EXHIBIT 10.1

 

REYNOLDS AMERICAN INC.

LONG-TERM INCENTIVE PROGRAM

_________________________________________

 

PERFORMANCE SHARE AGREEMENT

________________________________________

 

DATE OF GRANT:  [[GRANT DATE]]

 

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

 

[[FIRST NAME]] [[LAST NAME]] (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

 

[[SHARES GRANTED]]  Performance Shares.

 

A copy of the Plan has been provided to the Grantee and is made part of this
Performance Share 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 Performance Share 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.    Scoring.  (a) Subject to the terms and conditions of this Agreement, the
Performance Shares shall have a three-year performance period, consisting of the
Company’s fiscal years 2015, 2016 and 2017 (the “Performance Period”), after
which the number of Performance Shares earned (the “Earned Number”) will be
determined as provided below, and when vested, will be paid in Shares.

 

       (b)  If the Company fails to pay to its shareholders cumulative dividends
of at least $8.04 per Share (the “Dividend Threshold”) for the Performance
Period (which would exclude the dividend paid on January 2, 2015, but would
include the dividend paid on January 2, 2018), then the Target Number shall be
reduced by an amount equal to three times the percentage of the dividend
underpayment for the Performance Period, up to a maximum Target Number reduction
of 50% (the “Revised Target Number”).

      

(c)  At the end of the Performance Period, after determining if the Dividend
Threshold has been met, the Earned Number shall be determined by multiplying the
Target Number, or Revised Target Number if the Dividend Threshold has not been
met, by the average score for the Company under the Reynolds American Inc.
Annual Incentive Award Program (such program, and any successor plan or program
thereto, “AIAP”) for fiscal years 2015, 2016 and 2017; provided, however, that
such three-year average score shall in no event be greater than

 

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150%; and provided, further, that the value of the Earned Number of Performance
Shares 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 February 5,
2015, or otherwise contained in the Plan.

 

     (d)Notwithstanding anything in Section 3 of this Agreement to the contrary,
in the event of a Change of Control prior to the end of the Performance Period,
the Earned Number shall be equal to the product of (i) the Target Number and
(ii) the average of the following:  (x) the score for the Company under the AIAP
for each fiscal year of the Performance Period ending prior to the date of such
Change of Control, and (y) a score of 100% for each fiscal year of the
Performance Period ending after the date of such Change of Control (the “Change
of Control Earned Number”).

 

4.    Vesting.  (a) Subject to the terms and conditions of this Agreement, the
Earned Number of Performance Shares shall vest on March 2, 2018 (the “Normal
Vesting Date”), if the Grantee remains employed by the Company or a subsidiary
of the Company on 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 (i)
the Grantee’s Retirement (as such term is defined below) or (ii) the Grantee’s
involuntary 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), in either case, prior to the Normal Vesting
Date, the number of Performance Shares that will vest on the Normal Vesting Date
shall be equal to the product of (x) the Earned 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 Retirement or involuntary Termination of Employment, as
applicable, and the denominator of which shall be the number of days between the
Date of Grant and the Normal Vesting Date, and the remaining Performance Shares
will be forfeited and cancelled on the Normal Vesting Date.  For purposes of
this Agreement, the term “Retirement” shall mean the Grantee’s voluntary
Termination on or after his or her 65th birthday, on or after his or her 55th
birthday with 10 or more years of service with the Company or a subsidiary of
the Company, or on or after his or her 50th birthday with 20 or more years of
service with the Company or a subsidiary of the Company.

 

(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 Permanent Disability (as such term is
defined in the Company’s Long-Term Disability Plan), in either case, prior to
the Normal Vesting Date and while the Grantee is an active employee of the
Company or a subsidiary of the Company, the number of Performance Shares that
will vest on the date of the Grantee’s death or Permanent Disability, as
applicable, shall be equal to the product of (x) the 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 Permanent Disability, as
applicable, and the denominator of which shall be the number of days between the
Date of Grant and the Normal Vesting Date, and the remaining Performance Shares
will be forfeited and cancelled on the date of the Grantee’s death or Permanent
Disability, as applicable.

 

(d)  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 a Change of
Control prior to the Normal Vesting Date and while the Grantee is an active
employee of the Company or a

 

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subsidiary of the Company, the number of Performance Shares that will vest on
the date of such Change of Control shall be equal to the product of (i) the
higher of (x) the Target Number and (y) the Change of Control Earned Number, and
(ii) a fraction, the numerator of which shall be the number of days between the
Date of Grant and the date of the Change of Control, and the denominator of
which shall be the number of days between the Date of Grant and the Normal
Vesting Date, and the remaining Performance Shares will be forfeited and
cancelled on the date of such Change of Control.

 

(e)  Notwithstanding anything in Section 4 of 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 at Retirement), (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 Normal Vesting
Date, the Performance Shares shall be immediately forfeited and cancelled.

 

5.Payment.  (a)  Payment of vested Performance Shares 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 Employee” within the meaning of Section 162(m) of the Internal Revenue
Code, no payment of vested Performance Shares shall be made to the Grantee prior
to the Normal Vesting Date.  Except as otherwise provided by this Agreement,
payment of vested Performance Shares shall be made as soon as practicable
following the Normal Vesting Date, and in any event no later than March 15,
2019.

 

(c)  In the event of a Change of Control, the Grantee’s death or the Grantee’s
Permanent Disability, in each case prior to the Normal Vesting Date and while
the Grantee is an active employee of the Company or a subsidiary of the Company,
the payment of vested Performance Shares shall be made as soon as practicable
after such event occurs, and in any case no later than March 15 after the end of
the year in which such event occurs.

 

(d)  In the event of the death of the Grantee while the Grantee is an active
employee of the Company or a subsidiary of the Company, any payment to which the
Grantee is entitled under this Agreement shall be made to the beneficiary
designated by the Grantee to receive the proceeds of any noncontributory group
life insurance coverage provided for the Grantee by the Company or a subsidiary
of the Company (such life insurance coverage, “Group Life Insurance Coverage,”
and such beneficiary, a “Designated Beneficiary”).  If no designation of
beneficiary has been made by the Grantee under the Group Life Insurance
Coverage, distribution upon the Grantee’s death shall be made in accordance with
the provisions of the Group Life Insurance Coverage.  

 

       (e) In the event of the death of the Grantee while the Grantee is no
longer an active employee of the Company or a subsidiary of the Company, but at
a time while the Grantee continues to have Group Life Insurance Coverage, any
payment to which the Grantee is entitled

 

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under this Agreement shall be made to the Designated Beneficiary.  If no
designation of beneficiary has been made by the Grantee under the Group Life
Insurance Coverage, distribution shall be made in accordance with the provisions
of the Group Life Insurance Coverage.  In the event of the death of the Grantee
while the Grantee is no longer an active employee of the Company or a subsidiary
of the Company, and at a time while the Grantee no longer has Group Life
Insurance Coverage, distribution shall be made to the Grantee’s estate.

 

(f)  For purposes of Sections 5(d) and 5(e), (i) if the Designated Beneficiary
predeceases the Grantee, distribution shall be made in accordance with the
provisions of the Group Life Insurance Coverage, and (ii) if the Designated
Beneficiary survives the Grantee but dies before payment is made, distribution
shall be made to the Designated Beneficiary’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 of the Company; 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
Performance Shares, the Grantee shall receive a cash dividend equivalent payment
in an amount equal to the product of (a) the Earned Number 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 Performance Shares, 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 Performance Shares 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 Section 7 of
this Agreement to the contrary, to the extent the payment of the vested
Performance Shares 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 Performance
Shares unless and until, and to the extent, the Performance Shares 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 Performance Shares evidenced by this Agreement shall
constitute any

 

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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 Performance Shares 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 Performance Shares or payment of vested
Performance Shares 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 Performance Shares by the
Company to satisfy the minimum statutory tax withholding amount prior to
delivery of the vested Performance Shares.

 

14.Administration and Interpretation.  In consideration of the grant of
Performance Shares 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 Internal Revenue Code of 1986, as amended, and
shall be construed and interpreted in accordance with such intent.

 

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 Performance Shares 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

 

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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 Performance Shares 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.

 

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 Performance Shares 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;

 

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(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 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.

 

 

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(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-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 (v) the United States of America, its territories,
commonwealths and possessions (including duty-free stores or outlets located
anywhere in any of the foregoing places); (w) U.S. military installations
located anywhere in the world; (x) Western Europe; (y) Japan; 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 a 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, a Grantee will continue to be bound
by any and all applicable professional and ethical rules of conduct that govern
the use for 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 a 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

 

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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;

 

(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

 

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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)The Committee may direct recoupment of Shares pursuant to Section 19(a) of
this Agreement whether or not it directs recoupment of related AIAP
payouts.  The Committee also may amend a yearly AIAP payout percent for purposes
of recoupment of Shares under this Agreement without directing recoupment of
related AIAP payouts.

 

(c)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 Performance Shares
that have not yet 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.

 

(d)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 of the  Company 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 Performance Shares 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
Earned Number of Performance Shares that the Grantee may earn for the
Performance Period 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 Performance Period previously established by the Board of Directors of the
Company in resolutions adopted on February 5, 2015 to apply with respect to the
Grantee for the Performance Period (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 the factors described above under
Section 3 of this Agreement or any other criteria the Committee deems
appropriate.  The reductions in Earned Shares Value, if any, shall not result in
any increases in the value of performance shares earned by any other

 

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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 annual reports for 2015, 2016 and 2017, respectively).

 

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 Performance Share 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:                                      

                                                                        Authorized
Signature

 

___________________________________

Grantee’s Signature

 

Print Name:______________________________