Ex-10.2



 






Exhibit 10.2




Performance Share

3-Yr Vest




REYNOLDS AMERICAN INC.

LONG-TERM INCENTIVE PLAN










PERFORMANCE SHARE AGREEMENT










DATE OF GRANT: MARCH 2, 2005




W I T N E S S E T H:




     1. Grant. Pursuant to the provisions of the Reynolds American Inc.
Long-Term Incentive Plan (the “Plan”), Reynolds American Inc. (the “Company”) on the date set forth above has
granted to



«FirstName» «LastName» (the “Grantee”),



subject to the terms and conditions which follow and the terms and conditions of the Plan, a grant
of




«Number» Performance Shares.



A copy of the Plan is attached and made a part of this Agreement with the same effect as if set
forth in the Agreement itself. All capitalized terms used below shall have the meaning set forth in
the Plan, unless otherwise defined in this Agreement.




     2. Valuation of Performance Shares. Each Performance Share shall be equal
in value to one share of Common Stock.



     3. Vesting. (a) Subject to the terms and conditions of this Agreement,
the Performance Shares shall vest on March 2, 2008. For the Performance Shares to vest, the Company
must pay to its shareholders a dividend of at least $.95 per share in each fiscal quarter during
the period commencing on the Date of Grant and ending on December 31, 2007 (the “Threshold
Requirement”), unless the Company’s Board of Directors specifically approves the noncancellation of
the Performance Shares upon the declaration of a quarterly dividend of less than $.95 per share.
In the event the Company fails to pay its shareholders a dividend of at least $.95 per share in any
fiscal quarter during the period from the Date of Grant and ending on December 31, 2007, and the
Company’s Board of Directors does not approve the noncancellation of the Performance Shares, the
Performance Shares shall be cancelled.



     (b) Notwithstanding anything in Section 3(a) of this Agreement to the contrary,



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in the event of (i) the Grantee’s death, (ii) the Grantee’s Permanent Disability (as such term is
defined in the Company’s Long-Term Disability Plan), or (iii) a Change of Control, 100% of the
Performance Shares not previously cancelled due to the Company’s failure to meet the Threshold
Requirement, shall vest.




     (c) Notwithstanding anything in Section 3(a) of this Agreement to the contrary,
in the event of (i) the Grantee’s involuntary Termination of Employment without Cause (as such
terms are defined in Section 4 of this Agreement), or (ii) the Grantee’s Retirement (as such term
is defined below), the number of Performance Shares that will vest, if not previously cancelled due
to the Company’s failure to meet the Threshold Requirement, shall be equal to the product of (x)
the original number of Performance Shares granted to the Grantee under this Agreement and (y) a
fraction, the numerator of which shall be the number of whole or partial months between the Date of
Grant and the date of the Grantee’s Termination of Employment, and the denominator of which shall
be 36. For purposes of this Agreement, the term “Retirement” shall mean an employee’s voluntary
Termination of Employment on or after his or her 65th birthday, or on or after his or
her 55th birthday with 10 or more years of service with the Company or a subsidiary of
the Company.



     (d) Notwithstanding anything in Section 3(a) of this Agreement to the contrary,
in the event of the Grantee’s voluntary Termination of Employment (other than at Retirement) or
Termination of Employment for Cause (as such terms are defined in Section 4 of this Agreement), the
Performance Shares shall be cancelled.



     4. Termination of Employment. (a) 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).



     (b) For purposes of this Agreement, if the Grantee has an employment or severance agreement,
employment shall be deemed to have been terminated for “Cause” only as such term is defined in the
employment or severance agreement. For purposes of this Agreement, if the Grantee does not have an
employment or severance agreement that defines the term “Cause,” the Grantee’s employment shall be
deemed to have been terminated for “Cause” if the Termination of Employment results from the
Grantee’s: (i) criminal conduct; (ii) deliberate and continual refusal to perform employment
duties on substantially a full time basis; (iii) deliberate and continual refusal to act in
accordance with any specific lawful instructions of an authorized officer or employee more senior
than the Grantee or a majority of the Board of Directors of the Company; or (iv) deliberate
misconduct which could be materially damaging to the Company or any of its business operations
without a reasonable good faith belief by the Grantee that such conduct was in the best interests
of the Company. A Termination of Employment shall not be deemed for Cause hereunder unless the
chief human resources officer of the Company shall confirm that any such Termination of Employment
is for Cause; provided, however, that the chief executive officer of the Company
shall be required to confirm that a Termination of Employment of the chief human resources officer
of the Company is for Cause. Any voluntary Termination of Employment by the Grantee in
anticipation of an involuntary Termination of Employment for Cause shall be deemed to be a
Termination of Employment for Cause.



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     5. Dividends. As of the date any dividend is paid to shareholders of
Common Stock, the Grantee shall be paid an amount equal to the product of (a) the number of Performance
Shares held by the Grantee that have not yet been cancelled pursuant to Section 3 of this
Agreement, and (b) the dividend per share of Common Stock paid to shareholders of Common Stock on
such date. In the 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.



     6. Payment. (a) Except as otherwise provided by this Agreement, payment
of vested Performance Shares shall be made only in cash as soon as practicable following the date of vesting,
and in any event, no later than the March 15 after the end of the year in which the payment of
Performance Shares vests. The amount of payment shall be determined by multiplying (i) the number
of vested Performance Shares by (ii) the Fair Market Value at which the Common Stock is traded at
the close of business on the vesting date.



     (b) In the event of the death of a Grantee, any payment to which such Grantee is entitled
under the Plan 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 (“Group Life Insurance Coverage”). If the Grantee has not designated
such beneficiary, or desires to designate a different beneficiary, the Grantee may file with the
Company a written designation of a beneficiary under the Plan, which designation may be changed or
revoked only by the Grantee, in writing. If no designation of beneficiary has been made by a
Grantee under the Group Life Insurance Coverage or filed with the Company under the Plan,
distribution upon such Grantee’s death shall be made in accordance with the provisions of the Group
Life Insurance Coverage. If a Grantee is no longer an employee of the Company at the time of
death, no longer has any Group Life Insurance Coverage and has not filed a designation of
beneficiary with the Company under the Plan, distribution upon such Grantee’s death shall be made
to the Grantee’s estate.



     7. 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.



     8. 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 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.



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     9. Application of Laws. The Grant and the obligations of the Company
hereunder shall be subject to all applicable laws, rules and regulations and to such approvals of
any governmental agencies as may be required.



     10. Taxes. Any taxes required by federal, state or local laws to be
withheld by the Company on the grant or payment of Performance Shares 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 by the Company to satisfy such tax withholding
obligations prior to delivery of the payment of the Performance Shares.



     11. Notices. Any notices required to be given hereunder to the Company
shall be addressed to The 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.



     12. Administration and Interpretation. In consideration of the grant of
Performance Shares hereunder, the Grantee specifically agrees that the Compensation Committee shall
have the exclusive power to interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan and this Agreement as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all interpretation and
determinations made by the Compensation Committee shall be final, conclusive and binding upon the
Grantee, the Company and all other interested persons. No member of the Compensation Committee
shall be personally liable for any action, determination or interpretation made in good faith with
respect to the Plan or this Agreement. The Compensation Committee may delegate its interpretive
authority to an officer or officers of the Company.



     13. Compliance with Section 409A of the Code. To the extent applicable, it
is intended that this Agreement and the Plan comply with the provisions of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), so that the income inclusion provisions of
Section 409A(a)(1) do not apply to the Grantee. This Agreement and the Plan shall be administered
in a manner consistent with this intent, and any provision of this Agreement that would cause the
Agreement to fail to satisfy Section 409A of the Code shall have no force and effect until amended
to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted
by Section 409A of the Code and may be made by the Company without the consent of the Grantee). In
particular, to the extent the Grantee’s right to receive payment becomes nonforfeitable pursuant to
Section 3(b) or (c) and the event causing the Grantee’s right to become nonforfeitable either is
the Grantee’s Retirement or an event that does not constitute a permitted distribution event under
Section 409A(a)(2) of the Code, then notwithstanding anything to the contrary in Section 6 above,
payment will be made on the earlier of (a) the Grantee’s “separation from service” with the Company
(determined in accordance with Section 409A); provided, however, that in the case
the Grantee is a “specified employee” (within the meaning of Section 409A), the Grantee’s date of
payment shall be made on the date which is 6 months after the date of the Grantee’s separation from
service with the Company or (b) the Grantee’s death.



     14. Amendment. This Agreement is subject to the Plan, a copy of which is



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attached. The Board of Directors may amend the Plan and the Compensation Committee may amend this
Agreement at any time and in any way, except that, other than for adjustments under Section 13
hereof and 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.




     15. Obligations of Grantee. (a) In consideration of the grant of
Performance Shares hereunder, the Grantee, both while actively employed and in the event of Grantee’s
Termination of Employment for any reason, specifically agrees that within the term of this Grant or
within one year following the payment of any amounts pursuant to the Grant, if later: (i) the
Grantee will personally provide reasonable assistance and cooperation to the Company in activities
related to the prosecution or defense of any pending or future lawsuits or claims involving the
Company; (ii) the Grantee will promptly notify the Company upon receipt of any requests from anyone
other than an employee or agent of the Company for information regarding the Company, or if the
Grantee becomes aware of any potential claim or proposed litigation against the Company; (iii) the
Grantee will refrain from providing any information related to any claim or potential litigation
against the Company to any non-Company representatives without either the Company’s written
permission or being required to provide information pursuant to legal process; (iv) the Grantee
will not disclose or misuse any confidential information or material concerning the Company; and
(v) the Grantee will not engage in any activity contrary or harmful to the interests of the
Company. 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
Company-related matter: the Grantee will consult with and have Company designated legal counsel
present for such testimony (the Company will be responsible for the costs of such designated
counsel); the Grantee will confine his or her testimony to items about which the Grantee has
knowledge rather than speculation, unless otherwise directed by legal process; and 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.



     (b) If the Company reasonably determines that the Grantee has materially violated any of the
Grantee’s obligations under this Agreement, then this Grant shall terminate, effective the date on
which such violation began (unless otherwise terminated sooner), and the Company may demand the
return of any amount paid to the Grantee hereunder, and the Grantee hereby agrees to return such
amounts upon such demand. If after such demand the Grantee fails to return such amounts, the
Grantee acknowledges that the Company has the right to deduct from any amounts the Company owes to
the Grantee (including, but not limited to, wages or other compensation), or to commence judicial
proceedings against the Grantee, to recover such amounts and any and all of its attorney’s fees and
costs.



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     16. GOVERNING LAW. 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.



     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	 	

	Grantee’s Taxpayer Identification Number:	 	 
	 


	 	 
	Grantee’s Home Address:	 	 
	 


	 	 
	 


	 	 
	 


	 	 






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