Exhibit 10.39
EMPLOYMENT AGREEMENT
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THIS AGREEMENT by and among RJR Nabisco Holdings Corp., a
Delaware corporation ("Holdings"), RJR Nabisco, Inc., a Delaware
corporation and a direct subsidiary of Holdings (the "Company") and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇ ("Executive") is effective as of October 1, 1995. This
Agreement will (i) following a Change of Control (as defined in Exhibit A),
supersede the Executive's participation in the RJR Nabisco Holdings Corp.
Headquarters Continuing Excellence Recognition Program (the "Headquarters
Program") and (ii) be in lieu of Executive's participation in the RJR
Nabisco Holdings Corp. 1995 Employee Protection Program (the "1995
Program"), but will in no event provide lesser benefits to Executive in the
event of the termination of Executive's employment following a Change of
Control than would otherwise be available under the 1995 Program.
RECITALS
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In order to induce Executive to leave his current position and to
accept the position of President, General Counsel and member of the Office
of the Chairman of Holdings and the Company, Holdings and the Company
desire to provide Executive with compensation and other benefits under the
conditions set forth in this Agreement. Executive is willing
to accept such employment and perform services for Holdings and the Company
on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. Employment.
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1.1 Subject to the terms and conditions of this Agreement,
Holdings agrees to employ Executive during the term hereof as President,
General Counsel and member of the Office of Chairman of Holdings and the
Company. Executive shall have the customary powers, responsibilities and
authorities of presidents of corporations of the size, type and nature of
Holdings and Company, and specifically, he shall have responsibility for
all of Holdings' and the Company's staff functions, including finance,
human resources, administration and communications, in addition to
responsibility for Holdings' and the Company's legal affairs as General
Counsel. Executive's principal office shall be at the principal executive
offices of Holdings and the Company in New York, New York.
1.2 Holdings and the Company shall, throughout the term hereof,
cause the election and retention of Executive as President of Holdings and
the Company.
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1.3 Subject to the terms and conditions set forth herein,
Executive hereby accepts employment as President, General Counsel and
member of the Office of the Chairman of Holdings and the Company and shall
devote his full working time and efforts, to the best of his ability,
experience and talent, to the performance of the services, duties and
responsibilities in connection therewith. Nothing in this Agreement shall
preclude the Executive from engaging, consistent with his duties and
responsibilities hereunder, in charitable and community affairs, from
managing his personal investments, from continuing to serve on the boards
of directors of any Affiliate (as hereinafter defined) of Holdings or the
Company or from serving, subject to approval of the Holdings Board (as
defined in Exhibit A), as a member of boards of directors of other
companies. The term "Affiliate" shall mean any direct or indirect
subsidiary of Holdings or the Company or any successor thereto. For
purposes of this Agreement, the term "available to Senior Executive
Officers" shall mean that something is available to the senior executive
officers of Holdings or the Company or generally available to all chief
executive officers of the major operating companies of Holdings; provided,
however, such term shall not include the Chairman and Chief Executive
Officer of Holdings or the Company.
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1.4 This Agreement supersedes and revokes in their entirety any
and all prior employment or service agreements with Holdings or the
Company, and in particular, that certain Engagement Agreement with Holdings
dated March 3, 1995.
2. Term of Employment.
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Executive's term of employment under this Agreement shall continue in
accordance with the terms hereof until a termination of Executive's
employment.
3. Compensation.
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3.1 Salary. The Company shall pay Executive a base salary ("Base
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Salary") at the rate of $850,000 per annum. Base Salary shall be payable in
accordance with the ordinary payroll practices of the Company. Executive's
rate of Base Salary shall be reviewed for possible increases by the
Chairman and Chief Executive Officer of the Company at least annually and,
once approved by the Board (as defined in Exhibit A), such higher amount
shall constitute Executive's Base Salary.
3.2 Annual Bonus.
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(a) In addition to his Base Salary, Executive shall be entitled,
while he remains employed hereunder, to receive an annual bonus under the
Company's Annual Incentive Award Plan in effect on the date of this
Agreement, as amended from time to time, a copy of which has been given to
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Executive, or under any successor plan thereto available to Senior
Executive Officers ("AIAP"), in accordance with the terms thereof. Such
AIAP, in any event, will provide an annual target bonus opportunity to
Executive no less favorable than sixty percent (60%) of his Base Salary
paid or accrued with respect to the related year, subject to the attainment
of the performance goals established from time to time under such AIAP.
(b) For the fiscal year ending December 31, 1995, Executive shall
be deemed to have participated in the AIAP from March 3, 1995.
(c) For fiscal years beginning on and after January 1, 1996,
Executive may be granted Performance Units under the Company's 1990 Long
Term Incentive Plan or a successor plan (the "LTIP") in lieu of a cash
bonus. If such grants are made, each Performance Unit Agreement under the
LTIP to which Executive is a party shall specifically provide that following
a Change of Control the Committee responsible for exercising any discretion
with respect to the award shall not exercise such discretion so as to
reduce the "Payment Value" of such award below the award's "Initial Grant
Value" (as such terms are customarily defined in Performance Unit Agreements
awarded to Senior Executive Officers of the Company under the LTIP prior to
the date hereof).
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3.3 Compensation Plans and Programs. Executive shall participate
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in any compensation plan or program, whether annual or long term,
maintained by Holdings or the Company on terms no less favorable than those
available to Senior Executive Officers eligible to participate therein.
3.4 Special Bonus Payments. Upon a Change of Control, the
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Company shall pay to Executive a special cash bonus payment equal to the
sum of (a) Executive's AIAP Vested Amount as of such Change of Control,
Executive's PS Vested Amount as of such Change of Control, and Executive's
PU Vested Amount as of such Change of Control (all as defined in Exhibit
A); and (b) any additional funding amounts required to fully fund the
Benefit (as defined in Section 5) accrued to the date of such Change of
Control under Section 5 hereof. Notwithstanding the foregoing, in the event
that following a Change of Control any performance period relating to any
award under the AIAP or of Performance Units or Performance Shares under
the LTIP within which such Change of Control occurred is completed prior to
Executive's termination of employment, upon such completion Executive shall
be entitled to payment in respect of each such award of an amount, if any,
equal to the excess of the value of such award based on actual performance
for such performance period over the AIAP Vested Amount, PU Vested Amount
or PS Vested Amount, as the
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case may be, previously paid to Executive upon such Change of Control in
respect of such AIAP award, Performance Units or Performance Shares.
4. Employee Benefits.
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4.1 Employee Benefit Plans and Programs. The Company and
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Holdings shall provide Executive during the term of his employment
hereunder coverage under all employee benefit programs, plans and practices
(commensurate with his position in the Company and to the extent possible
under any employee benefit plan), in accordance with the terms thereof,
which Holdings and the Company make available to Senior Executive Officers,
including, but not limited to (a) retirement, pension and profit sharing
(including the SERP, as defined in Section 5, subject to the provisions of
Section 5) and (b) medical, dental, hospitalization, short and long term
disability, accidental death and dismemberment and travel accident
coverage.
4.2 Vacation and Fringe Benefits. Executive shall be entitled
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to the number of vacation days customarily available to Senior Executive
Officers of the Company. In addition, Executive shall be entitled to the
perquisites and fringe benefits from time to time available to Senior
Executive Officers.
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4.3 Directors and Officers Liability Coverage. Executive shall
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be entitled to the same level of coverage (as determined from time to time
by the Boards (as defined in Exhibit A)) under such directors' and
officers' liability insurance policies, if any, or other arrangements as
are available to Senior Executive Officers and directors of Holdings and
the Company, to the fullest extent permitted by the existing By-laws of
Holdings and the Company. In any event, Holdings and the Company shall
indemnify and hold Executive harmless, to the fullest extent permitted by
the laws of the States of Holdings' and the Company's incorporations, from
and against all costs, charges and expenses (including reasonable
attorneys' fees) whatsoever incurred or sustained by him or his legal
representatives in connection with any action, suit or proceeding to which
he or his legal representatives may be made a party by reason of his being
or having been a director or officer of Holdings or the Company or any of
their Affiliates. This Section 4.3 shall survive the termination of this
Agreement for any reason.
4.4 Retiree Medical. Upon retirement under Section 5 herein,
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Executive shall be eligible for retiree medical coverage based on (i) the
greater of his actual age or a minimum deemed age of 55 and (ii) the number
of years of
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actual and imputed Service with which Executive is credited as Service
under the provisions of Executive's individual SERP arrangement as
described in Section 5.
5. Supplemental Pension.
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(a) Executive shall become a participant in the Company's
Supplemental Executive Retirement Program ("SERP") upon the execution
of this Agreement and shall accrue a benefit (the "Benefit") under the
SERP formula resulting from his years of actual Service plus 13.5 additional
years of imputed Service. "Average Final Compensation" (as used in the SERP)
shall for the foregoing calculation, or any other SERP calculation made
before October 1, 1998, be an amount equal to the sum of the amounts
described under Section 6.1(a)(i) and Section 6.1(a)(ii) (without reduction
for actual performance). Executive's Benefit shall be forfeited if he
voluntarily leaves employment without Good Reason as defined in Section
6.1(b) or is terminated by the Company for Cause (as defined in Section 6.4)
in either case prior to the earlier of (i) October 1, 1998 or (ii) a Change of
Control. If Executive forfeits the accrued Benefit as described in this 5(a),
the cash value of any annuity securing such Benefit (as described in Section
5(b) below) at the time of such forfeiture, net of all taxes imposed on the
surrender thereof (computed at the maximum marginal rates), shall be
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returned by the trustee of the secular trust referred to below to
the Company.
(b) (i) To provide Executive with greater security and financial
flexibility, not later than April 30, 1996 the present value of the after-tax
equivalent of the accrued Benefit shall be secured by the Company's purchase
and delivery to a secular trust for Executive's benefit of an annuity contract
having a lump-sum cash-out option which is the same type of annuity previously
purchased for SERP participants. Executive shall make a timely election under
Section 83(b) (an "83(b) election") of the Internal Revenue Code of 1986, as
amended (the "Code") to be taxed on such transfer and the Company shall pay
to Executive an additional amount such that after payment by Executive of
all applicable Federal, state and local taxes thereon (computed at the
maximum marginal rates) there is retained a sufficient amount to pay all
such taxes incurred by Executive on such transfer.
(ii) For fiscal year 1996 and for each fiscal year or portion thereof
thereafter, during which Executive is actively employed or with respect to which
notional period Executive receives Compensation Continuance (as defined in
Section 6.1(a)), the Company shall purchase and deliver to a secular trust for
Executive's benefit an annuity for the incremental accrued Benefit in respect of
that year not
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already secured by such annuities until such time as, and to ensure that,
Executive's maximum Benefit under the SERP has been fully secured by such
purchases and deliveries of annuities. In the event of a Change of Control,
sufficient funds shall be transferred by the Company to a rabbi trust of
which Executive is a beneficiary in order to purchase for Executive an
annuity covering (i) the Benefit accrued to the Change of Control to the
extent not then fully secured by annuities and (ii) the incremental Benefit
to be accrued in respect of the three year period following termination of
employment in the event Executive becomes entitled to Compensation
Continuance (as defined in Section 6.1) after such Change of Control. In
connection with the Company's purchase and delivery to a secular trust for
Executive's benefit of any such additional annuities under this subparagraph
(ii) prior to Executive's Retirement Date, Executive shall make a timely
83(b) election if such purchase and delivery occur prior to the Benefit
becoming non-forfeitable pursuant to Section 5(a). In addition, upon (x) each
such purchase and transfer of additional annuities giving rise to taxes
payable by Executive and (y) the imposition on Executive of any other
Federal, state or local taxes in connection with the maintenance of such
secular trust, the Company or a trust established for such purpose
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shall pay to Executive an additional amount such that after payment by
Executive of all applicable Federal, state and local taxes thereon (computed
at the maximum marginal rates) there is retained a sufficient amount to pay
all such taxes incurred by Executive. (iii) The present value of the after-
tax benefits due the Executive under the SERP determined at Executive's
Retirement Date under the SERP will be offset by the after-tax value as of
Executive's Retirement Date of any annuities previously purchased hereunder
including earnings thereon. If an annuity instead of a lump sum is elected
at retirement, a portion of the annuity payments to be made during retirement
may be taxable to Executive, and Executive will be responsible for the
payment of any taxes on such payments. The event of the Executive's
retirement on the Retirement Date, or the delivery of the Benefit on such
date, shall be a termination of employment, but shall not automatically be a
termination under Section 6.1(a) entitling Executive to Compensation
Continuance under this Agreement.
(c) The Company shall, no later than Executive's Retirement Date,
purchase and transfer to Executive such additional annuities as shall be
necessary to fully fund any additional Benefit accrued to Executive's
Retirement Date and any such annuities, to the extent then held in a secular
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trust, will be delivered to Executive from such secular trust. The Company
shall pay to Executive at the time of such transfer an additional amount
such that after payment by Executive of all applicable Federal, state and
local taxes thereon (computed at the maximum marginal rates) there is
retained a sufficient amount to pay all such taxes incurred by Executive on
such transfer.
(d) Executive's "Retirement Date" shall be the attainment of age 60
or, if later, the last day of any Compensation Period (as described in
Section 6.1(a)). Executive's Retirement Date shall be deemed to include the
date of Executive's death if death occurs before retirement. Any annuity
delivered to Executive hereunder shall have a lump sum cash-out option.
Executive agrees that a pre-condition to any funding of a Benefit under
this Section 5 is the Executive's execution at such time of funding
acknowledgment waivers reasonably requested by the Company, and Executive's
agreement to place all annuities purchased for Executive in a secular trust
designated by the Company until Executive's Retirement Date.
6. Termination of Employment.
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6.1 Termination Not For Cause or For Good Reason.
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(a) The Company and Holdings may terminate Executive's
employment at any time for any reason, and
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Executive may terminate his employment at any time for Good Reason. If
Executive's employment is terminated by the Company or Holdings other than
for Cause (as hereinafter defined)prior to or more than twenty-four months
after a Change of Control or for any reason (other than death or
disability) during the twenty-four month period following a Change of
Control or Executive terminates his employment for Good Reason (as
hereinafter defined), the Company shall pay to Executive as additional
compensation ("Compensation Continuance") (x) if such termination is prior
to, or more than twenty-four months after, a Change of Control,
compensation until the third anniversary (the "Compensation Period") of the
date his employment terminated (or, if earlier, until his date of death),
payable monthly at an annual rate equal to the amounts set forth in clauses
(i) and (ii) below, or (y) if such termination occurs during the twenty-
four month period following a Change of Control, then upon such termination
a lump sum payment, discounted to its present value, based on a notional
payment period of 3 years assuming equal monthly payments and a discount
rate equal to the product of (i) the three-year Treasury bond yield as
published in the New York Times on the first of the month in which the
termination occurs and (ii) 100% minus the aggregate applicable Federal,
state and local taxes then
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imposed on Executive's employment income computed at the maximum applicable
marginal rates, in cash in an amount equal to three (3) times the sum of
the amounts set forth in clauses (i) and (ii) below:
(i) his Base Salary at its then current annual rate or
following a Change of Control, if higher, the rate
in effect immediately prior to such Change of
Control; and
(ii) his target bonus at its then current percentage or
following a Change of Control, if higher, the
percentage in effect immediately prior to such
Change of Control; and computed in the case of any
such bonus opportunity in the form of Performance
Units based on the Initial Grant Value (as defined
in Section 3.2(c)) of such Performance Units.
In addition, Executive, if he is entitled to Compensation Continuance,
shall be entitled to receive:
(iii) Executive's full Base Salary through the date of
termination at the rate in effect at the time
notice of termination is given, AIAP Vested Amount
as of the date of termination, and, except as set
forth below, all other amounts to which Executive
is entitled under any compensation or benefit plan
of the Company including, but not limited to, the
AIAP and LTIP, and all unpaid amounts, as of the
date of such termination, in respect of any bonus,
including any bonus for any Fiscal Year ending
before such termination which would have been
payable had the Executive remained in employment
until the date such bonus would otherwise have been
paid, at the times such payments are due under the
terms of such plans or, following a Change of
Control, upon such termination;
(iv) any payment deferred by Executive, together with
any applicable interest or other accruals thereon;
(v) the benefits under Section 5 hereof shall be paid
out in accordance with their terms; provided,
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however,that Executive shall, for purposes of
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Section 5, be deemed to have remained employed by the Company and
Holdings for the period ending on the third anniversary of the
date his employment terminated;
(vi) continued coverage under Holdings' and the
Company's employee benefit programs, plans and
practices described in Section 4.1 and 4.2 hereof
until the third anniversary of the date his
employment terminated, or Holdings or the Company
will provide for equivalent coverage (on an after-
tax basis), subject to any applicable coordination
of benefits rules; provided that (A) in the case of
any plan meeting the requirements of Section 401(a)
of the Code, prior to a Change of Control, such
coverage shall be provided only to the extent
consistent with such requirements and (B) in the
event of such a termination following a Change of
Control, the level of such coverage shall not be
less than that in effect immediately prior to such
Change of Control;
(vii) such payments under applicable plans or programs,
including but not limited to those described in
Section 3.3 and 4.3 and payment for accrued
vacation, as may be determined pursuant to the
terms of such plans or programs and this Agreement;
(viii) outplacement counseling services at Company
expense; provided however, this expense shall not
exceed 18% of annualized Base Pay in any calendar
year;
(ix) for the first six (6) months after termination, the
reasonable cost of one secretary and a fully
functional office, such office location to be
determined by Executive as long as the office is
not to be located on the premises of the Company;
(x) if Executive's termination occurs prior to March 1,
1996, any applicable additional benefits and
protections provided under the Headquarters
Program;
(xi) if Executive's termination occurs during the
twenty-four month period following a Change of
Control, all cash payments to be made hereunder
upon a termination of employment shall be made not
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later than 15 business days following the date of termination,
and in addition Executive shall receive:
(A) a lump sum cash payment equal to the sum of Executive's
AIAP Vested Amount, PS Vested Amount and PU Vested Amount all as
of the date of termination;
(B) a lump sum cash payment equal to three times the value
of the annual credit under the RJR Nabisco. Inc. Flexible
Perquisites Program (the "Perquisites Program") to which
Executive was entitled immediately prior to such termination or,
if higher, to which Executive was entitled immediately prior to
the Change of Control, reduced by such credits as would otherwise
be applied to the continued benefits under Section 6.1(a)(vi)
above;
(C) use of the automobile assigned to Executive immediately
prior to the Change of Control until the third anniversary of the
date of termination and, at the end of such period, the transfer
of ownership of such automobile to Executive plus such amount in
cash that after payment of all applicable Federal, state and
local taxes thereon, computed at the maximum marginal rates, is
equal to all such taxes, so computed, imposed in connection with
such transfer;
(D) in addition to and upon the expiration of the benefits
provided pursuant to Section 6.1(a) (vi) above, MedChoice Retiree
Medical benefits as may be in effect at the time of such
expiration for other retirees and as amended from time to time
thereafter at the minimum level of Company subsidy or, if
greater, the subsidy level based on his years of actual and
imputed service under the SERP; and
(E) if the Company fails to provide any of the benefits
under Section 6.1(a) (vi) or Section 6.1(a)(xi) (D) above,
reimbursement for the actual cost of Executive's obtaining
comparable benefits within 15 business days after the date
Executive gives the Company written notice that he incurred such
costs plus such additional amount that after
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payment of all applicable Federal, state and local taxes thereon,
computed at the maximum applicable marginal rates, is equal to
all such taxes, so computed, imposed with respect to such
reimbursement.
(b) For purposes of this Agreement, "Good Reason" shall mean any
of the following (without Executive's express prior written consent):
(i) (A) The assignment to Executive of duties materially
inconsistent with Executive's position (including duties,
responsibilities, status, titles or offices as set forth in
Section 1 hereof); (B) any elimination or reduction of
Executive's duties or responsibilities as set forth in Section 1;
or (C) any removal of Executive from or any failure to elect or
reelect Executive to the position of President of Holdings and
the Company (including the failure to elect Executive to the
positions of President of the ultimate controlling entity in
connection with any merger, acquisition or other extraordinary
corporate transaction that includes Holdings or the Company),
except in connection with the termination of Executive's
employment for Cause, Permanent Disability (as hereinafter
defined) or as a result of Executive's death or by Executive
other than for Good Reason;
(ii) A reduction in Executive's Base Salary or annual target bonus
opportunity as in effect at the commencement of employment
hereunder or as the same may be increased from time to time
during the term or pursuant to the terms of this Agreement;
(iii) The failure by the Company or Holdings to obtain the specific
assumption of this Agreement by any successor or assign of
Holdings or the Company or any person acquiring substantially all
of the Company's or Holdings' assets;
(iv) Any material breach by the Company or Holdings of any provision
of this Agreement or any agreements entered into pursuant
thereto;
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(v) Requiring Executive to be based at any office or location other
than that described in Section 1 above, except for travel
reasonably required in the performance of the Executive's
responsibilities, or
(vi) (A) During the twenty-four month period following a Change of
Control, the failure to continue in effect any compensation plan
in which Executive participates at the time of the Change of
Control, including but not limited to the LTIP, the AIAP, the
Perquisites Program, or any substitute plans adopted prior to the
Change of Control, unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan providing Executive
with substantially similar benefits) has been made with respect
to such plan in connection with the Change of Control, or the
failure to continue Executive's participation therein on
substantially the same basis, both in terms of the amount of
benefits provided and the level of his participation relative to
other participants, as existed at the time of the Change of
Control; or (B) the failure to continue to provide Executive with
benefits at least as favorable in the aggregate as those enjoyed
by him under any of the Company's pension, life insurance,
medical, health and accident, disability, deferred compensation
or savings plans in which he was participating at the time of the
Change of Control, the taking of any action which would directly
or indirectly materially reduce any of such benefits or deprive
Executive of any material fringe benefit enjoyed by him at the
time of the Change of Control, or the failure to provide him with
the number of paid vacation days to which he was entitled on the
basis of the Company's practice with respect to him as in effect
at the time of the Change of Control.
(c) (i) Anything in this Agreement to the contrary
notwithstanding, in the event that it is determined that any payment
or distribution by the Company to or for the benefit of Executive,
whether paid
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or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then Executive shall be entitled to
receive from the Company, within 15 days following the determination
described in Section 6.1(c)(ii) below, an additional payment ("Excise
Tax Adjustment Payment") in an amount such that after payment by
Executive of all applicable Federal, state and local taxes (computed
at the maximum marginal rates and including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed
upon the Excise Tax Adjustment Payment, Executive retains an amount of
the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon
the Payments.
(ii) All determinations required to be made under this Section
6.1(c), including whether an Excise Tax Adjustment Payment is required
and the amount of such Excise Tax Adjustment Payment, shall be made by
Ernst & ▇▇▇▇▇, ▇▇▇▇▇▇▇-Salem, North Carolina, or such other
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accounting firm as the Company or Holdings may designate prior to a
Change of Control, which shall provide detailed supporting
calculations to the Company and the Executive within 15 business days
of the date of termination of Executive's employment. Except as
hereinafter provided, any determination by Ernst & ▇▇▇▇▇,
▇▇▇▇▇▇▇-Salem, North Carolina, or such other accounting firm as the
Company or Holdings may designate prior to a Change of Control, shall
be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time
of the initial determination hereunder, it is possible that (x)
certain Excise Tax Adjustment Payments will not have been made by the
Company which should have been made (an "Underpayment"), or (y)
certain Excise Tax Adjustment Payments will have been made which
should not have been made (an "Overpayment"), consistent with the
calculations required to be made hereunder. In the event of an
Underpayment, such Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive. In the event that the
Executive discovers that an Overpayment shall have occurred, the
amount thereof shall be promptly repaid to the Company.
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(d) Except as provided in this Agreement, if Executive is a
participant in the LTIP or any other stock award plan of the Company,
Holdings, or any of their affiliates and has outstanding awards
thereunder, the treatment of such awards shall be governed by the
terms of such applicable plans and awards.
6.2 Permanent Disability. The event of the Executive
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becoming eligible for benefits under the Company's Long Term Disability
Plan is not a termination under Section 6.1(a) entitling Executive to
Compensation Continuance under this Agreement. If, however, Executive
becomes eligible for benefits under the Company's Long Term Disability Plan
during his Compensation Period, the amount of Compensation Continuance
shall be reduced during the Compensation Period by the amount of disability
benefits payable to the Executive. All other provisions of this Agreement
shall remain in effect notwithstanding the Executive's disability
including, without limitation, obligations pursuant to Section 5 hereof,
the terms of any applicable plans, including, but not limited to, those
described in Sections 3.3, 4.1, 4.2, 4.3 and 4.4 hereof, and all unpaid
amounts, as of the date of such disability, in respect of any bonus,
including any bonus payable for any fiscal year ending prior to such
disability, and any payment deferred by Executive,
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together with any applicable interest or other accruals thereon. If the
Executive is still disabled upon reaching his Retirement Date under the
SERP, he shall be retired under the SERP with an offset for any disability
payments made to the Executive after such retirement.
6.3 Death. In the event of Executive's death while actively
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employed, the Company's and Holdings' obligations under this Agreement
shall cease and terminate except with respect to obligations pursuant to
Section 5 hereof, the terms of any applicable plans, including, but not
limited to, those described in Sections 3.3, 4.1, 4.2, 4.3 and 4.4 hereof,
and all unpaid amounts, as of the date of death, in respect of any bonus,
including any bonus, for any fiscal year ending prior to death which would
have been payable had Executive remained in employment until the date such
bonus would otherwise have been paid shall be paid and any payment deferred
by Executive, together with any applicable interest or other accruals
thereon shall be paid. In the event of Executive's death subsequent to
commencement of his Compensation Period hereunder, the balance of
Compensation Continuance will be paid to his beneficiary in a lump sum.
"Beneficiary" shall mean the Executive's designated beneficiary under his
Executive Program life
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insurance. with the SERP. Any survivor benefit shall be paid in accordance
with the SERP.
6.4 Voluntary Resignation; Discharge for Cause.
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If Executive resigns voluntarily, other than for Good Reason or Permanent
Disability, or the Company and Holdings terminate the employment of
Executive prior to, or more than twenty-four months after, a Change of
Control for Cause, the Company's and Holdings' obligations under this
Agreement to make any further payments to Executive shall thereupon cease
and terminate except with respect to accrued and nonforfeeitable
obligations pursuant to Section 5 hereof, the terms of any applicable
plans, including those described in Sections 3.3, 4.1, and 4.3 hereof and
all unpaid amounts, as of the date of such termination, in respect of any
bonus, including any bonus for any fiscal year ending prior to such
termination which would have been payable had Executive remained in
employment until the date such bonus would otherwise have been paid, and
any payment deferred by Executive, together with any applicable interest or
other accruals thereon. The term "Cause" shall be limited to (a) action by
Executive involving willful malfeasance in connection with his employment
having a material adverse effect on Holdings or the Company, (b) any action
by Executive involving willful gross misconduct having a
24
material adverse effect on Holdings or the Company (other than an effect
that could not reasonably constitute grounds for dismissal under the
circumstances), (c) substantial and continuing refusal by Executive in
willful breach of this Agreement to perform the duties ordinarily performed
by an Executive occupying his positions, which refusal has a material
adverse effect on Holdings or the Company or (d) Executive being convicted
of (i) a felony under the laws of the United States or any state or (ii) a
felony under the laws of any other country or political subdivision thereof
involving moral turpitude. Termination of Executive pursuant to this
Section 6.4 shall be communicated by a Notice of Termination given within
one year after Holdings Board both (i) had knowledge of conduct or an event
allegedly constituting Cause and (ii) had reason to believe that such
conduct or event could be grounds for Cause. For purposes of this Agreement
a "Notice of Termination" shall mean delivery to Executive of a copy of a
resolution duly adopted by the affirmative vote of not less than three-
quarters of the entire membership of Holdings Board at a meeting of the
Holdings Board called and held for the purposes after reasonable notice to
the Executive ("Preliminary Notice") and reasonable opportunity for
Executive, together with the Executive's counsel, to be heard before the
Holdings Board
25
prior to such vote), finding that, in the good faith opinion of the
Holdings Board, Executive was guilty of conduct set forth in the second
sentence of this Section 6.4 and specifying the particulars thereof in
detail. Upon the receipt of the Preliminary Notice, Executive shall have 14
days in which to appear with counsel or take such other action as he
desires on his behalf, and such 14-day period is hereby agreed to by the
parties as a reasonable opportunity for Executive to be heard. The Holdings
Board shall no later than 30 days after the receipt of the Preliminary
Notice by Executive communicate its findings to Executive. A failure by the
Holdings Board to make its findings of Cause or to communicate its
conclusions within such 30-day period shall be deemed to be a finding that
Executive was not guilty of the conduct described in the second sentence of
this Section 6.4. Where the Holdings Board has made such findings that,
based upon conduct described in clause (a), (b) or (c) above, Cause exists
the Executive shall have 30 days in which to cure such conduct, to the
extent such cure is possible. Any termination of Executive's employment
(other than by death or Permanent Disability) within 30 days after the date
that the Preliminary Notice has been given to Executive shall be deemed to
be a termination for Cause; provided, however, that if during such period
Executive voluntarily terminates other
26
than for Good Reason or the Company terminates Executive other than for
Cause, and either (A) Executive cured his conduct, as permitted in the
preceding sentence of this Section 6.4, or (B) Executive is found (or is
deemed to be found) not guilty of the conduct described in the second
sentence of this Section 6.4, such termination shall not deemed to be for Cause.
7. Stock Arrangements. Except as otherwise provided in Section 3.4
-------------------
and Section 6, awards under the LTIP shall be governed by the provisions of the
individual grant agreements made under the LTIP.
8. Expenses. The Executive is authorized to incur reasonable expense
--------
in carrying out his duties and responsibilities under this Agreement,
including expenses for travel and similar items related to such duties and
responsibilities. The Company shall reimburse Executive for all such
expenses upon presentation by Executive from time to time of an itemized
account of such expenditures.
9. No Obligation to mitigate Damaqes. The Executive shall not be
---------------------------------
required to mitigate damages or the amount of any payment provided for
under this Agreement by seeking other employment or otherwise nor will (a)
any payments under Section 6 hereof be subject to offset in respect of any
claims which the Company may have against Executive or (b)
27
the amount of any payment or benefit provided for in Section 6 be reduced
by any compensation earned as a result of Executive's employment with
another employer.
10. Notices. All notices or communications hereunder shall be in
-------
writing, addressed as follows:
To the Company or Holdings:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
c/o RJR Nabisco Holdings Corp.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
To the Executive:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Any such notice or communication shall be sent certified or
registered mail, return receipt requested, postage prepaid, addressed as
above (or to such other address as such party may designate in a notice
duly delivered as described above), and the actual date of mailing shall
determine the time at which notice was given.
11. Separability; Legal Fees; Arbitration. If any provision of this
-------------------------------------
Agreement shall be declared to be invalid or unenforceable, in whole or in
part, such invalidity or unenforceability shall not affect the remaining
provisions hereof which shall remain in full force and effect. In addition,
the Company shall reimburse Executive for
28
reasonable legal fees incurred in connection with entering into this
Agreement and shall also pay to Executive as incurred all legal and
accounting fees and expenses incurred by Executive in seeking to obtain or
enforce any right or benefit provided by this Agreement or any other
compensation-related plan, agreement or arrangement of the Company, unless
Executive's claim is found by an arbitral tribunal of competent
jurisdiction to have been frivolous. Any good faith controversy or claim
arising out of or relating to this Agreement or the breach of this
Agreement (other than Section 14 hereof) that cannot be resolved by
Executive and the Company, including any dispute as to the calculation of
Executive's benefits or any payments hereunder shall be submitted to
arbitration in New York City in accordance with New York law and the
procedures of the American Arbitration Association. The determination of
the arbitrator(s) shall be conclusive and binding on the Company and
Executive and judgment may be entered on the arbitrator(s)' award in any
court having jurisdiction.
12. Assignment. This contract shall be binding upon and inure to the
----------
benefit of the heirs and representatives of Executive and the assigns and
successors of Holdings and the Company, but neither this Agreement nor any
rights hereunder shall be assignable or otherwise subject to hypothecation
by
29
Executive (except by will or by operation of the laws of intestate
succession) or by Holdings or the Company, except that Holdings or the
Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
businesses of Holdings or the Company.
13. Amendment/Termination.
----------------------
(a) The Agreement may only be amended at any time by mutual
written agreement of the parties hereto.
(b) Company and Holdings represent and warrant they will make
appropriate adjustments and amendments to the number of shares subject to,
and the exercise price of, options to purchase Holdings common stock
granted under the LTIP ("Options") (including, in the event of a spinoff or
distribution of assets or stock of Holdings or an affiliated entity,
substituting or replacing the shares issuable upon the exercise of Options)
should extraordinary events or transactions occur involving the Company,
Holdings, or an affiliated corporation.
14. Nondisclosure of Confidential Information; Non-Competition.
-----------------------------------------------------------
(a) Executive shall not, without the prior written consent of Holdings
or the Company, divulge, disclose or make accessible to any other person,
firm, partnership or
30
corporation or other entity any Confidential Information pertaining to the
business of Holdings or the Company except (i) while employed by Holdings
or the Company in the business of and for the benefit of Holdings or the
Company or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over
the business of Holdings or the Company, or by any administrative body or
legislative body (including a committee thereof) with purported or apparent
jurisdiction to order Executive to divulge, disclose or make accessible
such information. For purposes of this Section 14(a), "Confidential
Information" shall mean non-public information concerning Holdings' or the
Company's financial data, strategic business plans, product development (or
other proprietary product data), customer lists, marketing plans and other
proprietary information, except for specific items which have become
publicly available information or otherwise known to the public other than
through a breach by Executive of his fiduciary duty or any confidentiality
agreement, or information known to the Executive prior to the date of this
Agreement. Confidential Information does not include information the
disclosure of which cannot reasonably be expected to adversely affect the
business of Holdings or the Company.
31
(b) During the period commencing on the date hereof and ending (i) in
the case of a termination described in Section 6.1 hereof, three years
after the date of termination; and (ii) in case of a termination described
in Section 6.4 hereof, two years after the date of termination, Executive
covenants and agrees that he will not be an executive officer, board
member, owner, partner, consultant or employee of a food or tobacco company
with revenues over $1 billion, if such food or tobacco company is engaged
in a "major business" of Holdings or the Company. A "major business" for
this purpose is each major business segment of the Company and its
subsidiaries on the date hereof that produces products constituting over 5%
of the revenues of Holdings and its subsidiaries. For purposes of this
Section 14, Executive shall be deemed not a shareholder of a company that
would otherwise be a competing entity if Executive's record and beneficial
ownership of the capital stock of such company amount to not more than one
percent of the outstanding capital stock of any such company subject to the
periodic and other reporting requirements of Section 13 or Section 15(d) or
the Securities Exchange Act of 1934, as amended. Executive, Holdings, and
Company agree this covenant not to compete is a reasonable covenant under
the circumstances, and further agree that if in the opinion of
32
any court of competent jurisdiction, such restraint is not reasonable in
any respect, such court shall have the right, power and authority to excise
or modify such provision or provisions of this covenant as to the court
shall appear not reasonable and to enforce the remainder of the covenant as
so amended.
(c) Executive agrees that any breach of the covenants contained
in this Section 14 would irreparably injure Holdings and the Company.
Accordingly, Holdings or the Company may, in addition to pursuing any other
remedies they may have in law or in equity, obtain an injunction against
Executive from any court having jurisdiction over the matter, restraining
any further violation of this Agreement by Executive.
15. Beneficiaries/References. Executive shall be entitled to select
------------------------
(and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death, and may change such election, in
either case by giving the Company written notice hereof. In the event of
Executive's death or a judicial determination of his incompetence,
reference in this Agreement to Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal
representative. Any reference to the
33
masculine gender in this Agreement shall include, where appropriate, the
feminine.
16. Survivorship. The respective rights and obligations of the parties
------------
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section are in addition to the survivorship provisions
of any other section of this Agreement.
17. Representations and Warranties. Holdings and the Company each
------------------------------
represent and warrant that (a), respectively, they are fully authorized and
empowered to enter into this Agreement, (b) the execution of this Agreement
and the performance of their respective obligations under this Agreement
will not violate or result in a breach of the terms of any material
agreement to which Holdings and/or the Company is a party or by which it is
bound, (c) no approval by any governmental authority or body is required
for them to enter into this Agreement or perform their obligations
hereunder, and (d) this Agreement is valid, binding and enforceable against
Holdings and the Company in accordance with its terms, except to the extent
affected or limited by applicable bankruptcy laws or other statutes
governing the rights of creditors and any regulations or interpretations
34
thereof. Executive represents and warrants that his execution of this
Agreement and his performance of his duties and responsibilities under this
Agreement will not violate or result in a breach of the terms of any
material agreement to which he is a party or by which he is bound.
18. Governing Law. This Agreement shall be construed, interpreted,
-------------
and governed in accordance with laws of New York, without reference to
rules relating to conflicts of law.
19. Withholding. The Company and Holdings shall be entitled to
-----------
withhold for payment any amount of withholding required by law.
20. Interest on Late Payments. To the extent that any payments
-------------------------
required to be made hereunder following a Change of Control are not made
within the period specified therefor, the Company and Holdings shall be
liable for interest on such delayed payments at the rate of 150% of the
prime rate compounded monthly, as posted by the ▇▇▇▇▇▇ Guaranty Trust
Company of New York from time to time.
21. Actuarial Calculations. All required actuarial calculations of
----------------------
payments to be made hereunder and of annuities to be purchased pursuant to
Section 5 hereof shall be made by ▇▇▇▇▇▇ ▇▇▇▇▇ Worldwide, New York, New
York, or
35
such other actuarial firm as the Company or Holdings may designate prior to
a Change of Control.
22. Funding. Except as otherwise provided herein, all benefits
-------
hereunder are unfunded and will be paid out of the general assets of the
Company or Holdings. Notwithstanding the foregoing, the Company or Holdings
may choose to maintain a rabbi trust or other trusts for the purpose of
paying certain of the benefits hereunder or under other plans and programs
of the Company or Holdings and, if so, Executive shall be entitled to
payments therefrom, if any, as and to the extent provided in such rabbi
trust or other trusts.
23. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original.
RJR NABISCO HOLDINGS CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Chairman and Chief Executive Officer
RJR NABISCO, INC. By:
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Chairman and Chief Executive Officer
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
36
EXHIBIT "A"
AIAP Vested Amount means, as of a Change of Control or as of the date
------------------
Executive's employment terminates, as the case may be, an amount equal to (a
in the case of any bonus opportunity under the AIAP, the value of
Executive's target award under the AIAP for the relevant period in which
such Change of Control or such termination occurs, as the case may be,
multiplied by a fraction, the numerator of which is the number of months
(including partial months) in the period beginning on the first day of the
relevant performance period and ending on the Change of Control or such
termination, as the case may be, and the denominator of which is the number
of months in such performance period; provided that in the event of a
termination of employment following a Change in Control in the year in
which such Change of Control occurs, for purposes of computing the AIAP
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such Change of Control
and the target award shall be that in effect immediately preceding such
Change of Control, or (b) in the case of any annual bonus opportunity in
the form of Performance Units, the PU Vested Amount as of the date of such
termination.
Board means the Board of Directors of the Company.
-----
Boards means, collectively, the Board and the Holdings Board.
------
Change of Control means the first to occur of the following events
-----------------
provided such event occurs prior to October 11, 1996 or such later
date as the Boards may specify from time to time:
(a) an individual, corporation, partnership, group, associate
or other entity or "person", as such term is defined in
Section 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), other than Holdings or any employee
benefit plan(s) sponsored by Holdings or the Company, is
or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
30% or more of the combined voting power of Holdings'
outstanding securities ordinarily having the right to
vote at elections of directors.
(b) individuals who constitute the Holdings Board on October
11, 1995 (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any
person becoming a director subsequent to such date whose
election, or nomination for election by Holdings'
shareholders, was approved by a vote of at least three-
quarters of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy
statement of Holdings in which such person is named as a
nominee for director, without objection to such
nomination) shall be, for purposes of this paragraph
(ii), considered as though such person were a member of
the Incumbent Board;
(c) the approval by the shareholders of Holdings of a plan or
agreement providing (1) for a merger or consolidation of
Holdings other than with a wholly-owned subsidiary and
other than a merger or consolidation that would result in
the voting securities of Holdings outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of
Holdings or such surviving entity outstanding immediately
after such merger or consolidation, or (2) for a sale,
2
exchange or other disposition of all or substantially all of the
assets of Holdings. If any of the events enumerated in this
paragraph (c) occurs, the Holdings Board shall determine the
effective date of the Change of Control resulting therefrom for
purposes of the Program.
Holdings Board means the Board of Directors of Holdings.
--------------
PS Vested Amount means with respect to any award of Performance
----------------
Shares (as defined in the LTIP) Executive holds as of a Change of Control
or as of the date Executive's employment terminates, as the case may be, an
amount equal to the adjusted value of (i) the number of Performance Shares
subject to such award, multiplied by a fraction, the numerator of which is
the number of months (including partial months) elapsed in the relevant
performance period as of such Change of Control or as of the date of such
termination, as the case may be, and the denominator of which is the number
of months in such performance period, (ii) adjusted by applying target
performance with respect to such award; provided that in the event of a
termination of employment following a Change of Control in the year in
which such Change of Control occurs, for purposes of computing the PS
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such Change of Control
and target performance with respect to such Performance Shares shall be
that in effect immediately preceding the Change of Control.
3
PU Vested Amount means, for any award of Performance Units (as
----------------
defined in the LTIP) Executive holds as of a Change of Control or as of the
date Executive's employment terminates, as the case may be, an amount equal
to the target value of the number of Performance Units subject to such
award multiplied by a fraction, the numerator of which is the number of
months (including partial months) elapsed in the relevant performance
period as of the Change of Control and the denominator of which is the
number of months in such performance period; provided that in the event of
a termination of employment following a Change of Control in the year in
which such Change of Control occurs, for purposes of computing the PU
Vested Amount as of the date of such termination, the performance period
shall be deemed to begin on the first day following such Change of Control
and the target value of such Performance Units shall be that in effect
immediately preceding the Change of Control.
4
