Document:

<PAGE>

                                                                   Exhibit 10.17

                         DEFERRED COMPENSATION PLAN FOR
                                  DIRECTORS OF
                             REYNOLDS AMERICAN INC.
                            (EFFECTIVE JULY 30, 2004)

                                   ARTICLE I

      1.1 NAME AND PURPOSE. The name of this plan is the "Deferred Compensation
Plan for Directors of Reynolds American Inc." (the "Plan"). The Plan is an
amendment, restatement and continuation of the Deferred Compensation Plan for
Directors of R.J. Reynolds Tobacco Holdings, Inc. The purpose of this Plan is to
provide non-employee Directors of the Company with increased flexibility in
timing the receipt of board service fees and to assist the Company in attracting
and retaining qualified individuals to serve as Directors.

      1.2 DEFINITIONS. Whenever used in the Plan, the following terms shall have
the meaning set forth below:

      (a)   "Closing Price" means the closing price of the Company's Common
            Stock as reported in THE WALL STREET JOURNAL.

      (b)   "Common Stock" means the Common Stock, par value $0.0001 per share,
            of Reynolds American Inc.

      (c)   "Company" means Reynolds American Inc. and each Participating
            Company.

      (d)   "Compensation" means all remuneration paid to a Director for service
            as a Director other than reimbursement for expenses and shall
            include, but not be limited to, Board of Directors retainer fees,
            Board of Directors committee chairmanship and/or committee
            attendance fees, and any fees for attendance at Board of Directors
            meetings.

      (e)   "Director" means any individual serving on the Board of Directors of
            the Company who is not an employee of the Company or any of its
            subsidiaries.

      (f)   "Participant" means a Director who has filed an election to
            participate under Section 3.1 with regard to any Plan Year.

      (g)   "Participating Company" means any corporation which is a direct or
            indirect subsidiary of Reynolds American Inc., which has, by action
            of its board of directors, adopted the Plan and consented to being a
            Participating Company in the Plan.

      (h)   "Plan Administrator" means the Corporate Governance and Nominating
            Committee of the Board of Directors of the Company.

      (i)   "Plan Year" means the calendar year except the first Plan year is
            the period July 30, 2004 through December 31, 2004.

<PAGE>

                                   ARTICLE II

      2.1 PARTICIPATION IN THE PLAN. Any individual who is a Director as defined
in Section 1.2(e) may participate in the Plan.

                                  ARTICLE III

      3.1 ELECTION TO PARTICIPATE. Each Director may elect annually to have
payment of all or any increment of twenty-five percent (25%) of his or her
Compensation for that Plan Year deferred. An election to defer may provide that
the Compensation deferred will be paid in January of a specified year in the
future or in January following the end of the Plan Year during which the
Participant ceased to be a Director.

      No election to defer under this Plan may be made after December 31 of the
year preceding the Plan Year during which Compensation would otherwise be paid
or, if later, within thirty days after the date a Director becomes a Director.
An election to defer any Compensation shall be in writing and shall be delivered
to the Plan Administrator. An election to defer shall be irrevocable by the
Director and shall be effective only for the Plan Year immediately following the
date on which it was filed. In the absence of a written election to defer filed
by a Director with the Plan Administrator, any Compensation will be paid
directly to the Director.

      3.2 MODE OF DEFERRAL. Payment of a Participant's Compensation may be
deferred in twenty-five percent (25%) increments by means of a cash credit, a
stock credit or a combination of the two as the Participant shall elect in
writing at the same time as the election provided for in Section 3.1. If a
Participant fails to make an election as to mode of deferral, he or she shall be
deemed to have elected deferral by means of a cash credit. Cash credits and
stock credits shall be recorded in accounts established in Participants' names
on the books of the Company.

      (a)   CASH CREDITS. If the deferral is wholly or partly by means of a cash
            credit, the Participant's cash credit account shall be credited, as
            of the last day of the calendar quarter, with the dollar amount of
            Compensation deferred during the quarter by means of a cash credit.
            As of the last day of each calendar quarter, the Participant's cash
            credit account shall also be credited with interest equivalent in an
            amount determined by applying to the balance in the account as of
            the first day of the quarter (less any distributions during the
            quarter) an interest rate for such quarter which, when annualized,
            shall be the prime rate of Morgan Guaranty Trust Company of New York
            as of the first business day of the quarter. Interest shall be
            calculated on the actual number of days in the quarter based upon a
            360-day year.

      (b)   STOCK CREDITS. If the deferral is wholly or partly by means of a
            stock credit, the Participant's stock credit account shall be
            credited, as of the last day of the calendar quarter, with a Common
            Stock equivalent equal to the number of shares of Common Stock
            (including fractions of a share) that could have been purchased at
            the average of the Closing Price of Common Stock on each business
            day during the last month of the calendar quarter with the amount of
            the Compensation deferred during the quarter by means of a stock
            credit. As of the date any
<PAGE>

            dividend is paid to shareholders of Common Stock, the Participant's
            stock credit account shall also be credited with an additional
            Common Stock equivalent equal to the number of shares of Common
            Stock (including fractions of a share) that could have been
            purchased at the Closing Price of Common Stock on such date with the
            dividend paid on the number of shares of Common Stock to which the
            Participant's stock credit account is then equivalent. In case of
            dividends paid in property, the dividend shall be deemed to be the
            fair market value of the property at the time of distribution of the
            dividend, as determined by the Plan Administrator.

      (c)   A Participant may elect in writing that all or any designated
            portion of his stock credit account or his cash credit account be
            changed to, and such Participant shall instead be credited with, the
            other type of account as of the first day of the month following the
            month in which the election is received by the Plan Administrator.
            For this purpose, the value of a participant's stock credit account
            will be determined using the average of the Closing Price of Common
            Stock on each business day during the month preceding the effective
            date of the election. Notwithstanding the foregoing, any election to
            transfer between accounts may be made no more frequently than once
            in any six (6) month period and no such election may be made unless
            the transfer would be an exempt transaction for purposes of Section
            16(b) of the Securities Exchange Act of 1934.

      3.3 DISTRIBUTION OF CREDITS.

      (a)   Unless a Participant has elected to receive installment payments as
            provided below, payment of a Participant's accounts shall be made in
            one (1) lump sum as soon as practicable in the year in which the
            Participant had elected to receive payment.

            At the election of the Participant made in writing and delivered to
            the Plan Administrator at any time on or before December 1 of the
            year prior to the year in which the Participant had elected to
            receive payment, distribution of all of his or her account shall be
            made in any number of annual installments not exceeding (10) ten.
            Any such election, unless made irrevocable by its terms, may be
            changed by written notice to the Plan Administrator at any time
            prior to December 1 of the Plan Year prior to the year in which the
            Participant had elected to receive payment.

      (b)   Distribution of a Participant's cash credit and stock credit
            accounts shall be made in cash. For this purpose, the value of a
            Participant's stock credit account shall be determined by
            multiplying the number of shares of Common Stock attributable to the
            payment by the average of the Closing Price of Common Stock on each
            business day in the month of December immediately prior to the Plan
            Year in which the payment is to be paid.

      3.4 ADJUSTMENT. If at any time the number of outstanding shares of Common
Stock shall be changed or increased as the result of any stock dividend,
subdivision or

<PAGE>

reclassification of shares, the number of shares of Common Stock to which each
Participant's stock credit account is equivalent shall be changed or increased
in the same proportion as the outstanding number of shares of Common Stock is
changed or increased, or if the number of outstanding shares of Common Stock
shall at any time be decreased as the result of any combination or
reclassification of shares, the number of shares of Common Stock to which each
Participant's stock credit account is equivalent shall be decreased in the same
proportion as the outstanding number of shares of Common Stock is decreased. In
the event the Company shall at any time be consolidated with or merged into any
other corporation and holders of the Company's Common Stock receive common
shares of the resulting or surviving corporation, there shall be credited to
each Participant's stock credit account, in place of the shares then credited
thereto, a stock equivalent determined by multiplying the number of common
shares of stock given in exchange for a share of Common Stock upon such
consolidation or merger, by the number of shares of Common Stock to which the
Participant's account is then equivalent. If in such a consolidation or merger,
holders of the Company's Common Stock shall receive any consideration other than
common shares of the resulting or surviving corporation, the Plan Administrator,
in its sole discretion, shall determine the appropriate change in Participants'
accounts.

      3.5 INSTALLMENT AMOUNT. In the event a Participant has elected to receive
distribution of his or her accounts in more than one installment, the amount of
each installment shall be determined either (i) by multiplying the current
balance (denominated in cash units for the portion elected to be deferred as
cash credits and denominated in stock units for the portion elected to be
deferred in stock credits) in the accounts as determined under Section 3.2, by a
fraction, the numerator of which is one, and the denominator of which is the
number of installments yet to be paid or (ii) by any other method acceptable to
the Plan Administrator.

      3.6 DISTRIBUTION UPON DEATH. In the event of the death of a Participant,
whether before or after ceasing to serve as a Director, any cash credit account
and stock credit account to which he or she was entitled, shall be converted to
cash and distributed in one 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 Plan Administrator. A Participant
may from time to time revoke or change any such designation by written notice to
the Plan Administrator. If there is no unrevoked designation on file with the
Plan Administrator 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 3.6 shall be made as
soon as practicable following the end of the fiscal quarter in which the Plan
Administrator is notified of the Participant's death. In this case, a
Participant's stock credit account shall be converted to cash by multiplying the
number of whole and fractional shares of Common Stock to which the Participant's
stock credit account is equivalent by the average of the Closing Price of Common
Stock on each business day during the last month of the calendar quarter prior
to the date of death.

      3.7 WITHHOLDING TAXES. The Company shall deduct from all distributions
under the Plan any taxes required to be withheld by federal, state, or local
governments.

<PAGE>

                                   ARTICLE IV

      4.1 PLAN ADMINISTRATOR. The Plan Administrator shall have full power and
authority to administer the Plan including the power to promulgate forms to be
used with regard to the Plan, the power to promulgate rules of Plan
administration, the power to settle any disputes as to rights or benefits
arising from the Plan, and the power to make such decisions or take such action
as the Plan Administrator, in its sole discretion, deems necessary or advisable
to aid in the proper maintenance of the Plan.

                                   ARTICLE V

      5.1 FUNDING. No promise hereunder shall be secured by any specific assets
of the Company, nor shall any assets of the Company be designated as
attributable or allocated to the satisfaction of such promises. Nothing herein
creates a vested right. Cash credit and stock credit accounts are not funded and
are paid from the general assets of the Company from which the Participant
terminated service as a Director. Nothing herein shall be construed to require
the Company to maintain any fund or segregate any amount for the benefit of any
Participant and no Participant or other person shall have any claim against,
right to, or security or other interest in, any fund, account or asset of the
Company.

                                   ARTICLE VI

      6.1 NON-ALIENATION OF BENEFITS. No benefit under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to do so shall be void. No such benefit
shall, prior to receipt thereof by the Participant, be in any manner liable for
or subject to the debts, contracts, liabilities, engagements, or torts of the
Participant.

                                  ARTICLE VII

      7.1 DELEGATION OF ADMINISTRATIVE DUTIES. Administrative duties imposed by
this Plan may be delegated by the Plan Administrator or the individual charged
with such duties.

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

      7.3 AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Plan
Administrator at any time may terminate and in any respect, amend or modify the
Plan.<PAGE>

                                                                   Exhibit 10.18

                             REYNOLDS AMERICAN INC.
                            LONG-TERM INCENTIVE PLAN

                       Originally Effective June 14, 1999

1.          Purpose of Plan

      The Reynolds American Inc. Long-Term Incentive Plan (the "Plan") is an
amendment, restatement and continuation of the R.J. Reynolds Tobacco Holdings,
Inc. 1999 Long-Term Incentive Plan. The Plan became effective June 14, 1999 and
is designed:

      (a)         to promote the long-term financial interests and growth of
            Reynolds American Inc. and its Subsidiaries (collectively, the
            "Corporation") by attracting and retaining management personnel with
            the training, experience and ability to enable them to make a
            substantial contribution to the success of the Corporation's
            business;

      (b)         to motivate management personnel by means of growth-related
            incentives to achieve long range goals; and

      (c)         to further the identity of interests of Participants with
            those of the stockholders of Reynolds American through opportunities
            for increased stock, or stock-based, ownership in Reynolds American.

2.          Definitions

      As used in the Plan, the following words shall have the following
meanings:

      (a)         "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;

      (b)         "Base Value" means not less than the Fair Market Value on the
            date a Stock Appreciation Right is granted, or, in the case of a
            Stock Appreciation Right granted retroactively in tandem with (or in
            replacement of) an outstanding Option, not less than the exercise
            price of such Option;

      (c)         "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;

      (d)         "Board of Directors" means the Board of Directors of Reynolds
            American;

      (e)         "Code" means the Internal Revenue Code of 1986, as amended;

      (f)         "Committee" means the Compensation Committee of the Board of
            Directors;

<PAGE>

      (g)         "Common Stock" or "Share" means common stock, par value
            $0.0001 per share, of Reynolds American which may be authorized but
            unissued, or issued and reacquired;

      (h)         "Effective Date" shall have the meaning set forth in Section
            13;

      (i)         "Exchange Act" means the Securities Exchange Act of 1934, as
            amended;

      (j)         "Fair Market Value" means such value of a Share as reported
            for stock exchange transactions and/or determined in accordance with
            any applicable resolutions or regulations of the Committee in effect
            at the relevant time;

      (k)         "Grant Agreement" means an agreement between Reynolds American
            and a Participant that sets forth the terms, conditions and
            limitations applicable to a Grant;

      (l)         "Grant" means an award made to a Participant pursuant to the
            Plan and described in Section 5, including, without limitation, an
            award of an Incentive Stock Option, Other Stock Option, Stock
            Appreciation Right, Restricted Stock, Performance Units or
            Performance Shares or any combination of the foregoing;

      (m)         "Incentive Stock Options" shall have the meaning set forth in
            Section 5(a);

      (n)         "Other Stock Options" shall have the meaning set forth in
            Section 5(b);

      (o)         "Options" shall mean Incentive Stock Options and Other Stock
            Options;

      (p)         "Participant" means any employee, or other person having a
            unique relationship with Reynolds American or one of its
            Subsidiaries, to whom one or more Grants have been made and such
            Grants have not all been forfeited or terminated under the Plan;
            provided, however, a non-employee director of Reynolds American or
            one of its Subsidiaries may not be a Participant;

      (q)         "Performance Units" shall have the meaning set forth in
            Section 5(e);

      (r)         "Performance Shares" shall have the meaning set forth in
            Section 5(f);

      (s)         "Restricted Stock" shall have the meaning set forth in Section
            5(d);

      (t)         "Reynolds American" means Reynolds American Inc. and any
            successors thereto;

      (u)         "Stock Appreciation Rights" shall have the meaning set forth
            in Section 5(c); and

      (v)         "Subsidiary" means any corporation or other entity in which
            Reynolds American has a significant equity or other interest as
            determined by the Committee.

                                      -2-
<PAGE>

3.          Administration of Plan

      (a)         The Plan shall be administered by the Committee or, in lieu of
            the Committee, the Board of Directors. The Committee may adopt its
            own rules of procedure, and the action of a majority of the
            Committee, taken at a meeting or taken without a meeting by a
            writing signed by such majority, shall constitute action by the
            Committee. The Committee shall have the power and authority to
            administer, construe and interpret the Plan, to make rules for
            carrying it out and to make changes in such rules. Any such
            interpretations, rules and administration shall be consistent with
            the basic purposes of the Plan.

      (b)         The Committee may delegate its duties under the Plan to the
            Chief Executive Officer, to other senior officers of the
            Corporation, or to the Chairman of the Board of Directors, acting as
            a committee established by the Committee, subject to such conditions
            and limitations as the Committee shall prescribe; provided, however,
            that only the Committee may designate and make Grants to
            Participants who are subject to Section 16 of the Exchange Act.

      (c)         The Committee may employ attorneys, consultants, accountants,
            appraisers, brokers or other persons. The Committee, Reynolds
            American and the officers and directors of Reynolds American 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, Reynolds American 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 Reynolds American with respect
            to any such action, determination or interpretation.

4.          Eligibility

      The Committee may from time to time make Grants under the Plan to such
employees, or other persons having a unique relationship with Reynolds American
or any of its Subsidiaries, and in such form and having such terms, conditions
and limitations as the Committee may determine. No Grants may be made under this
Plan to non-employee directors of Reynolds American or any of its Subsidiaries.
Grants may be granted singly, in combination or in tandem. The terms, conditions
and limitations of each Grant under the Plan shall be set forth in a Grant
Agreement, in a form approved by the Committee, consistent, however, with the
terms of the Plan; provided, however, such Grant Agreement shall contain
provisions dealing with the treatment of Grants in the event of the termination,
death or disability of a Participant, and may also include provisions concerning
the treatment of Grants in the event of a change of control of Reynolds
American.

                                      -3-
<PAGE>

5.          Grants

      From time to time, the Committee will determine the forms and amounts of
Grants for Participants. Such Grants may take the following forms in the
Committee's sole discretion:

      (a)         Incentive Stock Options - These are stock options within the
            meaning of Section 422 of the Code to purchase Common Stock. In
            addition to other restrictions contained in the Plan, an option
            granted under this Section 5(a), (i) may not be exercised more than
            10 years after the date it is granted, (ii) may not have an option
            price less than the Fair Market Value of Common Stock on the date
            the option is granted, (iii) must otherwise comply with Code Section
            422, and (iv) must be designated as an "Incentive Stock Option" by
            the Committee. The maximum aggregate Fair Market Value of Common
            Stock (determined at the time of each Grant) with respect to which
            any Participant may first exercise Incentive Stock Options under
            this Plan and any Incentive Stock Options granted to the Participant
            for such year under any plans of Reynolds American or any Subsidiary
            in any calendar year is $100,000. Payment of the option price shall
            be made in cash or in shares of Common Stock, or a combination
            thereof, in accordance with the terms of the Plan, the Grant
            Agreement and any applicable guidelines of the Committee in effect
            at the time.

      (b)         Other Stock Options - These are options to purchase Common
            Stock which are not designated by the Committee as "Incentive Stock
            Options." At the time of the Grant, the Committee shall determine,
            and shall have contained in the Grant Agreement or other Plan rules,
            the option exercise period, the option price and such other
            conditions or restrictions on the grant or exercise of the option as
            the Committee deems appropriate. In addition to other restrictions
            contained in the Plan, an option granted under this Section 5(b),
            (i) may not be exercised more than fifteen (15) years after the date
            it is granted and (ii) may not have an option exercise price less
            than the Fair Market Value of Common Stock on the date the option is
            granted. Payment of the option price shall be made in cash or in
            shares of Common Stock, or a combination thereof, 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 in cash
            will be deemed satisfied if the Participant has made arrangements
            satisfactory to the Company with a duly registered broker-dealer
            that is a member of the National Association of Securities Dealers,
            Inc. to sell on the date of exercise a sufficient number of shares
            of Common Stock being purchased so that the net proceeds of the sale
            transaction will at least equal the full exercise price and pursuant
            to which the broker-dealer undertakes to deliver the full exercise
            price to the Company not later than the later of (A) the settlement
            date of the sale transaction and (B) the date on which the Company
            delivers to the broker-dealer the shares of Common Stock being
            purchased pursuant to the exercise of such option. This method is
            known as the "broker-dealer exercise method" and is subject to the
            terms and conditions set forth herein, in the Grant Agreement and in
            guidelines established by the Committee.

                                      -4-
<PAGE>

      (c)         Stock Appreciation Rights - These are rights that on exercise
            entitle the holder to receive the excess of (i) the Fair Market
            Value of a share of Common Stock on the date of exercise over (ii)
            the Base Value multiplied by (iii) the number of rights exercised in
            cash, stock or a combination thereof as determined by the Committee.
            Stock Appreciation Rights granted under the Plan may, but need not,
            be granted in conjunction with an Option under Sections 5(a) or
            5(b). The Committee, in the Grant Agreement or by other Plan rules,
            may impose such conditions or restrictions on the exercise of Stock
            Appreciation Rights as it deems appropriate, and may terminate,
            amend, or suspend such Stock Appreciation Rights at any time. No
            Stock Appreciation Right granted under this Plan may be exercised
            more than fifteen (15) years after the date it is granted.

      (d)         Restricted Stock - Restricted Stock is a Grant of Common Stock
            or stock units equivalent to Common Stock subject to such conditions
            and restrictions as the Committee shall determine. Any rights to
            dividends or dividend equivalents accruing due to a grant of
            Restricted Stock shall also be determined by the Committee. Grants
            of Restricted Stock shall be subject to a normal minimum vesting
            schedule of three (3) years. The number of shares of Restricted
            Stock and the restrictions or conditions on such shares, as the
            Committee may determine, shall be set forth in the Grant Agreement
            or by other Plan rules, and the certificate for the Restricted Stock
            shall bear evidence of the restrictions or conditions.

      (e)         Performance Units - These are rights, denominated in cash or
            cash units, to receive, at a specified future date, payment in cash
            or Common Stock of an amount equal to all or a portion of the value
            of a unit granted by the Committee. At the time of the Grant, in the
            Grant Agreement or by other Plan rules, the Committee must determine
            the base value of the unit, the performance factors applicable to
            the determination of the ultimate payment value of the unit as set
            forth in Section 7 and the period over which performance will be
            measured.

      (f)         Performance Shares - These are rights granted in the form of
            Common Stock or stock units equivalent to Common Stock to receive,
            at a specified future date, payment in cash or Common Stock, as
            determined by the Committee, of an amount equal to all or a portion
            of the Fair Market Value at which the Common Stock is traded on the
            last day of the specified performance period of a specified number
            of shares of Common Stock based on performance during the period. At
            the time of the Grant, the Committee, in the Grant Agreement or by
            Plan rules, will determine the factors which will govern the portion
            of the Grants so payable as set forth in Section 7 and the period
            over which performance will be measured.

6.          Limitations and Conditions

      (a)         The number of shares available for Grants under this Plan
            shall be eight (8) million shares of the authorized Common Stock as
            of the Effective Date. The maximum number of Shares subject to
            Grants of Options and Stock Appreciation Rights to any one
            Participant in any calendar year shall not exceed two (2) million
            shares for each type of Grant, plus any amount of shares that were
            available

                                      -5-
<PAGE>

            within this limit for such type of Grant for any prior year such
            limitation was in effect and which were not covered by Options or
            Stock Appreciation Rights granted to such Participant during such
            year. No more than three (3) million shares of Common Stock may be
            granted as Incentive Stock Options. The maximum payment that any one
            Participant may be paid in respect of any Grant of Performance Units
            granted for any specified performance period shall not exceed $10
            million. The maximum payment that any one Participant may receive in
            respect of any Grant of Performance Shares granted for any specified
            performance period shall not exceed 500,000 shares of Common Stock
            or the cash equivalent thereof. The aggregate maximum number of
            shares of Common Stock to which Restricted Stock granted may relate
            shall not exceed three (3) million shares. Shares related to Grants
            that are forfeited, terminated, cancelled, expire unexercised,
            settled in cash in lieu of stock, received in full or partial
            payment of any exercise price or in such manner that all or some of
            the Shares covered by a Grant are not issued to a Participant, shall
            immediately become available for Grants. A Grant may contain the
            right to receive dividends or dividend equivalent payments which may
            be paid either currently, credited to a Participant or deemed
            invested in shares or share units of Common Stock. Any such
            crediting of dividends or dividend equivalents or reinvestment in
            Shares may be subject to such conditions, restrictions and
            contingencies as the Committee shall establish, including the
            reinvestment of such credited amounts in Common Stock equivalents.
            Subject to the overall limitation on the number of shares of Common
            Stock that may be delivered under this Plan, the Committee may use
            available shares of Common Stock as the form of payment for
            compensation, grants or rights earned or due under any other
            compensation plans or arrangements of Reynolds American, including
            the plan of any entity acquired by Reynolds American.

      (b)         At the time a Grant is made or amended or the terms or
            conditions of a Grant are changed, the Committee may provide for
            limitations or conditions on such Grant. Reynolds American may adopt
            other compensation programs, plans or arrangements as it deems
            appropriate.

      (c)         Nothing contained herein shall affect the right of the
            Corporation to terminate any Participant's employment at any time or
            for any reason.

      (d)         Deferrals of Grant payouts may be provided for, at the sole
            discretion of the Committee, in the Grant Agreements.

      (e)         No benefit under the Plan shall, prior to receipt thereof by
            the Participant, be in any manner liable for or subject to the
            debts, contracts, liabilities, engagements, or torts of the
            Participant.

      (f)         Except to the extent otherwise provided in any other
            retirement or benefit plan, any Grant under this Plan shall not be
            deemed compensation for purposes of computing benefits or
            contributions under any retirement plan of Reynolds American or its
            Subsidiaries and shall not affect any benefits under any other

                                      -6-
<PAGE>

            benefit plan of any kind or subsequently in effect under which the
            availability or amount of benefits is related to level of
            compensation.

            This Plan is not a "Retirement Plan" or "Welfare Plan" under the
            Employee Retirement Income Security Act of 1974, as amended. This
            Plan shall be unfunded and shall not create (or be construed to
            create) a trust or a separate fund or funds. The Plan shall not
            establish any fiduciary relationship between Reynolds American and
            any Participant or beneficiary of a Participant. To the extent any
            person holds any obligation of Reynolds American by virtue of an
            award granted under this Plan, such obligation shall merely
            constitute a general unsecured liability of Reynolds American and
            accordingly shall not confer upon such person any right, title or
            interest in any assets of Reynolds American.

      (g)         Unless the Committee determines otherwise, no benefit or
            promise under the Plan shall be secured by any specific assets of
            Reynolds American or any of its Subsidiaries, nor shall any assets
            of Reynolds American or any of its Subsidiaries be designated as
            attributable or allocated to the satisfaction of Reynolds American's
            obligations under the Plan.

7.          Performance Factors

      The performance factors selected by the Committee in respect of
Performance Units and Performance Shares shall be based on any one or more of
the following: price of Common Stock or the stock of any affiliate, shareholder
return, return on equity, return on investment, return on capital, return on
invested capital, economic profit, economic value added, net income, cash net
income, free cash flow, earnings per share, cash earnings per share, operating
company contribution or market share. These factors shall have a minimum
performance standard below which no amount will be paid and may have a maximum
performance standard above which no additional payments will be made. The
applicable performance period shall not exceed 10 years.

8.          Adjustments

      (a)         In the event of any stock split, spin-off, stock dividend,
            extraordinary cash dividend, stock combination or reclassification,
            recapitalization or merger, change in control, or similar event, the
            Committee may adjust appropriately the number or kind of shares
            subject to the Plan and available for or covered by Grants, share
            prices related to outstanding Grants and the other applicable
            limitations of Section 6(a), and make such other revisions to
            outstanding Grants and the Plan as it deems are equitably required.

      (b)         In the event of a Change of Control, except as otherwise set
            forth in the terms of a Grant:

            (i)         Options granted pursuant to Sections 5(a) or 5(b) hereof
                  shall become fully vested and exercisable; provided, however,
                  that the Committee may make a cash payment to Participants (A)
                  in cancellation of such Options as provided in the applicable
                  Grant Agreements or any amendments or deemed amendments
                  thereto entered into by Reynolds

                                      -7-
<PAGE>

                  American and the Participant in such amount as shall be
                  provided in such Grant Agreements or amendments or (B) in lieu
                  of the delivery of shares upon exercise, equal to the product
                  of (x) and (y), where (x) is the excess of the Fair Market
                  Value on the date of exercise over the exercise price, and (y)
                  is the number of Shares subject to the Options being
                  exercised;

            (ii)        Stock Appreciation Rights shall become fully vested and
                  exercisable;

            (iii)       Restricted Stock shall have all restrictions removed;

            (iv)        Performance Units whose performance period ends after
                  the date of the Change of Control shall become vested as to a
                  percentage of Performance Units granted equal to the number of
                  months (including partial months) in the performance period
                  before the date of the Change of Control, divided by the total
                  number of months in the performance period. The value of the
                  Performance Units shall be equal to the greater of the target
                  value of the Performance Units or the value derived from the
                  actual performance as of the date of the Change of Control;

            (v)         Performance Shares whose performance period ends after
                  the date of the Change of Control shall become vested pro rata
                  as to the number of Performance Shares granted equal to the
                  number of months (including partial months) in the performance
                  period before the date of Change of Control, divided by the
                  total number of months in the performance period. The prorated
                  number of Performance Shares derived from the preceding
                  calculation shall be further adjusted by applying the higher
                  of target or actual performance to the date of Change of
                  Control; and

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

      (c)         For purposes of the Plan, a "Change of Control" shall mean the
            first to occur of the following events:

            (i)         an individual, corporation, partnership, group,
                  associate or other entity or "person", as such term is defined
                  in Section 14(d) of the Exchange Act, other than any employee
                  benefit plans sponsored by Reynolds American, 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 Reynolds American's
                  outstanding securities ordinarily having the right to vote at
                  elections of directors; provided, however, that the
                  acquisition of Reynolds

                                       -8-
<PAGE>

                  American securities by BAT pursuant to the Business
                  Combination Agreement, dated as of October 27, 2003, between
                  R.J. Reynolds Tobacco Holdings, Inc. ("RJR") and Brown &
                  Williamson Tobacco Corporation ("B&W"), as thereafter amended
                  (the "BCA") or as expressly permitted by the Governance
                  Agreement, dated as of July 30, 2004, among British American
                  Tobacco, p.l.c., B&W and Reynolds American (the "Governance
                  Agreement"), shall not be considered a Change of Control for
                  purposes of this subsection (i);

            (ii)        individuals who constitute the Board of Directors (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 Reynolds American's stockholders, was (1) approved
                  by a vote of at least three-quarters of the directors
                  comprising the Incumbent Board (either by a specific vote or
                  by approval of the proxy statement of Reynolds American in
                  which such person is named as a nominee of Reynolds American
                  for director) or (2) 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 Reynolds American's
                  Board, shall be, for purposes of this paragraph (ii),
                  considered as though such person were a member of the
                  Incumbent Board; and

            (iii)       the approval by the stockholders of Reynolds American of
                  a plan or agreement providing (A) for a merger or
                  consolidation of Reynolds American other than with a wholly
                  owned Subsidiary and other than a merger or consolidation that
                  would result in the voting securities of Reynolds American
                  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 Reynolds American 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 Reynolds American, other
                  than any such transaction where the transferee of all or
                  substantially all of the assets of Reynolds American 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 Reynolds American
                  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,

                                      -9-
<PAGE>

                  Reynolds American's Board shall determine the effective date
                  of the Change of Control resulting therefrom for purposes of
                  this Plan and the Grants hereunder.

9.          Amendment and Termination

      Except as otherwise required by law or as provided under the New York
Stock Exchange Rules, the Committee shall have the authority to make such
amendments to any terms and conditions applicable to outstanding Grants as are
consistent with this Plan, provided that, except for adjustments under Paragraph
8(a) hereof, no such action shall modify such Grant in a manner adverse to the
Participant without the Participant's consent except as such modification is
provided for or contemplated in the terms of the Grant. Except as provided in
Section 8(a), the exercise price of any outstanding Option or Stock Appreciation
Right may not be adjusted or amended, whether through amendment, cancellation or
replacement, unless such adjustment or amendment is properly approved by
Reynolds American's shareholders. Likewise, the share and payment limitations
set forth in Section 6(a) cannot be increased, and the minimum Option or Stock
Appreciation Right grant price limitations set forth in Sections 5(a), 5(b) and
5(c) cannot be reduced, in either case without proper stockholder approval.
Subject to the foregoing and except as otherwise required by law or as provided
in the New York Stock Exchange Rules, the Company's Board of Directors may
amend, suspend or terminate this Plan as it deems necessary and appropriate to
better achieve the Plan's purpose.

10.         Foreign Options and Rights

      (a)         The Committee may make Grants to employees who are subject to
            the tax laws of nations other than the United States, which Grants
            may have terms and conditions that differ from the terms thereof as
            provided elsewhere in the Plan for the purpose of complying with the
            foreign tax laws. Grants of stock options may have terms and
            conditions that differ from Incentive Stock Options and Other Stock
            Options for the purpose of complying with the foreign tax laws.

      (b)         The terms and conditions of stock options granted under
            Section 10(a) may differ from the terms and conditions which the
            Plan would require to be imposed upon Incentive Stock Options and
            Other Stock Options if the Committee determines that the Grants are
            desirable to promote the purposes of the Plan.

11.         Withholding Taxes

      The Corporation shall have the right to deduct from any payment or
settlement made under the Plan any federal, state or local income or other taxes
required by law to be withheld with respect to such payment.

12.         Distribution upon Death

      In the event of the death of a Participant, any distribution to which such
Participant is entitled under the Plan shall be made to the beneficiary
designated by the Participant to receive the proceeds of any noncontributory
group life insurance coverage provided for the Participant by the Corporation
("Group Life Insurance Coverage"). If the Participant has not designated

                                      -10-
<PAGE>

such beneficiary, or desires to designate a different beneficiary, the
Participant may file with the Corporation a written designation of a beneficiary
under the Plan, which designation may be changed or revoked only by the
Participant, in writing. If no designation of beneficiary has been made by a
Participant under the Group Life Insurance Coverage or filed with the
Corporation under the Plan, distribution upon such Participant's death shall be
made in accordance with the provisions of the Group Life Insurance Coverage. If
a Participant is no longer an employee of the Corporation at the time of death,
no longer has any Group Life Insurance Coverage and has not filed a designation
of beneficiary with the Corporation under the Plan, distribution upon such
Participant's death shall be made to the Participant's estate.

13.         Effective Date and Termination Dates

      The Plan was adopted by Reynolds American on July 30, 2004. The Plan
became effective on and as of June 14, 1999, and shall terminate ten (10) years
later, subject to earlier termination by the Board of Directors pursuant to
Section 9. The terms of Grants made on or before the expiration of the Plan
shall extend beyond such expiration. Grants made under the Plan prior to the
Effective Date shall be governed by the terms of the Plan as in effect on the
date such Grant was made.

14.         Governing Law

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

                                      -11-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00073-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00073-of-00352.parquet"}]]