Exhibit 10.48

REYNOLDS AMERICAN INC.

LONG-TERM INCENTIVE PROGRAM

_________________________________________

RESTRICTED STOCK UNIT AGREEMENT

________________________________________

DATE OF GRANT:  October 24, 2016

1.Grant.  Pursuant to the provisions of the Reynolds American Inc. Amended and
Restated 2009 Omnibus Incentive Compensation Plan (the “Plan”), Reynolds
American Inc. (the “Company”), on the date set forth above, has granted to

Joseph P. Fragnito (the “Grantee”),

subject to the terms and conditions which follow and the terms and conditions of
the Plan, an initial grant (the “Target Number”) of

21,101 Restricted Stock Units.

A copy of the Plan has been provided to the Grantee and is made part of this
Restricted Stock Unit Agreement (this “Agreement”) with the same force and
effect as if set forth in this Agreement itself.  All capitalized terms used in
this Agreement shall have the meaning set forth in the Plan, unless otherwise
defined in this Agreement.

2.Value.  Each Restricted Stock Unit shall be equal in value to one share of
common stock, par value $0.0001 per share, of the Company or any security or
other consideration into which such share may be changed by reason of any
transaction or event of the type referred to in Section 11 of the Plan (each, a
“Share”).

3.Performance Periods.  (a) Subject to the terms and conditions of this
Agreement, 50% of the Target Number (the “2017 Target Number”) shall have a
twelve-month performance period, consisting of the period beginning October 1,
2016 and ending September 30, 2017 (the “2017 Performance Period”), after which
the 2017 Target Number of Restricted Stock Units, if and when vested, will be
paid in Shares.  At the end of the 2017 Performance Period, the value of the
2017 Target Number of Restricted Stock Units that vest as provided in Section 4
of this Agreement, and are paid as provided in Section 5 of this Agreement,
shall not exceed any maximum limits set by the Board of Directors pursuant to
its resolutions adopted on September 15, 2016, or otherwise contained in the
Plan.

(b)Subject to the terms and conditions of this Agreement, the remaining 50% of
the Target Number (the “2018 Target Number”) shall have a twelve-month
performance period, consisting of the period beginning October 1, 2017 and
ending September 30, 2018, (the “2018 Performance Period”), after which the 2018
Target Number of Restricted Stock Units, if

NAI-1502151968v3

--------------------------------------------------------------------------------

 

(c)and when vested, will be paid in Shares.  At the end of the 2018 Performance
Period, the value of the 2018 Target Number of Restricted Stock Units that vest
as provided in Section 4 of this Agreement, and are paid as provided in Section
5 of this Agreement, shall not exceed any maximum limits set by the Board of
Directors pursuant to its resolutions adopted on September 15, 2016, or
otherwise contained in the Plan.

4.Vesting.  (a) Subject to the terms and conditions of this Agreement, the 2017
Target Number of Restricted Stock Units shall vest, if at all, on December 15,
2017 (the “First Vesting Date”), and the 2018 Target Number of Restricted Stock
Units shall vest, if at all, on December 15, 2018 (the “Second Vesting Date”)
(including in the event of a Change of Control in connection with which the
Restricted Stock Units are Assumed), if the Grantee remains employed by the
Company or a Subsidiary on each such date.

(b)Notwithstanding anything in Section 4(a) of this Agreement to the contrary
but subject to the other terms of this Agreement, in the event of the Grantee’s
Termination of Employment where the Grantee is eligible for and accepts
severance benefits under a Company-sponsored severance plan or agreement with
the Company (with eligibility for severance benefits to be determined in the
sole discretion of the Company) prior to both the First Vesting Date and the
occurrence of a Change of Control: (i) the number of Restricted Stock Units that
will vest on the First Vesting Date shall be equal to the product of (x) the
2017 Target Number and (y) a fraction, the numerator of which shall be the
number of days between the Date of Grant and the date of the Grantee’s
Termination of Employment, and the denominator of which shall be the number of
days between the Date of Grant and the First Vesting Date; and (ii) the number
of Restricted Stock Units that will vest on the Second Vesting Date shall be
equal to the product of (x) the 2018 Target Number and (y) a fraction, the
numerator of which shall be the number of days between the Date of Grant and the
date of the Grantee’s Termination of Employment, and the denominator of which
shall be the number of days between the Date of Grant and the Second Vesting
Date, and any remaining Restricted Stock Units that are at either such time not
vested will be forfeited and cancelled on the First Vesting Date or the Second
Vesting Date, as applicable.  Furthermore, notwithstanding anything in Section
4(a) of this Agreement to the contrary, in the event of the Grantee’s
Termination of Employment where the Grantee is eligible for and accepts
severance benefits under a Company-sponsored severance plan or agreement with
the Company (with eligibility for severance benefits to be determined in the
sole discretion of the Company) after the First Vesting Date but prior to both
the Second Vesting Date and the occurrence of a Change of Control, the number of
Restricted Stock Units that will vest on the Second Vesting Date shall be equal
to the product of (A) the 2018 Target Number and (B) a fraction, the numerator
of which shall be the number of days between the Date of Grant and the date of
the Grantee’s Termination of Employment, and the denominator of which shall be
the number of days between the Date of Grant and the Second Vesting Date, and
any remaining Restricted Stock Units that are at that time not vested will be
forfeited and cancelled on the Second Vesting Date.

(c)Notwithstanding anything in Section 4(a) of this Agreement to the contrary
but subject to the other terms of this Agreement, in the event of (i) the
Grantee’s death or (ii) the Grantee’s Termination of Employment due to Permanent
Disability (as such term is defined below), in each case, prior to both the
First Vesting Date and the occurrence of a Change of Control, and while the
Grantee is an active employee of the Company or a Subsidiary, the

2

NAI-1502151968v3

--------------------------------------------------------------------------------

 

number of Restricted Stock Units that will vest on the date of the Grantee’s
death or the date of the Grantee’s Termination of Employment due to Permanent
Disability, as applicable, shall be equal to the sum of (x) the product of (A)
the 2017 Target Number and (B) a fraction, the numerator of which shall be the
number of days between the Date of Grant and the date of the Grantee’s death or
the date of the Grantee’s Termination of Employment due to Permanent Disability,
as applicable, and the denominator of which shall be the number of days between
the Date of Grant and the First Vesting Date, and (y) the product of (A) the
2018 Target Number and (B) a fraction, the numerator of which shall be the
number of days between the Date of Grant and the date of the Grantee’s death or
the date of the Grantee’s Termination of Employment due to Permanent Disability,
as applicable, and the denominator of which shall be the number of days between
the Date of Grant and the Second Vesting Date, and any remaining Restricted
Stock Units that are at that time not vested will be forfeited and cancelled on
the date of the Grantee’s death or the date of the Grantee’s Termination of
Employment due to Permanent Disability, as applicable.  Furthermore,
notwithstanding anything in Section 4(a) of this Agreement to the contrary, in
the event of (I) the Grantee’s death or (II) the Grantee’s Termination of
Employment due to Permanent Disability (as such term is defined below), in each
case, after the First Vesting Date but prior to both the Second Vesting Date and
the occurrence of a Change of Control and while the Grantee is an active
employee of the Company or a Subsidiary, the number of Restricted Stock Units
that will vest on the date of the Grantee’s death or the date of the Grantee’s
Termination of Employment due to Permanent Disability, as applicable, shall be
equal to the product of (X) the 2018 Target Number and (Y) a fraction, the
numerator of which shall be the number of days between the Date of Grant and the
date of the Grantee’s death or the date of the Grantee’s Termination of
Employment due to Permanent Disability, as applicable, and the denominator of
which shall be the number of days between the Date of Grant and the Second
Vesting Date, and any remaining Restricted Stock Units that are at that time not
vested will be forfeited and cancelled on the date of the Grantee’s death or the
date of the Grantee’s Termination of Employment due to Permanent Disability, as
applicable.  For purposes of this Agreement, the term “Permanent Disability”
shall mean that the Grantee has become eligible for and is in receipt of
benefits under the Company’s Long-Term Disability Plan.

(d)(i) Notwithstanding anything in Section 4(a) or Section 4(b) of this
Agreement to the contrary but subject to the other terms of this Agreement, in
the event of a Change of Control that occurs prior to the Second Vesting Date in
connection with which the Restricted Stock Units are not Assumed, all of the
Restricted Stock Units that remain outstanding at the time of such Change of
Control will vest on the date of such Change of Control.

(ii)For purposes of this Agreement, the Restricted Stock Units shall be
considered “Assumed” in connection with a Change of Control if this Agreement is
continued without change in connection with such Change of Control or, if this
Agreement is modified or the Restricted Stock Units are adjusted in connection
with such Change of Control, the following requirements are satisfied:  (w) the
value of the Restricted Stock Units is not reduced by such modification or
adjustment, (x) the Restricted Stock Units as so modified or adjusted relate to
publicly traded equity securities of the Company or its successor in the Change
of Control (or another entity that is affiliated with the Company or its
successor following the Change of Control), (y) if the Grantee is subject to
U.S. federal income tax under the Code, the tax consequences under the Code of
the Restricted Stock Units as so modified or adjusted are not less

3

NAI-1502151968v3

--------------------------------------------------------------------------------

 

favorable to the Grantee than the tax consequences of the Restricted Stock Units
before such modification or adjustment, and (z) the other terms and conditions
of the Restricted Stock Units as so modified or adjusted are not less favorable
to the Grantee than the terms and conditions of the Restricted Stock Units
before such modification or adjustment (including the provisions that would
apply in the event of a subsequent Change of Control and in the event of the
Grantee’s Termination of Employment) and are consistent with Sections 4(d)(iii)
and (iv).  The Restricted Stock Units may be Assumed only to the extent such
assumption does not result in the Restricted Stock Units failing to comply with
Section 409A of the Code.  The determination of whether the conditions of this
Section 4(d)(ii) are satisfied will be made by the Committee, as constituted
immediately before the Change of Control, in its sole discretion.

(iii)Notwithstanding anything in Section 4(a) of this Agreement to the contrary
but subject to the other terms of this Agreement, if the Restricted Stock Units
are Assumed in connection with a Change of Control and the Grantee incurs a
Qualified Termination before the Second Vesting Date, but within the two year
period following the Change of Control, all of the Restricted Stock Units that
remain outstanding at the time of such Change of Control shall vest upon such
Qualified Termination.

(iv)For purposes of this Section 4(d), a “Qualified Termination” shall mean (x)
a Termination of Employment in connection with which the Grantee is or would be
eligible to receive severance benefits under a severance plan or agreement that
the Company sponsors or is party to as of the Change of Control (based on the
terms of such plan or agreement in effect immediately prior to the Change of
Control), (y) the Grantee’s death or (z) the Grantee’s Termination of Employment
due to Permanent Disability.

(e)Notwithstanding anything in this Agreement to the contrary but subject to the
other terms of this Agreement, in the event of the Grantee’s (i) voluntary
Termination of Employment (other than the Grantee’s Termination of Employment
where the Grantee is eligible for and accepts severance benefits under a
Company-sponsored severance plan or agreement with the Company), (ii)
involuntary Termination of Employment where the Grantee is not eligible for
severance benefits under a Company-sponsored severance plan or agreement with
the Company (including, without limitation, a Termination of Employment for
Cause, as such term is defined in the relevant severance plan or agreement) or
(iii) involuntary Termination of Employment where the Grantee is eligible for
but does not accept the severance benefits under the relevant Company-sponsored
severance plan or agreement with the Company, in each case, prior to the First
Vesting Date or the Second Vesting Date, as applicable, any Restricted Stock
Units that are at that time not vested shall be immediately forfeited and
cancelled and shall not be considered outstanding.

5.Payment.  (a) Payment of vested Restricted Stock Units shall be made only in
Shares.  At the Company’s sole discretion, such Shares may be issued in
certificated or book-entry form.

(b)Except as set forth in Section 5(c) of this Agreement, or except under such
other circumstances as the Committee deems appropriate if the Grantee is not a
“Covered

4

NAI-1502151968v3

--------------------------------------------------------------------------------

 

Employee” within the meaning of Section 162(m) of the Code, no payment of vested
Restricted Stock Units shall be made to the Grantee prior to the First Vesting
Date or the Second Vesting Date, as applicable.  Except as otherwise provided by
this Agreement, payment of vested Restricted Stock Units with respect to the
2017 Performance Period shall be made as soon as practicable following the First
Vesting Date, and in any event no later than 90 days after the First Vesting
Date, and payment of vested Restricted Stock Units with respect to the 2018
Performance Period shall be made as soon as practicable following the Second
Vesting Date, and in any event no later than 90 days after the Second Vesting
Date.

(c)In the event that the Restricted Stock Units vest pursuant to Section 4(c),
or pursuant to Section 4(d)(i) or Section 4(d)(iii) of this Agreement in
connection with or following a Change of Control that constitutes a “change in
control event” for purposes of Section 409A of the Code, the payment of the
vested Restricted Stock Units shall be made as soon as practicable after the
applicable vesting event, and in any event no later than 90 days after the date
such event occurs.

(d)Any payment to which the Grantee is entitled under this Agreement by reason
of (or otherwise after) the Grantee’s death shall be made to the Grantee’s
estate.  

6.Termination of Employment.  For purposes of this Agreement, the term
“Termination of Employment” shall mean termination from active employment with
the Company or a Subsidiary, a successor to the Company or a Subsidiary in a
Change of Control, or another entity that is affiliated with the Company or its
successor following the Change of Control; it does not mean the termination of
pay and benefits at the end of a period of salary continuation (or other form of
severance pay or pay in lieu of salary).

7.Dividend Equivalent Payment.  At the time of the payment of any vested
Restricted Stock Units, the Grantee shall receive a cash dividend equivalent
payment in an amount equal to the product of (a) the 2017 Target Number and the
2018 Target Number, as applicable, and (b) the aggregate amount of dividends per
share declared and paid to the Company’s shareholders on Shares during the
period from the Date of Grant through the date of the payment of the Restricted
Stock Units, without interest (the “Actual Dividends Paid”); provided, however,
that in the event that Section 4(b), 4(c) or 4(d) applies, the amount of the
dividend equivalent payment to the Grantee shall be equal to the product of (i)
the number of Restricted Stock Units in which the Grantee becomes vested
pursuant to Section 4(b), 4(c) or 4(d) of this Agreement, as applicable, and
(ii) the Actual Dividends Paid.  Notwithstanding anything in this Section 7 to
the contrary, to the extent the payment of the vested Restricted Stock Units
occurs after both the date a dividend has been declared by the Company and the
record date for such dividend, but prior to the dividend payment date related
thereto, the amount of the Actual Dividend Paid also shall include such
dividend.  In the case of a dividend payment to be paid in property, the
dividend payment shall be deemed to be the fair market value of the property at
the time of distribution of the dividend payment to the Grantee, as determined
by the Committee.

8.Rights as a Shareholder.  The Grantee shall not be, nor have any of the rights
or privileges of, a shareholder of the Company with respect to the Restricted
Stock Units unless and

5

NAI-1502151968v3

--------------------------------------------------------------------------------

 

until, and to the extent, the Restricted Stock Units vest and Shares have been
paid to the Grantee in accordance with Section 5 of this Agreement.

9.Transferability.  Other than as specifically provided in this Agreement with
regard to the death of the Grantee, this Agreement and any benefit provided or
accruing hereunder shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any
attempt to do so shall be void.  No such benefit shall, prior to receipt thereof
by the Grantee, be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the Grantee.

10.No Right to Employment.  Neither the execution and delivery of this Agreement
nor the granting of the Restricted Stock Units evidenced by this Agreement shall
constitute any agreement or understanding, express or implied, on the part of
the Company or its subsidiaries to employ the Grantee for any specific period or
in any specific capacity or shall prevent the Company or its subsidiaries from
terminating the Grantee’s employment at any time with or without cause.

11.Application of Laws.  The granting of Restricted Stock Units under this
Agreement shall be subject to all applicable laws, rules and regulations and to
such approvals of any governmental agencies as may be required.

12.Notices.  Any notices required to be given hereunder to the Company shall be
addressed to the Corporate Secretary, Reynolds American Inc., Post Office Box
2990, Winston-Salem, NC 27102-2990, and any notice required to be given
hereunder to the Grantee shall be sent to the Grantee’s address as shown on the
records of the Company.

13.Taxes.  Any taxes required by federal, state or local laws to be withheld by
the Company in respect of the grant of Restricted Stock Units or payment of
Shares in respect of vested Restricted Stock Units hereunder shall be paid to
the Company by the Grantee by the time such taxes are required to be paid or
deposited by the Company.  The Grantee hereby authorizes the necessary
withholding of Shares by the Company to satisfy the minimum statutory tax
withholding amount prior to delivery of Shares in respect of vested Restricted
Stock Units.

14.Administration and Interpretation.  In consideration of the grant of
Restricted Stock Units hereunder, the Grantee specifically agrees that the
Committee shall have the 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 Grantee, the
Company and all other interested persons.  No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or this Agreement.  The Committee may delegate
its interpretive authority as permitted by the provisions of the Plan.

15.Compliance with Section 409A of the Code.  This Agreement is intended to
comply with Section 409A of the Code and shall be construed and interpreted in
accordance with such intent.  If any period in which a payment under this
Agreement is to be made begins and

6

NAI-1502151968v3

--------------------------------------------------------------------------------

 

ends in two different years, the Grantee shall not have a right to designate the
taxable year of payment.

16.Amendment.  This Agreement is subject to the Plan, a copy of which has been
provided to the Grantee.  The Board of Directors and the Committee, as
applicable, may amend the Plan, and the Committee may amend this Agreement, at
any time in any way, except that, other than as otherwise provided by the Plan,
any amendment of the Plan or this Agreement that would impair the Grantee’s
rights under this Agreement may not be made without the Grantee’s written
consent.

17.Litigation Assistance.  (a) In addition to any other obligations of the
Grantee under law or any other agreement with any Related Company, in
consideration of the grant of Restricted Stock Units hereunder, the Grantee
specifically agrees that the Grantee:

(i)if requested by the Company, will personally provide reasonable assistance
and cooperation to the Related Companies in activities related to the
prosecution or defense of any pending or future lawsuits or claims involving any
Related Company (with the Company reimbursing the Grantee for reasonable and
necessary out-of-pocket costs and expenses incurred in connection therewith);

(ii)will promptly notify the Company’s General Counsel, in writing, upon receipt
of any requests from anyone other than an employee or agent of one of the
Related Companies for information regarding any Related Company which could
reasonably be construed as being proprietary, non-public or confidential, or if
the Grantee becomes aware of any potential claim or proposed litigation against
any Related Company;

(iii)will refrain from providing any information related to any claim or
potential litigation against any Related Company to any person who is not a
representative of the Company without the Company’s prior written permission,
unless required to provide information pursuant to legal process;

(iv)will not disclose or misuse any confidential information or material
concerning any Related Company; and

(v)will not engage in any activity detrimental to the interests of any Related
Company, including an act of dishonesty, moral turpitude or other misconduct
that has or could have a detrimental impact on the business or reputation of any
Related Company.  

(b)In further consideration of the grant of Restricted Stock Units hereunder,
the Grantee specifically agrees that, if required by law to provide sworn
testimony regarding any matter related to any Related Company:  the Grantee will
consult with and have Company designated legal counsel present for such
testimony (with the Company being responsible for the costs of such designated
counsel); the Grantee will cooperate with the Company’s attorneys to assist
their efforts, especially on matters the Grantee has been privy to, holding all
privileged attorney-client matters in strictest confidence.

7

NAI-1502151968v3

--------------------------------------------------------------------------------

 

(c)Notwithstanding anything herein to the contrary, nothing in this Agreement
shall (i) prohibit the Grantee from reporting possible violations of federal law
or regulation to any governmental agency or entity in accordance with any
whistleblower protection provisions of state or federal law or regulations, (ii)
prohibit the Grantee from communication with any governmental agency or entity
or otherwise participating in any investigation or proceeding that may be
conducted by such governmental agency or entity, including providing documents
or information, (iii) require notification or prior approval by the Company or
the Company’s General Counsel of any such reports, communications or
disclosures, or (iv) limit the Grantee’s right to receive an award for
information relating to a possible securities law violation to the Securities
and Exchange Commission.

18.Noncompetition and Other Prohibited Activities.  (a) In addition to any other
obligations of the Grantee under law or any other agreement with any Related
Company,  in consideration of the grant of Restricted Stock Units hereunder, the
Grantee, during the continuation of his or her employment by any Related Company
and during the one-year period commencing upon his or her Termination of
Employment for any reason (or, if the Grantee is receiving benefits under a
severance plan or agreement, the period of time set forth in the non-competition
agreement entered into by the Grantee in connection with the receipt of such
severance benefits), will not, directly or indirectly:

(i)be employed, or retained as an independent contractor, or otherwise provide
advisory or consulting services (in each case, whether compensated or not
compensated), in a sales-related capacity, marketing role, strategic planning
role, financial role, or in a product research and development role for any
Competitive Business;

(ii)be employed by, or retained as an independent contractor by, or otherwise
provide advisory or consulting services to (in each case, whether compensated or
not compensated), any Competitive Business in any sort of position or capacity
involving the performance of services that are the same as, or substantially
similar to, the services the Grantee performed while an employee of any Related
Company;

(iii)serve (whether compensated or not compensated) as an officer or director of
any Competitive Business;

(iv)organize, own (other than owning up to 5% of the outstanding stock of a
publicly traded company) or operate any Competitive Business;

(v)(w) be employed, or retained as an independent contractor (in each case,
whether compensated or not compensated) by, (x) provide advisory or consulting
services (in each case, whether compensated or not compensated) to, (y) organize
or operate or (z) serve as a director or official of (in each case, whether
compensated or not-compensated) any Anti-Tobacco Organization;

(vi)(x) be employed, or retained as an independent contractor (in each case,
whether compensated or not compensated) by, (y) provide advisory or consulting
services (in each case, whether compensated or not compensated) to or (z) serve
as a

8

NAI-1502151968v3

--------------------------------------------------------------------------------

 

director or official of (in each case, whether compensated or non-compensated)
any Regulator; or

(vii)solicit, offer employment to, or hire any employee, independent contractor
or any other individual providing services to any Related Company (other than
secretarial and clerical personnel), who was employed by, or provided services
to, any Related Company, at the time of the Grantee’s Termination of Employment,
or who was employed by, or provided services to, any Related Company during the
90-day period preceding such date, to become employed by or otherwise provide
services to, any person, firm, entity or corporation, or approach any such
person for any of the foregoing reasons.

As used in this Agreement, the term “including,” or variations thereof, shall
not be a term of limitation, but rather shall be deemed to be followed by the
words “without limitation.”

(b)For purposes of Section 17 and Section 18 of this Agreement, the terms set
forth below have the following definitions:

(i)“Anti-Tobacco Organization” means any firm, organization, entity, group, or
sole proprietorship, the activities or purposes of which include opposing,
advocating or lobbying against, or seeking the imposition of restrictions or
prohibitions with respect to, any of the Related Companies’ Businesses or the
use or consumption of any of the Products.

(ii)“Competitive Business” means any corporation, limited liability company,
partnership, person, firm, organization, entity, enterprise, business or
activity that is engaged in any of the Related Companies’ Businesses in the
Territory or seeking to engage in any of the Related Companies’ Businesses in
the Territory.

(iii)“Governmental Authority” means the government of the United States of
America, any other nation or political subdivision thereof, whether state or
local, and any agency, authority, administration, instrumentality, regulatory
body, court or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.

(iv)“Regulator” means: (x) the U.S. Food and Drug Administration (the “FDA”),
the Center for Tobacco Products established within the FDA (the “CTP”), the
Tobacco Products Scientific Advisory Committee established within the CTP, or
any other office, division, branch, committee, department or other body
(collectively, an “Organizational Body”) established by the FDA or by an
Organizational Body; or (y) any other Governmental Authority having the
authority to regulate, or make recommendations regarding any proposed
regulations affecting, any part of any of the Related Companies’ Businesses.

(v)“Related Companies’ Businesses” means the businesses of manufacturing,
distributing, advertising, promoting, marketing or selling any of the following
products (collectively, “Products”):  (w) any cigarette, cigar, little cigar,
“roll-

9

NAI-1502151968v3

--------------------------------------------------------------------------------

 

your-own” tobacco, smokeless or smoke-free tobacco product (including moist
snuff, dry snuff, snus, loose leaf, plug and twist tobacco and any other
smokeless or smoke-free tobacco, including dissolvable products, that may be
invented through the date of Grantee’s Termination of Employment); (x) any
nicotine replacement therapy products, including nicotine gum, mouth spray and
pouches, and any products otherwise marketed or intended to be used as part of a
smoking cessation program; (y) any product commonly referred to as an
“e-cigarette”; and (z) any other product, including any tobacco or cigarette
substitute, that any Related Company invents, develops and/or markets through
the date of the Grantee’s Termination of Employment.

(vi)“Related Company” means, at any time, individually, the Company and each of
its subsidiaries; and “Related Companies” means, at any time, collectively, the
Company and all of its subsidiaries, and, in any case, each and all of their
respective subsidiaries, parents, affiliates (including partnerships and joint
ventures in which any Related Company is a partner or joint venturer),
successors and assigns.

(vii)“Territory” means (x) the United States of America, its territories,
commonwealths and possessions (including duty-free stores or outlets located
anywhere in any of the foregoing places); (y) U.S. military installations
located anywhere in the world; and (z) any other location in which any Related
Company conducts any of the Related Companies’ Businesses through the date of
the Grantee’s Termination of Employment.

(c)Notwithstanding anything to the contrary contained in this Agreement, Section
18 of this Agreement will not prohibit the Grantee from engaging in the
authorized practice of law, whether for a firm, corporation or otherwise, in any
jurisdiction that prohibits agreements restricting the right of an individual to
engage in such practice; provided, however, the Grantee will continue to be
bound by any and all applicable professional and ethical rules of conduct that
govern the use or disclosure of confidential information obtained during the
course of any representation of the Company or any of its subsidiaries; and,
provided further, this Agreement does prohibit the Grantee from engaging in any
of the activities outlined in Section 18(a) of this Agreement in a non-legal,
business role.

(d)The Grantee understands and agrees that:

(i)the purpose of this Section 18 is solely to protect the Related Companies’
legitimate business interests, including, but not limited to, the Related
Companies’ confidential information, customer relationships and goodwill, all of
which contribute to the Related Companies’ competitive advantage in operating
the Related Companies’ Businesses in the Territory;

(ii)the Related Companies manufacture, distribute, advertise, promote, market
and sell Products in the Territory, and the restrictive covenants contained in
this Agreement are necessary to protect the Related Companies’ legitimate
business assets and interests, and they are reasonable in time, territory, and
scope, and in all other respects;

10

NAI-1502151968v3

--------------------------------------------------------------------------------

 

(iii)the restrictive covenants contained in this Agreement constitute a material
inducement to the Company entering this Agreement, without which the Company
would not have entered into this Agreement; and

(iv)the covenants set forth in this Section 18 are essential elements of this
Agreement and shall be construed as agreements independent of any other
provision in this Agreement, and the existence of any claim or cause of action
of the Grantee against the Company or any other Related Company, whether
predicated on this Agreement or otherwise, shall not excuse the Grantee’s
breach, or constitute a defense to the enforcement by the Related Companies, of
these restrictive covenants.  The Company and the Grantee have had the
opportunity to independently consult with their respective counsel for advice in
all respects concerning the reasonableness and propriety of such covenants, with
specific regard to the nature of the businesses conducted by the Related
Companies.

(e)The Grantee agrees that any breach of the covenants contained in Section 18
of this Agreement would irreparably injure the Related Companies and that their
remedies at law would be inadequate.  Accordingly, in the event of any breach or
threatened breach of Section 18 of this Agreement, the Related Companies, in
addition to any other rights and remedies available at law or in equity, shall
be entitled to an injunction (and/or other equitable relief), restraining such
breach or threatened breach, and be entitled to the reimbursement of court
costs, attorneys’ fees and other costs and expenses incurred in connection with
enforcing this Agreement.  The existence of any claim or cause of action on the
part of the Grantee against any Related Company shall not constitute a defense
to the enforcement of these provisions.  This Agreement shall be enforceable by
any Related Company, either alone or together with any other Related Company or
Related Companies.  The rights and remedies hereunder provided to the Related
Companies shall be cumulative and shall be in addition to any other rights or
remedies available at law, in equity or under this Agreement.

(f)If any of the provisions of Section 18 of this Agreement are determined by a
court of law to be excessively broad, whether as to geographical area, time,
scope or otherwise, such provision shall be reduced to whatever extent is
reasonable and shall be enforced as so modified.  Any provisions of Section 18
of this Agreement not so modified shall remain in full force and effect.

19.Recoupment Provisions.  (a) Subject to the clawback provisions of the
Sarbanes-Oxley Act of 2002, the Committee may, in its sole discretion, direct
that the Company recoup, and upon demand by the Company the Grantee agrees to
return to the Company, all or a portion of any Shares paid to the Grantee
hereunder computed using financial information or performance metrics later
found to be materially inaccurate.  The number of Shares to be recovered shall
be equal to the excess of the number of Shares paid out over the number of
Shares that would have been paid out had such financial information or
performance metric been fairly stated at the time the payout was made.

(b)If the Company reasonably determines that the Grantee has materially violated
any of the Grantee’s obligations under Section 17 or 18 of this Agreement, then
effective the date on which such violation began, (i) any Restricted Stock Units
that have not yet

11

NAI-1502151968v3

--------------------------------------------------------------------------------

 

vested and been paid to the Grantee under this Agreement shall be forfeited and
cancelled, and (ii) the Company may, in its sole discretion, recoup any and all
of the Shares previously paid to the Grantee under this Agreement.

(c)If, after a demand for recoupment of Shares under Section 19 of this
Agreement, the Grantee fails to return such Shares to the Company, the Grantee
acknowledges that the Company (or the Company through the actions of any of its
subsidiaries employing the Grantee, if applicable) has the right to effect the
recovery of the then current value of such Shares and the amount of its court
costs, attorneys’ fees and other costs and expenses incurred in connection with
enforcing this Agreement by (i) deducting (subject to applicable law and the
terms and conditions of the Plan) from any amounts the Company (and if
applicable, any Subsidiary employing the Grantee) owes to the Grantee
(including, but not limited to, wages or other compensation), except with
respect to any non-qualified deferred compensation under Section 409A of the
Code, (ii) withholding, except with respect to any non-qualified deferred
compensation under Section 409A of the Code, payment of future increases in
compensation (including the payment of any discretionary bonus amount) or grants
of compensatory awards that  otherwise would have been made in accordance with
the Company’s or any of its subsidiaries’ otherwise applicable compensation
practices, or (iii) any combination of the foregoing.  The right of recoupment
set forth in the preceding sentence shall not be the exclusive remedy of the
Company, and the Company may exercise each and every other remedy available to
it under applicable law.

20.Qualified Performance-Based Awards.  If the Grantee is a Covered Employee,
the grant of Restricted Stock Units evidenced by this Agreement shall be
considered a Qualified Performance-Based Award.  In furtherance thereof, and
notwithstanding anything in this Agreement or the Plan to the contrary, the 2017
Target Number of Restricted Stock Units or the 2018 Target Number of Restricted
Stock Units, as applicable, that the Grantee may earn for the 2017 Performance
Period or 2018 Performance Period, as applicable, pursuant to the grant
evidenced by this Agreement (the “Earned Shares”) shall be determined by the
Committee based on, and must have a value (the “Earned Shares Value”) that in no
event exceeds a value equal to, the percentage of the Company’s cumulative Cash
Net Income (as defined below) for the 2017 Performance Period or 2018
Performance Period, as applicable, previously established by the Board of
Directors of the Company in resolutions adopted on September 15, 2016 to apply
with respect to the Grantee for the 2017 Performance Period or the 2018
Performance Period, as applicable (the “Award Pool Value”).  Notwithstanding the
prior sentence, the Committee shall have the power and authority, in its sole
and absolute exercise of negative discretion, to reduce the Earned Shares such
that the Earned Shares Value will be less than the Award Pool Value, which
reduction may be made by taking into account any criteria the Committee deems
appropriate.  The reductions in Earned Shares Value, if any, shall not result in
any increases in the value of Restricted Stock Units earned by any other
Participant.  For purposes of this Agreement, the term “Cash Net Income” shall
mean the Company’s net income from continuing operations in the consolidated
statement of income adjusted for the impact of non-cash items, such as
depreciation, amortization, unrealized gains and losses, intangible asset
impairments and other non-cash gains/losses included in net income (as reported
in the Company’s quarterly and annual reports for the period from October 1,
2016 through September 30, 2018).

12

NAI-1502151968v3

--------------------------------------------------------------------------------

 

21.Electronic Signature.  This Agreement is delivered electronically.  The
Grantee consents to using an electronic signature to sign this Agreement and be
legally bound to his or her acceptance or rejection of the grant.  By
electronically signing the Agreement, the Grantee also consents to entering into
this Agreement in electronic form.  The Grantee acknowledges that his or her
electronic signature will have the same legal force and effect as a handwritten
signature.  The Grantee’s electronic signature, including date and time of
signing will be stored electronically with the Restricted Stock Unit grant
record.

22.GOVERNING LAWS.  THE LAWS OF THE STATE OF NORTH CAROLINA 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.  EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 22, ANY CONTROVERSY OR
DISPUTE ARISING OUT OF OR RELATED TO THIS AGREEMENT SHALL BE SETTLED EXCLUSIVELY
IN THE COURTS (FEDERAL AND STATE) SITUATED IN THE STATE OF NORTH CAROLINA,
FORSYTH COUNTY.  THE GRANTEE CONSENTS TO PERSONAL JURISDICTION IN THE STATE OF
NORTH CAROLINA AND IN THE COURTS THEREOF FOR THE ENFORCEMENT OF THIS AGREEMENT,
AND WAIVES ANY RIGHTS THE GRANTEE OTHERWISE MAY HAVE UNDER THE LAWS OF ANY
JURISDICTION TO OBJECT ON ANY BASIS TO JURISDICTION OR VENUE WITHIN THE STATE OF
NORTH CAROLINA TO ENFORCE THIS AGREEMENT.  IN ADDITION, AND NOTWITHSTANDING THE
FOREGOING, THE COMPANY MAY ELECT, IN ITS DISCRETION, TO SEEK A TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTIVE (OR SIMILAR) RELIEF TO
ENFORCE ITS RIGHTS UNDER SECTIONS 17 AND 18 OF THIS AGREEMENT IN ANY
JURISDICTION OR COURT ANYWHERE IN THE WORLD THAT THE COMPANY DETERMINES TO BE
APPROPRIATE, AND THE GRANTEE HEREBY CONSENTS TO VENUE IN ANY SUCH JURISDICTION
OR COURT IN SUCH EVENT.

IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the Grantee
have executed this Agreement as of the Date of Grant first above written.

 

REYNOLDS AMERICAN INC.

By:

[g201702091254110896366.jpg]

 

Authorized Signature

Grantee’s Signature: /s/ JOSEPH P. FRAGNITO

Print Name: Joseph P. Fragnito

13

NAI-1502151968v3