Document:

EX-10.3

 

Exhibit 10.3

Performance Units

Three-Year Vest

REYNOLDS AMERICAN INC.

LONG-TERM INCENTIVE PLAN

 

PERFORMANCE UNIT AGREEMENT

 

DATE OF GRANT: MARCH 6, 2006

W I T N E S S E T H:

     1. Grant. Pursuant to the provisions of the Long-Term Incentive Plan
(collectively, the “Plan”), Reynolds American Inc. (the “Company”) on the above date has granted to

«FirstName» «LastName» (the “Grantee”),

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

«Number» Performance Units.

A copy of the Plan 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. The initial grant value of each Performance
Unit shall be $1.00 (the “Initial Grant Value”). All capitalized terms used in this Agreement
shall have the meaning set forth in the Plan, unless the context requires a different meaning.

     2. Vesting. (a) The Performance Units shall have a three-year
performance period, consisting of the Company’s fiscal years 2006, 2007 and 2008 (the “Performance Period”), at
the end of which the Performance Units will be valued and paid, if they vest, or cancelled, if they
do not vest. For the Performance Units to vest, the Company must pay to its shareholders a
dividend of at least $1.25 per share in each fiscal quarter during the period commencing on the
Date of Grant and ending on December 31, 2008 (the “Threshold Requirement”), unless the Company’s
Board of Directors specifically approves the noncancellation of the Performance Units upon the
declaration of a quarterly dividend of less than $1.25 per share. In the event the Company fails
to pay its shareholders a dividend of at least $1.25 per share in any fiscal quarter during the
period from the Date of Grant and ending on December 31, 2008, and the Company’s Board of Directors
does not approve the noncancellation of the Performance Units, the Performance Units shall be
cancelled.

     (b) Notwithstanding
anything in Section 2(a) to the contrary, in the event of (i) the Grantee’s death, (ii) the Grantee’s Permanent Disability (as defined in the Company’s Long-Term
Disability Plan), (iii) the Grantee’s Retirement (as such term is defined below), or (iv) the
Grantee’s involuntary Termination of Employment without Cause (as such terms are defined in Section
5 of this Agreement), the number of Performance Units which shall vest, if

1

 

not previously cancelled due to the Company’s failure to meet the Threshold Requirement, shall be
equal to product of (x) the original number of Performance Units granted to the Grantee under this
Agreement and (y) a fraction, the numerator of which shall be the number of whole or partial months
between January 1, 2006, and the date of the Grantee’s Termination of Employment, and the
denominator of which shall be 36. Such prorated award shall be paid as soon as practicable
following the close of the Company’s books at the end of the Performance Period, and in any event
no later than March 15, 2009, and each Performance Unit shall have a Payment Value as defined in
Section 3 of this Agreement. For purposes of this Agreement, the term “Retirement” shall mean an
employee’s voluntary Termination of Employment on or after his or her 65th birthday, or
on or after his or her 55th birthday with 10 or more years of service with the Company
or a subsidiary of the Company.

     (c) Notwithstanding anything in Section 2(a) to the contrary, in the event of a Change of
Control (as defined in the Plan), the number of Performance Units which shall vest, if not
previously cancelled due to the Company’s failure to meet the Threshold Requirement, shall be equal
to the product of (i) the original number of Performance Units granted to the Grantee under this
Agreement and (ii) a fraction, the numerator of which shall be the number of whole or partial
months in the Performance Period before the date of the Change of Control, and the denominator of
which shall be 36. Such prorated award shall be paid as soon as practicable after the Change of
Control, and in any event no later than March 15 after the end of the year in which the Change of
Control occurs. The value of each Performance Unit shall be equal to the greater of (x) the
Initial Grant Value or (y) the Initial Grant Value multiplied by the average of the total weighted
Annual Incentive Award Plan (“AIAP”) scores for each of the years 2006, 2007 and 2008 completed
prior to the Change of Control.

     (d) Upon the Grantee’s voluntary Termination of Employment or Termination of Employment for
Cause (as such terms are defined in Section 5 of this Agreement) prior to the end of a Performance
Period, all of the Grantee’s Performance Units shall be cancelled.

     (e) Notwithstanding anything to the contrary contained in this Section 2 or in any other
Section of this Agreement, if the Grantee has a written employment or severance agreement with the
Company or one of its subsidiaries, and such other agreement contains provisions relating to the
vesting by the Grantee in the Performance Units or the right of the Grantee to receive the Payment
Value (as defined below) (including, without limitation, vesting provisions upon the termination of
employment of the Grantee), and such provisions are different than the comparable provisions of
this Agreement, then the provisions of such other agreement shall govern and control.

     3. Valuation of Performance Units. At the end of the Performance Period,
if the
Threshold Requirement is met or otherwise waived by the Company’s Board of Directors, the value of
each Performance Unit shall be determined by multiplying the Initial Grant Value by the average of
the total weighted AIAP scores for each of 2006, 2007 and 2008 (the “Payment Value”).

     4. Payment. (a) Payment of Performance Units shall be made only in cash.
Except with respect to a Change of Control as described in Section 2(c) of this Agreement, or
except under such other circumstances as the Compensation Committee of the Company’s Board of
Directors (the “Compensation Committee”) deems appropriate, no payment shall be made to the Grantee
prior to the end of the Performance Period. Except as otherwise provided by this Agreement,
payment of vested Performance Units shall be made in the amount of the

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Payment Value as soon as practicable following the close of the Company books at the end of the
Performance Period, and in any event no later than March 15, 2009.

     (b) In the event of the death of a Grantee, any payment to which such Grantee is entitled
under the Plan shall be made to the beneficiary designated by the Grantee to receive the proceeds
of any noncontributory group life insurance coverage provided for the Grantee by the Company or a
subsidiary of the Company (“Group Life Insurance Coverage”). If the Grantee has not designated
such beneficiary, or desires to designate a different beneficiary, the Grantee may file with the
Company a written designation of a beneficiary under the Plan, which designation may be changed or
revoked only by the Grantee, in writing. If no designation of beneficiary has been made by a
Grantee under the Group Life Insurance Coverage or filed with the Company under the Plan,
distribution upon such Grantee’s death shall be made in accordance with the provisions of the Group
Life Insurance Coverage. If a Grantee is no longer an employee of the Company at the time of
death, no longer has any Group Life Insurance Coverage and has not filed a designation of
beneficiary with the Company under the Plan, distribution upon such Grantee’s death shall be made
to the Grantee’s estate.

     5. Termination of Employment. (a) For purposes of this Agreement, the
term
“Termination of Employment” shall mean termination from active employment with the Company or a
subsidiary of the Company; it does not mean the termination of pay and benefits at the end of a
period of salary continuation (or other form of severance pay or pay in lieu of salary).

     (b) For purposes of this Agreement, if the Grantee has an employment or severance agreement,
employment shall be deemed to have been terminated for “Cause” only as such term is defined in the
employment or severance agreement. For purposes of this Agreement, if the Grantee does not have an
employment or severance agreement that defines the term “Cause,” the Grantee’s employment shall be
deemed to have been terminated for “Cause” if the Termination of Employment results from the
Grantee’s: (i) criminal conduct; (ii) deliberate and continual refusal to perform employment
duties on substantially a full time basis; (iii) deliberate and continual refusal to act in
accordance with any specific lawful instructions of an authorized officer or employee more senior
than the Grantee or a majority of the Board of Directors of the Company; or (iv) deliberate
misconduct which could be materially damaging to the Company or any of its business operations
without a reasonable good faith belief by the Grantee that such conduct was in the best interests
of the Company. A Termination of Employment shall not be deemed for Cause hereunder unless the
chief of human resources officer of the Company shall confirm that any such Termination of
Employment is for Cause; provided, however, that the chief executive officer of the
Company shall be required to confirm that a Termination of Employment of the chief human resources
officer of the Company is for Cause. Any voluntary Termination of Employment by the Grantee in
anticipation of an involuntary Termination of Employment for Cause shall be deemed to be a
Termination of Employment for Cause.

     6. Transferability. Other than as specifically provided in this Agreement
with
regard to the death of the Grantee, this Agreement and any benefit provided or accruing hereunder
shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or 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.

3

 

     7. No Right to Employment. Neither the execution and delivery of this
Agreement nor the granting of the Performance Units evidenced by this Agreement shall constitute
any agreement or understanding, express or implied, on the part of the Company or its subsidiaries
to employ the Grantee for any specific period or in any specific capacity or shall prevent the
Company or its subsidiaries from terminating the Grantee’s employment at any time with or without
Cause.

     8. Application of Laws. The granting of Performance Units under this
Agreement shall be subject to all applicable laws, rules and regulations and to such approvals of
any governmental agencies as may be required.

     9. Notices. Any notices required to be given hereunder to the Company
shall be
addressed to The Secretary, Reynolds American Inc., Post Office Box 2990, Winston-Salem, NC
27102-2990, and any notice required to be given hereunder to the Grantee shall be sent to the
Grantee’s address as shown on the records of the Company.

     10. Taxes. Any taxes required by federal, state or local laws to be
withheld by
the Company in respect of the grant of Performance Units or payment of the Payment Value hereunder
shall be paid to the Company by the Grantee by the time such taxes are required to be paid or
deposited by the Company. The Grantee hereby authorizes the necessary withholding by the Company
to satisfy such tax withholding obligations prior to delivery of the Payment Value.

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

     12. Compliance with Section 409A of the Code. To the extent applicable, it
is
intended that this Agreement and the Plan comply with the provisions of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), so that the income inclusion provisions of
Section 409A(a)(1) do not apply to the Grantee. This Agreement and the Plan shall be administered
in a manner consistent with this intent, and any provision of this Agreement that would cause the
Agreement to fail to satisfy Section 409A of the Code shall have no force and effect until amended
to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted
by Section 409A of the Code and may be made by the Company without the consent of the Grantee). In
particular, to the extent the Grantee’s right to receive payment becomes nonforfeitable pursuant to
Section 2(b) or (c) and the event causing the Grantee’s right to become nonforfeitable either is
the Grantee’s Retirement or an event that does not constitute a permitted distribution event under
Section 409A(a)(2) of the Code, then notwithstanding anything to the contrary in Section 4 above,
payment will be made on the earlier of (a) the Grantee’s “separation from service” with the Company
(determined in accordance with Section 409A); provided, however, that in the case
the Grantee is a “specified employee” (within the meaning of Section 409A), the Grantee’s

4

 

date of payment shall be made on the date which is 6 months after the date of the Grantee’s
separation from service with the Company or (b) the Grantee’s death.

     13. Amendment. This Agreement is subject to the Plan, a copy of which has
been
provided. The Board of Directors may amend the Plan and the Compensation Committee may amend this
Agreement at any time and in any way, except that, other than for adjustments under Section 12
hereof and as otherwise provided by the Plan, any amendment of the Plan or this Agreement that
would impair the Grantee’s rights under this Agreement may not be made without the Grantee’s
written consent.

     14. Obligations of Grantee. (a) In consideration of the grant of
Performance Units hereunder, the Grantee, while both actively employed and in the event of Grantee’s
Termination of Employment for any reason, specifically agrees that within the term of this grant or
within one year following the payment of any amounts pursuant to the grant, if later: (i) the
Grantee will personally provide reasonable assistance and cooperation to the Company in activities
related to the prosecution or defense of any pending or future lawsuits or claims involving the
Company; (ii) the Grantee will promptly notify the Company upon receipt of any requests from anyone
other than an employee or agent of the Company for information regarding the Company, or if the
Grantee becomes aware of any potential claim or proposed litigation against the Company; (iii) the
Grantee will refrain from providing any information related to any claim or potential litigation
against the Company to any non-Company representatives without either the Company’s written
permission or being required to provide information pursuant to legal process; (iv) the Grantee
will not disclose or misuse any confidential information or material concerning the Company; and
(v) the Grantee will not engage in any activity contrary or harmful to the interests of the
Company. In further consideration of the grant of Performance Units hereunder, the Grantee
specifically agrees that if required by law to provide sworn testimony regarding any
Company-related matter: the Grantee will consult with and have Company designated legal counsel
present for such testimony (the Company will be responsible for the costs of such designated
counsel); the Grantee will confine his testimony to items about which the Grantee has knowledge
rather than speculation, unless otherwise directed by legal process; and the Grantee will cooperate
with the Company’s attorneys to assist their efforts, especially on matters the Grantee has been
privy to, holding all privileged attorney-client matters in strictest confidence.

     (b) If the Company reasonably determines that the Grantee has materially violated any of the
Grantee’s obligations under this Agreement, then this Grant shall terminate, effective the date on
which such violation began (unless otherwise terminated sooner), and the Company may demand the
return of any amount paid to the Grantee hereunder and the Grantee hereby agrees to return such
amounts upon such demand. If after such demand the Grantee fails to return such amounts, the
Grantee acknowledges that the Company has the right to deduct from any amounts the Company owes to
the Grantee (including, but not limited to, wages or other compensation), or to commence judicial
proceedings against the Grantee, to recover such amounts and any and all of its attorney’s fees and
costs.

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

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

	 	 	 	 	 	 	 
	 

	 	 REYNOLDS AMERICAN INC.
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	               /s/ Ann
A. Johnston	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	               Authorized Signature
	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	Grantee
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Grantee’s Taxpayer Identification Number:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Grantee’s Home Address:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

6EX-10.4

 

Exhibit 10.4

REYNOLDS AMERICAN INC.

LONG TERM INCENTIVE PLAN

 

RESTRICTED STOCK AGREEMENT

 

DATE OF GRANT: MARCH 6, 2006

W I T N E S S E T H:

     1. Grant of Restricted Stock. Pursuant to the provisions of the Long-Term Incentive
Plan (the “Plan”), Reynolds American Inc. (the “Company”) on the above date has granted, and this
Restricted Stock Agreement (this “Agreement”) evidences the grant, to

«FIRST_NAME» «LAST_NAME» (the “Grantee”),

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

«REST_STOCK» shares

of Common Stock of the Company (“Common Stock”). 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 in this Agreement below shall have the meaning set forth in the
Plan, unless otherwise indicated.

     2. Receipt and Delivery of Stock. The Grantee waives receipt from the Company of a
certificate or certificates representing the shares of Common Stock granted hereunder, registered
in the Grantee’s name and bearing a legend evidencing the restrictions imposed on such shares of
Common Stock by this Agreement. The Grantee acknowledges and agrees that the Company shall retain
custody of such certificate or certificates until the restrictions imposed by Section 3 of this
Agreement on the shares of Common Stock granted hereunder lapse. The Grantee acknowledges and
agrees that, alternatively, the shares of Common Stock granted hereunder may be maintained in
book-entry form with instructions from the Company to the Company’s transfer agent that such shares
shall remain restricted until the restrictions imposed by Section 3 of this Agreement on such
shares lapse.

     3. Restrictions on Transfer of Stock. (a) The shares of Common Stock
granted
hereunder may not be sold, tendered, assigned, transferred, pledged or otherwise encumbered prior
to the earliest of:

 

 

	 	(i)	 	March 6, 2009, for 100% of the shares;
	 
	 	(ii)	 	the date of the Grantee’s death, for 100%
of the shares;
	 
	 	(iii)	 	the date of the Grantee’s Permanent
Disability (as defined in the Company’s Long-Term Disability Plan),
for 100% of the shares; or
	 
	 	(iv)	 	the date of a Change of Control (as defined
in the Plan), for 100% of the shares.

     (b) In the event of (i) the Grantee’s involuntary Termination of Employment without Cause (as
such terms are defined in Section 5 of this Agreement), or (ii) the Grantee’s Retirement (as such
term is defined below), the restrictions imposed by this Section 3 will lapse with respect to that
number of shares of Common Stock (rounded to the nearest whole number of shares) which is equal to
the product of (x) the total number of shares of Common Stock granted to the Grantee under this
Agreement and (y) a fraction, the numerator of which is the number of whole or partial months
between the Date of Grant and date of the Grantee’s involuntary Termination of Employment or
Retirement, as the case may be, and the denominator of which is 36. For purposes of this
Agreement, the term “Retirement” shall mean an employee’s voluntary Termination of Employment on or
after his or her 65th birthday, or on or after his or her 55th birthday with
10 or more years of service with the Company or a subsidiary of the Company.

     (c) Notwithstanding anything to the contrary contained in this Section 3 or in any other
Section of this Agreement, if the Grantee has a written employment or severance agreement with the
Company or one of its subsidiaries, and such other agreement contains provisions relating to the
lapsing of the restrictions imposed by this Section 3 on the shares of Common Stock granted
hereunder (including, without limitation, provisions relating to the termination of the employment
of the Grantee), and such provisions are different than the comparable provisions of this
Agreement, then the provisions of such other agreement shall govern.

     (d) At the time the restrictions imposed by this Section 3 shall lapse, the appropriate number
of shares of Common Stock shall be delivered to the Grantee without a restrictive legend on any
Common Stock certificate, or, if such shares are held in book-entry form, the Company’s transfer
agent shall be instructed to remove the restrictions on such shares.

     4. Forfeiture of Stock. (a) For the shares of Common Stock granted
hereunder
to vest, the Company must pay to its shareholders a dividend of at least $1.25 per share in each
fiscal quarter during the period commencing on the Date of Grant and ending on December 31, 2008
(the “Threshold Requirement”), unless the Company’s Board of Directors specifically approves the
nonforfeiture of such shares upon the declaration of

2

 

a quarterly dividend of less than $1.25 per share. In the event the Company fails to pay to its
shareholders a dividend of at least $1.25 per share in any fiscal quarter during the period from
the Date of Grant and ending on December 31, 2008, and the Company’s Board of Directors does not
approve the nonforfeiture of the shares of Common Stock granted hereunder, the Grantee shall
forfeit all right, title and interest in and to the shares of Common Stock still subject to the
restrictions set forth in Section 3 of this Agreement and to any dividends to be paid thereafter on
such shares.

     (b) Upon the Grantee’s voluntary Termination of Employment or Termination
of Employment for Cause (as such terms are defined in Section 5 of this Agreement), the Grantee
shall forfeit all right, title and interest in and to the shares of Common Stock still subject to
the restrictions set forth in Section 3 of this Agreement and to any dividends to be paid
thereafter on such shares.

     (c) Any shares of Common Stock granted hereunder and subsequently
forfeited shall revert to the Company and shall not become transferable by the Grantee or anyone
claiming through the Grantee. The Compensation Committee of the Company’s Board of Directors (the
“Compensation Committee”) or its agent shall act promptly to record forfeitures pursuant to this
Section 4 on the stock transfer books of the Company.

     5. Termination of Employment. (a) For purposes of this Agreement, the
term
“Termination of Employment” shall mean termination from active employment with the Company or a
subsidiary of the Company; it does not mean the termination of pay and benefits at the end of a
period of salary continuation (or other form of severance pay or pay in lieu of salary).

     (b) For purposes of this Agreement, if the Grantee has an employment or
severance agreement, employment shall be deemed to have been terminated for “Cause” only as such
term is defined in the employment or severance agreement. For purposes of this Agreement, if the
Grantee does not have an employment or severance agreement that defines the term “Cause,” the
Grantee’s employment shall be deemed to have been terminated for “Cause” if the Termination of
Employment results from the Grantee’s: (i) criminal conduct; (ii) deliberate and continual refusal
to perform employment duties on substantially a full time basis; (iii) deliberate and continual
refusal to act in accordance with any specific lawful instructions of an authorized officer or
employee more senior than the Grantee; or (iv) deliberate misconduct which could be materially
damaging to the Company or any of its business operations without a reasonable good faith belief by
the Grantee that such conduct was in the best interests of the Company. A Termination of
Employment shall not be deemed for Cause hereunder unless the chief of human resources executive of
the Company shall confirm that any such Termination of Employment is for Cause; provided,
however, that the chief executive officer of the Company shall be required to confirm that
a Termination of Employment of the chief of human resources officer of the Company is for Cause.
Any voluntary Termination of Employment by the Grantee in anticipation of an involuntary

3

 

Termination of Employment for Cause shall be deemed to be a Termination of Employment for Cause.

     6. Dividends. If the Grantee is a shareholder of record on any
applicable
record date, the Grantee shall receive any dividends on the shares of Common Stock granted
hereunder when paid regardless of whether the restrictions imposed by Section 3 of this Agreement
have lapsed.

     7. Voting. If the Grantee is a shareholder of record on any applicable
record
date, the Grantee shall have the right to vote the shares of Common Stock granted hereunder
regardless of whether the restrictions imposed by Section 3 of this Agreement have lapsed.

     8. No Right to Employment. The execution and delivery of this Agreement
and the granting of shares of Common Stock hereunder shall not constitute or be evidence of any
agreement or understanding, express or implied, on the part of the Company or its subsidiaries to
employ the Grantee for any specific period or in any particular capacity and shall not prevent the
Company or its subsidiaries from terminating the Grantee’s employment at any time with or without
Cause.

     9. Registration. The shares of Common Stock granted hereunder may be
offered and sold by the Grantee only if such shares are registered for resale under the Securities
Act of 1933 (the “1933 Act”), as amended, or if an exemption from registration under such Act is
available. The Company has no obligation to effect such registration. By executing this
Agreement, the Grantee (a) agrees not to offer or sell the shares of Common Stock granted hereunder
unless and until such shares are registered for resale under the 1933 Act or an exemption from
registration is available, (b) represents that the Grantee accepts such shares of Common Stock for
his own account for investment and not with a view to, or for sale in connection with, the
distribution of any part thereof and (c) agrees that the Grantee or the Grantee’s beneficiary, on
request, will be obligated to repeat these representations in writing prior to any future delivery
of such shares of Common Stock.

     10. Change in Common Stock or Corporate Structure. In the event of any
stock
split, spin-off, stock dividend, extraordinary cash dividend, stock combination or
reclassification, recapitalization or merger, Change of Control, or similar event, the Compensation
Committee shall make an appropriate adjustment to the number or kind of shares or other
consideration covered by this Agreement and to the level of dividends required under Section 4(a)
of this Agreement, and such other revisions to this Agreement as it deems are equitably required.
Any adjustment or revision made by the Compensation Committee shall be final and binding on the
Grantee, the Company and all other interested persons; provided, however, that the
Compensation Committee may not make any such adjustments or revisions that are adverse to the
Grantee without the Grantee’s written consent.

     11. Application of Laws. The granting of shares of Common Stock
hereunder

4

 

shall be subject to all applicable laws, rules and regulations and to such approvals of any
governmental agencies as may be required.

     12. Taxes. Any taxes required by federal, state or local laws to be
withheld by
the Company on the Date of Grant or the delivery of unrestricted shares of Common Stock hereunder
shall be paid to the Company by the Grantee by the time such taxes are required to be paid or
deposited by the Company. The Grantee hereby authorizes the Company to deduct a sufficient number
of shares of Common Stock (rounded up to the nearest whole share) to satisfy the minimum tax
withholding amount and any additional tax withholding amount requested by the Grantee prior to the
delivery of unrestricted shares of Common Stock.

     13. Notices. Any notices required to be given hereunder to the Company
shall
be addressed to The Secretary, Reynolds American Inc., Post Office Box 2990, Winston-Salem, NC
27102-2990, and any notice required to be given hereunder to the Grantee shall be sent to the
Grantee’s address as shown on the records of the Company.

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

     15. Amendment. This Agreement is subject to the Plan, a copy of which
has
been provided. The Board of Directors may amend the Plan and the Compensation Committee may amend
this Agreement at any time and in any way, except that any amendment of the Plan or this Agreement
that would impair the Grantee’s rights under this Agreement may not be made without the Grantee’s
written consent.

5

 

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

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

	 	 	 	 	 	 	 
	 

	 	 REYNOLDS AMERICAN INC.
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	               /s/ Ann
A. Johnston	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	               Authorized Signature
	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	Grantee
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Grantee’s Taxpayer Identification Number:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Grantee’s Home Address:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

6

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