Document:

Ex-10.53

 

Exhibit 10.53

Performance Unit

One-Year Vest

REYNOLDS AMERICAN INC.

LONG-TERM INCENTIVE PLAN

PERFORMANCE UNIT AGREEMENT

DATE OF GRANT: February 2, 2005

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

<<First
Name>> <<Last Name>> (the “Grantee”),

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

<<Number>>
(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 2005 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 2005.

     3. Vesting. (a) The Performance Units shall vest on December 31, 2005, or
if
earlier, upon the Grantee’s death, Permanent Disability (as defined in the Company’s Long Term
Disability Plan), or retirement. For purposes of this Agreement, the term “retirement” shall mean
the Grantee’s voluntary Termination of Employment (as such term is defined in Section 5 of this
Agreement) 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.

     (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 the number of whole or partial
months between January 1, 2005 and the date of the Grantee’s Termination of Employment, and the
denominator of which shall be 12.

     (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 2005. Payment of vested 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 2005, and in any event no later than March 15, 2006.

     (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 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

2

 

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.

     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. 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.

     9. 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.

     10. 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.

     11. Administration and Interpretation. (a) In consideration of the grant
of

3

 

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 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.

     (b) This Agreement is intended to comply with Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), and shall be construed and interpreted in accordance with such
intent. The Performance Units shall be subject to Section 409A of the Code and shall be paid in a
manner that will comply with Section 409A of the Code, including proposed, temporary or final
regulations or any other guidance issued by the Secretary of Treasury and the Internal Revenue
Service with respect thereto (the “Guidance”). Any provision of this Agreement that would cause
the Performance Units to fail to satisfy Section 409A of the Code shall have no force and effect
until amended to comply with Code Section 409A (which amendment may be retroactive to the extent
permitted by the Guidance).

     12. 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, other than for adjustments under Section 11(b)
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.

     13. 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 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

4

 

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.

     14. 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 Signatory 	 
	 	 	 	 
	 

	 
	

	                       Grantee

	 

	Grantee’s Taxpayer Identification Number:

	 

	

	 

	Grantee’s Home Address:

	 

	

	 

	

	 

	

5<PAGE>
                                                                   Exhibit 10.67

                            SUPPLEMENTAL PENSION PLAN

                                FOR EXECUTIVES OF

                     BROWN & WILLIAMSON TOBACCO CORPORATION

                       (As Amended Through July 29, 2004)

<PAGE>

                            SUPPLEMENTAL PENSION PLAN
                                FOR EXECUTIVES OF
                     BROWN & WILLIAMSON TOBACCO CORPORATION
                       (As Amended Through July 29, 2004)

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
ARTICLE 1. DEFINITIONS.....................................................    1
   1.01   Actuarial Basis..................................................    1
   1.02   Basic Plan.......................................................    2
   1.03   Company..........................................................    2
   1.04   PIP; PIP Award...................................................    2
   1.05   Employer.........................................................    3
   1.06   ERISA Excess Plan................................................    3
   1.07   Interest.........................................................    3
   1.08   Participant......................................................    3
   1.09   Plan.............................................................    3
   1.10   Supplemental Benefit.............................................    3
   1.11   Supplemental Salary..............................................    3

ARTICLE 2. PARTICIPATION...................................................    5
   2.01   Participation....................................................    5
   2.02   SERP Trust Individuals...........................................    6

ARTICLE 3. BENEFITS........................................................    6
   3.01   Eligibility......................................................    6
   3.02   Amount of Supplemental Benefit...................................    6
   3.03   Dependents' Benefits.............................................    9

ARTICLE 4. METHOD OF PAYMENT...............................................   10
   4.01   Payments On or After July 1, 1990................................   10
   4.02   Plan Unfunded....................................................   10
   4.03   Delay in Payment.................................................   10
   4.04   Withholding......................................................   10

ARTICLE 5. AMENDMENT AND TERMINATION.......................................   10
   5.01   Right to Amend or Terminate Reserved.............................   10
   5.02   Action to Bind Employers.........................................   11
   5.03   Change in Basic Plan.............................................   11

ARTICLE 6. ADMINISTRATION..................................................   11
   6.01   Administration...................................................   11
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                           <C>
ARTICLE 7. MISCELLANEOUS...................................................   11
   7.01   Payment to Incompetent...........................................   11
   7.02   Spendthrift Clause...............................................   11
   7.03   Usage............................................................   11
   7.04   Data.............................................................   11
   7.05   Separability.....................................................   12
   7.06   Right of Discharge Reserved......................................   12
   7.07   Other Benefits Unaffected........................................   12

ARTICLE 8. EFFECTIVE DATE, ETC.............................................   12
   8.01   Effective Date...................................................   12
</TABLE>

                                   * * * * *

                                       ii

<PAGE>

                            SUPPLEMENTAL PENSION PLAN
                                FOR EXECUTIVES OF
                     BROWN & WILLIAMSON TOBACCO CORPORATION
                       (As Amended Through July 29, 2004)

                                    PREAMBLE

          Effective January 1, 1991, Brown & Williamson Tobacco Corporation
assumed all liabilities for the Supplemental Pension Plan for Executives of
Brown & Williamson Tobacco Corporation (formerly the Supplemental Pension Plan
for Executives of BATUS Inc. and Brown & Williamson Tobacco Corporation), and
simultaneously restated the Plan to incorporate certain amendments approved by
the Company.

          The Plan has been amended from time to time thereafter, to read, as of
July 29, 2004, as set forth herein.

          Notwithstanding any such amendment, the right to and amount of any
pension payable to a Participant or beneficiary shall in all events be
determined in accordance with the terms of the Plan as in effect at the time of
termination of employment.

                                   ARTICLE 1.

                                   DEFINITIONS

          The following terms when used in this Plan shall have the designated
meaning unless a different meaning is clearly required by the context. Defined
terms in the Basic Plan which are used in this Plan (including, without
limitation, spouse and child) shall have the meanings given to them in the Basic
Plan unless a different meaning is given below or is clearly required by the
context.

1.01 Actuarial Basis.

(a)  The term "Actuarial Basis" means a benefit computed on the basis of the
     actuarial principles adopted by the Company, subject to subsection (b)
     below.

(b)  For purposes of determining the present value of the amount payable under
     Section 3.02, the following assumptions shall be used [effective October 1,
     1995]:

     (1)  Interest:

     (2)  with respect to any portion (or all) of the accrued amount for which
          the Company has not provided an external source of payment prior to
          the time actual payment becomes due under Article 3, the lower of (i)
          the average of the monthly interest rates used to determine the
          commuted value of pensions under the Basic Plan for the 36 month
          period immediately preceding the Participant's termination of
          employment, or (ii) the interest rate used to determine the commuted
          value of

<PAGE>

          pensions under the Basic Plan for the month immediately preceding the
          Participant's termination of employment.

     (3)  with respect to any portion (or all) of the accrued amount for which
          the Company has provided an alternate source of payment (whether in
          trust or otherwise) prior to the time actual payment becomes due under
          Article 3, the monthly interest rate used shall be determined pursuant
          to paragraph (A) above (but assuming the Participant had terminated
          employment as of the date of determination). A separate calculation
          shall be made for each such payment, and the interest rate applicable
          to each such calculation shall be established at the time of payment,
          and shall not be subject to change in the future as it relates to that
          payment.

     (4)  Mortality: the mortality table used under the Basic Plan to determine
          the commuted value of pensions at the time present value is
          determined.

1.02 Basic Plan.  The term "Basic Plan" means the Retirement Plan for Salaried
     Employees of Brown & Williamson Tobacco Corporation and Certain Affiliates,
     and, as applicable, its predecessor plan.

1.03 Company.  The word "Company" means, effective the date of closing (the
     "Closing") of the transactions contemplated by the Business Combination
     Agreement dated October 27, 2003, between Brown & Williamson Tobacco
     Corporation and R.J. Reynolds Tobacco Holdings, Inc. (the "Business
     Combination"), Reynolds American Inc., and any successor thereto ("RAI").
     Prior to Closing the word "Company" means Brown & Williamson Tobacco
     Corporation, and any successor thereto ("B&W"). Effective immediately prior
     to Closing, B&W shall be deemed to have withdrawn from and shall no longer
     maintain the Plan for its employees.

1.04 PIP; PIP Award.

(a)  Except as provided in subsection (b) below, effective January 1, 2002, the
     Performance Incentive Plan ("PIP") replaces and supercedes the Executive
     Incentive Plan ("EIP"), the Management Incentive Plan ("MIP") and the
     Competitive Annual Bonus ("CAB"). A "PIP Award" is an award of incentive
     compensation applicable to a Participant for a calendar year and may
     include a pension-eligible component. Prior to the year 2002, the CAB award
     was not pension eligible; consequently the CAB component of a PIP Award for
     and after 2002 is not pension-eligible. By way of example, but not
     exclusion, for calendar years commencing on and after January 1, 2002, the
     sole annual incentive compensation plan that may include a pension-eligible
     component is the PIP, and for calendar years prior to 2002, plans that may
     include a pension-eligible component include the EIP and MIP.

(b)  The Performance Incentive Plan, described in subsection (a) above, does not
     apply to Plan Participants seconded to an affiliate of the Company as of
     May 1, 2002. For such Participants, the Management Incentive Plan ("MIP"),
     as in effect on December 31, 2001, shall continue to apply for purposes of
     calculating Supplemental Salary.

                                      -2-

<PAGE>

1.05 Employer.  The word "Employer" means Reynolds American Inc., and any
     subsidiary or affiliate of the Employer which is approved for inclusion in
     the Plan by the Company.

1.06 ERISA Excess Plan.  The term "ERISA Excess Plan" means the portion of this
     Plan established by the Employer solely for the purpose of paying benefits
     based on the provisions of the Basic Plan (or other applicable plan) for
     certain employees in excess of the limitations on benefits imposed by
     Section 415 of the Internal Revenue Code of 1986, as amended. That portion
     of the Plan maintained for such purpose shall be treated as a separate plan
     which is an excess benefit plan, as defined by ERISA Section (3)(36).

1.07 Interest.  The word "Interest" means the rate of interest established from
     time to time by the Company, in its discretion, for deferred PIP account
     balances.

1.08 Participant.  The word "Participant" means a participant in the Basic Plan
     who satisfies the requirements for participation set out in Article 2 of
     the Plan.

1.09 Plan.  The word "Plan" means the Supplemental Pension Plan for Executives
     of Brown & Williamson Tobacco Corporation, as in effect from time to time.

1.10 Supplemental Benefit.  The term "Supplemental Benefit" means the benefit
     described in Section 3.02 hereof.

1.11 Supplemental Salary.

(a)  The term "Supplemental Salary" shall mean the sum of Paragraphs (1) through
     and including (4) as follows:

     (1)  Average PIP Award.  Subject to subsections (b) through (e) below, a
          Participant's Average PIP Award shall be the greater of:

          (A)  a Participant's Average PIP Award (whether or not deferred) for
               the three performance years immediately preceding the calendar
               year in which a Supplemental Benefit becomes payable to the
               Participant (or if applicable his spouse or dependents); provided
               that if any such Participant has not received a PIP Award for one
               or more of such three years, his award for such year shall be
               treated as zero dollars; or

          (B)  the amount obtained by multiplying the Participant's annual rate
               of salary at the time a Supplemental Benefit becomes payable to
               the Participant (or if applicable his spouse or dependents) by
               the EIP/MIP percentage that was, or would have been, applicable
               to such Participant's current position or level (i.e. the
               Participant's employment position or level at the time the
               Supplemental Benefit becomes payable) at the "Commendable" level
               for the 2001 performance year.

          Notwithstanding the foregoing, with respect to a Participant who
          enters into regular employment (as defined in Section 2.01(b)(2)) with
          RAI after Closing (as defined in Section 1.03), a Participant's
          Average PIP Award shall be the greater

                                      -3-

<PAGE>

          of (i) the amount calculated under paragraph (B) above, or (ii) an
          amount equal to the Participant's base annual compensation rate at the
          time of employment termination with RAI (or an affiliate), multiplied
          by B&W's average performance rating percentage for 2001, 2002 and 2003
          applicable to such Participant.

     (2)  Excess Pensionable Salary.  The excess of the amount that would have
          been the Participant's pensionable salary under the Basic Plan, but
          for the limitations of Section 401(a)(17) of the Internal Revenue Code
          of 1986 or any similar provision of subsequent law, over the
          Participant's actual pensionable salary under the Basic Plan.

     (3)  Deferred Compensation.  All amounts that would have constituted
          pensionable salary under the Basic Plan but for the fact that the
          receipt of these amounts was deferred, including without limitation,
          amounts deferred under the Deferred Compensation Plan for Executives
          of Brown & Williamson Tobacco Corporation, as amended from time to
          time.

     (4)  Special Contractual Arrangements.  Effective for special contractual
          arrangements entered into on or after January 1, 1993, and to the
          extent provided in or required by any such arrangement, all amounts
          that would have constituted pensionable salary under the Basic Plan,
          but for the limits of Section 401(a)(17) of the Internal Revenue Code
          of 1986, or any similar provision of subsequent law, over the sum of
          the Participant's pensionable salary determined under paragraphs (1),
          (2) and (3) above.

(b)  For purposes of subsection (a)(1) above, disability shall be deemed to
     occur on the date the Participant first commences a period of absence that
     leads to a determination of disability under the Basic Plan.

(c)  Except as specifically provided by written agreement between the Company
     and a Participant, Supplemental Salary shall include an Average PIP Award
     only for Participants who were Participants in the Plan on December 31,
     1990, and who continue to be employed in an PIP-eligible position
     thereafter (or, in the event the Company terminates or modifies the PIP or
     similar annual incentive or bonus program in a manner described in
     subsection (e) below, were in eligible PIP positions at the time of such
     termination or modification). Subject to any such agreement, Supplemental
     Salary shall not include an Average PIP Award for a Participant who:

     (1)  was not a Participant in the Plan on December 31, 1990; or

     (2)  becomes a Participant on or after January 1, 1991, whether as a result
          of initial employment, reemployment following a termination of
          employment (voluntary, involuntary, disability or otherwise),
          promotion, transfer or otherwise.

(d)  The Average PIP Award for a Participant who becomes ineligible to
     participate in PIP for any reason prior to termination of employment,
     disability or death (other than by reason of the termination of the Plan or
     modification of the PIP or similar annual incentive or bonus program in a
     manner described in subsection (e) below) shall be calculated

                                      -4-

<PAGE>

     pursuant to subsection (a) above, by assuming the Supplemental Benefit of
     such Participant is or becomes payable in the year in which such
     Participant first becomes ineligible to so participate.

(e)  If the EIP/MIP percentages in effect for the 2001 performance year are
     amended, terminated or replaced by a plan or program that has lower payout
     targets or opportunities than the EIP/MIP in effect as of January 1, 2001,
     e.g. if, with respect to a performance year subsequent to 2001, the
     percentage award applicable to the "Commendable" level for a Participant is
     lowered by the Company below the percentage award applicable to such
     Participant at the "Commendable" level for 2001, such Participant's Average
     PIP Award (or, if applicable, Average EIP/MIP Award), shall be determined
     and paid out at the time of such amendment, termination or replacement, and
     shall be the greater of (i) the amount determined under subsection
     (a)(1)(A) above, or (ii) the amount obtained by multiplying the
     Participant's rate of salary at the time of such amendment, termination or
     replacement by the EIP/MIP percentage applicable to such Participant at the
     "Commendable" level for the 2001 performance year.

                                   ARTICLE 2.

                                 PARTICIPATION

2.01 Participation.

(a)  Any participant in the Basic Plan who (1) is eligible to participate in the
     PIP (prior to January 1, 1991), (2) is eligible to and elects to defer
     pensionable salary under the Deferred Compensation Plan for Executives of
     Brown & Williamson Tobacco Corporation, (3) receives compensation that
     would be included in the Participant's pensionable salary under the Basic
     Plan but for the limitations of Section 401(a)(17) of the Internal Revenue
     Code of 1986 or any similar provision of subsequent law, or (4) would be
     eligible for an additional benefit under the Basic Plan but for the
     limitations of Section 415 of the Internal Revenue Code of 1986 or any
     similar provision of subsequent law, shall automatically become a
     Participant in this Plan.

(b)  Effective as of Closing (as defined in Section 1.03), the following classes
     of employees shall be excluded from eligibility to participate in the Plan:

     (1)  any individual who was not an employee of the Company (as defined in
          Section 1.03) immediately prior to Closing; and

     (2)  any individual who was not a participant in (or an Eligible Employee
          with respect to and as defined in) the Basic Plan at the time he or
          she entered into "regular employment" with RAI at and after Closing.
          For this purpose, the term "regular employment" means full- or
          part-time ongoing employment with RAI that is not classified by RAI as
          transitional employment. An employee is considered to be in
          "transitional employment" if his or her employment is transferred to
          RAI in connection with the Business Combination and the employee is
          employed within the B&W Division of RAI for a limited period of time
          (a "transition period").

                                      -5-

<PAGE>

2.02 SERP Trust Individuals.

(a)  Pursuant to the Business Combination Agreement dated October 27, 2003,
     between Brown & Williamson Tobacco Corporation and R.J. Reynolds Tobacco
     Holdings, Inc. (the "BCA"), (i) Liabilities (as defined in the formation
     agreement under the BCA (the "Formation Agreement")) under the Plan were
     retained by Brown & Williamson Tobacco Corporation (or an affiliate) to the
     extent they pertain or relate to the service and/or accrued benefits of the
     SERP Trust Individuals (as defined in Section 1.01 of the Formation
     Agreement and listed on Schedule 1.01(b) thereto as R. Baker, C.D. Brown,
     W. Carpenter, C. Dawson, M. DiCio, J. Eckmann, H. Frick, J. Graas, S. Ivey,
     M. Kovatch, R. Lewis, M. McGraw, R. Miller, C. Schoenbachler, D. Snyder, R.
     Stowe, R. Van Hess, and P. Wessel) prior to the Employment Transfer Time
     (as defined in the Formation Agreement), calculated on the assumption that
     each SERP Trust Individual's employment terminated immediately prior to the
     Employment Transfer Time, and (ii) rights in the assets of the trusts
     established pursuant to the Secular Trust Agreements with the SERP Trust
     Individuals (as defined in Section 1.01 of the Formation Agreement and
     listed on Schedule 1.01(b) thereto) were retained by Brown & Williamson
     Tobacco Corporation to the extent such assets were held in an account
     thereunder for the purpose of providing a fund to pay benefits under the
     Plan (defined in the Secular Trust Agreement as the "SERP Account").

(b)  Notwithstanding any provision of the Plan to the contrary, effective as of
     the Employment Transfer Time the Plan (and the Company) shall have no
     liability for any Liability described above (nor shall the Company or the
     Plan have a claim to any Assets related thereto). To the extent a benefit
     is payable under the Plan to any SERP Trust Individual for periods of
     service performed for the Company after the Employment Transfer Time, such
     benefit shall take into account and be reduced by the liability retained by
     Brown & Williamson Tobacco Corporation referred to in subsection (a) above
     to the extent necessary to prevent a duplication of benefit payments.

                                   ARTICLE 3.

                                    BENEFITS

3.01 Eligibility.  A Participant shall be entitled to receive a Supplemental
     Benefit under this Plan only upon [effective October 1, 1995]: (1)
     termination of employment with a vested benefit under the Basic Plan, (2)
     receipt of a disability pension under the Basic Plan or (3) death.

3.02 Amount of Supplemental Benefit.

(a)  The amount of a Participant's Supplemental Benefit shall be equal to the
     actuarial value of the benefit to which the Participant would be entitled
     under the Basic Plan (without regard to Section 3.03 thereof) and the ERISA
     Excess Plan in the aggregate (determined after applying Section 3.02 of the
     Basic Plan), with the following adjustments:

                                      -6-

<PAGE>

     (1)  the Participant's Supplemental Salary were included in his or her
          pensionable salary under the Basic Plan, or in the case of a
          Participant receiving a disability pension under the Basic Plan, were
          included in his or her salary at the time of disability,

     (2)  any additional pensionable and qualifying service granted under any
          special contractual arrangement entered into on or after January 1,
          1993, were included in his or her pensionable and qualifying service
          under the Basic Plan; and

     (3)  any incremental benefit granted pursuant to subsection (e) of this
          Section 3.02, offset by the actuarial value of the benefit payable
          under the Basic Plan.

(b)  Notwithstanding subsection (a) above, if a Participant becomes ineligible
     to participate in PIP for any reason after having become a Participant
     hereunder, that portion of such a Participant's Supplemental Benefit which
     is based on an Average PIP Award (if any) shall be calculated by
     disregarding pensionable service (as defined in the Basic Plan) earned
     during and after the year such Participant first became ineligible to
     participate in PIP.

(c)  If the Company provides an alternate source of payment for all or any
     portion of a Participant's accrued or projected Supplemental Benefit at any
     time before or on (or as of) the date the Participant becomes entitled
     thereto under Section 3.01, and payment to such alternate source results in
     the immediate taxation thereof, such accrued or projected Supplemental
     Benefit shall be reduced by the estimated tax liability attributable
     thereto (the tax rate to be used for this calculation shall be an assumed
     retiree tax rate for the Participant, as determined by the Company in its
     sole discretion) (the "after-tax benefit"), and such estimated after-tax
     benefit shall be increased by the tax paid with respect thereto; provided
     that in no event shall such prior payment or payments be deemed to be a
     discharge of the Company's obligation for all or any part of the
     Supplemental Benefit due under this Article 3 prior to the time the
     Participant becomes entitled to the payment thereof under Section 3.01. The
     amount of Supplemental Benefit due under this subsection (c) shall be paid
     as provided in Section 4.01(b).

(d)  A Participant who (i) is a corporate Vice President on, or as of, July 15,
     1997, (ii) is or becomes entitled to payment of a Supplemental Benefit
     under Section 3.01, and (iii) whose benefit is provided (in part or
     entirely) through an alternate source of payment as described in subsection
     (c) above, shall, at the time such Supplemental Benefit first becomes
     payable under the Plan, be entitled to an additional cash amount calculated
     as follows: the ratio of the "Projected Installment Sum" over the
     "Projected Employee Grantor Trust Sum", expressed as a percentage, minus
     one (1), with the resulting percentage multiplied by the Supplemental
     Benefit (after adjustment to an after-tax value at the time the benefit
     first becomes payable). Such additional cash amount shall, at the time of
     payment, be increased by an amount sufficient to pay income taxes thereon
     (inclusive of taxes on the increase). For purposes of this subsection (d),
     the following terms have the following meanings:

                                      -7-

<PAGE>

     (1)  "Projected Installment Sum" means the sum of the after-tax present
          value of each projected installment payment of the Supplemental
          Benefit, assuming that the Supplemental Benefit is paid in 10 annual
          installments, the first being paid on the first anniversary of the
          Participant's termination of employment. The amount of each projected
          annual installment shall be determined by multiplying the Account
          balance (including principal and accumulated notional earnings) as of
          the date the installment payment is due by a fraction, the numerator
          of which is one (1) and the denominator of which is the number of
          annual payments (including the payment then due) remaining to be paid;
          and by then reducing such amount by the projected tax effect related
          to such payment (State and local tax rates shall be taken into account
          only to the extent the State or locality of the Participant's
          residence, at the time the Participant first becomes entitled to
          payment under Section 3.01, imposes taxes on such payments). Notional
          earnings shall apply monthly to the unpaid Account balance as follows:
          the monthly rate of return shall be the greater of (i) the monthly
          equivalent of the annual yield on 10 year Treasury constant maturities
          as quoted in the Federal Reserve Statistical Release, as of the date
          of Supplemental Benefit entitlement (as set forth in Section 3.01) or
          (ii) the average of such monthly rates for the 36 month period ending
          with the month immediately preceding the month of such Supplemental
          Benefit entitlement.

     (2)  "Projected Employee Grantor Trust Sum" means the sum of the present
          value of each projected installment payment of the Supplemental
          Benefit (after adjustment of the said Supplemental Benefit to an
          after-tax value at the time the benefit first becomes payable),
          assuming that the said adjusted Supplemental Benefit is paid in 10
          annual installments in the manner described in paragraph (1) above
          (except that notional earnings on the unpaid balance shall be applied
          after adjustment for taxes).

          Such amount shall be paid as provided in Section 4.01(b) as soon as
          after the Participant becomes entitled a Supplemental Benefit under
          Section 3.01 above.

(e)  A Participant who is eligible to participate in the Plan by virtue of his
     or her eligibility to participate in the PIP prior to January 1, 1991, or
     whose employment classification is at the AVP (or equivalent) level or
     above, shall, unless otherwise specifically excluded from eligibility for
     the benefit described in this subsection (e) through a separate written
     agreement between the Company and the Participant, be entitled to elect to
     receive an incremental Supplemental Benefit equal to the incremental
     benefit provided under Section 4.04 of the Basic Plan and adjusted using
     the same methodology described in subsection (c) (except that the
     Participant's current tax rate shall be used to calculate the amount of
     after-tax benefit attributable to such incremental benefit), subject in all
     events to the same terms, conditions and exclusions of said Basic Plan
     Section 4.04 that apply to participants therein (including without
     limitation age and service requirements and the exclusions listed in items
     (1) through (5) of subsection (a) thereof). The incremental Supplemental
     Benefit payable under this subsection (e) shall be paid as provided in
     Section 4.01(b).

                                      -8-

<PAGE>

(f)  This subsection (f) shall apply only to Participants who are entitled to a
     Supplemental Benefit by virtue of participation in SERIB (as such acronym
     is defined in Section 2.01(b)) and whose Release Date thereunder is August
     1, 2001 or later. The cash value of a Supplemental Benefit to which any
     such Participant is entitled shall be calculated as of February 1, 2001,
     and at the Participant's employment termination date on or after August 1,
     2001. The Participant shall be entitled to the greater of the two
     calculations. Such amount shall be paid as follows:

     (1)  Payments to Participants whose benefit is paid to an alternate source
          of payment (as described in Section 3.02(c)) shall be made directly to
          such alternate source of payment. An initial deposit of the benefit
          due shall be made concurrent with other payments to such alternate
          source in January, 2001, based on the Participant's projected Release
          Date on or after August 1, 2001. If required, any additional amounts
          due will be paid upon actual termination of employment.

     (2)  Payments to all other Participants may be made as soon as practicable
          after July 1, 2001, based on the value of the Supplemental Benefit as
          of February 1, 2001, irrespective of whether the Participant has
          actually terminated employment (subject to any election by a
          Participant to defer payment). If required, any additional amounts due
          will be paid upon actual termination of employment.

3.03 Dependents' Benefits.

(a)  If dependents' benefits are payable under Article 8 of the Basic Plan to
     the surviving spouse or child of a retired Participant who had not yet
     received payment of benefits under Section 4.01, or of a Participant who
     died during employment (but not a Participant who terminated employment
     prior to retirement with vested rights, whether or not payment of such
     Participant's pension had begun), such spouse or child shall be entitled to
     a Supplemental Benefit equal to the additional benefit to which he would be
     entitled under the Basic Plan and the ERISA Excess Plan in the aggregate if
     the Participant's Supplemental Salary were included in his pensionable
     salary as defined in the Basic Plan (subject to the restrictions on
     pensionable service set forth in Section 3.02(b) hereof, if applicable to
     the Participant).

(b)  A Supplemental Benefit payable under subsection (a) above shall be paid in
     a single cash payment, determined on an Actuarial Basis, as soon as
     practicable after the Participant's death.

                                      -9-

<PAGE>

                                   ARTICLE 4.

                                METHOD OF PAYMENT

4.01 Payments On or After July 1, 1990.

(a)  Except as provided in subsection (b) hereof, the aggregate benefits to
     which a Participant is entitled under this Plan shall be paid in a single
     cash payment, determined on an Actuarial Basis, and such payment shall be
     made as soon as practicable after the Participant becomes entitled thereto
     under Section 3.01. Such payment shall be in full discharge of all
     obligations under this Plan with respect to such Participant (including the
     Participant's spouse and children).

(b)  Any portion of a Supplemental Benefit, not previously paid to the alternate
     source of payment referred to in Section 3.02(c), that is payable pursuant
     to Section 3.02(c) or (e), or both (c) and (e), shall be paid as soon as
     practicable after the Participant becomes entitled thereto under Section
     3.01 in a single cash payment to such alternate source of payment. Such
     payment shall be in full discharge of all obligations under this Plan with
     respect to such Participant (including the Participant's spouse and
     children).

(c)  In the case of such a Participant who is entitled to a disability pension
     under the Basic Plan, the single cash payment shall be determined by
     assuming that the Participant will continue to be entitled to receive a
     disability pension under the Basic Plan until his death.

4.02 Plan Unfunded.  All benefit payments under the Plan shall be made directly
     by the Employer out of its general assets.

4.03 Delay in Payment.  If payment of benefits under the Basic Plan in respect
     of a Participant or his spouse or child begins prior to determination of
     the PIP award for the previous calendar year, payment of his Supplemental
     Benefit (if any) shall be delayed until the amount of such prior year's PIP
     award is determined. Upon such a determination, the Supplemental Benefit
     shall be paid in an amount retroactive to the date that payment of benefits
     under the Basic Plan began. Interest shall not accrue, nor be or become
     payable, with respect to such retroactive payments.

4.04 Withholding.  All payments under the Plan shall be subject to any
     applicable withholding requirements imposed by any tax or other law.

                                   ARTICLE 5.

                            AMENDMENT AND TERMINATION

5.01 Right to Amend or Terminate Reserved.  The Company may at any time amend
     the Plan in any respect or terminate the Plan. However, no such amendment
     or termination shall deprive any Participant of any accrued benefit to
     which such Participant has a nonforfeitable right (determined in accordance
     with the rules of the Plan in effect immediately prior to the date of such
     amendment or termination), other than for the

                                      -10-

<PAGE>

     purpose of providing an offset for additional governmental benefits or for
     additional benefits provided by an Employer.

5.02 Action to Bind Employers.  By adoption of the Plan, each corporation
     included with the Employer designates the Company as its agent to
     administer the Plan in accordance with Article 6 hereof. The Company shall
     have the further right to amend or terminate the Plan and furnish written
     notice of such action and a copy of any such amendment to any such
     corporation, whereupon such amendment or termination shall become binding
     upon such corporation.

5.03 Change in Basic Plan.  If the Basic Plan and ERISA Excess Plan shall be
     amended to change in any way the benefits applicable to any Participant,
     spouse, or child, or shall be replaced in whole or in part by any successor
     plan, the provisions of the Plan shall apply based on the provisions of the
     Basic Plan and/or ERISA Excess Plan as so amended, or such successor plan,
     which are applicable to such Participant, spouse or child unless otherwise
     provided by the Company.

                                   ARTICLE 6.

                                 ADMINISTRATION

6.01 Administration.  The Company, through its duly designated agents, shall
     make all determinations required of it by the terms of the Plan, and its
     constructions and interpretations of the Plan, as well as its
     determinations as to rights and obligations under the Plan, shall be final
     and binding upon all persons.

                                   ARTICLE 7.

                                  MISCELLANEOUS

7.01 Payment to Incompetent.  If any person entitled to benefits under this Plan
     shall be a child or shall be either physically or mentally incompetent in
     the judgment of the Company, such benefits may be paid to the person to
     whom the corresponding benefits under the Basic Plan are paid under Section
     8.06(d) or 14.06 thereof, whichever is applicable.

7.02 Spendthrift Clause.  No benefit, distribution or payment under the Plan may
     be anticipated, assigned (either at law or in equity), alienated or subject
     to attachment, garnishment, levy, execution or other legal or equitable
     process.

7.03 Usage.  Whenever applicable, the masculine gender, when used in the Plan,
     will include the feminine gender, and the singular will include the plural.

7.04 Data.  Any Participant entitled to benefits under the Plan must furnish to
     the Company such documents, evidence or information as the Company
     considers necessary or desirable for the purpose of administering the Plan,
     or to protect the Company; and it is a condition of the Plan that each such
     Participant must furnish promptly true and complete

                                      -11-

<PAGE>

     data, evidence or information and sign such documents as the Company may
     require before any benefits become payable under the Plan.

7.05 Separability.  If any provision of the Plan is held invalid or
     unenforceable, its invalidity or unenforceability will not affect any other
     provisions of the Plan, and the Plan will be construed and enforced as if
     such provision had not been included therein. Captions. The captions
     contained herein and the table of contents prefixed hereto are inserted
     only as a matter of convenience and for reference and in no way define,
     limit, enlarge or describe the scope or intent of the Plan nor shall, in
     any way, affect the Plan or the construction of any provision thereof.

7.06 Right of Discharge Reserved.  The establishment of the Plan shall not be
     construed to confer upon an employee or Participant any legal right to be
     retained in the employ of the Employer or give any employee or any other
     person any right to benefits, except to the extent expressly provided for
     hereunder. All employees will remain subject to discharge to the same
     extent as if the Plan had never been adopted, and may be treated without
     regard to the effect such treatment might have upon them under the Plan.

7.07 Other Benefits Unaffected.  Nothing in this Plan shall be construed to
     require that a Participant's Supplemental Salary or PIP awards be taken
     into account in determining his benefits under the Employer's life
     insurance plan, profit-sharing plans, death-in-service payments (including
     payments under Section 9 of the Basic Plan), or any other benefit program.

                                   ARTICLE 8.

                              EFFECTIVE DATE, ETC.

8.01 Effective Date.  This Plan shall be effective as of January 1, 1981. No
     benefits shall be payable under the Plan in respect of employees who
     retired, terminated employment or died prior to such date, or to their
     spouses or children.

                                    * * * * *

                                      -12-

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