Exhibit 10.1
RJR NABISCO HOLDINGS CORP.
1990 LONG TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
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DATE OF GRANT: January 10, 1997
W I T N E S S E T H :
1. GRANT OF OPTION. Pursuant to the provisions of the 1990 Long Term
Incentive Plan (the "Plan"), RJR Nabisco Holdings Corp. (the "Company") on the
above date has granted to
XXXXXX X. XXXXXXXXX (THE "OPTIONEE"),
subject to the terms and conditions which follow and the terms and conditions of
the Plan, the right and option to exercise from the Company a total of
460,000 SHARES
of Common Stock of the Company, at the exercise price of $32.25 per share (the
"Option"). A copy of the Plan is attached and made a part of this agreement
with the same effect as if set forth in the agreement itself. All capitalized
terms used herein shall have the meaning set forth in the Plan, unless the
context requires a different meaning.
2. EXERCISE OF OPTION.
(a) Shares may be purchased by giving the Corporate Secretary of the
Company written notice of exercise, on a form prescribed by the Company,
specifying the number of shares to be purchased. The notice of exercise shall
be accompanied by
(i) tender to the Company of cash for the full purchase price of the
shares with respect to which such Option or portion thereof is
exercised; OR
(ii) the unsecured, demand borrowing by the Optionee from the Company
on an open account maintained solely for this purpose in the
amount of the full exercise price together with the instruction
from the Optionee to sell the shares exercised on the open market
through a duly registered broker-dealer with which the Company
makes an arrangement for the sale of such
shares under the Plan. This method is known as the "broker-dealer
exercise method" and is subject to the terms and conditions set forth
herein, in the Plan and in guidelines established by the Committee.
The Option shall be deemed to be exercised simultaneously with the
sale of the shares by the broker-dealer. If the shares purchased upon
the exercise of an Option or a portion thereof cannot be sold for a
price equal to or greater than the full exercise price plus direct
costs of the sales, then there is no exercise of the Option. Election
of this method authorizes the Company to deliver shares to the
broker-dealer and authorizes the broker-dealer to sell said shares on
the open market. The broker-dealer will remit proceeds of the sale to
the Company which will remit net proceeds to the Optionee after
repayment of the borrowing, deduction of costs, if any, and
withholding of taxes. The Optionee's borrowing from the Company on an
open account shall be a personal obligation of the Optionee which
shall bear interest at the published Applicable Federal Rate (AFR) for
short-term loans and shall be payable upon demand by the Company.
Such borrowing may be authorized by telephone or other
telecommunications acceptable to the Company. Upon such borrowing and
the exercise of the Option or portion thereof, title to the shares
shall pass to the Optionee whose election hereunder shall constitute
instruction to the Company to register the shares in the name of the
broker-dealer or its nominee. The Company reserves the right to
discontinue this broker-dealer exercise method at any time for any
reason whatsoever. The Optionee agrees that if this broker-dealer
exercise method under this paragraph is used, the Optionee promises
unconditionally to pay the Company the full balance in his open
account at any time upon demand. Optionee also agrees to pay interest
on the account balance at the AFR for short-term loans from and after
demand.
(b) This Option shall be exercisable in three installments. The first
installment shall be exercisable on the first anniversary following the Date of
Grant for 33% of the number of shares of Common Stock subject to this Option.
Thereafter, on each subsequent anniversary date an installment shall become
exercisable for 33% and 34%, respectively, of the number of shares subject to
this Option until the Option has become fully exercisable. To the extent that
any of the above installments is not exercised when it becomes exercisable, it
shall not expire, but shall continue to be exercisable at any time thereafter
until this Option shall terminate, expire or be surrendered. An exercise shall
be for whole shares only.
3. TERMINATION OF EMPLOYMENT
(a) The Option shall become exercisable as to all remaining shares
following the Termination of Employment of the Optionee for any reason, other
than a Termination of Employment by the Optionee voluntarily without "Good
Reason" or by the Company for "Cause" (each as defined in the Optionee's
employment agreement).
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(b) "Termination of Employment" as used herein means termination from
active employment; it does not mean termination of payment of severance or
benefits at the end of salary continuation or other form of severance or pay in
lieu of salary.
4. EXPIRATION OF OPTION. The Option shall expire or terminate and may not
be exercised to any extent by the Optionee after the first to occur of the
following events:
(a) The tenth anniversary of the Date of Grant, or such earlier time as
the Company may determine is necessary or appropriate in light of applicable
foreign tax laws; or
(b) Immediately upon the Optionee's Termination of Employment for Cause
(as defined in the Optionee's employment agreement).
5. TRANSFERABILITY. Other than as specifically provided with regard to
the death of the Optionee, this Option agreement and any benefit provided or
accruing hereunder shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge; and any
attempt to do so shall be void. No such benefit shall, prior to receipt thereof
by the Optionee, be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the Optionee.
6. NO RIGHT TO EMPLOYMENT. Neither the execution and delivery of this
agreement nor the granting of the Option evidenced by this agreement shall
constitute or be evidence of any agreement or understanding, express or implied,
on the part of the Company or its subsidiaries to employ the Optionee for any
specific period or shall prevent the Company or its subsidiaries from
terminating the Optionee's employment at any time with or without "Cause" (as
defined in Section 11 herein).
7. ADJUSTMENTS IN OPTION. In the event that the outstanding shares of
the Common Stock subject to the Option are, from time to time, changed into or
exchanged for a different number or kind of shares of the Company or other
securities by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, spinoff, combination of shares,
or otherwise, the Committee shall make an appropriate and equitable adjustment
in the number and kind of shares or other consideration as to which the Option,
or portions thereof then unexercised, shall be exercisable. Any adjustment made
by the Committee shall be final and binding upon the Optionee, the Company and
all other interested persons.
8. APPLICATION OF LAWS. The granting and the exercise of this Option and
the obligations of the Company to sell and deliver shares hereunder and to remit
cash under the broker-dealer exercise method shall be subject to all applicable
laws, rules, and regulations and to such approvals of any governmental agencies
as may be required.
9. TAXES. Any taxes required by federal, state, or local laws to be
withheld by the Company on exercise by the Optionee of the Option for Common
Stock shall be paid to the Company before delivery of the Common Stock is made
to the Optionee. When the Option is exercised under the broker-dealer exercise
method, the full amount of any taxes
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required to be withheld by the Company on exercise of stock options shall be
deducted by the Company from the proceeds.
10. NOTICES. Any notices required to be given hereunder to the Company
shall be addressed to The Secretary, RJR Nabisco Holdings Corp., 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, XX 00000-0000, and any notice required to be given
hereunder to the Optionee shall be sent to the Optionee's address as shown on
the records of the Company.
11. TERMINATION FOR "CAUSE." For purposes of this Agreement, the
Optionee's employment shall be deemed to have been terminated for "Cause" only
as such term is defined in the Optionee's employment or severance agreement.
Any voluntary termination by the Optionee in anticipation of an involuntary
termination of the Optionee's employment for Cause shall be deemed to be a
termination of Optionee's employment for Cause.
12. ADMINISTRATION AND INTERPRETATION. In consideration of the grant, the
Optionee specifically agrees that the Committee shall have the exclusive power
to interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan and Agreement as are
consistent therewith and to interpret or revoke any such rules. All actions
taken and all interpretations and determinations made by the Committee shall be
final, conclusive, and binding upon the Optionee, the Company and all other
interested persons. No member of the Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan or the Agreement. The Committee may delegate its interpretive
authority to an officer or officers of the Company.
13. OBLIGATIONS OF OPTIONEE
(a) In consideration of the grant, the Optionee, while both actively
employed and in the event of Optionee's Termination of Employment for any
reason, specifically agrees that within the term of this grant or within three
years following the payment of any amounts pursuant to the grant, if later: (i)
the Optionee will personally provide reasonable assistance and cooperation to
the Company in activities related to the prosecution or defense of any pending
or future lawsuits or claims involving the Company; (ii) the Optionee will
promptly notify the Company upon receipt of any requests from anyone other than
an employee or agent of the Company for information regarding the Company, or if
the Optionee becomes aware of any potential claim or proposed litigation against
the Company; (iii) the Optionee will refrain from providing any information
related to any claim or potential litigation against the Company to any
non-Company representatives without either the Company's written permission or
being required to provide information pursuant to legal process; (iv) the
Optionee will not disclose or misuse any confidential information or material
concerning the Company; and (v) the Optionee will not engage in any activity
contrary or harmful to the interests of the Company. In further consideration of
the grant, the Optionee specifically agrees that if required by law to provide
sworn testimony regarding any Company-related matter: the Optionee will consult
with and have Company designated legal counsel present for such testimony (the
Company will be responsible for the costs of such designated counsel); the
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Optionee will confine his testimony to items about which he has knowledge rather
than speculation, unless otherwise directed by legal process; and the Optionee
will cooperate with the Company's attorneys to assist their efforts, especially
on matters the Optionee has been privy to, holding all privileged
attorney-client matters in strictest confidence.
(b) If the Company reasonably determines that the Optionee has
materially violated any of his obligations under this agreement, then this
Option shall terminate, effective the date on which such violation began (unless
otherwise terminated sooner) and the Company may demand the return of any gain
realized by the Optionee from the exercise of all or a portion of this Option
and the Optionee hereby agrees to return such amounts upon such demand. If
after such demand the Optionee fails to return said amounts, the Optionee
acknowledges that the Company has the right to deduct from any amounts the
Company owes to the Optionee (including, but not limited to, wages or other
compensation), or to commence judicial proceedings against the Optionee, to
recover said amounts and any and all of its attorney's fees and costs.
14. OTHER PROVISIONS.
a) Titles are provided herein for convenience only and are not to
serve as a basis for interpretation of the Agreement.
b) This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this Agreement.
c) In the event of a Change of Control, the Optionee shall receive
in cash in respect of the Option and in exchange for the cancellation of the
Option, the higher of (i) or (ii) where (i) is the excess, if any, of the Fair
Market Value over the exercise price of the Option, multiplied by the number of
Shares subject to the Option and (ii) is the value of the Option using the
Black-Scholes method of valuing the Option based on the following assumptions:
(A) Fair Market Value; (B) a term equal to the remaining life of the option; (C)
a risk-free factor equal to the average yield on term equal to the expected term
of the option, a dividend yield calculated by dividing the annual dividend by
the Fair Market Value, and volatility of 35.6% (the 4 1/2 year weighted average
volatility of the Shares).zero-coupon U.S. government issues, with a maturity
coincident with the expiration of the remaining term of the option, as reported
in the Wall Street Journal for the day the Change of Control is deemed to have
occurred; (D) a dividend yield equal to the weighted average annual dividend
yield of Holdings for the time period since March 1995, or the immediately
preceding 60 months, whichever time period is less; and (E) a volatility equal
to the weighted average volatility for the immediately preceding 60 months. The
volatility shall be calculated for each year (12-month periods counting back
from the month prior to that in which the Change in Control is deemed to have
occurred) by using the month-end closing prices plus dividends paid in that
month. The dividend yield shall be calculated for each year (12-month periods
counting back from the month prior to that in which the Change of Control is
deemed to have occurred) by dividing the total dividends (for which the
ex-dividend dates occur within that 12-month period) by the average month-end
closing prices during that 12 month period. The weighted average dividend yield
is calculated by applying a weighting factor to each annual yield where the
highest factor is the number that equals the number of full or partial years in
the time
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period and is applied to the annual yield of the most recent 12-month period,
the second highest factor (highest factor minus 1) is applied to the annual
yield of the second most recent 12-month period, the third highest factor
(highest factor minus2) is applied to the annual yield of the most recent
12-month period, and so forth, adding all of these products together and
dividing by a number that equals the sum of the weighting factors. The weighted
average volatility is calculated in the same manner as described for dividend
yield. Notwithstanding the foregoing, this Section 14(c) shall not apply in the
event of a Change of Control under Section 8(c)(iii) of the Plan for which
Holdings is using the "pooling of interest" method of accounting.
d) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE
INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF
LAWS.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the
Optionee have executed this Agreement as of the date of Grant first above
written.
RJR NABISCO HOLDINGS CORP.
By:
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Authorized Signatory
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Optionee
Optionee's Taxpayer Identification Number:
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Optionee's Home Address:
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