Document:

eqbk-ex1020_353.htm

Exhibit 10.20

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into this 1st of October, 2018 (the “Effective Date”), by and between EQUITY BANK, a Kansas banking corporation (the “Bank”), and BRETT A. REBER, an individual (“Executive”).

RECITALS

WHEREAS, Executive is willing and desires to be employed by the Bank, and the Bank is willing to employ Executive, upon the terms, covenants and conditions hereinafter set forth.

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Bank and Executive hereby agree as follows:

1.Employment.  The Bank agrees to employ Executive, and Executive agrees to accept such employment, on the terms and conditions hereinafter provided.

2.Term.  The term of this Agreement shall be for an initial period of three (3) years commencing as of the Effective Date, and shall be automatically renewed for successive one-year periods thereafter, unless terminated pursuant to Section 6 below; provided, however, that Executive’s obligations in Section 5 below shall continue in effect after such termination.

3.Title, Duties and Responsibilities.  The Bank hereby employs Executive as its General Counsel-Executive Vice President (“GC”) or other title as designated by the Bank’s CEO in his sole discretion, subject to the supervision and direction of the Bank’s CEO or other executive as designated by the Bank’s CEO in his sole discretion (the “Supervisor”).  Executive shall have such duties as may be assigned to him from time to time by the Supervisor commensurate with his experience and ordinary responsibilities and regulatory requirements for the position for which he is employed.  Such duties shall be exercised subject to the control and supervision of the Supervisor. The Bank shall employ Executive on a full-time basis, and Executive shall devote his full time and professional efforts to the performance of his assigned duties.  The foregoing specifications are not intended as a complete itemization of the duties Executive shall perform and undertake on behalf of the Bank in satisfaction of his employment obligations under this Agreement.

4.Compensation and Benefits.

(a)Base Compensation.  For all services rendered by Executive under this Agreement, the Bank shall pay Executive a base salary of Two Hundred Seventy Five Thousand Dollars ($275,000) per annum, payable in equal installments in accordance with the Bank’s normal payroll practices, effective as of the Effective Date (the “Base Salary”).  The amount of the Base Salary may be reviewed at any time and from time to time by the Supervisor and shall be reviewed at least annually, but shall not be reduced.  No such change upward shall in any way abrogate, alter, terminate or otherwise affect the other terms of this Agreement.

(b)Vacation and Management Benefits.  Executive shall be entitled to (i) four (4) weeks annual paid vacation (which shall not accumulate from year to year and shall be 

 

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“paid” upon termination pursuant to Section 7); (ii) sick leave in accordance with Bank policy; (iii) benefits similarly provided to other executive officers of the Bank with similar job responsibilities, including but not limited to health insurance, a company automobile, appropriate country club membership, short term incentives, long term incentives and expenses.  All benefits shall be administered in accord with the Bank’s written policies.

(c)Reimbursement.  Executive shall be reimbursed for all reasonable “out-of-pocket” business expenses for continuing training and education, business travel and business entertainment (and where appropriate for business reasons, the business travel and business entertainment of his spouse) incurred in connection with the performance of his duties under this Agreement.  The reimbursement of Executive’s business expenses shall be upon monthly presentation to and approval by the Supervisor (in accordance with Bank’s expense reimbursement policy) of valid receipts and other appropriate documentation for such expenses, and in accordance with applicable governmental bank regulations.  

(d)Restrictions on Reimbursements, Gross-Ups and In-Kind Benefits.  Any reimbursements, gross-ups or in-kind benefits to be provided pursuant to this Agreement (including but not limited to the benefits described in Sections 4(d) and 4(e)) which are taxable to Executive shall be subject to the following restrictions:  (i) each reimbursement or gross-up must be paid no later than the last day of the calendar year following Executive’s tax year during which the expense was incurred or tax was remitted, as the case may be; (ii) the amount of expenses or taxes eligible for reimbursement or in-kind benefits or gross-ups provided, during a tax year of Executive may not affect the expenses or taxes eligible for reimbursement or in-kind benefits or gross-ups to be provided, in any other tax year of Executive; (iii) the period during which any reimbursement or gross-up may be paid or in-kind benefit may be provided shall end two years after termination of this Agreement; and (iv) the right to reimbursement, gross-up or in-kind benefits is not subject to liquidation or exchange for another benefit. 

5.Confidentiality of Trade Secrets; Non-Solicitation.

(a)Trade Secrets.  Other than in the performance of his duties hereunder, Executive agrees not to disclose, either during the term of Executive’s employment by the Bank or thereafter, to any person, firm or corporation, any confidential information concerning the business affairs, the trade secrets, the customer lists or similar information of the Bank. Without limitation, any unique technique, method, process or technology used by the Bank shall be considered a “trade secret” for the purposes of this Agreement. This paragraph shall survive the expiration or termination of this Employment Agreement for any reason.  Executive understands and acknowledges that nothing in this Section 5(a) limits his ability to communicate with any government agencies or otherwise participate in any investigation or proceeding that may be conducted by any government agencies in connection with any charge or complaint, whether filed by Executive, on Executive’s behalf, or by any other individual.

(b)Ownership of Trade Secrets; Assignment of Rights.  Executive hereby agrees that all know-how, documents, reports, plans, proposals, marketing and sales plans, 

 

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client lists, client files and materials made by Executive, or made or otherwise possessed by the Bank, are the property of the Bank and shall not be used by Executive in any way adverse to the Bank’s interests. Executive shall not deliver, reproduce or in any way allow such documents or things to be delivered to or used by any third party other than as reasonably necessary to carry out Executive’s duties without specific direction or consent of the Supervisor. Executive hereby assigns to the Bank any rights which Executive may otherwise have in any such trade secret or proprietary information and agrees to execute any further documents reasonably requested to secure the assignment.

(c)Non-Solicitation.  Executive covenants and agrees that both during Executive’s employment with the Bank and for a period of twenty four (24) months after his termination of employment with the Bank for any reason, Executive shall not engage in the following acts of “solicitation”:

	
 
	
(i)
	
directly or indirectly, whether as an individual for Executive’s own account, or on behalf of any other person, firm, corporation, partnership, joint venture or entity whatsoever, solicit or endeavor to entice away from the Bank any employee who is employed by the Bank;

	
 
	
(ii)
	
directly or indirectly through any other individual or entity, solicit, entice, persuade or induce any individual or entity to terminate, reduce or refrain from forming, renewing or extending its relationship, whether actual or prospective, with the Bank; or

	
 
	
(iii)
	
directly or indirectly through any other individual or entity, solicit, entice, persuade or induce any individual or business that was a customer of Bank during the term of Executive’s employment with Bank to do business with any individual or entity with respect to matters that the Bank did business or was attempting to do with such customer either during the term of Executive’s employment with the Bank or during the term of this solicitation prohibition.

(d)Conflicting Activities.  Executive shall not, during the term of this Agreement, be engaged in any other outside business activity without the prior written consent of the Supervisor with the exception of paid Board membership with non-competing companies or transition counsel services work for Executive’s law firm, as approved by the Supervisor; provided, however, that this restriction shall not be construed as preventing Executive from investing his personal assets in publicly traded stocks and bonds and similar passive assets.

(e)Acknowledgment, Enforceability.  Executive acknowledges that, in exchange for the execution of the terms set forth in this Section 5, he has received substantial, valuable consideration, and that this Section 5 is the result of arms-length negotiations.  Executive further acknowledges and agrees that this consideration constitutes fair and adequate consideration for the execution of the restriction set forth in this Section.

 

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(i)
	
Executive agrees that the restrictions set forth above are ancillary to an otherwise enforceable agreement and supported by independent valuable consideration as required by Kansas law.  Executive further agrees that the limitations as to time, geographical area, and scope of activity to be restrained by this Section are reasonable and acceptable, and do not impose any greater restraint than is reasonably necessary to protect the trade secrets, proprietary information, goodwill and other business interests of the Bank.  Executive agrees that if, at some later date, a court of competent jurisdiction determines that the agreement set forth in this Section does not meet the criteria established by Kansas law, this Section may be reformed by the court and enforced to the maximum extent permitted under Kansas law.

	
 
	
(ii)
	
This Section 5 shall survive any expiration, non-renewal or termination of the Agreement or any termination of Executive’s employment with the Bank.  To the extent that any provision of this Section 5 conflicts with the terms or provisions of any other agreement between the Bank and Executive, the terms of this Section 5 shall control for the applicable restriction period thereafter.

	
 
	
(iii)
	
All of the covenants in this Section shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Executive against the Bank, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Bank of such covenants.

	
 
	
(iv)
	
It is specifically agreed that any restriction period stated in this Section 5 during which the agreements and covenants of Executive shall be effective, shall be computed by excluding from such computation any time during which Executive is in violation of any provision of this Section.

6.Termination. Notwithstanding anything to the contrary contained herein, Executive’s employment with the Bank and this Agreement shall terminate upon the occurrence of any of the following:

(a)Basis of Termination.

	
 
	
(i)
	
Executive’s employment hereunder may be terminated at any time by mutual agreement of the parties.

	
 
	
(ii)
	
This Agreement shall automatically terminate upon the Executive’s death or the date Executive becomes permanently incapacitated.  “Permanent Incapacity” as used herein, shall mean mental or physical incapacity, or both reasonably determined by the Supervisor based upon an opinion of Executive’s regularly attending physician or other qualified physician, rendering Executive unable to perform substantially 

 

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all of his duties hereunder and which appears reasonably certain to continue for at least twelve consecutive months without substantial improvement.  Executive shall be deemed to have “become permanently incapacitated” on the date the Supervisor has determined that Executive is permanently incapacitated and so notifies Executive.

	
 
	
(iii)
	
Executive’s employment may be terminated by the Bank with “cause,” effective upon delivery of written notice to Executive given at any time (without any necessity for prior notice) if any of the following shall occur:

	
 
	
(1)
	
a violation of a material business directive of the Supervisor which is demonstrably willful and deliberate on Executive’s part and not remedied within a reasonable time period after receipt of written notice from the Supervisor;

	
 
	
(2)
	
(A) a felony conviction; (B) any other criminal conviction involving Executive’s theft, dishonesty, or moral turpitude; (C) continuing or habitual drug or alcohol use to an extent that interferes with the performance of Executive’s duties; or (D) Executive’s bankruptcy;

(3)Material breach of any material term of this Agreement; or

	
 
	
(4)
	
Failure to materially perform his duties to the satisfaction of any regulatory agency responsible for supervision of the Bank.

(b)Termination by Executive with Notice.  Executive may terminate his employment hereunder by giving the Bank sixty (60) days’ prior written notice, which termination shall be effective on the 60th day following such notice (the “Notice Termination Date”).  The Bank may, in lieu of continuing performance during the 60-day notice period, pay Executive his salary for the balance of the 60-day notice period without requiring further performance by Executive.

(c)Termination of Executive without Notice.  Executive’s employment may be terminated by the Bank for any reason other than death, permanent incapacity (as defined in paragraph 6(a)(ii) above), or cause (as defined in paragraph 6(a)(iii) above) by giving fifteen (15) days’ prior written notice to Executive and such termination shall be effective as of the date of termination stated in such notice.

(d)Termination by Executive for Good Reason.  Executive may terminate his employment for “good reason”.  For purposes of this Agreement, good reason means any material breach by the Bank of any provision of this Agreement.

(e)Nonrenewal.  Either the Bank or Executive may terminate this Agreement and the employment relationship that existed between them by giving written notice to the other not less than ninety (90) days before the end of the initial term hereof, or any subsequent renewal term.

 

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(f)Termination of Executive “Non-Performance”.  Executive’s employment may be terminated by the Bank for “non-performance,” effective upon delivery of written notice to Executive given at any time (without any necessity for prior notice) if any one of the following shall occur:

	
 
	
(i)
	
failure to substantially perform his duties to the satisfaction of the Supervisor; or

	
 
	
(ii)
	
extended absences from the Bank aggregating six (6) months or more due to illness or disability within a twelve (12) month period. 

(g)If the Executive is a member of the Board of Directors of either Bancshares or the Bank and the Executive’s employment is terminated by the Bank or by the Executive pursuant to Section 6, Executive shall immediately resign from his position(s) on the Board(s) of Directors of Bancshares and the Bank, effective as of the date his employment is terminated. 

7.Payment upon Termination. 

(a)Upon termination pursuant to Sections 6(a) or (f)(ii), the Bank shall pay to Executive within ten (10) days after termination an amount equal to the sum of Executive’s Base Salary accrued to the date of termination, plus any unreimbursed expenses, vacation pay, and other benefits accrued to the date of termination.  

(b)Upon termination pursuant to Sections 6(b) or (f)(i), the Bank shall pay to Executive, consistent with the Bank’s payroll practices (subject to the acceleration of contemplated by Section 6(b)), an amount equal to Executive’s Base Salary through the Notice Termination Date, plus any unreimbursed expenses, vacation pay, and other benefits accrued through the Notice Termination Date.

(c)Upon termination pursuant to Sections 6(c), (d), or (e), the Bank shall pay to Executive within ten (10) days after termination an amount equal to the sum of all compensation due to Executive under Section 4 accrued to the date of termination, including, without limitation, Executive’s Base Salary, bonus, vacation and management benefits, unreimbursed expenses, and other benefits.  In addition, the Bank shall pay Executive an amount equal to twelve (12) months of Executives’ Base Salary, subject to Executive signing a general release of claims in a form reasonably acceptable to the Bank within twenty-one (21) days or forty-five (45) days, whichever period is required by applicable law.  If Executive is in material breach of any of his obligations under Section 5 of this Agreement, the Bank may cease making these payments. If the Bank’s headquarters relocates from Wichita for any reason Executive is entitled to relocate or terminate according to Section 6(d). 

(d)In addition to an amount equal to the sum of Executive’s Base Salary accrued to the date of a Change in Control Termination (defined below), plus any unreimbursed expenses, vacation pay, and other benefits accrued to the date of a Change in Control Termination, within thirty (30) days after a Change in Control Termination, the Bank shall pay Executive an amount equal to 1.00 times the sum of (i) the immediately 

 

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prior year’s Base Salary and (ii) all additional cash compensation paid by the Bank and received by Executive during such year (but for the avoidance of doubt, it shall not include the value of any stock-based compensation) (“Change in Control Payment”); provided that in the event it is determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Internal Revenue Code), would constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code, then the Change in Control Payment under this Agreement shall be reduced by the maximum amount that may be paid without resulting in the imposition of excise tax on the Executive under Section 4999 of the Internal Revenue Code.  Any required reduction in the Change in Control Payment pursuant to the foregoing shall be accomplished by first reducing the amount of cash payments due under Section 4 and then by any other cash payments due to Executive.  All determinations to be made under this Section 7(d) shall be made by an independent public accounting firm selected by the Bank immediately prior to the Change in Control Termination, which shall provide its determinations and any supporting calculations both to the Bank and Executive within ten (10) days after the Change in Control Termination.  Any such determination by such accounting firm shall be binding upon the Bank and Executive.  The fees and expenses of such accounting firm in performing the determinations referred to in this Section shall be paid by the Bank.  For the avoidance of doubt, if Executive is eligible for the payment described in this Section, he shall not be eligible for any other severance benefit, inclusive of the benefits described in Section 7(b) hereof.  

(e)A “Change in Control Termination” shall mean (i) termination of Executive’s employment within twelve (12) months after a Change in Control (as defined below) for any reason other than death, “permanent incapacity”, “Cause” (as defined in Section 6(a)(iii) of this agreement), or (ii) Executive’s resignation from the Bank for any reason within twelve (12) months after the Change in Control.

(f)“Change in Control” shall mean the first to occur of any of the following events from and after the date of this Agreement:

	
 
	
(i)
	
Any person, entity or a “group” (as defined in Section 13(d)(3) of the Security Exchange Act, as amended (the “Exchange Act”)) becomes the beneficial owner, directly or indirectly of securities of Bancshares or the Bank representing 50% or more of: (1) the then outstanding shares of common stock of Bancshares or the Bank, as applicable;  (2) the combined voting power of Bancshares or the Bank’s then outstanding securities, as applicable; or (3) the fair market value of all Bancshares or the Bank’s then outstanding securities, as applicable; provided, however, if any person, entity or group is considered to own more than 50% of (1) the then outstanding shares of common stock of Bancshares or the Bank, as applicable; (2) the combined voting power of Bancshares or the Bank’s then outstanding securities, as applicable; or (3) the fair market value of all Bancshares or the Bank’s then outstanding securities, as applicable, the acquisition of additional securities by the same person, entity or group shall not be deemed to be a Change in Control; or

 

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(ii)
	
The consummation of a merger or consolidation of Bancshares or the Bank with any other entity other than (1) a merger or consolidation which would result in the voting securities of Bancshares or the Bank outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof)  50% or more of the combined voting power of the voting securities of Bancshares or the Bank or such surviving entity or any parent hereof outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of Bancshares or the Bank (or similar transaction) in which no person, entity or “group” (as defined in Section 13(d)(3) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of Bancshares or the Bank representing 50% or more of (1) the then outstanding shares of common stock of Bancshares or the Bank; (2) the combined voting power of Bancshares or the Bank’s then outstanding securities; or (3) the fair market value of all Bancshares or the Bank’s then outstanding securities; or

	
 
	
(iii)
	
The sale or disposition of all or substantially all of the assets of Bancshares or the Bank, as applicable;

Notwithstanding the foregoing, no “Change in Control” shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the holders of the common stock of Bancshares or the Bank immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of Bancshares or the Bank immediately following such transaction or series of transactions.

For purpose of this Section, “beneficial ownership” shall be determined in accordance with Rule 13d-3 under the Exchange Act.

8.Internal Revenue Code Section 409A.

(a)It is intended that this Agreement will comply with Section 409A of the Code and any regulations and guidelines issued thereunder (collectively, “Section 409A”) to the extent this Agreement is subject thereto.  This Agreement shall be interpreted on a basis consistent with such intent.

(b)If any payments or benefits provided to the Executive by the Bank, either per this Agreement or otherwise, are non-qualified deferred compensation subject to, and not exempt from, Section 409A (“Subject Payments”), the following provisions shall apply to such payments and/or benefits:

(c)For payments and benefits triggered by termination of employment, reference to the Executive’s “termination of employment” (and corollary terms) with the Bank shall be construed to refer to the Executive’s “separation from service” from the Bank 

 

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(with such phrase determined under Treas. Reg. Section 1.409A-1(h), as uniformly applied by the Bank) in tandem with the termination of his employment with the Bank.

(d)If the Executive is deemed on the date of his “separation from service” to be a “specified employee” (within the meaning of Treas. Reg. Section 1.409A-l(i)), then with regard to any payment that is required to be delayed pursuant to Internal Revenue Code Section 409A(a)(2)(B) (the “Delayed Payments”), such payment shall not be made prior to the earlier of (i) the expiration of the six (6) month period measured from the date of his “separation from service” and (ii) the date of his death.  Any payments other than the Delayed Payments shall be paid in accordance with the normal payment dates specified herein.  In no case will the delay of any of the Delayed Payments by the Bank constitute a breach of the Bank’s obligations to the Executive.

(e)The Executive’s right to receive installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Bank.  

(f)Notwithstanding any other provision of this Agreement to the contrary, in no event shall any Subject Payment be subject to offset by any other amount unless otherwise permitted by Section 409A.

(g)Notwithstanding anything herein to the contrary, in regard to Subject Payments, the definition of Change in Control set forth herein shall not be broader than the definition of “change in control event” as set forth under Section 409A, and if a transaction or event does not otherwise fall within such definition of “change of control event,” it shall not be deemed a Change in Control.

(h)To the extent that any reimbursement or in-kind benefits are Subject Payments: (x) the amount eligible for reimbursement or in-kind benefit in one calendar year may not affect the amount eligible for reimbursement or in-kind benefit in any other calendar year (except that a plan providing medical or health benefits may impose a generally applicable limit on the amount that may be reimbursed or paid), (y) the right to reimbursement or an in-kind benefit is not subject to liquidation or exchange for another benefit, and (z) subject to any shorter time periods provided herein, any such reimbursement of an expense or in-kind benefit must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred.

(i)If an amendment of this Agreement is necessary in order for it to comply with Section 409A, the Executive and the Bank agree to negotiate in good faith to amend this Agreement in a manner that preserves the original intent of the parties to the extent reasonably possible.  No action or failure by the Bank in good faith to act, pursuant to this Section 20, shall subject the Bank to any claim, liability, or expense, and the Bank shall not have any obligation to indemnify or otherwise protect the Executive from the obligation to pay any taxes pursuant to Section 409A.  The Bank does not make any representations 

 

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as to the personal income tax treatment of any severance payments or other benefits provided to the Executive.

9.Miscellaneous.

(a)Entire Agreement.  This Agreement constitutes the entire agreement between the parties and may not be changed except by a writing duly executed and delivered by the parties hereto.

(b)Governing Law.  This Agreement is governed by and shall be construed in accordance with the laws of the State of Kansas, without giving effect to its conflicts of laws principles. 

(c)Survival.  Except as otherwise provided in this Agreement, upon the termination of this Agreement, the obligations of the Bank and Executive contained in Sections 5 and 6 shall survive and remain in effect.

(d)Enforcement.  In view of the substantial harm which will result from the breach by Executive of any of the covenants contained in Section 5 the parties agree that such covenants shall be enforced to the fullest extent permitted by law.  Accordingly, if, in any judicial proceeding, a court shall determine that such covenants are unenforceable because they cover too extensive a geographic area or survive for too long a period of time, or for any other reason, then the parties intend that such covenants shall be deemed to cover such maximum geographic area and maximum period of time and shall otherwise be deemed to be limited in such manner as will permit enforceability by such court.  If any term or provision of this Agreement or the application thereof to any circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application to other persons and circumstances shall not be affected thereby and each term and provision hereof shall be enforced to the fullest extent permitted by law.

(e)Remedies.  Executive agrees that his breach of any of the provisions of Section 5 above will cause irreparable damage to the Bank and that the recovery by the Bank of money damages will not alone constitute an adequate remedy for such breach.  Accordingly, Executive agrees that such provisions may be specifically enforced against him, in addition to any other rights or remedies available to the Bank on account of any such breach, and Executive hereby waives the defense in any equitable proceeding that there is an adequate remedy at law for any such breach and agrees that injunctive or other equitable relief will not constitute any hardship upon Executive.

(f)Assignment.  The rights and obligations of the parties to this Agreement shall not be assignable, except that the rights and obligations of the Bank hereunder shall be assignable to any successor of the Bank upon a merger, reorganization or recapitalization or any entity that acquires substantially all of the assets of the Bank.

(g)Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument, regardless of whether or not the signatures of all of the parties hereto appear on any single counterpart hereof.  For purposes of this 

 

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Agreement, the Bank and Executive agree that a facsimile or electronically transmitted counterpart bearing the signature of any party to this Agreement shall, absent manifest evidence of fraud, be binding upon such party when actually delivered to the other parties hereto.

(h)Notices.  Unless otherwise provided herein, any and all payments, notices, requests, instructions and other communications required or permitted to be given under this Agreement after the date hereof by any party hereto to any other party may be delivered personally or by nationally recognized overnight courier service or sent by mail or (except in the case of payments) by facsimile transmission, at the respective addresses or transmission numbers set forth below and shall be effective (i) in the case of personal delivery, electronic transmission, when received; (ii) in the case of mail, upon the earlier of actual receipt or five (5) business days after deposit in the United States Postal Service, first class certified or registered mail, postage prepaid, return receipt requested; and (iii) in the case of nationally-recognized overnight courier service, one (1) business day after delivery to such courier service together with all appropriate fees or charges and instructions for such overnight delivery.  The parties may change their respective addresses and transmission numbers by written notice to all other parties, sent as provided in this Section 9(h).  All communications must be in writing and addressed as follows:

If to Executive at address on file:

If to the Bank:

Equity Bank
7701 E. Kellogg, Suite 300
Wichita, Kansas 67207
ATTN: CEO
E-mail: belliott@equitybank.com 

Cc: Human Resources

Or such other addresses as will be furnished in writing by the parties. 

(i)Remedies Cumulative; No Waiver.  No remedy conferred upon either party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity.  No delay or omission by either party in exercising any right, remedy, or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy, or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in such party’s sole discretion.

(j)Arbitration.  Subject to Section 9(e) hereof, any dispute, controversy, or claim arising out of or relating to this Agreement or breach thereof, or arising out of or relating in any way to the employment of Executive or the termination thereof, shall be submitted to arbitration in accordance with the Employment Dispute Arbitration Rules of the American Arbitration Association.  The arbitration proceedings shall be held in the 

 

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either Butler County, Kansas, or Sedgwick County, Kansas.  Judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction.  In reaching his decision, the arbitrator shall have no authority to ignore, change, modify, add to or delete from any provision of this Agreement, but instead is limited to interpreting this Agreement.  The parties specifically acknowledge that the Arbitrator must award fees, including attorneys’ fees, and costs of the arbitration to the prevailing party in any such proceeding.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

EXECUTIVE

 

 

/s/ Brett A. Reber

Brett A. Reber

 

 

EQUITY BANK

 

 

By:/s/ Brad Elliott

Brad Elliott Chairman/CEO

 

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benefit addendum

 

 
This addendum supplements that certain Employment Agreement dated October 1, 2018 (collectively the “Agreement”) by and between EQUITY BANK, a Kansas banking corporation (the “Bank”), EQUITY BANCSHARES, INC., a Kansas corporation and the Bank holding company (“Bancshares”), and BRETT A. REBER, an individual (“Executive”).
In addition to the compensation and benefits detailed in the Agreement, Bank, Bancshares and Executive mutually agree that the Executive shall be entitled to the following additional compensation and benefits during the term of the Agreement:

1.Annual Incentive Payment.  From the Effective Date and with respect to each fiscal year or portion of a fiscal year of the Bank ending during the term hereof, the Executive shall be eligible to receive an annual incentive payment (the “Incentive Payment”) in accordance with the terms of any applicable incentive plan of the Bank (an “Incentive Plan”) and subject to the achievement of any performance goals established by the Bank. The Executive’s target Incentive Payment opportunity (the “Target Incentive Payment”) under the Incentive Plan applicable to the Executive for each fiscal year during the term hereof shall be 45% of his Base Salary in the form of cash compensation for that year. The target incentive percentage may be increased but not decreased in the sole discretion of the Bank. Any earned Incentive Payment shall be paid to the Executive pursuant to the terms of the applicable incentive plan; provided, however, that any such Incentive Payment for a fiscal year shall be paid to the Executive no later than the last day of February following the close of such fiscal year, unless the Bank or Executive shall elect to defer the receipt of such Incentive Payment pursuant to an arrangement that meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). If Executive’s employment is terminated by the Bank for Cause or Executive voluntarily resigns without Good Reason prior to such date, Executive will forfeit his right to receive any payments under this Section 4(b).

2.Equity Compensation.  Each fiscal year or portion of a fiscal year of Bancshares thereafter ending during the term hereof, Bancshares will grant Executive an equity award (the “Annual Equity Award”) having a target value equal to 50% of the Base Salary for the prior calendar year.  The value of the Equity Award will be granted in the form of time-based restricted stock units that vest in three equal annual installments beginning on the grant date of award.  If Executive’s employment is terminated by the Bank for Cause or Executive voluntarily resigns without Good Reason, Executive will forfeit the unvested portion of the Annual Equity Awards.

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the date first above written.

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EXECUTIVE

 

 

/s/ Brett A. Reber

Brett A. Reber

 

 

EQUITY BANK

 

 

By: /s/ Brad Elliott

       Brad Elliott Chairman/CEO

 

 

EQUITY BANCSHARES, INC.

 

 

By: /s/ Brad Elliott

       Brad Elliott Chairman/CEO

 

(initials) _BAR_Page 15EX-4.3

 Exhibit 4.3 
  

 
 BRITISH AMERICAN TOBACCO P.L.C. 

 
  

RULES 
 of the 

BRITISH AMERICAN TOBACCO 

2016 LONG TERM INCENTIVE PLAN 
  

 
 Adopted pursuant
to shareholders’ approval obtained on 27 April 2016 
 and amended by the Board on 10 December 2018 

and amended by the Board on 3 June 2019 

and amended by the Board on 25 February 2020 

and amended by the Board on 19 February 2021 

Herbert Smith Freehills LLP 
 HSF
Ref: 30889176 

 British American Tobacco 2016 Long Term Incentive Plan 

 

 CONTENTS 

 

							
	 Clause
	 	 Heading
	  	Page	 
			
	1.	 	 INTERPRETATION AND CONSTRUCTION
	  	 	3	 
			
	2.	 	 PLAN LIMITS
	  	 	5	 
			
	3.	 	 AWARDS
	  	 	6	 
			
	4.	 	 AWARDS ARE NON-TRANSFERABLE
	  	 	8	 
			
	5.	 	 PERFORMANCE CONDITION
	  	 	8	 
			
	6.	 	 ADDITIONAL TERMS SPECIFIC TO FORFEITABLE SHARE AWARDS
	  	 	8	 
			
	7.	 	 VESTING
	  	 	9	 
			
	8.	 	 CESSATION OF OFFICE OR EMPLOYMENT
	  	 	10	 
			
	9.	 	 CORPORATE ACTIONS
	  	 	12	 
			
	10.	 	 OPTIONS
	  	 	14	 
			
	11.	 	 DIVIDEND EQUIVALENT
	  	 	15	 
			
	12.	 	 CASH ALTERNATIVE – OPTIONS AND CONDITIONAL AWARDS
	  	 	15	 
			
	13.	 	 TAX LIABILITY
	  	 	16	 
			
	14.	 	 VESTED SHARE ACCOUNTS
	  	 	16	 
			
	15.	 	 CLAW-BACK
	  	 	17	 
			
	16.	 	 VARIATION OF CAPITAL
	  	 	17	 
			
	17.	 	 ADMINISTRATION
	  	 	18	 
			
	18.	 	 AMENDMENTS
	  	 	18	 
			
	19.	 	 DATA PROTECTION
	  	 	19	 
			
	20.	 	 GENERAL
	  	 	20	 
		
	APPENDIX 1 : OPERATION OF CLAW-BACK	  	 	22	 
		
	APPENDIX 2 : AWARDS GRANTED TO U.S. TAXPAYERS	  	 	24	 
			
	1.	 	 INTERPRETATION
	  	 	24	 
			
	2.	 	 APPLICATION
	  	 	24	 
			
	3.	 	 PERFORMANCE AND SERVICE CONDITION
	  	 	24	 
			
	4.	 	 APPLICATION OF PARAGRAPH 5 AND 6
	  	 	25	 
			
	5.	 	 AWARDS (I) WHERE THE “WAIT AND SEE” APPROACH SHALL APPLY
	  			
			
		 	 (INCLUDING ALL AWARDS SUBJECT TO AN EXTENDED VESTING
	  			
			
		 	 PERIOD), (II) DESCRIBED IN PARAGRAPHS 3.1 AND 3.2 OF
	  			
			
		 	 ADDENDUM I TO THE PLAN OR (III) THAT OTHERWISE ARE NOT
	  			
			
		 	 EXEMPT FROM CODE § 409A AS A SHORT-TERM DEFERRAL
	  	 	25	 
			
	6.	 	 AWARDS WITHOUT AN EXTENDED VESTING PERIOD AND WHERE
	  			
			
		 	 THE “WAIT AND SEE” APPROACH DOES NOT APPLY AND THAT ARE
	  			
			
		 	 OTHERWISE EXEMPT FROM CODE § 409A AS A SHORT-TERM
	  			
			
		 	 DEFERRAL
	  	 	26	 
			
	7.	 	 DIVIDEND EQUIVALENTS
	  	 	26	 
			
	8.	 	 CASH ALTERNATIVE
	  	 	26	 
			
	9.	 	 CODE § 409A EXEMPTION AND COMPLIANCE
	  	 	26	 
			
	10.	 	 COOPERATION
	  	 	27	 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

							
			
	11.	 	 SETTLEMENT
	  	 	27	 
		
	ADDENDUM I: AWARDS GRANTED TO RAI PARTICIPANTS (PRIOR TO 2020)	  	 	28	 
			
	1.	 	 APPLICATION
	  	 	28	 
			
	2.	 	 MODIFICATION
	  	 	28	 
			
	3.	 	 TERMS
	  	 	28	 
			
	4.	 	 SETTLEMENT
	  	 	28	 
		
	ADDENDUM II: AWARDS GRANTED TO RAI PARTICIPANTS (FROM 2020)	  	 	29	 
			
	1.	 	 APPLICATION
	  	 	29	 
			
	2.	 	 MODIFICATION
	  	 	29	 
			
	3.	 	 TERMS
	  	 	29	 
			
	4.	 	 SETTLEMENT
	  	 	29	 
		
	SCHEDULE 1 : PERFORMANCE CONDITIONS	  	 	30	 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

 RULES OF THE BRITISH AMERICAN TOBACCO P.L.C. LONG TERM INCENTIVE PLAN 

 

	1.	 INTERPRETATION AND CONSTRUCTION 

 

	1.1	 For the purposes of the Plan, the following terms shall have the meaning indicated below unless the context
clearly indicates otherwise: 

 “Award” means one of a Conditional Award, a Forfeitable Share Award or an
Option; 
 “Board” means the board of directors of the Company or a committee duly authorised by the board of directors or,
following any Corporate Action, the Board or duly authorised committee as constituted immediately prior to the Corporate Action; 

“Claw-back” means a recovery of value by the Company from a Participant in accordance with the provisions of Rule 15
(Claw-back) and Appendix 1 (Operation of Claw-back); 
 “Company” means British American Tobacco p.l.c.
(registered in England and Wales under No. 3407696); 
 “Conditional Award” means a right to receive a transfer of
Shares following vesting of the Award; 
 “Control” has the meaning given by Section 995 of the Income Tax Act 2007;

 “Corporate Action” means any of the events referred to in: 

 

	 	(A)	 Rules 9.1 to 9.5 (but excluding a Reorganisation as defined in Rule 9.8); or 

 

	 	(B)	 if the Board determines that Awards will vest pursuant to such Rule, Rule 9.6; 

“Cross-Border Merger” means a merger pursuant to the implementation in any relevant jurisdiction of Directive 2005/56/EC (on
cross-border mergers of limited liability companies); 
 “Dealing Day” means any day on which the London Stock Exchange is
open for trading; 
 “Dealing Restriction” means any restriction on the dealing in shares, whether direct or indirect,
pursuant to any law, regulation, code or enactment in England and Wales and/or the jurisdiction in which the Participant is resident, or any share dealing code of the Company; 

“Eligible Employee” means an employee (including an executive director) of any Group Company; 

“Employees’ Share Scheme” has the meaning given by Section 1166 of the Companies Act 2006; 

“Financial Year” means the financial year of the Company within the meaning of Section 390 of the Companies Act 2006;

 “Forfeitable Share Award” means a beneficial interest in Shares, legal title to which is held by the Nominee subject to
the restrictions set out in Rule 6 (Additional terms applicable to Forfeitable Share Awards) until, and which shall be transferred to the Participant following, the vesting of the Award; 

“Grant Date” means the date on which a Conditional Award or Option is granted, or the date on which the Board determines that
a Forfeitable Share Award shall be granted; 
 “Group” means the Company and any company which from time to time is a
subsidiary of the Company, within the meaning of section 1159 of the Companies Act 2006 (each a “Group Company”); 

“Market Value” means, in relation to a Share on any day, the mid-closing price of a
Share on such day (as derived from the Daily Official List of the London Stock Exchange); 
 “Nominee” means any person
appointed by the Company from time to time to hold legal title to the Shares subject to a Forfeitable Share Award on behalf of the Participant in accordance with these Rules (which may be the trustee of a Trust acting as a nominee); 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

 “Normal Vesting Date” means: 

 

	 	(A)	 subject to (B): 

  

	 	(i)	 where the Board determines that an extended vesting period shall apply, the fifth anniversary of the Grant
Date, or otherwise, 

  

	 	(ii)	 the third anniversary of the Grant Date or any later date determined by the Board; or 

 

	 	(B)	 in respect of an Award granted in respect of the recruitment of an Eligible Employee, any other date (which may
be prior to the third anniversary of the Grant Date) as determined by the Board prior to the Grant Date; 

“Option” means a right to acquire Shares, which may be exercised by the Participant following the vesting of the Award during
any period permitted for exercise; 
 “Option Price” shall be nil, or such other amount as the Board may determine (provided
that the Board may reduce or waive such amount at any time); 
 “Participant” means an Eligible Employee who has received an
Award to the extent it has not been released and has not lapsed (or, following his death, his Personal Representatives); 

“Performance Condition” means the performance condition to which an Award is subject, which may consist of one or more
performance elements, being as set out in a Schedule to the Plan (as substituted or amended by the Board from time to time); 

“Performance Period” means the period of three Financial Years beginning with the Financial Year in which the Grant Date
falls, or such other period as is determined by the Board prior to the Grant Date in accordance with Rule 5; 
 “Personal
Representatives” means, following his death, the Participant’s personal representatives, or a person fulfilling a similar function in any jurisdiction; 

“Plan” means this British American Tobacco 2016 Long Term Incentive Plan, as amended from time to time; 

“Quarter Day” means 31 March, 30 June, 30 September or 31 December; 

“Rule” means a rule of this Plan; 

“Share” means a fully paid ordinary share in the capital of the Company; 

“Treasury Shares” means Shares to which Sections 724 to 732 of the Companies Act 2006 apply; 

“Trust” means any employee benefit trust from time to time established by the Company; 

“U.S. Taxpayer” has the meaning given in Rule 3.11 (U.S. Taxpayers); and 

“vesting” means: 
  

	 	(A)	 Shares subject to a Conditional Award becoming due to be transferred to the Participant; 

 

	 	(B)	 Shares subject to a Forfeitable Share Award ceasing to be subject to the restrictions set out in Rule 6
(Additional terms applicable to Forfeitable Share Awards), and legal title to such Shares becoming due to be transferred to the Participant; or 

  

	 	(C)	 an Option becoming exercisable, 

(and “vest” shall be construed accordingly). 
  

	1.2	 In this Plan unless the context requires otherwise: 

 

	 	1.2.1	 the headings are inserted for convenience only and do not affect the interpretation of any Rule;

  

	 	1.2.2	 a reference to a statute or statutory provision includes a reference: 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

	 	(A)	 to that statute or statutory provision as from time to time consolidated, modified, re-enacted or replaced by any statute or statutory provision; 

  

	 	(B)	 to any repealed statute or statutory provision which it re-enacts (with
or without modification); and 

  

	 	(C)	 to any subordinate legislation made under it; 

 

	 	1.2.3	 words in the singular include the plural, and vice versa; 

 

	 	1.2.4	 a reference to the masculine shall be treated as a reference to the feminine and vice versa;

  

	 	1.2.5	 a reference to a person shall include a reference to a body corporate; and 

 

	 	1.2.6	 a reference to writing or written form shall include any legible format capable of being reproduced on paper,
irrespective of the medium used. 

  

	1.3	 In this Plan: 

  

	 	1.3.1	 a reference to the “transfer of Shares” (or similar) shall include both the issue and
allotment of Shares and the transfer of Treasury Shares; and 

  

	 	1.3.2	 a provision obliging, or permitting, any company to do any thing shall be read as obliging, or permitting, such
company to do that thing, or procure that thing to be done; and 

  

	 	1.3.3	 the use of the word “including” shall mean including without limitation and without prejudice
to the generality of the foregoing. 

  

	2.	 PLAN LIMITS 

  

	2.1	 Pursuant to the Plan: 

 

	 	2.1.1	 subject to Rule 2.2, the Board may not grant a Conditional Award or Option; and 

 

	 	2.1.2	 Shares may not be issued for the purpose of a Forfeitable Share Award, 

if the number of Shares subject to such proposed Award (the “Relevant Shares”) would cause either of the limits in Rules 2.3
or 2.4 to be breached. 
  

	2.2	 Rule 2.1 shall not apply in respect of a Conditional Award or Option granted on terms that it shall not be
capable of being satisfied by the issue of Shares. 

 5 per cent limit: discretionary Employees’ Share Scheme

  

	2.3	 The number of Relevant Shares, when added to the aggregate of: 

 

	 	2.3.1	 the number of Shares subject to outstanding options or awards granted within the previous 10 years under the
Plan or any other discretionary Employees’ Share Scheme adopted by the Company which may be satisfied by the issue of Shares; and 

  

	 	2.3.2	 the number of Shares actually issued within the previous 10 years under the Plan, under any other discretionary
Employees’ Share Scheme or to a Trust (but excluding any of those Shares that were used to satisfy an option or award granted more than 10 years previously, and without double counting any Shares which the Board has determined are to be used to
satisfy options or awards counted under Rule 2.3.1 above), 

 may not exceed such number as represents 5 per cent of
the Company’s issued share capital immediately prior to such proposed grant or issue. 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

 10 per cent limit: Employees’ Share Scheme 

 

	2.4	 The number of Relevant Shares, when added to the aggregate of: 

 

	 	2.4.1	 the number of Shares subject to outstanding options or awards granted within the previous 10 years under the
Plan or any other Employees’ Share Scheme adopted by the Company which may be satisfied by the issue of Shares; and 

  

	 	2.4.2	 the number of Shares actually issued within the previous 10 years under the Plan, under any other
Employees’ Share Scheme or to a Trust (but excluding any of those Shares: that were used to satisfy an option or award granted more than 10 years previously, and without double counting any Shares which the Board has determined are to be used
to satisfy options or awards counted under Rule 2.4.1 above), 

 may not exceed such number as represents 10 per cent
of the Company’s issued share capital immediately prior to such proposed grant or issue. 
 Treasury Shares 

 

	2.5	 References in this Rule 2 to the issue of Shares shall include the transfer of Treasury Shares, but only until
such time as the guidelines issued by institutional investor bodies cease to provide that they should be so included. 

  

	3.	 AWARDS 

Eligibility 
  

	3.1	 Awards may be granted to Eligible Employees selected by the Board. 

Timing of grants 
  

	3.2	 An Award may only be granted: 

 

	 	3.2.1	 during the period of 42 days commencing on the date on which the Plan is approved shareholders of the Company
in general meeting; 

  

	 	3.2.2	 during the period of 42 days commencing on the Dealing Day immediately following the day on which the Company
announces its results for the preceding financial year, half-year or other period; 

  

	 	3.2.3	 in respect of an Award to be granted in respect of the recruitment of an Eligible Employee, as soon as
reasonably practicable after the Eligible Employee commences holding office or employment with any Group Company; and/or 

  

	 	3.2.4	 at such time at which the Board determines that exceptional circumstances exist which justify the grant of the
Award, 

 or, in any such case, if the grant of Awards during such period or at such time would be contrary to any Dealing
Restriction, as soon as reasonably practicable after such restriction ceases to apply. 
 Individual limit 

 

	3.3	 An Award may not be granted to an Eligible Employee where it would cause the aggregate Relevant Value of the
Shares subject to such Award and any Award(s) granted to the Eligible Employee in the same Financial Year to exceed an amount equal to 500% of the gross annual basic salary of that Eligible Employee as at the first day of such Financial Year or, if
later, the first day of the Eligible Employee’s employment with the Group during such Financial year. 

 An Award
granted in breach of this limit shall immediately lapse in respect of the number of Shares which cause this limit to be breached. Awards which have been released or have lapsed, or which are granted in connection with the recruitment of an Eligible
Employee in lieu of incentive awards granted by the individual’s former employer which are forfeited, and any right to receive Shares as a dividend equivalent, shall be ignored for this purpose. 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

 In this Rule 3.3, the “Relevant Value” of a Share subject to an Award means
either (as determined by the Board): (i) the Market Value of a Share on the Dealing Day immediately preceding the Grant Date; or (ii) the average of the Market Values of a Share over such number of Dealing Days preceding the Grant Date as the
Board may determine (all being within the period of 30 days preceding the Grant Date and, where the Award is granted within the period in Rule 3.2.2, being on or after the date of the results announcement). 

 

	3.4	 Where an Eligible Employee’s gross annual basic salary is denominated in a currency other than pounds
sterling, for the purposes of Rule 3.3 above such gross annual basic salary shall be converted into pounds sterling on such basis as the Board may reasonably determine. 

Method of grant 
  

	3.5	 An Award shall be granted by the Board. 

 

	3.6	 A Conditional Award or an Option shall be granted by deed. 

 

	3.7	 The Company shall procure that the Shares subject to a Forfeitable Share Award shall, on or as soon as
reasonably practicable following the Grant Date, be issued to or acquired by a Nominee, and shall thereafter be held on behalf of the Participant until the date on which the Forfeitable Share Award vests or such earlier date as the Forfeitable Share
Award lapses. 

  

	3.8	 No payment for the grant of an Award shall be made by the Participant. 

 

	3.9	 A Participant may within 30 days of the Grant Date release an Award (in full but not in part) by written notice
to the Company. Where a Participant does not release an Award within such period, the Participant shall be deemed to have accepted the Award on the terms set out in the Rules. Alternatively, it may be a term of the grant of an Award that the
Participant shall be required to accept the terms of the Award within such period following grant as may be determined by the Board and, where the Board specifies such period, the Award shall lapse at the end of such period if the terms of the Award
have not been accepted by the Participant. 

 Award notification 

 

	3.10	 As soon as practicable following the Grant Date the Company shall notify a Participant of the grant of an
Award. Such notification shall specify: 

  

	 	3.10.1	 whether the Award takes the form of a Conditional Award, a Forfeitable Share Award or an Option;

  

	 	3.10.2	 the Grant Date; 

  

	 	3.10.3	 the Normal Vesting Date; 

 

	 	3.10.4	 the number of Shares in respect of which the Award is granted; 

 

	 	3.10.5	 in relation to an Option, the Option Price (if any); 

 

	 	3.10.6	 the full terms of the Performance Condition and the Performance Period; 

 

	 	3.10.7	 if applicable, that the dividend equivalent provisions of Rule 11 (Dividend equivalent) shall apply; and

  

	 	3.10.8	 that the Award is subject to the claw-back provisions of Rule 15 (Claw-back) and Appendix 1
(Operation of Claw-back). 

 U.S. Taxpayers 

 

	3.11	 The provisions of Appendix 2 (Awards Granted to U.S. Taxpayers) shall apply to a Conditional Award or an
Option that is held by any Participant while he or she is subject to taxation under the U.S. Internal Revenue Code of 1986, as amended (a “U.S. Taxpayer”). References to Code §409A are to §409A of the U.S. Internal Revenue
Code of 1986, as amended. 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

	4.	 AWARDS ARE NON-TRANSFERABLE 

 

	4.1	 A Participant may not transfer, assign, pledge, charge or otherwise dispose of, or grant any form of security
or other interest over, any part of his interest in an Award. An Award shall (unless the Board determines otherwise) lapse on the Participant doing so (whether voluntarily or involuntarily), being deprived of the beneficial ownership of an Award by
operation of law, or becoming bankrupt. 

  

	4.2	 Rule 4.1 does not restrict the transmission of an Award to the Participant’s Personal Representatives
following his death. 

  

	5.	 PERFORMANCE CONDITION 

 

	5.1	 An Award shall be granted subject to the Performance Condition. 

 

	5.2	 Subject to Rule 5.3, each element of the Performance Condition shall be assessed over a period of not less than
three years, ending no later than the Normal Vesting Date. 

  

	5.3	 An Award granted in respect of the recruitment of an Eligible Employee may be granted on terms that the
Performance Condition shall be assessed over such shorter period as the Board may determine prior to the grant of the Award. 

  

	5.4	 If events happen following the Grant Date which cause the Board to determine that any element of the
Performance Condition is no longer a fair measure of the Company’s performance, the Board may alter the terms of such element as it determines to be appropriate but not so that the revised target is, in the opinion of the Board, materially less
challenging than was intended in setting the original Performance Condition. 

  

	5.5	 The Performance Condition may not be retested. 

 

	6.	 ADDITIONAL TERMS SPECIFIC TO FORFEITABLE SHARE AWARDS 

Restrictions applicable to Forfeitable Share Awards 
  

	6.1	 The Participant shall be (subject to the Award lapsing) the beneficial owner of the Shares subject to a
Forfeitable Share Award. For the avoidance of doubt, such beneficial interest shall be subject to the restriction in Rule 4.1 (Awards are non-transferable). 

 

	6.2	 Until a Forfeitable Share Award vests, the Nominee shall refuse to act on any instruction from the Participant
to (and, subject to Rule 6.3, shall not) transfer, assign, pledge, charge or otherwise dispose of, or grant any form of security or other interest over, legal title to the Shares subject to the Award or any interest therein, or enter into any
agreement or accept any offer to do any such thing. 

  

	6.3	 The Nominee shall take such action as is necessary to give effect to Rules 9.8 (Roll-over of Award),
13.1 (Tax Liability), 15 (Claw-back), 16 (Variation of capital) and Appendix 1 (Operation of Claw-back) and without further instruction from the Participant (and for the avoidance of doubt nothing in this Rule 6
shall prevent Shares subject to a Forfeitable Share Award becoming subject to a Corporate Action pursuant to Rule 9.3 (Scheme of compromise or arrangement)). 

Voting rights on forfeitable Shares 
  

	6.4	 Unless the Board determines otherwise, the Participant shall be entitled to direct the Nominee to vote the
Shares subject to a Forfeitable Share Award, provided that the Nominee shall not be bound to seek directions from the Participant to vote and in the absence of any such direction shall not vote. 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

 Dividend rights on forfeitable Shares 

 

	6.5	 Unless the Board determines otherwise, the Participant shall be entitled to receive any dividends paid in
respect of Shares subject to a Forfeitable Share Award (and if the Board so determines the Nominee shall waive the right to receive any dividends in respect of such Shares). 

Lapse of Forfeitable Share Award 
  

	6.6	 Where a Forfeitable Share Award lapses, the Participant shall cease to be beneficially entitled to the Shares
subject to the Award, and the beneficial interest in such Shares shall, unless the Board directs otherwise, revert to a Trust specified by the Board for nil or nominal consideration. 

 

	7.	 VESTING 

Normal vesting 
  

	7.1	 An Award shall vest on the Normal Vesting Date. 

Vesting subject to Dealing Restrictions 
  

	7.2	 A Conditional Award or a Forfeitable Share Award shall not vest unless, and vesting shall be delayed until, the
Board is satisfied that at that time: 

  

	 	7.2.1	 such vesting; 

  

	 	7.2.2	 the transfer of Shares to the Participant and the sale of Shares pursuant to Rule 13 (Tax Liability); and

  

	 	7.2.3	 any action needed to be taken by the Company to give effect to such vesting 

is not contrary to any Dealing Restriction. 

Extent of vesting determined by the Performance Condition 
  

	7.3	 The extent to which an Award shall be capable of vesting (if at all) shall be determined by reference to the
Performance Condition. At the end of the period over which the Performance Condition is assessed, the Award shall lapse to the extent that the Performance Condition is not met. 

 

	7.4	 Where an Award vests (pursuant to Rule 7.7 (International Transfers), Rule 8 (Cessation of office or
employment) or 9 (Corporate Actions)) prior to the end of the period over which any element of the Performance Condition is assessed, such element shall be assessed based on performance to the last Quarter Day prior to the date on which
the Award vests using such information (not limited to published accounts) as the Board shall determine. 

 Effect of
vesting 
  

	7.5	 The effect of the vesting of an Award is that: 

 

	 	7.5.1	 the Shares in respect of which a Conditional Award vests shall be transferred to the Participant as soon as is
reasonably practicable (which may include transferring the Shares on more than one consecutive Dealing Day on such basis as the Board may determine); 

  

	 	7.5.2	 the Shares in respect of which a Forfeitable Share Award vests shall cease to be subject to the restrictions
set out in Rule 6 (Additional terms applicable to Forfeitable Share Awards), and legal title to such Shares shall be transferred to the Participant as soon as is reasonably practicable; and 

 

	 	7.5.3	 an Option shall, to the extent that it vests, become exercisable in accordance with Rule 10 (Options).

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

	7.5A	 Shares shall not cease to be subject to the restrictions set out in Rule 6 (Additional terms applicable to
Forfeitable Share Awards) until such time as it is practicable for a number of Shares in respect of such vesting to be sold in accordance with Rule 13.1.1 (Tax Liability) (such that a proportion of such Shares may cease to be subject to
such restrictions on each Dealing Day within a period of consecutive Dealing Days (and on such basis) as the Board may determine), unless the Participant has in advance made other arrangements to pay the amount of the Tax Liability arising in
respect of such vesting to the Company or the Board determines otherwise. 

 Disciplinary proceedings 

 

	7.6	 Unless the Board determines otherwise, an Award shall not vest while a Participant is subject to an
investigation process and/or formal disciplinary process (or similar), or where a Participant has been served with notice that such a process may be instigated without such notice having been rescinded, and vesting shall (subject to the Award
lapsing to any extent prior to or as a result of the conclusion of such process pursuant to Rule 8 (Cessation of office or employment) or 15 (Claw-back)) be delayed until the conclusion of such process. 

International transfers 
  

	7.7	 Where a Participant, whilst continuing to hold an office or employment with a Group Company, is to be
transferred to work in another country, and as a result the Board considers that following such transfer either he or a Group Company is likely to suffer a tax disadvantage in respect of an Award or, due to securities or exchange control laws, the
Participant is likely to be restricted in his ability to receive Shares pursuant to an Award, to exercise an Option and/or to hold or deal in Shares, the Board may decide that an Award shall vest on such date as it may determine, in which case:

  

	 	7.7.1	 the proportion of the Award which may vest shall be limited (unless the Board determines otherwise) to a pro
rata proportion on the basis of the number of months (rounded up to the nearest whole month) which have elapsed from the first day of the Performance Period to such vesting date, as compared to the number of whole months within the Performance
Period. Any remainder of the Award shall lapse; and 

  

	 	7.7.2	 an Option may be exercised during such period as may be determined by the Board ending no later than the date
on which the Participant’s transfer takes effect. 

  

	8.	 CESSATION OF OFFICE OR EMPLOYMENT 

Cessation where Awards lapse 
  

	8.1	 An Award shall lapse: 

 

	 	8.1.1	 on the Participant ceasing to hold office or employment with any Group Company; or 

 

	 	8.1.2	 if the Participant gives or receives notice of such cessation, on such earlier date as may be determined by the
Board, 

 save in each case where Rule 8.2 or Rule 8.6 applies. 

Reasons for cessation where Awards remain capable of vesting 
  

	8.2	 An Award shall not lapse pursuant to Rule 8.1 where the reason for the cessation or notice is:

  

	 	8.2.1	 disability, ill-health or injury (as evidenced to the satisfaction of
the Board); 

  

	 	8.2.2	 redundancy (within the meaning of the Employment Rights Act 1996); 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

	 	8.2.3	 the transfer of the Participant’s employment in connection with the disposal of a business or undertaking,
or a part- business or part- undertaking; 

  

	 	8.2.4	 the company with which the Participant holds office or employment ceasing to be a Group Company; or

  

	 	8.2.5	 any other reason, if the Board so determines. 

Where the Board exercises its discretion under Rule 8.2.5 the Board may impose additional conditions on the Award (including as to when the
Award may vest). 
 Cessation prior to the Normal Vesting Date 

 

	8.3	 Where prior to the Normal Vesting Date a Participant ceases to hold office or employment with any Group Company
for any of the reasons specified in Rule 8.2: 

  

	 	8.3.1	 an Award shall not vest at the date of such cessation, but shall continue to be capable of vesting (in which
case an Option may be exercised during the period of six months, or such other period as may be determined by the Board, from such date on which the Award may vest, and shall lapse at the expiry of such period); or 

 

	 	8.3.2	 the Board may determine that the Award shall instead vest on or at any time following the date of cessation (in
which case an Option may be exercised during the period of six months, or such other period as may be determined by the Board, from such vesting date, and shall lapse at the expiry of such period). 

For the avoidance of doubt, the Board may make the determination in Rule 8.3.2 on a standing basis (subject to revocation of such determination
at any time) in respect of all Awards to be granted to a specified Eligible Employee or Eligible Employees. 
  

	8.4	 Where prior to the Normal Vesting Date a Participant ceases to hold office or employment with any Group Company
for any of the reasons specified in Rule 8.2, unless the Board determines otherwise: 

  

	 	8.4.1	 if the date of such cessation falls within the first six months of the Performance Period, the Award shall
lapse in full on the date of such cessation; or 

  

	 	8.4.2	 where Rule 8.4.1 does not apply, the proportion of the Award which may vest (under any Rule) shall be limited
to a pro rata proportion on the basis of the number of months (rounded up to the nearest whole month) which have elapsed from the first day of the Performance Period to the date of cessation, as compared to the number of whole months within the
Performance Period. Any remainder of the Award shall lapse. 

 Exercise period in the event of cessation on or after the
Normal Vesting Date 
  

	8.5	 Where on or after the Normal Vesting Date a Participant ceases to hold office or employment with any Group
Company for any of the reasons specified in Rule 8.2, an Option shall lapse at the expiry of the period of six months, or such other period as may be determined by the Board, from the date of cessation. 

Death 
  

	8.6	 An Award shall vest on the Participant’s death. An Option may be exercised (by the Participant’s
Personal Representatives) during a period of one year from the date of the Participant’s death and shall lapse at the expiry of such period. Where a Participant dies during an exercise period pursuant to either Rule 8.3 or 8.5 an Option shall
not lapse as a result of such Rule until the expiry of the twelve month period in this Rule 8.6. 

 Cessation following
a Corporate Action 
  

	8.7	 Where a Participant ceases to hold office or employment with any Group Company following a Corporate Action
within the relevant exercise period referred to in Rule 9 

  
 11 

 British American Tobacco 2016 Long Term Incentive Plan 

 

 
(Corporate Actions), an Option shall not lapse pursuant to this Rule 8 until the expiry of the relevant exercise period in Rule 9 (Corporate Actions). This Rule 8.7 shall not apply
where the cessation is by way of (or occurs where there are circumstances which the Board determines would have justified) summary dismissal or service of notice of termination of office or employment on the grounds of misconduct. 

Meaning of cessation of office or employment 
  

	8.8	 No provision of this Rule 8 shall apply in respect of any cessation of office or employment if immediately
following the cessation the Participant holds an office or employment with any Group Company, or in respect of any notice of cessation if arrangements are in place that mean immediately following the notice becoming effective the Participant will
hold an office or employment with any Group Company. 

  

	9.	 CORPORATE ACTIONS 

General offers 
  

	9.1	 Awards shall vest: 

  

	 	9.1.1	 upon a person obtaining Control of the Company as a result of making a general offer to acquire Shares;

  

	 	9.1.2	 upon a person, having obtained Control of the Company, making a general offer to acquire Shares; or

  

	 	9.1.3	 if a person makes a general offer to acquire Shares that would result in that person obtaining Control of the
Company and the Board so determines, on the date which the Board determines to be the last practicable date prior to the date on which it expects such person to obtain Control of the Company, 

in each case being a general offer to acquire all of the Shares (other than Shares held by the person making the offer and any person connected
to that person). 
 Options may be exercised during the period of six months from the date of any such event (but if not exercised, Options
shall not lapse at the expiry of such period). 
 Compulsory acquisition 

 

	9.2	 Awards shall vest upon a person becoming entitled to acquire Shares under Sections 979 to 982 of the Companies
Act 2006. 

 Options may be exercised during a period of one month from the date on which that person first becomes so
entitled, and shall lapse at the expiry of such period. 
 Scheme of compromise or arrangement 

 

	9.3	 Awards shall vest upon a Court sanctioning a compromise or arrangement which, on becoming effective, would
result in: 

  

	 	9.3.1	 any person obtaining Control of the Company; 

 

	 	9.3.2	 the undertaking, property and liabilities of the Company being transferred to another existing or new company;
or 

  

	 	9.3.3	 the undertaking, property and liabilities of the Company being divided among and transferred to two or more
companies, whether existing or new. 

 Options may be exercised during a period of six months from the date of a Court
sanctioning such a compromise or arrangement (or, if earlier, to the day prior to the date on which a transfer as described in Rule 9.3.2 or Rule 9.3.3 is to become effective), and shall lapse at the expiry of such period. 

  
 12 

 British American Tobacco 2016 Long Term Incentive Plan 

 

 Merger 
  

	9.4	 Awards shall vest upon a competent authority approving a Cross-Border Merger, pursuant to which the Company
shall cease to exist. 

 Options may be exercised during the period from the date of a competent authority approving a
Cross-Border Merger until the day prior to the date on which the Cross-Border Merger is to become effective, and shall lapse at the expiry of such period. 

Voluntary winding-up 
  

	9.5	 Awards shall vest in the event of a notice being given of a resolution for the voluntary winding-up of the Company. 

 Options may be exercised during a period of two months from
the date of such a notice being given and shall lapse at the expiry of such period. 
 Demerger or special dividend 

 

	9.6	 If the Board so determines, Awards may vest following the announcement of a demerger of a substantial part of
the Group’s business, a special dividend or a similar event affecting the value of Shares to a material extent on such date specified by the Board. Where the Board makes such determination, Options may be exercised during a period of two months
(or such other period as the Board may determine) from the date specified by the Board and, unless the Board determines otherwise, shall lapse at the expiry of such period. 

Extent of vesting on a Corporate Action 
  

	9.7	 Where an Award vests (and, in the case of an Option, is exercised) pursuant to any of Rules 9.1 to 9.6, the
proportion of the Award which may vest shall be limited (unless the Board determines otherwise) to a pro rata proportion on the basis of the number of months (rounded up to the nearest whole month) which have elapsed from the first day of the
Performance Period to the date of the Corporate Action, as compared to the number of whole months within the Performance Period. Any remainder of the Award shall lapse. 

Roll-over of Award on a Reorganisation or takeover 
  

	9.8	 Unless the Board determines otherwise, an Award shall not vest pursuant to this Rule 9 if, as a result of any
event that would otherwise be a Corporate Action, a company will obtain Control of the Company or will obtain substantially all of the assets of the Company (the “Acquiring Company”), and either: 

 

	 	9.8.1	 the Acquiring Company will immediately following such event have (either directly or indirectly) substantially
the same shareholders and approximate shareholdings as those of the Company prior to such event (a “Reorganisation”); or 

  

	 	9.8.2	 the Board, with the agreement of the Acquiring Company, determines that the Award shall not vest as a result of
such event and so notifies the Participant prior to the occurrence of the date on which the Award would otherwise vest. 

In such case: 
  

	 	9.8.3	 the existing Option or Conditional Award (the “Old Award”) shall lapse on the occurrence of the
relevant event, provided that the New Parent Company shall grant a replacement right to receive shares (the “New Award”) over such number of shares in the New Parent Company which are of equivalent value to the number of Shares in
respect of which the Old Award was outstanding. The New Award shall be granted on the terms of the Plan, but as if the New Award had been granted at the same time as the Old Award and shall continue to be subject to the Performance Condition (but
subject to Rule 5.4 (Performance Condition)); 

  

	 	9.8.4	 where the event is an event specified in Rule 9.1.1 or Rule 9.1.2 (notwithstanding that the Award shall not
vest pursuant to such Rule) the Nominee shall action the acceptance of the general offer in respect of the Shares subject to the Forfeitable Share Award; and/or 

  
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 British American Tobacco 2016 Long Term Incentive Plan 

 

	 	9.8.5	 the proceeds from the relevant event received by the Nominee in respect of the Shares subject to the
Forfeitable Share Award, whether in cash or securities (and the Nominee shall accept, on behalf of the Participant, any offer of securities in preference to the receipt of cash), shall continue to be held on behalf of the Participant subject to the
terms of the Plan, provided that a proportion of such proceeds as is of equal value to the amount of any Tax Liability arising in respect of the Award at such time shall vest and shall be dealt with in accordance with Rule 13.1.1 (Tax
Liability) (and references in the Plan to the Shares subject to the Forfeitable Share Award shall be read as being to the proceeds that continue to be held on behalf of the Participant). 

For the purposes of this Rule 9.8: 
  

	 	9.8.6	 the “New Parent Company” shall be the Acquiring Company, or, if different the company that is
the ultimate parent company of the Acquiring Company within the meaning of section 1159 of the Companies Act 2006; and 

  

	 	9.8.7	 the terms of the Plan shall following the date of the relevant event be construed as if: 

 

	 	(A)	 the reference to “British American Tobacco p.l.c.” in the definition of
“Company” in Rule 1 (Interpretation and construction) were a reference to the company which is the New Parent Company, and 

  

	 	(B)	 save where the New Parent Company is listed, Rule 18.2 (Amendments) were omitted. 

Compulsory winding-up 
  

	9.9	 An Award shall lapse on the passing of an effective resolution, or the making of a Court order, for the
compulsory winding-up of the Company. 

 Concert parties 

	9.10	 For the purposes of this Rule 9, a person shall be deemed to have Control of the Company where he and any
others acting in concert with him together have Control of the Company. 

  

	10.	 OPTIONS 

  

	10.1	 An Option may be exercised, in full or in any number of parts, by the delivery to the Company (or such other
person nominated by the Company) of a valid notice of exercise in such form as the Board may prescribe together with payment of the Option Price for the Shares in respect of which the Option is exercised (if any). 

 

	10.2	 An Option shall lapse on the tenth anniversary of the Grant Date (or such earlier date as the Board may
determine prior to the Grant Date). 

  

	10.3	 Any Shares in respect of which the Option is exercised shall be transferred to the Participant as soon as
reasonably practicable (which may include transferring the Shares on more than one consecutive Dealing Days on such basis as the Board may determine). 

  

	10.4	 An Option may not be exercised unless the Board is satisfied that at such time: 

 

	 	10.4.1	 such exercise, 

  

	 	10.4.2	 the transfer of Shares to the Participant and the sale of Shares pursuant to Rule 13; and

  

	 	10.4.3	 any action needed to be taken by the Company to give effect to such exercise, 

is not contrary to any Dealing Restriction. Where the exercise, transfer or dealing in Shares is contrary to any Dealing Restriction on the
last Dealing Day in any of the periods referred to in Rules 8.3, 8.5 or 8.6 (Rule 8 being in relation to cessation of office or employment) or Rules 9.1 to 9.3 or 9.6 (Rule 9 being in relation to Corporate Actions), such period shall
be extended to the end of the first Dealing Day thereafter on which the Board is satisfied that the exercise, transfer and dealing in Shares is not contrary to any Dealing Restriction. 

  
 14 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	10.5	 An Option shall lapse on the earliest date provided under any Rule (save only as expressly provided in Rules
8.6 (Death) and 8.7 (Cessation following a Corporate Action)). 

  

	11.	 DIVIDEND EQUIVALENT 

 

	11.1	 If at any time prior to the Normal Vesting Date the Board so determines, on or following the date on which an
Award vests the Company may: 

  

	 	11.1.1	 make a cash payment to the Participant equal to the amount of any dividends that the Participant would have
received in respect of the number of Shares in respect of which the Award vests had the Participant been the full legal and beneficial owner of such Shares during the period from the Grant Date to the date the Award vests; or 

 

	 	11.1.2	 transfer to the Participant such number of additional Shares as have an aggregate Market Value on the date on
which the Award vests equal to the amount determined in accordance with Rule 11.1.1 above. 

  

	11.2	 A cash payment under Rule 11.1 may be made in a currency other than pounds sterling, in which case the amount
of such payment shall be converted into such other currency on such basis as is determined by the Board. 

  

	11.3	 Rule 11.1 shall not apply in respect of a Forfeitable Share Award unless the Board determines pursuant to Rule
6.5 (Dividend rights on forfeitable Shares) that the Participant shall not be entitled to receive dividends paid in respect of the Shares subject to the Forfeitable Share Award. 

 

	12.	 CASH ALTERNATIVE – OPTIONS AND CONDITIONAL AWARDS 

 

	12.1	 This Rule 12 shall not apply in respect of any Award granted to a Participant resident in any jurisdiction
where the grant of an Award which provides for a cash alternative would be unlawful, fall outside any applicable exemption under securities, exchange control or similar regulations, or would cause adverse tax or social security (or similar)
contribution consequences for the Company or the Participant (in each case as determined by the Board) or where the Board determines prior to the Grant Date that this Rule 12 shall not apply. 

 

	12.2	 The Board may determine prior to the Grant Date that a Conditional Award or Option shall only be satisfied in
cash, in which case the Award shall not be a right to acquire Shares, and the vesting of the Conditional Award or exercise of the Option shall be satisfied in full by the payment of a cash equivalent amount, in substitution for the transfer of
Shares. 

  

	12.3	 Where the Board has made no determination pursuant to Rule 12.1 or 12.2 in respect of any Conditional Award or
Option, the Board may determine at any time prior to the transfer of Shares pursuant to such Award that the vesting of the Conditional Award or the exercise of the Option (or a part thereof) shall be satisfied by the payment of a cash equivalent
amount, in substitution for the transfer of Shares. 

  

	12.4	 A “cash equivalent amount” shall be calculated as the number of Shares which would otherwise
be transferred in respect of the relevant vesting or exercise but which are being substituted for the cash equivalent amount, multiplied by an amount equal to the relevant value less, in the case of an Option, the Option Price (if any), where the
“relevant value” is the Market Value of a Share on the date on which the Award vests or, in the case of an Option, is exercised (or, in either case, where only a part of the Award is to be satisfied with payment of a cash equivalent
amount, is the Market Value of a Share on the date on which Shares are transferred to the Participant pursuant to the Award)). 

  

	12.5	 A cash equivalent amount shall be paid as soon as reasonably practicable following the relevant vesting or
exercise. 

  
 15 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	12.6	 A cash equivalent amount may be paid in a currency other than pounds sterling, in which case the cash
equivalent amount shall be converted into such other currency on such basis as is determined by the Board. 

  

	13.	 TAX LIABILITY 

 

	13.1	 When any Tax Liability arises in respect of an Award, the Participant authorises any Group Company:

  

	 	13.1.1	 to retain and sell legal title to such number of the Shares which would otherwise have been transferred to the
Participant on vesting or exercise of the Award, or any part thereof, (notwithstanding that beneficial title shall pass) as may be sold for aggregate proceeds equal to the Group Company’s estimate of the amount of the Tax Liability;

  

	 	13.1.2	 to deduct an amount equal to the Group Company’s estimate of the Tax Liability from any cash payment made
under the Plan; and/or 

  

	 	13.1.3	 where the amount realised under Rule 13.1.1 or deducted under Rule 13.1.2 is insufficient to cover the full
amount of the Tax Liability, to deduct any further amount as is necessary through payroll, 

 and in each case to apply
such amount in paying the amount of the Tax Liability to the relevant revenue authority or in reimbursing the relevant Group Company for any such payment, provided that, where the amount realised under Rule 13.1.1 or deducted under Rule 13.1.2 is
greater than the actual Tax Liability, the Group Company shall repay the excess to the Participant as soon as reasonably practicable. 
 The
Group Company shall be entitled to make the estimates referred to in this Rule 13.1 on the basis of the highest rates of tax and/or social security applicable at the relevant time in the jurisdiction in which the Group Company is liable to account
for the Tax Liability, notwithstanding that the Tax Liability may not arise at such rates. 
  

	13.2	 “Tax Liability” shall mean any amount of tax and/or social security (or similar) contributions
which any Group Company becomes liable to pay on behalf of the Participant to the revenue authorities in any jurisdiction, together with all or such proportion (if any) of employer’s social security contributions which would otherwise be
payable by any Group Company as is determined to be recoverable from the Participant (to the extent permitted by law) by the Board, or which the Participant has agreed to pay or which are subject to recovery pursuant to an election to which
paragraph 3B of Schedule 1 to the Social Security Contributions and Benefits Act 1992 applies. 

  

	14.	 VESTED SHARE ACCOUNTS 

 

	14.1	 Legal title to any Shares which are due to be transferred to the Participant pursuant to the Plan may be
transferred to a person (the “Vested Share Account Provider”) appointed by the Company from time to time to hold legal title to such Shares on behalf of the Participant. 

 

	14.2	 The Vested Share Account Provider shall receive and hold Shares on behalf of the Participant in accordance with
such terms and conditions as are agreed by the Company from time to time, and by participating in the Plan the Participant irrevocably agrees to those terms and conditions (which shall be available to the Participant on request to the Company).

  

	14.3	 The transfer of any Shares to the Vested Share Account Provider shall satisfy any obligation of the Company
under the Plan to transfer Shares to the Participant (and references in the Plan to Shares (or legal title thereof) having been transferred to the Participant shall be read accordingly). 

 

	14.4	 The terms and conditions referred to in Rule 14.2 above may include terms that the Participant shall not be
entitled to transfer, assign, pledge, charge or otherwise dispose of, or grant any form of security or other interest over, some or all of the Shares if to do so would be in breach of the Participant’s obligations under the Company’s
shareholding requirements as they apply to such Participant. 

  
 16 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	15.	 CLAW-BACK 

Claw-back events 
  

	15.1	 The Board may at any time prior to the fifth anniversary of the Grant Date of an Award determine that a
Claw-back shall apply in respect of the Award, if the Board determines that: 

  

	 	15.1.1	 there has been a material misrepresentation in relation to the performance of any Group Company, relevant
business unit and/or the Participant on the basis of which the extent to which the Award will be capable of vesting, or vested, was determined (which may include, but shall not be limited to: (i) a misstatement of the financial results and/or
health of any Group Company; (ii) an erroneous calculation in relation to any Group Company’s results or other performance benchmark; (iii) errors in any Group Company’s financial statements; or (iv) discrepancies in the
financial accounts, and, for the avoidance of doubt, notwithstanding that such misrepresentation may not arise from fraud or reckless behaviour); or 

  

	 	15.1.2	 an erroneous calculation was made in assessing the extent to which the Award is to be capable of vesting, or
vested, 

 and, in either case, the Award is capable of vesting, or vested, in respect of a greater number of Shares
than would have been the case had there not been such a misrepresentation or had such error not been made. 
  

	15.2	 The Board may at any time (whether before or after vesting) determine that a Claw-back shall apply in respect
of an Award where the Participant is found to have committed at any time prior to the vesting of the Award, including prior to grant, an act or omission which justifies, or in the opinion of the Board would have justified, summary dismissal or
service of notice of termination of office or employment on the grounds of misconduct. 

 Applying Claw-back 

 

	15.3	 A Claw-back shall be applied in accordance with the provisions of Appendix 1 (Operation of Claw-back).

 Lapse of Awards to give effect to claw-back of other awards 

 

	15.4	 By participating in the Plan, the Participant acknowledges that the Board may lapse any Award to such extent as
it determines to be necessary (including in full) in order to give effect to a claw-back under the terms of the Plan or any other Employees’ Share Scheme or bonus scheme operated from time to time by any Group Company. 

No Claw-back following Corporate Action 
  

	15.5	 No Claw-back shall be capable of being applied at any time following any Corporate Action, save where the
determination that the Claw-back shall apply was made prior to such event (and, for the avoidance of doubt, a Corporate Action does not include a Reorganisation). 

 

	16.	 VARIATION OF CAPITAL 

 

	16.1	 If in respect of Shares subject to a Forfeitable Share Award the Nominee receives on behalf of a Participant
any rights to acquire securities, the Nominee shall sell such rights nil paid to the extent necessary to take up the remaining rights. 

  
 17 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	16.2	 In the event of any variation of the share capital of the Company, or in the event of the demerger of a
substantial part of the Group’s business, a special dividend or similar event affecting the value of Shares to a material extent (which shall not include the payment of any ordinary dividend): 

 

	 	16.2.1	 the Board may make such adjustments to Conditional Awards and Options as it may determine to be appropriate;
and 

  

	 	16.2.2	 any proceeds from such an event received by a Nominee in respect of any Shares subject to a Forfeitable Share
Award, whether in cash or securities, (including where the Nominee takes up rights pursuant to Rule 16.1) shall be held by the Nominee on the same terms as the Forfeitable Share Award to which they relate, and references to the Shares subject to a
Forfeitable Share Award shall be read to include such proceeds. 

  

	16.3	 For the avoidance of doubt Rule 16.2 shall not apply in respect of any Awards pursuant to which legal title to
Shares has been transferred prior to the date of the relevant event (such that the recipient of such legal title shall participate in such event as a holder of Shares) including pursuant to the vesting of an Award under Rule 9.6 (Demerger or
special dividend). 

  

	17.	 ADMINISTRATION 

 

	17.1	 Any notice or other communication under or in connection with this Plan may be given by the Company (or its
agents) to a Participant personally, by email or by post, or by a Participant to the Company or any Group Company either personally or by post to the Secretary of the Company. Items sent by post shall be
pre-paid and shall be deemed to have been received 48 hours after posting. Items sent by email shall be deemed to have been received immediately. 

 

	17.2	 A Participant shall not be entitled to: 

 

	 	17.2.1	 receive copies of accounts or notices sent to holders of Shares; 

 

	 	17.2.2	 subject to Rule 6.4 (Voting rights on forfeitable Shares) in respect of a Forfeitable Share Award,
exercise voting rights; or 

  

	 	17.2.3	 subject to Rule 6.5 (Dividends rights on forfeitable Shares) in respect of a Forfeitable Share Award,
receive dividends, 

 in respect of Shares subject to an Award legal title to which has not been transferred to the
Participant. 
  

	17.3	 Any discretion (including the power to make any determination) of the Board under or in connection with the
Plan may be exercised by the Board in its absolute discretion. 

  

	17.4	 Any exercise of discretion (including the making of any determination) by the Board under or in connection with
the Plan shall be final and binding. 

  

	17.5	 Any disputes regarding the interpretation of the Rules or the terms of any Award shall be determined by the
Board (upon such advice as the Board determines to be necessary) and any decision in relation thereto shall be final and binding. 

  

	18.	 AMENDMENTS 

  

	18.1	 Subject to Rules 18.2 and 18.4, the Board may at any time add to or alter the Plan or any Award made thereunder
in any respect. 

  

	18.2	 Subject to Rule 18.3, no addition or alteration to the advantage of present or future Participants relating to
eligibility, the limits on participation, the overall limits on the issue of Shares or the transfer of Treasury Shares, the basis for determining a Participant’s entitlement to, or the terms of, Shares or cash provided pursuant to the Plan and
the provisions for adjustments on a variation of share capital shall be made without the prior approval by ordinary resolution of the shareholders of the Company in general meeting. 

 

	18.3	 Rule 18.2 shall not apply to any alteration to or substitution of the Performance Condition or to any
alteration or addition which is necessary or desirable in order to comply with or take account of the provisions of any proposed or existing legislation, law or other 

  
 18 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	 	
regulatory requirements or to take advantage of any changes in legislation, law or other regulatory requirements, or to obtain or maintain favourable taxation, exchange control or regulatory
treatment of any Group Company or any Participant or to make minor amendments to benefit the administration of the Plan. 

  

	18.4	 No alteration or addition shall be made under Rule 18.1 which would abrogate or adversely affect the subsisting
rights of a Participant unless it is made: 

  

	 	18.4.1	 with the consent in writing of the Participant; 

 

	 	18.4.2	 with the consent in writing of such number of Participants as hold Awards under the Plan in relation to
75 per cent. of the Shares subject to all Awards under the Plan; or 

  

	 	18.4.3	 by a resolution at a meeting of Participants passed by not less than 75 per cent. of the Participants who
attend and vote either in person or by proxy, 

 and for the purpose of Rule 18.4.2 or 18.4.3 the Participants shall be
treated as the holders of a separate class of share capital and the provisions of the Articles of Association of the Company relating to class meetings shall apply mutatis mutandis. 

 

	18.5	 The Board may, in respect of Eligible Employees who are or who may become subject to taxation outside the
United Kingdom on their remuneration, establish such plans or sub-plans based on the Plan but subject to such modifications as the Board determines to be necessary or desirable to take account of or to
mitigate or to comply with relevant overseas taxation, securities or exchange control laws, provided that the terms of awards made under such plans or sub-plans are not overall more favourable than the terms
of Awards made under the Plan and provided that awards made, and Shares issued, pursuant to such plans or sub-plans shall count towards the limits set out in Rules 2 (Plan limits) and 3.3 (Individual
limit). 

  

	19.	 DATA PROTECTION 

 

	19.1	 From time to time the personal data of the Participant will be collected, used, stored, transferred and
otherwise processed for the purposes described in Rule 19.2 and 19.3. The legal grounds for this processing will (depending on the nature and purpose of any specific instance of processing) be one of: (i) such processing being necessary for the
purposes of the legitimate interests of the Company and each other Group Company in incentivising their officers and employees and operating the Plan; (ii) such processing being necessary for the purposes of any relevant data controller in
respect of such personal data complying with its legal obligations; and (iii) such processing being necessary for the performance of the contractual obligations arising under the Plan. The collection and processing of such personal data for
such purposes is a contractual requirement of participation in the Plan. 

  

	19.2	 The purposes for which personal data shall be processed as referred to in this Rule 19 shall be in order to
allow the Company and any other relevant Group Companies to incentivise their officers and employees and to operate the Plan and to fulfil its or their obligations to the Participant under the Plan, and for other purposes relating to or which may
become related to the Participant’s office or employment, the operation of the Plan or the business of the Group or to comply with legal obligations. Such processing will principally be for, but will not be limited to, personnel,
administrative, financial, regulatory or payroll purposes as well as for the purposes of introducing and administering the Plan. 

  

	19.3	 The personal data to be processed as referred to in this Rule 19 may be disclosed or transferred to,
and/or processed by: 

  

	 	19.3.1	 any professional advisors of any Group Company, HM Revenue & Customs or any other revenue, regulatory
or governmental authorities; 

  

	 	19.3.2	 a trustee of a Trust; any registrars, brokers, payroll provider or appointed in connection with any employee
share or incentive plans operated by any Group Company; or any person appointed (whether by the Participant or any Group Company) to act as nominee on behalf of (or provide a similar service to) the Participant; 

  
 19 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	 	19.3.3	 subject to appropriate confidentiality undertakings), any prospective purchasers of, and/or any person who
obtains control of or acquires, the Company or the whole or part of the business of the Group; or 

  

	 	19.3.4	 any Group Company and officers, employees or agents of such Group Company. 

 

	19.4	 Further information in relation to the processing of personal data referred to in this Rule 19, including the
details and identity of the data controller and of the Participant’s rights in respect of such personal data, is available in the Employee Data Protection Policy (or otherwise on request to the Company Secretary). 

 

	19.5	 To the extent that the processing of personal data of a Participant referred to in this Rule 19 is subject to
the laws or regulations of any jurisdiction that is not an EU member state and under which the legal grounds for processing described in Rule 19.1 do not provide a sufficient legal basis under such other laws or regulations for the processing
referred to in Rule 19.1 to 19.3, by such processing for the purposes of such other laws or regulations (but shall not be deemed to consent to such processing for the purposes of EU Regulation 2016/679). 

 

	19.6	 In this Rule19, “personal data” and “data controller” each have the meaning given in EU
Regulation 2016/679 and “Employee Data Protection Policy” means such privacy policy or similar operated by any Group Company in relation to the processing of personal data as amended from time to time and as is applicable to the
Participant. 

  

	20.	 GENERAL 

  

	20.1	 In the event of any discrepancy between these Rules in English and (i) any copy of these Rules translated
into any other language; or (ii) any communications, notices or materials issued in connection with this Plan, these Rules in English shall prevail. 

  

	20.2	 The Plan shall terminate on the 10th anniversary of the approval of the Plan by the shareholders of the Company
in general meeting, or at any earlier time by resolution of the Board or an ordinary resolution of the shareholders in general meeting. Such termination shall be without prejudice to the subsisting rights of Participants. 

 

	20.3	 Save as otherwise provided under the Plan: 

 

	 	20.3.1	 Shares issued and allotted pursuant to the Plan will rank pari passu in all respects with the Shares then in
issue at the date of such allotment, except that they will not rank for any rights attaching to Shares by reference to a record date preceding the date of allotment; and 

 

	 	20.3.2	 Shares to be transferred pursuant to the Plan will be transferred free of all liens, charges and encumbrances
and together with all rights attaching thereto, except they will not rank for any rights attaching to Shares by reference to a record date preceding the date of transfer. 

 

	20.4	 If and so long as the Shares are admitted to listing and/or for trading on any stock exchange or market, the
Company shall apply for any Shares issued and allotted pursuant to the Plan to be so admitted as soon as practicable. 

  

	20.5	 Any transfer of Shares under the Plan is subject to such consent, if any, of any authorities in any
jurisdiction as may be required, and the Participant shall be responsible for complying with the requirements to obtain or obviate the necessity for such consents. 

 

	20.6	 The terms of any individual’s office or employment with any past or present Group Company, and the rights
and obligations of the individual thereunder, shall not be affected by his participation in the Plan and the Plan shall not form part of any contract of employment between the individual and any such company. 

 

	20.7	 An Eligible Employee shall have no right to receive an Award under the Plan and participation in the Plan and
the grant of any Award is at the discretion of the Company. 

  
 20 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	20.8	 Participation in the Plan by, or the grant of any Award under it to, a Participant in any year does not create
any right to or expectation of participation in the Plan or the grant of any Award in any future year, even if the Participant has previously participated in the Plan (or any similar plan) over a long period of time and/or if participation in the
Plan and/or an Award under it (or any similar plan) has been granted (including repeatedly) without the relevant Group Company specifically expressing the voluntary and discretionary nature at the time of each such participation or Award.

  

	20.9	 By participating in the Plan, the Participant waives all and any rights to compensation or damages in
consequence of the termination of his office or employment with any past or present Group Company for any reason whatsoever, whether lawfully or otherwise, insofar as those rights arise or may arise from his ceasing to have rights under the Plan
(including ceasing to be entitled to exercise any Option) as a result of such termination, or from the loss or diminution in value of such rights or entitlements, including by reason of the operation of the terms of the Plan, any determination by
the Board pursuant to a discretion contained in the Plan or the provisions of any statute or law relating to taxation. 

  

	20.10	 Benefits under the Plan shall not form part of a Participant’s remuneration for any purpose and shall not
be pensionable. 

  

	20.11	 The invalidity or non-enforceability of any provision or Rule of the
Plan shall not affect the validity or enforceability of the remaining provisions and Rules of the Plan which shall continue in full force and effect. 

  

	20.12	 These Rules shall be governed by and construed in accordance with English Law. 20.13 The English courts shall
have exclusive jurisdiction to determine any dispute which may arise out of, or in connection with, the Plan. 

  
 21 

 British American Tobacco 2016 Long Term Incentive Plan 

 

 APPENDIX 1: OPERATION OF CLAW-BACK 

Claw-back prior to the transfer of Shares in respect of an Award (or “malus”) 

 

	1.	 Where the Board determines (pursuant to Rule 15.1 or 15.2 (Claw-back events)) that a Claw-back shall
apply in respect of an Award prior to legal title to Shares having been transferred to the Participant pursuant to the Award (whether before or after vesting), the Claw-back shall be applied by the Board reducing the number of Shares in respect of
which the Award may vest or, in the case of an Option, be exercised (or after vesting by reducing the number of Shares legal title to which may be transferred pursuant to the Award) by up to the number of Shares determined by the Board to be the
excess number of Shares in respect of which the Award was granted and/or is outstanding (and the Award shall lapse to the extent so reduced, which may be in full). 

Claw-back following the transfer of Shares in respect of an Award 
  

	2.	 Where the Board determines (pursuant to Rule 15.1 or 15.2 (Claw-back events)) that a Claw-back shall
apply in respect of an Award following legal title to Shares having been transferred to the Participant pursuant to the Award (a “Post-Transfer Claw-back”), the Board shall determine: 

 

	 	a.	 the excess number of Shares in respect of which the Award vested (the “Excess Shares”); and

  

	 	b.	 the aggregate Market Value of such Excess Shares (as determined by the Board) on the date on which the Award
vested or, in the case of an Option, the date the Option was exercised (the “Equivalent Value”). 

  

	3.	 In the case of a Post-Transfer Claw-back: 

 

	 	a.	 any dividends received in respect of the Shares subject to a Forfeitable Share Award pursuant to Rule 6.5
(Dividend rights on forfeitable Shares); and/or 

  

	 	b.	 any cash payment made or additional Shares transferred pursuant to Rule 11 (Dividend equivalent) in
respect of such Award shall be subject to the Claw-back to the extent that the Board determines that such cash payment or Shares relate to the Excess Shares. 

  

	4.	 A Post-Transfer Claw-back may be effected in such manner as may be determined by the Board, and notified to the
Participant, including by any one or more of the following: 

  

	 	a.	 by reducing the number of Shares and/or amount of cash in respect of which an Outstanding Award vests or may
vest (or has vested, but in respect of which no Shares have yet been transferred or cash payment made), whether before or after the assessment of performance conditions in respect of such Outstanding Award, by the number of Excess Shares and/or the
Equivalent Value (and such Outstanding Award shall lapse to the extent so reduced); 

  

	 	b.	 by setting-off against any amounts payable by any Group Company to the
Participant an amount up to the Equivalent Value (including from any bonus payment which may otherwise become payable to the Participant); and/or 

  

	 	c.	 by requiring the Participant to immediately transfer to the Company a number of Shares equal to the Excess
Shares or a cash amount equal to the Equivalent Value (which shall be an immediately payable debt due to the Company), provided that the Board may reduce the number of Excess Shares or the amount of the Equivalent Value subject to the Claw-back in
order to take account of any Tax Liability (as defined in Rule 13 (Tax Liability)) which arose on the Excess Shares (howsoever delivered to the Participant). 

 

	5.	 For the avoidance of doubt, nothing in Rule 15 (Clawback) or this Appendix shall in any way restrict a
Participant from being able to transfer or otherwise deal in Shares acquired on vesting or exercise of an Award. 

  

	6.	 In paragraph 4 above: 

“Outstanding Award” means any other Award under the Plan, any award or option under any other Employees’ Share Scheme
operated from time to time by any Group Company (other than any award or options granted under any arrangement which satisfies the 

  
 22 

 British American Tobacco 2016 Long Term Incentive Plan 

 

 
provisions of Schedules 2 or 3, or (unless the terms of such arrangement state that shares acquired thereunder are subject to claw-back) 4 or 5, of the Income Tax (Earnings and Pensions) Act
2003), or any bonus award under any bonus scheme operated from time to time by any Group Company, in each case which is either held by the Participant at the time of a determination that a Claw-back shall be applied or which are granted to the
Participant following such a determination; and 
 “vests” shall include shares or cash subject to an award becoming due to
be transferred or paid, and in the case of an option, the option becoming exercisable. 

  
 23 

 British American Tobacco 2016 Long Term Incentive Plan 

 

 APPENDIX 2: AWARDS GRANTED TO U.S. TAXPAYERS 

 

	1.	 INTERPRETATION 

 

	1.1	 This Appendix shall form part of the Rules of the Plan. 

 

	1.2	 In this Appendix a reference to a “Paragraph” is to a paragraph of this Appendix.

  

	1.3	 Capitalized terms used in this Appendix that are not otherwise defined in this Appendix shall have the meanings
set forth in the Plan. 

  

	2.	 APPLICATION 

  

	2.1	 The provisions of this Appendix shall apply to a Conditional Award or an Option that is held by any Participant
while he or she is a U.S. Taxpayer. For the avoidance of doubt, any references to an Award in this Appendix shall be to a Conditional Award or an Option (and not to a Forfeitable Share Award). 

 

	2.2	 To the extent that any provision of Paragraphs 4 to 10 is inconsistent with any Rule of the Plan, such
provision of this Appendix shall take precedence. Paragraph 3 is included to aid interpretation. 

  

	3.	 PERFORMANCE AND SERVICE CONDITION 

Rule 5 – Performance Condition 
  

	3.1	 All Awards to which this Appendix applies shall be subject to a Performance Condition, each element of which
shall be assessed over the Performance Period (or, if applicable the period described in Rule 7.4). 

 Rule 8 –
Cessation of Office or Employment 
  

	3.2	 All Awards to which this Appendix applies are subject to a service condition which applies until the
Award’s Normal Vesting Date or any earlier vesting date. 

 Paragraph 5 – Awards where the “wait and see
approach” shall apply (including all Awards subject to an extended vesting period); vesting date 
  

	3.3	 Notwithstanding the date on which a Conditional Award that is subject to Paragraph 5 vests, the Shares in
respect of which such Award vests shall not be transferred to the U.S. Taxpayer until the Normal Vesting Date (subject to any earlier date specified in Paragraph 5.5). Shares in respect of an Option that is subject to Paragraph 5 shall be deemed to
be exercised on the date on which such Option vests pursuant to the Plan, as amended by this Appendix. 

 Rule 8 and
Paragraph 6 – Cessation of Office or Employment; Award without extended vesting period and where the Committee does not determine that the “wait and see” approach shall apply 

 

	3.4	 An Award that is subject to Paragraph 6 will be subject to a service condition until the date on which it
vests, and (a) Shares in respect of a Conditional Award will be transferred to the U.S. Taxpayer no later than the 15th day of the third month following the end of the calendar year in which the Award is no longer subject to a substantial risk
of forfeiture (within the meaning of Code § 409A) and (b) Shares in respect of an Option shall be deemed to be exercised on the date on which such Option vests. 

Rules 7, 8 and 9 – Vesting, Cessation of Office or Employment and Corporate Actions 

 

	3.5	 Where an Award vests prior to the Normal Vesting Date, the extent of vesting shall be determined by such
applicable Rule. 

 Lapse 
  

	3.6	 Awards to which this Appendix applies shall lapse at any time specified in the Rules or this Appendix.

  
 24 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	4.	 APPLICATION OF PARAGRAPH 5 AND 6 

An Award to which this Appendix applies shall be subject to Paragraph 5 or 6, but shall only be capable of being subject to one of Paragraph 5
or Paragraph 6, and which such Paragraph the Award is subject to shall be determined without any involvement of the U.S. Taxpayer and shall not be capable of change for any reason. 

 

	5.	 AWARDS (I) WHERE THE “WAIT AND SEE” APPROACH SHALL APPLY (INCLUDING ALL AWARDS SUBJECT TO AN
EXTENDED VESTING PERIOD), (II) DESCRIBED IN PARAGRAPHS 3.1 AND 3.2 OF ADDENDUM I TO THE PLAN OR (III) THAT OTHERWISE ARE NOT EXEMPT FROM CODE § 409A AS A SHORT-TERM DEFERRAL 

 

	5.1	 An Award shall be subject to this Paragraph 5 if: 

 

	 	5.1.1	 the Normal Vesting Date of an Award is more than one year after the end of the Performance Period;

  

	 	5.1.2	 on the Grant Date the U.S. Taxpayer is a director of the Company or a member of the Management Board of the
Company (unless determined otherwise by the Committee prior to the Grant Date); 

  

	 	5.1.3	 such Award is otherwise not exempt from Code § 409A by reason of complying with the short-term deferral
exemption from Code § 409A; and/or 

  

	 	5.1.4	 it is so determined by the Committee prior to the Grant Date (including pursuant to Paragraph 3.2 of Addendum I
to the Plan). 

  

	5.2	 An Award which is subject to this Paragraph 5 shall vest on the earliest of: 

 

	 	5.2.1	 the Normal Vesting Date; 

 

	 	5.2.2	 any date on which the Award vests pursuant to Rule 9 (subject to Paragraph 5.3); 

 

	 	5.2.3	 the U.S. Taxpayer’s death; or 

 

	 	5.2.4	 any earlier vesting date determined by the Board pursuant to Rule 7.7 or Rule 8.2 (including pursuant to
Paragraph 3.1 of Addendum I to the Plan). 

  

	5.3	 An Award subject to this Paragraph 5: 

 

	 	5.3.1	 may only vest under Rule 9 if the event falling within Rule 9 which would give rise to such vesting constitutes
a “change in control event” as described in U.S. Treasury Regulations or other guidance issued pursuant to Code § 409A; and 

  

	 	5.3.2	 to the extent it does not vest by such time, shall lapse on any date on which an Option would lapse pursuant to
Rule 9.2 to 9.6. 

  

	5.4	 An Award subject to this Paragraph 5 that is an Option shall be deemed to be automatically exercised to the
fullest extent permitted by the Rules on the date on which it vests pursuant to the Plan, as amended by this Appendix, and such Shares shall become due to be transferred to the U.S. Taxpayer within 60 days (90 days if such Option vests pursuant to
Paragraph 5.2.3) of such date of automatic exercise. 

  

	5.5	 Any Shares in respect of which a Conditional Award which is subject to this Paragraph 5 vests shall become due
to be transferred to the U.S. Taxpayer within 60 days (90 days in the case of Paragraph 5.5.2(ii) below) of the earlier of: 

  
 25 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	 	5.5.1	 the Normal Vesting Date; or 

 

	 	5.5.2	 if applicable, (i) the date set forth in Paragraph 5.2.2; (ii) the date set forth in Paragraph 5.2.3 or
(iii) any applicable date described in Paragraph 5.2.4, 

 and shall be transferred within such period (and, for the
avoidance of doubt, not prior to such period). 
  

	6.	 AWARDS WITHOUT AN EXTENDED VESTING PERIOD AND WHERE THE “WAIT AND SEE” APPROACH DOES NOT APPLY AND
THAT ARE OTHERWISE EXEMPT FROM CODE § 409A AS A SHORT-TERM DEFERRAL 

  

	6.1	 An Award shall be subject to this Paragraph 6 if the Award is not subject to Paragraph 5.

  

	6.2	 An Award which is subject to this Paragraph 6 shall, subject to Rule 7.6, vest on the earliest of:

  

	 	6.2.1	 the Normal Vesting Date; 

 

	 	6.2.2	 any date on which the Award vests pursuant to Rule 9; 

 

	 	6.2.3	 the Participant’s death; 

 

	 	6.2.4	 any earlier vesting date determined by the Board pursuant to Rule 7.7; and 

 

	 	6.2.5	 the date on which the U.S. Taxpayer ceases to hold office or employment with any Group Company for any of the
reasons specified in Rule 8.2 (for the avoidance of doubt subject to Rule 8.8). 

  

	6.3	 An Award subject to this Paragraph 6 that is an Option shall be deemed to be automatically exercised to the
fullest extent permitted by the Rules on the date on which it vests pursuant to this Plan, as amended by this Appendix, and such Shares shall become due to be transferred to the U.S. Taxpayer no later than the 15th day of March in the calendar year immediately following the calendar year in which the Award is no longer subject to a substantial risk of forfeiture (within the meaning of Code § 409A).

  

	6.4	 Any Shares in respect of which a Conditional Award which is subject to this Paragraph 6 vests shall be
transferred to the U.S. Taxpayer no later than the 15th day of March in the calendar year immediately following the calendar year in which the Award is no longer subject to a substantial risk of
forfeiture (within the meaning of Code § 409A). 

  

	6.5	 Rule 8.3.1 shall not apply to an Award which is subject to this Paragraph 6. 

 

	7.	 DIVIDEND EQUIVALENTS 

Any payment to which a U.S. Taxpayer may become entitled under Rule 11 with respect to an Award shall be paid to the U.S. Taxpayer at the same
time as the transfer of Shares under Paragraph 5.4, 5.5, 6.3 or 6.4, as applicable. 
  

	8.	 CASH ALTERNATIVE 

 

	8.1	 If Shares cannot be delivered in accordance with Paragraph 5.4, 5.5, 6.3 or 6.4, as applicable, because of a
Dealing Restriction, such Award shall instead be satisfied by the payment of a cash equivalent amount pursuant to Rule 12 (as such Rule is amended by Paragraph 8.2). 

 

	8.2	 Any cash payment to which a U.S. Taxpayer may become entitled under Rule 12 with respect to an Award shall be
paid to the U.S. Taxpayer at the same time as the transfer of Shares would have occurred under Paragraph 5.4, 5.5, 6.3 or 6.4, as applicable. 

  

	9.	 CODE § 409A EXEMPTION AND COMPLIANCE 

 

	9.1	 Awards subject to Paragraph 6 are intended to be exempt from Code § 409A to the maximum extent possible
under the exemption for “short-term deferrals” specified in the Treasury Regulations, and the provisions of this Appendix and the Plan, as it applies to 

  
 26 

 British American Tobacco 2016 Long Term Incentive Plan 

 

	 	
such Award, shall be construed, interpreted and applied accordingly. Without limiting the foregoing, the Board shall not exercise any discretion that is otherwise afforded to it under the Plan in
a manner that is inconsistent with such treatment. For the avoidance of doubt, any Award subject to Paragraph 6 shall, in all events, be paid within the short-term deferral period specified in Treasury Regulation § 1.409A-1(b)(4). 

  

	9.2	 To the extent that any Award to which this Appendix applies is subject to Code § 409A, the provisions of
this Appendix and the Plan, as it applies to such Award, shall be construed, interpreted and applied in such a way as to comply with the applicable provisions of Code § 409A to the maximum extent possible. If an Award is subject to Code §
409A, then: (i) any payment or transfer of Shares on account of a change in control shall be made only if the change in control qualifies as a “change in control event,” as defined for purposes of Code § 409A; (ii) any
provision in the Plan that is inconsistent with the requirements of Code § 409A shall not apply to such Award; (iii) the Board shall exercise discretion otherwise afforded to it under the Plan (including under Appendix 1 to the Plan) only
to the extent that such exercise of discretion is consistent with the requirements of Code § 409A; and (iv) the U.S. Taxpayer shall not have the right to designate any payment date with respect to such Award. 

 

	9.3	 In the event that a U.S. Taxpayer is deemed to be a “specified employee” on the date of his or her
“separation from service,” as defined for purposes of Code § 409A (other than by reason of death), determined pursuant to identification methodology adopted by a Group Company in compliance with Code § 409A, and if any portion of
the Shares or other payments to be received by such U.S. Taxpayer in respect of an Award upon separation from service would constitute a “deferral of compensation” subject to Code § 409A, then to the extent necessary to comply with
Code § 409A, Shares or amounts that would otherwise be delivered or payable pursuant to this Plan, as amended by this Appendix, during the six (6) month period immediately following the date of such U.S. Taxpayer’s separation from
service shall instead be delivered or paid either (i) during the period commencing on the date that is six (6) months and one (1) day following the date of such U.S. Taxpayer’s separation from service and ending fifteen
(15) days following the first business day of the seventh month after the date of such separation from service, provided that the U.S. Taxpayer shall not have the right to designate the delivery or payment date, or (ii) if earlier, as soon
as practicable (and in any event within ninety (90) days) after the U.S. Taxpayer’s death. 

  

	9.4	 Each Award hereunder shall constitute a separate payment within the meaning of Treasury Regulation §1.409A-2(b)(2). 

  

	10.	 COOPERATION 

In the event that the terms of this Plan would subject any U.S. Taxpayer to taxes or penalties under Code § 409A (“409A
Penalties”), the Committee, the Company and such U.S. Taxpayer shall cooperate diligently to amend the terms of the Plan and the U.S. Taxpayer’s Award agreement to avoid such 409A Penalties, to the extent possible, provided that in no
event shall any Group Company be responsible for any 409A Penalties that arise in connection with any amounts payable in respect of any Award granted under this Plan. 
  

	11.	 SETTLEMENT 

No Award subject to paragraph 5 of this Appendix shall be settled with Shares from a trust. 

  
 27 

 British American Tobacco 2016 Long Term Incentive Plan 

 

 ADDENDUM I: AWARDS GRANTED TO RAI PARTICIPANTS (PRIOR TO 2020) 

 

	1.	 APPLICATION 

  

	1.1	 This Addendum applies to Participants who are employees of Reynolds American Inc. or a subsidiary of Reynolds
American Inc. (collectively, “RAI” and such Participants, “RAI Participants”). 

  

	1.2	 This Addendum sets out certain additional terms which apply in respect of Awards granted under the Plan to RAI
Participants prior to 2020. 

  

	1.3	 References in this Addendum to a “Rule” is to the Rule of the Plan. Capitalized terms used in this
Addendum shall, save where otherwise defined herein, have the meaning given in the Rules. To the extent that any provision of this Addendum is inconsistent with any Rule of the Plan, such provision of this Addendum shall take precedence.

  

	2.	 MODIFICATION 

  

	2.1	 The Board may at any time, and without notice to any person, add or alter or discontinue the terms of this
Addendum in any respect without prior notice to any Participant. 

  

	3.	 TERMS 

Retirement 
  

	3.1	 Pursuant to Rule 8.2.5 (Reasons for cessation where Award remain capable of vesting) it has been determined
that Rule 8.1 (Cessation where Awards lapse) shall not apply in respect of a RAI Participant who ceases to hold office or employment with any Group Company (within the meaning of Rule 8.8 (Meaning of cessation of office or employment)) in
circumstances where the RAI Participant meets the criteria set out below (provided that this provision shall not apply where, in the opinion of the Board, the RAI Participant has committed an act or omission which justifies, or in the opinion of the
Board would have justified, summary dismissal of service or notice of cessation of employment on the grounds of misconduct). The criteria referred to are: a RAI Participant’s voluntary termination of his or her employment with RAI (i) on
or after his or her 65th birthday, (ii) on or after his or her 55th birthday with 10 or more years of service with RAI, or (iii) on or after his or her 50th birthday with 20 or more years of service with RAI. RAI shall establish such
policies, procedures, rules and guidelines as it determines to be appropriate to administer the preceding sentence, including the form and timing of the RAI Participant’s notice of the RAI Participant’s intent to retire.

  

	3.2	 Notwithstanding anything in the Plan or Appendix 2 to the Plan to the contrary, a Conditional Award or an
Option granted to a RAI Participant who is on the Grant Date, or who may become during the applicable Performance Period, eligible for the application of the preceding paragraph, shall be subject to the terms of Paragraph 5 of Appendix 2 to the
Plan. 

 Disability 
  

	3.3	 With respect to RAI Participants, the reference to “disability” in Rule 8.2 (Reasons for cessation
where Awards remain capable of vesting) shall mean that the RAI Participant has become eligible for and is in receipt of benefits under RAI’s Long-Term Disability Plan. RAI shall establish such policies, procedures, rules and guidelines as
it determines to be appropriate to administer the preceding sentence. 

  

	4.	 SETTLEMENT 

  

	4.1	 Awards granted to RAI Participants may, at the discretion of the Board, be satisfied by the transfer of British
American Tobacco p.l.c. American Depositary Shares, and references in the Plan (including any Appendix, Schedule or Addendum thereto) to “Shares” shall be read accordingly. 

 

	4.2	 No Award subject to this Addendum shall be settled with Shares from a trust. 

  
 28 

 British American Tobacco 2016 Long Term Incentive Plan 

 

 ADDENDUM II: AWARDS GRANTED TO RAI PARTICIPANTS (FROM 2020) 

 

	1.	 APPLICATION 

  

	1.1	 This Addendum applies to Participants who are employees of Reynolds American Inc. or a subsidiary of Reynolds
American Inc. (collectively, “RAI” and such Participants, “RAI Participants”). 

  

	1.2	 This Addendum sets out certain additional terms which currently apply in respect of Awards granted under the
Plan to RAI Participants from 2020. 

  

	1.3	 References in this Addendum to a “Rule” is to the Rule of the Plan. Capitalized terms used in this
Addendum shall, save where otherwise defined herein, have the meaning given in the Rules. To the extent that any provision of this Addendum is inconsistent with any Rule of the Plan, such provision of this Addendum shall take precedence.

  

	2.	 MODIFICATION 

  

	2.1	 The Board may at any time, and without notice to any person, add or alter or discontinue the terms of this
Addendum in any respect without prior notice to any Participant. 

  

	3.	 TERMS 

Disability 
  

	3.1	 With respect to RAI Participants, the reference to “disability” in Rule 8.2 (Reasons for cessation
where Awards remain capable of vesting) shall mean that the RAI Participant has become eligible for and is in receipt of benefits under RAI’s Long-Term Disability Plan. RAI shall establish such policies, procedures, rules and guidelines as
it determines to be appropriate to administer the preceding sentence. 

  

	4.	 SETTLEMENT 

  

	4.1	 Awards granted to RAI Participants may, at the discretion of the Board, be satisfied by the transfer of British
American Tobacco p.l.c. American Depositary Shares, and references in the Plan (including any Appendix, Schedule or Addendum thereto) to “Shares” shall be read accordingly. 

 

	4.2	 No Award subject to this Addendum shall be settled with Shares from a trust. 

  
 29 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 SCHEDULE 1: PERFORMANCE CONDITIONS 

SCHEDULE 1A 

PERFORMANCE CONDITION APPLICABLE TO AWARDS GRANTED 

IN 2016, 2017 2018, 2019 and 2020 

TO PARTICIPANTS OTHER THAN EXECUTIVE DIRECTORS 
  

	1.	 Subject to the Rules, the extent to which the Shares in respect of which an Award is granted (the
“Award Shares”) may vest shall be determined: 

  

	 	a.	 as to 40% of the Award Shares, by reference to the performance target based on Earnings per Share specified in
paragraph 3 below is satisfied 

  

	 	b.	 as to 20% of the Award Shares, by reference to the performance target based on Total Shareholder Return
specified in paragraph 4 below; 

  

	 	c.	 as to 20% of the Award Shares, by reference to the performance target based on the Operating Cash Flow
Conversion Ratio specified in paragraph 5 below; 

  

	 	d.	 as to 20% of the Award Shares, by reference to the performance target based on Net Turnover specified in
paragraph 6 below; and 

  

	2.	 The Performance Period for 

 

	 	a.	 Awards granted in 2016 shall commence on 1 January 2016 and end on 31 December 2018;

  

	 	b.	 Awards granted in 2017 shall commence on 1 January 2017 and end on 31 December 2019;

  

	 	c.	 Awards granted in 2018 shall commence on 1 January 2018 and end on 31 December 2020;

  

	 	d.	 Awards granted in 2019 shall commence on 1 January 2019 and end on 31 December 2021; and

  

	 	e.	 Awards granted in 2020 shall commence on 1 January 2020 and end on 31 December 2022.

  

	3.	 Earnings per Share 

 

	 	a.	 The performance target in this paragraph 3 (the “EPS Target”) shall consist of two equal,
independent elements such that the number of Award Shares which vest pursuant to this EPS Target shall be the aggregate of the number of Award Shares which vest pursuant to each element. 

 

	 	b.	 Each element of the EPS Target operates by calculating the compound annual growth in adjusted diluted earnings
per share (unless the Board determines that an alternative definition of earnings per share is more appropriate) for the Company, in the case of the first element measured at current rates of exchange, and in the case of the second element measured
at constant rates of exchange. 

  
 30 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 EPS Target: current rates of exchange 

 

	 	c.	 The percentage of the Award Shares which may vest pursuant to this element of the EPS Target depends upon the
compound annual growth in adjusted diluted earnings per share over the Performance Period, measured at current rates of exchange, as follows: 

  

			
	 Compound annual growth rate in adjusted diluted EPS
(measured at current rates of
exchange) over the
Performance Period
	  	 % of the Award Shares which vest pursuant to this
element of the EPS
Target

	10% pa or greater	  	20%
	Between 10% pa and 5% pa	  	Pro-rata between 20% and 4%
	5% pa	  	4%
	Less than 5% pa	  	0%

 EPS Target: constant rates of exchange 

 

	 	d.	 The percentage of the Award Shares which may vest pursuant to this element of the EPS Target depends upon the
compound annual growth in adjusted diluted earnings per share over the Performance Period, measured at constant rates of exchange, as follows: 

  

			
	 Compound annual growth rate in adjusted diluted EPS
(measured at constant rates of
exchange) over the
Performance Period
	  	 % of the Award Shares which vest pursuant to this
element of the EPS
Target

	10% pa or greater	  	20%
	Between 10% pa and 5% pa	  	Pro-rata between 20% and 4%
	5% pa	  	4%
	Less than 5% pa	  	0%

  

	 	e.	 For the purposes of paragraphs 3.c and 3.d above, compound annual growth in adjusted diluted earnings per share
over the Performance Period (expressed as a percentage) is calculated as follows: 

  
 

 
 Where: 
  

	 	E0	 = adjusted diluted earnings per share of the Company in the Financial Year immediately preceding the Financial
Year in which the Performance Period begins (being “Year 0”); and 

  

	 	E3	 = adjusted diluted earnings per share of the Company in the final Financial Year of the Performance Period
(being “Year 3”), 

 measured at: 

 

	 	i.	 current rates of exchange for the purposes of paragraph 3.c; and 

 

	 	ii.	 constant rates of exchange for the purposes of paragraph 3.d, for which purpose the value of E0 and E3 shall be taken as index values, with the value for E0 being the base
index value (representing adjusted diluted earnings per share in Year 0), with the purpose of such index being to reflect changes over the Performance Period in adjusted diluted earnings per share of the Company as measured on a constant currency
basis, and E3 being taken as the value of such index for Year 3, 

and in either case provided that if the Board determines that a measurement of earnings per share other than adjusted diluted earnings per
share is more appropriate the calculation shall be on that other basis and this paragraph 3 shall apply accordingly). 

  
 31 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

	4.	 TSR Target 

  

	 	a.	 The percentage of the Award Shares which may vest pursuant to the performance target in this paragraph 4 (the
“TSR Target”) depends upon the Company’s Total Shareholder Return over the Performance Period relative to the Total Shareholder Return of the Comparator Group: 

 

			
	 Ranked position of the Company’s TSR against the relevant
comparator
companies
	  	 % of the Award Shares which vest pursuant to this TSR
Target

	Upper quartile or above	  	20%
	Between upper quartile and median	  	Pro-rata between 20% and 4%
	Median	  	4%
	Below median	  	0%

  

	 	b.	 For the purpose of this TSR Target: 

 

	 	i.	 The Comparator Group shall comprise the following companies: 

 

					
	[Altria Group]1 	  	Heineken	  	Nestlé
	Anheuser-Busch InBev	  	Imperial Brands	  	PepsiCo Inc
	Campbell Soup Company	  	Japan Tobacco	  	Pernod Ricard
	Carlsberg A/S	  	Johnson & Johnson	  	Philip Morris International
	Coca-Cola	  	Kellogg	  	Procter & Gamble
	Colgate-Palmolive	  	Kimberley-Clark	  	Reckitt Benckiser
	Danone	  	LVMH	  	[SABMiller]2 
	Diageo	  	Mondelēz International	  	 Unilever

  

	 	ii.	 The Total Shareholder Return of the Company and each of the relevant comparator companies over the relevant
Performance Period (expressed as a percentage) shall be computed as follows: 

  
 

 
  
 1 Included only for Awards granted from 2019 
 2
Included only for Awards granted in 2016 

  
 32 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 Where: 
  

	 	TSR0 =	 the average return index of the relevant companies as calculated by Datastream
(or other such data provider as determined by the Board) (excluding Saturdays and Sundays) in the three months preceding the beginning of the Performance Period; and 

 

	 	TSR3 =	 the average return index (calculated in the same manner as for
TSR0) in the 3 months preceding the end of the Performance Period. 

  

	 	iii.	 Unless the Board determines otherwise, the Total Shareholder Return for the Company and each of the relevant
comparator companies shall be calculated on a local currency basis. 

  

	 	iv.	 The Company and the companies in the Comparator Group shall be ranked by the resulting Total Shareholder Return
figures, with the company with the highest figure having the highest ranking, and median and upper quartile performance shall be determined on such basis as the Board, acting reasonably, may specify from time to time. 

 

	5.	 Operating Cash Flow Conversion Ratio Target 

 

	 	a.	 The percentage of the Award Shares which may vest pursuant to the performance target in this paragraph 5 (the
“Operating Cash Flow Conversion Ratio Target”) depends upon the Company’s average Operating Cash Flow as a percentage of Adjusted Operating Profit over the Performance Period: 

 

			
	 Average Operating Cash Flow Conversion Ratio over the
Performance
Period
	  	 % of the Award Shares which vest pursuant to the
Operating Cash Flow Conversion Ratio
Target

	95% or above	  	20%
	Between 95% and 85%	  	Pro-rata between 20% and 4%
	85%	  	4%
	Less than 85% of Adjusted Operating Profit	  	0%

  

	 	b.	 For the purpose of this Operating Cash Flow Conversion Ratio Target: 

 

	 	i.	 the “Average Operating Cash Flow Conversion Ratio” is the aggregate of the Operating Cash Flow
Conversion Ratios for each Financial Year in the Performance Period, divided by the number of Financial Years in the Performance Period; and 

  

	 	ii.	 the “Operating Cash Flow Conversion Ratio” for a Financial Year (expressed as a percentage) is
calculated as follows: 

  
 

 
 Where: 

“Operating Cash Flow” in respect of a Financial Year is the adjusted profit from operations (excluding associates) plus
depreciation, amortisation and impairment, plus other non-cash items, less the increase / (decrease) in working capital, less net capital expenditure, in each case for such Financial Year. All of these items
are excluding costs and movements relating to restructuring and integration in the Financial Year; and 

  
 33 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 “Adjusted Operating Profit” in respect of a Financial Year is derived by
excluding the adjusting items from the profit from operations for such Financial Year. Adjusting items include restructuring and integration costs, amortisation and impairment of trademarks and similar intangibles, a gain on deemed partial disposal
of a trademark and a payment and release of a provision relating to non-tobacco litigation. 
 For
the purpose of this Operating Cash Flow Conversion Ratio Target, Operating Cash Flow and Adjusted Operating Profit are calculated at current rates of exchange, unless the Board determines otherwise. 

 

	6.	 Net Turnover Target 

 

	 	a.	 The performance target in this paragraph 6 (the “NTO Target”) operates by calculating the
compound annual growth in the Net Turnover of the Company, measured at constant rates of exchange on an organic basis. 

  

	 	b.	 The percentage of the Award Shares which may vest pursuant to this NTO Target depends upon the compound annual
growth in Net Turnover over the Performance Period as follows: 

  

			
	 Compound annual growth of Net Turnover over the
Performance Period
	  	 % of the Award Shares which vest pursuant to this NTO
Target

	5% pa or greater	  	20%
	 Between 5% pa and 3% pa
	  	Pro-rata between 20% and 4%
	3% pa	  	4%
	Less than 3% pa	  	0%

 provided that, notwithstanding above, but subject to the Rules, no Award Shares shall vest pursuant to
this NTO Target unless the three-year constant currency compound annual growth rate of underlying adjusted operating profit exceeds the compound annual growth rate of the threshold performance level for underlying adjusted operating profit, as
defined annually in the International Executive Incentive Scheme (as approved by the Board). 
  

	 	c.	 For the purposes of this NTO Target, compound annual growth of Net Turnover (expressed as a percentage) is
calculated as follows: 

  
 

 
 Where: 
  

	 	NTO0  =	 Net Turnover in the Financial Year immediately preceding the Financial Year in which the Performance Period
begins (being “Year 0”); and 

  

	 	NTO3 =	 Net Turnover in the final Financial Year of the Performance Period (being “Year 3”),

 measured at constant rates of exchange, for which purpose the value of NTO0 and NTO3 shall be taken as index values, with the value for NTO0 being the
base index value (representing Net Turnover in Year 0), with the purpose of such index being to reflect changes over the Performance Period in Net Turnover of the Company as measured on a constant currency basis, and NTO3 being taken as the value of such 

  
 34 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 
index for Year 3, and where the values for NTO3 and/or NTO0 shall be
adjusted in such manner as is determined by the Board to exclude any Net Turnover attributable to any business acquired or disposed of during the Performance Period or otherwise with the intention that the growth in Net Turnover is assessed by
reference to organic growth. 
  

	7.	 Exchange rates 

In this Schedule: 

“current rates of exchange” means exchange rates applied for each year relevant to a given calculation based on the average
exchange rate in that year; and 
 “constant rates of exchange” means exchange rates applied based on a re-translation, at prior year exchange rates, of the current year information, in order that the same exchange rates are applied for each year relevant to a given calculation. 

 

	8.	 Adjustment to vesting outcome 

 

	 	a.	 After the performance targets in paragraphs 3 to 6 have been assessed, the Board may make such adjustment to
the percentage of Shares of the Award Shares that vest pursuant to one or more of such performance targets to ensure a fair result for both the Participants and shareholders. 

 

	 	b.	 An adjustment pursuant to this paragraph 8 may be either positive (but, for the avoidance of doubt, not so
that the percentage of the Award Shares which vests pursuant to any one of the performance targets in paragraphs 3 to 6 exceeds the maximum percentage of the Award Shares which may vest pursuant to that performance target, as set out in paragraph 1)
or negative (including reducing the percentage of Awards Shares which vest to nil). For the avoidance of doubt, where the Board makes any adjustment pursuant to this paragraph 8 the percentage of Award Shares to be transferred shall be the
percentage as adjusted by the Board notwithstanding the outcome of the performance targets as set out in paragraphs 3 to 6. 

  

	 	c.	 For the avoidance of doubt, vesting outcomes are subject to any forfeiture or reduction of Awards pursuant to
Rule 15 (Claw-back). 

  

	9.	 Adjustments to performance targets 

 

	 	a.	 In the event of: 

  

	 	i.	 a change to the accounting standards of the Company or similar event; 

 

	 	ii.	 any events which affect any of the companies comprised in the Comparator Group (such as a merger or de-listing); 

  

	 	iii.	 any variation of capital of the Company or a demerger, delisting, special dividend, rights issue or other event
which may, in the opinion of the Board, affect the current or future value of the Company’s shares; or 

  

	 	iv.	 any other similar event the Board considers relevant which may unduly affect the calculation of the performance
targets set out in paragraphs 3 to 6, 

 the Board may make such adjustments to the terms of this Performance Condition as
it determines appropriate to reflect such event with the intention of ensuring that this Performance Condition continues to assess the performance of the Company on a consistent basis over the Performance Period. 

 

	 	b.	 This Performance Condition may be amended in accordance with Rule 5.4 of the Plan. 

  
 35 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 General 
  

	10.	 References in this Schedule 1A to a paragraph are to a paragraph of this Schedule 1A. 

  
 36 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 SCHEDULE 1B 

PERFORMANCE CONDITION APPLICABLE TO AWARDS GRANTED 

IN 2016, 2017, 2018, 2019 and 2020 

TO EXECUTIVE DIRECTORS OF THE COMPANY 
  

	1.	 Subject to the Rules, the extent to which the Shares in respect of which an Award is granted (the
“Award Shares”) may vest shall be determined: 

  

	 	a.	 as to 40% of the Award Shares, by reference to the performance target based on Earnings per Share specified in
paragraph 3 below is satisfied 

  

	 	b.	 as to 20% of the Award Shares, by reference to the performance target based on Total Shareholder Return
specified in paragraph 4 below; 

  

	 	c.	 as to 20% of the Award Shares, by reference to the performance target based on the Operating Cash Flow
Conversion Ratio specified in paragraph 5 below; 

  

	 	d.	 as to 20% of the Award Shares, by reference to the performance target based on Net Turnover specified in
paragraph 6 below; and 

  

	2.	 The Performance Period for: 

 

	 	a.	 Awards granted in 2016 shall commence on 1 January 2016 and end on 31 December 2018;

  

	 	b.	 Awards granted in 2017 shall commence on 1 January 2017 and end on 31 December 2019;

  

	 	c.	 Awards granted in 2018 shall commence on 1 January 2018 and end on 31 December 2020;

  

	 	d.	 Awards granted in 2019 shall commence on 1 January 2019 and end on 31 December 2021; and

  

	 	e.	 Awards granted in 2020 shall commence on 1 January 2020 and end on 31 December 2022.

  

	3.	 Earnings per Share 

 

	 	a.	 The performance target in this paragraph 3 (the “EPS Target”) shall consist of two equal,
independent elements such that the number of Award Shares which vest pursuant to this EPS Target shall be the aggregate of the number of Award Shares which vest pursuant to each element. 

 

	 	b.	 Each element of the EPS Target operates by calculating the compound annual growth in adjusted diluted earnings
per share for the Company, in the case of the first element measured at current rates of exchange, and in the case of the second element measured at constant rates of exchange. 

  
 37 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 EPS Target: current rates of exchange 

 

	 	c.	 The percentage of the Award Shares which may vest pursuant to this element of the EPS Target depends upon the
compound annual growth in adjusted diluted earnings per share over the Performance Period, measured at current rates of exchange, as follows: 

  

			
	 Compound annual growth rate in adjusted diluted EPS
(measured at current rates of
exchange) over the
Performance Period
	  	 % of the Award Shares which vest pursuant to this
element of the EPS
Target

	10% pa or greater	  	20%
	Between 10% pa and 5% pa	  	Pro-rata between 20% and 3%
	5% pa	  	3%
	Less than 5% pa	  	0%

 EPS Target: constant rates of exchange 

 

	 	d.	 The percentage of the Award Shares which may vest pursuant to this element of the EPS Target depends upon the
compound annual growth in adjusted diluted earnings per share over the Performance Period, measured at constant rates of exchange, as follows: 

  

			
	 Compound annual growth rate in adjusted diluted EPS
(measured at constant rates of
exchange) over the
Performance Period
	  	 % of the Award Shares which vest pursuant to this
element of the EPS
Target

	10% pa or greater	  	20%
	Between 10% pa and 5% pa	  	Pro-rata between 20% and 3%
	5% pa	  	3%
	Less than 5% pa	  	0%

  

	 	e.	 For the purposes of paragraphs 3.c and 3.d above, compound annual growth in adjusted diluted earnings per share
over the Performance Period (expressed as a percentage) is calculated as follows: 

  
 

 
 Where: 
  

	 	E0 =	 adjusted diluted earnings per share of the Company in the Financial Year immediately preceding the Financial
Year in which the Performance Period begins (being “Year 0”); and 

  

	 	E3 =	 adjusted diluted earnings per share of the Company in the final Financial Year of the Performance Period (being
“Year 3”), 

 measured at: 

 

	 	i.	 current rates of exchange for the purposes of paragraph 3.c; and 

 

	 	ii.	 constant rates of exchange for the purposes of paragraph 3.d, for which purpose the value of E0 and E3 shall be taken as index values, with the value for E0 being the base
index value (representing adjusted diluted earnings per share in Year 0), with the purpose of such index being to reflect changes over the Performance Period in adjusted diluted earnings per share of the Company as measured on a constant currency
basis, and E3 being taken as the value of such index for Year 3. 

  
 38 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

	4.	 TSR Target 

  

	 	a.	 The percentage of the Award Shares which may vest pursuant to the performance target in this paragraph 4 (the
“TSR Target”) depends upon the Company’s Total Shareholder Return over the Performance Period relative to the Total Shareholder Return of the Comparator Group: 

 

			
	 Ranked position of the Company’s TSR against the relevant
comparator
companies
	  	 % of the Award Shares which vest pursuant to this TSR
Target

	Upper quartile or above	  	20%
	Between upper quartile and median	  	Pro-rata between 20% and 3%
	Median	  	3%
	Below median	  	0%

  

	 	b.	 For the purpose of this TSR Target: 

 

	 	i.	 The Comparator Group shall comprise the following companies: 

 

					
	[Altria Group]3 	  	Heineken	  	Nestlé
	Anheuser-Busch InBev	  	Imperial Brands	  	PepsiCo Inc
	Campbell Soup Company	  	Japan Tobacco	  	Pernod Ricard
	Carlsberg A/S	  	Johnson & Johnson	  	Philip Morris International
	Coca-Cola	  	Kellogg	  	Procter & Gamble
	Colgate-Palmolive	  	Kimberley-Clark	  	Reckitt Benckiser
	Danone	  	LVMH	  	[SABMiller]4 
	Diageo	  	Mondelēz International	  	Unilever

  

	 	ii.	 The Total Shareholder Return of the Company and each of the relevant comparator companies over the relevant
Performance Period (expressed as a percentage) shall be computed as follows: 

  
 

 
 Where: 
  

	 	TSR0 =	 the average return index of the relevant companies as calculated by Datastream (or other such data provider as
determined by the Board) (excluding Saturdays and Sundays) in the three months preceding the beginning of the Performance Period; and 

 
 3 Included only for Awards granted from 2019 
 4
Included only for Awards granted in 2016 

  
 39 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

	 	TSR3 =	 the average return index (calculated in the same manner as for
TSR0) in the 3 months preceding the end of the Performance Period. 

  

	 	iii.	 The Total Shareholder Return for the Company and each of the relevant comparator companies shall be calculated
on a local currency basis. 

  

	 	iv.	 The Company and the companies in the Comparator Group shall be ranked by the resulting Total Shareholder Return
figures, with the company with the highest figure having the highest ranking, and median and upper quartile performance shall be determined on such basis as the Board, acting reasonably, may specify from time to time. 

 

	5.	 Operating Cash Flow Conversion Ratio Target 

 

	 	a.	 The percentage of the Award Shares which may vest pursuant to the performance target in this paragraph 5 (the
“Operating Cash Flow Conversion Ratio Target”) depends upon the Company’s average Operating Cash Flow as a percentage of Adjusted Operating Profit over the Performance Period: 

 

			
	 Average Operating Cash Flow Conversion Ratio over the
Performance
Period
	  	 % of the Award Shares which vest pursuant to the
Operating Cash Flow Conversion Ratio
Target

	95% or above	  	20%
	Between 95% and 85%	  	Pro-rata between 20% and 3%
	85%	  	3%
	Less than 85% of Adjusted Operating Profit	  	0%

  

	 	b.	 For the purpose of this Operating Cash Flow Conversion Ratio Target: 

 

	 	i.	 the “Average Operating Cash Flow Conversion Ratio” is the aggregate of the Operating Cash Flow
Conversion Ratios for each Financial Year in the Performance Period, divided by the number of Financial Years in the Performance Period; and 

  

	 	ii.	 the “Operating Cash Flow Conversion Ratio” for a Financial Year (expressed as a percentage) is
calculated as follows: 

  
 

 
 Where: 

“Operating Cash Flow” in respect of a Financial Year is the adjusted profit from operations (excluding associates) plus
depreciation, amortisation and impairment, plus other non-cash items, less the increase / (decrease) in working capital, less net capital expenditure, in each case for such Financial Year. All of these items
are excluding costs and movements relating to restructuring and integration in the Financial Year; and 

  
 40 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 “Adjusted Operating Profit” in respect of a Financial Year is derived by
excluding the adjusting items from the profit from operations for such Financial Year. Adjusting items include restructuring and integration costs, amortisation and impairment of trademarks and similar intangibles, a gain on deemed partial disposal
of a trademark and a payment and release of a provision relating to non-tobacco litigation. 
 For
the purpose of this Operating Cash Flow Conversion Ratio Target, Operating Cash Flow and Adjusted Operating Profit are calculated at current rates of exchange. 
  

	6.	 Net Turnover Target 

 

	 	a.	 The performance target in this paragraph 6 (the “NTO Target”) operates by calculating the
compound annual growth in the Net Turnover of the Company, measured at constant rates of exchange on an organic basis. 

  

	 	b.	 The percentage of the Award Shares which may vest pursuant to this NTO Target depends upon the compound annual
growth in Net Turnover over the Performance Period as follows: 

  

			
	 Compound annual growth of Net Turnover over the
Performance Period
	  	 % of the Award Shares which vest pursuant to this NTO
Target

	5% pa or greater	  	20%
	Between 5% pa and 3% pa	  	Pro-rata between 20% and 3%
	3% pa	  	3%
	Less than 3% pa	  	0%

 provided that, notwithstanding above, but subject to the Rules, no Award Shares shall vest pursuant to
this NTO Target unless the three-year constant currency compound annual growth rate of underlying adjusted operating profit exceeds the compound annual growth rate of the threshold performance level for underlying adjusted operating profit, as
defined annually in the International Executive Incentive Scheme (as approved by the Board). 
  

	 	c.	 For the purposes of this NTO Target, compound annual growth of Net Turnover (expressed as a percentage) is
calculated as follows: 

  
 

 
 Where: 
  

	 	NTO0 =	 Net Turnover in the Financial Year immediately preceding the Financial Year in which the Performance Period
begins (being “Year 0”); and 

  

	 	NTO3 =	 Net Turnover in the final Financial Year of the Performance Period (being “Year 3”),

 measured at constant rates of exchange, for which purpose the value of NTO0 and NTO3 shall be taken as index values, with the value for NTO0 being the
base index value (representing Net Turnover in Year 0), with the purpose of such index being to reflect changes over the Performance Period in Net Turnover of the Company as measured on a constant currency basis, with NTO3 being taken as the value of such index for Year 3, and where the values for NTO3 and/or NTO0 shall be adjusted in such manner as is determined by the Board to exclude any Net Turnover attributable to any business acquired or disposed of during the Performance Period or otherwise with the
intention that the growth in Net Turnover is assessed by reference to organic growth. 

  
 41 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

	7.	 Exchange rates 

In this Schedule: 

“current rates of exchange” means exchange rates applied for each year relevant to a given calculation based on the average
exchange rate in that year; and 
 “constant rates of exchange” means exchange rates applied based on a re-translation, at prior year exchange rates, of the current year information, in order that the same exchange rates are applied for each year relevant to a given calculation. 

 

	8.	 Adjustment to vesting outcome 

 

	 	a.	 After the performance targets in paragraphs 3 to 6 have been assessed, the Board may make such adjustment to
the percentage of Shares of the Award Shares that vest pursuant to one or more of such performance targets to ensure a fair result for both the Participants and shareholders. 

 

	 	b.	 An adjustment pursuant to this paragraph 8 may be either positive (but, for the avoidance of doubt, not so
that the percentage of the Award Shares which vests pursuant to any one of the performance targets in paragraphs 3 to 6 exceeds the maximum percentage of the Award Shares which may vest pursuant to that performance target, as set out in paragraph 1)
or negative (including reducing the percentage of Awards Shares which vest to nil). For the avoidance of doubt, where the Board makes any adjustment pursuant to this paragraph 8 the percentage of Award Shares to be transferred shall be the
percentage as adjusted by the Board notwithstanding the outcome of the performance targets as set out in paragraphs 3 to 6. 

  

	 	c.	 For the avoidance of doubt, vesting outcomes are subject to any forfeiture or reduction of Awards pursuant to
Rule 15 (Claw-back). 

  

	9.	 Adjustments to performance targets 

 

	 	a.	 In the event of: 

  

	 	i.	 a change to the accounting standards of the Company or similar event; 

 

	 	ii.	 any events which affect any of the companies comprised in the Comparator Group (such as a merger or de-listing); 

  

	 	iii.	 any variation of capital of the Company or a demerger, delisting, special dividend, rights issue or other event
which may, in the opinion of the Board, affect the current or future value of the Company’s shares; or 

  

	 	iv.	 any other similar event the Board considers relevant which may unduly affect the calculation of the performance
targets set out in paragraphs 3 to 6, 

 the Board may make such adjustments to the terms of this Performance Condition as
it determines appropriate to reflect such event with the intention of ensuring that this Performance Condition continues to assess the performance of the Company on a consistent basis over the Performance Period. 

 

	 	b.	 This Performance Condition may be amended in accordance with Rule 5.4 of the Plan. 

  
 42 

 British American Tobacco 2016 Long Term Incentive Plan 

Performance Condition 
  

 General 
  

	10.	 References in this Schedule 1B to a paragraph are to a paragraph of this Schedule 1B. 

  
 43

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