UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
August 25, 1997
Date of Report (Date of earliest event reported)
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RJR NABISCO HOLDINGS CORP.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-10215 13-3490602
(Jurisdiction of (Commission file number) (I.R.S. Employer
Incorporation or Identification No.)
Organization)
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RJR NABISCO, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-6388 56-0950247
(Jurisdiction of (Commission file number) (I.R.S. Employer
Incorporation or Identification No.)
Organization)
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1301 Avenue of the Americas
New York, New York 10019
(212) 258-5600
(Address, including zip code, and telephone number,
including area code, of Registrants' principal
executive offices)
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ITEM 5. OTHER EVENTS.
On August 25, 1997, counsel representing R.J. Reynolds Tobacco Company
("RJRT") and certain other major tobacco companies signed a Settlement Agreement
(the "Agreement") with Lawton M. Chiles, Jr., Governor of the State of Florida,
and Robert A. Butterworth, Attorney General, to settle claims asserted by the
State of Florida against RJRT, RJR Nabisco, Inc. ("RJRN") and others in
litigation seeking reimbursement for certain State expenditures for treating
smoking related illnesses. Pursuant to the Agreement, all of these claims
against RJRT and RJRN have been dismissed, except certain claims for
non-monetary relief. The Agreement also provides that the State of Florida will
waive any and all future claims against RJRT, RJRN and others relating to the
use of or exposure to tobacco products.
The Agreement requires the tobacco companies to discontinue all billboard
advertisements, as well as all advertisements that appear on vehicles and in
certain public areas, within several months. In addition, the Agreement
requires the tobacco companies to make an initial $550 million payment to the
State of Florida on September 15, 1997, and subsequent annual payments beginning
with $220 million in September 1998, and, subject to various adjustments, $247.5
million at the end of 1999, $275 million for 2000, $357.5 million for 2001,
$357.5 million for 2002, and $440 million each year thereafter. The Agreement
also requires the tobacco companies to make a one-time $200 million payment on
September 15, 1997, to fund a two-year program against youth smoking. Based on
discussions with other tobacco company signatories to the Agreement, RJRT
believes that its share of the initial $550 million payment will be
approximately $40 million, subject to a possible adjustment, and that the
subsequent annual payments will be allocated on the basis of market share.
Terms similar to those contained in the Florida Agreement will apply to the
settlement of a similar lawsuit brought on behalf of the State of Mississippi by
Michael C. Moore, its attorney general, against RJRT and others to recover
certain amounts expended by the State of Mississippi in treating smoking related
illnesses. On July 2, 1997, lawyers representing RJRT and certain other parties
and Mr. Moore signed a Memorandum of Understanding (the "Memorandum") setting
forth an agreement in principle to settle the Mississippi litigation. Under the
Memorandum, the tobacco companies are required to accord Mississippi terms as
favorable as those contained in any other settlement of similar litigation.
Accordingly, the final settlement with Mississippi will include the same
advertising restrictions imposed under the Florida Agreement and similar payment
obligations as well. Pursuant to the Memorandum, the tobacco companies made an
initial $170 million payment to the State of Mississippi on July 30, 1997, and
they will be required to make additional annual payments, beginning with $68
million in December 1998, and, subject to various adjustments, $76.5 million in
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1999, $85 million in 2000, $110.5 million in 2001, $110.5 million in 2002, and
$136 million annually thereafter. The tobacco companies will also be required
to make a one-time payment of approximately $60 million to fund a two-year
program against youth smoking. RJRT has paid approximately $12 million, subject
to a possible adjustment, as its share of the initial $170 million payment. By
agreement among the tobacco company signatories to the Memorandum, the annual
payments will be allocated on the basis of market share.
With respect to both the Florida and the Mississippi settlements, the
tobacco companies have agreed to make such payments as are necessary to cover
the States' litigation costs and those of its private counsel, estimated at $37
million for both States together, as well as private counsel's fees. The
tobacco companies' payment of such fees, together with those to be paid in
connection with any future settlement of similar litigation, will be made in
amounts to be awarded by a panel of arbitrators, subject to an aggregate annual
cap of $500 million prorated from the date of settlement, and is to be
allocated among the tobacco companies on the basis of market share.
In the event that federal legislation is passed that substantially
implements the proposed resolution described in the Current Report on Form 8-K
filed by RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. on June 24, 1997, both
the Florida and the Mississippi settlements would be largely superseded.
However, whatever the terms of such legislation, no downward adjustment will be
made to the overall amount required to be paid by the tobacco companies to
Florida and Mississippi through 1998 under their respective settlements. In
addition, both settlements provide that, if federal legislation is enacted, the
tobacco companies will make additional payments to Florida and Mississippi for
their unique role in the national resolution, in amounts to be set by a panel of
arbitrators, subject to certain limitations. The tobacco companies have agreed
not to oppose requests for compensation of $250 million on the part of Florida
and $75 million on the part of Mississippi, to be paid over five years and
subject to an annual cap for all such payments to settling states of $100
million.
RJRN believes that, by settling these cases, it has resolved litigation
that could otherwise have materially affected the results of operations or cash
flows of RJRN in particular quarterly or annual periods or its financial
condition. Nonetheless, the financial consequences of these settlements for
RJRT are hard to predict, and may depend, among other things, on (i) the amount
of the future annual payments required of RJRT; (ii) the effect of discontinuing
most forms of outdoor advertising in the States of Florida and Mississippi on
consumption of tobacco products within those States; and (iii) the impact of the
advertising restrictions on RJRT's competitive position in Florida and
Mississippi. In addition, the negotiation and announcement of these agreements
could also affect (i) other federal, state and local regulation of the tobacco
industry, including the federal legislative resolution proposed on June 20,
1997; (ii) public attitudes toward smoking and the tobacco industry; (iii) the
climate for pending litigation against
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RJR Nabisco Holdings Corp. ("Holdings"), RJRN, RJRT and other tobacco companies;
and (iv) the number of new smoking and health claims filed against the industry.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibits
(1) Press Release of R.J. Reynolds Tobacco Company, Philip Morris
Incorporated, Brown and Williamson Tobacco Corporation and the
Lorillard Tobacco Company dated August 25, 1997.
(2) Settlement Agreement dated August 25, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
RJR NABISCO HOLDINGS CORP.
RJR NABISCO, INC.
(Registrants)
By:/s/ Robert F. Sharpe, Jr.
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Robert F. Sharpe, Jr.
Senior Vice President and
General Counsel
Date: September 4, 1997
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