Exhibit 10.16
AGREEMENT
THIS AGREEMENT is executed and entered into effective as of May 20,
1999 (the "EFFECTIVE DATE"), by and among the PENSION BENEFIT GUARANTY
CORPORATION ("PBGC"), RJR NABISCO HOLDINGS CORP. ("Holdings") and X.X. XXXXXXXX
TOBACCO COMPANY ("RJR").
WITNESSETH
WHEREAS, RJR Nabisco, Inc. ("RJRN" ) is the contributing sponsor, as
defined in 29 U.S.C. ss. 1301(a)(13), of the Retirement Plan for Employees of
RJR Nabisco, Inc. (the "Plan"); and
WHEREAS, Holdings, RJR and Nabisco Holdings Corp. ("Nabisco Holdings")
are members of the contributing sponsor's controlled group, as defined in 29
U.S.C. ss. 1301(a)(14) (the "RJR Controlled Group"); and
WHEREAS, the members of the RJR Controlled Group sponsor or the Plan
and other pension plans (together with the Plan, the "Plans") covered by Title
IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and
WHEREAS, each member of the RJR Controlled Group may be jointly and
severally liable for any liabilities arising under 29 U.S.C. ss. 1362 in the
event of the termination of any of the Plans; and
WHEREAS, in a series of transactions, Holdings separated the domestic
tobacco business of RJR from the food business of Nabisco, Inc. (the
"Transactions"); and
WHEREAS, the Transactions resulted in the separation of the RJR
Controlled Group; and
WHEREAS, in connection with the Transactions, Holdings caused the
portion of the assets and liabilities of the Plan which were associated with the
employees and former employees of Holdings and Nabisco, Inc. to be spun off into
a new pension plan; and
WHEREAS, the remaining assets and liabilities which were associated
with the employees and former employees of RJR stayed with the Plan; and
WHEREAS, PBGC informed Holdings and RJR that, as a result of the
Transactions, PBGC may determine to initiate proceedings pursuant to section
4042(a)(4) of ERISA to terminate the Plan after the PBGC determined that the
possible long-run loss to the PBGC may reasonably be expected to increase
unreasonably; and
WHEREAS, in consideration of Holdings and RJR's willingness to
undertake the obligations set forth below in this Agreement, PBGC will not
institute proceedings under section 4042(a)(4) of ERISA to terminate the Plan.
NOW THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows.
I. DEFINITIONS.
When used herein:
"AGREEMENT" means this agreement made by and among PBGC, Holdings and
RJR.
"CODE" means the Internal Revenue Code of 1986, as amended.
"EFFECTIVE DATE" means May 20, 1999, the date of the Memorandum of
Understanding.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FUNDING STANDARD ACCOUNT" means the funding standard account required
by Section 412(b) of the Code.
"INITIAL CREDIT BALANCE" means the Plan's credit balance in its Funding
Standard Account as of the Plan Spin-off Date.
"LETTER OF CREDIT" means Irrevocable Stand-By Letter of Credit No.
990610IS015 issued in PBGC's favor by Credit Lyonnais for RJR Nabisco,
Inc. in the stated amount of $116,000,000 (One Hundred Sixteen Million
United States Dollars) effective June 14, 1999, and any replacement
letter of credit.
"MEMORANDUM OF UNDERSTANDING" means the Memorandum of Understanding
dated as of May 20, 1999, by and among PBGC, Holdings and RJR.
"RJR CONTROLLED GROUP" means, as of the Effective Date, Holdings,
Nabisco, Inc., Nabisco Holdings, and XXX.
"XXXX" means the Pension Benefit Guaranty Corporation, a wholly-owned
United States government corporation..
"PLAN" shall mean the Retirement Plan for Employees of RJR Nabisco,
Inc.
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"PLANS" shall mean the Plan and all other pension plans covered by
Title IV of ERISA for which the members of the RJR Controlled Group are
plan sponsors.
"PLAN YEAR" means the plan year (as defined in Section 3(39) of ERISA)
for the Plan, which is the 12-month period starting January 1 and
ending December 31.
"REQUIRED CREDIT BALANCE" shall have the meaning set forth in Section V
hereof. The Required Credit Balance shall be maintained until the
Agreement terminates pursuant to Section IX hereof.
"REQUIRED CONTRIBUTIONS" shall have the meaning set forth in Section
III hereof.
"X.X. XXXXXXXX TOBACCO COMPANY" means X.X. Xxxxxxxx Tobacco Company, a
New Jersey corporation.
"RJR NABISCO HOLDINGS CORP." shall mean RJR Nabisco Holdings Corp., a
Delaware corporation.
"RJR NABISCO, INC." means RJR Nabisco, Inc., a Delaware corporation.
"TRANSACTIONS" means the series of transactions whereby the domestic
tobacco business of X.X. Xxxxxxxx Tobacco Company was legally separated
from the food business of Nabisco, Inc., which resulted in the
separation of the RJR Controlled Group.
"UNFUNDED BENEFIT LIABILITIES" shall have the meaning set forth in
Section 4001(a)(18) of ERISA.
II. ALLOCATION OF ASSETS AND LIABILITIES.
In connection with the Transactions , Holdings caused the portion of
the assets and liabilities of the Plan which were associated with the employees
and former employees of Holdings and Nabisco, Inc. to be spun off into a new
pension plan. The remaining assets and liabilities, which were associated with
the employees and former employees of RJR, stayed with the Plan. The assets and
liabilities spun off were calculated in accordance with the methodology
described in Attachment A to this Agreement. The Plan will continue to maintain
a calendar year Plan Year after the date of the spin-off ("PLAN SPIN-OFF DATE").
III. REQUIRED CONTRIBUTIONS TO THE PLAN.
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During the term of this Agreement, RJR shall make the following cash
contributions to the Plan (the "REQUIRED Contributions"), subject to any
limitations contained herein, including but not limited to Section IV:
(a) For Plan Year ending December 31, 1998, $58 million on the
Plan Spin-Off Date, which contribution shall not be included
in the determination of assets attributable to the liabilities
transferred as of the Plan Spin-Off Date;
(b) For each Plan Year beginning with the 1999 Plan Year, the
normal cost as used for Codess.412(b)(2)(A), by June 1 of the
following Plan Year; and
(c) For the Plan Year ending
(1) December 31, 1999, $58 million on or before June 1,
2000;
(2) December 31, 2000, $58 million on or before June 1,
2001;
(3) December 31, 2001, $58 million on or before June 1,
2002; and
(4) December 31, 2002, $58 million on or before June 1,
2003.
(d) As further described in Section V of this Agreement, all
Required Contributions that exceed the minimum funding
contributions required under Code ss. 412 will be carried as
credit balances for the duration of the Agreement.
(e) For each Plan Year, RJR shall make the greater of the Required
Contribution or the minimum funding contribution required
under Code ss. 412.
IV. DEDUCTIBILITY LIMITATION.
If any contribution required by this Agreement exceeds the maximum
deductible amount for the Plan under Code ss. 404 for the Plan Year, the portion
of the contribution that exceeds the maximum deductible contribution limitation
amount in that Plan Year will be carried forward and paid for the next Plan year
in which it is deductible. The lowest interest rate in the permissible range
prescribed by Code ss. 412(l)(7)(C) will be used for measuring deductibility, to
the extent that the contribution is limited by the maximum deductible amount
using another allowable interest rate..
V. REQUIRED CREDIT BALANCE.
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RJR shall maintain the Required Credit Balance for the term of this
Agreement. The Required Credit Balance shall be:
(a) for the Plan Year ending December 31, 1999:
(1) The Initial Credit Balance; and
(2) The Required Contribution under Section III(a) of
this Agreement to the extent that making this
Required Contribution produces a credit balance; and
(3) The Required Contribution under Section III(b) of
this Agreement to the extent that making this
Required Contribution produces a credit balance; and
(4) The Required Contribution under Section III(c)(1) of
this Agreement to the extent that making this
Required Contribution produces a credit balance; and
(5) Interest at the Funding Standard Account Rate to the
end of the Plan Year for all amounts under
subsections (a)(1)-(4) above.
(b) For each Plan Year after 1999, the Required Credit Balance
shall be
(1) The Plan's credit balance in its Funding Standard
Account as of the end of the prior Plan Year; and
(2) The Required Contribution under Section III(b) of
this Agreement to the extent that making this
Required Contribution produces a credit balance; and
(3) The Required Contribution for each Plan Year under
Section III(c) above to the extent that making this
Required Contribution produces a credit balance; and
(4) Interest at the Funding Standard Account Rate to the
end of the Plan Year for all amounts under
subsections (b)(1)-(3) above.
VI. LETTER OF CREDIT.
On or before the closing date of the Transactions, RJR will provide to
PBGC an irrevocable Letter of Credit payable to the PBGC with the following
terms:
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(a) AMOUNT AND DURATION: The Letter of Credit shall be a one year
irrevocable Letter of Credit in the amount of $116 million,
effective on the closing date of the Transactions, renewable
annually in the amount of $116 million. The Letter of Credit
shall permit partial draws. The amount of the Letter of Credit
will be reduced from $116 million to $58 million on June 15,
2002 if all Required Contributions due to the Plan through
June 1, 2002 have been made. Thereafter, the Letter of Credit
in the amount of $58 million will remain in effect until all
Required Contributions due to the Plan on June 1, 2003 have
been made. If all Required Contributions due to the Plan on
June 1, 2003 are made prior to the due date, the Letter of
Credit will by returned to RJR.
(b) ANNUAL NOTICE AND REPLACEMENT: The Letter of Credit shall
provide that the issuing bank shall notify PBGC no less than
sixty (60) days prior to the expiration of the Letter of
Credit as to whether it intends to renew the Letter of Credit
for another year. If the issuing bank does not intend to
renew, RJR must provide a replacement Letter of Credit before
the thirtieth (30) day prior to the expiration of the Letter
of Credit then in place. PBGC may, in its discretion, make
telephonic inquiry to the issuing bank to learn whether the
issuing bank intends to renew the Letter of Credit.
(c) DRAW EVENTS. PBGC may draw the full amount of the Letter of
Credit under the Agreement, in the event of any of the
following, except subsection (c)(4) below, :
(1) PBGC receives a Notice of Intent to Terminate the
Plan pursuant to 29 U.S.C.ss.1341(c) ;
(2) PBGC issues a Notice of Determination with respect to
the Plan pursuant to 29 U.S.C.ss.1342;
(3) RJR fails to provide a replacement Letter of Credit
under Section VI(b) of this Agreement more than
thirty (30) business days before the expiration of
the Letter of Credit then in place.
(4) RJR fails to make a Required Contribution by the
prescribed date. If this event occurs, PBGC may draw
down on the Letter of Credit in an amount equal to
the amount of the missed Required Contribution. In
the event the Letter of Credit is drawn upon to cover
a missed Required Contribution, RJR shall provide,
within five (5) business days of the prescribed date
of the Required Contribution, a replacement Letter of
Credit in the amount of $116 million, subject to the
limitations of Section VI(a) of this Agreement.
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VII. ESCROW ACCOUNT FOR LETTER OF CREDIT.
(a) Amounts received by PBGC pursuant to a draw of the Letter of
Credit or replacement Letter of Credit under Section VI(c)(1)
and (c)(2) of this Agreement shall be held in escrow until the
Plan has been terminated. If, however, PBGC subsequently
withdraws the Notice of Determination, or fails or otherwise
declines to terminate the Plan under 29 U.S.C. ss. 1341(c) or
1342, PBGC will return the amount in the escrow account to
RJR. If the Plan is terminated and the Unfunded Benefit
Liabilities of the Plan are less than the escrow amount, PBGC
will first apply the amount drawn to satisfy the Plan's
Unfunded Benefit Liabilities. Any amounts remaining in the
escrow after the Plan's Unfunded Benefit Liabilities are
satisfied will be returned to RJR.
(b) Amounts received by PBGC pursuant to a draw of the Letter of
Credit under Section VI(c)(3) of this Agreement shall be held
in escrow until such time as an event described in Sections
VI(c)(1), (2) or (4) occurs, at which time Section VII(a) or
(c) will govern the use of the amount in escrow account.
(c) Amounts received by PBGC pursuant to a draw of the Letter of
Credit under Section VI(c)(4) of this Agreement shall be held
in escrow until such time as the missed Required
Contribution(s) has been made and PBGC receives from RJR a
replacement Letter of Credit in the amount required under
Section VI(a) of this Agreement. If the missed Required
Contribution has been made to the Plan and PBGC receives a
replacement Letter of Credit under Section VI(b) of this
Agreement, PBGC will return the amount in the escrow account
to RJR
(d) In the event the Pension Plan is terminated in a standard
termination under 29 U.S.C. ss. 1341(b) of ERISA without the
issuance of a notice of noncompliance, amounts received by
PBGC pursuant to a draw of the Letter of Credit will be
returned to RJR. In addition, if the Agreement terminates in
accordance with Section VIII, any balance in the escrow
account will be returned to RJR.
VIII. EXPIRATION OF THE AGREEMENT
This Agreement will terminate upon the earliest to occur of (a), (b),
(c), or (d) below, but in the case of (a), (b) or (c), no earlier than five
years from the date of the Agreement. In addition, the Agreement will only
terminate if all payments to the Plan under the Agreement have been made. RJR
shall provide PBGC with written notice of any determination by RJR that it has
achieved one of the tests for termination of this Agreement. Within thirty days
of receipt of such notice, PBGC will respond in writing to RJR as to whether it
concurs with the determination, such concurrence not to be unreasonably
withheld.
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(a) The date on which RJR demonstrates to PBGC that the Plan has
no Unfunded Benefit Liabilities as of the last day of the Plan
year for any two consecutive Plan years (the last day of the
Plan year in the second consecutive Plan Year being the
measurement date).
(b) The date on which RJR obtains ratings on its unsecured debt
from Standard & Poor's and Xxxxx'x of at least BBB- and Baa3,
respectively.
(c) In the event there is no rating as provided in section (b)
above, the date on which RJR obtains a private rating on a
hypothetical issue of unsecured debt at the rating level from
Standard & Poor's and Xxxxx=s of at least BBB- and Baa3,
respectively. For purposes of obtaining such private ratings,
the amount of the hypothetical debt issue will equal at least
$500 million.
(d) The date on which the Plan is terminated in a standard
termination under 29 U.S.C.ss.1341(b) without the issuance of
a notice of noncompliance.
IX. NOTICE REQUIREMENTS
During the term of the Agreement, RJR shall provide notices and
information to PBGC's Corporate Finance & Negotiations Department, as follows:
(a) Within 15 days of the transfer of assets from the Retirement
Plan for Employees of RJR Nabisco, Inc. to the new Plan, a
certification from the Plan's enrolled actuary of the amount
of assets transferred, and of the Plan's initial funding
standard account entries, including the Initial Credit
Balance.
(b) Copies of Form 5500 (with attachments) when filed with the
IRS, and Actuarial Valuation Report by March 1st of the
following Plan year.
(c) Written notice of the date and amount of all Required
Contributions made to the Plan within ten (10) business days
after any contribution is made, or written notice of failure
to make any contribution within five (5) business days after
the due date.
(d) Written notice thirty (30) days prior to any change in any of
the Plan's actuarial assumptions or methods for the purpose of
the minimum funding standard of section 412 of the Internal
Revenue Code, which change shall be subject to PBGC's prior
consent, such consent not to be unreasonably withheld.
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(e) Written notice no later than thirty (30) days prior to any
Plan merger or spin-off that is not de minimis (as determined
in IRC Reg. ss. 1.414(l)-1(h) and 1.414(l)-1(n)(2), except
that notice is not required if spin-off assets meet the safe
harbor requirements of IRC Reg. ss. 1.414(l)-1(b)(9).
(f) Written notice thirty (30) days prior to any material
refinancing of debt or material change in debt amortization
schedule.
(g) Written notice no later than five (5) business days after RJR
becomes aware of any violation of financial covenants, or
receipt of a waiver of financial covenants.
(h) Written notice thirty (30) days prior to any transaction that
would have the effect of transferring assets and liabilities
of the Plan or transferring sponsorship of the Plan.
(i) Written notice thirty (30) days prior to any sale, transfer or
other disposition of assets of any member of the controlled
group, where such assets represent (I) 10% or more of the book
value of the assets of the controlled group on a consolidated
basis, or (ii) generated 10% or more of the consolidated
revenues or operating income.
(j) Copies of any notices of reportable events at the time they
are filed.
X. GENERAL PROVISIONS.
(a) COMPLIANCE WITH ERISA. Nothing in this Agreement shall affect
or in any way diminish RJR's and Holdings' obligations, if
any, to comply with ERISA.
(b) LIMITATION OF RIGHTS. This Agreement is intended to be and is
for the sole and exclusive benefit of PBGC, Holdings and RJR.
Nothing expressed or mentioned in or to be implied from the
Agreement gives any person other than PBGC, Holdings and RJR
any legal or equitable right, remedy or claim against PBGC,
Holdings or RJR under or in respect of this Agreement.
(c) NOTICES. All notices, demands, instructions and other
communications required or permitted under the Agreement to
any party to the Agreement shall be in writing and shall be
personally delivered or sent by registered, certified or
express mail, postage prepaid, return receipt requested;
telefacsimile (which shall be immediately followed by the
original of such communication); or pre-paid overnight
delivery service with confirmed receipt and shall be deemed to
be given for purposes of this Agreement on the date the
writing is sent by the intended
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recipient, or in the case of telefacsimile, on the date
transmitted to the intended recipient. Unless otherwise
specified in a notice sent or delivered in accordance with the
foregoing provisions of this section, notices, demands,
instructions and other communications in writing shall be sent
to the parties as indicated below:
To RJR: Secretary
X.X. Xxxxxxxx Tobacco Company
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx-Xxxxx, XX 00000
Telephone (000) 000-0000
Facsimile (000) 000-0000
To Holdings: Associate General Counsel
RJR Nabisco Holdings Corp.
0000 0xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone (000) 000-0000
Facsimile (000) 000-0000
To PBGC: Director, Corporate Finance
and Negotiations Department
Pension Benefit Guaranty Corporation
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000; and
General Counsel
Pension Benefit Guaranty Corporation
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties on separate
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
(e) ENTIRE AGREEMENT. This Agreement contains the complete and
exclusive statement of the agreement and understanding by and
among the parties hereto and supersedes all prior agreements,
understandings, commitments, representations, communications,
and proposals, oral or written, between the
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parties relating to the subject matter of this Agreement. This
Agreement may not be amended, modified, or supplemented except
by an instrument in writing executed by the parties to this
Agreement.
(f) REPRESENTATIONS AND WARRANTIES. PBGC, Holdings and RJR each
represents and warrants to the other that it has full power
and authority to enter into this Agreement and that this
Agreement constitutes a legal, valid and binding obligation
enforceable against it in accordance with the Agreement's
terms.
(g) NO WAIVERS. The failure of any party to the Agreement to
enforce a provision of the Agreement shall not constitute a
waiver of the party's right to enforce that provision of the
Agreement.
(h) HEADINGS. The section and paragraph headings contained in this
Agreement are for convenience only and shall not affect the
meaning or interpretation of this Agreement.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of North
Carolina and by ERISA, the Code and other laws of the United
States to the extent they preempt North Carolina law.
(j) BINDING EFFECT. This Agreement shall be binding upon RJR,
Holdings and PBGC and their respective successors, if any.
(k) CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction shall
be applied against any party hereto. Nor shall any rule of
construction that favors a non-draftsman be applied. A
reference to any statute shall be deemed also to refer to all
rules and regulations promulgated under the statute, unless
the context requires otherwise.
(l) ASSIGNMENT. This Agreement may not be assigned in whole or in
part by either party without the express written consent of
the other party.
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the day and year first stated above.
PENSION BENEFIT GUARANTY CORPORATION
Date:
--------------- --------------------------------------------
By: Xxxxxx X. Xxxxxxxxx
Title: Chief Negotiator and Director, Corporate
Finance and Negotiations Department
RJR NABISCO HOLDINGS CORP.
Date:
--------------- --------------------------------------------
By: H. Xxxxx XxXxxxx
Title: Senior Vice President
X.X. XXXXXXXX TOBACCO COMPANY
Date:
--------------- --------------------------------------------
By: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President, Chief
Financial Officer
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