Document:

EX-10.2

 

Exhibit 10.2

Performance Unit

One-Year Vest

REYNOLDS AMERICAN INC.

LONG-TERM INCENTIVE PLAN

PERFORMANCE UNIT AGREEMENT

DATE OF GRANT: OCTOBER 7, 2004

W I T N E S S E T H:

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

Susan M. Ivey (the “Grantee”),

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

333 Performance Units.

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 in
this Agreement shall have the meaning set forth in the Plan, unless otherwise
indicated.

     2. Valuation of Performance Units. Each Performance Unit shall
have an initial value of $1,000 (the “Initial Grant Value”). The Compensation Committee of the
Company’s Board of Directors (the “Compensation Committee”) shall value each
Performance Unit at the end of 2004 using the performance measures set forth in
the grid attached as Exhibit A, but the Compensation Committee shall have the
discretion to reduce the resulting valuation (the “Payment Value”). The
Grantee agrees that the Performance Units granted hereunder are in lieu of an
award under the Company’s Annual Incentive Award Plan for 2004.

     3. Vesting. (a) The Performance Units shall vest on December
31, 2004, or if earlier, upon the Grantee’s death, Permanent Disability (as defined in the
Company’s Long Term Disability Plan), or retirement under a retirement plan of
the Company or a subsidiary of the Company.

     (b) Notwithstanding anything in Section 3(a) to the contrary, in
the event of the Grantee’s involuntary Termination of Employment without Cause (as such terms
are defined in Section 5 of this Agreement), the number of Performance Units
which shall vest shall be equal to the product of (i) the original number of
Performance Units granted to the Grantee under this Agreement and (ii) a
fraction, the numerator of which shall be

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the number of whole or partial months between September 1, 2004 and the date of
the Grantee’s Termination of Employment, and the denominator of which shall be
4.

     (c) Upon the Grantee’s voluntary Termination of Employment or Termination
of Employment for Cause (as such terms are defined in Section 5 of this
Agreement) prior to the end of a Performance Period, all of the Grantee’s
Performance Units shall be cancelled, except to the extent that at the time of
Termination of Employment, the Grantee has an employment or termination
agreement with the Company or one of its subsidiaries which includes
non-cancellation of some or all of the Performance Units.

     4. Payment. (a) Payment of Performance Units shall be made only
in Cash. Except under such other circumstances as the Compensation Committee deems
appropriate, no payment shall be made to the Grantee prior to the end of 2004.
Payment of Performance Units shall be made in the amount of the Payment Value
as soon as practicable following the close of the Company books at the end of
2004.

     (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.

     5. 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 (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 senior human

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resources executive of the Company shall confirm that any such Termination of
Employment 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.

     6. 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 change; 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.

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

     8. Change in Corporate Structure. In the event of any stock
split, spin-off, stock dividend, extraordinary cash dividend, stock combination or reclassification,
recapitalization or merger, Change of Control (as defined in the Plan) or
similar event, the Compensation Committee shall make such revisions to this
Agreement as it deems are equitably required. Any adjustment or revision made
by the Compensation Committee shall be final and binding on the Grantee, the
Company and all other interested persons; provided, however, that the
Compensation Committee may not make any such adjustments or revisions that are
adverse to the Grantee without the Grantee’s written consent.

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

     10. 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.

     11. Taxes. Any taxes required by federal, state or local laws to
be withheld by the Company in respect of the grant of Performance Units or payment of the
Payment Value 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 by the Company to satisfy such tax
withholding obligations prior to delivery of the Payment Value.

     12. Administration and Interpretation. In consideration of the
grant of Performance Units 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 Agreement as are consistent therewith and to
interpret or revoke any such rules. All

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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 the Agreement.
The Compensation Committee may delegate its interpretive authority to an
officer or officers of the Company.

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

     14. Obligations of Grantee. (a) In consideration of the grant of
Performance Units hereunder, the Grantee, while both 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
Units 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 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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     15. 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:
	 	/s/ Ann A. Johnston
	

	 	 	 	
 
	

	 	 	 	Authorized Signatory
	 
	 	 	 	 

	/s/ Susan M. Ivey
Grantee	 	 	 	 
	 
	 	 	 	 
	Grantee’s Taxpayer Identification Number:
	 	 	 	 
	 

	
 
	 
	 	 	 	 
	Grantee’s Home Address:
	 	 	 	 
	 

	
 
	 

	
 
	 

	
 

5EX-10.3

 

Exhibit 10.3

AMENDMENT NO. 1 TO PERFORMANCE UNIT AGREEMENT

     THIS AMENDMENT NO. 1 TO THE PERFORMANCE UNIT AGREEMENT (this “Amendment
No. 1”) is entered into as of the 7th day of October 2004, by and between the
undersigned Grantee and Reynolds American Inc.

     WHEREAS, the Grantee received a grant of Performance Units pursuant to a
Performance Unit Agreement dated February 4, 2004 (the “Agreement”); and

     WHEREAS, the Agreement provided that the value of each Performance Unit
would be valued using the performance measures set forth in the grid attached
as “Exhibit A” to the Agreement; and

     WHEREAS, R.J. Reynolds Tobacco Holdings, Inc. and Brown & Williamson
Tobacco Corporation entered into certain business combination transactions (the
“Transactions”) effective as of July 30, 2004, which resulted in the formation
of a new public company, Reynolds American Inc. (the “Company”); and

     WHEREAS, the Company is now the sponsor of the Reynolds American Inc.
Long-Term Incentive Plan; and

     WHEREAS, the Company desires to amend Exhibit A to reflect the impact of
the Transactions on the valuation of the Performance Units.

     NOW, THEREFORE, in consideration of the foregoing premises, the parties to
the Agreement mutually agree to amend the Agreement as follows:

     1. The Agreement is amended by deleting in its entirety the grid
attached thereto as Exhibit A, and inserting therefor two grids, Exhibit A-1 and Exhibit A-2.
Exhibit A-1 shall set forth the performance measures to be used to value each
Performance Unit during the seven-month period beginning January 1, 2004 and
ending July 31, 2004, and Exhibit A-2 shall set forth the performance measures
to be used to value each Performance Unit during the five-month period
beginning August 1, 2004 and ending December 31, 2004.

     2. Except as amended by Section 1 of this Amendment No. 1, all
other terms and conditions of the Agreement shall remain in full force and effect.

     IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the
Grantee have executed this Amendment No. 1 as of the date first above written.

	 	 	 	 	 
	

	 	REYNOLDS AMERICAN INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Ann A. Johnston
	

	 	 	 	
 
	

	 	 	 	Authorized Signatory
	 

	
Name, Grantee

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