Document:

Exhibit 10.68

 

Exhibit 10.68

Executive Severance Plan

Reynolds American Inc.

As Amended and Restated Effective January 1, 2008

 

 

TABLE
OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	Article 1.

	 	Establishment and Term of the Plan
	 	 	1	 
	 

	1.1

	 	Establishment of the Plan
	 	 	1	 
	 

	1.2

	 	Plan Term
	 	 	1	 
	 

	1.3

	 	Change in Control and Plan Term
	 	 	1	 
	 

	Article 2.

	 	Definitions
	 	 	2	 
	 

	Article 3.

	 	Severance Benefits
	 	 	8	 
	 

	3.1

	 	Right to Severance Benefits
	 	 	8	 
	 

	3.2

	 	Qualifying Termination
	 	 	9	 
	 

	3.3

	 	Description of Change in Control Severance Benefits
	 	 	10	 
	 

	3.4

	 	Description of General Severance Benefits
	 	 	13	 
	 

	3.5

	 	Notice of Termination
	 	 	15	 
	 

	3.6

	 	Disability
	 	 	15	 
	 

	Article 4.

	 	Excise Taxes
	 	 	16	 
	 

	4.1

	 	Applicable Provisions if Excise Tax Applies.
	 	 	16	 
	 

	Article 5.

	 	Contractual Rights and Legal Remedies
	 	 	18	 
	 

	5.1

	 	Payment Obligations Absolute
	 	 	18	 
	 

	5.2

	 	Contractual Rights to Benefits
	 	 	18	 
	 

	5.3

	 	Legal Fees and Expenses
	 	 	18	 
	 

	Article 6.

	 	Successors
	 	 	19	 
	 

	6.1

	 	Successors to the Company
	 	 	19	 
	 

	6.2

	 	Assignment by the Executive
	 	 	19	 
	 

	Article 7.

	 	Miscellaneous
	 	 	19	 
	 

	7.1

	 	Employment Status
	 	 	19	 
	 

	7.2

	 	Entire Plan
	 	 	19	 
	 

	7.3

	 	Adoption Procedure for a Participating Company
	 	 	19	 
	 

	7.4

	 	Notices
	 	 	20	 
	 

	7.5

	 	Includable Compensation
	 	 	20	 
	 

	7.6

	 	Tax Withholding
	 	 	20	 
	 

	7.7

	 	Internal Revenue Code Section 409A
	 	 	20	 
	 

	7.8

	 	Severability
	 	 	20	 

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TABLE
OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	7.9

	 	Modification
	 	 	21	 
	 

	7.10

	 	Gender and Number
	 	 	21	 
	 

	7.11

	 	Applicable Law
	 	 	21	 

-ii-

 

Reynolds American Inc.

Executive Severance Plan

Article 1. Establishment and Term of the Plan

     1.1 Establishment of the Plan. Reynolds American Inc. (the “Company”) hereby amends and
restates the severance plan known as the “Reynolds American Inc. Executive Severance Plan” (the
“Plan”) effective as of January 1, 2008. The Plan was originally effective January 1, 2007. The
Plan provides severance benefits to specified senior executives of the Company and any other entity
that adopts this Plan in accordance with the provisions of Section 7.3 (a “Participating Company”)
upon certain terminations of employment from a Participating Company.

     The Company considers the establishment and maintenance of a sound management to be essential
to protecting and enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held corporations, the
possibilities of a change in control or a termination of an Executive’s employment by a
Participating Company may arise and that such possibilities, and the uncertainty and questions
which they may raise among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders.

     Accordingly, the Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Participating Companies’
management to their assigned duties without distraction in circumstances arising from the
possibility of a Change in Control of the Company or a termination of an Executive’s employment by
a Participating Company.

     1.2 Plan Term. This Plan commenced on January 1, 2007 and shall continue in effect until
terminated by the Company. The Company may terminate this Plan entirely or terminate any
individual Executive’s participation in the Plan at any time by: (a) giving all Executives twelve
(12) months prior written notice of Plan termination if terminating the Plan in its entirety; or
(b) giving the affected Executive twelve (12) months prior written notice terminating the affected
Executive’s participation in the Plan. Upon delivery of such notice by the Company, this Plan,
along with all corresponding rights, duties, and covenants, shall terminate on the date indicated
in such notice, which date shall not be less than twelve (12) months from the date the Executive
received such notice.

     1.3 Change in Control and Plan Term. Notwithstanding Section 1.2, in the event of a Change in
Control during the term of the Plan, the Company may not terminate the Plan or any individual
Executive’s participation in the Plan during the period beginning on the date of the Change in
Control through the second anniversary of the Change in Control, whereupon the provisions of the
Plan pertaining to Change in Control Severance Benefits shall automatically terminate. The Company
shall cause any successor entity in a Change in Control to expressly assume the Plan, as further
provided in Article 6.

 

 

Article 2. Definitions

     Wherever used in this Plan, the following capitalized terms shall have the meanings set forth
below:

	 	(a)	 	“Accounting Firm” means a nationally recognized accounting firm, or actuarial,
benefits or compensation consulting firm (with experience in performing the
calculations regarding the applicability of Section 280G of the Code and of the tax
imposed by Section 4999 of the Code) selected by the Company.
	 
	 	(b)	 	“B&W” means Brown & Williamson Tobacco Corporation.
	 
	 	(c)	 	“Base Salary” means, at any time, the then regular annual rate of pay which the
Executive is receiving as annual salary, excluding amounts: (i) received under
short-term or long-term incentive or other bonus plans, regardless of whether the
amounts are deferred, or (ii) designated by the Participating Company as payment toward
reimbursement of expenses.
	 
	 	(d)	 	“BAT” means, collectively, British American Tobacco, p.l.c., a public limited
company incorporated under the laws of England and Wales, and its affiliates, other
than the Participating Companies.
	 
	 	(e)	 	“BCA” has the meaning set forth in Section 2(i).
	 
	 	(f)	 	“Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
	 
	 	(g)	 	“Board” or “Board of Directors” means the Board of Directors of the Company.
	 
	 	(h)	 	“Cause” means the occurrence of any one or more of the following:

	 	(i)	 	The Executive’s criminal conduct;
	 
	 	(ii)	 	The Executive’s deliberate and continual refusal to perform
employment duties on a substantially full-time basis;
	 
	 	(iii)	 	The Executive’s deliberate and continual refusal to act in
accordance with any specific lawful instructions of an authorized officer or
employee more senior than the Executive or a majority of the Board of Directors
of the Participating Company; or
	 
	 	(iv)	 	The Executive’s deliberate misconduct which could be materially
damaging to the Participating Company or any of its business operations without
a reasonable good faith belief by the Executive that such conduct was in the
best interests of the Participating Company.

2

 

	 	 	 	Notwithstanding the foregoing, a Tier I or Tier II Executive shall not be deemed to
have been terminated for “Cause” hereunder unless and until there shall have been
delivered to the Tier I or Tier II Executive a copy of a resolution duly adopted by
the affirmative vote of not less than two thirds of the Board then in office at a
meeting of the Board called and held for such purpose (after reasonable notice to
the Tier I or Tier II Executive and an opportunity for the Tier I or Tier II
Executive, together with the Tier I or Tier II Executive’s counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board, the Tier I
or Tier II Executive had committed an act constituting “Cause” as herein defined and
specifying the particulars thereof in detail. Nothing herein will limit the right
of the Tier I or Tier II Executive or his beneficiaries to contest the validity or
propriety of any such determination.

	 	(i)	 	“Change in Control” shall occur if any of the following events occur:

	 	(i)	 	An individual, corporation, partnership, group, associate, or
other entity or Person, other than any employee benefit plans sponsored by the
Company, is or becomes the Beneficial Owner, directly or indirectly, of thirty
percent (30%) or more of the combined voting power of the Company’s outstanding
securities ordinarily having the right to vote at elections of directors;
provided, however, that the acquisition of Company securities by BAT pursuant
to the Business Combination Agreement, dated as of October 27, 2003, between
RJR and B&W, as thereafter amended (the “BCA”), or as expressly permitted by
the Governance Agreement, dated as of July 30, 2004, among British American
Tobacco, p.l.c., B&W, and the Company (the “Governance Agreement”), shall not
be considered a Change in Control for purposes of this subsection (i);
	 
	 	(ii)	 	Individuals who constitute the Board (or who have been
designated as directors in accordance with Section 1.09 of the BCA) on July 30,
2004 (the “Incumbent Board”) cease for any reason to constitute at least a
majority thereof, provided that any individual becoming a director subsequent
to such date whose election, or nomination for election by the Company’s
shareholders, was: (A) approved by a vote of at least three-quarters (3/4) of
the directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such individual is
named as a nominee of the Company for director); or (B) made in accordance with
Section 2.01 of the Governance Agreement, but excluding for this purpose any
such individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-2(c) of Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of an
individual, corporation, partnership, group, associate, or other entity or
Person other than the Company’s Board, shall be, for purposes of this paragraph
(ii), considered as though such person were a member of the Incumbent Board; or

3

 

	 	(iii)	 	The approval by the shareholders of the Company of a plan or
agreement providing: (A) for a merger or consolidation of the Company other
than with a wholly owned Subsidiary and other than a merger or consolidation
that would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent, either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (B) for a sale, exchange, or
other disposition of all or substantially all of the assets of the Company,
other than any such transaction where the transferee of all or substantially
all of the assets of the Company is a wholly owned Subsidiary or an entity more
than fifty percent (50%) of the combined voting power of the voting securities
of which is represented by voting securities of the Company outstanding
immediately prior to the transaction (either remaining outstanding or by being
converted into voting securities of the transferee entity). If any of the
events enumerated in this paragraph (iii) occur, the Board shall determine the
effective date of the Change in Control resulting there from for purposes of
this Plan.

	 	(j)	 	“Change in Control Good Reason” means the occurrence after a Change in Control
of any one (1) or more of the following:

	 	(i)	 	A material reduction of the Tier I or Tier II Executive’s
authorities, duties, or responsibilities as an executive and/or officer of a
Participating Company from those in effect as of ninety (90) calendar days
prior to the Change in Control, other than an insubstantial or inadvertent
reduction that is remedied by the Participating Company promptly after receipt
of notice thereof given by the Tier I or Tier II Executive; provided, however,
that any reduction in the foregoing resulting merely from the acquisition of
the Participating Company and its existence as a subsidiary or division of
another entity, such as a change in reporting relationship or title, shall not
be sufficient to constitute a Change in Control Good Reason;
	 
	 	(ii)	 	A Participating Company’s requiring a Tier I or Tier II
Executive to be based at a location that exceeds the minimum distance under
Section 217(c) of the Code (for purposes of a moving expense deduction), from
the location of the Tier I or Tier II Executive’s principal job location or
office immediately prior to the Change in Control; except for required travel
on the Participating Company’s business to an extent substantially consistent
with the Tier I or Tier II Executive’s then present business travel
obligations;
	 
	 	(iii)	 	A reduction by a Participating Company in excess of twenty
percent (20%) of the aggregate value of (A) a Tier I or Tier II Executive’s
Base Salary and target annual bonus amount (both as in effect on the date of
the Change in Control) and (B) the long-term incentive opportunities provided

4

 

	 	 	 	to a Tier I or Tier II Executive (as compared to the value of aggregate
long-term incentive opportunities provided as of the date of the Change in
Control), except for across-the-board reductions generally applicable to all
Tier I or Tier II Executives;
	 
	 	(iv)	 	A reduction by a Participating Company in aggregate employee
benefits provided to a Tier I or Tier II Executive as compared to the value of
aggregate employee benefits provided as of the date of the Change in Control,
except for across-the-board reductions generally applicable to all Tier I or
Tier II Executives;
	 
	 	(v)	 	The failure of the Company to obtain a satisfactory agreement
from any successor to the Company to assume and agree to perform the Company’s
obligations under this Plan, as contemplated in Article 6 herein; and
	 
	 	(vi)	 	A material breach of this Plan by a Participating Company which
is not remedied by the Participating Company within ten (10) business days of
receipt of written notice of such breach delivered by a Tier I or Tier II
Executive to the Participating Company.

	 	 	 	Notwithstanding the foregoing, Change in Control Good Reason shall cease to exist
for an event on the ninetieth (90th) day following the later of its occurrence or a
Tier I or Tier II Executive’s knowledge thereof, unless the Tier I or Tier II
Executive has given a Participating Company written notice thereof prior to such
date. Unless a Tier I or Tier II Executive becomes Disabled, a Tier I or Tier II
Executive’s right to terminate employment for a Change in Control Good Reason shall
not be affected by the Tier I or Tier II Executive’s incapacity due to physical or
mental illness. A Tier I or Tier II Executive’s continued employment shall not
constitute consent to, or a waiver of rights with respect to, any circumstance
constituting a Change in Control Good Reason herein. Notwithstanding anything in
this Plan to the contrary, a Tier III Executive shall have no right to terminate
employment for a Change in Control Good Reason.
	 
	 	(k)	 	“Change in Control Severance Benefits” mean the severance benefits as provided
in Section 3.3(a) through 3.3(k).
	 
	 	(l)	 	“CIP” has the meaning set forth in Section 3.3(h).
	 
	 	(m)	 	“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder.
	 
	 	(n)	 	“Committee” means the Compensation Committee of the Board of Directors, or
another committee of Board members appointed by the Board to administer this Plan.
	 
	 	(o)	 	“Company” means Reynolds American Inc., a North Carolina corporation, and any
successor thereto as provided in Article 6.

5

 

	 	(p)	 	“Disability” or “Disabled” shall have the meaning ascribed to such term in the
Company’s governing long-term disability plan, or if no such plan exists, at the
discretion of the Board.
	 
	 	(q)	 	“Effective Date” means January 1, 2008. The Plan was originally effective
January 1, 2007.
	 
	 	(r)	 	“Effective Date of Termination” means the date on which a Qualifying
Termination occurs, as provided in Section 3.2, which triggers the payment of Severance
Benefits, or such other date upon which the Executive’s employment with a Participating
Company terminates for reasons other than a Qualifying Termination.
	 
	 	(s)	 	“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time.
	 
	 	(t)	 	“Excise Tax” means, collectively, (i) the tax imposed by Section 4999 of the
Code by reason of being “contingent on a change in ownership or control” of the
Company, within the meaning of Section 280G of the Code, or (ii) any similar tax
imposed by state or local law, or (iii) any interest or penalties with respect to any
excise tax described in clause (i) or (ii).
	 
	 	(u)	 	“Executive” means a Tier I, Tier II or Tier III Executive who is initially
hired or rehired by a Participating Company on or after January 1, 2007 or who was
hired before that date and is not a party to an effective agreement with a
Participating Company providing for severance benefits.
	 
	 	(v)	 	“General Severance Benefits” mean the severance benefits as provided in Section
3.4(a) through 3.4(k).
	 
	 	(w)	 	“General Good Reason” means a reduction by a Participating Company in excess of
twenty percent (20%) of the aggregate value of (A) the Executive’s Base Salary and
target annual bonus amount (both as in effect on the date the Executive first becomes
covered by the Plan) and (B) the long-term incentive opportunities provided to the
Executive (as compared to the value of aggregate long-term incentive opportunities
provided as of the date the Executive first becomes covered by the Plan), except for
across-the-board reductions generally applicable to all Executives. Notwithstanding
the foregoing, General Good Reason shall cease to exist for an event on the ninetieth
(90th) day following the later of its occurrence or the Executive’s knowledge thereof,
unless the Executive has given a Participating Company written notice thereof prior to
such date. Unless the Executive becomes Disabled, the Executive’s right to terminate
employment for a General Good Reason shall not be affected by the Executive’s
incapacity due to physical or mental illness. The Executive’s continued employment
shall not constitute consent to, or a waiver of rights with respect to, any
circumstance constituting a General Good Reason herein.
	 
	 	(x)	 	“Governance Agreement” has the meaning set forth in Section 2(i).

6

 

	 	(y)	 	“Gross-Up Payment” has the meaning set forth in Section 4.1.
	 
	 	(z)	 	“Incumbent Board” has the meaning set forth in Section 2(i).
	 
	 	(aa)	 	“Insurance Adjustment Payment” has the meaning set forth in Section 3.3(f).
	 
	 	(bb)	 	“Notice of Termination” means a written notice which shall indicate the
specific termination provision in this Plan relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated.
	 
	 	(cc)	 	“Participating Company” or “Participating Companies” means the Company and/or
any other entity that adopts this Plan in accordance with the provisions of Section
7.3. “Participating Company” includes any successor(s) to a Participating Company,
whether by merger, consolidation or otherwise. All Participating Companies are listed
on Appendix C.
	 
	 	(dd)	 	“Payment” has the meaning set forth in Section 4.1.
	 
	 	(ee)	 	“Payment Date” has the meaning set forth in Section 3.1(c)(i).
	 
	 	(ff)	 	“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as
defined in Section 13(d).
	 
	 	(gg)	 	“Plan” means this Reynolds American Inc. Executive Severance Plan.
	 
	 	(hh)	 	“Qualifying Termination” means any of the events described in Section 3.2, the
occurrence of which triggers the payment of Severance Benefits.
	 
	 	(ii)	 	“RJR” means R.J. Reynolds Tobacco Holdings, Inc.
	 
	 	(jj)	 	“Separation from Service” has the meaning set forth in Section 3.2.
	 
	 	(kk)	 	“Severance Benefits” means the payout of Change in Control or General (as
appropriate) Severance compensation as provided in Article 3.
	 
	 	(ll)	 	“Subsidiary” means any corporation or other entity in which the Company has a
significant equity or other interest as determined by the Committee.
	 
	 	(mm)	 	“Tier I Executive” means the Chief Executive Officer of the Company.
	 
	 	(nn)	 	“Tier II Executive” means an individual employed by a Participating Company at
job level eleven (11) through fourteen (14), inclusive (within the meaning of the
Company’s payroll structure).
	 
	 	(oo)	 	“Tier III Executive” means an individual employed by a Participating Company at
job level ten (10) (within the meaning of the Company’s payroll structure).

7

 

Article 3. Severance Benefits

     3.1 Right to Severance Benefits.

	 	(a)	 	Change in Control Severance Benefits. The Executive shall be entitled to
receive from the Company Change in Control Severance Benefits, as described in Section
3.3, if a Qualifying Termination of the Executive’s employment as described in Section
3.2(a) or 3.2(b) has occurred.
	 
	 	(b)	 	General Severance Benefits. The Executive shall be entitled to receive from
the Company General Severance Benefits, as described in Section 3.4, if a Qualifying
Termination of the Executive’s employment as described in Section 3.2(c) has occurred.
	 
	 	(c)	 	Severance Payment Schedule.

	 	(i)	 	The Severance Benefits described in Sections 3.3(a), 3.3(h),
3.3(j), 3.4(a), 3.4(h) and 3.4(j) shall be paid in cash to the Executive in a
single lump sum on the last day of the month after the sixtieth (60th) calendar
day following the date of the Executive’s Qualifying Termination (the “Payment
Date”).
	 
	 	(ii)	 	The Severance Benefits described in Sections 3.3(c), 3.3(e),
3.4(c) and 3.4(e) shall be paid in cash to the Executive in a single lump sum
at the applicable time provided in the annual bonus plan then in effect.
	 
	 	(iii)	 	The Severance Benefits described in Section 3.3(d) shall be
paid out in cash in equal monthly installments (or more frequent installments
as determined by the Company) over a period of: (i) thirty-six (36) months for
Tier I Executives, (ii) twenty-four (24) months for Tier II Executives or (iii)
eighteen (18) months for Tier III Executives, commencing on the Payment Date.
In addition, the Severance Benefits described in Section 3.3(b) shall be paid
in cash to the Executive in a single lump sum with the last payment described
in the immediately preceding sentence.
	 
	 	(iv)	 	The Severance Benefits described in Section 3.4(d) shall be
paid out in cash in equal monthly installments (or more frequent installments
as determined by the Company) over a period of: (i) thirty (30) months for
Tier I Executives or (ii) eighteen (18) months for Tier II or Tier III
Executives, commencing on the Payment Date. In addition, the Severance
Benefits described in Section 3.4(b) shall be paid in cash to the Executive in
a single lump sum with the last payment described in the immediately preceding
sentence.
	 
	 	(v)	 	Notwithstanding anything in this Plan to the contrary, in the
event that the Executive is deemed to be a “specified employee” on the date of
the Qualifying Termination, determined pursuant to procedures adopted by the
Company in compliance with Code Section 409A, and if any portion

8

 

	 	 	 	of the payments or benefits to be received by the Executive upon separation
from service would constitute a “deferral of compensation” subject to Code
Section 409A, then to the extent necessary to comply with Code Section 409A,
amounts that would otherwise be payable pursuant to this Plan during the six
(6) month period immediately following the date of the Executive’s
Qualifying Termination and benefits that would otherwise be provided
pursuant to this Plan during the six (6) month period immediately following
the date of the Executive’s Qualifying Termination will instead be paid or
made available on the earlier of (i) within ten (10) days following the
first business day of the seventh month after the date of the Executive’s
Qualifying Termination, provided that the Executive shall not have the right
to designate the payment date; or (ii) the Executive’s death.

	 	(d)	 	No Severance Benefits. The Executive shall not be entitled to receive
Severance Benefits if the Executive’s employment with a Participating Company ends for
reasons other than a Qualifying Termination.
	 
	 	(e)	 	General Release and Restrictive Covenant Agreement. As a condition to
receiving Severance Benefits under either Section 3.3 or 3.4, the Executive shall,
prior to the 60th day following the date of the Executive’s Qualifying
Termination, be obligated to execute (i) a general release of claims in favor of the
Company, its current and former subsidiaries, affiliates and shareholders, and the
current and former directors, officers, employees, and agents thereof in substantially
the form attached hereto as Appendix A, and any period for revocation will have
expired and (ii) a Reynolds American Non-Competition, Non-Disclosure of Confidential
Information, and Commitment to Provide Assistance Agreement in substantially the form
attached hereto as Appendix B (a “Non-Competition Agreement”) or, with respect
to an Executive who has previously executed a Non-Competition Agreement, a written
affirmation of the Executive’s obligations thereunder.
	 
	 	(f)	 	No Duplication of Severance Benefits. If the Executive becomes entitled to
Change in Control Severance Benefits, the benefits provided for under Section 3.3 shall
be in lieu of the benefits provided to the Executive under Section 3.4. Similarly,
except following a Qualifying Termination described in Section 3.2(b), if the Executive
becomes entitled to General Severance Benefits, the Severance Benefits provided under
Section 3.4 shall be in lieu of the benefits provided to the Executive under Section
3.3.

     3.2 Qualifying Termination. The occurrence of any one or more of the following events (a
“Qualifying Termination”) shall trigger the payment of Severance Benefits to the Executive, as such
benefits are described under Sections 3.3 and 3.4:

	 	(a)	 	Within twenty-four (24) calendar months following a Change in Control, the
Executive incurs a Separation from Service other than:

	 	(i)	 	By a Participating Company for Cause; or

9

 

	 	(ii)	 	By reason of death of Disability; or
	 
	 	(iii)	 	By the Tier I or Tier II Executive without Change in Control
Good Reason.

	 	(b)	 	Within twelve (12) calendar months prior to a Change in Control, the Executive
incurs a Separation from Service by a Participating Company without Cause if such
Separation from Service occurs at the request of any party involved in the Change in
Control transaction; in such event, the date of the Qualifying Termination shall be
deemed to be the date of the Change in Control.
	 
	 	(c)	 	At any time other than as described in Section 3.2(a) or 3.2(b), the Executive
incurs a Separation from Service other than:

	 	(i)	 	By a Participating Company for Cause; or
	 
	 	(ii)	 	By reason of death of Disability; or
	 
	 	(iii)	 	By the Executive without General Good Reason.

     A “Separation from Service” shall be deemed to have occurred on the date on which the level of
bona fide services reasonably anticipated to be performed by the Executive is forty-five percent
(45%) or less of the average level of bona fide services performed by such Executive during the
immediately preceding thirty-six (36) month period (or the full period of services if the Executive
has been providing services for less than thirty-six (36) months).

     3.3 Description of Change in Control Severance Benefits. In the event that the Executive
becomes entitled to receive Change in Control Severance Benefits, as provided in Sections 3.1(a),
3.2(a), and 3.2(b), the Company shall pay to the Executive and provide the Executive with the
following:

	 	(a)	 	An amount equal to the Executive’s unpaid Base Salary, unreimbursed business
expenses, and all other items earned by and owed to the Executive through and including
the date of the Qualifying Termination. Such payment shall constitute full
satisfaction for these amounts owed to the Executive.
	 
	 	(b)	 	An amount equal to the unpaid, accrued vacation pay owed to the Executive
through and including the date of the Qualifying Termination. Such payment shall
constitute full satisfaction for this amount owed to the Executive, and in no event
shall the Executive accrue additional vacation time after the date of the Executive’s
Qualifying Termination.
	 
	 	(c)	 	Any amount payable to the Executive under the annual bonus plan then in effect
in respect of the most recently completed fiscal year, to the extent not theretofore
paid. Such payment shall constitute full satisfaction for these amounts owed to the
Executive.

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	 	(d)	 	An amount equal to: (i) three (3) for Tier I Executives, (ii) two (2) for Tier
II Executives or (iii) one and one-half (11/2) for Tier III Executives times the sum of:
(A) the Executive’s annual rate of Base Salary in effect upon the date of the
Qualifying Termination or, if greater, by the Executive’s annual rate of Base Salary in
effect immediately prior to the occurrence of the Change in Control plus (B) the
Executive’s then current target bonus opportunity established under the annual bonus
plan in effect for the bonus plan year in which the date of the Executive’s Qualifying
Termination occurs or, if greater, the Executive’s target bonus opportunity in effect
prior to the occurrence of the Change in Control.
	 
	 	(e)	 	An amount equal to the annual bonus the Executive would have earned under the
annual bonus plan for the plan year in which the Qualifying Termination occurs,
determined based on the actual performance achieved under such annual bonus plan for
such plan year, adjusted on a pro rata basis based on the number of months the
Executive was actually employed during such plan year (full credit is given for partial
months of employment). Such payment shall constitute full satisfaction for these
amounts owed to the Executive.
	 
	 	(f)	 	Subject to the following paragraph, the Company shall provide, at the same cost
structure as active employees, continuation of the coverage of the Executive (and the
Executive’s eligible dependents) under the Company’s medical, life, dental and vision
insurance benefit plans for: (1) thirty-six (36) months for Tier I Executives, (2)
twenty-four (24) months for Tier II Executives or (3) eighteen (18) months for Tier III
Executives, from the date of the Qualifying Termination; provided, however, that
following the date of the Qualifying Termination the Executive will be covered by the
fully insured medical, dental and vision plans maintained by the Company. The
Executive’s required payments, if any, towards the cost for such continuation coverage
shall be made on an after-tax basis. The applicable COBRA medical insurance benefit
continuation period shall begin at the end of the period of continued medical insurance
coverage described in the preceding sentence.
	 
	 	 	 	If the Executive becomes covered under the medical, dental and/or vision insurance
coverage of a subsequent employer that does not contain any exclusion or limitation
with respect to any preexisting condition of the Executive or the Executive’s
eligible dependents, this medical, dental and/or vision insurance benefit coverage
by the Company shall be discontinued prior to the end of the applicable benefit
continuation period.
	 
	 	 	 	In the event that any medical, life, dental and/or vision insurance benefit plan
coverage provided under this Section 3.3(f) is subject to federal, state, or local
income or employment taxes, the Company shall provide the Executive with an
additional payment (the “Insurance Adjustment Payment”) in the amount necessary such
that after payment by the Executive of all such taxes (calculated after assuming the
Executive pays such taxes for the year in which the payment or benefit occurs at the
highest marginal tax rate applicable), including the taxes imposed on the additional
payments, the Executive effectively received coverage

11

 

	 	 	 	on a tax-free basis. Such Insurance Adjustment Payment shall be made no later than
December 31 of the year following the year in which the Executive incurs the tax.
	 
	 	(g)	 	If the Executive is eligible to participate in a Participating Company’s
defined benefit pension plan as of the date of the Executive’s Qualifying Termination,
the Participating Company shall provide the Executive with an additional pension
benefit determined as if the Executive’s employment with the Participating Company had
continued for an additional: (i) three (3) years for Tier I Executives, (ii) two (2)
years for Tier II Executives or (iii) one and one-half (11/2) years for Tier III
Executives, and calculated as if the Executive’s relevant base pay and target bonus for
such additional period is at the same level as on the date of the Qualifying
Termination, which benefit shall be provided under and paid pursuant to the
Participating Company’s qualified retirement plans to the extent permitted thereunder
or under a nonqualified plan established and maintained by the Participating Company or
an affiliated company.
	 
	 	(h)	 	An amount equal to the matching contributions and/or retirement enhancement
contributions, if any, that would be contributed by the Participating Company on the
Executive’s behalf under the Participating Company’s qualified defined contribution
plan (the “CIP”) and nonqualified defined contribution benefit plans assuming that (i)
the Executive had continued to be employed as an active participant in the CIP for an
additional: (A) three (3) years for Tier I Executives, (B) two (2) years for Tier II
Executives or (C) one and one-half (11/2) years for Tier III Executives following the
date of the Qualifying Termination, (ii) the Executive’s pay was equal to the amount
determined in Section 3.3(d) above and (iii) the Executive contributed in an amount
that would have provided for the maximum matching contributions during such additional
period (without regard to any amendment to the CIP made subsequent to the date of the
Qualifying Termination which modifies the matching contributions and/or retirement
enhancement contributions thereunder).
	 
	 	(i)	 	If the Executive is eligible for retiree health and life insurance coverage on
the date of the Executive’s Qualifying Termination, a Participating Company shall
provide the Executive with additional age and service credit towards eligibility for
retiree health and life insurance coverage determined as if the Executive’s employment
with the Participating Company had continued for an additional: (i) three (3) years for
Tier I Executives, (ii) two (2) years for Tier II Executives or (iii) one and one-half
(11/2) years for Tier III Executives following the date of the Qualifying Termination.
	 
	 	(j)	 	If the Executive is eligible to participate in the Company’s MedSave Plan on
the date of the Qualifying Termination, an amount equal to the contributions that would
have been credited as Company contributions to the Executive’s notional account under
the MedSave Plan assuming that (i) the Executive had continued to be employed as an
active participant in the MedSave Plan for an additional: (A) three (3) years for Tier
I Executives, (B) two (2) years for Tier II Executives or

12

 

	 	 	 	(C) one and one-half (11/2) years for Tier III Executives following the date of the
Qualifying Termination and (ii) the Company had credited the Executive’s notional
account thereunder with the maximum amount of matching contributions each year
during such additional period.
	 
	 	(k)	 	If the Executive actively participates in any of the Company’s voluntary,
employee pay-all plans or programs on the date of the Executive’s Qualifying
Termination, the Executive may continue to participate in such plan or program,
pursuant to the terms and conditions set forth therein, for an additional: (i) three
(3) years for Tier I Executives, (ii) two (2) years for Tier II Executives or (iii) one
and one-half (11/2) years for Tier III Executives following the date of the Qualifying
Termination.

     3.4 Description of General Severance Benefits. In the event that the Executive becomes
entitled to receive General Severance Benefits, as provided in Sections 3.1(b) and 3.2(c), the
Company shall pay to the Executive and provide the Executive with the following:

	 	(a)	 	An amount equal to the Executive’s unpaid Base Salary, unreimbursed business
expenses, and all other items earned by and owed to the Executive through and including
the date of the Qualifying Termination. Such payment shall constitute full
satisfaction for these amounts owed to the Executive.
	 
	 	(b)	 	An amount equal to the unpaid, accrued vacation pay owed to the Executive
through and including the date of the Qualifying Termination. Such payment shall
constitute full satisfaction for this amount owed to the Executive, and in no event
shall the Executive accrue additional vacation time after the date of the Executive’s
Qualifying Termination.
	 
	 	(c)	 	Any amount payable to the Executive under the annual bonus plan then in effect
in respect of the most recently completed fiscal year, to the extent not theretofore
paid. Such payment shall constitute full satisfaction for these amounts owed to the
Executive.
	 
	 	(d)	 	An amount equal to: (i) two and one-half (21/2) for Tier I Executives, or (ii)
one and one-half (11/2) for Tier II and III Executives, times the sum of: (A) the
Executive’s annual rate of Base Salary in effect upon the date of the Qualifying
Termination plus (B) the Executive’s then current target bonus opportunity established
under the annual bonus plan in effect for the bonus plan year in which the date of the
Executive’s Qualifying Termination occurs.
	 
	 	(e)	 	An amount equal to the annual bonus the Executive would have earned under the
annual bonus plan for the plan year in which the Qualifying Termination occurs,
determined based on the actual performance achieved under such annual bonus plan for
such plan year, adjusted on a pro rata basis based on the number of months the
Executive was actually employed during such plan year (full credit is given for partial
months of employment). Such payment shall constitute full satisfaction for these
amounts owed to the Executive.

13

 

	 	(f)	 	Subject to the following paragraph, the Company shall provide, at the same cost
structure as active employees, continuation of the coverage of the Executive (and the
Executive’s eligible dependents) under the Company’s medical, life, dental and vision
insurance benefit plans for: (1) thirty (30) months for Tier I Executives, or (2)
eighteen (18) months for Tier II and III Executives, from the date of the Qualifying
Termination; provided, however, that following the date of the Qualifying Termination
the Executive will be covered by the fully insured medical, dental and vision plans
maintained by the Company. The Executive’s required payments, if any, towards the cost
for such continuation coverage shall be made on an after-tax basis. The applicable
COBRA medical insurance benefit continuation period shall begin at the end of the
period of continued medical insurance coverage described in the preceding sentence.
	 
	 	 	 	If the Executive becomes covered under the medical, dental and/or vision insurance
coverage of a subsequent employer that does not contain any exclusion or limitation
with respect to any preexisting condition of the Executive or the Executive’s
eligible dependents, this medical, dental and/or vision insurance benefit coverage
by the Company shall be discontinued prior to the end of the applicable benefit
continuation period.
	 
	 	 	 	In the event that any medical, life, dental and/or vision insurance benefit plan
coverage provided under this Section 3.4(f) is subject to federal, state, or local
income or employment taxes, the Company shall provide the Executive with an
Insurance Adjustment Payment in the amount necessary such that after payment by the
Executive of all such taxes (calculated after assuming the Executive pays such taxes
for the year in which the payment or benefit occurs at the highest marginal tax rate
applicable), including the taxes imposed on the additional payments, the Executive
effectively received coverage on a tax-free basis. Such Insurance Adjustment
Payment shall be made no later than December 31 of the year following the year in
which the Executive incurs the tax.
	 
	 	(g)	 	If the Executive is eligible to participate in a Participating Company’s
defined benefit pension plan as of the date of the Executive’s Qualifying Termination,
the Participating Company shall provide the Executive with an additional pension
benefit determined as if the Executive’s employment with the Participating Company had
continued for an additional: (i) thirty (30) months for Tier I Executives, or (ii)
eighteen (18) months for Tier II and III Executives, and calculated as if the
Executive’s relevant base pay and target bonus for such additional period is at the
same level as on the date of the Qualifying Termination, which benefit shall be
provided under and paid pursuant to the Participating Company’s qualified retirement
plans to the extent permitted thereunder or under a nonqualified plan established and
maintained by the Participating Company or an affiliated company.
	 
	 	(h)	 	An amount equal to the matching contributions and/or retirement enhancement
contributions, if any, that would be contributed by the Participating Company on the
Executive’s behalf under the CIP and the Participating Company’s

14

 

	 	 	 	nonqualified defined contribution benefit plans assuming that (i) the Executive had
continued to be employed as an active participant in the CIP for an additional: (A)
thirty (30) months for Tier I Executives, or (B) eighteen (18) months for Tier II
and III Executives following the date of the Qualifying Termination, (ii) the
Executive’s pay was equal to the amount determined in Section 3.4(d) above and (iii)
the Executive contributed in an amount that would have provided for the maximum
matching contributions during such additional period (without regard to any
amendment to the CIP made subsequent to the date of the Qualifying Termination which
modifies the matching contributions and/or retirement enhancement contributions
thereunder).
	 
	 	(i)	 	If the Executive is eligible for retiree health and life insurance coverage on
the date of the Executive’s Qualifying Termination, a Participating Company shall
provide the Executive with additional age and service credit towards eligibility for
retiree health and life insurance coverage determined as if the Executive’s employment
with the Participating Company had continued for an additional: (i) thirty (30) months
for Tier I Executives or (ii) eighteen (18) months for Tier II and III Executives,
following the date of the Qualifying Termination.
	 
	 	(j)	 	If the Executive is eligible to participate in the Company’s MedSave Plan on
the date of the Qualifying Termination, an amount equal to the contributions that would
have been credited as Company contributions to the Executive’s notional account under
the MedSave Plan assuming that (i) the Executive had continued to be employed as an
active participant in the MedSave Plan for an additional: (A) thirty (30) months for
Tier I Executives, or (B) eighteen (18) months for Tier II and III Executives following
the date of the Qualifying Termination and (ii) the Company had credited the
Executive’s notional account thereunder with the maximum amount of matching
contributions each year during such additional period.
	 
	 	(k)	 	If the Executive actively participates in any of the Company’s voluntary,
employee pay-all plans or programs on the date of the Executive’s Qualifying
Termination, the Executive may continue to participate in such plan or program pursuant
to the terms and conditions set forth therein, for an additional: (i) thirty (30)
months for Tier I Executives, or (ii) eighteen (18) months for Tier II and III
Executives following the date of the Qualifying Termination.

     3.5 Notice of Termination. Any termination of the Executive’s employment by a Participating
Company or by the Executive shall be communicated by Notice of Termination to the other party.

     3.6 Disability. Notwithstanding any provision of the Plan to the contrary, if an Executive
becomes Disabled after the date of the Executive’s Qualifying Termination, such Executive shall not
be entitled to benefits under any short-term or long-term disability plan of a Participating
Company.

15

 

Article 4. Excise Taxes.

     4.1 Applicable Provisions if Excise Tax Applies.

	 	(a)	 	Anything in the Plan to the contrary notwithstanding, if it is determined (as
hereafter provided) that any payment or distribution by or on behalf of a Participating
Company to or for the benefit of a Tier I or Tier II Executive, whether paid or payable
or distributed or distributable pursuant to the terms of the Plan or otherwise pursuant
to or by reason of any other agreement, policy, plan, program or arrangement, including
without limitation any stock option, stock appreciation right or similar right, or the
lapse or termination of any restriction on or the vesting or exercisability of any of
the foregoing (in the aggregate, the “Payment”), would be subject to the Excise Tax,
the Participating Company shall pay an additional amount (the “Gross-Up Payment”) such
that, after payment by the Tier I or Tier II Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise Tax
imposed upon the Gross-Up Payment, the Tier I or Tier II Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payment;
provided, however, that the Participating Company shall only be
required to pay the Gross-Up Payment if the Tier I or Tier II Executive receives total
“Parachute Payments” within the meaning of Section 280G of the Code (without
consideration of the Gross-Up Payment) that exceed one hundred and ten percent (110%)
of the amount that the Tier I and Tier II Executive would be entitled to receive
without being subject to the Excise Tax. Such Gross-Up Payment shall be made no later
than December 31 of the year following the year in which the Tier I or Tier II
Executive incurs the Excise Tax. Any expenses, including interest and penalties
assessed on the Excise Tax described in this Section 4.1 resulting from the Company’s
actions, incurred by a Tier I or Tier II Executive shall be reimbursed promptly after
the Tier I or Tier II Executive submits evidence of the incurrence of such expenses,
which reimbursement in no event will be later than December 31 of the year following
the year in which the Tier I or Tier II Executive incurs the expense, provided that in
no event will the amount of expenses eligible for reimbursement in one year affect the
amount of expenses to be reimbursed, or in-kind benefits to be provided, in any other
taxable year.
	 
	 	(b)	 	In the event that the Tier I and Tier II Executive is not entitled to receive a
Gross-Up Payment, the Tier I and Tier II Executive shall be entitled to receive the
Payment to which the Tier I and Tier II Executive is otherwise entitled to, unless
reducing such Payment would result in an increase in the after-tax benefit to the Tier
I and Tier II Executive (taking into account any Excise Tax, and any applicable
federal, state and local income taxes). If reducing such Payment would result in an
increase in the after-tax benefit to the Tier I and Tier II Executive, then the Payment
shall be reduced to the minimum extent necessary so that no portion of any such Payment
is subject to the Excise Tax. The fact that a Tier I or Tier II Executive’s right to a
Payment may be reduced by reason of the limitations contained in this Section 4.1 shall
not of itself limit or otherwise affect any other rights of the Tier I or Tier II
Executive other than under the Plan. In the event

16

 

	 	 	 	that a Payment intended to be provided under the Plan is required to be reduced
pursuant to this Section 4.1, the payment required by Section 3.3(d) will be so
reduced.
	 
	 	(c)	 	All determinations required to be made under this Section 4.1, including
whether an Excise Tax is payable by a Tier I or Tier II Executive and the amount of
such Excise Tax, shall be made by the Accounting Firm. The Participating Company shall
direct the Accounting Firm to submit its determination and detailed supporting
calculations to the relevant Participating Company and the Tier I or Tier II Executive
within fifteen (15) calendar days after the date of the Tier I or Tier II Executive’s
termination, if applicable, and any other such time or times as may be requested by
such Participating Company or the Tier I or Tier II Executive. If the Accounting Firm
determines that no Excise Tax is payable by the Tier I or Tier II Executive, it shall,
at the same time as it makes such determination, furnish the Tier I or Tier II
Executive with an opinion that the Tier I or Tier II Executive has substantial
authority not to report any Excise Tax on the Tier I or Tier II Executive’s federal,
state, local income or other tax return.
	 
	 	(d)	 	The Participating Company and the Tier I or Tier II Executive shall each
provide the Accounting Firm access to and copies of any books, records and documents in
the possession of the Participating Company or the Tier I or Tier II Executive, as the
case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with
the Accounting Firm in connection with the preparation and issuance of the
determination contemplated by Section 4.1(c). Any reasonable determination by the
Accounting Firm of the type contemplated by Section 4.1(c) (and supported by the
calculations done by the Accounting Firm) shall be binding upon such Participating
Company and the Tier I or Tier II Executive.
	 
	 	(e)	 	The federal, state and local income or other tax returns filed by the Tier I or
Tier II Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax, if any, payable by
the Tier I or Tier II Executive. The Tier I or Tier II Executive shall make proper
payment of the amount of any Excise Tax, and upon request, provide to the Participating
Company true and correct copies (with any amendments) of the Tier I or Tier II
Executive’s federal income tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with the applicable
taxing authority, and such other documents reasonably requested by the Participating
Company, evidencing such filing and payment.
	 
	 	(f)	 	The Participating Company will pay the fees and expenses of the Accounting Firm
for its services in connection with the determinations and calculations contemplated by
Section 4.1(c) and Section 4.1(e). If such fees and expenses are initially paid by the
Tier I or Tier II Executive, the Participating Company shall reimburse the Tier I or
Tier II Executive the full amount of such fees and expenses within ten (10) business
days after receipt from the Tier I or Tier II Executive of reasonable evidence of
payment; provided, however, that any such reimbursements shall be made no later than
December 31 of the year following

17

 

	 	 	 	the year in which the Tier I or Tier II Executive incurs the fees and expenses. In
no event will the amount of expenses eligible for reimbursement in one year affect
the amount of expenses to be reimbursed, or in-kind benefits to be provided, in any
other taxable year.

Article 5. Contractual Rights and Legal Remedies

     5.1 Payment Obligations Absolute. A Participating Company’s obligation to make the payments
and the arrangements provided for herein shall be absolute and unconditional, and shall not be
affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment,
defense, or other right which the Participating Company may have against the Executive or anyone
else. All amounts payable by a Participating Company hereunder shall be paid without notice or
demand.

     The Executive shall not be obligated to seek other employment in mitigation of the amounts
payable or arrangements made under any provision of this Plan, and the obtaining of any such other
employment shall in no event effect any reduction of a Participating Company’s obligations to make
the payments and arrangements required to be made under this Plan, except to the extent provided in
Section 3.3(f) and
3.4(f) herein.

     5.2 Contractual Rights to Benefits. This Plan establishes and vests in the Executive a
contractual right to the benefits to which he is entitled hereunder. However, nothing herein
contained shall require or be deemed to require, or prohibit or be deemed to prohibit, a
Participating Company to segregate, earmark, or otherwise set aside any funds or other assets, in
trust or otherwise, to provide for any payments to be made or required hereunder.

     5.3 Legal Fees and Expenses. A Participating Company shall pay all reasonable legal fees,
costs of litigation, prejudgment interest, and other expenses which are incurred in good faith by a
Tier I or Tier II Executive as a result of the Participating Company’s refusal to provide the
Change in Control Severance Benefits to which the Tier I or Tier II Executive becomes entitled
under this Plan, or as a result of the Participating Company’s (or any third party’s) contesting
the validity, enforceability, or interpretation of the Plan with respect to the Change in Control
Severance Benefits, or as a result of any conflict between the parties pertaining to the Change in
Control Severance Benefits under this Plan; provided, however, that if the court determines that a
Tier I or Tier II Executive’s claims were arbitrary and capricious, the Participating Company shall
have no obligation hereunder. If such fees and expenses are initially paid by the Tier I or Tier
II Executive, subject to Section 3.1(c)(v), the Participating Company shall reimburse the Tier I or
Tier II Executive the full amount of such fees and expenses after receipt from the Tier I or Tier
II Executive of reasonable evidence of payment; provided, however, that any such reimbursements
shall be made no later than December 31 of the year following the year in the which the Tier I or
Tier II Executive incurs the fees and expenses. In no event will the amount of expenses eligible
for reimbursement in one year affect the amount of expenses to be reimbursed, or in-kind benefits
to be provided, in any other taxable year.

18

 

Article 6. Successors

     6.1 Successors to the Company. The Company shall require any successor (whether direct or
indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock,
liquidation, or otherwise) of all or a significant portion of the assets of the Company by
agreement, to expressly assume and agree to perform this Plan in the same manner and to the same
extent that the Company would be required to perform if no such succession had taken place.
Regardless of whether such agreement is executed, this Plan shall be binding upon any successor in
accordance with the operation of law and such successor shall be deemed “the Company” for purposes
of this Plan.

     6.2 Assignment by the Executive. This Plan shall inure to the benefit of and be enforceable
by the Executive’s personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive dies while any amount would still be
payable to him hereunder had he continued to live, all such amounts, unless otherwise provided
herein, shall be paid in a single lump sum within ninety (90) days following the date of the
Executive’s death to the Executive’s devisee, legatee, or other designee, or if there is no such
designee, to the Executive’s estate, provided that such devisee, legatee, other designee or estate
shall not have the right to designate the payment date.

Article 7. Miscellaneous

     7.1 Employment Status. This Plan is not, and nothing herein shall be deemed to create, an
employment contract between the Executive and a Participating Company. The Executive acknowledges
that the rights of a Participating Company remain wholly intact to change or reduce at any time and
from time to time his compensation, title, responsibilities, location, and all other aspects of the
employment relationship, or to discharge him prior to a Change in Control (subject to Section 3.2).

     7.2 Entire Plan. This Plan contains the entire understanding of the Participating Company and
the Executive with respect to the subject matter hereof. Notwithstanding anything to the contrary,
if the Executive is entitled to the payments provided for under this Plan in the event of the
Executive’s termination of employment and any other employment, retention, severance, or similar
agreement with a Participating Company or any Subsidiary to which the Executive is a party or any
severance pay plan or program of a Participating Company or any Subsidiary in which the Executive
is a participant (an “Other Severance Arrangement”), the Executive will be entitled to severance
benefits under either this Plan or the Other Severance Arrangement, whichever provides for greater
benefits, but will not be entitled to benefits under both this Plan and the Other Severance
Arrangement.

     7.3 Adoption Procedure for a Participating Company.

	 	(a)	 	Any Subsidiary of the Company may become a Participating Company under the Plan
provided that by appropriate resolutions of the board of directors or other governing
body of such Subsidiary, such Subsidiary agrees to become a Participating Company under
the Plan and also agrees to be bound by any other terms and conditions which may be
required by the Board or the Committee,

19

 

	 	 	 	provided that such terms and conditions are not inconsistent with the purposes of
the Plan.
	 
	 	(b)	 	A Participating Company may withdraw from participation in the Plan, subject to
approval by the Committee, by providing written notice to the Committee that withdrawal
has been approved by the board of directors or other governing body of the
Participating Company. The Committee may at any time remove a Participating Company
from participation in the Plan by providing written notice to the Participating Company
that it has approved removal. The Committee will act in accordance with this Section
7.3 pursuant to unanimous written consent or by majority vote at a meeting.

     7.4 Notices. All notices, requests, demands, and other communications hereunder shall be
sufficient if in writing and shall be deemed to have been duly given if delivered by hand or if
sent by registered or certified mail to the Executive at the last address the Executive has filed
in writing with the Participating Company or, in the case of the Participating Company, at its
principal offices.

     7.5 Includable Compensation. Change in Control and General Severance Benefits provided
hereunder shall not be considered “includable compensation” for purposes of determining the
Executive’s benefits under any other plan or program of a Participating Company unless otherwise
provided by such other plan or program.

     7.6 Tax Withholding. A Participating Company shall withhold from any amounts payable under
this Plan all federal, state, city, or other taxes as legally required to be withheld.

     7.7 Internal Revenue Code Section 409A. To the extent applicable, it is intended that this
Plan comply with the provisions of Code Section 409A. This Plan shall be administered in a manner
consistent with this intent. References to Code Section 409A shall include any proposed, temporary
or final regulation, or any other guidance, promulgated with respect to such section by the U.S.
Department of Treasury or the Internal Revenue Service. Each payment and each provision of
Severance Benefits pursuant to Article 3, and each provision of reimbursements pursuant to Section
4.1 or Section 5.3, shall be considered a separate payment and not one of a series of payments for
purposes of Code Section 409A.

     7.8 Severability. In the event any provision of this Plan shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision had not been
included. Further, the captions of this Plan are not part of the provisions hereof and shall have
no force and effect.

     Notwithstanding any other provisions of this Plan to the contrary, a Participating Company
shall have no obligation to make any payment to the Executive hereunder to the extent, but only to
the extent, that such payment is prohibited by the terms of any final order of a federal or state
court or regulatory agency of competent jurisdiction; provided, however, that such an order shall
not affect, impair, or invalidate any provision of this Plan not expressly subject to such order.

20

 

     7.9 Modification. Provisions of this Plan may be modified or waived by the Company; provided,
however, that during the period beginning on the date of the Change in Control and ending on the
second anniversary of such Change in Control, no provision of this Plan may be modified or waived
unless such modification or waiver is agreed to in writing and signed by the affected Executives
then covered by the Plan and by a member of the Committee, as applicable, or by the respective
parties’ legal representatives or successors; provided further that any modification or waiver
occurring during the twelve (12) months immediately prior to the Change in Control shall be deemed
null and void unless such modification or waiver is agreed to in writing and signed by the affected
Executives then covered by the Plan and by a member of the Committee, as applicable, or by the
respective parties’ legal representatives or successors. Modifications or waivers agreed to in
writing may affect only those Executives who have signed such modification or waiver.

     7.10 Gender and Number. Except where otherwise indicated by the context, any masculine term
used herein shall include the feminine; the plural shall include the singular and the singular
shall include the plural.

     7.11 Applicable Law. To the extent not preempted by the laws of the United States, the laws
of North Carolina shall be the controlling law in all matters relating to this Plan, including the
Non-Competition, Non-Disclosure of Confidential Information and Commitment to Provide Assistance
Agreement attached hereto as Appendix B, without giving effect to principles of conflicts
of laws.

21

 

     IN
WITNESS WHEREOF, the Company has executed this Plan on this ___ day of _________,
2007.

     ATTEST:

     REYNOLDS AMERICAN INC.

	 	 	 	 	 
	 	 	/s/ Lisa J. Caldwell
	 	 	 
	By:
	 	Lisa Caldwell
	 	 	Senior Vice President — Human Resources

22Exhibit 10.69

 

Exhibit 10.69

REYNOLDS AMERICAN INC.

ANNUAL INCENTIVE AWARD PLAN

Effective July 30, 2004,

As Amended and Restated as of January 1, 2008

 

 

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, 2008

	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.

A-1

 

	 	(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%.
	 
	 	(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	 
	 

A-2

 

	 	 	 	 	 	 	 	 	 
	 	High Achieves
	 	 	1.2
	 	 	1.0	 
	 	Achieves
	 	 	1.0
	 	 	1.0	 
	 	Almost Achieves
	 	 	0.5
	 	 	0.5	 
	 	Fails to Meet
	 	 	0
	 	 	0	 
	 

	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,
Disability or Retirement 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,
Disability or Retirement. The Chief Human Resources Officer shall determine

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	 	 	 	whether such pro ration 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 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.
	 
	 	(f)	 	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.
	 
	 	(g)	 	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, Disability or Retirement 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

A-4

 

	 	 	 	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, 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

A-5

 

	 	 	 	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 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.

A-6

 

	 	(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 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

A-7

 

	 	 	 	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 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

A-8

 

	 	 	 	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.
	 
	 	(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;

A-9

 

	 	(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.
	 
	 	(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

A-10

 

	 	 	 	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 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.

A-11

 

	 	(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, and January 1, 2008.

A-12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00137-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00137-of-00352.parquet"}]]