-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rrQ52cPHvZfR3lyRTmEb5lbXSDy0hh9bPdYepnV7bb9GUTMoBB+egRK36Xd4CUQ3 dk4aapbz63STZHUhxNSk9Q== 0000950112-94-001804.txt : 19940705 0000950112-94-001804.hdr.sgml : 19940705 ACCESSION NUMBER: 0000950112-94-001804 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19940701 EFFECTIVENESS DATE: 19940720 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RJR NABISCO HOLDINGS CORP CENTRAL INDEX KEY: 0000847903 STANDARD INDUSTRIAL CLASSIFICATION: 2052 IRS NUMBER: 133490602 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 033-54393 FILM NUMBER: 94537524 BUSINESS ADDRESS: STREET 1: 1301 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019-6013 BUSINESS PHONE: 2122585600 MAIL ADDRESS: STREET 1: 1301 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019-6013 FORMER COMPANY: FORMER CONFORMED NAME: RJR HOLDINGS CORP DATE OF NAME CHANGE: 19891116 S-8 1 NABISCO BRANDS DE PUERTO RICO INC. Registration No. 33- =========================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________ Form S-8 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ____________________ RJR NABISCO HOLDINGS CORP. (Exact name of registrant as specified in its charter) Delaware 13-3490602 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1301 Avenue of the Americas New York, New York 10019 (Address, including zip code, of registrant's principal executive office) ____________________ NABISCO BRANDS DE PUERTO RICO, INC. CAPITAL ACCUMULATION PLAN (Full title of the plan) ____________________ Lawrence R. Ricciardi, Esq. RJR NABISCO HOLDINGS CORP. 1301 Avenue of the Americas New York, New York 10019 (212) 258-5600 (Name, address and telephone number, including area code, of agent for service) ____________________ Copies to: David J. Sorkin, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 ____________________ CALCULATION OF REGISTRATION FEE ================================================================================ Proposed Proposed Title of Maximum Maximum Securities to Amount to Offering Aggregate Amount of be Registered be Price Offering Registration Registered Per Price Fee(2) Share(1) - -------------------------------------------------------------------------------- Common Stock, par value $.01 per share ......... 15,000 shares $5.8125 $87,187.50 $100.00 ================================================================================ (1) Pursuant to Rule 457 under the Securities Act of 1933 the proposed maximum offering price per share relating to the Common Stock being registered has been based on the average of the high and low prices of the Common Stock reported on the New York Stock Exchange-Composite Tape on June 24, 1994. (2) The registration fee relating to the Common Stock being registered is the minimum fee pursuant to Section 6(b) of the Securities Act of 1933. In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this registration statement also covers an indeterminate amount of interests to be offered or sold pursuant to the employee benefit plan described herein. ================================================================================ 2 PART I Item 1. Plan Information Not required to be filed with this Registration Statement. Item 2. Registrant Information and Employee Plan Annual Information Not required to be filed with this Registration Statement. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference The following documents filed with the Securities and Exchange Commission (the "Commission") by RJR Nabisco Holdings Corp., a Delaware corporation ("Holdings"), and the Nabisco Brands de Puerto Rico, Inc. Capital Accumulation Plan (the "Plan") are incorporated as of their respective dates in this Registration Statement by reference: A. Holdings' Annual Report on Form 10-K for the year ended December 31, 1993. B. The Annual Report on Form 11-K of the Plan for the year ended December 30, 1993. C. All other reports filed by Holdings pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 since December 31, 1993. D. Description of Holdings' Common Stock contained in Holdings' Registration Statement on Form 8-A filed with the Commission on January 31, 1991. All documents filed by Holdings and the Plan pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold are deemed to be incorporated by reference in this Registration Statement and are a part hereof from the date of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. Item 4. Description of Securities Not applicable. Item 5. Interests of Named Experts and Counsel Certain legal matters in connection with any original issuance Common Stock offered hereby are being passed upon for Holdings by Simpson Thacher & Bartlett (a partnership which includes professional corporations), New York, New York. A member of Simpson Thacher & Bartlett owns shares of Common Stock which represent less than 0.1% of the currently outstanding shares of Common Stock. 3 Item 6. Indemnification of Directors and Officers Section 145 of the General Corporation Law of the State of Delaware (the "Delaware Law") empowers a Delaware corporation to indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests, and, for criminal proceedings, had no reasonable cause to believe his conduct was illegal. A Delaware corporation may indemnify officers and directors against expenses (including attorneys' fees) in connection with the defense or settlement of an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director actually and reasonably incurred. In accordance with the Delaware Law, the Certificate of Incorporation of Holdings contains a provision to limit the personal liability of the directors of Holdings for violations of their fiduciary duty. This provision eliminates each director's liability to Holdings or its stockholders for monetary damages except (i) for any breach of the director's duty of loyalty to Holdings or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware Law providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemption, or (iv) for any transaction from which a director derived an improper personal benefit. The effect of this provision is to eliminate the personal liability of directors for monetary damages for actions involving a breach of their fiduciary duty of care, including any such actions involving gross negligence. Article IV of the By-Laws of Holdings provides for indemnification of the officers and directors of Holdings to the full extent permitted by applicable law. Item 7. Exemption from Registration Claimed Not applicable. Item 8. Exhibits 4.1(a) Amended and Restated Certificate of Incorporation of RJR Nabisco Holdings Corp., filed October 1, 1990 (incorporated by reference to Exhibit 3.1 to Amendment No. 4, filed October 2, 1990, to the Registration Statement on Form S-4 of RJR Nabisco Holdings Corp., Registration No. 33-36070, filed July 25, 1990, as amended) 4.1(b) Certificate of Amendment to Amended and Restated Certificate of Incorporation of RJR Nabisco Holdings Corp., filed January 29, 1991 (incorporated by reference to Exhibit 3.1(a) to Amendment No. 3, filed January 31, 1991, to the Registration Statement on Form S-4 of RJR Nabisco Holdings Corp., filed December 14, 1990, Registration No. 33-38227) 4.1(c) Certificate of Designation of ESOP Convertible Preferred Stock, filed April 10, 1991 (incorporated by reference to Exhibit 3.1(b) to Amendment No. 2 filed on April 11, 1991, to the Registration Statement on Form S-1 of RJR Nabisco Holdings Corp., Registration No. 33-39532, filed on March 20, 1991). 4.1(d) Certificate of Designation of Series A Conversion Preferred Stock, filed November 7, 1991 (incorporated by reference to Exhibit 3.1(c) to Amendment No. 3, filed on November 1, 1991, to the Registration Statement on Form S-1 of RJR Nabisco Holdings Corp., Registration No. 33-43137, filed October 2, 1991). 4.1(e) Certificate of Amendment to Amended and Restated Certificate of Incorporation of RJR Nabisco Holdings Corp., filed December 16, 1991 (incorporated by reference to Exhibit 3.1(d) of the Annual Report on Form 10-K of RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group, Inc., RJR Nabisco Capital Corp. and RJR Nabisco, Inc. for the fiscal year ended December 31, 1991, File Nos. 1-10215, 1-10214, 1-10248 and 1-6388). 4.1(f) Certificate of Amendment to the Amended and Restated Certificate of Incorporation of RJR Nabisco Holdings Corp. (relating to the authorization of the issuance of additional shares of Common Stock) filed April 6, 1993 (incorporated by reference to Exhibit 3.3 of the Quarterly Report on Form 10-Q of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the fiscal quarter ended March 31, 1993, filed April 30, 1993). 4.1(g) Certificate of Designation of Series B Cumulative Preferred Stock, filed August 16, 1993 (incorporated by reference to Exhibit 3.1(g) of the Annual Report on Form 10-K of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the fiscal year ended December 31, 1993, File Nos. 1- 10215 and 1-6388 (the "1993 Form 10-K"). 4.1(h) Certificate of Designation of Series C Conversion Preferred Stock, filed May 6, 1994. 4.2 Amended and Restated By-laws of RJR Nabisco Holdings Corp., as amended, effective January 20, 1994 (incorporated by reference to Exhibit 3.2 to the 1993 Form 10-K). 4.3 Nabisco Brands de Puerto Rico, Inc. Capital Accumulation Plan. 4.4 RJR Nabisco Puerto Rico Defined Contribution Master Trust Agreement, as amended and restated July 12, 1993, between RJR Nabisco, Inc. and Banco Popular de Puerto Rico. 5 Opinion of Simpson Thacher & Bartlett regarding the legality of any original issuance securities being registered. 23.1 Consent of Deloitte & Touche. 23.2 Consent of Simpson Thacher & Bartlett (included in Exhibit 5). 24 Power of Attorney. 4 Item 9. Undertakings (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information set forth in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply to information contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post- effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and each filing of the Plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) The undersigned registrant hereby undertakes to submit the Plan and any amendment thereto to the Internal Revenue Service (the "IRS") in a timely manner and will make all changes required by the IRS in order to qualify the Plan under Section 401 of the Internal Revenue Code. 5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on this 1st day of July, 1994. RJR NABISCO HOLDINGS CORP. By: Lawrence R. Ricciardi ----------------------------- Lawrence R. Ricciardi Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities on July 1, 1994. Signature Title --------- ----- * Chairman of the Board ------------------- and Chief Executive Officer Charles M. Harper (principal executive officer) and Director * Executive Vice President and ------------------- Chief Financial Officer Stephen R. Wilson (principal financial officer) * Senior Vice President and Controller ----------------- (principal accounting officer) Robert S. Roath 6 * Director ----------------------- John T. Chain, Jr. * Director ----------------------- John L. Clendenin * Director ----------------------- James H. Greene, Jr. * Director ----------------------- H. John Greeniaus * Director ----------------------- James W. Johnston * Director ----------------------- Henry R. Kravis * Director ----------------------- John G. Medlin, Jr. * Director ----------------------- Paul E. Raether * Director ----------------------- Lawrence R. Ricciardi * Director ----------------------- Rozanne L. Ridgway * Director ----------------------- Clifton S. Robbins * Director ----------------------- George R. Roberts * Director ----------------------- Scott M. Stuart * Director ----------------------- Michael T. Tokarz *By: Jo-Ann Ford ----------------- Jo-Ann Ford Attorney-in-Fact 7 Pursuant to the requirements of the Securities Act of 1933, the trustees (or other persons who administer the employee benefit plan) have duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 1st day of July 1994. NABISCO BRANDS DE PUERTO RICO, INC. CAPITAL ACCUMULATION PLAN H. Colin McBride ------------------------------------ H. Colin McBride Secretary, RJR Employee Benefits Committee 8 INDEX TO EXHIBITS ----------------- Exhibit Sequentially Number Description of Exhibit Numbered Page ------- ---------------------- ------------- 4.1(a) - Amended and Restated Certificate of Incorporation of RJR Nabisco Holdings Corp., filed October 1, 1990 (incorporated by reference to Exhibit 3.1 to Amendment No. 4, filed October 2, 1990, to the Registration Statement on Form S- 4 of RJR Nabisco Holdings Corp., Registration No. 33-36070, filed July 25, 1990, as amended) 4.1(b) - Certificate of Amendment to Amended and Restated Certificate of Incorporation of RJR Nabisco Holdings Corp., filed January 29, 1991 (incorporated by reference to Exhibit 3.1(a) to Amendment No. 3, filed January 31, 1991, to the Registration Statement on Form S-4 of RJR Nabisco Holdings Corp., filed December 14, 1990, Registration No. 33-38227) 4.1(c) - Certificate of Designation of ESOP Convertible Preferred Stock, filed April 10, 1991 (incorporated by reference to Exhibit 3.1(b) to Amendment No. 2 filed on April 11, 1991, to the Registration Statement on Form S-1 of RJR Nabisco Holdings Corp., Registration No. 33-39532, filed on March 20, 1991). 4.1(d) - Certificate of Designation of Series A Conversion Preferred Stock, filed November 7, 1991 (incorporated by reference to Exhibit 3.1(c) to Amendment No. 3, filed on November 1, 1991, to the Registration Statement on Form S-1 of RJR Nabisco Holdings Corp., Registration No. 33-43137, filed October 2, 1991). 4.1(e) - Certificate of Amendment to Amended and Restated Certificate of Incorporation of RJR Nabisco Holdings Corp., filed December 16, 1991 (incorporated by reference to Exhibit 3.1(d) of the Annual Report on Form 10-K of RJR Nabisco Holdings Corp., RJR Nabisco Holdings Group, Inc., RJR Nabisco Capital Corp. and RJR Nabisco, Inc. for the fiscal year ended December 31, 1991, File Nos. 1-10215, 1-10214, 1-10248 and 1-6388). 4.1(f) - Certificate of Amendment to the Amended and Restated Certificate of Incorporation of RJR Nabisco Holdings Corp. (relating to the authorization of the issuance of additional shares of Common Stock) filed April 6, 1993 (incorporated by reference to Exhibit 3.3 of the Quarterly Report on Form 10-Q of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the fiscal quarter ended March 31, 1993, filed April 30, 1993). 9 Exhibit Sequentially Number Description of Exhibit Numbered Page ------- ---------------------- ------------- 4.1(g) - Certificate of Designation of Series B Cumulative Preferred Stock, filed August 16, 1993 (incorporated by reference to Exhibit 3.1(g) of the Annual Report on Form 10-K of RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. for the fiscal year ended December 31, 1993, File Nos. 1- 10215 and 1-6388 (the "1993 Form 10-K"). 4.1(h) - Certificate of Designation of Series C Conversion Preferred Stock, filed May 6, 1994. 4.2 - Amended and Restated By-laws of RJR Nabisco Holdings Corp., as amended, effective January 20, 1994 (incorporated by reference to Exhibit 3.2 to the 1993 Form 10-K). 4.3 - Nabisco Brands de Puerto Rico, Inc. Capital Accumulation Plan. 4.4 - RJR Nabisco Puerto Rico Defined Contribution Master Trust Agreement, as amended and restated July 12, 1993, between RJR Nabisco, Inc. and Banco Popular de Puerto Rico. 5 - Opinion of Simpson Thacher & Bartlett regarding the legality of any original issuance securities begin registered. 23.1 - Consent of Deloitte & Touche. 23.2 - Consent of Simpson Thacher & Bartlett (included in Exhibit 5). 24 - Power of Attorney. EX-4.1(H) 2 RJR NABISCO HOLDINGS CORP. CERTIFICATE OF DESIGNATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- SERIES C CONVERSION PREFERRED STOCK RJR Nabisco Holdings Corp. (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware, HEREBY CERTIFIES that pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware the following resolution was duly adopted by the Executive Committee of the Board of Directors of the Corporation, pursuant to authority conferred upon the Board of Directors by the provisions of the Amended and Restated Certificate of Incorporation, as amended, of the Corporation (the "Certificate of Incorporation") and pursuant to authority conferred upon the Executive Committee of the Board of Directors by Section 141(c) of the General Corporation Law of the State of Delaware, by the Certificate of Incorporation, by Article II, Section 4 of the By- Laws of the Corporation and by the resolutions of the Board of Directors of the Corporation dated February 23, 1994 and May 4, 1994, at a meeting of the Executive Committee thereof duly held on April 28, 1994. WHEREAS, the Board of Directors of the Corporation or (except with respect to voting rights) a duly authorized Committee thereof is authorized, within the limitations and restrictions stated in the Certificate of Incorporation, to fix, by resolution or resolutions for each series of Preferred Stock (the "Preferred Stock"), the number of shares constituting such series and the designations and powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limiting the generality of the foregoing, such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors or a duly authorized Committee thereof under the General Corporation Law of the State of Delaware; and WHEREAS, the Board of Directors of the Corporation on February 23, 1994 and May 4, 1994 adopted resolutions authorizing 2 a new series of Preferred Stock designated as Series C Conversion Preferred Stock and delegating to the Executive Committee of the Board of Directors the authority to act on behalf of the Board of Directors in connection with the exercise of the powers set forth in such resolutions to the fullest extent permitted by Section 141(c) of the General Corporation Law of the State of Delaware; and WHEREAS, it is the desire of the Executive Committee of the Board of Directors, pursuant to the authority conferred upon the Executive Committee of the Board of Directors by Section 141(c) of the General Corporation Law of the State of Delaware, by the Certificate of Incorporation, by Article II, Section 4 of the By-Laws of the Corporation and by the resolution of the Board of Directors of the Corporation dated February 23, 1994, to fix the number of shares constituting a series of Preferred Stock and the designations and powers, preferences and relative, participating, optional and other special rights and qualifications, limitations and restrictions of such series as set forth below; and WHEREAS, the Board of Directors of the Corporation on February 23, 1994 and May 4, 1994 adopted a resolution fixing the voting rights of such shares of Preferred Stock as set forth in paragraph (6) below. NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such series of Preferred Stock on the terms and with the provisions herein set forth: (1) Designation. The designation of the series of Preferred Stock authorized by this resolution shall be "Series C Conversion Preferred Stock" (the "Series C Preferred Stock") consisting of 26,675,000 shares. (2) Rank. The Series C Preferred Stock shall, with respect to dividend rights and rights upon liquidation, dissolution and winding up, rank prior to the Common Stock, par value $0.01 per share (the "Common Stock"), of the Corporation and on a parity with the Series A Conversion Preferred Stock, par value $0.01 per share (the "Series A Conversion Preferred Stock"), the Series B Cumulative Preferred Stock, par value $0.01 per share (the "Series B Cumulative Preferred Stock"), and the ESOP Convertible Preferred Stock, par value $0.01 per share and stated value $16.00 per share (the "ESOP Convertible Preferred Stock"), of the Corporation. All equity securities of the Corporation to which the Series C Preferred Stock ranks prior, including the Common Stock, are collectively referred to herein as the "Junior Securities," all equity securities of the Corporation with which the Series C Preferred Stock ranks on a parity, including the Series A Conversion Preferred Stock, the Series B Cumulative Preferred Stock and the ESOP Convertible Preferred Stock, are collectively referred to herein as the "Parity Securities" and all equity securities of the Corporation 3 (other than convertible debt securities) to which the Series C Preferred Stock ranks junior, whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise, are collectively referred to herein as the "Senior Securities." The Series C Preferred Stock shall be subject to the creation of Junior Securities, Parity Securities and Senior Securities. (3) Dividends. (a) The holders of outstanding shares of the Series C Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferential cash dividends accruing at the per share rate of $1.503 per quarter and no more, payable in arrears on each February 15, May 15, August 15 and November 15, respectively (each such date being hereinafter referred to as a "Dividend Payment Date"), commencing on August 15, 1994. If any Dividend Payment Date shall be or be declared a national or New York State holiday or if banking institutions in the State of New York shall be closed because of a banking moratorium or otherwise on such date, then such dividends shall be paid on the next succeeding day on which such banks shall be open. Each such dividend will be payable to holders of record as they appear on the stock books of the Corporation on such record dates, not less than 10 nor more than 50 days preceding the payment dates thereof, as shall be fixed by the Board of Directors. Dividends on the Series C Preferred Stock shall accrue (whether or not declared) on a daily basis from the previous Dividend Payment Date, except that the first dividend shall accrue from the date of issuance of the Series C Preferred Stock. Accrued and unpaid dividends shall not bear interest. Dividends will cease to accrue in respect of the Series C Preferred Stock on the Mandatory Conversion Date (as defined in paragraph (4)(a)) or on the date of their earlier redemption or conversion, unless the Corporation shall default in delivering the shares of Common Stock or other kind of security or other property and cash, if any, payable by the Corporation upon such redemption or conversion pursuant to paragraph (4). Dividends (or cash amounts equal to accrued and unpaid dividends) payable on the Series C Preferred Stock for any period shorter than a quarterly dividend period shall be computed on the basis of a 360-day year of twelve 30-day months. (b) No full dividends shall be declared by the Board of Directors or paid or set apart for payment by the Corporation on any Parity Securities for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum set apart sufficient for such payment on the Series C Preferred Stock through the most recent Dividend Payment Date. If any dividends are not paid or set apart in full, as aforesaid, upon the shares of the Series C Preferred Stock and any Parity Securities, all dividends declared upon the Series C Preferred Stock and any Parity Securities shall be declared pro rata so that the amount of dividends declared per share on the Series C Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accrued dividends 4 per share on the Series C Preferred Stock and such Parity Securities bear to each other. Unless full cumulative dividends, if any, accrued on all outstanding shares of the Series C Preferred Stock have been or contemporaneously are declared and paid or declared and a sum set apart sufficient for such payment through the most recent Dividend Payment Date, no dividend shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other Junior Securities (other than a dividend or distribution paid in shares of, or warrants, rights or options exercisable for or convertible into, Common Stock or any other Junior Securities), nor shall any Common Stock nor any other Junior Securities be redeemed, purchased or otherwise acquired for any consideration, nor may any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such securities, by the Corporation (other than redemptions and purchases pursuant to or in accordance with employee stock subscription agreements entered into between the Corporation and its subsidiaries' directors, officers and key employees), except by conversion into or exchange for Junior Securities. Except as provided in paragraph 4(d), holders of the shares of the Series C Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends as provided in paragraph 3(a). (c) Subject to the foregoing provisions of this paragraph (3) and paragraph (4)(d), the Board of Directors may declare and the Corporation may pay or set apart for payment dividends and other distributions on any of the Junior Securities or Parity Securities, and may redeem, purchase or otherwise acquire out of funds legally available therefor any Junior Securities, and the holders of the shares of the Series C Preferred Stock shall not be entitled to share therein. (d) Any dividend payment made on shares of the Series C Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to shares of the Series C Preferred Stock. (e) All dividends paid with respect to shares of the Series C Preferred Stock pursuant to this paragraph (3) shall be paid pro rata to the holders entitled thereto. (f) Holders of shares of the Series C Preferred Stock shall be entitled to receive the dividends provided for in this paragraph (3) in preference to and in priority over any dividends upon any of the Junior Securities. (4) Redemptions or Conversions. (a) Conversion on ------------- Mandatory Conversion Date. Unless earlier called for redemption ------------------------- in accordance with the provisions hereof, on May 15, 1997 (the "Mandatory Conversion Date"), each outstanding share of the Series C Preferred Stock shall convert into: 5 (i) subject to paragraph (4)(b)(vii) and (4)(d)(vi), shares of Common Stock at the Common Equivalent Rate (determined as provided in this paragraph (4)) in effect on the Mandatory Conversion Date; and (ii) the right to receive an amount in cash equal to all accrued and unpaid dividends on such share of Series C Preferred Stock to and including the Mandatory Conversion Date, whether or not declared, out of funds legally available for the payment of dividends (and dividends shall cease to accrue on such share as of the Mandatory Conversion Date). Subject to paragraphs 4(b)(i)(D), 4(b)(vii) and 4(d)(vi), the Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its issued Common Stock held in its treasury or both, for the purpose of effecting conversion of the Series C Preferred Stock pursuant to this paragraph 4(a), the full number of shares of Common Stock then deliverable upon such conversion of all outstanding shares of Series C Preferred Stock. (b) Conversion Upon the Occurrence of Certain Events. ------------------------------------------------ (i) If there shall occur a merger or consolidation of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) (other than a merger or consolidation of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) with or into a wholly owned subsidiary of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity)) that results in the conversion or exchange of Common Stock into, or the right to receive, other securities or other property (whether of the Corporation or any other entity) ("Merger Consideration") (any such merger or consolidation is referred to herein as a "Merger or Consolidation"), then (subject to the following provisions of this paragraph (4)(b) and paragraph 4(c)), each outstanding share of the Series C Preferred Stock shall, at the option of the Corporation: (A) (x) immediately prior to the Merger or Consolidation, convert into, subject to paragraphs (4)(b)(vii) and (4)(d)(vi), shares of Common Stock at the Common Equivalent Rate in effect immediately prior to such Merger or Consolidation; plus (y) the right to receive an amount in cash equal to all accrued and unpaid dividends on such share of the Series C Preferred Stock to and including the Settlement Date (as defined in paragraph 4(i)(v)), whether or not declared, out of funds legally available therefor (and dividends shall cease to accrue on such share as of the Settlement Date); plus 6 (z) the right to receive an amount of cash initially equal to $18.036, declining by $.01656 on each day following the date of issuance of the Series C Preferred Stock (computed on the basis of a 360-day year of twelve 30-day months) to $.996 on March 15, 1997, and equal to zero thereafter, in each case determined with reference to the Settlement Date, out of funds legally available therefor; provided, that if the Call Price (as defined in paragraph -------- (4)(i)(ii)) on the Settlement Date is less than the sum of (I) the product of (1) the Current Market Price (as defined in paragraph (4)(d)(viii)) of a share of Common Stock on the Settlement Date (which Current Market Price shall be appropriately adjusted for the purposes of this proviso if the Corporation has made any antidilution adjustment to the Common Equivalent Rate pursuant to paragraph 4(d) with respect to an event which has not occurred as of such Settlement Date) and (2) the number of shares of Common Stock issuable upon conversion of a share of Series C Preferred Stock pursuant to clause 4(b)(i)(A)(x) above, and (II) the amount of cash to be received with respect to an outstanding share of Series C Preferred Stock pursuant to clause 4(b)(i)(A)(z) above, then the number of shares of Common Stock issuable pursuant to clause 4(b)(i)(A)(x) above shall be reduced so that the sum referred to above in this proviso equals the Call Price on the Settlement Date, and provided, further, that the Corporation (or following the -------- ------- application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) may, at its option, deliver on the Settlement Date, in lieu of some or all of the cash consideration described in clauses 4(b)(i)(A)(y) and (z) above, a number of shares of Common Stock (subject to paragraphs 4(b)(vii) and 4(d)(vi)) to be determined by dividing the amount of cash consideration that the Corporation has elected to pay in Common Stock by the Current Market Price of the Common Stock determined as of the Settlement Date (which Current Market Price shall be appropriately adjusted, if necessary, for the purposes of this proviso if (I) the Corporation has made any antidilution adjustment to the Common Equivalent Rate pursuant to paragraph 4(d) with respect to an event which has not occurred as of such Settlement Date or (II) the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) has distributed cash or other property pursuant to clause (2) of paragraph 4(d)(iii), shares or other units of securities or assets pursuant to clause (2) of paragraph 4(d)(iv) or shares of capital stock of the Spinoff Corporation (as defined in paragraph 4(d)(v)) pursuant to clause (2) of paragraph 4(d)(v)). Notwithstanding the foregoing terms of this paragraph 4(b)(i)(A), if there shall have occurred an adjustment pursuant to paragraph (4)(d)(vi) as a result of a conversion or exchange or merger or consolidation referred 7 to in such paragraph prior to the Settlement Date, then with respect to the exercise of any such option referred to in this paragraph 4(b)(i)(A) (including the exercise of the option referred to in the foregoing proviso by the Corporation (or its successor)), the Corporation shall deliver out of funds legally available therefor on such Settlement Date, in lieu of shares of Common Stock as described in this paragraph 4(b)(i)(A), the kind of securities or other property received by holders of Common Stock as a result of such conversion or exchange or merger or consolidation, in the same relative proportions (if more than one kind of securities or other property was so received) as exist in the Common Equivalent Rate on such Settlement Date, with an aggregate market price (determined for any security or other property, to the extent possible, in the manner that the Current Market Price is determined for the Common Stock, and otherwise determined by the Board of Directors of the Corporation (or its successor), whose determination shall be conclusive), as of such Settlement Date, equal to the amount of cash consideration that the Corporation has elected to pay in such securities or other property (the option set forth in this paragraph 4(b)(i)(A) being hereinafter referred to as the "Common Conversion Option"); or (B) be converted into the right to receive (at the time such Merger Consideration is distributed to holders of shares of Common Stock) in such Merger or Consolidation (subject to provision being made therefor in an applicable agreement with respect to such Merger or Consolidation) in exchange for such share of Series C Preferred Stock one share or other unit of a security (whether debt or equity or any depositary receipt representing such a security) (the "Issuing Entity Preferred Stock") of the Issuing Entity (as defined in paragraph 4(b)(ii)) having terms substantially equivalent to the Series C Preferred Stock (except that upon call or conversion such Issuing Entity Preferred Stock shall convert into Issuing Entity Common Equity (as defined in paragraph 4(b)(ii)) (the option set forth in this paragraph 4(b)(i)(B) being hereinafter referred to as the "Issuing Entity Preferred Stock Conversion Option"); or (C) be converted into the right to receive (at the time such Merger Consideration is distributed to holders of Common Stock) in such Merger or Consolidation (subject to provision being made therefor in an applicable agreement with respect to such Merger or Consolidation) in exchange for such share of Series C Preferred Stock one share of a new series of Preferred Stock of the Corporation (or depositary receipts representing such Preferred Stock) ("New Preferred Stock") having terms substantially equivalent to the Series C Preferred Stock, except that (A) upon call or conversion such New Preferred Stock shall be exchanged (either against the Corporation or the Issuing Entity as 8 provided in the agreement with respect to such Merger or Consolidation) into Issuing Entity Common Equity, out of funds legally available therefor, and (B) such New Preferred Stock need not provide holders thereof with the right to vote on all matters submitted to a vote of holders of Common Stock as provided in paragraph 6(b) (the option set forth in this paragraph 4(b)(i)(C) being hereinafter referred to as the "Corporation Preferred Stock Conversion Option"); or (D) remain outstanding after such Merger or Consolidation, but only if the agreement with respect to such Merger or Consolidation requires that following the effective time of the Merger or Consolidation (a) upon call or conversation of the Series C Preferred Stock, in lieu of the Corporation delivering, out of funds legally available therefor, shares of its Common Stock, the Issuing Entity shall be obligated to deliver, out of legally available funds, Issuing Entity Common Equity directly to holders of the Series C Preferred Stock, (b) the Issuing Entity shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Issuing Entity Common Equity and its issued common equity held in its treasury, for the purpose of effecting any conversion of the Series C Preferred Stock, the full number of shares or other units of common equity deliverable upon any such call or conversion of all outstanding shares of Series C Preferred Stock, (c) the Issuing Entity shall have the right to call the Series C Preferred Stock and to cause the exchange of the Series C Preferred Stock for its Issuing Entity Common Equity upon such call and (d) the Corporation shall relinquish the right to call the Series C Preferred Stock and its obligations upon conversion of the Series C Preferred Stock. In such event, from and after such effective time, (x) holders of shares of Series C Preferred Stock will no longer have any right to receive any consideration from the Corporation upon call or conversion of the Series C Preferred Stock and (y) all references in this paragraph (4) and in paragraphs (6)(d), (e) and (f) to Common Stock shall thereafter mean Issuing Entity Common Equity and (z) the Corporation may, without a vote of the holders of Series C Preferred Stock, amend this Certificate of Designation to make any incidental and conforming modifications to reflect the provisions contained in this paragraph 4(b)(i)(D) (the option set forth in this paragraph 4(b)(i)(D) being hereinafter referred to as the "Existing Preferred Stock Option"). Whether the Issuing Entity Preferred Stock or the New Preferred Stock has terms substantially equivalent to the Series C Preferred Stock will be determined by the Board of Directors of the Corporation (or its successor), whose determination shall be conclusive; provided that if the Corporation elects the Issuing -------- Entity Preferred Stock Conversion Option and the Issuing Entity is not a corporation or other entity organized under the laws of 9 the United States or any State thereof or the District of Columbia (a "non-U.S. entity"), the Issuing Entity Preferred Stock may be considered substantially equivalent to the Series C Preferred Stock notwithstanding that, among other things, (i) a holder of Issuing Entity Preferred Stock is not entitled to the dividends received deduction under Section 243 or Section 245 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) the tax treatment of a holder of Issuing Entity Preferred Stock differs from the tax treatment of a holder of Series C Preferred Stock, including by reason of a future change in U.S. law, (iii) the Issuing Entity Preferred Stock does not provide voting rights to the holders thereof to the same extent as the Series C Preferred Stock, so long as the Issuing Entity Preferred Stock provides voting rights to the fullest extent permitted by the law applicable to such securities, (iv) the Issuing Entity Preferred Stock does not provide that any or all cash payments will be made in U.S. dollars so long as such payments may not be made in U.S. dollars under applicable law, provided that the amount of -------- currency other than U.S. dollars (the "Foreign Currency") payable on any given date is adjusted (by reference to the noon U.S. dollar buying rate for the Foreign Currency for cable transfers quoted in the City of New York on the business day next preceding such payment, as certified for customs purposes by the Federal Reserve Bank of New York) to equal the number of U.S. dollars which would have been payable on such date if payment had been permitted to be made in U.S. dollars, (v) the Issuing Entity is prohibited by its certificate of incorporation or by-laws (or equivalent constituent documents) or by the laws of the jurisdiction of its establishment from issuing Issuing Entity Preferred Stock that automatically converts into Issuing Entity Common Equity (or, upon the distribution of the capital stock of the Spinoff Corporation (as defined in paragraph 4(d)(v)), into Spinoff Corporation Preferred Stock (as defined in paragraph 4(d)(v)), so long as the terms of such Issuing Entity Preferred Stock (or other agreements relating thereto) provide for conversion into Issuing Entity Common Equity (or, upon the distribution of the capital stock of the Spinoff Corporation, into Spinoff Corporation Preferred Stock) not later than the same date as such automatic conversion would have occurred and in a manner which gives a holder thereof substantially the same rights as if such Issuing Entity Preferred Stock had automatically converted or (vi) the Issuing Entity is prohibited by its certificate of incorporation or by-laws (or equivalent constituent documents) or by the laws of the jurisdiction of its establishment from issuing such Issuing Entity Preferred Stock with a liquidation preference subject to adjustment as set forth in paragraph 5 hereof. The Corporation will not elect the Issuing Entity Preferred Stock Conversion Option if the Issuing Entity is a non-U.S. entity, unless provision is made in the Issuing Entity Preferred Stock to gross up the amount paid to U.S. persons (as defined in paragraph 4(i)(ix)) in respect of any then existing or future tax, assessment or governmental charge imposed by the laws of the jurisdiction in which the Issuing Entity is established or organized or any political subdivision 10 or taxing authority thereof or therein with respect to, and withheld on the making of, such payment; provided, however, that -------- ------- no gross up shall be required (a) if such holder is liable for such tax, assessment or governmental charge in respect of the Series C Preferred Stock by reason of such holder's having some connection with the jurisdiction in which the Issuing Entity is established or organized other than being a holder of such Series C Preferred Stock or (b) if the Corporation has notified such holder of the obligation to withhold taxes and requested but not received from such holder the appropriate documentation or certification in support of any claim for exemption and such withholding or deduction would not have been required had such documentation or certification been received. The Corporation's right to elect the Corporation Preferred Stock Conversion Option and the Existing Preferred Stock Option is subject to the conditions that (1) the Corporation shall survive as a subsidiary of the Issuing Entity and (2) the Issuing Entity shall have common equity which is publicly traded immediately after the effectiveness of the Merger or Consolidation (provided that the Issuing Entity Common Equity -------- need not be publicly traded in the United States). (ii) Notwithstanding the Corporation's election of the Issuing Entity Preferred Stock Conversion Option, the Corporation Preferred Stock Conversion Option or the Existing Preferred Stock Option, if the Merger Consideration (excluding consideration in connection with fractional shares or the exercise of appraisal rights) consists of both common equity (or any depository receipts representing such common equity) of the entity issuing such Merger Consideration (which could be a U.S. or non-U.S. entity) (the "Issuing Entity") in the Merger or Consolidation ("Issuing Entity Common Equity") and property which is not Issuing Entity Common Equity ("Non-Common Equity Merger Consideration"), then, in addition to having the rights arising out of the Corporation's election of one of the foregoing Options, such holder shall be entitled to receive, at the time such Merger Consideration is distributed to holders of Common Stock, an amount of Non-Common Equity Merger Consideration equal to the amount of Non-Common Equity Merger Consideration that such holder would have been entitled to receive in the Merger or Consolidation had (A) such holder's Series C Preferred Stock been converted into shares of Common Stock at the Common Equivalent Rate in effect immediately prior to the Merger or Consolidation and (B) such shares of Common Stock been exchanged in the Merger or Consolidation for the amount of Merger Consideration which would have given a holder the maximum possible number of shares of Issuing Entity Common Equity pursuant to the agreement applicable to such Merger or Consolidation with respect to a share of Common Stock; provided that if the Call Price on the -------- Settlement Date is less than the fair value of such Non-Common Equity Merger Consideration per share of Series C Preferred Stock (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) as of the Settlement 11 Date (the "Non-Common Equity Fair Value"), then the amount of Non-Common Equity Merger Consideration that a holder of Series C Preferred Stock shall be entitled to receive with respect to each share of Series C Preferred Stock will be reduced so that the Non-Common Equity Fair Value thereof equals the Call Price on the Settlement Date. If the Merger Consideration consists solely of Non-Common Equity Merger Consideration, the Corporation must elect the Common Conversion Option. (iii) If the Corporation elects the Issuing Entity Preferred Stock Conversion Option or the Corporation Preferred Stock Conversion Option, the initial common equivalent rate on the Issuing Entity Preferred Stock or the New Preferred Stock, as the case may be, shall be equal to the Common Equivalent Rate on the Series C Preferred Stock in effect immediately prior to the Merger or Consolidation adjusted to reflect the ratio by which one share of Common Stock is exchanged for shares of Issuing Entity Common Equity in the Merger or Consolidation, and if the Corporation elects the Existing Preferred Stock Option, the Common Equivalent Rate on the Series C Preferred Stock immediately following the Merger or Consolidation shall be equal to the Common Equivalent Rate on the Series C Preferred Stock in effect immediately prior to the Merger or Consolidation adjusted to reflect the ratio by which one share of Common Stock is exchanged for shares of Issuing Entity Common Equity in the Merger or Consolidation. (iv) If the Corporation fails to make the election set forth in paragraph 4(b)(i) prior to the date of effectiveness of the Merger or Consolidation, then the Corporation shall be deemed to have elected the Common Conversion Option. (v) Notwithstanding the foregoing provisions of this paragraph 4(b), if the Corporation elects any of the options set forth in paragraph 4(b)(i)(B), (C) or (D) each holder of a share of Series C Preferred Stock will have the right (the "Holder Opt- Out Right") to elect that, in lieu of such holder's shares of Series C Preferred Stock being subject to the Issuing Entity Preferred Stock Conversion Option, the Corporation Preferred Stock Conversion Option or the Existing Preferred Stock Option, as the case may be, each share of Series C Preferred Stock held by such holder will convert, in whole (but not in part), immediately prior to the effectiveness of the Merger or Consolidation into (A) subject to paragraphs (4)(b)(vii) and (4)(d)(vi), shares of Common Stock at the Common Equivalent Rate in effect immediately prior to such Merger or Consolidation (provided that if the Call Price on the Settlement Date is less -------- than the product of (x) the Current Market Price of a share of Common Stock on the Settlement Date (which Current Market Price shall be appropriately adjusted for the purposes of this proviso if the Corporation has made any antidilution adjustment to the Common Equivalent Rate pursuant to paragraph 4(d) with respect to an event which has not occurred as of such Settlement Date) and (y) the number of shares of Common Stock issuable upon conversion 12 of a share of Series C Preferred Stock pursuant to the Holder Opt-Out Right, then the number of shares of Common Stock issuable pursuant to the Holder Opt-Out Right shall be reduced so that product referred to above equals the Call Price on the Settlement Date), plus (B) the right to receive an amount in cash equal to all accrued and unpaid dividends on the Series C Preferred Stock to and including the Settlement Date, whether or not declared, out of funds legally available for the payment of dividends (and dividends shall cease to accrue on such share as of the Settlement Date); provided that the Corporation (or following the -------- application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) may, at its option, deliver on the Settlement Date, in lieu of some or all of the cash consideration described in clause (B), a number of shares of Common Stock (subject to paragraphs 4(b)(vii) and 4(d)(vi)) to be determined by dividing the amount of cash consideration that the Corporation has elected to pay in Common Stock by the Current Market Price of the Common Stock determined as of the Settlement Date (which Current Market Price shall be appropriately adjusted, if necessary, for the purposes of this proviso if (x) the Corporation has made any antidilution adjustment to the Common Equivalent Rate pursuant to paragraph 4(d) with respect to an event which has not occurred as of such Settlement Date or (y) the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) has distributed cash or other property pursuant to clause (2) of paragraph 4(d)(iii) or shares or other units of securities or assets pursuant to clause (2) of paragraph 4(d)(iv) or shares of capital stock of the Spinoff Corporation pursuant to clause (2) of paragraph 4(d)(v)). Notwithstanding the foregoing terms of this paragraph 4(b)(v), if there shall have occurred an adjustment pursuant to paragraph 4(d)(vi) as a result of a conversion or exchange or merger or consolidation referred to in such paragraph prior to the Settlement Date, then with respect to the exercise of any such option referred to in this paragraph 4(b)(v) (including the exercise of the option referred to in the foregoing proviso by the Corporation (or its successor)), the Corporation shall deliver out of funds legally available therefor on such Settlement Date, in lieu of shares of Common Stock as described in this paragraph 4(b)(v), the kind of securities or other property received by holders of Common Stock as a result of such conversion or exchange or merger or consolidation, in the same relative proportions (if more than one kind of securities or other property was so received) as exist in the Common Equivalent Rate on such Settlement Date, with an aggregate market price (determined for any security or other property, to the extent possible, in the manner that the Current Market Price is determined for the Common Stock, and otherwise determined by the Board of Directors of the Corporation (or its successor), whose determination shall be conclusive), as of such Settlement Date, equal to the amount of cash consideration that the Corporation has elected to pay in such securities or other property. (vi) In order to exercise the Holder Opt-Out Right, a holder of Series C Preferred Stock shall (a) deliver a properly 13 completed and duly executed written notice of election to convert, specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock (subject to paragraphs 4(b)(vii) and 4(d)(vi)) to be issued to the Corporation at its principal office or at the office of the agency which may be maintained for such purpose (the "Conversion Agent") at least one business day prior to the effectiveness of the Merger or Consolidation, (b) surrender the certificate for such shares of Series C Preferred Stock to the Corporation or the Conversion Agent, accompanied, if so required by the Corporation or the Conversion Agent, by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation or the Conversion Agent duly executed by the holder or his attorney duly authorized in writing, and (c) pay any transfer or similar tax required by paragraph 4(n). Conversion shall be deemed to have been effected immediately prior to the effective time of the Merger or Consolidation. Immediately upon conversion, the rights of the holders of converted shares of Series C Preferred Stock shall cease and the persons entitled to receive the shares of Common Stock (subject to paragraphs 4(b)(vii) and 4(d)(vi)) upon the conversion of such shares of Series C Preferred Stock shall be treated for all purposes as having become the beneficial owners of such shares of Common Stock (subject to paragraphs 4(b)(vii) and 4(d)(vi)). (vii) If there shall occur a Merger or Consolidation of the Corporation and the Corporation elects the Existing Preferred Stock Option, then (A) the Series C Preferred Stock will, from and after the effective time of the Merger or Consolidation, no longer be subject to conversion into shares of Common Stock pursuant to paragraphs (4)(a), (4)(b), 4(c) and 4(e), but instead will be subject to conversion out of funds legally available therefor into the Issuing Entity Common Equity and (B) in such event, from and after the effective time of the Merger or Consolidation, the number of such shares of Issuing Entity Common Equity so issuable upon conversion of the shares of Series C Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in paragraphs 4(b)(iii) and (4)(d). (c) Right to Call for Redemption. At any time and ---------------------------- from time to time prior to the Mandatory Conversion Date, the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall have the right to call, in whole or in part, the outstanding shares of the Series C Preferred Stock for redemption (subject to the notice provisions set forth in paragraph (4)(j)). Upon the redemption date, the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall deliver to the holders thereof in exchange for each such share called for redemption, (i) a number of shares of Common Stock (subject to paragraphs 4(b)(vii) and 4(d)(vi)) equal to the Call Price in effect on the redemption date divided by the Current Market Price 14 of the Common Stock determined as of the second Trading Date (as defined in paragraph 4(i)(vi)) immediately preceding the Notice Date (as defined in paragraph 4(i)(iv)) and (ii) an amount in cash equal to all accrued and unpaid dividends on such share of Series C Preferred Stock to and including the redemption date (and dividends shall cease to accrue on such share as of such date), whether or not declared, out of funds legally available therefor; provided that if there shall have occurred an adjustment pursuant to paragraph (4)(d)(vi) as a result of a conversion or exchange or merger or consolidation referred to in such paragraph prior to the redemption date, the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall deliver out of funds legally available therefor on the redemption date to the holders of shares of Series C Preferred Stock in exchange for each share thereof called for redemption, in lieu of shares of Common Stock as described in this paragraph (4)(c), the kind of securities or other property received by holders of Common Stock as a result of such conversion or exchange or merger or consolidation, in the same relative proportions (if more than one kind of securities or other property was so received) as exist in the Common Equivalent Rate on the redemption date, with an aggregate market price (determined for any security or other property, to the extent possible, in the manner that the Current Market Price is determined for the Common Stock, and otherwise determined by the Board of Directors of the Corporation (or its successor), whose determination shall be conclusive), as of the second Trading Date immediately preceding the Notice Date, equal to the Call Price in effect on the redemption date. If fewer than all the outstanding shares of Series C Preferred Stock are to be called for redemption, shares to be redeemed shall be selected by the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) from outstanding shares of Series C Preferred Stock not previously redeemed by lot or pro rata (as nearly as may be practicable without creating fractional shares) or by any other method determined by the Board of Directors of the Corporation in its sole discretion to be equitable. (d) Common Equivalent Rate; Adjustments. The Common ----------------------------------- Equivalent Rate to be used to determine the number of shares of Common Stock to be delivered on the conversion of the Series C Preferred Stock into shares of Common Stock pursuant to paragraph (4)(a) or (b) shall be initially ten shares of Common Stock for each share of Series C Preferred Stock; provided, however, that -------- ------- such Common Equivalent Rate shall be subject to adjustment from time to time as provided in paragraph 4(b)(iii) and in this paragraph (4)(d). All adjustments to the Common Equivalent Rate shall be calculated to the nearest 1/100th of a share of Common Stock. Such rate in effect at any time is herein called the "Common Equivalent Rate." 15 (i) If the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall either: (A) pay a dividend or make a distribution with respect to Common Stock in shares of Common Stock, (B) subdivide or split its outstanding shares of Common Stock into a greater number of shares, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of its shares of Common Stock any shares of common stock of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity), then, in any such event, the Common Equivalent Rate in effect immediately prior thereto shall be adjusted so that the holder of a share of the Series C Preferred Stock shall be entitled to receive on the conversion of such share of the Series C Preferred Stock, the number of shares of common stock of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) which such holder would have owned or been entitled to receive after the happening of any of the events described above had such share of the Series C Preferred Stock been converted at the Common Equivalent Rate in effect immediately prior to such event or any record date with respect thereto. Such adjustment shall become effective as of the close of business on the record date for determination of stockholders entitled to receive such dividend or distribution in the case of a dividend or distribution, and shall become effective immediately after the effective date in case of a subdivision, split, combination or reclassification; and any shares of Common Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock under clauses (ii), (iii), (iv) and (v) below. Such adjustment shall be made successively. (ii) If the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall, after the date hereof, issue rights or warrants to all holders of its Common Stock entitling them (for a period not exceeding 45 days from the date of such issuance) to subscribe for or purchase shares of Common Stock at a price per share less than the Current 16 Market Price of the Common Stock (determined pursuant to paragraph (4)(d)(viii)) on the record date for the determination of stockholders entitled to receive such rights or warrants, then in each case the Common Equivalent Rate shall be adjusted by multiplying the Common Equivalent Rate in effect immediately prior to the date of issuance of such rights or warrants by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, immediately prior to such issuance, plus the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, immediately prior to such issuance, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at such Current Market Price (determined by multiplying such total number of shares by the exercise price of such rights or warrants and dividing the product so obtained by such Current Market Price). Such adjustment shall become effective as of the close of business on the record date for the determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Common Equivalent Rate shall be readjusted to the Common Equivalent Rate which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. Such adjustment shall be made successively. (iii) If the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall distribute cash (other than any Permitted Quarterly Dividend (as defined in this paragraph 4(d)(iii)), any cash distributed in consideration of fractional shares of Common Stock, any cash distributed in accordance with paragraph 4(d)(iii)(2) or 4(d)(iv)(2) and any cash distributed in a Merger or Consolidation ("Excluded Distributions")), by dividend or otherwise, to all holders of its Common Stock or make an Excess Purchase Payment (as defined in this paragraph 4(d)(iii)) then, at the option of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity), the Corporation shall make the adjustment set forth in clause (1) below if such option is chosen by the Corporation (or the Issuing Entity) or shall make the distribution (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity shall make the distribution) set forth in clause (2) below if such option is chosen by the Corporation (or the Issuing Entity): (1) if the option set forth in this clause (1) is chosen, the Common Equivalent Rate shall be adjusted by multiplying the Common Equivalent Rate in effect on the record date with respect to such distribution or the payment 17 date with respect to such Excess Purchase Payments by a fraction, of which the numerator shall be the Current Market Price per share of the Common Stock (determined pursuant to paragraph 4(d)(viii)) on such record date or payment date and of which the denominator shall be such Current Market Price per share of Common Stock less the amount of such distribution applicable to one share of Common Stock which would not be a Permitted Quarterly Dividend (or in the case of an Excess Purchase Payment, less the aggregate amount of such Excess Purchase Payments divided by the number of outstanding shares of Common Stock on the relevant payment date) (provided that the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall not be permitted to elect the option described in this clause (1) if (a) the amount of such distribution applicable to one share of Common Stock which would not be a Permitted Quarterly Dividend (or in the case of an Excess Purchase Payment, the aggregate amount of such Excess Purchase Payments divided by the number of outstanding shares of Common Stock on the relevant payment date) is greater than or equal to 95% of such Current Market Price per share of Common Stock, in each case as of such record date or payment date, or (b) with respect to such cash distribution (other than an Excess Purchase Payment), the day on which such record date is fixed by the Board of Directors of the Corporation is less than twenty-one consecutive Trading Days prior to such record date); or (2) if the option set forth in this clause (2) is chosen, there shall be distributed, out of legally available funds, at the time such cash distribution or Excess Purchase Payment is made to the holders of its Common Stock, to the holders of Series C Preferred Stock (as of the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution (or in the case of an Excess Purchase Payment, as of the purchase date)) an amount of cash or other assets per share of Series C Preferred Stock as such holder would have been entitled to receive if such Series C Preferred Stock had been converted into shares of Common Stock (and in the case of an Excess Purchase Payment had participated on a pro rata basis (assuming the participation of all outstanding shares of Common Stock) in such tender offer or exchange offer) at the Common Equivalent Rate in effect immediately prior to the record date for such distribution or the payment date for such Excess Purchase Payment less, in the case of a cash distribution, the amount of such distribution which would have been a Permitted Quarterly Dividend. The adjustment provided in clause (1) above shall become effective as of the close of business on the record date for the determination of stockholders entitled to receive such dividend or distribution or the payment date with respect to such Excess Purchase Payment. If the amount of cash or, in the case of an 18 Excess Purchase Payment, the value of the assets (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) to be distributed in accordance with clause (2) above exceeds the Call Price as of such record date or payment date, the amount of cash or other assets to be distributed with respect to each share of Series C Preferred Stock shall be reduced so that the amount to be distributed equals the Call Price on such record date or payment date. As used in this paragraph 4(d)(iii), the term "Permitted Quarterly Dividend" means any quarterly cash dividend in respect of the Common Stock to the extent that the per share amount of such dividend does not exceed the greater of (x) the amount per share of Common Stock of the next preceding quarterly cash dividend on the Common Stock which did not at the record date therefor require an adjustment to the Common Equivalent Rate or a distribution in accordance with clause (2) above and (y) 15% of the Current Market Price per share of Common Stock, determined on the record date for such quarterly dividend, less the sum of the per share amounts (appropriately adjusted to account for any of the events described in paragraph 4(d)(i)) of all quarterly dividends, if any, in respect of the Common Stock with a record date less than one year prior to the record date for such quarterly dividend. As used in this paragraph 4(d)(iii), the term "Excess Purchase Payment" means the excess, if any, of (A) the cash and the value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of all other consideration paid by the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) with respect to one share of Common Stock acquired in a tender offer or exchange offer by the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) over (B) the Current Market Price per share of Common Stock on the payment date for such Excess Purchase Payment. (iv) If the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall pay a dividend or make a distribution to all holders of its Common Stock of evidence of its indebtedness, other securities or other assets (including shares of capital stock of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) (other than Common Stock) and shares of capital stock of any subsidiary of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) (other than as set forth in paragraph 4(d)(v)) but excluding any distributions and dividends referred to in paragraphs 4(d)(i) and (iii) above or any other cash dividends or distributions), or shall issue to all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (other than those referred to in paragraph 4(d)(ii) above), then in each such case at the option of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity), the Corporation shall make the adjustment set forth in clause (1) below if such option is chosen by the Corporation (or the Issuing 19 Entity) or shall make the distribution (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity shall make the distribution) set forth in clause (2) below if such option is chosen by the Corporation (or the Issuing Entity): (1) if the option set forth in this clause (1) is chosen, the Common Equivalent Rate shall be adjusted by multiplying the Common Equivalent Rate in effect on the record date for the distribution of the securities or assets by a fraction, of which the numerator shall be the Current Market Price per share of the Common Stock (determined pursuant to paragraph (4)(d)(viii)) on the record date for the determination of stockholders entitled to receive such dividend or distribution, and of which the denominator shall be such Current Market Price per share of Common Stock less the fair value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) as of such record date of the portion of the securities or assets so distributed, or of such rights or warrants, applicable to one share of Common Stock (the "Distribution Fair Value") (provided that the Corporation (or following -------- the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall not be permitted to elect the option described in this clause (1) if (a) such determination of fair value by the Board of Directors of the Corporation applicable to one share of Common Stock is greater than or equal to 95% of such Current Market Price per share of Common Stock, in each case as of such record date, or (b) the day on which such record date is fixed by the Board of Directors of the Corporation is less than twenty-one consecutive Trading Days prior to such record date; or (2) if the option set forth in this clause (2) is chosen, there shall be distributed, out of funds legally available therefor, at the time such dividend, distribution or issuance is made to the holders of its Common Stock, to the holders of shares of Series C Preferred Stock (as of the record date for the determination of holders of Common Stock entitled to receive such dividend, distribution or issuance) the kind and amount of such securities or assets of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) as such holder would have been entitled to receive if such shares of Series C Preferred Stock had been converted into shares of Common Stock at the Common Equivalent Rate in effect immediately prior to the record date for such dividend or distribution. The adjustment provided in clause (1) shall become effective as of the close of business on the record date for the determination of stockholders entitled to receive such dividend or distribution. If the Distribution Fair Value of the shares or other units of securities or assets distributed with respect to each share of Series C Preferred Stock in accordance with clause 20 (2) above would, as of the record date of such distribution, exceed the Call Price as of such record date, the amount of shares or other units of securities or assets to be distributed with respect to each share of Series C Preferred Stock shall be reduced so that the Distribution Fair Value thereof equals the Call Price on such record date. (v) If the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall pay a dividend or makes a distribution to all holders of its Common Stock of shares of capital stock of any subsidiary of the Corporation (the "Spinoff Corporation"), which Spinoff Corporation represents all or substantially all of the Corporation's interest in either of the two principal lines of business of RJR Nabisco Holdings Corp. and its subsidiaries as of May 6, 1994, then, at the option of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity), the Corporation shall, out of legally available funds, effect the conversion set forth in clause (1) below if such option is chosen by the Corporation (or the Issuing Entity) or shall make the distribution (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity shall make the distribution) set forth in clause (2) below if such option is chosen by the Corporation (or the Issuing Entity): (1) if the option set forth in this clause (1) is chosen, subject to the proviso set forth in clause (2) below, each share of Series C Preferred Stock will be converted into the right of the holder of such share of Series C Preferred Stock as of the Common Stock Record Date (as defined in this paragraph 4(d)(v)) to receive (at the time such capital stock is distributed to holders of Common Stock): (a) one half of a share of a security (the "Spinoff Corporation Preferred Stock") of the Spinoff Corporation having terms substantially equivalent to the Series C Preferred Stock (except that (i) upon call or conversion such Spinoff Corporation Preferred Stock shall convert into common stock of Spinoff Corporation, (ii) the initial common equivalent rate per share of Spinoff Corporation Preferred Stock (as of the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution (the "Common Stock Record Date")) shall equal a fraction, of which the numerator shall be the product of (A) the Current Market Price per share of the Common Stock (determined pursuant to paragraph 4(d)(viii)) on the Common Stock Record Date and (B) the Common Equivalent Rate on the Common Stock Record Date, and of which the denominator shall be the Spinoff Fair Value (as defined in this paragraph 4(d)(v)), (iii) all references to Common Stock shall mean the common stock of the Spinoff Corporation, (iv) all references to the Corporation (or 21 following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall mean the Spinoff Corporation, (v) any notice given to the holders of record of shares of Series C Preferred Stock on the Common Stock Record Date will be valid notice to the record holders of the Spinoff Corporation Preferred Stock for the purpose of giving notice required by the terms of the Spinoff Corporation Preferred Stock to such holders prior to the issuance thereof and (vi) the liquidation preference per share of Spinoff Corporation Preferred Stock shall be equal to the greater of (A) the liquidation preference per share of the Series C Preferred Stock prior to the date of conversion and (B) the fair market value per share of Spinoff Corporation Preferred Stock (as determined, on or within five business days after the date of issuance of the Spinoff Corporation Preferred Stock, by the board of directors of the Spinoff Corporation, whose determination shall be conclusive) as of the date of their issuance); and (b) one half of a share of Series C Preferred Stock; provided that following such conversion in accordance with this paragraph 4(d)(v)(1)(b), (i) the Common Equivalent Rate per share of Series C Preferred Stock (as of the Common Stock Record Date) shall equal a fraction, of which the numerator shall be the product of (A) the Current Market Price per share of the Common Stock on the Common Stock Record Date and (B) the Common Equivalent Rate on the Common Stock Record Date, and of which the denominator shall be the excess of (x) the Current Market Price per share of the Common Stock on the Common Stock Record Date over (y) the Spinoff Fair Value and (ii) the liquidation preference per share of Series C Preferred Stock from and after the time of conversion shall be equal to the greater of (A) the liquidation preference per share of the Series C Preferred Stock prior to the date of conversion and (B) the fair market value per share of the Series C Preferred Stock (as determined, on or within five business days after the date of issuance of the Spinoff Corporation Preferred Stock, by the board of directors of the Corporation, whose determination shall be conclusive) as of the date of issuance of the Spinoff Corporation Preferred Stock; or (2) if the option set forth in this clause (2) is chosen, there shall be distributed, at the time such dividend or distribution is made to the holders of its Common Stock, to the holders of shares of Series C Preferred Stock as of the Common Stock Record Date that number of shares of capital stock of the Spinoff Corporation as such holder would have been entitled to receive if such shares of Series C Preferred Stock had been converted into shares of Common Stock at the Common Equivalent Rate in effect 22 immediately prior to the record date for such dividend or distribution; provided that the Corporation (or following -------- the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall elect the option described in this clause (2) if (a) the fair value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) as of the Common Stock Record Date of the portion of the capital stock so distributed applicable to one share of Common Stock (assuming the conversion of the Series C Preferred Stock into Spinoff Corporation Preferred Stock) (the "Spinoff Fair Value") is greater than or equal to 95% of the Current Market Price per share of Common Stock as of the Common Stock Record Date, or (b) the day on which such record date is fixed by the Board of Directors of the Corporation is less than twenty-one consecutive Trading Days prior to such record date. As of the Common Stock Record Date (or as of any date thereafter until the distribution of the Spinoff Corporation Preferred Stock), the holders of record of shares of Series C Preferred Stock will be considered the holders of record of any Spinoff Corporation Preferred Stock for purposes of the Certificate of Designation and for purposes of the certificate of designation with respect to the Spinoff Corporation Preferred Stock, including the giving of notice or voting thereunder. If the Spinoff Fair Value of the shares of capital stock of the Spinoff Corporation distributed with respect to each share of Series C Preferred Stock pursuant to clause (2) above would, as of the Common Stock Record Date, exceed the Call Price as of such record date, the number of shares of such capital stock to be distributed with respect to each share of Series C Preferred Stock shall be reduced so that the Spinoff Fair Value thereof equals the Call Price on such record date. Whether, after the distribution of the capital stock of the Spinoff Company, the Spinoff Preferred Stock has terms substantially equivalent to the Series C Preferred Stock prior to such distribution will be determined by the Board of Directors of the Corporation (or its successor), whose determination shall be conclusive. Such Spinoff Company Preferred Stock may be considered substantially equivalent to the Series C Preferred Stock notwithstanding that, among other things, the tax treatment of a holder of Spinoff Company Preferred Stock differs from the tax treatment of a holder of Series C Preferred Stock, including by reason of a future change in U.S. law. (vi) If there shall occur a conversion or exchange of the Common Stock into, or the right to receive, other securities or other property of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) or a wholly owned subsidiary of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) (in each case other than in connection with a 23 Merger or Consolidation) or if there shall occur a merger or consolidation of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) with or into a wholly owned subsidiary of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) that results in the conversion or exchange of the Common Stock into, or the right to receive, other securities or other property (whether of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) or any other entity), then the Series C Preferred Stock will thereafter no longer be subject to conversion or redemption into shares of Common Stock pursuant to paragraphs (4)(a), (4)(b), 4(c) and 4(e), but instead will be subject to conversion or redemption into the kind and amount of securities or other property which the holder of such shares of Series C Preferred Stock would have owned immediately after such conversion or exchange or merger or consolidation if such shares of Series C Preferred Stock had been converted or redeemed into shares of Common Stock immediately before the effective time of such conversion or exchange or merger or consolidation. If this paragraph (4)(d)(vi) applies, then no adjustment in respect of the same conversion or exchange or merger or consolidation shall be made pursuant to the other provisions of this paragraph (4)(d). In the event that at any time, as a result of an adjustment made pursuant to this paragraph (4)(d)(vi), the Series C Preferred Stock shall become subject to conversion or redemption into any securities other than shares of Common Stock, thereafter the number of such other securities so issuable upon conversion or redemption of the shares of Series C Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Series C Preferred Stock contained in this paragraph (4)(d). (vii) Anything in this paragraph (4) notwithstanding, the Corporation shall be entitled to make such adjustments in the Common Equivalent Rate, in addition to those required by this paragraph (4), as the Corporation in its sole discretion may determine to be advisable, in order that any stock dividends, subdivision of shares, distribution of rights to purchase stock or securities, or a distribution of securities convertible into or exchangeable for stock (or any transaction which could be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended) hereafter made by the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) or any other entity) to its stockholders shall not be taxable. If the Corporation determines that an adjustment to the Common Equivalent Rate should be made pursuant to this paragraph 4(d)(vii), an adjustment shall be made effective as of such date as is determined by the Board of Directors of the Corporation. The determination of the Board of Directors of the Corporation as to whether an adjustment to the Common Equivalent Rate should be made pursuant to the foregoing provisions of this paragraph 24 4(d)(vii), and, if so, as to what adjustment should be made and when, shall be conclusive, final and binding on the Corporation and all stockholders of the Corporation. (viii) As used in this paragraph (4), the "Current Market Price" of a share of Common Stock on any date shall be, except as otherwise specifically provided, the average of the daily Closing Prices (as defined in paragraph 4(i)(iii)) for the twenty consecutive Trading Dates ending on and including the date of determination of the Current Market Price; provided, however, that for purposes of paragraph 4(c), the Current Market Price shall be the average of the daily Closing Prices for the five consecutive Trading Days ending on and including the date of determination of the Current Market Price unless the Closing Price for the Trading Date next following such five-day period (the "next-day closing price") is less than 95% of such average, then the Current Market Price per share of Common Stock on such date of determination shall be the next-day closing price; and provided, further, that, with respect to any redemption, conversion or antidilution adjustment if any event that results in an adjustment of the Common Equivalent Rate occurs during the period beginning on the first day of the applicable determination period and ending on the applicable redemption or conversion date, the Current Market Price as determined pursuant to the foregoing will be appropriately adjusted to reflect the occurrence of such event. (ix) In any case in which paragraph (4)(d) shall require that an adjustment as a result of any event become effective as of the close of business on the record date and the date fixed for conversion pursuant to paragraph (4)(a), 4(b), 4(c) or 4(e) occurs after such record date, but before the occurrence of such event the Corporation may in its sole discretion elect to defer the following until after the occurrence of such event: (A) issuing to the holder of any converted shares of the Series C Preferred Stock the additional shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to paragraph (4)(g). (x) Before taking any action which would cause an adjustment to the Common Equivalent Rate that would cause the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) to issue shares of Common Stock for consideration below the then par value (if any) of the Common Stock upon conversion of the Series C Preferred Stock, the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) may validly and legally issue fully paid and 25 nonassessable shares of such Common Stock at such adjusted Common Equivalent Rate. (e) Optional Tender Offer Conversion. (i) If pursuant -------------------------------- to the rules promulgated under the Securities Exchange Act of 1934, as amended, the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) has recommended acceptance of (or has expressed no opinion and is remaining neutral toward) a tender offer which would result in the ownership by the bidder (as defined in paragraph (i)(vii)) therein (or an affiliate (as defined in paragraph (i)(viii)) of the bidder) of more than 50% of the then outstanding shares of Common Stock of the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) (a "Recommended Tender Offer"), then prior to the expiration of such Recommended Tender Offer the Corporation shall give notice to each holder of record of Series C Preferred Stock that such holder may, at its option, convert (an "Optional Tender Offer Conversion") its shares of Series C Preferred Stock, in whole (but not in part), (A) into shares of Common Stock at the Common Equivalent Rate in effect at the close of business on the date prior to the date of expiration or termination of such Recommended Tender Offer (the "Tender Offer Measurement Date") (provided that if the Call Price on the Tender Offer Measurement -------- Date is less than the product of (x) the Current Market Price of a share of Common Stock on the Tender Offer Measurement Date (which Current Market Price shall be appropriately adjusted for the purposes of this proviso if the Corporation has made any antidilution adjustment to the Common Equivalent Rate pursuant to paragraph 4(d) with respect to an event which has not occurred as of such Tender Offer Measurement Date) and (y) the number of shares of Common Stock issuable upon conversion of a share of Series C Preferred Stock pursuant to the Optional Tender Offer Conversion, then the number of shares of Common Stock with respect to each share of Series C Preferred Stock issuable pursuant to the Optional Tender Offer Conversion shall be reduced so that the product referred to above in this proviso equals the Call Price on the Tender Offer Measurement Date), plus (B) the right to receive an amount of cash equal to all accrued and unpaid dividends on the Series C Preferred Stock to and including the Tender Offer Measurement Date, whether or not declared, out of funds legally available therefor (and dividends shall cease to accrue on such share as of the Tender Offer Measurement Date); provided that the Corporation (or following the application of -------- the terms of paragraph 4(b)(i)(D), the Issuing Entity) may, at its option, deliver on the Tender Offer Measurement Date, in lieu of some or all of the cash consideration described in paragraph 4(e)(i)(B), a number of shares of Common Stock (subject to paragraphs 4(b)(vii) and 4(d)(vi)) to be determined by dividing the amount of cash consideration that the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) has elected to pay in Common Stock by the Current Market Price of the Common Stock determined as of such Tender Offer Measurement Date (which Current Market Price shall 26 be appropriately adjusted, if necessary, for the purposes of this proviso if either (x) the Corporation has made any antidilution adjustment to the Common Equivalent Rate pursuant to paragraph 4(d) with respect to an event which has not occurred as of such Tender Offer Measurement Date or (y) the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) has distributed cash or other property pursuant to clause (2) of paragraph 4(d)(iii), shares or other units of securities or assets pursuant to clause (2) of paragraph 4(d)(iv) or shares of capital stock of the Spinoff Corporation pursuant to clause (2) of paragraph 4(d)(v)). Notwithstanding the foregoing terms of this paragraph 4(e), if there shall have occurred an adjustment pursuant to paragraph 4(d)(vi) as a result of a conversion or exchange or merger or consolidation referred to in such paragraph prior to the Tender Offer Measurement Date, then with respect to the exercise of any such option referred to in the foregoing proviso by the Corporation (or its successor), the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall deliver out of funds legally available therefor on such Settlement Date, in lieu of shares of Common Stock as described in this paragraph 4(e), the kind of securities or other property received by holders of Common Stock as a result of such conversion or exchange or merger or consolidation, in the same relative proportions (if more than one kind of securities or other property was so received) as exist in the Common Equivalent Rate on the Tender Offer Measurement Date, with an aggregate market price (determined for any security or other property, to the extent possible, in the manner that the Current Market Price is determined for the Common Stock, and otherwise determined by the Board of Directors of the Corporation (or its successor), whose determination shall be conclusive), as of such Settlement Date, equal to the amount of cash consideration that the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) has elected to pay in such securities or other property. (ii) The Corporation will provide notice of a Recommended Tender Offer to holders of record of the Series C Preferred Stock not less than fifteen business days prior to the expiration of such tender offer. Such notice shall specify the date of expiration or termination (as of the date of such notice) of such Recommended Tender Offer and that if such holder elects to convert its shares of Series C Preferred Stock into shares of Common Stock, dividends on such Series C Preferred Stock will cease to accrue dividends on the date they are converted. If the date of expiration of the Recommended Tender Offer is extended, the Corporation will be under no obligation to notify any holder of Series C Preferred Stock of such extension. (iii) In order to exercise the Optional Tender Offer Conversion, a holder of Series C Preferred Stock shall (a) deliver a properly completed and duly executed written notice of election to convert on or prior to the Tender Offer Measurement Date, specifying the name or names in which such holder wishes 27 the certificate or certificates for shares of Common Stock to be issued to the Corporation at its principal office or to the Conversion Agent, (b) surrender the certificate for such shares of Series C Preferred Stock to the Corporation or the Conversion Agent, accompanied, if so required by the Corporation or the Conversion Agent, by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation or the Conversion Agent duly executed by the holder or his attorney duly authorized in writing and (c) pay any transfer or similar tax required by paragraph (4)(n). (iv) (A) Conversion shall be deemed to have been effected immediately prior to the termination or expiration of the Recommended Tender Offer (the "Conversion Date") on which the Corporation or the Conversion Agent shall have received the notice of election to convert, the surrendered certificate, any required payments and all other required documents. Immediately upon conversion, the rights of the holders of converted shares of Series C Preferred Stock shall cease and the persons entitled to receive the shares of Common Stock upon the conversion of such shares of Series C Preferred Stock shall be treated for all purposes as having become the owners of such shares of Common Stock. (B) As promptly as practicable after the Conversion Date, the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall, unless otherwise instructed by the holder, deliver or cause to be delivered at the office or agency of the Conversion Agent, to or upon the written order of the holder of the surrendered shares of Series C Preferred Stock, a certificate or certificates representing the number of fully paid and nonassessable shares of Common Stock into which such shares of Series C Preferred Stock have been converted in accordance with the provisions of this paragraph (4)(e), and any cash payable in respect of fractional shares as provided in paragraph (4)(g). (f) Notice of Adjustments. Whenever the Common --------------------- Equivalent Rate is adjusted as herein provided, the Corporation shall: (i) forthwith compute the adjusted Common Equivalent Rate in accordance with this paragraph (4) and prepare a certificate signed by the Chief Financial Officer, any Vice President, the Treasurer or Controller of the Corporation setting forth the adjusted Common Equivalent Rate, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based, which certificate shall be conclusive, final and binding evidence of the correctness of the adjustment, and file such certificate forthwith with the transfer agent or agents for the Series C Preferred Stock and the Common Stock; and 28 (ii) mail a notice stating that the Common Equivalent Rate has been adjusted, the facts requiring such adjustment and the facts upon which such adjustment is based and setting forth the adjusted Common Equivalent Rate to the holders of record of the outstanding shares of the Series C Preferred Stock at or prior to the time the Corporation mails an interim statement to its stockholders covering the fiscal quarter during which the facts requiring such adjustment occurred, but in any event within 45 days of the end of such fiscal quarter. (g) No Fractional Shares. (i) No fractional shares or -------------------- scrip representing fractional shares of Common Stock or other kind of security (including upon a distribution of the capital stock of the Spinoff Company, the Series C Preferred Stock and the Spinoff Company Preferred Stock) shall be issued upon the redemption or conversion of any shares of Series C Preferred Stock. Instead of any fractional interest in a share of Common Stock or such other security which would otherwise be deliverable upon the redemption or conversion of a share of Series C Preferred Stock, the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall either (A) pay to the holder of such share (a "Fractional Shareholder") an amount in cash (computed to the nearest cent) equal to (x) in the case of fractional shares of Common Stock, the same fraction of the Current Market Price of the Common Stock determined as of the Settlement Date, Conversion Date or the second Trading Date immediately preceding the relevant Notice Date, as the case may be, (y) in the case of fractional shares of Spinoff Corporation Preferred Stock and Series C Preferred Stock otherwise issuable upon a distribution of shares of capital stock of the Spinoff Corporation, an amount in cash equal, with respect to the Spinoff Corporation Preferred Stock, to the same fraction of the product of the Spinoff Fair Value per share of Common Stock and the common equivalent rate applicable to the Spinoff Corporation Preferred Stock and an amount in the cash equal, with respect to the Series C Preferred Stock, to the same fraction of the product of (A) the Current Market Price, as of the Common Stock Record Date, less the Spinoff Fair Value, and (B) the Common Equivalent Rate after giving effect to the issuance of the Spinoff Corporation Preferred Stock and (z) in the case of fractional shares of capital stock of the Spinoff Corporation, an amount in cash equal to the same fraction of the Spinoff Fair Value per share of Common Stock or (B) follow the procedures set forth in paragraph (g)(ii). If more than one share of Series C Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series C Preferred Stock so surrendered. (ii) The Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) may, in lieu of paying cash to Fractional Shareholders as provided in 29 paragraph (g)(i), issue, in full payment of the Corporation's (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity's) obligation with respect to such fractional interests, shares of stock equal to the aggregate of such fractional interests of such Fractional Shareholder and other Fractional Shareholders (aggregated over a reasonable period of time, but not in any event more than 20 business days, and rounded upwards to the nearest whole share) to an agent (the "Transfer Agent") appointed by the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) for such Fractional Shareholders for sale promptly by the Transfer Agent on behalf of the Fractional Shareholders. The Transfer Agent will remit promptly to such Fractional Shareholders their proportionate interest in the net proceeds (following the deduction of applicable transaction costs and computed to the nearest cent) from such sale. (h) Cancellation. Shares of Series C Preferred Stock ------------ that have been issued and reacquired in any manner, including shares purchased, exchanged, redeemed or converted, shall not be reissued as part of the Series C Preferred Stock and shall (upon compliance with any applicable provisions of the laws of the State of Delaware) have the status of authorized and unissued shares of the class of Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of the Preferred Stock. (i) Definitions. As used in this paragraph (4): ----------- (i) the term "business day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close; provided that, from and after the effective time of a Merger or Consolidation in connection with which the Corporation elects the Existing Preferred Stock Option, the term "business day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York and in the place where the Issuing Entity has its headquarters are authorized by law to close; (ii) the term "Call Price" shall mean the per share price (payable in shares of Common Stock) at which the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) may redeem shares of Series C Preferred Stock, which shall be initially equal to $112.286 declining by $.01656 on each day following the date of issuance of the Series C Preferred Stock (computed on the basis of a 360-day year of twelve 30-day months) to $95.246 on March 15, 1997 and equal to $94.25 thereafter, if not sooner redeemed; provided that if the Corporation (or -------- following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) distributes cash or other property as provided in paragraph 4(d)(iii)(2), shares or 30 other units of securities or assets as provided in paragraph 4(d)(iv)(2), shares of capital stock of the Spinoff Corporation as provided in paragraph 4(d)(v)(2) or if Non- Common Equity Merger Consideration is distributed in connection with a Merger or Consolidation, then (i) in the case of a distribution described in paragraph 4(d)(iii)(2), from and after the close of business on the record date related to such distribution (or in the case of an Excess Purchase Payment, from and after the close of business on the payment date related to such Excess Purchase Payment) the Call Price per share for any day shall be reduced by the amount of cash or the value of other property (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) to be distributed pursuant thereto, (ii) in the case of a distribution described in paragraph 4(d)(iv)(2), from and after the close of business on the record date related to such distribution, the Call Price per share for any day shall be reduced by the Distribution Fair Value of such shares or other units of securities or assets, (iii) in the case of a distribution described in paragraph 4(d)(v)(2), from and after the close of business on the record date related to such distribution, the Call Price per share for any day shall be reduced by the Spinoff Fair Value of such shares of capital stock and (iv) in the case of a distribution of Non-Common Equity Merger Consideration, from and after the close of business on the Settlement Date related to the Merger or Consolidation, the Call Price per share shall be reduced by the Non-Common Equity Fair Value of such Non-Common Equity Merger Consideration; provided further that in no event shall the -------- effect of the foregoing proviso be to reduce the Call Price per share to an amount less than $0.01; the Corporation will provide notice (subsequent to such reduction) of any reduction in the Call Price as a result of the application of the first proviso in this definition to each holder of record of Series C Preferred Stock at such holder's address as it appears on the stock register of the Corporation (provided, however, that no failure to give such notice nor -------- ------- any defect therein shall affect the validity of the related reduction in the Call Price); (iii) the term "Closing Price" on any day shall mean the closing sale price regular way (with any relevant due bills attached) on such day, or in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way (with any relevant due bills attached), in each case on the New York Stock Exchange Consolidated Tape (or any successor composite tape reporting transactions on national securities exchanges), or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of Common Stock has been 31 traded during the five consecutive Trading Dates ending on and including the date of determination of the Current Market Price), or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices regular way (with any relevant due bills attached) of the Common Stock on the over-the-counter market on the day in question as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), or a similarly generally accepted reporting service, or if not so available as determined in good faith by the Board of Directors, on the basis of such relevant factors as it in good faith considers, in the reasonable judgment of the Board of Directors, appropriate. Notwithstanding the foregoing, from and after the effective time of a Merger or Consolidation in connection with which the Corporation elects the Existing Preferred Stock Option, if the Issuing Entity Common Equity is not trading on the New York Stock Exchange (or other national securities exchange or reported on NASDAQ as described above), "Closing Price" shall be (i) determined by reference to the principal trading market on which the Issuing Entity Common Equity is traded and (ii) converted, if necessary, into U.S. dollars by reference to the spot rate at noon local time in the relevant market at which, in accordance with the normal banking procedures, U.S. dollars could be purchased with the currency in which the Closing Price is denominated from major banks located in New York City or London, England; (iv) the term "Notice Date" with respect to any notice given by the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) in connection with a redemption or conversion of any of the Series C Preferred Stock shall be the commencement of the mailing of such notice to the holders of the Series C Preferred Stock in accordance with paragraph (4)(j); (v) the term "Settlement Date" shall mean the business day immediately prior to the effective date of a Merger or Consolidation; (vi) the term "Trading Date" shall mean a date on which the New York Stock Exchange (or any successor to such Exchange) is open for the transaction of business. Notwithstanding the foregoing, from and after the effective time of a Merger or Consolidation in connection with which the Corporation elects the Existing Preferred Stock Option, if the Issuing Entity Common Equity is not traded on the New York Stock Exchange (or other national securities exchange or reported on NASDAQ as described under paragraph 4(i)(ii)), "Trading Date" shall be determined by reference to the principal trading market on which the Issuing Entity Common Equity is traded; 32 (vii) the term "bidder" shall have the meaning set forth in Rule 14d-1(b)(1) promulgated under the Securities Exchange Act of 1934, as amended; (viii) the term "affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended; and (ix) the term "U.S. person" shall mean any citizen or resident of the United States and any domestic corporation, partnership, estate or trust. (j) Notice of Redemption or Conversion. The ---------------------------------- Corporation will provide notice of (i) any redemption or conversion (other than an Optional Tender Offer Conversion, but including any potential conversion upon the effectiveness of a Merger or Consolidation) of shares of Series C Preferred Stock to holders of record of the Series C Preferred Stock to be called or converted not less than 30 nor more than 60 days prior to the date fixed for such redemption or conversion, as the case may be, and (ii) the election of any of the options set forth in paragraph 4(b)(i) to the holders of record of the Series C Preferred Stock at least 30 days prior to the anticipated effective date of the Merger or Consolidation; provided, that the Corporation shall be under no obligation to notify any holder of any extension of such effective date. Such notice shall be provided by mailing such notice first class postage prepaid, to each holder of record of the Series C Preferred Stock, at such holder's address as it appears on the stock register of the Corporation; provided, however, that no failure to give such notice nor any defect therein shall affect the validity of the proceeding for the redemption or conversion of any shares of Series C Preferred Stock to be redeemed or converted except as to the holder to whom the Corporation has failed to give said notice or except as to the holder whose notice was defective. Each such notice shall state, as appropriate and to the extent determinable, the following: (A) the redemption, conversion or exchange date; (B) that all outstanding shares of Series C Preferred Stock are to be redeemed or converted or, in the case of a call for redemption pursuant to paragraph 4(c) of fewer than all outstanding shares of Series C Preferred Stock pursuant to paragraph (4)(c), the number of such shares held by such holder to be redeemed; (C) in the case of a call for redemption pursuant to paragraph (4)(c), the Call Price, the number of shares of Common Stock deliverable upon redemption of each share of Series C Preferred Stock to be redeemed and the Current Market Price used to calculate such number of shares of Common Stock subject to any subsequent adjustments pursuant to paragraph 4(d); 33 (D) whether the Corporation is exercising any option to deliver shares of Common Stock in lieu of cash (in the case of a conversion pursuant to paragraph (4)(b)(i)(A) or (4)(b)(v)), the method of calculating the Current Market Price to be used to calculate the number of such shares of Common Stock and, if the Corporation is exercising such option in respect of less than all the cash that is deliverable by the Corporation upon such conversion, the portion of such cash in lieu of which Common Stock will be delivered; (E) whether the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) is electing to exercise the Common Conversion Option, the Issuing Entity Preferred Stock Conversion Option, the Corporation Preferred Stock Conversion Option or the Existing Preferred Stock Option (in the case of a conversion pursuant to paragraph (4)(b)), and if the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) elects the Issuing Entity Preferred Stock Conversion Option, the Corporation Preferred Stock Conversion Option or the Existing Preferred Stock Option, that such holder shall be entitled to exercise the Holder Opt-Out Right; (F) the place or places where certificates for such shares are to be surrendered for redemption or conversion; and (G) that dividends on the shares of Series C Preferred Stock to be redeemed or converted will cease to accrue on such redemption or conversion date or, in the case of a conversion pursuant to paragraph (4)(b), on the related Settlement Date, unless the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall default in delivering the shares of Common Stock and cash, if any, payable by the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) pursuant to this paragraph (4), at the time and place specified in such notice. (k) Deposit of Shares and Funds. The Corporation's --------------------------- (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity's) obligation to deliver shares of Common Stock and provide funds in accordance with this paragraph (4) shall be deemed fulfilled if, on or before a redemption or conversion date, the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) shall deposit, with a bank or trust company, or an affiliate of a bank or trust company, having an office or agency in New York City and having a capital and surplus of at least $50,000,000, such number of shares of Common Stock as are required to be delivered by the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) pursuant to this 34 paragraph (4) upon the occurrence of the related redemption or conversion (including any payment of fractional share amounts pursuant to paragraph (4)(g)(i)), together with funds (or, in the case of a conversion pursuant to paragraph 4(b), shares of Common Stock and/or funds) sufficient to pay all accrued and unpaid dividends on the shares to be redeemed or converted as required by this paragraph (4), in trust for the account of the holders of the shares to be redeemed or converted (and so as to be and continue to be available therefor), with irrevocable instructions and authority to such bank or trust company that such shares and funds be delivered upon redemption or conversion of the shares of Series C Preferred Stock so called for redemption or converted. Any interest accrued on such funds shall be paid to the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) from time to time. Any shares of Common Stock or funds so deposited and unclaimed at the end of two years from such redemption or conversion date shall be repaid and released to the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity), after which the holder or holders of such shares of Series C Preferred Stock so called for redemption or converted shall look only to the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) for delivery of such shares of Common Stock or funds. (l) Surrender of Certificates; Status. Each holder of --------------------------------- shares of Series C Preferred Stock to be redeemed or converted shall surrender the certificates evidencing such shares (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state) to the Corporation at the place designated in the notice of such redemption or conversion and shall thereupon be entitled to receive certificates evidencing shares of Common Stock and to receive any funds payable pursuant to this paragraph 4 following such surrender and following the date of such redemption or conversion. In case fewer than all the shares represented by any such surrendered certificate are called for redemption, a new certificate shall be issued at the expense of the Corporation representing the unredeemed shares. If such notice of redemption or conversion shall have been given, and if on the date fixed for redemption or conversion shares of Common Stock and funds necessary for the redemption or conversion shall have been either set aside by the Corporation (or following the application of the terms of paragraph 4(b)(i)(D), the Issuing Entity) separate and apart from its other funds or assets in trust for the account of the holders of the shares to be redeemed or converted (and so as to be and continue to be available therefor) or deposited with a bank or trust company or affiliate thereof as provided in paragraph 4(k), then, notwithstanding that the certificates evidencing any shares of Series C Preferred Stock so called for redemption or subject to conversion shall not have been surrendered, the shares represented thereby so called for redemption or subject to conversion shall be deemed no longer outstanding, dividends with respect to the shares so called for 35 redemption or subject to conversion shall cease to accrue after the date fixed for redemption or conversion or, in the case of a conversion pursuant to paragraph (4)(b), on the related Settlement Date, and all rights with respect to the shares so called for redemption or subject to conversion shall forthwith after such date cease and terminate, except for the right of the holders to receive the shares of Common Stock and funds, if any, payable pursuant to this paragraph 4 without interest upon surrender of their certificates therefor. (m) Dividend Payments. The holders of shares of ----------------- Series C Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the call or conversion thereof (except that holders of shares called for redemption or to be converted on a date occurring between such record date and the Dividend Payment Date or on such Dividend Payment Date shall not be entitled to receive such dividend on such Dividend Payment Date but instead will receive an amount equal to accrued and unpaid dividends to such date or the related Settlement Date, as the case may be) or the Corporation's default in payment of the dividend due on such Dividend Payment Date. (n) Payment of Taxes. The Corporation will pay any ---------------- and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on the redemption or conversion of shares of Series C Preferred Stock pursuant to this paragraph (4); provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any registration of transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the registered holder of Series C Preferred Stock redeemed or converted or to be redeemed or converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (o) Notwithstanding any other provision of this paragraph 4, no dividend, redemption, repurchase, exchange or conversion or other distribution shall be made to or from the holders of Series C Preferred Stock other than out of funds legally available therefor. (5) Liquidation Preference. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after payment or provision for payment of any Senior Securities, an amount per share of Series C Preferred Stock in cash equal to the sum of (i) $65.00 (or, following any issuance of Spinoff Corporation Preferred Stock, 36 the greater of $65.00 and the fair market value per share of Series C Preferred Stock (as determined, on or within five business days after the date of issuance of the Spinoff Corporation Preferred Stock, by the Board of Directors of the Corporation, whose determination shall be conclusive) as of such date of issuance), plus (ii) all accrued and unpaid dividends thereon to the date of liquidation, dissolution or winding up, before any payment shall be made or any assets distributed to the holders of any of the Junior Securities. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Series C Preferred Stock and any Parity Securities, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of Series C Preferred Stock and the holders of outstanding shares of such Parity Securities are entitled were paid in full. Except as provided in this paragraph (5)(a), holders of Series C Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Corporation. The Corporation will provide notice to holder of record of Series C Preferred Stock not more than thirty days after any adjustment to the liquidation preference of the Series C Preferred in connection with the issuance of the Spinoff Corporation Preferred Stock. (b) For the purposes of this paragraph (5), neither the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more other corporations nor the consolidation or merger of one or more corporations with or into the Corporation shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up. (6) Voting Rights. (a) The holders of record of shares of Series C Preferred Stock shall not be entitled to any voting rights except as hereinafter provided in this paragraph (6) or as otherwise provided by law. (b) The holders of shares of Series C Preferred Stock shall be entitled to vote on all matters submitted to a vote of the holders of Common Stock, voting together with the holders of Common Stock (and any other capital stock of the Corporation entitled to vote together with the Common Stock) as one class; provided, however, that the holders of Series C Preferred Stock shall not be entitled to vote on any increase or decrease in the number of authorized shares of any class or classes of stock; and provided further that in the event of a Merger or Consolidation in which the Corporation elects the Existing Preferred Stock Option, the holders of shares of Series C Preferred Stock will no 37 longer be entitled to vote on such matters submitted to a vote of the holders of Common Stock, unless the Board of Directors of the Corporation specifically provides otherwise. Each share of the Series C Preferred Stock shall be entitled to a number of votes equal to one-tenth of the Common Equivalent Rate; it being understood that whenever the Common Equivalent Rate is adjusted as provided in paragraph 4(d) hereof, the voting rights of the Series C Preferred Stock shall also be similarly adjusted. (c) (i) If at any time or times dividends payable on all series of Preferred Stock, including the Series C Preferred Stock, shall be in arrears and unpaid for six quarterly periods, then the number of directors constituting the Board of Directors, without further action, shall be increased by two (2) and the holders of shares of Series C Preferred Stock shall have the right, together with the holders of all other outstanding series of the Preferred Stock entitled to vote thereon, to elect the directors of the Corporation to fill such newly created directorships, the remaining directors to be elected by the other class or classes of stock entitled to vote therefor, at each meeting of stockholders held for the purpose of electing directors; provided, that in no event shall such holders have the right to elect more than 25% of the total number of directors of the Corporation; provided, further, that, notwithstanding the foregoing proviso, such holders shall have the right to elect not less than one director pursuant to this paragraph (6)(c)(i). While holders of shares of such series of Preferred Stock are entitled to elect two directors, they shall not be entitled to participate with the holders of Common Stock in the election of any other directors, but shall continue to be entitled to vote with the holders of Common Stock upon each other matter coming before any meeting of the stockholders. (ii) Whenever such voting right shall have vested, such right may be exercised initially either at a special meeting of the holders of shares of Series C Preferred Stock together with the holders of all other outstanding series of the Preferred Stock entitled to vote thereon, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at such meetings or by the written consent of such holders pursuant to Section 228 of the General Corporation Law of the State of Delaware. Such voting right shall continue until such time as all cumulative dividends accumulated on all outstanding series of Preferred Stock shall have been paid in full or declared and set aside for payment in full, at which time such voting right of such holders shall terminate, subject to revesting in the event of each and every subsequent failure of the Corporation to pay dividends for the requisite number of quarters as described above. (iii) At any time when such voting right shall have vested in the holders of shares of Series C Preferred Stock together with all other series of Preferred Stock entitled to vote thereon and if such right shall not already have been 38 initially exercised, a proper officer of the Corporation shall, upon the written request of 10% of the holders of record of shares of such series of Preferred Stock then outstanding, addressed to the Secretary of the Corporation, call a special meeting of holders of shares of such series of Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation or, if none, at a place designated by the Secretary of the Corporation. If such meeting shall not be called by the proper officers of the Corporation within 30 days after the personal service of such written request upon the Secretary of the Corporation, or within 30 days after mailing the same within the United States, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of record of 10% of the shares of such series of Preferred Stock then outstanding may designate in writing a holder of shares of such series of Preferred Stock to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the same place as is elsewhere provided in this paragraph (6)(c)(iii). Any holder of shares of such series of Preferred Stock that would be entitled to vote at such meeting shall have access to the stock books of the Corporation for such series of Preferred Stock for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this paragraph. Notwithstanding the provisions of this paragraph, however, no such special meeting shall be called during a period within 90 days immediately preceding the date fixed for the next annual meeting of stockholders. (iv) At any meeting held for the purpose of electing directors at which the holders of shares of Series C Preferred Stock together with all other series of Preferred Stock entitled to vote thereon shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of at least a majority of the then outstanding shares of such series of Preferred Stock shall be required and be sufficient to constitute a quorum of such series for the election of directors by such series. At any such meeting or adjournment thereof (x) the absence of a quorum of the holders of shares of such series of Preferred Stock shall not prevent the election of directors other than those to be elected by the holders of stock of such series and the absence of a quorum or quorums of the holders of capital stock entitled to elect such other directors shall not prevent the election of directors to be elected by the holders of shares of such series of Preferred Stock and (y) in the absence of a quorum of the holders of shares of such series of Preferred Stock, a majority of such holders present in person or by proxy shall have the power to adjourn the meeting for the election of directors which the holders of shares of such series of Preferred Stock may be entitled to elect, from time to time, 39 without notice (except as required by law) other than announcement at the meeting, until a quorum shall be present. (v) The term of office of all directors elected by the holders of shares of Series C Preferred Stock together with all other series of Preferred Stock entitled to vote thereon pursuant to paragraph (6)(c)(i) in office at any time when the aforesaid voting rights are vested in the holders of shares of such series of Preferred Stock shall terminate upon the election of their successors at any meeting of stockholders for the purpose of electing directors. Upon any termination of the aforesaid voting rights in accordance with paragraph (6)(c)(ii), the term of office of all directors elected by the holders of shares of such series of Preferred Stock pursuant to paragraph (6)(c)(i) then in office shall thereupon terminate and upon such termination the number of directors constituting the Board of Directors shall, without further action, be reduced by two (2) (or such other lesser number by which the number of directors constituting the Board of Directors shall have been increased pursuant to paragraph (6)(c)(i) hereof), subject always to the increase of the number of directors pursuant to paragraph (6)(c)(i) in case of the future right of the holders of shares of such series of Preferred Stock to elect directors as provided herein. (vi) In case of any vacancy occurring among the directors elected pursuant to paragraph (6)(c)(i), the remaining director who shall have been so elected may appoint a successor to hold office for the unexpired term of the director whose place shall be vacant. If all directors so elected by the holders of shares of Series C Preferred Stock together with all other series of Preferred Stock entitled to vote thereon shall cease to serve as directors before their terms shall expire, the holders of shares of such series of Preferred Stock then outstanding may, at a special meeting of the holders called as provided above, elect successors to hold office for the unexpired terms of the directors whose places shall be vacant. (d) So long as any shares of the Series C Preferred Stock are outstanding (except when notice of the redemption or conversion of all outstanding shares of Series C Preferred Stock has been given pursuant to paragraph (4)(j) and shares of Common Stock and any necessary funds have been deposited in trust for such redemption or conversion pursuant to paragraph (4)(k)), the Corporation shall not, without the affirmative vote or consent of the holders of at least a majority of the shares of Series C Preferred Stock and any other series of Preferred Stock entitled to vote thereon at the time outstanding voting or consenting, as the case may be, together as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting called for the purpose, authorize any new class of Parity Securities. (e) So long as any shares of the Series C Preferred Stock are outstanding (except when notice of the redemption or conversion of all outstanding shares of Series C Preferred Stock 40 has been given pursuant to paragraph (4)(j) and shares of Common Stock and any necessary funds have been deposited in trust for such redemption or conversion pursuant to paragraph (4)(k)), the Corporation shall not, without the affirmative vote or consent of the holders of at least 66-2/3% of the shares of Series C Preferred Stock and any other series of Preferred Stock entitled to vote thereon at the time outstanding voting or consenting, as the case may be, together as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting called for the purpose, authorize any new class of Senior Securities. (f) Except for the amendments contemplated by the exercise of the Existing Preferred Stock Option, so long as any shares of the Series C Preferred Stock are outstanding (except when notice of the redemption or conversion of all outstanding shares of Series C Preferred Stock has been given pursuant to paragraph (4)(j) and shares of Common Stock and any necessary funds have been deposited in trust for such redemption or conversion pursuant to paragraph (4)(k)), the Corporation shall not, without the affirmative vote or consent of the holders of at least 66-2/3% of the shares of Series C Preferred Stock and any other series of Preferred Stock entitled to vote thereon at the time outstanding voting or consenting, as the case may be, together as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting called for the purpose, amend the Certificate of Incorporation or this Certificate of Designation so as to affect materially and adversely the specified rights, preferences, privileges or voting rights of holders of shares of Preferred Stock. (g) (i) Except as set forth in paragraphs (6)(d) and (6)(e) above, the creation, authorization or issuance of any shares of any Junior Securities, Parity Securities or Senior Securities, (ii) the creation of any indebtedness of any kind of the Corporation, or (iii) the increase or decrease in the amount of authorized capital stock of any class, including Preferred Stock, shall not require the consent of the holders of Series C Preferred Stock and shall not be deemed to affect materially and adversely the rights, preferences, privileges or voting rights of holders of shares of Series C Preferred Stock. (7) Increase in Shares. The number of shares of Series C Preferred Stock may, to the extent of the Corporation's authorized and unissued Preferred Stock, be increased by further resolution duly adopted by the Board of Directors and the filing of a certificate of increase with the Secretary of State of the State of Delaware. (8) Limitations. Except as may otherwise be required by law, the shares of Series C Preferred Stock shall not have any powers, preferences or relative, participating, optional or other special rights other than those specifically set forth in this resolution (as such resolution may be amended from time to time) or otherwise in the Certificate of Incorporation of the Corporation. 41 IN WITNESS WHEREOF, RJR Nabisco Holdings Corp. has caused this Certificate of Designation to be made under the seal of the Corporation signed by Lawrence R. Ricciardi, its President, and attested by Joan E. Gmora, its Assistant Secretary, this 5th day of May, 1994. RJR NABISCO HOLDINGS CORP. By: /s/ Lawrence R. Ricciardi ----------------------------- Name: Lawrence R. Ricciardi Title: President Attested: By: /s/ Joan E. Gmora ---------------------------- Name: Joan E. Gmora Title: Assistant Secretary EX-4.3 3 NABISCO BRANDS DE PUERTO RICO, INC. ----------------------------------- CAPITAL ACCUMULATION PLAN ------------------------- Effective September 1, 1992 1 NABISCO BRANDS DE PUERTO RICO, INC. CAPITAL ACCUMULATION PLAN TABLE OF CONTENTS Article Page ------- ---- I. Definitions 2 1.01 Account 2 1.02 Administrative Committee 2 1.03 Affiliated Company 2 1.04 After-Tax Contributions 2 1.05 Basic Contributions 2 1.06 Beneficiary 2 1.07 Board of Directors 3 1.08 Break in Service 3 1.09 Code 3 1.10 Committee 3 1.11 Company 3 1.12 Company Contributions 3 1.13 Compensation 3 1.14 Disability 3 1.15 Effective Date 4 1.16 Eligible Employee 4 1.17 Employee 4 1.18 Entry Date 4 1.19 ERISA 4 1.20 ITA 4 1.21 Investment Fund(s) 4 1.22 Participant 4 1.23 Plan 4 1.24 Plan Administrator 5 1.25 Plan Year 5 1.26 Pre-Tax Contributions 5 1.27 Retirement 5 1.28 Rollover Contribution 5 1.29 Service 5 1.30 Severence Date 5 1.31 Spouse 6 1.32 Supplemental Contributions 6 1.33 Termination of Employment 6 1.34 Trustee 6 1.35 Trust Fund 7 1.36 Valuation Date 7 2 Article Page ------- ---- II. Participation 8 2.01 Eligibility 8 2.02 Participation Application 8 2.03 Participant Status 8 2.04 Re-employment 8 III. Contributions 9 3.01 Basic Contributions 9 3.02 Supplemental Pre-Tax Contributions 9 3.03 Supplemental After-Tax Contributions 9 3.04 Change in Basic and Supplemental Contributions 9 3.05 Suspension of Basic and Supplemental Contributions 10 3.06 Company Contributions 10 3.07 Rollover Contributions 11 3.08 ITA Section 165(e) and Code Section 401(k) and 401(m) Nondiscrimination Tests 12 3.09 Dollar Limitation on Pre-Tax Contributions 18 IV. Trust Fund and Investment Funds 19 4.01 The Trust Agreement 19 4.02 The Trustee 19 4.03 Separate Funds 19 4.04 Investment Funds 19 4.05 Temporary Investment 20 4.06 Investment of Participant Contributions 20 4.07 Investment of Company Contributions 21 4.08 Investment Managers 21 4.09 Participant Responsibility For Selection of Funds 21 4.10 Voting by Participants 21 V. Account Statements and Valuation 23 5.01 Valuation of Accounts 23 5.02 Valuation Upon Transfer, Withdrawal, or Distribution 23 5.03 Statement of Accounts 23 VI. Vesting and Forfeitures 24 6.01 Vesting of Basic and Supplemental Contributions 24 6.02 Vesting of Company Contributions 24 6.03 Vesting of Rollover Contributions 24 6.04 Forfeiture on Termination of Employment 24 6.05 Disposition of Forfeitures 24 6.06 Restoration of Forfeitures 24 3 Article Page ------- ---- VII. Distributions 25 7.01 Distribution of Benefits 25 7.02 Proof of Death and Right of Beneficiary 26 7.03 Completion of Appropriate Forms and Procedures 26 7.04 Investment Pending Distribution 26 VIII. In-Service Withdrawals and Special Pre-Tax Contribution Rules 27 8.01 In-Service Withdrawals 27 8.02 Hardship Withdrawals 27 8.03 Restrictions on Pre-Tax Contribution Distributions 28 IX. Administration 29 9.01 RJR Employee Benefits Committee 29 9.02 Administrative Committee 30 9.03 RJR Pension Investment Committee 31 9.04 Indemnification by Company 31 9.05 Plan Expenses 31 9.06 Plan Administrator 31 9.07 Agent for Process 31 9.08 Named Fiduciaries 31 X. Amendments, Termination, Permanent Discontinuance of Contributions, Merger or Consolidation 33 10.01 Amendments 33 10.02 Termination or Permanent Discontinuance of Contributions 33 10.03 Partial Termination 33 10.04 Benefits in Case of Merger or Consolidation 33 XI. Miscellaneous 34 11.01 Benefits Payable from Trust Fund 34 11.02 Elections 34 11.03 No Right to Continued Employment 34 11.04 Inalienability of Benefits and Interests 34 11.05 Qualified Domestic Relations Orders 34 11.06 Payments for Exclusive Benefit of Participants 35 11.07 Puerto Rico Law to Govern 35 11.08 No Guarantee 35 11.09 Address of Record 35 11.10 Unlocated Spouse 35 11.11 Payments in the Event of Death with no Designated Survivor or Incompetency 35 11.12 Transfer of Prior Plan Assets and Liabilities to This Plan 36 11.13 Headings 36 4 Article Page ------- ---- XII. Claim Procedure 37 12.01 Initial Determination 37 12.02 Review 37 XIII. Limitations and Restrictions 38 13.01 Code Section 415 Maximum 38 13.02 Top-Heavy Requirement 41 Schedule A - Compensation 46 5 INTRODUCTION ------------ The Nabisco Brands de Puerto Rico, Inc. Capital Accumulation Plan is effective September 1, 1992. Its purpose is to provide eligible employees of Nabisco Brands de Puerto Rico, Inc. (the "Company") with a convenient method of voluntarily accumulating personal savings on a regular and systematic basis through payroll contributions. Employee contributions are made either on a "before-tax" or an "after-tax" basis with the Company making a 50% matching contribution to Employee pre-tax Basic contributions not in excess of 6% of pay. The Plan is intended to be qualified under Section 165(a) of the Puerto Rico Income Tax Act of 1954 and Section 401(a) of the Internal Revenue Code, thereby allowing employees to defer until distribution income tax on pre-tax and Company matching contributions to the Plan, and the investment income accumulated on both Company and employee contributions. The Plan was authorized by action of the RJR Employee Benefits Committee on August 5, 1992. 6 ARTICLE I --------- DEFINITIONS ----------- 1.01 Account means, with respect to any Participant, his After-Tax ------- Contribution Account, his Pre-Tax Contribution Account, his Company Contribution Account, and his Rollover Contribution Account. 1.02 Administrative Committee is the Administrative Committee appointed by ------------------------ the Committee pursuant to Section 10.02 to carry out the day to day responsibilities of the Plan administration. 1.03 Affiliated Company means the Company and any corporation which is a ------------------ Participant of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Company; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Company; any organization (whether or not incorporated) which is a Participant of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code. 1.04 After-Tax Contributions means the Supplemental Contributions made by a ----------------------- Participant on an after-tax basis; such contributions are not eligible to receive the matching Company Contribution. 1.05 Basic Contributions means the first 6% of a Participant's gross ------------------- Compensation that he may authorize the Company to contribute as a Pre- Tax Contribution on his behalf to the Plan and which is matched on a 50% basis with Company Contributions. Basic Contributions cannot be made on an after-tax basis. 1.06 Beneficiary means any person or persons (who may be designated ----------- contingently or successively and who may be an entity other than a natural person) designated by the Participant, on a form supplied by the Committee, to receive benefits payable in the event of the death of the Participant; provided, however, that if the Participant is married at the date of his death, any such Beneficiary designation that names a Beneficiary other than his Spouse exclusively shall be void unless it has been consented thereto in writing by the Participant's Spouse and such consent was witnessed by a notary public or a Plan representative on a form supplied by the Committee. The Spouse's consent must designate the alternative Beneficiary, must 7 acknowledge the effect of such consent, and cannot be changed without subsequent spousal consent. The Participant may, however, revoke the alternative Beneficiary at any time, thereby reinstating his Spouse as sole Beneficiary. Section 11.11 should be referred to for payment in the event of death with no designated survivor. 1.07 Board of Directors means the Board of Directors of RJR Nabisco, Inc. and ------------------ any committee of directors authorized by such Board to act in its behalf with reference to the Plan. 1.08 Break in Service occurs at the end of any twelve-consecutive-month ---------------- period beginning on a Severance Date during which an Employee does not complete an hour of Service. 1.09 Code means the United States of America's 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. 1.10 Committee means the RJR Employee Benefits Committee, which shall act as --------- the Plan Administrator for the Plan. The Committee shall have the duties and powers described in Article IX. 1.11 Company means Nabisco Brands de Puerto Rico, Inc., or any successor by ------- merger, purchase or otherwise, with respect to its Employees. The Company may also be referred to as the Employer. 1.12 Company Contributions means the matching contributions made by the --------------------- Company for the Plan Year and allocated to a Participant's Company Contributions Account by reason of the Participant electing Basic Contributions. 1.13 Compensation means the basic compensation paid for services performed ------------ for the Company or an Affiliated Company which is currently includable in gross income under the ITA and such other forms of compensation as the Committee has determined shall be included (listed in Schedule A which is attached hereto). Schedule A shall be revised as the Committee from time to time modifies the forms of compensation which are to be included. Only Compensation received by the Participant while an Eligible Employee shall be taken into account for Plan purposes. 1.14 Disability means being disabled as determined by the Federal Social ---------- Security Administration. 8 1.15 Effective Date means September 1, 1992. -------------- 1.16 Eligible Employee means any person regularly employed in either an ----------------- exempt or clerical category on a full time basis by the Company and who are not covered under the RJR Nabisco Capital Investment Plan; provided, that except as the Board of Directors or the Committee, pursuant to authority delegated to it by the Board of Directors, may otherwise provide on a basis uniformly applicable to all persons similarly situated, no person shall be an "Eligible Employee" for purposes of the Plan: (a) who is excepted by the Board of Directors or the Committee, (b) whose terms and conditions of employment are determined by a collective bargaining agreement with the Company, if employee retirement benefits were negotiated thereunder, which does not make this Plan applicable to him, or (c) who is a "leased employee" as defined in Section 414(n) of the Code and who is required by such Section to be considered an employee of the Company or an Affiliated Company. 1.17 Employee means any person employed by the Company or an Affiliated -------- Company and, for purposes of the requirements of Code Section 410(b), Leased Employees. 1.18 Entry Date means the first day of each month; provided that ---------- contributions shall not begin to be withheld until the payroll period coincident with or next following the applicable Entry Date. 1.19 ERISA means the Employee Retirement Income Security Act of 1974, as ----- amended. 1.20 ITA means the Puerto Rico Income Tax Act of 1954. --- 1.21 Investment Fund(s) means the separate funds in which Contributions to ------------------ the Plan are invested in accordance with Article IV. 1.22 Participant means any person who is participating in the Plan as ----------- provided in Article II. 1.23 Plan means the Nabisco Brands de Puerto Rico, Inc. Capital Accumulation ---- Plan, as described herein or as hereafter amended. 9 1.24 Plan Administrator means the RJR Employee Benefits Committee. ------------------ 1.25 Plan Year means the period from each December 31 through the following --------- December 30, except that the initial Plan year is September 1, 1992 through December 30, 1992. 1.26 Pre-Tax Contributions means Contributions which a Participant has --------------------- designated as pre-tax contributions made by the Company on his behalf pursuant to a salary reduction agreement. 1.27 Retirement means normal retirement of a Participant at age 65, or the ---------- early retirement of a Participant who has attained age 55 and who has completed either two years of participation in the Plan or five years of Service. 1.28 Rollover Contribution means amounts a Participant contributes from --------------------- another employee benefit plan qualified under ITA Section 165(e) and Code Section 401(k) pursuant to Section 3.07. 1.29 Service means all periods during which an Employee is employed by the ------- Company or any Affiliated Company commencing with the first day of employment or the first day of reemployment and ending with his Severance Date which next follows the first day of employment or the first day of reemployment, as the case may be. The first day of employment or the first day of reemployment shall be deemed to be the first day in which the Employee performs an hour of Service. Periods of Service commencing on the first day of employment and ending on the first Severance Date and commencing on each reemployment date and ending on the Severance Date which next follows shall be aggregated on a day by day basis and 365 days of aggregated Service shall constitute one year of Service. Service shall include any period of authorized part-time employment, periods of authorized leave of absence up to a maximum of one year, periods of absence due to service in the Armed Forces of the United States, as required, and periods of absence due to illness or disability up to a maximum of 12-consecutive months. A Participant shall continue to accrue Service for purposes of vesting his Company Contribution Account while he is on a period of leave due to Disability. 1.30 Severance Date means the following: -------------- (a) the date on which an Employee quits, retires, is discharged or dies; or 10 (b) the first anniversary of the first date of a period in which an Employee remains absent from Service (with or without pay) with the Company or an Affiliated Company for any reason other than quit, retirement, discharge, or death; provided, however, the absence from Service of an Employee receiving benefits under one or more long-term disability plans of the Company or an Affiliated Company is not a severance until the earlier of Normal Retirement Age or the cessation of such disability payments; provided further that if such an Employee in active employment after his Normal Retirement Age becomes disabled, his Severance Date is the date such long-term disability plan benefits commence or would commence. In the case of an Employee who is absent from work by virtue of (i) the Employee's pregnancy, (ii) birth of the Employee's child, (iii) placement of a child with the Employee by adoption, or (iv) caring for any such child for a period of up to a year immediately following such birth or placement, the Severance Date is the second anniversary of the first day of absence from Service provided that the period between the first and second anniversary of such first day of absence is neither counted as Service nor a Break in Service. 1.31 Spouse means the person to whom the Participant is legally married. ------ 1.32 Supplemental Contributions means up to an aggregate of 10% of a -------------------------- Participant's gross Compensation which he may contribute to the Plan on a before and/or after-tax basis pursuant to Sections 3.02 and 3.03 and which are not matched with Company Contributions. Supplemental Pre-Tax Contributions are limited to 4%. 1.33 Termination of Employment means separation from the employment of the ------------------------- Company for any reason, including, but not limited to, Retirement, death, Disability, resignation or dismissal by the Company; provided, however, that transfer in employment between the Company and an Affiliated Company shall not be deemed to be Termination of Employment and provided further, that if an Employee is rehired by the Company or an Affiliated Company within 30 days of his or her separation from the employment of the Company or an Affiliated Company, such separation shall not be considered to be Termination of Employment. 1.34 Trustee means Wachovia Bank of North Carolina, N.A.and Banco Popular de ------- Puerto Rico or any trustee or trustees appointed pursuant to Article IV with whom the funds of the Plan are held. 1.35 Trust Fund means the cash and other properties arising from ---------- contributions made by Participants and by the Company in accordance with the provisions of this Plan and 11 funds transferred pursuant to a Rollover which are held and administered by the Trustee pursuant to Article IV. 1.36 Valuation Date the last business day of each month and any other date -------------- the Committee deems desirable or necessary to value the Trust Fund in accordance with Article V. The masculine pronoun whenever used herein shall include the feminine, and singular number whenever used herein shall include the plural, and the plural the singular, unless the context clearly indicates a different meaning. 12 ARTICLE II ---------- PARTICIPATION ------------- 2.01 Eligibility. ----------- (a) Each Eligible Employee as of the Effective Date shall be eligible to enroll in the Plan as of September 1, 1992. (b) Every other Employee shall become eligible for participation in the Plan as of the Entry Date coincident with or next following the date he becomes an Eligible Employee. He shall become a Participant as of the Entry Date to which Contributions are first contributed. (c) All Eligible Employees who participate in this Plan shall participate under the terms and conditions herein stated. 2.02 Participation Application. An Eligible Employee may become a ------------------------- Participant as of any future Entry Date by completing and submitting to the Committee an application form supplied by the Committee within the established time frame. The application shall specify (i) the percentage of Compensation to be contributed to this Plan as Basic and/or Supplemental Contributions, (ii) the further designation of Supplemental Contributions as Pre-Tax or After-Tax Contributions, and (iii) the naming of a Beneficiary. Participation in the Plan by an Eligible Employee is voluntary. 2.03 Participant Status. An Eligible Employee who has once become a ------------------ Participant shall remain a Participant so long as he remains in Service of the Company, and shall cease to be a Participant upon his Termination of Employment, except that if he has met the conditions for entitlement to a benefit, he shall remain a Participant so long as he has an Account balance. Active participation, however, including contributions to the Plan by or for a Participant, shall automatically be suspended effective as of the Participant's Severance Date and during any time period for which he does not receive a paycheck. Participation in the Plan shall cease as of the date Accounts are transferred to an Affiliated Plan or are completely distributed to the Participant and/or his Beneficiary. 2.04 Re-employment. If a former Eligible Employee is rehired as an Eligible ------------- Employee after a Severance Date, he shall be entitled to become a Participant on the Entry Date coincident with or next following his date of re-employment. 13 ARTICLE III - ----------- CONTRIBUTIONS - ------------- 3.01 Basic Contributions. Subject to the provisions of Section 3.04, each ------------------- Participant may elect that the Company contribute from 1% to 6% of his Compensation to the Plan in 1% increments as Basic Contributions, in lieu of an equal amount being paid to him as Compensation. These pre- tax Basic Contributions will be made through payroll deductions and will be paid to the Trustee as soon as practicable but at least on a monthly basis. 3.02 Supplemental Pre-Tax Contributions. A Participant who has authorized ---------------------------------- the maximum Basic Contribution rate of 6% may also elect that the Company make additional Pre-Tax Contributions to the Plan of 1% to 4% of his Compensation in 1% increments in lieu of an equal amount being paid to him as Compensation. These contributions will be made through payroll deductions and will be paid to the Trustee as soon as practicable, but at least on a monthly basis. In no event may Basic and Supplemental Pre-Tax Contributions combined exceed 10% of Compensation. 3.03 Supplemental After-Tax Contributions. A Participant may make ------------------------------------ contributions to the Plan on an after-tax basis, either in lieu of or in combination with Basic and, Supplemental Pre-Tax Contributions by authorizing Supplemental After-Tax Contributions of 1% to 10% of his Compensation in 1% increments. After-Tax Contributions are referred to as "Supplemental" even though a Participant can elect to make them prior to authorizing any or the full amount of Basic Contributions. However, Supplemental After-Tax Contributions are not matched with Company Contributions. These contributions will be made through payroll deductions and will be paid to the Trustee as soon as practicable but at least on a monthly basis. A Participant's After-Tax Contributions cannot exceed 10% of Compensation and his Pre-Tax and After-Tax Contributions may not in the aggregate exceed 16% of his Compensation. 3.04 Change in Basic and Supplemental Contributions. Subject to the ---------------------------------------------- provisions of Sections 3.01, 3.02 and 3.03, and not more than once a month, a Participant may change the percentage of his authorized payroll deduction by giving the required prior written notice to the Committee. Such changed percentage shall become effective beginning with the first payroll period commencing after the expiration of the notice period. If a mistake-of-fact is made with regard to any contribution, the Committee shall, depending on the mistake-of-fact, either (i) cause said contribution 14 to be returned to the Participant without restriction or (ii) accept additional contributions for the affected period. Examples of a "mistake- of-fact" would be the continuation of payroll deductions after a Participant has requested the suspension of such deductions or failure to act on written instructions to take deductions. 3.05 Suspension of Basic and Supplemental Contributions. -------------------------------------------------- (a) A Participant may, no more than once a month, suspend his Basic and/or Supplemental Contributions, provided that all Supplemental Pre-Tax Contributions shall be suspended before Basic Contributions are suspended, by notifying the Committee in writing in the manner specified, in advance of the date on which such a suspension shall become effective. The suspension shall become effective on the first Entry Date commencing on or after the expiration of the notice period. During a period of suspension of Basic Contributions, no Company Contributions on behalf of such a Participant shall be made by the Company. (b) A Participant who has suspended his Basic or Supplemental Contributions may apply to the Committee to have such contributions resumed in accordance with Sections 3.01, 3.02 and 3.03 on the first Entry Date next following the required written notice of such intent. (c) A Participant who has ceased to make contributions under the Plan because he is on an unpaid absence from Service shall again be eligible to resume making contributions on the date he returns to Service as an Eligible Employee. No contributions may be made by a Participant for any unpaid period of absence from Service including, but not limited to, absence due to sickness, leave of absence, or service in the Armed Forces. (d) A Participant who has ceased to make contributions under the Plan because he has ceased to be an Eligible Employee but, nevertheless, continues to be an Employee shall again be eligible to resume making contributions on the date he again becomes an Eligible Employee and gives written notice to the Committee in the prescribed manner. 3.06 Company Contributions. --------------------- (a) With respect to each payroll period, the Company shall contribute on behalf of each Participant an amount equal to 50% of such Participant's Basic Contributions to the Plan for such payroll period. Company Contributions will be paid to the Trustee as soon as practicable after the end of each month. 15 (b) In satisfaction of its obligation under this Section, the Company shall pay its contribution in cash. Company Contributions shall be made out of the profits of the Company. (c) In the event that the Secretary of the Treasury of Puerto Rico or the Commissioner of Internal Revenue, on timely application made after the adoption or subsequent amendment of the Plan, determines that the Plan and the implementing trust do not qualify for tax-exempt status, or refuses, in writing, to issue a favorable determination with respect to the Plan and such trust, the Company Contributions made on or after the date on which such determination or refusal is applicable may, at the Company's discretion, be returned to the Company without interest. In the event that a Company Contribution to the Plan is made by a mistake of fact or all or part of the Company's deductions under ITA Section 23(p) or Code Section 404 for contributions to the Plan are disallowed by the Puerto Rico Treasury Department or the Internal Revenue Service, the portion of the contributions attributable to such mistake of fact or to which such disallowance applies may, at the Company's discretion be returned to the Company without interest. Any such return shall be made within one year after the making of such contribution by mistake of fact or the denial of qualification or disallowance of deductions, as the case may be. 3.07 Rollover Contributions. The Trustee is authorized to accept as Rollover ---------------------- Contributions any contributions as requested by the Participant; provided that the Participant certifies that such contributions meet the following criteria: (a) such amounts were received in a distribution which constitutes a qualified total distribution as defined in Code Section 402(a)(5)(E)(i) or a distribution from an individual retirement account, annuity, or bond in which such qualified total distribution was separately invested pursuant to Code Section 408(d)(3)(A)(ii) and (D)(i); (b) such contributions (less after-tax employee contributions, if any) are contributed within 60 days after the date such contributions are received by the Participant; (c) the spousal consent requirements of Section 205(c) of ERISA and Code Section 417(a)(2) were complied with, if applicable; and (d) such Rollover Contributions meet any other conditions as determined necessary by the Trustee or Committee to comply with ITA Section 165(b)(2) and Code Section 408(d)(3). 16 3.08 ITA Section 165(e) and Code Section 401(k) and 401(m) Nondiscrimination ----------------------------------------------------------------------- Tests. ----- (a) Definitions. For purposes of this Section, the following additional ----------- definitions shall be used: ( i) Actual Contribution Percentage or ACP means the ratio (expressed ------------------------------ --- as a percentage calculated to two decimal points) of the sum of the After-Tax Contributions and matching Company Contributions under the Plan on behalf of the Eligible Participant for the Plan Year to the Eligible Participant's Compensation for the Plan Year. (ii) Actual Deferral Percentage or ADP means the ratio (expressed -------------------------- --- as a percentage calculated to two decimal points) of Pre-Tax Contributions, Qualified Matching Contributions, and Qualified Non elective Contributions on behalf of the Eligible Participant for the Plan Year to the Eligible Participant's Compensation for the Plan Year. (iii) Average Actual Contribution Percentage or Average ACP means -------------------------------------- ----------- the average expressed as a percentage calculated to two decimal points) of the Actual Contribution Percentages (ACPs) of the Eligible Participants in a group. (iv) Average Actual Deferral Percentage or Average ADP means the ---------------------------------- ----------- average (expressed as a percentage calculated to two decimal points) of the Actual Deferral Percentages (ADPs) of the Eligible Participants in a group. (v) Eligible Participant means any Eligible Employee of the Company -------------------- who is authorized under the terms of the Plan to have After-Tax Contributions, Pre-Tax Contributions, Nonelective Contributions, or matching Company Contributions allocated to his Account for the Plan Year; regardless as to whether or not any such contributions are so allocated. (vi) Family Member means an individual described in Section 414(q)(6) of ------------- the Code and includes, with respect to any employee, such employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. (vii) Highly Compensated Employee means an individual described in Section --------------------------- 414(q) of the Code and such employee's Family Members or any Eligible Participant who is more highly compensated than two-thirds of all other Eligible Participants, if as a result of such definition a lowest Average ADP is obtained. 17 (viii) Nonhighly Compensated Employee means an employee of the Company ------------------------------ who is not a Highly Compensated Employee. (ix) Nonelective Contributions means contributions made by the Company ------------------------- other than matching contributions or Pre-Tax Contributions and that the Participant cannot otherwise elect to receive in cash. ( x) Qualified Matching Contributions are matching Company Contributions -------------------------------- that are 100% vested and nonforfeitable when made and that are subject to the same distribution limitations as Pre-Tax Contributions. Qualified Matching Contributions which are used to meet the requirements of the ADP Test are not to be taken into account for purposes of the ACP Test. (xi) Qualified Nonelective Contributions means these Nonelective ----------------------------------- Contributions that are 100% vested and nonforfeitable when made and that are subject to the same distribution limitations as Pre-Tax Contributions. (b) Average Actual Deferral Percentage Test. --------------------------------------- ( i) Notwithstanding anything in this Plan to the contrary, contributions made under the Plan (and any other plan that is aggregated with the Plan in accordance with Code Section 401(k)(3) and regulations thereunder) by or on behalf of a Participant shall be restricted so as to comply with one of the following ADP tests: (A) 1.25 Test. The Average ADP for Eligible Participants who are --------- Highly Compensated Employees for the Plan Year shall not exceed the Average ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or, (B) 2 Times/2% Test. The Average ADP for Eligible Participants who --------------- are Highly Compensated Employees for the Plan Year shall not exceed the Average ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, provided that the Average ADP for Eligible Participants who are Highly Compensated Employees does not exceed the Average ADP for Eligible Participants who are Nonhighly Compensated Employees by more than two (2) percentage points or such lesser amount as the United States or Puerto Rico Secretaries of the Treasury shall prescribe. 18 The Committee shall have the right to limit pre-tax contributions of Highly Compensated Employees as, and to the extent that it, in its discretion, deems necessary to comply with one of the above tests. ( ii) Determination of ADP Excess Contributions. The amount of excess ----------------------------------------- contributions for a Highly Compensated Employee will be determined in the following manner: First, the ADP of the Highly Compensated Employee with the highest ADP is reduced to the extent necessary to satisfy the ADP Test or cause such ratio to equal the ADP of the Highly Compensated Employee with the next highest ADP. Second, this process is repeated until the ADP Test is satisfied. The amount of excess contributions for a Highly Compensated Employee is then equal to the total Pre-Tax and other Contributions taken into account for the ADP Test minus the product of the Employee's ADP as determined above and the Employee's Compensation. (iii) Special Rules. ------------- (A) For purposes of this Section, the ADP for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Pre-Tax Contributions, Qualified Matching Contributions or Qualified Nonelective Contributions allocated to his account under two or more plans or arrangements described in ITA Section 165(e) and Code Section 401(k) that are maintained by the Company or an Affiliated Company shall be determined as if all such Pre-Tax, Qualified Matching and Qualified Nonelective Contributions were made under a single arrangement. (B) In the event that this Plan satisfies the requirements of ITA Section 165(a)(3) or Code Section 410(b) only if aggregated with one or more other plans, or if one or more other Plans satisfy the requirements of ITA Section 165(a)(3) or Code Section 410(b)only if aggregated with this Plan, then this Section shall be applied by determining the ADP of Eligible Participants as if all such plans were a single plan. (C) For purposes of determining the ADP of a Participant who is a Highly Compensated Employee as described in Section 414(q) of the Code, the Pre-Tax Contributions, Qualified Matching Contributions, Qualified Nonelective Contributions, and Compensation of such Participant shall include the Pre-Tax Contributions, Qualified 19 Matching Contributions, Qualified Nonelective Contributions, and Compensation of Family Members, with the actual ADP of the Highly Compensated Employee determined pursuant to Treas. Reg. 1.401(m) -1(c)(i), and such Family Members shall be disregarded in determining the Average ADP for Participants who are Nonhighly Compensated Employees. (D) The determination and treatment of the Pre-Tax Contributions, Qualified Nonelective Contributions, Qualified Matching Contributions and ADP of any Participants shall satisfy such other requirements as may be prescribed by the United States or Puerto Rico Secretaries of the Treasury. (c) Average Actual Contribution Percentage Test. ------------------------------------------- (i) Notwithstanding anything in this Plan to the contrary, contributions made under the Plan (and any other plan that is aggregated with the Plan in accordance with Code Section 401(k)(3) and regulations thereunder) by or on behalf of a Participant shall be restricted so as to comply with one of the following ACP tests: (A) 1.25 Test. The Average ACP for Eligible Participants who are --------- Highly Compensated Employees for the Plan Year shall not exceed the Average ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or, (B) 2 Times/2% Test. The Average ACP for Eligible Participants who --------------- are Highly Compensated Employees for the Plan Year shall not exceed the Average ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, provided that the Average ACP for Eligible Participants who are Highly Compensated Employees does not exceed the Average ACP for Eligible Participants who are Nonhighly Compensated Employees by more than two (2) percentage points or such lesser amount as the United States Secretary of the Treasury shall prescribe; provided, however, that if the ADP Test under subsection (b)(i)(B) (2 Times/2% Test) was used, the 2 Times/2% Test under this subsection (c)(i)(B) shall be reduced in accordance with Treas. Reg. 1.401(m)-2 (regarding the multiple use of alternative limitations). The Committee shall have the right to limit after-tax contributions of 20 Highly Compensated Employees as, and to the extent that it, in its discretion, deems necessary to comply with one of the above tests. ( ii) Determination of ACP Excess Contributions. The amount of excess ----------------------------------------- contributions for a Highly Compensated Employee will be determined in the following manner: First, the ACP of the Highly Compensated Employee with the highest ADP is reduced to the extent necessary to satisfy the ADP Test or cause such ratio to equal the ACP of the Highly Compensated Employee with the next highest ACP. Second, this process is repeated until the ACP Test is satisfied. The amount of excess aggregate contributions for a Highly Compensated Employee is then equal to the total After-Tax, matching Company and other Contributions taken into account for the ACP Test over the product of (1) the Employee's ACP following the reduction described above and (2) the Employee's Compensation. (iii) Special Rules. ------------- (A) For purposes of this Section, the ACP for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to make After-Tax Contributions, or to receive matching Company Contributions, Qualified Nonelective Contributions or Pre-Tax Contributions allocated to his account under two or more plans or arrangements described in Code Section 401(a) or 401(k) that are maintained by the Company or an Affiliated Company shall be determined as if all such contributions were made under a single plan. (B) In the event that this Plan satisfies the requirements of Code Section 410(b) only if aggregated with one or more other plans, or if one or more other Plans satisfy the requirements of Code Section 410(b) only if aggregated with this Plan, then this Section shall be applied by determining the ACP of Eligible Participants as if all such plans were a single plan. (C) For purposes of determining the ACP of an Eligible Participant who is a Highly Compensated Employee, the After-Tax Contributions, matching Company Contributions and Compensation of such Participant shall include the After-Tax Contributions, matching Company Contributions, and Compensation of Family Members, and such Family Members shall be disregarded in determining the ACP for Eligible Participants who are Highly Compensated Employees. 21 (D) The determination and treatment of the ACP of any Participant shall satisfy such other requirements as may be prescribed by the United States Secretary of the Treasury, including the provisions of Treas. Reg. 1.401(m) and any successor regulation, which is incorporated herein by reference. (d) Corrections of Excess Contributions. ----------------------------------- ( i) If the Committee shall determine that the Pre-Tax Contributions on behalf of any Participant or group of Participants might result in discrimination in favor of Employees who are officers, shareholders or Highly Compensated Employees or might cause the Plan to violate the requirements for cash or deferred arrangement under ITA Section 165(e) or Code Section 401(k), the Committee shall have the right to cause such adjustments to be made in the past, current or future Pre-Tax Contributions on behalf of such Participants and in the manner provided in Treas. Regs. 1.401(k)-1(f) as will, in the Committee's opinion, avoid such discrimination and satisfy the requirements of ITA Section 165(e) or Code Section 401(k), including, without limitation, the right to recharacterize any Pre-Tax Contributions on behalf of a Participant as current Compensation of the Participant to either be distributed (along with income allocable thereto) to the Participant or contributed as an After-Tax Contribution and subject to such terms and conditions as will cause the Plan to meet the requirements for a qualified cash or deferred arrangement under ITA Section 165(e) or Code Section 401(k). The decision of the Committee in this regard shall be final and shall not be subject to question by the Trustee, the Company or by any Participant or group of Participants. Any pre-tax Basic Contributions that are recharacterized as After-Tax Contributions pursuant to this Section shall be eligible to be matched with Company Contributions. ( ii) If the Committee shall determine that the After-Tax Contributions of any Participant or group of Participants might result in discrimination in favor of employees who are officers, shareholders or Highly Compensated Employees, or might cause the Plan to violate the requirements of ITA Section 165(a)(4) or Code Section 401(m), the Committee shall have the right to cause such adjustments to be made in past, current or future After-Tax Contributions of such Participants and in the manner provided in Treas. Reg. 1.401(m)-1(e) as will, in the Committee's opinion, avoid such discrimination and satisfy the requirements of ITA Section 165(a)(4) or Code Section 401(m), including, without limitation, the right to distribute such contributions (along with income allocable thereto) to the Participant 22 and subject to such terms and conditions as will cause the Plan to meet the requirements of ITA Section 165(a)(4) or Code Section 401(m). The decision of the Committee in this regard shall be final and shall not be subject to question by the Trustee, the Company or by any Participant or group of Participants 3.09 Dollar Limitation on Pre-Tax Contributions. ------------------------------------------- (a) Notwithstanding anything else in this Article, a participant may not designate more than $7,000 (or such other amount as may be specified by the Internal Revenue Service or the Secretary of the Treasury of Puerto Rico on account of an increase in cost of living index) as Pre-Tax Contributions in any calendar year. (b) Notwithstanding any other provision of the Plan, Excess Pre-Tax Contributions and income allocable thereto shall be distributed no later than each April 15 to Participants who claim Allocable Excess Pre-Tax Contributions for the preceding calendar year. "Allocable Excess Pre- Tax Contributions" means the amount of Pre-Tax Contributions for a calendar year that the Participant allocates to this Plan pursuant to the claim procedure described herein. (c) The Participant's claim shall be in writing, shall be submitted to the Committee no later than March 1; shall specify the Participant's Excess Pre-Tax Contributions for the preceding calendar year; and shall be accompanied by the Participant's written statement that if such amounts are not distributed, such Allocable Excess Pre-Tax Contributions, when added to amounts deferred under other plans or arrangements described in Sections 401(k), 402(h), 408(k) or 403(b) of the Code, exceeds the limit imposed on the Participant by Section 402(g) of the Code for the year in which the deferral amount occurred. (d) The Allocable Pre-Tax Contributions distributed to a Participant with respect to a calendar year shall be adjusted for income and, if there is a loss allocable to the Excess Pre-Tax Contributions, shall in no event be less than the lessor of the Participant's Pre-Tax Account under the Plan or the Participant's Pre-Tax Contributions for the Plan Year. 23 ARTICLE IV ---------- TRUST FUND AND INVESTMENT FUNDS ------------------------------- 4.01 The Trust Agreement. The Company shall enter into a trust agreement ------------------- which shall contain such provisions as shall render it impossible for any part of the corpus of the Trust or income therefrom to be at any time used for, or diverted to, purposes other than for the exclusive benefit of Participants. Any or all rights or benefits accruing to any person under the Plan with respect to any Company Contributions deposited under the Trust Agreement shall be subject to all the terms and provisions of the Trust which shall specifically incorporate and be subject to the provisions of the Plan. 4.02 The Trustee. The Trustee will be a corporate trustee appointed by the ----------- Committee to serve at its pleasure. The Committee may appoint a Puerto Rican bank as either Co-Trustee or as an agent of the Trustee as necessary to comply with Puerto Rican laws. 4.03 Separate Funds. The Trustee will maintain the following separate -------------- Investment Funds within the Trust Fund as active Funds: the General Stock Fund, the Growth Stock Fund, the Real Estate Fund, the Government Securities Fund, and the Interest Income Fund. In addition, the Trustee will add and maintain any other Investment Funds as are designated by the RJR Pension Investment Committee, including a Company Common Stock Fund. Appropriate Accounts for each Participant shall be established and maintained in each Investment Fund in which a Participant has an interest. 4.04 Investment Funds. ---------------- (a) Interest Income Fund. The Interest Income Fund consists of assets -------------------- invested in investment contracts purchased from banks and insurance companies which offer interest income at rates that are predetermined annually or that vary with the investment experience of the contracts' underlying assets. Assets will also be invested in one to three year fixed income securities. (b) Growth Stock Fund. The Growth Stock Fund consists of common stocks and ----------------- other securities selected by the Trustee or any investment manager as may be appointed pursuant to the Trust with the investment objective of maximizing total return primarily through emphasis on capital appreciation, with current income of secondary importance. 24 (c) General Stock Fund. The General Stock Fund consists primarily of ------------------ various common stocks selected by the Trustee or any investment manager as may be appointed pursuant to the Trust with the investment objective of generating an above-average total return through emphasis on capital appreciation and dividend income. (d) Government Securities Fund. The Government Securities Fund will invest -------------------------- in short-term U.S. Government securities that mature within one year, with a maximum average maturity of 90 days. (e) Real Estate Fund. The Real Estate Fund consists of assets invested in ---------------- one or more pooled real estate funds managed by insurance companies or other financial institutions. Such pooled funds seek to achieve stable long-term rates of return through direct ownership of income producing properties, diversified by usage and location. The objective of the Real Estate Fund is to provide long-term growth in assets that out-pace inflation through returns from rental income and appreciation. (f) Common Stock Fund. (If and when approved by the Pension Investment ----------------- Committee.) The Common Stock Fund consists of shares of Common Stock of the Parent Company. Refer to the Plan's Prospectus for a complete description of Common Stock. 4.05 Temporary Investment. Pending permanent investment of the assets of any -------------------- Investment Fund, the Trustee may temporarily hold cash or make short- term investments in obligations of the United States Government, commercial paper, an interim investment fund for tax qualified employee benefit plans established by the Trustee unless otherwise provided by applicable law, or other investments of a short-term nature. 4.06 Investment of Participant Contributions. --------------------------------------- (a) Election. All Basic and Supplemental Participant Contributions will be -------- invested at the election of the Participant in multiples of 5% in the Funds described in Section 4.04. A Participant may make an election or, once in any three-month period, change a prior election effective as to future contributions by giving notice to the Committee in the prescribed manner. Any such election or change of election shall be effective as of the first payroll period after it is processed. 25 (b) Transfer of Investments. A Participant (including a Participant who has ------------------------ a Termination of Employment) may, by giving notice to the Committee in the prescribed manner, elect to have all or any multiple of 5% of the value of his Account in any Investment Fund as of any future Valuation Date transferred to another Investment Fund described in Section 4.04. A Participant may make only one such election under this subsection 4.06(b) within any three-month period. The amount transferred from any Investment Fund will be based upon values as of such future Valuation Date, and the change in investments shall be made as soon as reasonably possible thereafter. 4.07 Investment of Company Contributions. Company Contributions will track ----------------------------------- the Investment Fund elections that a Participant makes with regard to Basic and Supplemental Contributions. 4.08 Investment Managers. The RJR Pension Investment Committee may enter ------------------- into a written agreement with or direct the Trustee to enter into an agreement with one or more investment managers to manage the investments of one or more of the Investment Funds. Such investment managers may include one or more legal reserve life insurance companies which enter into group annuity contracts with the Trustee. The RJR Pension Investment Committee may remove any such investment manager or any successor investment manager, or direct the Trustee to do so, and any such investment manager may resign. The RJR Pension Investment Committee may, upon removal or resignation of an investment manager, provide for the appointment of a successor investment manager. 4.09 Participant Responsibility For Selection of Funds. Each Participant is ------------------------------------------------- solely responsible for the selection of his Investment Funds. Neither the Trustee, the Committee, any Administrative Committee, the RJR Pension Investment Committee, the Company nor any of the directors, officers or employees of the Company are empowered to advise a Participant as to the manner in which his Accounts shall be invested. The fact that a security is available to Participants for investment under the Plan shall not be construed as a recommendation for the purchase of that security, nor shall the designation of any Investment Fund impose any liability on the Company, its directors, officers or employees, the Trustee, the Committee, any Administrative Committee, or the RJR Pension Investment Committee. 4.10 Voting by Participants. (This section will be applicable if and when a ---------------------- Parent Company Common Stock Fund is authorized.) 26 (a) Voting of Stock Generally. Each Participant shall have the right and ------------------------- shall be afforded the opportunity to instruct the Trustee how to vote at any meeting of the Parent Company's shareholders that proportionate number of the total number of shares of Common Stock held in the Common Stock Fund which is the same proportion that the value of his interest bears to the total value of the Fund. Instructions by Participants to the Trustee shall be in such form and pursuant to such regulations as the Committee may prescribe. Any such instructions shall remain in the strict confidence of the Trustee. Any share for which no such instructions are received by the Trustee shall be voted by the Trustee in the same proportion as the shares for which instructions are received. (b) Tender of Exchange Offers. In the event of a tender or exchange offer ------------------------- for any or all shares of Common Stock, the Committee shall notify each Participant or Beneficiary and utilize its best efforts to timely distribute or cause to be distributed to him such information as will be distributed to shareholders of the Parent Company in connection with any such tender or exchange offer. Each Participant or his Beneficiary shall have the right to instruct the Trustee in writing not to tender or exchange shares of Common Stock credited to his Account under the Trust Fund. The Trustee shall tender or exchange all shares of Common Stock credited to a Participant's Account under the Trust Fund unless instructions not to tender or exchange such shares have been received. 27 ARTICLE V --------- ACCOUNT STATEMENTS AND VALUATION -------------------------------- 5.01 Valuation of Accounts. As of each Valuation Date, the Accounts of each ---------------------- Participant shall be adjusted to reflect any appreciation or depreciation in the fair market value and income earned by each Investment Fund in which the Participant's Accounts are invested since the prior Valuation Date. Such fair market value shall be the aggregate fair market value of all securities or other property held for each Investment Fund, plus cash and accrued earnings, less accrued expenses and proper charges against each Investment Fund, all as of the Valuation Date. Participant accounts shall be adjusted in proportion to the balance in each Participant's account on each Valuation Date, adjusted for distribution. When determining the value of Participant accounts, any deposits due which have not been deposited in the Trust Fund on behalf of the Participant shall be added to his accounts. Similarly, adjustments of accounts for appreciation or depreciation of an Investment Fund shall be deemed to have been made as of the Valuation Date to which adjustment relates, even though they are actually made as of a later date. 5.02 Valuation Upon Transfer, Withdrawal, or Distribution. The valuation of ---------------------------------------------------- accounts for purposes of an in-service withdrawal, a transfer of accounts to another investment fund, or a cash distribution shall be as described in Section 5.01. 5.03 Statement of Accounts. Each Participant shall be furnished at least --------------------- annually a statement setting forth the value of his Accounts. 28 ARTICLE VI ---------- VESTING AND FORFEITURES ----------------------- 6.01 Vesting of Basic and Supplemental Contributions. Each Participant's ----------------------------------------------- Basic and Supplemental Contributions shall at all times be fully vested. 6.02 Vesting of Company Contributions. A Participant shall become fully -------------------------------- vested in his Company Contributions upon completion of the earlier of (i) 60 months of Service or (ii) completion of 24 months of Service subsequent to his first Entry Date, or (iii) in the event of any one of the following: (a) attainment of age 65, (b) Retirement, (c) death, (d) Disability (e) termination of the Plan, or (f) complete discontinuance of Company Contributions. 6.03 Vesting of Rollover Contributions. Contributions transferred pursuant --------------------------------- to a Rollover (Section 1.28) shall at all times be fully vested. 6.04 Forfeiture on Termination of Employment. If a Participant's employment --------------------------------------- is terminated prior to attainment of age 65 for reasons other than Retirement, Disability, or death, the portion, if any, of his Company Contribution Account in which he is not vested shall be forfeited upon the earlier of (i) the accrual of five (5) consecutive Break in Service year, or (ii) the receipt of a cash-out , and under circumstances where all Participant Contributions were distributed prior to Termination of Employment or there are no Participant Contributions, a cash-out will be deemed to have been made on the date the Termination of Employment occurred. All forfeitures pursuant to (ii) above are subject to the provisions of Section 6.06. 6.05 Disposition of Forfeitures. All forfeitures shall be used to reduce the -------------------------- Company Contributions otherwise payable to the Plan. 6.06 Restoration of Forfeitures. Any amount forfeited pursuant to the -------------------------- provisions of clause (ii) of Section 6.04 shall be restored to the Company Contribution Account of a Participant if the Participant is re- employed by the Company or an Affiliated Company prior to the expiration of five years after his Termination of Employment. The restoration will occur without the requirement that the Participant repay to the Plan any amounts previously distributed to him. 29 ARTICLE VII ----------- DISTRIBUTIONS ------------- 7.01 Distribution of Benefits. ------------------------- (a) Termination of Employment. A Participant who has a Termination of ------------------------- Employment for any reason except death shall receive a lump sum distribution of the value of his vested Accounts valued as of the valuation period in which such termination occurs or, if later, as of the next valuation period after a written application for distribution has been received by the Committee. Distributions provided under the Plan shall be made as soon as practicable after the valuation period. If the Committee has not received an application for distribution by the time specified in subsection (c) below, a distribution shall automatically be made at such time. (b) Death. The Account of a Participant who has died shall be distributed ------ to his Beneficiary in a single lump sum payment valued as of the valuation period in which the death occurs or, if later, as of the next valuation period after notification of the Participant's death; provided, however, that if the Beneficiary is the Participant's surviving Spouse, a distribution shall not be made until a written application for distribution from the surviving Spouse has been received by the Committee. If the Committee has not received an application for distribution by the time the Participant would have attained the age described in (c) below, the distribution shall automatically be made in accordance with (c) below. (c) Latest Date for Distribution. Unless otherwise elected pursuant to ----------------------------- subsection (a) or (b) above, all distributions shall be made no later than the April 1 of the calendar year following the calendar year such Participant attains age 70 1/2. (d) Small Lump Sum Cash-Outs. The foregoing notwithstanding, if the value ------------------------- of the Participant's vested Account does not exceed $3,500, a distribution shall be made to the Participant within 60 days after the end of the Plan Year in which he has a Termination of Employment. The Account shall be valued as of the December 31 Valuation Date. In no event shall the Account of a Participant which is in excess of the amount of $3,500 be distributed to him or on his behalf prior to the time specified in (c) above without the written consent of the Participant or, if applicable, his surviving Spouse. 30 (e) QDRO. Notwithstanding subsections (a) - (d) above, amounts payable ----- under a Qualified Domestic Relations Order pursuant to Section 11.05 shall be distributed to the alternate payee entitled to such payment as soon as a determination is made by the Committee that the order is so qualified, if the order provides for immediate payment. 7.02 Proof of Death and Right of Beneficiary. The Committee may require and ---------------------------------------- rely upon such proof of death and such evidence of the right of any Beneficiary to receive the undistributed value of the Account of a deceased Participant as the Committee may deem proper, and its determination of death and of the right of such Beneficiary or other person to receive payments shall be conclusive. 7.03 Completion of Appropriate Forms and Procedures. The Committee has ----------------------------------------------- prescribed forms/procedures providing notice to it in order for a distribution to be made under the Plan. In the event a Participant or Beneficiary does not comply with such procedures before the end of the calendar month following the date a distribution becomes payable under the terms of the Plan, such Participant or Beneficiary's Account may, at the option of the Committee (taking into account Section 11.11), be mailed to the Address of Record as provided in Section 11.09. The Valuation Date for purposes of this Section 7.03 shall be the last day of the valuation period coincident with or next following the date of a Participant's termination or, if later, the Valuation Date immediately preceding the required distribution date under Section 7.01(c). 7.04 Investment Pending Distribution. A Participant is not entitled to any -------------------------------- interest, dividends or any other form of investment proceeds on his Account for the period between the Valuation Date and the date payment is made. 31 ARTICLE VIII ------------ IN-SERVICE WITHDRAWALS ---------------------- AND SPECIAL PRE-TAX CONTRIBUTION RULES -------------------------------------- 8.01 In-Service Withdrawals. Subject to the requirements listed below, a ---------------------- Participant may make a withdraw of his After-Tax Contributions. A proportional share of earnings on such contributions will be distributed at such time. Pre-Tax Contributions (Basic or Supplemental) cannot be withdrawn except in the event of a hardship (See 8.02). (a) Withdrawals may only be made by prior notice to the Committee in the manner prescribed by the Committee. (b) Excluding Hardship withdrawals, no more than one withdrawal may be made in any six-month period. (c) In no event may a Participant make a withdrawal in an amount less than $500, or the full value of the Account, if less. (d) In no event may a Participant select the Fund from which his stated amount of withdrawal will be withdrawn. (e) Payments of withdrawal amounts shall be made as soon as practicable after a Participant's election to withdraw and will be valued as of the preceding Valuation Date. 8.02 Hardship Withdrawals. A Participant who has a Hardship may make a --------------------- withdrawal of his Pre-Tax Contributions (including Rollover Contributions), but not the earnings thereon, subject to the following. Financial hardship for purposes of this Section shall mean that a Participant requires a withdrawal of money for an immediate and heavy financial need. Such withdrawal cannot exceed the sum of (i) the amount required to meet such need and (ii) any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated as a result of the distribution. No withdrawal shall be permitted unless the hardship cannot reasonably be relieved from other sources including distributions (other than hardship distributions) and nontaxable loans available under any plan. Purchase by a Participant of a primary residence, college tuition for a Participant or his dependents, and any non-reimbursed medical expense of a Participant or his dependents may generally be considered situations of heavy financial need, unless otherwise governed by law or regulation. The Committee may, under rules 32 established by it which are uniformly applicable to all similarly situated Participants, determine other circumstances where a Participant has a heavy financial need and the decision of the Committee as to whether a Participant satisfies the financial hardship rule shall be conclusive, unless otherwise governed by law or regulation. 8.03 Restrictions on Pre-Tax Contribution Distributions. Notwithstanding any -------------------------------------------------- other provision in this Plan to the contrary, a Participant's Pre-Tax Contribution Account may not be distributed earlier than upon one of the following events: (a) The Participant's Retirement, death, Disability or Termination of Employment; (b) The termination of the Plan without the establishment of a successor plan; (c) A Participant's attainment of age 59 1/2; (d) A Participant's Hardship, restricted as set forth in Section 8.02; (e) The sale or other disposition of the Company or any Affiliated Company to an unrelated corporation, which does not maintain the Plan, of substantially all of the assets used in a trade or business, but only with respect to Employees who continue with the acquiring corporation; or (f) The sale or disposition by the Company or any Affiliated Company of its interest in a subsidiary to an unrelated entity which does not maintain the Plan, but only with respect to Employees who continue employment with the subsidiary. This Section is intended to comply with the earliest distribution requirements of Treasury Reg. 1.401(k)-1(d) and is not intended to add any forms of distribution not otherwise allowed under the Plan. 33 ARTICLE IX ---------- ADMINISTRATION -------------- 9.01 RJR Employee Benefits Committee. ------------------------------- (a) The Committee shall have control of and manage the operation and administration of the Plan. It shall have the authority to make amendments to the Plan to ensure compliance with ERISA, to maintain the qualified status of the Plan under ITA and the Code, and to make other amendments to the Plan provided that no such amendments cause a material increase in cost to the Company. The Committee shall also have the authority to appoint and substitute trustees, investment managers and actuaries for the Plan and to enter into and amend Plan trust agreements and agreements with investment managers. (b) The Committee shall consist of not less than three (3) persons appointed from time to time by the Board of Directors of RJR Nabisco, Inc. to serve at the pleasure of said Board of Directors. Any Participant of the Committee may resign by delivering a written resignation to the Secretary of the Committee and such resignation shall be effective upon the date specified therein. (c) The Committee shall elect from its members a Chairman, and shall also elect a Secretary who may be but need not be one of the members of the Committee. The Committee may appoint from its members such committees with such powers as it shall determine, and may authorize one or more of its members, or any agent, to execute or deliver any instrument or make any payment in its behalf. (d) The Committee shall hold meetings upon such notice, at such place or places, and at such time or times as it may from time to time determine. (e) A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business. All resolutions or other action taken by the Committee shall be by the vote of a majority of the members of the Committee present at any meeting or without a meeting by an instrument in writing signed by a majority of the members of the Committee. 34 (f) No member of the Committee shall receive any compensation for his service as such, and, except as may be required by applicable law, no bond or other security is required of him in such capacity in any jurisdiction. 9.02 Administrative Committee. ------------------------ (a) The Committee, in its discretion, may delegate its administrative duties and responsibilities to one or more Administrative Committees each consisting of three or more persons, who shall be appointed by and serve at the pleasure of the Committee and one or more of whom may also be members of such Committee. Vacancies in the Administrative Committee shall be filled by the Committee but the Administrative Committee may act, notwithstanding any vacancies, so long as there are at least two members of such Committee. The members of an Administrative Committee shall serve without compensation for their services as such, but shall be reimbursed by the Company for all necessary expenses incurred in the discharge of their duties. (b) Subject to restrictions imposed by the Committee, an Administrative Committee's powers shall include the following powers: (i) to interpret Plan provisions with respect to eligibility, service, vesting and determination of benefits, (ii) to calculate benefits and authorize the payment of benefits by the Plan trustees through disbursement accounts as directed by the Administrative Committee, (iii) to authorize the payment of routine plan expenses exclusive of trustee, investment manager, or actuary fees, (iv) to prepare and/or approve the filing of required governmental reports, (v) to maintain Plan and Account records, (vi) to prepare employee announcements, forms and procedures, and (vii) to review denials of benefit claims made by Participants or Beneficiaries. An Administrative Committee, at its discretion, may delegate to assistants, including employees in RJR Nabisco, Inc.'s or the Company's Employee Benefits Department, ministerial and clerical duties. 35 9.03 RJR Pension Investment Committee. -------------------------------- (a) The RJR Pension Investment Committee is a committee whose members are appointed by the Compensation Committee of the Board of Directors to serve at the pleasure of the Compensation Committee. (b) The RJR Pension Investment Committee is charged with the responsibility to approve all matters with respect to the funding of the plans, including, but not limited to, actuarial assumptions, investment guidelines, and the appointment and removal of investment managers. 9.04 Indemnification by Company. To the extent not insured against by any -------------------------- insurance company pursuant to the provisions of any applicable insurance policy, the Company shall indemnify and hold harmless the members of the Committee, the members of any Administrative Committee and their assistants from any and all claims, demands, lawsuits, or proceedings in connection with the Plan, including the expenses of defense, provided, that such indemnifications shall not apply to any person for such person's act of willful misconduct. 9.05 Plan Expenses. The expenses of administering the Plan, including, ------------- without limitation, reasonable fees and expenses of the trustee, certified public accountants, legal counsel, investment managers, and investment advisors, shall be paid from the trust established in accordance with Section 4.01 unless paid directly by the Company at its election. 9.06 Plan Administrator. The Plan Administrator shall be the RJR Employee ------------------ Benefits Committee and it shall be responsible for the performance of all reporting and disclosure obligations under ERISA and regulations promulgated by any federal, state and local agency; provided that the Committee may delegate under Section 9.02 some or all of such duties as Plan Administrator. 9.07 Agent for Process. The Secretary of Nabisco Brands de Puerto Rico, ----------------- Inc. shall be the designated agent for the service of legal process. 9.08 Named Fiduciaries. ----------------- (a) The Committee, the RJR Pension Investment Committee and any Administrative Committee, if delegated power in accordance with Section 9.02, shall each constitute named fiduciaries as such term is defined in ERISA. 36 (b) By resolution or by an appropriate instrument executed by duly authorized officer of the Company, the Company may appoint one or more other persons or committees as a named fiduciary in respect of the duties delegated to him or it in such resolution or instrument. (c) Any named fiduciary designated herein or appointed as provided herein, unless precluded from doing so by the terms of such appointment, may by appropriate instrument designate any person (including any firm or corporation) to carry out part or all of such fiduciary's responsibilities and upon such designation the named fiduciary shall have no liability, except as imposed by applicable law, for any act or omission of such person. The foregoing does not preclude any other fiduciary to the extent allowed by ERISA and the terms of his appointment from delegating part or all of such fiduciary's responsibilities with respect to the Plan. (d) Any fiduciary may serve in more than one fiduciary capacity with respect to the Plan. 37 ARTICLE X --------- AMENDMENTS, TERMINATION, PERMANENT DISCONTINUANCE ------------------------------------------------- OF CONTRIBUTIONS, MERGER OR CONSOLIDATION ----------------------------------------- 10.01 Amendments. The Committee reserves the right at any time and from time ---------- to time, both retroactively and prospectively, to modify or amend, in whole or in part, any or all of the provisions of the Plan, provided, however, that no such modification or amendment shall make it possible for any part of the funds of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of Participants, Spouses, former Participants, retired Participants or Beneficiaries under the Plan; and that no modification or amendment shall be made which has the effect of decreasing retroactively the Accounts of any Participant, of reducing the nonforfeitable percentage of the Company Contribution Account of a Participant below the nonforfeitable percentage thereof computed under the Plan as in effect on the later of the date on which the amendment is adopted or becomes effective, or of eliminating an optional form of benefit, except as permitted by law. 10.02 Termination or Permanent Discontinuance of Contributions. The Committee -------------------------------------------------------- may terminate the Plan with respect to all Participating Units or any of them or direct complete discontinuance of contributions hereunder by all or any of the Participating Units for any reason at any time. In case of such termination or complete discontinuance of contributions hereunder, there shall automatically vest in the appropriate Participants nonforfeitable rights to the Company Contributions credited to their Accounts and the total amount in each Participant's Accounts shall be distributed, as the Committee shall direct, to him or for his benefit. 10.03 Partial Termination. In the event of a partial termination of the Plan, ------------------- the provisions of Section 10.02 shall be applicable only to the Participants affected by such partial termination. 10.04 Benefits in Case of Merger or Consolidation. The Plan may not be merged ------------------------------------------- or consolidated with, nor may its assets or liabilities be transferred to, any other plan unless each Participant, Spouse, former Participant, retired Participant or Beneficiary under the Plan would, if the resulting plan were then terminated, receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer if the Plan had then terminated. 38 ARTICLE XI ---------- MISCELLANEOUS ------------- 11.01 Benefits Payable from Trust Fund. All persons with any interest in the -------------------------------- Trust Fund shall look solely to the Trust Fund for any payments with respect to such interest. 11.02 Elections. Elections hereunder shall be made by a Participant in --------- writing by the completion and delivery to the Committee of forms prescribed by the Committee for such purposes, within the time limits set forth hereunder with respect to each such election or, if no time limit is set forth, such limit as may be established by the Committee. 11.03 No Right to Continued Employment. Neither the establishment of the Plan -------------------------------- nor the payment of any benefits thereunder nor any action of the Company, the Board of Directors, the Committee or the Trustee shall be held or construed to confer upon any person any legal right to be continued in the employ of the Company. 11.04 Inalienability of Benefits and Interests. ---------------------------------------- (a) No benefit payable under the Plan or interest in the Trust Fund shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such attempted action shall be void and no such benefit or interest shall be in any manner liable for or subject to debts, contracts, liabilities, engagements or torts of any Participant, Spouse or Beneficiary. (b) If any Participant, Spouse or Beneficiary shall become bankrupt or shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any benefit payable under the Plan or interest in the Trust Fund, then to the extent permitted by law, the Committee in its discretion may hold or apply such benefit or interest or any part thereof to or for the benefit of such Participant, or his Beneficiary, his Spouse, children, blood relatives, or other dependents, or any of them, in such manner and in such proportions as the Committee may consider proper. 11.05 Qualified Domestic Relations Orders. The provisions in Section 11.04(a) ----------------------------------- shall also apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to a domestic relations order, unless such order is determined to be a qualified domestic relations order, as defined in Section 414(p) of the Code, or any domestic relations order entered before January 1, 1985. 39 11.06 Payments for Exclusive Benefit of Participants. Payments of benefits in ---------------------------------------------- respect of the interest of a Participant under the Plan to any person other than such Participant in accordance with the provisions of the Plan shall be deemed to be for the exclusive benefit of such Participant. 11.07 Puerto Rico Law to Govern. All questions pertaining to the ------------------------- construction, regulation, validity and effect of the provisions of the Plan shall be determined in accordance with the laws of Puerto Rico, except as provided in Section 514 of ERISA. 11.08 No Guarantee. Neither the Company nor the Trustee guarantee the Trust ------------ Fund in any manner against loss or depreciation. 11.09 Address of Record. Each individual or entity with an actual or ----------------- potential interest in the Plan shall file and maintain a current record address with the Plan. Communications mailed by the Company, Trustee, or Committee to such record address fulfills all obligations to provide required information to Participants, including former employees, Surviving Spouses and Beneficiaries, in regard to the Plan. If no record address is filed, it may be presumed that the address used by the Company in forwarding statements of a Participant's Account is the record address. 11.10 Unlocated Spouse. Notwithstanding the consent requirement in Section ---------------- 1.05, if the Participant establishes to the satisfaction of the Committee that such written consent cannot be obtained because there is no spouse or the spouse cannot be located, a waiver shall be deemed to be valid. Any consent necessary under Section 1.05 will be valid only with respect to the spouse who signs the consent, or in the event of a deemed election, the designated spouse. 11.11 Payments in the Event of Death with no Designated Survivor or ------------------------------------------------------------- Incompetency. In the event of (i) the death of a Participant, a Spouse ------------ or Beneficiary not survived by a person designated to receive any payment then due, or (ii) the Committee finding that a Participant or other person entitled to a benefit is unable to care for his affairs because of illness or accident or is a minor or has died, or (iii) there being no Spouse or designated Beneficiary, the Committee may direct that any benefit payment due the Participant, unless claim shall have been made therefor by a duly appointed legal representative, be paid to his spouse, a child, a parent or other blood relative, or to a person with whom he resides, and any such payment so made shall be a complete discharge of the liabilities of the Plan therefor. 40 The Committee shall determine to what extent, if any, previous service with such company shall be recognized as Service, but subject to the continued qualification of the Trust for the Plan as tax exempt under the ITA. Any such company may terminate its participation in the Plan with respect to a designated unit of its employees upon appropriate action by it, in which event the funds of the Plan held on account of Participants in the employ of such company and any unpaid balances of the Accounts of Participants who have separated from the employ of such company, shall be determined by the Committee and shall be distributed as provided in Section 10.02 in the event of termination of the Plan, or shall be segregated by the Trustee as a separate trust fund, pursuant to direction to the Trustee by the Committee, continuing the Plan as a separate plan for such employees of such company under which the board of directors of such company shall succeed to all the powers and duties of the Board of Directors, including the appointment of the Participants of the Committee. 11.12 Transfer of Prior Plan Assets and Liabilities to This Plan. Effective ---------------------------------------------------------- as of a date established by the Committee after receipt of Puerto Rico Treasury Department and Internal Revenue Service determinations that (i) this Plan meets the applicable requirements of Section 165(a) of the ITA and Section 401(a) of the Code, and (ii) a prior plan or plans meets the applicable requirements of Section 165(a) of the ITA and Section 401(a) of the Code, the assets in cash and liabilities (or only assets not in payout status and related liabilities if directed by the Committee) of a prior plan may be transferred to this Plan if the Committee so directs. Notwithstanding the immediately preceding sentence, this Plan shall not accept a Trustee-to-Trustee transfer from any plan that is subject to the requirements of Section 205 of ERISA. Any such transfer shall take place only on a Valuation Date. In the absence of an applicable Participant election, assets transferred from a prior plan shall be invested in the Government Securities Fund, and the Accounts of Participants and Beneficiaries under the prior plan will become their Accounts as Participants and Beneficiaries under this Plan, effective as of the transfer date. 11.13 Headings. Headings of Articles and Sections of the Plan are inserted -------- for convenience of reference. They constitute no part of the Plan. 41 ARTICLE XII ----------- CLAIM PROCEDURE --------------- 12.01 Initial Determination. The initial determination of a Participant's, --------------------- Spouse's or Beneficiary's eligibility for, and the amount of, a benefit shall be made by the Committee which shall mail or deliver to each such individual who has filed an effective claim for a benefit a written statement of the amount of his benefit or a notice of denial of his claim on or before the 90th day following the Committee's receipt of such claim. If special circumstances require additional time for processing the claim, the Committee may delay issuing its statement or notice for an additional 90 days provided that the Participant, Spouse or Beneficiary is notified of the circumstances necessitating the delay and the date the Committee expects to render its final opinion. A claim for benefits is not effective unless filed on forms prescribed by the Committee. 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 Participant, Spouse or Beneficiary or his 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. 42 12.02 Review. Each Participant, Spouse or Beneficiary 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 of the Committee may provide, and shall also have the right to request the Committee to review such denial; such request to be made on forms prescribed by the Committee. A request for review shall be filed by the Participant, Spouse or Beneficiary or his duly authorized representative on or before the 60th day following the earlier of the Participant's, Spouse's or Beneficiary's receipt of notice of denial of his claim or the expiration of the prescribed period for issuing a statement of benefits or notice of denial. The Committee shall issue a written statement on or before the 60th day following its receipt of such request stating the Committee's 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 Committee may delay issuing its decision for an additional 60 days provided that the Participant, Spouse or Beneficiary is notified of such circumstances and the date the Committee expects to render its final decision. If the decision is not issued within the prescribed period, the appeal shall be deemed denied. 43 ARTICLE XIII ------------ LIMITATIONS AND RESTRICTIONS ---------------------------- 13.01 Code Section 415 Maximum. This Section is intended to impose a maximum ------------------------ limitation on the benefit payable under this Plan equal to but no lower than that necessary to comply with the requirements of Section 415 of the Code. The provisions of this Section are intended to comply with said Section 415. (a) Definitions. ----------- (i) "Defined Benefit Plan" means any defined benefit plan (as defined in Code Section 415(k)) maintained by the Company or an Affiliated Company. (ii) "Related Plan" means any defined contribution plan (as defined in Code Section 415(k)), other than this Plan, maintained by the Company or an Affiliated Company or any individual account maintained for voluntary contributions made by a Participant under a defined benefit plan. (iii) "Total Compensation" means all remuneration paid to an Employee by the Company or an Affiliated Company. (iv) "Annual Addition" means the sum of the following amounts credited to a Participant's account for the limitation year: (1) employer contributions; (2) employee contributions; (3) forfeitures; and (4) Amounts allocated to an individual medical account, as defined in Section 415(l)(2) of the Code, which is part of a pension or annuity plan maintained by the employer are treated as Annual Additions to a defined contribution plan. Also, amounts derived from contributions paid or accused after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a key employee, as defined in Section 419(d)(3) of the Code, under a welfare benefit fund, as defined in Section 419(e) of the Code, maintained by the employer, are treated as Annual Additions to a defined contribution plan. 44 (b) Limitations Applicable to Participants in Defined Contribution Plans -------------------------------------------------------------------- Only. ---- (i) The Annual Addition credited to a Participant's Account under the Plan for any Plan Year must not exceed the lesser of (1) $30,000 (or, if greater, 25% of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code as in effect for the Plan Year) or (2) 25% of the Participant's Total Compensation for such Plan Year. (ii) In the case of any Participant who also participates in a Related Plan, the sum of his Annual Addition under this Plan and his Annual Addition under all Related Plans for any Plan Year must not exceed the amount set forth in (i) above. (iii) Excess Annual Additions. If as a result of the allocation of ----------------------- forfeitures, a reasonable error in estimating a Participant's annual compensation, or under other limited facts and circumstances which the Commissioner finds justified, the Annual Additions which cause the limitations of Code Section 415 for the limitation year to be exceeded shall not be deemed Annual Additions in that limitation year and shall be treated as follows: The excess amounts in the Participant's Account must be used to reduce Compnay Contributions for the next limitation year (and succeeding limitation years, as necessary) for that Participant if that Participant is covered by the Plan as of the end of the limitation year. However, if that Participant is not covered by the Plan as of the end of the limitation year, then the excess amounts shall be held unallocated in a suspense account for the limitation year and allocated and reallocated in the next limitation year to all of the remaining Participants in the Plan. Furthermore, the excess amounts must be used to reduce Company Contributions for the next limitation year ( and succeeding limitation years, as necessary) for all of the remaining Participants in the Plan. For purposes of this subsection, excess amounts may not be distributed to Participants or former Participants. Excess Participant Contributions shall be returned to the Participant except that gains attributable to the returned Participant Contributions will be considered as a Participant Contribution for the limitation year in which the returned Contribution was made. If a suspense account is in existence at any time during the limitation year in accordance with this Section, investment gains and losses and other income shall be allocated to the suspense account. To the extent that the investment losses are allocated to the suspense account, the entire amount 45 allocated to Participants from the suspense account, including any such gains or other income or less any losses, is considered as the Annual Addition. (c) Effect of Participation in a Defined Benefit Plan. ------------------------------------------------- (i) Notwithstanding the foregoing, if any Participant entitled to a benefit hereunder is also entitled to a benefit from a Defined Benefit Plan which is or was maintained by the Company or an Affiliated Company, the retirement benefit to be paid under the Defined Benefit Plan shall be reduced to the extent necessary to prevent the sum of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction computed as of the end of the Plan Year form exceeding 1.0. (ii) For purposes of this limitation, a Participant's Defined Benefit Plan Fraction for each Plan Year is a fraction (1) whose numerator is the Participant's projected annual retirement income benefit under the Defined Benefit Plan (determined as of the close of the calendar year); and (2) whose denominator is the lesser of the product of 1.25 multiplied by the current dollar limitation in effect for the calendar year under Code Section 415(b) or the product of 1.4 multiplied by 100% of the amount that may be taken into account under Code Section 415(b)(1). In the case of a Participant who was a Participant in one or more Defined Benefit Plans maintained by the Company or an Affiliated Company which were in existence on July 1, 1982, the denominator of this fraction will not be less than the product of 1.25 multiplied by the sum of the annual benefits under such Plan which the Participant had accrued as of the end of the last Plan Year beginning before January 1, 1983; provided such Plans satisfied the requirements of Code Section 415 as in effect on December 31, 1982. In the case of a Participant who prior to January 1, 1987, was a Participant in one or more Defined Benefit Plans maintained by the Company or an Affiliated Company which were in existence on May 6, 1986, the denominator of this fraction will not be less than the product of 1.25 multiplied by the sum of the annual benefits under such Plan which the Participant had accrued as of December 31, 1986 (determined without regard to any changes in the terms and conditions of such plan or any cost of living increases after May 6, 1986); provided such Plans satisfied the requirements of Code Section 415 for all plan years. 46 (iii) A Participant's Defined Contribution Plan Fraction for any calendar year is a fraction (1) whose numerator is the sum of the Participant's Annual Additions for all calendar years under this Plan and all Related Plans determined as of the close of the calendar year and (2) whose denominator is the sum of the lesser of the following amounts determined for the calendar year and each prior year of Service: the product of 1.4 multiplied by 25% of the Participant's Total Compensation for the Plan Year. (d) Aggregation of Plans. For purposes of the limitations in this Article, -------------------- all Defined Benefit Plans of the Company or an Affiliated company, whether or not terminated, shall be treated as one Defined Benefit Plan and all defined contribution plans of the Company or an Affiliated Company, whether or not terminated, shall be treated as one defined contribution plan for purposes of the limitation under Code Sections 415(b) and (c). 13.02 Top Heavy Requirement. This Section is intended to ensure the Plan's --------------------- compliance with Section 416 of the Code. The following Sections shall be applicable to Participants for any Plan Year with respect to which the Plan is top-heavy. (a) Definitions. The following definition shall be applied in construing ----------- this Article: (i) Top-Heavy Plan means any defined contribution plan maintained by the -------------- Company or an Affiliated Company if, as of the Determination Date, the aggregate of the accounts of Key Employees under the Plan exceeds 60% of the aggregate of the accounts for all employees under such Plan. The Plan will be deemed a "super top-heavy plan" if, as of the Determination Date, the Plan would meet the test specified above for being a top-heavy plan if 90% were substituted for 60% in each place it appears in this subsection (i). (ii) Determination Date means the last day of the preceding Plan Year ------------------ (or, in the case of the first plan year of a plan, the last day of such Plan year). When plan aggregation is required, calculation of accrued benefits as of the determination dates which fall within the same calendar year will be used. (iii) Valuation Date means the same date as the Determination Date. -------------- 47 (iv) Key Employee means each Employee or former Employee who is, at any ------------ time during the Plan Year ending on the "Determination Date", or was, during any one of the four Plan Years preceding the Plan Year ending on the Determination Date, any one or more of the following: (1) An officer of the Company or an Affiliated Company having an annual compensation greater than 150% of the dollar limitation in effect under Code Section 415(c)(1)(A) for any Plan Year; (2) One of 10 Employees having annual compensation from the Company or an Affiliated Company of more than the dollar limitation in effect under Code Section 415(c)(1)(A) and owning (or considered as owning within the meaning of Code Section 318) both the largest interests in the Company or an Affiliated Company and a 1/2% ownership interest; (3) any person owning (or considered as owning within the meaning of Code Section 318) more than 5% of the outstanding stock of the Company (or stock having more than 5% of the total combined voting power of all stock of the Company); or (4) Any personal who has annual compensation of more than $150,000 and would be described in subsection (3) above, if "1%" was substituted for "5%". For purposes of determining whether a person is an officer in subpart (1) above, in no event will more than 50 Employees or, if less than 50 Employees, the greater of 3 or 10% of all Employees, be considered Key Employees solely by reason of officer status. In addition, persons who are merely nominal officers will not be treated as Key Employees solely by reason of their titles as officers. For purposes hereof, compensation is as defined in Section 1.415-2(d) of the Income Tax Regulations. (v) Non-Key Employee means any Participant in the Plan (including a ---------------- beneficiary of such Participant) who is not a Key Employee. (b) Required Aggregation. This Plan and all other qualified plans, -------------------- including any terminated plans, maintained by the Company or an Affiliated Company which include a Key Employee must be aggregated to determine if the group as a whole is top-heavy. In addition, each other qualified plan maintained by the Company or an Affiliated Company which enables any plan in which a Key Employee is a Participant to meet the requirements of Sections 410(a)(4) and 410 of the Code must be aggregated. (c) Permissive Aggregation. The Company may include other plans maintained ---------------------- by the Company or an Affiliated Company which when considered as a group with the required aggregation group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code, to determine if the group as a whole is top-heavy, provided such plans are comparable in benefits or contributions. (d) Top-Heavy Ratio. --------------- (i) The top-heavy ratio is a fraction, the numerator of which is the sum of account balances under the defined contribution plans for all Key Employees and the present value of accrued benefits under the Defined Benefit Plans for all Key Employees, and the denominator of which is the sum of the account balances for all Participants and the present value of accrued benefits under the defined benefit plans for all Participants. Both the numerator and denominator are adjusted to include any distributions made in the fine-year period ending on the "Determination Date" and any contributions due but unpaid as of the Determination Date. (ii) The value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation date. The account balances and accrued benefits of a Participant who is not a Key Employee but who was a Key Employee in a prior year will be disregarded. The calculation of the top-heavy ratio, and the extent to which distribution, rollovers and transfers are taken into account will be made in accordance with Section 416 of the Code and the regulations thereunder. 48 (iii) If any Participant has not performed an hour of Service for the Company at any time during the five-year period ending on the Determination Date, the account of such Participant shall not be taken into account. (e) Minimum Vesting. For any Plan Year in which the Plan is a top-heavy --------------- plan as determined pursuant to Section 416 of the Code, a Participant will have a non-forfeitable right to a percentage of the Participant's Accounts derived from Company Contributions as set forth below if such schedule is more favorable to the Participant than the vesting schedule under Section 6.02. 49 Years of Service Completed For Vesting Purposes Vested Interest -------------------- --------------- Less than three 0% Three or more 100% The above vesting schedule applies to all benefits within the meaning of Section 411(a)(7) of the Code except those attributable to Participant Contributions, including benefits accrued before the effective date of Section 416 of the Code and benefits accrued before the Plan became top- heavy. (f) Minimum Required Contribution. It is intended that the Company or ----------------------------- an Affiliated Company will meet the minimum contribution requirements of Section 416(c) of the Code by providing a minimum contribution (which may include forfeitures otherwise allocable) without regard to any Social Security contributions for such Plan Year for each Participant who is a non-key employee in an amount equal to at least 3% of such Participant's compensation (as defined in Section 1.415-2(d) of the Income Tax Regulations) for such Plan Year. Such 3% minimum contribution requirement shall be increased to 4% for any year in which the Company or an Affiliated Company also maintains a defined pension plan if necessary to avoid the application of Section 416(h)(1) of the Code, relating to the special adjustments to Section 415 limits of the Code for top-heavy plans, if the adjusted limitations of Section 416(h)(1) would otherwise be exceeded if such minimum contribution were not so increased. The minimum contribution required shall be made to any non-key employee who is still employed on the last day of the play year regardless as to the number of hours of Service performed during the year and regardless of the employee's level of compensation. If for the Plan Year the Plan becomes a super top-heavy plan, then the denominator of both the defined contribution plan fraction and the defined benefit plan fraction shall be calculated as set forth in Section 3.08(b) for the limitation year ending in such Plan Year by substituting "1.0" for "1.25" in each place such figure appears, except with respect to any individual for whom there are no employer contributions, forfeitures or voluntary nondeductible contributions allocated or accruals for such individual under the defined benefit plan. 50 The minimum contribution requirements set forth herein above shall be reduced in the following circumstances: (i) The percentage minimum contribution required hereunder shall in no event exceed the percentage contribution made for the Key Employee for whom such percentage is the highest for the Plan Year after taking into account contributions or benefits under other qualified plans in this Plan's aggregation group providing no other defined benefit plan uses the defined contribution plan to satisfy Code Section 401(a) as provided in Section 416(c)(2)(B)(ii) of the Code; and (ii) No minimum contribution will be required for a Participant under this Plan for any Plan Year if the Company or an Affiliated Company maintains another qualified plan under which a minimum benefit is being accrued for such year for the Participant in accordance with Section 416(c) of the Code. 51 SCHEDULE A COMPENSATION ------------ I. The following payments are included as Compensation for all Participants: -------- ------------ - Basic Salary. - Shift Premium Pay. - Overtime. - Commissions. - Sales incentive payments. - Vacation Pay (except as noted in II). - Compensation deferred pursuant to salary reduction arrangements under Code Sections 401(k) or 125 or ITA Section 165(e). - Salary continuation payments prior to the Severance Date. - Lump sum payments in lieu of an increase in basic salary. - AIAP Payments that are eligible to be deferred. II. The following payments are not included as Compensation for Participants: --- ------------ - Any form of compensation not listed in Part I, and specifically excluding the following: - Vacation Pay received in lieu of vacation taken. - Moving Expenses. - Housing differential. - Bonus payments unless specifically identified in I. - Change of control bonus. - Stay-on bonus. - Management incentive plan payments unless specifically identified in I. - Nondeferrable AIAP payments. - Deferrals made pursuant to the RJR Nabisco Scholastic Savings Plan. - Christmas Bonus. 52 EX-4.4 4 EXHIBIT 4.4 NUMBER SEVEN DEED OF AMENDMENT AND RESTATEMENT OF DEED OF CONSTITUTION OF TRUST In the City of San Juan, Puerto Rico, this twelfth (12th) day of July, nineteen hundred ninety-three (1993). BEFORE ME TCHERINE ANDUJAR, Notary Public in and for the Commonwealth of Puerto Rico, with residence in San Juan, Puerto Rico and offices on the Fourteenth Floor of the Banco Popular Center, Hato Rey, San Juan, Puerto Rico. APPEAR AS PARTY OF THE FIRST PART: RJR Nabisco, Inc., employer identification number 56-0950247, a corporation organized and existing under the laws of Delaware, having its principal office in New York, New York (hereinafter sometimes referred to as "RJR Nabisco") and represented herein by its counsel Leon Lichter Kibrit, of legal age, married, and resident of Passaic, New Jersey, who represents that he is duly authorized to bind and act herein for RJR Nabisco. AS PARTY OF THE SECOND PART: BANCO POPULAR DE PUERTO RICO, employer identification number 66-0175278, a bank organized and existing under the laws of the Commonwealth of Puerto Rico, having its principal office in Hato Rey, Puerto Rico (hereinafter sometimes referred to as the "Trustee") and represented herein by its Vice President, Luis Carlos Fernandez Trinchet, of legal age, single and resident of San Juan, Puerto Rico, who represents that he is duly authorized to bind and act herein for the Trustee. I, the Notary, hereby certify that I personally know the appearing parties and, by their statements, I do certify as to their personal circumstances. Further, the appearing parties represent to me that they are in full enjoyment and exercise of their civil rights, and that they have, and in my judgment they do have, sufficient legal capacity and authority to execute this deed. WITNESSETH WHEREAS, the RJR Employee Benefits Committee, duly appointed by the Compensation Committee of the Board of Directors of RJR Nabisco (the "RJR Employee Benefits Committee"), has been delegated the authority and power to, among others, adopt, amend or terminate any employee pension or welfare benefit plan and any related trusts of any subsidiary of RJR Nabisco and appoint and remove trustees with respect to any such employee plans. WHEREAS, several direct and/or indirect subsidiaries of RJR Nabisco operating in Puerto Rico have or will establish defined contributions plans for the benefit of their employees; WHEREAS, as per Deed Number Fifteen (15) of December eighteen (18), nineteen hundred eighty nine (1989) before this Notary, R.J. Reynolds Tobacco Company entered into a Trust Agreement (the "Original Trust Agreement") with the Trustee establishing a trust to serve as a funding medium for the profit sharing plan adopted by R.J. Reynolds Tobacco Company which is officially entitled Savings and Investment Plan for Employees of R.J. Reynolds Tobacco Company in Puerto Rico; WHEREAS, as per Deed Number Four (4) of August twenty-four (24), nineteen hundred ninety-two (1992) before this Notary (the "Master Trust Agreement"), the Original Trust Agreement was amended to convert the trust therein established into a master trust (the "RJR Nabisco Puerto Rico Defined Contribution Master Trust") to serve as the funding medium for the defined contribution plans of RJR Nabisco and its subsidiaries in Puerto Rico (singularly referred to as the "Plan" and collectively referred to as the "Plans"). WHEREAS, the RJR Employee Benefits Committee desires to amend the Master Trust Agreement to authorize the appointment of custodians and the commingling by the custodians of the assets of the RJR Nabisco Puerto Rico Defined Contribution Master Trust with assets of any other tax qualified plans sponsored by RJR Nabisco or its affiliates. NOW THEREFORE, the Master Trust Agreement is amended to read as follows: THE AGREEMENT OF THE APPEARING PARTIES I. TITLE OF TRUST The trust hereby established shall be designated and known as the RJR Nabisco Puerto Rico Defined Contribution Master Trust. II. DEFINITIONS The words and phrases defined in the Plans shall have the meaning therein set out when used in this Master Trust Agreement, unless different meaning is plainly required by the context. III. GENERAL STATEMENTS First: The assets held in any trust heretofore established under a Plan upon being transferred to the Trustee, such other property or money as shall from time to time be delivered or paid to the Trustee pursuant to such Plan, and the earnings and profits thereon, shall be held in a trust by the Trustee and dealt with in accordance with the diverted to purposes other than the exclusive benefit of those individuals having an interest in such Plan (hereinafter collectively referred to with respect to each Plan as "Covered Individuals"), and paying the expenses of such Plan. Second: The Trustee is directed to consolidate into a single fund (hereinafter called the "Commingled Fund") and to commingle all assets received and held by it in each Separate Trust with all assets received and held by it in each other Separate Trust governed by this Deed of Trust, excepting any such assets hereinafter required to be segregated. The Trustee is directed to maintain at all times such records as will enable it to effect, as of any time, an equitable allocation and segregation of assets in the Commingled Fund into a separate fund held for the benefit of some or all of the Covered Individuals under one or more of the Plans. RJR Nabisco shall upon request of the Trustee provide the Trustee with such information as will enable the Trustee to maintain such records. If in the future the Trustee receives written notice from RJR Nabisco to effect any such allocation and segregation, the Trustee shall do so as soon thereafter as practicable. The Trustee is hereby directed to effect such allocation and segregation in the event that any Separate Trust shall cease to remain tax exempt under both Section 501(a) of the United States Internal Revenue Code of nineteen hundred eighty-six (1986), as amended (the "Code") and Section 165(a) of the Puerto Rico Income Tax Act of nineteen hundred fifty-four (1954) (the "ITA"). Each Separate Trust shall share proportionately in the aggregate investment hereby directed to effect such allocation and segregation in the event that any Separate Trust shall cease to remain tax exempt under both Section 501(a) of the United States Internal Revenue Code of nineteen hundred eighty-six (1986), as amended (the "Code") and Section 165(a) of the Puerto Rico Income Tax Act of nineteen hundred fifty-four (1954) (the "ITA"). Each Separate Trust shall share proportionately in the aggregate investment experience of the Commingled Fund. With respect to assets hereunder segregated, the investment experience shall be shared proportionately by those participating therein. Third: The Trustee shall be responsible only for such sums and property as shall actually be received by it as Trustee hereunder and shall not be required to determine whether contributions by RJR Nabisco, any subsidiary of RJR Nabisco and any Covered Individual delivered to it, comply with the provisions of the Plans nor shall it have any authority on behalf of the Separate Trusts or any Covered Individual to bring any action or proceeding to enforce the collection of any such amount. The Trustee shall manage, invest and reinvest the Commingled Fund pursuant to the provisions herein and shall make payments therefrom as hereinafter provided pursuant to the instructions of RJR Nabisco. Fourth: No duties or obligations shall be imposed upon the Trustee with respect to the Separate Trusts by the Plans or any other instrument to which the Trustee is not a party, unless they have been specifically undertaken by the Trustee or are otherwise imposed upon the Trustee by applicable law. Fifth: The Trustee shall not be required to make or file any inventory or any reports to any court or to give any bond, except to the extent required by the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. Sixth: RJR Nabisco shall have the power to interpret and construe this Master Trust Agreement and shall direct the Trustee as to any matter in which the Plan or this Master Trust Agreement may be ambiguous or uncertain and the Trustee, to the extent permitted by ERISA, shall be indemnified and held harmless by RJR Nabisco for acting in accordance with such direction. The Trustee may request advice or direction from RJR Nabisco in regard to any matter and the Trustee shall not be required to act pending receipt of such advice or direction and, to the extent permitted by ERISA, shall be indemnified and held harmless for any act or omission in accordance with the advice or direction of RJR Nabisco. Seventh: Neither RJR Nabisco nor any of its subsidiaries, nor any member of any of them, nor the Trustee, shall be liable or responsible for the acts or omissions of any other party except to the extent required by ERISA. IV. POWERS AND DUTIES OF TRUSTEE First: The Trustee shall receive such portion of the Commingled Fund as may be transferred, assigned or delivered to it from time to time by RJR Nabisco and hold and otherwise manage such portion of the Commingled Fund in accordance with the written directions of RJR Nabisco. Second: The Trustee shall accept any such money or property transferred, assigned or delivered to it by RJR Nabisco or any of its subsidiaries or affiliates, with the understanding that it will be disposed of as soon as practicable, and to return any such money or property to the participants or entity directed by RJR Nabisco. Third: The Trustee may consult with RJR Nabisco as it may from time to time request with respect to the management of the Commingled Fund. Fourth: The Trustee shall draw its check payable to such Covered Individual as RJR Nabisco shall direct and deliver it in accordance with the direction of RJR Nabisco. Fifth: In making a payment upon a direction authorized herein, the Trustee may accept such direction as a certification that complies with the provisions of this Article and need make no further investigation, subject, nevertheless, to the applicable provisions of ERISA. Sixth: The Trustee shall furnish to RJR Nabisco an annual account or an account for such other period as RJR Nabisco may specify, showing all investments, receipts, disbursements and other transactions involving that portion of the Commingled Fund held by it during the period and also showing the total amount of the Commingled Fund held by it at the end of the period, which shall be conclusive on all persons, including RJR Nabisco and any of its subsidiaries which have adopted this Trust Agreement except as to any act or transaction as to which RJR Nabisco filed with the Trustee written exceptions or objections within ninety (90) days after receipt of the account. Seventh: At the direction of RJR Nabisco, the Trustee shall appoint one or more custodians to hold, on behalf of the Puerto Rico Master Trust, some or all of the assets of the Puerto Rico Master Trust. Such custodians may be authorized to commingle some or all of the assets of the Puerto Rico Master Trust under their custody with assets of any other tax qualified plans sponsored by RJR Nabisco or its affiliates held by them as trustees or custodians. Eighth: Subject to the provisions of Section V, Ninth, the Trustee shall exercise the voting rights of any stocks, bonds or other securities in accordance with the instructions of RJR Nabisco. Ninth: The Trustee shall exercise the voting rights of any securities of RJR Nabisco in accordance with the instructions of the Plans' Participants, as provided in the Plans' documents. VI. TRUSTEE LIMITATIONS First: The Trustee shall have no investment discretion over the assets transferred to the Puerto Rico Master Trust. Any such investment discretion and power shall be vested on RJR Nabisco. VII. POWER OF RJR NABISCO TO DIRECT TRUSTEE First: Notwithstanding any other provisions of this Agreement, RJR Nabisco shall have the power to direct the Trustee. Any such direction shall be in writing and delivered to the Trustee and shall specify the extent and duration of the direction. VIII. EXTENT OF TRUSTEE'S RESPONSIBILITY First: No power, right, duty or responsibility is given to, or imposed upon, the Trustee under the Plan or this Trust Agreement, except as set forth herein or as required by applicable law. To the extent permitted by law, the Trustee shall not incur any liability by acting without question in accordance with any direction given by RJR Nabisco. IX. ADMINISTRATION First: The Trustee shall withhold any Puerto Rico income tax from all payments and distributions made by the Trustee to Covered Individuals when and to the extent required by the ITA; provided, however, if RJR Nabisco does not provide the Trustee, within thirty (30) days following request by the Trustee, any information prescribed in Puerto Rico Income Tax Regulations as necessary for the proper computation of such withholding tax liability, including the name, address and social security number of each payee, RJR Nabisco shall have sole responsibility for any Puerto Rico income tax withholding obligations under the ITA. RJR Nabisco agrees that it has the sole responsibility for notifying Covered Individuals of any right to elect out of Puerto Rico withholding, where applicable, and the Trustee shall be entitled to rely upon RJR Nabisco's certifications as to such elections by Covered Individuals. RJR Nabisco agrees to indemnify the Trustee for all withholding tax liability, interest and penalties assessed against the Trustee by reason of RJR Nabisco's failure to provide to the Trustee the correct and complete information necessary to comply with Puerto Rico tax withholding requirements applicable to the Trustee with respect to benefit payments made by it under the Plan and this Deed of Trust. Second: The indicia of ownership of all trust assets shall be maintained within the jurisdiction of the United States District Courts, except as otherwise required by applicable laws and regulations. Third: RJR Nabisco hereby agrees to hold the Trustee harmless and to indemnify the Trustee from and against any and all losses, claims, damages, liabilities or expenses whatsoever (including, but not limited to, any and all expenses reasonably incurred in investigating, preparing or defending against any litigation or proceeding, commenced or threatened, or any claim whatsoever), arising out of the administration of the Commingled Fund if the Trustee has acted in good faith or in reliance on the direction or certification of RJR Nabisco, unless arising from the Trustee's own negligence or willful misconduct, or arising out of or based upon any untrue statement contained in any instrument document or other material furnished by or through RJR Nabisco to Covered Individuals, or otherwise used by RJR Nabisco or authorized by it for use in respect of, any public offer, or arising out of or based upon an omission or alleged omission to state a material fact required to be stated or necessary to make other statements made in any such material not misleading. If a claim is made against the Trustee, the Trustee shall notify RJR Nabisco of any action commenced against the Trustee within a reasonable time after the Trustee shall have been served with the summons or other first legal process giving information as to the nature and basis of the claim. However, failure to so notify RJR Nabisco shall not relieve RJR Nabisco from any liability which it may have on account of this indemnity or otherwise if the Trustee shall sustain the burden of providing that RJR Nabisco has not been prejudiced in any material respect by such failure. RJR Nabisco shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff. . . by RJR Nabisco, and reimbursement for its reasonable out-of-pocket expenses for any services attributable to the duties and responsibilities described in this Deed of Trust. Second: All taxes of any kind that may be assessed or levied against or in respect to the Commingled Fund shall be paid from the Commingled Fund. To the extent permitted under applicable law, all other expenses of the Plans and the administration of the Puerto Rico Master Trust, including the Trustee's fees, fees for legal services rendered to the Trustee with respect to its actions as Trustee (whether or not rendered in connection with a judicial or administrative proceeding and whether or not incurred while it is acting as Trustee), all brokerage commissions, such compensation to the Trustee as may be agreed upon from time to time between the Trustee and an officer of RJR Nabisco, all recordkeeper fees, and all other proper charges and disbursements of the Trustee, shall be paid from the Commingled Fund, except that, at the discretion of RJR Nabisco, any such costs and expenses may be paid by RJR Nabisco. Third: The Trustee shall promptly notify RJR Nabisco of any and all such tax levies an assessments. RJR Nabisco shall have the right to seek to have reviewed, reduced, equalized, or abated any tax payable from the Commingled Fund hereunder, and the Trustee shall not pay any such taxes or assessments during such time as RJR Nabisco is contesting or protesting the same or seeking to have the same reviewed, reduced, equalized or abated, except that the Trustee shall pay the whole or any part of such contested tax if in the opinion of counsel to RJR Nabisco such payment in whole or in part is necessary. . . . Third: Within ninety (90) days after the receipt of such report RJR Nabisco shall file with the Trustee notice of any objection which it may have to any act or transaction of the Trustee set forth in such report. Upon such report being adjusted to the satisfaction of RJR Nabisco, RJR Nabisco shall endorse upon the report a statement that it has been settled and adjusted to its satisfaction, and thereupon the report shall become a report stated. To the extent permissible under ERISA, if no objection to said report is filed within a period of ninety (90) days after it has been received, it shall be deemed to have been settled and allowed in like manner as if RJR Nabisco had endorsed thereon a statement of approval as aforesaid, and thereupon the report shall become a reported stated. Fourth: Except when otherwise provided by law, when it is provided herein that an amount shall become an account stated, such an account shall be deemed to be finally settled and shall be conclusive between and among the Trustee, RJR Nabisco and all persons having or claiming to have any interest in the Separate Trusts or under the Plans, and such settlement of an account shall constitute a full and complete discharge and release of the Trustee, with like effect as if such account had been settled and allowed by a judgment or decree or a court of competent jurisdiction in an action or proceeding in which the Trustee, RJR Nabisco and all persons having or claiming to have any interest in the Trust or under the Plan were parties. The Trustee shall have the right to apply at any time to a court of competent jurisdiction for the judicial settlement of its account, and in. . . except that, at the discretion of RJR Nabisco, any such costs and expenses may be paid by RJR Nabisco. Third: The Trustee shall promptly notify RJR Nabisco of any and all such tax levies and assessments. RJR Nabisco shall have the right to seek to have reviewed, reduced, equalized, or abated any tax payable from the Commingled Fund hereunder, and the Trustee shall not pay any such taxes or assessments during such as time RJR Nabisco is contesting or protesting the same or seeking to have the same reviewed, reduced, equalized or abated, except that the Trustee shall pay the whole or any part of such contested tax if in the opinion of counsel to RJR Nabisco such payment in whole or in part is necessary to protect or preserve any property of the Commingled Fund. The Trustee shall execute all documents, applications, petitions, instruments, or complaints necessary for any such protest, contest, review or other proceedings. XI. ACCOUNTS OF THE TRUSTEE First: The Trustee shall maintain records and accounts of all receipts and disbursements made by the Trustee, which records and accounts shall be open to the inspection of RJR Nabisco at all reasonable times, and may be audited from time to time by any person or persons designated by RJR Nabisco. Second: The Trustee shall give RJR Nabisco a monthly report or a report for such other period as RJR Nabisco shall specify, setting forth all receipts, investments, disbursements and other transactions effected by it during such period or during the period from the close of the last previous period to the date of such report. The above report is to be delivered to RJR Nabisco within fifteen (15) days after the end of the corresponding period. . . . any such action or proceeding it shall only be necessary to join as parties thereto the Trustee and RJR Nabisco, and any final judgment or decree which may be entered therein shall be conclusive on all parties having or claiming to have any interest in the Separate Trusts or under the Plans. Fifth: Unless otherwise agreed to by RJR Nabisco and the Trustee, the Trustee shall not be responsible for the preparation or filing of any tax return or any other report or form required to be filed with any agency of the government of the Commonwealth of Puerto Rico by the Puerto Rico Master Trust regarding its income and losses or assets. The Trustee upon request shall furnish to RJR Nabisco such additional information under its control as RJR Nabisco may reasonably request for preparing any such return, report or form. The Trustee shall be responsible for the preparation, filing and delivery of any form required by the ITA with respect to payments and distributions from the Puerto Rico Master Trust. XII. THE TRUSTEE First: The Trustee shall be fully protected in relying upon a certification of RJR Nabisco with respect to any instruction, direction or approval of RJR Nabisco. The Trustee shall be fully protected in acting upon any instrument, certificate, or paper, reasonably believed by it to be genuine and to be signed or presented by RJR Nabisco, proper person or persons, and the Trustee shall be under no duty to make any investigation or inquiry as to any statement contained in any such writing, but may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained. Second: The Trustee shall not be liable for the proper application of the Commingled Fund if payments are made in accordance with the written directions of RJR Nabisco as herein provided, nor shall the Trustee be responsible for the adequacy of the Commingled Fund to meet and discharge any and all payments and liabilities under the Plans. All persons dealing with the Puerto Rico Master Trust are released from inquiring into the decision or authority of the Trustee and from seeing to the application of any monies, securities or other property paid or delivered to the Trustee, subject, nevertheless, to the applicable legal provisions. XIII. RESIGNATION; REMOVAL; AMENDMENTS; TERMINATION; SUCCESSOR TRUSTEE, FISCAL YEAR First: The Trustee may resign at any time by giving written notice to RJR Nabisco at least thirty (30) days prior to the effective date of such resignation. RJR Nabisco may remove the Trustee at any time by giving written notice to the Trustee at least thirty (30) days prior to the effective date of such removal. In the event of the resignation or removal of the Trustee, RJR Nabisco shall appoint a new trustee. Thereupon the Trustee shall deliver to the successor trustee all money and property held by the Trustee hereunder and the books and records held by the Trustee necessary to the proper administration of the Plans, and shall thereupon be discharged of all further responsibility hereunder. Unless RJR Nabisco or the successor trustee makes written claim against the retiring trustee within ninety (90) days from the delivery of such property, books and records, the Trustee shall, to the extent permitted by ERISA, be relieved from all liability for any of its acts or omissions hereunder. The successor trustee shall be under no obligation to audit the acts or accounts of the Trustee or to make any claim against the retiring trustee. Any such successor trustee shall have and may exercise all of the rights, powers, duties and immunities of the Trustee as fully and to the same extent as if it had originally been named as Trustee hereunder. Second: The Puerto Rico Master Trust and the Separate Trusts shall continue for such time as may be necessary to accomplish the purpose for which they were created, but may be terminated and discontinued by action of the RJR Employee Benefits Committee in accordance with applicable law. Notice of such termination shall be given to the Trustee by an instrument in writing executed by the RJR Employee Benefits Committee signed by its duly authorized officers, and declaring that the Puerto Rico Master Trust or the specific Separate Trust hereby established is terminated. A termination of a Separate Trust hereby established pursuant to action of the RJR Employee Benefits Committee shall take effect as of the date of the delivery of such notice to the Trustee. If and when a Separate Trust is terminated, the Trustee shall dispose of the assets of the Separate Trust in such manner as shall be directed by the RJR Employee Benefits Committee. Upon termination of a Plan, the Trustee shall have no obligation to make any payment from the Separate Trust until it shall have received approval from the Puerto Rico Treasury Department and/or the Internal Revenue Service, or a counsel opinion to the effect that the above mentioned approvals are not required. Upon termination of the Puerto Rico Master Trust, the Trustee shall continue to have and exercise all of the powers and duties set forth in this Agreement until liquidation and distribution of the assets of the Puerto Rico Master Trust have been completed. If the Puerto Rico Master Trust is terminated by reason of RJR Nabisco ceasing to exist or going out of business and if there shall be at any time no person authorized to administer the Plans, the Trustee shall assume the responsibilities and duties, and become entitled to the immunities of RJR Nabisco for the purpose of liquidating the Separate Trusts and distributing the assets thereof. Upon termination of a Plan and liquidation and distribution of a Separate Trust assets, in no event shall any of the Separate Trust assets be returned to RJR Nabisco or any of its subsidiaries, unless otherwise permissible by law. Third: If for any reason RJR Nabisco cannot or does not act in the event of the resignation or removal of the Trustee, as hereinabove provided, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee or for instructions. Any expenses so incurred shall be treated as an expense of administration. Fourth: RJR Nabisco shall have the right at any time and from time to time by an instrument in writing delivered to the Trustee, executed pursuant to the order of the RJR Employee Benefits Committee in form similar to the execution of this Deed of Trust to modify or amend this Trust Agreement in whole or in part, except that no such amendment affecting the rights, duties or responsibilities of the Trustee shall be made without the written consent of the Trustee, and further excepting that no amendment shall be made pursuant to which any part of the Separate Trust may be used for or diverted for purpose other than for the exclusive benefit of Covered Individuals prior to the satisfaction of all liabilities with respect to such individuals under this Deed of Trust. Any amendment required to continue this Trust in compliance with the law may be executed by an authorized officer of RJR Nabisco, previously authorized by the RJR Employee Benefits Committee. Fifth: Fiscal Year. The fiscal year of the Puerto ----------- Rico Master Trust and each of the Separate Trusts created by this Agreement shall be a twelve (12) months period ending on December thirty (30) of each year. XIV. MISCELLANEOUS First: Governing Law. This Agreement and the Puerto ------------- Rico Master Trust and the Separate Trusts created hereby shall be construed, regulated and administered under the laws of the Commonwealth of Puerto Rico except where superseded by the laws of the United States, and the Trustee shall be liable to account in the courts located within Puerto Rico. In case any provisions of this Deed of Trust shall be held illegal or invalid for any reason whatsoever, said illegality or invalidity shall not affect the remaining parts of this Deed of Trust and this Trust Agreement shall be construed and enforced as if said illegal and invalid provisions had never been inserted herein. Second: Assignment. Except as otherwise provided in ---------- the Plans, no benefit, right or interest of any person under any Plan shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; nor to seizure, attachment or other legal, equitable or other process; nor shall it be liable for, or subject to, the debts, liabilities or other obligations of such person. Third: Any action required to be taken by RJR Nabisco pursuant to the provisions of this Deed of Trust may be taken by the RJR Employee Benefits Committee or by any person authorized to act on behalf of RJR Nabisco by such RJR Employee Benefits Committee. All actions of such Committee shall be evidenced by a resolution of such Committee in a form satisfactory to the Trustee and the Trustee shall be fully protected in acting in accordance with such resolutions. Fourth: RJR Nabisco shall furnish the Trustee from time to time with a certificate of the RJR Employee Benefits Committee as to the names and signatures of all persons authorized to issue orders, requests, instructions and objections to the Trustee pursuant to the provisions of this Deed of Trust including, but not limited to, the persons designated pursuant to the Plan to direct the Trustee. Fifth: If the Trustee is at any time acting as a successor trustee or succeeds to responsibilities hereunder for management of plan assets with respect to the Commingled Fund (or any portion thereof), RJR Nabisco hereby agrees to hold the Trustee harmless from and against all taxes, expenses (including counsel fees), liabilities, claims, damages, actions, suits or other charges incurred by or assessed against it, as successor Trustee, as a direct or indirect result of any act or omission of a predecessor Trustee or any other person charged under any agreement affecting the Commingled Fund for investment responsibility with respect to such assets. In addition, the Trustee shall not be liable for any losses to the Commingled Fund resulting from the disposition of any investment which shall have been made by a predecessor Trustee or any Investment Manager or for the retention thereof if the Trustee is unable to dispose of such investment because of any federal or Puerto Rico securities laws restrictions or the unmarketable or illiquid nature of such investments, or if an orderly liquidation is difficult under prevailing conditions. Sixth: Trustee's Duties Under ERISA. No provision of ---------------------------- this Deed of Trust shall operate to relieve the Trustee from any responsibility, obligation or duty to the extent such relief would be prohibited under any applicable law, including ERISA. However, it must be understood that all mention herein to ERISA will not be applicable if it is determined that the Plan is not subject to ERISA. ACCEPTANCE The appearing parties hereby accept, ratify, and confirm this Deed, and I, the Notary, do hereby certify that I have advised them as to the pertinent legal warnings and of the legal effect of the present document as well as of their right under the Notarial Law of Puerto Rico to have one or more witnesses to appear herein and read and sign this deed together with them, which right they have waived, and this Deed having been read by them, to which fact I hereby certify, the said appearing parties approve and ratify its contents and sign the same before me, and affix their initials on each and every page of this instrument. ALL BEFORE ME. I, THE NOTARY, ATTEST AND GIVE FAITH. Signed: LEON LICHTER KIBRIT and LUIS CARLOS FERNANDEZ TRINCHET. Signed, sealed, marked and flourished: TCHERINE ANDUJAR. The corresponding internal revenue and notarial stamps have been cancelled on the original. The initials of the appearing parties have been affixed on each folio of the original. I, the Notary, certify that the foregoing is a true and exact copy of deed number SIX, the original of which forms part of my protocol of public instruments for the year nineteen hundred ninety-three (1993), which contains twenty-one (21) folios. IN WITNESS WHEREOF, and at the request of RJR NABISCO, INC., I issue the FIRST certified copy of this deed, in San Juan, Puerto Rico, this twelfth (12th) day of July, nineteen hundred ninety-three (1993). -------------------------------- Notary Public EX-5 5 SIMPSON THACHER & BARTLETT A Partnership which includes Professional Corporations 425 Lexington Avenue New York, New York, 1O017 July 1, 1994 RJR Nabisco Holdings Corp. 1301 Avenue of the Americas New York, New York 10019 Ladies & Gentlemen: We have acted as your counsel in connection with the Registration Statement on Form S-8 (the "Registration Statement") of RJR Nabisco Holdings Corp., a Delaware corporation (the "Company"), which you intend to file with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), relating, among other things, to the acquisition by employees of the Company or one or more of its subsidiaries who are participants in the Nabisco Brands de Puerto Rico, Inc. Capital Accumulation Plan (the "Plan") of up to 15,000 shares (the "Shares") of common stock, par value $.01 per share (the "Common Stock"), of the Company. We understand that the Plan provides that it will acquire Shares for distribution to its participants by means of purchases of Shares by the Trustee of the Plan at their then fair market value (i) in the open market, (ii) in privately negotiated transactions or (iii) at the option of the Company, from the Company. We have examined an executed copy of the Registration Statement (including the exhibits thereto) and originals, or copies certified or otherwise identified to our satisfaction, of such documents and records of the Company and we have made such RJR Nabisco Holdings Corp. -2- July 1, 1994 other and further investigations as we deemed necessary to enable us to express the opinions hereinafter set forth. We hereby advise you that in our opinion, assuming effectiveness of the Registration Statement under the Securities Act: If the Company exercises its option under the Plan to authorize the original issuance of Shares to the Trustee of the Plan, such originally issued Shares, when duly authorized, issued and sold as contemplated by the Registration Statement and the Plan, will be legally issued, fully paid and non-assessable. A member of Simpson Thacher & Bartlett owns shares of Common Stock which represent less than 0.1% of the currently outstanding shares of Common Stock. We are members of the Bar of the State of New York and we express no opinion herein other than with respect to the laws of the State of New York, the federal law of the United States of America and the Delaware General Corporation Law. We hereby consent to the use of this opinion as an exhibit to the Registration Statement. Very truly yours, SIMPSON THACHER & BARTLETT EX-23.1 6 Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Registration Statement (Form S-8) of RJR Nabisco Holdings Corp. pertaining to the Nabisco Brands de Puerto Rico Capital Accumulation Plan of our report dated February 1, 1994 (except with respect to the subsequent event discussed in Note 17, as to which the date is February 24, 1994), appearing in the Annual Report on Form 10-K of RJR Nabisco Holdings Corp. for the year ended December 31, 1993. Deloitte & Touche New York, New York June 30, 1994 EX-24 7 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a director or officer, or both, of RJR NABISCO HOLDINGS CORP., a Delaware corporation (the "Company"), do hereby make, constitute and appoint Jo-Ann Ford, Joan E. Gmora and H. Colin McBride, and each of them, attorneys-in-fact and agents of the undersigned with full power and authority of substitution and resubstitution, in any and all capacities, to execute for and on behalf of the undersigned the Registration Statement on Form S-8 relating to the sale of shares of common stock of the Company pursuant to the Nabisco Brands de Puerto Rico, Inc. Capital Accumulation Plan and any and all amendments or supplements to the foregoing Registration Statement and any other documents and instruments incidental thereto, and to deliver and file the same, with all exhibits thereto, and all documents and instruments in connection therewith, with the Securities and Exchange Commission, and with each exchange on which any class of securities of the Company is registered, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing that said attorneys-in-fact and agents, and each of them, deem advisable or necessary to enable the Company to effectuate the intents and purposes hereof, and the undersigned hereby fully ratify and confirm all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has subscribed his or her name, this 1st day of July, 1994. Signature Title --------- ----- Charles M. Harper - ----------------------------- Chairman of the Board and Chief Charles M. Harper Executive Officer, Director Stephen R. Wilson - ----------------------------- Executive Vice President and Chief Stephen R. Wilson Financial Officer Robert S. Roath - ----------------------------- Senior Vice President and Controller Robert S. Roath John T. Chain, Jr. - ----------------------------- Director John T. Chain, Jr. John L. Clendenin - ----------------------------- Director John L. Clendenin James H. Greene, Jr. - ----------------------------- Director James H. Greene, Jr. H. John Greeniaus - ----------------------------- Director H. John Greeniaus James W. Johnston - ----------------------------- Director James W. Johnston Henry R. Kravis - ----------------------------- Director Henry R. Kravis John G. Medlin, Jr. - ----------------------------- Director John G. Medlin, Jr. Paul E. Raether - ----------------------------- Director Paul E. Raether Lawrence R. Ricciardi - ----------------------------- Director Lawrence R. Ricciardi Rozanne L. Ridgway - ----------------------------- Director Rozanne L. Ridgway Clifton S. Robbins - ----------------------------- Director Clifton S. Robbins George R. Roberts - ----------------------------- Director George R. Roberts Scott M. Stuart - ----------------------------- Director Scott M. Stuart Michael T. Tokarz - ----------------------------- Director Michael T. Tokarz -----END PRIVACY-ENHANCED MESSAGE-----