Document:

EX-10.32

Exhibit 10.32

REYNOLDS AMERICAN INC.

EQUITY INCENTIVE AWARD PLAN FOR DIRECTORS OF

REYNOLDS AMERICAN INC.

DEFERRED STOCK UNIT AGREEMENT

 

DATE OF GRANT: ___________________________

W I T N E S S E T H:

     1. Grant. Pursuant to the provisions of the Equity Incentive Award Plan For Directors
of Reynolds American Inc. (the “Plan”) Reynolds American Inc. (the “Company”) on the above date has
granted to

__________________________ (the “Grantee”),

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

__________ Deferred Stock Units.

A copy of the Plan has been provided to the Grantee and is made a part of this Agreement with the
same effect as if set forth in the Agreement itself. All capitalized terms used below shall have
the meaning set forth in the Plan, unless the context requires a different meaning.

     2. Value of Deferred Stock Units. Each Deferred Stock Unit shall be equal in value to
one share of Common Stock.

     3. Dividends. As of the date any dividend is paid to shareholders of Common Stock,
the Grantee shall be credited with additional Deferred Stock Units equal to the number of shares of
Common Stock (including fractions of a share) that could have been purchased at the closing price
of Common Stock on such date with the dividend paid on the number of shares of Common Stock to
which the Grantee’s Deferred Stock Units are then equivalent. In case of dividends paid in
property, the dividend shall be deemed to be the fair market value of the property at the time of
distribution of the dividend, as determined by the Committee.

     4. Payment of Deferred Stock Units.

	 	(a)	 	Payment of the Grantee’s Deferred Stock Units shall be made either in a lump
sum or in the number of annual installments (not exceeding 10) according to the
election made by the Grantee on the initial election form provided by the Company to
the

 

 

	 	 	 	Grantee in December 2006. Such election is not irrevocable; provided,
however, that any subsequent election that changes the timing or form of the
Grantee’s previous distribution election must comply with Section 409A of the Code.

	 
	 	(b)	 	Distribution of the Grantee’s Deferred Stock Units shall be made in cash or
stock. If distribution is made in cash, the amount of distribution shall be determined
by multiplying the number of Deferred Stock Units attributable to the installment by
the average of the closing price in Common Stock on each business day in the month of
December immediately prior to the year in which the installment is to be paid.

	 
	 	(c)	 	In the event the Grantee has elected to receive distribution of his or her
Deferred Stock Units in more than one installment, the amount of each installment shall
be determined by multiplying the remaining number of Deferred Stock Units by a
fraction, the numerator of which is one, and the denominator of which is the number of
installments yet to be paid.

     5. Transferability. Other than as specially provided in the Plan with regard to the
death of the Grantee, this Agreement and any benefit provided or accruing hereunder shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance
or charge; and any attempt to do so shall be void. No such benefit shall, prior to receipt thereof
by the Grantee, be in any manner liable for or subject to the debts, contracts, liabilities,
engagements or torts of the Grantee.

     6. Consideration to the Company. In consideration of the Grant by the Company, the
Grantee agrees to render faithful and efficient services to the Company, with such duties and
responsibilities as the Company shall from time to time prescribe. Nothing in this Agreement or in
the Plan shall confer upon the Grantee any right to continue in the service of the Company as a
director or in any other capacity or shall interfere with or restrict in any way the rights of the
Company and its shareholders, which are hereby expressly reserved, in connection with the removal
of the Grantee from the Board of Directors of the Company at any time for any reason whatsoever,
with or without cause, subject to applicable law and the Company’s articles of incorporation and
bylaws.

     7. Application of Laws. The Grant and the obligations of the Company hereunder shall
be subject to all applicable laws, rules and regulations and to such approvals of any governmental
agencies as may be required. This Agreement is intended to comply with Section 409A of the Code
and shall be construed and interpreted in accordance with such intent.

     8. Taxes. Any taxes required by federal, state, or local laws to be withheld by the
Company on the grant or payment of Deferred Stock Units shall be paid to the Company before payment
of the Deferred Stock Units is made to the Grantee.

     9. Notices. Any notices required to be given hereunder to the Company shall be
addressed to the Corporate Secretary, Reynolds American Inc., P. O. Box 2990, 401 North Main
Street, Winston-Salem, NC 27102-2990, and any notice required to be given hereunder to the Grantee
shall be sent to the Grantee’s address as shown on the records of the Company.

 

 

     10. Administration and Interpretation. In consideration of the Grant, the Grantee
specifically agrees that the Committee shall have the exclusive power to interpret the Plan and
this Agreement and to adopt such rules for the administration, interpretation and application of
the Plan and Agreement as are consistent therewith and to interpret or revoke any such rules. All
actions taken and all interpretation and determinations made by the Committee shall be final,
conclusive, and binding upon the Grantee, the Company and all other interested persons. No member
of the Committee shall be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Agreement. The Committee may delegate its interpretive
authority to an officer or officers of the Company.

     11. Other Provisions.

	 	(a)	 	Titles are provided herein for convenience only and are not to serve as a basis
for interpretation of the Agreement.

	 
	 	(b)	 	This Agreement may be amended only by a writing executed by the parties hereto
which specifically states that it is amending this Agreement.

	 
	 	(c)	 	THE LAWS OF THE STATE OF NORTH CAROLINA SHALL GOVERN THE INTERPRETATION,
VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT, REGARDLESS OF THE LAW THAT
MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF LAWS.

     IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the Grantee have executed
this agreement as of the Date of Grant first above written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	REYNOLDS AMERICAN INC.
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Authorized Signatory
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Grantee
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Grantee’s Taxpayer Identification Number:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Grantee’s Home Address:EX-10.59

Exhibit 10.59

REYNOLDS AMERICAN INC.

ANNUAL INCENTIVE AWARD PLAN

Effective July 30, 2004,

As Amended and Restated as of January 1, 2009

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	1.

	 	Purpose
	 	 	2	 
	 
	 	 	 	 	 	 
	2.

	 	Definitions
	 	 	2	 
	 
	 	 	 	 	 	 
	3.

	 	Eligibility
	 	 	2	 
	 
	 	 	 	 	 	 
	4.

	 	Company Performance Objectives
	 	 	2	 
	 
	 	 	 	 	 	 
	5.

	 	Determination of Target Awards
	 	 	3	 
	 
	 	 	 	 	 	 
	6.

	 	Determination of Employee Performance Rating Multipliers
	 	 	3	 
	 
	 	 	 	 	 	 
	7.

	 	Determination of Cash Awards
	 	 	4	 
	 
	 	 	 	 	 	 
	8.

	 	Determination of Cash Awards for SBC Program Participants
	 	 	5	 
	 
	 	 	 	 	 	 
	9.

	 	Deferral
	 	 	6	 
	 
	 	 	 	 	 	 
	10.

	 	Tax Withholding
	 	 	9	 
	 
	 	 	 	 	 	 
	11.

	 	Adjustments, Amendments or Termination
	 	 	9	 
	 
	 	 	 	 	 	 
	12.

	 	Adoption/Withdrawal by Participating Companies
	 	 	9	 
	 
	 	 	 	 	 	 
	13.

	 	Miscellaneous
	 	 	10	 
	 
	 	 	 	 	 	 
	14.

	 	Effective Date
	 	 	12	 

 

 

REYNOLDS AMERICAN INC.

ANNUAL INCENTIVE AWARD PLAN

Effective July 30, 2004

As Amended and Restated as of January 1, 2009

	1.	 	Purpose

	 
	 	 	The Reynolds American Inc. Annual Incentive Award Plan is established to link corporate and
business priorities with individual and group performance objectives for employees of RAI
and its affiliated companies. The Plan is an amendment, restatement and continuation of the
R.J. Reynolds Tobacco Holdings, Inc. Annual Incentive Award Plan.

	 
	2.	 	Definitions

	 
	 	 	Capitalized terms have the meanings set forth in Exhibit A.

	 
	3.	 	Eligibility

	 
	 	 	To be eligible to participate in the Plan and receive an award, an employee must:

	 	(a)	 	be employed by a Participating Company in an employment classification and at
or above a job level or in a job category as designated by such Participating Company;

	 
	 	(b)	 	except as otherwise provided in Section 7, be employed by a Participating
Company for at least three months during the year; and

	 
	 	(c)	 	except as otherwise provided herein, be actively employed by a Participating
Company on the last day of the year.

	4.	 	Company Performance Objectives

	 	(a)	 	Subject to the approval of the Committee, the Chief Executive Officer of each
Participating Company may establish specific objectives (the “Company Performance
Objectives”) for each Participating Company for each year. Subject to the approval of
the Chief Executive Officer of RAI, the Chief Executive Officers of the Participating
Companies also may establish Company Performance Objectives for some or all of their
respective subsidiaries. Company Performance Objectives may be based on any financial,
operational or other criteria, such as market share.

	 
	 	(b)	 	Each of the Company Performance Objectives will be weighted for the purpose of
determining awards under the Plan. Different weights may be assigned to the objectives
for different Participants and Participating Companies. However, the aggregate weights
for the Company Performance Objectives will each range from 1-100% and together total
100%.

2

 

	 	(c)	 	Company Performance Objectives may be reviewed and revised during the year
pursuant to the procedures used for their adoption. The Chief Human Resources Officer
may change the weighting of any objective for any Participant below Senior Vice
President (job level 11).

	5.	 	Determination of Target Awards

	 	(a)	 	Each Participant’s target award level is expressed as a percentage of Base Pay
and falls within a range of target award levels set for the Participant’s salary grade.
The Committee will periodically review and may modify the range of target award levels
for each salary grade. Subject to the approval of the Chief Human Resources Officer,
Reviewing Managers will periodically review and may modify specific target award levels
for individual Participants. The Chief Executive Officer may modify the specific
target award level for the Chief Human Resources Officer.

	 
	 	(b)	 	Each Participant’s target award for each year equals the product of (i) the
Participant’s highest annual rate of Base Pay in effect for three months or more during
the year, multiplied by (ii) the Participant’s highest target award level for which he
was eligible for three months or more during the year; provided, however, that with
respect to employees of RAI, R. J. Reynolds Tobacco Company and R. J. Reynolds Global
Products, Inc. (exclusive of any Puerto Rico based employees), if the product of (i)
and (ii) is less than $1,000, the Participant’s target award will be $1,000.

	6.	 	Determination of Employee Performance Rating Multipliers

	 
	 	 	Each Participant’s Employee Performance Rating Multiplier will be determined by his
performance rating under each Participating Company’s Performance Management Center (PMC)
process, as set forth in the following table; provided, that the Employee Performance Rating
Multiplier shall never be greater than 1.0 for Participants above the vice president level:

	 	 	 	 	 	 	 	 	 
	 	PMC 

Performance Rating
	 	 	Employee Performance

Rating Multiplier

If Company Performance

Rating is 100% or greater
	 	 	Employee Performance

Rating Multiplier

If Company Performance

Rating is less than 100%	 
	 	Exceeds
	 	 	1.5
	 	 	1.0	 
	 	High Achieves
	 	 	1.25
	 	 	1.0	 
	 	Achieves
	 	 	1.0
	 	 	1.0	 
	 	Almost Achieves
	 	 	0.5
	 	 	0.5	 
	 	Fails to Meet
	 	 	0
	 	 	0	 
	 

3

 

	7.	 	Determination of Cash Awards

	 	(a)	 	Promptly after the end of each year, the Chief Executive Officer of RAI will
review the performance of each Participating Company with the Committee. Subject to
the approval of the Committee, the Chief Executive Officers of the Participating
Companies may give a rating to each Company Performance Objective for the year (a
“Company Performance Rating”) ranging from 0-200% for each Company Performance
Objective.

	 
	 	(b)	 	The amount of each Cash Award is determined by the following formula:

	 	(i)	 	the product of the Company Performance Ratings multiplied by
the respective weights assigned to the corresponding Company Performance
Objectives pursuant to Section 4(c)

	 
	 	 	 	multiplied by

	 
	 	(ii)	 	the target award for the Participant established pursuant to
Section 5

	 
	 	 	 	multiplied by

	 
	 	(iii)	 	the Employee Performance Rating Multiplier established
pursuant to Section 6.

	 	(c)	 	When a Participant becomes eligible to participate in the Plan after the start
of the year, the Participant’s Cash Award will be prorated for the number of months of
eligibility during the year. In the event a Participant is on a leave of absence
during the year, the Participant’s Cash Award may be prorated, based on the number of
full or partial months of active employment, at the discretion of the Chief Human
Resources Officer.

	 
	 	(d)	 	If a Participant’s employment is interrupted by the Participant’s death or
Disability at any time during the year, the Participant will receive a Cash Award equal
to his or her target award, prorated for the number of full or partial months of
employment during the year, as soon as practicable after such death or Disability. The
Chief Human Resources Officer shall determine whether such proration will be on a daily
or monthly basis, and if on a monthly basis, whether a full month’s credit will be
given for any partial month of work or short-term disability.

	 
	 	(e)	 	If a Participant’s employment terminates due to the Participant’s Retirement at
any time during the year, the Participant will receive a Cash Award for the year in
which his or her active employment terminates equal to his or her actual award
determined in accordance with Section 7(b), prorated for the number of full or partial
months of his or her active employment during that year. The Chief Human Resources
Officer shall determine whether such proration will be on a daily or monthly basis, and
if on a monthly basis, whether a full month’s credit will be given for any partial
month of active employment.

4

 

	 	(f)	 	If a Participant loses eligibility under the Plan as the result of a transfer
to a non-Participating Company, the Participant will receive a Cash Award equal to his
or her actual award determined in accordance with Section 7(b), prorated for the
number of full and partial months as an eligible employee under the Plan. If the
Participant’s employment has been for a period of less than three months, the
Participant’s Cash Award shall be determined under this Plan at the Base Pay in effect
on the date before the Participant loses eligibility under the Plan.

	 
	 	(g)	 	If a Participant is reclassified into a job with a lower base job value as a
result of a company-initiated redeployment (involuntary move for the Participant), the
target award will equal the product of (i) the greater of the highest annual rate of
Base Pay in effect for three months or more during the year or the Base Pay in effect
prior to any reduction due to the redeployment, multiplied by (ii) the greater of the
highest target award level in effect for three months or more during the year or the
target award level in effect prior to any reduction due to the redeployment.

	 
	 	(h)	 	After obtaining approval from the Committee and satisfying its requirements,
the Companies will pay the Cash Award as soon as practicable after the end of the year,
but in any event no later than March 15 (other than for employees on international
assignment, who will be paid the Cash Award no later than June 30) or as otherwise
required by Section 409A of the Internal Revenue Code of 1986, as amended, except as
provided in the event of death or Disability pursuant to Section 7(d).

	8.	 	Determination of Cash Awards for SBC Program Participants

	 	(a)	 	If a Participant’s employment terminates pursuant to the SBC Program at any
time during the year, the Participant will receive a Cash Award for the year of
termination of active employment equal to his or her actual award determined in
accordance with Section 7(b), prorated for the number of full or partial months as an
active employee, plus if the employment terminates in any of the first eleven months of
the year an amount equal to the amount of matching contributions and/or retirement
enhancement contributions, if any, that would be contributed by the Company to the
Company’s qualified defined contribution plan (the “CIP”) and nonqualified defined
contribution benefit plans assuming that (A) the Participant was as an active
participant in the CIP during the year of termination, (B) the Participant’s pay was
equal to the amount of such Cash Award and (C) the Participant had elected to
contribute in an amount that would have provided for the maximum matching contributions
for such year. In addition, the SBC Program may provide the Participant with credit
for some or all of the period of salary continuation and, if so, will establish
criteria to determine the Company Performance Ratings for the Participant during this
period. Payment of the resulting Cash Awards, if any, will be governed by the terms of
the SBC Program.

	 
	 	(b)	 	If an employee returns from the SBC Program to active employment for a
Participating Company, where such employee received credit under the Plan in accordance
with Section 8(a) for some or all of the period of salary continuation pursuant to the
SBC Program, but the employee’s active employment for the Participating Companies does
not satisfy the eligibility requirements of Section 3,

5

 

	 	 	 	the employee will receive a Cash Award equal to his or her target award, prorated
for the period he or she received salary continuation pursuant to the SBC Program
and was eligible for credit under the Plan. A Cash Award to be made pursuant to
this Section 8(b) will be paid to the employee as soon as practicable following his
or her return to active service.

	 
	 	(c)	 	If an employee returns from the SBC Program to active employment for a
Participating Company, where such employee received credit under the Plan in accordance
with Section 8(a) for some or all of the period of salary continuation pursuant to the
SBC Program and he or she continues to satisfy the eligibility requirements of Section
3, the Participant will receive (i) a Cash Award equal to his or her target award,
prorated for the period he or she received salary continuation pursuant to the SBC
Program and was eligible for credit under the Plan, and (ii) a Cash Award equal to his
or her actual award determined in accordance with Section 7(b), prorated for the number
of full or partial months as an active employee. Payment of the Participant’s Cash
Award pursuant to Section 8(c)(i) will be paid as soon as practicable following his or
her return to active service. Payment of the Participant’s Cash Award pursuant to
Section 8(c)(ii) will be paid as provided in Section 7(g).

	 
	 	(d)	 	If an employee has his or her SBC interrupted (short-term) and he or she
received credit under the Plan in accordance with Section 8(a) for some or all of the
period of salary continuation pursuant to the SBC Program, but the employee’s active
employment for Participating Companies does not satisfy the eligibility requirements of
Section 3, he or she will receive a Cash Award equal to his or her target award,
prorated for the period he or she received salary continuation pursuant to the SBC
Program and was eligible for credit under the Plan, to be paid at the end of the
employee’s SBC period.

	 
	 	(e)	 	If an employee has his or her SBC interrupted (short-term) and he or she
returns to active employment for a Participating Company, where such employee received
credit under the Plan in accordance with Section 8(a) for some or all of the period of
salary continuation pursuant to the SBC Program and he or she continues to satisfy the
eligibility requirements of Section 3, the Participant will receive (i) a Cash Award
equal to his or her target award, prorated for the period he or she received salary
continuation pursuant to the SBC Program and was eligible for credit under the Plan,
and (ii) a Cash Award equal to his or her actual award determined in accordance with
Section 7(b), prorated for the number of full or partial months as an active employee.
Payment of the Participant’s Cash Award pursuant to Section 8(e)(i) will be paid at the
end of the employee’s SBC period. Payment of the Participant’s Cash Award pursuant to
Section 8(e)(ii) will be paid as provided in Section 7(g).

	9.	 	Deferral

	 	(a)	 	As of the last day of each year prior to 2004, each Participant who was on a
U.S. dollar payroll could elect to defer payment of the Cash Award for that year. An
election to defer was made pursuant to procedures established by the Committee and was
made in writing, signed by the Participant and delivered to a Participating

6

 

	 	 	 	Company by December 15 of the year preceding payment. The election was irrevocable
and specified the percentage of the Cash Awards (from 5% to 100%) to be paid (i) as
soon as practicable after the year in which the Participant’s Retirement, Disability
or other termination of employment occurs or, if earlier, (ii) in January of any
designated future year. If the Participant’s employment with all Participating
Companies terminates before the designated year, the award will be paid in January
of the year following termination. If a Participant was eligible for CIP and
elected to defer the proceeds of Cash Awards, the Participant’s Participating
Company contributed an additional 3% to the amount deferred on account of the 3%
Company match that the Participant would have received under CIP if the Participant
had not deferred the Cash Award.

	 
	 	(b)	 	Each Participant specified, on the notice electing deferred payment pursuant to
Section 9(a), whether the Cash Award was deferred by cash credit, Common Stock credit,
or a combination of the two. If a Participant elected to defer payment pursuant to
Section 9(a) and failed to choose a mode of deferral, the Participant’s deferral was
made by means of a cash credit. Cash credits and stock credits are recorded in
accounts established in each Participant’s name on the books of the Participant’s
Participating Company. At the direction of RAI, any Participant’s accounts may be
consolidated on the books of RAI or any of its subsidiaries.

	 	(i)	 	If the deferral is wholly or partly a cash credit, the
Participant’s cash credit account will be credited, as of the date(s) that
payment of the Cash Awards would otherwise have been made, with the dollar
amount of the portion of the Cash Awards deferred by means of a cash credit.
In addition, the Participant’s cash credit account will be credited as of the
last day of each calendar quarter with an interest equivalent in an amount
determined by applying to the current balance in the account an interest rate
equal to the average prime rate of JPMorgan Chase & Co. or its successor during
the preceding quarter. Interest will be credited for the actual number of days
in the quarter using a 365-day year.

	 
	 	(ii)	 	If the deferral is wholly or partly a Common Stock credit, the
Participant’s Common Stock credit account will be credited, as of the date(s)
that payment of the Cash Awards would otherwise have been made, with the Common
Stock equivalent of the number of shares of Common Stock (including fractions
of a share) that could have been purchased with the portion of the Cash Awards
deferred by means of a Common Stock credit at the Closing Price on the date
that payment of the Cash Awards would otherwise have been made. As of the date
any dividend is paid to shareholders of Common Stock, the Participant’s Common
Stock credit account also will be credited with an additional Common Stock
equivalent equal to the number of shares of Common Stock (including fractions
of a share) that could have been purchased at the Closing Price on such date
with the dividend paid on the number of shares of Common Stock to which the
Participant’s Common Stock credit account is then equivalent. If dividends are
paid in property, the dividend will be deemed to be the

7

 

	 	 	 	fair market value of the property at the time of distribution of the
dividend, as determined by the Committee.

	 	(c)	 	Payment of deferred Cash Awards will be made in a single cash payment as soon
as practicable in January of the appropriate year. If and to the extent that the
deferral is by means of the Common Stock credit account the value of the payment will
be based on the Closing Price of Common Stock on the last trading day of the year prior
to payment. Notwithstanding the foregoing, if a Participant elects in writing before
December 15 of the year his employment terminates due to Retirement or Disability,
payment will be made in substantially equal annual installments (not to exceed ten)
commencing in January following the Retirement or Disability. Notwithstanding any
election under Section 9(a) to defer Cash Awards by means of a Common Stock credit, the
Common Stock credit account of a Participant who elects to receive installment payments
will be converted into a cash credit account as of January 1 of the year in which such
installment payments commence. Any election by a Participant under this Section 9(c)
will be irrevocable after December 15 of the year prior to commencement of payment.

	 
	 	(d)	 	At the one-time election of a Participant made in writing to the Committee, all
or any designated portion of the Common Stock credit account may be converted to, and
such Participant will be credited with, a cash credit account as of the first business
day of the calendar quarter following the quarter in which the election is made. The
amount credited to the cash credit account will be determined by multiplying the number
of shares of Common Stock to which the Participant’s Common Stock credit account is
then equivalent and as to which such election has been made by the Closing Price on the
last business day of the calendar quarter in which the election is made. Any Common
Stock credits attributable to dividends paid on Common Stock during the calendar
quarter in which the election is made will be credited before making the conversion.
Such election may be made by a Participant at any time prior to the end of the calendar
year in which termination of employment occurs. An election by a Participant under
this Section 9(d) will be irrevocable.

	 
	 	(e)	 	If the number of shares of Common Stock is increased or decreased as a result
of any stock dividend, subdivision or reclassification of shares, the number of shares
of Common Stock to which each Participant’s Common Stock credit account is equivalent
shall be increased in proportion to the increase or decrease in the number of
outstanding shares of Common Stock and the Closing Price on which payments hereunder is
based will be proportionately decreased or increased. If the number of outstanding
shares of Common Stock is decreased as the result of any combination or
reclassification of shares, the number of shares of Common Stock to which each
Participant’s Common Stock credit account is equivalent will be decreased in proportion
to the decrease in the number of outstanding shares of Common Stock. In the event RAI
is consolidated with or merged into any other corporation and holders of Common Stock
receive common shares of the resulting or surviving corporation, each Participant’s
Common Stock credit account, in place of the shares then credited thereto, will be
credited with a stock equivalent determined by multiplying the number of common shares
of stock

8

 

	 	 	 	given in exchange for a share of Common Stock upon such consolidation or merger, by
the number of shares of Common Stock to which the Participant’s account is then
equivalent. If in such a consolidation or merger, holders of Common Stock receive
any consideration other than common shares of the resulting or surviving
corporation, the Committee will determine the appropriate change in Participants’
accounts. In the event of an extraordinary dividend, including any spin-off, the
Committee will make appropriate adjustments to each Participant’s Common Stock
credit account.

	 
	 	(f)	 	If a Participant dies, whether before or after termination of employment, any
cash credit account and Common Stock credit account to which he or she is entitled,
including any award approved after the Participant’s death as to which an election to
defer was made and any remaining installment payments, will be distributed in cash as
soon as practicable (unless the Committee otherwise provides) to the Participant’s
beneficiaries pursuant to Section 13(i).

	10.	 	Tax Withholding

	 
	 	 	Each Participant’s employer will deduct any taxes required to be withheld by federal, state,
local or foreign governments from payments and distributions under the Plan.

	 
	11.	 	Adjustments, Amendments or Termination

	 	(a)	 	The Committee may make appropriate and equitable adjustments in the Company
Performance Ratings and the number, terms and conditions of any Cash Awards if it
determines that conditions warrant such adjustment. Such conditions may include,
without limitation, changes in the economy, laws, regulations and generally accepted
accounting principles, as well as corporate events such as a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, spin-off, change of
control or other event. Any adjustment made by the Committee shall be final and
binding upon the Participating Companies and the Participants.

	 
	 	(b)	 	The Committee may amend, suspend or terminate the Plan at will and at any time,
but it will not take any action that would materially adversely affect the rights of
Participants with respect to deferral accounts.

	12.	 	Adoption/Withdrawal by Participating Companies

	 	(a)	 	Adoption of Plan. Any entity may, with the consent of the Committee, adopt
the Plan and thereby become a Participating Company hereunder by executing an
instrument evidencing such adoption and filing a copy thereof with the Committee. By
this adoption of the Plan, Participating Companies (other than RAI) shall be deemed to
consent to actions taken by RAI in entering into any arrangements for the purpose of
providing benefits under the Plan, and to authorize RAI and/or the Committee on behalf
of RAI to take any actions within the authority of RAI under the terms of the Plan.

9

 

	 	(b)	 	Withdrawal/Effect of Termination. Notwithstanding the foregoing, in the case
of any Participating Company that adopts the Plan and thereafter (i) ceases to exist or
(ii) withdraws or is eliminated from the Plan, it shall not thereafter be considered a
Participating Company thereunder and the employees of such Participating Company shall
no longer be eligible to participate in the Plan. Any Participating Company (other
than RAI) which adopts the Plan may elect separately to withdraw from the Plan and such
withdrawal shall constitute a termination of the Plan as to it; provided, however, that
such terminating Participating Company shall continue to be a Participating Company for
the purposes hereof as to Participants to whom it owes obligations hereunder, unless
RAI or the Committee directs otherwise.

	 
	 	(c)	 	Expenses. The expenses of administering the Plan will be paid by RAI, unless
RAI, in its sole and absolute discretion, directs the other Participating Companies to
pay some or all of the expenses.

	 
	 	(d)	 	Liability for Payment/Transfers of Employment.

	 	(i)	 	Subject to the provisions of subsections (ii) and (iii) hereof,
each Participating Company shall be solely liable for and shall reimburse RAI
for the Participating Company’s appropriate share of any funding necessary to
provide benefits to its employees who are Participants under this Plan;

	 
	 	(ii)	 	Notwithstanding the foregoing, upon a transfer of employment
among Participating Companies, any liability for the payment of a Cash Award to
or on behalf of a Participant shall be transferred from the prior Participating
Company to the new Participating Company. The last Participating Company of
the Participant shall be responsible for the payment of any Cash Award payable
hereunder after the Participant’s termination of employment, whether liability
for such payment accrued before or after the Participant’s transfer of
employment to such Participating Company; and

	 
	 	(iii)	 	Notwithstanding the foregoing, in the event that RAI is unable
or refuses to satisfy its obligation hereunder with respect to the payment of
any Cash Award to or on behalf of its Participants, each of the Participating
Companies (unless it is insolvent), other than RAI, shall guarantee and be
jointly and severally liable for a portion of such Cash Award under the Plan,
allocated based on a fraction, the numerator of which is equal to the number of
Participants in the Plan who are current or former employees of the
Participating Company and the denominator of which is the total number of
Participants in the Plan, excluding current or former RAI employees (as in
effect on the date of the determination).

	13.	 	Miscellaneous

	 	(a)	 	Except as determined by the Committee, no person will have any right to receive
an award.

10

 

	 	(b)	 	The Committee has the power to interpret the Plan and, together with the
officers of the Companies, has complete discretion in making determinations and taking
action pursuant to the Plan. All interpretations, determinations and actions by the
Committee will be final, conclusive and binding on all parties. Subject to the
preceding sentence, the Chief Executive Officer of RAI will administer the Plan and
will resolve all administrative questions and interpretations. The Committee and the
Chief Executive Officer of RAI may delegate their authority to anyone. In such event,
references in the Plan to the Committee or to the Chief Executive Officer of RAI will
refer to their delegates when appropriate.

	 
	 	(c)	 	The Participating Companies, their boards of directors, the Committee, the
officers and the other employees of RAI and its subsidiaries will not be liable for any
action taken in good faith in interpreting and administering the Plan.

	 
	 	(d)	 	For purposes of the Plan, a Participant on leave of absence approved by a
Participating Company will be considered an employee. Except as otherwise provided
herein, a Participant on salary continuation under an SBC Program or agreement of
severance will not be considered an employee but will be deemed to be terminated on his
or her last day of active employment. A Participant absent due to short-term
disability on the last day of a year is deemed to be actively employed if such
Participant was actively employed at any time during the year.

	 
	 	(e)	 	Nothing herein creates a vested right. The Cash Awards and the interest,
dividends and other expenses on Cash Awards deferred under Section 9 are not funded
and, except to the extent provided in Section 12(d)(iii), are paid from the general
assets of the Company from which the Participant terminated employment. Nothing herein
shall be construed to require the Participating Companies to maintain any fund or
segregate any amount for the benefit of any Participant and no Participant or other
person shall have any claim against, right to, or security or other interest in, any
fund, account or asset of any Participating Company from which he or she terminated
employment. Other benefits referred to herein may be funded or unfunded as provided
for in the individual plans.

	 
	 	(f)	 	The Plan does not create or confer on any Participant any right to employment,
and the employment of any Participant may be terminated by the Participant or the
Participant’s employer without regard to the effect that termination might have on the
Participant with respect to the Plan.

	 
	 	(g)	 	Participants may not transfer, pledge or encumber any benefit under the Plan
prior to its receipt in cash. Except as required by law, creditors may not attach or
seize any such benefit.

	 
	 	(h)	 	The Plan will be governed by and subject to the laws of the State of North
Carolina.

	 
	 	(i)	 	In the event of the death of a Participant, any distribution to which such
Participant is entitled under the Plan shall be made to the beneficiary designated by
the Participant to receive the proceeds of any noncontributory group life insurance
coverage provided for the Participant by the Participant’s Participating

11

 

	 	 	 	Company (“Group Life Insurance Coverage”). If the Participant has not designated
such beneficiary, does not have any Group Life Insurance coverage or desires to
designate a different beneficiary, the Participant may file with the Chief Human
Resources Officer a written designation of a beneficiary under the Plan, which
designation may be changed or revoked only by the Participant, in writing. If no
designation of beneficiary has been made by a Participant under the Group Life
Insurance Coverage or filed with the Chief Human Resources Officer under the Plan,
distribution upon such Participant’s death shall be made in accordance with the
provisions of the Group Life Insurance Coverage. If a Participant is no longer an
employee of a Participating Company at the time of death, no longer has or never had
any Group Life Insurance Coverage and has not filed a designation of beneficiary
with the Chief Human Resources Officer under the Plan, distribution upon such
Participant’s death shall be made to the Participant’s estate.

	 
	 	(j)	 	A Company may supersede some or all of the terms of the Plan with respect to
individual Participants pursuant to an employment, termination or similar agreement.
In case of conflict, the agreement will control.

	14.	 	Effective Date

	 
	 	 	The Plan is effective as of July 30, 2004. The Plan as set forth herein reflects amendments
effective November 30, 2004, February 2, 2005, January 1, 2006, November 29, 2006, May 10,
2007, January 1, 2008, and January 1, 2009.

12

 

EXHIBIT A

Definitions

	(a)	 	“Base Pay” shall mean an amount or rate of compensation for a specified
position of employment excluding any other payments or allowances, such as shift
differential, overtime, merit or general increase lump sums or bonus payments.

	 
	(b)	 	“Board of Directors” shall mean the Board of Directors of RAI.

	 
	(c)	 	“Cash Award” shall mean annual cash payments made to Participants pursuant to
the Plan.

	 
	(d)	 	“Chief Executive Officer” shall mean, for employees of RAI and the chief
executive officers of the other Participating Companies, the chief executive officer of
RAI. For the other employees of each Participating Company other than RAI, “Chief
Executive Officer” shall mean the chief executive officer of the Participating Company
primarily responsible for their performance.

	 
	(e)	 	“Chief Human Resources Officer” shall mean, for employees of RAI and the
executive officers of the other Participating Companies, the chief human resources
officer of RAI. For the other employees of each Participating Company other than RAI,
“Chief Human Resources Officer” shall mean the chief human resources officer of the
Participating Company primarily responsible for their performance.

	 
	(f)	 	“CIP” shall mean the Reynolds American Capital Investment Plan, or comparable
Participating Company-sponsored 401(k) plan in which employees participate, or any
successor thereof.

	 
	(g)	 	“Closing Price” shall mean the closing sale price of the Common Stock as shown
on the New York Stock Exchange consolidated tape and reported in the Wall Street
Journal.

	 
	(h)	 	“Committee” shall mean the Compensation Committee of the Board of Directors.

	 
	(i)	 	“Common Stock” shall mean the Common Stock of RAI.

	 
	(j)	 	“Company Performance Objectives” shall have the meaning set forth in Section
4(a) of the Plan.

	 
	(k)	 	“Company Performance Rating” shall have the meaning set forth in Section 7(a)
of the Plan.

	 
	(l)	 	“Disability” shall mean being totally and permanently disabled as defined in
the Long-Term Disability Plan of the Participating Company employing the participant.

A-1

 

	(m)	 	“Employee Performance Rating Multiplier” shall have the meaning set forth in
Section 6 of the Plan.

	 
	(n)	 	“Group Life Insurance Coverage” shall have the meaning set forth in Section
13(i) of the Plan.

	 
	(o)	 	“Participant” shall mean, for any year, an employee who is eligible for or who
has deferred receipt of an award under the Plan. An eligible employee is a Participant
only with respect to the Participating Company for which he works most directly.
“Participant” shall also mean the heir or estate of a deceased Participant.

	 
	(p)	 	“Participating Companies” shall mean RAI, R. J. Reynolds Tobacco Company, FHS,
Inc., R. J. Reynolds Global Products, Inc., Santa Fe Natural Tobacco Company, Inc.,
Lane, Limited, Conwood Company, LLC, and any other affiliates of RAI that adopt the
Plan pursuant to Section 12(a).

	 
	(q)	 	“Plan” shall mean the Reynolds American Inc. Annual Incentive Award Plan.

	 
	(r)	 	“RAI” shall mean Reynolds American Inc. and its successor companies.

	 
	(s)	 	“Retirement” shall mean a Participant’s voluntary termination of employment on
or after his or her 65th birthday, on or after his or her 55th
birthday with 10 or more years of service with the Participating Companies, or on or
after his or her 50th birthday with 20 or more years of service with the
Participating Companies.

	 
	(t)	 	“Reviewing Manager” shall mean the manager to whom a Participant reports.

	 
	(u)	 	“SBC” or “SBC Program” shall mean a salary and benefits continuation or other
program, including any individualized agreements, maintained or entered into by a
Participating Company for the purpose of providing severance-type benefits to employees
whose employment is involuntarily terminated, including without limitation the Reynolds
American Salary and Benefits Continuation Program, the Reynolds American Inc. Executive
Severance Plan, any special severance benefits and change of control protection
agreements and all successor plans or agreements thereto.

A-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00153-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00153-of-00352.parquet"}]]