Document:

exv4w6

Exhibit 4.6

PUERTO RICO SAVINGS & INVESTMENT PLAN

Restated Effective as of October 1, 2009

Effective July 1, 1989

First Restatement Effective October 1, 1996

Second Restatement Effective December 31, 2002

Third Restatement Effective July 30, 2004

Fourth Restatement Effective January 1, 2008

Fifth Restatement Effective October 1, 2009

 

 

PUERTO RICO SAVINGS & INVESTMENT PLAN

Index

Page

	 	 	 	 	 
	INTRODUCTION
	 	 	5	 
	 
	 	 	 	 
	ARTICLE 1 — DEFINITIONS
	 	 	7	 
	 
	 	 	 	 
	ARTICLE 2 — PARTICIPATION
	 	 	13	 
	 
	 	 	 	 
	2.01 Eligibility
	 	 	13	 
	2.02 Participation
	 	 	13	 
	2.03 Participant Status
	 	 	14	 
	2.04 Reemployment
	 	 	14	 
	 
	 	 	 	 
	ARTICLE 3 — CONTRIBUTIONS
	 	 	15	 
	 
	 	 	 	 
	3.01 Basic Contribution
	 	 	15	 
	3.02 Supplemental Contributions
	 	 	15	 
	3.03 Pre-Tax Contributions
	 	 	15	 
	3.04 Change in Basic and Supplemental Contributions
	 	 	15	 
	3.05 Suspension of Basic and Supplemental Contributions
	 	 	16	 
	3.06 Company Contributions
	 	 	16	 
	3.07 Rollover Contributions
	 	 	19	 
	3.08 PR Code Section 1165(e) Nondiscrimination Tests
	 	 	19	 
	3.09 Dollar Limitation on Pre-Tax Contributions
	 	 	24	 
	3.10 Crediting of Contributions
	 	 	24	 
	3.11 Miscellaneous
	 	 	25	 
	 
	 	 	 	 
	ARTICLE 4 — TRUST FUND AND INVESTMENT FUNDS
	 	 	26	 
	 
	 	 	 	 
	4.01 The Trust Agreement
	 	 	26	 
	4.02 The Trustee
	 	 	26	 
	4.03 Separate Funds
	 	 	26	 
	4.04 Investment Funds
	 	 	26	 
	4.05 Temporary Investment
	 	 	27	 
	4.06 Investment of Participant Contributions
	 	 	27	 
	4.07 Investment of Company Contributions
	 	 	27	 
	4.08 Investment Managers
	 	 	27	 
	4.09 Participant Responsibility For Selection of Funds
	 	 	28	 
	4.10 Voting by Participants
	 	 	28	 
	4.11 Changes in Investment Funds or Elections, Conversions
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 5 — ACCOUNT STATEMENTS AND VALUATION
	 	 	30	 

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	5.01 Valuation of Accounts
	 	 	30	 
	5.02 Valuation Upon Transfer, Withdrawal, or Distribution
	 	 	30	 
	5.03 Statement of Accounts
	 	 	30	 
	 
	 	 	 	 
	ARTICLE 6 — VESTING OF CONTRIBUTIONS
	 	 	31	 
	 
	 	 	 	 
	6.01 Vesting of Basic and Supplemental Contributions
	 	 	31	 
	6.02 Vesting of Company Contributions
	 	 	31	 
	6.03 Vesting of Rollover Contributions
	 	 	31	 
	6.04 Forfeiture on Termination of Employment
	 	 	31	 
	6.05 Disposition of Forfeitures
	 	 	31	 
	6.06 Restoration of Forfeitures
	 	 	31	 
	 
	 	 	 	 
	ARTICLE 7 — DISTRIBUTIONS
	 	 	32	 
	 
	 	 	 	 
	7.01 Distribution of Benefits
	 	 	32	 
	7.02 Installment Option
	 	 	33	 
	7.03 Proof of Death and Right of Beneficiary
	 	 	33	 
	7.04 Completion of Appropriate Forms and Procedures
	 	 	34	 
	7.05 Investment Pending Distribution
	 	 	34	 
	7.06 Direct Rollovers
	 	 	34	 
	 
	 	 	 	 
	ARTICLE 8 — WITHDRAWAL PRIOR TO TERMINATION OF EMPLOYMENT
AND SPECIAL PRE-TAX CONTRIBUTION RULES
	 	 	35	 
	 
	 	 	 	 
	8.01 Election to Withdraw from Accounts
	 	 	35	 
	8.02 Order of Withdrawal from Accounts
	 	 	35	 
	8.03 Rules Applicable to Withdrawals Prior to Termination of Employment
	 	 	36	 
	8.04 Hardship Withdrawals
	 	 	37	 
	8.05 Restrictions on Pre-Tax Contribution Distributions
	 	 	37	 
	8.06 Loan Provisions
	 	 	38	 
	 
	 	 	 	 
	ARTICLE 9 — ADMINISTRATION OF THE PLAN
	 	 	40	 
	 
	 	 	 	 
	9.01 Employee Benefits Committee
	 	 	40	 
	9.02 Benefits Administration Committee
	 	 	41	 
	9.03 Pension Investment Committee
	 	 	41	 
	9.04 Indemnification by Company
	 	 	42	 
	9.05 Plan Expenses
	 	 	42	 
	9.06 Named Fiduciaries
	 	 	42	 
	9.07 Delegation
	 	 	42	 
	9.08 Multiple Capacities
	 	 	43	 
	 
	 	 	 	 
	ARTICLE 10 — AMENDMENTS, TERMINATION, PERMANENT DISCONTINUANCE
OF CONTRIBUTIONS, MERGER OR CONSOLIDATION
	 	 	44	 

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	10.01 Amendment of the Plan
	 	 	44	 
	10.02 Termination or Permanent Discontinuance of Contributions
	 	 	44	 
	10.03 Partial Termination
	 	 	44	 
	10.04 Benefits in Case of Merger or Consolidation
	 	 	44	 
	 
	 	 	 	 
	ARTICLE 11 — MISCELLANEOUS
	 	 	46	 
	 
	 	 	 	 
	11.01 Benefits Payable from Trust Fund
	 	 	46	 
	11.02 Elections
	 	 	46	 
	11.03 No Right to Continued Employment
	 	 	46	 
	11.04 Inalienability of Benefits and Interests
	 	 	46	 
	11.05 Qualified Domestic Relations Orders
	 	 	47	 
	11.06 Payments for Exclusive Benefit of Participants
	 	 	47	 
	11.07 Puerto Rico Law to Govern
	 	 	47	 
	11.08 No Guarantee
	 	 	47	 
	11.09 Address of Record
	 	 	47	 
	11.10 Unlocated Spouse
	 	 	47	 
	11.11 Plan Administrator
	 	 	47	 
	11.12 Agent for Process
	 	 	48	 
	11.13 Payments in the Event of Incompetency
	 	 	48	 
	11.14 Transfer of Prior Plan and Affiliated Plan Assets and Liabilities to
This Plan
	 	 	48	 
	11.15 Payment of Expenses
	 	 	49	 
	11.16 Headings
	 	 	49	 
	 
	 	 	 	 
	ARTICLE 12 — CLAIM PROCEDURE.
	 	 	50	 
	 
	 	 	 	 
	12.01 Initial Determination
	 	 	50	 
	12.02 Review
	 	 	50	 
	 
	 	 	 	 
	Schedule A — Compensation
	 	 	52	 
	Schedule B — Participating Companies
	 	 	53	 

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PUERTO RICO SAVINGS & INVESTMENT PLAN

INTRODUCTION

The Puerto Rico Savings & Investment Plan (the “Plan”) provides a means for full-time hourly and
salaried employees to save money through payroll deduction and to increase their savings with a
matching Company Contribution of 50% of the first 6% of Compensation contributed. The Plan
initially only permitted contributions to be made to the Plan on an after-tax basis; however,
effective January 1, 1992, a salary deferral arrangement was authorized.

The Plan allows Participants the flexibility to choose to invest their contributions among a
variety of Investment Funds. Company Contributions follow the investment decisions a Participant
makes with regard to his own contributions.

This Plan is a continuation of the RJR Employees’ Savings and Investment Plan (the “Predecessor
Plan”) for those salaried employees who were participants in that plan on June 30, 1989 and all
accounts held under the Predecessor Plan were transferred to this Plan. The installment payment
option offered under the Predecessor Plan for participants in that plan as of September 30, 1988,
shall be retained for such participants who transfer to this Plan. Effective as of April 1, 2002,
eligible employees of R. J. Reynolds Tobacco (CI), Co. were added as a participating unit in the
Plan. Effective as of August 1, 2002, the sponsorship of the Plan was transferred from R. J.
Reynolds Tobacco Co. to MSSH, Inc. (n/k/a R.J. Reynolds Global Products, Inc.), each of which is a
member of the R.J. Reynolds Tobacco Holdings, Inc. controlled group of corporations and the name of
the Plan was changed to the Savings & Investment Plan for Employees of R. J. Reynolds Tobacco in
Puerto Rico. Prior to August 1, 2002, the name of the Plan was the Savings and Investment Plan for
Employees of R. J. Reynolds Tobacco Company in Puerto Rico.

The Plan was restated effective October 1, 1996, and was again restated, effective December 31,
2002, to reflect Plan changes and amendments made since the 1996 restatement. The Plan was further
amended effective January 1, 2004 to change the matching contribution for Employees hired or
rehired on or after that date.

The Plan was amended and restated effective as of July 30, 2004 (the “Closing”), to incorporate
prior amendments and to reflect the transactions contemplated by the Business Combination Agreement
between Brown & Williamson Tobacco Corporation and R.J. Reynolds Tobacco Holdings, Inc. (“RJRTH”).
Pursuant to the Business Combination Agreement, RJRTH and Brown & Williamson Tobacco Corporation
agreed to form a new corporation, Reynolds American Inc. (“RAI”). In connection with the Closing
and to simplify the administration of the Plan, effective as of the Closing, R.J. Reynolds Global
Products, Inc. transferred sponsorship of the Plan to RAI.

The Plan was restated effective as of January 1, 2008 to reflect Plan changes and amendments made
since the 2004 restatement.

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Effective as of October 1, 2009, the Plan, is restated as set forth herein to reflect Plan changes
and amendments made since the 2008 restatement, including the change in the name of the Plan to the
Puerto Rico Savings & Investment Plan. The Plan, as restated, is a profit sharing plan that is
intended to be qualified under Section 1165(a) of the Puerto Rico Internal Revenue Code of 1994, as
amended.

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ARTICLE 1

DEFINITIONS

	1.01	 	Account means, with respect to any Participant, his After-Tax Contribution Account,
his Pre-Tax Contribution Account, and his Company Contribution Account. Some Participants may
also have Rollover Contribution Accounts.

	1.02	 	Affiliated Company means RAI and any corporation which is a member of a controlled
group of corporations (as defined in Section 210(c) of ERISA) which includes RAI; and any
trade or business (whether or not incorporated) which is under common control (as defined in
Section 210(d) of ERISA) with RAI.

	1.03	 	Affiliated Plan means a defined contribution plan sponsored by an Affiliated Company
if such plan has been designated by the Committee as an Affiliated Plan.

	1.04	 	After-Tax Contributions means the contributions which a Participant elects to make to
the Plan in accordance with Section 3.03.

	1.05	 	After-Tax Contribution Account means that portion of the Trust Fund which, with
respect to any Participant, is attributable to his own Supplemental After-Tax Contributions,
and any investment earnings and gains or losses thereon.

	1.06	 	Automatic Enrollment Date means, for each Eligible Employee, a date determined by the
Committee, which date is as soon as practicable following the date the Eligible Employee first
becomes eligible to participate in the Plan in accordance with Section 2.01(c).

	1.07	 	Basic Contributions means the contributions which a Participant elects to make to the
Plan in accordance with Section 3.01.

	1.08	 	Beneficiary means the beneficiary designated by the Participant under RAI’s or the
Company’s group term life insurance plan, unless the Participant has designated any other
person or persons (who may be designated contingently or successively and which may be an
entity other than a natural person), on a form supplied by the Committee, to receive benefits
payable in the event of the death of the Participant; provided, however, that if the
Participant is married at the date of his death, the Beneficiary shall be the Participant’s
surviving Spouse, and any such Beneficiary designation that names a Beneficiary other than his
Spouse exclusively shall be void unless it has been consented thereto in writing by the
Participant’s Spouse and such consent was witnessed by a notary public on a form supplied by
the Committee. The Spouse’s consent must designate the alternative Beneficiary and/or form of
benefit, must acknowledge the effect of such consent, and cannot be changed without subsequent
spousal consent. The Participant may, however, revoke the alternative Beneficiary at any time,
thereby reinstating his Spouse as sole Beneficiary. In the event of the Participant’s death
without an effective Beneficiary designation, any Plan

7

 

	 	 	 	benefits payable shall be paid in equal parts to the Participant’s surviving children or, if
the Participant has no surviving children, to the Participant’s surviving parents or, if the
Participant has no surviving parents, to the Participant’s surviving siblings or, if the
Participant has no surviving siblings, to the Participant’s estate. Section 8.06(d) shall be
referred to in the event of the death of a Participant with an outstanding loan balance.
Section 11.13 should be referred to for payment in the event of incompetency of a survivor.
Sections 7.01(f) and 11.05 should be referred to in the event of a Qualified Domestic
Relations Order. Notwithstanding the foregoing, any Beneficiary, prior to accepting any
benefit under the Plan, may disclaim his designation as Beneficiary under the Plan, by
executing and delivering to the Benefits Administration Committee an irrevocable waiver in
the form and manner prescribed by the Benefits Administration Committee, at any time. In
the event a Beneficiary so disclaims his interest hereunder, Plan benefits will be paid as
if the Participant died without an effective Beneficiary designation.

	1.09	 	Benefits Administration Committee means the Benefits Administration Committee
appointed by the Committee pursuant to Section 9.02 to carry out the day-to-day
responsibilities of the Plan administration.

	1.10	 	Board of Directors means the Board of Directors of Reynolds American Inc. and any
committee authorized by such Board or a committee thereof to act in its behalf with reference
to the Plan.

	1.11	 	Break in Service occurs at the end of any twelve consecutive-month period beginning
on a Severance Date during which an Employee does not complete an hour of Service.

	1.12	 	Committee means for the period from July 30, 2004 through August 17, 2004, the RJR
Employee Benefits Committee, and thereafter means the RAI Employee Benefits Committee, which
shall act as the Plan Administrator for the Plan. The Committee shall have the duties and
powers described in Article 9.

	1.13	 	Company means any Participating Company, as provided in Schedule B, with respect to
its Eligible Employees.

	1.14	 	Company Contributions means the contributions made by the Company for the Plan Year
pursuant to Section 3.06 and allocated to a Participant’s Company Contributions Account.

	1.15	 	Company Contribution Account means that portion of the Trust Fund which, with respect
to any Participant, is attributable to any contributions made in his behalf by the Company,
and any investment earnings and gains or losses thereon.

	1.16	 	Compensation means, with respect to any Plan Year, the basic compensation paid for
services performed for the Company or an Affiliated Company which is currently includable in
gross income under the PR Code and such other forms of compensation as are listed in Schedule
A hereto for the calendar year beginning in such Plan Year.

8

 

	 	 	 	Schedule A shall be revised as the Committee from time to time modifies the forms of
compensation which are to be included. Only compensation received by the Participant while
an Eligible Employee shall be taken into account for Plan purposes.

	1.17	 	Disability means being disabled as determined by the Federal Social Security
Administration.

	1.18	 	Effective Date of this restatement means October 1, 2009. The original effective date
of the Plan is July 1, 1989.

	1.19	 	Eligible Employee means any Employee of the Company who is not covered under any
other defined contribution plan sponsored by RAI; provided, that except as the Board of
Directors or the Committee may otherwise provide on a basis uniformly applicable to all
persons similarly situated, no person shall be an “Eligible Employee” for purposes of the
Plan:

	 	(a)	 	who is excepted by the Board of Directors or the Committee,
	 
	 	(b)	 	whose terms and conditions of employment are determined by a collective
bargaining agreement with the Company, if employee retirement benefits were negotiated
thereunder, which does not make this Plan applicable to him,
	 
	 	(c)	 	who is not an Employee of the Company and who has performed services for the
Company on a substantially full time basis pursuant to an agreement between the Company
and other organization, or
	 
	 	(d)	 	who is a nonresident alien of Puerto Rico and who receive no earned income from
the Company from sources within Puerto Rico.

	1.20	 	Employee means any person employed by the Company or an Affiliated Company.

	1.21	 	Entry Date means any business day.

	1.22	 	ERISA means the Employee Retirement Income Security Act of 1974, and as may be
amended.

	1.23	 	Investment Fund(s) means the separate funds or trusts in which After-Tax, Pre-Tax,
and Company Contributions to the Plan are invested in accordance with Article 4.

	1.24	 	Manufacturing Employee means any person who was classified by the Company as an
Employee in its manufacturing division.

	1.25	 	Normal Retirement Age means normal retirement of a Participant at or after age 65.

	1.26	 	Participant means any person participating in the Plan as provided in Article 2.
Except for purposes of Sections 2.01, 2.02 and 6.02 (ii) and Article 3, an Eligible Employee
who has

9

 

	 	 	 	made a rollover or transfer to the Plan which meets the requirements of Section 3.07 or
11.14 and for whom a Rollover Contribution Account or Plan Account is maintained shall be
treated as a Participant and such Eligible Employee shall become a Participant for all
purposes after meeting the requirements of Sections 2.01 and 2.02.

	1.27	 	Participating Company means any company listed on Schedule B.

	1.28	 	Pension Investment Committee means for the period from July 30, 2004 through August
17, 2004, the RJR Pension Investment Committee, and thereafter means the RAI Pension
Investment Committee.

	1.29	 	Plan means the Puerto Rico Savings & Investment Plan, as described herein or as
hereafter amended. Prior to October 1, 2009, the Plan was known as the Savings and Investment
Plan for Employees of R. J. Reynolds Tobacco in Puerto Rico.

	1.30	 	Plan Year means the calendar year. Prior to January 1, 2003, the Plan Year was the
period from each December 31 through the following December 30, except that the initial Plan
year was July 1, 1989-December 30, 1989. December 31, 2002 was a one-day Plan Year.

	1.31	 	PR Code means the Puerto Rico Internal Revenue Code of 1994, as amended from time to
time. Reference to any section or subsection of the PR Code includes reference to any
comparable or succeeding provisions of any legislation which amends, supplements or replaces
such section or subsection.

	1.32	 	Predecessor Plan means the RJR Employees’ Savings and Investment Plan which was
succeeded in part by this Plan with respect to salaried employees of the Company.

	1.33	 	Pre-Tax Contributions means the Participant’s Basic Contributions and Supplemental
Pre-Tax Contributions made in accordance with Sections 3.01 and 3.02.

	1.34	 	Pre-Tax Contribution Account means that portion of the Trust Fund which, with respect
to any Participant, is attributable to his own Pre-Tax Contributions, and any investment
earnings and gains or losses thereon.

	1.35	 	RAI means Reynolds American Inc., the sponsor of the Plan effective as of July 30,
2004.

	1.36	 	Retirement means normal retirement of a Participant who has attained age 65, or the
early retirement of a Participant who has attained age 55 and who has completed either 2 years
of participation in the Plan or 5 years of Service.

	1.37	 	Rollover Contributions mean amounts a Participant contributes from another employee
benefit plan qualified under PR Code Section 1165(a) pursuant to Section 3.07.

10

 

	1.38	 	Rollover Contribution Account means that portion of the Trust Fund which, with
respect to any Eligible Employee, is attributable to his Rollover Contributions, and any
investment earnings or losses thereon.
	 
	1.39	 	Service means all periods during which an Employee is employed by the Company or any
Affiliated Company commencing with the first day of employment or the first day of
reemployment and ending with his Severance Date which next follows the first day of employment
or the first day of reemployment, as the case may be. The first day of employment or the
first day of reemployment shall be deemed to be the first day in which the Employee performs
an “Hour of Service” (as defined in U.S. Department of Labor Reg. Section 2530.200b-2) as an
Employee. Periods of Service commencing on the first day of employment and ending on the first
Severance Date and commencing on each reemployment date and ending on the Severance Date which
next follows shall be aggregated on a day by day basis and 365 days of aggregated Service
shall constitute one year of Service. Service shall include any period of authorized part-time
employment, periods of authorized leave of absence up to a maximum of one year, periods of
absence due to qualified military service as required by USERRA, periods of absence due to
unpaid leave taken pursuant to the Family and Medical Leave Act of 1993 or similar state laws
(to the extent required by such state laws, but only to the extent such leave is not otherwise
credited under this Section 1.38), and periods of absence due to illness or disability up to a
maximum of 12-consecutive months.
	 
	1.40	 	Severance Date means the following:

	 	(a)	 	the date on which an Employee quits, retires, is discharged, dies or terminates
employment following a period of salary and benefit continuation; or
	 
	 	(b)	 	the first anniversary of the first date of a period in which an Employee
remains absent from Service (with or without pay) with the Company or an Affiliated
Company for any reason other than quit, retirement, discharge, or death; provided,
however, the absence from Service of an Employee receiving benefits under one or more
long-term disability plans of the Company or an Affiliated Company is not a severance
until the earlier of Normal Retirement Age, the cessation of such disability payments
or two consecutive years on long-term disability; provided further that if such an
Employee in active employment after his Normal Retirement Age becomes disabled, his
Severance Date is the date such long-term disability plan benefits commence or would
commence.
	 
	 	 	 	In the case of an Employee who is absent from work by virtue of (i) the Employee’s
pregnancy, (ii) birth of the Employee’s child, (iii) placement of a child with the
Employee by adoption, or (iv) caring for any such child for a period of up to a year
immediately following such birth or placement, the Severance Date is the second
anniversary of the first day of absence from Service provided that the period
between the first and second anniversary of such first day of absence is neither
counted as Service nor a Break in Service.

11

 

	1.41	 	Spouse means the Participant’s spouse, as defined under the federal Defense of
Marriage Act, at the time of the Participant’s death and to whom the benefits under the Plan
shall be payable in the event of the Participant’s death unless a valid Beneficiary
designation and consent thereto by the Participant’s spouse has been made and received by the
Committee, or unless such benefits are subject to a qualified domestic relations order as
defined in Section 206(d)(3) of ERISA.
	 
	1.42	 	Supplemental Contributions means the contributions which a Participant elects to have
the Company make directly to the Plan on behalf of the Participant in accordance with Sections
3.02 and 3.03, and which are not eligible for Company Matching Contributions.
	 
	1.43	 	Termination of Employment means separation from the employment of the Company or an
Affiliated Company for any reason, including, but not limited to, Retirement, death,
Disability, resignation or dismissal by the Company; provided, however, that transfer in
employment between the Company and an Affiliated Company shall not be deemed to be a
“Termination of Employment” and provided further, that if an Employee is rehired by the
Company or an Affiliated Company within 30 days of his separation from the employment of the
Company or an Affiliated Company, such separation shall not be considered to be a “Termination
of Employment”.
	 
	1.44	 	Trustee means Banco Popular de Puerto Rico or any successor trustee or trustees
appointed pursuant to Article 4 with whom the funds of the Plan are held.
	 
	1.45	 	Trust Fund means the cash and other properties arising from (i) contributions made by
Participants and by the Company in accordance with the provisions of this Plan, (ii) funds
transferred from a Prior Plan, and (iii) any investment earnings and gains or losses thereon.
The Trust Fund is held and administered by the Trustee pursuant to Article 4.
	 
	1.46	 	USERRA means the Uniformed Services Employment and Reemployment Rights Act.
Notwithstanding any provision of this Plan to the contrary, contributions, benefits and
service credit with respect to qualified military service will be provided in accordance with
USERRA.
	 
	1.47	 	Valuation Date means each business day and any other date the Committee deems
desirable or necessary to value the Trust Fund in accordance with Article 5.

The masculine pronoun whenever used herein shall include the feminine, and singular number whenever
used herein shall include the plural, and the plural the singular, unless the context clearly
indicates a different meaning.

12

 

ARTICLE 2

PARTICIPATION

	2.01	 	Eligibility.

	 	(a)	 	Any Eligible Employee who is a Participant in the Plan on the Effective Date
shall continue as a Participant.
	 
	 	(b)	 	Any Eligible Employee who is not a Participant in the Plan on the Effective
Date shall be eligible to become a Participant on any future Entry Date.
	 
	 	(c)	 	Any Employee shall be eligible to become a Participant in the Plan as of the
first Entry Date coincident with or next following the date he becomes an Eligible
Employee.
	 
	 	(d)	 	All Eligible Employees of a Participating Company who participate in this Plan
shall participate under the terms and conditions herein stated.

	2.02	 	Participation.

	 	(a)	 	Participation in the Plan by an Eligible Employee is voluntary. An Eligible
Employee may become a Participant on any Entry Date by making application in a manner
prescribed by the Committee in which he:

	 	(i)	 	designates the percentage of Compensation to be contributed as
Basic Contributions in accordance with Section 3.01 and/or designates the
percentage of Compensation to be contributed as Supplemental Contributions in
accordance with Section 3.02 and/or Section 3.03;
	 
	 	(ii)	 	further designates his contributions as Pre-Tax or After-Tax;
	 
	 	(iii)	 	authorizes applicable payroll deductions; and
	 
	 	(iv)	 	chooses one or more Investment Fund(s).

	 	(b)	 	If the Eligible Employee does not make the application contemplated in Section
2.02(a) prior to his Automatic Enrollment Date, such Eligible Employee shall become a
Participant effective as of his Automatic Enrollment Date and shall be deemed to have
(i) authorized payroll deductions for Basic Contributions in accordance with Section
3.01, equal to 3% of his Compensation and (ii) elected to invest such contributions in
the Vanguard LifeStrategy Conservative Growth Fund, or such other fund as the Pension
Investment Committee may designate. Notwithstanding the foregoing, the Eligible
Employee may at any time elect a different contribution percentage (including 0%) in
accordance with Section 3.04 and/or different Investment Funds in accordance with
Section 4.06.

13

 

	2.03	 	Participant Status. An Eligible Employee who has once become a Participant shall
remain a Participant so long as he remains in the Service of the Company or an Affiliated
Company, and shall cease to be a Participant upon his Termination of Employment, except that
if he has met the conditions for entitlement to a benefit, he shall remain a Participant so
long as he has an Account balance. However, active participation, including contributions to
the Plan by or for a Participant, shall automatically be suspended effective as of the
Participant’s Severance Date and during any time period for which he does not receive a
paycheck. Participation in the Plan shall cease as of the date Accounts are transferred to a
plan of an Affiliated Company or are completely distributed to the Participant or his
Beneficiary.
	 
	2.04	 	Reemployment. If a former Employee is rehired as an Eligible Employee after a
Severance Date, he shall be entitled to become a Participant on the Entry Date coincident with
or next following his date of reemployment.

14

 

ARTICLE 3

CONTRIBUTIONS

	3.01	 	Basic Contributions. Subject to the provisions of Section 3.09, each Participant may
contribute from 1% to 6% of his Compensation to the Plan (in 1% increments) as Pre-Tax
Contributions in lieu of an equal amount being paid to him as current cash Compensation.
Basic Contributions are matched with Company Contributions in accordance with Section 3.06(b).
Basic Contributions are made through payroll deductions.
	 
	3.02	 	Supplemental Pre-Tax Contributions. Subject to the provisions of Section 3.09, a
Participant who has authorized the maximum Basic Contribution rate of 6% may also make
additional Pre-Tax Contributions to the Plan by authorizing Supplemental Pre-Tax Contributions
of 1% to 10% of his Compensation (in 1% increments) in lieu of an equal amount being paid to
him as current cash Compensation. Supplemental Pre-Tax Contributions are made through payroll
deductions.
	 
	3.03	 	Supplemental After-Tax Contributions.

	 	(a)	 	A Participant may make contributions to the Plan on an after-tax basis, either
in lieu of or in combination with Pre-Tax Contributions, by authorizing Supplemental
After-Tax Contributions of 1% to 10% of his Compensation (in 1% increments) in lieu of
an equal amount being paid to him as current cash Compensation; provided that the
combined percentage of Compensation for Basic Contributions, Supplemental Pre-Tax
Contributions and Supplemental After-Tax Contributions is a minimum of 1% and a maximum
of 16% (after-tax contributions are referred to as “Supplemental” even though a
Participant may elect to make them prior to authorizing any or the full amount of Basic
Contributions). Supplemental After-Tax Contributions are made through payroll
deductions.
	 
	 	(b)	 	The Committee shall have the right to establish rules with respect to the
making of elections pursuant to this Section, including without limitation, the right
to require that any such election be made at such time prior to its becoming effective
as the Committee shall determine and the right to restrict the Participant’s right to
change such election. Pre-Tax Contributions are intended to be treated for Puerto Rico
income tax purposes as contributions made by the Company under a qualified cash or
deferred arrangement (as defined in PR Code Section 1165(e)), but shall be treated as
if they were contributions by a Participant for the purpose of the Plan except where
the Plan expressly indicates otherwise.

	3.04	 	Change in Basic and Supplemental Contributions. Subject to the provisions of this
Article, a Participant may elect to change the percentage of his authorized payroll deduction
by giving notice to the Committee in the prescribed manner. Such changed

15

 

	 	 	percentage shall become effective beginning with the first payroll period commencing after
processing such notice.

	 	 	If a mistake-of-fact is made with regard to any contribution, the Committee shall, depending
on the mistake-of-fact, either (i) cause said contribution to be returned to the Participant
without restriction, or (ii) accept additional contributions for the affected period.
Examples of a “mistake-of-fact” would be the continuation of payroll deductions after a
Participant has requested the suspension of such deductions or failure to act on written
instructions to take deductions.

	3.05	 	Suspension of Basic and Supplemental Contributions.

	 	(a)	 	A Participant may elect to suspend his Basic and/or Supplemental Contributions,
provided that all Supplemental Pre-Tax Contributions shall be suspended before Basic
Contributions are suspended, by notifying the Committee in advance in the manner
prescribed by the Committee. The suspension shall become effective on the first payroll
period commencing after processing such request. No Company Matching
Contributions shall be made by the Company on behalf of such a Participant during a
period of suspension of Basic Contributions.
	 
	 	(b)	 	A Participant who has suspended his Basic or Supplemental Contributions may
elect to apply to the Committee to resume his contributions in the manner prescribed by
the Committee. The resumption shall become effective as of the first payroll period
commencing on or after processing his request.
	 
	 	(c)	 	No contributions may be made by a Participant for any period of unpaid absence
from Service including, but not limited to, absence due to sickness, leave of absence,
or service in the Armed Forces. A Participant who has ceased to make contributions
under the Plan in accordance with this subsection (c) shall again be eligible to resume
making contributions on the date he returns to Service as an Eligible Employee.
	 
	 	(d)	 	A Participant who has ceased to make contributions under the Plan because he
has ceased to be an Eligible Employee but, nevertheless, continue to be an Employee
shall again be eligible to resume making contributions on the date he again becomes an
Eligible Employee and gives written notice to the Committee in the prescribed manner.

	3.06	 	Company Contributions.

	 	(a)	 	General.

	 	(i)	 	All Company Contributions shall be made subject to the terms
and conditions of this Section 3.06.

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	 	(ii)	 	In satisfaction of its obligation under this Section 3.06, the
Participating Companies shall pay their contributions in cash.
	 
	 	(iii)	 	Company Contributions shall be made out of the current or
accumulated profits of the Participating Companies.
	 
	 	(iv)	 	Each Company Contribution to the Plan is conditioned on its
deductibility. To the extent permitted under applicable law, in the event that
the Secretary of the Puerto Rico Department of the Treasury determines that the
Plan does not qualify for tax-exempt status under PR Code Section 1165 and
issues an adverse determination with respect to its initial qualification,
Company Contributions made on or after the date on which such determination or
refusal is applicable shall, at the Participating Company’s discretion, be
returned to each Participating Company without interest within one year after
such determination, but only if the application for determination is made by
the time prescribed by law for filing the Participating Company’s return for
the taxable year in which the Plan was adopted, or such later date as the
Secretary of the Puerto Rico Department of the Treasury may prescribe.
	 
	 	(v)	 	To the extent permitted by applicable law, in the event that a
Company Contribution to the Plan is made by a mistake of fact or all or part
of the Participating Company’s deductions under PR Code Section 1023(n) for
contributions to the Plan are disallowed by the Puerto Rico Department of the
Treasury, the portion of the contributions attributable to such mistake of
fact or to which such disallowance applies shall be returned to the
Participating Company without interest. Any such return shall be made within
one year after the making of such contribution by mistake of fact or
disallowance of deductions, as the case may be.

	 	(b)	 	Company Matching Contributions.

	 	(i)	 	For each Plan Year, the Participating Companies shall
contribute an amount (the “Company Matching Contributions”) which, together
with any forfeitures under Article 6, shall produce an allocation to each
Participant’s Company Contribution Account equal to:

	 	(A)	 	50% of such Participant’s Basic Contributions
for such Plan Year for each Participant who is accruing a benefit
under a defined benefit plan sponsored by RAI; or
	 
	 	(B)	 	100% of such Participant’s Basic
Contributions for such Plan Year for each Participant who is not
accruing a benefit under a defined benefit plan sponsored by RAI;

17

 

	 	(ii)	 	Each Participating Company’s share of Company Matching
Contributions for any Plan Year shall be that proportion of the amount of
Company Matching Contributions for that year which the Basic Contributions
withheld by that Participating Company bears to the total Basic
Contributions withheld by all Participating Companies for the Plan Year.

	 	(c)	 	Retirement Enhancement Contributions. Effective for Plan Years
beginning on and after January 1, 2006, the Participating Companies shall contribute
an additional amount (the “Retirement Enhancement Contribution”) which, together with
any forfeitures under Article 6 remaining after Section 3.06(b), shall produce an
allocation to the Company Contribution Account of certain eligible Participants other
than the “Excluded Participants” (as defined below) which shall be determined as
follows:

	 	(i)	 	For each eligible Participant whose first date of employment as
an Eligible Employee or most recent date of reemployment as an Eligible
Employee is on or after January 1, 2004, the Retirement Enhancement
Contribution shall be equal to 3% of such Participant’s Compensation.
	 
	 	(ii)	 	The Retirement Enhancement Contribution for all other eligible
Participants shall be as determined in accordance with the following chart:

	 	 	 
	Total of Age plus Years of Vested	 	Retirement Enhancement Contribution
	Service as of January 1, 2006	 	(as a % of Compensation)
	 	 	 
	Less than 30
	 	3%
	30-39
	 	4%
	40-49
	 	5%
	50-59
	 	6%
	60-69
	 	7%
	70-79
	 	8%
	80 or more
	 	9%

	 	(d)	 	Excluded Participant. For purposes of Section 3.06(c), the term
“Excluded Participant” shall mean any Participant who is either eligible to accrue a
“Grandfathered Benefit” or retired with a “Grandfathered Benefit” under the Retirement
Plan for Salaried Employees of R. J. Reynolds Tobacco in Puerto Rico (as such term is
defined thereunder), and whose first date of employment as an Eligible Employee and
most recent date of reemployment as an Eligible Employee, if applicable, is prior to
January 1, 2004. Notwithstanding the foregoing, effective as of April 1, 2007, the
term “Excluded Participant” shall also include any Participant who is a Manufacturing
Employee. Compensation earned while an Excluded Participant will not be taken into
account for purposes of determining the Retirement Enhancement Contribution.

18

 

	 	(e)	 	Manufacturing Employees. Notwithstanding any provision of the Plan to
the contrary, in satisfaction of their obligation to make the annual Retirement
Enhancement Contribution described in Section 3.06(c) above, the Participating
Companies shall contribute an amount to the Company Contribution Account of each
eligible Participant who was a Manufacturing Employee on April 1, 2007, in an amount
equal to the greater of (A) two times the product of the Participant’s base job value
for 2007 multiplied by the Participant’s applicable Retirement Enhancement percentage
determined under Section 3.06(c) above, or (B) $2,000.

	3.07	 	Rollover Contributions. The Trustee is authorized to accept as Rollover Contributions
any contributions as requested by an Eligible Employee, provided that such Eligible Employee
certifies that such contributions meet the following criteria:

	 	(a)	 	the contributed amounts were distributed from an employee retirement plan
qualified under the PR Code;
	 
	 	(b)	 	the contribution is made either (i) as a direct rollover to the Plan, or (ii)
by the Eligible Employee, within 60 days after the date such contributions are received
by the Eligible Employee;
	 
	 	(c)	 	if applicable, the spousal consent requirements of Section 205(c) of ERISA were
complied with; and
	 
	 	(d)	 	such Rollover Contributions meet any other conditions as determined necessary
by the Trustee or Committee to comply with PR Code Section 1165(b)(2).

	3.08	 	PR Code Section 1165(e) Nondiscrimination Tests.

	 	(a)	 	Definitions. For purposes of this Section, the following additional
definitions shall be used:

	 	(i)	 	Actual Deferral Percentage or ADP means the ratio
(expressed as a percentage calculated to two decimal points) of Pre-Tax
Contributions, Qualified Matching Contributions, and Qualified Nonelective
Contributions on behalf of the Eligible Participants for the Plan Year to the
Eligible Participant’s Compensation for the Plan Year.
	 
	 	(ii)	 	Average Actual Deferral Percentage or Average ADP means
the average (expressed as a percentage calculated to two decimal points) of the
Actual Deferral Percentages (ADPs) of the Eligible Participants in a group.
	 
	 	(iii)	 	Eligible Participant means any Eligible Employee of
the Company who is authorized under the terms of the Plan to have After-Tax
Contributions, Pre-Tax Contributions, Nonelective Contributions, or

19

 

	 	 	 	Company Matching Contributions allocated to his Account for the Plan Year;
regardless as to whether or not any such contributions are so allocated.
	 
	 	(iv)	 	Highly Compensated Employee means any Eligible
Participant who is more highly compensated than two-thirds of all other
Eligible Participants.
	 
	 	(v)	 	Nonhighly Compensated Employee means an employee of the
Company who is not a Highly Compensated Employee.
	 
	 	(vi)	 	Nonelective Contributions means contributions made by
the Company other than Company Matching Contributions or Pre-Tax Contributions
and that the Participant cannot otherwise elect to receive in cash.
	 
	 	(vii)	 	Qualified Matching Contributions means matching
Company Contributions that are 100% vested and nonforfeitable when made and
that are subject to the same distribution limitations as Pre-Tax Contributions.
	 
	 	(viii)	 	Qualified Nonelective Contributions means those Nonelective
Contributions that are 100% vested and nonforfeitable when made and that are
subject to the same distribution limitations as Pre-Tax Contributions (but are
not eligible for withdrawal pursuant to Section 8.02).

	 	(b)	 	Average Actual Deferral Percentage Test (ADP Test)

	 	(i)	 	Notwithstanding anything in this Plan to the contrary,
contributions made under the Plan (and any other Plan that is aggregated with
the Plan in accordance with PR Code Section 1165(e)(3) and regulations
thereunder) by or on behalf of a Participant shall be restricted so as to
comply with one of the following ADP Tests.

	 	(A)	 	1.25 Test. The Average ADP for Eligible
Participants who are Highly Compensated Employees for the Plan Year
shall not exceed the Average ADP for Eligible Participants who are
Nonhighly Compensated Employees for the Plan Year multiplied by 1.25;
or,
	 
	 	(B)	 	Two Times/2% Test. The Average ADP for
Eligible Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the Average ADP for Eligible Participants who are
Nonhighly Compensated Employees for the Plan Year multiplied by 2,
provided that the Average ADP for Eligible Participants who are Highly
Compensated Employees does not

20

 

	 	 	 	exceed the Average ADP for Eligible Participants who are Nonhighly
Compensated Employees by more than two (2) percentage points or such
lesser amount as the Secretary of the Puerto Rico Department of the
Treasury shall prescribe.

	 	 	 	The Committee shall have the right to limit Pre-Tax Contributions of Highly
Compensated Employees as, and to the extent that it, in its discretion,
deems necessary to comply with one of the above tests.
	 
	 	(ii)	 	Determination of ADP Excess Contributions. The amount
of excess contributions for a Highly Compensated Employee will be determined in
the following manner: First, the ADP of the Highly Compensated Employee with
the highest ADP is reduced to the extent necessary to satisfy the ADP Test or
cause such ratio to equal the ADP of the Highly Compensated Employee with the
next highest ADP. Second, this process is repeated until the ADP test is
satisfied. The amount of excess contributions for a Highly Compensated Employee
is then equal to the excess of the total contributions taken into account for
the ADP Test over the product of (1) the Employee’s ADP following the reduction
described above and (2) the Employee’s Compensation. The amount of Company
Contributions attributable to any portion of an Employee’s excess contributions
shall be distributed, if vested, or if not vested, forfeited and held in a
suspense account and used to reduce the Company’s future Company Contributions.
	 
	 	 	 	Income on a Participant’s ADP excess contributions shall be determined by
multiplying the income allocated to his Pre-Tax Contribution Account for the
Plan Year in which such ADP excess contribution was made by a fraction, the
numerator of which is the ADP excess contributions for such Participant for
the Plan Year, and the denominator of which is the total Pre-Tax
Contribution Account balance for such Participant as of the first day of the
Plan Year, plus the Pre-Tax Contributions made on behalf of the Participant
during the Plan Year.
	 
	 	 	 	Upon the distribution of ADP excess contributions, the amount of income
required to be distributed with respect to the period between the last day
of the Plan Year and the date on which the excess is distributed (the “gap
period”) shall be 10% of the amount of income allocable to ADP excess
contributions for such Plan Year multiplied by the number of calendar months
that have elapsed since the end of the Plan Year. For purposes of
determining the number of calendar months that have elapsed since the last
day of the Plan Year, if the distribution is made on or before the 15th day
of the month, such month shall not be included, and if the distribution is
made after the 15th day of the month, such month shall be included.

21

 

	 	(iii)	 	Special Rules.

	 	(A)	 	For purposes of this Section, the ADP for any
Eligible Participant who is a Highly Compensated Employee for the Plan
Year and who is eligible to have Pre-Tax Contributions, Qualified
Matching Contributions or Qualified Nonelective Contributions allocated
to his account under two or more plans or arrangements described in PR
Code Section 1165(e) that are maintained by the Company or an
Affiliated Company shall be determined as if all such Pre-Tax,
Qualified Matching and Qualified Nonelective Contributions were made
under a single arrangement.
	 
	 	(B)	 	In the event that this Plan satisfies the
requirements of PR Code Section 1165(a)(3) only if aggregated with one
or more other plans, or if one or more other plans satisfy the
requirements of PR Code Section 1165(a)(3) only if aggregated with this
Plan, then this Section shall be applied by determining the ADP of
Eligible Participants as if all such plans were a single plan.
	 
	 	(C)	 	The Committee may, to the extent permitted
under the applicable PR Code Treasury Regulations, recharacterize as
After-Tax Contributions for such Plan Year all or a portion of the
Pre-Tax Contributions for Participants who are Highly Compensated
Employees to the extent necessary to comply with the applicable limit
set forth in this Section 3.08(b), using the leveling method described
in Section 3.08(b)(ii) above. Recharacterized amounts shall remain
nonforfeitable and subject to the same distribution requirements as
Pre-Tax Contributions. Amounts may not be recharacterized with respect
to a Highly Compensated Employee to the extent that such amount, in
combination with other After-Tax Contributions made by such Employee,
would exceed the limitations under the Plan with respect to After-Tax
Contributions. Recharacterization shall occur no later than 2-1/2
months after the last day of the Plan Year in which such excess Pre-Tax
Contributions arose.
	 
	 	(D)	 	The determination and treatment of the Pre-Tax
Contributions, Qualified Nonelective Contributions, Qualified Matching
Contributions and ADP of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Puerto Rico
Department of the Treasury, including the provisions of the applicable
PR Code Treasury Regulations which are incorporated herein by
reference.
	 
	 	(E)	 	Notwithstanding any provision of this Plan, to
the event permitted by the PR Code and its regulations, the Committee
may elect to

22

 

	 	 	 	aggregate the Affiliated Companies for purposes of determining
compliance by the Plan with the ADP Test of PR Code Section 1165 and
the determination of Highly Compensated Employees.

	 	(c)	 	Corrections of Excess Contributions

	 	(i)	 	If the Committee shall determine that the Pre-Tax Contributions
on behalf of any Participant or group of Participants might result in
discrimination in favor of Employees who are officers, shareholders or Highly
Compensated Employees or might cause the Plan to violate the requirements for
cash or deferred arrangement under PR Code Section 1165(e), the Committee shall
have the right to cause such adjustments to be made in the past, current or
future Pre-Tax Contributions on behalf of such Participants and in the manner
provided in the applicable PR Code Treasury Regulations, as will, in the
Committee’s opinion, avoid such discrimination and satisfy the requirements of
PR Code Section 1165(e) and regulations promulgated thereunder, including,
without limitation, the right to recharacterize any Pre-Tax Contributions on
behalf of a Participant as current Compensation of the Participant to either be
distributed (along with income allocable thereto, as determined pursuant to
Section 3.08(b)(ii)) to the Participant or contributed as an After-Tax
Contribution and subject to such terms and conditions as will cause the Plan to
meet the requirements for a qualified cash or deferred arrangement under PR
Code Section 1165(e) and regulations promulgated thereunder. The decision of
the Committee in this regard shall be final and shall not be subject to
question by the Trustee, the Company or by any Participant or group of
Participants. Any Pre-Tax Basic Contributions that are recharacterized as
After-Tax Contributions pursuant to this Section shall not be eligible for
Company Matching Contributions.
	 
	 	(ii)	 	If the Committee shall determine that the After-Tax
Contributions of any Participant or group of Participants might result in
discrimination in favor of employees who are Highly Compensated Employees, or
might cause the Plan to violate the requirements of PR Code Section 1165(a)(4)
and regulations promulgated thereunder, the Committee shall have the right to
cause such adjustments to be made in past, current or future After-Tax
Contributions of such Participants and in the manner provided in the applicable
PR Code Treasury Regulations as will, in the Committee’s opinion, avoid such
discrimination and satisfy the requirements of PR Code Section 1165(a)(4),
including, without limitation, the right to distribute such contributions
(along with income allocable thereto) to the Participant and subject to such
terms and conditions as will cause the Plan to meet the requirements of PR Code
Section 1165(a)(4) and regulations promulgated thereunder. The decision of the
Committee in this regard shall be final and shall not be subject to question by
the Trustee, the Company or by any Participant or group of Participants.

23

 

	3.09	 	Dollar Limitation on Pre-Tax Contributions.

	 	(a)	 	Notwithstanding anything else in this Article, a Participant may not designate
more than $9,000 in 2009 and 2010, $10,000 in 2011 and 2012, and $12,000 in and after
2013 (or such other amount as may be specified by the Secretary of the Puerto Rico
Department of the Treasury on account of an increase in cost of living index) as
Pre-Tax Contributions in any calendar year. Provided that, annual Pre-Tax Contributions
by a Participant who also contributes to an individual retirement account described in
PR Code Section 1169 will be further limited to the extent required by the PR Code.
	 
	 	(b)	 	Notwithstanding any other provision of the Plan, excess Pre-Tax Contributions
and income allocable thereto shall be distributed no later than each April 15 to
Participants who claim Allocable Excess Pre-Tax Contributions for the preceding
calendar year. “Allocable Excess Pre-Tax Contributions” shall mean the amount of
Pre-Tax Contributions for a calendar year that the Participant allocates to this Plan
pursuant to the claim procedure described herein.
	 
	 	(c)	 	The Participant’s claim shall be in writing, shall be submitted to the
Committee no later than March 1; shall specify the Participant’s excess Pre-Tax
Contributions for the preceding calendar year; and shall be accompanied by the
Participant’s written statement that if such amounts are not distributed, such
Allocable Excess Pre-Tax Contributions, when added to amounts deferred under other
plans or arrangements described in Sections 1165(e) and 1169 of the PR Code, exceeds
the limit imposed on the Participant by Section 1165(e)(7) of the PR Code for the year
in which the deferral occurred.
	 
	 	(d)	 	The Allocable Pre-Tax Contributions distributed to a Participant with respect
to a calendar year shall be adjusted for income and, if there is a loss allocable to
the excess Pre-Tax Contributions, shall in no event be less than the lesser of the
Participant’s Pre-Tax Account under the Plan or the Participant’s Pre-Tax Contributions
for the Plan Year.
	 
	 	(e)	 	Notwithstanding any other provision of the Plan, Participant’s excess Pre-Tax
Contributions to the Plan which the Participant has not claimed to be Allocable Excess
Pre-Tax Contributions pursuant to the procedure described herein shall be, to the
extent permitted under the applicable PR Code Treasury Regulations, recharacterized as
After-Tax Contributions; provided that the combined percentage of Compensation for all
After-Tax Contributions (including Supplemental After-Tax Contributions) shall in no
event exceed 10%. Any Pre-Tax Contributions that are recharacterized as After-Tax
Contributions pursuant to this Section shall not be eligible for Company Matching
Contributions.

	3.10	 	Crediting of Contributions. Basic Contributions, Supplemental Pre-Tax Contributions,
Supplemental After-Tax Contributions and loan repayments are credited to the

24

 

	 	 	Participant’s Account as of the earliest date on which such contributions can reasonably be
segregated from the Company’s general assets.
	 
	3.11	 	Miscellaneous. The Committee shall have the right to establish rules with respect to
the making of elections pursuant to this Article 3, including without limitation, the right to
require that any such election be made at such time prior to its becoming effective as the
Committee shall determine and the right to restrict the Participant’s right to change such
election. Such Pre-Tax Contributions are intended to be treated for Puerto Rico income tax
purposes as contributions made by the Company under a qualified cash or deferred arrangement
(as defined in PR Code Section 1165(e)), but shall be treated as if they were contributions by
a Participant for the purpose of the Plan except where the Plan expressly indicates otherwise.

25

 

ARTICLE 4

TRUST FUND AND INVESTMENT FUNDS

	4.01	 	The Trust Agreement. The Committee, on behalf of RAI, shall enter into a trust
agreement which shall contain such provisions as shall render it impossible for any part of
the corpus of the Trust or income therefrom to be at any time used for, or diverted to,
purposes other than for the exclusive benefit of Participants. Any or all rights or benefits
accruing to any person under the Plan with respect to any Company Contributions deposited
under the Trust Agreement shall be subject to all the terms and provisions of the Trust which
shall specifically incorporate and be subject to the provisions of the Plan.
	 
	4.02	 	The Trustee. The Trustee will be a corporate trustee appointed by the Committee to
serve at its pleasure.
	 
	4.03	 	Separate Funds. The Trustee shall maintain separate Investment Funds within the Trust
Fund as designated by the Pension Investment Committee from time to time.
	 
	4.04	 	Investment Funds.
	 
		 	(a) Subject to Section 4.03, the following Investment Funds are maintained within the Trust
Fund as of the Effective Date:
	 
	 	 	Vanguard Retirement Savings Trust Fund,

Vanguard Total Stock Market Index Fund,

Vanguard Total International Stock Index Fund,

Vanguard LifeStrategy Conservative Growth Fund,

Vanguard LifeStrategy Moderate Growth Fund,

Vanguard LifeStrategy Growth Fund, and

RAI Common Stock Fund.
	 
		 	(b) The Pension Investment Committee reserves the right to eliminate, add or modify any
funds from time to time, including changes to comply with regulations and interpretations
that may be issued from time to time by the U.S. Department of Labor.
	 
		 	(c) Limitations/Rules. Notwithstanding any provision of the Plan to the contrary,
(1) the Pension Investment Committee may establish rules and procedures relating to the
investments in one or more of the Investment Funds, which rules and procedures may be
changed from time to time by the Pension Investment Committee and (2) the Investment Funds
shall be subject to, and governed by, all applicable legal rules and restrictions and the
rules specified by the investment fund providers in the fund prospectus(es) or other
governing documents thereof (to the extent such rules and procedures are imposed and
enforced by the investment fund provider against the Plan or a particular Participant).
Such rules, procedures and restrictions may limit the ability of a Participant to make

26

 

	 	 	transfers into or out of a particular Investment Fund and/or may result in additional
transaction fees or other costs relating to such transfers.
	 
	4.05	 	Temporary Investment. Pending permanent investment of the assets of any Investment
Fund, the Trustee may temporarily hold cash or make short-term investments in obligations of
the United States Government, commercial paper, an interim investment fund for tax qualified
employee benefit plans established by the Trustee unless otherwise provided by applicable law,
or other investments of a short-term nature.
	 
	4.06	 	Investment of Participant Contributions.

	 	(a)	 	Election. All Basic and Supplemental Participant Contributions will be
invested at the election of the Participant in multiples of 1% in the Investment Funds
described in Section 4.04. A Participant may make or change an election on any day by
giving notice to the Committee in the prescribed manner. Any such election or change of
election shall be effective as of the first payroll period after it is processed.
	 
	 	(b)	 	Reallocation of Investments. A Participant may elect on any day to
reallocate the investment of his Accounts to any one or combination of the Investment
Funds, in multiples of 1% by giving notice to the Committee in such manner as the
Committee may prescribe. The amounts reallocated will be based upon values as of the
Valuation Date applicable to the processing of the request.
	 
	 	(c)	 	Limitations/Rules. The provisions of this Section are subject to the
rules, procedures and restrictions described in Section 4.04(c) of the Plan. In
furtherance of, but without limiting the foregoing, the Trustee, recordkeeper, Pension
Investment Committee, Committee or Investment Fund provider (or their delegate, as
applicable) may decline to implement any investment election or instruction where it
deems appropriate.

	4.07	 	Investment of Company Contributions. Company Contributions will track the Investment
Fund elections that a Participant makes with regard to Basic and Supplemental Contributions.
	 
	4.08	 	Investment Managers. The Pension Investment Committee may enter into a written
agreement with or direct the Trustee to enter into an agreement with one or more investment
managers to manage the investments of one or more of the Investment Funds. Such investment
managers may include one or more legal reserve life insurance companies which enter into group
annuity contracts with the Trustee. The Pension Investment Committee may remove any such
investment manager or any successor investment manager, or direct the Trustee to do so, and
any such investment manager may resign. The Pension Investment Committee may, upon removal or
resignation of an investment manager, provide for the appointment of a successor investment
manager.

27

 

	4.09	 	Participant Responsibility For Selection of Funds. Each Participant is solely
responsible for the selection of his Investment Funds. Neither the Trustee, the Committee,
any Benefits Administration Committee, the Pension Investment Committee, the Company nor any
of the directors, officers or employees of the Company are empowered to advise a Participant
as to the manner in which his Accounts should be invested. The fact that a security is
available to Participants for investment under the Plan shall not be construed as a
recommendation for the purchase of that security, nor shall the designation of any Investment
Fund impose any liability on the Company, its directors, officers or employees, the Trustee,
the Committee, any Benefits Administration Committee, or the Pension Investment Committee.
	 
	4.10	 	Voting by Participants.

	 	(a)	 	Voting of Stock Generally. Each Participant shall have the right and
shall be afforded the opportunity to instruct the Trustee how to vote that
proportionate number of the total number of shares of stock held in the RAI Common
Stock Fund which is the same proportion that the value of his interest bears to the
total value of such Fund. Instructions by Participants to the Trustee shall be in such
form and pursuant to such regulations as the Committee may prescribe. Any such
instructions shall remain in the strict confidence of the Trustee. Any shares for
which no such instructions are received by the Trustee shall be voted by the Trustee in
the same proportion as the shares for which instructions are received.
	 
	 	(b)	 	Tender or Exchange Offers. In the event of a tender or exchange offer
for any or all shares of Stock, the Committee shall notify each Participant or
Beneficiary and utilize its best efforts to timely distribute or cause to be
distributed to him such information as will be distributed to other shareholders of
such Stock in connection with any such tender or exchange offer. Each Participant or
his Beneficiary shall have the right to instruct the Trustee in writing to tender or
exchange shares of Stock credited to his Account under the Trust Fund. Unless the
Trustee determines that ERISA requires it to act otherwise, the Trustee shall not
tender or exchange any shares of Stock credited to a Participant’s Account under the
Trust Fund unless specific instructions to tender or exchange such shares have been
received. For purposes of this Section 4.10(b), “Stock” shall mean the stock held in
the RAI Common Stock Fund.

	4.11	 	Changes in Investment Funds or Elections, Conversions. Notwithstanding any provision
of the Plan to the contrary:

	 	(a)	 	The Committee, in its sole and absolute discretion, may temporarily suspend, in
whole or in part, certain Plan transactions, including, without limitation, the right
to change or suspend contributions, and/or the right to receive a distribution, loan or
withdrawal from an Account in the event of any conversion, change in recordkeeper
and/or Plan merger or spinoff.

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	 	(b)	 	The Pension Investment Committee, in its sole and absolute discretion, may
suspend, in whole or in part, temporarily or permanently, Plan transactions dealing
with investments, including without limitation, the right of a Participant to change
investment elections or reallocate Account balances in the event of any conversion,
change in recordkeeper, change in Investment Funds and/or Plan merger or spinoff.
	 
	 	(c)	 	The Committee, the Pension Investment Committee, the Trustee, recordkeeper or
Investment Fund provider (or their delegate, as applicable) may decline to implement
any investment election or instruction where it deems appropriate in order to comply
with the rules, procedures and restrictions described in Section 4.04(c) of the Plan.
	 
	 	(d)	 	In the event of a change in Investment Funds and/or a Plan merger or spinoff,
the Pension Investment Committee, in its sole and absolute discretion, may decide to
map investments from a Participant’s prior investment fund elections to the then
available Investment Funds under the Plan. In the event that investments are mapped
in this manner, the Participant shall be permitted to reallocate funds among the
Investment Funds (in accordance with the terms of the Plan and any relevant rules and
procedures adopted for this purpose) after the suspension period described in
Paragraph (a) of this Section (if any) is lifted.

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ARTICLE 5

ACCOUNT STATEMENTS AND VALUATION

	5.01	 	Valuation of Accounts. As of each Valuation Date, the Accounts of each Participant
shall be adjusted to reflect any appreciation or depreciation in the fair market value and any
income earned by each Investment Fund in which the Participant’s Accounts are invested since
the prior Valuation Date. Such fair market value shall be the aggregate fair market value of
all securities or other property held for each Investment Fund, plus cash and accrued
earnings, less accrued expenses and proper charges against each Investment Fund.
	 
	 	 	When determining the value of the Participant’s Accounts, any deposits due which have not
been deposited in the Trust Fund on behalf of the Participant shall be added to his
Accounts. Similarly, adjustments of Accounts for appreciation or depreciation of an
Investment Fund shall be deemed to have been made as of the Valuation Date to which the
adjustment relates, even though they are actually made as of a later date.
	 
	5.02	 	Valuation Upon Transfer. Withdrawal, or Distribution. The valuation of Accounts for
purposes of an in-service withdrawal, a transfer of Accounts to another Investment Fund, or a
cash distribution shall be as described in Section 5.01.
	 
	5.03	 	Statement of Accounts. Each Participant shall be furnished at least annually a
statement setting forth the value of his Accounts.

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ARTICLE 6

VESTING OF CONTRIBUTIONS

	6.01	 	Vesting of Basic and Supplemental Contributions. Each Participant’s Basic and
Supplemental Contributions (including Pre-Tax Contributions) shall at all times be fully
vested.
	 
	6.02	 	Vesting of Company Contributions. A Participant shall become fully vested in his
Company Contributions upon completion of the earlier of (i) 36 months of Service or (ii)
completion of 24 months after he becomes a Participant, or (iii) in the event of any one of
the following:

	 	(a)	 	attainment of age 65 while an Employee,
	 
	 	(b)	 	Retirement,
	 
	 	(c)	 	Disability while an Employee,
	 
	 	(d)	 	death while an Employee,
	 
	 	(e)	 	termination of the Plan, or
	 
	 	(f)	 	complete discontinuance of Company Contributions.

	6.03	 	Vesting of Rollover Contributions. Contributions transferred pursuant to a Rollover
(Section 1.36) shall at all times be fully vested.
	 
	6.04	 	Forfeiture on Termination of Employment. If a Participant’s employment is terminated
prior to attainment of age 65 for reasons other than Retirement, Disability, or death, the
portion, if any, of his Company Contribution Account in which he is not vested shall be
forfeited upon the earlier of (i) the accrual of five (5) consecutive Break in Service years,
or (ii) the receipt of a cash-out and, under circumstances where all Participant Contributions
were distributed prior to Termination of Employment or there are no Participant Contributions,
a cash-out will be deemed to have been made on the date the Termination of Employment
occurred. All forfeitures pursuant to (ii) above are subject to the provisions of Section
6.06.
	 
	6.05	 	Disposition of Forfeitures. Forfeitures attributable to former Participants (or
Employees) of each Participating Company who has adopted the Plan shall be used to reduce the
Company Contributions otherwise payable to the Plan by each of such Participating Company who
has adopted the Plan.
	 
	6.06	 	Restoration of Forfeitures. Any amount forfeited pursuant to the provisions of clause
(ii) of Section 6.04 shall be restored to the Account of a Participant if the Participant is
reemployed by the Company or an Affiliated Company before he accrues five (5) consecutive
Break in Service years. The restoration will occur without the requirement that the
Participant repay to the Plan any amounts previously distributed to him.

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ARTICLE 7

DISTRIBUTIONS

	7.01	 	Distribution of Benefits.

	 	(a)	 	Termination of Employment. A Participant who has a Termination of
Employment for reasons other than death may elect to receive distribution of the value
of his vested Accounts in the form of (i) a lump sum or (ii) monthly installments as
provided in Section 7.02, subject to the provisions of Section 7.01(e). Distribution
shall be made as soon as administratively feasible following the valuation of the
Participant’s Accounts. Notwithstanding the foregoing, if the Committee has not
received an application for distribution by the time specified in subsection (d) below,
distribution shall automatically be made in the form of a lump sum at such time.
	 
	 	(b)	 	Death. The Accounts of a Participant who has died shall be distributed
to his Beneficiary in a single lump sum payment. Payment will be made after
notification and verification of the Participant’s death. The Accounts shall be valued
as of the Participant’s date of death, and distribution shall be made as soon as
administratively feasible following the valuation of the Participant’s Accounts.
	 
	 	(c)	 	Latest Date for Distribution. Unless otherwise elected pursuant to
subsection (a) above, all distributions shall be made no later than 60 days after the
close of the Plan Year in which occurs the latest of (i) the date on which the
Participant attains (or would have attained) age 65 provided he has a Termination of
Employment, or (ii) termination of the Participant’s Service with the Company or an
Affiliated Company.
	 
	 	(d)	 	Small Lump Sum Cash Outs. The foregoing notwithstanding, if the value
of the Participant’s vested Account does not exceed $1,000, a lump sum distribution
shall be made to the Participant as soon as administratively feasible following the
Participant’s Termination of Employment. In no event shall the Account of a
Participant which is in excess of the amount of $1,000 be distributed to him prior to
the later of the time the Participant has attained normal retirement age (as determined
pursuant to ERISA Section 3(24)) or age 62, without the written consent of the
Participant.
	 
	 	(e)	 	QDRO. Notwithstanding subsections (a)-(d) above and Section 11.05, if a
qualified domestic relations order, as described in Section 11.05, requires the
distribution of all or part of a Participant’s benefits under the Plan, the
acknowledgment of the alternate payee’s rights to benefits under the Plan in accordance
with the qualified domestic relations order shall in all events be applied in a manner
consistent with the terms of the Plan. Notwithstanding the foregoing, (i) the Committee
is authorized, pursuant to such uniform and

32

 

	 	 	 	nondiscriminatory rules as it shall establish which shall be consistent with
applicable law and the terms of the applicable qualified domestic relations order,
to cash out benefits to which alternate payees may be entitled prior to the date
such benefits would otherwise become payable in accordance with the applicable
provisions of the Plan, and (ii) in no event shall the recognition of an alternate
payee’s rights in accordance with this Section 7.01(e) be deemed to include the
right to make a withdrawal pursuant to the provisions of Article VIII or to receive
any benefits in the form of a partial payment.
	 
	 	(f)	 	Common Stock Fund Distribution. A Participant or his Beneficiary may
elect that the distribution from the RAI Common Stock Fund be in the form of cash or shares of common stock of RAI, except that any fractional interest in a share shall be
paid in cash. If a Participant does not make an election in connection with the
distribution, the RAI Common Stock Fund shall be paid in cash.

	7.02	 	Installment Option.

	 	(a)	 	A Participant may elect to receive the cash portion of his distribution by
payment in monthly installments over a period not to exceed the lesser of fifteen years
or the Participant’s life expectancy as follows: the amount of each installment to be
paid to each Participant making such an election shall be based upon the value of his
assets as of the last Valuation Date of the month coinciding with or next following the
date of receipt of the Participant’s election and monthly thereafter, and shall be
determined by multiplying each such value by a fraction the numerator of which shall be
the number of unpaid installments. Life expectancy shall be computed by the use of the
term multiple contained in Section 1.79-2 of the Federal Income Tax Regulations. In the
event the Committee determines that any payment(s) represents an amount less than the
minimum required payment pursuant to Section 401(a)(9) of the United States Internal
Revenue Code of 1986, as amended, it shall correct the payment(s).
	 
	 	(b)	 	A Participant or Beneficiary who is receiving the installment form of payment
may elect, as of any future Valuation date to receive the remaining value of his
Account in a single lump sum payment. The lump sum payment shall be made as of the next
practicable monthly payment date.
	 
	 	(c)	 	If the Participant dies before all the installments are paid the remaining
value of his Account shall be paid to his Beneficiary in a single lump sum payment;
provided, however, that the surviving Spouse Beneficiary may elect that the remaining
value of the Account continue to be paid in installments.
	 
	 	(d)	 	In no event shall any payment be made in the form of an annuity.

	7.03	 	Proof of Death and Right of Beneficiary. The Committee may require and rely upon such
proof of death and such evidence of the right of any Beneficiary to receive the undistributed
value of the Accounts of a deceased Participant as the Committee may deem proper, and its

33

 

	 	 	determination of death and of the right of such Beneficiary or other person to receive
payments shall be conclusive.
	 
	7.04	 	Completion of Appropriate Forms and Procedures. The Committee has prescribed
forms/procedures providing notice to it in order for a distribution to be made under the Plan.
In the event a Participant or a Beneficiary does not comply with such procedures before the
date a distribution becomes payable under the terms of the Plan, payment of such Participant
or Beneficiary’s Accounts may, at the option of the Committee (taking into account Section
11.13), be mailed to the Address of Record as provided in Section 11.09.
	 
	7.05	 	Investment Pending Distribution.

	 	(a)	 	The provisions of Sections 4.06(a) and (b) shall continue to apply to the
Accounts of inactive Participants, including Participants who have elected the
installment option as provided in Section 7.02(a).
	 
	 	(b)	 	A Participant is not entitled to any interest, dividends or any other form of
investment proceeds on his Account for the period between the Valuation Date on which
his Account is valued for payment and the date payment is made.

	7.06	 	Direct Rollovers.
	 
	 	 	Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee’s election under this Article, a
distributee may elect, at the time and in the manner prescribed by
the Committee, to have his entire Plan distribution paid directly to
a qualified retirement plan described in PR Code Section 1165(a) or
to an individual retirement account described in PR Code Section
1165(b)(2) specified by him.

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ARTICLE 8

WITHDRAWAL PRIOR TO TERMINATION OF EMPLOYMENT

AND SPECIAL PRE-TAX CONTRIBUTION RULES

	8.01	 	Election to Withdraw from Accounts. As of any Valuation Date and subject to Sections
8.02, 8.03 and 8.04, an active Participant may elect to withdraw, in cash only and in a stated
amount, all or a portion of the value of vested amounts in his Accounts.
	 
	8.02	 	Order of Withdrawal from Accounts. Withdrawals as described in Section 8.01 and
subject to the rules of Section 8.03 shall be applied by the Committee against a Participant’s
Accounts in the order and classification as follows:
	 
	 	 	Tax-Free Withdrawal: If applicable, an active Participant may withdraw the value of
his After-Tax Contributions in his After-Tax Contribution Account. Notwithstanding the
foregoing, investment earnings and accretions on After-Tax Contribution may not be
withdrawn.
	 
	 	 	Regular Withdrawal I: An active Participant may withdraw the value of his Rollover
Contribution Account, and the vested value of his Company Contribution Account; provided,
that a Participant with less than 60 months of Plan participation may not withdraw Company
Contributions that have been in the Plan for less than 24 months.
	 
	 	 	Regular Withdrawal II: An active Participant may withdraw the remaining value
attributable to After-Tax Contributions in his After-Tax Contribution Account, the value of
his Rollover Contribution Account, and the vested value of his Company Contribution Account,
subject to the following rules:

	 	(a)	 	Participants with less than 60 months of Plan participation may not withdraw
Company Contributions that have been in the Plan for less than 24 months.
	 
	 	(b)	 	As further provided in Section 8.03(e), if earnings and accretions on After-Tax
Contributions that have been in the Plan for less than 24 months are withdrawn by a
Participant with less than 60 months of Plan participation, the Participant will be
suspended from receiving Company Matching Contributions for a period of 6 months.

	 	
Hardship Withdrawal: An active Participant who qualifies for a financial hardship as
defined in Section 8.04 may make a withdrawal of his Accounts in the following order:

	 	(i)	 	After-Tax Contributions.
	 
	 	(ii)	 	The value in his Rollover Contribution Account.

35

 

	 	(iii)	 	The vested value of Company Contributions that have been in the Plan for over
24 months.
	 
	 	(iv)	 	The remaining vested value of his Company Contribution Account.
	 
	 	(v)	 	The value of his Pre-Tax Contribution Account (excluding earnings and
accretions thereon).

	8.03	 	Rules Applicable to Withdrawals Prior to Termination of Employment. The following
rules shall, except as noted in Section 8.04, apply to withdrawals under this Article 8:

	 	(a)	 	Withdrawals may only be made by prior notice to the Committee in the manner
prescribed by the Committee.
	 
	 	(b)	 	Excluding hardship withdrawals, no more than one withdrawal may be made in any
six-month period.
	 
	 	(c)	 	Excluding hardship withdrawals, in no event may a Participant make a withdrawal
in an amount less than $1,000, or the maximum amount available for withdrawal as a
Tax-Free Withdrawal, Regular Withdrawal I or Regular Withdrawal II, if less.
	 
	 	(d)	 	In no event may a Participant elect an order of withdrawal other than set forth
in Section 8.02, nor may a Participant select the classification or Investment Fund
from which his stated amount of withdrawal will be withdrawn.
	 
	 	(e)	 	A Participant with less than 60 cumulative months of participation in the Plan
making a withdrawal (other than a hardship withdrawal pursuant to Subsection 8.02) of
earnings and accretions on After-Tax Contributions that have been in the Plan for less
than 24 months shall be suspended from receiving Company Matching Contributions for a
period of six months from the instant Valuation Date. If by error more than one
withdrawal is permitted or made during a single 6-month period, each such withdrawal
shall separately incur a 6-month suspension period, but such periods shall run
concurrently (for example, a withdrawal 2 months after the start of a suspension period
due to a prior withdrawal will result in a total concurrent suspension period for both
withdrawals of 8 months and not 12 months).
	 
	 	(f)	 	To the extent feasible, the Committee, upon receipt of a withdrawal
application, will inform a Participant of any suspensions that will occur as a result
of the withdrawal.
	 
	 	(g)	 	Payments of withdrawal amounts will be made as soon as practicable after a
Participant’s election to withdraw and only as of a preceding Valuation Date.

36

 

	 	(h)	 	Amounts received from a Rollover or any prior, Affiliated or Predecessor Plan
in a trust-to-trust transfer which were subject to PR Code Section 1165(e) under such
Plan shall be subject to PR Code Section 1165(e) requirements under this Plan.

	8.04	 	Hardship Withdrawals. Financial hardship for purposes of Section 8.02 shall mean that
a Participant requires a withdrawal of money for an immediate and heavy financial need. Such
withdrawal cannot exceed the sum of (i) the amount required to meet such need, and (ii) any
amounts necessary to pay any federal, state or local income taxes or penalties reasonably
anticipated as a result of the distribution. No withdrawal shall be permitted unless the
hardship cannot reasonably be relieved from other sources including distributions (other than
hardship distributions) and nontaxable loans available under any plan, through reimbursement
or compensation by insurance or otherwise, by liquidation of assets, by cessation of all
Pre-Tax and After-Tax Contributions under the Plan, or by borrowing from commercial sources on
reasonable commercial terms, to the extent any of these sources would not itself cause an
immediate and heavy financial need. This determination will be made by the Committee based in
all the relevant facts and circumstances. Purchase by a Participant of a primary residence,
the need to prevent eviction or foreclosure on the primary residence of a Participant,
postsecondary education tuition, related fees, or room and board for a Participant, or his
Spouse, child or dependents for the next twelve months, and any non-reimbursed medical expense
(within the meaning of PR Code Section 1023(aa)(2)(P)) of a Participant, his Spouse or
dependents may generally be considered situations of heavy financial need, unless otherwise
governed by law or regulation. The Committee may, under rules established by it which are
uniformly applicable to all similarly situated Participants, determine other circumstances
where a Participant has a heavy financial need and the decision of the Committee as to whether
a Participant satisfies the financial hardship rule shall be conclusive, unless otherwise
governed by law or regulation.
	 
	8.05	 	Restrictions on Pre-Tax Contribution Distributions. Notwithstanding any other
provision in this Plan to the contrary, a Participant’s Pre-Tax Contribution Account may not
be distributed earlier than upon one of the following events:

	 	(a)	 	The Participant’s Retirement, death, Disability or Termination of Employment;
	 
	 	(b)	 	The termination of the Plan without the establishment of a successor plan;
	 
	 	(c)	 	A Participant’s attainment of age 59 1/2;
	 
	 	(d)	 	A Participant’s Hardship, restricted as set forth in Section 8.04;
	 
	 	(e)	 	The sale or other disposition of the Company to an unrelated corporation, which
does not maintain the Plan, of substantially all of the assets used in a trade or
business, but only with respect to Employees who continue with the acquiring
corporation; or

37

 

	 	(f)	 	The sale or disposition by the Company of its interest in a subsidiary to an
unrelated entity which does not maintain the Plan, but only with respect to Employees
who continue employment with the subsidiary.

	 	 	This Section is intended to comply with the earliest distribution requirements of PR Code
Section 1165(e)(2)(B) and applicable regulations and is not intended to add any forms of
distribution not otherwise allowed under the Plan.
	 
	8.06	 	Loan Provisions. An active Participant, each party in interest as defined in ERISA
Section 3(14) who is (i) a Participant but no longer an employee, or (ii) the Beneficiary of a
deceased Participant, may make an application to the Committee to borrow from the Trust Fund
and the Committee may permit such a loan upon the conditions hereinafter specified and any
other rules promulgated by the Committee.

	 	(a)	 	Loans shall be made available to all eligible Participants on a reasonably
equivalent basis and (i) shall not be made available to highly compensated employees in
an amount greater than the amount made available to other Participants, and (ii) shall
not be permitted for purchasing securities or in any way financing a securities
investment.
	 
	 	(b)	 	The maximum amount of a loan to a Participant shall not exceed the lesser of
(i) 50% of the vested interest in his Account, or (ii) $50,000, reduced by the highest
outstanding loan balance during the preceding twelve months. The minimum loan amount is
$1,000. Notwithstanding the foregoing, no amount of a Participant’s Account shall be
considered available for a loan if it is subject to a qualified domestic relations
order as such term is defined under Section 206(d)(3) of ERISA.
	 
	 	(c)	 	The loan term shall not be for more than 60 months, except when for the
purchase of a primary residence when the term can be, for not more than 10 years. The
loan check shall be signed by the Participant and in signing shall be evidence of
agreement to the terms of the loan adequate security (including up to one-half of the
Participant’s vested interest in his Account) designated as collateral for guaranteeing
the note. The Committee shall have complete discretion in determining lien priorities
among the various investments in the Account. The Committee shall determine the
interest rate for each loan, consistent with rate being charged by other lending
institutions for a similar loan to an unrelated borrower on the same date. A loan shall
be deemed to be an investment of a Participant’s individual Account and all interest
payments and repayments of principal shall be credited to the Account of the
Participant.
	 
	 	(d)	 	The Participant shall be required to authorize payroll deductions from his
Compensation in an amount sufficient to repay the loan over its term. Loan repayment
amounts shall be credited to a Participant’s Account as of the date or payment of the
Compensation from which the repayment is taken. In the event

38

 

	 	 	 	of default or the Termination of Employment of the Participant before the loan is
repaid in full, the unpaid balance thereof shall become due and payable and, to the
extent that the outstanding amount in not repaid within 60 days after demand for
payment is sent, such amount shall be deemed to have been distributed and the
Trustee shall first satisfy the indebtedness from the amount payable to the
Participant before making any payment to the Participant. In the event of a
Participant’s death before the loan is repaid in full, the Participant’s estate
shall be the Beneficiary with respect to the outstanding loan notwithstanding any
other deemed or actual Beneficiary designation and the unpaid loan balance shall be
deemed to have been distributed to the Participant’s estate.
	 
	 	(e)	 	During the repayment period for the loan, the Participant shall be permitted to
fully participate in the Plan.
	 
	 	(f)	 	The Participant shall execute such other documents as the Committee shall
request.
	 
	 	(g)	 	Only one loan for each Participant may be outstanding at one time.
	 
	 	(h)	 	The Committee may make additional rules for loans under the Plan, provided that
such rules are administered in a nondiscriminatory manner.

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ARTICLE 9

ADMINISTRATION OF THE PLAN

	9.01	 	Employee Benefits Committee.

	 	(a)	 	The Committee shall have control of and manage the operation and
administration of the Plan. It shall have the authority to make amendments to the
Plan to ensure compliance with ERISA and to make other amendments to the Plan
provided that no such amendments cause a material increase in cost to the Company.
The Committee shall also have the authority to appoint and remove trustees for the
Plan and to establish and amend trust agreements. The Committee shall have the sole
discretion to make decisions and take actions with respect to questions arising in
connection with the Plan, including but not limited to the determination of questions
of eligibility and participation, the amount, manner and timing of benefits, the
construction, interpretation and application of the Plan and Trust Agreement and the
application thereof to relevant facts, as determined by the Committee. Any such
decision or action shall be final and binding upon all Participants and
Beneficiaries.
	 
	 	(b)	 	The Committee shall consist of not less than three (3) persons appointed
from time to time by the Compensation Committee of the Board of Directors to serve at
the pleasure of the Compensation Committee of the Board of Directors. Any member of
the Committee may resign by delivering a written resignation to the Secretary of the
Committee and such resignation shall be effective upon the date specified therein. A
Committee member shall be deemed to have resigned from the Committee if he terminates
active employment with all members of the RAI controlled group of corporations.
	 
	 	(c)	 	The Committee shall elect from its members a Chairman, and shall also elect
a Secretary who may be but need not be one of the members of the Committee. The
Committee may appoint from its members such committees with such powers as it shall
determine, and may authorize one or more of its members, or any agent, to execute or
deliver any instrument or make any payment in its behalf.
	 
	 	(d)	 	The Committee shall hold meetings in person or telephonically upon such
notice, at such place or places, and at such time or times as it may from time to
time determine.
	 
	 	(e)	 	A majority of the members of the Committee at the time in office shall
constitute a quorum for the transaction of business. All resolutions or other action
taken by the Committee shall be by the vote of a majority of the members of the
Committee present at any meeting or without a meeting by an instrument in writing
signed by a majority of the members of the Committee.

40

 

	 	(f)	 	No member of the Committee shall receive any compensation for his service as
such, and, except as may be required by applicable law, no bond or other security is
required of him in such capacity in any jurisdiction.

	9.02	 	Benefits Administration Committee.

	 	(a)	 	The Committee, in its discretion, may delegate its administrative duties and
responsibilities to one or more Benefits Administration Committees each consisting of
three or more persons, who shall be appointed by and serve at the pleasure of the
Committee and one or more of whom may also be members of such Committee. Vacancies in
the Benefits Administration Committee shall be filled by the Committee but the Benefits
Administration Committee may act, notwithstanding any vacancies, so long as there are
at least two members of such Benefits Administration Committee. The members of a
Benefits Administration Committee shall serve without compensation for their services
as such, but shall be reimbursed by the Company for all necessary expenses incurred in
the discharge of their duties.
	 
	 	(b)	 	Subject to restrictions imposed by the Committee, a Benefits Administration
Committee’s powers shall include the following powers:

	 	(i)	 	to interpret Plan provisions with respect to eligibility,
service, vesting and determination of benefits,
	 
	 	(ii)	 	to calculate benefits and authorize the payment of benefits by
the Plan trustees through disbursement accounts as directed by the Benefits
Administration Committee,
	 
	 	(iii)	 	to authorize the payment of routine plan expenses exclusive of
trustee, investment manager, or actuary fees,
	 
	 	(iv)	 	to prepare and/or approve the filing of required governmental
reports,
	 
	 	(v)	 	to maintain Plan and Account records,
	 
	 	(vi)	 	to prepare employee announcements, forms and procedures, and
	 
	 	(vii)	 	to review denials of benefit claims made by Participants or
Beneficiaries.

	 	 	The Benefits Administration Committee, at its discretion, may delegate ministerial and
clerical duties to assistants, including employees in RAI’s or the Company’s Employee
Benefits Department.
	 
	9.03	 	Pension Investment Committee.

41

 

	 	(a)	 	The Pension Investment Committee is a committee whose members are appointed by
the Audit and Finance Committee of the Board of Directors to serve at the pleasure of
the Audit and Finance Committee of the Board of Directors.
	 
	 	(b)	 	The Pension Investment Committee is charged with the specific powers, duties
and authorities set forth in its Charter, as amended from time to time, including, but
not limited to, the appointment and removal of investment managers.
	 
	 	(c)	 	The Pension Investment Committee shall have the authority to establish rules
and procedures governing investment elections and directions of Participants under the
Plan, as specified in Section 4.04(c) of the Plan.

	9.04	 	Indemnification by Company. To the extent not insured against by any insurance
company pursuant to the provisions of any applicable insurance policy, RAI or the Company
shall indemnify and hold harmless the members of the Committee, the members of the Pension
Investment Committee, the members of any Benefits Administration Committee and their
assistants from any and all claims, demands, lawsuits, or proceedings in connection with the
Plan, including the expenses of defense, provided, that such indemnification shall not apply
to any person for such person’s act of willful misconduct.
	 
	9.05	 	Plan Expenses. The expenses of administering the Plan, including, without
limitation, reasonable fees and expenses of the trustee, certified public accountants, legal
counsel, record-keepers, auditors, investment managers and investment advisors, shall be paid
from the trust established in accordance with Section 4.01 unless paid directly by RAI or the
Company at its election. The Committee will allocate among the Company and all Participating
Companies the appropriate share of expenses paid by RAI or the Company. The Committee shall
determine the manner in which fees described in this Section 9.05 shall be charged against the
Accounts or Investment Funds held in the Trust.
	 
	9.06	 	Named Fiduciaries.

	 	(a)	 	The Committee, the Pension Investment Committee, and any Benefits
Administration Committee, if delegated power in accordance with Section 9.02, shall
each constitute named fiduciaries as such term is defined in ERISA.
	 
	 	(b)	 	By resolution or by an appropriate instrument executed by a duly authorized
officer of RAI, RAI may appoint one or more other persons or committees as a named
fiduciary in respect of the duties delegated to him or it in such resolution or
instrument.

	9.07	 	Delegation. Any named fiduciary designated herein or appointed as provided herein,
unless precluded from doing so by the terms of such appointment, may by appropriate instrument
designate any person (including any firm or corporation) to carry out part or all of such
fiduciary’s responsibilities and upon such designation the named fiduciary shall have no
liability, except as imposed by applicable law, for any act or omission of such person. The
foregoing does not preclude any other fiduciary to the extent allowed

42

 

	 	 	by ERISA and the terms of his appointment from delegating part or all of such fiduciary’s
responsibilities with respect to the Plan.
	 
	9.08	 	Multiple Capacities. Any fiduciary may serve in more than one fiduciary capacity with
respect to the Plan.

43

 

ARTICLE 10

AMENDMENTS, TERMINATION, PERMANENT DISCONTINUANCE OF

CONTRIBUTIONS, MERGER OR CONSOLIDATION

	10.01	 	Amendment of the Plan. The Committee reserves the right to amend or modify the
Plan, in whole or in part, at any time, in accordance with the procedure described in Section
9.01, subject to the following:

	 	(a)	 	No amendment or modification may be made which has the effect of decreasing
retroactively the Accounts of any Participant or of reducing the nonforfeitable
percentage of the Company Contribution Account of a Participant below the
nonforfeitable percentage thereof computed under the Plan as in effect on the later
of the date on which the amendment is adopted or becomes effective;
	 
	 	(b)	 	Except to the extent permitted by law and Section 10.02, no amendment or
modification may be made to cause any part of the assets of the Plan to be used for,
or diverted to, purposes other than for the exclusive benefit of Participants,
including retired Participants, Surviving Spouses or Beneficiaries, and the payment
of expenses of the Plan prior to the satisfaction of all liabilities for benefits
under the Plan;
	 
	 	(c)	 	If an individual is not a Participant or is a retired Participant on or
after the effective date of any amendment or modification to the Plan, the amendment
or modification shall not affect such individual’s benefit unless the Committee or
the Board of Directors specifically provides otherwise;
	 
	 	(d)	 	To the extent permitted by law, any modification or amendment of the Plan
may be made retroactively, if the Committee (or the Board of Directors) shall deem
retroactive application thereof to be necessary or appropriate, either to comply with
any law or regulation, or otherwise.

	10.02	 	Termination or Permanent Discontinuance of Contributions. RAI may by action of the
Committee terminate the Plan with respect to all or any groups of Participants or direct a
complete discontinuance of contributions hereunder for any reason at any time. In case of such
termination or complete discontinuance of contributions hereunder, there shall automatically
vest in the appropriate Participants nonforfeitable rights to the Company Contributions
credited to their Accounts and the total amount in each Participant’s Accounts shall be
distributed, as the Committee shall direct, to him or for his benefit.
	 
	10.03	 	Partial Termination. In the event of a partial termination of the Plan, the
provisions of Section 10.02 shall be applicable only to the Participants affected by such
partial termination.
	 
	10.04	 	Benefits in Case of Merger or Consolidation. The Plan may not be merged or
consolidated with, nor may its assets or liabilities be transferred to, any other plan unless
each Participant, Spouse, former Participant, retired Participant or Beneficiary under the
Plan would, if the resulting plan were then terminated, receive a benefit immediately after
the merger, consolidation, or transfer which is equal to or greater than the benefit he

44

 

	 	 	 	would have been entitled to receive immediately before the merger, consolidation, or
transfer if the Plan had then terminated.

45

 

ARTICLE 11

MISCELLANEOUS

	11.01	 	Benefits Payable from Trust Fund. All persons with any interest in the Trust Fund
shall look solely to the Trust Fund for any payments with respect to such interest.
	 
	11.02	 	Elections. Elections hereunder shall be made by a Participant in writing by the
completion and delivery to the Committee of forms prescribed by the Committee for such
purposes, or in such other manner as may be prescribed by the Committee, within the time
limits set forth hereunder with respect to each such election or, if no time limit is set
forth, such limit as may be established by the Committee.
	 
	11.03	 	No Right to Continued Employment. Neither the establishment of the Plan nor the
payment of any benefits thereunder nor any action of the Company, the Board of Directors, the
Committee, the Pension Investment Committee or the Trustee shall be held or construed to
confer upon any person any legal right to be continued in the employ of the Company.
	 
	11.04	 	Inalienability of Benefits and Interests.

	 	(a)	 	No benefit payable under the Plan or interest in the Trust Fund shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any such attempted action shall be in any manner liable for
or subject to debts, contracts, liabilities, engagements or torts of any Participant,
Spouse or Beneficiary.
	 
	 	(b)	 	If any Participant, Spouse or Beneficiary shall become bankrupt or shall
attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any
benefit payable under the Plan or interest in the Trust Fund, then to the extent
permitted by law, the Committee in its discretion may hold or apply such benefit or
interest or any part thereof to or for the benefit or interest or any part thereof to
or for the benefit of such Participant, or his Beneficiary, his Spouse, children, blood
relatives, or other dependents, or any of them, in such manner and in such proportions
as the Committee may consider proper.
	 
	 	(c)	 	Notwithstanding the provisions in (a) and (b) above, any Participant may direct
that benefits payable pursuant to Articles 7 or 8 from the Trust Fund shall be paid to
the trustee of a trust created by him for his own benefit and for the benefit of his
immediate family.
	 
	 	(d)	 	Notwithstanding any provision of the Plan to the contrary, this Section 11.04
shall not apply to an offset of the Participant’s benefits under the Plan which is
permitted pursuant to the provisions of Section 206(d)(4) of ERISA.

46

 

	11.05	 	Qualified Domestic Relations Orders.

	 	(a)	 	The provisions in Section 11.04(a) shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such order is determined to
be a qualified domestic relations order, as defined in Section 206(d)(3) of ERISA, or
any domestic relations order entered before January 1, 1985.
	 
	 	(b)	 	If the Committee is in receipt of a domestic relations order, or the Committee
is otherwise aware that a qualified domestic relations order affecting a Participant’s
Account is being sought, the Committee may take such action as necessary (including,
without limitation, restricting the Participant’s ability to withdraw or borrow funds
in his or her Accounts) in order to administer the Plan consistently with the terms of
any such qualified domestic relations order.

	11.06	 	Payments for Exclusive Benefit of Participants. Payments of benefits in respect of
the interest of a Participant under the Plan to any person other than such Participant in
accordance with the provisions of the Plan shall be deemed to be for the exclusive benefit of
such Participant.
	 
	11.07	 	Puerto Rico Law to Govern. All questions pertaining to the construction, regulation,
validity and effect of the provisions of the Plan shall be determined in accordance with the
laws of Puerto Rico, except to the extent such laws are pre-empted by ERISA.
	 
	11.08	 	No Guarantee. Neither the Company, RAI nor the Trustee guarantee the Trust Fund in
any manner against loss or depreciation.
	 
	11.09	 	Address of Record. Each individual or entity with an actual or potential interest in
the Plan shall file and maintain a current record address with the Plan. Communications mailed
by RAI, the Company, the Trustee, the Committee or the Benefits Administration Committee to
such record address fulfills all obligations to provide required information to Participants,
including former employees, surviving Spouses and Beneficiaries, in regard to the Plan. If no
record address is filed, it may be presumed that the address used by RAI, the Company, the
Trustee, the Committee or the Benefits Administration Committee in forwarding statements of a
Participant’s Account is the record address.
	 
	11.10	 	Unlocated Spouse. Notwithstanding the consent requirement in Section 1.08, if the
Participant establishes to the satisfaction of the Committee that such written consent cannot
be obtained because there is no Spouse or the Spouse cannot be located, a waiver shall be
deemed to be valid. Any consent necessary under Section 1.08 will be valid only with respect
to the Spouse who signs the consent or in the event of a deemed election, the designated
Spouse.
	 
	11.11	 	Plan Administrator. The Plan Administrator shall be the Committee and it shall be
responsible for the performance of all reporting and disclosure obligations under ERISA and
regulations promulgated by any federal, state and local agency, provided that the

47

 

	 	 	Committee may delegate under Section 9.02 some or all of such duties as Plan Administrator.
	 
	11.12	 	Agent for Process. The Secretary of RAI shall be the designated agent for the
service of legal process.
	 
	11.13	 	Payments in the Event of Incompetency. If the Committee finds that a Participant or
other person entitled to a benefit is unable to care for his affairs because of illness or
accident or is a minor, the Committee may direct that any benefit due the Participant, unless
claim shall have been made therefore by a duly appointed legal representative, be paid to his
Spouse, a child, or a parent for the benefit of such Participant, and any such payment so made
shall be a complete discharge of the liabilities of the Plan therefor.
	 
	11.14	 	Transfer of Prior Plan and Affiliated Plan Assets and Liabilities to This Plan.

	 	(a)	 	Prior Plans. Effective as of a date established by the Committee after
receipt of a Puerto Rico Department of the Treasury determination that (i) this Plan
meets the applicable requirements of Section 1165(a) of the PR Code, and (ii) a prior
plan or plans meets the applicable requirements of Section 1165(a) of the PR Code, the
assets in cash and liabilities (or only assets not in payout status and related
liabilities if directed by the Pension Investment Committee) of a prior plan may be
transferred to this Plan if the Pension Investment Committee so directs. This Plan
shall be considered as a successor plan with regard to such employee and all prior plan
contributions transferred shall be treated as though they were made under this Plan for
purposes of vesting, withdrawals and distributions.
	 
	 	(b)	 	Affiliated Plans. If a Participant of a Puerto Rico qualified
Affiliated Plan becomes eligible to be a Participant of this Plan before receiving a
distribution from the Affiliated Plan, his account under the Affiliated Plan shall be
transferred to this Plan by way of a trustee-to-trustee transfer. This Plan shall be
considered as a successor plan with regard to such employee and all Affiliated Plan
contributions transferred shall be treated as though they were made under this Plan for
purposes of vesting, withdrawals and distributions.
	 
	 	(c)	 	Notwithstanding (a) or (b) above, this Plan shall not accept a
trustee-to-trustee transfer from any plan that is subject to the requirements of
Section 205 of ERISA. In the absence of an applicable Participant election, assets
transferred from a prior plan or Affiliated Plan shall be invested in the equivalent
Investment Funds under this Plan or, if an equivalent Investment Fund does not exist,
then the assets from the prior plan or Affiliated Plan shall be invested in the
Vanguard Retirement Savings Trust Fund, and the Accounts of participants and
beneficiaries under the prior plan or Affiliated Plan will become their Accounts as
Participants and Beneficiaries under this Plan, effective as of the transfer date.

48

 

	11.15	 	Payment of Expenses.

	 	(a)	 	Direct charges and expenses arising out of the purchase or sale of securities,
and taxes levied on or measured by such transactions may be charged against the
Account(s) or Investment Fund for which the transactions took place.
	 
	 	(b)	 	Direct charges or expenses arising out of the establishment and maintenance of
any funding account with an insurance company or other financial institution may be
charged against the Account(s) or Investment Fund for which the funding account is
established.
	 
	 	(c)	 	Investment manager fees arising out of the establishment and maintenance of any
Investment Fund may be charged against the Investment Fund for which the Investment
Manager fees are incurred.
	 
	 	(d)	 	Trustee fees attributable to the Trust, auditor fees for the plan, and IRS user
fees may be paid directly from the Trust. The Committee shall determine the manner in
which these fees shall be charged against the Account(s) or Investment Funds held in
the Trust.
	 
	 	(e)	 	Any other charges or expenses relating to the maintenance or administration of
the Plan that are permitted under applicable law to be paid from the Trust including,
but not limited to, recordkeeping fees, may be paid directly from the Trust. The
Committee shall determine the manner in which these charges and expenses shall be
charged against the Accounts or Investment Funds held in the Trust.
	 
	 	(f)	 	Any of the expenses in (a)-(e) above may, at the option of RAI or the Company,
be paid wholly or partly directly by RAI or the Company.
	 
	 	(g)	 	RAI or the Company shall pay all other expenses reasonably incurred in
administering the Plan.
	 
	 	(h)	 	The Committee, along with the Pension Investment Committee, may authorize
additional expenses to be charged directly from the Trust; provided that payment of
such additional expenses from the Trust is permitted under applicable law, such fees
are reasonable, and that any change in fee policy is communicated to Participants in a
timely manner.

	11.16	 	Headings. Headings of Articles and Sections of the Plan are inserted for convenience
of reference. They constitute no part of the Plan.

49

 

ARTICLE 12

CLAIM PROCEDURE

	12.01	 	Initial Determination. The initial determination of a Participant’s, Spouse’s or
Beneficiary’s (collectively hereinafter, a “claimant”) eligibility for, and the amount of, a
benefit shall be made by the Benefits Administration Committee, or in its absence, the
Committee, which shall mail or deliver to each covered individual who has filed an effective
claim for a benefit a written statement of the amount of his benefit or a notice of denial of
his claim on or before the 90th day following the Committee’s receipt of such
claim. If special circumstances require additional time for processing the claim, the
Benefits Administration Committee, or in its absence, the Committee, may delay issuing its
statement or notice for an additional 90 days provided that the claimant is notified of the
circumstances necessitating the delay and the date the Benefits Administration Committee
expects to render its decision within the initial 90-day period. A claim for benefits is not
effective unless filed in the manner prescribed by the Committee. A notice of denial shall be
written in a manner calculated to be understood by the claimant and shall include (a) one or
more specific reasons for the denial of the claim, (b) specific reference(s) to provisions of
the Plan and/or Trust Agreement on which the denial of the claim is based, (c) a description
of any additional material or information necessary for the claimant to perfect the claim, and
an explanation of why such material or information is necessary, and (d) an explanation of the
Plan’s review procedures and the time limits applicable to such procedures, including a
statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA
following an adverse benefit determination on review.
	 
	12.02	 	Review. If a claim is denied and the claimant wishes to appeal the denial, the
claimant or his duly authorized representative must, within 60 days after the receipt by the
claimant of a written notice of denial of the claim, file a written request with the Committee
that it review the denial of the claim for benefits. If the claimant does not file such a
request within such 60-day period, the claimant shall be conclusively presumed to have
accepted as final and binding the initial decision of the Benefits Administration Committee on
his claim. If such an appeal is so filed within such 60-day period, the Committee shall
conduct a full and fair review of such claim. During such full review, the claimant (or his
duly authorized representative) shall be provided with the opportunity to submit written
comments, documents, records, and other information relating to the claim for benefits and
reasonable access to and copies of, upon request and free of charge, all documents, records,
and other information relevant to the claimant’s claim for benefits. In addition, such full
and fair review shall take into account all comments, documents, records, and other
information submitted by the claimant relating to the claim, without regard to whether such
information was submitted or considered in the initial benefit determination.
	 
	 	 	After the completion of such full review, the Committee shall mail or deliver to the
claimant a written decision on the matter, within a reasonable time, but in no event later
than 60 days after receipt of the request for review unless special circumstances require

50

 

	 	 	 	an extension of time for processing. If the Committee determines that an extension of time
for processing is required, written notice of the extension shall be furnished to the
claimant who filed the appeal setting forth the special circumstances requiring an extension
of time and the date by which the Committee expects to render a decision on review, and
shall be furnished prior to the termination of the initial 60-day period. In no event shall
such extension exceed a period of 60 days from the end of the initial 60-day period. In the
case of an adverse benefit determination on review, the notice of the determination shall
be written in a manner calculated to be understood by the claimant and shall include (a) one
or more specific reasons for the decision, (b) specific reference(s) to the provisions of
the Plan and/or Trust Agreement on which the decision was based, and (c) shall, to the
extent not prohibited by applicable law, be final and binding on all interested persons. In
addition, the notice of adverse determination shall also (x) include a statement that the
claimant is entitled to receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records and other information relevant to the claimant’s claim for
benefits and (y) describe any voluntary appeal procedures offered by the Plan and the
claimant’s right to obtain information about such procedures and a statement of the
claimant’s right to bring an action under Section 502(a) of ERISA.

            IN WITNESS WHEREOF, the undersigned member of the Committee has executed this Restatement of
the Puerto Rico Savings & Investment Plan on December 8, 2009.

	 	 	 	 	 
	 	RAI Employee Benefits Committee

 	 
	 	By:   	/s/
McDara P. Folan, III 	 

51

 

SCHEDULE A

COMPENSATION

	I.	 	The following payments are included as Compensation for all Participants:

	 	•	 	Basic salary.
	 
	 	•	 	Shift premium pay.
	 
	 	•	 	Overtime.
	 
	 	•	 	Commissions.
	 
	 	•	 	Sales incentive payments.
	 
	 	•	 	Vacation pay (except as noted in Part II below).
	 
	 	•	 	Compensation deferred pursuant to salary reduction arrangements under PR Code Section 1165(e).
	 
	 	•	 	Salary continuation payments prior to the Severance Date.
	 
	 	•	 	Lump sum payments in lieu of an increase in basic salary.
	 
	 	•	 	AIAP payments that are eligible to be deferred.

	II.	 	The following payments are not included as
Compensation for Participants:
	 
	 	 	Any form of compensation not listed in Part I, and specifically excluding the following:

	 	•	 	Vacation pay received in lieu of vacation taken.     
	 
	 	•	 	Moving expenses.     
	 
	 	•	 	Housing differential.     
	 
	 	•	 	Bonus payments unless specifically identified in Part I above.     
	 
	 	•	 	Change of control bonus.     
	 
	 	•	 	Stay-on bonus.     
	 
	 	•	 	Management incentive plan payments unless specifically identified in Part I above.     
	 
	 	•	 	Nondeferrable AIAP payments.     
	 
	 	•	 	Deferrals made pursuant to the Reynolds American Scholastic Savings Plan.     
	 
	 	•	 	Christmas bonus.     

52

 

SCHEDULE B

PARTICIPATING COMPANIES

	 	 	 
	Unit	 	Eligible Employees
	R. J. Reynolds Tobacco (CI), Co.

	 	As described in Section 1.19 of the Plan.

53exv10w9

Exhibit
10.9

PATTERSON-UTI ENERGY, INC.

2005 LONG-TERM INCENTIVE PLAN

CASH-SETTLED

PERFORMANCE UNIT AWARD AGREEMENT

[Insert Date]

	1.	 	Performance Unit Award. The Compensation Committee (the “Committee”) of the Board of
Directors of Patterson-UTI Energy, Inc., a Delaware corporation (the “Company”),
pursuant to the Patterson-UTI Energy, Inc. 2005 Long-Term Incentive Plan, as amended from time
to time (the “Plan”), hereby awards to                      (the “Grantee”),
effective as of the Date of Award set forth above, a Performance Unit Award (the
“Award”) on the terms and conditions as set forth in this agreement (this
“Agreement”).

	 	1.1	 	General Performance Criteria. The Award provides the Grantee an
opportunity to earn a cash payment based upon the Company’s total stockholder return
for the Performance Period (as that term is defined below) as compared with the total
stockholder returns of National-Oilwell Varco, Inc., Transocean LTD, Smith
International, Inc., Weatherford International Ltd., Nabors Industries Ltd.,
BJ Services Company, FMC Technologies, Inc., Diamond Offshore Drilling, Inc., Noble
Corporation, ENSCO International Incorporated, Pride International Inc., Rowan
Companies, Inc. and Helmerich & Payne, Inc., as such group of companies may be adjusted
pursuant to Section 1.5 (the “Peer Index Companies”) for such period. Total
shareholder return for the Company will be measured based on $100 invested in the
Company’s common stock on the first day of the Performance Period, with dividends
reinvested.
	 
	 	1.2	 	Payment Upon Achievement of Performance Criteria as of the Final Day of the
Performance Period. If (a) the Company’s total stockholder return (dividends
during the Performance Period, if any, are assumed to be reinvested) for the three-year
period (the “Performance Period”) ending March 31, 2012 (the “Final Day of
the Performance Period”), is positive and equals or exceeds the 25th
percentile of the total stockholder returns of the Peer Index Companies for the
Performance Period, (b) a Change in Control of the Company has not occurred on or
before the Final Day of the Performance Period, and (c) the Grantee remains in the
active employ of the Company through the Final Day of the Performance Period, then the
Company shall pay to the Grantee an amount equal to $                     (the “Base
Payment”) if the Company’s total stockholder return for the Performance Period is
at or above the 25th percentile rank of the Company’s total stockholder
return for the Performance Period as compared to the total stockholder returns of the
Peer Index Companies but less than the 50th percentile, two times the Base
Payment if at or above the 50th percentile but less than the 75th
percentile and four times the Base Payment if at the 75th percentile or
higher. No amount shall be payable under this Section 1.2 if an amount is payable
under Section 1.3.

 

 

	 	1.3	 	Payment Upon Achievement of Performance Criteria Following the Final Day of
Performance Period. If (a) the Company’s total stockholder return for the
Performance Period is negative, (b) during the two-year period ending March 31, 2014
the Company’s total shareholder return for any 30 consecutive day period (the
“Secondary Performance Period”) equals or exceeds 18 percent (18%) on an
annualized basis from April 1, 2009 through the last day of such 30 consecutive day
period (the “Final Day of the Secondary Performance Period”), and (c) the
Grantee is in the active employ of the Company through the Final Day of the Secondary
Performance Period, then the Company shall pay to the Grantee an amount, if any, as
determined under Section 1.2 based on the Company’s total shareholder return relative
to the Peer Index Companies as of March 31, 2012. No amount shall be payable under
this Section 1.3 if an amount is payable under Section 1.2.
	 
	 	1.4	 	Forfeiture. Notwithstanding any other provision of this Agreement to
the contrary, the Award pursuant to this Agreement shall lapse and be forfeited on the
earlier of the following:

	 	(i)	 	the Final Day of the Performance Period if (a) the Company’s
total stockholder return for the Performance Period is less than the
25th percentile of the total stockholder returns of the Peer Index
Companies for the Performance Period and (b) a Change in Control of the Company
has not occurred on or before the Final Day of the Performance Period; and
	 
	 	(ii)	 	March 31, 2014 if (a) the Company’s total stockholder return
for the Performance Period is negative, (b) the Company’s total stockholder
return for the Performance Period is equal to or greater than the
25th percentile of the total stockholder returns of the Peer Index
Companies for the Performance Period; (c) the Final Day of the Secondary
Performance Period has not occurred on or before March 31, 2014 and (d) a
Change in Control of the Company has not occurred on or before March 31, 2014.

	 	1.5	 	Committee Determination. Pursuant to Articles 4 and 9 of the Plan, the
Committee shall have the discretion to calculate the total stockholder returns for the
Performance Period and, if applicable, the Secondary Performance Period for the Peer
Index Companies, including the Company, and to determine the formula to achieve such
calculations.
	 
	 	 	 	The Committee’s determinations with respect to the Performance Period or Secondary
Performance Period for purposes of this Agreement shall be binding upon all persons.
The Committee may not increase the amount payable under this Agreement. The
Committee may, in its sole discretion, make such adjustments as it deems necessary
and appropriate, if any, in the composition of the group of Peer Index Companies to
address the merger or consolidation of any company in the Peer Index Companies as of
the date hereof with another company, an acquisition or disposition of a significant
portion of such company’s businesses or assets as it

2

 

	 	 	 	exists on the date hereof, or any other extraordinary event occurring in relation to
such company during the term of this Agreement.

	 	 	 	Prior to a payment made pursuant to Section 1.2 or, if applicable, Section 1.3 and
as provided in Section 2 or Section 3.4, the Compensation Committee of the Board of
Directors of the Company shall determine if the performance criteria for such
payment has been satisfied and, to the extent such performance criteria has been
satisfied, shall certify in writing that such performance criteria has been
satisfied.

	2.	 	TIME OF PAYMENT. For purposes of this Agreement, unless otherwise provided under the Plan or
Section 3.4 of this Agreement, the Grantee shall be paid the payment due under Section 1.2 or,
if applicable, Section 1.3 on or before the 75th day following the Final Day of the
Performance Period or, if applicable, the Final Day of the Secondary Performance Period. Any
such payment pursuant to this Agreement will be made to the Grantee or, if payable pursuant to
Section 3.3, the Grantee’s legal representative or the Grantee’s estate, and thereafter the
Grantee or, if applicable, the Grantee’s estate and heirs, executors, administrators and the
Grantee’s legal representatives shall have no further rights with respect to the Performance
Unit Award or this Agreement.
	 
	3.	 	TERMINATION OF EMPLOYMENT/CHANGE IN CONTROL. The following provisions will apply in the
event the Grantee’s employment with the Company terminates, or a Change in Control (as defined
below) occurs, before the Final Day of the Performance Period or, if applicable the Final Day
of the Secondary Performance Period.

	 	3.1	 	Definitions. For purposes of this Agreement, the following terms shall
have the meanings ascribed to them under this Section:

	 	(i)	 	The Grantee will have a “Disability” if the Grantee
qualifies for long-term disability benefits under a long-term disability
program sponsored by the Company in which executive officers participate
generally or, if the Company does not sponsor such a long-term disability
program, the Grantee is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months.
	 
	 	(ii)	 	“Retirement” means the voluntary termination of the
Grantee’s employment relationship with the Company on or after the date on
which the sum of the Grantee’s age and number of full years of service total
65.
	 
	 	(iii)	 	A “Change in Control of the Company” shall mean the
occurrence of any of the following after the Grant Date and prior to the date
on which the Performance Unit Award is forfeited in accordance with
Section 1.4:

	 	(1)	 	The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended) (a “ Covered Person”) of beneficial

3

 

	 	 	 	ownership (within the meaning of rule 13d-3 promulgated under the
Exchange Act) of 35% or more of either (A) the then outstanding
 shares of the common stock of the Company (the “Outstanding
Company Common Stock”), or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company
Voting Securities”); provided, however, that for purposes of this
subclause (1) of this Section 3.1(iii), the following acquisitions
shall not constitute a Change in Control of the Company: (A) any
acquisition directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any entity
controlled by the Company, or (D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B) and
(C) of subclause (3) of this Section 3.1(iii); or

	 	(2)	 	Individuals who, as of the Grant Date, constitute the Board of
Directors (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board of Directors; provided,
however, that any individual becoming a director subsequent to the
Grant Date whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or
on behalf of a Covered Person other than the Board; or

	 	(3)	 	Consummation of (xx) a reorganization, merger or consolidation
or sale of the Company or any subsidiary of the Company, or (yy) a
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, direct or indirectly, more than 65% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the

4

 

	 	 	 	Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Covered Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or, if earlier, of
the action of the Board of Directors, providing for such Business
Combination.

	 	3.2	 	Termination Generally. Except as specified in Section 3.3 and 3.4
below, all of the Grantee’s rights in this Agreement, including all rights to the
Performance Unit Award granted to the Grantee, will lapse and be completely forfeited
on the date the Grantee’s employment terminates if:

	 	(i)	 	the Grantee’s employment with the Company terminates on or
before the Final Day of the Performance Period for a payment payable pursuant
to Section 1.2, if any, for any reason other than death, Disability or
Retirement; or
	 
	 	(ii)	 	the Company’s total stockholder return for the Performance
Period is negative and the Grantee’s employment with the Company terminates
after the Final Day of the Performance Period but on or before the Final Day of
the Secondary Performance Period for a payment payable pursuant to Section 1.3,
if any, for any reason other than death, Disability or Retirement.

	 	3.3	 	Death, Disability or Retirement. Notwithstanding any other provision
of this Agreement to the contrary, if the Grantee’s employment with the Company
terminates because the Grantee dies, incurs a Disability, or due to Retirement each:

	 	(i)	 	after the completion of at least one month of the Performance
Period and on or before the Final Day of the Performance Period for a payment
payable pursuant to Section 1.2, if any, then the Company will pay to the
Grantee in cash, at such time as provided in Section 2, an amount equal to the
product of (1) and (2) where (1) is the amount the Grantee would have received
under this Agreement if the Grantee’s employment with the

5

 

	 	 	 	Company had not been terminated due to the Grantee’s death, Disability or
Retirement before such Final Day of the Performance Period and (2) is a
fraction, the numerator of which is the number of days from the beginning of
the Performance Period through the date of the Grantee’s death, or the
Grantee’s termination of employment with the Company due to a Disability or
Retirement up to a maximum of 1095 days and the denominator of which is
1095; or

	 	(ii)	 	after the completion of at least one month of the Performance
Period and on or before the Final Day of the Secondary Performance Period for a
payment payable pursuant to Section 1.3, if any, then the Company will pay to
the Grantee in cash, at such time as provided in Section 2, an amount equal to
the product of (1) and (2) where (1) is the amount the Grantee would have
received under this Agreement if the Grantee’s employment with the Company had
not been terminated due to the Grantee’s death, Disability or Retirement before
such Final Day of the Secondary Performance Period and (2) is a fraction, the
numerator of which is the number of days from the beginning of the Performance
Period through the date of the Grantee’s death, or the Grantee’s termination of
employment with the Company due to a Disability or Retirement up to a maximum
of 1095 days and the denominator of which is 1095.

	 	3.4	 	Change in Control. Notwithstanding anything in the Agreement to the
contrary, the Company (or its successor) will pay to the Grantee on or before ten (10)
business days following a Change in Control of the Company an amount equal to two times
the Base Payment, and thereafter the Company (or its successor) will have no further
obligations to the Grantee pursuant to this Agreement; provided, however, that this
Section 3.4 shall not apply if the Grantee is the Covered Person or forms part of the
Covered Person below that acquires 35% or more of either the Outstanding Company Common
Stock or Outstanding Company Voting Securities and such acquisition constitutes a
Change in Control of the Company.

	4.	 	TAX WITHHOLDING. To the extent that any payment pursuant to this Agreement results in
income, wages or other compensation to the Grantee for any income, employment or other tax
purposes with respect to which the Company or a Subsidiary has a withholding obligation, the
Company or the Subsidiary is authorized to withhold from any payment under this Agreement any
tax required to be withheld by reason of such taxable income, wages or compensation.
	 
	5.	 	NONTRANSFERABILITY. The Performance Unit Award and the Grantee’s rights under this Agreement
may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred,
encumbered or disposed of. Any such attempted sale, assignment, pledge, exchange,
hypothecation, transfer, encumbrance or disposition in violation of this Agreement shall be
void and the Company shall not be bound thereby.
	 
	6.	 	CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The existence of the Performance Unit Award shall
not affect in any way the right or power of the Company

6

 

	 	 	to make or authorize any adjustment, recapitalization, reorganization or other change in its
capital structure or its business, engage in any merger or consolidation, issue any debt or
equity securities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose of
all or any part of its assets or business, or engage in any other corporate act or
proceeding.

	7.	 	PERFORMANCE UNIT AWARD DOES NOT AWARD ANY RIGHTS OF A STOCKHOLDER. The Grantee shall not
have the voting rights or any of the other rights, powers or privileges of a holder of the
stock of the Company with respect to the Performance Unit Award that are awarded hereby.
	 
	8.	 	EMPLOYMENT RELATIONSHIP. For purposes of this Agreement, the Grantee shall be considered to
be in the employment of the Company as long as the Grantee has an employment relationship with
the Company and any of its Subsidiaries. The Committee shall determine any questions as to
whether and when there has been a termination of such employment relationship, and the cause
of such termination, under the Plan, and the Committee’s determination shall be final and
binding on all persons.
	 
	9.	 	NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment agreement, and no provision
of this Agreement shall be construed or interpreted to create an employment relationship
between the Grantee and the Company or any Affiliate or guarantee the right to remain employed
by the Company or any Affiliate for any specified term.
	 
	10.	 	LIMIT OF LIABILITY. Under no circumstances will the Company or an Affiliate be liable for
any indirect, incidental, consequential or special damages (including lost profits) of any
form incurred by any person, whether or not foreseeable and regardless of the form of the act
in which such a claim may be brought, with respect to the Plan.
	 
	11.	 	COMPANY LIABLE FOR PAYMENT. Except as specified in Section 3.4, the Company is liable for
the payment of any amounts that become due under this Agreement.
	 
	12.	 	MISCELLANEOUS. This Agreement is awarded pursuant to and is subject to all of the provisions
of the Plan, including amendments to the Plan, if any. Capitalized terms that are not defined
herein shall have the meanings ascribed to such terms in the Plan.

[SIGNATURE PAGE TO FOLLOW]

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     In accepting the Performance Unit Award set forth in this Agreement the Grantee accepts and
agree to be bound by all the terms and conditions of the Plan and this Agreement.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	PATTERSON-UTI ENERGY, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	 

	 	 
	Date:

	 	 	 	 	 	Title:
	 	 

	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(“GRANTEE”)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 

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