Document:

EX-10.2 FORM OF PERFORMANCE STOCK UNITS AGREEMENT

 

Exhibit 10.2

PSU Agreement

Version 2 (Bewkes Upfront Grant)

For Use in January 2008

Performance Stock Units Agreement

General Terms and Conditions

          WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby
incorporated by reference and made a part of this Agreement; and

          WHEREAS, the Committee has determined that it would be in the best interests of the Company
and its stockholders to grant the performance stock units (the “PSUs”) provided for herein
to the Participant pursuant to the Plan and the terms set forth herein, and such grant is required
under Section 3.5 of the Amended and Restated Employment Agreement dated December 11, 2007 between
the Participant and the Company (such employment agreement, as it may be amended, superseded or
replaced, the “Employment Agreement”).

          NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties
agree as follows:

	1.	 	Definitions. Whenever the following terms are used in this Agreement, they shall
have the meanings set forth below. Capitalized terms not otherwise defined herein shall have
the same meanings as in the Plan.

	 	a)	 	“Cause” means, “Cause” as defined in the Employment Agreement.
	 
	 	b)	 	“Participant” means an individual to whom PSUs have been awarded
pursuant to the Plan and shall have the same meaning as may be assigned to the terms
“Holder” or “Participant” in the Plan.
	 
	 	c)	 	“Performance Level” means the level of performance achieved by the
Company during a measurement period (generally, the Performance Period) based on the
TSR Percentile for such period or a portion of such period, which shall determine the
percentage of Target PSUs that will vest, as set forth in the Notice of Grant of
Performance Stock Units.
	 
	 	d)	 	“Performance Period” means the period commencing and ending on the
dates set forth in the Notice of Grant of Performance Stock Units.
	 
	 	e)	 	“Plan” means the equity plan maintained by the Company that is
specified in the Notice of Grant of Performance Stock Units, which has been provided to
the Participant separately and which accompanies and forms a part of this Agreement, as
such plan may be amended, supplemented or modified from time to time.

 

 

	 	f)	 	“Retirement” means a termination of employment by the Participant (i)
following the attainment of age 55 with ten (10) or more years of service as an
employee or a director with the Company or any Affiliate or (ii) pursuant to a
retirement plan or early retirement program of the Company or any Affiliate.
	 
	 	g)	 	“Shares” means shares of Common Stock of the Company.
	 
	 	h)	 	“Sub-Performance Period” means the periods within the Performance
Period commencing and ending on the dates set forth in the Notice of Grant of
Performance Stock Units.
	 
	 	i)	 	“Total Shareholder Return” or “TSR” means a company’s total
shareholder return, calculated based on stock price appreciation during a specified
measurement period plus the value of dividends paid on such stock during the
measurement period (which shall be deemed to have been reinvested in the underlying
company’s stock effective the “ex-dividend” date based on the closing price for such
company for purposes of measuring TSR).
	 
	 	j)	 	“TSR Percentile” means the percentile rank of the TSR for the Shares
during a specified measurement period (generally the Performance Period) relative to
the TSR for each of the companies in the S&P 500 Index (the “Index”) at the
beginning and throughout such measurement period; provided, however, that for
purposes of measuring the TSR Percentile, (i) the Index shall be deemed to include
companies that were removed from the S&P 500 Index during the measurement period but
that continued during the entire measurement period to have their shares listed on at
least one of the NYSE, NASDAQ, American Stock Exchange, Boston Stock Exchange, Chicago
Stock Exchange, National Stock Exchange (formerly Cincinnati Stock Exchange), NYSE Arca
(formerly known as the Pacific Stock Exchange) or Philadelphia Stock Exchange; (ii)
Time Warner Cable Inc. shall not be considered to be part of the Index for measurement
purposes even if it is included in the S&P 500 Index during some or all of the
measurement period; and (iii) the beginning and ending TSR values shall be calculated
based on the average of the closing prices of the applicable company’s stock on the
composite tape for the 30 trading days prior to and including the beginning or ending
date, as applicable, of the measurement period.
	 
	 	k)	 	“Vesting Date” means the vesting date set forth in the Notice of Grant
of Performance Stock Units.

	2.	 	Grant of Performance Stock Units. The Company hereby grants to the Participant (the
“Award”), on the terms and conditions hereinafter set forth, the target number of PSUs
(the “Target PSUs”) set forth on the Notice of Grant of Performance Stock Units (the
“Notice of Grant of Performance Stock Units”). Each PSU represents the unfunded,
unsecured right of the Participant to receive a Share on the
date(s) specified herein, subject
to achievement of the relevant performance criteria. The Target PSUs represent the number of
PSUs that will vest on the Vesting Date if the Company achieves the “Target” Performance Level
for the Performance Period, and the Participant remains in

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	 	 	Employment through the Vesting Date. PSUs do not constitute issued and outstanding shares
of Common Stock for any corporate purposes and do not confer on the Participant any
right to vote on matters that are submitted to a vote of holders of Shares.

	3.	 	Dividend Equivalents and Retained Distributions. The Participant shall not be
entitled to receive any dividend equivalent payments and the PSUs shall not otherwise be
credited or adjusted to reflect any regular cash dividend on the Shares that is paid while the
PSUs are outstanding hereunder. If on any date while PSUs are outstanding hereunder the
Company shall pay any dividend other than a regular cash dividend or make any other
distribution on the Shares, then, the Participant shall be credited with a bookkeeping entry
equivalent to such dividend or distribution for each Target PSU held by the Participant on the
record date for such dividend or distribution, but the Company shall retain custody of all
such dividends and distributions (the “Retained Distributions”) unless the Board has
in its sole discretion (and in a manner consistent with Section 19 of the Plan) determined
that an amount equivalent to such dividend or distribution shall be paid currently to the
Participant; provided, however, that if the Retained Distribution relates to a
dividend paid in Shares, the Participant shall receive an additional amount of PSUs (i.e., by
increasing the number of Target PSUs) equal to the product of (I) the aggregate number of
Target PSUs held by the Participant pursuant to this Agreement through the related dividend
record date, multiplied by (II) the number of Shares (including any fraction thereof) payable
as a dividend on a Share. Retained Distributions will not bear interest and will be subject
to the same restrictions as the PSUs to which they relate.

	4.	 	Vesting and Delivery of Vested Securities.

	 	a)	 	Subject to the terms and provisions of the Plan and this Agreement, on the
Vesting Date, the Company shall issue or transfer to the Participant the number of
Shares corresponding to the Performance Level achieved during the Performance Period
and the Retained Distributions, if any, covered by the Award. Except as otherwise
provided in paragraphs 5, 6 and 7, the vesting of such PSUs and any Retained
Distributions relating thereto shall occur only if the Participant has continued in
Employment of the Company or any of its Affiliates on the Vesting Date and has
continuously been so employed since the Date of Grant (as defined in the Notice of
Grant of Performance Stock Units).
	 
	 	b)	 	
PSUs Extinguished. Upon each issuance or transfer of Shares in
accordance with this Agreement, a number of PSUs equal to the number of Shares issued
or transferred to the Participant shall be extinguished and such number of PSUs will
not be considered to be held by the Participant for any purpose.
	 
	 	c)	 	Final Issuance. Upon the final issuance or transfer of Shares and
Retained Distributions, if any, to the Participant pursuant to this Agreement, in lieu
of a fractional Share, the Participant shall receive a cash payment equal to the Fair
Market Value of such fractional Share.

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	 	d)	 	Section 409A. Notwithstanding anything else contained in this
Agreement, no Shares or Retained Distributions shall be issued or transferred to a
Participant before the first date on which a payment could be made without subjecting
the Participant to tax under the provisions of Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”).

	5.	 	Termination of Employment.

	 	(a)	 	If the Participant’s Employment with the Company and its Affiliates is
terminated by the Participant for any reason other than those described in clauses (b),
(c) and (d) below prior to the Vesting Date, then the PSUs covered by the Award and all
Retained Distributions relating thereto shall be completely forfeited on the date of
any such termination, unless otherwise provided in the Employment Agreement.
	 
	 	(b)	 	If the Participant’s Employment terminates as a result of his or her death
prior to the end of the Performance Period, then the Company shall immediately issue or
transfer to the Participant’s estate a pro rata portion of the number of Shares
underlying the PSUs that would have vested (if any) if the Performance Period (and the
then-current Sub-Performance Period) ended on the date of the Participant’s death plus
all Retained Distributions relating thereto; provided, however, that in the
event such termination of Employment due to death occurs prior to the first anniversary
of the Date of Grant, then the pro rata number of PSUs that vest shall be based on the
number of Target PSUs, without regard to the actual Performance Level achieved through
such date. The pro rata amount of PSUs that shall vest upon the Participant’s death
shall be determined by multiplying

	 	(x)	 	the full number of PSUs covered by the Award
that would vest based on the actual Performance Level achieved through
the date of death (or, in the case of death prior to the first
anniversary of the Date of Grant, based on the number of Target PSUs)
by;
	 
	 	(y)	 	a fraction, the numerator of which shall be the
number of days from the Date of Grant through the date of the
Participant’s death, and the denominator of which shall be 1827.

If the product of (x) and (y) results in a fractional share, such fractional
share shall be rounded to the next higher whole share.

The PSUs and any Retained Distributions related thereto that do not vest as
described above shall be completely forfeited.

	 	(c)	 	If the Participant’s Employment is terminated at the end of the “Disability
Period” (as defined in the Employment Agreement), then the Participant shall remain
entitled to receive a pro rata portion of the PSUs that would otherwise vest (if any)
on the Vesting Date based on the actual Performance Level achieved for the

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	 	 	 	full Performance Period, and any Retained Distributions relating thereto, and such
pro rata portion of the PSUs shall become vested, and Shares subject to such PSUs shall
be issued or transferred to the Participant on the Vesting Date as follows:

	 	(x)	 	the number of PSUs covered by the Award that
would vest on the Vesting Date (based on the actual Performance Level
achieved for the full Performance Period) multiplied by;
	 
	 	(y)	 	a fraction, the numerator of which shall be the
number of days from the Date of Grant through the date of such
termination of Employment, and the denominator of which shall be 1827.

If the product of (x) and (y) results in a fractional share, such fractional
share shall be rounded to the next higher whole share.

The PSUs and any Retained Distributions related thereto that do not vest as
described above shall be completely forfeited following the end of the Performance
Period.

	 	(d)	 	If the Participant’s Employment is terminated pursuant to Section 4.2 of the
Employment Agreement or due to Retirement, then the Participant shall remain entitled
to receive a pro rata portion of the PSUs that would otherwise vest (if any) on the
Vesting Date based on the highest Performance Level achieved for the period(s)
beginning January 1, 2008 and ending on each December 31 occurring thereafter for each
year completed during the Performance Period, including the full year in which the
termination of Employment occurs (or ending on December 31, 2008 if Participant elects
to retire pursuant to the second sentence of Section 4.6 of the Employment Agreement)
and any Retained Distributions relating thereto, and such pro rata portion of the PSUs
and Retained Distributions shall become vested, and Shares subject to such PSUs and
such Retained Distributions shall be issued or transferred to the Participant not later
than March 15 of the year following the effective date of the termination of
Employment, as follows:

	 	(x)	 	the number of PSUs covered by the Award that
would vest on the Vesting Date (based on the Performance Level achieved
for the applicable portions of the Performance Period) multiplied by;
	 
	 	(y)	 	20% if Participant’s Employment terminates
because Participant elects to retire pursuant to the second sentence of
Section 4.6 of the Employment Agreement or, in other circumstances, a
fraction, the numerator of which shall be the number of days from the
Date of Grant through the effective date of such termination of
Employment, and the denominator of which shall be 1827.

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If the product of (x) and (y) results in a fractional share, such fractional
share shall be rounded to the next higher whole share.

The PSUs and any Retained Distributions related thereto that do not vest as
described above shall be completely forfeited.

For purposes of this paragraph 5, a temporary leave of absence shall not constitute a
termination of Employment or a failure to be continuously employed by the Company or any
Affiliate regardless of the Participant’s payroll status during such leave of absence if
such leave of absence is approved in writing by the Company or any Affiliate. Notice of
any such approved leave of absence should be sent to the Company at One Time Warner Center,
New York, New York 10019, attention: Director, Global Stock Plans Administration, but such
notice shall not be required for the leave of absence to be considered approved.

In the event the Participant’s Employment with the Company or any of its
Affiliates is terminated, the Participant shall have no claim against the Company with
respect to the PSUs and related Retained Distributions, if any, other than as set forth in
this paragraph 5, the provisions of this paragraph 5 being the sole remedy of the
Participant with respect thereto.

	6.	 	Acceleration of Vesting Date. Subject to paragraphs 4(d) and 7, in the event a
Change in Control occurs prior to the end of the Performance Period, the PSUs shall
immediately vest and the Participant shall receive immediate payment in respect thereof
determined as the sum of the following amounts:

	 	(x)	 	the number of PSUs covered by the Award that would have vested (if any)
if the Performance Period (and the then-current Sub-Performance Period)
ended on the date of the Change in Control (based on the actual Performance
Level achieved through the date of the Change in Control) multiplied by a
fraction, the numerator of which shall be the number of days from the Date
of Grant through the date of such Change in Control, and the denominator of
which shall be 1827;
	 
	 	(y)	 	the number of Target PSUs multiplied by a fraction, the numerator of
which shall be the number of days from the date of such Change in Control
through the last day of the Performance Period, and the denominator of which
shall be 1827; and
	 
	 	(z)	 	all related Retained Distributions.

If the sum of the amounts above would result in a fractional share, such
fractional share shall be rounded to the next higher whole share.

	7.	 	No Limitation on Acceleration Due to Section 280G. Notwithstanding any provision to
the contrary in the Plan or this Agreement, if the Payment (as hereinafter defined) due to the
Participant hereunder as a result of the acceleration of vesting of the PSUs pursuant

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	 	 	to paragraph 6 of this Agreement, either alone or together with all other Payments received or
to be received by the Participant from the Company or any of its Affiliates (collectively, the
“Aggregate Payments”), or any portion thereof, would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor thereto), the provisions of Section 11
of the Employment Agreement shall apply, and, accordingly, there will be no limitation on the
acceleration of vesting of the PSUs pursuant to paragraph 6 of this Agreement and no reduction
in the number of PSUs or any Retained Distributions related thereto that would vest due to
Section 280G or Section 4999 of the Code.

The term “Payment” shall mean any transfer of property within the meaning of Section
280G of the Code.

	8.	 	Withholding Taxes. The Participant agrees that,

	 	a)	 	Obligation to Pay Withholding Taxes. Upon the vesting of any portion
of the Award of PSUs and the Retained Distributions relating thereto, the Participant
will be required to pay to the Company any applicable Federal, state, local or foreign
withholding tax due as a result of such vesting. The Company’s obligation to deliver
the Shares subject to the PSUs or to pay any Retained Distributions shall be subject to
such payment. The Company and its Affiliates shall, to the extent permitted by law,
have the right to deduct from the Shares issued in connection with the vesting of PSUs
or the Retained Distributions, as applicable, or any payment of any kind otherwise due
to the Participant any Federal, state, local or foreign withholding taxes due with
respect to such vesting or payment.
	 
	 	b)	 	Payment of Taxes with Stock. Subject to the Committee’s right to
disapprove any such election and require the Participant to pay the required
withholding tax in cash, the Participant shall have the right to elect to pay the
required withholding tax associated with a vesting with Shares to be received upon
vesting. Unless the Company shall permit another valuation method to be elected by the
Participant, Shares used to pay any required withholding taxes shall be valued at the
average of the high and low sales price of a Share on the New York Stock Exchange on
the date the withholding tax becomes due (hereinafter called the “Tax Date”).
Notwithstanding anything herein to the contrary, if a Participant who is required to
pay the required withholding tax in cash fails to do so within the time period
established by the Company, then the Participant shall be deemed to have elected to pay
such withholding taxes with Shares to be received upon vesting. Elections must be made
in conformity with conditions established by the Committee from time to time.
	 
	 	c)	 	Conditions to Payment of Taxes with Stock. Any election to pay withholding
taxes with stock must be made on or prior to the Tax Date and will be irrevocable
once made.

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	9.	 	Changes in Capitalization and Government and Other Regulations. The Award
shall be subject to all of the terms and provisions as provided in this Agreement, the Plan
and the Employment Agreement, which are incorporated by reference herein and made a part
hereof, including, without limitation, the provisions of Section 10 of the Plan (generally
relating to adjustments to the number of Shares subject to the Award, upon certain changes
in capitalization and certain reorganizations and other transactions); provided that, in the
event of any inconsistency between the terms of this Agreement and the Plan, on the one
hand, and the Employment Agreement, on the other hand, the provisions of the Employment
Agreement shall govern.
	 
	10.	 	Forfeiture. A breach of any of the foregoing restrictions or a breach of any of the
other restrictions, terms and conditions of the Plan or this Agreement, with respect to any of
the PSUs or any Retained Distributions relating thereto, except as waived by the Board or the
Committee, will cause a forfeiture of such PSUs and any Retained Distributions relating
thereto.
	 
	11.	 	Right of Company to Terminate Employment. Nothing contained in the Plan or this
Agreement shall confer on any Participant any right to continue in the employ of the Company
or any of its Affiliates and the Company and any such Affiliate shall have the right to
terminate the Employment of the Participant at any such time, with or without Cause,
notwithstanding the fact that some or all of the PSUs and related Retained Distributions
covered by this Agreement may be forfeited as a result of such termination. The granting of
the PSUs under this Agreement shall not confer on the Participant any right to any future
Awards under the Plan.
	 
	12.	 	Notices. Any notice which either party hereto may be required or permitted to give
the other shall be in writing and may be delivered personally or by mail, postage prepaid,
addressed to Time Warner Inc., at One Time Warner Center, New York, NY 10019, Attention:
Director, Global Stock Plans Administration, and to the Participant at his or her address, as
it is shown on the records of the Company or its Affiliate, or in either case to such other
address as the Company or the Participant, as the case may be, by notice to the other may
designate in writing from time to time.
	 
	13.	 	Interpretation and Amendments. The Board and the Committee (to the extent delegated
by the Board) have plenary authority to interpret this Agreement and the Plan, to prescribe,
amend and rescind rules relating thereto and to make all other determinations in connection
with the administration of the Plan. The Board or the Committee may from time to time modify
or amend this Agreement in accordance with the provisions of the Plan, provided that no such
amendment shall adversely affect the rights of the Participant under this Agreement without
his or her consent.
	 
	14.	 	Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns, and shall be binding upon and inure to
the benefit of the Participant and his or her legatees, distributees and personal
representatives.

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	15.	 	Copy of the Plan. By entering into the Agreement, the Participant agrees and
acknowledges that he or she has received and read a copy of the Plan.
	 
	16.	 	Governing Law. The Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to any choice of law rules thereof
which might apply the laws of any other jurisdiction.
	 
	17.	 	Waiver of Jury Trial. To the extent not prohibited by applicable law which cannot
be waived, each party hereto hereby waives, and covenants that it will not assert (whether as
plaintiff, defendant or otherwise), any right to trial by jury in any forum in respect of any
suit, action, or other proceeding arising out of or based upon this Agreement.
	 
	18.	 	Submission to Jurisdiction; Service of Process. Each of the parties hereto hereby
irrevocably submits to the jurisdiction of the state courts of the State of New York and the
jurisdiction of the United States District Court for the Southern District of New York for the
purposes of any suit, action or other proceeding arising out of or based upon this Agreement.
Each of the parties hereto to the extent permitted by applicable law hereby waives, and agrees
not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or
proceeding brought in such courts, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune from attachment
or execution, that such suit, action or proceeding in the above-referenced courts is brought
in an inconvenient forum, that the venue of such suit, action or proceedings, is improper or
that this Agreement may not be enforced in or by such court. Each of the parties hereto
hereby consents to service of process by mail at its address to which notices are to be given
pursuant to paragraph 12 hereof.
	 
	19.	 	Personal Data. The Company, the Participant’s local employer and the local
employer’s parent company or companies may hold, collect, use, process and transfer, in
electronic or other form, certain personal information about the Participant for the exclusive
purpose of implementing, administering and managing the Participant’s participation in the
Plan. Participant understands that the following personal information is required for the
above named purposes: his/her name, home address and telephone number, office address
(including department and employing entity) and telephone number, e-mail address, date of
birth, citizenship, country of residence at the time of grant, work location country, system
employee ID, employee local ID, employment status (including international status code),
supervisor (if applicable), job code, title, salary, bonus target and bonuses paid (if
applicable), termination date and reason, tax payer’s identification number, tax equalization
code, US Green Card holder status, contract type (single/dual/multi), any shares of stock or
directorships held in the Company, details of all grants of PSUs (including number of grants,
grant dates, vesting type, vesting dates, and any other information regarding PSUs that have
been granted, canceled, vested, or forfeited) with respect to the Participant, estimated tax
withholding rate, brokerage account number (if applicable), and brokerage fees (the
“Data”). Participant understands that Data may be collected from the Participant
directly or, on Company’s request, from Participant’s local employer. Participant understands
that Data may be transferred to third parties assisting the Company in the implementation,
administration and

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	 	 	management of the Plan, including the brokers approved by the Company, the broker selected by the
Participant from among such Company-approved brokers (if applicable), tax consultants and the
Company’s software providers (the “Data Recipients”). Participant understands that
some of these Data Recipients may be located outside the Participant’s country of residence,
and that the Data Recipient’s country may have different data privacy laws and protections
than the Participant’s country of residence. Participant understands that the Data Recipients
will receive, possess, use, retain and transfer the Data, in electronic or other form, for the
purposes of implementing, administering and managing the Participant’s participation in the
Plan, including any requisite transfer of such Data as may be required for the administration
of the Plan and/or the subsequent holding of Shares on the Participant’s behalf by a broker or
other third party with whom the Participant may elect to deposit any Shares acquired pursuant
to the Plan. Participant understands that Data will be held only as long as necessary to
implement, administer and manage the Participant’s participation in the Plan. Participant
understands that Data may also be made available to public authorities as required by law,
e.g., to the U.S. government. Participant understands that the Participant may, at any time,
review Data and may provide updated Data or corrections to the Data by written notice to the
Company. Except to the extent the collection, use, processing or transfer of Data is required
by law, Participant may object to the collection, use, processing or transfer of Data by
contacting the Company in writing. Participant understands that such objection may affect
his/her ability to participate in the Plan. Participant understands that he/she may contact
the Company’s Stock Plan Administration to obtain more information on the consequences of such
objection.

10Exhibit 10.1

 

Exhibit 10.1

EXECUTION COPY

SHARE REPURCHASE AGREEMENT

          THIS SHARE REPURCHASE AGREEMENT (this “Agreement”), is entered into on April 29, 2008 by
REYNOLDS AMERICAN INC. (the “Company”) and BROWN & WILLIAMSON HOLDINGS, INC. (f/k/a Brown &
Williamson Tobacco Corporation) (“B&W”).

RECITALS

	I.	 	The Company’s Board of Directors has authorized a share repurchase program (the “Share
Repurchase Program”) for the purchase of outstanding shares of common stock of the Company,
par value $0.0001 per share (the “Shares”), pursuant to which the Company may spend up to
$350,000,000 over one year to repurchase Shares.
	 
	II.	 	Pursuant to the Governance Agreement dated as of July 30, 2004, as
amended (the “Governance Agreement”), the parties hereto and British
American Tobacco p.l.c. established certain terms and conditions
concerning the corporate governance of the Company, the acquisition
and disposition of securities of the Company by British American
Tobacco p.l.c., B&W and its affiliates and other matters. All
capitalized terms used but not defined herein shall have the meanings
set forth in the Governance Agreement.
	 
	III.	 	The purpose of this Agreement is to permit and require B&W to
participate in the Share Repurchase Program, subject to the
conditions herein, on a basis approximately proportionate with B&W’s
percentage ownership of the equity of the Company and in a manner in
which the repurchases from B&W shall qualify for the Intended Tax
Treatment (as defined below).
IV. This Agreement is being entered into in good faith and not as part of
a plan or scheme to evade the prohibitions of Rule 10b5-1 under the
Securities Exchange Act of 1934, as amended (the “1934 Act”).

          IN CONSIDERATION OF the mutual promises contained in this Agreement, the Company and B&W
hereby agree:

	A.	 	Calculations; Purchase and Sale.

	 	1.	 	For purposes of this Agreement,

     (i) a “Buyback Week” means a Calendar Week (as defined below) during which the
Company repurchases any Shares pursuant to the Share Repurchase Program from any
Person other than B&W;

     (ii) a “Calculation Period” means a period that begins on the day immediately
after the end of the preceding Calculation Period (or in the case of the first
Calculation Period, on the first day of the month that includes the date of this
Agreement) and ends on the earlier of (i) the next Friday that is the last day of a
Buyback Week or (ii) the next Friday that is the last Friday of a calendar month;
and

     (iii) “Calendar Week” means each seven-day period ending on a Friday.

	 	2.	 	The Company will promptly notify B&W if a Calendar Week is or is expected to be
a Buyback Week.
	 
	 	3.	 	On or before the third business day following the end of each Calculation
Period, the Company will deliver to B&W a certificate (a “Calculation Certificate”),
signed on behalf of the Company by any of its Chief Financial Officer, Chief Accounting
Officer, Treasurer or Secretary, substantially in the form attached hereto as Exhibit
A, as the same may hereafter be amended by the mutual agreement of the parties hereto.
If the Calculation Period includes a Buyback Week,

 

 

	 	 	 	then the Calculation Certificate
shall set forth the number of Shares that the Company proposes to buy back from B&W
with respect to such Buyback Week (the “B&W Buyback Number”). The B&W Buyback Number
shall be calculated in the Calculation Certificate based on the principles referred to
in Paragraphs A.5 and A.6.
	 
	 	4.	 	B&W, on or before the third business day following receipt of a Calculation
Certificate with respect to a Calculation Period which includes a Buyback Week, shall
deliver a notice (the “B&W Notice”) to the Company substantially in the form attached
hereto as Exhibit B. The B&W Notice shall state whether B&W agrees with the Company’s
calculation of the applicable B&W Buyback Number, and if not, it shall state B&W’s
proposal for the B&W Buyback Number and its calculation thereof. If the Company does
not agree with B&W’s proposal, then B&W and the Company will negotiate in good faith,
taking into account the advice of their respective outside tax counsel, to determine
the appropriate B&W Buyback Number. However, if the parties cannot agree on the B&W
Buyback Number within two business days following delivery of the B&W Notice to the
Company, then the B&W Buyback Number proposed by B&W, as it may have been amended by
B&W in connection with the negotiation between the parties, shall be the number of
Shares the Company will repurchase from B&W with respect to the relevant Buyback Week.
	 
	 	5.	 	The B&W Buyback Number with respect to a Buyback Week shall be the lowest of:

     (i) the number of Shares such that, after the purchase of such Shares from B&W by
the Company, the net total number of Shares sold by B&W to the Company under this
Agreement shall be equal to the total number of Shares purchased by the Company from
shareholders other than B&W for all periods through such Buyback Week pursuant to
the Share Repurchase Program multiplied by the ratio of (x) B&W’s percentage
ownership of the equity of the Company on the date of this Agreement, to (y) 1.0
minus B&W’s percentage ownership of the equity of the Company on the date of this
Agreement, provided that such ratio shall be appropriately adjusted to reflect
changes from time to time in B&W’s Percentage Interest that do not occur as part of
the same plan as the purchases under the Share Repurchase Program or this Agreement;

     (ii) the maximum number of Shares that B&W can sell to the Company without
decreasing B&W’s percentage ownership of the equity of the Company from the date of
this Agreement to the end of such Buyback Week; and

     (iii) the maximum number of Shares, reasonably determined by B&W upon advice of its
outside tax counsel after consultation with the Company, that B&W can sell to the
Company without putting at risk the Intended Tax Treatment.

	 	6.	 	The following rules shall apply for purposes of Paragraph A.5(ii) but shall not
limit the discretion of B&W under Paragraph 

A.5(iii):

     (i) any Sale (as defined below) of Shares to the Company under this Agreement
with respect to any Buyback Week (current or prior) shall be treated as having
occurred or as occurring on the last day of such Buyback Week,

     (ii) unless reasonably determined otherwise by B&W upon advice of its outside
tax counsel and after consultation with the Company, such calculation shall take
into account any increase or decrease in the outstanding equity of the Company since
the date of this Agreement for any reason, and

     (iii) B&W shall be entitled to provide itself with assurance of the Intended Tax
Treatment, based on advice of its outside tax counsel and after prior consultation
with the Company, by reducing the number of Shares otherwise determined under
Paragraph A.5(ii) so as to permit B&W to assure itself that B&W’s percentage
ownership of the equity of the Company does not decrease as a result of future
events that may be considered to occur as part of the same plan as the purchases
under the Share Repurchase Program or this Agreement, including, without

-2-

 

limitation,
issuances of new equity by the Company pursuant to the exercise of stock options,
the issuance or vesting of restricted stock, or the issuance of any other equity to
any third party reasonably expected to occur after the end of the applicable Buyback
Week.

	 	7.	 	For purposes of this Agreement other than Paragraph K, the determination of the
number of outstanding Shares or other equity of the Company shall be based on Shares or
equity considered outstanding for U.S. federal income tax purposes. Without limiting
the generality of the foregoing, (i) restricted stock for which an election pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended, (the “Code”) has been
made shall be considered outstanding, (ii) other restricted stock shall not be
considered outstanding prior to its vesting date and shall be considered outstanding
beginning on the vesting date, and (iii) outstanding stock options, and outstanding
awards of stock that have not yet been transferred to employees or directors for tax
purposes, shall be disregarded. Any assumptions made for the purposes of determining
the number of outstanding Shares shall be described in the Calculation Certificate.
	 
	 	8.	 	B&W shall deliver and sell to the Company, and the Company shall buy from B&W
(each such transaction, a “Sale”), at or before 12:00 p.m. Eastern Time on the second
business day following the date the B&W Buyback Number for the applicable Buyback Week
becomes final (a “Closing Date”) a number of Shares (the “Sale Shares”) equal to such
B&W Buyback Number. On each Closing Date, (a) B&W shall deliver to the Company’s
transfer agent instructions to transfer the Sale Shares to the Company, together with
such stock powers and other instruments as may be necessary to give effect to such
instructions, and (b) upon confirmation from the Company’s transfer agent of receipt of
such instructions, the Company shall pay the purchase price specified in Paragraph A.9
for the Sale Shares in immediately available funds to such account as B&W has
designated in writing.
	 
	 	9.	 	The price per Share to be paid by the Company under a Sale with respect to a
Buyback Week shall be the volume weighted average price (“VWAP”) paid by the Company
for the Shares purchased from shareholders other than B&W (the “Prior Period Shares”)
with respect to such Buyback Week. For purposes of this Agreement, VWAP is calculated
by dividing the total consideration paid, without taking commissions into account, for
the Prior Period Shares by the aggregate number of Prior Period Shares.
	 
	 	10.	 	The Company shall not be obligated to deliver a proposed B&W Buyback Number and
neither the Company nor B&W shall be required to effect a Sale if the performance of
their respective obligations would violate applicable law. Other than for the purposes
of correcting any error, only one Calculation Certificate may be delivered and one Sale
may be effected with respect to each Buyback Week.
	 
	 	11.	 	Any fractional amounts of Shares required to be sold to the Company under any
B&W Notice, as the same may be amended, shall be rounded down to the nearest whole
number.
	 
	 	12.	 	For purposes of this agreement, “business day” means a day which is not a
Federal Reserve Bank holiday and on which the New York Stock Exchange is open for
trading.
	 
	 	13.	 	If at any time the Company becomes aware that any statement previously made in
a Calculation Certificate is wrong or misleading, or if the Company decides to issue
equity not contemplated by the assumptions set forth in a Calculation Certificate, it
shall promptly notify B&W in writing. If at any time B&W becomes aware that any
statement previously made in a Calculation Certificate or B&W Notice is wrong or
misleading, it shall promptly notify the Company in writing.
	 
	 	14.	 	In the event Paragraph A.13 applies, or if B&W reasonably determines based upon
the advice of its outside tax counsel after prior consultation with the Company that
its calculation of a B&W Buyback Number was incorrect, then the Company shall take
remedial steps reasonably requested by B&W in order to permit B&W to assure itself of
the Intended Tax Treatment, including if necessary, rescinding prior Sales under this
Agreement.

-3-

 

	B.	 	Term. The term of this Agreement shall commence on April 29, 2008 and shall terminate as of
the earlier of April 29, 2009 and the expenditure of an aggregate of $350,000,000 pursuant to
this Share Repurchase Agreement and the Share Repurchase Program, collectively. In addition:
(a) B&W may terminate this Agreement at any time upon written notice to the Company, if B&W
determines in good faith, upon advice of its outside tax counsel and after consultation with
the Company, that based on the facts existing at such time, there is a reasonable risk that it
is not possible to achieve the Intended Tax Treatment for sales of Shares to the Company
pursuant to this Agreement (including through the exercise by B&W of its rights under
paragraph J of this Agreement) and (b) the Company may terminate this Agreement, upon written
notice to B&W, following public announcement by the Company of the termination of the Share
Repurchase Program by the Board of Directors of the Company, provided that (i) no such
termination shall be effective with respect to any Buyback Week, and (ii) paragraphs A.13,
A.14, I, J and L shall survive such termination. If B&W determines in good faith, upon advice
of its outside tax counsel and after consultation with the Company, that any circumstance has
arisen that could reasonably be expected to cause it in the future to invoke its right to
terminate the Agreement under clause (a) of the preceding sentence, it shall promptly notify
the Company, and the parties shall use their reasonable best efforts to avoid the need for
such termination.
	 
	C.	 	Intended Tax Treatment. The parties intend for the proceeds of any Sales pursuant to this
Agreement paid to B&W from the Company in exchange for the Shares to be treated as a dividend
pursuant to Sections 302(d) and 301(c)(1) of the Code and be eligible for Section 243(c) of
the Code (such treatment the “Intended Tax Treatment”). For the avoidance of doubt, it shall
be consistent with the Intended Tax Treatment if Section 1059(a)(1) of the Code applies, but
not if Section 1059(a)(2) of the Code applies.
	 
	D.	 	Representations and Warranties.

	 	1.	 	B&W represents and warrants to the Company that (i) the execution, delivery and
performance of this Agreement have been duly authorized by the Board of Directors of
B&W, (ii) no Sale will contravene, or require any consent, notice or filing which has
not been obtained, given or made, under (a) any law applicable to B&W, (b) the
organizational documents of B&W or (c) any judgment, order or decree or any contract or
agreement to which B&W is subject, (iii) B&W has or will have valid title to the Shares
to be sold to the Company and the legal right and power to sell, transfer and deliver
such Shares, (iv) the delivery of the Shares under each Sale will, upon payment of the
purchase price therefor, pass valid title to the Company to such Shares free and clear
of any security interests, claims, liens, equities, and other encumbrances, and (v) any
B&W Notice delivered under this Agreement will be accurate in all material respects.
	 
	 	2.	 	The Company represents and warrants to B&W that (i) the execution, delivery and
performance of this Agreement have been duly authorized by the Board of Directors of
the Company, (ii) no Sale will contravene, or require any consent, notice or filing
which has not been obtained, given or made, under (a) any law applicable to the
Company, (b) the organizational documents of the Company or
(c) any judgment, order or decree or any contract or agreement to which the Company
is subject, (iii) any Calculation Certificate delivered under this Agreement will be
accurate in all material respects, (iv) the Company has sufficient earnings and
profits for the gross proceeds of all Sales under this Agreement to be treated as
dividends within the meaning of Section 316 of the Code, and (v) the Company has
delivered to B&W a certificate signed on behalf of the Company by the Chief
Financial Officer, Chief Accounting Officer, Treasurer or Secretary of the Company
setting forth the applicable information otherwise required pursuant to Exhibit A,
treating for the purposes of this D.2(v) the calendar month ending prior to the date
of this Agreement as the Calculation Period thereunder.

	E.	 	Assignment; Third-Party Beneficiaries. This Agreement is intended solely for the benefit of
the Company and B&W and may not be assigned, in whole or in part, except that B&W shall
assign, any or all of its rights, interests and obligations under this Agreement to any
Investor Party to which it transfers Shares, provided that such assignment shall not relieve
B&W of its obligations hereunder and, provided, further that any Investor Party transferee
agrees in writing to be bound by the provisions hereof. B&W may not assign its rights, or its
obligations to deliver Shares, under this Agreement to any entity that is not a United

-4-

 

	 	 	States
domestic corporation for U.S. tax purposes during the term of this Agreement. This Agreement,
except for Paragraph I, is not intended to confer any rights or remedies upon any Person other
than the Company, B&W or any Investor Party referred to in the first sentence of this Section
E.
	 
	F.	 	Sales Plan. It is the intent of the parties that this Agreement comply with the requirements
of Rule 10b5-1(c) under the 1934 Act and this Agreement shall be interpreted to comply with
the requirements of Rule 10b5-1(c) under the 1934 Act.
	 
	G.	 	Complete Agreement. This Agreement constitutes the entire agreement between the parties with
respect to its subject matter and supersedes all prior agreements, oral or written, with
respect to such subject matter.
	 
	H.	 	Governing Law; Jurisdiction. Except to the extent specifically required by the North
Carolina Business Corporation Act, this Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof. The parties
declare that it is their intention that this Agreement be regarded as made under the laws of
the State of Delaware and that the laws of the State of Delaware be applied in interpreting
its provisions in all cases where interpretation shall be required, except to the extent the
North Carolina Business Corporation Act is specifically required by such act to govern the
interpretation of this Agreement.
	 
	 	 	The parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in the Chancery Court of the State of Delaware, this being in addition
to any other remedy to which they are entitled at law or in equity. In addition, each of
the parties (a) consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or Chancery Court of the State of Delaware in the event any
dispute arises out of this Agreement, (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such court, (c)
irrevocably and unconditionally waives (and agrees not to plead or claim) any objection to
the laying of venue in Delaware of any action, suit or proceeding arising out of this
Agreement, (d) agrees that it will not bring any action relating to this Agreement in any
court other than any Federal court sitting in the State of Delaware or Chancery Court of the
State of Delaware, (e) waives any right to trial by jury with respect to any action related
to or arising out of this Agreement, and (f) agrees that this Agreement involves at least
$100,000 and has been entered into by the parties in express reliance upon 6 Del. C. § 2708.
Without limiting the agreement of the parties set forth in this Section H, in the event
that any dispute arising under this Agreement is subject to, or adjudicated by, the courts
of the State of North Carolina, the parties agree that any such dispute will be adjudicated
by the North Carolina Business Court (with any references in this Section H to Delaware
courts being deemed to be references to North Carolina courts and any references in this
Section H to the Chancery Court of the State of Delaware being deemed to be references to
the North Carolina Business Court).
	 
	I.	 	Indemnity. The Company agrees to indemnify and hold B&W and its affiliates harmless, on an
after-tax basis, from and against any loss, liability, claim, cost, damage or expense
(including reasonable legal fees and expenses) suffered or incurred by B&W or any of its
affiliates arising from or relating to the failure of B&W or any of its affiliates to obtain
the Intended Tax Treatment resulting from the inaccuracy in any respect of information set
forth in any Calculation Certificate delivered pursuant to this Agreement including but not
limited to any increase in tax liability resulting from the Sales and arising from or relating
to any such inaccuracy. Notwithstanding the foregoing, B&W shall not be entitled to
indemnification hereunder to the extent its remedies under Paragraph B or J are adequate to
assure the Intended Tax Treatment and the Company (a) confirms that B&W is entitled to
exercise its remedies under such Paragraph B or J, as applicable, and (b) complies with such
Paragraph B or J, as applicable.
	 
	J.	 	B&W Purchase Right.

-5-

 

	 	1.	 	If B&W reasonably determines, based on advice of its outside tax counsel and
after consultation with the Company, that there is a reasonable risk that it is not
possible to achieve the Intended Tax Treatment for the Sale of any Shares to the
Company because of equity issued or to be issued (in each case, for tax purposes) by
the Company after the date hereof which reduces B&W’s percentage ownership of the
equity of the Company, and such risk cannot be avoided by reducing the B&W Buyback
Number for future Buyback Weeks, then B&W may deliver to the Company a written notice
(a “Primary Purchase Notice”) stating that B&W wishes to repurchase from the Company (a
“Primary Purchase”) a stated number of Shares (the “Purchase Number”) that it
previously sold to the Company pursuant to this Agreement. The Purchase Number shall
be reasonably
determined by B&W, upon advice of its outside tax counsel after consultation with
the Company, and shall not exceed the number of Shares that, if purchased, would
eliminate the identified risk. B&W shall provide the Company with the method of
calculation of the Purchase Number. The prices per Share (the “Purchase Price”) for
such a purchase shall be the prices previously paid by the Company to B&W to
purchase the equivalent number of Shares from B&W, determined on a “last in first
out” basis.
	 
	 	2.	 	If B&W properly delivers a Primary Purchase Notice, the Company will be
obligated to sell, and B&W shall be obligated to buy, a number of Shares equal to the
Purchase Number for the Purchase Price at or before 12:00 p.m. Eastern Time on the
second business day after the delivery of the Primary Purchase Notice.

	K.	 	Governance Agreement. B&W shall not reduce, pursuant to Paragraph A.6(iii), the amount
determined under Paragraph A.5(ii), and shall not purchase Shares from the Company under
Paragraph J, to the extent such reduction or purchase would cause B&W’s Percentage Interest
(after all purchases by the Company with respect to a Buyback Week) to exceed the Standstill
Percentage plus 1.0%; provided, however, that solely for purposes of the
calculation of B&W’s Percentage Interest under this Paragraph K, at any point in time, B&W’s
Percentage Interest will be calculated by treating as already outstanding any Shares or other
equity of the Company if (a) the future issuance of such Shares or other equity of the Company
has been publicly announced or approved by the Board of Directors of the Company or (b) the
Board of Directors of the Company has been informed of the possibility of the future issuance
of such Shares or other equity of the Company.
	 
	L.	 	Company Repurchases of Shares.

	 	1.	 	The parties understand that certain expected future issuances of Shares to
third parties by the Company could reduce the number of Shares purchased by the Company
from B&W under this Agreement, that such reduction may result in B&W’s Percentage
Interest exceeding the Standstill Percentage to the extent permitted by Paragraph K,
and that the actual issuance of such Shares by the Company would be expected to reduce
B&W’s Percentage Interest below the Standstill Percentage. If, contrary to such
expectations, the Company determines in good faith that such expected issuance will not
take place and if the operation of Paragraph A.5(i) would not otherwise result in
putting the parties in a position similar to the position they would be in if there had
never been an expectation that the Company would issue the additional Shares, then the
parties agree to comply with the procedures set forth in this Paragraph L in order to
put the parties in such similar position.
	 
	 	2.	 	(i) If (a) the Company determines in good faith that such expected issuance of
additional Shares will not take place, (b) the operation of Paragraph A.5(i) would not
otherwise result in putting the parties in a position similar to the position they
would be in if there had never been an expectation that the Company would issue the
additional Shares, and (c) B&W had previously reduced, pursuant to
Paragraph A.6(iii), the amount determined under Paragraph A.5(ii) or purchased
Shares from the Company under Paragraph J to permit B&W to assure itself that B&W’s
percentage ownership of the equity of the Company did not decrease as a result of
such expected issuance of additional Shares, then the Company shall deliver to B&W a
certificate (a “Purchase Certificate”) identifying the expected issuance which will
not take place (a “Canceled Issuance”) and setting forth the number of Shares (the
“Repurchase Number”) that the Company

-6-

 

	 	 	 	shall purchase from B&W as a result of such
Canceled Issuance. The Repurchase Number in respect of a Canceled Issuance shall be
equal to the lesser of (a) the sum of (i) the number of additional Shares that B&W
would have sold to the Company under this Agreement previously if there had never
been an expectation to issue additional Shares in such Canceled Issuance, and (ii)
the number of Shares that B&W purchased from the Company under Paragraph J on the
account of such Canceled Issuance, and (b) the maximum number of Shares that B&W may
sell to the Company consistent with Paragraphs A.5(i), A.5(ii) and A.5(iii) as if
such Shares were being sold to the Company for a Buyback Week. The price per Share
(the “Repurchase Price”) for a purchase in respect of a Canceled Issuance shall be
the volume weighted average price paid by the Company for the Shares purchased from
shareholders other than B&W in all prior Buyback Weeks pursuant to the Share
Repurchase Program. If B&W does not agree with the Company’s calculation of the
Repurchase Number or Repurchase Price, then B&W and the Company will negotiate in
good faith to determine the appropriate Repurchase Number or Repurchase Price, as
applicable.

(ii) If the Company properly delivers a Purchase Certificate, then B&W will be
obligated to sell, and the Company shall be obligated to buy, a number of Shares
equal to such Repurchase Number for such Repurchase Price at or before 12:00 p.m.
Eastern Time on the second business day after the determination of the Repurchase
Number and Repurchase Price in accordance with Paragraph L.2(i) above.

	 	3.	 	(i) If (a) B&W has previously reduced, pursuant to Paragraph A.5(iii), the
number of shares to be sold to the Company, (b) the Company or B&W determines in good
faith that any facts or assumptions relied upon by B&W in making the determination
under Paragraph A.5(iii) are no longer correct or applicable, and (c) the operation of
Paragraph A.5(i) would not otherwise result in putting the parties in a position
similar to the position they would be in if such facts or assumptions had not been
relied upon, then either the Company or B&W may deliver to the other party a
certificate (a “Modification Certificate”) identifying the facts or assumptions that
such party reasonably believes are no longer correct or applicable and setting forth
the number of Shares (the “Additional Number”) that such party believes the Company can
purchase from B&W consistent with such subsequent determination, Paragraphs A.5(i) and
(ii), and the Intended Tax Treatment. If B&W provides the Modification Certificate,
and the Company reasonably agrees with the calculations therein, then B&W shall sell
the Additional Number to the Company. If the Company provides the Modification
Certificate, then B&W shall reasonably consider, based on the
advice of its outside tax counsel after consultation with the Company, whether it
agrees with the calculations therein and whether selling such Additional Number to
the Company would put the Intended Tax Treatment at risk. If the reasonable
determination of B&W in accordance with the preceding sentence is that such
calculations are incorrect or such a purchase would put the Intended Tax Treatment
at risk, then to such extent B&W will have no obligation to sell such Shares to the
Company. If, however, B&W reasonably determines that the calculations are correct
and the sale of the Additional Number or an adjusted Additional Number would not put
the Intended Tax Treatment at risk, then B&W will consummate the sale contemplated
by the Modification Certificate, as so adjusted. The price per Share for a purchase
under this Paragraph L.3 shall be the volume weighted average price paid by the
Company for the Shares purchased from shareholders other than B&W in all prior
Buyback Weeks pursuant to the Share Repurchase Program (the “Modification Repurchase
Price”).

(ii)  If either the Company or B&W properly delivers a Modification Certificate,
then B&W will be obligated to sell, and the Company shall be obligated to buy, a
number of Shares equal to such Additional Number for such Modification Repurchase
Price at or before 12:00 p.m. Eastern Time on the second business day after such
determination of the Additional Number, if any, and Modification Repurchase Price
in accordance with Paragraph L.3(i) above.

	 	M.	 	Amendments; Waivers. No provision of this Agreement may be amended or waived unless such
amendment or waiver is in writing and signed, in the case of an amendment, by the parties
hereto, or in the case of a waiver, by the party against whom the waiver is to be effective.
The failure of any party to this

-7-

 

	 	 	 	Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights nor shall any single or partial
exercise by any party to this Agreement of any of its rights under this Agreement preclude any
other or further exercise of such rights or any other rights under this Agreement.
	 
	 	N.	 	Notices. All notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given upon receipt by the parties at the
following addresses (or at such other address for a party as shall be specified by like
notice):

	 	 	 	 	 
	 	 	if to B&W, to
	 
	 	 	 	 
	 

	 	 	 	103 Foulk Road, Suite 117
	 

	 	 	 	Wilmington, DE 19803
	 

	 	 	 	Fax: (302) 658-4269
	 

	 	 	 	Attention: Corporate Secretary
	 
	 	 	 	 
	 

	 	 	 	with copies to:
	 
	 	 	 	 
	 

	 	 	 	Divisional Vice President, Tax and Treasury
	 

	 	 	 	Louisville Corporate Services, Inc.
	 

	 	 	 	401 South 4th Street, Suite 1200
	 

	 	 	 	Louisville, KY 40202
	 

	 	 	 	Fax: (502) 371-1795
	 
	 

	 	 	 	Cravath, Swaine & Moore LLP
	 

	 	 	 	825 Eighth Avenue
	 

	 	 	 	New York, NY 10019
	 

	 	 	 	Fax: 212-474-3700
	 

	 	 	 	Phone: 212-474-1000
	 
	 

	 	 	 	Attention: Philip A. Gelston, Esq.
	 

	 	 	 	               Sarkis Jebejian, Esq.
	 
	 	 	 	 
	 	 	if to the Company, to
	 
	 	 	 	 
	 

	 	 	 	401 North Main Street
	 

	 	 	 	Winston-Salem, NC 27192
	 

	 	 	 	Fax: (336) 741-2998
	 
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	with a copy to:
	 
	 

	 	 	 	Jones Day
	 

	 	 	 	222 East 41st Street
	 

	 	 	 	New York, NY 10017
	 

	 	 	 	Fax: 212-755-7306
	 

	 	 	 	Phone: 212-326-3939
	 
	 

	 	 	 	Attention: Jere R. Thomson, Esq.
	 

	 	 	 	                Randi C. Lesnick, Esq.

-8-

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day
and year first above written.

	 	 	 	 	 	 	 
	 	 	BROWN & WILLIAMSON HOLDINGS, INC.,	 	 
	 
	 	 	 	 	 	 
	 

	 	by	 	 	 	 
	 

	 	 	 	/s/ Timothy J. Hazlett	 	 
	 

	 	 	 	 

Name: Timothy J. Hazlett
	 	 
	 

	 	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	 	 	REYNOLDS AMERICAN INC.,	 	 
	 
	 	 	 	 	 	 
	 

	 	by	 	 	 	 
	 

	 	 	 	/s/ Daniel A. Fawley	 	 
	 

	 	 	 	 

Name: Daniel A. Fawley
	 	 
	 

	 	 	 	Title: Senior Vice President and Treasurer	 	 

[Signature Page to the Share Repurchase Agreement]

-9-

 

EXHIBIT A1

REYNOLDS AMERICAN INC. CALCULATION CERTIFICATE

Date: ________________

Calculation Period: beginning date___ending date___

Note: Unless otherwise indicated, all statements of outstanding shares, shares issued, shares
acquired, percentage interest, etc. are to be based on the meaning of those terms for U.S. federal
income tax purposes and otherwise will be calculated in accordance with the Share Repurchase
Agreement.

Part A: Schedules 

The following schedules are attached hereto (as applicable).

Schedule 1: General information and calculation of B&W Buyback Number.

Schedule 2: Schedule of all outstanding restricted stock and employee stock options including
grant, vesting and expiration dates as of the end of the Calculation Period.

Schedule 3: Details of purchases made under the Program from parties other than B&W during the
Calculation Period.

[Other]

Part B: Assumptions and Additional Information 

	 	 	 
	Item 1.

	 	State any assumptions made in arriving at the numbers provided in
this exhibit and schedules hereto other than those explicitly
mentioned in the Share Repurchase Agreement including, without
limitation, treatment and number of shares held by corporate
affiliates.
	 
	 	 
	Item 2.

	 	Describe any issuance of or reacquisition by the Company of equity
of the Company (including but not limited to Shares) during the
Calculation Period that has been made except made with respect to
restricted stock or employee stock options.
	 
	 	 
	Item 3.

	 	Explanation of line items B3, C5, D6, D7, D11 and E3 on Schedule 1
(not otherwise described in Item 2).
	 
	 	 
	Item 4.

	 	Response to any additional information requested by tax counsel to
B&W for purposes of its determinations pursuant to this Agreement.

 

			
	1	 	Capitalized terms used but not defined herein shall
have the meaning assigned thereto in the Share Repurchase Agreement between
Reynolds American Inc. and Brown & Williamson Holdings, Inc., dated April 29,
2008 (the “Share Repurchase Agreement”).

 

 

Part C: Representations

          The Company represents that, except as otherwise expressly noted below or elsewhere in this
Exhibit A, (i) the Board of Directors of the Company has not been informed of and has not publicly
announced or approved any intent, plan or arrangement directly or indirectly to issue or acquire
any of its equity, other than the purchase of Shares pursuant to the Share Repurchase Program or
pursuant to employee stock option or restricted stock plans, (ii) previously issued Calculation
Certificates remain true, correct and complete as of their dates of issuance, (iii) if the
Calculation Period includes a Buyback Week, it will have sufficient earnings and profits to permit
the entire purchase price of all the Shares to be purchased pursuant to this Certificate to be
treated as a dividend within the meaning of Section 316 of the Code and (iv) it does not have a
Rabbi Trust or a similar arrangement holding shares.

Exceptions:

          The undersigned hereby certifies on behalf of Reynolds American Inc. that the statements
contained herein and on schedules attached hereto are true, correct and complete.

	 	 	 	 	 	 	 
	 	 	REYNOLDS AMERICAN INC.,	 	 
	 
	 	 	 	 	 	 
	 

	 	by	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

-2-

 

          Schedule 1: General Information and Calculation of B&W Buyback Number

	 	 	 	 	 
	 

	 	General 	 	 
	 

	 	Calculation Period (“period”)	 	 
	 

	 	Includes Buyback Week (Y/N)	 	 
	 
	 	 	 	 
	A

	 	Date of Agreement—April 29, 2008	 	 
	A1

	 	Shares owned by B&W	 	 
	A2

	 	Total outstanding shares (SEC)	 	 
	A3

	 	Restricted Shares outstanding—no 83(b) election	 	 
	A4

	 	Total outstanding Shares (tax)
	 	A2-A3
	A5

	 	B&W percentage ownership (tax)
	 	A1/A4
	A6

	 	B&W percentage ownership (SEC)
	 	A1/A2
	A7

	 	Governance cap percentage (SEC)	 	 
	A8

	 	Governance cap percentage (SEC) plus 1%	 	 
	 
	 	 	 	 
	B

	 	Beginning of Period	 	 
	B1

	 	Total outstanding Shares (SEC)	 	 
	B2

	 	Restricted Shares outstanding — no 83(b) election	 	 
	B3

	 	SEC Shares not outstanding for tax purposes (other than B2)	 	 
	B4

	 	Shares to be purchased by RAI from third parties for prior periods	 	 
	B5

	 	Shares to be purchased by RAI from B&W for prior periods	 	 
	B6

	 	Shares to be purchased by RAI from third parties & B&W for prior periods
	 	B4+B5
	B7

	 	Total net outstanding Shares (tax)
	 	B1-B2-B3-B6
	B8

	 	Shares owned by B&W	 	 
	B9

	 	Net Shares owned by B&W
	 	B8-B5
	B10

	 	B&W percentage interest (tax)
	 	B9/B7
	 
	 	 	 	 
	C

	 	Events During Period	 	 
	C1

	 	Restricted Shares becoming vested (net of Tax Shares cancelled) (tax)	 	 
	C2

	 	Vested EIAP shares issued	 	 
	C3

	 	Options exercised (net of Tax Shares cancelled)	 	 
	C4

	 	Shares bought or to be bought under buyback plan from third parties for current period	 	 
	C5

	 	Net issuances or reacquisitions* by RAI of Shares (tax) except C1, C2, C3, C4	 	 
	C6

	 	Net Shares outstanding (tax) on last day of period before buyback from B&W
	 	B7+C1+C2+C3-C4+C5
	C7

	 	Restricted Shares (including Tax Shares) forfeited or cancelled (SEC)	 	 
	C8

	 	Net issuances or reacquisitions* by RAI of Shares (SEC) except C2, C3, C4, C7	 	 
	C9

	 	Net Shares outstanding (SEC) on last day of period before buyback from B&W
	 	B1-B6+C2+C3-C4-C7+C8
	 
	 	 	 	 
	*

	 	 Use positive number for net issuances and negative number for net reacquisitions	 	 
	 
	 	 	 	 
	 

	 	Calculation of Buyback Number	 	 
	 
	 	 	 	 
	D

	 	Calculation Pursuant to Section A.5(ii) of the Agreement	 	 
	D1

	 	B&W shares owned on last day of period (B9 adjusted for any unrelated purchases/sales)	 	 
	D2

	 	Shares to be purchased by RAI from B&W from prior periods
	 	B5
	D3

	 	Net Shares owned by B&W on last day of period
	 	D1-D2
	D4

	 	Net Shares outstanding (tax) on last day of period before buyback from B&W
	 	C6
	D5

	 	Assumed future issuance used for immediately preceding period	 	 
	D6

	 	Increases in assumed issuances for this period	 	 
	D7

	 	Decreases in assumed issuances for this period	 	 
	D8

	 	Assumed future issuance to be used for current period
	 	D5+D6-D7
	D9

	 	Shares outstanding (tax) on last day of period including assumed future issuances
	 	D4+D8
	D10

	 	Tentative Buyback Number based on (D3-D10)/(D9-D10)=A5
	 	(D3-A5*D9)/(1-A5)
	D11

	 	Proposed reduction to tentative Buyback Number, if any	 	 
	D12

	 	B&W Buyback Number under A.5(ii)
	 	D10-D11
	 
	 	 	 	 
	E

	 	Calculation Pursuant to Section A.5(i) of the Agreement	 	 
	E1

	 	Sum of all buybacks from third parties (including for current period)	 	 
	E2

	 	B&W percentage ownership on first day of Agreement (tax)
	 	A5
	E3

	 	Adjustment to B&W percentage ownership pursuant to A.5(i), If any	 	 
	E4

	 	Adjusted B&W percentage ownership pursuant to A.5(i)
	 	E2+E3
	E5

	 	Cumulative limit on proposed purchases from B&W
	 	E1*E4/(1-E4)
	E6

	 	All purchases from B&W for prior periods (even if not yet made)	 	 
	E7

	 	B&W Buyback Number under A.5(i)
	 	E5-E6
	 
	 	 	 	 
	F

	 	Proposed B&W Buyback Number	 	 
	F1

	 	Proposed B&W Buyback Number (lower of D12 & E7, rounded down to nearest whole share)	 	 
	 
	 	 	 	 
	G

	 	B&W Status At End of Period Under Proposed B&W Buyback	 	 
	 
	 	 	 	 
	G1

	 	Shares outstanding on last day of period after all buybacks (SEC)
	 	C9-F1
	G2

	 	Same as G1 but including assumed issuances (SEC)
	 	G1+D8
	G3

	 	Shares outstanding on last day of period after all buybacks (tax)
	 	C6-F1
	G4

	 	Same as G3 but including assumed issuances (tax)
	 	G3+D8
	G5

	 	B&W Shares owned end of period after buyback (assuming no other purchase/sale during period)
	 	 B9-F1
	G6

	 	B&W percentage ownership after buyback (actual) (tax)
	 	G5/G3
	G7

	 	B&W percentage ownership after buyback (including assumed issuances) (tax)
	 	G5/G4
	G8

	 	B&W percentage ownership after buyback (actual) (SEC)
	 	G5/G1
	G9

	 	B&W percentage ownership after buyback (including assumed issuances) (SEC)
	 	G5/G2
	G10

	 	B&W portion of total shares bought back for period
	 	F1/(C4+F1)
	 
	 	 	 	 
	H

	 	Payment to B&W	 	 
	H1

	 	Total dollars paid to third parties (before commission) for purchases for this period	 	 
	H2

	 	Volume weighted average price per Share
	 	H1/C4
	H3

	 	Settlement Date	 	 
	H4

	 	Amount to be paid to B&W
	 	H2*F1
	 
	 	 	 	 
	I1

	 	Total dollars buyback for period
	 	H1+H4
	I2

	 	Total dollars of buyback (cumulative)
	 	H1+H4 (cumulative)

 

 

EXHIBIT B2

B&W NOTICE

Date: ________________

Calculation Period ending: ___

Date of Calculation Certificate___

___We agree with the B&W Buyback Number stated in such Calculation Certificate

___We DO NOT agree with the B&W Buyback Number stated in such Calculation Certificate.

     B&W Buyback Number proposed by B&W:

     [Explanation]

 

			
	2	 	Capitalized terms used but not defined herein shall have the meaning assigned thereto in
the Share Repurchase
Agreement between Reynolds American Inc. and Brown & Williamson Holdings, Inc., dated April 29, 2008
(the “Share Repurchase Agreement”).

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