Document:

Exhibit 10.39

 

Exhibit 10.39

REYNOLDS AMERICAN INC.

OUTSIDE DIRECTORS’ COMPENSATION SUMMARY (Effective 1/1/08)

	1.	 	Fees/Expense Reimbursement

	 	•	Fees:	–	Board Retainer fee of $60,000 per year.
	 
	 	•	 	–	Lead Director Retainer fee of $20,000 per year.
	 
	 	•	 	–	Chairperson Retainer fees of $20,000 per year for the audit
committee chair, $10,000 per year for the Compensation
Committee chair, and $10,000 per year for the Corporate
Governance, Nominating and Leadership Development Committee
chair.
	 
	 	•	 	–	Committee meeting attendance fees per meeting of $1,500.
	 
	 	•	 	–	Board meeting attendance fees of $1,500 per meeting.

	 	•	 	All fees payable quarterly in arrears, but may be deferred in 25%
increments in cash and/or in deferred stock units until termination of active
directorship or until a selected year in the future.
	 
	 	•	 	To be tax effective, deferral elections must be made in the year prior
to the year fees would otherwise be payable, or otherwise in accordance with
IRS Code Section 409A.
	 
	 	•	 	Expenses: Directors are reimbursed for actual expenses incurred in
connection with attendance at Board meetings, including transportation and
lodging expenses.

	2.	 	Deferred Stock Units

	 	•	 	Upon election to the Board, an Outside Director receives an initial
grant of 3,500 deferred stock units or, at the Director’s election, 3,500
shares of RAI common stock.
	 
	 	•	 	On the date of each Annual Meeting, an Outside Director receives an
annual grant of 2,000 deferred stock units or, at the Director’s election,
2,000 shares of RAI common stock.
	 
	 	•	 	Quarterly grant of deferred stock units is made on the last day of each
calendar quarter to each Outside Director. The number of deferred stock units
is equal to $10,000 divided by the average of the closing price of a share of
RAI common stock (as reported on the NYSE) for each business day during the
last month of such calendar quarter.
	 
	 	•	 	Initial and annual deferred stock units are paid in cash or RAI common
stock, and quarterly deferred units paid in cash only, following termination of
active directorship or until a selected year in the future, whichever is later,
in either a lump sum or in up to ten annual installments, per Director’s
election.
	 
	 	•	 	To be tax effective, deferred elections must be made in the year prior
to the year of a grant, or otherwise in accordance with IRS Code Section 409A.

	3.	 	Life Insurance

	 	•	 	Option to receive up to $100,000 non-contributory coverage while an
active Director. Imputed income will be calculated based on your end-of-year
age and coverage amount.

	4.	 	Excess Liability Insurance

	 	•	 	Eligible to receive $10,000,000 in Excess Liability coverage. No cash
payment required; the fair market value will be imputed income to you each
year. Policy requires that you have certain underlying liability limits under
your homeowner’s or other personal liability policy. Obligation to pay for
claims up to such liability limits not covered by this policy.

	5.	 	Business Travel Accident Insurance

	 	•	 	$500,000 non-contributory coverage while an active Director.

	6.	 	Matching Grants

	 	•	 	1:1 for Educational/Arts/Cultural/Charitable Organizations — combined $10,000
maximum.

	7.	 	Director Education Programs

	 	•	 	Directors may attend one outside director education program per year at RAI’s
expense.

	 	•	 	Directors are reimbursed for actual expenses incurred in connection with attendance
at director education programs, including transportation and lodging expenses.Exhibit 10.40

 

Exhibit
10.40

EQUITY INCENTIVE AWARD PLAN FOR

DIRECTORS OF REYNOLDS AMERICAN INC.

(Amended and Restated Effective November 30, 2007)

     Reynolds American Inc., a North Carolina corporation, hereby adopts this Equity Incentive
Award Plan for Directors of Reynolds American Inc. (amended and restated effective November 30,
2007). 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 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 I

DEFINITIONS

Section 1.1 — 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 1.2 — 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 1.3 — 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 1.4 — Board

     “Board” shall mean the Board of Directors of the Company.

Section 1.5 — Code

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

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Section 1.6 — Committee

     “Committee” shall mean the Corporate Governance, Nominating and Leadership Development
Committee of the Board.

Section 1.7 — Common Stock

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

Section 1.8 — Company

     “Company” shall mean Reynolds American Inc., a North Carolina corporation.

Section 1.9 — Director

     “Director” shall mean a member of the Board.

Section 1.10 — Eligible Director

     “Eligible Director” shall mean a Director who qualifies as “independent” in accordance with
Rule 303A.02 of the New York Stock Exchange listing standards, as such rule may be amended,
supplemented or replaced from time to time; provided, however, that the
Non-Executive Chairman shall be an Eligible Director, and provided
further, that no “Investor
Director” who is not an “Independent Director,” as such terms are defined in the Governance
Agreement (as defined in Section 8.3(c)(i) of this Plan), shall be an “Eligible Director.”

Section 1.11 — Grant

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

Section 1.12 — Non-Executive Chairman

     “Non-Executive Chairman” shall mean the Non-Executive Chairman of the Board.

Section 1.13 — Option

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

Section 1.14 — Option Price

     “Option Price” shall have the meaning given in Section 4.2.

Section 1.15 — Optionee

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

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Section 1.16 — Participant

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

Section 1.17 — Plan

     “Plan” shall mean the Equity Incentive Award Plan for Directors of Reynolds American Inc.

Section 1.18 — Secretary

     “Secretary” shall mean the Secretary of the Company.

Section 1.19 — 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 1.20 — 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.

ARTICLE II

SHARES SUBJECT TO PLAN

Section 2.1 — 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 1,000,000.
[Note: the number of shares of Common Stock available for grants increased as a result of the
Company’s two-for-one stock split on August 14, 2006.] Shares of Common Stock 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 III

GRANTING OF OPTIONS

Section 3.1 — Eligibility

     Any Eligible Director shall be eligible to be granted Options as set forth in this Article
III.

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Section 3.2 — 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 IV

TERMS OF OPTIONS FOR DIRECTORS

Section 4.1 — 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 4.2 — 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 4.3 — 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 4.4 — 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.

ARTICLE V

EXERCISE OF OPTIONS

Section 5.1 — 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 5.2 — 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

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portion thereof may be exercised in whole or in part; provided, however, that
the Company shall not be required to issue fractional shares.

Section 5.3 — 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 of Common Stock 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 of Common Stock, 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 (i) the settlement date of the sale transaction and (ii) 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 5.4 — Rights as Shareholders

     The holders of Options shall not be, nor have any of the rights or privileges of, shareholders
of the Company in respect of any shares of Common Stock purchasable upon the exercise of any part
of an Option unless and until certificates representing such shares of Common Stock have been
issued by the Company to such holders.

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Section 5.5 — Transfer Restrictions

     The Committee, in its absolute discretion, may impose such restrictions on the transferability
of the shares of Common Stock 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 of Common Stock.

ARTICLE VI

STOCK AWARDS

Section 6.1 — 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. Notwithstanding this Section 6.1(a), in the
event of the appointment of an existing Director who was an employee of the Company to the position
of Non-Executive Chairman and such Director has not yet received an Initial Stock Award, the
Non-Executive Chairman shall receive an Initial Stock Award upon his or her appointment to the
position of Non-Executive Chairman.

     (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 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 (or in the case of a Non-Executive Chairman,
within thirty (30) days after his or her appointment). An election to receive shares of Common
Stock shall be irrevocable by the Director.

Section 6.2 — 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 shareholders or the one (1) year anniversary of the preceding year’s annual
meeting of shareholders, 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 2,000 (or in the case of a Non-Executive Chairman, 4,000) deferred stock
units , ). [Note: the number of shares of Common Stock constituting an Annual Stock Award
increased as a result of the Company’s two-for-one stock split on August 14, 2006.]

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     (c) Notwithstanding the foregoing, commencing with the Annual Stock Award for 2005, an
Eligible Director or the Non-Executive Chairman may elect to receive the Annual Stock Award in the
form of 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 (or in the case of a Non-Executive Chairman, within thirty (30) days after his or her
appointment). 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 6.3 — 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 each Eligible Director’s
account on the last day of each calendar quarter shall be determined pursuant to the following
formula: $10,000 (or in the case of a Non-Executive Chairman, $20,000) divided by the average of
the final 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 an Eligible Director has served on the Board or in the position of Non-Executive Chairman for
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 6.4 — 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, each Participant 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 such Participant’s deferred
stock units are equivalent on the record date for such dividend. 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 6.5 — Distribution of Deferred Stock Units

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

     (i) Unless as otherwise elected in Section 6.5(a)(ii), payment of a Participant’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 Participant ceases to be a Director.

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     (ii) At the election of the Participant made in writing and delivered to the Committee
at any time on or before December 1 of the year of termination of the Participant’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 Participant 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 Participant’s termination of his
or her service as a Director.

     (b) For all Grants made under this Plan after December 31, 2004 and on or prior to December
31, 2007, the distribution of a Participant’s deferred stock units will be made in the following
manner. According to the election made by each Participant on an annual election form provided by
the Company to the Participant prior to December 31 of the year preceding the grant of any award
under this Plan in the next Plan year or, if later, within thirty (30) days after the date a
Director becomes a Director (or in the case of a Non-Executive Chairman, within thirty (30) days
after his or her appointment), payment of a Participant’s deferred stock units will be made either
in a lump sum or in any number of annual installments not exceeding ten (10), on (or commencing on)
January 2 following the termination of his or her service as a Director.

     (c) For all Grants made under this Plan after December 31, 2007, the distribution of a
Participant’s deferred stock units will be made in the following manner. Each Participant shall
elect annually to have payment of his or her deferred stock units with respect to a grant (i) be
made either in a lump sum or in any number of annual installments not exceeding ten (10), and (ii)
be paid either (A) on (or commencing on)January 2 following the termination of his or her service
as a Director, or (B) on (or commencing on)the later of January 2 of the year specified and January
2 following the termination of his or her service as a Director. Such election by each Participant
shall be made on an annual election form provided by the Company prior to December 31 of the year
preceding the grant of any award under this Plan in the next Plan year or, if later, within thirty
(30) days after the date a Director becomes a Director (or in the case of a Non-Executive Chairman,
within thirty (30) days after his or her appointment).

     (d) Elections made pursuant to Section 6.5(b) and (c) are not irrevocable; provided,
however, (A) any subsequent election may not be effective until twelve (12) months after
the date the election is made, (B) any subsequent election relating to payments scheduled for a
particular date or dates must be made at least twelve (12) months prior to the date of the first
scheduled payment, and (C) any subsequent election for distributions, other than those triggered by
disability, death or an unforeseeable emergency, must delay distribution by at least five (5) years
from the original distribution date.

     (e) Distribution of a Participant’s deferred stock units received in connection with such
Participant’s Quarterly Stock Awards shall be made only in cash. Subject to 8.3(b) hereof,
distribution of a Participant’s deferred stock units received in connection with such Participant’s
Initial Stock Award and Annual Stock Awards shall be made in cash or stock, at the election of the
Participant made in writing and delivered to the Committee at any time on or before December 1 of
the year of termination of the Participant’s service as a Director. Subject to 8.3(b) hereof, 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

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the final closing price of a share of Common Stock (as reported on the New York Stock Exchange
consolidated tape) on each business day in the month of December immediately prior to the year in
which the installment is to be paid. If distribution is made in stock, any fractional shares of
stock shall be paid in cash equal to the value of the fractional share multiplied by the final
closing price of a share of Common Stock (as reported on the New York Stock Exchange consolidated
tape) on the last business day immediately preceding the date of distribution.

     (f) For purposes of Section 6.5(b) and Section 6.5(c), termination of service as a Director
shall be the later of (i) the end of the Director’s service as a member of the Board of Directors
of the Company and (ii) the Director’s separation from service with the Company within the meaning
of Section 409A of the Code.

     (g) Notwithstanding the foregoing provisions of this Section 6.5, with respect to grants made
under this Plan after December 31, 2004, in the event that a Participant is a “specified employee,”
determined pursuant to procedures adopted by the Company in compliance with Section 409A of the
Code, at the time of termination of service as a Director, as provided in Section 6.5(f), the
distribution of deferred units to be made following the termination of service as a Director shall
be paid no earlier than the first day of the seventh month following the date such termination of
service as a Director occurs (or if earlier, on the date of death).

Section 6.6 — 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 6.7 — 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 average of the final closing price of a share of Common
Stock (as reported on the New York Stock Exchange consolidated tape) on each business day during
the last month of the calendar quarter prior to the date of death.

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Section 6.8 — 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 6.9 — 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 VII

ADMINISTRATION

Section 7.1 — Plan Administrator

     The Plan shall be administered by the Committee.

Section 7.2 — 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 unanimous written consent in lieu of a meeting.

Section 7.3 — 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.

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ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 8.1 — 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.

Section 8.2 — 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 8.3 — 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 shall (i) adjust appropriately the number of shares of
Common Stock subject to the Plan and available for or covered by Grants, the number of deferred
stock units or shares of Common Stock constituting Initial Stock Awards and Annual Stock Awards in
Section 6.1 and 6.2 hereof and share prices related to outstanding Grants and (ii) 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 Section 8.3(c) hereof):

     (i) Options granted pursuant to Article III hereof shall become fully vested and exercisable;
provided, however, that

     (A) for each Option with an exercise price less than the value of the consideration for a
share of Common Stock in the Change of Control transaction (the “Transaction Consideration”), the
Committee may, in its sole discretion, elect to make a cash payment to Participants in cancellation
of such Options in an amount equal to the product of (1) and (2), where (1) is the excess of
Transaction Consideration over the exercise price, and (2) is the number of shares of Common Stock
subject to the Options being cancelled, which amount shall be paid at the same time as the
Transaction Consideration is paid to holders of Common Stock,

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and in any case no later than March 15 of the year succeeding the year in which such event of
a Change of Control occurred; and

     (B) for each Option with an exercise price greater than the Transaction Consideration, the
Committee may, in its sole discretion, elect to cancel such Options without any payment to
Participants holding such Options.

(ii) (A) Deferred stock units granted pursuant to Article VI hereof and described in
Section 6.5(a) shall be distributed to Participants in a single lump sum as soon as practicable
following the event of a Change of Control.

     (B) Deferred stock units granted pursuant to Article VI hereof and described in Section
6.5(b) and Section 6.5(c) shall be distributed to Participants:

     (1) in a single lump sum upon a Change of Control that is also a “change in the ownership or
effective control” of the Company for purposes of Section 409A of the Code, and in any case no
later than March 15 of the year succeeding the year in which such “change in the ownership or
effective control” occurred; or

     (2) in the event a Change of Control is not a “change in the ownership or effective control”
of the Company for purposes of Section 409A of the Code, in accordance with Article VI hereof.

     (C) Notwithstanding the foregoing provisions of this Section 8.3(b)(ii), in the event of a
Change of Control, the Committee may, in its sole discretion, elect to make the distribution with
respect to deferred stock units in cash in lieu of shares of Common Stock with respect to Initial
Stock Awards and Annual Stock Awards. With respect to any distribution made in cash, the amount of
the distribution shall be determined by multiplying the number of deferred stock units by the
Transaction Consideration. Payment with respect to deferred stock units described in Section
8.3(b)(ii)(b)(1) shall be made at the same time as the Transaction Consideration is paid to holders
of Common Stock, and in any case no later than March 15 of the year succeeding the year in which
such “change in the ownership or effective control” occurred.

     (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,

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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 British American Tobacco, p.l.c., 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, 2004 (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 (A) 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 (B) made in accordance with Section 2.01 of the Governance
Agreement, but 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; or

     (iii) the approval by the shareholders of the Company of a plan or agreement
providing (A) 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 (B) 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 8.4 — Compliance with Section 409A of the Code

     The Plan is intended to comply with Section 409A of the Code and shall be construed and
interpreted in accordance with such intent. Each payment pursuant to this Plan shall be considered
a separate payment and not one of a series of payments for purposes of Section 409A of the Code.

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Section 8.5 — Titles

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

Section 8.6 — Pronouns

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

Section 8.7 — Governing Law

     All questions arising in respect of the Plan, including those pertaining to its validity,
interpretation and administration, shall be governed, controlled and determined in accordance with
the applicable provisions of federal law and, to the extent not preempted by federal law, the laws
of the State of North Carolina.

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