THIS AGREEMENT, made as of this 31st day of October, 1988, by and between RJR NABISCO, INC., a Delaware corporation (the “Company”) and ANDREW J. SCHINDLER (the “Executive”).
WHEREAS, in order to provide the Executive continued incentives to remain in the services of the Company or its subsidiaries, the Company desires to provide the Executive with compensation security under the conditions set forth in this Agreement should his employment with the Company or its designated subsidiaries for any reason be terminated without cause by the Company during the term of this Agreement; NOW, THEREFORE, it is hereby agreed by and between the parties as follows: 1. Employment. The Executive agrees to devote his working time exclusively to the performance of such services for the Company or its subsidiaries as may be assigned to him from time to time and to perform such services faithfully and to the best of his ability except as the provisions of subsection 4 (b) (b) shall apply.
2. Term of Agreement . This Agreement shall commence on the date hereof and shall remain in effect so long as the Executive remains employed by the Company, any of its subsidiaries or any successor organization.
3. Termination of Employment Without Compensation Continuance. (a) Termination for Cause . This Agreement shall immediately be terminated and neither party shall have any obligation hereunder if the Executive’s employment is terminated for “cause.” Termination for cause shall arise where termination results from (a) criminal dishonesty, (b) deliberate and continual refusal to perform employment duties on substantially a full-time basis, (c) deliberate and continual refusal to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company, or (d) deliberate misconduct which could be materially damaging to the Company without reasonable good faith belief by the Executive that such conduct was in the best interests of the Company. (b) Voluntary Termination of Employment by the Executive. The Executive reserves the right to voluntarily terminate his employment at any time for any reason; provided, he shall give the Company not less than three (3) months written notice thereof, unless the Company consents to a shorter notice period. Three (3) months after the Company receives such notice, this Agreement shall cease, all obligations of the Company hereunder shall be cancelled automatically, and the Executive shall not be entitled to any form of Compensation Continuance under this Agreement, including that described in Section 5 below. (c) Disability . The event of physical or mental disability of a nature that entitles the Executive to benefits under the Company’s Long-Term Disability Plan is not a termination of employment under any section of this Agreement. As such, disability shall not qualify the Executive for the Compensation Continuance described herein unless the Executive is terminated under Section 4(a). (d) Death . In the event of the Executive’s death prior to involuntary termination, this Agreement will be null and void.
4. Termination With Compensation Continuance. (a) Involuntary Termination Without Cause by the Company. The Company reserves the right to terminate the employment of the Executive at any time for any reason subject to providing the compensation and benefits described herein. Except as provided in Section 6, the Company will provide the Executive with the Compensation Continuance described in Section 5 hereof if the Executive is involuntarily separated from active employment without cause by the Company (“Involuntary Termination”). Involuntary Termination shall not include the divestiture of the Operating Company employing the Executive, and the obligations of the Company under this Agreement shall be assigned to the Operating Company, or its successor or acquiror, in connection with the divestiture of either all, or substantially all, the shares or assets of such Operating Company. (b) Deemed Involuntary Termination Without Cause by the Company. Involuntary Termination shall be deemed to occur if the Executive voluntarily terminates employment after: (a) the total amount of his base salary and targeted awards under the Long—Term Incentive Plan and the Annual Incentive Award Plan (or successors thereto) is at any time reduced by more than 20% without the Executive’s consent, provided, however, nothing herein shall be construed to guarantee the Executive’s target award if performance is below target, or (b) his job responsibilities are substantially reduced in importance without the Executive’s consent. Unless the Executive provides written notification of his non-consent to either of the events in (a) or (b) above within 90 days after the occurrence of such events, the Executive shall be deemed to have consented to the occurrence of such event or events and no deemed Involuntary Termination shall occur. If the Executive provides written notice of his non—consent to either of the events in (a) or (b) above within 90 days after the occurrence of such events, he shall be deemed to have been Involuntarily Terminated ninety (90) days after receipt of such written notice by the Company.
5. Compensation Continuance Under this Agreement. (a) Compensation Period . If at any time during the term ofthis Agreement the Executive has an Involuntary Termination pursuant to Section 4, he will be provided with Compensation Continuance as provided in this Section 5 for a period of three (3) years commencing with the effective date of such Involuntary Termination (the “Compensation Period”). (b) Cash compensation. (i) The Executive will be entitled to cash compensation equal to two (2) years pay, calculated as described below, payable in equal monthly installments over the three (3) year Compensation Period, each installment representing two-thirds (2/3) of the Executive’s full pay. The aggregate cash compensation will be calculated as twice the sum of (A) plus (B), where (A) is the Executive’s highest annual rate of base salary in effect during the twelve (12) month period prior to his involuntary termination and (B) is the target amount of his award under the Company’s Annual Incentive Award Plan (or successor Short—Term Incentive Plan) for the calendar year in which his employment terminated (or, if greater, the amount of such award for the next preceding calendar year of full-time employment).
(ii) Cash compensation paid pursuant to this Section5(b) shall be payable in equal monthly installments over the Compensation Period, and shall be subject to regular payroll deductions. (iii) For purposes of calculating Average Final Compensation for pension benefits, the Executive will be deemed to be paid during the entire Compensation Period at the Executive’s highest annual rate of base salary during the twelve (12) month period prior to Involuntary Termination. (c) Short Term Incentive Plan Awards . The Executive will be paid at the time of Involuntary Termination an award under the Annual Incentive Award Plan (or successor thereto, if any) of the Company, based upon the target award for the year in which the Executive’s Involuntary Termination occurs, prorated for the Executive’s active employment during such year and adjusted for performance. Except as stated in the foregoing sentence, all provisions of the Annual Incentive Award Plan shall be applicable to the Executive. (d) Long Term Incentive Plan Awards. (i) Stock Options
During the Compensation Period, subject to the terms of specific stock option awards, any options to acquire Company Common stock that have been granted to the Executive by the Company shall continue to vest. All vested stock options must be exercised prior to the end of the compensation period; provided, however, if the Executive retires at the end of the Compensation period and immediately commences to receive a retirement benefit from the Company, the Executive may exercise any vested stock options during the eighteen (18) month period following the date of his retirement. All options that remain unvested at the end of the Compensation period shall be governed by the terms of the Plan and agreement under which such options were granted. (ii) Restricted Stock. Any shares of the Company’s restricted stock (the “stock”) which is subject to restriction as of the date of Involuntary Termination shall not be totally forfeited, and the Executive shall receive a portion of shares of stock determined by multiplying the number of such shares by a fraction, the denominator of which is the total number of months under which the stock was subject to restriction (“Restricted period”) and the numerator of which is the number of months of the Executive’s active employment during the Restricted period. In the event of Executive’s death, termination by reason of disability, or retirement at his normal retirement age or early retirement with consent of the Company, all restrictions on the Stock shall lapse. If any provision of the Long—Term Incentive Plan prohibits delivery of Stock, a comparable cash award shall be made to the Executive. The total number of shares of Stock subject to the provisions of this Agreement shall be adjusted as provided in the applicable Restricted Stock Agreement between the Executive and the Company in the event of merger, stock split or other similar event. (e) Welfare Benefits . During the Compensation Period the Executive will be provided the welfare benefits afforded by the Employee Benefit Plans and programs maintained by the Company in which he participated immediately prior to his Involuntary Termination. (f) Internal Revenue Code Qualified Defined Benefit Plans. If Executive was participating in an IRC Section 401(a) defined benefit plan prior to Involuntary Termination, he will continue to accrue benefits under such plan during the Compensation Period, and if the Executive has attained age 50 at the end of the Compensation Period, he will, subject to the conditions of Paragraph 6, be deemed retired with the consent of the Company. (g) Internal Revenue Code Qualified Defined Contribution Plans. If Executive was participating in an IRC Section 401(a) defined contribution plan prior to separation from active employment, he may continue to so participate, pursuant to the terms of that plan, during the Compensation Period. (h) ERISA Excess Plans . Executive shall be eligible to participate during the Compensation Period in any plan of the Company adopted for the purpose of restoring benefits under the Qualified Defined Benefit and Defined Contribution Plans of the Company which would otherwise be reduced by the limitations imposed by Section 415 and other sections of the IRC. (i) Executive or Management Program . The Executive may continue to participate in the Executive or Management Program, if a participant on the date immediately prior to Involuntary Termination, pursuant to the terms of the program governing inactive pay status as in effect on the date of this Agreement or as each respective provision of the Program may be improved from time to time or as additional provisions become effective.
6. Conditions on Compensation Continuance. (a) Availability and Consulting . During the Compensation Period the Executive shall provide consulting services to the Company on a reasonable basis subject to appropriate notice and reimbursement of all travel and other expenses. During the first six (6) months of the Compensation Period the Executive may be required by the Company to provide up to fifteen (15) days of consultation during normal business hours and business days. When and if the Executive becomes employed on a full—time basis, either with another company or on a self—employed basis, his obligation to provide consulting services shall be limited by the requirements of such employment, and under appropriate circumstances, may be restricted to telephone conference. (b) Confidentiality and Conduct . The Executive warrants that he will not disclose to any other person any confidential information or trade secrets concerning the Company or any of its subsidiaries at any time during or after the Compensation period. The Executive will at all times refrain from taking any action or making any statements, written or oral, which are intended to and do disparage the goodwill or reputation of the Company, its directors, officers or executives or which could adversely affect the morale of Company employees. (c) Breach of Conditions. In the event that the Executive unreasonably refuses to provide consulting services in accordance with paragraph (a) above or materially violates the terms and conditions of paragraph (b) above, the Company may, at its election upon ten (10) days notice, terminate the Compensation Period, discontinue cash compensation payments and employee benefits coverage and cancel any outstanding stock options or Restricted Stock. The Company may also initiate any form of legal action it may deem appropriate seeking damages or injunctive relief with respect to any material violations of paragraph (b) above. (d) Non-Competition . The Compensation Period shall be terminated if the Executive, without the Company’s written approval, accepts a substantially similar or higher executive position, paying a substantially comparable or greater level of cash compensation, with any other company conducting a business which is substantially competitive with a business conducted by the Company. Alternatively, the Company may, in its discretion, appropriately reduce the Executive’s cash compensation and employee benefits coverage for the balance of the Compensation Period. (e) Employment With Another Employer During Compensation Period. Except as otherwise provided in this Section 6, if the Executive commences employment with another employer during the Compensation Period, he will continue to receive the compensation continuance provided under Section 5 for the balance of the Compensation Period, except that, unless otherwise required by law, benefits under the Company’s Employee Benefits Plans, including the Executive or Management Program, if applicable, shall be appropriately terminated or offset to the extent provided by the other employer. (f) Other Severance Benefits . The Executive is entitled to no other form of severance benefits, including benefits otherwise payable under any of the Company’s regular severance policies, other than those set forth elsewhere in this Agreement. The Executive will at the time of termination of employment be eligible for any form of post retirement benefit provided under the Company’s qualified Employee Benefits Plans, including retiree medical benefits, as any other employee upon retirement with the same age and service. Nothing contained in this Agreement shall adversely affect the Executive’s rights to accrued vested pension benefits or his right to receive previously deferred awards under any of the Company’s incentive award plans. (g) Release and Waiver of Claims. In consideration of the compensation and benefits continuance available pursuant to this Agreement, the Executive, except as otherwise expressly provided in this Agreement, unconditionally releases the Company and its subsidiaries, their directors, officers, employees and stockholders, or any of them, from any and all claims, liabilities, and obligations of any nature pertaining to termination of employment including, but not limited to, (a) any claims under federal, state or local laws prohibiting age discrimination, or (b) any claims growing out of any alleged legal restrictions on the Company’s right to terminate its employees, such as any alleged implied contract of employment or termination contrary to public policy. (h) Disability . In the event the Executive is eligible for benefits under the Company’s Long Term Disability Plan during his Compensation Period any Compensation Continuance will be suspended while disability benefits are paid from any Company plan and resumed when such disability payments cease. All other provisions of this Agreement shall remain in effect notwithstanding the Executive’s disability. (i) Death In the event of the Executive’s death subsequent to commencement of his Compensation period hereunder, the balance of Compensation Continuance will be paid to his beneficiary in a lump sum. “BeneficiarY” shall mean the Executive’s designated beneficiary under his Executive Program life insurance or, if not so eligible, his core life insurance benefit under the Company’s plans.
7. General Provisions.
(a) Limited Right of Appeal. (i) If the Executive is advised in writing that he is being terminated for cause and within fifteen (15) days thereafter submits to the Chief Executive officer of the Company a written objection to such a determination, section 3(a) will not be applicable unless the organization, Compensation and Nominating committee of the Board of Directors of the Company at or before its next regularly scheduled meeting determines by majority vote that the Executive has been terminated for cause. (ii) If the Executive’s Compensation Period is terminated pursuant to Section 6, he may, within fifteen (15) days after mailing of notice thereof to him, submit to the Chief Executive Officer of the Company a written objection to such termination. In such event, the organization, Compensation and Nominating Committee of the Board of Directors at or before its next regularly scheduled meeting must determine by majority vote that termination of the Compensation Period was appropriate or, failing that, the Compensation period must be reinstated with full retroactive effect.
(b) Notices . All notices hereunder shall be in writing and deemed properly given if delivered by hand and receipted or if mailed by registered mail, return receipt requested. Notices to the Company shall be directed to the Corporate secretary at the Company’s headquarters offices. Notices to the Executive shall be directed to his last known home address.
(c) Limited Waiver . The waiver by the Company of a violation of any of the provisions of this Agreement, whether express or implied, shall not operate or be construed as a waiver of any subsequent violation of any such provision.
(d) No Assignment . No right, benefit or interest hereunder shall be subject to assignment, encumbrance, charge, pledge, hypothecation or set off by Executive in respect of any claim, debt or obligation, or similar process. The Company, however, may assign its obligations hereunder in the event of the divestiture (whether by the sale of shares or assets) of the operating Company employing the Executive.
(e) Amendment . This Agreement may not be amended, modified or cancelled except by written agreement of the parties.
(f) Severability . In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law.
(g) Binding Effect . This Agreement shall be binding upon and inure to the benefit of the Executive, the Company, its affiliates, and any successor organization or organizations which shall succeed to substantially all of the business and property of the Company, whether by means of merger, consolidation, acquisition of substantially all of the assets of the Company or otherwise, including by operation of law.
(h) Unsecured Promise . Unless otherwise stated herein, no benefit or promise hereunder shall be secured by any specific assets of the Company. Unless otherwise stated herein, the Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises.
(i) Governing Law . This Agreement has been made in and shall be governed and construed in accordance with the laws of the State of Delaware.
(j) Entire Agreement . This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. This Agreement supersedes and replaces any prior agreement with respect to employment, compensation continuation and the matters contained in this Agreement which the Executive. may have had with the Company or any affiliate. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
RJR NABISCO, INC.
This Special Addendum to the above-referenced Agreement (the “Agreement’) between RJR Nabisco, Inc. (the “Company”) and the Executive is made as of this 20th day of December, 1988. 1. The Agreement is hereby amended to add the following provisions in Paragraph 4(b): At the end of the first sentence add ‘... or (c) he, without his consent, is at any time required as a condition of continued employment to relocate more than thirty-five (35) miles from his then current place of employment.”- In the second and third sentences change the word “either” to "any" and after the phrase “or (b)” add “... or (c)...’ 2. The Agreement is hereby amended to add to the Compensation Continuance section the following provisions: Notwithstanding any provision to the contrary, pension benefits based on Average Final Compensation will becalculated applying the rate of Compensation Continuance for the entire Compensation Period and retirement on or after age 50 that is deemed to be with the consent of the Company is only for the purposes of welfare and executive compensation plans and does not change the terms of any tax-qualified or ERISA excess or executive retirement plan. Outplacement During the Compensation Period, Executive will be provided with outplacement counseling services at Company expense; provided, however, this expense shall not exceed 18% of the amount of Compensation Continuance for any calendar year. This counseling shall include, but is not limited to, skill assessment, job market analysis, resume preparation, interviewing skills, job search techniques and negotiating.
3. In all other respects, the Agreement continues in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Special Addendum to the Agreement as of December 20, 1988.
RJR Nabisco, Inc.
Andrew J. Schindler
In addition to your other contractual arrangements with the Company and its affiliates, in the event of a Change of Control of RJR Nabisco Holdings Corp. (as such Change of Control is defined in the RJR Nabisco Holdings Corp. 1990 Long-Term Incentive Plan), the following shall occur:
1) The Company shall hold you harmless from any golden parachute tax imposed by any federal, state or local taxing authority as a result of any of the payments made from the Company. In the event that it is determined that any payment or distribution by the Company to or for you (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then you shall be entitled to receive from the Company an additional payment "Excise Tax Adjustment Payment") in an amount such that after payment by you of all applicable Federal, state and local taxes (computed at the maximum marginal rates and including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment Payment, you retain an amount of the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the Payments. You agree to cooperate fully with the Company in any protester appeal by the Company in the event of the imposition of golden parachute tax.
2) If you are terminated without Cause following such Change of Control, the Company shall pay to you as incurred all legal and accounting fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, in seeking to obtain or enforce any right or benefit provided by any compensation-related plan, agreement or arrangement of the Company) unless your claim is found by an arbitral tribunal of competent jurisdiction to have been frivolous.
3) During the twenty-four month period following a Change of Control, you shall be entitled to terminate your employment for Good Reason and receive the severance arrangements under your contractual arrangements with the Company as if you had been terminated by the Company without Cause. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, any of the following occurring following a Change of Control:
(A) A material reduction in your duties, a material diminution in your position or a material adverse change in your reporting relationship from those in effect immediately prior to the Change of Control;
(B) A reduction in your pay grade or bonus opportunity as in effect immediately prior to the Change of Control or as the same may thereafter be increased from time to time during the term of this Agreement;
(C) The failure to continue in effect any compensation plan in which you participate at the time of the Change of Control, including but not limited to the RJR Nabisco Holdings Corp. 1990 Long Term Incentive Plan ("LTIP") and the RJR Nabisco, Inc. Annual Incentive Award Plan (the "MAP"), or any substitute plans adopted prior to the Change of Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan providing you with substantially similar benefits) has been made with respect to such plan in connection with the Change of Control, or the failure to continue your participation therein on substantially the same basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the Change of Control;
(D) The taking of any action which would directly or indirectly materially reduce any of the benefits to be provided under the Retirement or Savings Plans of the Company (unless such reduction is required by law) or deprive you of any material fringe benefit enjoyed by you at the time of the Change of Control, or the failure to provide you with the number of paid vacation days to which you are entitled on the basis of the Company's practice with respect to you as in effect at the time of the Change of Control;
(E) Any purported termination of your employment which is not effected pursuant to a written notice of termination given to you not less than thirty (30) or more than sixty (60) days prior to the date of termination; provided further that for purposes of this Agreement, no such purported termination shall be effective;
(F) Any material breach by Holdings or the Company of any provision of this Agreement or any other of your contractual arrangements with the Company;
(G) Requiring you to be based at any office or location more than 35 miles from the office or location at which you were based immediately prior to such Change of Control, except for travel reasonably required in the performance of your responsibilities.
Please indicate your acceptance of the terms of this Agreement by signing this letter below arid returning it to Jerry Angowitz. A copy will be provided to you.
RJR NABISCO HOLDINGS CORP. RJR NABISCO IN
By: Steven Goldstone Chief Executive Officer
WHEREAS, the Executive and RJR Nabisco, Inc. entered into an employment agreement (the "Employment Agreement") originally dated October 31, 1988 and subsequently amended as of December 20, 1988, which addresses the compensation security to be provided to the Executive in the event his employment with RJR Nabisco, Inc. is involuntarily terminated without Cause; and
WHEREAS, on May 18, 1999, RJR Nabisco, Inc. was renamed R.J. Reynolds Tobacco Holdings, Inc. ("RJR"); and
WHEREAS, in order to provide the Executive with continued incentives to remain in the services of RJR, and to reflect the Executive's additional responsibilities as Chief Executive Officer of RJR, RJIR desires to amend the Employment Agreement to enhance the Executive's compensation security in the event his employment with RJR or a subsidiary is involuntarily terminated without Cause.
NOW, THEREFORE, the parties hereby agree to amend Section 5(b)(i) of the Employment Agreement, effective June 14, 1999, to read as follows:
(b) Cash Compensation. The Executive will be entitled to cash compensation equal to three (3) years pay, calculated as described below, payable in equal monthly installments over the three (3) year Compensation Period. The aggregate cash compensation will be calculated as three times the sum of (a) plus (b), where (a) is the Executive's highest annual rate of base salary in effect during the twelve (12) month period prior to his involuntary termination and (b) is the target amount of his award under the Company's Annual Incentive Award Plan (or successor Short-Term Incentive Plan) for the calendar year in which his employment terminated (or, if greater, the amount of such award for the next preceding calendar year of full-time employment).