Document:

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                                                                    EXHIBIT 10.2

                      NON-QUALIFIED STOCK OPTION AGREEMENT

      This NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made this
____ day of _________, ____, by and between CORRECTIONS CORPORATION OF AMERICA,
a Maryland corporation (the "Company"), and _________________________, a
resident of ____________ (the "Optionee").

                              W I T N E S S E T H:

      WHEREAS, the Company has adopted the Corrections Corporation of America
2000 Stock Incentive Plan, as amended (the "Plan"), which authorizes the Company
to grant non-qualified stock options ("Options") to key employees of the Company
and/or its affiliates; and

      WHEREAS, the Company and Optionee wish to confirm the terms and conditions
of an Option granted to Optionee on ___________, ____ (the "Date of Grant").

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed between the parties
hereto as follows:

      1.    Definitions. Except as provided in this Agreement, or unless the
context otherwise requires, the terms used herein shall have the same meaning as
in the Plan.

      2.    Grant of Option. Upon and subject to the terms, restrictions,
limitations and conditions stated herein, the Company hereby grants to Optionee
an Option to purchase up to ______ shares of the Company's Common Stock
(collectively, the "Option Shares").

      3.    Option Price. The purchase price per Option Share shall be $_____
(the "Option Price").

      4.    Exercise; Vesting; Forfeiture.

            (i)   Except as otherwise provided herein, Optionee shall have the
right to exercise the Option, if and to the extent the Option has vested in
accordance with subparagraphs (iii) and (iv) below, at any time during the
ten-year period commencing on the Date of Grant; provided, however, that except
as otherwise provided in subparagraph (iv) below, Optionee may not exercise the
Option unless Optionee is on the date of exercise and continuously after the
Date of Grant an employee of: (a) the Company; (b) an Affiliate Corporation; or
(c) a corporation issuing or assuming the Option in a Transaction to which Code
Section 424 applies (or a Subsidiary Corporation of such corporation) ((a), (b)
and (c) known collectively, herein, as the "Employer").

            (ii)  The Option shall be exercised by giving written notice of such
exercise to the Company in the form attached hereto as Exhibit A; provided,
however, that an Option may not be exercised at any one time as to fewer than
one hundred (100) shares (or such number of shares as to which the Option is
then exercisable if such number of shares is less than one hundred (100)). The

<PAGE>

Option Price shall be paid or satisfied in full, at the time of exercise, in
cash, in shares of Common Stock owned by Optionee for at least six months having
a Fair Market Value equal to such Option Price or in a combination of cash and
such shares of Common Stock. In addition, payment may also be made in whole or
in part in the form of an option to acquire Common Stock or in the form of
another Award (based, in each case, on the Fair Market Value of such option or
Award on the date the Option is exercised, as determined by the Committee).

            (iii) Subject to the provisions of subparagraph (iv) below, the
Option shall vest with respect to ___________ of the Option Shares on each
Vesting Date (as herein defined). For purposes hereof, the term "Vesting Date"
shall mean each of the following ______ dates: _______________________________.

            (iv)  In the event that: (a) Optionee dies while in the employ of
the Employer or within three (3) months after the termination of employment with
Employer for any reason; or (b) Optionee's employment with the Employer
terminates by reason of Optionee's Disability or Retirement, then in any such
case the Option shall vest in full and may be, unless earlier terminated or
expired, exercised by Optionee (or by Optionee's estate or by a person who
acquired the right to exercise such Option by bequest or inheritance or
otherwise by reason of the death or Disability of Optionee) at any time during
the stated term of the Option. In the event that there occurs a Change of
Control, then in such case the Option shall vest in full and, unless earlier
terminated or expired, may be exercised by Optionee (or by Optionee's estate or
by a person who acquired the right to exercise such Option by bequest or
inheritance or otherwise by reason of the death or Disability of Optionee)
within one (1) year following the Change in Control. Subject to the first
sentence of this subparagraph (iv), in the event that Optionee's employment with
the Employer terminates other than by reason of Optionee's death, Disability or
Retirement, then the Option, to the extent the Option has vested and unless it
earlier terminates or expires, may be exercised within three (3) months
following the termination of such employment, with the unvested portion of the
Option being forfeited. Nothing in this Agreement or in any Option granted
pursuant hereto shall confer upon Optionee any right to continue in the employ
or service of the Employer or interfere in any way with the right of the
Employer to terminate Optionee's employment at any time.

            5.    Option and Option Shares Subject to Plan. The Option and the
Option Shares shall be subject to, and the Company and Optionee agree to be
bound by, all of the terms and conditions of the Plan, as the same shall be
amended from time to time in accordance with the terms thereof. A copy of the
Plan, as amended, is attached hereto as Exhibit B and made a part hereof as if
fully set out herein.

            6.    Covenants and Representations of Optionee. Optionee
represents, warrants, covenants and agrees with the Company as follows:

                  (i)   Optionee is not acquiring the Option Shares based upon
any representation, oral or written, by any person with respect to the future
value of, or income from, the Option Shares but rather upon an independent
examination and judgment as to the prospects of the Company;

                  (ii)  Optionee is able to bear the economic risks of the
investment in the Option Shares, including the risk of a complete loss of his or
her investment therein;

                  (iii) Optionee understands and agrees that the Option Shares
may be issued and sold to Optionee without registration under any state law
relating to the registration of securities for

<PAGE>

sale, and in such event will be issued and sold in reliance on exemptions from
registration under appropriate state laws;

                  (iv)  The Option Shares cannot be offered for sale, sold or
transferred by Optionee other than pursuant to: (A) an effective registration
under applicable state securities laws or in a transaction which is otherwise in
compliance with such laws; (B) an effective registration under the Securities
Act of 1933, as amended (the "1933 Act"), or in a transaction otherwise in
compliance with the 1933 Act; and (C) evidence satisfactory to the Company of
compliance with the securities laws of all applicable jurisdictions. The Company
shall be entitled to rely upon an opinion of counsel satisfactory to it with
respect to compliance with the foregoing laws;

                  (v)   The Company will be under no obligation to register the
Option Shares or to comply with any exemption available for sale of the Option
Shares without registration. The Company is under no obligation to act in any
manner so as to make Rule 144 promulgated under the 1933 Act available with
respect to sales of the Option Shares;

                  (vi)  A legend indicating that the Option Shares have not been
registered under the applicable state securities laws and referring to any
applicable restrictions on transferability and sale of the Option Shares may be
placed on the certificate or certificates delivered to Optionee and any transfer
agent of the Company may be instructed to require compliance therewith;

                  (vii) Optionee realizes that the purchase of the Option Shares
is a speculative investment and that any possible profit therefrom is uncertain;

                  (viii) Optionee will notify the Company prior to any sale of
the Option Shares within one year of the date of the exercise of all or any
portion of the Option; and

                  (ix)  The agreements, representations, warranties and
covenants made by Optionee herein extend to and apply to all of the Common Stock
of the Company issued to Optionee from time to time pursuant to this Option.
Acceptance by Optionee of the certificate(s) representing such Common Stock
shall constitute a confirmation by Optionee that all such agreements,
representations, warranties and covenants made herein shall be true and correct
at such time.

            7.    Withholding. If Optionee recognizes compensation income as a
result of the exercise of the Option granted hereunder, Optionee shall remit in
cash to the Company the minimum amount of federal and state income and
employment tax withholding which the Company is required to remit to the
Internal Revenue Service or applicable state department of revenue in accordance
with the then current provisions of the Code or applicable state law. Optionee
shall pay the full amount of such withholding simultaneously with the exercise
of the Option or upon the occurrence of any other event that results in the
recognition of compensation income by Optionee. The failure by Optionee to remit
the full amount of withholding due may, in the discretion of the Company, result
in the forfeiture of the related benefit notwithstanding any other provision of
this Agreement.

            8.    Governing Law. This Agreement shall be construed, administered
and enforced according to the laws of the State of Maryland, without regard to
the conflicts of laws provisions thereof; provided, however, the Option may not
be exercised except, in the reasonable judgment of the Committee, in compliance
with exemptions under applicable state securities laws of the state in which
Optionee resides, and/or any other applicable securities laws.

<PAGE>

            9.    Successors. This Agreement shall be binding upon and inure to
the benefits of the heirs, legal representatives, successors and permitted
assigns of the parties.

            10.   Notice. Except as otherwise specified herein, all notices and
other communications under this Agreement shall be in writing and shall be
deemed to have been given if personally delivered or if sent by registered or
certified United States mail, return receipt requested, postage prepaid,
addressed to the proposed recipient at the last known address of such recipient.
Any party may designate any other address to which notices shall be sent by
giving notice of such address to the other parties in the same manner provided
herein.

            11.   Severability. In the event that any one or more of the
provisions or portion thereof contained in this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any respect, the same shall
not invalidate or otherwise affect any other provisions of this Agreement and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.

            12.   Entire Agreement. Subject to the terms and conditions of the
Plan, this Agreement expresses the entire understanding and agreement of the
parties hereto with respect to such terms, restrictions and limitations. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed and original but all of which shall constitute one and the same
instrument.

            13.   Violation. Any transfer, pledge, sale, assignment or
hypothecation of the Option except in accordance with this Agreement shall be a
violation of the terms hereof and shall be void and without effect.

            14.   Headings. Section headings used herein are for convenience of
reference only and shall not be considered in interpreting this Agreement.

            15.   Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.

            16.   Counterparts. This Agreement may be executed by the signatures
of each of the parties hereto, or to a counterpart of this Agreement, and all
such counterparts shall collectively constitute one Agreement. Facsimile
signatures shall constitute original signatures for purposes of this Agreement.

            IN WITNESS WHEREOF, the parties have executed and sealed this
Agreement on the day and year first set forth above.

                                    CORRECTIONS CORPORATION OF AMERICA

                                    By: _______________________________________

                                    Title: ____________________________________

<PAGE>

                                    OPTIONEE:

                                    Signature: ________________________________

                                    Name (printed): ___________________________<PAGE>

                                                                   Exhibit 10.15

                      ------------------------------------

                             REYNOLDS AMERICAN INC.

                         500,000 shares of Common Stock
                          (par value $0.0001 per share)

                  EQUITY INCENTIVE AWARD PLAN FOR DIRECTORS OF
                     REYNOLDS AMERICAN INC. AND SUBSIDIARIES

                      ------------------------------------

                          INFORMATION FOR PARTICIPANTS

                      ------------------------------------

   THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
  ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
                                    OFFENSE.

                                  JULY 30, 2004

       This document constitutes part of a prospectus covering securities
     that have been registered under the Securities Act of 1933, as amended.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           PAGE
<S>                                                                        <C>
Introduction........................................................        1
The Plan............................................................        1
Certain United States Federal Income Tax Matters....................        2
Restrictions on Transfer............................................        3
Additional Information..............................................        4
</TABLE>

                                      -i-

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                                  INTRODUCTION

      On July 30, 2004, R.J. Reynolds Tobacco Holdings, Inc. ("RJR") completed
the combination transactions (the "Combination Transactions") between RJR and
Brown & Williamson Tobacco Corporation ("B&W") pursuant to the Business
Combination Agreement, dated as of October 27, 2003, to form a new wholly owned
holding corporation, Reynolds American Inc. ("RAI"). Upon completion of the
Combination Transactions, each share of RJR common stock outstanding immediately
prior to the Combination Transactions was converted into the right to receive
one share of RAI common stock. "We", "our" and the "Company" refer, prior to the
closing of the Combination Transactions, to RJR and, following the completion of
the Combination Transactions, to RAI. In connection with the closing of the
Combination Transactions, the Company registered with the Securities and
Exchange Commission ("SEC") 500,000 shares of RAI's common stock for issuance
pursuant to the Plan (as defined below).

                                    THE PLAN

      Under the terms of the Equity Incentive Award Plan for Directors of
Reynolds American Inc. and Subsidiaries (the "Plan"), we make equity award
grants to non-employee members of our Board of Directors (the "Board"). The Plan
was adopted and approved by the written consent of RJR's sole stockholder, on
May 12, 1999. The Company assumed sponsorship of and authorized the amendments
to the Plan on July 28, 2004.

      The principal features of the Plan are summarized below, but the following
summary is qualified by reference to the Plan itself, a copy of which is
attached.

      The Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended, nor is it to be qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code").

      The purposes of the Plan are (1) to further the growth, development and
financial success of RAI by providing additional incentives to its directors by
assisting them to become owners of capital stock of RAI and thus to benefit
directly from its growth, development and financial success; and (2) to enable
RAI to obtain and retain the services of, and business relationships with, the
type of directors considered essential to the long-term success of RAI by
providing and offering them an opportunity to become owners of capital stock of
RAI.

ELIGIBILITY

      Non-employee directors are eligible to receive equity award grants in the
form of deferred stock units ("Units") or stock options ("Options").

ADMINISTRATION OF THE PLAN

      The Plan is administered by the Corporate Governance and Nominating
Committee of our Board (the "Committee"), whose members participate in the Plan.
The Committee is authorized to establish rules and regulations for the
administration of the Plan and to make determinations and interpretations under
the Plan.

SHARES AVAILABLE FOR EQUITY AWARD GRANTS

            The total number of shares of our common stock, par value $0.0001
per share, of RAI ("Common Stock") available for grants under the Plan is
500,000 shares. Shares of Common Stock related to grants that are forfeited,
canceled or expire unexercised will immediately become available for other
grants. Shares of Common Stock delivered under the Plan may be newly issued or
treasury shares.

            In the event of any change in our outstanding Common Stock by reason
a stock split, spin-off, stock dividend, stock combination or reclassification,
recapitalization or merger, change of control, or similar event, the

<PAGE>

Committee shall adjust appropriately the number of shares of our Common Stock
subject to the Plan and available for or covered by equity award grants and
prices per share of Common Stock related to outstanding equity award grants and
make such other revisions to outstanding equity award grants as it deems are
equitably required.

STOCK OPTION GRANTS TO DIRECTORS

      Under the terms of the Plan, eligible directors may receive a grant of
Options to purchase shares of our Common Stock. Such a grant may be made at any
time, but will be made solely in the discretion of the Committee. The exercise
price of each share of Common Stock subject to an Option is equal to the final
closing price of a share of Common Stock on the date of grant. Options vest
immediately but are not exercisable prior to six months after the date of grant.
The Options may not be exercised after ten years from the date of grant.

STOCK AWARDS TO DIRECTORS

      Under the terms of the Plan, each eligible director receives a one-time
grant of 3,500 deferred stock units (the "Units"). This grant is made as soon as
practicable after the director's initial election to serve on our Board. In
addition, each director receives an annual grant of 1,000 Units unless,
commencing with the stock award for 2005, the director elects to receive instead
1,000 shares of our Common Stock. Each eligible director also receives a
quarterly grant of Units on the last day of each calendar quarter determined by
the following formula: $10,000 divided by the average of the closing price of a
share of Common Stock for each business day during the last month of such
calendar quarter. If a director has served for less than the entire quarter, the
number of Units will be pro-rated.

      Each Unit has a value equal to one (1) share of Common Stock. Units bear
dividends at the same rate as our Common Stock, but the dividends are paid in
the form of additional Units in an amount equal to the number of shares of
Common Stock that could be purchased with the dividend on the date of payment.
The director receives payment of the Units as soon as practicable following his
or her last year of service on the Board. At the election of the director, the
payment of annual grants of Units may be made in cash or in our Common Stock.
Distribution of the Units received in connection with a quarterly award shall be
made only in cash. Distributions may be made in one lump sum or in up to 10
annual installments. Cash payments are generally based on the average closing
price of our Common Stock during December of the year preceding payment.

AMENDMENT AND TERMINATION OF THE PLAN

      Our Board may terminate or amend the Plan. No amendment or termination of
the Plan may adversely affect any participant's rights with respect to
previously granted Options or Units without the consent of such participant.

CHANGE OF CONTROL

      In the event of a Change of Control (as described below) of the Company:
(i) Options will become fully vested and exercisable; provided, however, that
the Committee may elect to make a cash payment to participants in lieu of
delivery of shares upon exercise equal to an amount determined pursuant to
applicable Option grant agreements or an amount equal to the "spread" (i.e., the
excess of the fair market value of our Common Stock on the date of exercise over
the exercise price) multiplied by the number of shares exercised and (ii) the
Committee will have authority to establish or revise the terms of grants in a
manner that is not adverse to participants. A Change of Control includes certain
acquisitions of 30% or more of the combined voting power of the Company's
securities, certain changes in the composition of our Board (including certain
changes resulting from a proxy contest), certain mergers or consolidations of
RAI or the disposition of substantially all of our assets.

                CERTAIN UNITED STATES FEDERAL INCOME TAX MATTERS

      The following is a brief summary of the U.S. federal income tax rules
currently applicable to grants under the Plan. The tax consequences described
below are stated in general terms only. We do not provide tax advice, so

                                       2
<PAGE>

participants should consult with their own tax advisors with respect to all
federal tax consequences of Plan participation as well as any tax consequences
of Plan participation.

STOCK OPTIONS

      The grant of an Option will have no immediate tax consequences to the
optionee or to us. Upon the exercise of an Option, the optionee will recognize
ordinary income (and we will be entitled to a deduction) in an amount equal to
the excess of the fair market value of the shares of Common Stock on the date of
the exercise of the Option over the exercise price. The optionee's tax basis in
the shares will be the exercise price plus the amount of ordinary income
recognized by the optionee, and the optionee's holding period will commence on
the date the shares are transferred. Upon a subsequent sale of shares of Common
Stock acquired pursuant to the exercise of an Option, any difference between the
optionee's tax basis in the shares and the amount realized on the sale is
treated as long-term or short-term capital gain or loss, depending on the
holding period of the shares.

UNITS

      The grant of Units will not result in taxable income to you or a deduction
for us in the year of grant. The value of the Units will be taxable to you in
the year in which you receive a payment of the Units, either in cash or in
shares of Common Stock. We will generally be entitled to an income tax deduction
equal to the amount of ordinary income recognized by you in the year such income
is recognized.

COMMON STOCK

      If you elect to receive shares of our Common Stock instead of Units, the
fair market value of the shares of our Common Stock received will be ordinary
income to you (and we will be entitled to a deduction).

                            RESTRICTIONS ON TRANSFER

      We will not deliver any shares pursuant to the Plan unless and until any
then-applicable requirements of the SEC or any other regulatory agency having
jurisdiction and of any exchanges upon which our Common Stock may be listed have
been fully complied with.

      Any person receiving shares of our Common Stock under the Plan who is an
"affiliate" of the Company (as the term "affiliate" is used in Rule 144 under
the Securities Act of 1933 (the "1933 Act")) may resell such shares only
pursuant to a registration statement filed under the 1933 Act (the Company
having no obligation to file any such registration statement) or within the
restrictions, including the sales volume limitations imposed by Rule 144 other
than the holding period requirement in the Rule. In addition, under Section 16
of the 1934 Act, any person who is a beneficial owner of more than 10% of any
equity security of the Company registered under the 1934 Act, or an officer or
director of the Company, may be liable to the Company for profit realized from
any purchase and sale (or any sale and purchase) of any equity security of the
Company within a period of less than six months, irrespective of the intention
on the part of such person in entering into the transaction. The term "equity
security" includes our Common Stock, securities convertible into our Common
Stock, and rights to acquire shares of our Common Stock upon exercise of
warrants or options or on conversion of convertible or exchangeable securities,
or otherwise.

      All recipients of awards under the Plan are advised to consult with
counsel as to their status as an "affiliate" of the Company and as to the
applicability of Section 16(b) and various insider trading restrictions of the
1934 Act to the grant and exercise of awards under the Plan and the purchase and
sale (or sale and purchase) of shares of our Common Stock or other equity
securities of the Company, whether or not such shares or securities were
delivered pursuant to the Plan.

                                       3
<PAGE>

                             ADDITIONAL INFORMATION

      The following documents and documents filed by RAI with the SEC are
incorporated by reference into this Prospectus:

      (1)   Amendment No. 4 to our registration statement on Form S-4 dated June
            23, 2004;

      (2)   Our Quarterly Report on Form 10-Q for the quarterly period ended
            June 30, 2004;

      (3)   Our form of Rights Agreement with The Bank of New York, as rights
            agent (incorporated by reference to Exhibit 3 of our registration
            statement on Form 8-A filed with the SEC on July 29, 2004);

      (4)   The description of our Common Stock and certain rights contained in
            our 1934 Act registration statement on Form 8-A dated July 29, 2004,
            filed with the SEC pursuant to Section 13 of the 1934 Act, including
            any amendment thereto or report filed for the purpose of updating
            such description; and

      (5)   All documents filed with the SEC by RAI pursuant to Sections 13(a),
            13(c), 14 and 15(d) of the 1934 Act subsequent to the date hereof
            and prior to the filing of a post-effective amendment which
            indicates that all securities offered herein have been sold or which
            deregisters all securities then remaining unsold.

      Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Prospectus of which this information statement is a part to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Prospectus of which this information statement is a
part.

      Additional information about the Plan and RAI may be obtained from, and
copies of the following documents or reports will be furnished without charge
upon oral or written request to: Corporate Secretary, 401 North Main Street,
Winston-Salem, NC 27102-2990, (336)741-2000:

            -     Documents or reports incorporated by reference into the
                  Prospectus (including exhibits); and

            -     Copies of all reports, proxy statements and other
                  communications distributed to RAI shareholders.

      You will receive copies of all reports, proxy statements and other
communications generally distributed to RAI shareholders. Such materials will be
delivered to you not later than the time at which they are sent to RAI
shareholders.

                                       4
<PAGE>

                         EQUITY INCENTIVE AWARD PLAN FOR
                                  DIRECTORS OF
                     REYNOLDS AMERICAN INC. AND SUBSIDIARIES
                            (EFFECTIVE JULY 30, 2004)

      Reynolds American Inc., a North Carolina corporation, hereby adopts this
Equity Incentive Award Plan for Directors of Reynolds American Inc. and
Subsidiaries. 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, and
business relationships with, 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 II
                                   DEFINITIONS

SECTION 2.1 -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 2.2 -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 2.3 -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 2.4 -BOARD

      "Board" shall mean the Board of Directors of the Company.

SECTION 2.5 -CODE

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

SECTION 2.6 -COMMITTEE

      "Committee" shall mean the Corporate Governance and Nominating Committee
of the Board.

SECTION 2.7 -COMMON STOCK

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

SECTION 2.8 -COMPANY

      "Company" shall mean Reynolds American Inc., a North Carolina corporation.
<PAGE>

SECTION 2.9 -DIRECTOR

      "Director" shall mean a member of the Board.

SECTION 2.10 -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.

SECTION 2.11 -GRANT

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

SECTION 2.12 -OPTION

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

SECTION 2.13 -OPTION PRICE

      "Option Price" shall have the meaning given in Section 4.2.

SECTION 2.14 -OPTIONEE

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

SECTION 2.15 -PARTICIPANT

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

SECTION 2.16 -PLAN

      "Plan" shall mean the Equity Incentive Award Plan for Directors of
Reynolds American Inc. and Subsidiaries.

SECTION 2.17 -SECRETARY

      "Secretary" shall mean the Secretary of the Company.

SECTION 2.18 -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 2.19 -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.

                                     - 2 -
<PAGE>

                                  ARTICLE III
                             SHARES SUBJECT TO PLAN

SECTION 3.1 -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 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 IV
                               GRANTING OF OPTIONS

SECTION 4.1 -ELIGIBILITY

      Any Eligible Director of the Company or of any Subsidiary shall be
eligible to be granted Options as set forth in this Article III.

SECTION 4.2 -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.

                                   ARTICLE V
                         TERMS OF OPTIONS FOR DIRECTORS

SECTION 5.1 -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 5.2 -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 5.3 -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 5.4 -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.

                                     - 3 -
<PAGE>

                                   ARTICLE VI
                               EXERCISE OF OPTIONS

SECTION 6.1 -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 6.2 -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.

SECTION 6.3 -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 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, 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 (A) the settlement date of the
sale transaction and (B) 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 6.4 -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 purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.

                                     - 4 -
<PAGE>

SECTION 6.5 -TRANSFER RESTRICTIONS

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

                                  ARTICLE VII
                                  STOCK AWARDS

SECTION 7.1 -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.

      (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 7.2 -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 shall receive an Annual Stock Award of 1,000 deferred
stock units.

      (c) Notwithstanding the foregoing, commencing with the Annual Stock Award
for 2005, an Eligible Director may elect to receive the Annual Stock Award in
the form of 1,000 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 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 7.3 -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 a Director'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 consolidated tape for each business day during the last month of
such calendar quarter). In the event a Director has served on the Board for

                                     - 5 -
<PAGE>

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 7.4 -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 7.5 -DISTRIBUTION OF DEFERRED STOCK UNITS

      (a) Unless a Director has elected to receive installment payments as
provided below, payment of a Director'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 Director ceases to be a Director.

      At the election of the Director made in writing and delivered to the
Committee at any time on or before December 1 of the year of termination of the
Director'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 Director 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 Director's termination of service
as a Director.

      (b) Distribution of a Director's deferred stock units received in
connection with such Director's Quarterly Stock Awards shall be made only in
cash. Distribution of a Director's deferred stock units received in connection
with such Director's Initial Stock Award and Annual Stock Awards shall be made
in cash or stock. 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.

SECTION 7.6 -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 7.7 -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

                                     - 6 -
<PAGE>

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 7.8 -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 7.9 -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 VIII
                                 ADMINISTRATION

SECTION 8.1 -PLAN ADMINISTRATOR

      The Plan shall be administered by the Committee.

SECTION 8.2 -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 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 a memorandum or other written instrument signed by a majority of the
Committee.

SECTION 8.3 -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 IX
                            MISCELLANEOUS PROVISIONS

SECTION 9.1 -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.

                                     - 7 -
<PAGE>

SECTION 9.2 -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 9.3 -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 subject to
the Plan and available for or covered by Grants and Share prices 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
      subject to the Options being canceled.

            (ii) The Committee shall have authority to revise the terms of any
      such Grant or any other Grant as it, in its discretion, deems appropriate;
      provided, however, that the Committee may not make revisions that are
      adverse to the Participant without the Participant's consent unless such
      revision is provided for or contemplated in the terms of the Grant.

      (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
      BAT, 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, 2005 (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

                                     - 8 -
<PAGE>

      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 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 9.4 -TITLES

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

SECTION 9.5 -PRONOUNS

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

SECTION 9.6 -GOVERNING LAW

      This Plan shall be governed by the laws of the State of North Carolina.

                                     - 9 -

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