Exhibit 2.1
DISTRIBUTION AGREEMENT
dated as of May 12, 1999
among
RJR NABISCO HOLDINGS CORP.
(to be renamed "Nabisco Group Holdings Corp.")
RJR NABISCO, INC.
(to be renamed "X.X. Xxxxxxxx Tobacco Holdings, Inc..")
and
X. X. XXXXXXXX TOBACCO COMPANY
TABLE OF CONTENTS
-----------------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions....................................................1
ARTICLE 2
RESTRUCTURING
SECTION 2.01. The Restructuring..............................................9
ARTICLE 3
THE DISTRIBUTION
SECTION 3.01. Cooperation Before the Distribution...........................10
SECTION 3.02. Holdings Board Action; Conditions Precedent to
the Distribution...........................................11
SECTION 3.03. The Distribution..............................................11
SECTION 3.04. Stock Dividends...............................................12
SECTION 3.05. Fractional Shares.............................................12
ARTICLE 4
EMPLOYEE BENEFITS
SECTION 4.01. Definitions...................................................12
SECTION 4.02. Employees.....................................................14
SECTION 4.03. Qualified Defined Contribution Plans..........................14
SECTION 4.04. Qualified Defined Benefit Plans...............................15
SECTION 4.05. Supplemental Benefit Plans....................................17
SECTION 4.06. Welfare Benefit Plans.........................................18
SECTION 4.07. Employee Stock Options and Restricted Stock...................18
SECTION 4.08. Outside Director Benefits.....................................19
SECTION 4.09. Deferred Compensation.........................................20
SECTION 4.10. Employee Benefit Transition Services..........................20
SECTION 4.11. COBRA.........................................................21
SECTION 4.12. Third Party Beneficiaries.....................................21
SECTION 4.13. WARN Act......................................................21
PAGE
ARTICLE 5
CERTAIN RJRN COVENANTS
SECTION 5.01. Certain Definitions...........................................21
SECTION 5.02. Restricted Payments...........................................24
SECTION 5.03. Prohibition on Certain Leveraged Transactions
and Other Mergers..........................................25
SECTION 5.04. Termination...................................................26
ARTICLE 6
ACCESS TO INFORMATION
SECTION 6.01. Provision of Corporate Records................................26
SECTION 6.02. Access to Information.........................................26
SECTION 6.03. Future Litigation and Other Proceedings.......................27
SECTION 6.04. Reimbursement.................................................27
SECTION 6.05. Retention of Records..........................................27
SECTION 6.06. Confidentiality...............................................28
SECTION 6.07. Delivery of Officer's Certificates............................28
SECTION 6.08. Inapplicability of Article to Tax Matters.....................29
ARTICLE 7
INDEMNIFICATION FOR NON-TOBACCO LIABILITIES
SECTION 7.01. RJRN Indemnification of the Nabisco Group for
Certain Liabilities........................................29
SECTION 7.02. Holdings Indemnification of RJRN Group........................30
SECTION 7.03. Third-Party Rights; Tax Benefits..............................30
SECTION 7.04. Notice and Payment of Claims..................................30
SECTION 7.05. Notice and Defense of Third-Party Claims (Other
than Tobacco Claims).......................................31
SECTION 7.06. Contribution..................................................32
ARTICLE 8
INDEMNIFICATION FOR TOBACCO LIABILITIES
SECTION 8.01. Notice and Defense of Tobacco Claims Against
RJRN; Tobacco Claims Against Holdings or Other
Members of the Nabisco Group...............................32
SECTION 8.02. Indemnification of Nabisco Indemnitees for
Tobacco Liabilities........................................34
ii
PAGE
SECTION 8.03. Preservation of Historical Privileges.........................35
SECTION 8.04. Third Party Rights; Tax Benefits..............................36
ARTICLE 9
CERTAIN OTHER AGREEMENTS
SECTION 9.01. Intercompany Accounts.........................................36
SECTION 9.02. Intellectual Property Rights and Licenses.....................36
SECTION 9.03. Further Assurances and Consents...............................37
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices......................................................37
SECTION 10.02. Amendments; No Waivers.......................................38
SECTION 10.03. Expenses.....................................................38
SECTION 10.04. Successor and Assigns........................................39
SECTION 10.05. Governing Law................................................39
SECTION 10.06. Counterparts; Effectiveness; No Third Party
Beneficiaries..............................................39
SECTION 10.07. Entire Agreement.............................................39
SECTION 10.08. Tax Sharing Agreement; Certain Transfer Taxes................39
SECTION 10.09. Jurisdiction.................................................40
SECTION 10.10. Existing Arrangements........................................40
SECTION 10.11. Termination Before the Distribution..........................41
SECTION 10.12. Severability.................................................41
SECTION 10.13. Specific Performance.........................................41
EXHIBITS
Exhibit A -- Form of Corporate Agreement
Exhibit B -- Certain RJRN and Holdings Indebtedness
Exhibit C -- Form of Intercompany Services Agreement
Exhibit D -- Form of Tax Sharing Agreement
Exhibit E -- Form of Reorganization Merger Certificate
Exhibit F -- Form of Name Change Merger Certificate
iii
PAGE
SCHEDULES
Schedule 4.01(a) -- Holdings Employees and Retirees
Schedule 4.01(b) -- RJRN Employees and Retirees
Schedule 4.10 -- Terms and Conditions of Certain Benefits Services
iv
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT dated as of May 12, 1999 among RJR Nabisco
Holdings Corp. (to be renamed "Nabisco Group Holdings Corp."), a Delaware
corporation (together with its successors, "Holdings"), RJR Nabisco, Inc. (to be
renamed "X.X. Xxxxxxxx Tobacco Holdings, Inc."), a Delaware corporation
(together with its successors, "RJRN"), and X. X. Xxxxxxxx Tobacco Company, a
New Jersey corporation (together with its successors, "RJRT").
RECITALS
WHEREAS, RJRN is currently a wholly owned Subsidiary of Holdings;
WHEREAS, the Holdings Board has determined that it is in the best
interests of Holdings and its stockholders (i) to cause the Nabisco Shares to be
held directly by Holdings and (ii) to distribute in a tax-free transaction all
of the outstanding shares of RJRN Common Stock to Holdings Stockholders as of
the Record Date, in each case on the terms and conditions set forth herein;
WHEREAS, in this Agreement, the parties have set forth the principal
corporate transactions to be effected in connection with the Distribution and
the terms of the relationship between, and the respective rights and obligations
of, the parties following the Distribution; and
WHEREAS, the parties are entering into this Agreement for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and agreed, in order to obtain the benefits that each party
reasonably believes will accrue to it as a result of the transactions
contemplated hereby, by the other Distribution Documents and by the Purchase
Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) As used herein, the following terms have
the following meanings:
"Action" means any claim, suit, action, arbitration, inquiry,
investigation or other proceeding of any nature (whether criminal, civil,
legislative, administrative, regulatory, prosecutorial or otherwise) by or
before any arbitrator or Governmental Entity.
"Affiliate" means, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, the term "control"
(including the correlative terms "controlling", "controlled by" and "under
common control with") means the direct or indirect possession of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
For purposes of this Agreement, no member of one Group shall be treated as an
Affiliate of any member of the other Group.
"Business Day" means any day other than a Saturday, Sunday or one on
which banks are authorized or required by law to close in New York, New York.
"Business" means the Tobacco Business or the Food Business, as the
context may indicate.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Corporate Agreement" means the Corporate Agreement to be dated as of
the Distribution Date among Holdings, RJRN and Nabisco, substantially in the
form of Exhibit A hereto.
"Debt Tender Offers/Consent Solicitations" means, in respect of all of
the Indebtedness set forth on Exhibit B hereto, tender offers for that
Indebtedness by RJRN and Holdings as issuers thereof, together with
solicitations by those issuers of the holders of that Indebtedness which result
in the receipt of all of the consents of those holders that are necessary to
amend the indentures and other agreements relating to that Indebtedness so as to
permit the consummation of all of the transactions contemplated by the Purchase
Agreement and the Distribution Documents under each such indenture and
agreement.
"Defense Materials" means, with respect to any Group, any and all
written or oral information (including, without limitation, any and all (A)
written communications, (B) documents, (C) factual and legal analyses and
memoranda, (D) interview reports and reports of experts, consultants or
investigators, (E) meetings in person or by telephone and e-mail or other forms
of electronic communication, and (F) records, reports or testimony regarding
those
2
communications, documents, memoranda or meetings) (i) within the custody or
control, within the meaning of Rule 34 of the Federal Rules of Civil Procedure,
or reasonably accessible by that Group or its Representatives (as defined below)
and (ii) directly or indirectly arising out of or relating to, the preparation
or litigation of any Tobacco Claim or other Action in which Holdings, RJRN
and/or RJRT have a common interest.
"DGCL" means the General Corporation Law of the State of Delaware, as
amended.
"Disclosure Documents" means the Form 8-A, the Information Statement,
the offering memorandum relating to the sale of senior unsecured debt securities
of RJRN before the Effective Time, the offers to purchase and consent
solicitation statements relating to the Debt Tender Offers/Consent Solicitations
and related documents, each Report on Form 8-K filed by either RJRN or Holdings
in connection with the matters contemplated by any of the Distribution Documents
and each other report or filing made by RJRN, Holdings or Nabisco under the 1933
Act or the 1934 Act in connection with the matters contemplated by any of the
Distribution Documents, in each case as amended or supplemented.
"Distribution" means the distribution by Holdings, pursuant to the
terms and subject to the conditions hereof, of all of the outstanding shares of
RJRN Common Stock to the Holdings Stockholders of record as of the Record Date.
"Distribution Agent" means First Chicago Trust Company of New York.
"Distribution Date" means the Business Day on which the Distribution is
effected.
"Distribution Documents" means this Agreement, the Tax Sharing
Agreement, the Intercompany Services Agreement, the Corporate Agreement, the
Name Change Plan of Merger, the Reorganization Merger Agreement, and the
exhibits and schedules to those agreements.
"Effective Time" means the time immediately before the close of
business on the Distribution Date.
"Finally Determined" means, with respect to any Action, threatened
Action or other matter, that the outcome or resolution of that Action,
threatened Action or matter has either (i) been decided by an arbitrator or
Governmental Entity of competent jurisdiction by judgment, order, award, or
other ruling or (ii) has been settled or voluntarily dismissed and, in the case
of each of clauses (i) and (ii), the claimants' rights to maintain that Action,
threatened Action or other
3
matter have been finally adjudicated, waived, discharged or extinguished, and
that judgment, order, ruling, award, settlement or dismissal (whether mandatory
or voluntary, but if voluntary that dismissal must be final, binding and with
prejudice as to all claims specifically pleaded in that Action) is subject to no
further appeal, vacatur proceeding or discretionary review.
"Food Business" means the businesses and operations of the Nabisco
Group, whether conducted prior to, at or after the Effective Time, which include
the production, manufacturing, marketing, distribution and sale of cookies,
crackers and other food, sauce and snack products.
"Form 8-A" means the registration statement on Form 8-A that RJRN will
file with the SEC to register the RJRN Common Stock under the 1934 Act in
connection with the Distribution, as that registration statement may be amended
from time to time.
"Governmental Entity" means any government or any state, department or
other political subdivision thereof, or any governmental body, agency, authority
(including, but not limited to, any central bank or taxing authority) or
instrumentality (including, but not limited to, any court, tribunal or grand
jury) exercising executive, prosecutorial, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Group" means, as the context requires, the RJRN Group or the Nabisco
Group.
"Holdings Board" means the Board of Directors of Holdings.
"Holdings Common Shares" means shares of common stock, par value $0.01
per share, of Holdings.
"Holdings Stockholders" means the holders of the Holdings Common
Shares.
"Information Statement" means the information statement, substantially
complying with the disclosure items of Schedule 14C of the 1934 Act, that RJRN
will file as an exhibit to the Form 8-A and send to each Holdings Stockholder of
record as of the Record Date in connection with the Distribution.
"Intercompany Services Agreement" means the Intercompany Services
Agreement to be dated as of the Distribution Date among Holdings, Nabisco and
RJRN, substantially in the form of Exhibit C hereto.
4
"Joint Defense Agreements" means the continuing and prospective
agreements, arrangements and understandings, written or unwritten, to which
Holdings, RJRN, RJRT and/or any of their respective counsel are now or hereafter
a party, which are designed to facilitate the parties' continued cooperation and
joint protection through the lawful sharing of communications, strategies,
information, documents, reports, interviews and other data, including privileged
or attorney-work product documents and information for use for the purpose of
preparing for and litigating Tobacco Claims and other Actions or threatened
Actions in which the parties have a common interest.
"Liabilities" means any and all claims, debts, liabilities,
assessments, fines, penalties, damages, losses, disgorgements and obligations,
of any kind, character or description (whether absolute, contingent, matured,
not matured, liquidated, unliquidated, accrued, known, unknown, direct,
indirect, derivative or otherwise) whenever arising, including, but not limited
to, all costs and expenses relating thereto (including, but not limited to, all
expenses of investigation, all attorneys' fees and all out-of-pocket expenses in
connection with any Action, threatened Action or Tobacco Claim).
"Nabisco" means Nabisco Holdings Corp., a Delaware corporation, and its
successors.
"Nabisco Group" means Nabisco, the Subsidiaries of Nabisco and, on and
after the Effective Time, Holdings, including all predecessors and successors to
each of those Persons.
"Nabisco Group Liabilities" means, except as otherwise specifically
provided in any Distribution Document, all Liabilities, whether arising before,
at or after the Effective Time, of or in any way relating, in whole or in part,
to any member of the Nabisco Group (other than any Tobacco Liabilities of
Holdings) or arising from the conduct of, in connection with or in any way
relating to, in whole or in part, the Food Business, or the ownership or use of
assets or property in connection with that Business. Notwithstanding the
foregoing, "Nabisco Group Liabilities" shall exclude (i) all Liabilities for
Taxes of Holdings or any member of the Nabisco Group (because the Tax Sharing
Agreement will govern those Liabilities) and (ii) all Liabilities for the fees,
costs, expenses and transfer taxes (and other similar fees and expenses) that
Sections 10.03 and 10.08 impose on RJRN.
"Nabisco Shares" means shares of the Class B common stock, par value
$0.01 per share, of Nabisco.
5
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"NYSE" means The New York Stock Exchange.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
Governmental Entity.
"Purchase Agreement" means the Purchase Agreement dated as of Xxxxx 0,
0000 xxxxx XXXX, XXXX and Japan Tobacco Inc., as amended, together with the
exhibits and schedules thereto.
"Record Date" means the date determined by the Holdings Board (or by a
committee of that board or any other Person acting under authority duly
delegated to that committee or Person by the Holdings Board or a committee of
that board) as the record date for determining the Holdings Stockholders of
record entitled to receive the Distribution.
"RJRI Sale Closing" means the Closing as the Purchase Agreement defines
that term.
"RJRN Board" means the Board of Directors of RJRN.
"RJRN Common Stock" means the common stock of RJRN, par value $0.01 per
share.
"RJRN Group" means RJRN, the Subsidiaries of RJRN (other than Nabisco
and the Subsidiaries of Nabisco) and Holdings (but only with respect to all
matters and conduct occurring or arising at any time before the Effective Time,
and in no event as to any matter or conduct occurring on or after the Effective
Time), including all predecessors and successors to each of those Persons.
"RJRN Group Liabilities" means, except as otherwise specifically
provided in any Distribution Document, (i) all Liabilities (other than any
Tobacco Liabilities), whether arising before, at or after the Effective Time, of
or in any way relating, in whole or in part, to any member of the RJRN Group or
arising from the conduct of, in connection with or in any way relating to, in
whole or in part, the Tobacco Business, or the ownership or use of assets or
property in connection with that Business, before, at or after the Effective
Time and (ii) all Liabilities for
6
the fees, costs, expenses and transfer taxes (and other similar fees and
expenses) that Sections 10.03 and 10.08 impose on RJRN. Notwithstanding the
foregoing, "RJRN Group Liabilities" shall exclude (x) all Liabilities for Taxes
of Holdings or any member of the RJRN Group (because the Tax Sharing Agreement
will govern those Liabilities), and (y) all Liabilities in respect of any 9 1/2%
Trust Originated Preferred Securities of RJR Nabisco Holdings Capital Trust II
that remain outstanding after the Effective Time.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned by
that Person.
"Tax" has the meaning assigned to that term in the Tax Sharing
Agreement.
"Tax Sharing Agreement" means the Tax Sharing Agreement to be dated as
of the Distribution Date among Holdings, RJRN and Nabisco, substantially in the
form of Exhibit D hereto.
"Tobacco Business" means the production, manufacturing, marketing,
distribution and sale of tobacco products of any description and any other
businesses and operations of RJRT and the other Subsidiaries of RJRN (other than
Nabisco and the Subsidiaries of Nabisco), in each case whether conducted prior
to, at or after the Effective Time.
"Tobacco Claim" means any demand, assertion, inquiry or claim that, in
whole or in part, is the basis for, could result in or give rise to, an Action
or threatened Action that:
(i) directly, indirectly or derivatively is based on, arises out of
or in any way relates to, in whole or in part, the use, sale,
distribution, manufacture, development, advertising, marketing or
health effects of, exposure to, or to research, statements or warnings
regarding, tobacco products of any description; or
(ii) seeks to impose any Liability on RJRN or Holdings on the
grounds that any Liability of RJRT or any of its Subsidiaries or
Affiliates that is based, in whole or in part, on an Action described
in clause (i) of this definition is enforceable against or recoverable
from RJRN or Holdings, as the case may be.
7
"Tobacco Liabilities" means all Liabilities that arise, in whole or in
part, out of any Tobacco Claim which may at any time (whether past, present or
future) be made, commenced, asserted or pursued. Notwithstanding the foregoing,
"Tobacco Liabilities" shall exclude any Liabilities for Taxes of Holdings or any
member of the RJRN Group (because the Tax Sharing Agreement will govern those
Liabilities).
(b) Each of the following terms is defined in the Section set forth
opposite that term:
Term Section
---- -------
414(1) Amount 4.04
COBRA Coverage 4.11
Employee Welfare Benefit Plan 4.06
414 (1) Amount 4.04
Holdings Preamble
Holdings 401(k) Plan 4.03
Holdings Actuary 4.04
Holdings Deferred Compensation 4.09
Assets and Liabilities
Holdings Retirement Plan 4.04
Holdings Supplemental Assets and 4.05
Liabilities
Indemnified Party 7.04
Indemnifying Party 7.04
IRS 4.03
Nabisco Indemnitee 7.01(a)
Name Change Effective Time 2.01(c)
Name Change Merger 2.01(c)
Name Change Plan of Merger 2.01(c)
NameSub 2.01(a)
PBGC 4.04
Reorganization Effective Time 2.01(b)
Reorganization Merger 2.01(b)
Reorganization Merger Agreement 2.01(b)
ReorgSub 2.01(a)
Representatives 6.06
Restricted Stock 4.07
Retained Deferred Compensation 4.09
Assets and Liabilities
Retained Supplemental Assets and 4.05
Liabilities
8
Term Section
----
RJRN Preamble
RJRN's Actuary 4.04
RJRN 401(k) Plan 4.03
RJRN Indemnitee 7.02(a)
RJRN Restricted Shares 4.07
RJRN Retirement Plan 4.04
RJRN Tobacco Claim 8.01
RJRT Preamble
Third Party Claim 7.05
Transferred Participants 4.04
WARN Act 4.13
ARTICLE 2
RESTRUCTURING
SECTION 2.01. The Restructuring. Upon the terms and subject to the
conditions set forth in the Distribution Documents, the parties agree that the
following transactions will occur and become effective before or as of the
Distribution Date (but, in each case before the Effective Time) on or after the
consummation of the Debt Tender Offers/Consent Solicitations in the following
sequence:
(a) Holdings will form two wholly-owned Subsidiaries, one of which
this Agreement refers to as "ReorgSub" and the other of which this Agreement
refers to as "NameSub". ReorgSub and NameSub will be Delaware corporations and
Holdings will form them in accordance with the DGCL.
(b) Holdings will cause ReorgSub to merge with and into RJRN in the
manner set forth in this Section 2.01(b) (the "Reorganization Merger"), at which
time the separate existence of ReorgSub shall cease, and RJRN shall be the
surviving corporation. The Reorganization Merger shall be effected in accordance
with the DGCL pursuant to an agreement and plan of merger between RJRN and
ReorgSub substantially in the form of Annex A to Exhibit E hereto (the
"Reorganization Merger Agreement"). RJRN and ReorgSub will file a certificate of
merger (with the Reorganization Merger Agreement attached as an exhibit)
substantially in the form of Exhibit E hereto with the Secretary of State of the
State of Delaware and make all other filings or recordings required by the DGCL
in connection with the Reorganization Merger. The Reorganization Merger shall
become effective at the time (the "Reorganization Effective Time") that the
certificate of merger is duly filed with the Secretary of State of the State of
Delaware or at any later time as is specified in that certificate. As a result
of
9
the Reorganization Merger, (i) Holdings will retain all of the outstanding RJRN
Common Stock and will receive (A) all of the outstanding Nabisco Shares and (B)
the amount of cash that may be set forth in the Reorganization Merger Agreement
and (ii) RJRN will be renamed "X.X. Xxxxxxxx Tobacco Holdings, Inc.".
(c) Holdings will cause NameSub to merge with and into Holdings in
the manner set forth in this Section 2.01(c) (the "Name Change Merger"), at
which time the separate existence of NameSub shall cease, and Holdings shall be
the surviving corporation. The Name Change Merger shall be effected in
accordance with the DGCL pursuant to a plan of merger between Holdings and
NameSub substantially in the form of Annex A to Exhibit F hereto (the "Name
Change Plan of Merger"). Holdings and NameSub will file a certificate of merger
(with the Name Change Plan of Merger attached as an exhibit) substantially in
the form of Exhibit F hereto with the Secretary of State of the State of
Delaware and make all other filings or recordings required by the DGCL in
connection with the Name Change Merger. The Name Change Merger shall become
effective at the time that the certificate of merger is duly filed with the
Secretary of State of the State of Delaware or at any later time as is specified
in that certificate. As a result of the Name Change Merger, Holdings will be
renamed "Nabisco Group Holdings Corp.", all as provided in the Name Change Plan
of Merger.
ARTICLE 3
THE DISTRIBUTION
SECTION 3.01. Cooperation Before the Distribution. (a) As promptly as
practicable after the date of this Agreement, Holdings and RJRN shall prepare,
and Holdings shall file with the SEC and the NYSE, the Form 8-A, which will
include as an exhibit the Information Statement. The Information Statement will
set forth appropriate disclosure concerning RJRN and the Distribution. Holdings
and RJRN shall use all commercially reasonable efforts to cause the Form 8-A
(together with the Information Statement attached as an exhibit) to become
effective under the 1934 Act as soon as practicable. After the Form 8-A
(together with the Information Statement attached as an exhibit) has become
effective, Holdings shall mail the Information Statement as promptly as
practicable to the Holdings Stockholders of record as of the Record Date.
(b) Holdings and RJRN shall cooperate in preparing and filing with the
SEC and causing to become effective any registration statements or amendments
thereto that are necessary or appropriate to reflect the establishment of or
10
amendments to any employee benefit and other plans contemplated by the
Distribution Documents.
(c) Holdings and RJRN shall take all actions as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by the Distribution Documents.
(d) As promptly as practicable, RJRN shall prepare, file and pursue an
application to permit (i) the listing of shares of the RJRN Common Stock on the
New York Stock Exchange and (ii) the name change of Holdings to "Nabisco Group
Holdings Corp." pursuant to the Name Change Merger.
SECTION 3.02. Holdings Board Action; Conditions Precedent to the
Distribution. The Holdings Board shall, in its discretion, establish (or
delegate authority to establish) the Record Date and the Distribution Date and
any appropriate procedures in connection with the Distribution. The parties
agree that in no event shall the Distribution occur before (x) the consummation
of the Debt Tender Offers/Consent Solicitations, the Reorganization Merger and
the Name Change Merger and (y) each of the Holdings Board and the Board of
Directors of RJRN have received an opinion, addressed and satisfactory to them,
in their sole discretion, from American Appraisal Associates, Inc. (or another
independent solvency firm selected by those boards of directors), and are
otherwise satisfied in their sole discretion, as to matters relating to the
solvency and adequacy of capital of Holdings, RJRN and RJRT both before and
after giving effect to the RJRI Sale Closing and the consummation of the Debt
Tender Offers/Consent Solicitations and the transactions contemplated by the
Distribution Documents. In addition, the Distribution shall be subject to the
satisfaction or waiver of those conditions that Holdings and RJRN shall deem
necessary or advisable in connection with the Distribution.
SECTION 3.03. The Distribution. Subject to the terms and conditions set
forth or described in this Agreement, (i) on or before the Distribution Date,
Holdings shall deliver to the Distribution Agent for the benefit of the Holdings
Stockholders of record on the Record Date, a stock certificate or certificates,
endorsed by Holdings in blank, representing all of the then outstanding shares
of RJRN Common Stock owned by Holdings, (ii) the Distribution shall be effective
as of the Effective Time and (iii) Holdings and RJRN shall instruct the
Distribution Agent to distribute to, or make book-entry credits for, on or as
soon as practicable after the Distribution Date, each Holdings Stockholder of
record as of the Record Date one share of RJRN Common Stock for every three
Holdings Common Shares so held. RJRN agrees to (x) provide all certificates for
shares of RJRN Common Stock that Holdings shall require (after giving effect to
Sections
11
3.04 and 3.05) in order to effect the Distribution and (y) take all necessary
actions to adopt a book-entry stock transfer and registration system for RJRN
effective as of the Distribution Date.
SECTION 3.04. Stock Dividends. On or before the Distribution Date, RJRN
shall issue to Holdings as a stock dividend the number of shares of RJRN Common
Stock that are required to effect the Distribution, as certified by the
Distribution Agent. In connection with the Distribution, Holdings shall deliver
to RJRN for cancellation all of the share certificates currently held by it
representing RJRN Common Stock.
SECTION 3.05. Fractional Shares. All Holdings Stockholders of record as
of the Record Date will receive fractional shares of RJRN Common Stock in the
Distribution, except for those holders who (x) are entitled to receive a number
of shares of RJRN Common Stock in the Distribution that is an integer, (y) will
own less than one whole share of RJRN Common Stock in total at the Effective
Time or (z) request a physical stock certificate for the RJRN Common Stock which
those holders receive in the Distribution. No certificates or scrip representing
fractional shares of RJRN Common Stock will be received by Holdings Stockholders
in the Distribution. Holdings and RJRN will instruct the Distribution Agent to
do the following, as soon as practicable after the Distribution Date: (a) to
determine the number of whole shares and fractional shares of RJRN Common Stock
allocable to each Holdings Stockholder of record as of the Record Date who (i)
has requested a physical stock certificate or (ii) owns less than one whole
share of RJRN Common Stock, (b) to aggregate all fractional shares held by those
holders, and (c) to sell the whole shares attributable to the aggregate of those
fractional shares, in open market transactions, in each case at the then
prevailing market prices, and to cause to be distributed to each such holder, in
lieu of any fractional share, without interest, that holder's ratable share of
the proceeds of that sale, after making appropriate deductions of the amount
required, if any, to be withheld for United States federal income Tax purposes.
ARTICLE 4
EMPLOYEE BENEFITS
SECTION 4.01. Definitions. As used in this Article 4, the following
terms have the following meanings:
12
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations under that Act.
"Holdings CGP" means the Charitable Giving Plan for RJR Directors.
"Holdings Director Stock Plan" means the Equity Incentive Award Plan
for Directors and Key Employees of RJR Nabisco Holdings Corp. and
Subsidiaries, effective September 1, 1996, as amended and restated.
"Holdings D.C. Plan" means the Deferred Compensation Plan for RJR
Directors, effective November 16, 1998, as amended and restated.
"Holdings Employees" means those individuals listed on the payroll
records of any member of the Nabisco Group after the Distribution Date, or who
are identified as a Holdings Employee on Schedule 4.01(a), and shall not include
individuals who are RJRN Employees.
"Holdings Employee Group" means all Holdings Employees and Holdings
Retirees and their respective beneficiaries.
"Holdings LTIP" means the RJR Nabisco Holdings Corp. 1990 Long
Term Incentive Plan, effective April 16, 1997, as amended and restated.
"Holdings Retirees" means those individuals who were employed by
Holdings or any member of the Nabisco Group immediately before those
individuals' retirement or other termination of employment from all members of
the Nabisco Group and of the RJRN Group and Holdings or who are identified as
Holdings Retirees on Schedule 4.01(a).
"RJRN Employees" means those individuals listed on the payroll records
of any member of the RJRN Group on the Distribution Date, who are identified as
RJRN Employees on Schedule 4.01(b), or who after the Distribution Date become
employed by any member of the RJRN Group, and shall not include individuals who
are Holdings Employees.
"RJRN Employee Group" means all RJRN Employees and RJRN Retirees and
their respective beneficiaries.
"RJRN Retirees" means those individuals who were employed by any member
of the RJRN Group immediately before those individuals' retirement or other
termination of employment from all members of the RJRN Group and of the Nabisco
Group and Holdings or who are identified as RJRN Retirees on Schedule 4.01(b).
13
"Supplemental Plans" means the RJRN Supplemental Benefits Plan, the
RJRN Supplemental Executive Retirement Plan and the RJRN Additional Benefits
Plan.
"Welfare Benefits" means medical, surgical or hospital care or
benefits, or benefits in the event of sickness, accident, disability, death or
unemployment, or vacation benefits, apprenticeship or other training programs,
or day care centers, scholarship funds or prepaid legal services; provided that
Welfare Benefits do not include pensions on retirement or death or insurance to
provide those pensions.
SECTION 4.02. Employees. (a) RJRN shall, or shall cause a member of the
RJRN Group to, assume, honor and be bound by the employment and/or severance
agreements between or among any RJRN Employee and any member of the Nabisco
Group and/or the RJRN Group.
(b) Holdings shall, or shall cause a member of the Nabisco Group to,
assume, honor and be bound by the employment and/or severance agreements between
or among any Holdings Employee and any member of the Nabisco Group and/or the
RJRN Group.
SECTION 4.03. Qualified Defined Contribution Plans. (a) No member of
the Nabisco Group shall have any obligation to make contributions to RJRN's
Capital Investment Plan (the "RJRN 401(k) Plan") in respect of any member of the
Holdings Employee Group or otherwise after the Distribution Date, except for
accrued but unpaid employee and employer contributions, if any, relating to that
employee's compensation earned before the Distribution Date.
(b) Effective not later than the Distribution Date, Holdings shall, or
shall cause a member of the Nabisco Group to, adopt or designate a defined
contribution plan intended to qualify under Section 401(a) and Section 401(k) of
the Code (the "Holdings 401(k) Plan") in which members of the Holdings Employee
Group shall be eligible to participate on and after the Distribution Date to the
same extent that those members were eligible to participate in the RJRN 401(k)
Plan immediately before the Distribution Date.
(c) Within 30 days after the adoption or designation of the Holdings
401(k) Plan or as soon as practicable thereafter, RJRN shall cause to be
transferred to the Holdings 401(k) Plan cash or, to the extent provided below,
other assets as the parties may agree, having a fair market value equal to the
aggregate value of the account balances in the RJRN 401(k) Plan, and any
allocable portion of any suspense account, as of the date of the plan asset
transfer for each member of the Holdings Employee Group. The plan asset transfer
14
contemplated by this Section 4.03 shall include any notes evidencing loans to
members of the Holdings Employee Group from their account balances, securities
acceptable to Holdings, RJRN Common Stock, if any, Holdings Common Shares, if
any, and shares of the Class A Common Stock of Nabisco, if any, held in any such
member's account and the balance in cash, and shall also include all qualified
domestic relations orders, within the meaning of Section 414(p) of the Code,
applicable to members of the Holdings Employee Group. The transfer of assets
contemplated by this Section 4.03 shall be made only after Holdings has supplied
to RJRN a written representation from Holdings (with appropriate indemnities) to
the effect that the Holdings 401(k) Plan has been established in accordance with
the Code and ERISA, and an agreement that Holdings will request a determination
letter from the Internal Revenue Service ("IRS") and make any and all changes to
the Holdings 401(k) Plan necessary to receive a favorable determination letter.
(d) Holdings and RJRN shall cooperate with each other during the
period beginning on the date hereof and ending on the date that the assets are
transferred to the trust maintained under the Holdings 401(k) Plan to ensure the
ongoing operation and administration of the RJRN 401(k) Plan and the Holdings
401(k) Plan with respect to the members of the Holdings Employee Group and the
RJRN Employee Group. After that transfer of assets, Holdings shall assume all of
the RJRN Group's liabilities under the RJRN 401(k) Plan with respect to each
member of the Holdings Employee Group and the RJRN Group shall have no further
liability, under this Agreement or otherwise, to any member of the Nabisco Group
or any member of the Holdings Employee Group under the RJRN 401(k) Plan other
than liability arising out of any breach of fiduciary duties or any non-exempt
prohibited transaction occurring before that transfer of assets and liabilities.
SECTION 4.04. Qualified Defined Benefit Plans. (a) As soon as
practicable after and effective as of the Distribution Date, Holdings shall, or
shall cause a member of the Nabisco Group to, adopt or designate a defined
benefit plan ("Holdings Retirement Plan") that covers the members of the
Holdings Employee Group that participate in the Retirement Plan for Employees of
RJR Nabisco, Inc. ("RJRN Retirement Plan") immediately before the Distribution
Date ("Transferred Participants") and meets the requirements of Section 401(a)
of the Code. Holdings agrees that all service credited under the RJRN Retirement
Plan as of the Distribution Date with respect to the Transferred Participants
shall be credited under the Holdings Retirement Plan for all plan purposes,
including eligibility, vesting and benefit accrual. Effective as of the
Distribution Date, RJRN shall cause the Transferred Participants to cease
further accrual of benefits under the RJRN Retirement Plan.
15
(b) (i) As soon as practicable after the Distribution Date, RJRN shall
cause to be transferred from the RJRN Retirement Plan to the Holdings Retirement
Plan assets, in cash, equal to the amount of assets required by Section 414(l)
of the Code in respect of Transferred Participants, based on allocating assets
by priority categories described in Section 4044(a) of ERISA, as determined
under (ii) below (the "414(l) Amount"), reduced by distributions, if any, from,
and reasonable expenses of administration (consistent with past practice) under,
the RJRN Retirement Plan for benefits or other purposes made with respect to the
Transferred Participants from the Distribution Date through the date that the
assets are transferred to the trust maintained under the Holdings Retirement
Plan, plus or minus interest on the 414(l) Amount based on the actual rate of
return on assets held in the Master Trust for the RJRN Retirement Plan net of
that trust's fees and expenses from and including the Distribution Date through
but excluding the transfer date. The 414(l) Amount shall be adjusted as may be
required by the Pension Benefit Guaranty Corporation ("PBGC") or the IRS to
maintain the status of the Holdings Retirement Plan or the RJRN Retirement Plan
as an employee pension plan meeting the requirements of Section 401(a) of the
Code. Within 30 days before the Distribution Date or as soon as practicable
thereafter, Holdings and RJRN shall make any required governmental filings
necessary to effect the asset transfers described in this Section, including the
filing of IRS Form 5310-A.
(ii) Xxxxxx Xxxxx Worldwide ("RJRN's Actuary") shall be
responsible for determining the 414(l) Amount. RJRN's Actuary shall
make this determination as of the Distribution Date on the basis of the
PBGC's safe harbor assumptions set forth in Treasury Regulation Section
1.414(l)-1(b)(5)(ii). In connection therewith, RJRN shall cause RJRN's
Actuary to determine the amounts of charges and credits to the funding
standard account under Section 412 of the Code, the funding standard
account credit balance and the annual amortization charges and credits
(those amounts determined under the provisions of IRS Revenue Ruling
81-212 and other applicable guidance) to be allocated between the RJRN
Retirement Plan and the Holdings Retirement Plan as a result of the
transfer of assets and liabilities anticipated under this Section 4.04.
Those amounts shall be determined without regard to use of the de
minimis option contained in that revenue ruling and the regulations
promulgated under Section 414(l) of the Code. The actuarial
calculations of RJRN's Actuary in determining the 414(l) Amount shall
be reviewed by an actuarial firm designated by Holdings ("Holdings
Actuary"). If there is a dispute between RJRN's Actuary and Holdings
Actuary, those actuaries shall agree on the appointment of an
independent enrolled actuary associated with a nationally-recognized
actuarial firm to review the calculations of each of those actuaries.
The decisions of this third party
16
actuary shall be final, unappealable and binding on all parties. RJRN
and Holdings shall bear the fees and expenses of that third party
actuary equally
(iii) The transfer of assets contemplated by this Section 4.04
shall be made only after Holdings has supplied to RJRN (x) a written
representation from Holdings (with appropriate indemnities) to the
effect that the Holdings Retirement Plan has been established in
accordance with the Code and ERISA, and an agreement that Holdings will
request a determination letter from the IRS and make any and all
changes to the Holdings Retirement Plan necessary to receive a
favorable determination letter and (y) information enabling RJRN's
Actuary to issue the certification required by Section 414(l) of the
Code (Form 5310-A). Holdings and RJRN shall cooperate with each other
during the period beginning on the date hereof and ending on the last
day that those assets are transferred to the trust maintained under the
Holdings Retirement Plan to ensure the ongoing operation and
administration of the RJRN Retirement Plan and the Holdings Retirement
Plan with respect to the Transferred Participants.
(iv) The assets to be transferred to the trust maintained under
the Holdings Retirement Plan shall be held, invested and distributed as
required under the RJRN Retirement Plan and the related trust
thereunder for the benefit of Holdings Plan Participants after the
Distribution Date, pending the transfer to the trust maintained under
the Holdings Retirement Plan pursuant to this Section 4.04. Holdings
and RJRN shall use their best efforts to effectuate the above transfer
as promptly as possible after the Distribution Date.
(v) After the transfer of assets and liabilities from the RJRN
Retirement Plan to the Holdings Retirement Plan has occurred as
provided in this Section, RJRN and the members of the RJRN Group shall
have no further liability whatsoever (either under this Agreement or
otherwise) with respect to the Transferred Participants under the RJRN
Retirement Plan other than liability arising out of any breach of
fiduciary duties or any nonexempt prohibited transaction occurring
before that transfer of assets and liabilities.
SECTION 4.05. Supplemental Benefit Plans. (a) All liabilities under the
Supplemental Plans to the extent applicable to any member of the Holdings
Employee Group and any assets allocable to those liabilities shall be
transferred to and assumed by Holdings as of the Distribution Date ("Holdings
Supplemental Assets and Liabilities").
17
(b) RJRN shall retain all liabilities, and any assets allocable to
those liabilities, to the extent applicable to any member of the RJRN Employee
Group under the Supplemental Plans ("Retained Supplemental Assets and
Liabilities").
SECTION 4.06. Welfare Benefit Plans. (a) (i) Effective as of the
Distribution Date, no member of the Holdings Employee Group shall be eligible to
participate in any "Employee Welfare Benefit Plan" (within the meaning of
Section 3(1) of ERISA) sponsored by RJRN or any member of the RJRN Group and,
except as set forth in Section 4.06(c) and except for life insurance claims in
respect of any member of the Holdings Employee Group who dies on or before the
Distribution Date, neither RJRN nor any member of the RJRN Group shall have any
liability after the Distribution Date for Welfare Benefits of any member of the
Holdings Employee Group.
(ii) RJRN shall be responsible for all Welfare Benefits payable to
or in respect of each member of the RJRN Employee Group regardless of
whether the event(s) giving rise to payment of those benefits occurred
before, on or after the Distribution Date.
(b) (i) Effective as of the Distribution Date, Holdings shall
establish or designate one or more Employee Welfare Benefit Plans as Holdings,
in its sole discretion shall determine, covering members of the Holdings
Employee Group.
(ii) Except as set forth in Section 4.06(c), Holdings shall be
responsible for all Welfare Benefits payable after the Distribution
Date to or in respect of each member of the Holdings Employee Group
including, without limitation, post-employment medical, dental and life
insurance benefits, if any.
(c) Expenses incurred by each member of the Holdings Employees Group
under RJRN's medical and dental plans during the year that includes the
Distribution Date shall be taken into account for purposes of satisfying
deductible and coinsurance requirements and satisfaction of out-of-pocket
provisions of Holdings' medical and dental plans for that year. RJRN shall
retain liability for all medical or dental claims incurred before the
Distribution Date by any member of the Holdings Employee Group. For purposes of
this Section 4.06, a medical or dental claim shall be deemed "incurred" when the
relevant service is provided or item is purchased.
SECTION 4.07. Employee Stock Options and Restricted Stock. (a) All
options outstanding under the Holdings LTIP on the Distribution Date and held by
members of the Holdings Employee Group shall be equitably adjusted pursuant to
18
the terms of that LTIP to reflect the Distribution. After that equitable
adjustment, all of those options shall continue to relate to Holdings Common
Shares.
(b) Each option outstanding under the Holdings LTIP on the
Distribution Date and held by a member of the RJRN Employee Group shall be
equitably adjusted pursuant to the terms of that LTIP to reflect the
Distribution. Following that equitable adjustment, 50% in value (as may be
equitably determined pursuant to the Holdings LTIP) of each of those adjusted
options shall continue to relate to Holdings Common Shares and 50%, in value, as
so determined, shall relate to shares of RJRN Common Stock.
(c)(i) Before the Distribution, Holdings shall take the action under
the Holdings LTIP that it deems necessary to ensure that each holder of shares
of "Restricted Stock" (as defined in the Holdings LTIP) shall receive pursuant
to the Distribution that number of shares of RJRN Common Stock that that holder
would have received pursuant to the Distribution if that Restricted Stock had
been 100% vested immediately before the Distribution Date; provided, however,
that the shares of RJRN Common Stock so distributed shall be forfeitable and
subject to the same restrictions on transfer as the shares of Restricted Stock
in respect of which those shares of RJRN Common Stock were distributed, as
modified to effectuate clause (ii) of this Section 4.07(c) ("RJRN Restricted
Shares").
(ii) If any RJRN Restricted Shares or shares of Restricted Stock are
forfeited, those shares shall be forfeited only to RJRN or Holdings,
respectively. It is understood and agreed that, without in any way affecting the
rights of any holder of any Restricted Shares or any shares of Restricted Stock,
on and after the Distribution Date, (x) none of the member companies or other
business entities of the Nabisco Group shall have any interest in or rights to
RJRN Restricted Shares and (y) none of the member companies or other business
entities of the RJRN Group shall have any interest in or rights to Restricted
Stock.
SECTION 4.08. Outside Director Benefits. (a) All options or other
stock-based awards outstanding under the Holdings Director Stock Plan on the
Distribution Date and held by any current or former non-employee director shall
be equitably adjusted pursuant to the terms of that Plan to reflect the
Distribution. Following that equitable adjustment, all of those options or other
stock-based awards shall continue to relate to Holdings Common Shares. Holdings
shall retain all liabilities and related assets, if any, under the Holdings
Director Stock Plan.
(b) Effective as of the Distribution Date, the number of stock credits
in each participant's account in the Holdings D.C. Plan shall be equitably
adjusted pursuant to the terms of that D.C. Plan to reflect the Distribution.
Following that
19
equitable adjustment, all of those stock credits shall continue to relate to
Holdings Common Shares. Holdings shall retain all liabilities and related
assets, if any, under the Holdings D.C. Plan.
(c) Holdings shall retain all liabilities, and any assets allocable to
those liabilities, under the Holdings CGP.
(d) Holdings shall retain all liabilities and related assets, if any,
relating to life insurance, automobile insurance, excess liability insurance,
business travel accident insurance and matching grants, in each case relating to
all current and former directors of Holdings.
SECTION 4.09. Deferred Compensation.
(a) (i) All deferred compensation liabilities to the extent applicable
to any member of the Holdings Employee Group, and any assets allocable to those
liabilities, shall be transferred to and assumed by Holdings as of the
Distribution Date ("Holdings Deferred Compensation Assets and Liabilities").
(ii) Effective as of the Distribution Date, any Holdings Employee's
deferred compensation denominated in stock credits shall be equitably adjusted
to reflect the Distribution. After that equitable adjustment, that stock credit
shall relate to Holdings Common Shares.
(b) (i) RJRN shall retain all deferred compensation liabilities, and
any assets allocable to those liabilities, to the extent applicable to any
member of the RJRN Employee Group under the Deferred Compensation Plans
("Retained Deferred Compensation Assets and Liabilities").
(ii) Effective as of the Distribution Date, any RJRN Employee's
deferred compensation denominated in stock credits shall be equitably adjusted
to reflect the Distribution.
SECTION 4.10. Employee Benefit Transition Services. Pursuant to and on
the terms and conditions set forth in Schedule 4.10 hereto, each party agrees
(i) to provide certain administrative services to the other parties in respect
of the members of the RJRN Employee Group and the Holdings Employee Group,
including but not limited to payroll services, record keeping services and
claims processing services and (ii) to cover those members under the employee
plans and benefit arrangements set forth in Schedule 4.10 and to provide claims
processing services in respect of those employees, in both cases for the period
set forth in that Schedule. The continuation of coverage and administrative
services contemplated
20
by this Section 4.10 shall not affect the allocation of liabilities and
obligations as set forth in this Article 4.
SECTION 4.11. COBRA. (a) As of the Distribution Date, Holdings shall,
or shall cause a member of the Holdings Group to, assume RJRN's obligations and
responsibilities with respect to health care benefits provided, and to be
provided, under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA Coverage") to each member of the Holdings Employee Group.
(b) RJRN shall, or shall cause a member of the RJRN Group to, retain
the obligation and responsibility to provide COBRA Coverage to each member of
the RJRN Employee Group.
SECTION 4.12. Third Party Beneficiaries. No provision of this Article 4
shall (a) create any third party beneficiary rights in any person (including any
beneficiary or dependent thereof) in respect of continued employment or resumed
employment with Holdings, the RJRN Group or the Nabisco Group, (b) create any
rights in any persons in respect of any benefits that may be provided, directly
or indirectly, under any employee benefit plan or benefit arrangement sponsored
or to be sponsored by Holdings or any member of the RJRN Group or the Nabisco
Group, or (c) otherwise establish or create any rights on the part of any third
party.
SECTION 4.13. WARN Act. (a) RJRN will be responsible for providing any
notification that may be required under the Workers Adjustment and Retraining
Notification Act ("WARN Act") with respect to any RJRN Employees on or after the
Distribution Date.
(b) Holdings will be responsible for providing any notification that
may be required under the WARN Act with respect to any Holdings Employees on or
after the Distribution Date.
ARTICLE 5
CERTAIN RJRN COVENANTS
SECTION 5.01. Certain Definitions. As used herein, the following terms
have the following meanings:
21
"Capital Stock" means (i) in the case of a corporation, corporate stock;
(ii) in the case of an association, limited liability company or business
entity, shares, participations, rights, membership or other interests or other
equivalents of corporate stock; (iii) in the case of a partnership, limited or
general partnership interests; and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Net Income" means, for any period, the consolidated net income
(loss) of RJRN and its consolidated subsidiaries for that period, excluding (i)
all amortization and depreciation of trademarks and goodwill for that period;
(ii) all extraordinary or restructuring non-cash losses, charges and expenses
incurred in that period; (iii) all extraordinary non-cash gains realized in that
period; (iv) all earnings in that period attributable to Equity Interests in
Persons that are not Subsidiaries of RJRN, except and only to the extent that
RJRN or its Subsidiaries actually receive cash dividends or distributions with
respect to those Equity Interests; and (v) the cumulative effect on consolidated
net income of any change in GAAP and/or any change in the method of accounting
of RJRN or its consolidated subsidiaries. All of these adjustments will be made
only to the extent that they are reflected in consolidated net income (loss) for
the period in question and only after giving effect to any related net tax
benefit or expense. Except as set forth above, the determination of Cash Net
Income shall be made in accordance with GAAP; provided that (x) all cash
restructuring charges and (y) all losses, charges and expenses incurred in
connection with the settlement(s) of any Tobacco Claim(s) that are otherwise
required to be accrued under GAAP on or before the date of the agreement to
settle those Tobacco Claim(s) shall, in each case, be amortized on a
straight-line basis using a six-year amortization schedule.
"Equity Interest" means any Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"GAAP" means generally accepted accounting principles in the United
States as in effect at any time, applied on a basis consistent with RJRN's most
recent audited financial statements.
"Guarantee" means any direct or indirect guarantee (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business) of another Person's Indebtedness if the primary purpose of that
guarantee is to protect the holder of that Indebtedness against loss, including,
but not limited to, the grant of any security or similar interest for that
purpose (whether or not liability for that Indebtedness is assumed).
22
"Indebtedness" means, without duplication, (i) all obligations for
borrowed money; (ii) all obligations evidenced by bonds, debentures, notes or
other similar instruments; (iii) all obligations to pay the deferred purchase
price of property or services, except trade accounts payable arising in the
ordinary course of business; (iv) all obligations under any lease or similar
arrangement that would be required to be accounted for by the lessee as a
capital lease in accordance with GAAP; (v) all obligations to purchase
securities or other property that arise out of the sale of the same or
substantially similar securities or other property; (vi) all obligations to
reimburse any bank or other Person for amounts paid under a letter of credit or
similar instrument; and (vii) all Guarantees (but only to the extent of those
Guarantees).
"Investment" means an investment (whether acquired directly, indirectly
or by assumption, operation of law or otherwise) in another Person (including an
Affiliate) in the form of a direct or indirect advance, a loan or other
extension of credit (including, but not limited to, by way of Guarantees, but
excluding advances to customers or suppliers in the ordinary course of business
that would be recorded as accounts receivable on a consolidated balance sheet
prepared in accordance with GAAP), a capital contribution or a purchase or other
acquisition of Indebtedness, Equity Interests, derivative instruments or other
securities issued by that Person (other than any bona fide hedging transaction
entered into with a financial institution), as well as any other item that would
be classified as an investment on a consolidated balance sheet prepared in
accordance with GAAP.
"Invest" has the correlative meaning.
"Investment Grade" means that the RJRN Debt is rated at least BBB- by
Standard & Poor's Ratings Services and at least Baa3 by Xxxxx'x Investors
Service, Inc.; provided that, if no RJRN Debt is outstanding at that time, then
the RJRN Debt shall be deemed to be rated at those ratings that the Rating
Agencies assign to Indebtedness of RJRN having the hypothetical characteristics
of the RJRN Debt on a "shadow rating" or "indicative rating" basis.
"Measurement Period" means the period from the beginning of the first
full fiscal quarter of RJRN ending after the Distribution Date to the end of the
last fiscal quarter of RJRN for which consolidated financial statements have
been provided to Holdings pursuant to Section 6.07.
"Net Cash Proceeds" means an amount equal to the cash proceeds actually
received by RJRN from the issuance of its Equity Interests, other than
Redeemable Equity Interests, from Persons other than its Affiliates, less all
expenses (including fees or commissions of attorneys, accountants, underwriters,
financial advisors and other agents or consultants) incurred by RJRN or any of
its Subsidiaries in respect of that transaction.
23
"Officer's Certificate" means a certificate signed by the Chairman of the
Board of Directors, the Chief Executive Officer, the President, the Chief
Financial Officer or the Comptroller of RJRN.
"Qualified Opinion" means a written opinion of a nationally recognized
investment banking firm, which opinion and firm shall be reasonably satisfactory
to Holdings.
"Rating Agencies" means Standard & Poor's Ratings Services and Xxxxx'x
Investors Service, Inc., and their respective successors.
"Redeemable Equity Interest" means any Equity Interest that is (i)
subject to any mandatory redemption (whether scheduled, upon the occurrence of
specified events or otherwise); (ii) redeemable at the option of its holder; or
(iii) convertible into or exchangeable for Equity Interests described in clause
(i) or (ii).
"Restricted Payment" means (i) any dividend or distribution on account of
any Equity Interests of RJRN or any of its Subsidiaries and (ii) the purchase,
redemption or other acquisition or retirement for value of the Equity Interests
of RJRN or any of its Subsidiaries (including, but not limited to, any purchase,
redemption or other acquisition or retirement for value of those Equity
Interests by way of a merger, consolidation, business combination, restructuring
or recapitalization); provided that the following are not Restricted Payments:
(1) dividends or distributions payable solely in the Capital Stock (other than
Redeemable Equity Interests) of RJRN; (2) dividends or distributions payable
solely to RJRN or any of its wholly owned Subsidiaries; (3) pro rata dividends
or distributions on the Capital Stock of any Subsidiary of RJRN that is not
wholly owned by RJRN or its Subsidiaries; (4) acquisitions of Equity Interests
from RJRN or its Subsidiaries (including, but not limited to, acquisitions
upon original issuance); and (5) redemptions, repurchases or other retirements
or acquisitions for value from employees, officers and directors of RJRN and
its Subsidiaries of Equity Interests of RJRN or its Subsidiaries issued
pursuant to the terms of board-approved benefit plans, so long as the
aggregate purchase price paid for all of those redeemed, repurchased, retired
or acquired Equity Interests shall not exceed $15 million in any fiscal year.
"RJRN Debt" means the long-term senior unsecured public debt of RJRN
that is guaranteed on an unsecured basis by RJRT.
SECTION 5.02. Restricted Payments. (a) Subject to Section 5.04, RJRN
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, declare, make or pay any Restricted Payment unless:
24
(i) the Restricted Payment is RJRN's regularly scheduled quarterly
cash dividend and the amount per share of that Restricted Payment does
not exceed the amount per share of its last regularly scheduled
quarterly cash dividend (appropriately adjusted to reflect any stock
split, reverse stock split, stock dividend, spin-off or other
recapitalization); or
(ii) the sum of the aggregate amount of that Restricted Payment,
together with the amounts of all other Restricted Payments paid or made
by RJRN or any of its Subsidiaries after the date of this Agreement,
does not exceed the sum of (x) $300 million, plus (y) 60% of the Cash
Net Income (or, if Cash Net Income is negative, less 100% of the
deficit) during the Measurement Period, plus (z) 100% of the Net Cash
Proceeds from the issuance of Equity Interests of RJRN during the
Measurement Period; or
(iii) the RJRN Debt is Investment Grade and RJRN delivers to
Holdings, at least 30 days before the declaration or other RJRN Board
approval of that Restricted Payment, a Qualified Opinion, dated no
earlier than 45 days before its delivery to Holdings, that the RJRN Debt
is reasonably likely to remain Investment Grade after giving effect to
that Restricted Payment; or
(iv) the Restricted Payment is the payment of a dividend within 60
days of its declaration if the dividend was permitted at the time of
declaration.
(b) The amount of any non-cash Restricted Payment shall equal its fair
market value as determined in good faith by a resolution of the RJRN Board and
set forth in an Officer's Certificate delivered to Holdings at least 30 days
before the date of its declaration, in the case of a dividend, or payment, in
the case of any other Restricted Payment.
SECTION 5.03. Prohibition on Certain Leveraged Transactions and Other
Mergers. (a) Subject to Section 5.04 , RJRN will not, and will not permit any of
its Subsidiaries to, (i) directly or indirectly, assume or Guarantee the
Indebtedness of, or Invest in, any Person, (ii) enter into any transaction in
connection with which RJRN or any Subsidiary will, directly or indirectly,
assume or Guarantee the Indebtedness of, or Invest in, any Person or (iii) enter
into a merger, consolidation or other business combination with any Person that
has Indebtedness or Investments in another Person, if the Guarantee or the
proceeds of the Indebtedness or Investments have been or will be used, directly
or indirectly,
25
to acquire or finance the acquisition of any Equity Interests of RJRN or any of
its Subsidiaries.
(b) Section 5.03(a) shall not apply (i) to the use by RJRN or any of its
Subsidiaries of the proceeds of any Guarantee, Indebtedness or Investment to
finance the purchase, redemption or other acquisition or retirement for value of
Equity Interests of RJRN or any of its Subsidiaries by RJRN or any of those
Subsidiaries (including, but not limited to, any purchase or other acquisition
upon original issuance of any such Equity Interests), so long as that purchase,
redemption or other acquisition or retirement for value is not prohibited by
Section 5.02 or (ii) if RJRN delivers to Holdings a Qualified Opinion that
neither Rating Agency has reduced, or is reasonably likely to reduce, the
rating of RJRN Debt below Investment Grade or, if before the announcement of
that transaction the rating of the RJRN Debt is already below Investment
Grade, further below Investment Grade, as a result of the proposed or any
related transaction(s) and any announcement relating thereto.
(c) Neither RJRN nor RJRT shall merge, combine, consolidate or enter into
a business combination with, or sell all or substantially all of that party's
assets to, the other party.
SECTION 5.04. Termination. All of the obligations of RJRN and its
Subsidiaries under this Article 5, except those set forth in Section 5.03(c)
which shall survive, and under Section 6.07(a) shall terminate on the twelfth
anniversary of the date of this Agreement.
ARTICLE 6
ACCESS TO INFORMATION
SECTION 6.01. Provision of Corporate Records. Immediately before or as
soon as practicable after the Distribution Date, each Group shall provide to the
other Group all documents, contracts, books, records and data (including, but
not limited to, minute books, stock registers, stock certificates and documents
of title) in its possession relating primarily to the other Group or its
business and affairs; provided that if any of those documents, contracts, books,
records or data relate to both Groups or both of their businesses and
operations, each Group shall provide to the other Group when and if requested
true and complete copies of those documents, contracts, books, records or data.
26
SECTION 6.02. Access to Information. After the Distribution Date, each
Group shall promptly provide reasonable access during normal business hours to
the other Group and its directors, officers, employees, accountants, counsel and
other designated representatives to all documents, contracts, books, records,
Defense Materials, computer data and other data in that Group's possession
relating to the other Group or its business and affairs (other than data and
information subject to an attorney/client or other privilege that is not subject
to the provisions of the Joint Defense Agreements or any other joint defense
arrangements between a member or members of one Group and a member or members of
another Group), to the extent that that access is reasonably requested by the
other Group, including, but not limited to, for audit, accounting, litigation
and disclosure and reporting purposes.
SECTION 6.03. Future Litigation and Other Proceedings. Each Group shall
use all commercially reasonable efforts to make its directors, officers,
employees and representatives available as witnesses to the other Group and its
accountants, counsel and other designated representatives, upon written request.
Additionally, each Group shall otherwise cooperate with the other Group, to the
extent reasonably required in connection with any Action arising out of either
Group's business and operations in which the requesting party may periodically
be involved.
SECTION 6.04. Reimbursement. Except and to the extent that any member of
one Group is obligated to indemnify any member of the other Group under either
Article 7 or Article 8 for that cost or expense, each Group providing
information or witnesses to the other Group, or otherwise incurring any expense
in connection with cooperating, under Sections 6.01, 6.02 and 6.03 shall be
entitled to receive from the recipient thereof, upon the presentation of
invoices therefor, payment for all out-of-pocket costs and expenses as may
reasonably be incurred in providing such information, witnesses or cooperation.
SECTION 6.05. Retention of Records. Except as otherwise required by law
or agreed to in writing, each party shall retain, and shall cause the members of
its Group to retain, all information relating to the other Group's business and
operations in accordance with the past practice of that party. Notwithstanding
the foregoing, any party may destroy or otherwise dispose of any of that
information at any time, provided that, for a period of five years after the
Effective Time, before destruction or disposal, (i) that party shall provide not
less than 90 days' prior written notice to the other party, specifying the
information proposed to be destroyed or disposed of, and (ii) if the recipient
of that notice shall request in writing before the scheduled date for
destruction or disposal that any of the information proposed to be destroyed or
disposed of be delivered to that requesting party, the party proposing the
destruction or disposal shall promptly
27
deliver to that requesting party the information that was requested at the
expense of the requesting party.
SECTION 6.06. Confidentiality. Each party shall hold and shall cause its
directors, officers, employees, agents, consultants, attorneys and advisors
("Representatives") to hold in strict confidence all information (other than any
information relating primarily to the business or affairs of that party)
concerning the other party unless and to the extent that (i) that party is
compelled to disclose that information by judicial or administrative process or,
in the opinion of its counsel, by other requirements of law or (ii) that
information can be shown to have been (A) in the public domain through no fault
of that party, (B) lawfully acquired after the Distribution Date on a
non-confidential basis from other sources or (C) acquired or developed
independently by that party without violating this Section or any other
confidentiality agreement with the other party. Notwithstanding the foregoing, a
party may disclose that information to its Representatives so long as those
Representatives are informed by that party of the confidential nature of that
information and are directed by that party to treat that information
confidentially. Each party shall be responsible for any breach of this Section
by its Representatives. If a party or any of its Representatives becomes legally
compelled to disclose any documents or information subject to this Section, that
party will promptly notify the other party so that the other party may seek a
protective order or other remedy or waive that party's compliance with this
Section. If no such protective order or other remedy is obtained or waiver
granted, that party will furnish only the portion of the information that it is
advised by counsel is legally required and will exercise all commercially
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded that information. Each party agrees to be liable for any breach of
this Section by it and its Representatives. Without prejudice to the rights and
remedies of either party to this Agreement, if either party breaches or
threatens to breach any provision of this Section, the other party shall be
entitled to equitable relief by way of an injunction.
SECTION 6.07. Delivery of Officer's Certificates. RJRN will deliver to
Holdings:
(a) subject to Section 5.04, not later than 5 Business Days before RJRN
or any of its Subsidiaries declares or otherwise agrees to make any Restricted
Payment, other than any Restricted Payment made pursuant to Section 5.02(a)(i),
an Officer's Certificate stating that that Restricted Payment, is permitted and
setting forth the basis upon which the calculations or determinations required
by Section 5.02 or Section 5.04, as applicable, were computed; and
28
(b) within 5 Business Days of receipt thereof, any letters prepared by
any in-house counsel or outside counsel of RJRN or RJRT that (i) are delivered
to RJRN's independent auditor and (ii) relate to any Tobacco Claims or any other
litigation-related letters delivered to RJRN's auditors.
SECTION 6.08. Inapplicability of Article to Tax Matters. Notwithstanding
anything to the contrary in this Article 6, Article 6 shall not apply to
information, records and other matters relating to Taxes, all of which shall be
governed by the Tax Sharing Agreement.
ARTICLE 7
INDEMNIFICATION FOR NON-TOBACCO LIABILITIES
SECTION 7.01. RJRN Indemnification of the Nabisco Group for Certain
Liabilities. (a) Subject to Section 7.03, on and after the Distribution Date,
RJRN and RJRT shall indemnify and hold harmless each member of the Nabisco Group
and their respective directors, officers and employees (each, a "Nabisco
Indemnitee") from and against any and all Liabilities incurred or suffered by
any Nabisco Indemnitee arising out of (i) any and all RJRN Group Liabilities and
(ii) the breach by any member of the RJRN Group of any obligation under (x) this
Agreement or (y) any of the other Distribution Documents, other than the Tax
Sharing Agreement and the Intercompany Services Agreement.
(b) Subject to Section 7.03, RJRN and RJRT shall indemnify and hold
harmless each Nabisco Indemnitee from and against any and all Liabilities caused
by any untrue statement or alleged untrue statement of a material fact contained
in any Disclosure Document, or caused by any omission or alleged omission to
state therein a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
insofar as those Liabilities are caused by any such untrue statement or omission
or alleged untrue statement or omission based upon information furnished to RJRN
in writing by Holdings or any member of the Nabisco Group expressly for use
therein.
(c) Subject to Section 7.03, RJRN and RJRT shall indemnify and hold
harmless each Nabisco Indemnitee from and against any and all Liabilities caused
by any untrue statement or alleged untrue statement of a material fact contained
in any document filed with the SEC by any member of the Nabisco Group pursuant
to the 1933 Act or the 1934 Act, or caused by any omission or alleged omission
to state therein a material fact necessary to make the statements therein, in
the light
29
of the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that those Liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission (i)
relating primarily to the Tobacco Business, if that statement or omission was
made or occurred before or at the Effective Time or (ii) based upon information
that is either furnished to Holdings by any member of the RJRN Group or
incorporated by reference by Holdings from any filings made by any member of the
RJRN Group with the SEC under the 1933 Act or the 1934 Act, if that statement or
omission was made or occurred after the Effective Time.
SECTION 7.02. Holdings Indemnification of RJRN Group. (a) Subject to
Section 7.03, on and after the Distribution Date, Holdings shall indemnify and
hold harmless each member of the RJRN Group and their respective directors,
officers and employees (each, an "RJRN Indemnitee") from and against any and all
Liabilities incurred or suffered by any RJRN Indemnitee arising out of (i) any
Nabisco Group Liabilities or (ii) the breach by any member of the Nabisco Group
of any obligation under (x) this Agreement or (y) any of the other Distribution
Documents, other than the Tax Sharing Agreement and the Intercompany Services
Agreement.
(b) Subject to Section 7.03, Holdings shall indemnify and hold harmless
each RJRN Indemnitee from and against any and all Liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Disclosure Document, or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that those Liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information (i) relating primarily to the Food Business, if that statement
or omission was made or occurred before or at the Effective Time or (ii) that is
either furnished to RJRN by any member of the Nabisco Group or incorporated by
reference by RJRN from any filings made by any member of the Nabisco Group with
the SEC under the 1933 Act or the 1934 Act, if that statement or omission was
made or occurred after the Effective Time.
SECTION 7.03. Third-Party Rights; Tax Benefits. Any indemnification
pursuant to Section 7.01 or Section 7.02 shall be paid net of any tax benefit to
the Indemnified Party attributable to the relevant payment. It is expressly
agreed that no insurer or any other third party shall be (i) entitled to a
benefit (as a third-party beneficiary or otherwise) that it would not be
entitled to receive in the absence of Section 7.01 or Section 7.02, (ii)
relieved of the responsibility to pay any claims to which it is obligated or
(iii) entitled to any subrogation rights with respect to any obligation under
Section 7.01 or Section 7.02.
30
SECTION 7.04. Notice and Payment of Claims. If any Nabisco Indemnitee or
RJRN Indemnitee (the "Indemnified Party") determines that it is or may be
entitled to indemnification by any party (the "Indemnifying Party") under
Article 7 of this Agreement (other than in connection with any Action subject to
Sections 7.05), the Indemnified Party shall deliver to the Indemnifying Party a
written notice specifying, to the extent reasonably practicable, the basis for
its claim for indemnification and the amount for which the Indemnified Party
reasonably believes it is entitled to be indemnified. Within 30 days after
receipt of that notice, the Indemnifying Party shall pay the Indemnified Party
that amount in cash or other immediately available funds unless the Indemnifying
Party objects to the claim for indemnification or the amount of the claim. If
the Indemnifying Party does not give the Indemnified Party written notice
objecting to that indemnity claim and setting forth the grounds for the
objection(s) within that 30-day period, the Indemnifying Party shall be deemed
to have acknowledged its liability for that claim and the Indemnified Party may
exercise any and all of its rights under applicable law to collect that amount.
If there is a timely objection by the Indemnifying Party, the Indemnifying Party
shall pay to the Indemnified Party in cash the amount, if any, that is Finally
Determined to be required to be paid by the Indemnifying Party in respect of
that indemnity claim within 15 days after that indemnity claim has been so
Finally Determined.
SECTION 7.05. Notice and Defense of Third-Party Claims (Other than
Tobacco Claims). Promptly after the earlier of receipt of (i) notice that a
third party has commenced an Action (other than a Tobacco Claim) against or
otherwise involving any Indemnified Party or (ii) information from a third party
alleging the existence of a claim (other than a Tobacco Claim) against an
Indemnified Party, in either case, with respect to which indemnification may be
sought under Article 7 of this Agreement (a "Third-Party Claim"), the
Indemnified Party shall give the Indemnifying Party written notice of the
Third-Party Claim. The failure of the Indemnified Party to give notice as
provided in this Section 7.05 shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent that the Indemnifying
Party is prejudiced by the failure to give notice. Within 30 days after receipt
of that notice, the Indemnifying Party may (i) at its option, elect to assume
and control the defense of that Third-Party Claim at its sole cost and expense
by giving written notice to that effect to the Indemnified Party, or (ii) object
to the claim for indemnification set forth in the notice delivered by the
Indemnified Party pursuant to the first sentence of this Section 7.05; provided
that if the Indemnifying Party does not within that 30-day period give the
Indemnified Party written notice objecting to that indemnification claim and
setting forth the grounds for the objection(s), the Indemnifying Party shall be
deemed to have acknowledged its liability for that indemnification claim. If the
Indemnifying Party has acknowledged liability and elected to assume the defense
of a Third-Party Claim, (x) the defense shall be
31
conducted by counsel retained by the Indemnifying Party and reasonably
satisfactory to the Indemnified Party, provided that the Indemnified Party shall
have the right to participate in those proceedings and to be represented by
counsel of its own choosing at the Indemnified Party's sole cost and expense;
and (y) the Indemnifying Party may settle or compromise the Third-Party Claim
without the prior written consent of the Indemnified Party so long as any
settlement or compromise of the Third-Party Claim includes an unconditional
release of the Indemnified Party from all claims that are the subject of that
Third-Party Claim, provided that the Indemnifying Party may not agree to any
such settlement or compromise pursuant to which any remedy or relief, other than
monetary damages for which the Indemnifying Party shall be responsible under
this Agreement, shall be applied to or against the Indemnified Party, without
the prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. If the Indemnifying Party does not assume the defense of
a Third-Party Claim for which it has acknowledged liability for indemnification
hereunder, the Indemnified Party will act in good faith with respect to that
Third-Party Claim and may require the Indemnifying Party to reimburse it on a
current basis for its reasonable expenses of investigation, reasonable
attorney's fees and reasonable out-of-pocket expenses incurred in investigating
and defending against that Third-Party Claim and the Indemnifying Party shall be
bound by the result obtained with respect to that claim by the Indemnified
Party; provided that the Indemnifying Party shall not be liable for any
settlement or compromise of any Third-Party Claim effected without its consent,
which consent shall not be unreasonably withheld. The Indemnifying Party shall
pay to the Indemnified Party in cash the amount, if any, for which the
Indemnified Party is entitled to be indemnified under this Agreement within 15
days after that Third-Party Claim has been Finally Determined.
SECTION 7.06. Contribution. If for any reason the indemnification
provided for in Section 7.01 or 7.02 is unavailable to any Indemnified Party, or
insufficient to hold it harmless, then the Indemnifying Party shall contribute
to the amount paid or payable by that Indemnified Party as a result of those
Liabilities in that proportion as is appropriate to reflect the relative fault
of the Indemnifying Party, on the one hand, and the Indemnified Party, on the
other hand, in connection with those statements or omissions, which relative
fault shall be determined by reference to the Business and Group to which those
actions, conduct, statements or omissions are primarily related, as well as any
other relevant equitable considerations.
32
ARTICLE 8
INDEMNIFICATION FOR TOBACCO LIABILITIES
SECTION 8.01. Notice and Defense of Tobacco Claims Against RJRN; Tobacco
Claims Against Holdings or Other Members of the Nabisco Group. (a) As promptly
as reasonably practicable after the earlier of receipt of notice that an Action
has been commenced in respect of any Tobacco Claim against RJRN, or receipt of
information alleging the existence of a Tobacco Claim against RJRN (an "RJRN
Tobacco Claim"), RJRN shall give Holdings written notice thereof. Holdings shall
(x) have the right to assume and control the defense of that RJRN Tobacco Claim
on behalf of RJRN if, in the reasonable judgment of Holdings, that RJRN Tobacco
Claim is in any way based upon allegations of conduct, acts, omissions,
research, statements, warnings, health effects or exposure, occurring, arising
or suffered on or before the date of this Agreement and (y) be deemed to have
assumed, and be in control of, that defense, unless Holdings provides written
notice to RJRN to the contrary within 15 days of Holdings' receipt of notice of
that RJRN Tobacco Claim from RJRN. RJRN agrees that, on and as of the date of
this Agreement, Holdings has assumed and is in control of all RJRN Tobacco
Claims in respect of which an Action has been commenced on or before the date of
this Agreement.
(b) If Holdings has assumed, or is deemed to have assumed, the defense
of an RJRN Tobacco Claim, Holdings shall (i) conduct the defense of that RJRN
Tobacco Claim in good faith, in consultation with RJRN and (ii) have the right,
after good faith consultation with RJRN, to appoint and retain lead counsel and
such other counsel as Holdings may deem necessary or appropriate to defend that
RJRN Tobacco Claim; provided that RJRN shall have the right to participate with
its own counsel in the defense of any and all RJRN Tobacco Claims; provided,
further that it is understood and agreed that any counsel appointed and retained
on or before the date of this Agreement to defend any RJRN Tobacco Claim in
respect of which an Action has been commenced on or before the date of this
Agreement shall be deemed to have been appointed and retained by Holdings for
all purposes and RJRN shall be deemed to have consented to that appointment and
retention. Holdings may not settle or compromise any RJRN Tobacco Claim without
the prior written consent of RJRN, which consent shall not be unreasonably
withheld.
(c) Each party shall cooperate, and cause their respective Affiliates to
cooperate, in the defense of any Tobacco Claim and shall furnish or cause to be
furnished such records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials or appeals, as may be reasonably
requested or otherwise material in connection with that defense. RJRN and RJRT
shall bear
33
the out-of-pocket fees and expenses of that cooperation, as contemplated by
Section 8.02.
(d) Holdings shall conduct and control the defense of any Tobacco Claim
against any Nabisco Indemnitee and have the right to appoint and retain lead
counsel and such other counsel as Holdings may deem necessary or appropriate to
defend that Tobacco Claim. Holdings may not settle or compromise any Tobacco
Claim against any Nabisco Indemnitee for which indemnification is sought under
this Agreement, without the prior written consent of RJRN.
SECTION 8.02. Indemnification of Nabisco Indemnitees for Tobacco
Liabilities. (a) Tobacco Liability Indemnity. On and after the Distribution
Date, each of RJRN and RJRT shall, jointly and severally, indemnify and hold
harmless each Nabisco Indemnitee from and against any and all Liabilities
incurred or suffered by that Nabisco Indemnitee arising out of, based upon or
relating in any way, in whole or in part, to Tobacco Liabilities.
(b) Procedures for Indemnification of Tobacco Liabilities. The
procedures for payment and satisfaction of the indemnification obligations of
RJRN and RJRT set forth in Section 8.02(a) shall be the following:
(i) Payment of Fees and Expenses. RJRN and/or RJRT shall pay all
expenses of investigation, all attorneys' fees and all out-of-pocket
expenses incurred by or on behalf of RJRN, RJRT and any Nabisco
Indemnitee in investigating or defending against any and all RJRN
Tobacco Claims and all Tobacco Claims against any Nabisco Indemnitee, on
a current basis, but in any event within 15 Business Days of any written
demand by Holdings for either party to make that payment or payments.
Each written demand by Holdings for indemnification under this Section
8.02(b)(i) shall include documentation for the fees and expenses for
which Holdings demands indemnification under this Section 8.02(b)(i).
Any cash disbursements made by any Nabisco Indemnitee with respect to
those fees and expenses shall be deemed advances made on behalf of and
for the benefit of RJRN and/or RJRT, and shall be amounts from and
against which that Nabisco Indemnitee is indemnified pursuant to this
Section 8.02(b)(i).
(ii) Payment in Respect of Certain Other Tobacco Liabilities. RJRN
and/or RJRT shall pay to the relevant Nabisco Indemnitee (whether or not
the obligation to pay, or the amount of the obligation, is in dispute),
within 15 Business Days of any written demand by Holdings to RJRN and
RJRT that RJRN and/or RJRT make that payment or payments, the
34
amount in cash specified in that demand that Holdings reasonably
believes is necessary to do any or all of the following: (x) to satisfy
and discharge any and all obligations under any judgment, assessment,
arbitral award, fine, penalty or other order or ruling, (y) to appeal,
seek a stay, judicial review, injunction, mandamus or other relief to
prevent the enforcement of any judgment, arbitral award, fine, penalty
or other order or ruling against it (including, without limitation, the
posting of any bond with respect to any such relief) or (z) subject to
the last sentence of Section 8.01(b), to settle or resolve, in each case
any Tobacco Claims against any Nabisco Indemnitee or any RJRN Tobacco
Claim. Each written demand by Holdings for indemnification under this
Section 8.02(b)(ii) shall include a calculation of the amount of the
indemnification claim and any related documentation of the amount for
which Holdings demands indemnification under this Section 8.02(b)(ii).
Neither RJRN nor RJRT may object to its liability for, or the amount of
any payment to be made pursuant to, this Section 8.02(b)(ii) before
making that payment and neither RJRN nor RJRT shall be entitled to any
right of set-off with respect thereto.
(c) Responsibility For Expenses Incurred in Enforcing this Article 8.
Each of RJRN and RJRT shall, jointly and severally, indemnify and hold harmless
each Nabisco Indemnity from and against all expenses of investigation, all
attorney's fees, all out-of-pocket expenses and all other Liabilities incurred
by or on behalf of any Nabisco Indemnitee in any and all Actions seeking to
enforce the obligations of RJRN and/or RJRT under this Article 8. Holdings shall
provide documentation to RJRN and RJRT of the fees, expenses and Liabilities for
which it seeks indemnification under this Section 8.02(c).
SECTION 8.03. Preservation of Historical Privileges. Each of RJRN, RJRT
and Holdings acknowledges and agrees that those parties have prepared and
litigated the Tobacco Claims and other Actions or threatened Actions in which
the parties have a common interest on and before the Effective Time pursuant to
the Joint Defense Agreements and hereby reaffirms that party's intent to
continue, to the maximum extent permitted by law, to prepare and litigate all
Tobacco Claims and other Actions or threatened Actions in which the parties have
a common interest after the Effective Time pursuant to the terms of those Joint
Defense Agreements. Each of RJRN, RJRT and Holdings further agrees, to the
maximum extent permitted by law, not to make any statement, take any action or
fail to make any statement or take any action, in each case, of any kind
whatsoever that foreseeably could have the effect of compromising the existence
and protections of the attorney-client privilege, the work product doctrine and
other applicable privileges or protections that existed for Defense Materials
exchanged on or before the Effective Time between or among Holdings, RJRN or
RJRT (whether
35
at law or equity or pursuant to any of the Joint Defense Agreements) in respect
of all Defense Materials prepared before the Effective Time. Without limiting
the generality of the foregoing, and to the maximum extent permitted by law,
none of Holdings, RJRN or RJRT may waive, undermine or fail to defend, any such
privilege or protection, or take any action, or fail to take any action, that
could result in the disclosure of any of those Defense Materials to any third
party that would have the effect of waiving or undermining that privilege or
protection, in either case without the prior written consent of the affected or
nondisclosing party or parties.
SECTION 8.04. Third Party Rights; Tax Benefits. Any indemnification
pursuant to Section 8.02 shall be paid net of any tax benefit to the Nabisco
Indemnitee attributable to the relevant payment. The determination of any such
tax benefit shall take into account all tax consequences to the Nabisco
Indemnitee in connection with the relevant payment and with any transactions
resulting in that payment. It is expressly agreed that no insurer or any other
third party shall be (i) entitled to a benefit (as a third party beneficiary or
otherwise) that would not be entitled to receive in the absence of the foregoing
indemnification provisions, (ii) relieved of the responsibility to pay any
claims to which it is obligated or (iii) entitled to any subrogation rights with
respect to any obligation under Section 8.02.
ARTICLE 9
CERTAIN OTHER AGREEMENTS
SECTION 9.01. Intercompany Accounts. Except for any amounts owed by
Nabisco to RJRN or by RJRN to Nabisco, which amounts shall be paid in the
ordinary course of business, and except as otherwise provided in any of the
other Distribution Documents, all intercompany receivable, payable and loan
balances existing as of the Distribution Date between any member of the Nabisco
Group and any member of RJRN Group will be deemed to have been paid in full by
the party or parties owing any such obligation on and as of (i) the
Reorganization Effective Time, in the case of any such account between Nabisco
and its Subsidiaries, on the one hand, and RJRN and its Subsidiaries (other than
Nabisco and the Subsidiaries of Nabisco), on the other hand, and (ii) the
Effective Time, in the case of any such account between Holdings, on the one
hand, and any member of the RJRN Group (other than Holdings), on the other hand.
SECTION 9.02. Intellectual Property Rights and Licenses. Except as
otherwise provided in any of the other Distribution Documents, neither Group
36
shall have any right or license in or to any technology, software, intellectual
property (including any trademark, service xxxx, patent or copyright), know-how
or other proprietary right owned, licensed or held for use by the other Group.
SECTION 9.03. Further Assurances and Consents. In addition to the
actions specifically provided for elsewhere in this Agreement and the other
Distribution Documents, each of the parties to this Agreement shall use all
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by this Agreement
and the other Distribution Documents, including, but not limited to, using all
commercially reasonable efforts to obtain any consents and approvals and to make
any filings and applications necessary or desirable in order to consummate the
transactions contemplated by this Agreement and the other Distribution
Documents; provided that no party to this Agreement shall be obligated to pay
any consideration for any consent or approval (except for filing fees and other
similar charges) to any third party from whom a consent or approval is requested
or to take any action or omit to take any action if the taking of or the
omission to take that action would be unreasonably burdensome to that party, its
Group or its Group's business.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given,
if to Holdings, to:
Nabisco Group Holdings Corp.
f/k/a RJR Nabisco Holdings Corp.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: General Counsel
Facsimile: 000-000-0000
37
if to RJRN, to:
X.X. Xxxxxxxx Tobacco Holdings, Inc.
f/k/a RJR Nabisco Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx-Xxxxx, XX 00000
Attention: General Counsel
Facsimile: 000-000-0000
if to RJRT, to:
X. X. Xxxxxxxx Tobacco Company
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx-Xxxxx, XX 00000
Attention: General Counsel
Fax: 000-000-0000
or any other address or facsimile number and to any other individual's attention
as that party may hereafter specify in writing for this purpose by notice to the
other parties to this Agreement. Each notice, request or other communication
under this Section 10.01 shall be effective (a) if given by facsimile, when that
facsimile is transmitted to the facsimile number specified in this Section and
the appropriate facsimile confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
SECTION 10.02. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, that amendment or waiver is
in writing and signed, in the case of an amendment, by Holdings, RJRN and RJRT,
or in the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement shall be cumulative and not exclusive of any rights
or remedies provided by law.
SECTION 10.03. Expenses. (a) Except as specifically provided otherwise
in any of the Distribution Documents, all costs and expenses incurred in
connection with the preparation, execution and delivery of the Distribution
Documents and the consummation of the Distribution and the other transactions
contemplated hereby and thereby (including (x) the fees and expenses of all
counsel,
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accountants and financial and other advisors of both Groups in connection
therewith, and all expenses in connection with preparing, filing and printing
the Disclosure Documents and (y) any fees and expenses incurred to redeem and/or
refinance RJRN's long-term debt) shall be paid by RJRN; provided that (i)
Holdings shall pay any fees and expenses incurred to redeem and/or refinance its
junior subordinated debentures that are held by RJR Nabisco Holdings Capital
Trust I and RJR Nabisco Holdings Capital Trust II and (ii) the Holdings
Stockholders shall pay their own expenses, if any, incurred in connection with
the Distribution.
(b) RJRN shall be responsible for all Liabilities arising out of (i)
the closing of the corporate headquarters of RJRN and Holdings, (ii) all
severance and benefit payment obligations to Holdings Employees arising as a
result of the completion of the Distribution, and (iii) miscellaneous expenses
identified by Holdings that are otherwise related to the transactions
contemplated by the Distribution Documents or represent certain ongoing
administrative expenses or financing needs. In full satisfaction of RJRN's
responsibilities under this Section 10.03(b) only, RJRN shall pay to Holdings
before the Effective Time the amount of cash that Holdings calculates as the
amount of those Liabilities no later than 3 Business Days before the
Effective Time. Holdings' notice shall be accompanied by a schedule setting
forth its calculation of the amount of these expenses.
SECTION 10.04. Successor and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties to this Agreement
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the other parties to this
Agreement.
SECTION 10.05. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of New York.
SECTION 10.06. Counterparts; Effectiveness; No Third Party
Beneficiaries. This Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party to this Agreement shall have received a counterpart of this
Agreement signed by the other parties. Except as specifically set forth in
Article 7 or Article 8 in respect of any Nabisco Indemnitee or RJRN Indemnitee,
the parties to this Agreement do not intend that any of its provisions will or
do confer any rights, benefits, remedies, obligations or liabilities under this
Agreement upon any Person other than the parties to this Agreement and their
respective successors and assigns.
SECTION 10.07. Entire Agreement. The Distribution Documents constitute
the entire understanding of the parties with respect to the subject matter of
those documents and supersede all prior agreements and understandings, both oral
and written, among the parties with respect to the subject matter of the
Distribution Documents. No representation, inducement, promise, understanding,
condition or warranty not set forth in the Distribution Documents has been made
or relied upon by any party to this Agreement. To the extent that the provisions
of this Agreement are inconsistent with the provisions of any other Distribution
Document, the provisions of the other Distribution Document shall prevail.
SECTION 10.08. Tax Sharing Agreement; Certain Transfer Taxes. (a)
Except to the extent that this Section 10.08 or another provision of this
Agreement
39
expressly indicates and that the application of that provision is not
inconsistent with the Tax Sharing Agreement, this Agreement shall not govern any
Tax matters, and any and all Liabilities relating to Taxes shall be governed
exclusively by the Tax Sharing Agreement.
(b) All transfer, documentary, sales, use, stamp and registration taxes
and fees (including any penalties and interest) incurred in connection with any
of the transactions described in Sections 2.01 of this Agreement shall be borne
and paid by the Person that is transferring the relevant property. The party or
parties that is or are required by applicable law to file any Return (as defined
in the Tax Sharing Agreement) or make any payment with respect to any of those
taxes shall do so, and the other party or parties shall cooperate with respect
to that filing or payment as necessary. The non-paying party or parties shall
reimburse the paying party in accordance with this Section 10.08, as
appropriate, within 5 Business Days after it or they receive(s) notice of the
payment of those taxes. The Tax Sharing Agreement shall exclusively govern all
Taxes, other than transfer, documentary, sales, use, stamp and registration
taxes, incurred in connection with any of the transactions described in Section
2.01 of this Agreement.
SECTION 10.09. Jurisdiction. Any Action seeking to enforce any provision
of, or based on any matter arising out of or in connection with, any of the
Distribution Documents or any of the transactions contemplated by any of the
Distribution Documents shall be brought exclusively in the United States
District Court for the Southern District of New York or any other New York State
court sitting in New York County, and each of the parties hereby consents to the
exclusive jurisdiction of those courts (and of the appropriate appellate courts
therefrom) in any such Action and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such Action in any of those courts or that any such Action
which is brought in any of those courts has been brought in an inconvenient
forum. Process in any such Action may be served on any party anywhere in the
world, whether within or without of the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on that party
as provided in Section 10.01 shall be deemed effective service of process on
that party.
SECTION 10.10. Existing Arrangements. Except for the Distribution
Documents and except as otherwise contemplated by any Distribution Document, all
prior agreements and arrangements, including those relating to goods, rights or
services provided or licensed, between any member(s) of the RJRN Group and any
member(s) of the Nabisco Group shall be terminated effective as of the
Distribution Date, if not previously terminated. No such agreements or
40
arrangements shall be in effect after the Distribution Date unless embodied in
the Distribution Documents.
SECTION 10.11. Termination Before the Distribution. The Holdings Board
may at any time before the Distribution abandon the Distribution and, by notice
to RJRN, terminate this Agreement (whether or not the Holdings Board has
previously approved this Agreement and/or the Distribution).
SECTION 10.12. Severability. If any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained in this Agreement shall not in any way be affected or
impaired by that holding. The parties shall endeavor in good faith negotiations
to replace the invalid, illegal or unenforceable provisions so that the
replacement provisions will be valid, legal and enforceable and will have an
economic effect which comes as close as possible to that of the invalid, illegal
or unenforceable provisions.
SECTION 10.13. Specific Performance. Each of the parties to this
Agreement acknowledges and agrees that damages for a breach or threatened breach
of any of the provisions of this Agreement would be inadequate and irreparable
harm would occur. In recognition of this fact, each party agrees that, if there
is a breach or threatened breach, in addition to any damages, any of the other
nonbreaching parties to this Agreement, without posting any bond, shall be
entitled to seek and obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction,
attachment, or any other equitable remedy which may then be available to
obligate the breaching party (i) to perform its obligations under this Agreement
or (ii) if the breaching party is unable, for whatever reason, to perform those
obligations, to take any other actions as are necessary, advisable or
appropriate to give the other parties to this Agreement the economic effect
which comes as close as possible to the performance of those obligations
(including, but not limited to, transferring, or granting Liens on, the assets
of the breaching party to secure the performance by the breaching party of those
obligations).
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Distribution Agreement to be duly executed by their respective authorized
officers as of the date first above written.
RJR NABISCO HOLDINGS CORP.
By:
------------------------------------------
Name:
Title:
RJR NABISCO, INC.
By:
------------------------------------------
Name:
Title:
X. X. XXXXXXXX TOBACCO COMPANY
By:
------------------------------------------
Name:
Title:
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