EX-10.8



 





Exhibit 10.8




EQUITY INCENTIVE AWARD PLAN FOR

DIRECTORS OF REYNOLDS AMERICAN INC.

(Amended and Restated Effective July 12, 2007)




     Reynolds American Inc., a North Carolina corporation, hereby adopts this Equity Incentive
Award Plan for Directors of Reynolds American Inc. (amended and restated effective July 12, 2007).
The Plan is an amendment, restatement and continuation of the Amended and Restated Equity Incentive
Award Plan for Directors of R.J. Reynolds Tobacco Holdings, Inc. and Subsidiaries. The purposes of
this Plan are as follows:



     (1) To further the growth, development and financial success of the Company by providing
additional incentives to its Directors by assisting them to become owners of capital stock of the
Company and thus to benefit directly from its growth, development and financial success.



     (2) To enable the Company to obtain and retain the services of the type of Directors
considered essential to the long-term success of the Company by providing and offering them an
opportunity to become owners of capital stock of the Company.



ARTICLE I

DEFINITIONS




Section 1.1 — General




     Whenever the following terms are used in this Plan they shall have the meaning specified below
unless the context clearly indicates to the contrary.



Section 1.2 —  Affiliate




     “Affiliate” of any person shall mean another person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control with, such first
person.



Section 1.3 —  BAT




     “BAT” shall mean, collectively, British American Tobacco, p.l.c., a public limited company
incorporated under the laws of England and Wales, and its Affiliates.



Section 1.4 —  Board




     “Board” shall mean the Board of Directors of the Company.



Section 1.5 — Code




     “Code” shall mean the Internal Revenue Code of 1986, as amended.



 









 





Section 1.6 —  Committee




     “Committee” shall mean the Corporate Governance, Nominating and Leadership Development
Committee of the Board.



Section 1.7 —  Common Stock




     “Common Stock” shall mean the common stock, par value $0.0001 per share, of the Company.



Section 1.8 —  Company




     “Company” shall mean Reynolds American Inc., a North Carolina corporation.



Section 1.9 — Director




     “Director” shall mean a member of the Board.



Section 1.10 — Eligible Director




     “Eligible Director” shall mean a Director who has never been an employee or officer of the
Company, any Subsidiary, BAT or any of their Affiliates; provided, however, that the Non-Executive
Chairman shall be an Eligible Director.



Section 1.11 —  Grant




     “Grant” shall mean an award made to a Participant pursuant to the Plan.



Section 1.12 — Non-Executive Chairman




     “Non-Executive Chairman” shall mean the Non-Executive Chairman of the Board.



Section 1.13 — Option




     “Option” shall mean an option granted under the Plan to purchase Common Stock.



Section 1.14 — Option Price




     “Option Price” shall have the meaning given in Section 4.2.



Section 1.15 — Optionee




     “Optionee” shall mean a Director to whom an Option is granted under the Plan.



Section 1.16 — Participant




     “Participant” shall mean a Director to whom a Grant has been made.



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Section 1.17 —  Plan




     “Plan” shall mean the Equity Incentive Award Plan for Directors of Reynolds American Inc.



Section 1.18 —  Secretary




     “Secretary” shall mean the Secretary of the Company.



Section 1.19 — Stock Award




     “Stock Award” shall mean the annual award, either in the form of deferred stock units or
shares of Common Stock, made pursuant to Article VI.



Section 1.20 —  Subsidiary




     “Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with
the Company if each of the corporations, or if each group of commonly controlled corporations,
other than the last corporation in an unbroken chain then owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.



ARTICLE II

SHARES SUBJECT TO PLAN




Section 2.1 —  Shares Subject to Plan




     The shares of stock subject to Grant shall be shares of Common Stock. The aggregate number of
shares of Common Stock which are available for Grants under the Plan shall not exceed 500,000.
Shares of Common Stock related to Grants that are forfeited, terminated, canceled, expire
unexercised, settled in cash in lieu of stock or in such manner that all or some of the shares of
Common Stock covered by a Grant are not issued to a Participant, shall immediately become available
for Grants.



ARTICLE III

GRANTING OF OPTIONS




Section 3.1 —  Eligibility




     Any Eligible Director shall be eligible to be granted Options as set forth in this Article
III.



Section 3.2 —  Granting of Options to Directors




     Options may be granted at any time and solely in the discretion of the Committee to each
Eligible Director elected to serve on the Board. Such Options shall be subject to the terms and
conditions set forth in Article IV.



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ARTICLE IV

TERMS OF OPTIONS FOR DIRECTORS




Section 4.1 —  Option Agreement




     A grant of Options to Eligible Directors shall be evidenced by a Stock Option Agreement, which
shall be executed by the Optionee and an authorized officer of the Company and which shall
incorporate the terms and conditions of this Article IV and such other terms and conditions as the
Committee shall determine, consistent with the Plan.



Section 4.2 —  Option Price




     The exercise price of each share of Common Stock subject to an Option granted pursuant to
Section 3.2 shall be the final closing price of a share of Common Stock (as reported on the New
York Stock Exchange consolidated tape) on the date of grant.



Section 4.3 —  Commencement of Exercisability




     Options granted pursuant to Section 3.2 shall not be exercisable prior to six (6) months after
the date of grant, and thereafter shall be exercisable in full, subject to applicable securities
regulations.



Section 4.4 —  Expiration of Option




     The Option shall expire and may not be exercised to any extent after the expiration of ten
(10) years from the date the Option was granted.



ARTICLE V

EXERCISE OF OPTIONS




Section 5.1 —  Persons Eligible to Exercise




     During the lifetime of the Optionee, only he or his guardian may exercise an Option granted to
him, or any portion thereof. After the death of the Optionee, any exercisable portion of an Option
may, prior to the time when such portion becomes unexercisable under Section 4.4, be exercised by
his personal representative or by any person empowered to do so under the deceased Optionee’s will
or under the then applicable laws of descent and distribution.



Section 5.2 —  Partial Exercise




     At any time and from time to time prior to the time when any exercisable Option or exercisable
portion thereof expires or becomes unexercisable under Section 4.4, such Option or portion thereof
may be exercised in whole or in part; provided, however, that the Company shall not
be required to issue fractional shares.



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Section 5.3 —  Manner of Exercise




     An exercisable Option, or any exercisable portion thereof, may be exercised solely by
delivering to the Secretary or his office all of the following prior to the time when such Option
or such portion becomes unexercisable:



     (a) Notice in writing signed by the Optionee or other person then entitled to exercise such
Option or portion thereof, stating that such Option or portion thereof is exercised;



     (b) Full payment of the Option Price shall be made in cash, by check or a combination thereof,
for the shares of Common Stock with respect to which such Option or portion thereof is thereby
exercised, together with payment of any federal income or other tax required to be withheld by the
Company with respect to such shares of Common Stock, in accordance with the terms of the Plan and
of any applicable guidelines of the Committee in effect at the time. The requirement of payment
will be deemed satisfied if the Participant has made arrangements satisfactory to the Company with
a duly registered broker-dealer that is a member of the National Association of Securities Dealers,
Inc. to sell on the date of exercise a sufficient number of shares of Common Stock being purchased
so that the net proceeds of the sale transaction will at least equal the full exercise price and
pursuant to which the broker-dealer undertakes to deliver the full exercise price to the Company
not later than the later of (i) the settlement date of the sale transaction and (ii) the date on
which the Company delivers to the broker-dealer the shares of Common Stock being purchased pursuant
to the exercise of such Option. This method is known as the “broker-dealer exercise method” and is
subject to the terms and conditions set forth herein, in the Option grant agreement and in
guidelines established by the Committee;



     (c) Such representations and documents as the Committee reasonably deems necessary or
advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as
amended and any other federal, state or foreign securities laws or regulations. The Committee may,
in its absolute discretion, also take whatever additional actions it deems appropriate to effect
such compliance, including, without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars; and



     (d) In the event that the Option or portion thereof shall be exercised pursuant to Section 5.1
by any person or persons other than the Optionee, appropriate proof of the right of such person or
persons to exercise the Option or portion thereof.



Section 5.4 —  Rights as Stockholders




     The holders of Options shall not be, nor have any of the rights or privileges of, stockholders
of the Company in respect of any shares of Common Stock purchasable upon the exercise of any part
of an Option unless and until certificates representing such shares of Common Stock have been
issued by the Company to such holders.



Section 5.5 —  Transfer Restrictions




     The Committee, in its absolute discretion, may impose such restrictions on the transferability
of the shares of Common Stock purchasable upon the exercise of an Option as it



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deems appropriate, and any such restriction shall be set forth in the respective Stock Option
Agreement and may be referred to on the certificates evidencing such shares of Common Stock.



ARTICLE VI

STOCK AWARDS




Section 6.1 —  Granting of Initial Stock Award to Directors




     (a) Each Eligible Director who is elected to serve on the Board shall receive an initial Stock
Award as of the date of such Director’s initial election to serve on the Board (an “Initial Stock
Award”). Such Initial Stock Award shall be granted only once to each Eligible Director as soon as
practicable following the Director’s initial election to serve on the Board and shall be subject to
the terms and conditions set forth in this Article VI. Notwithstanding this Section 6.1(a), in the
event of the appointment of an existing Director who is or was an employee of the Company to the
position of Non-Executive Chairman and such Director has not yet received an Initial Stock Award,
the Non-Executive Chairman shall receive an Initial Stock Award upon his or her appointment to the
position of Non-Executive Chairman.



     (b) Except as provided in Section 6.1(c) below, the Initial Stock Award shall be made in the
form of deferred stock units, as described in Section 6.4. Each Eligible Director shall receive an
Initial Stock Award of 3,500 deferred stock units.



     (c) Notwithstanding the foregoing, commencing with the Initial Stock Award for 2004, an
Eligible Director may elect to receive the Initial Stock Award in the form of 3,500 shares of
Common Stock. The election to receive shares of Common Stock must be made in writing within thirty
(30) days after the date a Director becomes a Director. An election to receive shares of Common
Stock shall be irrevocable by the Director.



Section 6.2 —  Granting of Annual Stock Awards




     (a) Each Eligible Director shall receive an annual Stock Award as of the date of the Company’s
annual meeting of stockholders or the one (1) year anniversary of the preceding year’s annual
meeting of stockholders, if no meeting has been scheduled for such subsequent year, provided that
the Director serves on the Board immediately following such date (an “Annual Stock Award”). The
Annual Stock Award for 2005 shall be made as of July 30, 2005 or, if later, the date of the
Director’s election or re-election to serve on the Board.



     (b) Except as provided in Section 6.2(c) below, the Annual Stock Award shall be made in the
form of deferred stock units, as described in Section 6.4. Each Eligible Director, other than the
Non-Executive Chairman, shall receive an Annual Stock Award of 2,000 deferred stock units. The
Non-Executive Chairman shall receive an Annual Stock Award of 4,000 deferred stock units. [Note:
the amounts of the Annual Stock Awards increased as a result of the Company’s two-for-one stock
split on August 14, 2006.]



     (c) Notwithstanding the foregoing, commencing with the Annual Stock Award for 2005, an
Eligible Director or the Non-Executive Chairman may elect to receive the Annual Stock Award in the
form of shares of Common Stock. The election to receive shares of Common Stock must be made in
writing by December 31 of the year preceding the year during which the



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Annual Stock Award would otherwise be granted or, if later, within thirty (30) days after the
date a Director becomes a Director. An election to receive shares of Common Stock shall be
irrevocable by the Director and shall be effective only for the year immediately following the date
on which it was filed.



Section 6.3 —  Grant of Quarterly Stock Awards




     (a) Each Eligible Director shall receive a quarterly Stock Award on the last day of each
calendar quarter, provided that the Director has served on the Board at any time during such
calendar quarter (a “Quarterly Stock Award”).



     (b) The Quarterly Stock Award shall be made in the form of deferred stock units, as described
in Section 6.4. The number of deferred stock units to be credited to each Eligible Director’s
account, other than the Non-Executive Chairman’s account, on the last day of each calendar quarter
shall be determined pursuant to the following formula: $10,000 divided by the average of the
closing price of a share of Common Stock (as reported on the New York Stock Exchange (“NYSE”)
consolidated tape for each business day during the last month of such calendar quarter). The
number of deferred stock units to be credited to the Non-Executive Chairman’s account on the last
day of each calendar quarter shall be determined pursuant to the following formula: $20,000
divided by the average of the closing price of a share of Common Stock (as reported on the NYSE
consolidated tape for each business day during the last month of such calendar quarter). In the
event an Eligible Director has served on the Board or in the position of Non-Executive Chairman for
less than an entire quarter, the number of deferred stock units to be credited to his or her
account on the last day of such quarter shall be prorated based on the actual number of days of his
or her service on the Board during the quarter.



Section 6.4 —  Deferred Stock Units




     Each deferred stock unit shall be equal in value to one (1) share of Common Stock. As of the
date any dividend is paid to shareholders of Common Stock, the Director shall be credited with
additional deferred stock units equal to the number of shares of Common Stock (including fractions
of a share) that could have been purchased at the closing price of Common Stock on such date with
the dividend paid on the number of shares of Common Stock to which the Director’s deferred stock
units are then equivalent. In case of dividends paid in property, the dividend shall be deemed to
be the fair market value of the property at the time of distribution of the dividend, as determined
by the Committee.



Section 6.5 —  Distribution of Deferred Stock Units




     (a) For all Grants made under this Plan prior to December 31, 2004, the distribution of a
Participant’s deferred stock units will be made as follows:




     (i) Unless as otherwise elected in Section 6.5(a)(ii), payment of a Participant’s
deferred stock units shall be made in one (1) lump sum as soon as practicable following the
end of the year in which the Participant ceases to be a Director.




     (ii) At the election of the Participant made in writing and delivered to the Committee
at any time on or before December 1 of the year of termination of the



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Participant’s service as a Director, distribution of all of his or her deferred stock
units, commencing as soon as practicable following the end of the year in which the
Participant ceases to be a Director, shall be made in any number of annual installments not
exceeding ten (10). Any such election, unless made irrevocable by its terms, may be changed
by written notice to the Committee at any time prior to December 1 of the year of a
Participant’s termination of service as a Director.



     (b) For all Grants made under this Plan after December 31, 2004 and prior to December 31,
2007, the distribution of a Participant’s deferred stock units will be made in the following
manner. According to the election made by each Participant on an annual election form provided by
the Company to the Participant prior to December 31 of the year preceding the grant of any award
under this Plan in the next Plan year or, if later, within thirty (30) days after the date a
Director becomes a Director, payment of a Participant’s deferred stock units will be made either in
a lump sum or in any number of annual installments not exceeding ten (10), both commencing in the
January following the termination of service as a Director.



     (c) For all Grants made under this Plan after December 31, 2007, the distribution of a
Participant’s deferred stock units will be made in the following manner. Each Participant shall
elect annually to have payment of his or her deferred stock units with respect to a grant (i) be
made either in a lump sum or in any number of annual installments not exceeding ten (10), and (ii)
commence either (A) in the January following the termination of his or her service as a Director,
or (B) in the later of the January of the year specified and the January following the termination
of his or her service as a Director. Such election by each Participant shall be made on an annual
election form provided by the Company prior to December 31 of the year preceding the grant of any
award under this Plan in the next Plan year or, if later, within thirty (30) days after the date a
Director becomes a Director.



     (d) Elections made pursuant to Section 6.5(b) and (c) are not irrevocable; provided,
however, (A) any subsequent election may not be effective until twelve (12) months after
the date the election is made, (B) any subsequent election relating to payments scheduled for a
particular date or dates must be made at least twelve (12) months prior to the date of the first
scheduled payment, and (C) any subsequent election for distributions, other than those triggered by
disability, death or an unforeseeable emergency, must delay distribution by at least five (5) years
from the original distribution date.



     (e) Distribution of a Participant’s deferred stock units received in connection with such
Participant’s Quarterly Stock Awards shall be made only in cash. Distribution of a Participant’s
deferred stock units received in connection with such Participant’s Initial Stock Award and Annual
Stock Awards shall be made in cash or stock, at the election of the Participant made in writing and
delivered to the Committee at any time on or before December 1 of the year of termination of the
Participant’s service as a Director. If distribution is made in cash, the amount of distribution
shall be determined by multiplying the number of deferred stock units attributable to the
installment by the average of the closing price in Common Stock on each business day in the month
of December immediately prior to the year in which the installment is to be paid. If distribution
is made in stock, any fractional shares of stock shall be paid in cash equal to the value of the
fractional share multiplied by the closing price of the Common Stock on the last business day
immediately preceding the date of distribution.



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Section 6.6 —  Installment Amount




     In the event a Participant has elected to receive distribution of his or her deferred stock
units in more than one (1) installment, the amount of each installment shall be determined by
multiplying the current number of deferred stock units by a fraction, the numerator of which is one
(1), and the denominator of which is the number of installments yet to be paid.



Section 6.7 —  Distribution upon Death




     In the event of the death of a Participant, whether before or after ceasing to serve as a
Director, any deferred stock units to which he or she was entitled, shall be converted to cash and
distributed in a lump sum to such person or persons or the survivors thereof, including
corporations, unincorporated associations or trusts, as the Participant may have designated. All
such designations shall be made in writing signed by the Participant and delivered to the
Committee. A Participant may from time to time revoke or change any such designation by written
notice to the Committee. If there is no unrevoked designation on file with the Committee at the
time of the Participant’s death, or if the person or persons designated therein shall have all
predeceased the Participant or otherwise ceased to exist, such distributions shall be made in
accordance with the Participant’s will or in the absence of a will, to the administrator of the
Participant’s estate. Any distribution under this Section 6.7 shall be made as soon as practicable
following the end of the fiscal quarter in which the Committee is notified of the Participant’s
death. In this case, a Participant’s deferred stock units shall be converted to cash by
multiplying the number of whole and fractional shares of Common Stock to which the Participant’s
deferred stock units are equivalent by the average of the closing price of Common Stock on each
business day during the last month of the calendar quarter prior to the date of death.



Section 6.8 —  Withholding Taxes




     The Company shall deduct from all distributions under the Plan any taxes required to be
withheld by federal, state, or local governments.



Section 6.9 —  Terms and Conditions




     All Stock Awards shall be subject to the terms and conditions of this Article VI and such
other terms and conditions as the Committee shall determine, consistent with the Plan.



ARTICLE VII

ADMINISTRATION




Section 7.1 —  Plan Administrator




     The Plan shall be administered by the Committee.



Section 7.2 — Duties and Powers of Committee




     It shall be the duty of the Committee to conduct the general administration of the Plan in
accordance with its provisions. The Committee shall have the power to interpret the Plan and the
Grants and to adopt such rules for the administration, interpretation, and application of the Plan



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as are consistent therewith and to interpret, amend or revoke any such rules. Any such
interpretations and rules shall be consistent with the basic purpose of the Plan to make Grants.
In its absolute discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan. The Committee may act either by vote at a
telephonic or other meeting or by unanimous written consent in lieu of a meeting.




Section 7.3 —  Compensation; Professional Assistance; Good Faith Actions




     Members of the Committee shall not receive compensation for their services as members in
connection with the administration of the Plan, but all expenses and liabilities they incur in
connection with the administration of the Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee,
the Company, the Directors and the officers of the Company shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding upon all
Participants, the Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good faith with respect
to the Plan or the Grants, and all members of the Committee shall be fully protected by the Company
with respect to any such action, determination or interpretation.



ARTICLE VIII

MISCELLANEOUS PROVISIONS




Section 8.1 —  Amendment, Suspension or Termination of the Plan




     The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Board. Except as expressly permitted by the terms of the
Plan, neither the amendment, suspension nor termination of the Plan shall, without the consent of
the Participant alter or impair any rights or obligations under any Grant theretofore granted. No
Grant may be made during any period of suspension nor after termination of the Plan.



Section 8.2 —  Effect of Plan Upon Other Options and Compensation Plans




     Nothing in this Plan shall be construed to limit the right of the Company or any of its
Subsidiaries (a) to establish any other forms of incentives or compensation for Directors of the
Company or any of its Subsidiaries or (b) to grant or assume options other than under this Plan in
connection with any proper corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease, merger, consolidation
or otherwise, of the business, stock or assets of any corporation, firm, association or other
entity.



Section 8.3 —  Adjustments




     (a) In the event of any change in the outstanding Common Stock by reason of a stock split,
spin-off, stock dividend, stock combination or reclassification, recapitalization or merger, change
of control, or similar event, the Committee may adjust appropriately the number of shares of Common
Stock subject to the Plan and available for or covered by Grants and share prices



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related to outstanding Grants and make such other revisions to outstanding Grants as it deems
are equitably required. Any such adjustment made by the Committee shall be final and binding upon
all Participants, the Company and all other interested persons.



(b) In
the event of a Change of Control (as defined in paragraph 8.3(c) hereof):




     (i) Options granted pursuant to Article III hereof shall become fully vested and
exercisable; provided, however, that the Committee may elect to make a cash
payment to Participants in cancellation of such Options in such amount as the Committee in
its sole discretion shall determine, which amount shall not be less than the product of (x)
and (y), where (x) is the excess of the fair market value of Common Stock on the date of
exercise over the exercise price, and (y) is the number of shares of Common Stock subject to
the Options being canceled.




     (ii) Subject to Section 8.4, deferred stock units granted pursuant to Article VI hereof
shall be distributed to Participants in a single lump sum.



     (c) For purposes of the Plan, a “Change of Control” shall mean the first to occur of the
following events:




     (i) an individual, corporation, partnership, group, associate or other entity or
“person”, as such term is defined in Section 14(d) of the Securities Exchange Act of 1934
(the “Exchange Act”), other than the Company or any employee benefit plans sponsored by the
Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of thirty percent (30%) or more of the combined voting power
of the Company’s outstanding securities ordinarily having the right to vote at elections of
directors; provided, however, that the acquisition of Company securities by
BAT pursuant to the Business Combination Agreement, dated as of October 27, 2003, between
R.J. Reynolds Tobacco Holdings, Inc. (“RJR”) and Brown & Williamson Tobacco Corporation
(“B&W”), as thereafter amended (the “BCA”) or as expressly permitted by the Governance
Agreement, dated as of July 30, 2004, among British American Tobacco, p.l.c., B&W and the
Company (the “Governance Agreement”), shall not be considered a Change of Control for
purposes of this subsection (i).




     (ii) individuals who constitute the Board (or who have been designated as directors in
accordance with Section 1.09 of the BCA) on July 30, 2004 (the “Incumbent Board”) cease for
any reason to constitute at least a majority thereof, provided that any person becoming a
director subsequent to such date whose election, or nomination for election by the Company’s
shareholders, was (1) approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee of the Company for
director) or (2) made in accordance with Section 2.01 of the Governance Agreement, but
excluding for this purpose any such individual whose initial assumption of office occurs as
a result of either an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on



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behalf of an individual, corporation, partnership, group, associate or other entity or
“person” other than the Board, shall be, for purposes of this paragraph (ii), considered as
though such person were a member of the Incumbent Board;




     (iii) the approval by the shareholders of the Company of a plan or agreement providing
(1) for a merger or consolidation of the Company other than with a wholly-owned Subsidiary
and other than a merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) more than
fifty percent (50%) of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or consolidation, or (2) for
a sale, exchange or other disposition of all or substantially all of the assets of the
Company, other than any such transaction where the transferee of all or substantially all of
the assets of the Company is a wholly owned subsidiary or an entity more than fifty percent
(50%) of the combined voting power of the voting securities of which is represented by
voting securities of the Company outstanding immediately prior to the transaction (either
remaining outstanding or by being converted into voting securities of the transferee
entity). If any of the events enumerated in this paragraph (iii) occur, the Board shall
determine the effective date of the Change of Control resulting therefrom for purposes of
the Plan or the Grants hereunder.



Section 8.4 —  Compliance with Section 409A of the Code




     The Plan is intended to comply with Section 409A of the Code and shall be construed and
interpreted in accordance with such intent.



Section 8.5 —  Titles




     Titles are provided herein for convenience only and are not to serve as a basis for
interpretation or construction of the Plan.



Section 8.6 —  Pronouns




     The masculine pronoun shall include the feminine and neutral and the singular shall include
the plural, where the context so indicates.



Section 8.7 —  Governing Law




     All questions arising in respect of the Plan, including those pertaining to its validity,
interpretation and administration, shall be governed, controlled and determined in accordance with
the applicable provisions of federal law and, to the extent not preempted by federal law, the laws
of the State of North Carolina.




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