funds legally available therefor on such
Settlement Date, in lieu of shares of Common Stock as
described in this paragraph 4(b)(i)(A), the kind of
securities or other property received by holders of Common
Stock as a result of such conversion or exchange or merger
or consolidation, in the same relative proportions (if more
than one kind of securities or other property was so
received) as exist in the Common Equivalent Rate on such
Settlement Date, with an aggregate market price (determined
for any security or other property, to the extent possible,
in the manner that the Current Market Price is determined
for the Common Stock, and otherwise determined by the Board
of Directors of the Corporation (or its successor), whose
determination shall be conclusive), as of such Settlement
Date, equal to the amount of cash consideration that the
Corporation has elected to pay in such securities or other
property (the option set forth in this paragraph 4(b)(i)(A)
being hereinafter referred to as the "Common Conversion
Option"); or
(B) be converted into the right to receive (at the
time such Merger Consideration is distributed to holders of
shares of Common Stock) in such Merger or Consolidation
(subject to provision being made therefor in an applicable
agreement with respect to such Merger or Consolidation) in
exchange for such share of Series C Preferred Stock one
share or other unit of a security (whether debt or equity or
any depositary receipt representing such a security) (the
"Issuing Entity Preferred Stock") of the Issuing Entity (as
defined in paragraph 4(b)(ii)) having terms substantially
equivalent to the Series C Preferred Stock (except that upon
call or conversion such Issuing Entity Preferred Stock shall
convert into Issuing Entity Common Equity (as defined in
paragraph 4(b)(ii)) (the option set forth in this paragraph
4(b)(i)(B) being hereinafter referred to as the "Issuing
Entity Preferred Stock Conversion Option"); or
(C) be converted into the right to receive (at the
time such Merger Consideration is distributed to holders of
Common Stock) in such Merger or Consolidation (subject to
provision being made therefor in an applicable agreement
with respect to such Merger or Consolidation) in exchange
for such share of Series C Preferred Stock one share of a
new series of Preferred Stock of the Corporation (or
depositary receipts representing such Preferred Stock) ("New
Preferred Stock") having terms substantially equivalent to
the Series C Preferred Stock, except that (A) upon call or
conversion such New Preferred Stock shall be exchanged
(either against the Corporation or the Issuing Entity as
<PAGE>
8
provided in the agreement with respect to such Merger or
Consolidation) into Issuing Entity Common Equity, out of
funds legally available therefor, and (B) such New Preferred
Stock need not provide holders thereof with the right to
vote on all matters submitted to a vote of holders of Common
Stock as provided in paragraph 6(b) (the option set forth in
this paragraph 4(b)(i)(C) being hereinafter referred to as
the "Corporation Preferred Stock Conversion Option"); or
(D) remain outstanding after such Merger or
Consolidation, but only if the agreement with respect to
such Merger or Consolidation requires that following the
effective time of the Merger or Consolidation (a) upon call
or conversation of the Series C Preferred Stock, in lieu of
the Corporation delivering, out of funds legally available
therefor, shares of its Common Stock, the Issuing Entity
shall be obligated to deliver, out of legally available
funds, Issuing Entity Common Equity directly to holders of
the Series C Preferred Stock, (b) the Issuing Entity shall
at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized
but unissued Issuing Entity Common Equity and its issued
common equity held in its treasury, for the purpose of
effecting any conversion of the Series C Preferred Stock,
the full number of shares or other units of common equity
deliverable upon any such call or conversion of all
outstanding shares of Series C Preferred Stock, (c) the
Issuing Entity shall have the right to call the Series C
Preferred Stock and to cause the exchange of the Series C
Preferred Stock for its Issuing Entity Common Equity upon
such call and (d) the Corporation shall relinquish the right
to call the Series C Preferred Stock and its obligations
upon conversion of the Series C Preferred Stock. In such
event, from and after such effective time, (x) holders of
shares of Series C Preferred Stock will no longer have any
right to receive any consideration from the Corporation upon
call or conversion of the Series C Preferred Stock and (y)
all references in this paragraph (4) and in paragraphs
(6)(d), (e) and (f) to Common Stock shall thereafter mean
Issuing Entity Common Equity and (z) the Corporation may,
without a vote of the holders of Series C Preferred Stock,
amend this Certificate of Designation to make any incidental
and conforming modifications to reflect the provisions
contained in this paragraph 4(b)(i)(D) (the option set forth
in this paragraph 4(b)(i)(D) being hereinafter referred to
as the "Existing Preferred Stock Option").
Whether the Issuing Entity Preferred Stock or the New
Preferred Stock has terms substantially equivalent to the Series
C Preferred Stock will be determined by the Board of Directors of
the Corporation (or its successor), whose determination shall be
conclusive; provided that if the Corporation elects the Issuing
--------
Entity Preferred Stock Conversion Option and the Issuing Entity
is not a corporation or other entity organized under the laws of
<PAGE>
9
the United States or any State thereof or the District of
Columbia (a "non-U.S. entity"), the Issuing Entity Preferred
Stock may be considered substantially equivalent to the Series C
Preferred Stock notwithstanding that, among other things, (i) a
holder of Issuing Entity Preferred Stock is not entitled to the
dividends received deduction under Section 243 or Section 245 of
the Internal Revenue Code of 1986, as amended (the "Code"), (ii)
the tax treatment of a holder of Issuing Entity Preferred Stock
differs from the tax treatment of a holder of Series C Preferred
Stock, including by reason of a future change in U.S. law, (iii)
the Issuing Entity Preferred Stock does not provide voting rights
to the holders thereof to the same extent as the Series C
Preferred Stock, so long as the Issuing Entity Preferred Stock
provides voting rights to the fullest extent permitted by the law
applicable to such securities, (iv) the Issuing Entity Preferred
Stock does not provide that any or all cash payments will be made
in U.S. dollars so long as such payments may not be made in U.S.
dollars under applicable law, provided that the amount of
--------
currency other than U.S. dollars (the "Foreign Currency") payable
on any given date is adjusted (by reference to the noon U.S.
dollar buying rate for the Foreign Currency for cable transfers
quoted in the City of New York on the business day next preceding
such payment, as certified for customs purposes by the Federal
Reserve Bank of New York) to equal the number of U.S. dollars
which would have been payable on such date if payment had been
permitted to be made in U.S. dollars, (v) the Issuing Entity is
prohibited by its certificate of incorporation or by-laws (or
equivalent constituent documents) or by the laws of the
jurisdiction of its establishment from issuing Issuing Entity
Preferred Stock that automatically converts into Issuing Entity
Common Equity (or, upon the distribution of the capital stock of
the Spinoff Corporation (as defined in paragraph 4(d)(v)), into
Spinoff Corporation Preferred Stock (as defined in paragraph
4(d)(v)), so long as the terms of such Issuing Entity Preferred
Stock (or other agreements relating thereto) provide for
conversion into Issuing Entity Common Equity (or, upon the
distribution of the capital stock of the Spinoff Corporation,
into Spinoff Corporation Preferred Stock) not later than the same
date as such automatic conversion would have occurred and in a
manner which gives a holder thereof substantially the same rights
as if such Issuing Entity Preferred Stock had automatically
converted or (vi) the Issuing Entity is prohibited by its
certificate of incorporation or by-laws (or equivalent
constituent documents) or by the laws of the jurisdiction of its
establishment from issuing such Issuing Entity Preferred Stock
with a liquidation preference subject to adjustment as set forth
in paragraph 5 hereof. The Corporation will not elect the
Issuing Entity Preferred Stock Conversion Option if the Issuing
Entity is a non-U.S. entity, unless provision is made in the
Issuing Entity Preferred Stock to gross up the amount paid to
U.S. persons (as defined in paragraph 4(i)(ix)) in respect of any
then existing or future tax, assessment or governmental charge
imposed by the laws of the jurisdiction in which the Issuing
Entity is established or organized or any political subdivision
<PAGE>
10
or taxing authority thereof or therein with respect to, and
withheld on the making of, such payment; provided, however, that
-------- -------
no gross up shall be required (a) if such holder is liable for
such tax, assessment or governmental charge in respect of the
Series C Preferred Stock by reason of such holder's having some
connection with the jurisdiction in which the Issuing Entity is
established or organized other than being a holder of such Series
C Preferred Stock or (b) if the Corporation has notified such
holder of the obligation to withhold taxes and requested but not
received from such holder the appropriate documentation or
certification in support of any claim for exemption and such
withholding or deduction would not have been required had such
documentation or certification been received.
The Corporation's right to elect the Corporation
Preferred Stock Conversion Option and the Existing Preferred
Stock Option is subject to the conditions that (1) the
Corporation shall survive as a subsidiary of the Issuing Entity
and (2) the Issuing Entity shall have common equity which is
publicly traded immediately after the effectiveness of the Merger
or Consolidation (provided that the Issuing Entity Common Equity
--------
need not be publicly traded in the United States).
(ii) Notwithstanding the Corporation's election of the
Issuing Entity Preferred Stock Conversion Option, the Corporation
Preferred Stock Conversion Option or the Existing Preferred Stock
Option, if the Merger Consideration (excluding consideration in
connection with fractional shares or the exercise of appraisal
rights) consists of both common equity (or any depository
receipts representing such common equity) of the entity issuing
such Merger Consideration (which could be a U.S. or non-U.S.
entity) (the "Issuing Entity") in the Merger or Consolidation
("Issuing Entity Common Equity") and property which is not
Issuing Entity Common Equity ("Non-Common Equity Merger
Consideration"), then, in addition to having the rights arising
out of the Corporation's election of one of the foregoing
Options, such holder shall be entitled to receive, at the time
such Merger Consideration is distributed to holders of Common
Stock, an amount of Non-Common Equity Merger Consideration equal
to the amount of Non-Common Equity Merger Consideration that such
holder would have been entitled to receive in the Merger or
Consolidation had (A) such holder's Series C Preferred Stock been
converted into shares of Common Stock at the Common Equivalent
Rate in effect immediately prior to the Merger or Consolidation
and (B) such shares of Common Stock been exchanged in the Merger
or Consolidation for the amount of Merger Consideration which
would have given a holder the maximum possible number of shares
of Issuing Entity Common Equity pursuant to the agreement
applicable to such Merger or Consolidation with respect to a
share of Common Stock; provided that if the Call Price on the
--------
Settlement Date is less than the fair value of such Non-Common
Equity Merger Consideration per share of Series C Preferred Stock
(as determined by the Board of Directors of the Corporation,
whose determination shall be conclusive) as of the Settlement
<PAGE>
11
Date (the "Non-Common Equity Fair Value"), then the amount of
Non-Common Equity Merger Consideration that a holder of Series C
Preferred Stock shall be entitled to receive with respect to each
share of Series C Preferred Stock will be reduced so that the
Non-Common Equity Fair Value thereof equals the Call Price on the
Settlement Date. If the Merger Consideration consists solely of
Non-Common Equity Merger Consideration, the Corporation must
elect the Common Conversion Option.
(iii) If the Corporation elects the Issuing Entity
Preferred Stock Conversion Option or the Corporation Preferred
Stock Conversion Option, the initial common equivalent rate on
the Issuing Entity Preferred Stock or the New Preferred Stock, as
the case may be, shall be equal to the Common Equivalent Rate on
the Series C Preferred Stock in effect immediately prior to the
Merger or Consolidation adjusted to reflect the ratio by which
one share of Common Stock is exchanged for shares of Issuing
Entity Common Equity in the Merger or Consolidation, and if the
Corporation elects the Existing Preferred Stock Option, the
Common Equivalent Rate on the Series C Preferred Stock
immediately following the Merger or Consolidation shall be equal
to the Common Equivalent Rate on the Series C Preferred Stock in
effect immediately prior to the Merger or Consolidation adjusted
to reflect the ratio by which one share of Common Stock is
exchanged for shares of Issuing Entity Common Equity in the
Merger or Consolidation.
(iv) If the Corporation fails to make the election set
forth in paragraph 4(b)(i) prior to the date of effectiveness of
the Merger or Consolidation, then the Corporation shall be deemed
to have elected the Common Conversion Option.
(v) Notwithstanding the foregoing provisions of this
paragraph 4(b), if the Corporation elects any of the options set
forth in paragraph 4(b)(i)(B), (C) or (D) each holder of a share
of Series C Preferred Stock will have the right (the "Holder Opt-
Out Right") to elect that, in lieu of such holder's shares of
Series C Preferred Stock being subject to the Issuing Entity
Preferred Stock Conversion Option, the Corporation Preferred
Stock Conversion Option or the Existing Preferred Stock Option,
as the case may be, each share of Series C Preferred Stock held
by such holder will convert, in whole (but not in part),
immediately prior to the effectiveness of the Merger or
Consolidation into (A) subject to paragraphs (4)(b)(vii) and
(4)(d)(vi), shares of Common Stock at the Common Equivalent Rate
in effect immediately prior to such Merger or Consolidation
(provided that if the Call Price on the Settlement Date is less
--------
than the product of (x) the Current Market Price of a share of
Common Stock on the Settlement Date (which Current Market Price
shall be appropriately adjusted for the purposes of this proviso
if the Corporation has made any antidilution adjustment to the
Common Equivalent Rate pursuant to paragraph 4(d) with respect to
an event which has not occurred as of such Settlement Date) and
(y) the number of shares of Common Stock issuable upon conversion
<PAGE>
12
of a share of Series C Preferred Stock pursuant to the Holder
Opt-Out Right, then the number of shares of Common Stock issuable
pursuant to the Holder Opt-Out Right shall be reduced so that
product referred to above equals the Call Price on the Settlement
Date), plus (B) the right to receive an amount in cash equal to
all accrued and unpaid dividends on the Series C Preferred Stock
to and including the Settlement Date, whether or not declared,
out of funds legally available for the payment of dividends (and
dividends shall cease to accrue on such share as of the
Settlement Date); provided that the Corporation (or following the
--------
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) may, at its option, deliver on the Settlement Date, in
lieu of some or all of the cash consideration described in clause
(B), a number of shares of Common Stock (subject to paragraphs
4(b)(vii) and 4(d)(vi)) to be determined by dividing the amount
of cash consideration that the Corporation has elected to pay in
Common Stock by the Current Market Price of the Common Stock
determined as of the Settlement Date (which Current Market Price
shall be appropriately adjusted, if necessary, for the purposes
of this proviso if (x) the Corporation has made any antidilution
adjustment to the Common Equivalent Rate pursuant to paragraph
4(d) with respect to an event which has not occurred as of such
Settlement Date or (y) the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) has distributed cash or other property pursuant to clause
(2) of paragraph 4(d)(iii) or shares or other units of securities
or assets pursuant to clause (2) of paragraph 4(d)(iv) or shares
of capital stock of the Spinoff Corporation pursuant to clause
(2) of paragraph 4(d)(v)). Notwithstanding the foregoing terms
of this paragraph 4(b)(v), if there shall have occurred an
adjustment pursuant to paragraph 4(d)(vi) as a result of a
conversion or exchange or merger or consolidation referred to in
such paragraph prior to the Settlement Date, then with respect to
the exercise of any such option referred to in this paragraph
4(b)(v) (including the exercise of the option referred to in the
foregoing proviso by the Corporation (or its successor)), the
Corporation shall deliver out of funds legally available therefor
on such Settlement Date, in lieu of shares of Common Stock as
described in this paragraph 4(b)(v), the kind of securities or
other property received by holders of Common Stock as a result of
such conversion or exchange or merger or consolidation, in the
same relative proportions (if more than one kind of securities or
other property was so received) as exist in the Common Equivalent
Rate on such Settlement Date, with an aggregate market price
(determined for any security or other property, to the extent
possible, in the manner that the Current Market Price is
determined for the Common Stock, and otherwise determined by the
Board of Directors of the Corporation (or its successor), whose
determination shall be conclusive), as of such Settlement Date,
equal to the amount of cash consideration that the Corporation
has elected to pay in such securities or other property.
(vi) In order to exercise the Holder Opt-Out Right, a
holder of Series C Preferred Stock shall (a) deliver a properly
<PAGE>
13
completed and duly executed written notice of election to
convert, specifying the name or names in which such holder wishes
the certificate or certificates for shares of Common Stock
(subject to paragraphs 4(b)(vii) and 4(d)(vi)) to be issued to
the Corporation at its principal office or at the office of the
agency which may be maintained for such purpose (the "Conversion
Agent") at least one business day prior to the effectiveness of
the Merger or Consolidation, (b) surrender the certificate for
such shares of Series C Preferred Stock to the Corporation or the
Conversion Agent, accompanied, if so required by the Corporation
or the Conversion Agent, by a written instrument or instruments
of transfer in form reasonably satisfactory to the Corporation or
the Conversion Agent duly executed by the holder or his attorney
duly authorized in writing, and (c) pay any transfer or similar
tax required by paragraph 4(n). Conversion shall be deemed to
have been effected immediately prior to the effective time of the
Merger or Consolidation. Immediately upon conversion, the rights
of the holders of converted shares of Series C Preferred Stock
shall cease and the persons entitled to receive the shares of
Common Stock (subject to paragraphs 4(b)(vii) and 4(d)(vi)) upon
the conversion of such shares of Series C Preferred Stock shall
be treated for all purposes as having become the beneficial
owners of such shares of Common Stock (subject to paragraphs
4(b)(vii) and 4(d)(vi)).
(vii) If there shall occur a Merger or Consolidation of
the Corporation and the Corporation elects the Existing
Preferred Stock Option, then (A) the Series C Preferred Stock
will, from and after the effective time of the Merger or
Consolidation, no longer be subject to conversion into shares of
Common Stock pursuant to paragraphs (4)(a), (4)(b), 4(c) and
4(e), but instead will be subject to conversion out of funds
legally available therefor into the Issuing Entity Common Equity
and (B) in such event, from and after the effective time of the
Merger or Consolidation, the number of such shares of Issuing
Entity Common Equity so issuable upon conversion of the shares of
Series C Preferred Stock 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 shares of
Common Stock contained in paragraphs 4(b)(iii) and (4)(d).
(c) Right to Call for Redemption. At any time and
----------------------------
from time to time prior to the Mandatory Conversion Date, the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) shall have the right to
call, in whole or in part, the outstanding shares of the Series C
Preferred Stock for redemption (subject to the notice provisions
set forth in paragraph (4)(j)). Upon the redemption date, the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) shall deliver to the
holders thereof in exchange for each such share called for
redemption, (i) a number of shares of Common Stock (subject to
paragraphs 4(b)(vii) and 4(d)(vi)) equal to the Call Price in
effect on the redemption date divided by the Current Market Price
<PAGE>
14
of the Common Stock determined as of the second Trading Date (as
defined in paragraph 4(i)(vi)) immediately preceding the Notice
Date (as defined in paragraph 4(i)(iv)) and (ii) an amount in
cash equal to all accrued and unpaid dividends on such share of
Series C Preferred Stock to and including the redemption date
(and dividends shall cease to accrue on such share as of such
date), whether or not declared, out of funds legally available
therefor; provided that if there shall have occurred an
adjustment pursuant to paragraph (4)(d)(vi) as a result of a
conversion or exchange or merger or consolidation referred to in
such paragraph prior to the redemption date, the Corporation (or
following the application of the terms of paragraph 4(b)(i)(D),
the Issuing Entity) shall deliver out of funds legally available
therefor on the redemption date to the holders of shares of
Series C Preferred Stock in exchange for each share thereof
called for redemption, in lieu of shares of Common Stock as
described in this paragraph (4)(c), the kind of securities or
other property received by holders of Common Stock as a result of
such conversion or exchange or merger or consolidation, in the
same relative proportions (if more than one kind of securities or
other property was so received) as exist in the Common Equivalent
Rate on the redemption date, with an aggregate market price
(determined for any security or other property, to the extent
possible, in the manner that the Current Market Price is
determined for the Common Stock, and otherwise determined by the
Board of Directors of the Corporation (or its successor), whose
determination shall be conclusive), as of the second Trading Date
immediately preceding the Notice Date, equal to the Call Price in
effect on the redemption date. If fewer than all the outstanding
shares of Series C Preferred Stock are to be called for
redemption, shares to be redeemed shall be selected by the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) from outstanding shares
of Series C Preferred Stock not previously redeemed by lot or pro
rata (as nearly as may be practicable without creating fractional
shares) or by any other method determined by the Board of
Directors of the Corporation in its sole discretion to be
equitable.
(d) Common Equivalent Rate; Adjustments. The Common
-----------------------------------
Equivalent Rate to be used to determine the number of shares of
Common Stock to be delivered on the conversion of the Series C
Preferred Stock into shares of Common Stock pursuant to paragraph
(4)(a) or (b) shall be initially ten shares of Common Stock for
each share of Series C Preferred Stock; provided, however, that
-------- -------
such Common Equivalent Rate shall be subject to adjustment from
time to time as provided in paragraph 4(b)(iii) and in this
paragraph (4)(d). All adjustments to the Common Equivalent Rate
shall be calculated to the nearest 1/100th of a share of Common
Stock. Such rate in effect at any time is herein called the
"Common Equivalent Rate."
<PAGE>
15
(i) If the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the
Issuing Entity) shall either:
(A) pay a dividend or make a distribution
with respect to Common Stock in shares of Common
Stock,
(B) subdivide or split its outstanding
shares of Common Stock into a greater number
of shares,
(C) combine its outstanding shares of
Common Stock into a smaller number of shares,
or
(D) issue by reclassification of its shares
of Common Stock any shares of common stock of the
Corporation (or following the application of the
terms of paragraph 4(b)(i)(D), the Issuing
Entity),
then, in any such event, the Common Equivalent Rate in
effect immediately prior thereto shall be adjusted so that
the holder of a share of the Series C Preferred Stock shall
be entitled to receive on the conversion of such share of
the Series C Preferred Stock, the number of shares of common
stock of the Corporation (or following the application of
the terms of paragraph 4(b)(i)(D), the Issuing Entity) which
such holder would have owned or been entitled to receive
after the happening of any of the events described above had
such share of the Series C Preferred Stock been converted at
the Common Equivalent Rate in effect immediately prior to
such event or any record date with respect thereto. Such
adjustment shall become effective as of the close of
business on the record date for determination of
stockholders entitled to receive such dividend or
distribution in the case of a dividend or distribution, and
shall become effective immediately after the effective date
in case of a subdivision, split, combination or
reclassification; and any shares of Common Stock issuable in
payment of a dividend shall be deemed to have been issued
immediately prior to the close of business on the record
date for such dividend for purposes of calculating the
number of outstanding shares of Common Stock under clauses
(ii), (iii), (iv) and (v) below. Such adjustment shall be
made successively.
(ii) If the Corporation (or following the application
of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall,
after the date hereof, issue rights or warrants to all holders of
its Common Stock entitling them (for a period not exceeding 45
days from the date of such issuance) to subscribe for or purchase
shares of Common Stock at a price per share less than the Current
<PAGE>
16
Market Price of the Common Stock (determined pursuant to
paragraph (4)(d)(viii)) on the record date for the determination
of stockholders entitled to receive such rights or warrants, then
in each case the Common Equivalent Rate shall be adjusted by
multiplying the Common Equivalent Rate in effect immediately
prior to the date of issuance of such rights or warrants by a
fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights
or warrants, immediately prior to such issuance, plus the number
of additional shares of Common Stock offered for subscription or
purchase pursuant to such rights or warrants, and of which the
denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus the number of shares of
Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at
such Current Market Price (determined by multiplying such total
number of shares by the exercise price of such rights or warrants
and dividing the product so obtained by such Current Market
Price). Such adjustment shall become effective as of the close
of business on the record date for the determination of
stockholders entitled to receive such rights or warrants. To the
extent that shares of Common Stock are not delivered after the
expiration of such rights or warrants, the Common Equivalent Rate
shall be readjusted to the Common Equivalent Rate which would
then be in effect had the adjustments made upon the issuance of
such rights or warrants been made upon the basis of delivery of
only the number of shares of Common Stock actually delivered.
Such adjustment shall be made successively.
(iii) If the Corporation (or following the application
of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall
distribute cash (other than any Permitted Quarterly Dividend (as
defined in this paragraph 4(d)(iii)), any cash distributed in
consideration of fractional shares of Common Stock, any cash
distributed in accordance with paragraph 4(d)(iii)(2) or
4(d)(iv)(2) and any cash distributed in a Merger or Consolidation
("Excluded Distributions")), by dividend or otherwise, to all
holders of its Common Stock or make an Excess Purchase Payment
(as defined in this paragraph 4(d)(iii)) then, at the option of
the Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity), the Corporation shall
make the adjustment set forth in clause (1) below if such option
is chosen by the Corporation (or the Issuing Entity) or shall
make the distribution (or following the application of the terms
of paragraph 4(b)(i)(D), the Issuing Entity shall make the
distribution) set forth in clause (2) below if such option is
chosen by the Corporation (or the Issuing Entity):
(1) if the option set forth in this clause (1) is
chosen, the Common Equivalent Rate shall be adjusted by
multiplying the Common Equivalent Rate in effect on the
record date with respect to such distribution or the payment
<PAGE>
17
date with respect to such Excess Purchase Payments by a
fraction, of which the numerator shall be the Current Market
Price per share of the Common Stock (determined pursuant to
paragraph 4(d)(viii)) on such record date or payment date
and of which the denominator shall be such Current Market
Price per share of Common Stock less the amount of such
distribution applicable to one share of Common Stock which
would not be a Permitted Quarterly Dividend (or in the case
of an Excess Purchase Payment, less the aggregate amount of
such Excess Purchase Payments divided by the number of
outstanding shares of Common Stock on the relevant payment
date) (provided that the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the
Issuing Entity) shall not be permitted to elect the option
described in this clause (1) if (a) the amount of such
distribution applicable to one share of Common Stock which
would not be a Permitted Quarterly Dividend (or in the case
of an Excess Purchase Payment, the aggregate amount of such
Excess Purchase Payments divided by the number of
outstanding shares of Common Stock on the relevant payment
date) is greater than or equal to 95% of such Current Market
Price per share of Common Stock, in each case as of such
record date or payment date, or (b) with respect to such
cash distribution (other than an Excess Purchase Payment),
the day on which such record date is fixed by the Board of
Directors of the Corporation is less than twenty-one
consecutive Trading Days prior to such record date); or
(2) if the option set forth in this clause (2) is
chosen, there shall be distributed, out of legally available
funds, at the time such cash distribution or Excess Purchase
Payment is made to the holders of its Common Stock, to the
holders of Series C Preferred Stock (as of the record date
for the determination of holders of Common Stock entitled to
receive such dividend or distribution (or in the case of an
Excess Purchase Payment, as of the purchase date)) an amount
of cash or other assets per share of Series C Preferred
Stock as such holder would have been entitled to receive if
such Series C Preferred Stock had been converted into shares
of Common Stock (and in the case of an Excess Purchase
Payment had participated on a pro rata basis (assuming the
participation of all outstanding shares of Common Stock) in
such tender offer or exchange offer) at the Common
Equivalent Rate in effect immediately prior to the record
date for such distribution or the payment date for such
Excess Purchase Payment less, in the case of a cash
distribution, the amount of such distribution which would
have been a Permitted Quarterly Dividend.
The adjustment provided in clause (1) above shall become
effective as of the close of business on the record date for the
determination of stockholders entitled to receive such dividend
or distribution or the payment date with respect to such Excess
Purchase Payment. If the amount of cash or, in the case of an
<PAGE>
18
Excess Purchase Payment, the value of the assets (as determined
by the Board of Directors of the Corporation, whose determination
shall be conclusive) to be distributed in accordance with clause
(2) above exceeds the Call Price as of such record date or
payment date, the amount of cash or other assets to be
distributed with respect to each share of Series C Preferred
Stock shall be reduced so that the amount to be distributed
equals the Call Price on such record date or payment date. As
used in this paragraph 4(d)(iii), the term "Permitted Quarterly
Dividend" means any quarterly cash dividend in respect of the
Common Stock to the extent that the per share amount of such
dividend does not exceed the greater of (x) the amount per share
of Common Stock of the next preceding quarterly cash dividend on
the Common Stock which did not at the record date therefor
require an adjustment to the Common Equivalent Rate or a
distribution in accordance with clause (2) above and (y) 15% of
the Current Market Price per share of Common Stock, determined on
the record date for such quarterly dividend, less the sum of the
per share amounts (appropriately adjusted to account for any of
the events described in paragraph 4(d)(i)) of all quarterly
dividends, if any, in respect of the Common Stock with a record
date less than one year prior to the record date for such
quarterly dividend. As used in this paragraph 4(d)(iii), the
term "Excess Purchase Payment" means the excess, if any, of (A)
the cash and the value (as determined by the Board of Directors
of the Corporation, whose determination shall be conclusive) of
all other consideration paid by the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) with respect to one share of Common Stock acquired in a
tender offer or exchange offer by the Corporation (or following
the application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) over (B) the Current Market Price per share of Common
Stock on the payment date for such Excess Purchase Payment.
(iv) If the Corporation (or following the application
of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall
pay a dividend or make a distribution to all holders of its
Common Stock of evidence of its indebtedness, other securities or
other assets (including shares of capital stock of the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) (other than Common
Stock) and shares of capital stock of any subsidiary of the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) (other than as set
forth in paragraph 4(d)(v)) but excluding any distributions and
dividends referred to in paragraphs 4(d)(i) and (iii) above or
any other cash dividends or distributions), or shall issue to all
holders of its Common Stock rights or warrants to subscribe for
or purchase any of its securities (other than those referred to
in paragraph 4(d)(ii) above), then in each such case at the
option of the Corporation (or following the application of the
terms of paragraph 4(b)(i)(D), the Issuing Entity), the
Corporation shall make the adjustment set forth in clause (1)
below if such option is chosen by the Corporation (or the Issuing
<PAGE>
19
Entity) or shall make the distribution (or following the
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity shall make the distribution) set forth in clause (2) below
if such option is chosen by the Corporation (or the Issuing
Entity):
(1) if the option set forth in this clause (1) is
chosen, the Common Equivalent Rate shall be adjusted by
multiplying the Common Equivalent Rate in effect on the
record date for the distribution of the securities or assets
by a fraction, of which the numerator shall be the Current
Market Price per share of the Common Stock (determined
pursuant to paragraph (4)(d)(viii)) on the record date for
the determination of stockholders entitled to receive such
dividend or distribution, and of which the denominator shall
be such Current Market Price per share of Common Stock less
the fair value (as determined by the Board of Directors of
the Corporation, whose determination shall be conclusive) as
of such record date of the portion of the securities or
assets so distributed, or of such rights or warrants,
applicable to one share of Common Stock (the "Distribution
Fair Value") (provided that the Corporation (or following
--------
the application of the terms of paragraph 4(b)(i)(D), the
Issuing Entity) shall not be permitted to elect the option
described in this clause (1) if (a) such determination of
fair value by the Board of Directors of the Corporation
applicable to one share of Common Stock is greater than or
equal to 95% of such Current Market Price per share of
Common Stock, in each case as of such record date, or (b)
the day on which such record date is fixed by the Board of
Directors of the Corporation is less than twenty-one
consecutive Trading Days prior to such record date; or
(2) if the option set forth in this clause (2) is
chosen, there shall be distributed, out of funds legally
available therefor, at the time such dividend, distribution
or issuance is made to the holders of its Common Stock, to
the holders of shares of Series C Preferred Stock (as of the
record date for the determination of holders of Common Stock
entitled to receive such dividend, distribution or issuance)
the kind and amount of such securities or assets of the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) as such holder
would have been entitled to receive if such shares of Series
C Preferred Stock had been converted into shares of Common
Stock at the Common Equivalent Rate in effect immediately
prior to the record date for such dividend or distribution.
The adjustment provided in clause (1) shall become effective as
of the close of business on the record date for the determination
of stockholders entitled to receive such dividend or
distribution. If the Distribution Fair Value of the shares or
other units of securities or assets distributed with respect to
each share of Series C Preferred Stock in accordance with clause
<PAGE>
20
(2) above would, as of the record date of such distribution,
exceed the Call Price as of such record date, the amount of
shares or other units of securities or assets to be distributed
with respect to each share of Series C Preferred Stock shall be
reduced so that the Distribution Fair Value thereof equals the
Call Price on such record date.
(v) If the Corporation (or following the application
of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall
pay a dividend or makes a distribution to all holders of its
Common Stock of shares of capital stock of any subsidiary of the
Corporation (the "Spinoff Corporation"), which Spinoff
Corporation represents all or substantially all of the
Corporation's interest in either of the two principal lines of
business of RJR Nabisco Holdings Corp. and its subsidiaries as of
May 6, 1994, then, at the option of the Corporation (or following
the application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity), the Corporation shall, out of legally available funds,
effect the conversion set forth in clause (1) below if such
option is chosen by the Corporation (or the Issuing Entity) or
shall make the distribution (or following the application of the
terms of paragraph 4(b)(i)(D), the Issuing Entity shall make the
distribution) set forth in clause (2) below if such option is
chosen by the Corporation (or the Issuing Entity):
(1) if the option set forth in this clause (1) is
chosen, subject to the proviso set forth in clause (2)
below, each share of Series C Preferred Stock will be
converted into the right of the holder of such share of
Series C Preferred Stock as of the Common Stock Record Date
(as defined in this paragraph 4(d)(v)) to receive (at the
time such capital stock is distributed to holders of Common
Stock):
(a) one half of a share of a security (the
"Spinoff Corporation Preferred Stock") of the Spinoff
Corporation having terms substantially equivalent to
the Series C Preferred Stock (except that (i) upon call
or conversion such Spinoff Corporation Preferred Stock
shall convert into common stock of Spinoff Corporation,
(ii) the initial common equivalent rate per share of
Spinoff Corporation Preferred Stock (as of the record
date for the determination of holders of Common Stock
entitled to receive such dividend or distribution (the
"Common Stock Record Date")) shall equal a fraction, of
which the numerator shall be the product of (A) the
Current Market Price per share of the Common Stock
(determined pursuant to paragraph 4(d)(viii)) on the
Common Stock Record Date and (B) the Common Equivalent
Rate on the Common Stock Record Date, and of which the
denominator shall be the Spinoff Fair Value (as defined
in this paragraph 4(d)(v)), (iii) all references to
Common Stock shall mean the common stock of the Spinoff
Corporation, (iv) all references to the Corporation (or
<PAGE>
21
following the application of the terms of paragraph
4(b)(i)(D), the Issuing Entity) shall mean the Spinoff
Corporation, (v) any notice given to the holders of
record of shares of Series C Preferred Stock on the
Common Stock Record Date will be valid notice to the
record holders of the Spinoff Corporation Preferred
Stock for the purpose of giving notice required by the
terms of the Spinoff Corporation Preferred Stock to
such holders prior to the issuance thereof and (vi) the
liquidation preference per share of Spinoff Corporation
Preferred Stock shall be equal to the greater of (A)
the liquidation preference per share of the Series C
Preferred Stock prior to the date of conversion and (B)
the fair market value per share of Spinoff Corporation
Preferred Stock (as determined, on or within five
business days after the date of issuance of the Spinoff
Corporation Preferred Stock, by the board of directors
of the Spinoff Corporation, whose determination shall
be conclusive) as of the date of their issuance); and
(b) one half of a share of Series C Preferred
Stock; provided that following such conversion in
accordance with this paragraph 4(d)(v)(1)(b), (i) the
Common Equivalent Rate per share of Series C Preferred
Stock (as of the Common Stock Record Date) shall equal
a fraction, of which the numerator shall be the product
of (A) the Current Market Price per share of the Common
Stock on the Common Stock Record Date and (B) the
Common Equivalent Rate on the Common Stock Record Date,
and of which the denominator shall be the excess of (x)
the Current Market Price per share of the Common Stock
on the Common Stock Record Date over (y) the Spinoff
Fair Value and (ii) the liquidation preference per
share of Series C Preferred Stock from and after the
time of conversion shall be equal to the greater of (A)
the liquidation preference per share of the Series C
Preferred Stock prior to the date of conversion and (B)
the fair market value per share of the Series C
Preferred Stock (as determined, on or within five
business days after the date of issuance of the Spinoff
Corporation Preferred Stock, by the board of directors
of the Corporation, whose determination shall be
conclusive) as of the date of issuance of the Spinoff
Corporation Preferred Stock; or
(2) if the option set forth in this clause (2) is
chosen, there shall be distributed, at the time such
dividend or distribution is made to the holders of its
Common Stock, to the holders of shares of Series C Preferred
Stock as of the Common Stock Record Date that number of
shares of capital stock of the Spinoff Corporation as such
holder would have been entitled to receive if such shares of
Series C Preferred Stock had been converted into shares of
Common Stock at the Common Equivalent Rate in effect
<PAGE>
22
immediately prior to the record date for such dividend or
distribution; provided that the Corporation (or following
--------
the application of the terms of paragraph 4(b)(i)(D), the
Issuing Entity) shall elect the option described in this
clause (2) if (a) the fair value (as determined by the Board
of Directors of the Corporation, whose determination shall
be conclusive) as of the Common Stock Record Date of the
portion of the capital stock so distributed applicable to
one share of Common Stock (assuming the conversion of the
Series C Preferred Stock into Spinoff Corporation Preferred
Stock) (the "Spinoff Fair Value") is greater than or equal
to 95% of the Current Market Price per share of Common Stock
as of the Common Stock Record Date, or (b) the day on which
such record date is fixed by the Board of Directors of the
Corporation is less than twenty-one consecutive Trading Days
prior to such record date.
As of the Common Stock Record Date (or as of any date
thereafter until the distribution of the Spinoff Corporation
Preferred Stock), the holders of record of shares of Series C
Preferred Stock will be considered the holders of record of any
Spinoff Corporation Preferred Stock for purposes of the
Certificate of Designation and for purposes of the certificate of
designation with respect to the Spinoff Corporation Preferred
Stock, including the giving of notice or voting thereunder.
If the Spinoff Fair Value of the shares of capital
stock of the Spinoff Corporation distributed with respect to each
share of Series C Preferred Stock pursuant to clause (2) above
would, as of the Common Stock Record Date, exceed the Call Price
as of such record date, the number of shares of such capital
stock to be distributed with respect to each share of Series C
Preferred Stock shall be reduced so that the Spinoff Fair Value
thereof equals the Call Price on such record date.
Whether, after the distribution of the capital stock of
the Spinoff Company, the Spinoff Preferred Stock has terms
substantially equivalent to the Series C Preferred Stock prior to
such distribution will be determined by the Board of Directors of
the Corporation (or its successor), whose determination shall be
conclusive. Such Spinoff Company Preferred Stock may be
considered substantially equivalent to the Series C Preferred
Stock notwithstanding that, among other things, the tax treatment
of a holder of Spinoff Company Preferred Stock differs from the
tax treatment of a holder of Series C Preferred Stock, including
by reason of a future change in U.S. law.
(vi) If there shall occur a conversion or exchange of
the Common Stock into, or the right to receive, other securities
or other property of the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) or a wholly owned subsidiary of the Corporation (or
following the application of the terms of paragraph 4(b)(i)(D),
the Issuing Entity) (in each case other than in connection with a
<PAGE>
23
Merger or Consolidation) or if there shall occur a merger or
consolidation of the Corporation (or following the application of
the terms of paragraph 4(b)(i)(D), the Issuing Entity) with or
into a wholly owned subsidiary of the Corporation (or following
the application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) that results in the conversion or exchange of the Common
Stock into, or the right to receive, other securities or other
property (whether of the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) or any other entity), then the Series C Preferred Stock
will thereafter no longer be subject to conversion or redemption
into shares of Common Stock pursuant to paragraphs (4)(a),
(4)(b), 4(c) and 4(e), but instead will be subject to conversion
or redemption into the kind and amount of securities or other
property which the holder of such shares of Series C Preferred
Stock would have owned immediately after such conversion or
exchange or merger or consolidation if such shares of Series C
Preferred Stock had been converted or redeemed into shares of
Common Stock immediately before the effective time of such
conversion or exchange or merger or consolidation. If this
paragraph (4)(d)(vi) applies, then no adjustment in respect of
the same conversion or exchange or merger or consolidation shall
be made pursuant to the other provisions of this paragraph
(4)(d). In the event that at any time, as a result of an
adjustment made pursuant to this paragraph (4)(d)(vi), the Series
C Preferred Stock shall become subject to conversion or
redemption into any securities other than shares of Common Stock,
thereafter the number of such other securities so issuable upon
conversion or redemption of the shares of Series C Preferred
Stock 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 shares of Series C Preferred Stock
contained in this paragraph (4)(d).
(vii) Anything in this paragraph (4) notwithstanding,
the Corporation shall be entitled to make such adjustments in the
Common Equivalent Rate, in addition to those required by this
paragraph (4), as the Corporation in its sole discretion may
determine to be advisable, in order that any stock dividends,
subdivision of shares, distribution of rights to purchase stock
or securities, or a distribution of securities convertible into
or exchangeable for stock (or any transaction which could be
treated as any of the foregoing transactions pursuant to Section
305 of the Internal Revenue Code of 1986, as amended) hereafter
made by the Corporation (or following the application of the
terms of paragraph 4(b)(i)(D), the Issuing Entity) or any other
entity) to its stockholders shall not be taxable. If the
Corporation determines that an adjustment to the Common
Equivalent Rate should be made pursuant to this paragraph
4(d)(vii), an adjustment shall be made effective as of such date
as is determined by the Board of Directors of the Corporation.
The determination of the Board of Directors of the Corporation as
to whether an adjustment to the Common Equivalent Rate should be
made pursuant to the foregoing provisions of this paragraph
<PAGE>
24
4(d)(vii), and, if so, as to what adjustment should be made and
when, shall be conclusive, final and binding on the Corporation
and all stockholders of the Corporation.
(viii) As used in this paragraph (4), the "Current Market
Price" of a share of Common Stock on any date shall be, except as
otherwise specifically provided, the average of the daily Closing
Prices (as defined in paragraph 4(i)(iii)) for the twenty
consecutive Trading Dates ending on and including the date of
determination of the Current Market Price; provided, however,
that for purposes of paragraph 4(c), the Current Market Price
shall be the average of the daily Closing Prices for the five
consecutive Trading Days ending on and including the date of
determination of the Current Market Price unless the Closing
Price for the Trading Date next following such five-day period
(the "next-day closing price") is less than 95% of such average,
then the Current Market Price per share of Common Stock on such
date of determination shall be the next-day closing price; and
provided, further, that, with respect to any redemption,
conversion or antidilution adjustment if any event that results
in an adjustment of the Common Equivalent Rate occurs during the
period beginning on the first day of the applicable determination
period and ending on the applicable redemption or conversion
date, the Current Market Price as determined pursuant to the
foregoing will be appropriately adjusted to reflect the
occurrence of such event.
(ix) In any case in which paragraph (4)(d) shall
require that an adjustment as a result of any event become
effective as of the close of business on the record date and the
date fixed for conversion pursuant to paragraph (4)(a), 4(b),
4(c) or 4(e) occurs after such record date, but before the
occurrence of such event the Corporation may in its sole
discretion elect to defer the following until after the
occurrence of such event: (A) issuing to the holder of any
converted shares of the Series C Preferred Stock the additional
shares of Common Stock issuable upon such conversion before
giving effect to such adjustment and (B) paying to such holder
any amount in cash in lieu of a fractional share of Common Stock
pursuant to paragraph (4)(g).
(x) Before taking any action which would cause an
adjustment to the Common Equivalent Rate that would cause the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) to issue shares of
Common Stock for consideration below the then par value (if any)
of the Common Stock upon conversion of the Series C Preferred
Stock, the Corporation (or following the application of the terms
of paragraph 4(b)(i)(D), the Issuing Entity) will take any
corporate action which may, in the opinion of its counsel, be
necessary in order that the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) may validly and legally issue fully paid and
<PAGE>
25
nonassessable shares of such Common Stock at such adjusted Common
Equivalent Rate.
(e) Optional Tender Offer Conversion. (i) If pursuant
--------------------------------
to the rules promulgated under the Securities Exchange Act of
1934, as amended, the Corporation (or following the application
of the terms of paragraph 4(b)(i)(D), the Issuing Entity) has
recommended acceptance of (or has expressed no opinion and is
remaining neutral toward) a tender offer which would result in
the ownership by the bidder (as defined in paragraph (i)(vii))
therein (or an affiliate (as defined in paragraph (i)(viii)) of
the bidder) of more than 50% of the then outstanding shares of
Common Stock of the Corporation (or following the application of
the terms of paragraph 4(b)(i)(D), the Issuing Entity) (a
"Recommended Tender Offer"), then prior to the expiration of such
Recommended Tender Offer the Corporation shall give notice to
each holder of record of Series C Preferred Stock that such
holder may, at its option, convert (an "Optional Tender Offer
Conversion") its shares of Series C Preferred Stock, in whole
(but not in part), (A) into shares of Common Stock at the Common
Equivalent Rate in effect at the close of business on the date
prior to the date of expiration or termination of such
Recommended Tender Offer (the "Tender Offer Measurement Date")
(provided that if the Call Price on the Tender Offer Measurement
--------
Date is less than the product of (x) the Current Market Price of
a share of Common Stock on the Tender Offer Measurement Date
(which Current Market Price shall be appropriately adjusted for
the purposes of this proviso if the Corporation has made any
antidilution adjustment to the Common Equivalent Rate pursuant to
paragraph 4(d) with respect to an event which has not occurred as
of such Tender Offer Measurement Date) and (y) the number of
shares of Common Stock issuable upon conversion of a share of
Series C Preferred Stock pursuant to the Optional Tender Offer
Conversion, then the number of shares of Common Stock with
respect to each share of Series C Preferred Stock issuable
pursuant to the Optional Tender Offer Conversion shall be reduced
so that the product referred to above in this proviso equals the
Call Price on the Tender Offer Measurement Date), plus (B) the
right to receive an amount of cash equal to all accrued and
unpaid dividends on the Series C Preferred Stock to and including
the Tender Offer Measurement Date, whether or not declared, out
of funds legally available therefor (and dividends shall cease to
accrue on such share as of the Tender Offer Measurement Date);
provided that the Corporation (or following the application of
--------
the terms of paragraph 4(b)(i)(D), the Issuing Entity) may, at
its option, deliver on the Tender Offer Measurement Date, in lieu
of some or all of the cash consideration described in paragraph
4(e)(i)(B), a number of shares of Common Stock (subject to
paragraphs 4(b)(vii) and 4(d)(vi)) to be determined by dividing
the amount of cash consideration that the Corporation (or
following the application of the terms of paragraph 4(b)(i)(D),
the Issuing Entity) has elected to pay in Common Stock by the
Current Market Price of the Common Stock determined as of such
Tender Offer Measurement Date (which Current Market Price shall
<PAGE>
26
be appropriately adjusted, if necessary, for the purposes of this
proviso if either (x) the Corporation has made any antidilution
adjustment to the Common Equivalent Rate pursuant to paragraph
4(d) with respect to an event which has not occurred as of such
Tender Offer Measurement Date or (y) the Corporation (or
following the application of the terms of paragraph 4(b)(i)(D),
the Issuing Entity) has distributed cash or other property
pursuant to clause (2) of paragraph 4(d)(iii), shares or other
units of securities or assets pursuant to clause (2) of paragraph
4(d)(iv) or shares of capital stock of the Spinoff Corporation
pursuant to clause (2) of paragraph 4(d)(v)). Notwithstanding
the foregoing terms of this paragraph 4(e), if there shall have
occurred an adjustment pursuant to paragraph 4(d)(vi) as a result
of a conversion or exchange or merger or consolidation referred
to in such paragraph prior to the Tender Offer Measurement Date,
then with respect to the exercise of any such option referred to
in the foregoing proviso by the Corporation (or its successor),
the Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) shall deliver out of
funds legally available therefor on such Settlement Date, in lieu
of shares of Common Stock as described in this paragraph 4(e),
the kind of securities or other property received by holders of
Common Stock as a result of such conversion or exchange or merger
or consolidation, in the same relative proportions (if more than
one kind of securities or other property was so received) as
exist in the Common Equivalent Rate on the Tender Offer
Measurement Date, with an aggregate market price (determined for
any security or other property, to the extent possible, in the
manner that the Current Market Price is determined for the Common
Stock, and otherwise determined by the Board of Directors of the
Corporation (or its successor), whose determination shall be
conclusive), as of such Settlement Date, equal to the amount of
cash consideration that the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) has elected to pay in such securities or other property.
(ii) The Corporation will provide notice of a
Recommended Tender Offer to holders of record of the Series C
Preferred Stock not less than fifteen business days prior to the
expiration of such tender offer. Such notice shall specify the
date of expiration or termination (as of the date of such notice)
of such Recommended Tender Offer and that if such holder elects
to convert its shares of Series C Preferred Stock into shares of
Common Stock, dividends on such Series C Preferred Stock will
cease to accrue dividends on the date they are converted. If the
date of expiration of the Recommended Tender Offer is extended,
the Corporation will be under no obligation to notify any holder
of Series C Preferred Stock of such extension.
(iii) In order to exercise the Optional Tender Offer
Conversion, a holder of Series C Preferred Stock shall (a)
deliver a properly completed and duly executed written notice of
election to convert on or prior to the Tender Offer Measurement
Date, specifying the name or names in which such holder wishes
<PAGE>
27
the certificate or certificates for shares of Common Stock to be
issued to the Corporation at its principal office or to the
Conversion Agent, (b) surrender the certificate for such shares
of Series C Preferred Stock to the Corporation or the Conversion
Agent, accompanied, if so required by the Corporation or the
Conversion Agent, by a written instrument or instruments of
transfer in form reasonably satisfactory to the Corporation or
the Conversion Agent duly executed by the holder or his attorney
duly authorized in writing and (c) pay any transfer or similar
tax required by paragraph (4)(n).
(iv) (A) Conversion shall be deemed to have been
effected immediately prior to the termination or expiration of
the Recommended Tender Offer (the "Conversion Date") on which the
Corporation or the Conversion Agent shall have received the
notice of election to convert, the surrendered certificate, any
required payments and all other required documents. Immediately
upon conversion, the rights of the holders of converted shares of
Series C Preferred Stock shall cease and the persons entitled to
receive the shares of Common Stock upon the conversion of such
shares of Series C Preferred Stock shall be treated for all
purposes as having become the owners of such shares of Common
Stock.
(B) As promptly as practicable after the Conversion
Date, the Corporation (or following the application of the terms
of paragraph 4(b)(i)(D), the Issuing Entity) shall, unless
otherwise instructed by the holder, deliver or cause to be
delivered at the office or agency of the Conversion Agent, to or
upon the written order of the holder of the surrendered shares of
Series C Preferred Stock, a certificate or certificates
representing the number of fully paid and nonassessable shares of
Common Stock into which such shares of Series C Preferred Stock
have been converted in accordance with the provisions of this
paragraph (4)(e), and any cash payable in respect of fractional
shares as provided in paragraph (4)(g).
(f) Notice of Adjustments. Whenever the Common
---------------------
Equivalent Rate is adjusted as herein provided, the Corporation
shall:
(i) forthwith compute the adjusted Common
Equivalent Rate in accordance with this paragraph (4) and
prepare a certificate signed by the Chief Financial Officer,
any Vice President, the Treasurer or Controller of the
Corporation setting forth the adjusted Common Equivalent
Rate, the method of calculation thereof in reasonable detail
and the facts requiring such adjustment and upon which such
adjustment is based, which certificate shall be conclusive,
final and binding evidence of the correctness of the
adjustment, and file such certificate forthwith with the
transfer agent or agents for the Series C Preferred Stock
and the Common Stock; and
<PAGE>
28
(ii) mail a notice stating that the Common
Equivalent Rate has been adjusted, the facts requiring such
adjustment and the facts upon which such adjustment is based
and setting forth the adjusted Common Equivalent Rate to the
holders of record of the outstanding shares of the Series C
Preferred Stock at or prior to the time the Corporation
mails an interim statement to its stockholders covering the
fiscal quarter during which the facts requiring such
adjustment occurred, but in any event within 45 days of the
end of such fiscal quarter.
(g) No Fractional Shares. (i) No fractional shares or
--------------------
scrip representing fractional shares of Common Stock or other
kind of security (including upon a distribution of the capital
stock of the Spinoff Company, the Series C Preferred Stock and
the Spinoff Company Preferred Stock) shall be issued upon the
redemption or conversion of any shares of Series C Preferred
Stock. Instead of any fractional interest in a share of Common
Stock or such other security which would otherwise be deliverable
upon the redemption or conversion of a share of Series C
Preferred Stock, the Corporation (or following the application of
the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall
either (A) pay to the holder of such share (a "Fractional
Shareholder") an amount in cash (computed to the nearest cent)
equal to (x) in the case of fractional shares of Common Stock,
the same fraction of the Current Market Price of the Common Stock
determined as of the Settlement Date, Conversion Date or the
second Trading Date immediately preceding the relevant Notice
Date, as the case may be, (y) in the case of fractional shares of
Spinoff Corporation Preferred Stock and Series C Preferred Stock
otherwise issuable upon a distribution of shares of capital stock
of the Spinoff Corporation, an amount in cash equal, with respect
to the Spinoff Corporation Preferred Stock, to the same fraction
of the product of the Spinoff Fair Value per share of Common
Stock and the common equivalent rate applicable to the Spinoff
Corporation Preferred Stock and an amount in the cash equal, with
respect to the Series C Preferred Stock, to the same fraction of
the product of (A) the Current Market Price, as of the Common
Stock Record Date, less the Spinoff Fair Value, and (B) the
Common Equivalent Rate after giving effect to the issuance of the
Spinoff Corporation Preferred Stock and (z) in the case of
fractional shares of capital stock of the Spinoff Corporation, an
amount in cash equal to the same fraction of the Spinoff Fair
Value per share of Common Stock or (B) follow the procedures set
forth in paragraph (g)(ii). If more than one share of Series C
Preferred Stock shall be surrendered for conversion at one time
by the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis
of the aggregate number of shares of Series C Preferred Stock so
surrendered.
(ii) The Corporation (or following the application of
the terms of paragraph 4(b)(i)(D), the Issuing Entity) may, in
lieu of paying cash to Fractional Shareholders as provided in
<PAGE>
29
paragraph (g)(i), issue, in full payment of the Corporation's (or
following the application of the terms of paragraph 4(b)(i)(D),
the Issuing Entity's) obligation with respect to such fractional
interests, shares of stock equal to the aggregate of such
fractional interests of such Fractional Shareholder and other
Fractional Shareholders (aggregated over a reasonable period of
time, but not in any event more than 20 business days, and
rounded upwards to the nearest whole share) to an agent (the
"Transfer Agent") appointed by the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity) for such Fractional Shareholders for sale promptly by the
Transfer Agent on behalf of the Fractional Shareholders. The
Transfer Agent will remit promptly to such Fractional
Shareholders their proportionate interest in the net proceeds
(following the deduction of applicable transaction costs and
computed to the nearest cent) from such sale.
(h) Cancellation. Shares of Series C Preferred Stock
------------
that have been issued and reacquired in any manner, including
shares purchased, exchanged, redeemed or converted, shall not be
reissued as part of the Series C Preferred Stock and shall (upon
compliance with any applicable provisions of the laws of the
State of Delaware) have the status of authorized and unissued
shares of the class of Preferred Stock undesignated as to series
and may be redesignated and reissued as part of any series of the
Preferred Stock.
(i) Definitions. As used in this paragraph (4):
-----------
(i) the term "business day" shall mean 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; provided that,
from and after the effective time of a Merger or
Consolidation in connection with which the Corporation
elects the Existing Preferred Stock Option, the term
"business day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State
of New York and in the place where the Issuing Entity has
its headquarters are authorized by law to close;
(ii) the term "Call Price" shall mean the per
share price (payable in shares of Common Stock) at which the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) may redeem shares
of Series C Preferred Stock, which shall be initially equal
to $112.286 declining by $.01656 on each day following the
date of issuance of the Series C Preferred Stock (computed
on the basis of a 360-day year of twelve 30-day months) to
$95.246 on March 15, 1997 and equal to $94.25 thereafter, if
not sooner redeemed; provided that if the Corporation (or
--------
following the application of the terms of paragraph
4(b)(i)(D), the Issuing Entity) distributes cash or other
property as provided in paragraph 4(d)(iii)(2), shares or
<PAGE>
30
other units of securities or assets as provided in paragraph
4(d)(iv)(2), shares of capital stock of the Spinoff
Corporation as provided in paragraph 4(d)(v)(2) or if Non-
Common Equity Merger Consideration is distributed in
connection with a Merger or Consolidation, then (i) in the
case of a distribution described in paragraph 4(d)(iii)(2),
from and after the close of business on the record date
related to such distribution (or in the case of an Excess
Purchase Payment, from and after the close of business on
the payment date related to such Excess Purchase Payment)
the Call Price per share for any day shall be reduced by the
amount of cash or the value of other property (as determined
by the Board of Directors of the Corporation, whose
determination shall be conclusive) to be distributed
pursuant thereto, (ii) in the case of a distribution
described in paragraph 4(d)(iv)(2), from and after the close
of business on the record date related to such distribution,
the Call Price per share for any day shall be reduced by the
Distribution Fair Value of such shares or other units of
securities or assets, (iii) in the case of a distribution
described in paragraph 4(d)(v)(2), from and after the close
of business on the record date related to such distribution,
the Call Price per share for any day shall be reduced by the
Spinoff Fair Value of such shares of capital stock and (iv)
in the case of a distribution of Non-Common Equity Merger
Consideration, from and after the close of business on the
Settlement Date related to the Merger or Consolidation, the
Call Price per share shall be reduced by the Non-Common
Equity Fair Value of such Non-Common Equity Merger
Consideration; provided further that in no event shall the
--------
effect of the foregoing proviso be to reduce the Call Price
per share to an amount less than $0.01; the Corporation will
provide notice (subsequent to such reduction) of any
reduction in the Call Price as a result of the application
of the first proviso in this definition to each holder of
record of Series C Preferred Stock at such holder's address
as it appears on the stock register of the Corporation
(provided, however, that no failure to give such notice nor
-------- -------
any defect therein shall affect the validity of the related
reduction in the Call Price);
(iii) the term "Closing Price" on any day shall
mean the closing sale price regular way (with any relevant
due bills attached) on such day, or in case no such sale
takes place on such day, the average of the reported closing
bid and asked prices regular way (with any relevant due
bills attached), in each case on the New York Stock Exchange
Consolidated Tape (or any successor composite tape reporting
transactions on national securities exchanges), or, if the
Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading
(which shall be the national securities exchange on which
the greatest number of shares of Common Stock has been
<PAGE>
31
traded during the five consecutive Trading Dates ending on
and including the date of determination of the Current
Market Price), or, if not listed or admitted to trading on
any national securities exchange, the average of the closing
bid and asked prices regular way (with any relevant due
bills attached) of the Common Stock on the over-the-counter
market on the day in question as reported by the National
Association of Securities Dealers Automated Quotation System
("NASDAQ"), or a similarly generally accepted reporting
service, or if not so available as determined in good faith
by the Board of Directors, on the basis of such relevant
factors as it in good faith considers, in the reasonable
judgment of the Board of Directors, appropriate.
Notwithstanding the foregoing, from and after the effective
time of a Merger or Consolidation in connection with which
the Corporation elects the Existing Preferred Stock Option,
if the Issuing Entity Common Equity is not trading on the
New York Stock Exchange (or other national securities
exchange or reported on NASDAQ as described above), "Closing
Price" shall be (i) determined by reference to the principal
trading market on which the Issuing Entity Common Equity is
traded and (ii) converted, if necessary, into U.S. dollars
by reference to the spot rate at noon local time in the
relevant market at which, in accordance with the normal
banking procedures, U.S. dollars could be purchased with the
currency in which the Closing Price is denominated from
major banks located in New York City or London, England;
(iv) the term "Notice Date" with respect to any
notice given by the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the
Issuing Entity) in connection with a redemption or
conversion of any of the Series C Preferred Stock shall be
the commencement of the mailing of such notice to the
holders of the Series C Preferred Stock in accordance with
paragraph (4)(j);
(v) the term "Settlement Date" shall mean the
business day immediately prior to the effective date of a
Merger or Consolidation;
(vi) the term "Trading Date" shall mean a date on
which the New York Stock Exchange (or any successor to such
Exchange) is open for the transaction of business.
Notwithstanding the foregoing, from and after the effective
time of a Merger or Consolidation in connection with which
the Corporation elects the Existing Preferred Stock Option,
if the Issuing Entity Common Equity is not traded on the New
York Stock Exchange (or other national securities exchange
or reported on NASDAQ as described under paragraph
4(i)(ii)), "Trading Date" shall be determined by reference
to the principal trading market on which the Issuing Entity
Common Equity is traded;
<PAGE>
32
(vii) the term "bidder" shall have the meaning set
forth in Rule 14d-1(b)(1) promulgated under the Securities
Exchange Act of 1934, as amended;
(viii) the term "affiliate" shall have the meaning
set forth in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended; and
(ix) the term "U.S. person" shall mean any citizen
or resident of the United States and any domestic
corporation, partnership, estate or trust.
(j) Notice of Redemption or Conversion. The
----------------------------------
Corporation will provide notice of (i) any redemption or
conversion (other than an Optional Tender Offer Conversion, but
including any potential conversion upon the effectiveness of a
Merger or Consolidation) of shares of Series C Preferred Stock to
holders of record of the Series C Preferred Stock to be called or
converted not less than 30 nor more than 60 days prior to the
date fixed for such redemption or conversion, as the case may be,
and (ii) the election of any of the options set forth in
paragraph 4(b)(i) to the holders of record of the Series C
Preferred Stock at least 30 days prior to the anticipated
effective date of the Merger or Consolidation; provided, that the
Corporation shall be under no obligation to notify any holder of
any extension of such effective date. Such notice shall be
provided by mailing such notice first class postage prepaid, to
each holder of record of the Series C Preferred Stock, at such
holder's address as it appears on the stock register of the
Corporation; provided, however, that no failure to give such
notice nor any defect therein shall affect the validity of the
proceeding for the redemption or conversion of any shares of
Series C Preferred Stock to be redeemed or converted except as to
the holder to whom the Corporation has failed to give said notice
or except as to the holder whose notice was defective. Each such
notice shall state, as appropriate and to the extent
determinable, the following:
(A) the redemption, conversion or exchange date;
(B) that all outstanding shares of Series C
Preferred Stock are to be redeemed or converted or, in the
case of a call for redemption pursuant to paragraph 4(c) of
fewer than all outstanding shares of Series C Preferred
Stock pursuant to paragraph (4)(c), the number of such
shares held by such holder to be redeemed;
(C) in the case of a call for redemption pursuant
to paragraph (4)(c), the Call Price, the number of shares of
Common Stock deliverable upon redemption of each share of
Series C Preferred Stock to be redeemed and the Current
Market Price used to calculate such number of shares of
Common Stock subject to any subsequent adjustments pursuant
to paragraph 4(d);
<PAGE>
33
(D) whether the Corporation is exercising any
option to deliver shares of Common Stock in lieu of cash (in
the case of a conversion pursuant to paragraph (4)(b)(i)(A)
or (4)(b)(v)), the method of calculating the Current Market
Price to be used to calculate the number of such shares of
Common Stock and, if the Corporation is exercising such
option in respect of less than all the cash that is
deliverable by the Corporation upon such conversion, the
portion of such cash in lieu of which Common Stock will be
delivered;
(E) whether the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the
Issuing Entity) is electing to exercise the Common
Conversion Option, the Issuing Entity Preferred Stock
Conversion Option, the Corporation Preferred Stock
Conversion Option or the Existing Preferred Stock Option (in
the case of a conversion pursuant to paragraph (4)(b)), and
if the Corporation (or following the application of the
terms of paragraph 4(b)(i)(D), the Issuing Entity) elects
the Issuing Entity Preferred Stock Conversion Option, the
Corporation Preferred Stock Conversion Option or the
Existing Preferred Stock Option, that such holder shall be
entitled to exercise the Holder Opt-Out Right;
(F) the place or places where certificates for
such shares are to be surrendered for redemption or
conversion; and
(G) that dividends on the shares of Series C
Preferred Stock to be redeemed or converted will cease to
accrue on such redemption or conversion date or, in the case
of a conversion pursuant to paragraph (4)(b), on the related
Settlement Date, unless the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the
Issuing Entity) shall default in delivering the shares of
Common Stock and cash, if any, payable by the Corporation
(or following the application of the terms of paragraph
4(b)(i)(D), the Issuing Entity) pursuant to this paragraph
(4), at the time and place specified in such notice.
(k) Deposit of Shares and Funds. The Corporation's
---------------------------
(or following the application of the terms of paragraph
4(b)(i)(D), the Issuing Entity's) obligation to deliver shares of
Common Stock and provide funds in accordance with this paragraph
(4) shall be deemed fulfilled if, on or before a redemption or
conversion date, the Corporation (or following the application of
the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall
deposit, with a bank or trust company, or an affiliate of a bank
or trust company, having an office or agency in New York City and
having a capital and surplus of at least $50,000,000, such number
of shares of Common Stock as are required to be delivered by the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) pursuant to this
<PAGE>
34
paragraph (4) upon the occurrence of the related redemption or
conversion (including any payment of fractional share amounts
pursuant to paragraph (4)(g)(i)), together with funds (or, in the
case of a conversion pursuant to paragraph 4(b), shares of Common
Stock and/or funds) sufficient to pay all accrued and unpaid
dividends on the shares to be redeemed or converted as required
by this paragraph (4), in trust for the account of the holders of
the shares to be redeemed or converted (and so as to be and
continue to be available therefor), with irrevocable instructions
and authority to such bank or trust company that such shares and
funds be delivered upon redemption or conversion of the shares of
Series C Preferred Stock so called for redemption or converted.
Any interest accrued on such funds shall be paid to the
Corporation (or following the application of the terms of
paragraph 4(b)(i)(D), the Issuing Entity) from time to time. Any
shares of Common Stock or funds so deposited and unclaimed at the
end of two years from such redemption or conversion date shall be
repaid and released to the Corporation (or following the
application of the terms of paragraph 4(b)(i)(D), the Issuing
Entity), after which the holder or holders of such shares of
Series C Preferred Stock so called for redemption or converted
shall look only to the Corporation (or following the application
of the terms of paragraph 4(b)(i)(D), the Issuing Entity) for
delivery of such shares of Common Stock or funds.
(l) Surrender of Certificates; Status. Each holder of
---------------------------------
shares of Series C Preferred Stock to be redeemed or converted
shall surrender the certificates evidencing such shares (properly
endorsed or assigned for transfer, if the Board of Directors of
the Corporation shall so require and the notice shall so state)
to the Corporation at the place designated in the notice of such
redemption or conversion and shall thereupon be entitled to
receive certificates evidencing shares of Common Stock and to
receive any funds payable pursuant to this paragraph 4 following
such surrender and following the date of such redemption or
conversion. In case fewer than all the shares represented by any
such surrendered certificate are called for redemption, a new
certificate shall be issued at the expense of the Corporation
representing the unredeemed shares. If such notice of redemption
or conversion shall have been given, and if on the date fixed for
redemption or conversion shares of Common Stock and funds
necessary for the redemption or conversion shall have been either
set aside by the Corporation (or following the application of the
terms of paragraph 4(b)(i)(D), the Issuing Entity) separate and
apart from its other funds or assets in trust for the account of
the holders of the shares to be redeemed or converted (and so as
to be and continue to be available therefor) or deposited with a
bank or trust company or affiliate thereof as provided in
paragraph 4(k), then, notwithstanding that the certificates
evidencing any shares of Series C Preferred Stock so called for
redemption or subject to conversion shall not have been
surrendered, the shares represented thereby so called for
redemption or subject to conversion shall be deemed no longer
outstanding, dividends with respect to the shares so called for
<PAGE>
35
redemption or subject to conversion shall cease to accrue after
the date fixed for redemption or conversion or, in the case of a
conversion pursuant to paragraph (4)(b), on the related
Settlement Date, and all rights with respect to the shares so
called for redemption or subject to conversion shall forthwith
after such date cease and terminate, except for the right of the
holders to receive the shares of Common Stock and funds, if any,
payable pursuant to this paragraph 4 without interest upon
surrender of their certificates therefor.
(m) Dividend Payments. The holders of shares of
-----------------
Series C Preferred Stock at the close of business on a dividend
payment record date shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the call or conversion thereof (except that
holders of shares called for redemption or to be converted on a
date occurring between such record date and the Dividend Payment
Date or on such Dividend Payment Date shall not be entitled to
receive such dividend on such Dividend Payment Date but instead
will receive an amount equal to accrued and unpaid dividends to
such date or the related Settlement Date, as the case may be) or
the Corporation's default in payment of the dividend due on such
Dividend Payment Date.
(n) Payment of Taxes. The Corporation will pay any
----------------
and all documentary, stamp or similar issue or transfer taxes
payable in respect of the issue or delivery of shares of Common
Stock on the redemption or conversion of shares of Series C
Preferred Stock pursuant to this paragraph (4); provided,
however, that the Corporation shall not be required to pay any
tax which may be payable in respect of any registration of
transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the registered holder of
Series C Preferred Stock redeemed or converted or to be redeemed
or converted, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(o) Notwithstanding any other provision of this
paragraph 4, no dividend, redemption, repurchase, exchange or
conversion or other distribution shall be made to or from the
holders of Series C Preferred Stock other than out of funds
legally available therefor.
(5) Liquidation Preference. (a) In the event of any
voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation, the holders of shares of
Series C Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Corporation available for
distribution to its stockholders, after payment or provision for
payment of any Senior Securities, an amount per share of Series C
Preferred Stock in cash equal to the sum of (i) $65.00 (or,
following any issuance of Spinoff Corporation Preferred Stock,
<PAGE>
36
the greater of $65.00 and the fair market value per share of
Series C Preferred Stock (as determined, on or within five
business days after the date of issuance of the Spinoff
Corporation Preferred Stock, by the Board of Directors of the
Corporation, whose determination shall be conclusive) as of such
date of issuance), plus (ii) all accrued and unpaid dividends
thereon to the date of liquidation, dissolution or winding up,
before any payment shall be made or any assets distributed to the
holders of any of the Junior Securities. If the assets of the
Corporation are not sufficient to pay in full the liquidation
payments payable to the holders of outstanding shares of the
Series C Preferred Stock and any Parity Securities, then the
holders of all such shares shall share ratably in such
distribution of assets in accordance with the amount which would
be payable on such distribution if the amounts to which the
holders of outstanding shares of Series C Preferred Stock and the
holders of outstanding shares of such Parity Securities are
entitled were paid in full. Except as provided in this paragraph
(5)(a), holders of Series C Preferred Stock shall not be entitled
to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation.
The Corporation will provide notice to holder of record
of Series C Preferred Stock not more than thirty days after any
adjustment to the liquidation preference of the Series C
Preferred in connection with the issuance of the Spinoff
Corporation Preferred Stock.
(b) For the purposes of this paragraph (5), neither
the voluntary sale, conveyance, lease, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Corporation
nor the consolidation or merger of the Corporation with or into
one or more other corporations nor the consolidation or merger of
one or more corporations with or into the Corporation shall be
deemed to be a voluntary or involuntary liquidation, dissolution
or winding up.
(6) Voting Rights. (a) The holders of record of
shares of Series C Preferred Stock shall not be entitled to any
voting rights except as hereinafter provided in this paragraph
(6) or as otherwise provided by law.
(b) The holders of shares of Series C Preferred Stock
shall be entitled to vote on all matters submitted to a vote of
the holders of Common Stock, voting together with the holders of
Common Stock (and any other capital stock of the Corporation
entitled to vote together with the Common Stock) as one class;
provided, however, that the holders of Series C Preferred Stock
shall not be entitled to vote on any increase or decrease in the
number of authorized shares of any class or classes of stock; and
provided further that in the event of a Merger or Consolidation
in which the Corporation elects the Existing Preferred Stock
Option, the holders of shares of Series C Preferred Stock will no
<PAGE>
37
longer be entitled to vote on such matters submitted to a vote of
the holders of Common Stock, unless the Board of Directors of the
Corporation specifically provides otherwise. Each share of the
Series C Preferred Stock shall be entitled to a number of votes
equal to one-tenth of the Common Equivalent Rate; it being
understood that whenever the Common Equivalent Rate is adjusted
as provided in paragraph 4(d) hereof, the voting rights of the
Series C Preferred Stock shall also be similarly adjusted.
(c) (i) If at any time or times dividends payable on
all series of Preferred Stock, including the Series C Preferred
Stock, shall be in arrears and unpaid for six quarterly periods,
then the number of directors constituting the Board of Directors,
without further action, shall be increased by two (2) and the
holders of shares of Series C Preferred Stock shall have the
right, together with the holders of all other outstanding series
of the Preferred Stock entitled to vote thereon, to elect the
directors of the Corporation to fill such newly created
directorships, the remaining directors to be elected by the other
class or classes of stock entitled to vote therefor, at each
meeting of stockholders held for the purpose of electing
directors; provided, that in no event shall such holders have the
right to elect more than 25% of the total number of directors of
the Corporation; provided, further, that, notwithstanding the
foregoing proviso, such holders shall have the right to elect not
less than one director pursuant to this paragraph (6)(c)(i).
While holders of shares of such series of Preferred Stock are
entitled to elect two directors, they shall not be entitled to
participate with the holders of Common Stock in the election of
any other directors, but shall continue to be entitled to vote
with the holders of Common Stock upon each other matter coming
before any meeting of the stockholders.
(ii) Whenever such voting right shall have vested, such
right may be exercised initially either at a special meeting of
the holders of shares of Series C Preferred Stock together with
the holders of all other outstanding series of the Preferred
Stock entitled to vote thereon, called as hereinafter provided,
or at any annual meeting of stockholders held for the purpose of
electing directors, and thereafter at such meetings or by the
written consent of such holders pursuant to Section 228 of the
General Corporation Law of the State of Delaware. Such voting
right shall continue until such time as all cumulative dividends
accumulated on all outstanding series of Preferred Stock shall
have been paid in full or declared and set aside for payment in
full, at which time such voting right of such holders shall
terminate, subject to revesting in the event of each and every
subsequent failure of the Corporation to pay dividends for the
requisite number of quarters as described above.
(iii) At any time when such voting right shall have
vested in the holders of shares of Series C Preferred Stock
together with all other series of Preferred Stock entitled to
vote thereon and if such right shall not already have been
<PAGE>
38
initially exercised, a proper officer of the Corporation shall,
upon the written request of 10% of the holders of record of
shares of such series of Preferred Stock then outstanding,
addressed to the Secretary of the Corporation, call a special
meeting of holders of shares of such series of Preferred Stock.
Such meeting shall be held at the earliest practicable date upon
the notice required for annual meetings of stockholders at the
place for holding annual meetings of stockholders of the
Corporation or, if none, at a place designated by the Secretary
of the Corporation. If such meeting shall not be called by the
proper officers of the Corporation within 30 days after the
personal service of such written request upon the Secretary of
the Corporation, or within 30 days after mailing the same within
the United States, by registered mail, addressed to the Secretary
of the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 10% of the shares of
such series of Preferred Stock then outstanding may designate in
writing a holder of shares of such series of Preferred Stock to
call such meeting at the expense of the Corporation, and such
meeting may be called by such person so designated upon the
notice required for annual meetings of stockholders and shall be
held at the same place as is elsewhere provided in this paragraph
(6)(c)(iii). Any holder of shares of such series of Preferred
Stock that would be entitled to vote at such meeting shall have
access to the stock books of the Corporation for such series of
Preferred Stock for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this
paragraph. Notwithstanding the provisions of this paragraph,
however, no such special meeting shall be called during a period
within 90 days immediately preceding the date fixed for the next
annual meeting of stockholders.
(iv) At any meeting held for the purpose of electing
directors at which the holders of shares of Series C Preferred
Stock together with all other series of Preferred Stock entitled
to vote thereon shall have the right to elect directors as
provided herein, the presence in person or by proxy of the
holders of at least a majority of the then outstanding shares of
such series of Preferred Stock shall be required and be
sufficient to constitute a quorum of such series for the election
of directors by such series. At any such meeting or adjournment
thereof (x) the absence of a quorum of the holders of shares of
such series of Preferred Stock shall not prevent the election of
directors other than those to be elected by the holders of stock
of such series and the absence of a quorum or quorums of the
holders of capital stock entitled to elect such other directors
shall not prevent the election of directors to be elected by the
holders of shares of such series of Preferred Stock and (y) in
the absence of a quorum of the holders of shares of such series
of Preferred Stock, a majority of such holders present in person
or by proxy shall have the power to adjourn the meeting for the
election of directors which the holders of shares of such series
of Preferred Stock may be entitled to elect, from time to time,
<PAGE>
39
without notice (except as required by law) other than
announcement at the meeting, until a quorum shall be present.
(v) The term of office of all directors elected by the
holders of shares of Series C Preferred Stock together with all
other series of Preferred Stock entitled to vote thereon pursuant
to paragraph (6)(c)(i) in office at any time when the aforesaid
voting rights are vested in the holders of shares of such series
of Preferred Stock shall terminate upon the election of their
successors at any meeting of stockholders for the purpose of
electing directors. Upon any termination of the aforesaid voting
rights in accordance with paragraph (6)(c)(ii), the term of
office of all directors elected by the holders of shares of such
series of Preferred Stock pursuant to paragraph (6)(c)(i) then in
office shall thereupon terminate and upon such termination the
number of directors constituting the Board of Directors shall,
without further action, be reduced by two (2) (or such other
lesser number by which the number of directors constituting the
Board of Directors shall have been increased pursuant to
paragraph (6)(c)(i) hereof), subject always to the increase of
the number of directors pursuant to paragraph (6)(c)(i) in case
of the future right of the holders of shares of such series of
Preferred Stock to elect directors as provided herein.
(vi) In case of any vacancy occurring among the
directors elected pursuant to paragraph (6)(c)(i), the remaining
director who shall have been so elected may appoint a successor
to hold office for the unexpired term of the director whose place
shall be vacant. If all directors so elected by the holders of
shares of Series C Preferred Stock together with all other series
of Preferred Stock entitled to vote thereon shall cease to serve
as directors before their terms shall expire, the holders of
shares of such series of Preferred Stock then outstanding may, at
a special meeting of the holders called as provided above, elect
successors to hold office for the unexpired terms of the
directors whose places shall be vacant.
(d) So long as any shares of the Series C Preferred
Stock are outstanding (except when notice of the redemption or
conversion of all outstanding shares of Series C Preferred Stock
has been given pursuant to paragraph (4)(j) and shares of Common
Stock and any necessary funds have been deposited in trust for
such redemption or conversion pursuant to paragraph (4)(k)), the
Corporation shall not, without the affirmative vote or consent of
the holders of at least a majority of the shares of Series C
Preferred Stock and any other series of Preferred Stock entitled
to vote thereon at the time outstanding voting or consenting, as
the case may be, together as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting called for the purpose, authorize any new class
of Parity Securities.
(e) So long as any shares of the Series C Preferred
Stock are outstanding (except when notice of the redemption or
conversion of all outstanding shares of Series C Preferred Stock
<PAGE>
40
has been given pursuant to paragraph (4)(j) and shares of Common
Stock and any necessary funds have been deposited in trust for
such redemption or conversion pursuant to paragraph (4)(k)), the
Corporation shall not, without the affirmative vote or consent of
the holders of at least 66-2/3% of the shares of Series C
Preferred Stock and any other series of Preferred Stock entitled
to vote thereon at the time outstanding voting or consenting, as
the case may be, together as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting called for the purpose, authorize any new class
of Senior Securities.
(f) Except for the amendments contemplated by the
exercise of the Existing Preferred Stock Option, so long as any
shares of the Series C Preferred Stock are outstanding (except
when notice of the redemption or conversion of all outstanding
shares of Series C Preferred Stock has been given pursuant to
paragraph (4)(j) and shares of Common Stock and any necessary
funds have been deposited in trust for such redemption or
conversion pursuant to paragraph (4)(k)), the Corporation shall
not, without the affirmative vote or consent of the holders of at
least 66-2/3% of the shares of Series C Preferred Stock and any
other series of Preferred Stock entitled to vote thereon at the
time outstanding voting or consenting, as the case may be,
together as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting
called for the purpose, amend the Certificate of Incorporation or
this Certificate of Designation so as to affect materially and
adversely the specified rights, preferences, privileges or voting
rights of holders of shares of Preferred Stock.
(g) (i) Except as set forth in paragraphs (6)(d) and
(6)(e) above, the creation, authorization or issuance of any
shares of any Junior Securities, Parity Securities or Senior
Securities, (ii) the creation of any indebtedness of any kind of
the Corporation, or (iii) the increase or decrease in the amount
of authorized capital stock of any class, including Preferred
Stock, shall not require the consent of the holders of Series C
Preferred Stock and shall not be deemed to affect materially and
adversely the rights, preferences, privileges or voting rights of
holders of shares of Series C Preferred Stock.
(7) Increase in Shares. The number of shares of
Series C Preferred Stock may, to the extent of the Corporation's
authorized and unissued Preferred Stock, be increased by further
resolution duly adopted by the Board of Directors and the filing
of a certificate of increase with the Secretary of State of the
State of Delaware.
(8) Limitations. Except as may otherwise be required
by law, the shares of Series C Preferred Stock shall not have any
powers, preferences or relative, participating, optional or other
special rights other than those specifically set forth in this
resolution (as such resolution may be amended from time to time)
or otherwise in the Certificate of Incorporation of the
Corporation.
<PAGE>
41
IN WITNESS WHEREOF, RJR Nabisco Holdings Corp. has
caused this Certificate of Designation to be made under the seal
of the Corporation signed by Lawrence R. Ricciardi, its
President, and attested by Joan E. Gmora, its Assistant
Secretary, this 5th day of May, 1994.
RJR NABISCO HOLDINGS CORP.
By: /s/ Lawrence R. Ricciardi
-----------------------------
Name: Lawrence R. Ricciardi
Title: President
Attested:
By: /s/ Joan E. Gmora
----------------------------
Name: Joan E. Gmora
Title: Assistant Secretary
NABISCO BRANDS DE PUERTO RICO, INC.
-----------------------------------
CAPITAL ACCUMULATION PLAN
-------------------------
Effective September 1, 1992
1
<PAGE>
NABISCO BRANDS DE PUERTO RICO, INC.
CAPITAL ACCUMULATION PLAN
TABLE OF CONTENTS
Article Page
------- ----
I. Definitions 2
1.01 Account 2
1.02 Administrative Committee 2
1.03 Affiliated Company 2
1.04 After-Tax Contributions 2
1.05 Basic Contributions 2
1.06 Beneficiary 2
1.07 Board of Directors 3
1.08 Break in Service 3
1.09 Code 3
1.10 Committee 3
1.11 Company 3
1.12 Company Contributions 3
1.13 Compensation 3
1.14 Disability 3
1.15 Effective Date 4
1.16 Eligible Employee 4
1.17 Employee 4
1.18 Entry Date 4
1.19 ERISA 4
1.20 ITA 4
1.21 Investment Fund(s) 4
1.22 Participant 4
1.23 Plan 4
1.24 Plan Administrator 5
1.25 Plan Year 5
1.26 Pre-Tax Contributions 5
1.27 Retirement 5
1.28 Rollover Contribution 5
1.29 Service 5
1.30 Severence Date 5
1.31 Spouse 6
1.32 Supplemental Contributions 6
1.33 Termination of Employment 6
1.34 Trustee 6
1.35 Trust Fund 7
1.36 Valuation Date 7
2
<PAGE>
Article Page
------- ----
II. Participation 8
2.01 Eligibility 8
2.02 Participation Application 8
2.03 Participant Status 8
2.04 Re-employment 8
III. Contributions 9
3.01 Basic Contributions 9
3.02 Supplemental Pre-Tax Contributions 9
3.03 Supplemental After-Tax Contributions 9
3.04 Change in Basic and Supplemental
Contributions 9
3.05 Suspension of Basic and Supplemental
Contributions 10
3.06 Company Contributions 10
3.07 Rollover Contributions 11
3.08 ITA Section 165(e) and Code Section 401(k)
and 401(m) Nondiscrimination Tests 12
3.09 Dollar Limitation on Pre-Tax Contributions 18
IV. Trust Fund and Investment Funds 19
4.01 The Trust Agreement 19
4.02 The Trustee 19
4.03 Separate Funds 19
4.04 Investment Funds 19
4.05 Temporary Investment 20
4.06 Investment of Participant Contributions 20
4.07 Investment of Company Contributions 21
4.08 Investment Managers 21
4.09 Participant Responsibility For Selection
of Funds 21
4.10 Voting by Participants 21
V. Account Statements and Valuation 23
5.01 Valuation of Accounts 23
5.02 Valuation Upon Transfer, Withdrawal, or
Distribution 23
5.03 Statement of Accounts 23
VI. Vesting and Forfeitures 24
6.01 Vesting of Basic and Supplemental
Contributions 24
6.02 Vesting of Company Contributions 24
6.03 Vesting of Rollover Contributions 24
6.04 Forfeiture on Termination of Employment 24
6.05 Disposition of Forfeitures 24
6.06 Restoration of Forfeitures 24
3
<PAGE>
Article Page
------- ----
VII. Distributions 25
7.01 Distribution of Benefits 25
7.02 Proof of Death and Right of Beneficiary 26
7.03 Completion of Appropriate Forms and
Procedures 26
7.04 Investment Pending Distribution 26
VIII. In-Service Withdrawals and Special Pre-Tax
Contribution Rules 27
8.01 In-Service Withdrawals 27
8.02 Hardship Withdrawals 27
8.03 Restrictions on Pre-Tax Contribution
Distributions 28
IX. Administration 29
9.01 RJR Employee Benefits Committee 29
9.02 Administrative Committee 30
9.03 RJR Pension Investment Committee 31
9.04 Indemnification by Company 31
9.05 Plan Expenses 31
9.06 Plan Administrator 31
9.07 Agent for Process 31
9.08 Named Fiduciaries 31
X. Amendments, Termination, Permanent Discontinuance
of Contributions, Merger or Consolidation 33
10.01 Amendments 33
10.02 Termination or Permanent Discontinuance
of Contributions 33
10.03 Partial Termination 33
10.04 Benefits in Case of Merger or
Consolidation 33
XI. Miscellaneous 34
11.01 Benefits Payable from Trust Fund 34
11.02 Elections 34
11.03 No Right to Continued Employment 34
11.04 Inalienability of Benefits and Interests 34
11.05 Qualified Domestic Relations Orders 34
11.06 Payments for Exclusive Benefit of
Participants 35
11.07 Puerto Rico Law to Govern 35
11.08 No Guarantee 35
11.09 Address of Record 35
11.10 Unlocated Spouse 35
11.11 Payments in the Event of Death with no
Designated Survivor or Incompetency 35
11.12 Transfer of Prior Plan Assets and
Liabilities to This Plan 36
11.13 Headings 36
4
<PAGE>
Article Page
------- ----
XII. Claim Procedure 37
12.01 Initial Determination 37
12.02 Review 37
XIII. Limitations and Restrictions 38
13.01 Code Section 415 Maximum 38
13.02 Top-Heavy Requirement 41
Schedule A - Compensation 46
5
<PAGE>
INTRODUCTION
------------
The Nabisco Brands de Puerto Rico, Inc. Capital Accumulation Plan is
effective September 1, 1992. Its purpose is to provide eligible employees
of Nabisco Brands de Puerto Rico, Inc. (the "Company") with a convenient
method of voluntarily accumulating personal savings on a regular and
systematic basis through payroll contributions. Employee contributions are
made either on a "before-tax" or an "after-tax" basis with the Company
making a 50% matching contribution to Employee pre-tax Basic contributions
not in excess of 6% of pay. The Plan is intended to be qualified under
Section 165(a) of the Puerto Rico Income Tax Act of 1954 and Section 401(a)
of the Internal Revenue Code, thereby allowing employees to defer until
distribution income tax on pre-tax and Company matching contributions to the
Plan, and the investment income accumulated on both Company and employee
contributions. The Plan was authorized by action of the RJR Employee
Benefits Committee on August 5, 1992.
6
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
1.01 Account means, with respect to any Participant, his After-Tax
-------
Contribution Account, his Pre-Tax Contribution Account, his Company
Contribution Account, and his Rollover Contribution Account.
1.02 Administrative Committee is the Administrative Committee appointed by
------------------------
the Committee pursuant to Section 10.02 to carry out the day to day
responsibilities of the Plan administration.
1.03 Affiliated Company means the Company and any corporation which is a
------------------
Participant of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Company; any trade or business
(whether or not incorporated) which is under common control (as defined
in Section 414(c) of the Code) with the Company; any organization
(whether or not incorporated) which is a Participant of an affiliated
service group (as defined in Section 414(m) of the Code) which includes
the Company; and any other entity required to be aggregated with the
Company pursuant to regulations under Section 414(o) of the Code.
1.04 After-Tax Contributions means the Supplemental Contributions made by a
-----------------------
Participant on an after-tax basis; such contributions are not eligible
to receive the matching Company Contribution.
1.05 Basic Contributions means the first 6% of a Participant's gross
-------------------
Compensation that he may authorize the Company to contribute as a Pre-
Tax Contribution on his behalf to the Plan and which is matched on a 50%
basis with Company Contributions. Basic Contributions cannot be made on
an after-tax basis.
1.06 Beneficiary means any person or persons (who may be designated
-----------
contingently or successively and who may be an entity other than a
natural person) designated by the Participant, on a form supplied by the
Committee, to receive benefits payable in the event of the death of the
Participant; provided, however, that if the Participant is married at
the date of his death, any such Beneficiary designation that names a
Beneficiary other than his Spouse exclusively shall be void unless it
has been consented thereto in writing by the Participant's Spouse and
such consent was witnessed by a notary public or a Plan representative
on a form supplied by the Committee. The Spouse's consent must
designate the alternative Beneficiary, must
7
<PAGE>
acknowledge the effect of such consent, and cannot be changed without
subsequent spousal consent. The Participant may, however, revoke the
alternative Beneficiary at any time, thereby reinstating his Spouse as
sole Beneficiary. Section 11.11 should be referred to for payment in
the event of death with no designated survivor.
1.07 Board of Directors means the Board of Directors of RJR Nabisco, Inc. and
------------------
any committee of directors authorized by such Board to act in its behalf
with reference to the Plan.
1.08 Break in Service occurs at the end of any twelve-consecutive-month
----------------
period beginning on a Severance Date during which an Employee does not
complete an hour of Service.
1.09 Code means the United States of America's Internal Revenue Code of 1986
----
as amended from time to time. Reference to any Section or subsection of
the Code includes reference to any comparable or succeeding provisions
of any legislation which amends, supplements or replaces such Section or
subsection.
1.10 Committee means the RJR Employee Benefits Committee, which shall act as
---------
the Plan Administrator for the Plan. The Committee shall have the
duties and powers described in Article IX.
1.11 Company means Nabisco Brands de Puerto Rico, Inc., or any successor by
-------
merger, purchase or otherwise, with respect to its Employees. The
Company may also be referred to as the Employer.
1.12 Company Contributions means the matching contributions made by the
---------------------
Company for the Plan Year and allocated to a Participant's Company
Contributions Account by reason of the Participant electing Basic
Contributions.
1.13 Compensation means the basic compensation paid for services performed
------------
for the Company or an Affiliated Company which is currently includable
in gross income under the ITA and such other forms of compensation as
the Committee has determined shall be included (listed in Schedule A
which is attached hereto). Schedule A shall be revised as the Committee
from time to time modifies the forms of compensation which are to be
included. Only Compensation received by the Participant while an
Eligible Employee shall be taken into account for Plan purposes.
1.14 Disability means being disabled as determined by the Federal Social
----------
Security Administration.
8
<PAGE>
1.15 Effective Date means September 1, 1992.
--------------
1.16 Eligible Employee means any person regularly employed in either an
-----------------
exempt or clerical category on a full time basis by the Company and who
are not covered under the RJR Nabisco Capital Investment Plan; provided,
that except as the Board of Directors or the Committee, pursuant to
authority delegated to it by the Board of Directors, may otherwise
provide on a basis uniformly applicable to all persons similarly
situated, no person shall be an "Eligible Employee" for purposes of the
Plan:
(a) who is excepted by the Board of Directors or the Committee,
(b) whose terms and conditions of employment are determined by a
collective bargaining agreement with the Company, if employee
retirement benefits were negotiated thereunder, which does not
make this Plan applicable to him, or
(c) who is a "leased employee" as defined in Section 414(n) of the
Code and who is required by such Section to be considered an
employee of the Company or an Affiliated Company.
1.17 Employee means any person employed by the Company or an Affiliated
--------
Company and, for purposes of the requirements of Code Section 410(b),
Leased Employees.
1.18 Entry Date means the first day of each month; provided that
----------
contributions shall not begin to be withheld until the payroll period
coincident with or next following the applicable Entry Date.
1.19 ERISA means the Employee Retirement Income Security Act of 1974, as
-----
amended.
1.20 ITA means the Puerto Rico Income Tax Act of 1954.
---
1.21 Investment Fund(s) means the separate funds in which Contributions to
------------------
the Plan are invested in accordance with Article IV.
1.22 Participant means any person who is participating in the Plan as
-----------
provided in Article II.
1.23 Plan means the Nabisco Brands de Puerto Rico, Inc. Capital Accumulation
----
Plan, as described herein or as hereafter amended.
9
<PAGE>
1.24 Plan Administrator means the RJR Employee Benefits Committee.
------------------
1.25 Plan Year means the period from each December 31 through the following
---------
December 30, except that the initial Plan year is September 1, 1992
through December 30, 1992.
1.26 Pre-Tax Contributions means Contributions which a Participant has
---------------------
designated as pre-tax contributions made by the Company on his behalf
pursuant to a salary reduction agreement.
1.27 Retirement means normal retirement of a Participant at age 65, or the
----------
early retirement of a Participant who has attained age 55 and who has
completed either two years of participation in the Plan or five years of
Service.
1.28 Rollover Contribution means amounts a Participant contributes from
---------------------
another employee benefit plan qualified under ITA Section 165(e) and
Code Section 401(k) pursuant to Section 3.07.
1.29 Service means all periods during which an Employee is employed by the
-------
Company or any Affiliated Company commencing with the first day of
employment or the first day of reemployment and ending with his
Severance Date which next follows the first day of employment or the
first day of reemployment, as the case may be. The first day of
employment or the first day of reemployment shall be deemed to be the
first day in which the Employee performs an hour of Service. Periods of
Service commencing on the first day of employment and ending on the
first Severance Date and commencing on each reemployment date and ending
on the Severance Date which next follows shall be aggregated on a day by
day basis and 365 days of aggregated Service shall constitute one year
of Service. Service shall include any period of authorized part-time
employment, periods of authorized leave of absence up to a maximum of
one year, periods of absence due to service in the Armed Forces of the
United States, as required, and periods of absence due to illness or
disability up to a maximum of 12-consecutive months. A Participant
shall continue to accrue Service for purposes of vesting his Company
Contribution Account while he is on a period of leave due to Disability.
1.30 Severance Date means the following:
--------------
(a) the date on which an Employee quits, retires, is discharged or dies; or
10
<PAGE>
(b) the first anniversary of the first date of a period in which an Employee
remains absent from Service (with or without pay) with the Company or an
Affiliated Company for any reason other than quit, retirement,
discharge, or death; provided, however, the absence from Service of an
Employee receiving benefits under one or more long-term disability plans
of the Company or an Affiliated Company is not a severance until the
earlier of Normal Retirement Age or the cessation of such disability
payments; provided further that if such an Employee in active employment
after his Normal Retirement Age becomes disabled, his Severance Date is
the date such long-term disability plan benefits commence or would
commence.
In the case of an Employee who is absent from work by virtue of (i) the
Employee's pregnancy, (ii) birth of the Employee's child, (iii) placement of
a child with the Employee by adoption, or (iv) caring for any such child for
a period of up to a year immediately following such birth or placement, the
Severance Date is the second anniversary of the first day of absence from
Service provided that the period between the first and second anniversary of
such first day of absence is neither counted as Service nor a Break in
Service.
1.31 Spouse means the person to whom the Participant is legally married.
------
1.32 Supplemental Contributions means up to an aggregate of 10% of a
--------------------------
Participant's gross Compensation which he may contribute to the Plan on
a before and/or after-tax basis pursuant to Sections 3.02 and 3.03 and
which are not matched with Company Contributions. Supplemental Pre-Tax
Contributions are limited to 4%.
1.33 Termination of Employment means separation from the employment of the
-------------------------
Company for any reason, including, but not limited to, Retirement,
death, Disability, resignation or dismissal by the Company; provided,
however, that transfer in employment between the Company and an
Affiliated Company shall not be deemed to be Termination of Employment
and provided further, that if an Employee is rehired by the Company or
an Affiliated Company within 30 days of his or her separation from the
employment of the Company or an Affiliated Company, such separation
shall not be considered to be Termination of Employment.
1.34 Trustee means Wachovia Bank of North Carolina, N.A.and Banco Popular de
-------
Puerto Rico or any trustee or trustees appointed pursuant to Article IV
with whom the funds of the Plan are held.
1.35 Trust Fund means the cash and other properties arising from
----------
contributions made by Participants and by the Company in accordance with
the provisions of this Plan and
11
<PAGE>
funds transferred pursuant to a Rollover which are held and administered by
the Trustee pursuant to Article IV.
1.36 Valuation Date the last business day of each month and any other date
--------------
the Committee deems desirable or necessary to value the Trust Fund in
accordance with Article V.
The masculine pronoun whenever used herein shall include the feminine, and
singular number whenever used herein shall include the plural, and the plural
the singular, unless the context clearly indicates a different meaning.
12
<PAGE>
ARTICLE II
----------
PARTICIPATION
-------------
2.01 Eligibility.
-----------
(a) Each Eligible Employee as of the Effective Date shall be eligible to
enroll in the Plan as of September 1, 1992.
(b) Every other Employee shall become eligible for participation in the Plan
as of the Entry Date coincident with or next following the date he
becomes an Eligible Employee. He shall become a Participant as of the
Entry Date to which Contributions are first contributed.
(c) All Eligible Employees who participate in this Plan shall participate
under the terms and conditions herein stated.
2.02 Participation Application. An Eligible Employee may become a
-------------------------
Participant as of any future Entry Date by completing and submitting to
the Committee an application form supplied by the Committee within the
established time frame. The application shall specify (i) the
percentage of Compensation to be contributed to this Plan as Basic
and/or Supplemental Contributions, (ii) the further designation of
Supplemental Contributions as Pre-Tax or After-Tax Contributions, and
(iii) the naming of a Beneficiary. Participation in the Plan by an
Eligible Employee is voluntary.
2.03 Participant Status. An Eligible Employee who has once become a
------------------
Participant shall remain a Participant so long as he remains in Service
of the Company, and shall cease to be a Participant upon his Termination
of Employment, except that if he has met the conditions for entitlement
to a benefit, he shall remain a Participant so long as he has an Account
balance. Active participation, however, including contributions to the
Plan by or for a Participant, shall automatically be suspended effective
as of the Participant's Severance Date and during any time period for
which he does not receive a paycheck. Participation in the Plan shall
cease as of the date Accounts are transferred to an Affiliated Plan or
are completely distributed to the Participant and/or his Beneficiary.
2.04 Re-employment. If a former Eligible Employee is rehired as an Eligible
-------------
Employee after a Severance Date, he shall be entitled to become a
Participant on the Entry Date coincident with or next following his date
of re-employment.
13
<PAGE>
ARTICLE III
- -----------
CONTRIBUTIONS
- -------------
3.01 Basic Contributions. Subject to the provisions of Section 3.04, each
-------------------
Participant may elect that the Company contribute from 1% to 6% of his
Compensation to the Plan in 1% increments as Basic Contributions, in
lieu of an equal amount being paid to him as Compensation. These pre-
tax Basic Contributions will be made through payroll deductions and will
be paid to the Trustee as soon as practicable but at least on a monthly
basis.
3.02 Supplemental Pre-Tax Contributions. A Participant who has authorized
----------------------------------
the maximum Basic Contribution rate of 6% may also elect that the
Company make additional Pre-Tax Contributions to the Plan of 1% to 4% of
his Compensation in 1% increments in lieu of an equal amount being paid
to him as Compensation. These contributions will be made through payroll
deductions and will be paid to the Trustee as soon as practicable, but
at least on a monthly basis. In no event may Basic and Supplemental
Pre-Tax Contributions combined exceed 10% of Compensation.
3.03 Supplemental After-Tax Contributions. A Participant may make
------------------------------------
contributions to the Plan on an after-tax basis, either in lieu of or in
combination with Basic and, Supplemental Pre-Tax Contributions by
authorizing Supplemental After-Tax Contributions of 1% to 10% of his
Compensation in 1% increments. After-Tax Contributions are referred to
as "Supplemental" even though a Participant can elect to make them prior
to authorizing any or the full amount of Basic Contributions. However,
Supplemental After-Tax Contributions are not matched with Company
Contributions. These contributions will be made through payroll
deductions and will be paid to the Trustee as soon as practicable but at
least on a monthly basis. A Participant's After-Tax Contributions
cannot exceed 10% of Compensation and his Pre-Tax and After-Tax
Contributions may not in the aggregate exceed 16% of his Compensation.
3.04 Change in Basic and Supplemental Contributions. Subject to the
----------------------------------------------
provisions of Sections 3.01, 3.02 and 3.03, and not more than once a
month, a Participant may change the percentage of his authorized payroll
deduction by giving the required prior written notice to the Committee.
Such changed percentage shall become effective beginning with the first
payroll period commencing after the expiration of the notice period. If
a mistake-of-fact is made with regard to any contribution, the Committee
shall, depending on the mistake-of-fact, either (i) cause said
contribution
14
<PAGE>
to be returned to the Participant without restriction or (ii) accept
additional contributions for the affected period. Examples of a "mistake-
of-fact" would be the continuation of payroll deductions after a Participant
has requested the suspension of such deductions or failure to act on written
instructions to take deductions.
3.05 Suspension of Basic and Supplemental Contributions.
--------------------------------------------------
(a) A Participant may, no more than once a month, suspend his Basic and/or
Supplemental Contributions, provided that all Supplemental Pre-Tax
Contributions shall be suspended before Basic Contributions are
suspended, by notifying the Committee in writing in the manner
specified, in advance of the date on which such a suspension shall
become effective. The suspension shall become effective on the first
Entry Date commencing on or after the expiration of the notice period.
During a period of suspension of Basic Contributions, no Company
Contributions on behalf of such a Participant shall be made by the
Company.
(b) A Participant who has suspended his Basic or Supplemental Contributions
may apply to the Committee to have such contributions resumed in
accordance with Sections 3.01, 3.02 and 3.03 on the first Entry Date
next following the required written notice of such intent.
(c) A Participant who has ceased to make contributions under the Plan
because he is on an unpaid absence from Service shall again be eligible
to resume making contributions on the date he returns to Service as an
Eligible Employee. No contributions may be made by a Participant for
any unpaid period of absence from Service including, but not limited to,
absence due to sickness, leave of absence, or service in the Armed
Forces.
(d) A Participant who has ceased to make contributions under the Plan
because he has ceased to be an Eligible Employee but, nevertheless,
continues to be an Employee shall again be eligible to resume making
contributions on the date he again becomes an Eligible Employee and
gives written notice to the Committee in the prescribed manner.
3.06 Company Contributions.
---------------------
(a) With respect to each payroll period, the Company shall contribute on
behalf of each Participant an amount equal to 50% of such Participant's
Basic Contributions to the Plan for such payroll period. Company
Contributions will be paid to the Trustee as soon as practicable after
the end of each month.
15
<PAGE>
(b) In satisfaction of its obligation under this Section, the Company shall
pay its contribution in cash. Company Contributions shall be made out
of the profits of the Company.
(c) In the event that the Secretary of the Treasury of Puerto Rico or the
Commissioner of Internal Revenue, on timely application made after the
adoption or subsequent amendment of the Plan, determines that the Plan
and the implementing trust do not qualify for tax-exempt status, or
refuses, in writing, to issue a favorable determination with respect to
the Plan and such trust, the Company Contributions made on or after the
date on which such determination or refusal is applicable may, at the
Company's discretion, be returned to the Company without interest. In
the event that a Company Contribution to the Plan is made by a mistake
of fact or all or part of the Company's deductions under ITA Section
23(p) or Code Section 404 for contributions to the Plan are disallowed
by the Puerto Rico Treasury Department or the Internal Revenue Service,
the portion of the contributions attributable to such mistake of fact or
to which such disallowance applies may, at the Company's discretion be
returned to the Company without interest. Any such return shall be made
within one year after the making of such contribution by mistake of fact
or the denial of qualification or disallowance of deductions, as the
case may be.
3.07 Rollover Contributions. The Trustee is authorized to accept as Rollover
----------------------
Contributions any contributions as requested by the Participant;
provided that the Participant certifies that such contributions meet the
following criteria:
(a) such amounts were received in a distribution which constitutes a
qualified total distribution as defined in Code Section 402(a)(5)(E)(i)
or a distribution from an individual retirement account, annuity, or
bond in which such qualified total distribution was separately invested
pursuant to Code Section 408(d)(3)(A)(ii) and (D)(i);
(b) such contributions (less after-tax employee contributions, if any) are
contributed within 60 days after the date such contributions are
received by the Participant;
(c) the spousal consent requirements of Section 205(c) of ERISA and Code
Section 417(a)(2) were complied with, if applicable; and
(d) such Rollover Contributions meet any other conditions as determined
necessary by the Trustee or Committee to comply with ITA Section
165(b)(2) and Code Section 408(d)(3).
16
<PAGE>
3.08 ITA Section 165(e) and Code Section 401(k) and 401(m) Nondiscrimination
-----------------------------------------------------------------------
Tests.
-----
(a) Definitions. For purposes of this Section, the following additional
-----------
definitions shall be used:
( i) Actual Contribution Percentage or ACP means the ratio (expressed
------------------------------ ---
as a percentage calculated to two decimal points) of the sum of
the After-Tax Contributions and matching Company Contributions
under the Plan on behalf of the Eligible Participant for the
Plan Year to the Eligible Participant's Compensation for the
Plan Year.
(ii) Actual Deferral Percentage or ADP means the ratio (expressed
-------------------------- ---
as a percentage calculated to two decimal points) of Pre-Tax
Contributions, Qualified Matching Contributions, and
Qualified Non elective Contributions on behalf of the
Eligible Participant for the Plan Year to the Eligible
Participant's Compensation for the Plan Year.
(iii) Average Actual Contribution Percentage or Average ACP means
-------------------------------------- -----------
the average expressed as a percentage calculated to two
decimal points) of the Actual Contribution Percentages
(ACPs) of the Eligible Participants in a group.
(iv) Average Actual Deferral Percentage or Average ADP means the
---------------------------------- -----------
average (expressed as a percentage calculated to two decimal
points) of the Actual Deferral Percentages (ADPs) of the
Eligible Participants in a group.
(v) Eligible Participant means any Eligible Employee of the Company
--------------------
who is authorized under the terms of the Plan to have After-Tax
Contributions, Pre-Tax Contributions, Nonelective Contributions,
or matching Company Contributions allocated to his Account for
the Plan Year; regardless as to whether or not any such
contributions are so allocated.
(vi) Family Member means an individual described in Section 414(q)(6) of
-------------
the Code and includes, with respect to any employee, such employee's
spouse and lineal ascendants or descendants and the spouses of such
lineal ascendants or descendants.
(vii) Highly Compensated Employee means an individual described in Section
---------------------------
414(q) of the Code and such employee's Family Members or any
Eligible Participant who is more highly compensated than two-thirds
of all other Eligible Participants, if as a result of such
definition a lowest Average ADP is obtained.
17
<PAGE>
(viii) Nonhighly Compensated Employee means an employee of the Company
------------------------------
who is not a Highly Compensated Employee.
(ix) Nonelective Contributions means contributions made by the Company
-------------------------
other than matching contributions or Pre-Tax Contributions and that
the Participant cannot otherwise elect to receive in cash.
( x) Qualified Matching Contributions are matching Company Contributions
--------------------------------
that are 100% vested and nonforfeitable when made and that are
subject to the same distribution limitations as Pre-Tax
Contributions. Qualified Matching Contributions which are used to
meet the requirements of the ADP Test are not to be taken into
account for purposes of the ACP Test.
(xi) Qualified Nonelective Contributions means these Nonelective
-----------------------------------
Contributions that are 100% vested and nonforfeitable when made
and that are subject to the same distribution limitations as
Pre-Tax Contributions.
(b) Average Actual Deferral Percentage Test.
---------------------------------------
( i) Notwithstanding anything in this Plan to the contrary,
contributions made under the Plan (and any other plan that is
aggregated with the Plan in accordance with Code Section
401(k)(3) and regulations thereunder) by or on behalf of a
Participant shall be restricted so as to comply with one of the
following ADP tests:
(A) 1.25 Test. The Average ADP for Eligible Participants who are
---------
Highly Compensated Employees for the Plan Year shall not exceed
the Average ADP for Eligible Participants who are Nonhighly
Compensated Employees for the Plan Year multiplied by 1.25; or,
(B) 2 Times/2% Test. The Average ADP for Eligible Participants who
---------------
are Highly Compensated Employees for the Plan Year shall not
exceed the Average ADP for Eligible Participants who are
Nonhighly Compensated Employees for the Plan Year multiplied by
2, provided that the Average ADP for Eligible Participants who
are Highly Compensated Employees does not exceed the Average ADP
for Eligible Participants who are Nonhighly Compensated
Employees by more than two (2) percentage points or such lesser
amount as the United States or Puerto Rico Secretaries of the
Treasury shall prescribe.
18
<PAGE>
The Committee shall have the right to limit pre-tax contributions of
Highly Compensated Employees as, and to the extent that it, in its
discretion, deems necessary to comply with one of the above tests.
( ii) Determination of ADP Excess Contributions. The amount of excess
-----------------------------------------
contributions for a Highly Compensated Employee will be
determined in the following manner: First, the ADP of the
Highly Compensated Employee with the highest ADP is reduced to
the extent necessary to satisfy the ADP Test or cause such ratio
to equal the ADP of the Highly Compensated Employee with the
next highest ADP. Second, this process is repeated until the
ADP Test is satisfied. The amount of excess contributions for a
Highly Compensated Employee is then equal to the total Pre-Tax
and other Contributions taken into account for the ADP Test
minus the product of the Employee's ADP as determined above and
the Employee's Compensation.
(iii) Special Rules.
-------------
(A) For purposes of this Section, the ADP for any Eligible
Participant who is a Highly Compensated Employee for the Plan
Year and who is eligible to have Pre-Tax Contributions,
Qualified Matching Contributions or Qualified Nonelective
Contributions allocated to his account under two or more plans
or arrangements described in ITA Section 165(e) and Code Section
401(k) that are maintained by the Company or an Affiliated
Company shall be determined as if all such Pre-Tax, Qualified
Matching and Qualified Nonelective Contributions were made under
a single arrangement.
(B) In the event that this Plan satisfies the requirements of ITA
Section 165(a)(3) or Code Section 410(b) only if aggregated with
one or more other plans, or if one or more other Plans satisfy
the requirements of ITA Section 165(a)(3) or Code Section
410(b)only if aggregated with this Plan, then this Section shall
be applied by determining the ADP of Eligible Participants as if
all such plans were a single plan.
(C) For purposes of determining the ADP of a Participant who is a
Highly Compensated Employee as described in Section 414(q) of
the Code, the Pre-Tax Contributions, Qualified Matching
Contributions, Qualified Nonelective Contributions, and
Compensation of such Participant shall include the Pre-Tax
Contributions, Qualified
19
<PAGE>
Matching Contributions, Qualified Nonelective Contributions, and
Compensation of Family Members, with the actual ADP of the
Highly Compensated Employee determined pursuant to Treas. Reg.
1.401(m) -1(c)(i), and such Family Members shall be disregarded
in determining the Average ADP for Participants who are
Nonhighly Compensated Employees.
(D) The determination and treatment of the Pre-Tax Contributions,
Qualified Nonelective Contributions, Qualified Matching
Contributions and ADP of any Participants shall satisfy such
other requirements as may be prescribed by the United States or
Puerto Rico Secretaries of the Treasury.
(c) Average Actual Contribution Percentage Test.
-------------------------------------------
(i) Notwithstanding anything in this Plan to the contrary, contributions
made under the Plan (and any other plan that is aggregated with the
Plan in accordance with Code Section 401(k)(3) and regulations
thereunder) by or on behalf of a Participant shall be restricted so
as to comply with one of the following ACP tests:
(A) 1.25 Test. The Average ACP for Eligible Participants who are
---------
Highly Compensated Employees for the Plan Year shall not exceed
the Average ACP for Eligible Participants who are Nonhighly
Compensated Employees for the Plan Year multiplied by 1.25; or,
(B) 2 Times/2% Test. The Average ACP for Eligible Participants who
---------------
are Highly Compensated Employees for the Plan Year shall not
exceed the Average ACP for Eligible Participants who are
Nonhighly Compensated Employees for the Plan Year multiplied by
2, provided that the Average ACP for Eligible Participants who
are Highly Compensated Employees does not exceed the Average ACP
for Eligible Participants who are Nonhighly Compensated
Employees by more than two (2) percentage points or such lesser
amount as the United States Secretary of the Treasury shall
prescribe; provided, however, that if the ADP Test under
subsection (b)(i)(B) (2 Times/2% Test) was used, the 2 Times/2%
Test under this subsection (c)(i)(B) shall be reduced in
accordance with Treas. Reg. 1.401(m)-2 (regarding the multiple
use of alternative limitations).
The Committee shall have the right to limit after-tax contributions
of
20
<PAGE>
Highly Compensated Employees as, and to the extent that it, in its
discretion, deems necessary to comply with one of the above tests.
( ii) Determination of ACP Excess Contributions. The amount of excess
-----------------------------------------
contributions for a Highly Compensated Employee will be
determined in the following manner: First, the ACP of the
Highly Compensated Employee with the highest ADP is reduced to
the extent necessary to satisfy the ADP Test or cause such ratio
to equal the ACP of the Highly Compensated Employee with the
next highest ACP. Second, this process is repeated until the
ACP Test is satisfied. The amount of excess aggregate
contributions for a Highly Compensated Employee is then equal to
the total After-Tax, matching Company and other Contributions
taken into account for the ACP Test over the product of (1) the
Employee's ACP following the reduction described above and (2)
the Employee's Compensation.
(iii) Special Rules.
-------------
(A) For purposes of this Section, the ACP for any Eligible
Participant who is a Highly Compensated Employee for the Plan
Year and who is eligible to make After-Tax Contributions, or to
receive matching Company Contributions, Qualified Nonelective
Contributions or Pre-Tax Contributions allocated to his account
under two or more plans or arrangements described in Code
Section 401(a) or 401(k) that are maintained by the Company or
an Affiliated Company shall be determined as if all such
contributions were made under a single plan.
(B) In the event that this Plan satisfies the requirements of Code
Section 410(b) only if aggregated with one or more other plans,
or if one or more other Plans satisfy the requirements of Code
Section 410(b) only if aggregated with this Plan, then this
Section shall be applied by determining the ACP of Eligible
Participants as if all such plans were a single plan.
(C) For purposes of determining the ACP of an Eligible Participant
who is a Highly Compensated Employee, the After-Tax
Contributions, matching Company Contributions and Compensation
of such Participant shall include the After-Tax Contributions,
matching Company Contributions, and Compensation of Family
Members, and such Family Members shall be disregarded in
determining the ACP for Eligible Participants who are Highly
Compensated Employees.
21
<PAGE>
(D) The determination and treatment of the ACP of any Participant
shall satisfy such other requirements as may be prescribed by
the United States Secretary of the Treasury, including the
provisions of Treas. Reg. 1.401(m) and any successor regulation,
which is incorporated herein by reference.
(d) Corrections of Excess Contributions.
-----------------------------------
( i) If the Committee shall determine that the Pre-Tax Contributions
on behalf of any Participant or group of Participants might
result in discrimination in favor of Employees who are officers,
shareholders or Highly Compensated Employees or might cause the
Plan to violate the requirements for cash or deferred
arrangement under ITA Section 165(e) or Code Section 401(k), the
Committee shall have the right to cause such adjustments to be
made in the past, current or future Pre-Tax Contributions on
behalf of such Participants and in the manner provided in Treas.
Regs. 1.401(k)-1(f) as will, in the Committee's opinion, avoid
such discrimination and satisfy the requirements of ITA Section
165(e) or Code Section 401(k), including, without limitation,
the right to recharacterize any Pre-Tax Contributions on behalf
of a Participant as current Compensation of the Participant to
either be distributed (along with income allocable thereto) to
the Participant or contributed as an After-Tax Contribution and
subject to such terms and conditions as will cause the Plan to
meet the requirements for a qualified cash or deferred
arrangement under ITA Section 165(e) or Code Section 401(k).
The decision of the Committee in this regard shall be final and
shall not be subject to question by the Trustee, the Company or
by any Participant or group of Participants. Any pre-tax Basic
Contributions that are recharacterized as After-Tax
Contributions pursuant to this Section shall be eligible to be
matched with Company Contributions.
( ii) If the Committee shall determine that the After-Tax Contributions of
any Participant or group of Participants might result in
discrimination in favor of employees who are officers, shareholders
or Highly Compensated Employees, or might cause the Plan to violate
the requirements of ITA Section 165(a)(4) or Code Section 401(m),
the Committee shall have the right to cause such adjustments to be
made in past, current or future After-Tax Contributions of such
Participants and in the manner provided in Treas. Reg. 1.401(m)-1(e)
as will, in the Committee's opinion, avoid such discrimination and
satisfy the requirements of ITA Section 165(a)(4) or Code Section
401(m), including, without limitation, the right to distribute such
contributions (along with income allocable thereto) to the
Participant
22
<PAGE>
and subject to such terms and conditions as will cause the Plan to
meet the requirements of ITA Section 165(a)(4) or Code Section
401(m). The decision of the Committee in this regard shall be final
and shall not be subject to question by the Trustee, the Company or
by any Participant or group of Participants
3.09 Dollar Limitation on Pre-Tax Contributions.
-------------------------------------------
(a) Notwithstanding anything else in this Article, a participant may not
designate more than $7,000 (or such other amount as may be specified by
the Internal Revenue Service or the Secretary of the Treasury of Puerto
Rico on account of an increase in cost of living index) as Pre-Tax
Contributions in any calendar year.
(b) Notwithstanding any other provision of the Plan, Excess Pre-Tax
Contributions and income allocable thereto shall be distributed no later
than each April 15 to Participants who claim Allocable Excess Pre-Tax
Contributions for the preceding calendar year. "Allocable Excess Pre-
Tax Contributions" means the amount of Pre-Tax Contributions for a
calendar year that the Participant allocates to this Plan pursuant to
the claim procedure described herein.
(c) The Participant's claim shall be in writing, shall be submitted to the
Committee no later than March 1; shall specify the Participant's Excess
Pre-Tax Contributions for the preceding calendar year; and shall be
accompanied by the Participant's written statement that if such amounts
are not distributed, such Allocable Excess Pre-Tax Contributions, when
added to amounts deferred under other plans or arrangements described in
Sections 401(k), 402(h), 408(k) or 403(b) of the Code, exceeds the limit
imposed on the Participant by Section 402(g) of the Code for the year in
which the deferral amount occurred.
(d) The Allocable Pre-Tax Contributions distributed to a Participant with
respect to a calendar year shall be adjusted for income and, if there is
a loss allocable to the Excess Pre-Tax Contributions, shall in no event
be less than the lessor of the Participant's Pre-Tax Account under the
Plan or the Participant's Pre-Tax Contributions for the Plan Year.
23
<PAGE>
ARTICLE IV
----------
TRUST FUND AND INVESTMENT FUNDS
-------------------------------
4.01 The Trust Agreement. The Company shall enter into a trust agreement
-------------------
which shall contain such provisions as shall render it impossible for
any part of the corpus of the Trust or income therefrom to be at any
time used for, or diverted to, purposes other than for the exclusive
benefit of Participants. Any or all rights or benefits accruing to any
person under the Plan with respect to any Company Contributions
deposited under the Trust Agreement shall be subject to all the terms
and provisions of the Trust which shall specifically incorporate and be
subject to the provisions of the Plan.
4.02 The Trustee. The Trustee will be a corporate trustee appointed by the
-----------
Committee to serve at its pleasure. The Committee may appoint a Puerto
Rican bank as either Co-Trustee or as an agent of the Trustee as
necessary to comply with Puerto Rican laws.
4.03 Separate Funds. The Trustee will maintain the following separate
--------------
Investment Funds within the Trust Fund as active Funds: the General
Stock Fund, the Growth Stock Fund, the Real Estate Fund, the Government
Securities Fund, and the Interest Income Fund. In addition, the Trustee
will add and maintain any other Investment Funds as are designated by
the RJR Pension Investment Committee, including a Company Common Stock
Fund. Appropriate Accounts for each Participant shall be established
and maintained in each Investment Fund in which a Participant has an
interest.
4.04 Investment Funds.
----------------
(a) Interest Income Fund. The Interest Income Fund consists of assets
--------------------
invested in investment contracts purchased from banks and insurance
companies which offer interest income at rates that are predetermined
annually or that vary with the investment experience of the contracts'
underlying assets. Assets will also be invested in one to three year
fixed income securities.
(b) Growth Stock Fund. The Growth Stock Fund consists of common stocks and
-----------------
other securities selected by the Trustee or any investment manager as
may be appointed pursuant to the Trust with the investment objective of
maximizing total return primarily through emphasis on capital
appreciation, with current income of secondary importance.
24
<PAGE>
(c) General Stock Fund. The General Stock Fund consists primarily of
------------------
various common stocks selected by the Trustee or any investment manager
as may be appointed pursuant to the Trust with the investment objective
of generating an above-average total return through emphasis on capital
appreciation and dividend income.
(d) Government Securities Fund. The Government Securities Fund will invest
--------------------------
in short-term U.S. Government securities that mature within one year,
with a maximum average maturity of 90 days.
(e) Real Estate Fund. The Real Estate Fund consists of assets invested in
----------------
one or more pooled real estate funds managed by insurance companies or
other financial institutions. Such pooled funds seek to achieve stable
long-term rates of return through direct ownership of income producing
properties, diversified by usage and location. The objective of the
Real Estate Fund is to provide long-term growth in assets that out-pace
inflation through returns from rental income and appreciation.
(f) Common Stock Fund. (If and when approved by the Pension Investment
-----------------
Committee.) The Common Stock Fund consists of shares of Common Stock of
the Parent Company. Refer to the Plan's Prospectus for a complete
description of Common Stock.
4.05 Temporary Investment. Pending permanent investment of the assets of any
--------------------
Investment Fund, the Trustee may temporarily hold cash or make short-
term investments in obligations of the United States Government,
commercial paper, an interim investment fund for tax qualified employee
benefit plans established by the Trustee unless otherwise provided by
applicable law, or other investments of a short-term nature.
4.06 Investment of Participant Contributions.
---------------------------------------
(a) Election. All Basic and Supplemental Participant Contributions will be
--------
invested at the election of the Participant in multiples of 5% in the
Funds described in Section 4.04. A Participant may make an election or,
once in any three-month period, change a prior election effective as to
future contributions by giving notice to the Committee in the prescribed
manner. Any such election or change of election shall be effective as
of the first payroll period after it is processed.
25
<PAGE>
(b) Transfer of Investments. A Participant (including a Participant who has
------------------------
a Termination of Employment) may, by giving notice to the Committee in
the prescribed manner, elect to have all or any multiple of 5% of the
value of his Account in any Investment Fund as of any future Valuation
Date transferred to another Investment Fund described in Section 4.04.
A Participant may make only one such election under this subsection
4.06(b) within any three-month period. The amount transferred from any
Investment Fund will be based upon values as of such future Valuation
Date, and the change in investments shall be made as soon as reasonably
possible thereafter.
4.07 Investment of Company Contributions. Company Contributions will track
-----------------------------------
the Investment Fund elections that a Participant makes with regard to
Basic and Supplemental Contributions.
4.08 Investment Managers. The RJR Pension Investment Committee may enter
-------------------
into a written agreement with or direct the Trustee to enter into an
agreement with one or more investment managers to manage the investments
of one or more of the Investment Funds. Such investment managers may
include one or more legal reserve life insurance companies which enter
into group annuity contracts with the Trustee. The RJR Pension
Investment Committee may remove any such investment manager or any
successor investment manager, or direct the Trustee to do so, and any
such investment manager may resign. The RJR Pension Investment
Committee may, upon removal or resignation of an investment manager,
provide for the appointment of a successor investment manager.
4.09 Participant Responsibility For Selection of Funds. Each Participant is
-------------------------------------------------
solely responsible for the selection of his Investment Funds. Neither
the Trustee, the Committee, any Administrative Committee, the RJR
Pension Investment Committee, the Company nor any of the directors,
officers or employees of the Company are empowered to advise a
Participant as to the manner in which his Accounts shall be invested.
The fact that a security is available to Participants for investment
under the Plan shall not be construed as a recommendation for the
purchase of that security, nor shall the designation of any Investment
Fund impose any liability on the Company, its directors, officers or
employees, the Trustee, the Committee, any Administrative Committee, or
the RJR Pension Investment Committee.
4.10 Voting by Participants. (This section will be applicable if and when a
----------------------
Parent Company Common Stock Fund is authorized.)
26
<PAGE>
(a) Voting of Stock Generally. Each Participant shall have the right and
-------------------------
shall be afforded the opportunity to instruct the Trustee how to vote at
any meeting of the Parent Company's shareholders that proportionate
number of the total number of shares of Common Stock held in the Common
Stock Fund which is the same proportion that the value of his interest
bears to the total value of the Fund. Instructions by Participants to
the Trustee shall be in such form and pursuant to such regulations as
the Committee may prescribe. Any such instructions shall remain in the
strict confidence of the Trustee. Any share for which no such
instructions are received by the Trustee shall be voted by the Trustee
in the same proportion as the shares for which instructions are
received.
(b) Tender of Exchange Offers. In the event of a tender or exchange offer
-------------------------
for any or all shares of Common Stock, the Committee shall notify each
Participant or Beneficiary and utilize its best efforts to timely
distribute or cause to be distributed to him such information as will be
distributed to shareholders of the Parent Company in connection with any
such tender or exchange offer. Each Participant or his Beneficiary
shall have the right to instruct the Trustee in writing not to tender or
exchange shares of Common Stock credited to his Account under the Trust
Fund. The Trustee shall tender or exchange all shares of Common Stock
credited to a Participant's Account under the Trust Fund unless
instructions not to tender or exchange such shares have been received.
27
<PAGE>
ARTICLE V
---------
ACCOUNT STATEMENTS AND VALUATION
--------------------------------
5.01 Valuation of Accounts. As of each Valuation Date, the Accounts of each
----------------------
Participant shall be adjusted to reflect any appreciation or
depreciation in the fair market value and income earned by each
Investment Fund in which the Participant's Accounts are invested since
the prior Valuation Date. Such fair market value shall be the aggregate
fair market value of all securities or other property held for each
Investment Fund, plus cash and accrued earnings, less accrued expenses
and proper charges against each Investment Fund, all as of the Valuation
Date. Participant accounts shall be adjusted in proportion to the
balance in each Participant's account on each Valuation Date, adjusted
for distribution.
When determining the value of Participant accounts, any deposits due which
have not been deposited in the Trust Fund on behalf of the Participant shall
be added to his accounts. Similarly, adjustments of accounts for
appreciation or depreciation of an Investment Fund shall be deemed to have
been made as of the Valuation Date to which adjustment relates, even though
they are actually made as of a later date.
5.02 Valuation Upon Transfer, Withdrawal, or Distribution. The valuation of
----------------------------------------------------
accounts for purposes of an in-service withdrawal, a transfer of
accounts to another investment fund, or a cash distribution shall be as
described in Section 5.01.
5.03 Statement of Accounts. Each Participant shall be furnished at least
---------------------
annually a statement setting forth the value of his Accounts.
28
<PAGE>
ARTICLE VI
----------
VESTING AND FORFEITURES
-----------------------
6.01 Vesting of Basic and Supplemental Contributions. Each Participant's
-----------------------------------------------
Basic and Supplemental Contributions shall at all times be fully vested.
6.02 Vesting of Company Contributions. A Participant shall become fully
--------------------------------
vested in his Company Contributions upon completion of the earlier of
(i) 60 months of Service or (ii) completion of 24 months of Service
subsequent to his first Entry Date, or (iii) in the event of any one of
the following:
(a) attainment of age 65,
(b) Retirement,
(c) death,
(d) Disability
(e) termination of the Plan, or
(f) complete discontinuance of Company Contributions.
6.03 Vesting of Rollover Contributions. Contributions transferred pursuant
---------------------------------
to a Rollover (Section 1.28) shall at all times be fully vested.
6.04 Forfeiture on Termination of Employment. If a Participant's employment
---------------------------------------
is terminated prior to attainment of age 65 for reasons other than
Retirement, Disability, or death, the portion, if any, of his Company
Contribution Account in which he is not vested shall be forfeited upon
the earlier of (i) the accrual of five (5) consecutive Break in Service
year, or (ii) the receipt of a cash-out , and under circumstances where
all Participant Contributions were distributed prior to Termination of
Employment or there are no Participant Contributions, a cash-out will be
deemed to have been made on the date the Termination of Employment
occurred. All forfeitures pursuant to (ii) above are subject to the
provisions of Section 6.06.
6.05 Disposition of Forfeitures. All forfeitures shall be used to reduce the
--------------------------
Company Contributions otherwise payable to the Plan.
6.06 Restoration of Forfeitures. Any amount forfeited pursuant to the
--------------------------
provisions of clause (ii) of Section 6.04 shall be restored to the
Company Contribution Account of a Participant if the Participant is re-
employed by the Company or an Affiliated Company prior to the expiration
of five years after his Termination of Employment. The restoration will
occur without the requirement that the Participant repay to the Plan any
amounts previously distributed to him.
29
<PAGE>
ARTICLE VII
-----------
DISTRIBUTIONS
-------------
7.01 Distribution of Benefits.
-------------------------
(a) Termination of Employment. A Participant who has a Termination of
-------------------------
Employment for any reason except death shall receive a lump sum
distribution of the value of his vested Accounts valued as of the
valuation period in which such termination occurs or, if later, as of
the next valuation period after a written application for distribution
has been received by the Committee. Distributions provided under the
Plan shall be made as soon as practicable after the valuation period.
If the Committee has not received an application for distribution by the
time specified in subsection (c) below, a distribution shall
automatically be made at such time.
(b) Death. The Account of a Participant who has died shall be distributed
------
to his Beneficiary in a single lump sum payment valued as of the
valuation period in which the death occurs or, if later, as of the next
valuation period after notification of the Participant's death;
provided, however, that if the Beneficiary is the Participant's
surviving Spouse, a distribution shall not be made until a written
application for distribution from the surviving Spouse has been received
by the Committee. If the Committee has not received an application for
distribution by the time the Participant would have attained the age
described in (c) below, the distribution shall automatically be made in
accordance with (c) below.
(c) Latest Date for Distribution. Unless otherwise elected pursuant to
-----------------------------
subsection (a) or (b) above, all distributions shall be made no later
than the April 1 of the calendar year following the calendar year such
Participant attains age 70 1/2.
(d) Small Lump Sum Cash-Outs. The foregoing notwithstanding, if the value
-------------------------
of the Participant's vested Account does not exceed $3,500, a
distribution shall be made to the Participant within 60 days after the
end of the Plan Year in which he has a Termination of Employment. The
Account shall be valued as of the December 31 Valuation Date. In no
event shall the Account of a Participant which is in excess of the
amount of $3,500 be distributed to him or on his behalf prior to the
time specified in (c) above without the written consent of the
Participant or, if applicable, his surviving Spouse.
30
<PAGE>
(e) QDRO. Notwithstanding subsections (a) - (d) above, amounts payable
-----
under a Qualified Domestic Relations Order pursuant to Section 11.05
shall be distributed to the alternate payee entitled to such payment as
soon as a determination is made by the Committee that the order is so
qualified, if the order provides for immediate payment.
7.02 Proof of Death and Right of Beneficiary. The Committee may require and
----------------------------------------
rely upon such proof of death and such evidence of the right of any
Beneficiary to receive the undistributed value of the Account of a
deceased Participant as the Committee may deem proper, and its
determination of death and of the right of such Beneficiary or other
person to receive payments shall be conclusive.
7.03 Completion of Appropriate Forms and Procedures. The Committee has
-----------------------------------------------
prescribed forms/procedures providing notice to it in order for a
distribution to be made under the Plan. In the event a Participant or
Beneficiary does not comply with such procedures before the end of the
calendar month following the date a distribution becomes payable under
the terms of the Plan, such Participant or Beneficiary's Account may, at
the option of the Committee (taking into account Section 11.11), be
mailed to the Address of Record as provided in Section 11.09. The
Valuation Date for purposes of this Section 7.03 shall be the last day
of the valuation period coincident with or next following the date of a
Participant's termination or, if later, the Valuation Date immediately
preceding the required distribution date under Section 7.01(c).
7.04 Investment Pending Distribution. A Participant is not entitled to any
--------------------------------
interest, dividends or any other form of investment proceeds on his
Account for the period between the Valuation Date and the date payment
is made.
31
<PAGE>
ARTICLE VIII
------------
IN-SERVICE WITHDRAWALS
----------------------
AND SPECIAL PRE-TAX CONTRIBUTION RULES
--------------------------------------
8.01 In-Service Withdrawals. Subject to the requirements listed below, a
----------------------
Participant may make a withdraw of his After-Tax Contributions. A
proportional share of earnings on such contributions will be distributed
at such time. Pre-Tax Contributions (Basic or Supplemental) cannot be
withdrawn except in the event of a hardship (See 8.02).
(a) Withdrawals may only be made by prior notice to the Committee in the
manner prescribed by the Committee.
(b) Excluding Hardship withdrawals, no more than one withdrawal may be made
in any six-month period.
(c) In no event may a Participant make a withdrawal in an amount less than
$500, or the full value of the Account, if less.
(d) In no event may a Participant select the Fund from which his stated
amount of withdrawal will be withdrawn.
(e) Payments of withdrawal amounts shall be made as soon as practicable
after a Participant's election to withdraw and will be valued as of the
preceding Valuation Date.
8.02 Hardship Withdrawals. A Participant who has a Hardship may make a
---------------------
withdrawal of his Pre-Tax Contributions (including Rollover
Contributions), but not the earnings thereon, subject to the following.
Financial hardship for purposes of this Section shall mean that a
Participant requires a withdrawal of money for an immediate and heavy
financial need. Such withdrawal cannot exceed the sum of (i) the amount
required to meet such need and (ii) any amounts necessary to pay any
federal, state or local income taxes or penalties reasonably anticipated
as a result of the distribution. No withdrawal shall be permitted
unless the hardship cannot reasonably be relieved from other sources
including distributions (other than hardship distributions) and
nontaxable loans available under any plan. Purchase by a Participant of
a primary residence, college tuition for a Participant or his
dependents, and any non-reimbursed medical expense of a Participant or
his dependents may generally be considered situations of heavy financial
need, unless otherwise governed by law or regulation. The Committee
may, under rules
32
<PAGE>
established by it which are uniformly applicable to all similarly
situated Participants, determine other circumstances where a Participant
has a heavy financial need and the decision of the Committee as to
whether a Participant satisfies the financial hardship rule shall be
conclusive, unless otherwise governed by law or regulation.
8.03 Restrictions on Pre-Tax Contribution Distributions. Notwithstanding any
--------------------------------------------------
other provision in this Plan to the contrary, a Participant's Pre-Tax
Contribution Account may not be distributed earlier than upon one of the
following events:
(a) The Participant's Retirement, death, Disability or Termination of
Employment;
(b) The termination of the Plan without the establishment of a successor
plan;
(c) A Participant's attainment of age 59 1/2;
(d) A Participant's Hardship, restricted as set forth in Section 8.02;
(e) The sale or other disposition of the Company or any Affiliated Company
to an unrelated corporation, which does not maintain the Plan, of
substantially all of the assets used in a trade or business, but only
with respect to Employees who continue with the acquiring corporation;
or
(f) The sale or disposition by the Company or any Affiliated Company of its
interest in a subsidiary to an unrelated entity which does not maintain
the Plan, but only with respect to Employees who continue employment
with the subsidiary.
This Section is intended to comply with the earliest distribution
requirements of Treasury Reg. 1.401(k)-1(d) and is not intended to add any
forms of distribution not otherwise allowed under the Plan.
33
<PAGE>
ARTICLE IX
----------
ADMINISTRATION
--------------
9.01 RJR Employee Benefits Committee.
-------------------------------
(a) The Committee shall have control of and manage the operation and
administration of the Plan. It shall have the authority to make
amendments to the Plan to ensure compliance with ERISA, to maintain the
qualified status of the Plan under ITA and the Code, and to make other
amendments to the Plan provided that no such amendments cause a material
increase in cost to the Company. The Committee shall also have the
authority to appoint and substitute trustees, investment managers and
actuaries for the Plan and to enter into and amend Plan trust agreements
and agreements with investment managers.
(b) The Committee shall consist of not less than three (3) persons appointed
from time to time by the Board of Directors of RJR Nabisco, Inc. to
serve at the pleasure of said Board of Directors. Any Participant of
the Committee may resign by delivering a written resignation to the
Secretary of the Committee and such resignation shall be effective upon
the date specified therein.
(c) The Committee shall elect from its members a Chairman, and shall also
elect a Secretary who may be but need not be one of the members of the
Committee. The Committee may appoint from its members such committees
with such powers as it shall determine, and may authorize one or more of
its members, or any agent, to execute or deliver any instrument or make
any payment in its behalf.
(d) The Committee shall hold meetings upon such notice, at such place or
places, and at such time or times as it may from time to time determine.
(e) A majority of the members of the Committee at the time in office shall
constitute a quorum for the transaction of business. All resolutions or
other action taken by the Committee shall be by the vote of a majority
of the members of the Committee present at any meeting or without a
meeting by an instrument in writing signed by a majority of the members
of the Committee.
34
<PAGE>
(f) No member of the Committee shall receive any compensation for his
service as such, and, except as may be required by applicable law, no
bond or other security is required of him in such capacity in any
jurisdiction.
9.02 Administrative Committee.
------------------------
(a) The Committee, in its discretion, may delegate its administrative duties
and responsibilities to one or more Administrative Committees each
consisting of three or more persons, who shall be appointed by and serve
at the pleasure of the Committee and one or more of whom may also be
members of such Committee. Vacancies in the Administrative Committee
shall be filled by the Committee but the Administrative Committee may
act, notwithstanding any vacancies, so long as there are at least two
members of such Committee. The members of an Administrative Committee
shall serve without compensation for their services as such, but shall
be reimbursed by the Company for all necessary expenses incurred in the
discharge of their duties.
(b) Subject to restrictions imposed by the Committee, an Administrative
Committee's powers shall include the following powers:
(i) to interpret Plan provisions with respect to eligibility, service,
vesting and determination of benefits,
(ii) to calculate benefits and authorize the payment of benefits by the
Plan trustees through disbursement accounts as directed by the
Administrative Committee,
(iii) to authorize the payment of routine plan expenses exclusive of
trustee, investment manager, or actuary fees,
(iv) to prepare and/or approve the filing of required governmental
reports,
(v) to maintain Plan and Account records,
(vi) to prepare employee announcements, forms and procedures, and
(vii) to review denials of benefit claims made by Participants or
Beneficiaries.
An Administrative Committee, at its discretion, may delegate to assistants,
including employees in RJR Nabisco, Inc.'s or the Company's Employee
Benefits Department, ministerial and clerical duties.
35
<PAGE>
9.03 RJR Pension Investment Committee.
--------------------------------
(a) The RJR Pension Investment Committee is a committee whose members are
appointed by the Compensation Committee of the Board of Directors to
serve at the pleasure of the Compensation Committee.
(b) The RJR Pension Investment Committee is charged with the
responsibility to approve all matters with respect to the funding of
the plans, including, but not limited to, actuarial assumptions,
investment guidelines, and the appointment and removal of investment
managers.
9.04 Indemnification by Company. To the extent not insured against by any
--------------------------
insurance company pursuant to the provisions of any applicable insurance
policy, the Company shall indemnify and hold harmless the members of the
Committee, the members of any Administrative Committee and their
assistants from any and all claims, demands, lawsuits, or proceedings in
connection with the Plan, including the expenses of defense, provided,
that such indemnifications shall not apply to any person for such
person's act of willful misconduct.
9.05 Plan Expenses. The expenses of administering the Plan, including,
-------------
without limitation, reasonable fees and expenses of the trustee,
certified public accountants, legal counsel, investment managers, and
investment advisors, shall be paid from the trust established in
accordance with Section 4.01 unless paid directly by the Company at its
election.
9.06 Plan Administrator. The Plan Administrator shall be the RJR Employee
------------------
Benefits Committee and it shall be responsible for the performance of
all reporting and disclosure obligations under ERISA and regulations
promulgated by any federal, state and local agency; provided that the
Committee may delegate under Section 9.02 some or all of such duties as
Plan Administrator.
9.07 Agent for Process. The Secretary of Nabisco Brands de Puerto Rico,
-----------------
Inc. shall be the designated agent for the service of legal process.
9.08 Named Fiduciaries.
-----------------
(a) The Committee, the RJR Pension Investment Committee and any
Administrative Committee, if delegated power in accordance with Section
9.02, shall each constitute named fiduciaries as such term is defined in
ERISA.
36
<PAGE>
(b) By resolution or by an appropriate instrument executed by duly
authorized officer of the Company, the Company may appoint one or more
other persons or committees as a named fiduciary in respect of the
duties delegated to him or it in such resolution or instrument.
(c) Any named fiduciary designated herein or appointed as provided herein,
unless precluded from doing so by the terms of such appointment, may by
appropriate instrument designate any person (including any firm or
corporation) to carry out part or all of such fiduciary's
responsibilities and upon such designation the named fiduciary shall
have no liability, except as imposed by applicable law, for any act or
omission of such person. The foregoing does not preclude any other
fiduciary to the extent allowed by ERISA and the terms of his
appointment from delegating part or all of such fiduciary's
responsibilities with respect to the Plan.
(d) Any fiduciary may serve in more than one fiduciary capacity with respect
to the Plan.
37
<PAGE>
ARTICLE X
---------
AMENDMENTS, TERMINATION, PERMANENT DISCONTINUANCE
-------------------------------------------------
OF CONTRIBUTIONS, MERGER OR CONSOLIDATION
-----------------------------------------
10.01 Amendments. The Committee reserves the right at any time and from time
----------
to time, both retroactively and prospectively, to modify or amend, in
whole or in part, any or all of the provisions of the Plan, provided,
however, that no such modification or amendment shall make it possible
for any part of the funds of the Plan to be used for, or diverted to,
purposes other than for the exclusive benefit of Participants, Spouses,
former Participants, retired Participants or Beneficiaries under the
Plan; and that no modification or amendment shall be made which has the
effect of decreasing retroactively the Accounts of any Participant, of
reducing the nonforfeitable percentage of the Company Contribution
Account of a Participant below the nonforfeitable percentage thereof
computed under the Plan as in effect on the later of the date on which
the amendment is adopted or becomes effective, or of eliminating an
optional form of benefit, except as permitted by law.
10.02 Termination or Permanent Discontinuance of Contributions. The Committee
--------------------------------------------------------
may terminate the Plan with respect to all Participating Units or any of
them or direct complete discontinuance of contributions hereunder by all
or any of the Participating Units for any reason at any time. In case
of such termination or complete discontinuance of contributions
hereunder, there shall automatically vest in the appropriate
Participants nonforfeitable rights to the Company Contributions credited
to their Accounts and the total amount in each Participant's Accounts
shall be distributed, as the Committee shall direct, to him or for his
benefit.
10.03 Partial Termination. In the event of a partial termination of the Plan,
-------------------
the provisions of Section 10.02 shall be applicable only to the
Participants affected by such partial termination.
10.04 Benefits in Case of Merger or Consolidation. The Plan may not be merged
-------------------------------------------
or consolidated with, nor may its assets or liabilities be transferred
to, any other plan unless each Participant, Spouse, former Participant,
retired Participant or Beneficiary under the Plan would, if the
resulting plan were then terminated, receive a benefit immediately after
the merger, consolidation, or transfer which is equal to or greater than
the benefit he would have been entitled to receive immediately before
the merger, consolidation, or transfer if the Plan had then terminated.
38
<PAGE>
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.01 Benefits Payable from Trust Fund. All persons with any interest in the
--------------------------------
Trust Fund shall look solely to the Trust Fund for any payments with
respect to such interest.
11.02 Elections. Elections hereunder shall be made by a Participant in
---------
writing by the completion and delivery to the Committee of forms
prescribed by the Committee for such purposes, within the time limits
set forth hereunder with respect to each such election or, if no time
limit is set forth, such limit as may be established by the Committee.
11.03 No Right to Continued Employment. Neither the establishment of the Plan
--------------------------------
nor the payment of any benefits thereunder nor any action of the
Company, the Board of Directors, the Committee or the Trustee shall be
held or construed to confer upon any person any legal right to be
continued in the employ of the Company.
11.04 Inalienability of Benefits and Interests.
----------------------------------------
(a) No benefit payable under the Plan or interest in the Trust Fund shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any such attempted action
shall be void and no such benefit or interest shall be in any manner
liable for or subject to debts, contracts, liabilities, engagements or
torts of any Participant, Spouse or Beneficiary.
(b) If any Participant, Spouse or Beneficiary shall become bankrupt or shall
attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge any benefit payable under the Plan or interest in the
Trust Fund, then to the extent permitted by law, the Committee in its
discretion may hold or apply such benefit or interest or any part
thereof to or for the benefit of such Participant, or his Beneficiary,
his Spouse, children, blood relatives, or other dependents, or any of
them, in such manner and in such proportions as the Committee may
consider proper.
11.05 Qualified Domestic Relations Orders. The provisions in Section 11.04(a)
-----------------------------------
shall also apply to the creation, assignment, or recognition of a right
to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined to be a
qualified domestic relations order, as defined in Section 414(p) of the
Code, or any domestic relations order entered before January 1, 1985.
39
<PAGE>
11.06 Payments for Exclusive Benefit of Participants. Payments of benefits in
----------------------------------------------
respect of the interest of a Participant under the Plan to any person
other than such Participant in accordance with the provisions of the
Plan shall be deemed to be for the exclusive benefit of such
Participant.
11.07 Puerto Rico Law to Govern. All questions pertaining to the
-------------------------
construction, regulation, validity and effect of the provisions of the
Plan shall be determined in accordance with the laws of Puerto Rico,
except as provided in Section 514 of ERISA.
11.08 No Guarantee. Neither the Company nor the Trustee guarantee the Trust
------------
Fund in any manner against loss or depreciation.
11.09 Address of Record. Each individual or entity with an actual or
-----------------
potential interest in the Plan shall file and maintain a current record
address with the Plan. Communications mailed by the Company, Trustee,
or Committee to such record address fulfills all obligations to provide
required information to Participants, including former employees,
Surviving Spouses and Beneficiaries, in regard to the Plan. If no
record address is filed, it may be presumed that the address used by the
Company in forwarding statements of a Participant's Account is the
record address.
11.10 Unlocated Spouse. Notwithstanding the consent requirement in Section
----------------
1.05, if the Participant establishes to the satisfaction of the
Committee that such written consent cannot be obtained because there is
no spouse or the spouse cannot be located, a waiver shall be deemed to
be valid. Any consent necessary under Section 1.05 will be valid only
with respect to the spouse who signs the consent, or in the event of a
deemed election, the designated spouse.
11.11 Payments in the Event of Death with no Designated Survivor or
-------------------------------------------------------------
Incompetency. In the event of (i) the death of a Participant, a Spouse
------------
or Beneficiary not survived by a person designated to receive any
payment then due, or (ii) the Committee finding that a Participant or
other person entitled to a benefit is unable to care for his affairs
because of illness or accident or is a minor or has died, or (iii) there
being no Spouse or designated Beneficiary, the Committee may direct that
any benefit payment due the Participant, unless claim shall have been
made therefor by a duly appointed legal representative, be paid to his
spouse, a child, a parent or other blood relative, or to a person with
whom he resides, and any such payment so made shall be a complete
discharge of the liabilities of the Plan therefor.
40
<PAGE>
The Committee shall determine to what extent, if any, previous service with
such company shall be recognized as Service, but subject to the continued
qualification of the Trust for the Plan as tax exempt under the ITA. Any
such company may terminate its participation in the Plan with respect to a
designated unit of its employees upon appropriate action by it, in which
event the funds of the Plan held on account of Participants in the employ of
such company and any unpaid balances of the Accounts of Participants who
have separated from the employ of such company, shall be determined by the
Committee and shall be distributed as provided in Section 10.02 in the event
of termination of the Plan, or shall be segregated by the Trustee as a
separate trust fund, pursuant to direction to the Trustee by the Committee,
continuing the Plan as a separate plan for such employees of such company
under which the board of directors of such company shall succeed to all the
powers and duties of the Board of Directors, including the appointment of
the Participants of the Committee.
11.12 Transfer of Prior Plan Assets and Liabilities to This Plan. Effective
----------------------------------------------------------
as of a date established by the Committee after receipt of Puerto Rico
Treasury Department and Internal Revenue Service determinations that (i)
this Plan meets the applicable requirements of Section 165(a) of the ITA
and Section 401(a) of the Code, and (ii) a prior plan or plans meets the
applicable requirements of Section 165(a) of the ITA and Section 401(a)
of the Code, the assets in cash and liabilities (or only assets not in
payout status and related liabilities if directed by the Committee) of a
prior plan may be transferred to this Plan if the Committee so directs.
Notwithstanding the immediately preceding sentence, this Plan shall not
accept a Trustee-to-Trustee transfer from any plan that is subject to
the requirements of Section 205 of ERISA. Any such transfer shall take
place only on a Valuation Date. In the absence of an applicable
Participant election, assets transferred from a prior plan shall be
invested in the Government Securities Fund, and the Accounts of
Participants and Beneficiaries under the prior plan will become their
Accounts as Participants and Beneficiaries under this Plan, effective as
of the transfer date.
11.13 Headings. Headings of Articles and Sections of the Plan are inserted
--------
for convenience of reference. They constitute no part of the Plan.
41
<PAGE>
ARTICLE XII
-----------
CLAIM PROCEDURE
---------------
12.01 Initial Determination. The initial determination of a Participant's,
---------------------
Spouse's or Beneficiary's eligibility for, and the amount of, a benefit
shall be made by the Committee which shall mail or deliver to each such
individual who has filed an effective claim for a benefit a written
statement of the amount of his benefit or a notice of denial of his
claim on or before the 90th day following the Committee's receipt of
such claim. If special circumstances require additional time for
processing the claim, the Committee may delay issuing its statement or
notice for an additional 90 days provided that the Participant, Spouse
or Beneficiary is notified of the circumstances necessitating the delay
and the date the Committee expects to render its final opinion. A claim
for benefits is not effective unless filed on forms prescribed by the
Committee. Each notice of whole or partial denial of claimed benefits
shall set forth the specific reasons for the denial, the time within
which an appeal must be made by the Participant, Spouse or Beneficiary
or his duly authorized representative, and shall contain such other
information as may be required by applicable law. If a statement or
notice is not issued within the prescribed period, the claim shall be
deemed denied.
42
<PAGE>
12.02 Review. Each Participant, Spouse or Beneficiary whose claim for
------
benefits has been wholly or partially denied shall have such rights to
review documents and submit comments as applicable law and regulations
of the Committee may provide, and shall also have the right to request
the Committee to review such denial; such request to be made on forms
prescribed by the Committee. A request for review shall be filed by the
Participant, Spouse or Beneficiary or his duly authorized representative
on or before the 60th day following the earlier of the Participant's,
Spouse's or Beneficiary's receipt of notice of denial of his claim or
the expiration of the prescribed period for issuing a statement of
benefits or notice of denial. The Committee shall issue a written
statement on or before the 60th day following its receipt of such
request stating the Committee's decision on review and the reasons
therefore, including specific references to pertinent Plan provisions on
which the decision is based, and any other information required by
applicable law. If special circumstances require additional time for
processing such review, the Committee may delay issuing its decision for
an additional 60 days provided that the Participant, Spouse or
Beneficiary is notified of such circumstances and the date the Committee
expects to render its final decision. If the decision is not issued
within the prescribed period, the appeal shall be deemed denied.
43
<PAGE>
ARTICLE XIII
------------
LIMITATIONS AND RESTRICTIONS
----------------------------
13.01 Code Section 415 Maximum. This Section is intended to impose a maximum
------------------------
limitation on the benefit payable under this Plan equal to but no lower
than that necessary to comply with the requirements of Section 415 of
the Code. The provisions of this Section are intended to comply with
said Section 415.
(a) Definitions.
-----------
(i) "Defined Benefit Plan" means any defined benefit plan (as defined in
Code Section 415(k)) maintained by the Company or an Affiliated Company.
(ii) "Related Plan" means any defined contribution plan (as defined in
Code Section 415(k)), other than this Plan, maintained by the
Company or an Affiliated Company or any individual account
maintained for voluntary contributions made by a Participant under a
defined benefit plan.
(iii) "Total Compensation" means all remuneration paid to an Employee by
the Company or an Affiliated Company.
(iv) "Annual Addition" means the sum of the following amounts credited to
a Participant's account for the limitation year:
(1) employer contributions;
(2) employee contributions;
(3) forfeitures; and
(4) Amounts allocated to an individual medical account, as defined in
Section 415(l)(2) of the Code, which is part of a pension or annuity plan
maintained by the employer are treated as Annual Additions to a defined
contribution plan. Also, amounts derived from contributions paid or accused
after December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the separate
account of a key employee, as defined in Section 419(d)(3) of the Code,
under a welfare benefit fund, as defined in Section 419(e) of the Code,
maintained by the employer, are treated as Annual Additions to a defined
contribution plan.
44
<PAGE>
(b) Limitations Applicable to Participants in Defined Contribution Plans
--------------------------------------------------------------------
Only.
----
(i) The Annual Addition credited to a Participant's Account under the Plan
for any Plan Year must not exceed the lesser of (1) $30,000 (or, if
greater, 25% of the defined benefit dollar limitation set forth in
Section 415(b)(1) of the Code as in effect for the Plan Year) or (2) 25%
of the Participant's Total Compensation for such Plan Year.
(ii) In the case of any Participant who also participates in a Related
Plan, the sum of his Annual Addition under this Plan and his Annual
Addition under all Related Plans for any Plan Year must not exceed
the amount set forth in (i) above.
(iii) Excess Annual Additions. If as a result of the allocation of
-----------------------
forfeitures, a reasonable error in estimating a Participant's annual
compensation, or under other limited facts and circumstances which
the Commissioner finds justified, the Annual Additions which cause
the limitations of Code Section 415 for the limitation year to be
exceeded shall not be deemed Annual Additions in that limitation
year and shall be treated as follows:
The excess amounts in the Participant's Account must be used to
reduce Compnay Contributions for the next limitation year (and
succeeding limitation years, as necessary) for that Participant
if that Participant is covered by the Plan as of the end of the
limitation year. However, if that Participant is not covered by
the Plan as of the end of the limitation year, then the excess
amounts shall be held unallocated in a suspense account for the
limitation year and allocated and reallocated in the next
limitation year to all of the remaining Participants in the
Plan. Furthermore, the excess amounts must be used to reduce
Company Contributions for the next limitation year ( and
succeeding limitation years, as necessary) for all of the
remaining Participants in the Plan. For purposes of this
subsection, excess amounts may not be distributed to
Participants or former Participants. Excess Participant
Contributions shall be returned to the Participant except that
gains attributable to the returned Participant Contributions
will be considered as a Participant Contribution for the
limitation year in which the returned Contribution was made. If
a suspense account is in existence at any time during the
limitation year in accordance with this Section, investment
gains and losses and other income shall be allocated to the
suspense account. To the extent that the investment losses are
allocated to the suspense account, the entire amount
45
<PAGE>
allocated to Participants from the suspense account, including
any such gains or other income or less any losses, is considered
as the Annual Addition.
(c) Effect of Participation in a Defined Benefit Plan.
-------------------------------------------------
(i) Notwithstanding the foregoing, if any Participant entitled to a benefit
hereunder is also entitled to a benefit from a Defined Benefit Plan
which is or was maintained by the Company or an Affiliated Company, the
retirement benefit to be paid under the Defined Benefit Plan shall be
reduced to the extent necessary to prevent the sum of the Defined
Benefit Plan Fraction and the Defined Contribution Plan Fraction
computed as of the end of the Plan Year form exceeding 1.0.
(ii) For purposes of this limitation, a Participant's Defined Benefit
Plan Fraction for each Plan Year is a fraction (1) whose numerator
is the Participant's projected annual retirement income benefit
under the Defined Benefit Plan (determined as of the close of the
calendar year); and (2) whose denominator is the lesser of the
product of 1.25 multiplied by the current dollar limitation in
effect for the calendar year under Code Section 415(b) or the
product of 1.4 multiplied by 100% of the amount that may be taken
into account under Code Section 415(b)(1). In the case of a
Participant who was a Participant in one or more Defined Benefit
Plans maintained by the Company or an Affiliated Company which were
in existence on July 1, 1982, the denominator of this fraction will
not be less than the product of 1.25 multiplied by the sum of the
annual benefits under such Plan which the Participant had accrued as
of the end of the last Plan Year beginning before January 1, 1983;
provided such Plans satisfied the requirements of Code Section 415
as in effect on December 31, 1982. In the case of a Participant who
prior to January 1, 1987, was a Participant in one or more Defined
Benefit Plans maintained by the Company or an Affiliated Company
which were in existence on May 6, 1986, the denominator of this
fraction will not be less than the product of 1.25 multiplied by the
sum of the annual benefits under such Plan which the Participant had
accrued as of December 31, 1986 (determined without regard to any
changes in the terms and conditions of such plan or any cost of
living increases after May 6, 1986); provided such Plans satisfied
the requirements of Code Section 415 for all plan years.
46
<PAGE>
(iii) A Participant's Defined Contribution Plan Fraction for any calendar
year is a fraction (1) whose numerator is the sum of the
Participant's Annual Additions for all calendar years under this
Plan and all Related Plans determined as of the close of the
calendar year and (2) whose denominator is the sum of the lesser of
the following amounts determined for the calendar year and each
prior year of Service: the product of 1.4 multiplied by 25% of the
Participant's Total Compensation for the Plan Year.
(d) Aggregation of Plans. For purposes of the limitations in this Article,
--------------------
all Defined Benefit Plans of the Company or an Affiliated company,
whether or not terminated, shall be treated as one Defined Benefit
Plan and all defined contribution plans of the Company or an
Affiliated Company, whether or not terminated, shall be treated as
one defined contribution plan for purposes of the limitation under
Code Sections 415(b) and (c).
13.02 Top Heavy Requirement. This Section is intended to ensure the Plan's
---------------------
compliance with Section 416 of the Code. The following Sections shall
be applicable to Participants for any Plan Year with respect to which
the Plan is top-heavy.
(a) Definitions. The following definition shall be applied in construing
-----------
this Article:
(i) Top-Heavy Plan means any defined contribution plan maintained by the
--------------
Company or an Affiliated Company if, as of the Determination Date, the
aggregate of the accounts of Key Employees under the Plan exceeds 60% of
the aggregate of the accounts for all employees under such Plan. The
Plan will be deemed a "super top-heavy plan" if, as of the Determination
Date, the Plan would meet the test specified above for being a top-heavy
plan if 90% were substituted for 60% in each place it appears in this
subsection (i).
(ii) Determination Date means the last day of the preceding Plan Year
------------------
(or, in the case of the first plan year of a plan, the last day of
such Plan year). When plan aggregation is required, calculation of
accrued benefits as of the determination dates which fall within the
same calendar year will be used.
(iii) Valuation Date means the same date as the Determination Date.
--------------
47
<PAGE>
(iv) Key Employee means each Employee or former Employee who is, at any
------------
time during the Plan Year ending on the "Determination Date", or
was, during any one of the four Plan Years preceding the Plan Year
ending on the Determination Date, any one or more of the following:
(1) An officer of the Company or an Affiliated Company having an annual
compensation greater than 150% of the dollar limitation in effect under Code
Section 415(c)(1)(A) for any Plan Year;
(2) One of 10 Employees having annual compensation from the Company or an
Affiliated Company of more than the dollar limitation in effect under Code
Section 415(c)(1)(A) and owning (or considered as owning within the meaning
of Code Section 318) both the largest interests in the Company or an
Affiliated Company and a 1/2% ownership interest;
(3) any person owning (or considered as owning within the meaning of Code
Section 318) more than 5% of the outstanding stock of the Company (or stock
having more than 5% of the total combined voting power of all stock of the
Company); or
(4) Any personal who has annual compensation of more than $150,000 and would
be described in subsection (3) above, if "1%" was substituted for "5%".
For purposes of determining whether a person is an officer in subpart (1)
above, in no event will more than 50 Employees or, if less than 50
Employees, the greater of 3 or 10% of all Employees, be considered Key
Employees solely by reason of officer status. In addition, persons who are
merely nominal officers will not be treated as Key Employees solely by
reason of their titles as officers. For purposes hereof, compensation is as
defined in Section 1.415-2(d) of the Income Tax Regulations.
(v) Non-Key Employee means any Participant in the Plan (including a
----------------
beneficiary of such Participant) who is not a Key Employee.
(b) Required Aggregation. This Plan and all other qualified plans,
--------------------
including any terminated plans, maintained by the Company or an
Affiliated Company which include a Key Employee must be aggregated to
determine if the group as a whole is top-heavy. In addition, each other
qualified plan maintained by the Company or an Affiliated Company which
enables any plan in which a Key Employee is a Participant to meet the
requirements of Sections 410(a)(4) and 410 of the Code must be
aggregated.
(c) Permissive Aggregation. The Company may include other plans maintained
----------------------
by the Company or an Affiliated Company which when considered as a
group with the required aggregation group, would continue to satisfy the
requirements of Sections 401(a)(4) and 410 of the Code, to determine if
the group as a whole is top-heavy, provided such plans are comparable in
benefits or contributions.
(d) Top-Heavy Ratio.
---------------
(i) The top-heavy ratio is a fraction, the numerator of which is the sum of
account balances under the defined contribution plans for all Key
Employees and the present value of accrued benefits under the Defined
Benefit Plans for all Key Employees, and the denominator of which is the
sum of the account balances for all Participants and the present value
of accrued benefits under the defined benefit plans for all
Participants. Both the numerator and denominator are adjusted to
include any distributions made in the fine-year period ending on the
"Determination Date" and any contributions due but unpaid as of the
Determination Date.
(ii) The value of account balances and the present value of accrued
benefits will be determined as of the most recent Valuation date.
The account balances and accrued benefits of a Participant who is
not a Key Employee but who was a Key Employee in a prior year will
be disregarded. The calculation of the top-heavy ratio, and the
extent to which distribution, rollovers and transfers are taken into
account will be made in accordance with Section 416 of the Code and
the regulations thereunder.
48
<PAGE>
(iii) If any Participant has not performed an hour of Service for the
Company at any time during the five-year period ending on the
Determination Date, the account of such Participant shall not be
taken into account.
(e) Minimum Vesting. For any Plan Year in which the Plan is a top-heavy
---------------
plan as determined pursuant to Section 416 of the Code, a Participant
will have a non-forfeitable right to a percentage of the Participant's
Accounts derived from Company Contributions as set forth below if such
schedule is more favorable to the Participant than the vesting schedule
under Section 6.02.
49
<PAGE>
Years of Service Completed
For Vesting Purposes Vested Interest
-------------------- ---------------
Less than three 0%
Three or more 100%
The above vesting schedule applies to all benefits within the meaning of
Section 411(a)(7) of the Code except those attributable to Participant
Contributions, including benefits accrued before the effective date of
Section 416 of the Code and benefits accrued before the Plan became top-
heavy.
(f) Minimum Required Contribution. It is intended that the Company or
-----------------------------
an Affiliated Company will meet the minimum contribution requirements of
Section 416(c) of the Code by providing a minimum contribution (which
may include forfeitures otherwise allocable) without regard to any
Social Security contributions for such Plan Year for each Participant
who is a non-key employee in an amount equal to at least 3% of such
Participant's compensation (as defined in Section 1.415-2(d) of the
Income Tax Regulations) for such Plan Year. Such 3% minimum
contribution requirement shall be increased to 4% for any year in which
the Company or an Affiliated Company also maintains a defined pension
plan if necessary to avoid the application of Section 416(h)(1) of the
Code, relating to the special adjustments to Section 415 limits of the
Code for top-heavy plans, if the adjusted limitations of Section
416(h)(1) would otherwise be exceeded if such minimum contribution were
not so increased. The minimum contribution required shall be made to
any non-key employee who is still employed on the last day of the play
year regardless as to the number of hours of Service performed during
the year and regardless of the employee's level of compensation. If for
the Plan Year the Plan becomes a super top-heavy plan, then the
denominator of both the defined contribution plan fraction and the
defined benefit plan fraction shall be calculated as set forth in
Section 3.08(b) for the limitation year ending in such Plan Year by
substituting "1.0" for "1.25" in each place such figure appears, except
with respect to any individual for whom there are no employer
contributions, forfeitures or voluntary nondeductible contributions
allocated or accruals for such individual under the defined benefit
plan.
50
<PAGE>
The minimum contribution requirements set forth herein above shall
be reduced in the following circumstances:
(i) The percentage minimum contribution required hereunder shall in no event
exceed the percentage contribution made for the Key Employee for whom
such percentage is the highest for the Plan Year after taking into
account contributions or benefits under other qualified plans in this
Plan's aggregation group providing no other defined benefit plan uses
the defined contribution plan to satisfy Code Section 401(a) as provided
in Section 416(c)(2)(B)(ii) of the Code; and
(ii) No minimum contribution will be required for a Participant under
this Plan for any Plan Year if the Company or an Affiliated Company
maintains another qualified plan under which a minimum benefit is
being accrued for such year for the Participant in accordance with
Section 416(c) of the Code.
51
<PAGE>
SCHEDULE A
COMPENSATION
------------
I. The following payments are included as Compensation for all Participants:
-------- ------------
- Basic Salary.
- Shift Premium Pay.
- Overtime.
- Commissions.
- Sales incentive payments.
- Vacation Pay (except as noted in II).
- Compensation deferred pursuant to salary reduction arrangements under
Code Sections 401(k) or 125 or ITA Section 165(e).
- Salary continuation payments prior to the Severance Date.
- Lump sum payments in lieu of an increase in basic salary.
- AIAP Payments that are eligible to be deferred.
II. The following payments are not included as Compensation for Participants:
--- ------------
- Any form of compensation not listed in Part I, and specifically
excluding the following:
- Vacation Pay received in lieu of vacation taken.
- Moving Expenses.
- Housing differential.
- Bonus payments unless specifically identified in I.
- Change of control bonus.
- Stay-on bonus.
- Management incentive plan payments unless specifically identified in I.
- Nondeferrable AIAP payments.
- Deferrals made pursuant to the RJR Nabisco Scholastic Savings Plan.
- Christmas Bonus.
52
EXHIBIT 4.4
NUMBER SEVEN
DEED OF AMENDMENT AND RESTATEMENT OF
DEED OF CONSTITUTION OF TRUST
In the City of San Juan, Puerto Rico, this twelfth (12th)
day of July, nineteen hundred ninety-three (1993).
BEFORE ME
TCHERINE ANDUJAR, Notary Public in and for the Commonwealth
of Puerto Rico, with residence in San Juan, Puerto Rico and
offices on the Fourteenth Floor of the Banco Popular Center,
Hato Rey, San Juan, Puerto Rico.
APPEAR
AS PARTY OF THE FIRST PART: RJR Nabisco, Inc., employer
identification number 56-0950247, a corporation organized and
existing under the laws of Delaware, having its principal office
in New York, New York (hereinafter sometimes referred to as "RJR
Nabisco") and represented herein by its counsel Leon Lichter
Kibrit, of legal age, married, and resident of Passaic, New
Jersey, who represents that he is duly authorized to bind and
act herein for RJR Nabisco.
AS PARTY OF THE SECOND PART: BANCO POPULAR DE PUERTO RICO,
employer identification number 66-0175278, a bank organized and
existing under the laws of the Commonwealth of Puerto Rico,
having its principal office in Hato Rey, Puerto Rico
(hereinafter sometimes referred to as the "Trustee") and
represented herein by its Vice President, Luis Carlos Fernandez
Trinchet, of legal age, single and resident of San Juan, Puerto
Rico, who represents that he is duly authorized to bind and act
herein for the Trustee.
I, the Notary, hereby certify that I personally know the
appearing parties and, by their statements, I do certify as to
their personal circumstances. Further, the appearing parties
represent to me that they are in full enjoyment and exercise of
their civil rights, and that they have, and in my judgment they
do have, sufficient legal capacity and authority to execute this
deed.
WITNESSETH
WHEREAS, the RJR Employee Benefits Committee, duly
appointed by the Compensation Committee of the Board of
Directors of RJR Nabisco (the "RJR Employee Benefits
Committee"), has been delegated the authority and power to,
among others, adopt, amend or terminate any employee pension or
welfare benefit plan and any related trusts of any subsidiary of
<PAGE>
RJR Nabisco and appoint and remove trustees with respect to any
such employee plans.
WHEREAS, several direct and/or indirect subsidiaries of RJR
Nabisco operating in Puerto Rico have or will establish defined
contributions plans for the benefit of their employees;
WHEREAS, as per Deed Number Fifteen (15) of December
eighteen (18), nineteen hundred eighty nine (1989) before this
Notary, R.J. Reynolds Tobacco Company entered into a Trust
Agreement (the "Original Trust Agreement") with the Trustee
establishing a trust to serve as a funding medium for the profit
sharing plan adopted by R.J. Reynolds Tobacco Company which is
officially entitled Savings and Investment Plan for Employees of
R.J. Reynolds Tobacco Company in Puerto Rico;
WHEREAS, as per Deed Number Four (4) of August twenty-four
(24), nineteen hundred ninety-two (1992) before this Notary (the
"Master Trust Agreement"), the Original Trust Agreement was
amended to convert the trust therein established into a master
trust (the "RJR Nabisco Puerto Rico Defined Contribution Master
Trust") to serve as the funding medium for the defined
contribution plans of RJR Nabisco and its subsidiaries in Puerto
Rico (singularly referred to as the "Plan" and collectively
referred to as the "Plans").
WHEREAS, the RJR Employee Benefits Committee desires to
amend the Master Trust Agreement to authorize the appointment of
custodians and the commingling by the custodians of the assets
of the RJR Nabisco Puerto Rico Defined Contribution Master Trust
with assets of any other tax qualified plans sponsored by RJR
Nabisco or its affiliates.
NOW THEREFORE, the Master Trust Agreement is amended to
read as follows:
THE AGREEMENT OF THE APPEARING PARTIES
I. TITLE OF TRUST
The trust hereby established shall be designated and
known as the RJR Nabisco Puerto Rico Defined Contribution Master
Trust.
II. DEFINITIONS
The words and phrases defined in the Plans shall have
the meaning therein set out when used in this Master Trust
Agreement, unless different meaning is plainly required by the
context.
<PAGE>
III. GENERAL STATEMENTS
First: The assets held in any trust heretofore
established under a Plan upon being transferred to the Trustee,
such other property or money as shall from time to time be
delivered or paid to the Trustee pursuant to such Plan, and the
earnings and profits thereon, shall be held in a trust by the
Trustee and dealt with in accordance with the diverted to
purposes other than the exclusive benefit of those individuals
having an interest in such Plan (hereinafter collectively
referred to with respect to each Plan as "Covered Individuals"),
and paying the expenses of such Plan.
Second: The Trustee is directed to consolidate into a
single fund (hereinafter called the "Commingled Fund") and to
commingle all assets received and held by it in each Separate
Trust with all assets received and held by it in each other
Separate Trust governed by this Deed of Trust, excepting any
such assets hereinafter required to be segregated. The Trustee
is directed to maintain at all times such records as will enable
it to effect, as of any time, an equitable allocation and
segregation of assets in the Commingled Fund into a separate
fund held for the benefit of some or all of the Covered
Individuals under one or more of the Plans. RJR Nabisco shall
upon request of the Trustee provide the Trustee with such
information as will enable the Trustee to maintain such records.
If in the future the Trustee receives written notice from RJR
Nabisco to effect any such allocation and segregation, the
Trustee shall do so as soon thereafter as practicable. The
Trustee is hereby directed to effect such allocation and
segregation in the event that any Separate Trust shall cease to
remain tax exempt under both Section 501(a) of the United States
Internal Revenue Code of nineteen hundred eighty-six (1986), as
amended (the "Code") and Section 165(a) of the Puerto Rico
Income Tax Act of nineteen hundred fifty-four (1954) (the
"ITA"). Each Separate Trust shall share proportionately in the
aggregate investment hereby directed to effect such allocation
and segregation in the event that any Separate Trust shall cease
to remain tax exempt under both Section 501(a) of the United
States Internal Revenue Code of nineteen hundred eighty-six
(1986), as amended (the "Code") and Section 165(a) of the Puerto
Rico Income Tax Act of nineteen hundred fifty-four (1954) (the
"ITA"). Each Separate Trust shall share proportionately in the
aggregate investment experience of the Commingled Fund. With
respect to assets hereunder segregated, the investment
experience shall be shared proportionately by those
participating therein.
Third: The Trustee shall be responsible only for such
sums and property as shall actually be received by it as Trustee
hereunder and shall not be required to determine whether
contributions by RJR Nabisco, any subsidiary of RJR Nabisco and
any Covered Individual delivered to it, comply with the
provisions of the Plans nor shall it have any authority on
<PAGE>
behalf of the Separate Trusts or any Covered Individual to bring
any action or proceeding to enforce the collection of any such
amount. The Trustee shall manage, invest and reinvest the
Commingled Fund pursuant to the provisions herein and shall make
payments therefrom as hereinafter provided pursuant to the
instructions of RJR Nabisco.
Fourth: No duties or obligations shall be imposed upon
the Trustee with respect to the Separate Trusts by the Plans or
any other instrument to which the Trustee is not a party, unless
they have been specifically undertaken by the Trustee or are
otherwise imposed upon the Trustee by applicable law.
Fifth: The Trustee shall not be required to make or
file any inventory or any reports to any court or to give any
bond, except to the extent required by the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended.
Sixth: RJR Nabisco shall have the power to interpret
and construe this Master Trust Agreement and shall direct the
Trustee as to any matter in which the Plan or this Master Trust
Agreement may be ambiguous or uncertain and the Trustee, to the
extent permitted by ERISA, shall be indemnified and held
harmless by RJR Nabisco for acting in accordance with such
direction. The Trustee may request advice or direction from RJR
Nabisco in regard to any matter and the Trustee shall not be
required to act pending receipt of such advice or direction and,
to the extent permitted by ERISA, shall be indemnified and held
harmless for any act or omission in accordance with the advice
or direction of RJR Nabisco.
Seventh: Neither RJR Nabisco nor any of its
subsidiaries, nor any member of any of them, nor the Trustee,
shall be liable or responsible for the acts or omissions of any
other party except to the extent required by ERISA.
IV. POWERS AND DUTIES OF TRUSTEE
First: The Trustee shall receive such portion of the
Commingled Fund as may be transferred, assigned or delivered to
it from time to time by RJR Nabisco and hold and otherwise
manage such portion of the Commingled Fund in accordance with
the written directions of RJR Nabisco.
Second: The Trustee shall accept any such money or
property transferred, assigned or delivered to it by RJR Nabisco
or any of its subsidiaries or affiliates, with the understanding
that it will be disposed of as soon as practicable, and to
return any such money or property to the participants or entity
directed by RJR Nabisco.
Third: The Trustee may consult with RJR Nabisco as it
may from time to time request with respect to the management of
the Commingled Fund.
<PAGE>
Fourth: The Trustee shall draw its check payable to
such Covered Individual as RJR Nabisco shall direct and deliver
it in accordance with the direction of RJR Nabisco.
Fifth: In making a payment upon a direction authorized
herein, the Trustee may accept such direction as a certification
that complies with the provisions of this Article and need make
no further investigation, subject, nevertheless, to the
applicable provisions of ERISA.
Sixth: The Trustee shall furnish to RJR Nabisco an
annual account or an account for such other period as RJR
Nabisco may specify, showing all investments, receipts,
disbursements and other transactions involving that portion of
the Commingled Fund held by it during the period and also
showing the total amount of the Commingled Fund held by it at
the end of the period, which shall be conclusive on all persons,
including RJR Nabisco and any of its subsidiaries which have
adopted this Trust Agreement except as to any act or transaction
as to which RJR Nabisco filed with the Trustee written
exceptions or objections within ninety (90) days after receipt
of the account.
Seventh: At the direction of RJR Nabisco, the Trustee
shall appoint one or more custodians to hold, on behalf of the
Puerto Rico Master Trust, some or all of the assets of the
Puerto Rico Master Trust. Such custodians may be authorized to
commingle some or all of the assets of the Puerto Rico Master
Trust under their custody with assets of any other tax qualified
plans sponsored by RJR Nabisco or its affiliates held by them as
trustees or custodians.
Eighth: Subject to the provisions of Section V, Ninth,
the Trustee shall exercise the voting rights of any stocks,
bonds or other securities in accordance with the instructions of
RJR Nabisco.
Ninth: The Trustee shall exercise the voting rights of
any securities of RJR Nabisco in accordance with the
instructions of the Plans' Participants, as provided in the
Plans' documents.
VI. TRUSTEE LIMITATIONS
First: The Trustee shall have no investment discretion
over the assets transferred to the Puerto Rico Master Trust.
Any such investment discretion and power shall be vested on RJR
Nabisco.
VII. POWER OF RJR NABISCO TO DIRECT TRUSTEE
First: Notwithstanding any other provisions of this
Agreement, RJR Nabisco shall have the power to direct the
Trustee. Any such direction shall be in writing and delivered
<PAGE>
to the Trustee and shall specify the extent and duration of the
direction.
VIII. EXTENT OF TRUSTEE'S RESPONSIBILITY
First: No power, right, duty or responsibility is
given to, or imposed upon, the Trustee under the Plan or this
Trust Agreement, except as set forth herein or as required by
applicable law. To the extent permitted by law, the Trustee
shall not incur any liability by acting without question in
accordance with any direction given by RJR Nabisco.
IX. ADMINISTRATION
First: The Trustee shall withhold any Puerto Rico
income tax from all payments and distributions made by the
Trustee to Covered Individuals when and to the extent required
by the ITA; provided, however, if RJR Nabisco does not provide
the Trustee, within thirty (30) days following request by the
Trustee, any information prescribed in Puerto Rico Income Tax
Regulations as necessary for the proper computation of such
withholding tax liability, including the name, address and
social security number of each payee, RJR Nabisco shall have
sole responsibility for any Puerto Rico income tax withholding
obligations under the ITA. RJR Nabisco agrees that it has the
sole responsibility for notifying Covered Individuals of any
right to elect out of Puerto Rico withholding, where applicable,
and the Trustee shall be entitled to rely upon RJR Nabisco's
certifications as to such elections by Covered Individuals. RJR
Nabisco agrees to indemnify the Trustee for all withholding tax
liability, interest and penalties assessed against the Trustee
by reason of RJR Nabisco's failure to provide to the Trustee the
correct and complete information necessary to comply with Puerto
Rico tax withholding requirements applicable to the Trustee with
respect to benefit payments made by it under the Plan and this
Deed of Trust.
Second: The indicia of ownership of all trust assets
shall be maintained within the jurisdiction of the United States
District Courts, except as otherwise required by applicable laws
and regulations.
Third: RJR Nabisco hereby agrees to hold the Trustee
harmless and to indemnify the Trustee from and against any and
all losses, claims, damages, liabilities or expenses whatsoever
(including, but not limited to, any and all expenses reasonably
incurred in investigating, preparing or defending against any
litigation or proceeding, commenced or threatened, or any claim
whatsoever), arising out of the administration of the Commingled
Fund if the Trustee has acted in good faith or in reliance on
the direction or certification of RJR Nabisco, unless arising
from the Trustee's own negligence or willful misconduct, or
arising out of or based upon any untrue statement contained in
any instrument document or other material furnished by or
<PAGE>
through RJR Nabisco to Covered Individuals, or otherwise used by
RJR Nabisco or authorized by it for use in respect of, any
public offer, or arising out of or based upon an omission or
alleged omission to state a material fact required to be stated
or necessary to make other statements made in any such material
not misleading. If a claim is made against the Trustee, the
Trustee shall notify RJR Nabisco of any action commenced against
the Trustee within a reasonable time after the Trustee shall
have been served with the summons or other first legal process
giving information as to the nature and basis of the claim.
However, failure to so notify RJR Nabisco shall not relieve RJR
Nabisco from any liability which it may have on account of this
indemnity or otherwise if the Trustee shall sustain the burden
of providing that RJR Nabisco has not been prejudiced in any
material respect by such failure. RJR Nabisco shall not be
liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be
a final judgment for the plaintiff. . . by RJR Nabisco, and
reimbursement for its reasonable out-of-pocket expenses for any
services attributable to the duties and responsibilities
described in this Deed of Trust.
Second: All taxes of any kind that may be assessed or
levied against or in respect to the Commingled Fund shall be
paid from the Commingled Fund. To the extent permitted under
applicable law, all other expenses of the Plans and the
administration of the Puerto Rico Master Trust, including the
Trustee's fees, fees for legal services rendered to the Trustee
with respect to its actions as Trustee (whether or not rendered
in connection with a judicial or administrative proceeding and
whether or not incurred while it is acting as Trustee), all
brokerage commissions, such compensation to the Trustee as may
be agreed upon from time to time between the Trustee and an
officer of RJR Nabisco, all recordkeeper fees, and all other
proper charges and disbursements of the Trustee, shall be paid
from the Commingled Fund, except that, at the discretion of RJR
Nabisco, any such costs and expenses may be paid by RJR Nabisco.
Third: The Trustee shall promptly notify RJR Nabisco
of any and all such tax levies an assessments. RJR Nabisco
shall have the right to seek to have reviewed, reduced,
equalized, or abated any tax payable from the Commingled Fund
hereunder, and the Trustee shall not pay any such taxes or
assessments during such time as RJR Nabisco is contesting or
protesting the same or seeking to have the same reviewed,
reduced, equalized or abated, except that the Trustee shall pay
the whole or any part of such contested tax if in the opinion of
counsel to RJR Nabisco such payment in whole or in part is
necessary. . . .
Third: Within ninety (90) days after the receipt of
such report RJR Nabisco shall file with the Trustee notice of
any objection which it may have to any act or transaction of the
Trustee set forth in such report. Upon such report being
<PAGE>
adjusted to the satisfaction of RJR Nabisco, RJR Nabisco shall
endorse upon the report a statement that it has been settled and
adjusted to its satisfaction, and thereupon the report shall
become a report stated. To the extent permissible under ERISA,
if no objection to said report is filed within a period of
ninety (90) days after it has been received, it shall be deemed
to have been settled and allowed in like manner as if RJR
Nabisco had endorsed thereon a statement of approval as
aforesaid, and thereupon the report shall become a reported
stated.
Fourth: Except when otherwise provided by law, when it
is provided herein that an amount shall become an account
stated, such an account shall be deemed to be finally settled
and shall be conclusive between and among the Trustee, RJR
Nabisco and all persons having or claiming to have any interest
in the Separate Trusts or under the Plans, and such settlement
of an account shall constitute a full and complete discharge and
release of the Trustee, with like effect as if such account had
been settled and allowed by a judgment or decree or a court of
competent jurisdiction in an action or proceeding in which the
Trustee, RJR Nabisco and all persons having or claiming to have
any interest in the Trust or under the Plan were parties. The
Trustee shall have the right to apply at any time to a court of
competent jurisdiction for the judicial settlement of its
account, and in. . . except that, at the discretion of RJR Nabisco,
any such costs and expenses may be paid by RJR Nabisco.
Third: The Trustee shall promptly notify RJR Nabisco
of any and all such tax levies and assessments. RJR Nabisco
shall have the right to seek to have reviewed, reduced,
equalized, or abated any tax payable from the Commingled Fund
hereunder, and the Trustee shall not pay any such taxes or
assessments during such as time RJR Nabisco is contesting or
protesting the same or seeking to have the same reviewed,
reduced, equalized or abated, except that the Trustee shall pay
the whole or any part of such contested tax if in the opinion of
counsel to RJR Nabisco such payment in whole or in part is
necessary to protect or preserve any property of the Commingled
Fund. The Trustee shall execute all documents, applications,
petitions, instruments, or complaints necessary for any such
protest, contest, review or other proceedings.
XI. ACCOUNTS OF THE TRUSTEE
First: The Trustee shall maintain records and accounts
of all receipts and disbursements made by the Trustee, which
records and accounts shall be open to the inspection of RJR
Nabisco at all reasonable times, and may be audited from time to
time by any person or persons designated by RJR Nabisco.
Second: The Trustee shall give RJR Nabisco a monthly
report or a report for such other period as RJR Nabisco shall
specify, setting forth all receipts, investments, disbursements
<PAGE>
and other transactions effected by it during such period or
during the period from the close of the last previous period to
the date of such report. The above report is to be delivered to
RJR Nabisco within fifteen (15) days after the end of the
corresponding period. . . .
any such action or proceeding it shall only be necessary
to join as parties thereto the Trustee and RJR Nabisco,
and any final judgment or decree which may be entered
therein shall be conclusive on all parties having or claiming to
have any interest in the Separate Trusts or under the Plans.
Fifth: Unless otherwise agreed to by RJR Nabisco and
the Trustee, the Trustee shall not be responsible for the
preparation or filing of any tax return or any other report or
form required to be filed with any agency of the government of
the Commonwealth of Puerto Rico by the Puerto Rico Master Trust
regarding its income and losses or assets. The Trustee upon
request shall furnish to RJR Nabisco such additional information
under its control as RJR Nabisco may reasonably request for
preparing any such return, report or form. The Trustee shall be
responsible for the preparation, filing and delivery of any form
required by the ITA with respect to payments and distributions
from the Puerto Rico Master Trust.
XII. THE TRUSTEE
First: The Trustee shall be fully protected in relying
upon a certification of RJR Nabisco with respect to any
instruction, direction or approval of RJR Nabisco. The Trustee
shall be fully protected in acting upon any instrument,
certificate, or paper, reasonably believed by it to be genuine
and to be signed or presented by RJR Nabisco, proper person or
persons, and the Trustee shall be under no duty to make any
investigation or inquiry as to any statement contained in any
such writing, but may accept the same as conclusive evidence of
the truth and accuracy of the statements therein contained.
Second: The Trustee shall not be liable for the proper
application of the Commingled Fund if payments are made in
accordance with the written directions of RJR Nabisco as herein
provided, nor shall the Trustee be responsible for the adequacy
of the Commingled Fund to meet and discharge any and all
payments and liabilities under the Plans. All persons dealing
with the Puerto Rico Master Trust are released from inquiring
into the decision or authority of the Trustee and from seeing to
the application of any monies, securities or other property paid
or delivered to the Trustee, subject, nevertheless, to the
applicable legal provisions.
<PAGE>
XIII. RESIGNATION; REMOVAL; AMENDMENTS; TERMINATION;
SUCCESSOR TRUSTEE, FISCAL YEAR
First: The Trustee may resign at any time by giving
written notice to RJR Nabisco at least thirty (30) days prior to
the effective date of such resignation. RJR Nabisco may remove
the Trustee at any time by giving written notice to the Trustee
at least thirty (30) days prior to the effective date of such
removal. In the event of the resignation or removal of the
Trustee, RJR Nabisco shall appoint a new trustee. Thereupon the
Trustee shall deliver to the successor trustee all money and
property held by the Trustee hereunder and the books and records
held by the Trustee necessary to the proper administration of
the Plans, and shall thereupon be discharged of all further
responsibility hereunder. Unless RJR Nabisco or the successor
trustee makes written claim against the retiring trustee within
ninety (90) days from the delivery of such property, books and
records, the Trustee shall, to the extent permitted by ERISA, be
relieved from all liability for any of its acts or omissions
hereunder. The successor trustee shall be under no obligation
to audit the acts or accounts of the Trustee or to make any
claim against the retiring trustee. Any such successor trustee
shall have and may exercise all of the rights, powers, duties
and immunities of the Trustee as fully and to the same extent as
if it had originally been named as Trustee hereunder.
Second: The Puerto Rico Master Trust and the Separate
Trusts shall continue for such time as may be necessary to
accomplish the purpose for which they were created, but may be
terminated and discontinued by action of the RJR Employee
Benefits Committee in accordance with applicable law. Notice of
such termination shall be given to the Trustee by an instrument
in writing executed by the RJR Employee Benefits Committee
signed by its duly authorized officers, and declaring that the
Puerto Rico Master Trust or the specific Separate Trust hereby
established is terminated. A termination of a Separate Trust
hereby established pursuant to action of the RJR Employee
Benefits Committee shall take effect as of the date of the
delivery of such notice to the Trustee. If and when a Separate
Trust is terminated, the Trustee shall dispose of the assets of
the Separate Trust in such manner as shall be directed by the
RJR Employee Benefits Committee. Upon termination of a Plan,
the Trustee shall have no obligation to make any payment from
the Separate Trust until it shall have received approval from
the Puerto Rico Treasury Department and/or the Internal Revenue
Service, or a counsel opinion to the effect that the above
mentioned approvals are not required. Upon termination of the
Puerto Rico Master Trust, the Trustee shall continue to have and
exercise all of the powers and duties set forth in this
Agreement until liquidation and distribution of the assets of
the Puerto Rico Master Trust have been completed. If the Puerto
Rico Master Trust is terminated by reason of RJR Nabisco ceasing
to exist or going out of business and if there shall be at any
time no person authorized to administer the Plans, the Trustee
<PAGE>
shall assume the responsibilities and duties, and become
entitled to the immunities of RJR Nabisco for the purpose of
liquidating the Separate Trusts and distributing the assets
thereof. Upon termination of a Plan and liquidation and
distribution of a Separate Trust assets, in no event shall any
of the Separate Trust assets be returned to RJR Nabisco or any
of its subsidiaries, unless otherwise permissible by law.
Third: If for any reason RJR Nabisco cannot or does
not act in the event of the resignation or removal of the
Trustee, as hereinabove provided, the Trustee may apply to a
court of competent jurisdiction for the appointment of a
successor Trustee or for instructions. Any expenses so
incurred shall be treated as an expense of administration.
Fourth: RJR Nabisco shall have the right at any time
and from time to time by an instrument in writing delivered to
the Trustee, executed pursuant to the order of the RJR Employee
Benefits Committee in form similar to the execution of this Deed
of Trust to modify or amend this Trust Agreement in whole or in
part, except that no such amendment affecting the rights, duties
or responsibilities of the Trustee shall be made without the
written consent of the Trustee, and further excepting that no
amendment shall be made pursuant to which any part of the
Separate Trust may be used for or diverted for purpose other
than for the exclusive benefit of Covered Individuals prior to
the satisfaction of all liabilities with respect to such
individuals under this Deed of Trust. Any amendment required to
continue this Trust in compliance with the law may be executed
by an authorized officer of RJR Nabisco, previously authorized
by the RJR Employee Benefits Committee.
Fifth: Fiscal Year. The fiscal year of the Puerto
-----------
Rico Master Trust and each of the Separate Trusts created by
this Agreement shall be a twelve (12) months period ending on
December thirty (30) of each year.
XIV. MISCELLANEOUS
First: Governing Law. This Agreement and the Puerto
-------------
Rico Master Trust and the Separate Trusts created hereby shall
be construed, regulated and administered under the laws of the
Commonwealth of Puerto Rico except where superseded by the laws
of the United States, and the Trustee shall be liable to account
in the courts located within Puerto Rico. In case any
provisions of this Deed of Trust shall be held illegal or
invalid for any reason whatsoever, said illegality or invalidity
shall not affect the remaining parts of this Deed of Trust and
this Trust Agreement shall be construed and enforced as if said
illegal and invalid provisions had never been inserted herein.
Second: Assignment. Except as otherwise provided in
----------
the Plans, no benefit, right or interest of any person under any
Plan shall be subject to anticipation, alienation, sale,
<PAGE>
transfer, assignment, pledge, encumbrance or charge; nor to
seizure, attachment or other legal, equitable or other process;
nor shall it be liable for, or subject to, the debts,
liabilities or other obligations of such person.
Third: Any action required to be taken by RJR Nabisco
pursuant to the provisions of this Deed of Trust may be taken by
the RJR Employee Benefits Committee or by any person authorized
to act on behalf of RJR Nabisco by such RJR Employee Benefits
Committee. All actions of such Committee shall be evidenced by
a resolution of such Committee in a form satisfactory to the
Trustee and the Trustee shall be fully protected in acting in
accordance with such resolutions.
Fourth: RJR Nabisco shall furnish the Trustee from
time to time with a certificate of the RJR Employee Benefits
Committee as to the names and signatures of all persons
authorized to issue orders, requests, instructions and
objections to the Trustee pursuant to the provisions of this
Deed of Trust including, but not limited to, the persons
designated pursuant to the Plan to direct the Trustee.
Fifth: If the Trustee is at any time acting as a
successor trustee or succeeds to responsibilities hereunder for
management of plan assets with respect to the Commingled Fund
(or any portion thereof), RJR Nabisco hereby agrees to hold the
Trustee harmless from and against all taxes, expenses (including
counsel fees), liabilities, claims, damages, actions, suits or
other charges incurred by or assessed against it, as successor
Trustee, as a direct or indirect result of any act or omission
of a predecessor Trustee or any other person charged under any
agreement affecting the Commingled Fund for investment
responsibility with respect to such assets. In addition, the
Trustee shall not be liable for any losses to the Commingled
Fund resulting from the disposition of any investment which
shall have been made by a predecessor Trustee or any Investment
Manager or for the retention thereof if the Trustee is unable to
dispose of such investment because of any federal or Puerto Rico
securities laws restrictions or the unmarketable or illiquid
nature of such investments, or if an orderly liquidation is
difficult under prevailing conditions.
Sixth: Trustee's Duties Under ERISA. No provision of
----------------------------
this Deed of Trust shall operate to relieve the Trustee from any
responsibility, obligation or duty to the extent such relief
would be prohibited under any applicable law, including ERISA.
However, it must be understood that all mention herein to ERISA
will not be applicable if it is determined that the Plan is not
subject to ERISA.
<PAGE>
ACCEPTANCE
The appearing parties hereby accept, ratify, and confirm
this Deed, and I, the Notary, do hereby certify that I have
advised them as to the pertinent legal warnings and of the legal
effect of the present document as well as of their right under
the Notarial Law of Puerto Rico to have one or more witnesses to
appear herein and read and sign this deed together with them,
which right they have waived, and this Deed having been read by
them, to which fact I hereby certify, the said appearing parties
approve and ratify its contents and sign the same before me, and
affix their initials on each and every page of this instrument.
ALL BEFORE ME.
I, THE NOTARY, ATTEST AND GIVE FAITH.
Signed: LEON LICHTER KIBRIT and LUIS CARLOS FERNANDEZ
TRINCHET.
Signed, sealed, marked and flourished: TCHERINE ANDUJAR.
The corresponding internal revenue and notarial stamps have
been cancelled on the original.
The initials of the appearing parties have been affixed on
each folio of the original.
I, the Notary, certify that the foregoing is a true and
exact copy of deed number SIX, the original of which forms part
of my protocol of public instruments for the year nineteen
hundred ninety-three (1993), which contains twenty-one (21)
folios.
IN WITNESS WHEREOF, and at the request of RJR NABISCO,
INC., I issue the FIRST certified copy of this deed, in San
Juan, Puerto Rico, this twelfth (12th) day of July, nineteen
hundred ninety-three (1993).
--------------------------------
Notary Public
SIMPSON THACHER & BARTLETT
A Partnership which includes Professional Corporations
425 Lexington Avenue
New York, New York, 1O017
July 1, 1994
RJR Nabisco Holdings Corp.
1301 Avenue of the Americas
New York, New York 10019
Ladies & Gentlemen:
We have acted as your counsel in connection with the Registration
Statement on Form S-8 (the "Registration Statement") of RJR
Nabisco Holdings Corp., a Delaware corporation (the "Company"),
which you intend to file with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the
"Securities Act"), relating, among other things, to the
acquisition by employees of the Company or one or more of its
subsidiaries who are participants in the Nabisco Brands de Puerto
Rico, Inc. Capital Accumulation Plan (the "Plan") of up to 15,000
shares (the "Shares") of common stock, par value $.01 per share
(the "Common Stock"), of the Company. We understand that the Plan
provides that it will acquire Shares for distribution to its
participants by means of purchases of Shares by the Trustee of the
Plan at their then fair market value (i) in the open market, (ii) in
privately negotiated transactions or (iii) at the option of the Company,
from the Company.
We have examined an executed copy of the Registration
Statement (including the exhibits thereto) and originals, or
copies certified or otherwise identified to our satisfaction, of such
documents and records of the Company and we have made such
<PAGE>
RJR Nabisco Holdings
Corp. -2- July 1, 1994
other and further investigations as we deemed necessary to enable
us to express the opinions hereinafter set forth.
We hereby advise you that in our opinion, assuming
effectiveness of the Registration Statement under the Securities
Act:
If the Company exercises its option under the Plan to
authorize the original issuance of Shares to the
Trustee of the Plan, such originally issued Shares,
when duly authorized, issued and sold as contemplated
by the Registration Statement and the Plan, will be
legally issued, fully paid and non-assessable.
A member of Simpson Thacher & Bartlett owns shares of Common
Stock which represent less than 0.1% of the currently outstanding
shares of Common Stock.
We are members of the Bar of the State of New York and we
express no opinion herein other than with respect to the laws of
the State of New York, the federal law of the United States of
America and the Delaware General Corporation Law.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
SIMPSON THACHER & BARTLETT
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration
Statement (Form S-8) of RJR Nabisco Holdings Corp. pertaining to the
Nabisco Brands de Puerto Rico Capital Accumulation Plan of our report
dated February 1, 1994 (except with respect to the subsequent event
discussed in Note 17, as to which the date is February 24, 1994),
appearing in the Annual Report on Form 10-K of RJR Nabisco Holdings
Corp. for the year ended December 31, 1993.
Deloitte & Touche
New York, New York
June 30, 1994
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being
a director or officer, or both, of RJR NABISCO HOLDINGS CORP., a Delaware
corporation (the "Company"), do hereby make, constitute and appoint
Jo-Ann Ford, Joan E. Gmora and H. Colin McBride, and each of them,
attorneys-in-fact and agents of the undersigned with full power and
authority of substitution and resubstitution, in any and all capacities,
to execute for and on behalf of the undersigned the Registration Statement
on Form S-8 relating to the sale of shares of common stock of the Company
pursuant to the Nabisco Brands de Puerto Rico, Inc. Capital Accumulation Plan
and any and all amendments or supplements to the foregoing Registration
Statement and any other documents and instruments incidental thereto, and to
deliver and file the same, with all exhibits thereto, and all documents and
instruments in connection therewith, with the Securities and Exchange
Commission, and with each exchange on which any class of securities of the
Company is registered, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every
act and thing that said attorneys-in-fact and agents, and each of them,
deem advisable or necessary to enable the Company to effectuate
the intents and purposes hereof, and the undersigned hereby fully ratify
and confirm all that said attorneys-in-fact and agents, or any of them,
or their or his or her substitute or substitutes, shall do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed his
or her name, this 1st day of July, 1994.
Signature Title
--------- -----
Charles M. Harper
- ----------------------------- Chairman of the Board and Chief
Charles M. Harper Executive Officer, Director
Stephen R. Wilson
- ----------------------------- Executive Vice President and Chief
Stephen R. Wilson Financial Officer
Robert S. Roath
- ----------------------------- Senior Vice President and Controller
Robert S. Roath
<PAGE>
John T. Chain, Jr.
- ----------------------------- Director
John T. Chain, Jr.
John L. Clendenin
- ----------------------------- Director
John L. Clendenin
James H. Greene, Jr.
- ----------------------------- Director
James H. Greene, Jr.
H. John Greeniaus
- ----------------------------- Director
H. John Greeniaus
James W. Johnston
- ----------------------------- Director
James W. Johnston
Henry R. Kravis
- ----------------------------- Director
Henry R. Kravis
John G. Medlin, Jr.
- ----------------------------- Director
John G. Medlin, Jr.
Paul E. Raether
- ----------------------------- Director
Paul E. Raether
Lawrence R. Ricciardi
- ----------------------------- Director
Lawrence R. Ricciardi
Rozanne L. Ridgway
- ----------------------------- Director
Rozanne L. Ridgway
Clifton S. Robbins
- ----------------------------- Director
Clifton S. Robbins
George R. Roberts
- ----------------------------- Director
George R. Roberts
Scott M. Stuart
- ----------------------------- Director
Scott M. Stuart
Michael T. Tokarz
- ----------------------------- Director
Michael T. Tokarz
