-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UpIjlNr96ph5YhF3MrqTnom8H3UcAEJ3/aJ5UNLQQo2ug3QXH2IVK41NEo74zZ1Z 0A5pyyWV3CO/Vgzm6gXGIw== 0000912057-00-024100.txt : 20000516 0000912057-00-024100.hdr.sgml : 20000516 ACCESSION NUMBER: 0000912057-00-024100 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NABISCO HOLDINGS CORP CENTRAL INDEX KEY: 0000932130 STANDARD INDUSTRIAL CLASSIFICATION: COOKIES & CRACKERS [2052] IRS NUMBER: 133077142 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13556 FILM NUMBER: 630768 BUSINESS ADDRESS: STREET 1: 7 CAMPUS DR STREET 2: P O BOX 311 CITY: PARSIPPANY STATE: NJ ZIP: 07054 BUSINESS PHONE: 2016825000 MAIL ADDRESS: STREET 1: 7 CAMPUS DR STREET 2: P O BOX 311 CITY: PARSIPPANY STATE: NJ ZIP: 07054 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NABISCO INC CENTRAL INDEX KEY: 0000069526 STANDARD INDUSTRIAL CLASSIFICATION: FOOD & KINDRED PRODUCTS [2000] IRS NUMBER: 131841519 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01021 FILM NUMBER: 630769 BUSINESS ADDRESS: STREET 1: 7 CAMPUS DR STREET 2: P O BOX 311 CITY: PARSIPPANY STATE: NJ ZIP: 07054 BUSINESS PHONE: 2016825000 MAIL ADDRESS: STREET 1: 7 CAMPUS DRIVE STREET 2: P O BOX 311 CITY: PARSIPPANY STATE: NJ ZIP: 07054 10-Q 1 10-Q AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 ------------------- NABISCO HOLDINGS CORP. (Exact name of registrant as specified in its charter) DELAWARE 1-13556 13-3077142 (State or other (Commission file (I.R.S. Employer Identification jurisdiction of number) No.) incorporation or organization)
NABISCO, INC. (Exact name of registrant as specified in its charter) NEW JERSEY 1-1021 13-1841519 (State or other (Commission file (I.R.S. Employer Identification jurisdiction of number) No.) incorporation or organization)
7 CAMPUS DRIVE PARSIPPANY, NEW JERSEY 07054-0311 (973) 682-5000 (Address, including zip code, and telephone number, including area code, of the principal executive offices of Nabisco Holdings Corp. and Nabisco, Inc.) ------------------------ INDICATE BY CHECK MARK WHETHER THE REGISTRANTS (1) HAVE FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANTS WERE REQUIRED TO FILE SUCH REPORTS), AND (2) HAVE BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO __ INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANTS' CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: APRIL 30, 2000: NABISCO HOLDINGS 51,438,397 SHARES OF CLASS A COMMON STOCK, PAR VALUE $.01 CORP.: PER SHARE 213,250,000 SHARES OF CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE NABISCO, INC.: 100 SHARES OF COMMON STOCK, PAR VALUE $2.50 PER SHARE
------------------- NABISCO, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEX
PAGE ---- PART I--FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Statements of Income--Three Months Ended March 31, 2000 and 1999............................. 1 Consolidated Condensed Statements of Comprehensive Income--Three Months Ended March 31, 2000 and 1999........ 2 Consolidated Condensed Statements of Cash Flows--Three Months Ended March 31, 2000 and 1999...................... 3 Consolidated Condensed Balance Sheets--March 31, 2000 and December 31, 1999......................................... 4 Notes to Consolidated Condensed Financial Statements........ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk...................................................... 13 PART II--OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders......... 14 Item 5. Other Information........................................... 15 Item 6. Exhibits and Reports on Form 8-K............................ 15 Signatures........................................................... 16
PART I ITEM 1. FINANCIAL STATEMENTS NABISCO HOLDINGS CORP. NABISCO, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 2000 MARCH 31, 1999 ------------------- ------------------- NABISCO NABISCO HOLDINGS NABISCO HOLDINGS NABISCO -------- -------- -------- -------- NET SALES.................................................. $ 2,069 $2,069 $ 1,855 $1,855 -------- ------ -------- ------ Costs and expenses: Cost of products sold.................................... 1,146 1,146 1,027 1,027 Selling, advertising, administrative and general expenses............................................... 693 693 641 641 Amortization of trademarks and goodwill.................. 55 55 53 53 -------- ------ -------- ------ OPERATING INCOME..................................... 175 175 134 134 Interest and debt expense.................................. (70) (70) (65) (65) Other income (expense), net................................ (6) (6) (10) (10) -------- ------ -------- ------ INCOME BEFORE INCOME TAXES........................... 99 99 59 59 Provision for income taxes................................. 39 39 23 23 -------- ------ -------- ------ NET INCOME........................................... $ 60 $ 60 $ 36 $ 36 ======== ====== ======== ====== NET INCOME PER COMMON SHARE--BASIC......................... $ .23 $ .14 ======== ======== NET INCOME PER COMMON SHARE--DILUTED....................... $ .22 $ .13 ======== ======== DIVIDENDS DECLARED PER COMMON SHARE........................ $ .1875 $ .1875 ======== ======== Average number of common shares outstanding (in thousands): Basic.................................................... 264,663 264,736 ======== ======== Diluted.................................................. 266,633 267,042 ======== ========
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. 1 NABISCO HOLDINGS CORP. NABISCO, INC. CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (DOLLARS IN MILLIONS)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 2000 MARCH 31, 1999 ------------------- ------------------- NABISCO NABISCO HOLDINGS NABISCO HOLDINGS NABISCO -------- -------- -------- -------- NET INCOME.................................................. $ 60 $ 60 $ 36 $ 36 -------- ------ -------- ------ Other comprehensive income (loss): Cumulative translation adjustment......................... 3 3 (135) (135) Provision (benefit) for income taxes...................... -- -- -- -- -------- ------ -------- ------ OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAX........ 3 3 (135) (135) -------- ------ -------- ------ Comprehensive income (loss)................................. $ 63 $ 63 $ (99) $ (99) ======== ====== ======== ======
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. 2 NABISCO HOLDINGS CORP. NABISCO, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (DOLLARS IN MILLIONS)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 2000 MARCH 31, 1999 ------------------- ------------------- NABISCO NABISCO HOLDINGS NABISCO HOLDINGS NABISCO ----- ----- ----- ----- CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: Net income............................................... $ 60 $ 60 $ 36 $ 36 Adjustments to reconcile net income to net cash flows from (used in) operating activities: Depreciation of property, plant and equipment........ 66 66 67 67 Amortization of intangibles.......................... 55 55 53 53 Deferred income tax provision........................ 21 21 16 16 Restructuring payments............................... (21) (21) (18) (18) Accounts receivable, net............................. 130 130 (8) (8) Inventories.......................................... (74) (74) (73) (73) Prepaid expenses and other current assets............ (3) (3) (1) (1) Accounts payable..................................... (248) (248) (172) (172) Accrued liabilities.................................. (13) (13) (48) (46) Income taxes accrued................................. 10 10 (4) (4) Other, net........................................... (2) (2) 3 3 ----- ----- ----- ----- Net cash flows (used in) operating activities.......... (19) (19) (149) (147) ----- ----- ----- ----- CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: Capital expenditures..................................... (39) (39) (47) (47) Proceeds from sale of assets............................. 2 2 2 2 ----- ----- ----- ----- Net cash flows (used in) investing activities.......... (37) (37) (45) (45) ----- ----- ----- ----- CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: Net proceeds from long-term debt......................... 57 57 226 226 Increase in notes payable................................ 33 33 5 5 Dividends paid on common stock........................... (50) (50) (46) (46) Net proceeds from issuance of Class A common stock....... -- -- 2 -- ----- ----- ----- ----- Net cash flows from financing activities............... 40 40 187 185 ----- ----- ----- ----- Effect of exchange rate changes on cash and cash equivalents.............................................. -- -- (6) (6) ----- ----- ----- ----- Net change in cash and cash equivalents................ (16) (16) (13) (13) Cash and cash equivalents at beginning of period........... 110 110 111 111 ----- ----- ----- ----- Cash and cash equivalents at end of period................. $ 94 $ 94 $ 98 $ 98 ===== ===== ===== ===== Income taxes paid, net of refunds.......................... $ 8 $ 8 $ 11 $ 11 Interest paid.............................................. $ 77 $ 77 $ 72 $ 72
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. 3 NABISCO HOLDINGS CORP. NABISCO, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (DOLLARS IN MILLIONS)
MARCH 31, 2000 DECEMBER 31, 1999 ------------------- ------------------- NABISCO NABISCO HOLDINGS NABISCO HOLDINGS NABISCO ------- ------- ------- ------- ASSETS Current assets: Cash and cash equivalents............................. $ 94 $ 94 $ 110 $ 110 Accounts receivable, net.............................. 553 553 681 681 Deferred income taxes................................. 100 100 116 116 Inventories........................................... 964 964 898 898 Prepaid expenses and other current assets............. 82 82 79 79 ------- ------- ------- ------- TOTAL CURRENT ASSETS.............................. 1,793 1,793 1,884 1,884 ------- ------- ------- ------- Property, plant and equipment--at cost.................. 5,087 5,087 5,053 5,053 Less accumulated depreciation........................... (2,030) (2,030) (1,966) (1,966) ------- ------- ------- ------- Net property, plant and equipment..................... 3,057 3,057 3,087 3,087 ------- ------- ------- ------- Trademarks, net of accumulated amortization of $1,242 and $1,214, respectively.............................. 3,414 3,414 3,443 3,443 Goodwill, net of accumulated amortization of $1,032 and $1,007, respectively.................................. 3,151 3,151 3,159 3,159 Other assets and deferred charges....................... 163 163 134 134 ------- ------- ------- ------- $11,578 $11,578 $11,707 $11,707 ======= ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable......................................... $ 72 $ 72 $ 39 $ 39 Accounts payable...................................... 403 403 642 642 Accrued liabilities................................... 982 932 1,020 970 Intercompany payable to Nabisco Holdings.............. -- 7 -- 7 Current maturities of long-term debt.................. 11 11 158 158 Income taxes accrued.................................. 121 121 104 104 ------- ------- ------- ------- TOTAL CURRENT LIABILITIES......................... 1,589 1,546 1,963 1,920 ------- ------- ------- ------- Long-term debt (less current maturities)................ 4,094 4,094 3,892 3,892 Other noncurrent liabilities............................ 770 770 744 744 Deferred income taxes................................... 1,180 1,180 1,176 1,176 Stockholders' equity: Class A common stock (51,412,707 shares issued and outstanding at March 31, 2000 and December 31, 1999)............................................... 1 -- 1 -- Class B common stock (213,250,000 shares issued and outstanding at March 31, 2000 and December 31, 1999)............................................... 2 -- 2 -- Paid-in capital....................................... 4,093 4,141 4,093 4,141 Retained earnings..................................... 158 137 148 127 Treasury stock, at cost............................... (17) -- (17) -- Accumulated other comprehensive income (loss)......... (290) (290) (293) (293) Notes receivable on common stock purchases............ (2) -- (2) -- ------- ------- ------- ------- TOTAL STOCKHOLDERS' EQUITY........................ 3,945 3,988 3,932 3,975 ------- ------- ------- ------- $11,578 $11,578 $11,707 $11,707 ======= ======= ======= =======
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. 4 NABISCO HOLDINGS CORP. NABISCO, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS NOTE 1--INTERIM REPORTING AND RESULTS OF OPERATIONS GENERAL For interim reporting purposes, certain costs and expenses are charged to operations in proportion to the estimated total annual amount expected to be incurred. The results for the three months ended March 31, 2000 are not necessarily indicative of the results to be expected for the year ended December 31, 2000. In management's opinion, the accompanying unaudited consolidated condensed financial statements (the "Consolidated Condensed Financial Statements") of Nabisco Holdings Corp. ("Nabisco Holdings") and Nabisco, Inc. ("Nabisco" together with Nabisco Holdings, the "Companies") contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. The Consolidated Condensed Financial Statements should be read in conjunction with the consolidated financial statements and footnotes included in the Annual Report on Form 10-K of Nabisco Holdings and Nabisco for the year ended December 31, 1999. Certain prior period amounts have been reclassified to conform to the current period presentation. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS During the second quarter of 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, which was required to be adopted by January 1, 2000, with early adoption permitted. In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of SFAS No. 133, which amended SFAS No. 133 to delay its effective date one year. SFAS No. 133 requires that all derivative instruments be recorded on the consolidated balance sheet at their fair value. Changes in the fair value of derivatives will be recorded each period in earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Nabisco Holdings and Nabisco have not yet determined the impact, if any, that adoption or subsequent application of SFAS No. 133 will have on its financial position or results of operations. ACQUISITION GOODWILL ADJUSTMENT In November 1999, Nabisco acquired certain assets and liabilities of Favorite Brands International, Inc. As of March 31, 2000 the purchase price allocation has not been fully completed, pending the completion of the acquisition integration plan. However, additional goodwill of $24 million was recognized during the first quarter of 2000 from the settlement of the purchase price for working capital amounts, resulting in total goodwill of $92 million. 5 NOTE 1--INTERIM REPORTING AND RESULTS OF OPERATIONS (CONTINUED) 1998 RESTRUCTURING CHARGES In the second and fourth quarters of 1998, Nabisco recorded restructuring charges of $406 million ($268 million after tax) and $124 million ($94 million after tax), respectively, and in 1999, recorded a net restructuring credit of $67 million ($48 million after tax), resulting in a total net charge for the 1998 restructuring programs of $463 million ($314 million after tax). These restructuring programs were undertaken to streamline operations and improve profitability and will result in a workforce reduction of approximately 6,900 employees of which 6,700 positions were eliminated as of March 31, 2000. The June 1998 program was substantially completed in 1999 and the December 1998 program is expected to be substantially completed by mid-year 2000. The restructuring programs when completed will require cash expenditures, net of cash proceeds of approximately $140 million. The key elements of the restructuring programs include:
SEVERANCE CONTRACT ASSET OTHER EXIT IN MILLIONS AND BENEFITS TERMINATIONS IMPAIRMENTS COSTS TOTAL - ----------- ------------ ------------ ----------- ---------- -------- Sales force reorganizations.............. $ 37 $ 3 $ -- $ -- $ 40 Distribution reorganizations............. 16 8 9 -- 33 Staff reductions......................... 83 -- 3 -- 86 Manufacturing costs reduction initiatives............................ 22 -- 8 -- 30 Plant closures........................... 46 3 217 15 281 Product line rationalizations............ 4 4 20 32 60 ----- ---- ----- ---- ----- Total 1998 restructuring reserves.... 208 18 257 47 530 1999 net restructuring credit............ (50) 1 (14) (4) (67) ----- ---- ----- ---- ----- 158 19 243 43 463 ----- ---- ----- ---- ----- Charges and Payments: Cumulative through December 31, 1999..... (132) (14) (233) (35) (414) Three months ended March 31, 2000........ (11) -- (4) (2) (17) ----- ---- ----- ---- ----- Total charges and payments, net of cash proceeds...................... (143) (14) (237) (37) (431) ----- ---- ----- ---- ----- Reserve and valuation account balances as of March 31, 2000...................... $ 15 $ 5 $ 6 $ 6 $ 32 ===== ==== ===== ==== =====
The key elements of the restructuring programs, after the restructuring credit of $67 million include:
SEVERANCE CONTRACT ASSET OTHER EXIT IN MILLIONS AND BENEFITS TERMINATIONS IMPAIRMENTS COSTS TOTAL - ----------- ------------ ------------ ----------- ---------- -------- Sales force reorganizations.............. $ 16 $ 3 $ -- $-- $ 19 Distribution reorganizations............. 11 4 7 -- 22 Staff reductions......................... 59 1 4 -- 64 Manufacturing costs reduction initiatives............................ 19 -- 8 -- 27 Plant closures........................... 51 6 203 15 275 Product line rationalizations............ 2 5 21 28 56 ---- --- ---- --- ---- Total restructuring charges.......... $158 $19 $243 $43 $463 ==== === ==== === ====
Total charges and payments include cash expenditures, non-cash charges primarily for asset impairments and committed severance and benefits to be paid. The total cash payments, net of cash proceeds applied against the restructuring reserves totaled $123 million, which is comprised of cumulative cash expenditures of $145 million and cumulative cash proceeds of $22 million. For the quarter ended March 31, 2000, cash payments, net of cash proceeds totaled $20 million, which is comprised of $21 million 6 NOTE 1--INTERIM REPORTING AND RESULTS OF OPERATIONS (CONTINUED) of cash expenditures and $1 million of cash proceeds which were applied against the restructuring reserves. Cash payments for the three months ended March 31, 2000 exceeded charges and payments, net of cash proceeds, for the three months ended March 31, 2000 due to payments made to satisfy severance and benefit obligations previously committed and charged against the reserves. NOTE 2--INVENTORIES The major classes of inventory are shown in the table below:
MARCH 31, DECEMBER 31, IN MILLIONS 2000 1999 - ----------- --------- ------------ Finished products........................................... $576 $551 Raw materials............................................... 244 199 Work in process............................................. 42 45 Other....................................................... 102 103 ---- ---- $964 $898 ==== ====
NOTE 3--SEGMENT INFORMATION OPERATING SEGMENT DATA Nabisco Holdings is a holding company whose subsidiaries are engaged in the manufacture, distribution and sale of cookies, crackers and other food products. Nabisco Holdings is organized and reports its results of operations in three business segments: Nabisco Biscuit Company, the Nabisco Foods Company and the International Food Group which are segregated by both product and geographic area. The Company evaluates performance and allocates resources based on operating company contribution ("OCC") before restructuring-related expenses. OCC before restructuring-related expenses for each reportable segment is operating income before amortization of intangibles, restructuring charges and credits and exclusive of restructuring-related expenses.
THREE MONTHS ENDED MARCH 31, --------------------- IN MILLIONS 2000 1999 - ----------- -------- ---------- Net sales from external customers: Nabisco Biscuit Company................................... $ 881 $ 867 Nabisco Foods Company..................................... 631 435 International Food Group.................................. 557 553 ------- ------- Total............................................... $ 2,069 $ 1,855 ======= ======= Operating company contribution: Nabisco Biscuit Company................................... $ 132 $ 121 Nabisco Foods Company..................................... 65 49 International Food Group.................................. 33 32 ------- ------- Total segment operating company contribution................ 230 202 Restructuring-related expenses.............................. -- 15 Amortization of trademarks and goodwill..................... 55 53 ------- ------- Consolidated operating income............................... 175 134 Interest and debt expense................................... 70 65 Other expense, net.......................................... 6 10 ------- ------- Income before income taxes.................................. $ 99 $ 59 ======= =======
7 NOTE 4--SUBSEQUENT EVENT On May 5, 2000, the European Commission gave clearance to Nabisco's previously announced intention of joining a consortium of investors, Finalrealm Limited ("Finalrealm"), that has acquired the equity of United Biscuits (Holdings) plc ("UB"), a United Kingdom company, for cash of 265 pence per UB share. Pursuant to the definitive agreements and subject to completion: (i) Nabisco will contribute approximately $45 million in cash and its operations in Spain, Portugal and the Middle East (in 1999, these operations had net sales of approximately $290 million) to an associate of Finalrealm and in exchange receive dual convertible discounted preferred securities; (ii) Finalrealm has agreed to procure the sale to Nabisco of UB's operations in China, Hong Kong and Taiwan (in 1999, these operations had net sales of approximately $66 million). It is expected that Nabisco will have: (i) an economic interest of 26.5% in the consortium which will be comprised of UB's businesses in the United Kingdom, France, the Benelux countries and Nabisco's operations named above; and (ii) ownership of UB's Asian businesses cited above. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of Nabisco Holdings' financial condition and results of operations. The discussion and analysis of the results of operations is divided into separate sections for sales, operating company contribution and operating income. The sales section includes information as reported in the historical financial statements followed by management's discussion and analysis of these results. The operating company contribution and operating income sections include information as reported in the historical financial statements, followed by special items that management believes impact the comparability of historical results, results excluding special items and management's discussion and analysis of results excluding special items. Results excluding special items are presented on a basis consistent with how the businesses are managed. Special items include restructuring-related expenses that management believes affect the comparability of the results of operations. The results of operations excluding special items should not be viewed as a substitute for the historical results of operations but as a tool to better understand the underlying trends in the business. The discussion and analysis of Nabisco Holdings' financial condition and results of operations should be read in conjunction with the historical financial information and the related notes thereto included in the Consolidated Condensed Financial Statements. The food business is conducted by the operating subsidiaries of Nabisco Holdings. Nabisco's businesses in the United States are comprised of Nabisco Biscuit Company and the Nabisco Foods Company, formerly known as the U.S. Foods Group. Nabisco's businesses outside the United States are conducted by Nabisco Ltd and Nabisco International, Inc. ("Nabisco International" together with Nabisco Ltd, the "International Food Group"). SALES
THREE MONTHS ENDED MARCH 31, ------------------------------ DOLLARS IN MILLIONS 2000 1999 % CHANGE - ------------------- -------- -------- -------- NET SALES: Nabisco Biscuit Company................................... $ 881 $ 867 2% Nabisco Foods Company..................................... 631 435 45% International Food Group.................................. 557 553 1% ------ ------ Total..................................................... $2,069 $1,855 12% ====== ======
- Nabisco Biscuit Company's net sales increased 2% versus the prior year due to continued momentum in volume growth from its core cookie and cracker brands as well as the impact of several new products. Offsetting some of these gains were several discontinued breakfast food and snack items. - Nabisco Foods Company's net sales increased 45% to $631 million. Excluding the impact on net sales resulting from the November 1999 acquisition of the Favorite Brands' business, net sales grew 14%, over the prior year, primarily due to volume gains from nuts, confections and pet snacks. - International's net sales increased 1% versus the prior year to $557 million. Excluding the impact of unfavorable foreign currency translations, International's net sales increased 2%. This increase is primarily due to volume gains in Argentina, principally due to the impact of the Canale S.A. acquisition, the Andean region and Asia as well as price increases in Brazil, partially offset by volume declines in Brazil, Mexico and Spain.
9 OPERATING COMPANY CONTRIBUTION
THREE MONTHS ENDED MARCH 31, ------------------------------ DOLLARS IN MILLIONS 2000 1999 % CHANGE - ------------------- -------- -------- -------- REPORTED OPERATING COMPANY CONTRIBUTION(1): Nabisco Biscuit Company................................... $ 132 $ 108 22% Nabisco Foods Company..................................... 65 48 35% International Food Group.................................. 33 31 6% ------ ------ Total....................................................... 230 187 23% ------ ------ SPECIAL ITEMS: Restructuring-related expenses: Nabisco Biscuit Company................................. -- (13) Nabisco Foods Company................................... -- (1) International Food Group................................ -- (1) ------ ------ Total....................................................... -- (15) ------ ------ OPERATING COMPANY CONTRIBUTION EXCLUDING SPECIAL ITEMS: Nabisco Biscuit Company................................... 132 121 9% Nabisco Foods Company..................................... 65 49 33% International Food Group.................................. 33 32 3% ------ ------ Total....................................................... $ 230 $ 202 14% ====== ======
- ------------------------ (1) Operating company contribution represents operating income before amortization of trademarks and goodwill and restructuring charges (credits). THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON OPERATING COMPANY CONTRIBUTION EXCLUDING SPECIAL ITEMS: - Nabisco Biscuit Company's operating company contribution increased 9% versus the prior year. The increase reflects the impact of ongoing productivity programs on manufacturing costs and volume gains in its core cookie and cracker brands. Increased marketing spending and lower breakfast snack volumes partially offset these gains. - Nabisco Foods Company's operating company contribution increased 33% versus the prior year. The results were primarily due to strong volume gains from nuts, confections and pet snacks partially offset by increased marketing spending. - International's operating company contribution increased 3% versus the prior year. The increase was primarily due to volume increases in Argentina, the Andean region and Asia. Also contributing to the increase was the impact of productivity programs on lowering costs in Canada and Argentina. Partially offsetting this increase were volume declines in Brazil, Mexico and Spain in addition to increased marketing investments in Canada, Asia and Brazil.
10 OPERATING INCOME
THREE MONTHS ENDED MARCH 31, ------------------------------ DOLLARS IN MILLIONS 2000 1999 % CHANGE - ------------------- -------- -------- -------- REPORTED OPERATING INCOME................................. $ 175 $ 134 31% ------ ------ SPECIAL ITEMS: Restructuring-related expenses.......................... -- (15) ------ ------ OPERATING INCOME EXCLUDING SPECIAL ITEMS.................. $ 175 $ 149 17% ====== ======
THE FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON OPERATING INCOME EXCLUDING SPECIAL ITEMS: - Nabisco Holdings' operating income was $175 million in the first quarter of 2000, an increase of 17% from the first quarter 1999 level of $149 million, primarily due to the increase in operating company contribution discussed previously.
INTEREST AND DEBT EXPENSE Consolidated interest and debt expense of $70 million in the first quarter of 2000 increased 8% from the first quarter of 1999, due to higher average debt levels and higher average interest rates. OTHER INCOME (EXPENSE), NET Other income (expense), net was $6 million expense in the first three months of 2000 compared to $10 million expense in the first three months of 1999. The first three months comparison primarily reflects foreign exchange gains in 2000 versus foreign exchange losses in 1999. NET INCOME Nabisco Holdings reported net income of $60 million in the first quarter of 2000, an increase of 67% when compared with net income of $36 million for the first quarter of 1999. This increase resulted primarily from higher operating income and lower other income (expense), net offset by higher interest and debt expense and an increase in the provision for income taxes. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) was $63 million income in the first quarter of 2000 versus a loss of $99 million in the first quarter of 1999. The $162 million change reflects higher net income and foreign currency translation gains in 2000 compared to foreign currency translation losses in 1999. RESTRUCTURING Savings objectives set in our 1998 restructuring programs are on target despite lower than anticipated spending to date. The June 1998 program was substantially completed in 1999 and the December 1998 program is expected to be substantially completed by mid-year 2000. Pre-tax savings in 2000 are expected to be approximately $140 million including cash savings of $133 million and, after completion of the programs, are expected to be approximately $145 million annually including cash savings of $135 million. In 1999, Nabisco recorded a net restructuring credit of $67 million. This net credit reduced the restructuring charges to $463 million. As the remaining projects from the December 1998 restructuring program are completed, we will continue to analyze the actual spending and the estimated cost to complete the programs. The results of that analysis will determine what further adjustments, if any, will be necessary. Cumulative cash expenditures, net of cash proceeds to date have totaled $123 million with $20 million expended in the first three months of 2000. The cash component of the restructuring charge for the 11 programs will be approximately $140 million including an estimated $37 million expenditure in 2000. For a further discussion of the restructuring programs, see Note 1 to the Consolidated Financial Statements. LIQUIDITY AND FINANCIAL CONDITION Net cash flows used in operating activities amounted to $19 million for the first quarter of 2000 compared to $149 million for the first quarter of 1999. The decrease in net cash flows used in operating activities primarily reflects the 2000 increase in net income and lower working capital requirements. Cash flows used in investing activities decreased $8 million in the first quarter of 2000 to $37 million from the first quarter of 1999 primarily because of lower capital expenditures. Capital expenditures were $39 million in the first quarter of 2000. Management expects that capital expenditures for 2000 will be approximately $250 million, which is sufficient to support the strategic and operating needs of Nabisco Holdings' businesses. Management also expects that cash flow from operations will be sufficient to support its planned capital expenditures in 2000. Cash flows from financing activities for the first quarter of 2000 decreased $147 million to $40 million from the first quarter of 1999, principally due to lower net proceeds from long-term debt partially offset by a higher increase in notes payable. As of March 31, 2000, the $1.5 billion revolving credit facility was unutilized and available to support borrowings and the 364-day $1.1 billion credit facility was unavailable as it supported outstanding commercial paper borrowings. The Nabisco Holdings' credit facilities restrict dividends and distributions after January 1, 1999 by Nabisco Holdings to holders of its equity securities by requiring a minimum net worth amount. As of March 31, 2000, actual net worth, as defined, exceeded required net worth by approximately $810 million. Nabisco Holdings does not believe that its credit arrangements will limit its ability to pay dividends. Nabisco's credit facilities limit the ability of Nabisco Holdings and its subsidiaries to incur indebtedness, engage in transactions with stockholders and affiliates, create liens, acquire, sell or dispose of certain assets and securities and engage in certain mergers or consolidations. Nabisco Holdings and Nabisco believe that they are currently in compliance with all covenants and restrictions imposed by the terms of their indebtedness. At March 31, 2000, Nabisco Holdings' total debt (notes payable and long-term debt, including current maturities) and total capital (total debt and total stockholders' equity) amounted to approximately $4.2 billion and $8.1 billion, respectively, of which total debt is higher by $88 million and total capital is higher by $101 million than their respective balances at December 31, 1999. Nabisco Holdings' ratios of total debt to total stockholders' equity and total debt to total capital at March 31, 2000 were 1.1 to 1 and .51 to 1, respectively. Nabisco Holdings currently pays regular quarterly dividends on its common stock at an annual rate of $.75 per share. At that rate, the aggregate amount of dividends to be paid would be approximately $198 million during 2000. Nabisco holdings believes that its internally generated cash and borrowings under its bank credit agreement and any other lines of credit it may establish will provide adequate funds for working capital, interest expense, capital expenditures and payment of its anticipated quarterly dividends. Nabisco Holdings expects to finance future acquisitions primarily from internally generated cash or borrowings. SUBSEQUENT EVENT On May 5, 2000, the European Commission gave clearance to Nabisco's previously announced intention of joining a consortium of investors, Finalrealm Limited ("Finalrealm"), that has acquired the equity of United Biscuits (Holdings) plc ("UB"), a United Kingdom company, for cash of 265 pence per 12 UB share. Pursuant to the definitive agreements and subject to completion: (i) Nabisco will contribute approximately $45 million in cash and its operations in Spain, Portugal and the Middle East (in 1999, these operations had net sales of approximately $290 million) to an associate of Finalrealm and in exchange receive dual convertible discounted preferred securities; (ii) Finalrealm has agreed to procure the sale to Nabisco of UB's operations in China, Hong Kong and Taiwan (in 1999, these operations had net sales of approximately $66 million). It is expected that Nabisco will have: (i) an economic interest of 26.5% in the consortium which will be comprised of UB's businesses in the United Kingdom, France, the Benelux countries and Nabisco's operations named above; and (ii) ownership of UB's Asian businesses cited above. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE EXPOSURE Nabisco is exposed to changes in interest rates primarily as a result of its borrowing activities which include commercial paper, short-term borrowings and long-term fixed rate debt used to maintain liquidity and fund its business operations. Nabisco employs a variance/co-variance approach to its calculation of Value at Risk ("VaR"), which is a statistical measure of potential loss in terms of fair value, cash flows, or earnings of interest rate sensitive financial instruments over a one year horizon using a 95% confidence interval for changes in interest rates. The model assumes that financial returns are normally distributed. For options and instruments with non-linear returns, the model uses the delta/gamma method to approximate the financial return. The VaR, which is the potential loss in fair value associated with Nabisco's exposure to changing interest rates, was $226 million after tax at March 31, 2000, an increase of $5 million from the December 31, 1999 amount. The VaR model is a risk analysis tool and does not purport to represent actual losses in fair value that will be incurred by Nabisco, nor does it consider the potential effect of favorable changes in market factors. COMMODITY PRICE EXPOSURE The VaR associated with Nabisco's derivative commodity instruments due to reasonably possible near-term changes in commodity prices, based on historical commodity price movements, would not result in a material effect on the future earnings of Nabisco. The VaR associated with Nabisco's net commodity exposure (anticipated future purchases less derivatives, inventory and firm purchase commitments) would result in a potential loss in pre-tax earnings of $40 million at March 31, 2000, an increase of $10 million from the December 31, 1999 amount. The VaR associated with either Nabisco's derivative commodity instruments or its net commodity exposure would not have a material effect on the fair values or cash flows of Nabisco. ------------------------ The foregoing discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements concerning, among other things, the amount of savings from the restructuring program, the level of future capital expenditures, and the level of dividends. These statements reflect management's current views with respect to future events and financial performance. These forward-looking statements are based on many assumptions and factors including competitive pricing for products, commodity prices, success of new product innovations and acquisitions, economic conditions in countries where Nabisco Holdings' subsidiaries do business, the effects of currency fluctuations and the effects of government regulation. Any changes in such assumptions or factors could produce significantly different results. 13 PART II ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The matters below were voted upon at the annual meeting of stockholders of Nabisco Holdings Corp. held on May 8, 2000. At the meeting, 41,499,066 shares of Class A Common Stock and 213,250,000 shares of Class B Common Stock were represented in person or by proxy. Class A Common Stock and Class B Common Stock are entitled to one (1) vote and ten (10) votes per share, respectively, and vote together as a single class. (a) Election of thirteen Directors
NAME VOTES FOR VOTES WITHHELD ---- --------- -------------- Herman Cain................................ 2,173,893,881 105,187 John T. Chain, Jr.......................... 2,173,872,821 126,247 Julius L. Chambers......................... 2,173,859,228 139,840 John L. Clendenin.......................... 2,173,868,225 130,843 Steven F. Goldstone........................ 2,173,890,640 108,428 Ray J. Groves.............................. 2,173,869,013 130,055 David B. Jenkins........................... 2,173,868,539 130,529 Nancy Karch................................ 2,173,896,131 102,937 James M. Kilts............................. 2,173,891,046 108,022 Fred H. Langhammer......................... 2,173,893,931 105,137 H. Eugene Lockhart......................... 2,173,894,101 104,967 Theodore E. Martin......................... 2,173,869,491 129,577 Rozanne L. Ridgway......................... 2,173,870,245 128,823
(b) Ratification of appointment of Deloitte & Touche LLP as independent auditors. For........................................... 2,173,960,677 Against....................................... 22,019 Abstain....................................... 16,372
14 PART II ITEM 5. OTHER INFORMATION EXPLORATION OF ALTERNATIVES TO MAXIMIZE SHAREHOLDER VALUE On April 3, 2000, the Board of Directors of Nabisco Group Holdings Corp. ("NGH") directed its management to explore all alternatives to maximize shareholder value, including the sale of NGH or the sale of Nabisco Holdings. In this connection, NGH engaged UBS Warburg LLC and Morgan Stanley & Co. Incorporated as financial advisors. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 Nabisco Holdings Corp. 1994 Long Term Incentive Plan (effective April 17, 1997 as amended and restated through March 17, 2000). 10.2 Form of Restricted Stock Units Agreement between Nabisco Holdings Corp. and the grantee named therein. 10.3 Form of Non-Qualified Stock Option Agreement between Nabisco Holdings Corp. and optionee named therein (2000 grant). 10.4 Amended and Restated Employment Agreement by and among Nabisco Holdings Corp., Nabisco, Inc., Nabisco Group Holdings Corp. and James M. Kilts (effective April 1, 2000). 10.5 Employment Agreement (dated October 1, 1997) by and among Nabisco, Inc., Nabisco Holdings Corp., Nabisco Group Holdings Corp. and James E. Healey (as amended and restated effective March 17, 2000). 10.6 Employment Agreement (dated October 12, 1988) by and among Nabisco, Inc., Nabisco Holdings Corp., Nabisco Group Holdings Corp. and C. Michael Sayeau (as amended and restated effective March 17, 2000). 10.7 Employment Agreement (dated February 9, 1998) by and among Nabisco, Inc., Nabisco Holdings Corp., Nabisco Group Holdings Corp. and Richard H. Lenny (as amended and restated effective March 17, 2000). 10.8 Employment Agreement (dated September 1, 1995) by and among Nabisco, Inc., Nabisco Holdings Corp., Nabisco Group Holdings Corp. and Douglas R. Conant (as amended and restated effective March 17, 2000). 10.9 Nabisco Holdings Corp. Annual Incentive Award Plan (effective January 1, 1995 as amended and restated as of March 17, 2000). 10.10 Nabisco Holdings Corp. 1999 Retention Plan Guidelines (effective July 1, 1999). 10.11 Nabisco Salary and Benefit Continuation Program (as amended and restated effective January 1, 1997). 10.12 Nabisco Flexible Perquisite Program Guidelines (as updated January 1, 2000). 12 Nabisco, Inc. Computation of Ratio of Earnings to Fixed Charges for the three months ended March 31, 2000. 27.1 Nabisco Holdings Corp. Financial Data Schedule for the first quarter of 2000. 27.2 Nabisco, Inc. Financial Data Schedule for the first quarter of 2000.
---------------------------- (b) Reports on Form 8-K None. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NABISCO HOLDINGS CORP. NABISCO, INC. (Registrants) /s/ JAMES E. HEALEY ...................................... James E. Healey Executive Vice President and Chief Financial Officer Date: May 12, 2000 /s/ THOMAS J. PESCE ...................................... Thomas J. Pesce Senior Vice President and Controller
16 EX-10.1 2 EXHIBIT 10.1 EXH 10.1 PLAN DOCUMENT NABISCO HOLDINGS CORP. 1994 LONG TERM INCENTIVE PLAN (AS AMENDED AND RESTATED THROUGH MARCH 17, 2000) 1. PURPOSE OF PLAN The Nabisco Holdings Corp. 1994 Long Term Incentive Plan (the "Plan"), as amended and restated effective April 17, 1997, subject to the approval of Nabisco's shareholders (the "Plan"), is designed: (a) to promote the long term financial interests and growth of Nabisco Holdings Corp. and subsidiaries (the "Corporation") by attracting and retaining management personnel with the training, experience and ability to enable them to make a substantial contribution to the success of the Corporation's business; (b) to motivate management personnel by means of growth-related incentives to achieve long range goals; and (c) to further the identity of interests of participants with those of the stockholders of the Corporation through opportunities for increased stock, or stock-based, ownership in the Corporation. 2. DEFINITIONS As used in the Plan, the following words shall have the following meanings: (a) "Base Value" means not less than the Fair Market Value on the date a Stock Appreciation Right is granted, or, in the case of a Stock Appreciation Right granted retroactively in tandem with (or in replacement of) an outstanding stock option, not less than the exercise price of such option; (b) "Board of Directors" means the Board of Directors of Nabisco; -1- (c) "Code" means the Internal Revenue Code of 1986, as amended; (d) "Committee" means the Compensation Committee of the Board of Directors; (e) "Common Stock" or "Share" means Class A common stock of Nabisco which may be authorized but unissued, or issued and reacquired; (f) "Dividend Equivalent Rights" shall have the meaning set forth in Section 5(f); (g) "Effective Date" shall have the meaning set forth in Section 12; (h) "Exchange Act" means the Securities Exchange Act of 1934, as amended; (i) "Fair Market Value" means such value of a Share as reported for stock exchange transactions and/or determined in accordance with any applicable resolutions or regulations of the Committee in effect at the relevant time; (j) "Grant" means an award made to a Participant pursuant to the Plan and described in Paragraph 5, including, without limitation, an award of an Incentive Stock Option, Stock Option, Stock Appreciation Right, Dividend Equivalent Right, Restricted Stock, Purchase Stock, Performance Units, Performance Shares or Other Stock-Based Grant, or any combination of the foregoing; (k) "Grant Agreement" means an agreement between Nabisco and a Participant that sets forth the terms, conditions and limitations applicable to a Grant; (l) "Incentive Stock Options" shall have the meaning set for in Section 5(a); (m) "Nabisco" means Nabisco Holdings Corp.; (n) "NGH" means Nabisco Group Holdings Corp.; (o) "Other Stock Based Grants" shall have the meaning set for in Section 5(i); (p) "Other Stock Options" shall have meaning set forth in Section 5(b); (q) "Participant" means an employee, or other person having a unique relationship with Nabisco or one of its Subsidiaries, to whom Grants may be made in accordance with Paragraph 4, or to whom one or more Grants have been made and such Grants have not all been forfeited or terminated under the Plan; provided, however, a non-employee director of NGH, Nabisco or one of its Subsidiaries may not be a Participant; (r) "Performance Units" shall have the meaning set forth in Section 5(g); (s) "Performance Shares" shall have the meaning set forth in Section 5(h); -2- (t) "Purchase Stock" shall have the meaning set forth in Section 5(e); (u) "Restricted Stock" shall have the meaning set forth in Section 5(d); (v) "Stock Appreciation Rights" shall have the meaning set forth in Section 5(c); (w) "Subsidiary" means any corporation other than Nabisco in an unbroken chain of corporations beginning with Nabisco if each of the corporations other than the last corporation in the unbroken chain owns 50% or more of the voting stock in one of the other corporations in such chain. 3. ADMINISTRATION OF PLAN (a) The Plan shall be administered by the Committee or, in lieu of the Committee, the Board of Directors. The Committee may adopt its own rules of procedure, and the action of a majority of the Committee, taken at a meeting or taken without a meeting by a writing signed by such majority, shall constitute action by the Committee. The Committee shall have the power and authority to administer, construe and interpret the Plan, to make rules for carrying it out and to make changes in such rules. Any such interpretations, rules, and administration shall be consistent with the basic purposes of the Plan. (b) The Committee may delegate to the Chief Executive Officer and to other senior officers of the Corporation its duties under the Plan subject to such conditions and limitations as the Committee shall prescribe except that only the Committee may designate and make Grants to Participants who are subject to Section 16 of the Exchange Act. (c) The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, Nabisco, and the officers and directors of Nabisco shall be entitled to rely upon the advise, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Participants, Nabisco and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Grants, and all members of the Committee shall be fully protected by Nabisco with respect to any such action, determination or interpretation. -3- 4. ELIGIBILITY The Committee may from time to time make Grants under the Plan to such employees, or other persons having a unique relationship with Nabisco or any of its Subsidiaries, and in such form and having such terms, conditions and limitations as the Committee may determine. No Grants may be made under this Plan to non-employee directors of NGH, Nabisco or any of its Subsidiaries. Grants may be granted singly, in combination or in tandem. The terms, conditions and limitations of each Grant under the Plan shall be set forth in a Grant Agreement, in a form approved by the Committee, consistent, however, with the terms of the Plan; provided, however, such Grant Agreement shall contain provisions dealing with the treatment of Grants in the event of the termination, death or disability of a Participant, and may also include provisions concerning the treatment of Grants in the event of a change of control of Nabisco. 5. GRANTS From time to time, the Committee will determine the forms and amounts of Grants for Participants. Such Grants may take the following forms in the Committee's sole discretion: (a) INCENTIVE STOCK OPTIONS - These are stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended ("Code"), to purchase Common Stock. In addition to other restrictions contained in the Plan, an option granted under this Section 5(a), (i) may not be exercised more than 10 years after the date it is granted, (ii) may not have an option price less than the Fair Market Value of Common Stock on the date the option is granted, (iii) must otherwise comply with Code Section 422, and (iv) must be designated as an "Incentive Stock Option" by the Committee. The maximum aggregate Fair Market Value of Common Stock (determined at the time of each Grant) with respect to which any Participant may first exercise Incentive Stock Options under this Plan and any Incentive Stock Options granted to the Participant for such year under any plans of NGH, Nabisco or any Subsidiary in any calendar year is $100,000. Payment of the option price shall be made in cash or in shares of Common Stock, or a combination thereof, in accordance with the terms of the Plan, the Grant Agreement, and of any applicable guidelines of the Committee in effect at the time. No Participant may -4- receive Grants of Incentive Stock Options in any calendar year to purchase more than one million shares. (b) OTHER STOCK OPTIONS - These are options to purchase Common Stock which are not designated by the Committee as "Incentive Stock Options". At the time of the Grant the Committee shall determine, and shall have contained in the Grant Agreement or other Plan rules, the option exercise period, the option price, and such other conditions or restrictions on the grant or exercise of the option as the Committee deems appropriate, which may include the requirement that the grant of options is predicated on the acquisition of Purchase Stock under Section 5(e) by the Optionee. In addition to other restrictions contained in the Plan, an option granted under this Section 5(b), (i) may not be exercised more than 15 years after the date it is granted and (ii) may not have an option exercise price less than 50% of the Fair Market Value of Common Stock on the date the option is granted. Payment of the option price shall be made in cash or in shares of Common Stock, or a combination thereof, in accordance with the terms of the Plan and of any applicable guidelines of the Committee in effect at the time. Payment of the option price may also be made by tender of an amount equal to the full exercise price which has been borrowed from Nabisco or one of its Subsidiaries if the Participant also authorizes the concurrent sale of the exercised Common Stock by a broker (through an arrangement established by Nabisco, or one of its Subsidiaries, for Participants) and repays the borrowing, all in accordance with any applicable guidelines of the Committee. No participant may receive Grants of options in any calendar year to purchase more than one million Shares. (c) STOCK APPRECIATION RIGHTS - These are rights that on exercise entitle the holder to receive the excess of (i) the Fair Market Value of a share of Common Stock on the date of exercise over (ii) the Base Value multiplied by (iii) the number of rights exercised in cash, stock or a combination thereof as determined by the Committee. Stock Appreciation Rights granted under the Plan may, but need not be, granted in conjunction with an option under Paragraphs 5(a) or 5(b). The Committee, in the Grant Agreement or by other Plan rules, may impose such conditions or restrictions on the exercise of Stock Appreciation Rights as it deems appropriate, and may terminate, amend, or suspend such Stock Appreciation Rights at any time. No Stock Appreciation Right granted under this Plan may be exercised more than 15 years after the date it -5- is granted. To the extent that any Stock Appreciation Right that shall have become exercisable, but shall not have been exercised or canceled or, by reason of any termination of employment, shall have become non-exercisable, it shall be deemed to have been exercised automatically, without any notice of exercise, on the last day of which it is exercisable, provided that any conditions or limitations on its exercise are satisfied (other than (i) notice of exercise and (ii) exercise or election to exercise during the period prescribed) and the Stock Appreciation Right shall then have value. Such exercise shall be deemed to specify that, the holder elects to receive cash and that such exercise of a Stock Appreciation Right shall be effective as of the time of automatic exercise. Stock Appreciation Rights will be granted for no consideration. No Participant may receive Grants of more than one million Stock Appreciation Rights in any calendar year. (d) RESTRICTED STOCK - Restricted Stock is a Grant of Common Stock or stock units equivalent to Common Stock subject to such conditions and restrictions as the Committee shall determine. Any rights to dividends or dividend equivalents accruing due to a grant of Restricted Stock shall also be determined by the Committee. The number of shares of Restricted Stock and the restrictions or conditions on such shares shall be as the Committee determines, in the Grant Agreement or by other Plan rules, and the certificate for the Restricted Stock shall bear evidence of the restrictions or conditions. No Participant may receive Grants of more than 100,000 shares of Restricted Stock in any calendar year. (e) PURCHASE STOCK - Purchase Stock are shares of Common Stock offered to a Participant at such price as determined by the Committee, the acquisition of which may make him eligible to receive other grants under the Plan, including, but not limited to, Stock Options; provided, however, that the price of such Purchase Shares may not be less than 50% of the Fair Market Value of the Common Stock on the date such shares of Purchase Stock are offered. No Participant may receive Grants of more than one million shares of Purchase Stock in any calendar year. (f) DIVIDEND EQUIVALENT RIGHTS - These are rights to receive cash payments from Nabisco at the same time and in the same amount as any cash dividends paid on an equal number of shares of Common Stock to shareholders of record during the period such rights are effective. -6- The Committee, in the Grant Agreement or by other Plan rules, may impose such restrictions and conditions on the Dividend Equivalent Rights, including the date such rights will terminate, as it deems appropriate, and may terminate, amend, or suspend such Dividend Equivalent Rights at any time. No Participant may receive Grants of Dividend Equivalent Rights on the equivalent of more than one million Shares in any calendar year. (g) PERFORMANCE UNITS - These are rights to receive at a specified future date, payment in cash or stock of an amount equal to all or a portion of the value of a unit granted by the Committee. At the time of the Grant, in the Grant Agreement or by other Plan rules, the Committee must determine the base value of the unit, the performance factors applicable to the determination of the ultimate payment value of the unit and the period over which Corporation performance will be measured. The performance factors for any specific Grants hereunder shall be determined in the discretion of the Committee, and may be based on any of the following: price of Common Stock or the stock of any affiliate, shareholder return; return on equity; return on investment; return on capital; return on invested capital; economic profit; economic value added; net income; cash net income; free cash flow; earnings per share; cash earnings per share; operating company contribution or market share. These factors must include a minimum performance standard for the Corporation below which no payment will be made and may include a maximum performance level above which no increased payment will be made. No Participant may receive Grants of Performance Units in any calendar year with a maximum payment (if maximum performance level is attained) in excess of $8 million. The term over which Corporation performance will be measured shall not exceed ten years. (h) PERFORMANCE SHARES - These are rights to receive at a specified future date, payment in cash or Common Stock, as determined by the Committee, of an amount equal to all or a portion of the Fair Market Value for all days that the Common Stock is traded during the last forty-five (45) days of the specified period of performance of a specified number of shares of Common Stock at the end of a specified period based on Corporation performance during the period. At the time of the Grant, the Committee, in the Grant Agreement or by Plan rules, will determine the factors which will govern the portion of the rights so payable and the period over which Corporation performance will be measured. The performance factors for any specific Grants -7- hereunder shall be determined in the discretion of the Committee, and may be based on any of the following: return on equity; net income; cash net income; free cash flow; earnings per share; cash earnings per share; or operating company contribution. The factors will be based on Corporation performance and must include a minimum performance standard for the Corporation below which no payment will be made and a maximum performance level above which no increased payment will be made. No Participant may receive Grants of Performance Shares in any calendar year with a maximum payment (if the maximum performance level is attained) of more than 300,000 Shares (or its cash equivalent). The term over which Corporation performance will be measured shall be not less than six months. Performance Shares will be granted for no consideration. (i) OTHER STOCK-BASED GRANTS - The Committee may make other Grants under the Plan pursuant to which shares of Common Stock (which may, but need not, be shares of Restricted Stock pursuant to Paragraph 5(d)), are or may in the future be acquired, or Grants denominated in stock units, including ones valued using measures other than market value. Other Stock-Based Grants may be granted with or without consideration; provided, however, that the price of any such Grant made for consideration that provides for the acquisition of shares of Common Stock or other equity securities of the Corporation may not be less than 50% of the Fair Market Value of the Common Stock or such other equity securities on the date of grant of such Grant. Such Other Stock-Based Grants may be made alone, in addition to or in tandem with any Grant of any type made under the Plan and must be consistent with the purposes of the Plan. No Participant may receive Other Stock-Based Grants of more than one million shares in any calendar year. 6. LIMITATIONS AND CONDITIONS (a) The number of Shares available for Grants under this Plan shall be 28.3 million shares of the authorized Common Stock as of the effective date of the Plan. The number of Shares subject to Grants under this Plan to any one Participant during the term of this Plan shall not be more than 10 million shares. No more than 1% of the authorized Common Stock as of the effective date of the Plan may be granted as Incentive Stock Options as described in Paragraph 5(a). Shares related to Grants that are forfeited, terminated, canceled, expire unexercised, settled -8- in cash in lieu of stock or in such manner that all or some of the Shares covered by a Grant are not issued to a Participant, shall immediately become available for Grants; provided, however, that the number of Shares available for Grants shall be limited to the extent necessary to satisfy Section 16 of the Exchange Act. Subject to the overall limitation on the number of shares of Common Stock that may be delivered under this Plan, the Committee may use available shares of Common Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of Nabisco, including the plan of any entity acquired by Nabisco. (b) No Grants shall be made under the Plan beyond ten years after the effective date of the Plan, but the terms of Grants made on or before the expiration thereof may extend beyond such expiration. At the time a Grant is made or amended or the terms or conditions of a Grant are changed, the Committee may provide for limitations or conditions on such Grant. (c) Nothing contained herein shall affect the right of the Corporation to terminate any Participant's employment at any time or for any reason. (d) Deferrals of Grant payouts may be provided for, at the sole discretion of the Committee, in the Grant Agreements. (e) Except as otherwise prescribed by the Committee, the amounts of the Grants for any employee of a Subsidiary, along with interest, dividend, and other expenses accrued on deferred Grants shall be charged to the Participant's employer during the period for which the Grant is made. If the Participant is employed by more than one Subsidiary or by both Nabisco and a Subsidiary during the period for which the Grant is made, the Participant's Grant and related expenses will be allocated between the companies employing the Participant in a manner prescribed by the Committee. (f) No benefit under the Plan shall, prior to receipt thereof by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the Participant. (g) Except to the extent otherwise provided in any other retirement or benefit plan, any grant under this Plan shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of Nabisco or its Subsidiaries and shall not affect any -9- benefits under any other benefit plan of any kind or subsequently in effect under which the availability or amount of benefits is related to level of compensation. This Plan is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of 1974, as amended. (h) Unless the Committee determines otherwise, no benefit or promise under the Plan shall be secured by any specific assets of Nabisco or any of its Subsidiaries, nor shall any assets of Nabisco or any of its Subsidiaries be designated as attributable or allocated to the satisfaction of Nabisco's obligations under the Plan. (i) In the event of a Participant's death, the right to receive benefits or exercise awards shall pass to the beneficiary designated by the Participant for this purpose under the Plan. If the Participant has not designated a beneficiary under the Plan, the right to receive benefits or exercise awards shall pass to the Participant's spouse and, if the Participant does not have a spouse at the date of death, to the Participant's designated beneficiary under the Company's SELECT Core Life Insurance Plan. 7. TRANSFERS AND LEAVES OF ABSENCE For purposes of the Plan: (a) a transfer of a Participant's employment without an intervening period of separation from Nabisco to a Subsidiary or vice versa, or from one Subsidiary to another, shall not be deemed a termination of employment, and (b) a Participant who is granted in writing a leave of absence shall be deemed to have remained in the employ of the Corporation during such leave of absence. 8. ADJUSTMENTS (a) In the event of any change in the outstanding Common Stock by reason of a stock split, spin-off, stock dividend, stock combination or reclassification, recapitalization or merger, or similar event, the Committee may adjust appropriately the number of Shares subject to the Plan and available for or covered by Grants and Share prices related to outstanding Grants and make such other revisions to outstanding Grants as it deems are equitably required. -10- (b) In the event of a Change of Control (as defined in paragraph 8 (c) hereof), except as otherwise set forth in the terms of a Grant: (i) Stock options granted pursuant to paragraphs 5 (a) or 5 (b) hereof shall become fully vested and exercisable (subject to paragraph 5 (b) (iii)); provided; however, that the Committee may elect to make a cash payment to Participants in lieu of the delivery of shares upon exercise, equal to the product of (x) and (y), where (x) is the excess of the fair market value of Common Stock on the date of exercise over the exercise price, and (y) is the number of Shares subject to the stock options being exercised; (ii) Stock Appreciation Rights granted pursuant to paragraph 5 (c) hereof shall become fully vested and exercisable; (iii) Performance Units granted pursuant to paragraph 5 (g) hereof whose performance periods ends after the date of the Change of Control shall become vested as to a percentage of performance units granted equal to the number of months (including partial months) in the performance period before the date of the Change of Control, divided by the total number of months in the performance period. The value of the performance units shall be equal to the greater of the target value of the units or the value derived from the actual performance as of the date of the Change of Control; and (iv) the Committee shall have authority to establish or revise the terms of any other Grant as it, in it's discretion, deems appropriate; provided; however, that the Committee may not make revisions that are adverse to the Participant without the Participant's consent unless such revision is provided for or contemplated in the terms of the Grant. (c) As used herein, a "Change of Control" shall occur on the date upon which one of the following events occurs (except as otherwise provided in paragraph (iii) below): (i) Any individual, corporation, partnership, group, associate or other entity or "person" as such term is defined in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than the Corporation, NGH or any of their -11- Subsidiaries, or any employee benefit plan(s) sponsored by the Corporation, NGH or any of their subsidiaries, is or becomes the "beneficial owner" (as defined in Rule 13D-3 under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of the Corporation or NGH outstanding securities ordinarily having the right to vote at elections of directors; (ii) Individuals who constitute the Board of Directors of either the Corporation or NGH on January 1, 2000 (each such Board the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of the Corporation or NGH, as the case may be, provided that any person becoming a director subsequent to such date hereof whose election, or nomination for election by the Corporation's or NGH's shareholders, as the case may be, was approved by a vote of at least three-quarters of the directors comprising that Incumbent Board (either by a specific vote or by approval of the proxy statement of the Corporation or NGH, as the case may be, in which such person is named a nominee of the Corporation or NGH, as the case may be, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity of "person" other than the Corporation's or NGH's Board, as the case may be, shall be, for purposes of this paragraph (ii), considered as though such person were a member of the Incumbent Board. (iii) The approval by the shareholders of the Corporation or NGH, as the case may be, of a plan or agreement providing (A) for a merger or consolidation of the Corporation or NGH, as the case may be, other than with a wholly-owned subsidiary or with NGH, the Corporation or any of their subsidiaries, and other than a merger or consolidation that would result in the voting securities of the -12- Corporation or NGH, as the case may be, outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Corporation or NGH, as the case may be, of such surviving entity outstanding immediately after such merger or consolidation or (B) for a sale, exchange or other disposition of all or substantially all of the assets of the Corporation or NGH. If any of the events enumerated in this paragraph (iii) occurs, the Corporation's Board of Directors shall determine the effective date of the Change of Control resulting therefrom. For purposes hereof, "Subsidiary" of the Corporation or NGH means any 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 the Corporation or NGH, as the case may be. 9. AMENDMENT AND TERMINATION The Committee shall have the authority to make such amendments to any terms and conditions applicable to outstanding Grants as are consistent with this Plan provided that, except for adjustments under Paragraph 8 hereof, no such action shall modify such Grant in a manner adverse to the Participant without the Participant's consent except as such modification is provided for or contemplated in the terms of the Grant. The Board of Directors may amend, suspend or terminate the Plan. 10. FOREIGN OPTIONS AND RIGHTS (a) The Committee may make Grants to employees who are subject to the tax laws of nations other than the United States, which Grants may have terms and conditions that differ from the terms thereof as provided elsewhere in the Plan for the purpose of complying with the foreign tax laws. Grants of Options may have terms and conditions that differ from Incentive Stock Options and Other Stock Options for the purposes of complying with the foreign tax laws. -13- (b) The terms and conditions of Options granted under Paragraph 10(a) may differ from the terms and conditions which the Plan would require to be imposed upon Incentive Stock Options and Other Stock Options if the Committee determines that the Grants are desirable to promote the purposes of the Plan for the employees identified in Paragraph 10(a); provided that the Committee may not grant such Options or Stock Appreciation Rights that do not comply with the limitations of Paragraph 6. 11. WITHHOLDING TAXES The Corporation shall have the right to deduct from any payment or settlement made under the Plan any federal, state or local income or other taxes required by law to be withheld with respect to such payment. 12. EFFECTIVE DATE AND TERMINATION DATES The Plan shall be effective on and as of April 17, 1997, subject to approval by the stockholders of Nabisco and shall terminate ten years later, subject to earlier termination by the Board of Directors pursuant to Paragraph 9. The terms of Grants made on or before the expiration of the Plan shall extend beyond such expiration. Grants made under the Plan prior to the Effective Date shall be governed by the terms of the Plan as in effect on the date such Grant was made. -14- EX-10.2 3 EXHIBIT 10.2 EXH 10.2 1994 NABISCO HOLDINGS CORP. LONG-TERM INCENTIVE PLAN RESTRICTED STOCK PROGRAM RESTRICTED STOCK UNITS AGREEMENT ------------------------------------- W I T N E S S E T H 1. GRANT OF RESTRICTED STOCK UNITS. Pursuant to the provisions of the 1994 Long-Term Incentive Plan and the Restricted Stock Units Program (collectively, the "Plan"), Nabisco Holdings Corp. (the "Company") on the above date has granted to ((NAME)) (THE "GRANTEE") subject to the terms and conditions which follow and the terms and conditions of the Plan and this Agreement (the "Agreement"), a total of ((RSEG)) RESTRICTED STOCK UNITS which entitle the Grantee to receive at the option of the Company (a) shares of Common Stock of the Company ("Common Stock") equal to the number of Restricted Stock Units granted, as of the dates the restrictions lapse; or (b) an amount in cash equal to the fair market value of an equivalent number of shares of Common Stock of the Company ("Common Stock") as of the Payment Date determined in Section 3. A copy of the Plan is attached and made a part of this Agreement with the same effect as if set forth in the Agreement itself. All capitalized terms used below shall have the meaning set forth in the Plan, unless the context requires a different meaning. 2. VESTING OF RESTRICTED STOCK UNITS. Subject to Section 4, the Restricted Stock Units granted hereunder shall vest, and all restrictions thereon shall lapse, on the first to occur of the dates as set forth below in subsections (a) through (g), ("Vesting Date"): (a) 33%, December 14, 2002, 33%, December 14, 2003, and 34%, December 14, 2004; (b) the date of Grantee's death; (c) the date Grantee shall be deemed to have a "Permanent Disability" (as defined in the Nabisco, Inc. Long-Term Disability Plan, applicable to senior executive officers as in effect on such dates hereof), or if the Board of Directors or any committee thereof so determines; (d) the date of Grantee's Retirement at age 65 or over; (e) the date of a Change of Control; (f) the date Grantee's active employment with the Company is terminated by the Company without Cause (excluding any termination to which subsection (e) applies); or (g) the date Grantee commences early retirement from the Company. As used herein, early retirement means retirement between the ages of 55 through 64 with the approval of the Company, which approval specifically states that the vesting of the Restricted Stock Units is accelerated and shall become fully vested as to the number of units. 3. SETTLEMENT OF RESTRICTED STOCK UNITS. (a) The Restricted Stock Units grant will be settled at the option of the Company, in shares of Company Common Stock, or in cash, pursuant to Section 3(b), as of the dates the restrictions lapse. (b) Unless the Grantee has elected to defer receipt of payment in accordance with Section 7 and subject to the provisions of subsection (c), the Grantee will receive a payment in cash in respect of Restricted Stock Units granted to the Grantee hereunder in an amount (the "Payment Amount") determined by multiplying the number of such units by the closing price as listed on the New York Stock Exchange (the "NYSE") of the Company's Common Stock on the Vesting Date. The payment shall be made as soon as practicable following the Vesting Date. In the event the Vesting Date falls on a date on which the NYSE is closed, the aforesaid computation shall be based on the closing price of the Company's Common Stock on the first trading day immediately preceding the Vesting Date. If the Grantee has elected to defer receipt of such payment in accordance with Section 7, the payment date will be the last day of the deferral period and payment will be made as soon as practicable thereafter. (c) In the event Grantee's Vesting Date arises pursuant to Section 2(f) or 2(g), shares of Company Common Stock or the Payment Amount shall be adjusted by multiplying the number of shares of Company Common Stock or the Payment Amount by a fraction the denominator of which is 1,095 and the numerator of which is the number of days from the Date of Grant to the Vesting Date, and Grantee shall receive shares of Company Common Stock or the Payment Amount as so adjusted. 4. TERMINATION AND FORFEITURE OF THE RESTRICTED STOCK UNITS. The Restricted Stock Units granted hereunder shall terminate and Grantee shall immediately forfeit all rights to such Restricted Stock Units upon Grantee's termination of active employment from the Company for Cause, Resignation or for any other reason, excluding termination from active employment arising from the events specifically enumerated in Section 2. 5. TERMINATION OF EMPLOYMENT. Subject to Sections 2(f) and 2(g) and 4: (a) Unless otherwise provided in a written employment or termination agreement between the Grantee and the Company, the Restricted Stock Units shall not become vested as to any additional units following the Termination of Employment of the Grantee for any reason other than a Termination of Employment because of death, Permanent Disability or Retirement of the Grantee. In the event of Termination of Employment because of death, Permanent Disability or Retirement, the Restricted Stock Units shall immediately become vested as to the number of units. (b) TERMINATION FOR CAUSE. Unless otherwise defined in a written employment or termination agreement between the Grantee and the Company, termination for Cause shall mean termination by the Company where such termination results from (i) criminal dishonesty, (ii) deliberate and continual refusal to perform employment duties on substantially a full-time basis, (iii) deliberate and continual refusal to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company, or (iv) deliberate misconduct which could be materially damaging to the Company without reasonable good faith belief by the Grantee that such conduct was in the best interests of the Company. (c) TERMINATION FOR GOOD REASON. Unless otherwise defined in a written employment or termination agreement between the Grantee and the Company, termination for Good Reason shall mean termination by Grantee where such termination results from (i) the total amount of Grantee's base salary and targeted awards under the Long-Term Incentive Plan and the Annual Incentive Award Plan (or successors thereto) being reduced at any time without the Grantee's consent, (ii) Grantee's job responsibilities being substantially reduced in importance without the Grantee's consent, or (iii) Grantee being required as a condition of continued employment to relocate more than 35 miles from the Grantee's place of employment as of the date of a Change of Control without the Grantee's consent. (d) "Retirement" as used herein means Retirement at age 65 or over, or Early Retirement at age 55 or over with the approval of the Company, which approval specifically states the vesting of the Restricted Stock Units is accelerated and shall become fully vested as to the number of units. (e) "Termination of Employment" as used herein means termination from active employment; it does not mean termination of payment or benefits at the end of salary continuation or other form of severance or pay in lieu of salary. (f) "Permanent Disability" as used herein means to have a "Permanent Disability" as defined in the Nabisco, Inc. Long-Term Disability Plan, applicable to senior executive officers as in effect on such dates hereof, or if the Board of Directors or any committee thereof so determines; 6. DIVIDEND EQUIVALENT PAYMENTS. At all times prior to the date restrictions lapses, the Grantee shall receive cash payments at the same time and in the same amount as any cash dividends paid on an equivalent number of shares of Common Stock. 7. DEFERRAL. If the Grantee is to receive a cash payment, the Grantee may elect to defer payment of vested Restricted Stock Units in accordance with procedures established by the Committee; provided, that the Grantee may not defer payment in respect of Restricted Stock Units that vest in connection with the Grantee's termination of employment for any reason and further, provided, that in no event may the period of deferral extend beyond January of the year following the Grantee's termination of employment for any reason. The Payment Amount will be based upon the fair market value of an equivalent number of shares of Common Stock at the Vesting Date. During the period between the Vesting Date and the actual payment date, such funds will be invested in accordance with the Grantee's investment elections under the Nabisco Deferred Compensation Plan. 8. NO RIGHT TO EMPLOYMENT. The execution and delivery of this Agreement and the granting of Restricted Stock Units hereunder shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Company or its subsidiaries to employ the Grantee for any specific period or in any particular capacity and shall not prevent the Company or its subsidiaries from terminating the Grantee's employment at any time with or without Cause. 9. TRANSFERABILITY. Other than as specifically provided in the Plan with regard to the death of the Grantee, this Agreement and any benefit provided or accruing hereunder shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge; and any attempt to do so shall be void. No such benefit shall, prior to receipt thereof by the Grantee, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Grantee. 10. CHANGE IN COMMON STOCK OR CORPORATE STRUCTURE. (a) If at any time the number or nature of outstanding shares of Common Stock of the Company shall be increased or changed as the result of any stock dividend, subdivision or reclassification of shares, the number or nature of Restricted Stock Units subject to this Agreement after such an event shall be increased or changed in the same proportion or manner as the outstanding shares of Common Stock are increased or changed, or if the number of outstanding shares of Common Stock shall at any time be decreased as the result of any combination or reclassification of shares, the number of Restricted Stock Units subject to this Agreement after such an event shall be decreased in the same proportion as the outstanding number of shares of Common Stock is decreased. (b) In the event the Company shall at any time be consolidated with or merged into any other corporation and holders of the Company's Common Stock receive common shares of the resulting or surviving corporation, there shall be an adjustment to the Restricted Stock Units subject to this Agreement after such an event, and in place of the Restricted Stock Units so subject, a stock equivalent shall be determined by multiplying the number of common shares of stock delivered in exchange for a share of Common Stock upon such consolidation or merger, by the number of Restricted Stock Units subject to this Agreement. If in such a consolidation or merger, holders of the Company's Common Stock shall receive any consideration other than common shares of the resulting or surviving corporation, the Committee shall determine the appropriate adjustment to shares held pursuant to this Agreement after such an event; provided, however, such adjustment shall not be to the detriment of the Grantee. 11. TAXES. Any taxes required by federal, state or local laws to be withheld by the Company on the Grant of Restricted Stock Units or delivery of Common Stock or any other cash payment or event hereunder shall be paid to the Company by the Grantee by the time such taxes are required to be paid or deposited by the Company. Subject to Section 3, if settled in Common Stock, the Grantee hereby authorizes the conversion to cash by the Company of a sufficient amount of Common Stock to satisfy withholding prior to the delivery of Common Stock; or if Restricted Stock Units are settled in cash, the Grantee hereby authorizes the Company to withhold or offset a sufficient amount from any payment hereunder to satisfy any such tax withholding obligation. 12. NOTICES. Any notices required to be given hereunder to the Company shall be addressed to The Secretary, Nabisco Holdings Corp., 7 Campus Drive, Parsippany, NJ 07054, and any notice required to be given hereunder to the Grantee shall be sent to the Grantee's most recent address as shown on the records of the Company. 13. GRANTEE. In consideration of the grant, the Grantee specifically agrees that the Committee shall have the exclusive power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan and Agreement as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretation and determinations made by the Committee shall be final, conclusive, and binding upon the Grantee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Agreement. The Committee may delegate its interpretive authority to an officer or officers of the Company. 14. NON-COMPETITION. Provided that the Grantee is not party to a written employment or termination agreement with the Company containing restrictions on Grantee's eligibility to compete with the Company following Grantee's Termination of Employment, in consideration for the Restricted Stock Units Grantee agrees that: (a) For the twelve (12) month period commencing on the date of Grantee's Termination of Employment, Grantee shall not engage in Competitive Employment. As used herein, "Competitive Employment" means providing any person, company or other entity with any services, whether as a consultant, employee, investor or otherwise, regarding any business, product, service or other matter which: (i) is substantially similar to or competes with any business, product, service or other matter regarding which Grantee worked for the Company, or any of its affiliates, during the two (2) years prior to Grantee's Termination of Employment; or (ii) concerns subject matters about which Grantee gained proprietary information of the Company, or its affiliates, during the two (2) year period prior to Grantee's Termination of Employment. (b) If the Company reasonably determines that Grantee has materially violated any of Grantee's obligations under subparagraph (a), above, then, in addition to any other remedies at law or in equity it may have: (i) the Company shall have the right to cease payment of any compensation, salary continuation, benefits, perquisites and any other remuneration which is due or may become due Grantee under any employment, salary continuation or similar agreement between the Company, or any of its affiliates, and Grantee; and (ii) all past, present and future stock option grants awarded Grantee under the Plan, including grants which according to their terms are vested, shall terminate, effective the date on which such violation began (the "Violation Date"). The Company may demand the return of any gain realized by Grantee from the exercise of any such grants by Grantee at any time on or after the date sixty (60) days prior to the Violation Date. If after such demand Grantee fails to return said amounts, Grantee acknowledges that the Company has the right to offset against said amounts any amounts, including compensation, owed Grantee by the Company or to commence judicial proceedings against Grantee to recover said amounts and any attorneys' fees and costs. (c) Grantee acknowledges and agrees that: (i) the restrictions contained in this Section 14 are necessary to protect the legitimate interests of the Company and impose no undue hardship on Grantee; (ii) the violation or threatened violation of this Section 14 will result in irreparable injury to the Company and Grantee consents to the issuance of any restraining order, preliminary restraining order or injunction, without bond, which arises from conduct by Grantee in violation of this Section 14, and the existence of any claim Grantee may have against the Company will not constitute a defense thereto; (iii) if the Company prevails in any suit or proceeding to enforce its rights under this Section 14, Grantee shall indemnify the Company for all expenses incurred by the Company, including reasonable attorneys' fees; and (iv) no one employed by or representing the Company has any authority to make oral statements which modify, waive or discharge in any manner any provision of this Section 14. 15. OTHER PROVISIONS. a) Titles are provided herein for convenience only and are not to serve as a basis for interpretation of the Agreement. b) The Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Agreement. c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF LAWS. IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the Grantee have executed this Agreement as of the Date of Grant first above written. EX-10.3 4 EXHIBIT 10.3 EXH 10.3 NABISCO HOLDINGS CORP. 1994 LONG TERM INCENTIVE PLAN STOCK OPTION AGREEMENT ______________________ DATE OF GRANT: _____________________ W I T N E S S E T H : 1. GRANT OF OPTION. Subject to (i) the terms and conditions herein and (ii) the provisions of the Nabisco Holdings Corp. 1994 Long Term Incentive Plan (the "Plan"), Nabisco Holdings Corp. (the "Company") on the above date has granted to ___________________ (THE "OPTIONEE"), the right and option to exercise from the Company a total of _____________ SHARES of Class A Common Stock of the Company ("Common Stock"), at the exercise price of $________ per share (the "Option"). A copy of the Plan is attached and made a part of this Agreement with same effect as if set forth in the Agreement itself. All capitalized terms used herein shall have the meaning set forth in the Plan, unless the context requires a different meaning. 2. EXERCISE OF OPTION. (a) Shares may be purchased by giving the Corporate Secretary of the Company written notice of exercise, on a form prescribed by the Company, specifying the number of shares to be purchased. The notice of exercise shall be accompanied by (i) tender to the Company of cash for the full purchase price of the shares with respect to which such Option or portion thereof is exercised; OR (ii) the unsecured, demand borrowing by the Optionee from the Company on an open account maintained solely for this purpose in the amount of the full exercise price together with the instruction from the Optionee to sell the shares exercised on the open market through a duly registered broker-dealer with which the Company makes an arrangement for the sale of such shares under the Plan. This method is known as the "broker-dealer exercise method" and is subject to the terms and conditions set forth herein, in the Plan and in guidelines established by the Committee. The Option shall be deemed to be exercised simultaneously with the sale of the shares by the broker-dealer. If the shares purchased upon the exercise of an Option or a portion thereof cannot be sold for a price equal to or greater than the full exercise price plus direct costs of the sales, then there is no exercise of the Option. Election of this method authorizes the Company to deliver shares to the broker-dealer and authorizes the broker-dealer to sell said shares on the open market. The broker-dealer will remit proceeds of the sale to the Company which will remit net proceeds to the Optionee after repayment of the borrowing, deduction of costs, if any, and withholding of taxes. The Optionee's borrowing from the Company on an open account shall be a personal obligation of the Optionee which shall bear interest at the published Applicable Federal Rate (AFR) for short-term loans and shall be payable upon demand by the Company. Such borrowing may be authorized by telephone or other telecommunications acceptable to the Company. Upon such borrowing and the exercise of the Option or portion thereof, title to the shares shall pass to the Optionee whose election hereunder shall constitute instruction to the Company to register the shares in the name of the broker-dealer or its nominee. The Company reserves the right to discontinue this broker-dealer exercise method at any time for any reason whatsoever. The Optionee agrees that if this broker-dealer exercise method under this paragraph is used, the Optionee promises unconditionally to pay the Company the full balance in his open account at any time upon demand. Optionee also agrees to pay interest on the account balance at the AFR for short-term loans from and after demand. (b) Notwithstanding provisions for regular exercise in Section 2(a), if more than 80% of the aggregate value of all classes of Company common stock is owned, directly or indirectly, by Nabisco Group Holdings on the date of exercise then the Company may, in its absolute discretion, make a cash payment to the Optionee, net of taxes, equal to the product of (x) and (y), where (x) is the excess of the fair market value of Common Stock on the date of exercise over the exercise price, and (y) is the number of shares subject to the Option(s) being exercised. Such cash payment shall be in lieu of delivery of shares. ANNUAL GRANT VESTS EACH JANUARY 1, FOLLOWING THE DATE OF GRANT AND THEREAFTER ON EACH JANUARY 1: (c) Subject to Sections 2(b), 2(d), and 4, this Option shall be vested in three installments. The first installment shall be vested on the 1st of January following the Date of Grant for 33% of the number of shares of Common Stock subject to this Option. Thereafter, on each subsequent January 1st an installment shall become vested for 33% and 34%, respectively, of the number of shares subject to this Option until the Option has become fully vested. To the extent that any portion of the Option is not exercised, it shall not expire, but shall continue to be vested at any time thereafter until this Option shall terminate, expire or be surrendered. An exercise shall be for whole shares only; (d) This Option shall not be exercised prior to 36 months after the Date of Grant. NOTWITHSTANDING THE FOREGOING, IN THE EVENT THIS OPTION IS SCHEDULED TO EXPIRE OR 2 TERMINATE PURSUANT TO SECTION 4(b), THEN THE OPTIONEE SHALL HAVE THE RIGHT TO EXERCISE THE OPTION (TO THE EXTENT THEN VESTED) AT ANY TIME PRIOR TO ITS EXPIRATION. OR FOR NEW HIRES, USE THIS SECTION INSTEAD: VESTING SCHEDULE: VEST 33% ON EACH ANNIVERSARY FOLLOWING THE DATE OF GRANT: (c) Subject to Sections 2(b), 2(d), and 4, this Option shall be vested in three installments. The first installment shall be vested on the anniversary of the Date of Grant for 33% of the number of shares of Common Stock subject to this Option. Thereafter, on each anniversary of the Date of Grant an installment shall become vested for 33% and 34%, respectively, of the number of shares subject to this Option until the Option has become fully vested. To the extent that any portion of the Option is not exercised, it shall not expire, but shall continue to be vested at any time thereafter until this Option shall terminate, expire or be surrendered. An exercise shall be for whole shares only. (d) This Option shall not be exercised prior to 36 months after the Date of Grant. NOTWITHSTANDING THE FOREGOING, IN THE EVENT THIS OPTION IS SCHEDULED TO EXPIRE OR TERMINATE PURSUANT TO SECTION 4(b), THEN THE OPTIONEE SHALL HAVE THE RIGHT TO EXERCISE THE OPTION (TO THE EXTENT THEN VESTED) AT ANY TIME PRIOR TO ITS EXPIRATION. 3. TERMINATION OF EMPLOYMENT. Subject to Sections 2(b), 2(d) and 4: (a) Unless otherwise provided in a written employment or termination agreement between the Optionee and the Company, the Option shall not become vested as to any additional shares following the Termination of Employment of the Optionee for any reason other than a Termination of Employment because of death, Permanent Disability or Retirement of the Optionee. In the event of Termination of Employment because of death, Permanent Disability or Retirement, the Option shall immediately become vested as to all shares. (b) Unless otherwise defined in a written employment or termination agreement between the Optionee and the Company, Termination for Cause shall mean Termination by the Company where such termination results from: (a) criminal dishonesty, (b) deliberate continual refusal to perform employment duties on substantially a full time basis, (c) deliberate and continual refusal to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company, or (d) deliberate misconduct which could be materially damaging to the Company or any of its business operations without a reasonable good faith belief by the Optionee that such conduct was in the best interests of the Company. A termination of Optionee's employment shall not be deemed for Cause hereunder unless the senior personnel executive of the Company shall confirm that any such termination is for Cause as defined hereunder. Any voluntary termination by the Optionee in anticipation of an involuntary termination of the Optionee's employment for Cause shall be deemed to be a termination of Optionee's employment for Cause. 3 (c) Unless otherwise defined in a written employment or termination agreement between the Optionee and the Company, termination for Good Reason shall mean termination by Optionee where such termination results from (i) the total amount of Optionee's base salary and targeted awards under the Long-Term Incentive Plan and the Annual Incentive Award Plan (or successors thereto) being reduced at any time without the Optionee's consent, (ii) Optionee's job responsibilities being substantially reduced in importance without the Optionee's consent, or (iii) Optionee being required as a condition of continued employment to relocate more than 35 miles from the Optionee's place of employment as of the date of a Change of Control without the Optionee's consent. (d) The Optionee shall be deemed to have a "Permanent Disability" if the Optionee totally and permanently disabled (as defined in Nabisco, Inc.'s Long Term Disability Plan applicable to senior executive officers as in effect on the date hereof), or if the Board of Directors or any committee thereof so determines. (e) "Retirement" as used herein means Retirement at age 65 or over, or early retirement at age 55 or over with the approval of the Company, which approval specifically states that the Option shall become fully vested as to all shares. (f) "Termination of Employment" as used herein means termination from active employment; it does not mean termination of payment or benefits at the end of salary continuation or other form of severance or pay in lieu of salary. 4. EXPIRATION OF OPTION. The Option shall expire or terminate and may not be exercised to any extent by the Optionee after the first to occur of the following events: (a) The tenth anniversary of the Date of Grant, or such earlier time as the Company may determine is necessary or appropriate in light of applicable foreign tax laws; or (b) The first anniversary of the date of the Optionee's Termination of Employment for any reason other than the Optionee's death, Permanent Disability, Retirement, termination for Good Reason or involuntary Termination of Employment by the Company without Cause; or (c) Immediately upon the Optionee's Termination of Employment for Cause. 5. TRANSFERABILITY. Other than as specifically provided in the Plan with regard to the death of the Optionee, this Option agreement and any benefit provided or accruing hereunder shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge; and any attempt to do so shall be void. No such benefit shall, prior to receipt thereof by the Optionee, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Optionee. 4 6. NO RIGHT TO EMPLOYMENT. The execution and delivery of this agreement and the granting of the Option hereunder shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Company or its subsidiaries to employ the Optionee for any specific period or in any particular capacity shall not prevent the Company or its subsidiaries from terminating the Optionee's employment at any time with or without Cause. 7. ADJUSTMENTS IN OPTION. In the event that the outstanding shares of the Common Stock subject to the Option are, from time to time, changed into or exchanged for a different number or kind of shares of the Company or other securities by reason of a merger, consolidation, recapitalization, reclassification, stock split, stock dividend, combination of shares, or otherwise, the Committee may make an appropriate and equitable adjustment in the number and kind of shares or other consideration as to which the Option, or portions thereof then unexercised, shall be exercisable. Any adjustment made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. 8. APPLICATION OF LAWS. The granting and the exercise of this Option and the obligations of the Company to sell and deliver shares hereunder and to remit cash under the broker-dealer exercise method shall be subject to all applicable laws, rules, and regulations and to such approvals of any governmental agencies as may be required. 9. TAXES. Any taxes required by federal, state, or local laws to be withheld by the Company on exercise by the Optionee of the Option for Common Stock shall be paid to the Company before delivery of the Common Stock is made to the Optionee. When the Option is exercised under the broker-dealer exercise method, the full amount of any taxes required to be withheld by the Company on exercise of stock options shall be deducted by the Company from the proceeds. 10. NOTICES. Any notices required to be given hereunder to the Company shall be addressed to The Secretary, Nabisco Holdings Corp., 7 Campus Drive, Parsippany, New Jersey 07054, and any notice required to be given hereunder to the Optionee shall be sent to the Optionee's most recent address as shown on the records of the Company. 11. ADMINISTRATION AND INTERPRETATION. In consideration of the grant, the Optionee specifically agrees that the Committee shall have the exclusive power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan and Agreement as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final, conclusive, and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Agreement. The Committee may delegate its interpretive authority to an officer or officers of the Company. 5 12. NON-COMPETITION. Provided that the Optionee is not party to a written employment or termination agreement with the Company containing restrictions on Optionee's eligibility to compete with the Company following Optionee's Termination of Employment, in consideration for the Option Optionee agrees that: (a) For the twelve (12) month period commencing on the date of Optionee's Termination of Employment, Optionee shall not engage in Competitive Employment. As used herein, "Competitive Employment" means providing any person, company or other entity with any services, whether as a consultant, employee, investor or otherwise, regarding any business, product, service or other matter which: (i) is substantially similar to or competes with any business, product, service or other matter regarding which Optionee worked for the Company, or any of its affiliates, during the two (2) years prior to Optionee's Termination of Employment; or (ii) concerns subject matters about which Optionee gained proprietary information of the Company, or its affiliates, during the two (2) year period prior to Optionee's Termination of Employment. (b) If the Company reasonably determines that Optionee has materially violated any of Optionee's obligations under subparagraph (a), above, then, in addition to any other remedies at law or in equity it may have: (i) the Company shall have the right to cease payment of any compensation, salary continuation, benefits, perquisites and any other remuneration which is due or may become due Optionee under any employment, salary continuation or similar agreement between the Company, or any of its affiliates, and Optionee; and (ii) all past, present and future stock option grants awarded Optionee under the Plan, including grants which according to their terms are vested, shall terminate, effective the date on which such violation began (the "Violation Date"). The Company may demand the return of any gain realized by Optionee from the exercise of any such grants by Optionee at any time on or after the date sixty (60) days prior to the Violation Date. If after such demand Optionee fails to return said amounts, Optionee acknowledges that the Company has the right to offset against said amounts any amounts, including compensation, owed Optionee by the Company or to commence judicial proceedings against Optionee to recover said amounts and any attorneys' fees and costs. (c) Optionee acknowledges and agrees that: (i) the restrictions contained in this Section 12 are necessary to protect the legitimate interests of the Company and impose no undue hardship on Optionee; (ii) the violation or threatened violation of this Section 12 will result in irreparable injury to the Company and Optionee consents to the issuance of any restraining order, preliminary restraining order or injunction, without bond, which arises from conduct by Optionee in violation of this Section 12, and the existence of any claim Optionee may have against the Company will not constitute a defense thereto; (iii) if the Company prevails in any suit or proceeding to enforce its rights under this Section 12, Optionee shall indemnify the Company for all expenses incurred by the Company, including reasonable attorneys' fees; and (iv) no one employed by or representing the Company has any authority to make oral statements which modify, waive or discharge in any manner any provision of this Section 12. 6 13. OTHER PROVISIONS. (a) Titles are provided herein for convenience only and are not to serve as a basis for interpretation of the Agreement. (b) This Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Agreement. (c) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF LAWS. IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the Optionee have executed this Agreement as of the Date of Grant first above written. NABISCO HOLDINGS CORP. By______________________ Authorized Signatory ______________________________________ Optionee Optionee's Social Security Number: ______________________________________ Optionee's Home Address: ______________________________________ ______________________________________ ______________________________________ 7 EX-10.4 5 EXHIBIT 10.4 Exhibit 10.4 EMPLOYMENT AGREEMENT (amended and restated as of April 1, 2000) This Amended and Restated Employment Agreement by and among NABISCO HOLDINGS CORP., a Delaware Corporation ("NHC"), NABISCO, INC., a New Jersey Corporation ("NA", together with NHC, the "Company"), NABISCO GROUP HOLDINGS CORP. ("NGH") and JAMES M. KILTS ("Executive"), is effective as of April 1, 2000. RECITALS WHEREAS, in order to induce Executive to continue to serve as President and Chief Executive Officer of the Company and of NGH and as a member of the Board of Directors of the Company and of NGH, the Company, NGH and Executive agree that the Employment Agreement between the Company and Executive dated as of November 20, 1997 (the "Prior Agreement") should be amended and restated. NOW, THEREFORE, in consideration of mutual incentives, it is hereby agreed by and between the Company, NGH and Executive to amend and restate the Prior Agreement, effective on the date first above written, as follows: 1. EMPLOYMENT. 1.1. Subject to the terms and conditions of this Agreement, the Company agrees to employ Executive during the Term of Employment, as defined in Section 2 below. It is also the intention of the parties that Executive shall serve as President and Chief Executive Officer of the Company and of NGH, and as a member of the Boards of Directors of the Company and of NGH throughout the Term of Employment (for purposes of this Agreement, the positions and titles associated with "the Company" shall mean the same position and titles at each of NHC and NA). Executive's principal office shall be at the principal executive offices of the Company in East Hanover and Parsippany, New Jersey. Executive shall perform his duties hereunder subject only to the direction and control of the Board of Directors of the Company and NGH and the Chairman of each of the Boards of Directors of the Company and NGH (the "Chairman"). 1.2. The Company shall, during the term of this Agreement, use its best efforts to insure the election and retention of Executive as President and Chief Executive Officer of the Company and of NGH and as a member of the Boards of Directors of the Company and of NGH. 1.3. Subject to the terms and conditions of this Agreement, Executive hereby (i) agrees to continue employment with the Company and agrees to continue to serve as President and Chief Executive Officer of the Company and of NGH and shall devote his full working time and efforts to the best of his ability, experience and talent, to the performance of the services, duties and responsibilities in connection therewith; and (ii) agrees to continue to serve as a member of the Boards of Directors of the Company and of NGH. Executive's authority and duties shall include the exclusive right to hire, discharge and fix the terms and conditions of employment of all employees of the Company and its subsidiaries, subject only to the approval of the Chairman with respect to senior level management employees. Nothing in this Agreement shall preclude Executive from engaging, consistent with his duties and responsibilities hereunder, in charitable and community affairs, from managing his personal investments, from continuing to serve on the boards of directors of any Affiliate (as hereinafter defined) of the Company or NGH or from serving, subject to approval of the Board of Directors of the Company, as a member of boards of directors of other companies. 1.4. For purposes of this Agreement, (a) "Affiliate" means, with respect to the Company or NGH, any person or entity directly or indirectly controlling, controlled by, or under common control with the Company or NGH, as the case may be, (b) "Subsidiary" of the Company or NGH means any 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 the Company or NGH, as the case may be, and (c) the term "available to Senior Executive Officers" shall mean that something is available to the senior executive officers of the Company or NGH or generally available to all chief executive officers of the major operating companies of the Company or NGH; PROVIDED, HOWEVER, such term shall not include the Chairman of NGH or NHC. 2. TERM OF EMPLOYMENT. Executive's term of employment under this Agreement shall continue in accordance with the terms hereof until a termination of Executive's employment. 2 3. COMPENSATION. 3.1. SALARY. The Company shall pay Executive a base salary ("Base Salary") at the rate of $1,000,000 per annum. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company. Executive's rate of Base Salary shall be reviewed for increase by the Chairman at least annually and by the Boards of Directors of the Company and Holdings, if necessary, and if any increases are approved, such higher amount shall constitute Executive's Base Salary. 3.2. ANNUAL BONUS. (a) In addition to his Base Salary, subject to Section 3.2(b) below, Executive shall be entitled, while he remains employed hereunder, to receive an annual bonus opportunity under NHC's Annual Incentive Award Plan or any successor thereto (the "NHC AIAP"), in accordance with the terms thereof. Executive's annual bonus will be determined in accordance with the NHC AIAP available to Senior Executive Officers; the NHC AIAP, in any event, will provide an annual target bonus opportunity to Executive no less favorable than one hundred percent (100%) of his Base Salary, subject to the attainment of the performance goals established from time to time under the NHC AIAP. (b) Executive may be granted Performance Units under NHC's 1994 Long Term Incentive Plan or any successor thereto (the "NHC LTIP") in lieu of all or a portion of a cash bonus opportunity under the NHC AIAP pursuant to Section 3.2(a), provided that with respect to any year the aggregate annual target bonus opportunity under the NHC AIAP and the "Initial Grant Value" of all such Performance Units granted in such year shall not be less than the annual target bonus opportunity under Section 3.2(a) (the aggregate annual target bonus opportunity under Section 3.2(a) and/or 3.2(b), as applicable, is hereinafter referred to as the "Target Bonus Opportunity"). The term "Initial Grant Value" shall have the meaning customarily given to it in Performance Unit Agreements awarded to Senior Executive Officers of the Company under the NHC LTIP prior to the date hereof. 3.3. COMPENSATION PLANS AND PROGRAMS. Executive shall participate in any compensation plan or program, whether annual or long term, maintained by the Company or NGH on terms no less favorable than those available to Senior Executive Officers eligible to participate therein. 3 4. EMPLOYEE BENEFITS. 4.1. EMPLOYEE BENEFIT PROGRAMS, PLANS AND PRACTICES. The Company shall provide Executive during the term of his employment hereunder with coverage under the employee benefit programs, plans and practices (commensurate with his position in the Company and to the extent possible under any employee benefit plan), if any, in accordance with the terms thereof, which the Company makes available to Senior Executive Officers from time to time. 4.2. VACATION AND FRINGE BENEFITS. Executive shall be entitled to the number of vacation days customarily available to Senior Executive Officers. In addition, Executive shall be entitled to the perquisites and fringe benefits normally made available to Senior Executive Officers by the Company. 4.3. DIRECTORS AND OFFICERS LIABILITY COVERAGE, INDEMNIFICATION. (a) Executive shall be entitled to the same level of coverage (as determined from time to time by the Board of Directors of the Company) under such directors' and officers' liability insurance policies, if any, or other arrangements as are available to Senior Executive Officers and directors of the Company, to the fullest extent permitted by the existing By-laws of the Company. (b) The Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or NGH or is or was serving at the request of the Company or NGH as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, Executive shall be indemnified and held harmless by the Company and NGH to the fullest extent legally permitted or authorized by the Company's or NGH's certificate of incorporation or bylaws or resolutions of the Company's or NGH's Board of Directors, as the case may be, or, if greater, by the applicable state laws, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, employee or agent of the Company or NGH or other entity and shall inure to the benefit of Executive's heirs, executors and administrators. The Company or NGH, as the case may be, shall advance to Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by the Company or NGH, as the case may be, of a written request for such advance. Such request shall include an 4 undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses. (c) The Company also agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding by reason of the termination of his employment with his prior employer or his accepting employment with the Company, he shall be indemnified and held harmless by the Company against all costs, expenses, liabilities and losses (including, without limitation, attorney's fees) reasonably incurred or suffered by Executive in connection therewith provided; however, that Executive provides full and substantial cooperation in the defense of any such action. (d) The Company also agrees to indemnify Executive against any liabilities, costs or expenses, including attorney's fees, if his prior employer takes legal action against him in connection with his employment at the Company; provided, however, that Executive provides full and substantial cooperation in the defense of any such action. To the extent that Executive's prior employer does not comply with its obligations to provide a SERP benefit of $300,000 per year because of an assertion that Executive has violated a non-competition covenant, the Company shall provide Executive with 90% of the equivalent payments and benefits; provided, however, that Executive shall take any and all necessary or appropriate action to recover such amounts and further provided that Executive will fully cooperate with the Company in any action to recover said amounts. This Section 4.3 shall survive the termination of the Agreement for any reason. 4.4. LIFE INSURANCE. In addition to any life insurance coverage which Executive has under programs of the Company, except to the extent superseded by the Travelers Agreement and the Hancock Agreement (each as defined in Section 19 hereof) the Company shall, at Company cost, provide Executive with term life insurance coverage in the amount of $5,000,000 on the Executive's life, and term life insurance coverage in the amount of $5,000,000 on the life of the Executive's spouse. The policies shall be owned by the Kilts DYN Preservation Trust dated December 21, 1999 (the "Trust") and Bessemer Trust Company (the "Owner"). The Company shall hold Executive harmless from taxes, if any, incurred as a result of premiums paid on such life insurance. As long as Executive (i) is actively employed by the Company, (ii) retires pursuant to Section 5(d) hereof, (iii) is terminated by the Company other than for Cause (as defined in Section 6.4(a) hereof) or (iv) terminates for Good Reason (as defined in Section 6.1(b) hereof), the Company shall pay all premiums due for such insurance until the executive attains age 65. 5 4.5. RETIREE MEDICAL. Upon retirement under Section 5 hereof on or after age 55, Executive shall be eligible for retiree medical coverage based on his actual number of years of service with a minimum of 10 years credited service. The benefit provided hereunder shall be offset by any retiree medical benefits provided to Executive by his prior employers. 5. SUPPLEMENTAL PENSION. (a) Executive shall participate in (i) the Retirement Plan for Employees of Nabisco Holdings Corp. ("PEP"), (ii) the Nabisco Holdings Corp. Supplemental Benefits Plan ("SBP") and (iii) the Nabisco Holdings Corp. Additional Benefits Plan ("ABP") (collectively, the "Plans") in accordance with the terms of the Plans. (b) Upon completion of five years of active service with the Company or upon Executive's termination at any time other than (i) by the Company for Cause or (ii) by Executive without Good Reason, Executive shall be entitled to a minimum annual pension (the "Minimum Pension") equal to $200,000, (determined on the basis of a single-life annuity beginning at age 60, determined using the actuarial assumptions under the PEP). If and to the extent that the benefits payable under the terms of the Plans are less than the Minimum Pension, Executive, at the later of (i) Executive's Normal Retirement Age (as defined in subsection (d) hereof) or (ii) termination of Executive's employment other than for (A) by the Company for Cause or (B) by Executive without Good Reason, shall receive a supplemental pension (the "Supplemental Pension") equal to the difference between the Minimum Pension and the pension payable under the terms of the Plans. The Supplemental Pension shall be paid from the general assets of the Company (subject to Section 5(c) hereof) and shall be paid in the form of a single life annuity. If Executive dies after completing five years of active service with the Company, but prior to the commencement of his Supplemental Pension payments, Executive's beneficiary (as defined in Section 6.3 hereof) shall receive a benefit equal to the amount the beneficiary would have received in respect of the Supplemental Pension had Executive retired and been entitled to receive Supplemental Pension payments commencing immediately on the day prior to his death and elected to receive the Supplemental Pension in the form of a joint and 50% survivor annuity. (c) The Supplemental Benefit will be pre-funded only if similar retirement benefits provided to any other executives of the Company are pre-funded. (d) Executive's "Normal Retirement Age" shall be the first day of the month next following Executive's 60th birthday, unless Executive is permitted to 6 retire earlier with the consent of the Compensation Committee of the Board of Directors of the Company; provided, however, Executive's Normal Retirement Age shall in any event not occur until the end of any period of Compensation Continuance. Notwithstanding the foregoing, if termination of Executive's employment is other than for (i) by the Company for Cause or (ii) by Executive without Good Reason and is following a Change of Control (as defined in Section 6.1(d) hereof), Executive's "Normal Retirement Age" shall be deemed to be the date of such termination. Executive's voluntary termination of employment without Good Reason on or after his Normal Retirement Age shall be a termination of employment, but shall not be an "Involuntary Termination" (as defined in Section 6.1 (a) hereof) entitling Executive to Compensation Continuance (as defined in Section 6.1(a) hereof) under this Agreement. 6. TERMINATION OF EMPLOYMENT. 6.1. TERMINATION NOT FOR CAUSE OR FOR GOOD REASON. (a) The Company may terminate Executive's employment at any time for any reason, and as provided in Section 6.4, Executive may terminate his employment at any time for any reason. If Executive's employment is terminated by the Company other than for Cause or if Executive terminates his employment for Good Reason (collectively, an "Involuntary Termination"), in either case prior to, or after the second anniversary of, a Change of Control (hereafter, the 24-month period beginning on a Change of Control, a "Window Period"), Executive shall, subject to Section 6.1(e) hereof and the execution of a letter containing a waiver and release, in form and substance reasonably acceptable to Executive and the Company, releasing the Company and NGH from all claims and liabilities relating to such Termination and the Company's employment of Executive, become entitled to receive compensation ("Compensation Continuance") as provided in this Section 6.1 from the date of such Termination until the third anniversary (the "Compensation Period") of the date of such Involuntary Termination, and in lieu of any other severance, in an amount in cash equal to two (2) year's Full Pay, calculated as described below, payable in equal monthly installments over the Compensation Period, each installment representing 1/18th of one year's Full Pay (as defined below). One year's "Full Pay" is the sum of (i) plus (ii), where (i) is the Executive's highest annual rate of Base Salary in effect during the twelve (12) month period prior to the Executive's Involuntary Termination and (ii) is the Target Bonus Opportunity for the calendar year in which the Executive's employment terminated, or, if greater, the amount of the actual award for the calendar year immediately preceding the year of such Termination; provided, however, in the event that Executive's termination of employment with the Company occurs before he has foregone the entire $3,030,000 amount contemplated in Sections 1a. and 1b. of the Amended Agreement to Forego Compensation, effective as of April 6, 2000 between Executive and NA, as 7 subsequently amended from time to time (the "Relinquishment Agreement"), each monthly installment payable under this Section 6.1(a) shall be reduced by 1/36th of the difference between (x) $3,030,000 and (y) the amount actually foregone by the Executive under Sections 1a. and 1b. of the Relinquishment Agreement prior to his termination of employment with the Company. In addition, Executive shall be entitled to receive as Compensation Continuance during the Compensation Period under this Section 6.1(a): (iii) all unpaid amounts, as of the date of Executive's Involuntary Termination, in respect of any bonus, for any fiscal year ending before such termination which would have been payable had Executive remained in employment until the date such amount would otherwise have been paid, and an amount equal to the Vested Target Bonus Opportunity (as defined in Exhibit A); (iv) any payment deferred by Executive, together with any applicable interest or other accruals thereon; (v) full coverage under the Company's employee benefit programs, plans and practices, including continued crediting of service under the Company pension plans, described in Section 4.1 hereof (in the case of any plan meeting the requirements of Section 401 (a) of the Internal Revenue Code of 1986, as amended (the "Code"), only to the extent consistent with such requirements) for the Compensation Period, or the Company will provide for equivalent coverage (on an equivalent tax basis); PROVIDED, HOWEVER, that if, in connection with an Involuntary Termination outside a Window Period, Executive is provided with benefit plan or executive perquisite program coverage other than retirement plan coverage by an unaffiliated successor employer, any such coverage by the Company shall be reduced, with respect to amounts payable hereunder, by the benefits actually provided to Executive under any similar plan or coverage by any unaffiliated successor employer; (vi) full vesting of any outstanding stock options granted pursuant to the Prior Agreement or otherwise outstanding under the NHC LTIP or NGH's Long-Term Incentive Plan or successor thereto (the "NGH LTIP", and together with the NHC LTIP, the "LTIPs"), with the continued right to exercise such stock options for the remainder of their respective terms; 8 (vii) lapse of restrictions and deemed satisfaction of any performance objectives on or applicable to any outstanding restricted or contingent stock awards or units granted pursuant to the Prior Agreement or the LTIPs; (viii) such rights to payments under applicable plans or programs as may be appropriate to the terms of such plans or programs; (ix) for the first six (6) months after termination, the reasonable cost of one secretary and a fully functional office, such office location to be determined by Executive as long as the office is not to be located on the premises of the Company; and (x) outplacement counseling services at Company expense; provided, however, this expense shall not exceed 18% of the amount of Compensation Continuance for any calendar year. This counseling shall include, but is not limited to, skill assessment, job market analysis, resume preparation, interviewing skills, job search techniques and negotiating. If, subsequent to an Involuntary Termination, Executive shall die or suffer Permanent Disability (as defined in Section 6.2 hereof), such death or Permanent Disability shall not diminish the rights of Executive, his beneficiaries or successors to the payments and benefits under this Section 6.1(a) or Section 6.5(a) hereof, less any amounts paid under 6.2 (other than as required under any applicable subsections of this Section 6.1(a)). (b) For purposes of this Agreement, "Good Reason" shall mean the occurrence, without Executive's prior written consent, of one or more of the following events: (i) the aggregate amount of Executive's Base Salary from the Company and ordinary course of business annual award opportunities under the NHC AIAP or NGH's Annual Incentive Award Plan or any successor thereto (the "NGH AIAP", and together with the NHC AIAP, the "AIAPs") and/or either LTIP is at any time reduced without the Executive's consent; provided, however, nothing herein shall be construed to guarantee the Executive's targeted bonus or other awards if performance is below target; 9 (ii) the termination or material reduction of any employee benefit or perquisite enjoyed by him (other than, outside a Window Period, as part of an across-the-board reduction applicable to all executive officers of the Company); (iii) The failure to elect or reelect Executive to any of the positions described in Section 1 above or removal of him from any such position; (iv) Subject to Section 6.1 (c) hereof, Executive's job responsibilities as President and Chief Executive Officer of the Company or NGH are substantially reduced in importance without the Executive's consent or he is assigned duties which are materially inconsistent with his duties or which materially impair his ability to function as the President and Chief Executive Officer of the Company or of NGH; (v) The failure to continue Executive's participation in any incentive compensation plan unless a plan providing a substantially similar opportunity is substituted; (vi) Executive, without his consent, is at any time required as a condition of continued employment with the Company to relocate a distance of more than 35 miles from the current headquarters; (vii) Following a Change of Control or the divestiture of NHC or NA by NGH or NHC, as the case may be, the Chairman of NHC is anyone other than the Chairman of NGH (immediately prior to such Change of Control or divestiture); (viii) The failure of the Company to obtain the assumption in writing or its obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company within 45 days after a merger, consolidation, sale or similar transaction; or (ix) Unilateral termination of the Agreement by the Company or any material breach by the Company of any provision of this Agreement or any agreements entered into pursuant thereto. Unless the Executive provides written notification of his non-consent to the Company to any of the events described above within 180 days after his 10 learning of the occurrence of such event, the Executive shall be deemed to have consented to the occurrence of such event, or events, and no "Good Reason" shall continue to exist. If the Executive provides written notice of his non-consent to any of the events above within 180 days after the occurrence of such event, or events, and if the Company does not cure such event, or events, within 30 days of such written notice, he may thereupon terminate his employment for Good Reason ninety (90) days after receipt of written notice of such termination by the Company. (c) In the event of Executive's promotion with his consent, no "Good Reason" under Section 6.1(b) shall be deemed to have occurred, and the parties to this Agreement agree to amend and restate the Agreement to reflect the change in status resulting from the promotion. If, however, Executive refuses a promotion, the provisions of Section 6.1 (b) shall continue to be applicable. (d) As used herein, a "Change of Control" shall occur on the date upon which one of the following events occurs (except as otherwise provided in paragraph (iii) below): (i) Any individual, corporation, partnership, group, associate or other entity or "person" as such term is defined in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than NHC, NGH or any of their Subsidiaries, or any employee benefit plan(s) sponsored by NHC, NGH or any of their Subsidiaries, is or becomes the "beneficial owner" (as defined in Rule 13D-3 under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of NHC or NGH outstanding securities ordinarily having the right to vote at elections of directors; (ii) Individuals who constitute the Board of either NHC or NGH on January 1, 2000 (each such Board the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of NHC or NGH, as the case may be, provided that any person becoming a director subsequent to such date hereof whose election, or nomination for election by NHC or NGH shareholders, as the case may be, was approved by a vote of at least three-quarters of the directors comprising that Incumbent Board (either by a specific vote or by approval of the proxy statement of NHC or NGH, as the case may be, in which such person is named a nominee of NHC or NGH, as the case may be, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest 11 (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or "person" other than the NHC or NGH Board, as the case may be, shall be, for purposes of this paragraph (ii), considered as though such person were a member of the Incumbent Board. (iii) The approval by the shareholders of NHC or NGH, as the case may be, of a plan or agreement providing (A) for a merger or consolidation of NHC or NGH, as the case may be, other than with a wholly-owned subsidiary or with NGH, NHC or any of their subsidiaries, and other than a merger or consolidation that would result in the voting securities of NHC or NGH, as the case may be, outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of NHC or NGH, as the case may be, of such surviving entity outstanding immediately after such merger or consolidation or (B) for a sale, exchange or other disposition of all or substantially all of the assets of NHC or NGH. If any of the events enumerated in this paragraph (iii) occurs, the NHC Board shall determine the effective date of the Change of Control resulting therefrom. (e)(i) During any Compensation Period beginning outside a Window Period, the Executive shall provide consulting services to the Company on a reasonable basis, subject to appropriate notice and reimbursement of all travel and other expenses. During the first six (6) months of the Compensation Period the Executive may be required by the Company to provide up to fifteen (15) days of consultation during normal business hours and business days, subject to his other reasonable business and personal commitments. When and if the Executive becomes employed on a full-time basis, either with another company or on a self-employed basis, his obligation to provide consulting services shall be limited by the requirements of such employment, subject to his other reasonable business and personal commitments, and under appropriate circumstances, may be restricted to telephone conference. Continuing failure to provide such consulting services shall result in the termination of Compensation Continuance. (ii) If the Executive's Compensation Continuance is terminated pursuant to this Section 6.1(e), he may, within fifteen (15) days after mailing of notice thereof to him, submit to the Chairman a written objection to such termination. In such event, the Compensation Committee of the Board of 12 Directors of the Company at or before its next regularly scheduled meeting must determine by majority vote that termination of Compensation Continuance was appropriate or, failing that, Compensation Continuance must be reinstated with full retroactive effect. 6.2. PERMANENT DISABILITY. The event of the Executive becoming eligible for benefits under the Company's Long Term Disability Plan is not a termination under Section 6.1(a) or Section 6.5(a) hereof entitling Executive to Compensation Continuance under this Agreement. If, however, Executive becomes eligible for benefits under the Company's Long Term Disability Plan during his Compensation Period, the amount of Compensation Continuance shall be reduced during the Compensation Period by the amount of disability benefits payable to the Executive. All other provisions of this Agreement shall remain in effect notwithstanding the Executive's disability. 6.3. DEATH. In the event of Executive's death while actively employed, the Company's obligations under this Agreement shall cease except for the obligations under any program of the Company providing for a death benefit. In the event of Executive's death subsequent to commencement of his Compensation Period hereunder, the balance of Compensation Continuance will be paid to his beneficiary in a lump sum. "Beneficiary" shall mean the Executive's designated beneficiary under his Executive Program life insurance. 6.4. VOLUNTARY RESIGNATION; DISCHARGE FOR CAUSE; NOTICE AND DATE OF TERMINATION. (a) If Executive resigns voluntarily, other than for Good Reason or Permanent Disability, or the Company terminates the employment of Executive at any time for Cause, the Company's obligations under this Agreement to make any further payments to Executive, including, but not limited to, the benefits under Section 3 or Section 6.1(a), shall thereupon cease and terminate except with respect to any previously deferred amounts, or accrued but unpaid salary. "Cause" shall mean: (a) Executive is convicted of a felony involving moral turpitude; or (b) Executive is guilty of willful gross neglect or willful gross misconduct in carrying out his duties under this Agreement, which results, or reasonably likely may result, in either case, in material economic harm to the Company, unless Executive believed in good faith that such act or nonact was in the best interests of the Company. (b) For purposes of this Agreement, a "Notice of Termination for Cause" shall mean delivery to Executive of a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the membership of the NHC Board (or a committee thereof) (which, for these purposes, will be hereinafter referred to as the "NHC Board") at a meeting thereof called and held for the purpose (after reasonable notice to the Executive, "Preliminary Notice", and 13 reasonable opportunity for Executive, together with the Executive's counsel, to be heard before the Board prior to such vote), finding that in the good faith opinion of the Board, Executive was guilty of conduct set forth in the second sentence of this Section 6.4(a) and specifying the particulars thereof in detail. Upon the receipt of the Preliminary Notice, Executive shall have 14 days in which to appear with counsel or take such action as he desires on his behalf, and such 14-day period is hereby agreed to by the parties as a reasonable opportunity for Executive to be heard. The Board shall no later than 30 days after the receipt of the Preliminary Notice by Executive communicate its findings to Executive. A failure by the Board to make its finding of Cause or to communicate its conclusions within such 30-day period (the "Determination Period") shall be deemed to be a finding that Executive was not guilty of the conduct described in the second sentence of this Section 6.4(b). Any termination of Executive's employment by Executive outside a Window Period (other than by death or Permanent Disability) within 30 days after the date that the Preliminary Notice has been given to Executive shall be deemed to be a termination for Cause for purposes of the Agreement. (c) Except as provided in Section 6.4(b) above, (i) Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, (A) during a Window Period a "Notice of Termination" by the Company shall mean, and (B) outside a Window Period a "Notice of Termination" by the Executive shall mean, a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (ii) "Date of Termination" shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), (ii) if the Executive's employment is terminated by reason of the Executive's death, the date of the Executive's death, (iii) if the Executive's employment is terminated by reason of the Executive's Retirement, for Cause, Involuntary Termination or for any other reason (other than Disability or death), the date specified in the Notice of Termination or Notice of Termination for Cause, as the case may be, (which (A) in the case of a Notice of Termination for Cause during a Window Period shall not be less than thirty (30) nor more than sixty (60) days from the date, if any, in the Determination Period that the Board notifies the Executive of its finding of Cause and (B) in the case of the 14 Executive's voluntary termination (other than Executive's termination of employment for Good Reason) shall not be less than three (3) months after the date such Notice of Termination is given). 6.5. TERMINATION FOLLOWING A CHANGE OF CONTROL. (a) Upon the Executive's Involuntary Termination during a Window Period, in lieu of the benefits provided by Section 6.1(a)(i) and (ii) hereof Executive shall be entitled to a lump sum payment within fifteen (15) business days following the date of such Termination equal to three hundred percent (300%) of the sum of (i), (ii) and (iii), where (i) is the greater of the Executive's annual rate of Base Salary as in effect immediately prior to such termination or immediately prior to the Change of Control to which such Window Period relates, (ii) is the greater of (1) the Executive's annual Target Bonus Opportunity immediately prior to such termination or immediately prior to such Change of Control or (2) the greater of the aggregate amount of such actual award for the calendar year immediately preceding the year of such termination or immediately preceding the year of such Change of Control and (iii) is the greater of the annual perquisite allowance applicable to the Executive under the Nabisco Flexible Perquisites Program as in effect immediately prior to such termination or immediately prior to such Change of Control (such greater amount, the "Allowance"); provided, however, in the event that Executive's termination of employment with the Company occurs before he has foregone the entire $3,030,000 amount contemplated in Sections 1a. and 1b. of the Relinquishment Agreement, the amount payable under this Section 6.5(a) shall be reduced by the difference between (x) $3,030,000 and (y) the amount actually foregone by the Executive under Sections 1a. and 1b. of the Relinquishment Agreement prior to his termination of employment with the Company. (b) In addition to the benefits provided by Section 6.5(a) above, upon the Executive's Involuntary Termination during a Window Period, the Executive shall be entitled to receive Compensation Continuance as set forth in Section 6.1(a)(iii)-(x) hereof until the third anniversary of such Involuntary Termination. (c) (i) Anything herein to the contrary notwithstanding, in the event that it is determined that any payment or distribution by the Company to or for the Executive's benefit, whether paid or payable or distributed or distributable pursuant to the terms hereof, including but not limited to Section 7, or otherwise, other than any payment pursuant to this Section 6.5(c), (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive, within fifteen (15) business days following the determination described in Section 6.5(c)(ii) below, an additional 15 payment ("Excise Tax Adjustment Payment") in an amount such that after payment by the Executive of all applicable Federal, state and local taxes (computed at the maximum marginal rates and including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment Payment, the Executive shall retain an amount of the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the Payments. (ii) All determinations required to be made under this Section 6.5(b), including whether Excise Tax Adjustment Payment is required and the amount of such Excise Tax Adjustment Payment, shall be made by DELOITTE & TOUCHE LLP, or such other accounting firm as the Company may designate prior to a Change of Control, which shall provide to the Company and the Executive detailed supporting calculations within fifteen (15) business days of the date of the Executive's termination of employment. Except as hereinafter provided, any determination by DELOITTE & TOUCHE LLP, or such other accounting firm as the Company may designate prior to a Change of Control, shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination hereunder, it is possible that (A) Excise Tax Adjustment Payments which should have been made will not have been made by the Company ("Underpayment"), or (B) certain Payments will have been made which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event of an Underpayment, the Company shall promptly determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the Executive's benefit. In the event that the Executive discovers that an Overpayment shall have occurred, the amount thereof shall be promptly repaid to the Company. 6.6. NO MITIGATION; NO OFFSET. In the event of any termination of employment under this Section 6, Executive shall be under no obligation to seek other employment and, except to the extent provided in Section 14(c) hereof, there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain. 7. CERTAIN AIAP PROVISIONS. In the event of a Change of Control, the Executive will be paid within fifteen (15) business days following the date of such Change of Control a lump sum cash payment equal to the Executive's Vested Target Bonus Opportunity. 8. EXPENSES. Upon submission of proper vouchers therefor, the Company will pay or reimburse Executive for all transportation, hotel and living 16 expenses incurred by Executive on business trips outside New Jersey, and for all other business and entertainment expenses reasonably incurred by him in connection with the business of the Company and its Affiliates during the term of his employment hereunder, at a standard commensurate with chief executive officers of the Company and its significant subsidiaries. 9. LEGAL FEES AND EXPENSES. (a) The Company shall reimburse Executive for reasonable legal fees incurred in connection with executing this Agreement and shall pay all reasonable legal fees and expenses which Executive may incur outside a Window Period in respect of obtaining any compensation or other benefits to which he is entitled under this Agreement. (b) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive as a result of the Executive's Involuntary Termination on the date of a Change of Control or during the resulting Window Period (including all such fees and expenses, if any, in seeking to obtain or enforce any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company) unless the Executive's claim is found by an arbitral tribunal of competent jurisdiction to have been frivolous. (c) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive during a Window Period as a result of both (i) the Executive's Involuntary Termination prior to the Change of Control to which such Window Period relates and (ii) the Company's refusal after such Change of Control to provide any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company in respect of such Termination, including all such fees and expenses, if any, in seeking to obtain or enforce any such right or benefit unless the Executive's claim is found by an arbitral tribunal or court of competent jurisdiction to have been frivolous. 10. NOTICES. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: Steven F. Goldstone Chairman Nabisco, Inc. 7 Campus Drive Parsippany, NJ 07054 17 with a copy to: Chief Legal Officer Nabisco, Inc. 7 Campus Drive Parsippany, NJ 07054 Any such notice or communication shall be sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and three days after the actual date of mailing shall be deemed the time at which notice was given. 11. LIMITED WAIVER/SEPARABILITY. The waiver by any party of a violation by Executive of any of the provisions of this Agreement, whether expressed or implied, shall not operate or be construed as a waiver of any subsequent violation of any such provision. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. 12. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. No rights or obligations of the Company or NGH under this Agreement may be assigned or transferred by the Company or NGH, as the case may be, except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company or NGH, as the case may be, is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company or NGH, as the case may be, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company or NGH, as the case may be, and such assignee or transferee assumes the liabilities, obligations and duties of the Company or NGH, as the case may be, , as contained in this Agreement, either contractually or as a matter of law. The Company or NGH, as the case may be, further agree that, in the event of a sale of assets or liquidation as described in the preceding sentence, they shall take whatever action it legally can in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of the Company hereunder. 13. AMENDMENT. The Agreement may be amended at any time only by mutual written agreement of the parties hereto. 18 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION; COOPERATION DURING THE COMPENSATION PERIOD; NONCOMPETITION. (a) Executive shall not, without the prior consent of the Company and/or NGH, divulge, disclose or make accessible to any other person, firm, partnership or corporation or other entity any Confidential Information pertaining to the business of the Company or NGH except (1) while employed by the Company in the business of and for the benefit of the Company or NGH or (2) while employed by the Company when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of NGH or the Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information or (3) while on Compensation Continuance when required to do so as provided in Section 14(b) hereof. For purposes of this Section 14(a), "Confidential Information" shall mean non-public information concerning the Company's or NGH's financial data, strategic business plans, product development (or other proprietary product data), customer lists, marketing plans and other proprietary information, except for specific items which have become publicly available information (other than such items which Executive knows have become publicly available through a breach of fiduciary duty or any confidentiality agreement). During active employment or during Compensation Continuance, in accordance with normal ethical and professional standards, Executive will refrain from taking actions or making statements, written or oral, which defame or denigrate the goodwill or reputation of the Company and/or NGH, their properties, products, directors, officers, executives and employees or which constitute willful conduct under circumstances where it is reasonable for Executive to anticipate or to expect that the natural consequences of such conduct by Executive will be to affect adversely the morale of other employees. (b) During the Compensation Period, Executive agrees that (1) subject to reasonable scheduling requirements, he will personally provide reasonable assistance and cooperation to the Company and/or NGH in activities related to the prosecution or defense of any pending or future lawsuits or claims involving the Company and/or NGH, (2) he will promptly notify the Company and/or NGH if he receives any requests from anyone other than an employee or agent of the Company and/or NGH for information regarding the Company and/or NGH or if he becomes aware of any potential claim or proposed litigation against the Company and/or NGH, (3) he will refrain from providing any information related to any claim or potential litigation against the Company and/or NGH to any non-Company or non-NGH representatives without either the Company's or NGHs' written permission or being required to provide information pursuant to legal process, (4) if required by law to provide sworn testimony regarding any Company or NGH-related matter, he will consult with and have Company or NGH-designated legal counsel present for such testimony, (5) the Company and/or NGH 19 will be responsible for the costs of such designated counsel and he will bear no cost for same, (6) he will confine his testimony to items about which he has knowledge rather than speculation, unless otherwise directed by legal process and (7) he will cooperate with the Company's and/or NGHs' attorneys to assist their efforts, especially on matters he has been privy to, holding all privileged attorney-client matters in strictest confidence. Nothing in the foregoing clauses 2-7 is intended to apply to governmental or judicial investigations; provided, however, the Company and/or NGH will reimburse Executive for legal expenses if he is compelled to appear in a governmental or judicial investigation. (c) Any Compensation Period resulting from an Involuntary Termination outside a Window Period shall be terminated if the Executive, without the Company's written approval, accepts a substantially similar or higher executive position, paying a substantially comparable or greater level of cash compensation, with any other company conducting a business which is substantially competitive with a business conducted by the Company or an Affiliate. Alternatively, the Company may, in its discretion, appropriately reduce the Executive's cash compensation and employee benefits coverage for the balance of the Compensation Period. (d) In the event that the Executive unreasonably refuses to provide consulting services in accordance with Section 6.1(e) or materially violates the terms and conditions of Sections 14(a) or 14(b) above, the Company may, at its election upon ten (10) days notice, terminate the Compensation Period, discontinue cash compensation payments and employee benefits coverage and cancel any outstanding stock options or other LTIP awards. The Company may also initiate any form of legal action it may deem appropriate seeking damages or injunctive relief with respect to any material violations of Sections 14(a), 14(b) or 14(c) above. 15. BENEFICIARIES/REFERENCES. Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such election, in either case by giving the Company written notice thereof. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. Any reference to the masculine gender in this Agreement shall include, where appropriate, the feminine. 16. SURVIVORSHIP. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. The provisions of this 20 Section are in addition to the survivorship provisions of any other section of this Agreement. 17. GOVERNING LAW. This Agreement shall be construed, interpreted, and governed in accordance with the laws of New Jersey, without reference to rules relating to conflicts of law. 18. WITHHOLDING & TAXES. The Company shall be entitled to withhold from payment any amount of withholding required by law. 19. ENTIRE AGREEMENT. (a) (i) Except as set forth in Subsection (ii) of this Section 19(a), this Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby and supersedes and replaces any prior agreement with respect to employment, compensation continuation and the matters contained in this Agreement which Executive may have had with the Company or an Affiliate. (ii) This Agreement does not supersede or replace the Relinquishment Agreement, that certain Travelers Life Insurance Agreement effective as of January 1, 2000 between NA, Executive, The Trust, the Owner and all agreements, assignments and other documentation related thereto (collectively, the "Travelers Agreements") or that certain John Hancock Life Insurance Agreement between NA, Executive, the Trust and the Owner, effective as of January 1, 2000 and all agreements, assignments and other documentation related thereto (collectively, the "Hancock Agreements"), which Relinquishment Agreement, Travelers Agreements and Hancock Agreements remain in full force and effect according to their terms. (b) This Agreement shall be binding upon and inure to the benefit of Executive, the Company or Affiliates, and any successor organization or organizations which shall succeed to substantially all of the business and property of the Company, whether by means of merger, consolidation, acquisition of substantially all of the assets of the Company or otherwise, including by operation of law. (c) Unless otherwise stated herein, no benefit or promise hereunder shall be secured by any specific assets of the Company. Unless otherwise stated herein, Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises. 21 20. LATE PAYMENTS. To the extent that any payments required to be made hereunder following a Change of Control in connection with any Involuntary Termination occurring prior to the second anniversary of such Change of Control are not made within the period specified therefor, the Company shall be liable for interest on such delayed payments at the rate of 150% of the prime rate compounded monthly, as posted by the Morgan Guaranty Trust Company of New York, from time to time. 21. ACTUARIAL CALCULATIONS. All required actuarial calculations of payments to be made hereunder shall be made by WATSON WYATT WORLDWIDE, NEW YORK, NEW YORK, or such other actuarial firm as the Company may designate prior to a Change of Control. 22. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. 23. PARAGRAPH HEADINGS. Paragraph headings are inserted for convenience only and do not constitute a part and shall not affect the interpretation of this Agreement. 22 IN WITNESS WHEREOF. the parties have executed this Agreement as of , 2000. NABISCO HOLDINGS CORP. /s/ James M. Kilts By: /s/ James A. Kirkman III - ----------------------------- -------------------------------------- James M. Kilts James A. Kirkman III Executive Vice President, General Counsel & Secretary NABISCO INC. By: /s/ James A. Kirkman III -------------------------------------- James A. Kirkman III Executive Vice President, General Counsel & Secretary NABISCO GROUP HOLDINGS CORP. By: /s/ James A. Kirkman III -------------------------------------- James A. Kirkman III Executive Vice President, General Counsel & Secretary 23 EXHIBIT A DEFINITIONS VESTED TARGET BONUS OPPORTUNITY means, as of a Change of Control or as of a Termination Date, as the case may be, an amount equal to the value of the Executive's target award or Target Bonus Opportunity, as the case may be, under the relevant AIAP or LTIP, as the case may be, for the relevant performance period in which the Change of Control or Involuntary Termination occurs, as the case may be, multiplied by a fraction, the numerator of which is the number of days in the period beginning on the first day of the relevant performance period and ending on the Change of Control or such Termination Date, as the case may be, and the denominator of which is 365; provided that in the event of an Involuntary Termination following a Change of Control in the year in which a Change of Control occurs, for purposes of computing the Vested Target Bonus Opportunity as of the date of such Termination, the performance period shall be deemed to begin on the first day following the Change of Control and the target award or Target Bonus Opportunity, as the case may be, shall be that in effect immediately preceding such Change of Control. EX-10.5 6 EXHIBIT 10.5 Exhibit 10.5 EMPLOYMENT AGREEMENT AMENDMENT AND RESTATEMENT, made effective as of this 17th day of March, 2000, of the EMPLOYMENT AGREEMENT dated October 1, 1997, as amended, by and between NABISCO, INC., a New Jersey corporation (the "Company"), and James E. Healey ("the Executive"). RECITALS WHEREAS, the Executive and RJR Nabisco, Inc., a Delaware corporation ("RJRN"), entered into the Employment Agreement dated October 1, 1997; and WHEREAS, the Executive, RJRN and the Company executed an Amendment to the Employment Agreement as of May 1, 1999; and WHEREAS, the Company and the Executive agree that the Employment Agreement should be further amended and restated, in order to more effectively provide the Executive continued incentives to remain in the service of the Company or its subsidiaries or affiliates; NOW, THEREFORE, in consideration of mutual incentives, it is hereby agreed by and between the Company, Nabisco Holdings Corp. ("NHC") and Nabisco Group Holdings Corp. ("NGH") and the Executive to amend and restate the Employment Agreement, effective on the date first above written, as follows: 1. Employment. The Executive agrees to devote the Executive's working time exclusively to the performance of such services for the Company or NHC or any of their Subsidiaries or Affiliates (each, as defined below) as may be assigned to the Executive from time to time and to perform such services faithfully and to the best of the Executive's ability except as the provisions of subsections 4(b)(i) or 4(b)(ii) shall apply. For purposes of this Agreement, (i) "Affiliate" means, with respect to the Company, NHC or NGH, any person or entity directly or indirectly controlling, controlled by, or under common control with the Company, NHC or NGH, as the case may be, and (ii) "Subsidiary" of the Company, NHC or NGH means any 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 the Company, NHC or NGH, as the case may be. 2. Term of Agreement. Subject to Section 7(e) hereof, this Agreement shall commence on the date hereof and shall remain in effect so long as the Executive remains employed by the Company or NHC or any of their subsidiaries or any successor organizations. 3. Termination of Employment Without Compensation Continuance. (a) Termination for Cause. This Agreement shall immediately be terminated and neither party shall have any obligation hereunder if the Executive's employment is terminated for Cause (as defined below). (i) At any time before a Change of Control (as defined below) or following the second anniversary of such Change of Control, termination for "Cause" shall mean termination by the Company of the Executive's employment resulting from the Executive's: (A) criminal dishonesty; (B) deliberate and continual refusal to perform employment duties on substantially a full-time basis; (C) deliberate and continual refusal to act in accordance with any specific lawful instructions of a majority of the Board of Directors of NHC (the "NHC Board"); or (D) deliberate misconduct which could be materially damaging to the Company without reasonable good faith belief by the Executive that such conduct was in the best interests of the Company. (ii) Any purported termination for Cause under Section 3(a)(i) shall not be applicable unless (A) the Executive is advised in writing that the Executive is being terminated for Cause and, (B) if within fifteen (15) days thereafter the Executive submits to the Chief Executive Officer of the Company a written objection to such a determination, the Compensation Committee of the NHC Board at or before its next regularly scheduled meeting determines by majority vote that the Executive has been terminated for Cause. (iii) During the two (2) year period beginning on a Change of Control, termination for "Cause" shall mean termination by the Company of the Executive's employment resulting from the Executive's: (A) willful and continued failure substantially to perform employment duties with the Company or any Subsidiary or Affiliate (other than as a result of total or partial incapacity due to physical or mental illness or as a result of a termination by the Executive for Good Reason (as defined below)) after a written demand for substantial performance is delivered to the Executive by the NHC Board, which demand specifically identifies the manner in which the NHC Board believes that the Executive has not substantially performed the Executive's duties; (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to NHC, NGH or the Company, monetarily or otherwise; or (C) the Executive's conviction of a 2 felony under the laws of the United States, any state or any other country or political sub-division thereof involving moral turpitude. For purposes of this paragraph (iii), no act or failure to act on the Executive's part shall be deemed "willful" unless done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause under this paragraph (iii) unless and until there shall have been delivered to the Executive documentation of the affirmative vote (which cannot be delegated) of not less than three-quarters (3/4) of the entire membership of the NHC Board of Directors at a meeting of the NHC Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the NHC Board), finding that in the good faith opinion of the NHC Board the Executive was guilty of conduct set forth above in subclauses (A), (B) or (C) above, specifying the particulars thereof in detail. (b) Voluntary Termination of Employment by the Executive. The Executive reserves the right to terminate voluntarily the Executive's employment at any time for any reason. Upon such a termination other than a termination pursuant to Section 4(b), all obligations of the Company hereunder shall be cancelled automatically, and the Executive shall not be entitled to any form of Compensation Continuance under this Agreement, including that described in Section 5 below. (c) Disability. The event of physical or mental disability of a nature that entitles the Executive to benefits under the Company's Long-Term Disability Plan is not a termination of employment under any section of this Agreement. As such, disability shall not qualify the Executive for the Compensation Continuance described herein unless the Executive is terminated under Section 4(a) or Section 4(b)(i). (d) Death. In the event of the Executive's death prior to Involuntary Termination, this Agreement will be null and void. 4. Termination With Compensation Continuance. (a) Involuntary Termination Without Cause by the Company. (i) The Company reserves the right to terminate the employment of the Executive at any time for any reason subject to providing the compensation and benefits described herein. Except as provided in Section 6, the Company will provide the Executive with the Compensation Continuance described in Section 5 hereof if the Executive is involuntarily separated from active employment without Cause by the Company ("Involuntary Termination"). 3 (ii) The divestiture of the operating company employing the Executive, and the assignment of the obligations of the Company under this Agreement to such operating company, or its successor or acquiror, in connection with the divestiture of either all, or substantially all, the shares or assets of such operating company shall not automatically be an Involuntary Termination unless such divestiture and assignment would result in an Involuntary Termination under Section 4(b) hereof. (iii) The transfer of the Executive's employment to any company that owns at least 50% of the voting power of the Company, or any subsidiary of such company (an "Affiliated Company"), shall not automatically be deemed an Involuntary Termination unless such transfer would result in an Involuntary Termination under Section 4(b) hereof. (b) Deemed Involuntary Termination Without Cause by the Company. (i) At any time before a Change of Control or following the second anniversary of a Change of Control, Involuntary Termination shall be deemed to occur if the Executive voluntarily terminates employment after: (A) the total amount of the Executive's base salary, annual bonus and long term incentive opportunity under the Annual Incentive Award Plans (or other annual incentive plans) of NGH or NHC, as the case may be, (collectively, as in effect from time to time, the "AIAPs") and Long Term Incentive Plans (or other long term incentive plans) of NGH or NHC, as the case may be (collectively, as in effect from time to time, the "LTIPs") is at any time reduced by more than 20% without the Executive's consent, provided, however, nothing herein shall be construed to guarantee the Executive's target award if performance is below target; (B) the Executive's job responsibilities are substantially reduced in importance without the Executive's consent or the Company fails to guarantee the obligations hereunder as required by Section 7(d); or (C) the Executive, without the Executive's consent, is at any time required as a condition of continued employment to relocate more than thirty-five (35) miles from the Executive's then current place of employment. Unless the Executive provides written notification of the Executive's non-consent to an event in (A), (B) or (C) above within ninety (90) days after the occurrence of such event, the Executive shall be deemed to have consented to the occurrence of such event and no deemed Involuntary Termination shall occur. If the Executive provides written notice of the Executive's non-consent to any of the events in (A), (B) or (C) above within ninety (90) days after the occurrence of such event, the Executive shall be deemed to have been Involuntarily Terminated ninety (90) days after receipt of such written notice by the Company. 4 (ii) At any time during the two (2) year period beginning on a Change of Control, Involuntary Termination shall be deemed to occur if the Executive voluntarily terminates employment after an event of "Good Reason". For purposes of this Agreement "Good Reason" shall mean, without the Executive's express written consent, any of the following: (A) Any reduction in the Executive's duties, any diminution in the Executive's position or any adverse change in the Executive's reporting relationship from those in effect immediately prior to the Change of Control; (B) Any reduction in the Executive's base salary, grade or annual bonus or long term incentive opportunity as in effect immediately prior to the Change of Control or as the same may thereafter be increased from time to time during the term of this Agreement; (C) The failure to continue in effect any compensation or benefit plan in which the Executive participates or is entitled to participate in at the time of the Change of Control, including but not limited to the relevant LTIP, the relevant AIAP, any defined benefit or defined contribution plan or related supplemental plans, or any substitute plans adopted prior to the Change of Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan providing the Executive with substantially similar benefits) has been made with respect to such plan in connection with the Change of Control, or the failure to continue the Executive's participation therein on substantially the same basis, both in terms of the amount of the benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change of Control; (D) The taking of any action which would directly or indirectly reduce any of the benefits to be provided under Section 5 or any benefits thereunder or any compensation or benefit plan of the Company, NGH or NHC including, without limitation the LTIPs, the AIAPs and the Company's Deferred Compensation Plan or deprive the Executive of or reduce any benefits or amounts with respect to any perquisite or any material fringe benefit enjoyed by the Executive at the time of the Change of Control, or the failure to provide the Executive with the number of paid vacation days to which the Executive is entitled on the basis of the Company's practice with respect to the Executive as in effect at the time of the Change of Control; 5 (E) Any material breach by the Company, NGH or NHC of any provision of this Agreement including, but not limited to any provision of Section 5, any benefits thereunder or any compensation, benefit or perquisite plan of the Company, NGH or NHC including, without limitation the LTIPs, the AIAPs and the Company's Deferred Compensation Plan, or any agreements entered into pursuant thereto; (F) Any purported termination of Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subsection (c) below; provided further that for purposes of this Agreement, no such purported termination shall be effective; or (G) Requiring the Executive to be based at any office or location more than thirty-five (35) miles from the office or location at which the Executive was based immediately prior to such Change of Control, except for travel reasonably consistent with the Executive's travel requirements prior to such Change of Control; If the Executive provides written notice of the Executive's non-consent to any of the events in (A), (B), (C), (D), (E), (F) or (G), above within 180 days after the occurrence of any such event, the Executive shall be deemed to have been Involuntarily Terminated upon the earlier of the date set forth in Executive's Notice of Termination or 181 days after the occurrence of such event. (iii) As used herein, a "Change of Control" shall occur on the date upon which one of the following events occurs (except as otherwise provided in paragraph (C) below): (A) Any individual, corporation, partnership, group, associate or other entity or "person" as such term is defined in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than NHC, NGH or any of their Subsidiaries, or any employee benefit plan(s) sponsored by NHC, NGH or any of their Subsidiaries, is or becomes the "beneficial owner" (as defined in Rule 13D-3 under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of NHC or NGH outstanding securities ordinarily having the right to vote at elections of directors; (B) Individuals who constitute the Board of either NHC or NGH on January 1, 2000 (each such Board the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of NHC or NGH, as the case may be, provided that any person becoming a director subsequent to such date hereof whose election, or nomination for election by NHC or NGH shareholders, as the case may 6 be, was approved by a vote of at least three-quarters of the directors comprising that Incumbent Board (either by a specific vote or by approval of the proxy statement of NHC or NGH, as the case may be, in which such person is named a nominee of NHC or NGH, as the case may be, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or "person" other than the NHC or NGH Board, as the case may be, shall be, for purposes of this paragraph (B), considered as though such person were a number of the Incumbent Board. (C) The approval by the shareholders of NHC or NGH, as the case may be, of a plan or agreement providing (I) for a merger or consolidation of NHC or NGH, as the case may be, other than with a wholly-owned subsidiary or with NGH, NHC or any of their subsidiaries, and other than a merger or consolidation that would result in the voting securities of NHC or NGH, as the case may be, outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of NHC or NGH, as the case may be, of such surviving entity outstanding immediately after such merger or consolidation or (II) for a sale, exchange or other disposition of all or substantially all of the assets of NHC or NGH. If any of the events enumerated in this paragraph (C) occurs, the NHC Board shall determine the effective date of the Change of Control resulting therefrom. (c) (i) Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7(b) hereof. For purposes of this Agreement, (A) during the twenty-four (24) month period beginning on a Change of Control a "Notice of Termination" by the Company shall mean, and (B) prior to, and following the second anniversary of, a Change of Control a "Notice of Termination" by the Executive shall mean, a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. 7 (ii) "Date of Termination" shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), (ii) if the Executive's employment is terminated by reason of the Executive's death, the date of the Executive's death, (iii) if the Executive's employment is terminated by reason of the Executive's Retirement, for Cause, Involuntary Termination or for any other reason (other than Disability or death), the date specified in the Notice of Termination (which (A) in the case of a termination for Cause during the two (2) year period beginning on a Change of Control shall not be less than thirty (30) nor more than sixty (60) days from the date such Notice of Termination is given and (B) in the case of the Executive's voluntary termination (other than pursuant to Section 4(b) and other than during the two (2) year period beginning on a Change of Control) shall not be less than three (3) months after the date such Notice of Termination is given). 5. Compensation Continuance Under This Agreement. (a) Compensation Period. If at any time during the term of this Agreement the Executive has an Involuntary Termination pursuant to Section 4, subject to Section 6(g), if applicable, the Executive will be provided with Compensation Continuance as provided in this Section 5. (b) Cash Compensation. (i)(A) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will be entitled to cash compensation equal to two (2) year's Full Pay, calculated as described below, payable in equal monthly installments over the Compensation Period (as defined below), each installment representing 1/18th of one year's Full Pay (as defined below). One year's "Full Pay" is the sum of (x) plus (y), where (x) is the Executive's highest annual rate of base salary in effect during the twelve (12) month period prior to the Executive's Involuntary Termination and (y) is the annual target amount of the Executive's annual bonus under the relevant AIAP and/or LTIP for the calendar year in which the Executive's employment terminated (or, if greater, the amount of such actual award for the next preceding calendar year of full-time employment). For all purposes of this Agreement, "Compensation Period" shall mean the three (3) year period commencing on the Date of Termination. 8 (B) Upon an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Executive will be entitled to a lump sum payment within fifteen (15) business days following the date of such Involuntary Termination equal to twice the sum of (u), (v) and (w), where (u) is the greater of the Executive's annual base salary as in effect immediately prior to such Termination or immediately prior to such Change of Control (such greater amount, the "Base Salary"), (v) is the greater of the Executive's annual target bonus under the relevant AIAP and/or LTIP immediately prior to such Termination or immediately prior to the Change of Control or ("Target Amount") and (w) is 1.5 times the greater of the annual perquisite allowance applicable to the Executive under the Nabisco Flexible Perquisite Program (the "Program") as in effect immediately prior to such Termination or immediately prior to such Change of Control (such greater amount, the "Allowance"). The sum of Base Salary, Target Amount and Allowance are hereinafter referred to as "Base Cash". For purposes of this Agreement, "Compensation Period" shall mean the three (3) year period commencing on the Date of Termination. (ii) Cash compensation paid pursuant to this Section 5(b) shall be subject to all required payroll deductions. (c) Annual Incentive and Retention Plan Awards. (i) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will be paid at the time of such Involuntary Termination a portion of the Executive's annual bonus under the relevant AIAP and/or LTIP, based upon the target award for the year in which the Executive's Involuntary Termination occurs, prorated for the Executive's active employment during such year. Except as stated in the foregoing sentence, all provisions of the relevant AIAP and/or LTIP shall be applicable to the Executive. (ii) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, all provisions of NHC's 1999 Retention Program (the "1999 Program") shall be applicable to the Executive. (iii) Upon an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Company shall pay to the Executive, not later than fifteen (15) business days following the Date of Termination, a lump sum cash payment equal to the sum of (A) and (B), where (A) is Executive's AIAP Vested Amount for such plan year and (B) is the sum of (x) and (y) where (x) is the Executive's Vested 1999 Program Award Amount and (y) is the Executive's Earned 1999 Program Amount (each as defined in Exhibit A) as of the Date of Termination. 9 (d) Long Term Incentive Plan Awards. The treatment of long term incentive awards during the Compensation Period shall be determined pursuant to the terms of the relevant LTIP and related award agreements; provided, however, that for such purposes, the Compensation Period shall be treated as a period of salary and benefit continuance. (e) Welfare Benefits. During the Compensation Period the Executive will be provided the welfare benefits and other fringe benefits afforded by the employee benefit plans and programs maintained by the Company in which the Executive participated immediately prior to Involuntary Termination. (f) Retirement and Savings Plans. (i) If Executive was participating in any Retirement Plan or Savings Plan (each as defined in Exhibit A) immediately prior to an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will continue to accrue or be deemed to accrue benefits during the Compensation Period under such Retirement Plans and Savings Plans for purposes of benefit accrual and employer matching contributions, as applicable, based on the same formula and matching amount as in effect immediately prior to such Termination. If the Executive will have attained age 50 at the end of the Compensation Period with 10 years of service (including the Compensation Period), the Executive will, subject to the conditions of Paragraph 6, be deemed retired with the consent of the Company for the purposes of welfare and executive compensation plans but not for the purposes of any Retirement or Savings Plan. Notwithstanding any provision herein to the contrary, upon such a Termination pension benefits under any Retirement Plan based on "Average Final Compensation" will be calculated applying the rate of one year's Full Pay and the Executive's Annual Flexible Perquisite Allowance for each year in the Compensation Period. (ii) If Executive was participating in any Retirement Plan immediately prior to an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Executive will be deemed to accrue benefits during the Compensation Period under such Retirement Plans for purposes of benefit accrual based on the same formula as in effect immediately prior to such Termination. If the Executive will have attained age 50 at the end of the Compensation Period with 10 years of service (including the Compensation Period), the Executive will, subject to the conditions of Paragraph 6, be deemed retired with the consent of the Company for the purposes of welfare and executive compensation plans but not for the purposes of any Retirement. Notwithstanding any provision herein to the contrary, upon such a Termination pension benefits under any Retirement Plan based on "Average Final Compensation" will be calculated applying the rate of one year's Base Cash for each year in the Compensation Period. 10 (g) Flexible Perquisite Program. During the Compensation Period, the Executive shall continue to receive benefits under the Program; provided, further, that in the event of an Involuntary Termination during the two (2) year period beginning on a Change of Control, ownership of the automobile assigned to the Executive immediately prior to such Termination shall be transferred to the Executive within fifteen (15) business days after such Termination. At the time of such transfer, the Company shall pay to the Executive such amount in cash that, after payment of all applicable federal, state and local taxes thereon, computed at the maximum marginal rates, is equal to all such taxes, so computed, imposed in connection with such transfer. (h) Outplacement. During the Compensation Period, Executive will be provided with outplacement counseling services at Company expense; provided, however, this expense shall not exceed 18% of the amount of one year's Full Pay or Base Cash, as the case may be. This counseling shall include, but is not limited to, skill assessment, job market analysis, resume preparation, interviewing skills, job search techniques and negotiating. 6. Conditions on Compensation Continuance. (a) Availability and Consulting. Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, during the related Compensation Period the Executive shall provide consulting services to the Company on a reasonable basis subject to appropriate notice and reimbursement of all travel and other expenses. During the first six (6) months of such Compensation Period, the Executive may be required by the Company to provide up to fifteen (15) days of consultation during normal business hours and business days. When and if the Executive becomes employed on a full-time basis, either with another company or on a self-employed basis, the Executive's obligation to provide consulting services shall be limited by the requirements of such employment, and under appropriate circumstances, may be restricted to telephone conference. (b) Confidentiality and Conduct. The Executive warrants that the Executive will not disclose to any other person any confidential information or trade secrets concerning the Company or any of its subsidiaries at any time during or after the Compensation Period and upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will at all times refrain from taking any action or making any statements, written or oral, which are intended to and do disparage the goodwill or reputation of the Company, its directors, officers or executives or which could adversely affect the morale of Company employees. 11 (c) Breach of Conditions. In the event that the Executive unreasonably refuses to provide consulting services to the extent required under paragraph (a) above or materially violates the terms and conditions of paragraph (b) above, the Company may, at its election upon ten (10) days notice, terminate any ongoing Compensation Period, discontinue cash compensation payments and employee benefits coverage and cancel any outstanding stock options or restricted stock. The Company may also initiate any form of legal action it may deem appropriate seeking damages or injunctive relief with respect to any material violations of paragraph (b) above. (d) Non-Competition. Any Compensation Period resulting from an Involuntary Termination prior to, or after the second anniversary of, a Change of Control shall be terminated if the Executive, without the Company's written approval, accepts a substantially similar or higher executive position, paying a substantially comparable or greater level of cash compensation, with any company (other than an Affiliate of the Company) conducting a business which is substantially competitive with a business conducted by the Company. Alternatively, the Company may, in its discretion, appropriately reduce the Executive's cash compensation and employee benefits coverage for the balance of such Compensation Period. (e) Employment With Another Employer During Compensation Period. Except as otherwise provided in this Section 6, if the Executive commences employment with another employer during a Compensation Period commencing prior to, or after the second anniversary of, a Change of Control, the Executive will continue to receive the compensation continuance provided under Section 5 for the balance of such Compensation Period, except that, unless otherwise required by law, benefits under the Company's Employee Benefits Plans, including the Program, if applicable, shall be appropriately terminated or offset to the extent the same are provided by the other employer. (f) Other Severance Benefits. The Executive is entitled to no form of severance benefits, including benefits otherwise payable under any of the Company's regular severance policies, other than those set forth or made applicable by reference in this Agreement. Notwithstanding the foregoing, the Executive will at the time of termination of employment be eligible for any form of post-retirement benefit provided under the Company's qualified Employee Benefits Plans, including retiree medical benefits, as any other employee upon retirement with the same age and service. Nothing contained in this Agreement shall adversely affect the Executive's rights to accrued vested pension benefits or the Executive's right to receive previously deferred awards or amounts under any of the Company's short and long term incentive award programs or deferred compensation plans or perquisite programs. 12 (g) Release and Waiver of Claims. In consideration of the compensation and benefits continuance available pursuant to this Agreement, upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control the Executive agrees to execute a release, in form and substance reasonably acceptable to the Executive and the Company, releasing the Company, NHC and NGH from all claims and liabilities relating to such Termination and the Company's employment of the Executive. (h) Disability. In the event the Executive is eligible for benefits under the Company's Short Term or Long Term Disability Plan during the Executive's Compensation Period, any Compensation Continuance will be suspended while disability benefits are paid from any Company plan and resumed when such disability payments cease. All other provisions of this Agreement shall remain in effect notwithstanding the Executive's disability. (i) Death. In the event of the Executive's death subsequent to commencement of the Executive's Compensation Period hereunder, the balance of Compensation Continuance will be paid to the Executive's beneficiary in a lump sum. "Beneficiary" shall mean the Executive's designated beneficiary under the Executive's Executive Program life insurance or, if not so eligible, the Executive's core life insurance benefit under the Company's plans. (j) No Mitigations. Notwithstanding anything to the contrary in this Agreement, the Executive shall not be required to mitigate the amount of any payment provided for in Section 5 by seeking other employment or otherwise, nor, except under coordination of benefit rules in connection with certain welfare benefits under Section 5(e), shall the amount of any payment or benefit provided for in Section 5 hereof be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination of employment, or otherwise. 7. General Provisions. (a) Limited Right of Appeal. If the Executive's Compensation Period is terminated pursuant to Section 6, the Executive may, within fifteen (15) days after mailing of notice thereof to the Executive, submit to the Chief Executive Officer of the Company a written objection to such termination. In such event, the Compensation Committee of the NHC Board at or before its next regularly scheduled meeting must determine by majority vote that termination of the Compensation Period was appropriate or, failing that, the Compensation Period must be reinstated with full retroactive effect. 13 (b) Notices. All notices hereunder shall be in writing and deemed given if delivered by hand and receipted or if mailed by registered mail, return receipt requested. Notices to the Company shall be directed to the Corporate Secretary at the Company's headquarters offices. Notices to the Executive shall be directed to the Executive's last known home address. (c) Limited Waiver. The waiver by any party hereto of a violation of any of the provisions of this Agreement, whether express or implied, shall not operate or be construed as a waiver of any subsequent violation of any such provision. (d) No Assignment. Except as provided herein, no right, benefit, obligation or interest hereunder shall be subject to assignment, encumbrance, charge, pledge, hypothecation or set off by Executive or the Company. The Company, however, may assign its obligations hereunder in the event of the transfer of the Executive's employment to an Affiliated Company or the divestiture (whether by the sale of shares or assets) of the operating company employing the Executive. In the event the obligations of the Company under this Agreement are assigned to an employing Affiliated Company as contemplated by Section 4(a)(iii), the Company agrees to guarantee to Executive the obligations of such Affiliated Company under this Agreement. Except as provided in the preceding sentence, upon any permitted assignment of the Company's obligations hereunder, "Company" shall be deemed to refer to the assignee as the context may require. (e) Amendment. This Agreement may not be amended, modified or cancelled except by written agreement of the parties. (f) Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. (g) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Executive, the Company, its affiliates, and any successor organization or organizations which shall succeed to substantially all of the business and property of the Company, whether by means of merger, consolidation, acquisition of substantially all of the assets of the Company or otherwise, including by operation of law. (h) Unsecured Promise. Unless otherwise stated herein, no benefit or promise hereunder shall be secured by any specific assets of the Company. Unless otherwise stated herein, the Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises. Notwithstanding the foregoing, the Company may choose to maintain a rabbi trust or trusts for the purpose of paying certain of the benefits hereunder or under other plans and programs of the Company and, if so, the Executive shall be entitled to payments therefrom, if any, as and to the extent provided in such rabbi trust or trusts. 14 (i) Governing Law. This Agreement has been made in and shall be governed and construed in accordance with the laws of the State of Delaware. (j) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. This Agreement supersedes and replaces any prior agreement with respect to employment, compensation continuation and the matters contained in this Agreement which the Executive may have had with the Company or any affiliate. (k) Legal Fees and Expenses. (i) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive as a result of the Executive's Involuntary Termination on or during the two (2) year period beginning on a Change of Control (including all such fees and expenses, if any, in seeking to obtain or enforce any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company) unless the Executive's claim is found by an arbitral tribunal of competent jurisdiction to have been frivolous. (ii) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive during the two (2) year period beginning on a Change of Control as a result of both (A) the Executive's Involuntary Termination prior to such Change of Control and (B) the Company's refusal after such Change of Control to provide any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company in respect of such Termination, including all such fees and expenses, if any, in seeking to obtain or enforce any such right or benefit unless the Executive's claim is found by an arbitral tribunal or court of competent jurisdiction to have been frivolous. (l) Certain AIAP and LTIP Change of Control Provisions. (i) In the event of a Change of Control, the Executive will be paid within fifteen (15) business days following the date of such Change of Control a lump sum cash payment equal to the Executive's AIAP Vested Amount. (ii) Upon a Change of Control, all stock options, shares of restricted stock, restricted stock units and restricted stock equivalents then held by the Executive under either LTIP shall become 100% vested and non-forfeitable on the date of such Change of Control and any restrictions thereon shall immediately lapse on such date. 15 (m) Certain Payments. (i) Anything herein to the contrary notwithstanding, in the event that it is determined that any payment or distribution by the Company to or for the Executive's benefit, whether paid or payable or distributed or distributable pursuant to the terms hereof, including but not limited to Section 7(l), or otherwise, other than any payment pursuant to this Section 7(m), (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive, within fifteen (15) business days following the determination described in Section 7(m)(ii) below, an additional payment ("Excise Tax Adjustment Payment") in an amount such that after payment by the Executive of all applicable Federal, state and local taxes (computed at the maximum marginal rates and including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment Payment, the Executive shall retain an amount of the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the Payments. (ii) All determinations required to be made under this Section 7(m), including whether Excise Tax Adjustment Payment is required and the amount of such Excise Tax Adjustment Payment, shall be made by Deloitte & Touche LLP, or such other accounting firm as the Company may designate prior to a Change of Control, which shall provide to the Company and the Executive detailed supporting calculations within fifteen (15) business days of the date of the Executive's termination of employment. Except as hereinafter provided, any determination by Deloitte & Touche LLP, or such other accounting firm as the Company may designate prior to a Change of Control, shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination hereunder, it is possible that (x) Excise Tax Adjustment Payments which should have been made will not have been made by the Company ("Underpayment"), or (y) certain Payments will have been made which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event of an Underpayment, the Company shall promptly determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the Executive's benefit. In the event that the Executive discovers that an Overpayment shall have occurred, the amount thereof shall be promptly repaid to the Company. 16 (n) Arbitration. Following a Change of Control, any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in New York, New York in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. The determination of the arbitral tribunal shall be conclusive and binding on the parties and judgment may be entered on the arbitrator's award in any court having jurisdiction. (o) Unconditional Obligation. The Company's obligations to make all payments and honor all commitments under this Agreement or otherwise following a Change of Control or in connection with an Involuntary Termination during the two (2) year period beginning on a Change of Control shall be absolute and unconditional and shall not be affected by any circumstances including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive. (p) Late Payments. To the extent that any payments required to be made hereunder following a Change of Control in connection with any Involuntary Termination occurring prior to the second anniversary of such Change of Control are not made within the period specified therefor, the Company shall be liable for interest on such delayed payments at the rate of 150% of the prime rate compounded monthly, as posted by the Morgan Guaranty Trust Company of New York, from time to time. 17 (q) Actuarial Calculations. All required actuarial calculations of payments to be made hereunder shall be made by Watson Wyatt Worldwide, New York, New York, or such other actuarial firm as the Company may designate prior to a Change of Control. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. NABISCO, INC. By: /s/ C. Michael Sayeau ------------------------------------- C. Michael Sayeau Executive Vice President and Chief Personnel Officer NABISCO HOLDINGS CORP. By: /s/ C. Michael Sayeau ------------------------------------- C. Michael Sayeau Executive Vice President and Chief Personnel Officer NABISCO GROUP HOLDINGS, INC. By: /s/ James M. Kilts ------------------------------------- James M. Kilts President and Chief Executive Officer THE EXECUTIVE /s/ James E. Healey - ------------------- James E. Healey 18 EXHIBIT A DEFINITIONS AIAP Vested Amount means, as of a Change of Control or as of a Termination Date during the two (2) year period beginning on a Change of Control, as the case may be, an amount equal to the value of the Executive's target award under the relevant AIAP for the relevant performance period in which the Change of Control or such termination occurs, as the case may be, multiplied by a fraction, the numerator of which is the number of months (including partial months) in the period beginning on the first day of the relevant performance period and ending on the Change of Control or such Termination Date, as the case may be, and the denominator of which is the number of months in such performance period; provided that in the event of a termination of employment following a Change of Control in the year in which a Change of Control occurs, for purposes of computing the AIAP Vested Amount as of the date of such termination, the performance period shall be deemed to begin on the first day following the Change of Control and the target award shall be that in effect immediately preceding such Change of Control. Earned 1999 Program Amount means, as of a Termination Date during the two (2) year period beginning on a Change of Control, an amount equal to the Executive's Retention Award or awards under the 1999 Program in respect of calendar years ending prior to such Termination Date and not previously paid to the Executive. Vested 1999 Program Amount means, as of a Termination Date during the two (2) year period beginning on a Change of Control, an amount equal to the value of the Executive's Retention Award under the 1999 Program in respect of the year in which such Termination Date occurs. Retirement Plans means the Retirement Plan for Employees of Nabisco, Inc., the Additional Benefits Plan of Nabisco, Inc. and participating Companies, the Supplemental Benefits Plan of Nabisco, Inc. and participating Companies and the Supplemental Executive Retirement Plan of Nabisco, Inc. and participating Companies, and such other plans as the Board may hereafter determine. Savings Plans means the Capital Investment Plan of Nabisco, Inc., the Additional Benefits Plan of Nabisco, Inc. and participating Companies and the Supplemental Benefits Plan of Nabisco, Inc. and participating Companies, and such other plans as the Board may hereafter determine. EX-10.6 7 EXHIBIT 10.6 Exhibit 10.6 EMPLOYMENT AGREEMENT AMENDMENT AND RESTATEMENT, made effective as of this 17th day of March, 2000, of the EMPLOYMENT AGREEMENT dated October 12, 1988, as amended, by and between NABISCO, INC., a New Jersey corporation (the "Company"), and C. Michael Sayeau ("the Executive"). RECITALS WHEREAS, the Executive and RJR Nabisco, Inc., a Delaware corporation ("RJRN"), entered into the Employment Agreement dated October 12, 1988; and WHEREAS, the Executive and RJRN executed a Special Addendum to the Employment Agreement as of December 20, 1988; and WHEREAS, the Executive, RJRN and the Company executed Amendments to the Employment Agreement as of July 19, 1995 and May 1, 1999; and WHEREAS, the Company and the Executive agree that the Employment Agreement should be further amended and restated, in order to more effectively provide the Executive continued incentives to remain in the service of the Company or its subsidiaries or affiliates; NOW, THEREFORE, in consideration of mutual incentives, it is hereby agreed by and between the Company, Nabisco Holdings Corp. ("NHC") and Nabisco Group Holdings Corp. ("NGH") and the Executive to amend and restate the Employment Agreement, effective on the date first above written, as follows: 1. Employment. The Executive agrees to devote the Executive's working time exclusively to the performance of such services for the Company or NHC or any of their Subsidiaries or Affiliates (each, as defined below) as may be assigned to the Executive from time to time and to perform such services faithfully and to the best of the Executive's ability except as the provisions of subsections 4(b)(i) or 4(b)(ii) shall apply. For purposes of this Agreement, (i) "Affiliate" means, with respect to the Company, NHC or NGH, any person or entity directly or indirectly controlling, controlled by, or under common control with the Company, NHC or NGH, as the case may be, and (ii) "Subsidiary" of the Company, NHC or NGH means any 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 the Company, NHC or NGH, as the case may be. 2. Term of Agreement. Subject to Section 7(e) hereof, this Agreement shall commence on the date hereof and shall remain in effect so long as the Executive remains employed by the Company or NHC or any of their subsidiaries or any successor organizations. 3. Termination of Employment Without Compensation Continuance. (a) Termination for Cause. This Agreement shall immediately be terminated and neither party shall have any obligation hereunder if the Executive's employment is terminated for Cause (as defined below). (i) At any time before a Change of Control (as defined below) or following the second anniversary of such Change of Control, termination for "Cause" shall mean termination by the Company of the Executive's employment resulting from the Executive's: (A) criminal dishonesty; (B) deliberate and continual refusal to perform employment duties on substantially a full-time basis; (C) deliberate and continual refusal to act in accordance with any specific lawful instructions of a majority of the Board of Directors of NHC (the "NHC Board"); or (D) deliberate misconduct which could be materially damaging to the Company without reasonable good faith belief by the Executive that such conduct was in the best interests of the Company. (ii) Any purported termination for Cause under Section 3(a)(i) shall not be applicable unless (A) the Executive is advised in writing that the Executive is being terminated for Cause and, (B) if within fifteen (15) days thereafter the Executive submits to the Chief Executive Officer of the Company a written objection to such a determination, the Compensation Committee of the NHC Board at or before its next regularly scheduled meeting determines by majority vote that the Executive has been terminated for Cause. (iii) During the two (2) year period beginning on a Change of Control, termination for "Cause" shall mean termination by the Company of the Executive's employment resulting from the Executive's: (A) willful and continued failure substantially to perform employment duties with the Company or any Subsidiary or Affiliate (other than as a result of total or partial incapacity due to physical or mental illness or as a result of a termination by the Executive for Good Reason (as defined below)) after a written demand for substantial performance is delivered to the Executive by the NHC Board, which demand specifically identifies the manner in which the NHC Board believes that the Executive has not substantially performed the Executive's duties; (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to NHC, NGH or the Company, monetarily or otherwise; or (C) the Executive's conviction of a 2 felony under the laws of the United States, any state or any other country or political sub-division thereof involving moral turpitude. For purposes of this paragraph (iii), no act or failure to act on the Executive's part shall be deemed "willful" unless done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause under this paragraph (iii) unless and until there shall have been delivered to the Executive documentation of the affirmative vote (which cannot be delegated) of not less than three-quarters (3/4) of the entire membership of the NHC Board of Directors at a meeting of the NHC Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the NHC Board), finding that in the good faith opinion of the NHC Board the Executive was guilty of conduct set forth above in subclauses (A), (B) or (C) above, specifying the particulars thereof in detail. (b) Voluntary Termination of Employment by the Executive. The Executive reserves the right to terminate voluntarily the Executive's employment at any time for any reason. Upon such a termination other than a termination pursuant to Section 4(b), all obligations of the Company hereunder shall be cancelled automatically, and the Executive shall not be entitled to any form of Compensation Continuance under this Agreement, including that described in Section 5 below. (c) Disability. The event of physical or mental disability of a nature that entitles the Executive to benefits under the Company's Long-Term Disability Plan is not a termination of employment under any section of this Agreement. As such, disability shall not qualify the Executive for the Compensation Continuance described herein unless the Executive is terminated under Section 4(a) or Section 4(b)(i). (d) Death. In the event of the Executive's death prior to Involuntary Termination, this Agreement will be null and void. 4. Termination With Compensation Continuance. (a) Involuntary Termination Without Cause by the Company. (i) The Company reserves the right to terminate the employment of the Executive at any time for any reason subject to providing the compensation and benefits described herein. Except as provided in Section 6, the Company will provide the Executive with the Compensation Continuance described in Section 5 hereof if the Executive is involuntarily separated from active employment without Cause by the Company ("Involuntary Termination"). 3 (ii) The divestiture of the operating company employing the Executive, and the assignment of the obligations of the Company under this Agreement to such operating company, or its successor or acquiror, in connection with the divestiture of either all, or substantially all, the shares or assets of such operating company shall not automatically be an Involuntary Termination unless such divestiture and assignment would result in an Involuntary Termination under Section 4(b) hereof. (iii) The transfer of the Executive's employment to any company that owns at least 50% of the voting power of the Company, or any subsidiary of such company (an "Affiliated Company"), shall not automatically be deemed an Involuntary Termination unless such transfer would result in an Involuntary Termination under Section 4(b) hereof. (b) Deemed Involuntary Termination Without Cause by the Company. (i) At any time before a Change of Control or following the second anniversary of a Change of Control, Involuntary Termination shall be deemed to occur if the Executive voluntarily terminates employment after: (A) the total amount of the Executive's base salary, annual bonus and long term incentive opportunity under the Annual Incentive Award Plans (or other annual incentive plans) of NGH or NHC, as the case may be, (collectively, as in effect from time to time, the "AIAPs") and Long Term Incentive Plans (or other long term incentive plans) of NGH or NHC, as the case may be (collectively, as in effect from time to time, the "LTIPs") is at any time reduced by more than 20% without the Executive's consent, provided, however, nothing herein shall be construed to guarantee the Executive's target award if performance is below target; (B) the Executive's job responsibilities are substantially reduced in importance without the Executive's consent or the Company fails to guarantee the obligations hereunder as required by Section 7(d); or (C) the Executive, without the Executive's consent, is at any time required as a condition of continued employment to relocate more than thirty-five (35) miles from the Executive's then current place of employment. Unless the Executive provides written notification of the Executive's non-consent to an event in (A), (B) or (C) above within ninety (90) days after the occurrence of such event, the Executive shall be deemed to have consented to the occurrence of such event and no deemed Involuntary Termination shall occur. If the Executive provides written notice of the Executive's non-consent to any of the events in (A), (B) or (C) above within ninety (90) days after the occurrence of such event, the Executive shall be deemed to have been Involuntarily Terminated ninety (90) days after receipt of such written notice by the Company. 4 (ii) At any time during the two (2) year period beginning on a Change of Control, Involuntary Termination shall be deemed to occur if the Executive voluntarily terminates employment after an event of "Good Reason". For purposes of this Agreement "Good Reason" shall mean, without the Executive's express written consent, any of the following: (A) Any reduction in the Executive's duties, any diminution in the Executive's position or any adverse change in the Executive's reporting relationship from those in effect immediately prior to the Change of Control; (B) Any reduction in the Executive's base salary, grade or annual bonus or long term incentive opportunity as in effect immediately prior to the Change of Control or as the same may thereafter be increased from time to time during the term of this Agreement; (C) The failure to continue in effect any compensation or benefit plan in which the Executive participates or is entitled to participate in at the time of the Change of Control, including but not limited to the relevant LTIP, the relevant AIAP, any defined benefit or defined contribution plan or related supplemental plans, or any substitute plans adopted prior to the Change of Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan providing the Executive with substantially similar benefits) has been made with respect to such plan in connection with the Change of Control, or the failure to continue the Executive's participation therein on substantially the same basis, both in terms of the amount of the benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change of Control; (D) The taking of any action which would directly or indirectly reduce any of the benefits to be provided under Section 5 or any benefits thereunder or any compensation or benefit plan of the Company, NGH or NHC including, without limitation the LTIPs, the AIAPs and the Company's Deferred Compensation Plan or deprive the Executive of or reduce any benefits or amounts with respect to any perquisite or any material fringe benefit enjoyed by the Executive at the time of the Change of Control, or the failure to provide the Executive with the number of paid vacation days to which the Executive is entitled on the basis of the Company's practice with respect to the Executive as in effect at the time of the Change of Control; 5 (E) Any material breach by the Company, NGH or NHC of any provision of this Agreement including, but not limited to any provision of Section 5, any benefits thereunder or any compensation, benefit or perquisite plan of the Company, NGH or NHC including, without limitation the LTIPs, the AIAPs and the Company's Deferred Compensation Plan, or any agreements entered into pursuant thereto; (F) Any purported termination of Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subsection (c) below; provided further that for purposes of this Agreement, no such purported termination shall be effective; or (G) Requiring the Executive to be based at any office or location more than thirty-five (35) miles from the office or location at which the Executive was based immediately prior to such Change of Control, except for travel reasonably consistent with the Executive's travel requirements prior to such Change of Control; If the Executive provides written notice of the Executive's non-consent to any of the events in (A), (B), (C), (D), (E), (F) or (G), above within 180 days after the occurrence of any such event, the Executive shall be deemed to have been Involuntarily Terminated upon the earlier of the date set forth in Executive's Notice of Termination or 181 days after the occurrence of such event. (iii) As used herein, a "Change of Control" shall occur on the date upon which one of the following events occurs (except as otherwise provided in paragraph (C) below): (A) Any individual, corporation, partnership, group, associate or other entity or "person" as such term is defined in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than NHC, NGH or any of their Subsidiaries, or any employee benefit plan(s) sponsored by NHC, NGH or any of their Subsidiaries, is or becomes the "beneficial owner" (as defined in Rule 13D-3 under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of NHC or NGH outstanding securities ordinarily having the right to vote at elections of directors; (B) Individuals who constitute the Board of either NHC or NGH on January 1, 2000 (each such Board the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of NHC or NGH, as the case may be, provided that any person becoming a director subsequent to such date hereof whose election, or nomination for election by NHC or NGH shareholders, as the case may 6 be, was approved by a vote of at least three-quarters of the directors comprising that Incumbent Board (either by a specific vote or by approval of the proxy statement of NHC or NGH, as the case may be, in which such person is named a nominee of NHC or NGH, as the case may be, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or "person" other than the NHC or NGH Board, as the case may be, shall be, for purposes of this paragraph (B), considered as though such person were a number of the Incumbent Board. (C) The approval by the shareholders of NHC or NGH, as the case may be, of a plan or agreement providing (I) for a merger or consolidation of NHC or NGH, as the case may be, other than with a wholly-owned subsidiary or with NGH, NHC or any of their subsidiaries, and other than a merger or consolidation that would result in the voting securities of NHC or NGH, as the case may be, outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of NHC or NGH, as the case may be, of such surviving entity outstanding immediately after such merger or consolidation or (II) for a sale, exchange or other disposition of all or substantially all of the assets of NHC or NGH. If any of the events enumerated in this paragraph (C) occurs, the NHC Board shall determine the effective date of the Change of Control resulting therefrom. (c) (i) Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7(b) hereof. For purposes of this Agreement, (A) during the twenty-four (24) month period beginning on a Change of Control a "Notice of Termination" by the Company shall mean, and (B) prior to, and following the second anniversary of, a Change of Control a "Notice of Termination" by the Executive shall mean, a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. 7 (ii) "Date of Termination" shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), (ii) if the Executive's employment is terminated by reason of the Executive's death, the date of the Executive's death, (iii) if the Executive's employment is terminated by reason of the Executive's Retirement, for Cause, Involuntary Termination or for any other reason (other than Disability or death), the date specified in the Notice of Termination (which (A) in the case of a termination for Cause during the two (2) year period beginning on a Change of Control shall not be less than thirty (30) nor more than sixty (60) days from the date such Notice of Termination is given and (B) in the case of the Executive's voluntary termination (other than pursuant to Section 4(b) and other than during the two (2) year period beginning on a Change of Control) shall not be less than three (3) months after the date such Notice of Termination is given). 5. Compensation Continuance Under This Agreement. (a) Compensation Period. If at any time during the term of this Agreement the Executive has an Involuntary Termination pursuant to Section 4, subject to Section 6(g), if applicable, the Executive will be provided with Compensation Continuance as provided in this Section 5. (b) Cash Compensation. (i)(A) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will be entitled to cash compensation equal to two (2) year's Full Pay, calculated as described below, payable in equal monthly installments over the Compensation Period (as defined below), each installment representing 1/18th of one year's Full Pay (as defined below). One year's "Full Pay" is the sum of (x) plus (y), where (x) is the Executive's highest annual rate of base salary in effect during the twelve (12) month period prior to the Executive's Involuntary Termination and (y) is the annual target amount of the Executive's annual bonus under the relevant AIAP and/or LTIP for the calendar year in which the Executive's employment terminated (or, if greater, the amount of such actual award for the next preceding calendar year of full-time employment). For all purposes of this Agreement, "Compensation Period" shall mean the three (3) year period commencing on the Date of Termination. 8 (B) Upon an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Executive will be entitled to a lump sum payment within fifteen (15) business days following the date of such Involuntary Termination equal to twice the sum of (u), (v) and (w), where (u) is the greater of the Executive's annual base salary as in effect immediately prior to such Termination or immediately prior to such Change of Control (such greater amount, the "Base Salary"), (v) is the greater of (1) the Executive's annual target bonus under the relevant AIAP and/or LTIP immediately prior to such Termination or immediately prior to the Change of Control or (2) the greater of the aggregate amount of such actual award for the calendar year immediately prior to such Termination or immediately prior to the Change of Control (the greater of (1) and (2), the "Target Amount") and (w) is 1.5 times the greater of the annual perquisite allowance applicable to the Executive under the Nabisco Flexible Perquisite Program (the "Program") as in effect immediately prior to such Termination or immediately prior to such Change of Control (such greater amount, the "Allowance"). The sum of Base Salary, Target Amount and Allowance are hereinafter referred to as "Base Cash". For purposes of this Agreement, "Compensation Period" shall mean the three (3) year period commencing on the Date of Termination. (ii) Cash compensation paid pursuant to this Section 5(b) shall be subject to all required payroll deductions. (c) Annual Incentive and Retention Plan Awards. (i) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will be paid at the time of such Involuntary Termination a portion of the Executive's annual bonus under the relevant AIAP and/or LTIP, based upon the target award for the year in which the Executive's Involuntary Termination occurs, prorated for the Executive's active employment during such year. Except as stated in the foregoing sentence, all provisions of the relevant AIAP and/or LTIP shall be applicable to the Executive. (ii) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, all provisions of NHC's 1999 Retention Program (the "1999 Program") shall be applicable to the Executive. (iii) Upon an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Company shall pay to the Executive, not later than fifteen (15) business days following the Date of Termination, a lump sum cash payment equal to the sum of (A) and (B), where (A) is Executive's AIAP Vested Amount for such plan year and (B) is the sum of (x) and (y) where (x) is the Executive's Vested 1999 Program Award Amount and (y) is the Executive's Earned 1999 Program Amount 9 (each as defined in Exhibit A) as of the Date of Termination. (d) Long Term Incentive Plan Awards. The treatment of long term incentive awards during the Compensation Period shall be determined pursuant to the terms of the relevant LTIP and related award agreements; provided, however, that for such purposes, the Compensation Period shall be treated as a period of salary and benefit continuance. (e) Welfare Benefits. During the Compensation Period the Executive will be provided the welfare benefits and other fringe benefits afforded by the employee benefit plans and programs maintained by the Company in which the Executive participated immediately prior to Involuntary Termination. (f) Retirement and Savings Plans. (i) If Executive was participating in any Retirement Plan or Savings Plan (each as defined in Exhibit A) immediately prior to an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will continue to accrue or be deemed to accrue benefits during the Compensation Period under such Retirement Plans and Savings Plans for purposes of benefit accrual and employer matching contributions, as applicable, based on the same formula and matching amount as in effect immediately prior to such Termination. If the Executive will have attained age 50 at the end of the Compensation Period with 10 years of service (including the Compensation Period), the Executive will, subject to the conditions of Paragraph 6, be deemed retired with the consent of the Company for the purposes of welfare and executive compensation plans but not for the purposes of any Retirement or Savings Plan. Notwithstanding any provision herein to the contrary, upon such a Termination pension benefits under any Retirement Plan based on "Average Final Compensation" will be calculated applying the rate of one year's Full Pay and the Executive's Annual Flexible Perquisite Allowance for each year in the Compensation Period. (ii) If Executive was participating in any Retirement Plan immediately prior to an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Executive will be deemed to accrue benefits during the Compensation Period under such Retirement Plans for purposes of benefit accrual based on the same formula as in effect immediately prior to such Termination. If the Executive will have attained age 50 at the end of the Compensation Period with 10 years of service (including the Compensation Period), the Executive will, subject to the conditions of Paragraph 6, be deemed retired with the consent of the Company for the purposes of welfare and executive compensation plans but not for the purposes of any Retirement. Notwithstanding any provision herein to the contrary, upon such a Termination pension benefits under any Retirement Plan 10 based on "Average Final Compensation" will be calculated applying the rate of one year's Base Cash for each year in the Compensation Period. (g) Flexible Perquisite Program. During the Compensation Period, the Executive shall continue to receive benefits under the Program; provided, further, that in the event of an Involuntary Termination during the two (2) year period beginning on a Change of Control, ownership of the automobile assigned to the Executive immediately prior to such Termination shall be transferred to the Executive within fifteen (15) business days after such Termination. At the time of such transfer, the Company shall pay to the Executive such amount in cash that, after payment of all applicable federal, state and local taxes thereon, computed at the maximum marginal rates, is equal to all such taxes, so computed, imposed in connection with such transfer. (h) Outplacement. During the Compensation Period, Executive will be provided with outplacement counseling services at Company expense; provided, however, this expense shall not exceed 18% of the amount of one year's Full Pay or Base Cash, as the case may be. This counseling shall include, but is not limited to, skill assessment, job market analysis, resume preparation, interviewing skills, job search techniques and negotiating. (i) Facilities. During the first six (6) months of the Compensation Period, the Executive will, at the Executive's option, be provided with an office and secretarial services during regular business hours at a Company approved location. Except as may be specifically approved by the Company's Chief Executive Officer, the Executive will not be provided with the use of any other Company facility or services. 6. Conditions on Compensation Continuance. (a) Availability and Consulting. Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, during the related Compensation Period the Executive shall provide consulting services to the Company on a reasonable basis subject to appropriate notice and reimbursement of all travel and other expenses. During the first six (6) months of such Compensation Period, the Executive may be required by the Company to provide up to fifteen (15) days of consultation during normal business hours and business days. When and if the Executive becomes employed on a full-time basis, either with another company or on a self-employed basis, the Executive's obligation to provide consulting services shall be limited by the requirements of such employment, and under appropriate circumstances, may be restricted to telephone conference. (b) Confidentiality and Conduct. The Executive warrants that the Executive will not disclose to any other person any confidential information or trade secrets concerning the Company or any of its subsidiaries at any time during or after the Compensation Period and upon an Involuntary Termination prior to, or after the 11 second anniversary of, a Change of Control, the Executive will at all times refrain from taking any action or making any statements, written or oral, which are intended to and do disparage the goodwill or reputation of the Company, its directors, officers or executives or which could adversely affect the morale of Company employees. (c) Breach of Conditions. In the event that the Executive unreasonably refuses to provide consulting services to the extent required under paragraph (a) above or materially violates the terms and conditions of paragraph (b) above, the Company may, at its election upon ten (10) days notice, terminate any ongoing Compensation Period, discontinue cash compensation payments and employee benefits coverage and cancel any outstanding stock options or restricted stock. The Company may also initiate any form of legal action it may deem appropriate seeking damages or injunctive relief with respect to any material violations of paragraph (b) above. (d) Non-Competition. Any Compensation Period resulting from an Involuntary Termination prior to, or after the second anniversary of, a Change of Control shall be terminated if the Executive, without the Company's written approval, accepts a substantially similar or higher executive position, paying a substantially comparable or greater level of cash compensation, with any company (other than an Affiliate of the Company) conducting a business which is substantially competitive with a business conducted by the Company. Alternatively, the Company may, in its discretion, appropriately reduce the Executive's cash compensation and employee benefits coverage for the balance of such Compensation Period. (e) Employment With Another Employer During Compensation Period. Except as otherwise provided in this Section 6, if the Executive commences employment with another employer during a Compensation Period commencing prior to, or after the second anniversary of, a Change of Control, the Executive will continue to receive the compensation continuance provided under Section 5 for the balance of such Compensation Period, except that, unless otherwise required by law, benefits under the Company's Employee Benefits Plans, including the Program, if applicable, shall be appropriately terminated or offset to the extent the same are provided by the other employer. (f) Other Severance Benefits. The Executive is entitled to no form of severance benefits, including benefits otherwise payable under any of the Company's regular severance policies, other than those set forth or made applicable by reference in this Agreement. Notwithstanding the foregoing, the Executive will at the time of termination of employment be eligible for any form of post-retirement benefit provided under the Company's qualified Employee Benefits Plans, including retiree medical benefits, as any other employee upon retirement with the same age and service. Nothing contained in this Agreement shall adversely affect the Executive's rights to accrued vested pension benefits or the Executive's right to receive previously deferred awards or amounts under any of the Company's short and long term 12 incentive award programs or deferred compensation plans or perquisite programs. (g) Release and Waiver of Claims. In consideration of the compensation and benefits continuance available pursuant to this Agreement, upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control the Executive agrees to execute a release, in form and substance reasonably acceptable to the Executive and the Company, releasing the Company, NHC and NGH from all claims and liabilities relating to such Termination and the Company's employment of the Executive. (h) Disability. In the event the Executive is eligible for benefits under the Company's Short Term or Long Term Disability Plan during the Executive's Compensation Period, any Compensation Continuance will be suspended while disability benefits are paid from any Company plan and resumed when such disability payments cease. All other provisions of this Agreement shall remain in effect notwithstanding the Executive's disability. (i) Death. In the event of the Executive's death subsequent to commencement of the Executive's Compensation Period hereunder, the balance of Compensation Continuance will be paid to the Executive's beneficiary in a lump sum. "Beneficiary" shall mean the Executive's designated beneficiary under the Executive's Executive Program life insurance or, if not so eligible, the Executive's core life insurance benefit under the Company's plans. (j) No Mitigations. Notwithstanding anything to the contrary in this Agreement, the Executive shall not be required to mitigate the amount of any payment provided for in Section 5 by seeking other employment or otherwise, nor, except under coordination of benefit rules in connection with certain welfare benefits under Section 5(e), shall the amount of any payment or benefit provided for in Section 5 hereof be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination of employment, or otherwise. 7. General Provisions. (a) Limited Right of Appeal. If the Executive's Compensation Period is terminated pursuant to Section 6, the Executive may, within fifteen (15) days after mailing of notice thereof to the Executive, submit to the Chief Executive Officer of the Company a written objection to such termination. In such event, the Compensation Committee of the NHC Board at or before its next regularly scheduled meeting must determine by majority vote that termination of the Compensation Period was appropriate or, failing that, the Compensation Period must be reinstated with full retroactive effect. 13 (b) Notices. All notices hereunder shall be in writing and deemed given if delivered by hand and receipted or if mailed by registered mail, return receipt requested. Notices to the Company shall be directed to the Corporate Secretary at the Company's headquarters offices. Notices to the Executive shall be directed to the Executive's last known home address. (c) Limited Waiver. The waiver by any party hereto of a violation of any of the provisions of this Agreement, whether express or implied, shall not operate or be construed as a waiver of any subsequent violation of any such provision. (d) No Assignment. Except as provided herein, no right, benefit, obligation or interest hereunder shall be subject to assignment, encumbrance, charge, pledge, hypothecation or set off by Executive or the Company. The Company, however, may assign its obligations hereunder in the event of the transfer of the Executive's employment to an Affiliated Company or the divestiture (whether by the sale of shares or assets) of the operating company employing the Executive. In the event the obligations of the Company under this Agreement are assigned to an employing Affiliated Company as contemplated by Section 4(a)(iii), the Company agrees to guarantee to Executive the obligations of such Affiliated Company under this Agreement. Except as provided in the preceding sentence, upon any permitted assignment of the Company's obligations hereunder, "Company" shall be deemed to refer to the assignee as the context may require. (e) Amendment. This Agreement may not be amended, modified or cancelled except by written agreement of the parties. (f) Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. (g) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Executive, the Company, its affiliates, and any successor organization or organizations which shall succeed to substantially all of the business and property of the Company, whether by means of merger, consolidation, acquisition of substantially all of the assets of the Company or otherwise, including by operation of law. (h) Unsecured Promise. Unless otherwise stated herein, no benefit or promise hereunder shall be secured by any specific assets of the Company. Unless otherwise stated herein, the Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises. Notwithstanding the foregoing, the Company may choose to maintain a rabbi trust or trusts for the purpose of paying certain of the benefits hereunder or under other plans and programs of the Company and, if so, the Executive shall be entitled to payments 14 therefrom, if any, as and to the extent provided in such rabbi trust or trusts. (i) Governing Law. This Agreement has been made in and shall be governed and construed in accordance with the laws of the State of Delaware. (j) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. This Agreement supersedes and replaces any prior agreement with respect to employment, compensation continuation and the matters contained in this Agreement which the Executive may have had with the Company or any affiliate. (k) Legal Fees and Expenses. (i) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive as a result of the Executive's Involuntary Termination on or during the two (2) year period beginning on a Change of Control (including all such fees and expenses, if any, in seeking to obtain or enforce any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company) unless the Executive's claim is found by an arbitral tribunal of competent jurisdiction to have been frivolous. (ii) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive during the two (2) year period beginning on a Change of Control as a result of both (A) the Executive's Involuntary Termination prior to such Change of Control and (B) the Company's refusal after such Change of Control to provide any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company in respect of such Termination, including all such fees and expenses, if any, in seeking to obtain or enforce any such right or benefit unless the Executive's claim is found by an arbitral tribunal or court of competent jurisdiction to have been frivolous. (l) Certain AIAP and LTIP Change of Control Provisions. (i) In the event of a Change of Control, the Executive will be paid within fifteen (15) business days following the date of such Change of Control a lump sum cash payment equal to the Executive's AIAP Vested Amount. (ii) Upon a Change of Control, all stock options, shares of restricted stock, restricted stock units and restricted stock equivalents then held by the Executive under either LTIP shall become 100% vested and non-forfeitable on the date of such Change of Control and any restrictions thereon shall immediately lapse on such date. 15 (m) Certain Payments. (i) Anything herein to the contrary notwithstanding, in the event that it is determined that any payment or distribution by the Company to or for the Executive's benefit, whether paid or payable or distributed or distributable pursuant to the terms hereof, including but not limited to Section 7(l), or otherwise, other than any payment pursuant to this Section 7(m), (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive, within fifteen (15) business days following the determination described in Section 7(m)(ii) below, an additional payment ("Excise Tax Adjustment Payment") in an amount such that after payment by the Executive of all applicable Federal, state and local taxes (computed at the maximum marginal rates and including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment Payment, the Executive shall retain an amount of the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the Payments. (ii) All determinations required to be made under this Section 7(m), including whether Excise Tax Adjustment Payment is required and the amount of such Excise Tax Adjustment Payment, shall be made by Deloitte & Touche LLP, or such other accounting firm as the Company may designate prior to a Change of Control, which shall provide to the Company and the Executive detailed supporting calculations within fifteen (15) business days of the date of the Executive's termination of employment. Except as hereinafter provided, any determination by Deloitte & Touche LLP, or such other accounting firm as the Company may designate prior to a Change of Control, shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination hereunder, it is possible that (x) Excise Tax Adjustment Payments which should have been made will not have been made by the Company ("Underpayment"), or (y) certain Payments will have been made which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event of an Underpayment, the Company shall promptly determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the Executive's benefit. In the event that the Executive discovers that an Overpayment shall have occurred, the amount thereof shall be promptly repaid to the Company. 16 (n) Arbitration. Following a Change of Control, any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in New York, New York in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. The determination of the arbitral tribunal shall be conclusive and binding on the parties and judgment may be entered on the arbitrator's award in any court having jurisdiction. (o) Unconditional Obligation. The Company's obligations to make all payments and honor all commitments under this Agreement or otherwise following a Change of Control or in connection with an Involuntary Termination during the two (2) year period beginning on a Change of Control shall be absolute and unconditional and shall not be affected by any circumstances including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive. (p) Late Payments. To the extent that any payments required to be made hereunder following a Change of Control in connection with any Involuntary Termination occurring prior to the second anniversary of such Change of Control are not made within the period specified therefor, the Company shall be liable for interest on such delayed payments at the rate of 150% of the prime rate compounded monthly, as posted by the Morgan Guaranty Trust Company of New York, from time to time. 17 (q) Actuarial Calculations. All required actuarial calculations of payments to be made hereunder shall be made by Watson Wyatt Worldwide, New York, New York, or such other actuarial firm as the Company may designate prior to a Change of Control. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. NABISCO, INC. By: /s/ James M. Kilts ------------------------------------- James M. Kilts President and Chief Executive Officer NABISCO HOLDINGS CORP. By: /s/ James M. Kilts ------------------------------------- James M. Kilts President and Chief Executive Officer NABISCO GROUP HOLDINGS, INC. By: /s/ James M. Kilts ------------------------------------- James M. Kilts President and Chief Executive Officer THE EXECUTIVE /s/ C. Michael Sayeau - --------------------- C. Michael Sayeau 18 EXHIBIT A DEFINITIONS AIAP Vested Amount means, as of a Change of Control or as of a Termination Date during the two (2) year period beginning on a Change of Control, as the case may be, an amount equal to the value of the Executive's target award under the relevant AIAP for the relevant performance period in which the Change of Control or such termination occurs, as the case may be, multiplied by a fraction, the numerator of which is the number of months (including partial months) in the period beginning on the first day of the relevant performance period and ending on the Change of Control or such Termination Date, as the case may be, and the denominator of which is the number of months in such performance period; provided that in the event of a termination of employment following a Change of Control in the year in which a Change of Control occurs, for purposes of computing the AIAP Vested Amount as of the date of such termination, the performance period shall be deemed to begin on the first day following the Change of Control and the target award shall be that in effect immediately preceding such Change of Control. Earned 1999 Program Amount means, as of a Termination Date during the two (2) year period beginning on a Change of Control, an amount equal to the Executive's Retention Award or awards under the 1999 Program in respect of calendar years ending prior to such Termination Date and not previously paid to the Executive. Vested 1999 Program Amount means, as of a Termination Date during the two (2) year period beginning on a Change of Control, an amount equal to the value of the Executive's Retention Award under the 1999 Program in respect of the year in which such Termination Date occurs. Retirement Plans means the Retirement Plan for Employees of Nabisco, Inc., the Additional Benefits Plan of Nabisco, Inc. and participating Companies, the Supplemental Benefits Plan of Nabisco, Inc. and participating Companies and the Supplemental Executive Retirement Plan of Nabisco, Inc. and participating Companies, and such other plans as the Board may hereafter determine. Savings Plans means the Capital Investment Plan of Nabisco, Inc., the Additional Benefits Plan of Nabisco, Inc. and participating Companies and the Supplemental Benefits Plan of Nabisco, Inc. and participating Companies, and such other plans as the Board may hereafter determine. EX-10.7 8 EXHIBIT 10.7 Exhibit 10.7 EMPLOYMENT AGREEMENT AMENDMENT AND RESTATEMENT, made effective as of this 17th day of March, 2000, of the EMPLOYMENT AGREEMENT dated February 9, 1998, as amended, by and between NABISCO, INC., a New Jersey corporation (the "Company"), and Richard H. Lenny ("the Executive"). RECITALS WHEREAS, the Executive and RJR Nabisco, Inc., a Delaware corporation ("RJRN"), entered into the Employment Agreement dated February 9, 1998; and WHEREAS, the Executive, RJRN and the Company executed an Amendment to the Employment Agreement as of May 1, 1999; and WHEREAS, the Company and the Executive agree that the Employment Agreement should be further amended and restated, in order to more effectively provide the Executive continued incentives to remain in the service of the Company or its subsidiaries or affiliates; NOW, THEREFORE, in consideration of mutual incentives, it is hereby agreed by and between the Company, Nabisco Holdings Corp. ("NHC") and Nabisco Group Holdings Corp. ("NGH") and the Executive to amend and restate the Employment Agreement, effective on the date first above written, as follows: 1. Employment. The Executive agrees to devote the Executive's working time exclusively to the performance of such services for the Company or NHC or any of their Subsidiaries or Affiliates (each, as defined below) as may be assigned to the Executive from time to time and to perform such services faithfully and to the best of the Executive's ability except as the provisions of subsections 4(b)(i) or 4(b)(ii) shall apply. For purposes of this Agreement, (i) "Affiliate" means, with respect to the Company, NHC or NGH, any person or entity directly or indirectly controlling, controlled by, or under common control with the Company, NHC or NGH, as the case may be, and (ii) "Subsidiary" of the Company, NHC or NGH means any 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 the Company, NHC or NGH, as the case may be. 2. Term of Agreement. Subject to Section 7(e) hereof, this Agreement shall commence on the date hereof and shall remain in effect so long as the Executive remains employed by the Company or NHC or any of their subsidiaries or any successor organizations. 3. Termination of Employment Without Compensation Continuance. (a) Termination for Cause. This Agreement shall immediately be terminated and neither party shall have any obligation hereunder if the Executive's employment is terminated for Cause (as defined below). (i) At any time before a Change of Control (as defined below) or following the second anniversary of such Change of Control, termination for "Cause" shall mean termination by the Company of the Executive's employment resulting from the Executive's: (A) criminal dishonesty; (B) deliberate and continual refusal to perform employment duties on substantially a full-time basis; (C) deliberate and continual refusal to act in accordance with any specific lawful instructions of a majority of the Board of Directors of NHC (the "NHC Board"); or (D) deliberate misconduct which could be materially damaging to the Company without reasonable good faith belief by the Executive that such conduct was in the best interests of the Company. (ii) Any purported termination for Cause under Section 3(a)(i) shall not be applicable unless (A) the Executive is advised in writing that the Executive is being terminated for Cause and, (B) if within fifteen (15) days thereafter the Executive submits to the Chief Executive Officer of the Company a written objection to such a determination, the Compensation Committee of the NHC Board at or before its next regularly scheduled meeting determines by majority vote that the Executive has been terminated for Cause. (iii) During the two (2) year period beginning on a Change of Control, termination for "Cause" shall mean termination by the Company of the Executive's employment resulting from the Executive's: (A) willful and continued failure substantially to perform employment duties with the Company or any Subsidiary or Affiliate (other than as a result of total or partial incapacity due to physical or mental illness or as a result of a termination by the Executive for Good Reason (as defined below)) after a written demand for substantial performance is delivered to the Executive by the NHC Board, which demand specifically identifies the manner in which the NHC Board believes that the Executive has not substantially performed the Executive's duties; (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to NHC, NGH or the Company, monetarily or otherwise; or (C) the Executive's conviction of a 2 felony under the laws of the United States, any state or any other country or political sub-division thereof involving moral turpitude. For purposes of this paragraph (iii), no act or failure to act on the Executive's part shall be deemed "willful" unless done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause under this paragraph (iii) unless and until there shall have been delivered to the Executive documentation of the affirmative vote (which cannot be delegated) of not less than three-quarters (3/4) of the entire membership of the NHC Board of Directors at a meeting of the NHC Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the NHC Board), finding that in the good faith opinion of the NHC Board the Executive was guilty of conduct set forth above in subclauses (A), (B) or (C) above, specifying the particulars thereof in detail. (b) Voluntary Termination of Employment by the Executive. The Executive reserves the right to terminate voluntarily the Executive's employment at any time for any reason. Upon such a termination other than a termination pursuant to Section 4(b), all obligations of the Company hereunder shall be cancelled automatically, and the Executive shall not be entitled to any form of Compensation Continuance under this Agreement, including that described in Section 5 below. (c) Disability. The event of physical or mental disability of a nature that entitles the Executive to benefits under the Company's Long-Term Disability Plan is not a termination of employment under any section of this Agreement. As such, disability shall not qualify the Executive for the Compensation Continuance described herein unless the Executive is terminated under Section 4(a) or Section 4(b)(i). (d) Death. In the event of the Executive's death prior to Involuntary Termination, this Agreement will be null and void. 4. Termination With Compensation Continuance. (a) Involuntary Termination Without Cause by the Company. (i) The Company reserves the right to terminate the employment of the Executive at any time for any reason subject to providing the compensation and benefits described herein. Except as provided in Section 6, the Company will provide the Executive with the Compensation Continuance described in Section 5 hereof if the Executive is involuntarily separated from active employment without Cause by the Company ("Involuntary Termination"). 3 (ii) The divestiture of the operating company employing the Executive, and the assignment of the obligations of the Company under this Agreement to such operating company, or its successor or acquiror, in connection with the divestiture of either all, or substantially all, the shares or assets of such operating company shall not automatically be an Involuntary Termination unless such divestiture and assignment would result in an Involuntary Termination under Section 4(b) hereof. (iii) The transfer of the Executive's employment to any company that owns at least 50% of the voting power of the Company, or any subsidiary of such company (an "Affiliated Company"), shall not automatically be deemed an Involuntary Termination unless such transfer would result in an Involuntary Termination under Section 4(b) hereof. (b) Deemed Involuntary Termination Without Cause by the Company. (i) At any time before a Change of Control or following the second anniversary of a Change of Control, Involuntary Termination shall be deemed to occur if the Executive voluntarily terminates employment after: (A) the total amount of the Executive's base salary, annual bonus and long term incentive opportunity under the Annual Incentive Award Plans (or other annual incentive plans) of NGH or NHC, as the case may be, (collectively, as in effect from time to time, the "AIAPs") and Long Term Incentive Plans (or other long term incentive plans) of NGH or NHC, as the case may be (collectively, as in effect from time to time, the "LTIPs") is at any time reduced by more than 20% without the Executive's consent, provided, however, nothing herein shall be construed to guarantee the Executive's target award if performance is below target; (B) the Executive's job responsibilities are substantially reduced in importance without the Executive's consent or the Company fails to guarantee the obligations hereunder as required by Section 7(d); or (C) the Executive, without the Executive's consent, is at any time required as a condition of continued employment to relocate more than thirty-five (35) miles from the Executive's then current place of employment. Unless the Executive provides written notification of the Executive's non-consent to an event in (A), (B) or (C) above within ninety (90) days after the occurrence of such event, the Executive shall be deemed to have consented to the occurrence of such event and no deemed Involuntary Termination shall occur. If the Executive provides written notice of the Executive's non-consent to any of the events in (A), (B) or (C) above within ninety (90) days after the occurrence of such event, the Executive shall be deemed to have been Involuntarily Terminated ninety (90) days after receipt of such written notice by the Company. 4 (ii) At any time during the two (2) year period beginning on a Change of Control, Involuntary Termination shall be deemed to occur if the Executive voluntarily terminates employment after an event of "Good Reason". For purposes of this Agreement "Good Reason" shall mean, without the Executive's express written consent, any of the following: (A) Any reduction in the Executive's duties, any diminution in the Executive's position or any adverse change in the Executive's reporting relationship from those in effect immediately prior to the Change of Control; (B) Any reduction in the Executive's base salary, grade or annual bonus or long term incentive opportunity as in effect immediately prior to the Change of Control or as the same may thereafter be increased from time to time during the term of this Agreement; (C) The failure to continue in effect any compensation or benefit plan in which the Executive participates or is entitled to participate in at the time of the Change of Control, including but not limited to the relevant LTIP, the relevant AIAP, any defined benefit or defined contribution plan or related supplemental plans, or any substitute plans adopted prior to the Change of Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan providing the Executive with substantially similar benefits) has been made with respect to such plan in connection with the Change of Control, or the failure to continue the Executive's participation therein on substantially the same basis, both in terms of the amount of the benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change of Control; (D) The taking of any action which would directly or indirectly reduce any of the benefits to be provided under Section 5 or any benefits thereunder or any compensation or benefit plan of the Company, NGH or NHC including, without limitation the LTIPs, the AIAPs and the Company's Deferred Compensation Plan or deprive the Executive of or reduce any benefits or amounts with respect to any perquisite or any material fringe benefit enjoyed by the Executive at the time of the Change of Control, or the failure to provide the Executive with the number of paid vacation days to which the Executive is entitled on the basis of the Company's practice with respect to the Executive as in effect at the time of the Change of Control; 5 (E) Any material breach by the Company, NGH or NHC of any provision of this Agreement including, but not limited to any provision of Section 5, any benefits thereunder or any compensation, benefit or perquisite plan of the Company, NGH or NHC including, without limitation the LTIPs, the AIAPs and the Company's Deferred Compensation Plan, or any agreements entered into pursuant thereto; (F) Any purported termination of Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subsection (c) below; provided further that for purposes of this Agreement, no such purported termination shall be effective; or (G) Requiring the Executive to be based at any office or location more than thirty-five (35) miles from the office or location at which the Executive was based immediately prior to such Change of Control, except for travel reasonably consistent with the Executive's travel requirements prior to such Change of Control; If the Executive provides written notice of the Executive's non-consent to any of the events in (A), (B), (C), (D), (E), (F) or (G), above within 180 days after the occurrence of any such event, the Executive shall be deemed to have been Involuntarily Terminated upon the earlier of the date set forth in Executive's Notice of Termination or 181 days after the occurrence of such event. (iii) As used herein, a "Change of Control" shall occur on the date upon which one of the following events occurs (except as otherwise provided in paragraph (C) below): (A) Any individual, corporation, partnership, group, associate or other entity or "person" as such term is defined in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than NHC, NGH or any of their Subsidiaries, or any employee benefit plan(s) sponsored by NHC, NGH or any of their Subsidiaries, is or becomes the "beneficial owner" (as defined in Rule 13D-3 under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of NHC or NGH outstanding securities ordinarily having the right to vote at elections of directors; (B) Individuals who constitute the Board of either NHC or NGH on January 1, 2000 (each such Board the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of NHC or NGH, as the case may be, provided that any person becoming a director subsequent to such date hereof whose election, or nomination for election by NHC or NGH shareholders, as the case may 6 be, was approved by a vote of at least three-quarters of the directors comprising that Incumbent Board (either by a specific vote or by approval of the proxy statement of NHC or NGH, as the case may be, in which such person is named a nominee of NHC or NGH, as the case may be, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or "person" other than the NHC or NGH Board, as the case may be, shall be, for purposes of this paragraph (B), considered as though such person were a number of the Incumbent Board. (C) The approval by the shareholders of NHC or NGH, as the case may be, of a plan or agreement providing (I) for a merger or consolidation of NHC or NGH, as the case may be, other than with a wholly-owned subsidiary or with NGH, NHC or any of their subsidiaries, and other than a merger or consolidation that would result in the voting securities of NHC or NGH, as the case may be, outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of NHC or NGH, as the case may be, of such surviving entity outstanding immediately after such merger or consolidation or (II) for a sale, exchange or other disposition of all or substantially all of the assets of NHC or NGH. If any of the events enumerated in this paragraph (C) occurs, the NHC Board shall determine the effective date of the Change of Control resulting therefrom. (c) (i) Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7(b) hereof. For purposes of this Agreement, (A) during the twenty-four (24) month period beginning on a Change of Control a "Notice of Termination" by the Company shall mean, and (B) prior to, and following the second anniversary of, a Change of Control a "Notice of Termination" by the Executive shall mean, a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. 7 (ii) "Date of Termination" shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), (ii) if the Executive's employment is terminated by reason of the Executive's death, the date of the Executive's death, (iii) if the Executive's employment is terminated by reason of the Executive's Retirement, for Cause, Involuntary Termination or for any other reason (other than Disability or death), the date specified in the Notice of Termination (which (A) in the case of a termination for Cause during the two (2) year period beginning on a Change of Control shall not be less than thirty (30) nor more than sixty (60) days from the date such Notice of Termination is given and (B) in the case of the Executive's voluntary termination (other than pursuant to Section 4(b) and other than during the two (2) year period beginning on a Change of Control) shall not be less than three (3) months after the date such Notice of Termination is given). 5. Compensation Continuance Under This Agreement. (a) Compensation Period. If at any time during the term of this Agreement the Executive has an Involuntary Termination pursuant to Section 4, subject to Section 6(g), if applicable, the Executive will be provided with Compensation Continuance as provided in this Section 5. (b) Cash Compensation. (i)(A) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will be entitled to cash compensation equal to two (2) year's Full Pay, calculated as described below, payable in equal monthly installments over the Compensation Period (as defined below), each installment representing 1/18th of one year's Full Pay (as defined below). One year's "Full Pay" is the sum of (x) plus (y), where (x) is the Executive's highest annual rate of base salary in effect during the twelve (12) month period prior to the Executive's Involuntary Termination and (y) is the annual target amount of the Executive's annual bonus under the relevant AIAP and/or LTIP for the calendar year in which the Executive's employment terminated (or, if greater, the amount of such actual award for the next preceding calendar year of full-time employment). For all purposes of this Agreement, "Compensation Period" shall mean the three (3) year period commencing on the Date of Termination. 8 (B) Upon an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Executive will be entitled to a lump sum payment within fifteen (15) business days following the date of such Involuntary Termination equal to twice the sum of (u), (v) and (w), where (u) is the greater of the Executive's annual base salary as in effect immediately prior to such Termination or immediately prior to such Change of Control (such greater amount, the "Base Salary"), (v) is the greater of the Executive's annual target bonus under the relevant AIAP and/or LTIP immediately prior to such Termination or immediately prior to the Change of Control or ("Target Amount") and (w) is 1.5 times the greater of the annual perquisite allowance applicable to the Executive under the Nabisco Flexible Perquisite Program (the "Program") as in effect immediately prior to such Termination or immediately prior to such Change of Control (such greater amount, the "Allowance"). The sum of Base Salary, Target Amount and Allowance are hereinafter referred to as "Base Cash". For purposes of this Agreement, "Compensation Period" shall mean the three (3) year period commencing on the Date of Termination. (ii) Cash compensation paid pursuant to this Section 5(b) shall be subject to all required payroll deductions. (c) Annual Incentive and Retention Plan Awards. (i) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will be paid at the time of such Involuntary Termination a portion of the Executive's annual bonus under the relevant AIAP and/or LTIP, based upon the target award for the year in which the Executive's Involuntary Termination occurs, prorated for the Executive's active employment during such year. Except as stated in the foregoing sentence, all provisions of the relevant AIAP and/or LTIP shall be applicable to the Executive. (ii) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, all provisions of NHC's 1999 Retention Program (the "1999 Program") shall be applicable to the Executive. (iii) Upon an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Company shall pay to the Executive, not later than fifteen (15) business days following the Date of Termination, a lump sum cash payment equal to the sum of (A) and (B), where (A) is Executive's AIAP Vested Amount for such plan year and (B) is the sum of (x) and (y) where (x) is the Executive's Vested 1999 Program Award Amount and (y) is the Executive's Earned 1999 Program Amount (each as defined in Exhibit A) as of the Date of Termination. 9 (d) Long Term Incentive Plan Awards. The treatment of long term incentive awards during the Compensation Period shall be determined pursuant to the terms of the relevant LTIP and related award agreements; provided, however, that for such purposes, the Compensation Period shall be treated as a period of salary and benefit continuance. (e) Welfare Benefits. During the Compensation Period the Executive will be provided the welfare benefits and other fringe benefits afforded by the employee benefit plans and programs maintained by the Company in which the Executive participated immediately prior to Involuntary Termination. (f) Retirement and Savings Plans. (i) If Executive was participating in any Retirement Plan or Savings Plan (each as defined in Exhibit A) immediately prior to an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will continue to accrue or be deemed to accrue benefits during the Compensation Period under such Retirement Plans and Savings Plans for purposes of benefit accrual and employer matching contributions, as applicable, based on the same formula and matching amount as in effect immediately prior to such Termination. If the Executive will have attained age 50 at the end of the Compensation Period with 10 years of service (including the Compensation Period), the Executive will, subject to the conditions of Paragraph 6, be deemed retired with the consent of the Company for the purposes of welfare and executive compensation plans but not for the purposes of any Retirement or Savings Plan. Notwithstanding any provision herein to the contrary, upon such a Termination pension benefits under any Retirement Plan based on "Average Final Compensation" will be calculated applying the rate of one year's Full Pay and the Executive's Annual Flexible Perquisite Allowance for each year in the Compensation Period. (ii) If Executive was participating in any Retirement Plan immediately prior to an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Executive will be deemed to accrue benefits during the Compensation Period under such Retirement Plans for purposes of benefit accrual based on the same formula as in effect immediately prior to such Termination. If the Executive will have attained age 50 at the end of the Compensation Period with 10 years of service (including the Compensation Period), the Executive will, subject to the conditions of Paragraph 6, be deemed retired with the consent of the Company for the purposes of welfare and executive compensation plans but not for the purposes of any Retirement. Notwithstanding any provision herein to the contrary, upon such a Termination pension benefits under any Retirement Plan based on "Average Final Compensation" will be calculated applying the rate of one year's Base Cash for each year in the Compensation Period. 10 (g) Flexible Perquisite Program. During the Compensation Period, the Executive shall continue to receive benefits under the Program; provided, further, that in the event of an Involuntary Termination during the two (2) year period beginning on a Change of Control, ownership of the automobile assigned to the Executive immediately prior to such Termination shall be transferred to the Executive within fifteen (15) business days after such Termination. At the time of such transfer, the Company shall pay to the Executive such amount in cash that, after payment of all applicable federal, state and local taxes thereon, computed at the maximum marginal rates, is equal to all such taxes, so computed, imposed in connection with such transfer. (h) Outplacement. During the Compensation Period, Executive will be provided with outplacement counseling services at Company expense; provided, however, this expense shall not exceed 18% of the amount of one year's Full Pay or Base Cash, as the case may be. This counseling shall include, but is not limited to, skill assessment, job market analysis, resume preparation, interviewing skills, job search techniques and negotiating. 6. Conditions on Compensation Continuance. (a) Availability and Consulting. Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, during the related Compensation Period the Executive shall provide consulting services to the Company on a reasonable basis subject to appropriate notice and reimbursement of all travel and other expenses. During the first six (6) months of such Compensation Period, the Executive may be required by the Company to provide up to fifteen (15) days of consultation during normal business hours and business days. When and if the Executive becomes employed on a full-time basis, either with another company or on a self-employed basis, the Executive's obligation to provide consulting services shall be limited by the requirements of such employment, and under appropriate circumstances, may be restricted to telephone conference. (b) Confidentiality and Conduct. The Executive warrants that the Executive will not disclose to any other person any confidential information or trade secrets concerning the Company or any of its subsidiaries at any time during or after the Compensation Period and upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will at all times refrain from taking any action or making any statements, written or oral, which are intended to and do disparage the goodwill or reputation of the Company, its directors, officers or executives or which could adversely affect the morale of Company employees. 11 (c) Breach of Conditions. In the event that the Executive unreasonably refuses to provide consulting services to the extent required under paragraph (a) above or materially violates the terms and conditions of paragraph (b) above, the Company may, at its election upon ten (10) days notice, terminate any ongoing Compensation Period, discontinue cash compensation payments and employee benefits coverage and cancel any outstanding stock options or restricted stock. The Company may also initiate any form of legal action it may deem appropriate seeking damages or injunctive relief with respect to any material violations of paragraph (b) above. (d) Non-Competition. Any Compensation Period resulting from an Involuntary Termination prior to, or after the second anniversary of, a Change of Control shall be terminated if the Executive, without the Company's written approval, accepts a substantially similar or higher executive position, paying a substantially comparable or greater level of cash compensation, with any company (other than an Affiliate of the Company) conducting a business which is substantially competitive with a business conducted by the Company. Alternatively, the Company may, in its discretion, appropriately reduce the Executive's cash compensation and employee benefits coverage for the balance of such Compensation Period. (e) Employment With Another Employer During Compensation Period. Except as otherwise provided in this Section 6, if the Executive commences employment with another employer during a Compensation Period commencing prior to, or after the second anniversary of, a Change of Control, the Executive will continue to receive the compensation continuance provided under Section 5 for the balance of such Compensation Period, except that, unless otherwise required by law, benefits under the Company's Employee Benefits Plans, including the Program, if applicable, shall be appropriately terminated or offset to the extent the same are provided by the other employer. (f) Other Severance Benefits. The Executive is entitled to no form of severance benefits, including benefits otherwise payable under any of the Company's regular severance policies, other than those set forth or made applicable by reference in this Agreement. Notwithstanding the foregoing, the Executive will at the time of termination of employment be eligible for any form of post-retirement benefit provided under the Company's qualified Employee Benefits Plans, including retiree medical benefits, as any other employee upon retirement with the same age and service. Nothing contained in this Agreement shall adversely affect the Executive's rights to accrued vested pension benefits or the Executive's right to receive previously deferred awards or amounts under any of the Company's short and long term incentive award programs or deferred compensation plans or perquisite programs. 12 (g) Release and Waiver of Claims. In consideration of the compensation and benefits continuance available pursuant to this Agreement, upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control the Executive agrees to execute a release, in form and substance reasonably acceptable to the Executive and the Company, releasing the Company, NHC and NGH from all claims and liabilities relating to such Termination and the Company's employment of the Executive. (h) Disability. In the event the Executive is eligible for benefits under the Company's Short Term or Long Term Disability Plan during the Executive's Compensation Period, any Compensation Continuance will be suspended while disability benefits are paid from any Company plan and resumed when such disability payments cease. All other provisions of this Agreement shall remain in effect notwithstanding the Executive's disability. (i) Death. In the event of the Executive's death subsequent to commencement of the Executive's Compensation Period hereunder, the balance of Compensation Continuance will be paid to the Executive's beneficiary in a lump sum. "Beneficiary" shall mean the Executive's designated beneficiary under the Executive's Executive Program life insurance or, if not so eligible, the Executive's core life insurance benefit under the Company's plans. (j) No Mitigations. Notwithstanding anything to the contrary in this Agreement, the Executive shall not be required to mitigate the amount of any payment provided for in Section 5 by seeking other employment or otherwise, nor, except under coordination of benefit rules in connection with certain welfare benefits under Section 5(e), shall the amount of any payment or benefit provided for in Section 5 hereof be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination of employment, or otherwise. 7. General Provisions. (a) Limited Right of Appeal. If the Executive's Compensation Period is terminated pursuant to Section 6, the Executive may, within fifteen (15) days after mailing of notice thereof to the Executive, submit to the Chief Executive Officer of the Company a written objection to such termination. In such event, the Compensation Committee of the NHC Board at or before its next regularly scheduled meeting must determine by majority vote that termination of the Compensation Period was appropriate or, failing that, the Compensation Period must be reinstated with full retroactive effect. 13 (b) Notices. All notices hereunder shall be in writing and deemed given if delivered by hand and receipted or if mailed by registered mail, return receipt requested. Notices to the Company shall be directed to the Corporate Secretary at the Company's headquarters offices. Notices to the Executive shall be directed to the Executive's last known home address. (c) Limited Waiver. The waiver by any party hereto of a violation of any of the provisions of this Agreement, whether express or implied, shall not operate or be construed as a waiver of any subsequent violation of any such provision. (d) No Assignment. Except as provided herein, no right, benefit, obligation or interest hereunder shall be subject to assignment, encumbrance, charge, pledge, hypothecation or set off by Executive or the Company. The Company, however, may assign its obligations hereunder in the event of the transfer of the Executive's employment to an Affiliated Company or the divestiture (whether by the sale of shares or assets) of the operating company employing the Executive. In the event the obligations of the Company under this Agreement are assigned to an employing Affiliated Company as contemplated by Section 4(a)(iii), the Company agrees to guarantee to Executive the obligations of such Affiliated Company under this Agreement. Except as provided in the preceding sentence, upon any permitted assignment of the Company's obligations hereunder, "Company" shall be deemed to refer to the assignee as the context may require. (e) Amendment. This Agreement may not be amended, modified or cancelled except by written agreement of the parties. (f) Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. (g) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Executive, the Company, its affiliates, and any successor organization or organizations which shall succeed to substantially all of the business and property of the Company, whether by means of merger, consolidation, acquisition of substantially all of the assets of the Company or otherwise, including by operation of law. (h) Unsecured Promise. Unless otherwise stated herein, no benefit or promise hereunder shall be secured by any specific assets of the Company. Unless otherwise stated herein, the Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises. Notwithstanding the foregoing, the Company may choose to maintain a rabbi trust or trusts for the purpose of paying certain of the benefits hereunder or under other plans and programs of the Company and, if so, the Executive shall be entitled to payments therefrom, if any, as and to the extent provided in such rabbi trust or trusts. 14 (i) Governing Law. This Agreement has been made in and shall be governed and construed in accordance with the laws of the State of Delaware. (j) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. This Agreement supersedes and replaces any prior agreement with respect to employment, compensation continuation and the matters contained in this Agreement which the Executive may have had with the Company or any affiliate. (k) Legal Fees and Expenses. (i) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive as a result of the Executive's Involuntary Termination on or during the two (2) year period beginning on a Change of Control (including all such fees and expenses, if any, in seeking to obtain or enforce any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company) unless the Executive's claim is found by an arbitral tribunal of competent jurisdiction to have been frivolous. (ii) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive during the two (2) year period beginning on a Change of Control as a result of both (A) the Executive's Involuntary Termination prior to such Change of Control and (B) the Company's refusal after such Change of Control to provide any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company in respect of such Termination, including all such fees and expenses, if any, in seeking to obtain or enforce any such right or benefit unless the Executive's claim is found by an arbitral tribunal or court of competent jurisdiction to have been frivolous. (l) Certain AIAP and LTIP Change of Control Provisions. (i) In the event of a Change of Control, the Executive will be paid within fifteen (15) business days following the date of such Change of Control a lump sum cash payment equal to the Executive's AIAP Vested Amount. (ii) Upon a Change of Control, all stock options, shares of restricted stock, restricted stock units and restricted stock equivalents then held by the Executive under either LTIP shall become 100% vested and non-forfeitable on the date of such Change of Control and any restrictions thereon shall immediately lapse on such date. 15 (m) Certain Payments. (i) Anything herein to the contrary notwithstanding, in the event that it is determined that any payment or distribution by the Company to or for the Executive's benefit, whether paid or payable or distributed or distributable pursuant to the terms hereof, including but not limited to Section 7(l), or otherwise, other than any payment pursuant to this Section 7(m), (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive, within fifteen (15) business days following the determination described in Section 7(m)(ii) below, an additional payment ("Excise Tax Adjustment Payment") in an amount such that after payment by the Executive of all applicable Federal, state and local taxes (computed at the maximum marginal rates and including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment Payment, the Executive shall retain an amount of the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the Payments. (ii) All determinations required to be made under this Section 7(m), including whether Excise Tax Adjustment Payment is required and the amount of such Excise Tax Adjustment Payment, shall be made by Deloitte & Touche LLP, or such other accounting firm as the Company may designate prior to a Change of Control, which shall provide to the Company and the Executive detailed supporting calculations within fifteen (15) business days of the date of the Executive's termination of employment. Except as hereinafter provided, any determination by Deloitte & Touche LLP, or such other accounting firm as the Company may designate prior to a Change of Control, shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination hereunder, it is possible that (x) Excise Tax Adjustment Payments which should have been made will not have been made by the Company ("Underpayment"), or (y) certain Payments will have been made which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event of an Underpayment, the Company shall promptly determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the Executive's benefit. In the event that the Executive discovers that an Overpayment shall have occurred, the amount thereof shall be promptly repaid to the Company. 16 (n) Arbitration. Following a Change of Control, any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in New York, New York in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. The determination of the arbitral tribunal shall be conclusive and binding on the parties and judgment may be entered on the arbitrator's award in any court having jurisdiction. (o) Unconditional Obligation. The Company's obligations to make all payments and honor all commitments under this Agreement or otherwise following a Change of Control or in connection with an Involuntary Termination during the two (2) year period beginning on a Change of Control shall be absolute and unconditional and shall not be affected by any circumstances including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive. (p) Late Payments. To the extent that any payments required to be made hereunder following a Change of Control in connection with any Involuntary Termination occurring prior to the second anniversary of such Change of Control are not made within the period specified therefor, the Company shall be liable for interest on such delayed payments at the rate of 150% of the prime rate compounded monthly, as posted by the Morgan Guaranty Trust Company of New York, from time to time. 17 (q) Actuarial Calculations. All required actuarial calculations of payments to be made hereunder shall be made by Watson Wyatt Worldwide, New York, New York, or such other actuarial firm as the Company may designate prior to a Change of Control. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. NABISCO, INC. By: /s/ C. Michael Sayeau ------------------------------------ C. Michael Sayeau Executive Vice President and Chief Personnel Officer NABISCO HOLDINGS CORP. By: /s/ C. Michael Sayeau ------------------------------------ C. Michael Sayeau Executive Vice President and Chief Personnel Officer NABISCO GROUP HOLDINGS, INC. By: /s/ James M. Kilts ------------------------------------ James M. Kilts President and Chief Executive Officer THE EXECUTIVE /s/ Richard H. Lenny - -------------------- Richard H. Lenny 18 EXHIBIT A DEFINITIONS AIAP Vested Amount means, as of a Change of Control or as of a Termination Date during the two (2) year period beginning on a Change of Control, as the case may be, an amount equal to the value of the Executive's target award under the relevant AIAP for the relevant performance period in which the Change of Control or such termination occurs, as the case may be, multiplied by a fraction, the numerator of which is the number of months (including partial months) in the period beginning on the first day of the relevant performance period and ending on the Change of Control or such Termination Date, as the case may be, and the denominator of which is the number of months in such performance period; provided that in the event of a termination of employment following a Change of Control in the year in which a Change of Control occurs, for purposes of computing the AIAP Vested Amount as of the date of such termination, the performance period shall be deemed to begin on the first day following the Change of Control and the target award shall be that in effect immediately preceding such Change of Control. Earned 1999 Program Amount means, as of a Termination Date during the two (2) year period beginning on a Change of Control, an amount equal to the Executive's Retention Award or awards under the 1999 Program in respect of calendar years ending prior to such Termination Date and not previously paid to the Executive. Vested 1999 Program Amount means, as of a Termination Date during the two (2) year period beginning on a Change of Control, an amount equal to the value of the Executive's Retention Award under the 1999 Program in respect of the year in which such Termination Date occurs. Retirement Plans means the Retirement Plan for Employees of Nabisco, Inc., the Additional Benefits Plan of Nabisco, Inc. and participating Companies, the Supplemental Benefits Plan of Nabisco, Inc. and participating Companies and the Supplemental Executive Retirement Plan of Nabisco, Inc. and participating Companies, and such other plans as the Board may hereafter determine. Savings Plans means the Capital Investment Plan of Nabisco, Inc., the Additional Benefits Plan of Nabisco, Inc. and participating Companies and the Supplemental Benefits Plan of Nabisco, Inc. and participating Companies, and such other plans as the Board may hereafter determine. EX-10.8 9 EXHIBIT 10.8 Exhibit 10.8 EMPLOYMENT AGREEMENT AMENDMENT AND RESTATEMENT, made effective as of this 17th day of March, 2000, of the EMPLOYMENT AGREEMENT dated September 1, 1995, as amended, by and between NABISCO, INC., a New Jersey corporation (the "Company"), and Douglas R. Conant ("the Executive"). RECITALS WHEREAS, the Executive and RJR Nabisco, Inc., a Delaware corporation ("RJRN"), entered into the Employment Agreement dated September 1, 1995; and WHEREAS, the Executive, RJRN and the Company executed an Amendment to the Employment Agreement as of May 1, 1999; and WHEREAS, the Company and the Executive agree that the Employment Agreement should be further amended and restated, in order to more effectively provide the Executive continued incentives to remain in the service of the Company or its subsidiaries or affiliates; NOW, THEREFORE, in consideration of mutual incentives, it is hereby agreed by and between the Company, Nabisco Holdings Corp. ("NHC") and Nabisco Group Holdings Corp. ("NGH") and the Executive to amend and restate the Employment Agreement, effective on the date first above written, as follows: 1. Employment. The Executive agrees to devote the Executive's working time exclusively to the performance of such services for the Company or NHC or any of their Subsidiaries or Affiliates (each, as defined below) as may be assigned to the Executive from time to time and to perform such services faithfully and to the best of the Executive's ability except as the provisions of subsections 4(b)(i) or 4(b)(ii) shall apply. For purposes of this Agreement, (i) "Affiliate" means, with respect to the Company, NHC or NGH, any person or entity directly or indirectly controlling, controlled by, or under common control with the Company, NHC or NGH, as the case may be, and (ii) "Subsidiary" of the Company, NHC or NGH means any 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 the Company, NHC or NGH, as the case may be. 2. Term of Agreement. Subject to Section 7(e) hereof, this Agreement shall commence on the date hereof and shall remain in effect so long as the Executive remains employed by the Company or NHC or any of their subsidiaries or any successor organizations. 3. Termination of Employment Without Compensation Continuance. (a) Termination for Cause. This Agreement shall immediately be terminated and neither party shall have any obligation hereunder if the Executive's employment is terminated for Cause (as defined below). (i) At any time before a Change of Control (as defined below) or following the second anniversary of such Change of Control, termination for "Cause" shall mean termination by the Company of the Executive's employment resulting from the Executive's: (A) criminal dishonesty; (B) deliberate and continual refusal to perform employment duties on substantially a full-time basis; (C) deliberate and continual refusal to act in accordance with any specific lawful instructions of a majority of the Board of Directors of NHC (the "NHC Board"); or (D) deliberate misconduct which could be materially damaging to the Company without reasonable good faith belief by the Executive that such conduct was in the best interests of the Company. (ii) Any purported termination for Cause under Section 3(a)(i) shall not be applicable unless (A) the Executive is advised in writing that the Executive is being terminated for Cause and, (B) if within fifteen (15) days thereafter the Executive submits to the Chief Executive Officer of the Company a written objection to such a determination, the Compensation Committee of the NHC Board at or before its next regularly scheduled meeting determines by majority vote that the Executive has been terminated for Cause. (iii) During the two (2) year period beginning on a Change of Control, termination for "Cause" shall mean termination by the Company of the Executive's employment resulting from the Executive's: (A) willful and continued failure substantially to perform employment duties with the Company or any Subsidiary or Affiliate (other than as a result of total or partial incapacity due to physical or mental illness or as a result of a termination by the Executive for Good Reason (as defined below)) after a written demand for substantial performance is delivered to the Executive by the NHC Board, which demand specifically identifies the manner in which the NHC Board believes that the Executive has not substantially performed the Executive's duties; (B) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to NHC, NGH or the Company, monetarily or otherwise; or (C) the Executive's conviction of a 2 felony under the laws of the United States, any state or any other country or political sub-division thereof involving moral turpitude. For purposes of this paragraph (iii), no act or failure to act on the Executive's part shall be deemed "willful" unless done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause under this paragraph (iii) unless and until there shall have been delivered to the Executive documentation of the affirmative vote (which cannot be delegated) of not less than three-quarters (3/4) of the entire membership of the NHC Board of Directors at a meeting of the NHC Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the NHC Board), finding that in the good faith opinion of the NHC Board the Executive was guilty of conduct set forth above in subclauses (A), (B) or (C) above, specifying the particulars thereof in detail. (b) Voluntary Termination of Employment by the Executive. The Executive reserves the right to terminate voluntarily the Executive's employment at any time for any reason. Upon such a termination other than a termination pursuant to Section 4(b), all obligations of the Company hereunder shall be cancelled automatically, and the Executive shall not be entitled to any form of Compensation Continuance under this Agreement, including that described in Section 5 below. (c) Disability. The event of physical or mental disability of a nature that entitles the Executive to benefits under the Company's Long-Term Disability Plan is not a termination of employment under any section of this Agreement. As such, disability shall not qualify the Executive for the Compensation Continuance described herein unless the Executive is terminated under Section 4(a) or Section 4(b)(i). (d) Death. In the event of the Executive's death prior to Involuntary Termination, this Agreement will be null and void. 4. Termination With Compensation Continuance. (a) Involuntary Termination Without Cause by the Company. (i) The Company reserves the right to terminate the employment of the Executive at any time for any reason subject to providing the compensation and benefits described herein. Except as provided in Section 6, the Company will provide the Executive with the Compensation Continuance described in Section 5 hereof if the Executive is involuntarily separated from active employment without Cause by the Company ("Involuntary Termination"). 3 (ii) The divestiture of the operating company employing the Executive, and the assignment of the obligations of the Company under this Agreement to such operating company, or its successor or acquiror, in connection with the divestiture of either all, or substantially all, the shares or assets of such operating company shall not automatically be an Involuntary Termination unless such divestiture and assignment would result in an Involuntary Termination under Section 4(b) hereof. (iii) The transfer of the Executive's employment to any company that owns at least 50% of the voting power of the Company, or any subsidiary of such company (an "Affiliated Company"), shall not automatically be deemed an Involuntary Termination unless such transfer would result in an Involuntary Termination under Section 4(b) hereof. (b) Deemed Involuntary Termination Without Cause by the Company. (i) At any time before a Change of Control or following the second anniversary of a Change of Control, Involuntary Termination shall be deemed to occur if the Executive voluntarily terminates employment after: (A) the total amount of the Executive's base salary, annual bonus and long term incentive opportunity under the Annual Incentive Award Plans (or other annual incentive plans) of NGH or NHC, as the case may be, (collectively, as in effect from time to time, the "AIAPs") and Long Term Incentive Plans (or other long term incentive plans) of NGH or NHC, as the case may be (collectively, as in effect from time to time, the "LTIPs") is at any time reduced by more than 20% without the Executive's consent, provided, however, nothing herein shall be construed to guarantee the Executive's target award if performance is below target; (B) the Executive's job responsibilities are substantially reduced in importance without the Executive's consent or the Company fails to guarantee the obligations hereunder as required by Section 7(d); or (C) the Executive, without the Executive's consent, is at any time required as a condition of continued employment to relocate more than thirty-five (35) miles from the Executive's then current place of employment. Unless the Executive provides written notification of the Executive's non-consent to an event in (A), (B) or (C) above within ninety (90) days after the occurrence of such event, the Executive shall be deemed to have consented to the occurrence of such event and no deemed Involuntary Termination shall occur. If the Executive provides written notice of the Executive's non-consent to any of the events in (A), (B) or (C) above within ninety (90) days after the occurrence of such event, the Executive shall be deemed to have been Involuntarily Terminated ninety (90) days after receipt of such written notice by the Company. 4 (ii) At any time during the two (2) year period beginning on a Change of Control, Involuntary Termination shall be deemed to occur if the Executive voluntarily terminates employment after an event of "Good Reason". For purposes of this Agreement "Good Reason" shall mean, without the Executive's express written consent, any of the following: (A) Any reduction in the Executive's duties, any diminution in the Executive's position or any adverse change in the Executive's reporting relationship from those in effect immediately prior to the Change of Control; (B) Any reduction in the Executive's base salary, grade or annual bonus or long term incentive opportunity as in effect immediately prior to the Change of Control or as the same may thereafter be increased from time to time during the term of this Agreement; (C) The failure to continue in effect any compensation or benefit plan in which the Executive participates or is entitled to participate in at the time of the Change of Control, including but not limited to the relevant LTIP, the relevant AIAP, any defined benefit or defined contribution plan or related supplemental plans, or any substitute plans adopted prior to the Change of Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan providing the Executive with substantially similar benefits) has been made with respect to such plan in connection with the Change of Control, or the failure to continue the Executive's participation therein on substantially the same basis, both in terms of the amount of the benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change of Control; (D) The taking of any action which would directly or indirectly reduce any of the benefits to be provided under Section 5 or any benefits thereunder or any compensation or benefit plan of the Company, NGH or NHC including, without limitation the LTIPs, the AIAPs and the Company's Deferred Compensation Plan or deprive the Executive of or reduce any benefits or amounts with respect to any perquisite or any material fringe benefit enjoyed by the Executive at the time of the Change of Control, or the failure to provide the Executive with the number of paid vacation days to which the Executive is entitled on the basis of the Company's practice with respect to the Executive as in effect at the time of the Change of Control; 5 (E) Any material breach by the Company, NGH or NHC of any provision of this Agreement including, but not limited to any provision of Section 5, any benefits thereunder or any compensation, benefit or perquisite plan of the Company, NGH or NHC including, without limitation the LTIPs, the AIAPs and the Company's Deferred Compensation Plan, or any agreements entered into pursuant thereto; (F) Any purported termination of Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subsection (c) below; provided further that for purposes of this Agreement, no such purported termination shall be effective; or (G) Requiring the Executive to be based at any office or location more than thirty-five (35) miles from the office or location at which the Executive was based immediately prior to such Change of Control, except for travel reasonably consistent with the Executive's travel requirements prior to such Change of Control; If the Executive provides written notice of the Executive's non-consent to any of the events in (A), (B), (C), (D), (E), (F) or (G), above within 180 days after the occurrence of any such event, the Executive shall be deemed to have been Involuntarily Terminated upon the earlier of the date set forth in Executive's Notice of Termination or 181 days after the occurrence of such event. (iii) As used herein, a "Change of Control" shall occur on the date upon which one of the following events occurs (except as otherwise provided in paragraph (C) below): (A) Any individual, corporation, partnership, group, associate or other entity or "person" as such term is defined in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than NHC, NGH or any of their Subsidiaries, or any employee benefit plan(s) sponsored by NHC, NGH or any of their Subsidiaries, is or becomes the "beneficial owner" (as defined in Rule 13D-3 under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of NHC or NGH outstanding securities ordinarily having the right to vote at elections of directors; (B) Individuals who constitute the Board of either NHC or NGH on January 1, 2000 (each such Board the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of NHC or NGH, as the case may be, provided that any person becoming a director subsequent to such date hereof whose election, or nomination for election by NHC or NGH shareholders, as the case may 6 be, was approved by a vote of at least three-quarters of the directors comprising that Incumbent Board (either by a specific vote or by approval of the proxy statement of NHC or NGH, as the case may be, in which such person is named a nominee of NHC or NGH, as the case may be, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or "person" other than the NHC or NGH Board, as the case may be, shall be, for purposes of this paragraph (B), considered as though such person were a number of the Incumbent Board. (C) The approval by the shareholders of NHC or NGH, as the case may be, of a plan or agreement providing (I) for a merger or consolidation of NHC or NGH, as the case may be, other than with a wholly-owned subsidiary or with NGH, NHC or any of their subsidiaries, and other than a merger or consolidation that would result in the voting securities of NHC or NGH, as the case may be, outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of NHC or NGH, as the case may be, of such surviving entity outstanding immediately after such merger or consolidation or (II) for a sale, exchange or other disposition of all or substantially all of the assets of NHC or NGH. If any of the events enumerated in this paragraph (C) occurs, the NHC Board shall determine the effective date of the Change of Control resulting therefrom. (c) (i) Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7(b) hereof. For purposes of this Agreement, (A) during the twenty-four (24) month period beginning on a Change of Control a "Notice of Termination" by the Company shall mean, and (B) prior to, and following the second anniversary of, a Change of Control a "Notice of Termination" by the Executive shall mean, a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. 7 (ii) "Date of Termination" shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), (ii) if the Executive's employment is terminated by reason of the Executive's death, the date of the Executive's death, (iii) if the Executive's employment is terminated by reason of the Executive's Retirement, for Cause, Involuntary Termination or for any other reason (other than Disability or death), the date specified in the Notice of Termination (which (A) in the case of a termination for Cause during the two (2) year period beginning on a Change of Control shall not be less than thirty (30) nor more than sixty (60) days from the date such Notice of Termination is given and (B) in the case of the Executive's voluntary termination (other than pursuant to Section 4(b) and other than during the two (2) year period beginning on a Change of Control) shall not be less than three (3) months after the date such Notice of Termination is given). 5. Compensation Continuance Under This Agreement. (a) Compensation Period. If at any time during the term of this Agreement the Executive has an Involuntary Termination pursuant to Section 4, subject to Section 6(g), if applicable, the Executive will be provided with Compensation Continuance as provided in this Section 5. (b) Cash Compensation. (i)(A) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will be entitled to cash compensation equal to two (2) year's Full Pay, calculated as described below, payable in equal monthly installments over the Compensation Period (as defined below), each installment representing 1/18th of one year's Full Pay (as defined below). One year's "Full Pay" is the sum of (x) plus (y), where (x) is the Executive's highest annual rate of base salary in effect during the twelve (12) month period prior to the Executive's Involuntary Termination and (y) is the annual target amount of the Executive's annual bonus under the relevant AIAP and/or LTIP for the calendar year in which the Executive's employment terminated (or, if greater, the amount of such actual award for the next preceding calendar year of full-time employment). For all purposes of this Agreement, "Compensation Period" shall mean the three (3) year period commencing on the Date of Termination. 8 (B) Upon an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Executive will be entitled to a lump sum payment within fifteen (15) business days following the date of such Involuntary Termination equal to twice the sum of (u), (v) and (w), where (u) is the greater of the Executive's annual base salary as in effect immediately prior to such Termination or immediately prior to such Change of Control (such greater amount, the "Base Salary"), (v) is the greater of the Executive's annual target bonus under the relevant AIAP and/or LTIP immediately prior to such Termination or immediately prior to the Change of Control or ("Target Amount") and (w) is 1.5 times the greater of the annual perquisite allowance applicable to the Executive under the Nabisco Flexible Perquisite Program (the "Program") as in effect immediately prior to such Termination or immediately prior to such Change of Control (such greater amount, the "Allowance"). The sum of Base Salary, Target Amount and Allowance are hereinafter referred to as "Base Cash". For purposes of this Agreement, "Compensation Period" shall mean the three (3) year period commencing on the Date of Termination. (ii) Cash compensation paid pursuant to this Section 5(b) shall be subject to all required payroll deductions. (c) Annual Incentive and Retention Plan Awards. (i) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will be paid at the time of such Involuntary Termination a portion of the Executive's annual bonus under the relevant AIAP and/or LTIP, based upon the target award for the year in which the Executive's Involuntary Termination occurs, prorated for the Executive's active employment during such year. Except as stated in the foregoing sentence, all provisions of the relevant AIAP and/or LTIP shall be applicable to the Executive. (ii) Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, all provisions of NHC's 1999 Retention Program (the "1999 Program") shall be applicable to the Executive. (iii) Upon an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Company shall pay to the Executive, not later than fifteen (15) business days following the Date of Termination, a lump sum cash payment equal to the sum of (A) and (B), where (A) is Executive's AIAP Vested Amount for such plan year and (B) is the sum of (x) and (y) where (x) is the Executive's Vested 1999 Program Award Amount and (y) is the Executive's Earned 1999 Program Amount (each as defined in Exhibit A) as of the Date of Termination. 9 (d) Long Term Incentive Plan Awards. The treatment of long term incentive awards during the Compensation Period shall be determined pursuant to the terms of the relevant LTIP and related award agreements; provided, however, that for such purposes, the Compensation Period shall be treated as a period of salary and benefit continuance. (e) Welfare Benefits. During the Compensation Period the Executive will be provided the welfare benefits and other fringe benefits afforded by the employee benefit plans and programs maintained by the Company in which the Executive participated immediately prior to Involuntary Termination. (f) Retirement and Savings Plans. (i) If Executive was participating in any Retirement Plan or Savings Plan (each as defined in Exhibit A) immediately prior to an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will continue to accrue or be deemed to accrue benefits during the Compensation Period under such Retirement Plans and Savings Plans for purposes of benefit accrual and employer matching contributions, as applicable, based on the same formula and matching amount as in effect immediately prior to such Termination. If the Executive will have attained age 50 at the end of the Compensation Period with 10 years of service (including the Compensation Period), the Executive will, subject to the conditions of Paragraph 6, be deemed retired with the consent of the Company for the purposes of welfare and executive compensation plans but not for the purposes of any Retirement or Savings Plan. Notwithstanding any provision herein to the contrary, upon such a Termination pension benefits under any Retirement Plan based on "Average Final Compensation" will be calculated applying the rate of one year's Full Pay and the Executive's Annual Flexible Perquisite Allowance for each year in the Compensation Period. (ii) If Executive was participating in any Retirement Plan immediately prior to an Involuntary Termination during the two (2) year period beginning on a Change of Control, the Executive will be deemed to accrue benefits during the Compensation Period under such Retirement Plans for purposes of benefit accrual based on the same formula as in effect immediately prior to such Termination. If the Executive will have attained age 50 at the end of the Compensation Period with 10 years of service (including the Compensation Period), the Executive will, subject to the conditions of Paragraph 6, be deemed retired with the consent of the Company for the purposes of welfare and executive compensation plans but not for the purposes of any Retirement. Notwithstanding any provision herein to the contrary, upon such a Termination pension benefits under any Retirement Plan based on "Average Final Compensation" will be calculated applying the rate of one year's Base Cash for each year in the Compensation Period. 10 (g) Flexible Perquisite Program. During the Compensation Period, the Executive shall continue to receive benefits under the Program; provided, further, that in the event of an Involuntary Termination during the two (2) year period beginning on a Change of Control, ownership of the automobile assigned to the Executive immediately prior to such Termination shall be transferred to the Executive within fifteen (15) business days after such Termination. At the time of such transfer, the Company shall pay to the Executive such amount in cash that, after payment of all applicable federal, state and local taxes thereon, computed at the maximum marginal rates, is equal to all such taxes, so computed, imposed in connection with such transfer. (h) Outplacement. During the Compensation Period, Executive will be provided with outplacement counseling services at Company expense; provided, however, this expense shall not exceed 18% of the amount of one year's Full Pay or Base Cash, as the case may be. This counseling shall include, but is not limited to, skill assessment, job market analysis, resume preparation, interviewing skills, job search techniques and negotiating. 6. Conditions on Compensation Continuance. (a) Availability and Consulting. Upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, during the related Compensation Period the Executive shall provide consulting services to the Company on a reasonable basis subject to appropriate notice and reimbursement of all travel and other expenses. During the first six (6) months of such Compensation Period, the Executive may be required by the Company to provide up to fifteen (15) days of consultation during normal business hours and business days. When and if the Executive becomes employed on a full-time basis, either with another company or on a self-employed basis, the Executive's obligation to provide consulting services shall be limited by the requirements of such employment, and under appropriate circumstances, may be restricted to telephone conference. (b) Confidentiality and Conduct. The Executive warrants that the Executive will not disclose to any other person any confidential information or trade secrets concerning the Company or any of its subsidiaries at any time during or after the Compensation Period and upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control, the Executive will at all times refrain from taking any action or making any statements, written or oral, which are intended to and do disparage the goodwill or reputation of the Company, its directors, officers or executives or which could adversely affect the morale of Company employees. 11 (c) Breach of Conditions. In the event that the Executive unreasonably refuses to provide consulting services to the extent required under paragraph (a) above or materially violates the terms and conditions of paragraph (b) above, the Company may, at its election upon ten (10) days notice, terminate any ongoing Compensation Period, discontinue cash compensation payments and employee benefits coverage and cancel any outstanding stock options or restricted stock. The Company may also initiate any form of legal action it may deem appropriate seeking damages or injunctive relief with respect to any material violations of paragraph (b) above. (d) Non-Competition. Any Compensation Period resulting from an Involuntary Termination prior to, or after the second anniversary of, a Change of Control shall be terminated if the Executive, without the Company's written approval, accepts a substantially similar or higher executive position, paying a substantially comparable or greater level of cash compensation, with any company (other than an Affiliate of the Company) conducting a business which is substantially competitive with a business conducted by the Company. Alternatively, the Company may, in its discretion, appropriately reduce the Executive's cash compensation and employee benefits coverage for the balance of such Compensation Period. (e) Employment With Another Employer During Compensation Period. Except as otherwise provided in this Section 6, if the Executive commences employment with another employer during a Compensation Period commencing prior to, or after the second anniversary of, a Change of Control, the Executive will continue to receive the compensation continuance provided under Section 5 for the balance of such Compensation Period, except that, unless otherwise required by law, benefits under the Company's Employee Benefits Plans, including the Program, if applicable, shall be appropriately terminated or offset to the extent the same are provided by the other employer. (f) Other Severance Benefits. The Executive is entitled to no form of severance benefits, including benefits otherwise payable under any of the Company's regular severance policies, other than those set forth or made applicable by reference in this Agreement. Notwithstanding the foregoing, the Executive will at the time of termination of employment be eligible for any form of post-retirement benefit provided under the Company's qualified Employee Benefits Plans, including retiree medical benefits, as any other employee upon retirement with the same age and service. Nothing contained in this Agreement shall adversely affect the Executive's rights to accrued vested pension benefits or the Executive's right to receive previously deferred awards or amounts under any of the Company's short and long term incentive award programs or deferred compensation plans or perquisite programs. 12 (g) Release and Waiver of Claims. In consideration of the compensation and benefits continuance available pursuant to this Agreement, upon an Involuntary Termination prior to, or after the second anniversary of, a Change of Control the Executive agrees to execute a release, in form and substance reasonably acceptable to the Executive and the Company, releasing the Company, NHC and NGH from all claims and liabilities relating to such Termination and the Company's employment of the Executive. (h) Disability. In the event the Executive is eligible for benefits under the Company's Short Term or Long Term Disability Plan during the Executive's Compensation Period, any Compensation Continuance will be suspended while disability benefits are paid from any Company plan and resumed when such disability payments cease. All other provisions of this Agreement shall remain in effect notwithstanding the Executive's disability. (i) Death. In the event of the Executive's death subsequent to commencement of the Executive's Compensation Period hereunder, the balance of Compensation Continuance will be paid to the Executive's beneficiary in a lump sum. "Beneficiary" shall mean the Executive's designated beneficiary under the Executive's Executive Program life insurance or, if not so eligible, the Executive's core life insurance benefit under the Company's plans. (j) No Mitigations. Notwithstanding anything to the contrary in this Agreement, the Executive shall not be required to mitigate the amount of any payment provided for in Section 5 by seeking other employment or otherwise, nor, except under coordination of benefit rules in connection with certain welfare benefits under Section 5(e), shall the amount of any payment or benefit provided for in Section 5 hereof be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination of employment, or otherwise. 7. General Provisions. (a) Limited Right of Appeal. If the Executive's Compensation Period is terminated pursuant to Section 6, the Executive may, within fifteen (15) days after mailing of notice thereof to the Executive, submit to the Chief Executive Officer of the Company a written objection to such termination. In such event, the Compensation Committee of the NHC Board at or before its next regularly scheduled meeting must determine by majority vote that termination of the Compensation Period was appropriate or, failing that, the Compensation Period must be reinstated with full retroactive effect. 13 (b) Notices. All notices hereunder shall be in writing and deemed given if delivered by hand and receipted or if mailed by registered mail, return receipt requested. Notices to the Company shall be directed to the Corporate Secretary at the Company's headquarters offices. Notices to the Executive shall be directed to the Executive's last known home address. (c) Limited Waiver. The waiver by any party hereto of a violation of any of the provisions of this Agreement, whether express or implied, shall not operate or be construed as a waiver of any subsequent violation of any such provision. (d) No Assignment. Except as provided herein, no right, benefit, obligation or interest hereunder shall be subject to assignment, encumbrance, charge, pledge, hypothecation or set off by Executive or the Company. The Company, however, may assign its obligations hereunder in the event of the transfer of the Executive's employment to an Affiliated Company or the divestiture (whether by the sale of shares or assets) of the operating company employing the Executive. In the event the obligations of the Company under this Agreement are assigned to an employing Affiliated Company as contemplated by Section 4(a)(iii), the Company agrees to guarantee to Executive the obligations of such Affiliated Company under this Agreement. Except as provided in the preceding sentence, upon any permitted assignment of the Company's obligations hereunder, "Company" shall be deemed to refer to the assignee as the context may require. (e) Amendment. This Agreement may not be amended, modified or cancelled except by written agreement of the parties. (f) Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. (g) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Executive, the Company, its affiliates, and any successor organization or organizations which shall succeed to substantially all of the business and property of the Company, whether by means of merger, consolidation, acquisition of substantially all of the assets of the Company or otherwise, including by operation of law. (h) Unsecured Promise. Unless otherwise stated herein, no benefit or promise hereunder shall be secured by any specific assets of the Company. Unless otherwise stated herein, the Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises. Notwithstanding the foregoing, the Company may choose to maintain a rabbi trust or trusts for the purpose of paying certain of the benefits hereunder or under other plans and programs of the Company and, if so, the Executive shall be entitled to payments therefrom, if any, as and to the extent provided in such rabbi trust or trusts. 14 (i) Governing Law. This Agreement has been made in and shall be governed and construed in accordance with the laws of the State of Delaware. (j) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. This Agreement supersedes and replaces any prior agreement with respect to employment, compensation continuation and the matters contained in this Agreement which the Executive may have had with the Company or any affiliate. (k) Legal Fees and Expenses. (i) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive as a result of the Executive's Involuntary Termination on or during the two (2) year period beginning on a Change of Control (including all such fees and expenses, if any, in seeking to obtain or enforce any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company) unless the Executive's claim is found by an arbitral tribunal of competent jurisdiction to have been frivolous. (ii) The Company shall pay to the Executive as incurred all legal and accounting fees and expenses incurred by the Executive during the two (2) year period beginning on a Change of Control as a result of both (A) the Executive's Involuntary Termination prior to such Change of Control and (B) the Company's refusal after such Change of Control to provide any right or benefit provided by this Agreement or any other compensation-related plan, agreement or arrangement of the Company in respect of such Termination, including all such fees and expenses, if any, in seeking to obtain or enforce any such right or benefit unless the Executive's claim is found by an arbitral tribunal or court of competent jurisdiction to have been frivolous. (l) Certain AIAP and LTIP Change of Control Provisions. (i) In the event of a Change of Control, the Executive will be paid within fifteen (15) business days following the date of such Change of Control a lump sum cash payment equal to the Executive's AIAP Vested Amount. (ii) Upon a Change of Control, all stock options, shares of restricted stock, restricted stock units and restricted stock equivalents then held by the Executive under either LTIP shall become 100% vested and non-forfeitable on the date of such Change of Control and any restrictions thereon shall immediately lapse on such date. 15 (m) Certain Payments. (i) Anything herein to the contrary notwithstanding, in the event that it is determined that any payment or distribution by the Company to or for the Executive's benefit, whether paid or payable or distributed or distributable pursuant to the terms hereof, including but not limited to Section 7(l), or otherwise, other than any payment pursuant to this Section 7(m), (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive, within fifteen (15) business days following the determination described in Section 7(m)(ii) below, an additional payment ("Excise Tax Adjustment Payment") in an amount such that after payment by the Executive of all applicable Federal, state and local taxes (computed at the maximum marginal rates and including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment Payment, the Executive shall retain an amount of the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the Payments. (ii) All determinations required to be made under this Section 7(m), including whether Excise Tax Adjustment Payment is required and the amount of such Excise Tax Adjustment Payment, shall be made by Deloitte & Touche LLP, or such other accounting firm as the Company may designate prior to a Change of Control, which shall provide to the Company and the Executive detailed supporting calculations within fifteen (15) business days of the date of the Executive's termination of employment. Except as hereinafter provided, any determination by Deloitte & Touche LLP, or such other accounting firm as the Company may designate prior to a Change of Control, shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination hereunder, it is possible that (x) Excise Tax Adjustment Payments which should have been made will not have been made by the Company ("Underpayment"), or (y) certain Payments will have been made which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event of an Underpayment, the Company shall promptly determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the Executive's benefit. In the event that the Executive discovers that an Overpayment shall have occurred, the amount thereof shall be promptly repaid to the Company. 16 (n) Arbitration. Following a Change of Control, any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in New York, New York in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. The determination of the arbitral tribunal shall be conclusive and binding on the parties and judgment may be entered on the arbitrator's award in any court having jurisdiction. (o) Unconditional Obligation. The Company's obligations to make all payments and honor all commitments under this Agreement or otherwise following a Change of Control or in connection with an Involuntary Termination during the two (2) year period beginning on a Change of Control shall be absolute and unconditional and shall not be affected by any circumstances including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive. (p) Late Payments. To the extent that any payments required to be made hereunder following a Change of Control in connection with any Involuntary Termination occurring prior to the second anniversary of such Change of Control are not made within the period specified therefor, the Company shall be liable for interest on such delayed payments at the rate of 150% of the prime rate compounded monthly, as posted by the Morgan Guaranty Trust Company of New York, from time to time. 17 (q) Actuarial Calculations. All required actuarial calculations of payments to be made hereunder shall be made by Watson Wyatt Worldwide, New York, New York, or such other actuarial firm as the Company may designate prior to a Change of Control. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. NABISCO, INC. By: /s/ C. Michael Sayeau ------------------------------------ C. Michael Sayeau Executive Vice President and Chief Personnel Officer NABISCO HOLDINGS CORP. By: /s/ C. Michael Sayeau ------------------------------------ C. Michael Sayeau Executive Vice President and Chief Personnel Officer NABISCO GROUP HOLDINGS, INC. By: /s/ James M. Kilts ------------------------------------ James M. Kilts President and Chief Executive Officer THE EXECUTIVE /s/ Douglas R. Conant - --------------------- Douglas R. Conant 18 EXHIBIT A DEFINITIONS AIAP Vested Amount means, as of a Change of Control or as of a Termination Date during the two (2) year period beginning on a Change of Control, as the case may be, an amount equal to the value of the Executive's target award under the relevant AIAP for the relevant performance period in which the Change of Control or such termination occurs, as the case may be, multiplied by a fraction, the numerator of which is the number of months (including partial months) in the period beginning on the first day of the relevant performance period and ending on the Change of Control or such Termination Date, as the case may be, and the denominator of which is the number of months in such performance period; provided that in the event of a termination of employment following a Change of Control in the year in which a Change of Control occurs, for purposes of computing the AIAP Vested Amount as of the date of such termination, the performance period shall be deemed to begin on the first day following the Change of Control and the target award shall be that in effect immediately preceding such Change of Control. Earned 1999 Program Amount means, as of a Termination Date during the two (2) year period beginning on a Change of Control, an amount equal to the Executive's Retention Award or awards under the 1999 Program in respect of calendar years ending prior to such Termination Date and not previously paid to the Executive. Vested 1999 Program Amount means, as of a Termination Date during the two (2) year period beginning on a Change of Control, an amount equal to the value of the Executive's Retention Award under the 1999 Program in respect of the year in which such Termination Date occurs. Retirement Plans means the Retirement Plan for Employees of Nabisco, Inc., the Additional Benefits Plan of Nabisco, Inc. and participating Companies, the Supplemental Benefits Plan of Nabisco, Inc. and participating Companies and the Supplemental Executive Retirement Plan of Nabisco, Inc. and participating Companies, and such other plans as the Board may hereafter determine. Savings Plans means the Capital Investment Plan of Nabisco, Inc., the Additional Benefits Plan of Nabisco, Inc. and participating Companies and the Supplemental Benefits Plan of Nabisco, Inc. and participating Companies, and such other plans as the Board may hereafter determine. EX-10.9 10 EXHIBIT 10.9 EXHIBIT 10.9 NABISCO HOLDINGS CORP. ANNUAL INCENTIVE AWARD PLAN Effective January 1, 1995 (Amended and Restated as of March 17, 2000) NABISCO HOLDINGS CORP. ANNUAL INCENTIVE AWARD PLAN Effective January 1, 1995 (Amended and Restated as of March 17, 2000) I N D E X
Section Page - ------- ---- 1. Purpose............................................................................... 1 2. Definitions........................................................................... 1 3. Eligibility........................................................................... 3 4. Performance Objectives................................................................ 3 5. Determination of Performance Targets.................................................. 3 6. Determination of Performance Awards................................................... 4 7. Payment of Awards..................................................................... 5 8. Miscellaneous......................................................................... 5 9. Finality of Determination............................................................. 7 10. Change of Control..................................................................... 7 11. Effective Date........................................................................ 8
NABISCO HOLDINGS CORP. ANNUAL INCENTIVE AWARD PLAN Effective January 1, 1995 (Amended & Restated on 3/17/00) 1. PURPOSE The Nabisco Holdings Corp. Annual Incentive Award Plan is established to provide managers with a management system to link corporate and business priorities with individual and group performance objectives for the leadership group of employees of NHC and its designated companies. 2. DEFINITIONS For purposes of the Plan, the following terms shall have the meanings set forth below: (a) AWARD. Annual cash payments made to Participants pursuant to the Plan. (b) BOARD OF DIRECTORS. The Board of Directors of Nabisco Holdings Corp. (c) CAUSE. Termination resulting from: (a) criminal conduct; (b) deliberate continual refusal to perform employment duties on a substantially full-time basis; (c) deliberate and continual refusal to act in accordance with any specific lawful instructions of a more senior officer or employee; or (d) deliberate misconduct which could be materially damaging to a Company's operations without a reasonable good faith belief that such conduct is in the best interests of the Company. A termination of employment shall not be deemed for Cause unless confirmed by the Chief Personnel Officer. Any voluntary termination in anticipation of an involuntary termination of employment for Cause shall be deemed a termination of employment for Cause. (d) CHIEF EXECUTIVE OFFICER. For employees of NHC and the Chief Executive Officers of the Operating Companies, the Chief Executive Officer of NHC. For the other employees of each Operating Company and its subsidiaries, the Chief Executive Officer of the Operating Company primarily responsible for their performance. (e) CHIEF PERSONNEL OFFICER. For employees of NHC and the Chief Executive Officers of the Operating Companies, the Chief Personnel Officer of NHC. For the other employees of each Operating Company and its subsidiaries, the Chief Personnel Officer of the Operating Company primarily responsible for their performance. (f) COMMITTEE. The Compensation Committee of the Board of Directors, no member of which is an officer or in the salaried employ of the Company, an Operating Company or other subsidiary of the Company. (g) COMPANY(IES). NHC and its Operating Companies. (h) DISABILITY. Being totally and permanently disabled as currently defined in the Company's Short-Term Disability and Long-Term Disability Plans. (i) FMLA. Family, parental, medical leave of absence as defined in the Company's FMLA Policy. (j) LONG-TERM DISABILITY. Being totally and permanently disabled as defined in the Company's Long-Term Disability Plan. (k) NHC. Nabisco Holdings Corp. (l) OPERATING COMPANY(IES). Operating Companies of NHC: Nabisco Biscuit Company; Nabisco International Company and Nabisco Foods Company (Planters/Specialty Products Company; Food Service Company; Lifesavers Company; Sales and Integrated Logistics; Nabisco Limited). (m) PARTICIPANT. For any Plan Year, an employee who is eligible for an Award under the Plan. An eligible employee shall be a Participant only with respect to the Company for which he or she works most directly and for whom performance objectives have been established for any given Plan Year. (n) PERFORMANCE PERIOD. The Plan Year or the portion of the Plan Year during which the employee is eligible to participate in the Plan. (o) PLAN. Nabisco Holdings Corp. Annual Incentive Award Plan. (p) PLAN YEAR. The one-year period beginning January 1 and ending December 31 of the same calander year. (q) RETIREMENT. Normal Retirement (age 65) with eligibility for retiree medical benefits. (R) SBC PROGRAM. The Company's Salary and Benefits Continuation Program or other program maintained by the Company for the purpose of providing severance-type benefits to employees whose employment is involuntarily terminated. 2 (S) SHORT-TERM DISABILITY. Being disabled for a short-term period as defined in the Company's Short-Term Disability Plan. 3. ELIGIBILITY To be eligible to participate in the Plan and to receive an Award, an employee of the Company or its Operating Companies must: (a) be employed by a Company on or before October 1 of the Performance Period in a position which is at a salary grade at least equal to or higher than the minimum participant salary grade designated by the Chief Executive Officer for that Plan Year; (b) not be a participant in the Company's Sales Incentive Plan or any other Company bonus plan designated by the Committee; (c) be approved by the Committee or its designee; and (d) except as otherwise provided herein provided in Sections 6(f), 6(i) or 8(c), be actively employed by a Company on the last day of the Plan Year. 4. PERFORMANCE OBJECTIVES (FINANCIAL AND ANNUAL) (a) For each Plan Year, the Chief Executive Officer shall establish specific financial and individual annual objectives for the Company headed by such Chief Executive Officer. (b) For each Performance Period, the Participant and the manager to whom that Participant reports (the "Reviewing Manager") will develop specific, individual annual performance objectives for that Participant, which must be approved by the next higher level of management as contributing to the objectives established by the Chief Executive Officer. (c) The Chief Executive Officer (subject to the approval of the Committee) will assign each aspect of the Company's financial and individual annual objectives a weighting, expressed as a percentage, such that the total weighting will equal 100%. The Chief Executive Officer may increase or reduce the weighting of any financial and individual annual objectives for certain positions so long as the total of all weightings equals 100%. (d) From time to time during the Performance Period, a Participant's individual annual objectives may be reviewed by the Reviewing Manager and the Participant. If needed, individual annual objectives may be revised subject to approval in the same manner as the objectives were originally approved prior to the beginning of the Performance Period. 5. DETERMINATION OF PERFORMANCE TARGETS 3 (a) A target percent Award for each Plan Year, expressed as a percentage of base salary, shall be established by the Committee for each eligible salary grade. (b) If a Participant changes salary grade during the Performance Period, the Participant's target Award level range will be based upon the highest target Award level range for which the Participant was eligible for three months or more during the Performance Period. 6. DETERMINATION OF PERFORMANCE AWARDS (a) At the end of the Plan Year, each category objective (i.e, financial/individual objectives) will be assigned a rating between 0% and 200%. (b) At the end of the Plan Year, the Chief Executive Officer of the Company will review with the Committee the financial and non-financial performance of the Company and each Operating Company. The Committee will establish a financial rating for the Company and each Operating Company which will be the rating for the financial performance objectives for each Participant for that Plan Year. (c) At the end of the Plan Year, the Participant and the Reviewing Manager shall review the performance of the Participant based on the Participant's individual annual objectives. The Reviewing Manager shall assign a rating to the individual annual objectives. (d) A Participant's Award under the Plan shall be determined by multiplying the weight assigned to each performance category under Section 4(c) by the performance rating assigned under Sections 6(b) and (c), respectively. The sum of such weighted performance ratings is then multiplied by the target Award level determined under Section 5 and by the highest annual rate of base salary in effect for at least three months during the Performance Period. The product may be rounded at the discretion of the Chief Executive Officer. (e) The Committee shall review and approve all Awards for Participants at Salary Grade B or higher, making such changes therein as the Committee deems appropriate. The Chief Executive Officer shall review and approve all Awards for Participants at Salary Grade C and/or below, making such changes therein as the Chief Executive Officer deems appropriate. Information regarding Awards for Participants at Salary Grades C or below shall be made available to the Committee. (f) Awards shall be paid as soon as practicable after the foregoing process is completed. (g) In the event of the Participant's termination of employment as a result of death, Long-Term Disability or Retirement (with the consent of the Company) during the Performance Period, Awards, if approved pursuant to Section 6(e), will be determined by multiplying the target Award level by the annual rate of base salary in effect immediately prior to the Participant's death, Long-Term Disability or Retirement, prorated for the number of 4 months of employment during the Performance Period. In the event a termination of a Participant's employment during the Performance Period, other than as provided above or in Section 6(b), the Committee, in its discretion, may order payment of all or any portion of the Award held by such Participant. (h) When a Participant holds more than one eligible position during a Plan Year, the weighted performance rating under Section 6(d) will be the sum of the weighted performance ratings for each position after each rating is multiplied by a fraction, the numerator of which is the number of months in such position and the denominator of which is twelve. (i) When a Participant is newly hired or promoted into an eligible position, the Participant's Award described in Section 6(d) shall be calculated using the highest annual rate of base salary in effect for at least three months since the date of hire or promotion, as applicable, and prorated for the number of months of employment during the Performance Period since the date of hire or promotion, as applicable. Notwithstanding the foregoing, no Award shall be payable unless the Participant was employed in an eligible position on or before October 1 of the Performance Period. (j) A Participant whose employment is involuntarily terminated and who receives benefits under the SBC Program will, if approved by the Executive Vice President and Chief Personnel Officer, be Awarded a lump-sum payment equal to the financial rating of the Operating Company employing the Participant, weighted 100%, multiplied by the highest annual rate of base salary in effect at the time of SBC, prorated for the number of months of employment during the Performance Period and paid at the same time as other Plan Participants. In addition, if approved by the Executive Vice President and Chief Personnel Officer of the Company or Operating Company employing the Participant, the Participant may, for each pay period during salary continuation, under the SBC be paid an Award equal to the target Award prorated for the period on SBC for the last year of active employment divided by the number of pay periods in a calendar year. (k) In the event a Participant is on Short-Term Disability or FMLA, the Participant's Award described in Section 6(d) shall be calculated using the Participant's aggregate base salary in effect during the Performance Period. (l) In the event of a Change of Control (as described in Section 10), the Participant's Award shall be calculated by multiplying the Target Award level by the annual rate of base salary in effect immediately prior to the date of the Change of Control, and prorated for the number of months during the Performance Period prior to the Change of Control. 7. PAYMENT OF AWARDS 5 (a) Unless deferred by a participant, Awards approved for a Plan Year will be paid to each Participant in cash on or before March 1 following the Plan Year, except as otherwise provided pursuant to Section 6(i); provided, however, Awards under Section 6(f) made in the event of death, Long-Term Disability or Retirement during the Plan Year shall be paid as soon as practicable after such event. 8. MISCELLANEOUS (a) Except as approved by the Committee, pursuant to Section 6(e), or the Chief Executive Officer, no person shall have any right to receive an Award. (b) The Company, the Board of Directors, the Committee, the officers and other employees of the Company or its Operating Companies shall not be liable for any action taken in good faith in interpreting or administering the Plan. (c) For purposes of the Plan, a Participant on leave of absence approved by the Company employing such person, and any person employed, with the consent of the Company, by a subsidiary of the Company that is not an Operating Company, will be considered as being in the employ of the Company or an Operating Company. Except as otherwise provided in Section 6(i), a Participant on salary continuation under a plan or agreement of severance will not be considered as being in the employ of the Company or an Operating Company but will be deemed to be retired as of the later of such Participant's last day of active employment release date. A Participant's absence by reason of Disability on December 31 of a Plan Year is deemed to be actively employed by the Company or an Operating Company during a Performance Period if such Participant was actively employed at any time during such Performance Period. (d) The Company or Operating Company employing the Participant shall deduct from all payments and distributions under the Plan any taxes required to be withheld by federal, state or local law. (e) The amounts of any Award and related expenses for any Participant shall be charged to the Company employing the Participant during the Plan Year for which the Award was made. If the Participant is employed by more than one Company during the Plan Year, the Participant's Award and related expenses shall be allocated between the Companies employing the Participant in a manner prescribed by the Committee. (f) The establishment of the Plan shall not be construed as conferring on any Participant any right to continued employment or employment in any position. The employment of any Participant may be terminated by the Company or Operating Company employing the Participant, or by the Participant, without regard to the effect which such action might have upon the Participant as a Participant in the Plan. (g) No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do 6 so shall be void. No such benefit shall, prior to receipt thereof by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant. (h) No benefit or promise hereunder shall be secured by any specific assets of the Company or any Operating Company, nor shall any assets of the Company or any Operating Company be designated as attributable or allocated to the satisfaction of the Company's or any Operating Company's obligations under the Plan. (i) The Committee at any time may terminate and in any respect, amend or modify the Plan so long as such amendment does not reduce the amount of any Award granted, or the earnings credited, prior to such amendment. (j) The Plan shall be governed by and subject to the laws of the State of Delaware. 9. FINALITY OF DETERMINATION The Committee shall have the power to interpret the Plan and all interpretations, determinations and actions by the Committee shall be final, conclusive and binding upon all parties. Subject to the preceding sentence, the Chief Executive Officer of the Company shall administer the Plan and shall resolve all administrative questions and interpretations. The Committee and the Chief Executive Officer may delegate any of their authority under the Plan to any other person or persons. In such event, references in the Plan to the Committee or to the Chief Executive Officer shall, when appropriate, refer to the persons so delegated. 10. CHANGE OF CONTROL (a) As used herein, a "Change of Control" shall occur on the date upon which one of the following events occurs (except as otherwise provided in paragraph (iii) below): (i) Any individual, corporation, partnership, group, associate or other entity or "person" as such term is defined in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than Nabisco Holding Corp. ("NHC"), Nabisco Group Holdings Corp. ("NGH") or any of their Subsidiaries, or any employee benefit plan(s) sponsored by NHC, NGH or any of their subsidiaries, is or becomes the "beneficial owner" (as defined in Rule 13D-3 under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of NHC or NGH outstanding securities ordinarily having the right to vote at elections of directors; (ii) Individuals who constitute the Board of Directors of either NHC or NGH on January 1, 2000 (each such Board the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of NHC or NGH, as the case may be, provided that any person becoming a director subsequent to such date hereof whose election, or nomination for election by NHC or NGH shareholders, as the case may be, was approved by a vote of at least three-quarters of the directors comprising that Incumbent Board (either by a specific vote or by approval of the 7 proxy statement of NHC or NGH, as the case may be, in which such person is named a nominee of NHC or NGH, as the case may be, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity of "person" other than the NHC or NGH Board, as the case may be, shall be, for purposes of this paragraph (ii), considered as though such person were a member of the Incumbent Board. (iii) The approval by the shareholders of NHC or NGH, as the case may be, of a plan or agreement providing (A) for a merger or consolidation of NHC or NGH, as the case may be, other than with a wholly-owned subsidiary or with NGH, NHC or any of their subsidiaries, and other than a merger or consolidation that would result in the voting securities of NHC or NGH, as the case may be, outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of NHC or NGH, as the case may be, of such surviving entity outstanding immediately after such merger or consolidation or (B) for a sale, exchange or other disposition of all or substantially all of the assets of NHC or NGH. If any of the events enumerated in this paragraph (iii) occurs, the NHC Board shall determine the effective date of the Change of Control resulting therefrom. For purposes hereof, "Subsidiary" of NHC or NGH means any 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 NHC or NGH, as the case may be. 11. EFFECTIVE DATE The Plan is effective as of January 1, 1995, and amended and restated effective as of January 1, 1999 and March 17, 2000. 8
2000 ANNUAL OBJECTIVES - ---------------------------------------------------------------------------------------------- MANAGER: DATE: APPROVAL: - ---------------------------------------------------------------------------------------------- RATING --------------- RELATIVE STANDARD OF WGT. ACCOUNTABILITY OBJECTIVES PRIORITY PERFORMANCE RATING RATING RATING - ---------------------------------------------------------------------------------------------- - - People - - Business Effectiveness - ---------------------------------------------------------------------------------------------- - - People - - Business Effectiveness - ---------------------------------------------------------------------------------------------- - - People - - Business Effectiveness - ----------------------------------------------------------------------------------------------
- ------------------------- ------------------------- ------------------------- Employee Signature Date Manager's Signature Date Additional Approval Date 9 EX-10.10 11 EXHIBIT 10.10 Exhibit 10.10 NABISCO HOLDINGS COMPANY 1999 RETENTION PLAN GUIDELINES PURPOSE: To provide a monetary incentive to support the retention of key executives and grant a one-time, performance-based long-term cash incentive award. APPROVAL: Compensation Committee approved in April, 1999. ELIGIBILITY: Grades A - D and selected Grade E executives EFFECTIVE DATE: July 1, 1999 PERIOD TENURE: July 1, 1999 - June 30, 2002 (36 months): - July 1, 1999 - June 30, 2000 - July 1, 2000 - June 30, 2001 - July 1, 2001 - June 30, 2002 AWARD: Equivalent of 1999, 2000 and 2001 actual AIAP awards VESTING: The award shall vest on the first to occur of the dates as set forth below in Sections (a) - (f). (a) June 30, 2002; (b) the date of the executive's death; [SEE EXHIBIT C] (c) the date the executive shall be deemed to have a "Permanent Disability" (as defined in the Nabisco, Inc. Long-Term Disability Plan applicable to senior executive officers as in effect on such dates hereof) or if the Board of Directors or any Committee thereof so determines; [SEE EXHIBIT C] (d) the date of the executive's retirement at age 65 or greater; [SEE EXHIBIT C] (e) the date the executive commences early retirement from the Company. As used herein, early retirement means retirement between the ages of 55 and 64 with the approval of the Company; or [SEE EXHIBIT C] (f) Involuntary Termination without cause. [SEE EXHIBITS A (DURING THE TWO- YEAR PERIOD BEGINNING ON A CHANGE OF CONTROL) AND B (PRIOR TO OR AFTER SECOND ANNIVERSARY OF A CHANGE OF CONTROL)]. FORFEITURES: If the executive RESIGNS OR IS INVOLUNTARILY TERMINATED FROM ACTIVE EMPLOYMENT WITH CAUSE, the executive shall immediately forfeit all rights to such award. "DISCRETIONARY When the amount of each segment of the award is known, COMPANY the Company will fund the monies through the CONTRIBUTION": Company-owned Rabbi Trust under the Deferred Compensation Plan. The award is not vested until June 30, 2002; therefore, any funded monies will be designated as `Discretionary Company Contributions' under the Deferred Compensation Plan. The executive will be able to direct the investment of the `unvested' monies; however, the account will be `restricted' until the vest date of June 30, 2002. PAYABLE DATE: July, 2002 or the first date to occur as stated above in Sections (b) - (f). DEFERRED COMPENSATION: While actively employed, the executive may defer up to 100% of the entire award. Deferral Elections must be made at least 6 months in advance of the payment date (i.e., November, 2001). NOTE: THE DESCRIPTIONS/DEFINITIONS OUTLINED ABOVE ARE TO PROVIDE AN OVERVIEW OF HOW THE 1999 RETENTION PLAN WILL BE ADMINISTERED. FINAL INTERPRETATION OF THE PLAN WILL BE THE SOLE RESPONSIBILITY OF THE NABISCO HOLDINGS CORP. COMPENSATION COMMITTEE. EXHIBIT A 1999 RETENTION PLAN CALCULATION INVOLUNTARY TERMINATION DURING THE 2-YEAR PERIOD BEGINNING ON A CHANGE OF CONTROL - -------------------------------------------------------------------------------- - ----------------------------------------------------------------- ASSUMPTION: IF CHANGE OF CONTROL OCCURS ON SEPTEMBER 1, 2000... - ----------------------------------------------------------------- - ------------------------------------------------------ INVOLUNTARY TERMINATION W/O CAUSE: NOVEMBER 1, 2000 - ------------------------------------------------------
- --------------------------------------------------------------------------------------------------------- AWARD SEGMENT PERIOD ACTUAL TARGET GRANTED/PAID MONTHS - -------------- ------------------------------ -------------- ------------- ------------------ ----------- 1 7/1/1999 - 6/30/2000 $ 120.0 $ 100.0 $ 120.0 12 2 7/1/2000 - 6/30/2001 -- $ 100.0 $ 100.0 12 3 7/1/2001 - 6/30/2002 -- -- -- -- TOTAL PAYOUT $ 220.0 - -------------- ------------------------------ -------------- ------------- ------------------ -----------
- ---------------------------------------------------- INVOLUNTARY TERMINATION W/O CAUSE: DECEMBER 1, 2001 - ----------------------------------------------------
- --------------- --------------------------- ------------- ------------- ----------------- ----------- AWARD SEGMENT PERIOD ACTUAL TARGET GRANTED/PAID MONTHS - --------------- --------------------------- ------------- ------------- ----------------- ----------- 1 7/1/1999 - 6/30/2000 $ 120.0 $ 100.0 $ 120.0 12 2 7/1/2000 - 6/30/2001 $ 135.0 $ 100.0 $ 135.0 12 3 7/1/2001 - 6/30/2002 -- $ 100.0 $ 100.0 12 TOTAL PAYOUT $ 355.0 - --------------- --------------------------- ------------- ------------- ----------------- -----------
- ------------------------------------------------------- INVOLUNTARY TERMINATION W/O CAUSE: JANUARY 1, 2002 - -------------------------------------------------------
- -------------- -------------------------- --------------- ------------- ------------------ ----------- AWARD SEGMENT PERIOD ACTUAL TARGET GRANTED/PAID MONTHS - -------------- -------------------------- --------------- ------------- ------------------ ----------- 1 7/1/1999 - 6/30/2000 $ 120.0 $ 100.0 $ 120.0 12 2 7/1/2000 - 6/30/2001 $ 135.0 $ 100.0 $ 135.0 12 3 7/1/2001 - 6/30/2002 $ 110.0 $ 100.0 $ 110.0 12 TOTAL PAYOUT $ 365.0 - -------------- -------------------------- --------------- ------------- ------------------ -----------
If active on July 1 of Plan segment, the executive will receive 100% of actual and/or target award. EXHIBIT B 1999 RETENTION PLAN CALCULATION INVOLUNTARY TERMINATION WITHOUT CAUSE [PRIOR TO OR AFTER THE SECOND ANNIVERSARY OF A CHANGE OF CONTROL] - -------------------------------------------------------------------------------- ASSUMPTION: IF CHANGE OF CONTROL OCCURS ON SEPTEMBER, 2000 - --------------------------- IF LDW: APRIL 30, 2000 - ---------------------------
- ------------ ------------------------------ ------------ ------------ ----------------- ----------- AWARD SEGMENT PERIOD ACTUAL TARGET GRANTED/PAID MONTHS - ------------ ------------------------------ ------------ ------------ ----------------- ----------- 1 7/1/1999 - 6/30/2000 $65,000 $60,550 $54,167 10 2 7/1/2000 - 6/30/2001 -- -- -- -- 3 7/1/2001 - 6/30/2002 -- -- -- -- TOTAL PAYOUT $54,167 - ------------ ------------------------------ ------------ ------------ ----------------- -----------
NOTES: - - Payment (pro rata/full) based on active months of service for each segment of the retention period in which executive is an active employee. Each segment is based on a 12-month period. - - Target award is calculated based on the executives' base salary and target percent as in effect on the LDW. - - Payout will be made as soon as administratively possible. EXHIBIT C 1999 RETENTION PLAN CALCULATION - -------------------------------------------------------------------------------- TERMINATION DUE TO: - DEATH - LONG-TERM DISABILITY (LTD) - RETIREMENT (AGE 65) - EARLY RETIREMENT (AGE 55-64) WITH CEO APPROVAL - --------------------------- IF LDW: APRIL 1, 2001 (SAME CALCULATION AS INVOLUNTARY TERM W/O CAUSE) - ---------------------------
- ------------ ------------------------ ---------- ------------ ----------------- ----------- AWARD SEGMENT PERIOD ACTUAL TARGET GRANTED/PAID MONTHS - ------------ ------------------------ ---------- ------------ ----------------- ----------- 1 7/1/1999 - 6/30/2000 $ 120.0 $ 100.0 $ 120.0 12 2 7/1/2000 - 6/30/2001 $ 135.0 $ 100.0 $ 101.3 9 3 7/1/2001 - 6/30/2002 -- -- -- -- TOTAL PAYOUT $ 221.3 - ------------ ------------------------ ---------- ------------ ----------------- -----------
NOTES: - - Payment (pro rata/full) based on active months of service for each segment of the retention period in which an executive is "actively" employed. Each segment is based on a 12-month period. - - Target award is calculated based on the executives' base salary and target percent as in effect on the LDW. - - Payout will be made as soon as administratively possible. EX-10.11 12 EXHIBIT 10.11 Exhibit 10.11 NABISCO SALARY AND BENEFIT CONTINUATION PROGRAM (AS OF JANUARY 1, 1997) GENERAL The Nabisco Salary and Benefit Continuation Program (the "Plan") assists Employees after involuntary separation of employment from the Company when that separation results from certain "specified separation conditions that make an Employee eligible for payment" that are detailed in the Section entitled "Separation Conditions." As a precondition of these Salary Continuation benefits, each eligible Employee signs an agreement between the Company and the Employee which sets forth the specific terms and conditions of that Employee's Salary Continuation and which contains a release of claims against the Company. EFFECTIVE DATE The effective date of this amendment and restatement is January 1, 1997, unless otherwise noted. The Salary and Benefit Continuation Program was effective January 1, 1988. DEFINITIONS OF IMPORTANT TERMS AFFILIATED COMPANY means any company, more than 50% of the voting stock of which is owned directly or indirectly by Nabisco Holdings Corp. ("Holdings") or any successor, and each trade or business (whether or not incorporated) controlled by Holdings or with which Holdings is under common control. BASE PAY means: (i) for Salaried Employees, 1/52 of the annualized rate of pay in effect on the day prior to the last day of active employment excluding amounts for overtime or bonuses, rounded to the nearest dollar; and (ii) for Salaried Part-Time Employees, 1/52 of the annualized salary in effect on the last day of active employment based on his or her regularly scheduled hours. CODE means the Internal Revenue Code of 1986, as amended from time to time. Reference to any Section or Subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such Section or Subsection. COMPANY means Nabisco, Inc., Nabisco International, Inc. and any successor thereto. EFFECTIVE DATE means January 1, 1988. EMPLOYEE means a salaried individual who is employed on a U.S. dollar payroll by the Company or an Affiliated Company which has adopted the Plan and who is not in a unit of -1- employees covered by a collective bargaining agreement, unless such collective bargaining agreement provides for the application of the Plan to such employees. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. JOB ELIMINATION means the elimination of an existing position at the sole discretion of the Company when, because of changing needs or circumstances, (1) the job is no longer performed, or (2) the job is still performed, but fewer employees are needed to perform it. PLAN means the Nabisco Salary and Benefit Continuation Program as described herein. PLAN ADMINISTRATOR means the RJR Employee Benefits Committee which administers the Plan. PLAN YEAR means the calendar year. SALARIED EMPLOYEES means Employees of the Company who are scheduled to work a certain number of hours per week, but not less than thirty (30) hours, with full compensation, benefits coverage and vacation/holidays. SALARIED PART-TIME EMPLOYEES means Employees of the Company who are scheduled to work a certain number of hours per week, but less than thirty (30) hours, with compensation, benefits coverage and vacation/holidays based on the number of hours he or she is scheduled to work weekly. SALARY CONTINUATION means continuation of an eligible Employee's current Base Pay for that period of time determined under the terms of this Plan during which such Employee is placed on inactive payroll after involuntary separation from employment due to certain specified conditions. YEAR OF SERVICE means each completed year of employment with the Company beginning on the Employee's date of hire and ending on the successive anniversaries thereof. No pro rata Years of Service will be given for partial years worked. ELIGIBILITY All salaried Employees, except for those specified below, may be considered for participation in this Plan from the date they begin active work. The following Employees are not eligible to participate in this Plan: (a) hourly Employees, non-regular Employees and seasonal Employees (which includes temporary Employees); -2- (b) regular part-time salaried Employees who are scheduled to work less than half the regular work week and are not eligible for pension and benefits; (c) any Employee whose terms and conditions of employment are determined by a collective bargaining agreement with the Company; (d) any individual who is employed by a leasing, temporary employment, consulting or other organization not a part of the Company who is a "leased employee" as defined in Section 414(n) of the Code and who may be required by such Section to be considered an Employee of the Company for certain benefits and other circumstances; (e) any Employee who is disabled and qualified to receive benefits under a short term or long term disability policy or plan of the Company prior to onset of any separation which would, but for disability, make such Employee eligible for payment of salary and benefit continuance as set forth below; however, if the Employee is eligible to return to work at a later date, salary and benefit continuation will be provided as of the date the Employee could return to work; (f) any Employee who is eligible for a separation or termination benefit under any other separation policy or plan of the Company or an Affiliated Company; or (g) any Employee who has an employment agreement that specifically provides for compensation in the event of separation from employment. BENEFITS 1. All eligible non-exempt Salaried Employees and non-exempt Salaried Part-Time Employees who qualify will continue to receive salary at separation from active employment as set forth below: a. - an amount equal to two weeks Base Pay plus: i. one week of Base Pay for each Year of Service NOT IN EXCESS of fifteen (15) years; and ii. two weeks of Base Pay for each Year of Service IN EXCESS of fifteen (15) years. The minimum pay period shall be one month and the maximum shall not exceed twenty-four (24) months. 2. All eligible exempt Salaried Employees and exempt Salaried Part-Time Employees who qualify will continue to receive salary at separation from active employment as set forth below: a. - an amount equal to two months of Base Pay plus: i. one week of Base Pay for each Year of Service NOT IN EXCESS of fifteen (15) years; and -3- ii. two weeks of Base Pay for each Year of Service IN EXCESS of fifteen (15) years. The minimum pay period shall be three months and the maximum shall not exceed twenty-four (24) months. 3. All eligible exempt Salaried Employees and exempt Salaried Part-Time Employees, whose Job Level equals or exceeds Job Level H, or participants in the Sales Incentive Plans, whose Job Level equals or exceeds Job Level SA 13 with a minimum Incentive Target of 20% or Job Level SL 12 with a minimum Incentive Target of 23%, who qualify will continue to receive salary at separation from active employment as set forth below: (i) an amount equal to two months of Base Pay, plus two weeks of Base Pay for each Year of Service. The minimum pay period shall be four months and the maximum shall not exceed twenty-four (24) months. In no event will any period of Salary Continuation exceed twenty-four (24) months, and total payments cannot exceed two times the Employee's compensation for his/her final year of active employment. The amount of Salary Continuation payable to the Employee shall be offset by: (i) amounts that the Participant owes to the Company as of the date of his/her separation of employment; (ii) any foreign statutory or mandatory termination pay, including, but not limited to, mandatory severance entitlement, compensation in lieu of notification pay, and termination indemnities; and (iii) any foreign statutory or mandatory retirement benefits paid by the Company to the Participant or on the Participant's behalf, to the extent that such benefits relate to periods for which benefits are provided to the Participant pursuant to any retirement plan sponsored, or contributed to, by the Company or any of its affiliates. Salary Continuation will be payable at the same frequency as normal salary payments until the specified duration of Salary Continuation is complete. Where Salary Continuation calculated in accordance with the formula above would not conclude at the end of a pay period, full Salary Continuation will be continued until the end of such final pay period or, if the Employee is eligible to retire under a retirement plan of the Company or an Affiliated Company at the end of Salary Continuation, Salary Continuation will be continued through the end of the month preceding the Employee's retirement date. A lump sum payment will ONLY be made in the event of death during Salary Continuation, in which case the balance will be paid in a lump sum to the Employee's beneficiary designated under the Employee's core or basic group life insurance. Payments will be subject to normal deductions for taxes and other legally required withholding. Payments will not cease when the individual finds new employment during Salary Continuation with an employer which is not an Affiliated Company; however, payments will cease if the individual is reemployed by any Affiliated Company on a regular full-time basis at any time prior to the end of Salary Continuation. -4- SEPARATION CONDITIONS THAT MAKE AN EMPLOYEE ELIGIBLE FOR PAYMENT Payment will be made under the Plan if involuntary separation of employment is due to any of the following specified conditions: a. restructuring of organizations or consolidation of operations resulting in loss of employment; b. elimination of a position with no other position available commensurate with the Employee's qualifications; c. completion of an assignment with no other position available commensurate with the Employee's qualifications; d. failure to consistently perform at a level that meets the minimum acceptable requirements for the position in situations where the Company determines that the Employee has made a bona fide effort to achieve or maintain such acceptable level of job performance; or e. refusal of transfer or assignment within the Company and its Affiliated Companies to a position that (i) requires relocation equal to or greater than the mileage threshold required by the IRS for a moving expense deduction or (ii) is more than two salary grade levels below current job or (iii) is below current salary grade level with a reduction in Base Pay; provided that Employee must provide written notice to the Company of refusal or non-consent within 90 days after the offer of transfer or assignment or the Employee will be deemed to have accepted or consented and shall be eligible for payment under this Plan. If the Employee provides such written notice, it shall be deemed a claim under the Claims Procedure of this Plan. THAT MAKE AN EMPLOYEE INELIGIBLE FOR PAYMENT No payment will be made under the Program if separation of employment is due to any of the following specified conditions: a. temporary layoffs or voluntary resignations and retirements or separations resulting from disability which are not a part of conditions under (a) to (e) above; b. refusal of transfer or assignment within the Company (including transfer or assignment between Affiliated Companies) to a position that (i) is not more than two salary grade levels below the current job or (ii) is not below current salary grade level with a reduction in Base Pay or (iii) does not require relocation equal to or greater than the mileage threshold required by the IRS for a moving expense deduction; c. termination for violation of Company rules, policies, guides, or standards of conduct except for conditions under (d) above; or -5- d. termination directly resulting from a sale or other divestiture (which includes the Employee's work unit) where the Employee is offered continued employment with a successor employer, except as may be otherwise specifically provided in the sale or divestiture agreement. If (i) the Employee violates condition (c) above during salary continuation or, (ii) if the Company determines that the Employee should have been terminated under condition (c) above instead of a condition eligible for payment, all payments shall immediately cease and the Employee shall return all payments made to date. IMPACT ON OTHER BENEFIT PLANS Except as otherwise stated herein or as may be governed by the terms of individual programs, the Employee receiving Salary Continuation will continue to participate in the benefit programs, contributory and non-contributory, in which such Employee participated as though still an active Employee. Changes in benefit programs after Salary Continuation has begun will apply, unless otherwise required by law. New benefit programs which replace or supersede existing programs will also apply after Salary Continuation begins unless the Company chooses to continue the former programs for participants of this Plan. Upon commencement of Salary Continuation, a Participant who is terminated due to Job Elimination will become 100% vested in his/her accrued benefits under the defined benefit and defined contribution plans of the Company in which he participates. An employee receiving Salary Continuation will not be eligible for either Short or Long Term Disability benefits. During the period of Salary Continuation, the Employee will continue to be covered by the contributory benefit plans in which the Employee was a participant as of such Employee's last day of active employment only if the Employee remits or authorizes payroll deduction for normally required contributions. However, if the Employee is employed by a non-affiliated employer during Salary Continuation, and the new employer provides life, accident, health and/or other welfare benefits prior to the end of Salary Continuation, benefit continuation shall be subject to applicable coordination of benefits rules, with the new employer's plan deemed primary coverage. Employees will be eligible to continue to participate fully in the RJR Nabisco Capital Investment Plan except that no loan applications will be approved during Salary Continuation. The Employee receiving Salary Continuation will be covered by the Company's SELECT Flexible Benefits Program. Coverage under SELECT ceases at the end of the month in which Salary Continuation ends. Continuation coverage as required under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) will be offered. Effective July 1, 1997, if elected by the Employee, the monthly premium for COBRA continuation coverage will be 102% of actual plan cost. Employees who are eligible to retire with medical coverage under a retiree medical plan of the Company or Affiliated Company at the end of Salary Continuation are not eligible for COBRA continuation coverage but may elect retiree medical, dental and life insurance coverage under the Company's retiree plans. If an Employee receiving Salary Continuation is a participant in the Company's Annual Incentive Award Plan or any other incentive award plan, has stock option awards outstanding, or -6- shares of restricted stock, the operation of each of the aforementioned shall be governed by the terms of applicable plans or agreements. VACATION PAYMENTS An Employee will be paid for any unused vacation that is attributable to the year in which the Employee's last day of active employment occurs. In addition, an Employee whose last day of active employment occurs on December 31 will be paid for vacation days attributable to the NEXT calendar year. Such vacation payment will be made in a Lump Sum at the end of Salary Continuation based on the Employee's Base Pay. The period of Salary Continuation shall not be counted in determining an Employee's vacation. Effective January 1, 1996, pursuant to the salaried Vacation Policy, eligible vacation not used in a calendar year will be forfeited and may not be carried over into the next year. If an employee had carryover days accumulated from years PRIOR to 1996, notification would have been due to his/her manager to confirm the number of days. An employee will be compensated for any of these unused days as of the last day of active employment. AMENDMENT AND TERMINATION The Company reserves the right to terminate this Plan or to modify, amend or change the provisions, terms and conditions of this Plan at any time. Nothing herein creates a vested right. All Salary Continuation payments shall be made out of the general assets of the Company and shall not be funded. Other benefits referred to herein may be funded or unfunded as provided for in the individual plans. PROGRAM INTERPRETATION The Plan Administrator or the designated representative thereof shall have exclusive authority to interpret the Plan. The decision of the Plan Administrator with respect to any question arising as to the Employees selected to participate in the Plan, the amount, term, form and time of payment of benefits under the Plan or any other matter concerning the Plan shall be final, conclusive and binding on both the Company and the participants. CLAIMS PROCEDURES All decisions by the Company regarding an Employee's selection for separation from employment and eligibility for coverage hereunder shall be final and conclusive. Prior to an Employee executing the agreement referred to in the section entitled "General", all disputes concerning the calculation of the amount of benefits provided hereunder shall have been resolved in accordance with this paragraph. The Plan Administrator or designated representative shall mail or deliver to each individual who has filed an effective claim for a benefit a written statement of the amount of the individual's benefit or a notice of denial of such individual's claim on or before the 90th day -7- following receipt of such claim. If special circumstances require additional time for processing the claim, the Plan Administrator or designated representative may delay issuing its statement or notice for an additional 90 days provided that the individual is notified of the circumstances necessitating the delay. Each notice of whole or partial denial of claimed benefits shall set forth the specific reasons for the denial, the time within which an appeal must be made by the individual or the individual's duly authorized representative, and shall contain such other information as may be required by applicable law. If a statement or notice is not issued within the prescribed period, the claim shall be deemed denied. Each Employee whose claim for benefits has been wholly or partially denied shall have such rights to review documents and submit comments as applicable law and regulations and rules of the Plan Administrator may provide, and shall also have the right to request the Plan Administrator to review such denial, such request to be made on forms prescribed by the Plan Administrator. A request for review shall be made by the Employee or the Employee's duly authorized representative on or before the 60th day following the earlier of the Employee's receipt of notice of denial of such claim or the expiration of the prescribed period for issuing a statement of benefits or notice of denial. The Plan Administrator or its designee shall issue a written statement on or before the 60th day following the receipt of such request stating the decision on review and the reasons therefore, including specific references to pertinent Plan provisions on which the decision is based, and any other information required by applicable law. If special circumstances require additional time for processing such review, the Plan Administrator or its designee may delay issuing its decision for an additional 60 days provided that the Employee is notified of such circumstances and the date the Plan Administrator or its designee expects to render its final decision. If the decision is not issue within the prescribed period, the appeal shall be deemed denied. ERISA INFORMATION GENERAL All benefits under the Plan are unfunded, paid out of the general assets of the Company and may not be assigned in any way.
PLAN INFORMATION ---------------- Name of Plan: Nabisco Salary and Benefit Continuation Program Plan Number: 533 Plan Sponsor: Nabisco, Inc. 100 DeForest Avenue East Hanover, NJ 07936 (201) 503-2000 EIN: 13-1851519 Plan Year End: December 31 Type of Plan: Welfare Benefit Type of Administration: Employer Self-Administered
-8- The Plan is administered on behalf of the Company by the RJR Employee Benefits Committee, which is the Plan Administrator for ERISA purposes. This Committee has general authority to interpret and administer the Plan. ERISA Plan Administrator: RJR Employee Benefits Committee c/o RJR Nabisco, Inc. 1301 Avenue of the Americas New York, New York 10019-6013 (212) 258-5600 The RJR Employee Benefits Committee has delegated some of its authority for the day-to-day administration of the Plan to local Benefits Administration Committees to handle Plan transactions as well as to assist participants with their Plan questions. You should therefore, direct your calls and questions as follows: Benefits Administration Committee: Nabisco Benefits Administration Committee Nabisco, Inc. 100 DeForest Avenue East Hanover, NJ 07936 Tel. No.: (201) 503-2000 Funding: No contributions are made-benefits are paid from the general assets of the employer. Agent for Service of Legal Process: Corporate Secretary RJR Nabisco, Inc. 1301 Avenue of the Americas New York, NY 10019 (212) 258-5600 STATEMENT OF ERISA RIGHTS As a participant in the above-mentioned Plan you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974. ERISA provides that all Plan participants shall be entitled to: - Examine, without charge, at the Plan Administrator's office, all Plan documents, including insurance contracts, and copies of all documents filed by the Plan with the U.S. Department of Labor, such as annual reports and Plan descriptions. - Obtain copies of all Plan documents and other Plan information upon written request to the Plan Administrator. -9- - Receive a summary of the Plan's annual financial report, if it files an annual report. The Plan Administrator is required by law to furnish each participant with a copy of this summary financial report. In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate your plan, called "fiduciaries" of the plan, have a duty to do so prudently and in the interest of you and other plan participants and beneficiaries. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. If your claim for a benefit is denied in whole or in part you must receive a written explanation of the reason for the denial. You have the right to have the plan review and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits which is denied or ignored in whole or in part, you may file suit in a state or federal court. If it should happen that plan fiduciaries misuse the plan's money or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay your costs and legal fees. If you are successful, the court may order the person you sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. If you have any questions about your plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, you should contact the nearest Area Office of the U.S. Department of Labor-Management Services Administration, Department of Labor. -10- EX-10.12 13 EXHIBIT 10.12 EXHIBIT 10.12 [GRAPHIC OMITTED] FLEXIBLE PERQUISITE PROGRAM GUIDELINES UPDATED: JANUARY 1, 2000 REVISED: OCTOBER, 1996
TABLE OF CONTENTS ----------------- CONTACT LIST.................................................................5 FLEXIBLE PERQUISITE PROGRAM GUIDELINES.......................................6 OBJECTIVE.................................................................6 OVERVIEW.....................................................................7 CORE PERQUISITES..........................................................7 ADDITIONAL FLEXIBLE PERQUISITES...........................................7 SPECIAL BENEFITS..........................................................8 TAX IMPLICATION...........................................................8 EFFECTIVE DATE OF PROGRAM.................................................8 ELIGIBILITY...............................................................8 ELIGIBILITY AFTER JANUARY 1 OF PROGRAM YEAR...............................9 ELIGIBILITY CHANGES.......................................................9 JOB LEVEL ASSIGNMENT...................................................9 DISABILITY............................................................10 RETIREMENT............................................................10 DEATH.................................................................10 TERMINATION FOR OTHER REASONS.........................................11 COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION................11 FLEXIBLE PERQUISITE ALLOWANCE............................................12 COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION................12 CORE PERQUISITES............................................................13 COMPANY CAR..............................................................13 SELECTION OF CAR......................................................13 MAINTENANCE...........................................................13 INSURANCE.............................................................13 RETENTION.............................................................13 COMPANY-CAR UPGRADE......................................................14 UPGRADE APPROVAL......................................................14 COMPANY-CAR TAX IMPLICATION...........................................15 ANNUAL-LEASE VALUE IMPUTATION.........................................15 COMPANY-CAR UPGRADE IMPUTATION........................................16 CHANGE IN JOB LEVEL...................................................16 COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION................16 EXECUTIVE MEDICAL/DENTAL.................................................17 TAX IMPLICATION.......................................................17 ENROLLMENT............................................................17 ELIGIBLE DEPENDENTS...................................................17 COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION................17 BUSINESS TRAVEL ACCIDENT INSURANCE.......................................18 TAX IMPLICATION.......................................................18 ENROLLMENT............................................................18 BENEFICIARY...........................................................18 COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION................18
2
EXECUTIVE LIFE INSURANCE.................................................20 ENROLLMENT/CANCELLATION...............................................20 COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION................21 EXECUTIVE PERSONAL AUTO INSURANCE ..................................23 ELIGIBLE DEPENDENTS...................................................23 ENROLLMENT/CANCELLATION...............................................24 IMPUTED INCOME........................................................24 COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION................24 EXECUTIVE EXCESS LIABILITY INSURANCE.....................................25 ENROLLMENT/CANCELLATION...............................................26 COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION................27 CLUB INITIATION FEES........................................................28 DISCLOSURE..................................................................28
3 The Program described in this booklet does not create or give any contractual rights to any employee nor is it evidence of any contract or covenant of employment. Nabisco reserves the right to modify, revoke, suspend or change any program or service that is described. This booklet is the property of Nabisco and may not be reproduced or distributed outside the Company without the permission of the Executive Vice President and Chief Personnel Officer. 4 NABISCO, INC. -- CONTACT LIST ----------------------------- EXECUTIVE COMPENSATION ---------------------- MICHELLE PEDULLA SUSAN REUTER (973) 503-3094 (973) 503-3881 Nabisco, Inc. 100 DeForest Avenue East Hanover, NJ 07936 Fax: (973) 503-3223 PLEASE NOTE: ALL ENROLLMENT AND CANCELLATION FORMS SHOULD BE MAILED DIRECTLY TO MICHELLE PEDULLA. - -------------------------------------------------------------------------------- MEDICAL ------- MARY MAYERL Executive Claim Aetna Life & Casualty P.O. Box 31450 Tampa, FL 33631-3450 (813) 775-0138 - -------------------------------------------------------------------------------- DENTAL ------ DON HICKEY WENDY GUILLERMAIN (973) 285-4086 (973) 285-4207 Delta Dental 1639 Route 10 Parsippany, NJ 07054 - -------------------------------------------------------------------------------- FLEET ----- BILL KIDDLE ALICE GREENE (973) 503-2767 (973) 503-2773 Nabisco, Inc. 100 DeForest Avenue East Hanover, NJ 07936 - -------------------------------------------------------------------------------- RISK MANAGEMENT --------------- PAMELA PLAZA Nabisco, Inc. 7 Campus Drive Parsippany, NJ 07054 (973) 682-7310 5 FLEXIBLE PERQUISITE PROGRAM GUIDELINES -------------------------------------- OBJECTIVE The Flexible Perquisite Program has been designed to offer executive perquisites which consider executives' personal needs by providing "choice" in selecting perquisites and perquisite providers. The Program enables executives to avail themselves of those perquisites most suitable to his/her individual needs utilizing a flexible perquisite allowance. The Program is based upon the results of a competitive total compensation analysis and will be reviewed annually to ensure its continued competitiveness. 6 OVERVIEW -------- The Flexible Perquisite Program allows eligible executives to make independent decisions, which provide them with lifestyle-sensitive enhancements. - -------------------------------------------------------------------------------- This Program consists of a Flexible Perquisite Allowance and Core Perquisites, as follows: - - FLEXIBLE PERQUISITE ALLOWANCE A flexible perquisite allowance will be granted based on the executive's Job Level at the beginning of each Program year. The perquisite allowance will be paid to the executive in four quarterly payments. At the end of each quarter, a payment less appropriate taxes will be issued, via direct deposit or check, whichever is applicable. An executive, who is actively employed by the Company, will have an opportunity to participate in the Nabisco Deferred Compensation Plan and defer up to 100% of his/her allowance. However, no deferral election shall reduce his/her compensation below the amount necessary to satisfy applicable employment taxes (e.g., FICA/Medicare), Company-sponsored insurance and/or Company-car upgrade amounts purchased under the Flexible Perquisite Program. CORE PERQUISITES - Company car - Executive Medical/Dental Insurance - Business Travel Accident Insurance - Club initiation fee ADDITIONAL FLEXIBLE PERQUISITES An executive may purchase Company-sponsored Insurance programs and Individual Selection, as follows: - Company-car upgrade - Company-Sponsored Insurance: >> EXECUTIVE LIFE INSURANCE >> EXECUTIVE PERSONAL AUTO INSURANCE >> EXECUTIVE EXCESS LIABILITY INSURANCE 7 SPECIAL BENEFITS Upon eligibility to the Flexible Perquisite Program, an executive will also receive the following special benefits: - First Class Travel - Reserved Parking Space - Corporate Executive Credit Card TAX IMPLICATION - - FLEXIBLE PERQUISITES: The flexible perquisite allowance is taxable and Federal tax will be withheld at the rate of 28 8 minimum rate. - - CORE PERQUISITES: Business Travel Accident Insurance is non-taxable to the executive. The entire Annual Lease Value (ALV) of an executive's Company car is taxable income and imputed to his/her income each pay period during the Program year. Such amount will be reduced based on the ratio of business to personal miles in December of the Program year (refer to Company car section for further details). - - ADDITIONAL PERQUISITES: An executive's income will be imputed based on the value of insurance benefit(s) purchased, i.e., life insurance, personal auto insurance and excess liability premiums in December of the Program year. The Company-car upgrade imputation will occur each pay period during the Program year (refer to Company car section for further details). EFFECTIVE DATE OF PROGRAM January 1, 1991 PROGRAM YEAR January 1 - December 31 ELIGIBILITY Participation in the Flexible Perquisite Program is limited to executives whose Job Levels are included in the Executive Salary Structure. Each executive's flexible perquisite allowance is determined by his/her Job Level within the Executive Salary Structure. ELIGIBILITY AFTER JANUARY 1 OF PROGRAM YEAR If eligibility occurs after January 1 of a Program year, the executive will be eligible for Core Perquisites and a prorata perquisite allowance for his/her Job Level. ELIGIBILITY CHANGES JOB LEVEL ASSIGNMENT If an executive is PROMOTED TO A HIGHER JOB LEVEL, the adjusted perquisite allowance balance will be based on the prorata allowance variance between the allowance designated for the CURRENT JOB LEVEL and the NEW JOB LEVEL. Such amount will be ADDED to the current balance. The proration will be effective as of the date of promotion. Example: On January 1, a Grade D executive is granted a $25,000 flexible perquisite allowance. The executive utilizes $10,000 between January 1 and June 30. On July 1, the executive is promoted to Grade C and is entitled to a flexible allowance of $32,500. The difference between the two Job Levels is $7,500. This variance is prorated based on the number of months in the new Job Level during the Program year, namely, six (6) months and is equal to $3,750. Therefore, the executive has an adjusted allowance balance on July 1 of $18,750, as follows:
ALLOWANCES Job Level D-January 1 Allowance $25,000 January 1-June 30 Allowance Used (10,000) -------- Balance 15,000 Promotion to Job Level C 3,750 prorata ----- July 1 Adjusted Allowance Balance $18,750
If an executive is ASSIGNED TO A LOWER-GRADED JOB LEVEL THAT IS STILL ELIGIBLE FOR THE PROGRAM, the executive will maintain the flexible perquisite allowance granted on January 1 for the balance of the Program year, as well as Core Perquisites. The allowance will then be adjusted for the appropriate level commencing the following January 1. If an executive REQUESTS A TRANSFER TO A LOWER-GRADED JOB LEVEL THAT IS STILL ELIGIBLE FOR THE PROGRAM, the adjusted allowance balance will be based on the prorata allowance variance between the allowance designated for the CURRENT JOB LEVEL and the NEW JOB LEVEL. Such amount will be SUBTRACTED from the current balance (the resultant minimum allowance balance is zero). The proration will be effective as of the date of event. If the executive REQUESTS A TRANSFER TO A LOWER-GRADED JOB LEVEL THAT IS NO LONGER ELIGIBLE FOR THE PROGRAM, the remaining 9 flexible perquisite allowance and Core Perquisites will cease immediately. However, the executive may purchase his Company car. If an executive is ASSIGNED TO A JOB LEVEL THAT IS NO LONGER ELIGIBLE FOR THE PROGRAM, the executive will remain in the Program for six (6) months or the remainder of the Program year, whichever is longer. If participation extends into the next Program year, the flexible perquisite allowance granted in the year of loss of eligibility will be "frozen" and prorated. Core Perquisites will be retained. The executive will be paid the prorated perquisite allowance on the next scheduled quarterly payout, via direct deposit or check, whichever is applicable. Federal Income Tax will be withheld at the 28% minimum rate. DISABILITY If an executive is placed on SHORT-TERM DISABILITY (STD), the executive will remain in the Program during such period. If an executive is placed on LONG-TERM DISABILITY (LTD), the executive will continue in the Program. However, the executive's status as an eligible participant will be reviewed annually. The flexible perquisite allowance granted in the year LTD begins will be "frozen" and no new leased-Company car may be selected. RETIREMENT If an executive RETIRES, all benefits of the Program will cease immediately, except for Personal Auto Insurance and Excess Liability Insurance which may be continued for three (3) months. Effective with the executive's retirement date, the allowance granted on January 1 of the Program year will be prorated based on the executive's active service in such year. The executive will be paid, via direct deposit or check, whichever is applicable, the prorated perquisite allowance on the next scheduled quarterly payout. Federal Income Tax will be withheld at the 28% minimum rate. DEATH If the executive DIES, all benefits of the Program will cease three (3) calendar months from the month death occurs. The flexible perquisite allowance granted on January 1 of the Program year will be prorated based on the executive's active service in such Program year plus three (3) additional calendar months after the month of death. Any allowance used year-to-date will be deducted from such adjusted flexible perquisite allowance. If the three-month period extends into the next Program year, the flexible perquisite allowance granted in the year of death will be "frozen" and prorated. At the end of the three-month period, a check representing the unused flexible perquisite allowance balance, if any, will be issued to the executive's spouse. If the executive does not have a spouse, a check will be issued to the executive's beneficiary under SELECT Core Life Insurance. 10 The title of the Company car will be transferred to the executive's spouse at no cost. If the executive does not have a spouse, the executive's beneficiary under SELECT Core Life Insurance will have this vehicle transfer option. TERMINATION FOR OTHER REASONS If the executive VOLUNTARILY RESIGNS or is TERMINATED FOR CAUSE, all benefits of the Program will cease as of the resignation/termination date. The executive WILL NOT have the option to purchase the Company car. COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION If an executive is involuntarily terminated without cause and placed on severance under the terms of an Employment Agreement or the Salary & Benefits Continuation Program, the executive shall continue to receive benefits under the Flexible Perquisite Program for the period of such severance, except for Business Travel Accident Insurance. The perquisite allowance will be "frozen" based on the executive's current job level at the time the executive begins Compensation Continuance/Salary & Benefits Continuation. Except as noted below, the executive shall have an opportunity to purchase his/her Company car at the Company determined price. However, in the event of an involuntary termination without cause during the two-year period beginning on a Change of Control, as defined by the Company, ownership of the Company car assigned to the executive immediately prior to such involuntary termination without cause shall be transferred to the executive within 15 business days from the end of the Compensation Continuance/Salary & Benefits Continuation period. At the time of such automobile transfer, the Company shall pay to the executive such amount in cash that, after payment of all applicable federal, state and local taxes thereon, computed at the maximum marginal rates, is equal to all such taxes, so computed imposed in connection with such transfer. 11 FLEXIBLE PERQUISITE ALLOWANCE A flexible perquisite allowance will be granted annually based on the executive's Job Level at the beginning of each Program year. A prorata adjustment to such allowance will be made upon promotion to a higher Job Level during the Program year. The executive may purchase Company-sponsored Insurance(s) and a Company-car upgrade. An executive, who is actively employed by the Company, will have an opportunity to participate in the Nabisco Deferred Compensation Plan and defer up to 100% of his/her perquisite allowance each Program year. However, no deferral election shall reduce his/her compensation below the amount necessary to satisfy applicable employment taxes (e.g., FICA/Medicare), Company-sponsored insurance and/or Company-car upgrade amounts purchased under the Flexible Perquisite Program. Enrollment will occur in November prior to each Program year. For additional details, please refer to the Nabisco Deferred Compensation Plan Booklet or contact Executive Compensation (see Contact List located in Appendix). COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION If an executive is placed on Compensation Continuance/Salary & Benefit Continuance, the flexible perquisite allowance will be "frozen", based on the executive's current job level at the time the executive begins Compensation Continuance/Salary & Benefit Continuation. Such flexible perquisite allowance will continue until the end of Compensation Continuance/Salary & Benefit Continuation. 12 CORE PERQUISITES ---------------- COMPANY CAR SELECTION OF CAR Each executive may select a Company car of his/her choice subject to the following limitations. The cost to the Company shall not exceed the allowable Fair-Market Value (FMV) amount determined by Management. The maximum allowable FMV will increase incrementally by Job Level. For the purpose of this Program, only new cars may be selected by the executive. An executive who wishes to obtain a car should contact the Fleet Department (see Contact List located in the Appendix) who will provide additional information. MAINTENANCE Receipts covering fuel, oil, tires and other normal maintenance costs of the vehicle (including car washes) are reimbursable when submitted on approved expense reports. INSURANCE Company car insurance is administered by Risk Management. Therefore, the executive is not required to obtain auto insurance. RETENTION Company car will be retained for 50-months or 60,000 miles, whichever occurs first. The executive may purchase his/her Company car at the end of the 50-month lease period or prior to the end of the 50-month lease period due to 60,000 miles, involuntary termination without cause, overseas assignment or Long-Term Disability. If the executive dies, the title of the car will be transferred to the beneficiary at no cost to the beneficiary. For tax purposes, the executive's income will be grossed up by the amount of the FMV of the car at the time of transfer. Upon a domestic relocation, the executive will retain his/her Company car at the new location. 13 COMPANY-CAR UPGRADE An executive may select a Company car with a higher FMV than his/her maximum allowable FMV. However, the DIFFERENCE BETWEEN THE ALLOWABLE ANNUAL LEASE VALUE (ALV) AND THE ACTUAL ALV WILL BE DEDUCTED FROM THE EXECUTIVE'S ALLOWANCE at the beginning of each Program year during the 50-month lease period or 60,000 miles, whichever occurs first, and will be prorated for partial-year leases, i.e. lease inception/termination, whichever occurs first. The executive may use all of his/her available perquisite allowance in addition to his/her FMV level amount (ALV) to lease a car. Example: The executive is entitled to a Company car with a FMV of $29,999 for which the ALV is $7,750. The executive advises the Fleet Department of the car the executive wants to lease. The Fleet Department is able to obtain the car for $31,999 (excludes tax, title, and registration fee). The ALV is $8,250. Therefore, $500 allowance will be deducted from the executive's account at the beginning of each Program year during the 50-month lease period or 60,000 miles, whichever occurs first. If the lease begins or expires during the Program year, the cost will be prorated. This is based on the ALV Table variance of the maximum FMV versus the upgraded FMV (See IRS Annual Lease Value table located in the Appendix), as follows:
Allowance FMV ALV TABLE REQUIRED --- --------- -------- Company car $29,999 $7,750 Upgrade $31,999 $8,250 $500
UPGRADE APPROVAL If an executive wishes to upgrade the FMV of his/her Company car, prior approval by Executive Compensation is required to determine available perquisite allowance dollars in such year. If the Company car the executive has selected exceeds the executive's maximum allowable FMV, the FLEET DEPARTMENT SHOULD: 1. Contact Executive Compensation to obtain verbal approval. 2. Complete their portion of the "Company-car Upgrade" form (FP-8) and send it to Executive Compensation. 14 COMPANY-CAR TAX IMPLICATION ANNUAL-LEASE VALUE IMPUTATION If the Company car is driven solely for personal use during the 12-month period ending October 31 of each year, the entire ALV will be taxable income. If it is used partially for business purposes, the taxable amount will be reduced by the percentage of the car's substantiated business mileage versus total mileage during that period. IRS regulations require imputation of a fuel charge for all personal usage. The present fuel charge imputation is 5.5 cents per mile for personal use. Commuting between the executive's home and regular office is considered a personal trip, not business. As of October 31 of each year, each executive will receive a Business/Personal Mileage Statement and will be responsible for providing the percentage of personal versus business mileage. Therefore, it is required that the executive maintain a log of miles driven for business/personal usage. BUSINESS USAGE of personal cars is not reimbursable on a Company expense report, except in an extraordinary situation. (See "Maintenance"). EXAMPLE OF THE BUSINESS/PERSONAL USAGE CALCULATION: Period: November 1 through October 31
APPROVED ACTUAL # MONTHS -------- ------ -------- Fair-Market Value: $29,999 $31,999 12 Annual Lease Value: $ 7,750 $ 8,250 Taxable Income: $ 7,750 Taxable Income equals the lesser of the approved or actual ALV. COMPANY-CAR BUSINESS/PERSONAL MILE USAGES Personal miles driven 11/1 through 10/31: 12,000 Business miles driven 11/1 through 10/31: 3,000 ----- Total Miles: 15,000 Personal miles as a percent of total miles: 80.0% 12,000 personal miles divided by 15,000 total miles Annual Taxable Income: $6,200.00 $7,750 ALV times 80.0% Personal miles driven times 5.5 cents per mile: $660.00 12,000 personal miles times 5.5 cents -------- Imputed Income: $6,860.00 Less Payroll YTD Offset: ($7,104.17) [AS OF 11/30] ----------- Total Actual Imputed Income: ($244.17) imputed imputed over 12/15 and 12/30 payroll periods. i.e., ($122.08) per payroll
15 COMPANY-CAR UPGRADE IMPUTATION An executive's income will be imputed for the Company-car upgrade during the Program year, if applicable. CHANGE IN JOB LEVEL - - PROMOTION - If an executive is promoted to a higher Job Level and has a Company-car upgrade, the upgrade cost will be recalculated based on the allowance for the new Job Level. - - DEMOTION - If an executive's Job Level is reduced at the Company's request and the executive is still eligible for participation in the Program, the executive may retain the use of the CURRENT Company car through the end of the lease period or 60,000 miles, whichever occurs first. A new car may then be selected based on the allowable FMV of the executive's new Job Level. COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION If an executive is involuntarily terminated without cause and placed on severance under the terms of an Employment Agreement or the Salary & Benefit Continuation Program, the executive shall continue to receive benefits under the Flexible Perquisite Program for the period of such severance, except for Business Travel Accident Insurance. Except as noted below, the executive shall have an opportunity to purchase his/her Company car at the Company determined price. If a lease expires prior to the completion of Compensation Continuance/Salary & Benefit Continuation, the current lease will be extended. However, effective on that date, the imputed income will be based on the then current FMV of the leased-Company car versus the original lease cost of the car. A new car or lease will not be provided during this period. However, in the event of an involuntary termination without cause during the two-year period beginning on a Change of Control, as defined by the Company, ownership of the Company car assigned to the executive immediately prior to such involuntary termination without cause shall be transferred to the executive within 15 business days from the end of the Compensation Continuance/Salary & Benefits Continuation period. At the time of such automobile transfer, the Company shall pay to the executive such amount in cash that, after payment of all applicable federal, state and local taxes thereon, computed at the maximum marginal rates, is equal to all such taxes, so computed imposed in connection with such transfer. 16 CORE PERQUISITES ---------------- EXECUTIVE MEDICAL/DENTAL The executive is reimbursed for any eligible medical and/or dental expenses which the executive or eligible dependents incur. There is no lifetime maximum eligible for medical and dental expenses. Eligible expenditures are medical and dental expenses, as covered by Section 213 of the Internal Revenue Code. TAX IMPLICATION The benefit is non-taxable. ENROLLMENT Executives will automatically be enrolled in Executive Medical and Dental Plan. The executive is not eligible to participate in the Health Care Spending Account. Executives should submit all medical and/or dental bills to the insurance carrier (see Contact List located in the Appendix). ELIGIBLE DEPENDENTS - - executive's spouse (including a legally separated but not a divorced spouse) and - - unmarried children, stepchildren, or legally adopted children who reside with the executive and rely on the executive for support and who are: - UNDER AGE 19 or - OVER AGE 18 BUT YOUNGER THAN AGE 25 and registered as FULL-TIME STUDENT in an accredited secondary school, college, university or school of nursing. COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION If an executive is placed on Compensation Continuance/Salary & Benefit Continuation, the executive may retain the Executive Medical and Dental benefit during such period, even if the executive becomes employed by a new employer. If the executive commences employment with another employer during Compensation Continuance/Salary & Benefit Continuation, the coordination of benefits provisions of the new employer's plan and the executive's medical and dental plan will determine which plan provides primary coverage and which is secondary. Benefits will be payable under the Executive Medical and Dental Plan only after expenses have been considered by the new employer's plan. 17 CORE PERQUISITES ---------------- BUSINESS TRAVEL ACCIDENT INSURANCE The amount of special Business Travel Accident Insurance in the event of death occurring while on Company business is equal to 2.5 TIMES CURRENT BASE SALARY UP TO A LIMIT OF $1.5 MILLION. This coverage is in addition to the basic coverage provided under the executive's Company-sponsored benefit program. TAX IMPLICATION This benefit is non-taxable. ENROLLMENT Executives will automatically be enrolled. BENEFICIARY This benefit will be paid to the beneficiary designated for SELECT Core Life Insurance. If an executive wishes to designate a different beneficiary for Business Travel Accident Insurance, a beneficiary form may be obtained from Executive Compensation (see Contract list located in the Appendix). COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION If the executive is placed on Compensation Continuance/Salary & Benefit Continuation, this coverage will no longer be applicable as it is contingent on death while on Company business. Generally, individuals will not be asked to travel on Company business during Compensation Continuance/Salary & Benefit Continuation. Activities in search of new employment are not considered to be "on Company business". If you have any questions, please contact Risk Management (see Contact List located in the Appendix). 18 ADDITIONAL FLEXIBLE PERQUISITE ------------------------------ COMPANY-SPONSORED INSURANCE There are three (3) Company-sponsored Insurance available for selection, as follows: - - Executive Life Insurance - - Executive Personal Auto Insurance - - Executive Excess Liability Insurance Enrollment will be effective January 1 of the Program year or on the date the executive specifies on the enrollment form, except for life insurance coverage. If an executive selects life insurance after January 1, evidence of insurability may be required by the insurance carrier. Upon enrollment, allowance representing the year's premium (full year or prorata) will be deducted from the executive's flexible perquisite allowance. An allowance adjustment will be made if the executive cancels such perquisite or if there is a change in the amount of coverage. Imputation of income will occur at year end. The amount imputed will equal the allowance used. 19 EXECUTIVE LIFE INSURANCE An executive may select Executive Life Insurance for two (2) times current base salary. The executive's coverage is a universal life insurance plan provided by Paragon Life Insurance Company up to a certain maximum and depending on certain underwriting requirements. ENROLLMENT/CANCELLATION INITIAL ENROLLMENT - Upon employment or promotion to a Job Level eligible for the Perquisite Program, the executive will receive a complete enrollment package from Paragon. The enrollment package describes the Paragon program in detail. ANNUAL RE-ENROLLMENT - Annually, executives with less than the maximum amount of Paragon Insurance will receive a form asking if they want to increase coverage or enroll in the Paragon program. If the executive does not want to make any changes, no action is required. If the executive does want a change, the form should be completed and sent to Executive Compensation. This is the annual opportunity to apply for or increase coverage. Executives can decrease coverage at any time. Upon enrollment, the allowance representing the year's premium will be deducted from the executive's flexible perquisite allowance. If there is a change in the executive's base salary during the Program year, the insurance coverage will change and an allowance adjustment will be effected. Policy coverage is determined on executive's date of birth. An allowance adjustment will be made at that time in the year. If the executive requests cancellation and/or decrease coverage of this insurance during the Program year, the executive must submit a Change Form to Executive Compensation who will forward to Paragon Life Insurance Company. An allowance adjustment will be effected the first of the month following notice of cancellation and/or decrease of coverage. The executive's income will be imputed at year end for the months coverage is in effect. A Service Request Form must be completed and mailed directly to Paragon Life Insurance for purposes of changing a beneficiary, address change notification, transfer of ownership, etc. 20 NOTE: IF AN EXECUTIVE, WHO HAS PREVIOUSLY ASSIGNED SUCH BENEFIT, HAS THE OPPORTUNITY TO CONTINUE OR CHANGE SUCH BENEFIT, IT IS THE ASSIGNEE WHO MUST MAKE THE CHOICE EVEN IF THE CHOICE IS "NO CHANGE." THE ASSIGNEE MUST EXECUTE THE ENROLLMENT/BENEFICIARY AND CANCELLATION FORMS IF SUCH INSURANCE HAS BEEN ASSIGNED. CALCULATION The monthly premium calculation is based on the executive's base salary times a salary factor of two (2) times the Internal Revenue Code (IRC) Section 79 Monthly Income Factor Table I Rate "X" per $1,000 of insurance (see appendix for Table I). A change in coverage may only occur on the first of the month. The age-related premium is based on when the executive's birth date falls during the year. Example: The executive's base salary on the January 1 enrollment date is $110,000 a year. The executive is 44 years old and will turn 45 and receives a salary increase to $130,000 on March 1. The following is an example of the Executive Life Insurance calculation:
IRC Monthly Monthly Period 1 Income Factor Premium Premium Table I (Age) $ Period Allowance Allowance ------------- - ------ --------- --------- PERIOD 1 $.17 $220,000 Jan 1-Feb 28 $37.40 74.80 PERIOD 2 $.29 $260,000 Mar 1-Dec 31 $75.40 $754.00
COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION If the executive is placed on Compensation Continuance/Salary & Benefit Continuation, the executive may retain the Executive Life Insurance benefit during such period. The Executive Life Insurance benefit calculation will be based on the executive's last base salary prior to the commencement of Compensation Continuance/Salary and Benefits Compensation. Since Paragon insurance is portable, the executive can maintain his/her Paragon policy after termination of employment. Paragon will bill the executive directly after termination. 21 TO DETERMINE WHAT, IF ANY, COVERAGE IS TERMINATED UNDER THIS PROGRAM BECAUSE OF COVERAGE BY A NEW EMPLOYER, THE TOTAL AMOUNT OF LIFE INSURANCE PROVIDED BY THE NEW EMPLOYER ON A NON-CONTRIBUTORY BASIS IS COMPARED TO THE AMOUNT PROVIDED UNDER THE EXECUTIVE LIFE INSURANCE PROGRAM. ANY DUPLICATE COVERAGE WILL OFFSET DOLLAR FOR DOLLAR THE COVERAGE UNDER THE FLEXIBLE PERQUISITE PROGRAM. SELECT CORE LIFE INSURANCE UNDER THE COMPANY-SPONSORED BENEFIT PROGRAM IS NOT INCLUDED IN THIS COMPARISON. ALTHOUGH IT IS NON-CONTRIBUTORY, IT WILL NOT BE CANCELED OR REDUCED DURING COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION. THE OFFSETS FOR LIFE INSURANCE WILL BE MADE ONCE WHEN THE EXECUTIVE COMMENCES EMPLOYMENT WITH A NEW EMPLOYER; NO ADJUSTMENTS WILL BE MADE FOR SALARY INCREASES IN THE NEW JOB. All enrollment and cancellation forms should be submitted directly to Executive Compensation (see Contact List located in the Appendix). 22 FLEXIBLE PERQUISITE ------------------- COMPANY-SPONSORED INSURANCE EXECUTIVE PERSONAL AUTO INSURANCE (Premium = $150 or $978 per vehicle annually) Executive Personal Auto Insurance provides eligible executives with Automobile Liability and Physical Damage insurance on his/her personal automobiles. This coverage applies to vehicle(s) registered in the executive's name, in an eligible dependent's name or held jointly with an eligible dependent. Vehicle(s) may be driven by the executive and/or their eligible dependents. ELIGIBLE DEPENDENTS - - executive's spouse (including a legally separated but not a divorced spouse) and - - unmarried children, stepchildren, or legally adopted children who reside with the executive and rely on the executive for support and who are: - UNDER AGE 19 or - OVER AGE 18 BUT YOUNGER THAN AGE 25 and registered as FULL-TIME STUDENT in an accredited secondary school, college, university or school of nursing. The Program provides a primary automobile liability insurance limit of $1,000,000 for Bodily Injury and Property Damage Liability. Additional coverage of up to $10,000,000 for Bodily Injury and Property Damage Liability is available under the Executive Excess Liability Insurance Program. Accordingly, a total limit of $11,000,000 bodily injury/property damage liability is available under the combined programs. The primary liability policy also includes: Medical Payments $ 10,000 Uninsured Motorist $250,000
The Physical Damage coverage includes Comprehensive (such as fire and theft) and Collision insurance. A comprehensive and/or collision deductible is $250 per occurrence. If an executive gives VERBAL approval to a licensed driver who is a TEMPORARY VISITOR for OCCASIONAL use (1 or 2 times per year) of such a car, auto insurance coverage will continue to be effective on such insured car. Additionally, any household employee, including a Nanny or Au pair, is covered under the Executive Personal Auto Insurance Program, however, they must have a U.S. driver's license. The Executive Personal Auto Insurance Program has a standard "business pursuits" clause which excludes coverage for any liability arising from business activity. Employment-related activity on behalf of the Company is covered under separate Company-maintained insurance coverages. Any non-Company related business activity should be covered by the executive under separate insurance placement. 23 ENROLLMENT/CANCELLATION To enroll, an Executive Personal Auto Insurance Application form should be completed and sent to Executive Compensation (see Contact List located in the Appendix). Enrollment will be effective January 1 or the date the executive specifies on the Application form. Upon enrollment, the allowance representing the year's premium (full year or prorata) will be deducted. Deductions will be based on the FMV cost of such insurance Program, as determined by Risk Management in concert with Executive Compensation. Each executive may enroll up to three (3) personal cars under the Executive Personal Auto Insurance at the Company cost of the benefit. Additional automobiles may be insured, however, at the FMV of such insurance program. If the executive requests cancellation of this insurance during the Program year, the executive must submit an Executive Personal Auto Insurance Cancellation form which provides written notification of cancellation to Executive Compensation. An allowance adjustment will be effected following Executive Compensation's receipt of such written notice of cancellation. If the executive RETIRES, the executive may remain in the Personal Auto Insurance Program for three (3) months from such date unless the executive was on Salary & Benefit Continuation immediately prior to retirement. However, if the three (3) months of insurance coverage extends into the next Program year, a check for the full-year premium or prorata amount will be requested, and the variance between the FMV and the actual cost will be reported for tax purposes as additional income. Risk Management should be contacted to obtain such coverage (see Contact List located in the Appendix). IMPUTED INCOME The Company designated Personal Auto Insurance cost (full or prorata) will be deducted from the perquisite allowance. The executive's income will be imputed based on the Personal Auto Insurance FMV of the benefit to the executive at year end. The variance will be prorated if the personal auto is not covered for a full year. COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION If the executive is placed on Compensation Continuance/Salary & Benefit Continuation, the executive may retain the Executive Personal Auto Insurance benefit during such period. To the extent coverage is provided by a new employer, such employer-provided coverage will be considered primary and the Company coverage as excess. Specific coverage determination may be obtained from Risk Management. Questions should be directed to Risk Management (see Contact List located in the Appendix). However, all enrollment and cancellation forms should be submitted directly to Executive Compensation (see Contact List located in the Appendix). 24 FLEXIBLE PERQUISITE ------------------- COMPANY-SPONSORED INSURANCE EXECUTIVE EXCESS LIABILITY INSURANCE (Premium = $225 per $1,000,000 coverage annually) Executive Excess Liability Insurance provides to each eligible executive Excess Liability Insurance coverage with a combined limit of $10,000,000 bodily injury and property damage liability for each occurrence/annual aggregate for personal and automobile liability. Eligible executives may purchase such insurance in increments of $1,000,000 up to a maximum limit of $10,000,000. This insurance provides coverage above a limit of $1,000,000 bodily injury and property damage for automobile liability on personal automobiles that are eligible for coverage under the Executive Personal Auto Insurance Program. The combined programs provide a maximum coverage limit of $11,000,000 bodily injury/property damage for automobile liability insurance. If an eligible executive does not elect Executive Automobile Insurance, the executive is still eligible for the $10,000,000 Excess Liability Insurance Coverage provided the EXECUTIVE MAINTAINS A MINIMUM LIMIT OF $1,000,000 UNDER THE EXECUTIVE'S OWN PRIMARY AUTO POLICY. Risk Management must be notified of such coverage on the enrollment form. Each eligible executive SHOULD MAINTAIN A LIMIT OF AT LEAST $500,000 PERSONAL LIABILITY (BODILY INJURY/PROPERTY DAMAGE) UNDER HIS/HER PERSONAL HOMEOWNER OR TENANT LIABILITY INSURANCE POLICY. Executives employing domestics should maintain Workers' Compensation with statutory limits and Employer's Liability Coverage of $500,000 either under his/her homeowner or separate workers' compensation policy. If the executive does not carry the $500,000 limit under an insurance policy, the executive will be responsible for the first $500,000 in the event of an accident. The Executive Excess Liability Insurance Program then provides an additional limit of $10,000,000 bodily injury/property damage for personal liability. Excess coverage is also provided within the $10,000,000 liability limit on pleasure-use watercraft, not more than 50 feet in length, subject to an underlying bodily injury and property damage liability insurance limit of $500,000 maintained by the covered executive. The Executive Excess Liability Insurance Program has a standard "business pursuits" clause which excludes coverage for any liability arising from business activity. Employment-related activity on behalf of the Company is covered under separate Company-maintained insurance coverages. Any non-Company related business activity should be covered by the executive under separate insurance placement. 25 Boats: No limits on number of boats. To be covered under Excess Liability insurance, the boat(s) must be covered under the executive's homeowner's policy or yacht insurance. Snowmobiles: No limit on the number of snowmobiles. However, they must be covered under homeowner's policy for at least the minimum personal liability limit of $500,000 (personal injury/property damage) in order to qualify for Excess Liability Insurance coverage. Motorcycles: Not covered. Airplanes: Not covered. Jet Skis: Not covered
ENROLLMENT/CANCELLATION To enroll, an Executive Excess Liability Insurance Enrollment form should be completed and sent to Executive Compensation (see Contact List located in the Appendix). Enrollment will be effective January 1 of the Program year or the date the executive specifies on the Enrollment form. Upon enrollment, the allowance representing the year's premium (full year or prorata) will be deducted. Deductions will be based on the FMV cost of such insurance program, as determined by Risk Management. The executive's income will be imputed at year end. If the executive requests cancellation of this insurance during the Program year, the executive must submit an Executive Excess Liability Insurance Cancellation form which provides written notification of cancellation to Executive Compensation. An allowance adjustment will be effected following Executive Compensation's receipt of such written notice of cancellation. If the executive RETIRES, the executive may remain in the Excess Liability Insurance Program for three (3) months from such date unless the executive was on Salary & Benefit Continuation prior to retirement. However, if the three (3) months of insurance coverage extends into the next Program year, a check for the full-year premium or prorata amount will be requested. Risk Management should be contacted to obtain such coverage (see Contact List located in the Appendix). 26 COMPENSATION CONTINUANCE/SALARY & BENEFIT CONTINUATION If the executive is placed on Compensation Continuance/Salary & Benefit Continuation, the executive may retain the Executive Excess Liability Insurance benefit during such period. To the extent coverage is provided by a new employer, such employer-provided coverage will be considered primary and the Company coverage as excess. Specific coverage determination will be obtained from Risk Management. Questions should be directed to Risk Management (see Contact List located in the Appendix). However, all enrollment and cancellation forms should be submitted directly to Executive Compensation (see Contact List located in the Appendix). 27 EX-12 14 EXHIBIT 12 EXHIBIT 12 NABISCO, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN MILLIONS)
THREE MONTHS ENDED MARCH 31, 2000 -------------- Earnings before fixed charges: Net income................................................ $ 60 Provision for income taxes................................ 39 ---- Income before income taxes................................ 99 Interest and debt expense................................. 70 Interest portion of rental expense........................ 8 ---- Earnings before fixed charges............................... $177 ==== Fixed charges: Interest and debt expense................................. $ 70 Interest portion of rental expense........................ 8 Capitalized interest...................................... 1 ---- Total fixed charges..................................... $ 79 ==== Ratio of earnings to fixed charges.......................... 2.2 ====
EX-27.1 15 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF NABISCO HOLDINGS CORP., WHICH WERE FILED WITH SEC FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000932130 NABISCO HOLDINGS CORP. 1,000,000 3-MOS DEC-31-2000 MAR-31-2000 94 0 553 0 964 1,793 3,057 0 11,578 1,589 4,094 0 0 3 3,942 11,578 2,069 2,069 1,146 1,146 55 0 70 99 39 60 0 0 0 60 .23 .22
EX-27.2 16 EXHIBIT 27.2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF NABISCO, INC. WHICH WERE FILED WITH SEC FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000069526 NABISCO, INC. 1,000,000 3-MOS DEC-31-2000 MAR-31-2000 94 0 553 0 964 1,793 3,057 0 11,578 1,546 4,094 0 0 0 3,988 11,578 2,069 2,069 1,146 1,146 55 0 70 99 39 60 0 0 0 60 0 0
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