SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
RJR Nabisco Holdings Corp.
________________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
N/A
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_________________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
_________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
_________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_________________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
_________________________________________________________________________
(2) Form, schedule or registration statement no.:
_________________________________________________________________________
(3) Filing party:
_________________________________________________________________________
(4) Date filed:
_________________________________________________________________________
- ------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
[RJR NABISCO LOGO]
RJR NABISCO HOLDINGS CORP.
March [ ], 1995
Dear Stockholder:
You are cordially invited to attend the 1995 Annual Meeting of Stockholders
of RJR Nabisco Holdings Corp. The meeting will be held at 2:00 p.m. (local time)
on Wednesday, April 12, 1995 at Le Centre Sheraton, 1201 Boulevard Rene-Levesque
Ouest, Montreal, Quebec, Canada. The Company has important food and tobacco
operations in Montreal.
Please note that attendance at the Annual Meeting will be limited to
stockholders as of the record date (or their authorized representatives) and to
guests of the company. If your shares are registered in your name and you plan
to attend the Annual Meeting, please mark the appropriate box on the enclosed
proxy card and you will be pre-registered for the meeting. If your shares are
held of record by a broker, bank or other nominee and you plan to attend the
meeting, you must also pre-register by returning the registration card forwarded
to you by your bank or broker. Stockholders who are not pre-registered will only
be admitted to the Annual Meeting upon verification of stock ownership.
Please give these proxy materials your careful attention. It is important
that your shares be represented and voted at the Annual Meeting regardless of
the size of your holdings. Accordingly, whether or not you plan to attend the
Annual Meeting, please complete, sign, date and return the accompanying proxy
card in the enclosed envelope in order to make certain that your shares will be
represented at the Annual Meeting.
Sincerely,
CHARLES M. HARPER
CHARLES M. HARPER
Chairman and Chief Executive
Officer
IMPORTANT: YOUR PROXY CARD IS ENCLOSED IN THE
ADDRESS WINDOW OF THE ENVELOPE CONTAINING THIS MATERIAL
<PAGE>
[RJR NABISCO LOGO]
RJR NABISCO HOLDINGS CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 12, 1995
To the Stockholders:
The Annual Meeting of Stockholders of RJR Nabisco Holdings Corp., a Delaware
corporation ("Holdings"), will be held at Le Centre Sheraton, 1201 Boulevard
Rene-Levesque Ouest, Montreal, Quebec H3B 2L7, Canada, at 2:00 p.m., local time,
on Wednesday, April 12, 1995 for the following purposes:
1. To elect twelve Directors to serve until the 1996 annual meeting of
stockholders and until their respective successors are duly elected
and qualified;
2. To ratify the appointment of Deloitte & Touche as independent auditors
for Holdings' 1995 fiscal year;
3. To approve an amendment to Holdings' Certificate of Incorporation to
effect a one-for-five reverse split of Holdings' Common Stock and to
reduce the number of authorized shares of Common Stock;
4. To act on four stockholder proposals if presented by their proponents;
and
5. To transact such other business as may be properly brought before the
meeting and any adjournments or postponements thereof.
Only holders of record of Holdings' Common Stock, Series C Conversion
Preferred Stock and ESOP Convertible Preferred Stock as of the close of business
on March 16, 1995 are entitled to notice of and to vote at the annual meeting
and any adjournments or postponements thereof. A list of such stockholders may
be examined for any purpose germane to the meeting at Le Centre Sheraton during
the ten-day period preceding the meeting.
JO-ANN FORD
Vice President and Secretary
New York, New York
March [ ], 1995
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE>
RJR NABISCO HOLDINGS CORP.
1301 AVENUE OF THE AMERICAS
NEW YORK, NY 10019
PROXY STATEMENT
This Proxy Statement and enclosed form of proxy are being furnished
commencing on or about March [ ], 1995 in connection with the solicitation by
the Board of Directors of RJR Nabisco Holdings Corp., a Delaware corporation
("Holdings"), of proxies in the enclosed form for use at the annual meeting of
stockholders to be held on April 12, 1995 for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. Any proxy given pursuant
to such solicitation and received in time for the meeting will be voted as
specified in such proxy. If no instructions are given, proxies will be voted FOR
the election of the nominees listed below under the caption "Election of
Directors--Information Concerning the Nominees", FOR the ratification of the
appointment of Deloitte & Touche as independent auditors for Holdings' 1995
fiscal year, FOR the amendment to the Certificate of Incorporation, AGAINST the
four stockholder proposals, and in the discretion of the proxies named on the
proxy card with respect to any other matters properly brought before the meeting
and any adjournments thereof. Any proxy may be revoked by written notice
received by the Secretary of Holdings at any time prior to the voting thereof,
by submitting a subsequent proxy or by attending the meeting and voting in
person.
Only holders of record of Holdings' voting securities as of the close of
business on March 16, 1995 are entitled to notice of and to vote at the annual
meeting and any adjournments or postponements thereof. As of the record date,
the following shares of voting securities were outstanding: [ ] shares
of Common Stock, par value $.01 per share ("Common Stock"), 26,675,000 shares of
Series C Conversion Preferred Stock, par value $.01 per share ("PERCS"), and
15,322,114 shares of ESOP Convertible Preferred Stock, par value $.01 per share
and stated value $16 per share ("ESOP Preferred Stock"). All issued shares of
PERCS are held by First Chicago Trust Company of New York as Depositary for
holders of Series C Depositary Shares ("Series C Depositary Shares"). Each
Series C Depositary Share represents one-tenth of a share of PERCS.
Each share of Common Stock, PERCS and ESOP Preferred Stock, voting together
as a single class, entitles the record date holder thereof to one vote on the
proposals to elect directors, ratify the appointment of auditors and amend the
Certificate of Incorporation, as well as on the four stockholder proposals and
all other matters properly brought before the meeting. Holders of shares of
Common Stock are also entitled to vote as a separate class on the proposal to
amend the Certificate of Incorporation.
The presence of a majority of the combined outstanding shares of Common
Stock, PERCS and ESOP Preferred Stock, represented in person or by proxy at the
meeting, will constitute a quorum. Shares represented by proxies that are marked
"abstain" will be counted as shares present for purposes of determining the
presence of a quorum on all matters. Proxies relating to "street name" shares
that are voted by brokers on some but not all of the matters will be treated as
shares present for purposes of determining the presence of a quorum on all
matters, but will not be treated as shares entitled to vote at the annual
meeting on those matters as to which authority to vote is withheld by the broker
("broker non-votes"). The twelve nominees receiving the highest vote totals will
be elected as Directors of Holdings. Accordingly, abstentions and broker
non-votes will not affect the outcome of the election. All other matters to be
voted on (other than the proposed amendment to Holdings' Certificate of
Incorporation) will be decided by the affirmative vote of a majority of the
shares present or represented at the meeting and entitled to vote. On any such
matter, an abstention will have the same effect as a negative vote but, because
shares held by brokers will not be considered entitled to vote on matters as to
which the brokers withhold authority, a broker non-vote will have no effect on
the vote. The proposed amendment to Holdings' Certificate of Incorporation will
require the affirmative vote of both a majority
1
<PAGE>
of the issued and outstanding Common Stock and a majority of the combined
outstanding shares of Common Stock, PERCS and ESOP Preferred Stock; accordingly,
with respect to the proposed amendment, abstentions and broker non-votes will
have the same effect as negative votes.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE
ACCOMPANYING ENVELOPE, which is postage-paid if mailed in the United States.
Securities and Exchange Commission ("SEC") rules require that an annual
report precede or accompany proxy materials. However, if you are a stockholder
of record and have your shares registered in more than one account at the same
address, you may wish to authorize Holdings to discontinue sending annual and
quarterly reports to all but one of your accounts. You can eliminate such
duplicate mailings by marking the appropriate box on the proxy card for any
account for which you do not wish to receive reports. You will, however,
continue to receive proxy statements and proxy cards to vote the shares for all
of your accounts.
ITEM 1--ELECTION OF DIRECTORS
INFORMATION CONCERNING THE NOMINEES
At the upcoming annual meeting, a board of twelve Directors will be elected
to hold office until the next annual meeting of stockholders and until their
successors have been elected and qualified. Directors are elected by a plurality
of the votes cast. Although management does not anticipate that any of the
persons named below will be unable or unwilling to stand for election, in the
event of such an occurrence, proxies may be voted for a substitute designated by
the Board of Directors. All of the Board of Directors' nominees were elected to
their present terms by the stockholders in May 1994, except Mr. Chambers who was
elected to his present term in November 1994.
Background information appears below with respect to the Board of Directors'
nominees for election, all of whom are incumbent Directors. See "Security
Ownership of Management" and "Security Ownership of Certain Beneficial Owners"
for information regarding such persons' holdings of equity securities of
Holdings.
<TABLE><CAPTION>
YEAR BUSINESS EXPERIENCE DURING PAST FIVE
FIRST YEARS
NAME AGE ELECTED AND OTHER INFORMATION
- ------------------------- --- ------- --------------------------------------
<S> <C> <C> <C>
John T. Chain, Jr........ 60 1994 Executive Vice President, Safety and
Corporate Support, Burlington Northern
Railroad since 1991. For more than
five years prior thereto, General
(Commander-in-Chief, Strategic Air
Command), United States Air Force.
Member of the Board of Directors of
Nabisco Holdings Corp. ("Nabisco"),
Kemper Corporation and Northrop
Grumman Corporation.
Julius L. Chambers....... 58 1994 Chancellor, North Carolina Central
University since January 1993. For
more than five years prior thereto,
Director-Counsel, NAACP Legal
Defense and Educational Fund, Inc.
Member of the Board of Directors of
First Union National Bank (Durham,
NC).
John L. Clendenin........ 60 1994 Chairman of the Board and Chief
Executive Officer, BellSouth
Corporation for more than five
years. Member of the Board of
Directors of BellSouth Corporation,
Coca-Cola Enterprises Inc., Equifax
Inc., National Service Industries,
Inc., Providian Corporation, Springs
Industries, Inc., The Kroger
Company, The New York Stock
Exchange, Inc. and Wachovia
Corporation.
</TABLE>
2
<PAGE>
<TABLE><CAPTION>
YEAR BUSINESS EXPERIENCE DURING PAST FIVE
FIRST YEARS
NAME AGE ELECTED AND OTHER INFORMATION
- ------------------------- --- ------- --------------------------------------
<S> <C> <C> <C>
H. John Greeniaus........ 50 1992 President, Chief Executive Officer and
Director of Nabisco since October
1994; Chairman and Chief Executive
Officer of Nabisco, Inc. since May
1993 and prior thereto President,
Nabisco since 1992. From 1987-1991,
President and Chief Executive
Officer, Nabisco. Member of the
Board of Directors of Nabisco.
Charles M. Harper........ 67 1993 Chairman and Chief Executive Officer
of Holdings since May 1993. For more
than five years prior thereto,
Chairman and, until 1992, Chief
Executive Officer of ConAgra, Inc.
Member of the Board of Directors of
Nabisco, ConAgra, Inc., E.I. du Pont
de Nemours and Company, Norwest
Corp., Peter Kiewit Sons', Inc. and
Valmont Industries, Inc.
James W. Johnston........ 48 1992 Chairman and Chief Executive Officer
of R.J. Reynolds Tobacco Company since
1989 and Chairman of R. J. Reynolds
Tobacco Worldwide since October
1993. Member of the Board of
Directors of Sealy Corporation and
Wachovia Corporation.
Henry R. Kravis(1)....... 51 1989 General Partner of Kohlberg Kravis
Roberts & Co. ("KKR") since its
establishment in 1976 and a General
Partner of KKR Associates since its
establishment. Member of the Board
of Directors of Nabisco, American Re
Corporation, AutoZone, Inc., Borden,
Inc., Duracell International Inc.,
Flagstar Companies, Inc., Flagstar
Corporation, IDEX Corporation, K-III
Communications Corp., Owens-Illinois,
Inc., Owens-Illinois Group, Inc.,
Safeway Inc., The Stop & Shop
Companies, Inc., Union Texas
Petroleum Holdings, Inc. and World
Color Press, Inc.
John G. Medlin, Jr....... 61 1989 Chairman of Wachovia Corporation for
more than five years and Chief
Executive Officer until December
1993. Member of the Board of
Directors of Nabisco, Wachovia
Corporation, BellSouth Corporation,
Burlington Industries, Inc., Media
General, Inc., National Services
Industries, Inc. and USAir Group,
Inc.
Rozanne L. Ridgway....... 59 1989 Co-Chair of the Atlantic Council of
the United States since January 1993
and President of the Council from
1989-1992. From 1985-1989, Assistant
Secretary of State for European and
Canadian Affairs. Member of the
Board of Directors of Bell Atlantic
Corporation, The Boeing Company,
Citicorp, Emerson Electric Co.,
Minnesota Mining and Manufacturing
Company, Sara Lee Corporation and
Union Carbide Corp.
Clifton S. Robbins....... 37 1988 General Partner of KKR and KKR
Associates since January 1995 and an
executive of KKR and a limited
partner of KKR Associates for more
than five years prior thereto.
Member of the Board of Directors of
Borden, Inc., Flagstar Companies,
Inc., Flagstar Corporation, IDEX
Corporation and The Stop & Shop
Companies, Inc.
</TABLE>
3
<PAGE>
<TABLE><CAPTION>
YEAR BUSINESS EXPERIENCE DURING PAST FIVE
FIRST YEARS
NAME AGE ELECTED AND OTHER INFORMATION
- ------------------------- --- ------- --------------------------------------
<S> <C> <C> <C>
George R. Roberts(1)..... 51 1989 General Partner of KKR since its
establishment in 1976 and a General
Partner of KKR Associates since its
establishment. Member of the Board
of Directors of Nabisco, American Re
Corporation, AutoZone, Inc., Borden,
Inc., Duracell International Inc.,
Flagstar Companies, Inc., Flagstar
Corporation, IDEX Corporation, K-III
Communications Corp.,
Owens-Illinois, Inc., Owens-Illinois
Group, Inc., Red Lion Properties
Inc., Safeway Inc., The Stop & Shop
Companies, Inc. and Union Texas
Petroleum Holdings, Inc.
Scott M. Stuart.......... 35 1988 General Partner of KKR and KKR
Associates since January 1995 and an
executive of KKR and a limited
partner of KKR Associates for more
than five years prior thereto.
Member of the Board of Directors of
Borden, Inc., Duracell International
Inc. and World Color Press, Inc.
</TABLE>
- ------------
(1) Messrs. Kravis and Roberts are first cousins.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH NOMINEE FOR DIRECTOR NAMED ABOVE.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors met nine times during the 1994 fiscal year. During
1994, all incumbent Directors attended at least 75% of the meetings of the Board
of Directors and the committees thereof on which they served except Mr. Roberts.
The standing committees of the Board of Directors include the Executive
Committee, the Audit Committee, the Compensation Committee and the JFEW Special
Committee. The Board of Directors does not have a nominating committee and the
usual functions of such a committee have been performed by the entire Board of
Directors.
Executive Committee. The Executive Committee has authority to act for the
Board on most matters during intervals between Board meetings. The Executive
Committee, whose current members are Messrs. Harper, Chain, Kravis and Medlin,
met three times during the 1994 fiscal year.
Audit Committee. The Audit Committee has the principal function of reviewing
the adequacy of Holdings' internal system of accounting controls, conferring
with the independent auditors and the internal auditors concerning the scope of
their examinations of the books and records of Holdings and its subsidiaries,
reviewing with appropriate personnel actions taken to ensure compliance with
Holdings' Code of Conduct, recommending to the Board of Directors the
appointment of independent auditors and considering other appropriate matters
regarding the financial affairs of Holdings and its subsidiaries. The Audit
Committee, whose current members are Messrs. Medlin and Chambers and Ms.
Ridgway, held three meetings during the 1994 fiscal year.
Compensation Committee. The Compensation Committee makes recommendations to
the Board with respect to compensation and grants of stock options to management
employees. In addition, the Compensation Committee administers plans and
programs relating to employee benefits, incentives and compensation. The
Compensation Committee, whose current members are Messrs. Chain and Clendenin,
met seven times during the 1994 fiscal year.
JFEW Special Committee. The JFEW Special Committee was established in
October 1993 in connection with the settlement of a stockholder derivative suit
entitled Jewish Foundation for Education of Women v. Kohlberg Kravis Roberts &
Co. et. al. The purpose of the JFEW Special Committee is
4
<PAGE>
to monitor KKR's performance of services for Holdings pursuant to the Retainer
Agreement dated November 2, 1993 between KKR and Holdings (the "Retainer
Agreement"). The JFEW Special Committee, whose current members are Mr. Medlin
and Ms. Ridgway, met three times during the 1994 fiscal year.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information, as of March 16, 1995,
regarding the beneficial ownership of (i) Common Stock and (ii) Class A Common
Stock, par value $.01 per share, of Nabisco Holdings Corp., a Delaware
corporation ("Nabisco"), by each director of Holdings, by each of the five most
highly compensated executive officers of Holdings during the last fiscal year
and by all directors and executive officers of Holdings as a group. Nabisco was
a wholly-owned indirect subsidiary of Holdings prior to the January 1995 initial
public offering by Nabisco of its Class A Common Stock. As of March 16, 1995,
Holdings indirectly owned all 213,250,000 shares of Nabisco Class B Common Stock
outstanding, which represent approximately 80.5% of the economic interest in
Nabisco and approximately 97.6% of the combined voting power of all classes of
Nabisco voting stock. Except as otherwise noted, the persons named in the table
below do not own any other capital stock of Holdings or Nabisco and have sole
voting and investment power with respect to all shares shown as beneficially
owned by them.
<TABLE><CAPTION>
NUMBER OF SHARES OF
NUMBER OF SHARES OF NABISCO CLASS A PERCENT OF NABISCO
HOLDINGS COMMON STOCK PERCENT OF HOLDINGS COMMON STOCK CLASS A
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) COMMON STOCK BENEFICIALLY OWNED(1)(3) COMMON STOCK
- -------------------------- ------------------------ ------------------- ------------------------ ------------------
<S> <C> <C> <C> <C>
John T. Chain, Jr.(2)..... 40,000 * 1,000 *
Julius L. Chambers........ 30,000 * 0 --
John L. Clendenin......... 32,266 * 500 *
Eugene R. Croisant(2)..... 1,704,355 [ ]% 0 --
James H. Greene,
Jr.(4)(5)................. 27,301 * 0 --
H. John Greeniaus(2)...... 631,544 * 10,100 *
Charles M. Harper(2)...... 1,405,659 [ ] 71,429 0.14%
James W. Johnston(2)(6)... 2,347,765 [ ] 1,000 *
Henry R. Kravis(4)........ 289,189 * 0 --
John G. Medlin, Jr........ 34,333 * 1,000 *
Paul E. Raether(4)(5)..... 94,185 * 0 --
Lawrence R.
Ricciardi(2)(7)(8)....... 2,079,756 [ ] 0 --
Rozanne L. Ridgway(2)..... 30,000 * 0 --
Clifton S. Robbins(4)..... 21,614 * 0 --
George R. Roberts(4)(9)... 289,189 * 100,000 0.19
Scott M. Stuart(4)........ 14,106 * 0 --
Michael T. Tokarz(4)(5)... 29,577 * 0 --
All directors and
executive officers as a
group (other than as set
forth below in relation
to KKR
Associates)(2)(4)........ 13,323,694 [ ]% 189,029 0.37%
</TABLE>
- ------------
* Less than 0.1%.
(1) For purposes of this table, a person or group of persons is deemed to be the
"beneficial owner" of any shares that such person has the right to acquire
within 60 days. For purposes of computing the percentage of outstanding
shares held by each person or group of persons named above on a given date,
any security that such person or persons has the right to acquire within 60
days is deemed to be outstanding, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person.
(Footnotes continued on following page)
5
<PAGE>
(Footnotes continued from preceding page)
(2) The number of shares of Holdings Common Stock beneficially owned includes
(i) 30,000 shares subject to currently exercisable options granted to each
of Gen. Chain and Ms. Ridgway; 30,000 shares subject to options granted to
each of Messrs. Chambers and Clendenin that are exercisable within 60 days;
1,400,000, 1,093,750, 1,840,200, 1,780,000 and 9,154,523 shares subject to
currently exercisable options granted to, respectively, Messrs. Croisant,
Harper, Johnston, Ricciardi and all directors and executive officers as a
group; and (ii) 1,366, 798, 1,359, 1,368, 1,366 and 17,829 shares of Common
Stock currently issuable on conversion of a like number of shares of ESOP
Preferred Stock owned by, respectively, Messrs. Croisant, Harper, Greeniaus,
Johnston, Ricciardi and all directors and executive officers as a group.
(3) No director or officer of Holdings holds any options exercisable within 60
days to acquire shares of Nabisco Class A Common Stock.
(4) Messrs. Greene, Kravis, Raether, Robbins, Roberts, Stuart and Tokarz, all
directors of Holdings, and Saul A. Fox, Edward A. Gilhuly, Perry Golkin,
Robert I. MacDonnell and Michael W. Michelson are general partners of KKR
Associates, a limited partnership that beneficially owns [111,661,652]
shares of Common Stock as set forth in the table below. Such persons may be
deemed to share beneficial ownership of the shares shown in the table below
as owned by KKR Associates. The foregoing persons disclaim beneficial
ownership of any of such shares.
(5) Messrs. Greene, Raether and Tokarz are currently directors of Holdings but
are not nominees for re-election.
(6) The outstanding shares of Common Stock shown as beneficially owned by Mr.
Johnston include 60,000 shares held in trust for the benefit of Mr.
Johnston's children, as to which Mr. Johnston disclaims beneficial
ownership.
(7) Mr. Ricciardi retired as a director of Holdings effective March 3, 1995.
(8) The outstanding shares of Common Stock shown as beneficially owned by Mr.
Ricciardi include 60,000 shares held in trust for the benefit of Mr.
Ricciardi's children, as to which Mr. Ricciardi disclaims beneficial
ownership.
(9) The outstanding shares of Nabisco Common Stock shown as beneficially owned
by Mr. Roberts are held by The Roberts Foundation, of which Mr. Roberts is a
director. Mr. Roberts disclaims beneficial ownership of these shares.
Compliance with Section 16(a) of the Exchange Act. Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires Holdings' officers and
directors, and persons who own more than ten-percent of a registered class of
Holdings' equity securities, to file initial statements of beneficial ownership
(Form 3), and statements of changes in beneficial ownership (Forms 4 or 5), of
Common Stock and other equity securities of Holdings with the SEC and The New
York Stock Exchange, Inc. Officers, directors and greater than ten-percent
stockholders are required by SEC regulation to furnish Holdings with copies of
all such forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no additional forms
were required for those persons, Holdings believes that during 1994 all filing
requirements applicable to its officers, directors, and greater than ten-percent
beneficial owners were complied with.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of March 16, 1995,
regarding the beneficial ownership of persons known to Holdings to be the
beneficial owners of more than five percent of any class of Holdings' voting
securities. Except as otherwise noted, the persons named in the table below have
sole voting and investment power with respect to all shares shown as
beneficially owned by them.
<TABLE><CAPTION>
NUMBER OF SHARES
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ----------------- --------------------------------------------- ------------------ ----------------
<S> <C> <C> <C>
Common Stock KKR Associates(1)............................ [111,661,652] [ ]%
9 West 57th Street
New York, NY 10019
Common Stock FMR Corp.(2)................................. [171,529,314] [ ]%
82 Devonshire Street
Boston, MA 02109
Series C College Retirement Equities Fund(3).......... 1,782,800 6.68%
Conversion 730 Third Avenue
Preferred Stock New York, NY 10019
Series C Brinson Partners, Inc.(4).................... 1,745,310 6.54%
Conversion 209 South LaSalle
Preferred Stock Chicago, IL 60604
Series C The Prudential Insurance Company
Conversion of America(5)............................... 1,680,200 6.30%
Preferred Stock Prudential Plaza
Newark, NJ 07102
ESOP Convertible Wachovia Bank of North Carolina, N.A.(6)..... 15,322,114 100%
Preferred Stock Box 3075, Trust Operations
Winston-Salem, NC 27102
</TABLE>
- ------------
(1) Shares of Common Stock shown as beneficially owned by KKR Associates include
shares owned of record by the limited partnerships of which KKR Associates
is the sole general partner and as to which it possesses sole voting and
investment power. KKR Associates is a limited partnership of which Messrs.
Greene, Kravis, Raether, Robbins, Roberts, Stuart and Tokarz, all directors
of Holdings, and Saul A. Fox, Edward A. Gilhuly, Perry Golkin, Robert I.
MacDonnell and Michael W. Michelson are the general partners. Such persons
may be deemed to share beneficial ownership of the shares shown as owned by
KKR Associates. The foregoing persons disclaim beneficial ownership of any
such shares.
(2) According to Amendment No. 1 to Schedule 13G dated February 13, 1995 jointly
filed by FMR Corp. and Edward C. Johnson 3d, Chairman of FMR Corp. and a
member of a controlling group with respect to FMR Corp., the 171,529,314
shares of Holdings Common Stock shown as beneficially owned by FMR Corp. and
Mr. Johnson as of December 31, 1994 include (i) 158,683,514 shares
beneficially owned by Fidelity Management & Research Company, a registered
investment adviser and wholly owned subsidiary of FMR Corp., as a result of
acting as investment adviser to several registered investment companies that
own such shares (the "Fidelity Funds"), (ii) 12,466,800 shares beneficially
owned by Fidelity Management Trust Company ("Fidelity Trust"), a bank and
wholly owned subsidiary of FMR Corp., as a result of serving as investment
manager of institutional accounts, (iii) 52,000 shares owned directly by Mr.
Johnson or in trusts for the benefit of Mr. Johnson or a member of his
family and (iv) 327,000 shares beneficially owned by Fidelity International
Limited ("Fidelity International"), an investment adviser of which Mr.
Johnson is also Chairman and a member of a controlling group, but which is
managed independently from FMR Corp. Each of FMR Corp. and Fidelity
International disclaim
(Footnotes continued on following page)
7
<PAGE>
(Footnotes continued from preceding page)
beneficial ownership of shares beneficially owned by the other. According to
the Schedule 13G, FMR Corp. and Mr. Johnson also beneficially own 516,580
shares of Series C Preferred Stock as a result of (i) the Fidelity Funds
owning 4,071,700 Series C Depositary Shares and (ii) the institutional
accounts managed by Fidelity Trust owning 1,094,100 Series C Depositary
Shares. According to the Schedule 13G, (a) FMR Corp. and Mr. Johnson each
has sole investment power, but neither has sole voting power, over the
shares owned by the Fidelity Funds, (b) FMR Corp. and Mr. Johnson each has
sole investment power over all of, has sole voting power over certain of,
and has no voting power over the remainder of, the shares owned by the
institutional accounts managed by Fidelity Trust and (c) Mr. Johnson has
sole voting and investment power over certain of, has shared voting and
investment power over certain of, and has no voting or investment power over
the remainder of, the shares owned directly by him or in family trusts.
(3) College Retirement Equities Fund beneficially owned 1,782,680 shares of
Series C Preferred Stock as of December 31, 1994 as a result of its
beneficial ownership of 17,826,800 Series C Depositary Shares as reported in
its Schedule 13G dated February 10, 1995.
(4) According to the Schedule 13G dated February 10, 1995 jointly filed by
Brinson Partners, Inc. ("Brinson Partners"), Brinson Trust Company ("Brinson
Trust") and Brinson Holdings, Inc. ("Brinson Holdings"), as of December 31,
1994 (i) Brinson Partners, a registered investment adviser and wholly owned
subsidiary of Brinson Holdings, beneficially owned 1,238,560 shares of
Series C Preferred Stock as a result of its beneficial ownership of
12,385,600 Series C Depositary Shares and (ii) Brinson Trust, a bank and
wholly owned subsidiary of Brinson Partners, beneficially owned 506,750
shares of Series C Preferred Stock as a result of its beneficial ownership
of 5,067,500 Series C Depositary Shares.
(5) According to the Schedule 13G dated February 9, 1995 filed by The Prudential
Insurance Company of America ("Prudential"), Prudential beneficially owned
an aggregate of 1,680,200 shares of Series C Preferred Stock as of December
31, 1994 as a result of having direct or indirect voting and/or investment
discretion over 16,802,000 Series C Depositary Shares which were held for
the benefit of its clients. According to the Schedule 13G, Prudential had
shared voting and investment power over such shares.
(6) Wachovia Bank of North Carolina, N.A. ("Wachovia") holds such shares in its
capacity as Trustee of the RJRN Defined Contribution Master Trust. Under the
terms of the Master Trust, Wachovia is required to vote shares of ESOP
Preferred Stock allocated to participants' accounts in accordance with
instructions received from such participants and to vote allocated shares of
ESOP Preferred Stock for which it has not received instructions and
unallocated shares in the same ratio as shares with respect to which
instructions have been received. Wachovia has no investment power with
respect to shares of ESOP Preferred Stock.
ITEM 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to stockholder ratification, the Board of Directors has appointed
the firm of Deloitte & Touche as independent auditors for the fiscal year ending
December 31, 1995 and until their successors are selected. The appointment was
made upon the recommendation of the Audit Committee, which is comprised of
Directors who are not employees of Holdings or its subsidiaries.
A representative of Deloitte & Touche will be present at the Annual Meeting
and will have the opportunity to make a statement if he desires to do so and
will be available to answer appropriate questions.
THE BOARD OF DIRECTORS CONSIDERS DELOITTE & TOUCHE TO BE WELL-QUALIFIED AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR RATIFICATION.
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The affirmative vote of the shares representing a majority of the shares
present at the meeting in person or represented by proxy and entitled to vote,
will be required to approve this item proposed by the Board of Directors.
ITEM 3--AMENDMENT TO HOLDINGS' CERTIFICATE OF INCORPORATION TO EFFECT A
ONE-FOR-FIVE REVERSE SPLIT OF HOLDINGS' COMMON STOCK AND TO REDUCE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has proposed an amendment to Article Fourth of
Holdings' Certificate of Incorporation that would effect a reverse split of
Holdings' Common Stock on the basis of one new share of Common Stock for each
five shares of presently outstanding Common Stock and reduce the authorized
number of shares of Common Stock from 2,200,000,000 shares to 440,000,000
shares, thereby reducing the total number of authorized shares of capital stock
from 2,350,000,000 shares to 590,000,000 shares. As of March 16,
1995, shares of Common Stock were issued and outstanding, no shares were
held in treasury and shares were unissued. As of February 28, 1995 there
were shares of Common Stock reserved for issuance upon the conversion of
various convertible or converting securities of Holdings or upon the exercise of
options or delivery of performance shares under Holdings' management incentive
plans.
REASONS FOR THE PROPOSED REVERSE STOCK SPLIT
The principal purpose of the proposed amendment is to reduce the number of
shares of Common Stock outstanding. The Board of Directors believes that the
total number of shares currently outstanding is disproportionately large
relative to Holdings' present market capitalization. Moreover, when such a large
number of shares is outstanding, earnings per share is only affected by a
significant change in net earnings. If a smaller number of shares were
outstanding, management would be more likely to see its sales efforts and cost
savings reflected in Holdings' earnings per share.
In addition, the Board of Directors believes that the present level of per
share market prices of the Common Stock impairs the acceptability of the stock
by portions of the financial community and the investing public. Theoretically,
the number of shares outstanding should not, by itself, affect the marketability
of the stock, the type of investor who acquires it or a company's reputation in
the financial community, but in practice this is not necessarily the case, as
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investment in such stocks. The Board of Directors
also believes that the current per share price of the Common Stock has reduced
the effective marketability of the shares because of the reluctance of many
leading brokerage firms to recommend low priced stock to their clients. Further,
various brokerage house policies and practices tend to discourage individual
brokers from dealing in low priced stocks. Some of those policies and practices
pertain to the payment of brokers' commissions and to time-consuming procedures
which function to make the handling of low priced stocks unattractive to brokers
from an economic standpoint. In addition, the structure of trading commissions
also tends to have an adverse impact upon holders of low priced stock because
the brokerage commission on a sale of low priced stock generally represents a
higher percentage of the sales price than the commission on higher priced
issues.
Although there can be no assurance that the price of the Common Stock after
the reverse split will actually increase in an amount proportionate to the
decrease in the number of outstanding shares, the proposed reverse stock split
is intended to result in a price level for the Common Stock that will increase
investor interest and reduce resistance of brokerage firms to recommend the
Common Stock.
PRINCIPAL EFFECTS
The principal effects of the proposed reverse stock split would be the
following:
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Based upon shares of Common Stock outstanding on March 16, 1995, the
proposed one-for-five reverse stock split would decrease the outstanding shares
of Common Stock by 80%, and thereafter approximately shares of Common
Stock would be outstanding. The proposed reverse split would not affect the
proportionate equity interest in Holdings of any holder of Common Stock, except
as may result from the provisions for the elimination of fractional shares as
described below.
The reverse split may leave certain stockholders with one or more "odd lots"
of Holdings Common Stock, i.e., stock in amounts of less than 100 shares. These
shares may be more difficult to sell, or require a greater commission per share
to sell, than shares in even multiples of 100.
As of February 28, 1995, there were outstanding options to purchase shares
and outstanding grants contingently to deliver performance shares under
Holdings' management incentive plans relating to an aggregate of shares of
Common Stock. On that date shares of Common Stock remained available for
grant under such plans. All of the outstanding options and other grants include
provisions for adjustments in the number of shares covered thereby, and the
exercise price thereof, in the event of a reverse stock split by appropriate
action of the Compensation Committee of Holdings' Board of Directors. If the
proposed one-for-five reverse split is approved and effected, there would be
reserved for issuance upon exercise of all outstanding options and other grants
a total of shares of Common Stock. Each of the outstanding options would
thereafter evidence the right to purchase 20% of the shares of Common Stock
previously covered thereby and the exercise price per share would be five times
the previous exercise price. Each of the outstanding grants of performance
shares would thereafter evidence the contingent obligation to deliver 20% of the
shares of Common Stock previously covered thereby. The number of shares
available for grant under Holdings' management incentive plans would be
decreased to approximately shares of Common Stock. In addition, the total
number of shares of Common Stock covered by each of Holdings' management
incentive plans is also subject to adjustment in the event of a reverse stock
split by appropriate action of the Compensation Committee. If the proposed
one-for-five reverse split is approved and effected, the total number of shares
of Common Stock available under such plans would be reduced by 80%, with an
aggregate of shares of Common Stock available for future grants under such
plans.
An aggregate of shares of Common Stock are currently reserved for
issuance upon conversion of all outstanding shares of PERCS and ESOP Preferred
Stock. If the proposed one-for-five reverse stock split is approved and
effected, the conversion rates for such shares of preferred stock would be
adjusted proportionately so that the new conversion rates would be 20% of the
present conversion rate and there would be reserved for issuance for this
purpose approximately shares of Common Stock. As a result, following the
reverse stock split, each share of ESOP Preferred Stock would thereafter be
convertible into one-fifth of a share of Common Stock instead of one share, and
each share of PERCS would thereafter convert into two shares of Common Stock
instead of ten shares. Consequently, following the reverse split, each Series C
Depositary Share (representing one-tenth of a share of PERCS) would thereafter
convert into one-fifth of a share of Common Stock instead of one share. In
addition, the voting powers of the PERCS and the ESOP Preferred Stock would
thereafter be reduced to one-fifth of a vote per share; consequently, each
Series C Depositary Share (representing one-tenth of a share of PERCS) would
thereafter reflect one-fiftieth of a vote per share instead of one-tenth of a
vote per share.
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The following table illustrates the principal effects of the proposed
reverse stock split discussed in the preceding paragraphs:
<TABLE><CAPTION>
PRIOR TO REVERSE AFTER REVERSE
NUMBER OF SHARES SPLIT AND AMENDMENT SPLIT AND AMENDMENT
OF COMMON STOCK TO CERTIFICATE TO CERTIFICATE
- -------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Authorized.............................................. 2,200,000,000 440,000,000
Outstanding............................................. [ ] [ ]
Reserved for future issuance upon exercise of options or
delivery of performance shares under management
incentive plans....................................... [58,647,769] [11,729,553]
Reserved for issuance in connection with future grants
under management incentive plans...................... [95,204,823] [19,040,964]
Reserved for issuance upon conversion of PERCS and ESOP
Preferred Stock....................................... [282,240,964] [56,448,192]
Available for future issuance by action of the Board of
Directors (after giving effect to the above
reservations)......................................... [ ] [ ]
</TABLE>
Assuming the proposed amendment to the first paragraph of Article Fourth of
the Certificate effecting the reverse stock split and reducing the authorized
number of shares of Common Stock is approved, a Certificate of Amendment
amending the Certificate as set forth in Exhibit A to this Proxy Statement will
be filed with the Secretary of State of the State of Delaware (the "Delaware
Secretary of State") as promptly as practicable thereafter. The amendment and
the proposed reverse stock split would become effective upon the date of filing
(the "Effective Date").
EXCHANGE OF STOCK CERTIFICATES AND ELIMINATION OF FRACTIONAL SHARE INTERESTS
As soon as possible after the Effective Date, holders of Common Stock will
be notified and requested to surrender their present Common Stock certificates
for new certificates representing the number of whole shares of Common Stock
after the reverse split. Until so surrendered, each current certificate
representing shares of Common Stock will be deemed for all corporate purposes
after the Effective Date to evidence ownership of Common Stock in the
appropriately reduced whole number of shares. First Chicago Trust Company of New
York will be appointed exchange agent (the "Exchange Agent") to act for
stockholders in effecting the exchange of their certificates.
No scrip or fractional share certificates for Common Stock will be issued in
connection with the reverse split, but in lieu thereof, a certificate or
certificates evidencing the aggregate of all fractional shares otherwise
issuable (rounded, if necessary, to the next higher whole share) shall be issued
to the Exchange Agent or its nominee, as agent for the accounts of all holders
of Common Stock otherwise entitled to have a fraction of a share issued to them
in connection with the reverse split. Sales of fractional interests will be
effected by the Exchange Agent as soon as practicable on the basis of prevailing
market prices of the Common Stock on the New York Stock Exchange at the time of
sale. After the Effective Date, the Exchange Agent will pay to such stockholders
their pro rata share of the net proceeds derived from the sale of their
fractional interests upon surrender of their stock certificates. No service
charges or brokerage commissions will be payable by stockholders in connection
with the sale of fractional interests, all of which costs will be borne by
Holdings.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal income tax
consequences of the proposed reverse split of Holdings Common Stock. This
discussion does not purport to deal with all aspects of federal income taxation
that may be relevant to holders of Common Stock and is not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance
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companies, tax-exempt organizations and foreign persons, may be subject to
special rules. Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and
administrative and judicial interpretations as of the date hereof, all of which
are subject to change. Holders of Common Stock are advised to consult their own
tax advisors regarding the federal, state, local and foreign tax consequences of
the proposed reverse stock split.
The proposed reverse stock split will be a tax-free recapitalization for
Holdings and its stockholders.
The new shares of Common Stock in the hands of a stockholder will have an
aggregate basis for computing gain or loss equal to the aggregate basis of
shares of Common Stock held by that stockholder immediately prior to the
proposed reverse stock split reduced by the amount of proceeds, if any, received
from the sale of fractional interests and increased by any gain recognized on
that sale.
A stockholder's holding period for the new shares of Common Stock will be
the same as the holding period for the shares of Common Stock exchanged
therefor.
Stockholders who receive cash for all of their holdings (as a result of
owning fewer than five shares) will recognize a gain or loss for federal income
tax purposes as a result of the disposition of their shares of Common Stock.
Although the tax consequences to stockholders who receive cash for some of their
holdings are not entirely certain, those stockholders in all likelihood will
recognize a gain or loss for federal income tax purposes as a result of the
disposition of a portion of their shares of Common Stock. Stockholders who do
not receive any cash for their holdings will not recognize any gain or loss for
federal income tax purposes as a result of the proposed reverse stock split.
VOTE REQUIRED
The proposed amendment would effect both a reverse stock split and a
reduction in the authorized number of shares of Common Stock. Approval of the
reverse stock split requires the affirmative vote of a majority of all of the
issued and outstanding shares of Common Stock, PERCS and ESOP Preferred Stock,
voting together as a single class; however, only holders of shares of Common
Stock are entitled to vote on the reduction in the authorized number of shares
of Common Stock. Consequently, the affirmative votes of both (i) a majority of
all of the issued and outstanding shares of Common Stock, PERCS and ESOP
Preferred Stock, voting together as a single class, and (ii) a majority of all
of the issued and outstanding Common Stock, voting as a separate class, will be
required for approval of this item.
The foregoing summary of the amendment is qualified in its entirety by
reference to the complete text of the proposed revised first paragraph of
Article Fourth of the Certificate of Incorporation, which is set forth as
Exhibit A to this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING RESOLUTION
WHICH WILL BE PRESENTED AT THE MEETING.
"RESOLVED, that the amendment modifying the first paragraph of Article
Fourth of Holdings' Amended and Restated Certificate of Incorporation to conform
to Exhibit A of the Proxy Statement for this meeting is hereby adopted and
approved in all respects."
The Board of Directors reserves the right to abandon the proposed amendment
without further action by the stockholders at any time prior to the filing of
the amendment with the Delaware Secretary of State notwithstanding authorization
of the proposed amendment by the stockholders.
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STOCKHOLDER PROPOSALS
Certain stockholders have submitted the four proposals set forth below.
Holdings will furnish orally or in writing the identity of the proponents of
these stockholder proposals, as well as their claimed share ownership amounts,
upon written or oral request directed to the Secretary of Holdings. The
following proposals have been carefully considered by the Board of Directors
which has concluded that their adoption would not be in the best interests of
Holdings or its stockholders. For the reasons stated after each proposal, the
Board of Directors recommends a vote "AGAINST" each proposal.
Proposals of stockholders intended to be presented at the next Annual
Meeting must be received by the Secretary, RJR Nabisco Holdings Corp., 1301
Avenue of the Americas, New York, NY 10019-6013 no later than [November 21],
1995.
ITEM 4--STOCKHOLDER PROPOSAL ON EQUAL EMPLOYMENT REPORTING
A stockholder has submitted the following proposal, which will be voted upon
at the meeting if presented by its proponent:
"We believe there is a strong need for corporate commitment to equal
employment opportunity. We also believe a clear policy opposing all forms of
discrimination is a sign of a socially responsible corporation. Since a
substandard equal employment opportunity record leaves a company open to
expensive legal action, poor employment morale and even the loss of certain
types of business, we believe it is in the company's and shareholder's interest
to have information on our company's equal employment record.
"One of the country's largest institutional investors, the California Public
Employees' Retirement System, includes workplace performance guidelines as part
of their corporate performance criteria. The Department of Labor's Glass Ceiling
Commission has for the last four conducted studies, with the help of a number of
corporations, and in 1994 held public hearings to ascertain the status of
equality and diversity in Corporate America. In 1995 the commission will report
to the President their recommendations.
"As a major employer we are in a position to take the lead in ensuring that
employees receive fair employment opportunities and promotions. We believe a
report containing the basic information requested in this resolution keeps
issues high and on top of management's and Board of Directors' agenda, and
reaffirms our public commitment to equal employment opportunity and programs
responsive to the concerns of all employees. Publicizing our standards is
helpful to our investors and the companies with whom we do business.
"We are requesting that EEO information already gathered for the purpose of
complying with government regulations be made available to company shareholders
on request. The format of the request is not the central question. Many
corporations openly release their EEO-1 information in annual reports or public
interest booklets.
"Different companies use different styles in telling their story to
shareholders. Capital Cities/American Broadcasting Company, Bristol-Myers-Squibb
and Travellers produced a substantial magazine style report. Campbell Soup
produced a straightforward four page document. We feel this request is fair and
reasonable.
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"Resolved: The shareholders request our company prepare a report at
reasonable cost available to shareholders and employees reporting on the
following issues. This report, which may omit confidential information, shall be
available by September 1995.
"1. A chart identifying employees according to their sex, and race in
each of the nine major Equal Employment Opportunity Commission defined job
categories for 1992, 1993, 1994 listing either numbers or percentages in
each category.
"2. A summary description of any Affirmative Action policies and
programs to improve performances, including job categories where woman and
minorities are underutilized.
"3. A description of any policies and programs oriented specifically
toward increasing the number of managers, who are qualified females and/or
belong to ethnic minorities.
"4. A description of how our company publicizes our company's
affirmative action policies and programs to merchandise suppliers and
service providers.
"5. A description of any policies and programs directing the purchase of
goods and services to minority- and/or female-owned business enterprises."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
Holdings' corporate policy set forth in the RJR Nabisco Code of Conduct is
to provide equal employment opportunity in all personnel actions. Holdings and
its subsidiaries strive to maintain a workplace that is free of discrimination
on the basis of race, color, religion, gender, age, sexual orientation, national
origin, disability or veteran status. Holdings is proud of the progress it and
its subsidiaries have made in recent years in building a varied and diverse
workforce and is fully committed to continuing to advance the goals of equal
employment opportunity, affirmative action and diversity in the workplace.
Holdings' and its subsidiaries' current efforts in this area include
diversity awareness training for employees; recruiting, developing and advancing
women, minorities and people with disabilities; work and family programs;
internal diversity councils and employee networking groups; and HIV/AIDS
awareness and education.
As federal contractors, Holdings' subsidiaries prepare annual Affirmative
Action Plans which analyze the workforce by department and job group, according
to race and gender, and which establish goals in those areas where Holdings and
its subsidiaries strive to increase the representation of minorities and/or
women. Affirmative Action Plans are also developed annually for people with
disabilities and Vietnam Era and disabled veterans. Holdings' subsidiaries
actively monitor the progress and effectiveness of all of their Affirmative
Action Plans throughout the year. Female and minority workforce representation
is studied and analyzed, not only for the current year, but also in comparison
to past years for the purpose of identifying important trends. Holdings' and its
subsidiaries' commitment to increasing the representation of women and minority
employees is further supported by a wide range of corporate sponsorships and
contributions.
In addition to the above, Holdings is annually required to provide the
Federal government with certain reports containing data on the race and gender
composition of the U.S. workforce. These reports include several hundred pages
of charts and require substantial time and effort to produce.
Given the fact that Holdings already spends significant resources to produce
and file 150 legally required reports, and taking into consideration Holdings'
and its subsidiaries' existing equal employment opportunity policies and
initiatives, the Board believes that the expenditure of more resources to
produce additional reports, as requested by the proponent, is both unnecessary
and inappropriate. The Board believes that the production of additional reports
would not serve to advance either Holdings' or
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<PAGE>
its subsidiaries' business performance or the goal of equal employment
opportunity and, further, that the resources and costs involved would far exceed
any benefit to stockholders.
THEREFORE, YOUR BOARD URGES STOCKHOLDERS TO VOTE "AGAINST" THIS PROPOSAL.
The affirmative vote of the shares representing a majority of the shares
present at the meeting in person or represented by proxy and entitled to vote,
will be required to approve this item.
ITEM 5--STOCKHOLDER PROPOSAL ON NICOTINE MANIPULATION
Two stockholders have submitted the following proposal, which will be voted
upon at the meeting if presented by its proponents:
"WHEREAS Nicotine has been recognized by the Surgeon General, by the
Commissioner of the Food and Drug Administration (FDA), and by the FDA's
Advisory Committee and Drug Abuse as an addictive substance;
"--A Company scientist told ABC's Day One program in February 1994 that
consumers seek "mild pharmacology" from their cigarettes;
"--Another Company spokeswoman told a CNN reporter on April 13, 1994: "In
order to deliver to the consumer a product that he wants, a consistent level of
nicotine, we have to blend the tobaccos accordingly. So we do control it;"
"--According to a July 14, 1994 article in The New England Journal of
Medicine, virtually all cigarettes sold in the US today contain addictive levels
of nicotine;
"--When a cigarette is smoked, some of the nicotine in the smoke is
converted to nitrosamines, which are highly carcinogenic to the lung; products
and nicotine absorption by the consumer can now be readily manipulated and
controlled, unlike the situation that existed in the early 1950s, when,
according to the Federal Trade Commission, nicotine levels in cigarettes were
inherently viable;
"--The FDA Commissioner has found that at least some methods to control
nicotine are used by major manufactures of tobacco products;
"--The technology exist to reduce the levels of nitrosamines produced in
cigarette smoke by altering the levels of other precursors besides nicotine;
RESOLVED that the Company issue a report to shareholders and to the public,
without revealing proprietary information and produced at a reasonable cost,
whether nicotine content in and absorption from its tobacco products are
deliberately controlled by the Company and if the reasons for any such control
include the delivery of a reliable dose of nicotine to and/or the promotion of
nicotine absorption by the customer. The report shall also include the levels of
nitrosamines found in smoke from our Company's current cigarette brands."
The proponents have submitted the following statement in support of this
proposal:
"Nicotine is both a highly addictive substance and a precursor to potent
carcinogens. Both its level and its absorbability can be controlled in the
manufacturing process. This resolution asks for information on the extent to
which the Company controls nicotine content and delivery in its tobacco products
and for information on the levels of nitrosamines in the smoke of its cigarette
brands."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
In June 1994, R.J. Reynolds Tobacco Company ("RJRT") published a statement
in an advertisement placed in numerous national publications with readerships of
approximately 5.6 million which
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clearly stated that RJRT does not "spike" its cigarettes with nicotine.
Stockholders and other members of the public may obtain a reprint of this
statement, as well as a list of ingredients used by the major manufacturers of
cigarettes in the United States, which was made available by RJRT in April 1994,
by writing to R.J. Reynolds Tobacco Company, Public Relations Department, P.O.
Box 2959, Winston-Salem, N.C. 27102-2959.
As RJRT stated in the advertisement and has publicly stated on other
occassions, RJRT does not add nicotine to any of its tobacco products and does
not manipulate the amount of nicotine in any of its products to create,
maintain, or satisfy an "addiction". In fact, RJRT's manufacturing processes
actually result in a reduction in the amount of nicotine found in finished
cigarettes when compared to the amount of nicotine found in unprocessed tobacco.
The amount of nicotine in a cigarette is largely a result of the amount and
kinds of tobacco used in the cigarette blend, which are chosen because of their
taste and other properties. A variety of agricultural factors and practices in
turn influence these properties, including, for example, tobacco type, stalk
position of the leaf, curing practices, and whether a particular crop year is
wet or dry.
Through statements in peer reviewed scientific literature and other sources,
RJRT has clearly stated its position regarding the claim by the Surgeon General,
the Commissioner of the Food and Drug Administration and others that cigarette
smoking is an "addiction". In RJRT's opinion, cigarette smoking does not meet
the classic definitions of "addiction", and the forty-five million Americans who
smoke are not "addicts". To call nicotine "addictive" is to ignore significant
differences between cigarettes and truly addicting drugs.
Over the last forty years, RJRT, other cigarette manufacturers, and
scientists have explored many methods to reduce or eliminate individual
constituents, such as nitrosamines, in cigarette smoke as suggested in this
proposal. In general these efforts to produce commercial cigarettes using such
methods have not been successful. During the same period, however, RJRT has been
one of the world's leaders in research that reduces levels of all constituents
of cigarette smoke, which include "tar", nicotine and many other constituents of
smoke , including nitrosamines. As a result of this research by RJRT and others,
cigarettes such as RJRT's NOW brand are now available with "tar" yields of less
than 1.0 milligram and nicotine yields of less than 0.1 milligrams as measured
by the FTC method. This compares to the early 1950's, when all cigarettes had
yields of "tar" and nicotine of approximately 40 milligrams and 2.5 milligrams,
respectively. Other constituents of cigarette smoke, such as nitrosamines, have
been reduced more or less proportionately. There has been extensive discussion
of these issues in the publicly available literature, including the 1981 Surgeon
General's Report.
RJRT is proud to produce the highest quality cigarette products in the world
today. In order to ensure that quality and that each WINSTON, CAMEL and SALEM
has the same taste, quality and other characteristics that its customers have
come to expect, RJRT controls its tobacco blending, processing, and
manufacturing very closely. This results in cigarettes which are consistent from
cigarette to cigarette and from pack to pack in all performance characteristics,
including taste, appearance, draw and other qualities. However, these controls
are not intended to and do not result in some predetermined "addictive level" of
nicotine in RJRT's cigarettes.
In summary, RJRT does not "spike" its cigarettes with nicotine. Furthermore,
RJRT complies with all government regulations regarding the public disclosure of
tar and nicotine levels in its cigarettes and regarding disclosure to the
federal government of the ingredients in RJRT's cigarettes. Accordingly, RJRT
does not believe that it would serve any useful purpose to issue a report to
stockholders and the public regarding nicotine, nitrosamines or other smoke
constituents.
THEREFORE, YOUR BOARD URGES STOCKHOLDERS TO VOTE "AGAINST" THIS PROPOSAL.
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The affirmative vote of the shares representing a majority of the shares
present at the meeting in person or represented by proxy and entitled to vote,
will be required to approve this item.
ITEM 6--STOCKHOLDER PROPOSAL ON WARNING LABELS FOR
ADVERTISING AND PROMOTIONAL ITEMS
Two stockholders have submitted the following proposal, which will be voted
upon at the meeting if presented by its proponents:
"WHEREAS Camel cigarettes has been the fastest-growing brand among teenagers
for the last six years;
"--Our Company actively seeks customers for its cigarettes by spending
hundreds of millions of dollars in advertising and promotions. These include
advertising on billboards, magazines, newspapers, bus signs, placards and
television whenever allowed, as well as advertising through sponsorships and
promotional items bearing our Company's cigarette logos and symbols. These
include clothing, toys, sporting goods, and watches. Many of these are popular
with children. For instance, 30% of 12-17 year olds in a Gallup survey reported
owning promotional items for tobacco products;
"--In recent years, our Company has shifted advertising dollars into
promotions to convey the images, symbols, and other advertising messages of its
cigarette brands, to impress the image of the brands on potential consumers'
psyches;
"--The Joe Camel campaign helped increase our Company's share of the
cigarette market for minors from 0.5% to almost 33.0% between 1988 and 1933. In
1992, Camel was the only major brand of cigarettes to show a sales increase,
which we believe is attributable to sales to minors;
"--Although promotions are a form of advertising for our Company's brands,
they carry no warnings about health hazards caused by smoking our cigarette
brands;
"--The Federal Trade Commission requires that advertising for brands of
chewing tobacco and moist snuff on items such as caps and t-shirts carry
prominent warning labels;
"RESOLVED that shareholders request the Board to adopt the following policy
to be put into effect by January 1, 1996: All advertising and promotional items
for our Company's tobacco products distributed throughout the world shall
include clear and effective health warnings about the dangers of addiction,
disease, and death caused by smoking cigarettes."
The proponents have submitted the following statement in support of this
proposal:
"On the one hand, our Company says smoking is an adult custom and that it
tries to "discourage" children from smoking. On the other hand, we believe it
encourages young people to smoke through promotions and by sponsoring sporting
events which attract them. The cigarette brand symbols and logos invade their
consciousness with no simultaneous warnings about the health hazards caused by
smoking. We believe there should be warnings wherever our ads and promotions
appear; these should be at least as readable and easy to see as the images or
symbols associated with our cigarette brands.
"Our Company has been relatively free of damages connected to litigation
from plaintiffs because of smoking, arguing that cigarette packages contained
warnings. Similar warnings should be placed on any ads or promotional symbols
connected to our cigarettes because it may be argued that these attracted people
to use our products to the detriment of their health. Recently our Company
voluntarily placed health warnings on all cigarette packages sold throughout the
world, even though such were not required by law. We believe warnings on all use
of our cigarette logos is the logical next step. If you agree, please vote "yes"
for this resolution."
17
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
Independent studies consistently conclude that advertising does not play a
significant role in the decision to start smoking. Peer pressure and sibling and
parental example are consistently found to be the principal reasons young people
start to smoke; indeed, many studies conclude that advertising plays no role in
this decision at all.
Claims that the CAMEL campaign has resulted in additional underage smoking
are not supported by the empirical data. In fact, the same studies cited by the
proponents conclude that another brand manufactured by another company has the
overwhelming share of underage smokers. Indeed, the 1993 Center for Disease
Control Teenage Attitude and Practices Study found that smoking among 12-17 year
olds was down when compared to 1989 and that CAMEL's share among 12-17 year olds
who purchase cigarettes was up only modestly.
After conducting a thorough investigation of tens of thousands of pages of
company documents and other available research, the Federal Trade Commission
concluded in June 1994 that:
"Although it may seem intuitive to some that the Joe Camel advertising
campaign would lead more children to smoke or lead children to smoke more,
the evidence to support that intuition is not there."
RJRT does not direct its cigarette advertising and/or promotions towards
minors. Moreover, RJRT supports its position that youth should not smoke through
in-school, parental and retail programs. RJRT's off-shore subsidiaries also
comply with industry marketing codes which exist in a number of markets in which
they compete. In markets where no such codes exist, RJRT's off-shore
subsidiaries comply with the R. J. Reynolds Tobacco International, Inc. Youth
Policy and Voluntary Code. These codes similarly seek to ensure that cigarettes
are advertised and promoted to adults only.
RJRT believes that there is awareness throughout the world of the health
issues involved with smoking. This awareness is reinforced through the warning
label on each pack of cigarettes that RJRT manufactures. Additionally, RJRT is
already in compliance with age and labeling restrictions in all countries in
which it operates.
In summary, RJRT is confident that its CAMEL advertising does not influence
children to start smoking. The Federal Trade Commission has concluded that there
is no evidence to support the contention that the Joe Camel campaign leads more
children to smoke. Accordingly, RJRT does not believe that extending warning
labels to promotional items would decrease the incidence of underage smoking.
THEREFORE, YOUR BOARD URGES STOCKHOLDERS TO VOTE "AGAINST" THIS PROPOSAL.
The affirmative vote of the shares representing a majority of the shares
present at the meeting in person or represented by proxy and entitled to vote,
will be required to approve this item.
ITEM 7--STOCKHOLDER PROPOSAL TO SPIN OFF TOBACCO BUSINESS
Two stockholders have submitted the following proposal, which will be voted
upon at the meeting if presented by its proponents:
"WHEREAS many institutional investors believe our Company would produce more
financial returns if our tobacco business would be separated from our other
businesses;
"--Some institutional investors have been uneasy about [cigarette
companies'] potential legal liability for the health problems of smokers, and
think that such problems have depressed the share price" of tobacco companies'
stock (The New York Times 9/22/94);
18
<PAGE>
"--A consumer boycott of RJR Nabisco's products has been launched by INFACT,
a consumer activist group. It successfully brought infant formula companies to
change their practices and General Electric to sell a good portion of its
nuclear weapons business. Among INFACT's demands to end the boycott include the
Company's need to stop marketing to children and young people, stop influencing
public policy, and pay its just share of health care costs associated with
tobacco use;
"--With the stock of the Company depressed in the past year from previous
years' highs, the threat of a consumer boycott does not auger well for any rapid
rebound;
"--Increased litigation coming from states and private insurers indicate new
and ominous challenges that might undermine the value of the stock. The stock
value might be increased if the tobacco division(s) would be separated from the
other divisions;
"--Some pension-fund executives feel that the decisions by Kohlberg, Kravis,
Roberts & Company to shed a major portion of its stock in RJR Nabisco Holdings
has put the idea of a split-up back on the table (The New York Times 9/22/94);
"--The subsequent decision of our Company not to acquire 20% of Borden Inc.,
and to sell 19% of our Nabisco food division to the public is seen by The Wall
Street Journal as the first step in dividing RJR into completely separate food
and tobacco companies (10/31/94);
"--The day following Kmart Corporation's announcement that it would sell
majority stakes in three of its specialty businesses in August, 1994, its stock
jumped over 2%;
"RESOLVED that shareholders ask management to take steps to accomplish a
separation of the Corporation's tobacco business from all its non-tobacco
businesses by January 1, 1996."
The proponents have submitted the following statement in support of this
proposal:
"According to The Wall Street Journal, the decision by RJR Nabisco Holdings
Corp. to sell part of Nabisco to the public "is the culmination of a
frustrating, two-year struggle by RJR management to increase the value of its
tobacco-tainted stock by getting Wall Street to focus on the performance of red-
hot Nabisco." Even though the article continues that "given the current
antitobacco climate and recent increase in lawsuits against tobacco companies,
observers say that RJR won't be in a hurry to separate its businesses"
(10/31/94). However, it is precisely for this reason that the proponents of this
resolution feel the split-up of tobacco from the rest of the Company should take
place as soon as possible. If you agree, please vote "yes" for this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
The Board of Directors is strongly supportive of the proponent's goal of
improving the value of Holdings' Common Stock. In furtherance of this objective,
the Board of Directors has reviewed--and continues to review--on an ongoing
basis various alternatives to improve Holdings' capital structure and its
subsidiaries' operations. Among the alternatives considered have been
repurchases or issuances of securities, joint ventures, mergers, acquisitions,
divestitures, asset swaps, spin-offs and recapitalizations. Certain of these
options have envisioned the partial or complete separation of the tobacco and
food businesses. However, based on its review of these alternatives, the Board
has decided that separating Holdings' tobacco business from its other businesses
at this time is not the most effective means of increasing the value of
Holdings' Common Stock.
Instead, after considering the available alternatives in consultation with
its financial advisors, bank creditors and rating agencies, Holdings announced
in October 1994 that it would undertake a major initiative which included an
initial public offering of approximately 19% of the common stock of Nabisco. The
offering was completed in January 1995 and the proceeds of the offering were
used to reduce consolidated debt by approximately $1 billion. The offering
improved Holdings' credit ratios and
19
<PAGE>
established a separate market for Nabisco's stock. Holdings believes that the
offering should encourage the financial markets to recognize the value of
Nabisco in each common share of Holdings.
As a further part of the initiative, Holdings declared a regular quarterly
cash dividend of $.075 per share of Common Stock, or $.30 per common share on an
annualized basis. The first dividend is payable April 1, 1995 to stockholders of
record on March 10, 1995. Payment of a dividend not only provides stockholders
with a cash return on their investment but also provides an additional measure
of Holdings' performance--its dividend yield.
In addition, as a part of the overall initiative, the Board has adopted a
policy of not declaring a dividend or distribution to its stockholders of the
shares of capital stock of a subsidiary before December 31, 1996. The Board has
also adopted a policy of not making such a distribution prior to December 31,
1998 if that distribution would cause the ratings of the senior indebtedness of
RJR Nabisco, Inc. to be reduced from investment grade to non-investment grade or
if, after giving effect to such distribution, any publicly held senior
indebtedness of the distributed company would not be rated investment grade.
The actions described above and the proposal included in this Proxy
Statement to effect a one-for-five reverse split of Holdings' Common Stock
demonstrate that Holdings is committed to the goal of improving the value of its
Common Stock, the same objective espoused by the proponents. Holdings will
continue to review all appropriate alternatives to create stockholder value and
believes that it should do so without being constrained by a specific program or
timetable such as that suggested in this proposal. Although the Board of
Directors does not believe that it is in the best interests of Holdings or its
stockholders to separate Holdings' tobacco business from its food business at
this time, the initiative described above has been structured in a manner that
preserves the option of separating such businesses on a tax free basis at some
later date should Holdings consider it advisable.
THEREFORE, YOUR BOARD URGES STOCKHOLDERS TO VOTE "AGAINST" THIS PROPOSAL.
The affirmative vote of the shares representing a majority of the shares present
at the meeting in person or represented by proxy and entitled to vote, will be
required to approve this item.
20
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY
The following pages describe the components of the total compensation of the
five most highly compensated executive officers (as defined under SEC rules) of
Holdings at the end of the last completed fiscal year. The principal components
of such individuals' current cash compensation are the annual base salary and
bonus included in the Summary Compensation Table. The bonus amounts represent
amounts that the Compensation Committee and the Board approved for each named
individual based on company performance during 1994. The long-term compensation
shown in the Summary Compensation Table was provided under Holdings' 1990 Long
Term Incentive Plan (the "LTIP") which provides for various types of awards such
as stock options, restricted stock, performance share awards and performance
unit awards, as described below. Also described below is the future compensation
such individuals can receive under Holdings' retirement plans or, following
termination of employment under certain circumstances, under private employment
agreements in effect during 1994.
SUMMARY COMPENSATION TABLE
The following table presents certain specific information regarding the 1994
compensation of the five most highly compensated executive officers of Holdings
at the end of the last fiscal year. Effective March 3, 1995, Messrs. Ricciardi
and Croisant, in anticipation of retirement, ceased to be executive officers of
Holdings.
SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -----------------------------------------
-------------------------------------- RESTRICTED LONG-TERM
NAME & OTHER ANNUAL STOCK STOCK INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARD(S)($)(1) OPTIONS(#) PAYOUTS($)(2) COMPENSATION(3)
- ------------------- ---- --------- ---------- --------------- -------------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CHARLES M. HARPER.. 1994 $ 600,000 $2,410,000 $ 7,534,241(4) $ 0 750,000 $ 0 $ 2,120,391
Chairman & Chief 1993 $ 700,000 $1,750,000 $ 472,830 $ 0 8,750,000 $ 0 $ 423,417
Executive Officer
LAWRENCE R.RICCIARDI 1994 $ 600,000 $1,350,000 $ 2,991,131(5) $ 0 0 $ 200,994 $ 28,431
President and 1993 $ 557,333 $ 462,000 $ 77,254 $815,625 500,000 $ 0 $ 43,979
General Counsel 1992 $ 420,833 $ 385,000 $ 59,480 $ 0 0 $ 0 $ 12,276
H. JOHN GREENIAUS.. 1994 $ 700,000 $ 983,430 $ 2,045,752(6) $ 0 0 $ 254,490 $ 24,990
President & Chief 1993 $ 601,042 $ 579,000 $ 71,398 $600,000 500,000 $ 0 $ 34,808
Executive Officer, 1992 $ 572,500 $ 310,000 $ 58,644 $ 0 0 $ 0 $ 17,210
Nabisco, Inc.
JAMES W. JOHNSTON.. 1994 $ 700,000 $1,725,000 $ 3,902,147(7) $ 0 0 $ 255,104 $ 57,878
Chairman & Chief 1993 $ 612,083 $ 225,000 $ 123,435 $826,460 500,000 $ 0 $ 70,065
Executive Officer, 1992 $ 572,500 $ 495,000 $ 99,991 $ 0 0 $ 0 $ 17,210
R.J. Reynolds
Tobacco Co.
EUGENE R. CROISANT. 1994 $ 475,000 $1,107,500 $ 2,255,545(8) $ 0 0 $ 144,403 $ 15,174
Executive Vice 1993 $ 396,875 $ 308,000 $ 60,521 $678,000 400,000 $ 0 $ 25,109
President, Human 1992 $ 318,333 $ 261,000 $ 54,404 $ 0 0 $ 0 $ 23,161
Resources & Admin.
</TABLE>
- ------------
(1) Restrictions on the restricted stock granted to the named individuals in
1993 lapsed on December 31, 1994, at which time the individuals were
required to dispose of 39.6% of their shares to satisfy federal income tax
withholding obligations.
(2) The amounts shown in the table represent the value of grants made to the
named executive officers in July 1994 under the Executive Equity Program of
the LTIP, which applies to individuals who previously acquired purchase
stock under the LTIP (as described under "Stock-Based Awards" below). The
named executive officers who participate in the program receive cash grants
on four annual grant dates beginning July 1994 and ending July 1997. The
amount awarded on each grant date is equal to the excess, if any, of (i) 25%
of the maximum amount the individual could have borrowed to acquire purchase
stock, over (ii) the then fair market value of the same percentage of such
individual's purchase stock. The grant is increased by the amount necessary
to hold the individual harmless from income taxes due as a result of the
grant. No grant will be made on a grant date if, on such grant date, the
amount determined under clause (ii) above equals or exceeds the amount
determined in clause (i) above.
(3) The amounts shown in the table reflect company contributions made on behalf
of the named individuals under RJRN's qualified and non-qualified defined
contribution plans, as follows:
<TABLE><CAPTION>
COMPANY MATCHING CONTRIBUTION COMPANY CONTRIBUTION
NAME (QUALIFIED PLAN) (NON-QUALIFIED PLAN)
- --------------------------------------- ----------------------------- --------------------
<S> <C> <C>
Mr. Harper........................... $ 4,500 $ 13,500
Mr. Ricciardi........................ $ 4,500 $ 14,886
Mr. Greeniaus........................ $ 4,500 $ 20,490
Mr. Johnston......................... $ 4,500 $ 17,175
Mr. Croisant......................... $ 4,500 $ 10,674
</TABLE>
(Footnotes continued on following page)
21
<PAGE>
(Footnotes continued from preceding page)
The amount shown in the table for Mr. Harper also includes $2,011,119, which
was the one-time discounted advance premium deposit made in 1994 for the
insurance policy described in footnote (4), and $91,272 of interest income
arising from the advance premium deposit. The amount shown in the table for
Mr. Ricciardi also includes $9,045, which was the 1994 premium for the
insurance policy described in footnote (5). The amount shown in the table for
Mr. Johnston also includes $36,203, which was the 1994 premium for the
insurance policies described in footnote (7).
(4) Mr. Harper's employment agreement provides him with a retirement arrangement
similar to that provided to the prior chief executive officer of Holdings.
The retirement benefits under Mr. Harper's employment agreement are
substantially similar to those provided under Holdings' Supplemental
Executive Retirement Plan (described below under "Retirement Plans"). The
after-tax vested benefits accrued as of December 31, 1993 for Mr. Harper
under his retirement arrangement (reduced by his vested benefits under
Holdings' qualified pension plan), were funded through the purchase of
annuity contracts in February 1994, as was done for the prior chief
executive officer of Holdings (whose retirement benefits were funded through
the purchase of annuity contracts). $5,482,999 of the amount shown was to
hold Mr. Harper harmless from increased personal income tax liability
related to the funding of his retirement plan benefit. In addition, Mr.
Harper's employment agreement requires Holdings to pay annual premiums on a
$5 million permanent life insurance policy owned by Mr. Harper. This is
similar to the arrangement maintained for the prior chief executive officer
of Holdings, who also owned a $5 million permanent life insurance program
for which Holdings made all premium payments. In March 1994, Holdings made a
one-time discounted advance premium deposit with the insurance carrier to
cover future premium payments under the policy. $1,748,464 of the amount
shown was Mr. Harper's increased personal income tax liability attributable
to the advance premium deposit and the resulting recognition of interest
income, which was reimbursed by Holdings to Mr. Harper under the terms of
his employment agreement. The amount of the premium and the interest income
is included in the "All Other Compensation" column. The amount shown also
reflects other income tax liabilities which were reimbursed by Holdings to
Mr. Harper ($87,043), amounts not paid to Mr. Harper but nonetheless
allocable to his personal use of company facilities and aircraft ($136,566),
and amounts attributable to his participation in RJRN's executive perquisite
program, which provides him with supplemental insurance, a leased automobile
and an annual allowance ($61,750) which may be used to reimburse
miscellaneous expenses and, to the extent not so used, is paid to him in
cash. The supplemental insurance consists of medical, dental, business
travel accident and, to the extent elected, life, spousal life and personal
liability insurance.
(5) The after-tax vested benefits accrued as of December 31, 1993 for
participants in the Supplemental Executive Retirement Plan (reduced by the
participants' vested benefits under Holdings' qualified pension plan), were
funded through the purchase of annuity contracts in February 1994.
$2,719,812 of the amount shown was to hold Mr. Ricciardi harmless from
increased personal income tax liability related to the funding of his
retirement plan benefit. In accordance with Mr. Ricciardi's employment
agreement, Holdings pays annual premiums on a $1 million variable life
insurance policy for Mr. Ricciardi. $8,050 of the amount shown was Mr.
Ricciardi's increased personal income tax liability attributable to the 1994
payment, which was reimbursed by Holdings to Mr. Ricciardi. The amount of
the 1994 premium payment is included in the "All Other Compensation" column.
In addition, $193,838 of the amount shown was to hold Mr. Ricciardi harmless
from increased personal income tax liability related to his participation in
the Executive Equity Program described in footnote (2). The amount shown
also reflects amounts not paid to Mr. Ricciardi but nonetheless allocable to
his personal use of company aircraft ($3,955), and amounts attributable to
his participation in RJRN's executive perquisite program, which provides him
with supplemental insurance, a leased automobile and an annual allowance
($47,500) which may be used to reimburse miscellaneous expenses and, to the
extent not so used, is paid to him in cash. The supplemental insurance
consists of medical, dental, business travel accident and, to the extent
elected, life, spousal life and personal liability insurance.
(6) The after-tax vested retirement benefits accrued as of December 31, 1993 for
participants in the Supplemental Executive Retirement Plan (reduced by the
participants' vested benefit under Holdings' qualified pension plan) were
funded through the purchase of annuity contracts in February 1994.
$1,740,604 of the amount shown was to hold Mr. Greeniaus harmless from
increased personal income tax liability related to the funding of his
retirement plan benefit. In addition, $232,095 of the amount shown was to
hold Mr. Greeniaus harmless from increased personal income tax liability
related to his participation in the Executive Equity Program described in
footnote (2). The amount shown in the table also reflects amounts not paid
to Mr. Greeniaus but, nonetheless, allocable to his personal use of company
aircraft ($12,461), and amounts attributable to his participation in RJRN's
executive perquisite program, which provides him with supplemental
insurance, a leased automobile and an annual allowance ($47,500) which may
be used to reimburse miscellaneous expenses and, to the extent not so used,
is paid to him in cash. The supplemental insurance consists of medical,
dental, business travel accident and, to the extent elected, life, spousal
life, automobile and personal liability insurance.
(7) The after-tax vested benefits accrued as of December 31, 1993 for
participants in the Supplemental Executive Retirement Plan (reduced by the
participants' vested benefits under Holdings' qualified pension plan), were
funded through the purchase of annuity contracts in February 1994.
$3,529,060 of the amount shown was to hold Mr. Johnston harmless from
increased personal income tax liability related to the funding of his
retirement plan benefit. Mr. Johnston's employment agreement requires
Holdings to pay annual premiums on a $1 million term life insurance policy
and a $1 million permanent life insurance policy owned by Mr. Johnston.
$30,188 of the amount shown was Mr. Johnston's increased personal income tax
liability attributable to the payment of the 1994 premium by Holdings, which
was reimbursed by Holdings to Mr. Johnston. The amount of the 1994 premium
payment is included in the "All Other Compensation" column. In addition,
$243,139 of the amount shown was to hold Mr. Johnston harmless from
increased personal income tax liability related to his participation in the
Executive Equity Program described in footnote (2). The amount shown also
reflects amounts not paid to Mr. Johnston but nonetheless allocable to his
personal use of company aircraft ($36,227) and amounts attributable to Mr.
Johnston's participation in RJRN's executive perquisite program, which
provides him with supplemental insurance, a leased automobile and an annual
allowance ($47,500) which may be used to reimburse miscellaneous expenses
and, to the extent not so used, is paid to him in cash. The supplemental
insurance consists of medical, dental, business travel accident and, to the
extent elected, life, spousal life and personal liability insurance.
(8) The after-tax vested benefits accrued as of December 31, 1993 for
participants in the Supplemental Executive Retirement Plan (reduced by the
participants' vested benefits under Holdings' qualified pension plan), were
funded through the purchase of annuity contracts in February 1994.
$2,036,557 of the amount shown was to hold Mr. Croisant harmless from
increased personal income tax liability related to the funding of his
retirement plan benefit. In addition, $156,707 of the amount shown was to
hold Mr. Croisant harmless from increased personal income tax liability
related to his participation in the Executive Equity Program described in
footnote (2). The amount shown in the table also reflects Mr. Croisant's
participation in RJRN's executive perquisite program, which provides him
with supplemental insurance, a leased automobile and an annual allowance
($47,500) which may be used to reimburse miscellaneous expenses and, to the
extent not so used, is paid to him in cash. The supplemental insurance
consists of medical, dental, business travel accident and, to the extent
elected, life, spousal life, automobile and personal liability insurance.
22
<PAGE>
STOCK-BASED AWARDS
Holdings believes that significant purchases of Common Stock by its
executives through the commitment of personal financial resources is critical to
Holdings' philosophy of encouraging executives to act as owner-managers.
Accordingly, Holdings has implemented two programs to encourage executives to
purchase Common Stock: the Management Equity Participation Plan and the LTIP
(collectively, the "Programs"). Holdings has issued stock options under the
Programs to the named executive officers and to other key employees. Certain
options granted to all of the named executive officers were conditioned on the
purchase by them of Common Stock under purchase stock agreements that, together
with the options granted, contained a variety of limitations on the ability of
the holders to transfer or realize gain from the purchase stock or the options.
The executives received options to purchase four shares of Common Stock for
every share purchased.
In connection with the purchase of Common Stock under the LTIP, executives
were permitted to borrow on a secured basis from Holdings the purchase price for
the shares of the purchased stock. In addition, purchasers were entitled to
borrow money from Holdings on substantially the same terms to pay taxes due on
any taxable income recognized in connection with such purchases. The current
annual interest rate, which was set in July 1993 at the then applicable federal
rate for long term loans, is 6.37%. The indebtedness, plus accrued interest and
taxes, must be repaid upon the earlier of sale of the shares or termination of
plan participation. As of March 1, 1995, the named executive officers of
Holdings, with outstanding indebtedness in connection with such loans were: Mr.
Ricciardi $961,873; Mr. Greeniaus $1,856,892; Mr. Johnston $1,240,145; and Mr.
Croisant $841,282. All of these individuals have repaid a portion of their
indebtedness since January 1, 1994. The largest amount of indebtedness since
January 1, 1994 for each of these individuals is: Mr. Ricciardi $1,331,585; Mr.
Greeniaus $2,035,527; Mr. Johnston $1,712,037; and Mr. Croisant $951,132.
The following table identifies the grants of stock options made to the named
executive officers in 1994.
OPTION GRANTS IN THE LAST FISCAL YEAR (1994)
<TABLE><CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
UNDERLYING OPTIONS ANNUAL RATES OF STOCK PRICE
OPTIONS GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------------------------
NAME (#) FISCAL YEAR ($/SHARE) DATE 0.0% 5.0% 10.0%
- ---------------------------- ---------- ------------ --------- ---------- ---- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
C. M. Harper(1)............. 750,000 45.1% $ 5.500 12/31/09 $0 $4,042,218 $11,539,681
L. R. Ricciardi............. 0 0.0% n/a n/a n/a n/a n/a
H. J. Greeniaus............. 0 0.0% n/a n/a n/a n/a n/a
J. W. Johnston.............. 0 0.0% n/a n/a n/a n/a n/a
E. R. Croisant.............. 0 0.0% n/a n/a n/a n/a n/a
All Stockholders(2)......... n/a n/a n/a n/a $0 $7,338,818,340 $20,950,780,753
Gain to Named Executive
Officers as a Percentage of
Gain to All
Stockholders(3)............ n/a n/a n/a n/a n/a 0.0551% 0.0551%
</TABLE>
- ------------
(1) Mr. Harper's stock options were granted pursuant to the terms of his
employment agreement (described below). The grant shown for Mr. Harper was
made on December 31, 1994. The exercise price of the stock options is equal
to the fair market value of Common Stock on the date of grant. The stock
options become exercisable over four years in accordance with the following
schedule: 25% on each May 31, beginning May 31, 1995. The stock options have
terms of 15 years from the date of grant, but are subject to earlier
cancellation in certain circumstances.
(2) The amounts on this line of the table show the potential increase in the
value of the Common Stock issued and outstanding as of December 31, 1994
(1,361,656,883 shares) if the assumed annual rates of stock price
appreciation are maintained over a 15 year term (equal to the term of the
stock options) beginning December 31, 1994.
(3) No gain to the optionee is possible without an increase in the price of
Common Stock, which would benefit all stockholders commensurately.
23
<PAGE>
The following table provides information relating to the number and value of
shares of Common Stock subject to options held by the named executive officers
as of December 31, 1994. There were no stock option exercises during 1994 by any
of the named individuals.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUE (1994)
<TABLE><CAPTION>
VALUE OF UNEXERCISED,
SHARES TOTAL NO. UNEXERCISED IN-THE-MONEY
ACQUIRED ON OPTIONS HELD AT FY-END (#) OPTIONS HELD AT FY-END ($)(1)
EXERCISE VALUE ------------------------------ ------------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. M. Harper....... 0 $0 2,187,500 7,312,500 $ 0 $ 0
L. R. Ricciardi.... 0 $0 1,254,599 525,401 $ 360,000 $ 0
H. J. Greeniaus.... 0 $0 1,840,200 579,800 $ 600,000 $ 0
J. W. Johnston..... 0 $0 1,840,200 579,800 $ 600,000 $ 0
E. R. Croisant..... 0 $0 995,998 404,002 $ 300,000 $ 0
</TABLE>
- ------------
(1) Calculated based on the excess of the fair market value of common stock of
Holdings on December 31, 1994 ($5.50) over the option exercise price.
LONG-TERM INCENTIVE AWARDS
The following table describes performance units that were granted to the
named executive officers in 1994 pursuant to the LTIP. Participants were granted
a designated number of performance units, which may be earned upon completion of
a three-year performance period. Payouts of awards at the end of the performance
period are based on cumulative operating company contribution (operating income
before amortization of trademarks and goodwill) during the performance period
for Holdings and its subsidiaries, for Nabisco or for worldwide tobacco, as
appropriate.
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR (1994)
<TABLE><CAPTION>
AWARDS ESTIMATED FUTURE PAYOUTS
------------------------------------------- ----------------------------------------
PERFORMANCE OR OTHER
NO. OF SHARES/UNITS PERIOD UNTIL THRESHOLD TARGET MAXIMUM
NAME OR OTHER RIGHTS (#) MATURATION OR PAYOUT ($) ($) ($)
- ---------------------------- ------------------- -------------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
C. M. Harper(1)............. 1,500,000 12/31/96 $0 $1,500,000 $3,750,000
L. R. Ricciardi(1).......... 680,000 12/31/96 $0 $ 680,000 $1,700,000
H. J. Greeniaus(2).......... 680,000 12/31/96 $0 $ 680,000 $1,700,000
J. W. Johnston(3)........... 680,000 12/31/96 $0 $ 680,000 $1,700,000
E. R. Croisant(1)........... 680,000 12/31/96 $0 $ 680,000 $1,700,000
</TABLE>
- ------------
(1) The payouts for Messrs. Harper, Ricciardi and Croisant are based on
cumulative operating company contribution during the performance period for
all of Holdings. If targeted results are achieved, their performance units
will have the targeted value. Their performance units will have no value
unless the actual performance exceeds 85.5% of the target, and they will
have the maximum value if the actual performance equals or exceeds 111.9% of
the target. Messrs. Ricciardi and Croisant will receive 15/36 of the award,
to reflect their period of active service during the performance period.
(2) The payout for Mr. Greeniaus is based on cumulative operating company
contribution during the performance period for Nabisco. If targeted results
are achieved, his performance units will have the targeted value. His
performance units will have no value unless the actual performance exceeds
90.4% of the target, and they will have the maximum value if the actual
performance equals or exceeds 103.5% of the target.
(3) The payout for Mr. Johnston is based on cumulative operating company
contribution during the performance period for worldwide tobacco operations.
If targeted results are achieved, his performance units will have the
targeted value. His performance units will have no value unless the actual
performance exceeds 83.2% of the target, and they will have the maximum
value if the actual performance equals or exceeds 104.3% of the target.
RETIREMENT PLANS
The named executive officers participate in noncontributory defined benefit
retirement plans maintained by Holdings or its subsidiaries. Mr. Ricciardi, Mr.
Greeniaus, Mr. Johnston and Mr. Croisant also participate in a Supplemental
Executive Retirement Plan. Mr. Harper's employment agreement provides him with a
vested supplemental pension substantially similar to the Supplemental Executive
Retirement Plan, except that Mr. Harper will be credited with 6 years of service
in addition to his actual service with RJRN. Benefits under the Supplemental
Executive Retirement Plan are payable only after a participant's retirement at a
specified retirement age.
24
<PAGE>
The following table shows the estimated annual benefits payable upon
retirement under the Supplemental Executive Retirement Plan and, in Mr. Harper's
case, pursuant to his employment agreement, as described in the preceding
paragraph. The retirement benefits shown are computed without regard to the
Social Security offset and are based upon retirement at age 60 and the payment
of a single-life annuity to the employee.
<TABLE><CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
YEARS OF SERVICE
----------------------------------------
10 OR
AVERAGE FINAL COMPENSATION FEWER 15 20 OR MORE
- -------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
$ 800,000 $ 266,666 $ 300,000 $ 400,000
$ 900,000 $ 300,000 $ 337,500 $ 450,000
$1,000,000 $ 333,333 $ 375,000 $ 500,000
$1,200,000 $ 400,000 $ 450,000 $ 600,000
$1,600,000 $ 533,333 $ 600,000 $ 800,000
$2,000,000 $ 666,666 $ 750,000 $1,000,000
$2,400,000 $ 800,000 $ 900,000 $1,200,000
$2,800,000 $ 933,333 $1,050,000 $1,400,000
$3,200,000 $1,066,666 $1,200,000 $1,600,000
$3,600,000 $1,200,000 $1,350,000 $1,800,000
$4,000,000 $1,333,333 $1,500,000 $2,000,000
</TABLE>
The retirement benefits for all of the named executive officers are
determined under this table. For purposes of determining retirement benefits
under the Supplemental Executive Retirement Plan (and, in Mr. Harper's case,
under his employment agreement), compensation includes base salary, bonus (in
the year earned) and pre-tax contributions to plans maintained under sections
401(k) and 125 of the Code. "Average Final Compensation" under the Supplemental
Executive Retirement Plan (and, in Mr. Harper's case, under his employment
agreement) is determined by considering the 36 consecutive months that yield the
highest average compensation during the participant's last 60 months of service.
If the participant has fewer than 36 months of service, all months are
considered. Average Final Compensation as of December 31, 1994 for the named
individuals who are participants in the Supplemental Executive Retirement Plan
was: Mr. Ricciardi: $1,277,345; Mr. Greeniaus: $1,248,657; Mr. Johnston:
$1,518,194; and Mr. Croisant: $981,401. Mr. Harper's Average Final Compensation
as of December 31, 1994 was $3,000,000. The following are estimated years of
credited service (rounded to the nearest year) under the Supplemental Executive
Retirement Plan (giving effect to individual arrangements) for the participants
listed above: Mr. Ricciardi: 25 years (at retirement); Mr. Greeniaus: 28 years
(at age 60); Mr. Johnston: 30 years (at age 60) and Mr. Croisant: 20 years (at
retirement). Mr. Harper's estimated years of credited service at the end of the
term of his employment agreement will be 10 years.
In February 1994, Holdings purchased annuity contracts to fund certain
retirement benefits for participants in the Supplemental Executive Retirement
Plan, and for Mr. Harper under his retirement arrangement. The annuity contracts
fund participants' after-tax vested benefits under the Supplemental Executive
Retirement Plan (and, in Mr. Harper's case, under his employment agreement) as
of December 31, 1993, reduced by the participants' vested benefit under
Holdings' qualified pension plan. The funds used to purchase the annuity
contracts had been previously expensed and were held in a trust designed for the
payment of such benefits. Accordingly, there was no adverse impact on the
corporation's earnings as a result of the funding. The benefits funded by the
purchase of annuity contracts will not be available to the individuals until
they retire.
AGREEMENTS WITH CERTAIN OFFICERS
In 1993, Holdings and RJRN entered into an employment agreement with Mr.
Harper pursuant to which Mr. Harper became employed as Chairman of the Boards of
Directors of Holdings and RJRN and Chief Executive Officer of Holdings and RJRN
for a period commencing on May 31, 1993 and continuing through May 31, 1997.
Pursuant to the employment agreement, Mr. Harper is entitled to receive a base
salary of $1.2 million per annum, increasing each January 1 by at least 6%, and
a guaranteed minimum annual bonus so that his salary plus bonus for calendar
years after 1993 will be at
25
<PAGE>
a rate that is no less than $3.0 million per year. In order to enable Holdings
to preserve its federal income tax deduction for the salary and annual bonus
paid to Mr. Harper, Mr. Harper agreed, in March 1994, to amend his employment
agreement as it relates to his 1994 salary and annual bonus. The amendment
reduces his base salary for 1994 to $600,000, increases his target bonus to
reflect the salary reduction and makes his annual bonus contingent on company
operating performance.
Pursuant to the employment agreement, Mr. Harper is provided with life
insurance in the amount of $5 million. Mr. Harper's employment agreement
provides that Mr. Harper will receive a supplemental pension substantially
similar to the Supplemental Executive Retirement Plan, except that Mr. Harper
will be credited for six of his years of service with his previous employer in
addition to his actual service with RJRN. Mr. Harper's benefit under this
supplemental pension is vested at all times. In February 1994, the after-tax
benefit accrued as of December 31, 1993 for Mr. Harper under his employment
agreement (and for all participants in the Supplemental Executive Retirement
Plan), reduced by amounts accrued under Holdings' qualified pension plan, was
funded through the purchase of annuity contracts (see "Retirement Plans"). Mr.
Harper's employment agreement also provides for the payment to Mr. Harper of
compensation continuance until May 31, 1997, based on Mr. Harper's then current
base salary and the highest annual bonus paid to, or accrued for, him, if
Holdings or RJRN terminates Mr. Harper's employment without cause or if Mr.
Harper terminates his employment for "good reason" (which includes a reduction
in Mr. Harper's duties or positions, a reduction in Mr. Harper's initial salary
and annual bonus or a material breach of the contract by RJRN or Holdings).
Cause includes willful gross misconduct or malfeasance, or substantial and
continuing refusal by Mr. Harper to perform his duties. In the event that a
"parachute" excise tax would be imposed on Mr. Harper's termination payments,
Mr. Harper would also be reimbursed for the amount of the excise tax on his
termination payments, as well as any incremental income taxes payable on the
reimbursed amount.
Under the terms of his employment agreement, Mr. Harper was required to
purchase 622,222 shares of Common Stock at a price of $5.625 (the closing market
price on May 21, 1993) from Holdings. The employment agreement restricts the
transfer of such stock so long as Mr. Harper remains employed by Holdings or any
of its subsidiaries, except for such transfers as may be permitted by the Board
of Directors of Holdings. The purchase of such stock was a condition to the
grant to Mr. Harper on May 31, 1993 under the LTIP of options to purchase
8,000,000 shares of Common Stock at an exercise price of $5.625. Such options
become vested and exercisable in four equal annual installments on the first,
second, third and fourth anniversaries of the date of grant. The employment
agreement also provides that Holdings will grant options to purchase 750,000
shares of Common Stock to Mr. Harper on each December 31 on which he remains
employed by RJRN through December 31, 1996. The exercise price for such options
will be equal to the fair market value of such shares on the business day
immediately preceding the date of grant. Such additional options will become
vested and exercisable in equal annual installments on each May 31 after the
date of grant through May 31, 1997. All of the options referred to above will be
exercisable for 15 years from the date of grant unless Mr. Harper's employment
terminates other than by reason of a permitted retirement. If his employment
terminates for any reason other than a permitted retirement, the options will
remain exercisable for one year, provided that if his termination were for
cause, the options would terminate immediately. In December 1994, the board of
directors of Holdings authorized the acquisition of one-half of Mr. Harper's
purchase shares at the fair market value on the date of the acquisition,
provided that the full amount of such proceeds be used by Mr. Harper solely for
the acquisition of Nabisco Class A Common Stock containing the same transfer
restrictions as the Holdings purchase stock. On January 19, 1995, Holdings
purchased one-half of Mr. Harper's purchase stock at the closing market price on
that date ($5.625 per share) and the proceeds were used by Mr. Harper to
purchase shares of Nabisco Class A Common Stock on the initial public offering
date. In addition, on January 19, 1995, one-half of Mr. Harper's outstanding
options to purchase Common Stock were canceled and, in exchange for the
cancellation, he received options to purchase Nabisco Class A Common Stock.
Specifically, he received
26
<PAGE>
options to purchase 1,090,550 shares of Nabisco Class A Common Stock (based on a
ratio of the fair market values of Common Stock and Nabisco Class A Common Stock
on that date) at an exercise price of $24.50 (the fair market value of Nabisco
Class A Common Stock on that date). The Nabisco stock options are fully vested
and have a term of 15 years, but may not be exercised for three years from the
date of grant.
Mr. Ricciardi, Mr. Johnston, Mr. Greeniaus and Mr. Croisant also have
employment agreements with RJRN.
In 1993, Holdings and RJRN entered into a revised employment agreement with
Mr. Ricciardi for the period commencing on May 31, 1993 and continuing through
May 31, 1997, pursuant to which Mr. Ricciardi will receive an annual base salary
of no less than $600,000. Mr. Ricciardi's employment agreement also provides
that if his employment is terminated without cause or if he terminates
employment for reasons specified in the agreement (which include a change in Mr.
Ricciardi's duties, position or pay status), he will receive compensation and
benefit continuance for the longer of (i) 36 months or (ii) the remainder of the
term of the agreement. Cause includes criminal conduct, deliberate misconduct
and deliberate and continual refusal by Mr. Ricciardi to perform his duties.
Such continued compensation will be based on Mr. Ricciardi's annual base salary
plus the highest annual bonus paid to, or targeted for, him. Mr. Ricciardi is
entitled to life insurance during the term of the agreement, and is reimbursed
for taxes incurred as a result of this arrangement. In addition, Mr. Ricciardi
has an arrangement with RJRN pursuant to which he is credited with an additional
16 years of benefit calculation service under the Supplemental Executive
Retirement Plan to reflect service with his prior employer. Upon reaching age 55
(or if terminated by RJRN prior thereto other than for cause) Mr. Ricciardi will
be entitled to his maximum benefit under the Supplemental Executive Retirement
Plan, without reduction for early retirement.
Mr. Johnston's employment agreement was revised in 1993. Mr. Johnston will
receive a base salary of no less than $700,000 per annum and a target bonus of
at least 70% of his base salary. Mr. Johnston's revised employment agreement
provides that if his employment is terminated without cause or if he terminates
employment for "good reason" (which includes a reduction in Mr. Johnston's
duties or positions, a reduction in Mr. Johnston's base salary or annual bonus
opportunity, or the disposal of a significant segment of Holdings' tobacco
operations) he will receive compensation and benefit continuance for three
years, based on his then current annual base salary and targeted annual bonus.
Cause includes willful gross misconduct or malfeasance, or substantial and
continuing refusal by Mr. Johnston to perform his duties. Mr. Johnston may elect
to receive the discounted present value of his severance in a lump sum. Mr.
Johnston is not entitled to severance if he voluntarily resigns or if he is
terminated for cause. In the event of a change of control Mr. Johnston would
receive three annual lump-sum payments equal in the aggregate to the salary and
bonus that would have been payable to him had his termination occurred upon such
change of control; provided, however, that any amounts payable upon subsequent
termination of employment shall be offset by amounts paid in connection with
such change of control. A change of control would occur if, following a
corporate transaction, a party other than KKR Associates and/or its affiliates
obtains control of Holdings, R. J. Reynolds Tobacco Company or R. J. Reynolds
Tobacco International, Inc.; provided, that Mr. Johnston is not thereafter chief
executive officer of the surviving entity with responsibility for all tobacco
operations. Pursuant to the employment agreement, Mr. Johnston is provided with
$1 million of term life insurance and $1 million of whole life insurance while
actively employed. Mr. Johnston will continue to be provided with his whole life
insurance following termination of employment (other than for cause) until age
70. Mr. Johnston is reimbursed for taxes payable as a result of this
arrangement. Pursuant to the employment agreement, Mr. Johnston is credited
under the Supplemental Executive Retirement Plan with 8 years of service in
addition to his actual current and prior service with subsidiaries of RJRN. Mr.
Johnston's normal retirement age for purposes of the Supplemental Executive
Retirement Plan is 52, and no early retirement reduction will be taken unless
Mr. Johnston terminates employment without good reason prior to attaining age
52.
27
<PAGE>
In 1988, RJRN entered into an employment agreement with Mr. Greeniaus. Mr.
Greeniaus's employment agreement provides that if he is involuntarily terminated
other than for cause he will receive three years' base salary plus bonus payable
for three years, as well as benefit continuation for three years. Cause includes
criminal dishonesty, deliberate misconduct, and deliberate and continual refusal
to perform employment duties or to act in accordance with instructions of the
board of directors. The period of compensation and benefit continuance may not
extend beyond Mr. Greeniaus's normal retirement age under the Supplemental
Executive Retirement Plan. Compensation continuance is based on the highest
annual rate of salary in effect during the twelve months immediately prior to
termination and the most recent annual incentive award or the current target
level, if higher.
In 1994, Mr. Croisant received a letter from Holdings and RJRN confirming
the terms of his employment. Mr. Croisant will receive an annual base salary of
no less than $475,000 and a target bonus of at least 70% of his base salary. The
letter provides that if Mr. Croisant is terminated without cause he will receive
compensation and benefit continuance for 36 months based on his rate of annual
salary and targeted annual bonus during the period prior to termination. Cause
includes criminal conduct, deliberate misconduct and deliberate and continual
refusal by Mr. Croisant to perform his duties. Mr. Croisant has an arrangement
with RJRN pursuant to which he is credited with an additional 15 years of
benefit calculation service under the Supplemental Executive Retirement Plan to
reflect service with his prior employer. Upon reaching age 55 and five years of
service, Mr. Croisant became entitled to his maximum benefit under the
Supplemental Executive Retirement Plan.
In July 1994, in connection with the exploration of alternative corporate
structures and the uncertain prospects for corporate headquarters employees,
Holdings adopted the Continuing Excellence Recognition Program for all corporate
headquarters employees (with the exception of Mr. Harper). Of the named
executive officers, only Messrs. Ricciardi and Croisant are eligible for this
program. The program was announced to employees in July 1994, and its
implementation began in January 1995, in connection with the public announcement
of a reorganization, pursuant to which certain functions that historically had
been performed by corporate headquarters employees would thereafter be performed
by employees of the operating companies. Under the program, corporate
headquarters employees are entitled to additional compensation as a result of
the reorganization. Corporate headquarters employees whose employment is
terminated or who retire in connection with the reorganization would be entitled
to additional periods of salary and benefit continuance, except that employees
with contractual severance arrangements (including Messrs. Ricciardi and
Croisant) would be entitled to their contractually determined benefits. In
addition, such terminating or retiring employees would be entitled to a
supplemental annual bonus and certain other termination related benefits.
DIRECTOR'S COMPENSATION
Directors who are not employees of Holdings or its subsidiaries are
compensated at the rate of $60,000 per year. Holdings provides directors who are
not employees and who are not associated with KKR with life insurance having a
death benefit of $100,000, participation in charitable giving programs (pursuant
to which directors with at least three years of service may direct that up to $1
million be contributed to eligible educational institutions following the
director's death) and supplemental insurance programs. Each director who is
neither associated with KKR nor an employee of Holdings or its subsidiaries is,
upon becoming a director, granted an option pursuant to a stock option plan to
purchase 30,000 shares of Common Stock. The options have an exercise price equal
to the fair market value of the Common Stock on the date of grant. They cannot
be exercised for six months following the date of grant but, thereafter, are
exercisable for ten years from the date of grant. In addition, each director who
is not an employee of Holdings or its subsidiaries receives an annual grant of
stock options which, beginning in 1995, will be made on the date of the
director's election or re-election to the Board of Directors. The annual grant
is intended to deliver a predetermined value, and the number of shares of Common
Stock subject to the option is determined based on an internal valuation
methodology. In 1994, each eligible director received a stock option to purchase
5,900 shares of Common Stock. The
28
<PAGE>
annually granted stock options have a 15 year term and vest over three years
(33% on the first and second anniversaries of the date of grant and 34% on the
third anniversary). No additional compensation is paid to directors who are
employees of Holdings or its subsidiaries in their capacity as directors.
Directors who have never been employees of Holdings or its subsidiaries
participate in the Directors Retirement Plan. The Directors Retirement Plan
provides each eligible director with a monthly allowance equal to the monthly
directors' fee in effect on the date the director's service terminates. The
maximum benefits payable under the Directors Retirement Plan are (a) for those
directors with ten or more years of service, 180 monthly payments; (b) for those
directors with less than ten but more than five years of service, monthly
payments equal to 180 multiplied by a fraction, the numerator of which is equal
to the years of service of such director and the denominator of which is 10; or
(c) for directors with less than five years of service, 48 monthly payments. For
purposes of computing years of service, partial years of service count as a full
year. The Directors Retirement Plan also provides that upon a "change in
control," the Directors Retirement Plan cannot be amended or terminated.
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee currently consists of Messrs. Chain and Clendenin. During
the 1994 fiscal year, the Compensation Committee consisted of Messrs. Chain,
Raether (who is not a nominee for re-election) and Stuart. Mr. Raether was an
officer of Holdings from February 1989 through February 1991, and Mr. Stuart was
an officer of Holdings from November 1988 through February 1991. KKR, of which
Messrs. Raether and Stuart are general partners, renders management, consulting
and financial services to Holdings and its subsidiaries for an annual fee.
Pursuant to the Retainer Agreement, an annual fee of $8 million plus expenses
was approved by the JFEW Special Committee (whose current members are Ms.
Ridgway and Mr. Medlin) and paid for such services performed in 1994. In
addition, upon application by KKR to the JFEW Special Committee pursuant to the
Retainer Agreement, the JFEW Special Committee in February 1995 approved KKR's
request for an additional fee of $2 million in recognition of extraordinary
services performed by KKR for Holdings and its subsidiaries during 1994.
Mr. Johnston is a member of the Compensation, Nominating and Organization
Committee of the Board of Directors of Wachovia Corporation. Mr. Medlin, who is
a director of Holdings, is Chairman of Wachovia Corporation.
29
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURNS
RJR NABISCO HOLDINGS CORP., S&P 500 INDEX, AND S&P FOOD/TOBACCO INDEX
2/1/91 12/31/91 12/31/92 12/31/93 12/31/94
RJR Nabisco Holdings Corp.
Common Stock............... 100.00 191.11 153.33 113.33 97.78
S&P Food/Tobacco Index....... 100.00 144.17 143.77 119.43 127.14
S&P 500 Index................ 100.00 125.00 134.53 146.87 148.74
- ------------
* The S&P Food/Tobacco Index is a weighted average of the separate S&P Food and
Tobacco Indices based upon the percentage of operating income from Holdings'
business units. As of December 31, 1994, 66% of Holdings' total company
operating income came from Tobacco operations and 34% came from Food
operations.
* Total returns assume $100 invested on February 1, 1991 in Common Stock, the
S&P 500 Index, and the S&P Food/Tobacco Index with reinvestment of dividends.
Common Stock was first issued to the public under a registration statement
which was effective January 31, 1991. February 1, 1991 was the first trading
day for Common Stock.
30
<PAGE>
COMPENSATION COMMITTEE REPORT
This report was prepared by the Compensation Committee (the "Committee") of
the Board of Directors as of December 31, 1994 and reflects the executive
compensation policies and practices of Holdings and its subsidiaries during
1994. The Committee is responsible for all executive compensation policies and
practices of Holdings and its subsidiaries. The Committee approves all executive
compensation actions and administers all of Holdings' executive compensation
programs and plans. The Committee reports regularly to the Board of Directors,
and the Board is periodically asked to ratify Committee actions. During 1994,
the Committee consisted of three Directors who were not employees of Holdings or
any of its subsidiaries, and who, therefore, were not eligible to participate in
any of Holdings' executive compensation programs or plans.
EXECUTIVE COMPENSATION PRINCIPLES AND POLICIES
In determining the amounts, composition, and terms and conditions of the
compensation for executive officers of Holdings, the Committee is guided by two
principles: (1) compensation opportunities must enable Holdings to attract and
retain individuals with outstanding executive talent and skills; and (2) a
substantial portion of each executive officer's compensation must be tied to
quantifiable measures of Holdings' financial results from operations and stock
price performance. These principles are reflected in the actions discussed below
relating to salaries, annual incentives and long-term incentives.
In 1994, the Committee adopted the Continuing Excellence Recognition Program
to aid in retaining key headquarters personnel in this period of organizational
uncertainty. The retention program is discussed on page 28. With respect to Mr.
Harper, the Committee approved the payment of a one-time advance premium deposit
to cover future premiums for a life insurance policy provided to him pursuant to
his employment agreement (as described in footnote 4 to the Summary Compensation
Table). In addition, to ensure that Mr. Harper's terms of employment are
comparable to the terms provided to the prior chief executive officer of
Holdings, the Committee approved the funding of non-tax-qualified retirement
benefits to which Mr. Harper is entitled under the terms of his employment
agreement (as described in footnote 4 to the Summary Compensation Table). The
Committee also approved the funding of non-tax-qualified retirement benefits for
certain senior executives (as described on page 25). The amounts used to fund
these retirement benefits of Mr. Harper and the other executives had been
previously expensed and were held in a trust designed for the payment of such
benefits.
As noted in last year's report, changes made to the Internal Revenue Code in
1993 limit the ability of publicly-traded companies to secure a tax deduction
for certain compensation paid to certain individuals named in the summary
compensation table. The Committee has taken actions, including those noted in
this report, to limit the impact of this change in tax law. The Committee will
continue to seek ways to limit the impact of this change; however, the Committee
has not (and cannot) compromise Holdings' ability to attract the executive
talent required to compete successfully on a global basis. Accordingly,
achieving the desired flexibility in the design and delivery of compensation may
periodically result in some compensation that is not deductible for federal
income tax purposes.
MAJOR COMPENSATION COMPONENTS
The compensation program for executive officers is composed of annual
compensation, long-term compensation and benefits. In determining compensation
levels, the Committee relies on surveys of the compensation practices of other
companies that are representative of the size and type of company with which
Holdings competes for executive talent. Accordingly, this is a broader and more
diverse group of companies than those used for the peer company index in the
SEC-mandated Performance Graph appearing on page 30.
31
<PAGE>
ANNUAL COMPENSATION
The annual compensation for each of the named executive officers is composed
of salary and an annual incentive opportunity. In general, salaries paid to
executive officers reflect the median of competitive practices used by the
Committee for comparison purposes. Salary increases are granted to senior
executives only when the Committee determines that market conditions warrant
them. No named executive officer received a salary increase during 1994. The
Committee did approve contingent increases in the salaries to be paid to Messrs.
Greeniaus and Johnston, effective February 1, 1995, to reflect the increased
scope of independence and responsibilities of Holdings' operating companies
resulting from the successful public offering of Class A Common Stock of
Nabisco.
Annual compensation levels (salary plus target annual incentive award) are
set to reflect the 75th percentile of the compensation practices of competitive
companies. For the named executive officers, 1994 performance objectives were
established early in 1994, and annual incentive awards were determined
essentially as prescribed by Holdings' Annual Incentive Award Program. Given the
status of the domestic tobacco market and the increasing competitiveness in
Holdings' other businesses at the start of the year, the Committee established
higher than usual maximum annual incentive opportunities for 1994 to encourage
superior performance. These one-time maximums were earned by most of the named
executive officers because stretch operating performance objectives were
attained as a result of superior operating performance in 1994 by Holdings'
tobacco and food operating companies. The annual incentive awards are based on
operating performance, not stock price; thus, most executives earned the higher
than usual maximum awards even though Holdings' superior 1994 operating
performance is not yet reflected in the price of Common Stock.
LONG-TERM COMPENSATION
The Committee relies on various forms of stock-based grants and multi-year
incentive opportunities to motivate executives to maintain a longer-term
perspective. Information about stock-based grants, including stock options, is
covered in the tables and accompanying text preceding this report. As of
December 31, 1994, approximately 500 key executives of Holdings and its
subsidiaries owned in excess of nine million shares of Common Stock, with an
aggregate value of approximately $54 million. (This number does not include
stock options or future incentive awards.) The Committee believes this
constitutes a significant ownership position, which properly aligns management's
interests with those of other shareholders and meets the Committee's objective
of encouraging meaningful ownership by executives.
In late 1993, executive officers other than Mr. Harper received stock
options in advance of the more typical February 1994 annual grant date.
Accordingly, no stock options were granted to any named executive officer during
1994, except for stock options granted to Mr. Harper pursuant to his employment
agreement, as described below.
As indicated in the table on page 24, the Committee granted performance unit
awards to all the named executive officers in 1994. These cash-denominated
awards provide for potential payments if certain pre-established 1994-96
operating company contribution goals are achieved. In determining the size of
stock option and performance unit grants, the Committee targets the 75th
percentile of combined competitive stock options and other long-term incentive
opportunities. In making grants of performance units and stock options, the
Committee does not take into account whether an executive has exercised or
continues to hold previously granted stock options.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Mr. Harper's compensation is determined, in great part, by the terms of his
employment agreement with Holdings, which was unanimously approved by the Board
of Directors. The level of compensation provided under his agreement reflects an
amount necessary to acquire and retain the
32
<PAGE>
services of an individual with the skills, experience and stature of Mr. Harper,
and is commensurate with the compensation provided to Holdings' prior chief
executive officer.
While Mr. Harper was contractually entitled to an annual salary of
$1,260,000 for 1994, he initiated a reduction to $600,000. In exchange, the
Committee increased his target annual incentive award to reflect this reduction.
At the same time, Mr. Harper relieved the Company of its commitment to provide a
minimum annual combined salary and bonus of $3 million. This action not only
reduced the amount of Mr. Harper's compensation that was essentially guaranteed,
it should also ensure that all of Mr. Harper's 1994 salary and annual incentive
award is deductible for federal income tax purposes. Mr. Harper's 1994 annual
incentive award was based on a performance schedule adopted by the Committee in
early 1994, and does not reflect the higher than usual maximum award
opportunities offered to, and earned by, other officers.
Pursuant to his employment agreement, on December 31, 1994, Mr. Harper was
granted a stock option covering 750,000 shares of Common Stock with an exercise
price of $5.50 per share, the fair market value on the date of the grant. Other
details of this option are described on page 26. Mr. Harper was also granted a
performance unit award for the 1994-96 performance period, as more fully
described on page 24. This award was based on providing Mr. Harper with total
long-term incentive compensation opportunities (stock options plus performance
units) reflecting the 75th percentile of competitive chief executive officer
grants.
Respectfully submitted,
John T. Chain, Jr.
Paul E. Raether
Scott M. Stuart
33
<PAGE>
OTHER INFORMATION
Solicitation may be made personally, by telephone, by telegraph or by mail
by officers and employees of Holdings and its subsidiaries who will not be
additionally compensated therefor. Holdings will request persons such as
brokers, nominees and fiduciaries, holding stock in their names for others, or
holding stock for others who have the right to give voting instructions, to
forward proxy material to their principals and request authority for the
execution of the proxy. Holdings will reimburse such persons for their expenses
in so doing. MacKenzie Partners, Inc. has been retained to assist in the
solicitation of proxies for a fee not to exceed $20,000, plus reimbursement of
out of pocket expenses. The total cost of soliciting proxies will be borne by
Holdings.
The Board of Directors has no knowledge of any other matters to be presented
at the meeting other than those described herein. If any other matters should
properly come before the meeting, it is the intention of the persons designated
in the proxy to vote thereon according to their best judgment.
Stockholders are urged to forward their proxies without delay. A prompt
response will be greatly appreciated.
RJR NABISCO HOLDINGS CORP.
New York, New York
March [ ], 1995
34
<PAGE>
EXHIBIT A
FIRST PARAGRAPH OF ARTICLE FOURTH
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
RJR NABISCO HOLDINGS CORP.
(AS PROPOSED TO BE AMENDED)
The total number of shares of capital stock that the Corporation is
authorized to issue is 590,000,000 shares of which 440,000,000 shares are Common
Stock, par value $.01 each, and 150,000,000 shares of which are shares of
preferred stock, par value $.01 each (hereinafter referred to as "Preferred
Stock"). The Preferred Stock may be issued from time to time in one or more
series with such distinctive designations as may be stated in the resolution or
resolutions providing for the issue of such stock from time to time adopted by
the Board of Directors or a duly authorized committee thereof. The resolution or
resolutions providing for the issue of shares of a particular series shall fix,
subject to applicable laws and the provisions of this ARTICLE FOURTH, for each
such series the number of shares constituting such series and the designations
and powers, preferences and relative participating, optional or other special
rights and qualifications, limitations or restrictions thereof, including,
without limiting the generality of the foregoing, such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or 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. The number of authorized shares of any class or classes of
stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
Common Stock of the Corporation irrespective of the provisions of Section
242(b)(2) of the General Corporation Law of the State of Delaware or any
corresponding provision hereafter enacted.
At the effective time of this amendment to the Certificate of Incorporation
of the Corporation, each five (5) issued and outstanding shares of Common Stock
of the Corporation shall be combined into one (1) share of validly issued, fully
paid and nonassessable Common Stock of the Corporation. No scrip or fractional
shares shall be issued by reason of this amendment.
<PAGE>
PROXY RJR NABISCO HOLDINGS CORP.
ANNUAL MEETING OF STOCKHOLDERS--APRIL 12, 1995
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Charles M. Harper, John G.
Medlin, Jr. and Jo-Ann Ford, and each of them, his true and lawful agents and
proxies with full power of substitution in each, to represent the undersigned at
the Annual Meeting of Stockholders of RJR NABISCO HOLDINGS CORP., to be held at
Le Centre Sheraton, 1201 Boulevard Rene-Levesque Ouest, Montreal, Quebec,
Canada, on Wednesday, April 12, 1995 at 2:00 P.M., and at any adjournments or
postponements thereof, and to vote all the shares of stock of the Company which
the undersigned may be entitled to vote on all matters coming before said
meeting.
Election of Directors, Nominees:
J.T. Chain, Jr.; J.L. Chambers; J.L. Clendenin; H.J. Greeniaus; C.M. Harper;
J.W. Johnston; H.R. Kravis; J.G. Medlin, Jr.; R.L. Ridgway; C.S. Robbins; G.R.
Roberts; and S.M. Stuart.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4, 5, 6 AND 7. PLEASE MARK
THIS PROXY CARD, FILL IN THE DATE AND SIGN ON THE REVERSE SIDE AND RETURN
PROMPTLY IN THE ACCOMPANYING ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE
UNITED STATES.
Change of address:
__________________________________________________
__________________________________________________
(If you have written in the above
space, please mark the
corresponding box on the reverse side
of this card.)
-------------------
/X/ Please mark your votes as in this example.
The proxies are directed to vote as specified below and in their discretion
on all other matters. If no direction is made, this signed Proxy will be voted
FOR the election of all directors, FOR proposals 2 and 3 and AGAINST proposals
4, 5, 6 and 7.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of Directors (see reverse)
FOR / / WITHHELD / /
For, except withheld from the following nominee(s):
------------------------------------------------------
2. Ratify the appointment of Deloitte & Touche as Independent Auditors.
FOR / / AGAINST / / ABSTAIN / /
3. Amend Certificate of Incorporation to effect one-for-five reverse split of
common stock and to reduce the authorized shares of common stock.
FOR / / AGAINST / / ABSTAIN / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSALS 4, 5, 6, AND 7.
4. Stockholder proposal on equal employment reporting.
FOR / / AGAINST / / ABSTAIN / /
5. Stockholder proposal on nicotine manipulation.
FOR / / AGAINST / / ABSTAIN / /
6. Stockholder proposal on warning labels for advertising and promotional items.
FOR / / AGAINST / / ABSTAIN / /
7. Stockholder proposal to spin off tobacco business.
FOR / / AGAINST / / ABSTAIN / /
REQUEST CHANGE OF
ADMITTANCE ADDRESS ON
TICKET FOR REVERSE SIDE / /
MEETING / /
Please sign exactly as
name appears hereon.
Joint owners should each
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give
full title as such.
_______________________________
_______________________________
Signature(s) Date
<PAGE>
P R O X Y [ PERCS ]
RJR NABISCO HOLDINGS CORP.
ANNUAL MEETING OF STOCKHOLDERS - APRIL 12, 1995
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Charles M. Harper,
John G. Medlin, Jr. and Jo-Ann Ford, and each of them, his true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Stockholders of RJR Nabisco Holdings Corp.,
to be held at Le Centre Sheraton, 1201 Boulevard Rene-Levesque Ouest, Montreal,
Quebec, Canada, on Wednesday, April 12, 1995 at 2:00 p.m., and at any
adjournments or postponements thereof, and to vote all the shares of stock of
the Company which the undersigned may be entitled to vote on all matters coming
before said meeting.
The undersigned is acting pursuant to instructions from the holders of
Series C Depositary Shares, each representing one-tenth of a share of Series C
Conversion Preferred Stock (PERCS), and evidenced by depositary receipts issued
under the Deposit Agreement, dated as of May 6, 1994, between RJR Nabisco
Holdings Corp. and the undersigned.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL DIRECTORS, FOR PROPOSALS 2 AND 3 AND AGAINST
PROPOSALS 4, 5, 6 AND 7, AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER
MATTERS. PLEASE MARK THIS PROXY CARD, FILL IN THE DATE AND SIGN AND RETURN
PROMPTLY IN THE ACCOMPANYING ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE
UNITED STATES.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of Directors
FOR WITHHELD
J.T. Chain, Jr. ______________________ ______________________
J.L. Chambers ______________________ ______________________
J.L. Clendenin ______________________ ______________________
H.J. Greeniaus ______________________ ______________________
C.M. Harper ______________________ ______________________
J.W. Johnston ______________________ ______________________
H.R. Kravis ______________________ ______________________
J.G. Medlin, Jr. ______________________ ______________________
R.L. Ridgway ______________________ ______________________
C.S. Robbins ______________________ ______________________
G.R. Roberts ______________________ ______________________
S.M. Stuart ______________________ ______________________
2. Ratify the appointment of Deloitte & Touche as Independent Auditors
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
3. Amend Certificate of Incorporation to effect one-for-five reverse
split of common stock and to reduce the authorized shares of common
stock
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
[ continued on reverse ]
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSALS 4, 5, 6 AND 7.
4. Stockholder proposal on equal employment reporting
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
5. Stockholder proposal on nicotine manipulation
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
6. Stockholder proposal on warning labels for advertising and promotional
items
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
7. Stockholder proposal to spin off tobacco business
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such.
_________________________________________
Signature(s) Date
First Chicago Trust Company of New York as
Depositary under a Deposit Agreement dated
5/6/94 between RJR Nabisco Holdings Corp.
and First Chicago Trust Company of New York
14 Wall Street
New York, NY 10005
Holder of record of 26,675,000 shares
of Series C Conversion Preferred Stock
- 2 -
<PAGE>
P R O X Y [ ESOP ]
RJR NABISCO HOLDINGS CORP.
ANNUAL MEETING OF STOCKHOLDERS - APRIL 12, 1995
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Charles M. Harper,
John G. Medlin, Jr. and Jo-Ann Ford, and each of them, his true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Stockholders of RJR Nabisco Holdings Corp.,
to be held at Le Centre Sheraton, 1201 Boulevard Rene-Levesque Ouest, Montreal,
Quebec, Canada, on Wednesday, April 12, 1995 at 2:00 p.m., and at any
adjournments or postponements thereof, and to vote all the shares of stock of
the Company which the undersigned may be entitled to vote on all matters coming
before said meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL DIRECTORS, FOR PROPOSALS 2 AND 3 AND AGAINST
PROPOSALS 4, 5, 6 AND 7, AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER
MATTERS. PLEASE MARK THIS PROXY CARD, FILL IN THE DATE AND SIGN AND RETURN
PROMPTLY IN THE ACCOMPANYING ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE
UNITED STATES.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of Directors
FOR WITHHELD
J.T. Chain, Jr. ______________________ ______________________
J.L. Chambers ______________________ ______________________
J.L. Clendenin ______________________ ______________________
H.J. Greeniaus ______________________ ______________________
C.M. Harper ______________________ ______________________
J.W. Johnston ______________________ ______________________
H.R. Kravis ______________________ ______________________
J.G. Medlin, Jr. ______________________ ______________________
R.L. Ridgway ______________________ ______________________
C.S. Robbins ______________________ ______________________
G.R. Roberts ______________________ ______________________
S.M. Stuart ______________________ ______________________
2. Ratify the appointment of Deloitte & Touche as Independent Auditors
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
3. Amend Certificate of Incorporation to effect one-for-five reverse
split of common stock and to reduce the authorized shares of common
stock
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
[ continued on reverse ]
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSALS 4, 5, 6 AND 7.
4. Stockholder proposal on equal employment reporting
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
5. Stockholder proposal on nicotine manipulation
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
6. Stockholder proposal on warning labels for advertising and promotional
items
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
7. Stockholder proposal to spin off tobacco business
FOR AGAINST ABSTAIN
_____________________ _____________________ ____________________
Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such.
_________________________________________
Signature(s) Date
Bull & Co.
Wachovia Bank of North Carolina, N.A.
Box 3075, Trust Operations
Winston-Salem, NC 27102
Holder of record of 15,322,114 shares
of ESOP Convertible Preferred Stock
- 2 -
