EX-10.3



 






Exhibit 10.3




DEFERRED COMPENSATION PLAN FOR

DIRECTORS OF

REYNOLDS AMERICAN INC.

(Amended and Restated Effective February 2, 2005)




ARTICLE I




     1.1 NAME AND PURPOSE. The name of this plan is the “Deferred Compensation Plan for Directors
of Reynolds American Inc.” (the “Plan”). The Plan is an amendment, restatement and continuation of
the Deferred Compensation Plan for Directors of R.J. Reynolds Tobacco Holdings, Inc. The purpose
of this Plan is to provide non-employee Directors of the Company with increased flexibility in
timing the receipt of board service fees and to assist the Company in attracting and retaining
qualified individuals to serve as Directors.



     1.2 DEFINITIONS. Whenever used in the Plan, the following terms shall have the meaning set
forth below:




	 	(a)  	“Closing Price” means the closing price of the Company’s Common Stock as
reported in THE WALL STREET JOURNAL.
	 
	 	(b)  	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	 	(c)  	“Common Stock” means the Common Stock, par value $0.0001 per share, of Reynolds
American Inc.
	 
	 	(d)  	“Company” means Reynolds American Inc.
	 
	 	(e)  	“Compensation” means all remuneration paid to a Director for service as a
Director other than reimbursement for expenses and shall include, but not be limited
to, Board of Directors retainer fees, Board of Directors committee chairmanship and/or
committee attendance fees, and any fees for attendance at Board of Directors meetings.
	 
	 	(f)  	“Director” means any individual serving on the Board of Directors of the
Company who is not an employee of the Company or any of its subsidiaries.
	 
	 	(g)  	“Participant” means a Director who has filed an election to participate under
Section 3.1 with regard to any Plan Year.
	 
	 	(h)  	“Plan Administrator” means the Corporate Governance and Nominating Committee of
the Board of Directors of the Company.
	 
	 	(i)  	“Plan Year” means the calendar year except the first Plan Year is the period
July 30, 2004 through December 31, 2004.




 









 











ARTICLE II




     2.1 PARTICIPATION IN THE PLAN. Any individual who is a Director as defined in Section 1.2(f)
may participate in the Plan.



ARTICLE III




     3.1 ELECTION TO PARTICIPATE. Each Director may elect annually to have payment of all or any
increment of twenty-five percent (25%) of his or her Compensation for that Plan Year deferred. An
election to defer may provide that the Compensation deferred will be paid in January of a specified
year in the future or in January following the end of the Plan Year during which the Participant
ceased to be a Director.



     No election to defer under this Plan may be made after December 31 of the year preceding the
Plan Year during which Compensation would otherwise be paid or, if later, within thirty (30) days
after the date a Director becomes a Director. An election to defer any Compensation shall be in
writing and shall be delivered to the Plan Administrator. An election to defer shall be
irrevocable by the Director and shall be effective only for the Plan Year immediately following the
date on which it was filed. In the absence of a written election to defer filed by a Director with
the Plan Administrator, any Compensation will be paid directly to the Director.



     3.2 MODE OF DEFERRAL. Payment of a Participant’s Compensation may be deferred in twenty-five
percent (25%) increments by means of a cash credit, a stock credit or a combination of the two as
the Participant shall elect in writing at the same time as the election provided for in Section
3.1. If a Participant fails to make an election as to mode of deferral, he or she shall be deemed
to have elected deferral by means of a cash credit. Cash credits and stock credits shall be
recorded in accounts established in Participants’ names on the books of the Company.




	 	(a)  	CASH CREDITS. If the deferral is wholly or partly by means of a cash credit,
the Participant’s cash credit account shall be credited, as of the last day of the
calendar quarter, with the dollar amount of Compensation deferred during the quarter.
As of the last day of each calendar quarter, the Participant’s cash credit account
shall also be credited with interest equivalent in an amount determined by applying to
the balance in the account as of the first day of the quarter (less any distributions
during the quarter) an interest rate for such quarter which, when annualized, shall be
the prime rate of JPMorgan Chase & Co. as of the first business day of the quarter.
Interest shall be calculated on the actual number of days in the quarter based upon a
360-day year.
	 
	 	(b)  	STOCK CREDITS. If the deferral is wholly or partly by means of a stock credit,
the Participant’s stock credit account shall be credited, as of the last day of the
calendar quarter, with a Common Stock equivalent equal to the number of shares of
Common Stock (including fractions of a share) that could have been purchased at the
average of the Closing Price on each business day during the last month of the calendar
quarter with the amount of the Compensation deferred during the




 









 












quarter. As of the date any dividend is paid to shareholders of Common Stock, the
Participant’s stock credit account shall also be credited with an additional Common
Stock equivalent equal to the number of shares of Common Stock (including fractions
of a share) that could have been purchased at the Closing Price on such date with
the dividend paid on the number of shares of Common Stock to which the Participant’s
stock credit account is 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 Plan Administrator.




	 	(c)  	A Participant may elect in writing that all or any designated portion of his
stock credit account or his cash credit account be changed to, and such Participant
shall instead be credited with, the other type of account as of the first day of the
month following the month in which the election is received by the Plan Administrator.
For this purpose, the value of a participant’s stock credit account will be determined
using the average of the Closing Price on each business day during the month preceding
the effective date of the election. Notwithstanding the foregoing, any election to
transfer between accounts may be made no more frequently than once in any six (6) month
period and no such election may be made unless the transfer would be an exempt
transaction for purposes of Section 16(b) of the Securities Exchange Act of 1934.





     3.3 DISTRIBUTION OF CREDITS.




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






(i) Unless as otherwise elected in Section 3.3(a)(ii), payment of a Participant’s
deferred stock units shall be made in one (1) lump sum as soon as practicable in the
year in which the Participant had elected to receive payment.




(ii) At the election of the Participant made in writing and delivered to the Plan
Administrator at any time on or before December 1 of the year prior to the year in
which the Participant had elected to receive payment, distribution of all of his or
her account 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 Plan Administrator at any time prior to December 1 of the Plan
Year prior to the year in which the Participant had elected to receive payment.




	 	(b)  	For all Compensation deferred under this Plan after December 31, 2004, the
distribution of a Participant’s stock credit account or cash credit account will be
made as follows:






(i) According to the election by each Participant on an annual election form
provided by the Company to the Participant in December of the year preceding



 









 






the grant of any award under this Plan in the next Plan Year, payment of a
Participant’s stock credit account or cash credit account will be made either in a
lump sum or in any number of annual installments not exceeding ten (10), both upon a
date or dates certain or commencing in the January following the termination of
service as a Director.




(ii) Elections pursuant to Section 3.3(b)(i) are not irrevocable; provided, however,
any subsequent election that changes the timing or form of a Participant’s previous
distribution election must comply with Section 409A of the Code, including
requirements that such selection (A) may not be effective until twelve (12) months
after the date the election is made, (B) any subsequent elections relating to
payments scheduled for a particular date or dates must be made at lease twelve (12)
months prior to the date of the first scheduled payment, and (C) all subsequent
elections 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.




	 	(c)  	Distribution of a Participant’s cash credit and stock credit accounts shall be
made in cash. For this purpose, the value of a Participant’s stock credit account
shall be determined by multiplying the number of shares of Common Stock attributable to
the payment by the average of the Closing Price on each business day in the month of
December immediately prior to the Plan Year in which the payment is to be paid.





     3.4 ADJUSTMENT. If at any time the number of outstanding shares of Common Stock shall be
changed or increased as the result of any stock dividend, subdivision or reclassification of
shares, the number of shares of Common Stock to which each Participant’s stock credit account is
equivalent shall be changed or increased in the same proportion as the outstanding number of shares
of Common Stock is changed or increased, or if the number of outstanding shares of Common Stock
shall at any time be decreased as the result of any combination or reclassification of shares, the
number of shares of Common Stock to which each Participant’s stock credit account is equivalent
shall be decreased in the same proportion as the outstanding number of shares of Common Stock is
decreased. In the event the Company shall at any time be consolidated with or merged into any
other corporation and holders of the Company’s Common Stock receive common shares of the resulting
or surviving corporation, there shall be credited to each Participant’s stock credit account, in
place of the shares then credited thereto, a stock equivalent determined by multiplying the number
of common shares of stock given in exchange for a share of Common Stock upon such consolidation or
merger, by the number of shares of Common Stock to which the Participant’s account is then
equivalent. If in such a consolidation or merger, holders of the Company’s Common Stock shall
receive any consideration other than common shares of the resulting or surviving corporation, the
Plan Administrator, in its sole discretion, shall determine the appropriate change in Participants’
accounts.



     3.5 INSTALLMENT AMOUNT. In the event a Participant has elected to receive distribution of his
or her accounts in more than one installment, the amount of each installment shall be determined
either (a) by multiplying the current balance (denominated in cash units for



 









 





the portion elected to be deferred as cash credits and denominated in stock units for the
portion elected to be deferred in stock credits) in the accounts as determined under Section 3.2,
by a fraction, the numerator of which is one, and the denominator of which is the number of
installments yet to be paid or (b) by any other method acceptable to the Plan Administrator.




     3.6 DISTRIBUTION UPON DEATH. In the event of the death of a Participant, whether before or
after ceasing to serve as a Director, any cash credit account and stock credit account to which he
or she was entitled, shall be converted to cash and distributed in one (1) 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 Plan Administrator. A Participant may from time to time
revoke or change any such designation by written notice to the Plan Administrator. If there is no
unrevoked designation on file with the Plan Administrator 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 3.6 shall be made as soon as practicable following the end of the
fiscal quarter in which the Plan Administrator is notified of the Participant’s death. In this
case, a Participant’s stock credit account shall be converted to cash by multiplying the number of
whole and fractional shares of Common Stock to which the Participant’s stock credit account is
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.



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



ARTICLE IV




     4.1 PLAN ADMINISTRATOR. The Plan Administrator shall have full power and authority to
administer the Plan including the power to promulgate forms to be used with regard to the Plan, the
power to promulgate rules of Plan administration, the power to settle any disputes as to rights or
benefits arising from the Plan, and the power to make such decisions or take such action as the
Plan Administrator, in its sole discretion, deems necessary or advisable to aid in the proper
maintenance of the Plan.



ARTICLE V




     5.1 FUNDING. No promise hereunder shall be secured by any specific assets of the Company, nor
shall any assets of the Company be designated as attributable or allocated to the satisfaction of
such promises. Nothing herein creates a vested right. Cash credit and stock credit accounts are
not funded and are paid from the general assets of the Company from which the Participant
terminated service as a Director. Nothing herein shall be construed to require the Company to
maintain any fund or segregate any amount for the benefit of any Participant and no Participant or
other person shall have any claim against, right to, or security or other interest in, any fund,
account or asset of the Company.



 









 





ARTICLE VI




     6.1 NON-ALIENATION OF BENEFITS. No benefit under the Plan shall 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
Participant, be in any manner liable for or subject to the debts, contracts, liabilities,
engagements, or torts of the Participant.



ARTICLE VII




     7.1 DELEGATION OF ADMINISTRATIVE DUTIES. Administrative duties imposed by this Plan may be
delegated by the Plan Administrator or the individual charged with such duties.



     7.2 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.



     7.3 AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Plan Administrator at any time
may terminate and in any respect, amend or modify the Plan.



     7.4 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.