Document:

EX-10.5

 

Exhibit 10.5

February 2, 2005

Jeffrey A. Eckmann

409 Orchard Park Drive

Bermuda Run, NC 27006

Dear Jeff:

     When signed in the space provided below, this document shall constitute an acceptance of an
amendment to your offer of employment letter dated July 29, 2004.

     Your offer of employment letter is hereby amended by adding the following explanatory language
regarding your eligibility for severance and the Company’s Long Term Incentive Plan (LTIP):

	 	•  	Following the termination of your active employment, projected to be August 31,
2006, you will be eligible to receive severance under the terms of a Special Severance
Benefits and Change of Control Protection agreement, subject to approval by the RAI
Board of Directors.
	 
	 	•  	If you are terminated from active employment under circumstances that make you
eligible for the terms of Special Severance Benefits and Change of Control Protections
agreement, any LTIP granted to you will be deemed to be fully vested on your last day
of active employment.

     Please indicate your agreement to the terms of this amendment by signing below and returning
it to Ann Johnston. A copy will be provided to you.

	 	 	 	 	 	 	 
	 	 	Sincerely,
	 
	 	 	 	 	 	 
	 	 	REYNOLDS AMERICAN INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	/s/ Ann A. Johnston
	 	 	 	 
	

	 	 	 	 	 	Ann A. Johnston

Executive Vice President

Human Resources

	 	 	 	 	 
	Acknowledged and Accepted:
	 	 
	 
	 	 
	     /s/ Jeffrey A. Eckmann
	 	 
	     Jeffrey A. Eckmann
	 	 
	 
	 	 
	Date:      February 4, 2005EX-10.6

 

	 	Exhibit 10.6

REYNOLDS AMERICAN INC

[                    , 200  ]

[Name]

[Street]

[City, State, Zip]

Re: Special Severance Benefits and Change of Control Protections

          As consideration for your entering into the Non-Competition, Non-Disclosure of Confidential
Information and Commitment to Provide Assistance Agreement, attached hereto as Exhibit A
and made a part of this document, you will be eligible for special severance and certain change of
control protections from Reynolds American Inc. (the “Company”), the terms and conditions of which
are set forth below.

	1.  	   Special Severance Benefits.

	 	(a)  	       If, during the course of your employment with the Company or any of its
affiliates, your employment is involuntarily terminated for any reason other than Cause
(as defined in the Company’s Long Term Incentive Plan (the “LTIP”)) you will receive
two (2) years’ pay (defined as base pay and target bonus at the time of the termination
of your employment), payable over three (3) years, and full employee benefits coverage
for three (3) years, and if you participate in an executive supplemental payment plan
at the time of your termination of employment, coverage under the executive
supplemental payment plan according to its terms and conditions for three (3) years.
These special severance benefits replace any compensation or benefits under the
Reynolds American Salary and Benefits Continuation Program (“SBC”). It is intended
that you will not receive any less pay or benefits than provided under the SBC
obligation; provided, however, that any payment under this Section 1(a) is conditioned
upon your execution of the release described in Section 3(a). In the event that you do
not execute the release described in Section 3(a), you will not be entitled to any
benefits under this agreement and will be entitled only to those benefits provided
under the SBC obligation.
	 
	 	(b)  	       For purposes of this agreement, your employment shall be deemed to have been
terminated for “Cause” if the termination of employment results from your: (i)
criminal conduct; (ii) deliberate and continual refusal to perform employment duties on
substantially a full time basis; (iii) deliberate and continual refusal to act in
accordance with any specific lawful instructions of an authorized officer or employee
more senior than you or a majority of the Board of Directors of the Company; or (iv)
deliberate misconduct which could be materially damaging to the Company or any of its
business operations without a reasonable good faith belief by you that such conduct was
in the best interests of the Company. A termination of employment shall not be deemed
for Cause hereunder unless the senior human resources executive of the Company shall
confirm that any such termination of employment is for Cause. Any voluntary
termination of employment by you in anticipation of an involuntary termination of employment for
Cause shall be deemed to be a termination of employment for Cause.
	 
	 	(c)  	       Notwithstanding any provision to the contrary contained herein, in the event
that you are deemed to be a “Key Employee” of the Company (as defined below), to the
extent required under Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”) and the regulations promulgated thereunder, payment of your severance
benefits will not commence before the date which is at least six (6) months after the
date of your separation from service with the Company or any of its affiliates (or, if
earlier, the date of your death). Any cash payment delayed under this Section 1(c)
will accrue interest during the period the payment is delayed equal to the average
prime rate of JPMorgan Chase & Co. for the six-month period.

 

 

	 	(d)  	       For purposes of this agreement, a “Key Employee” means an employee of the
Company who is a key employee within the meaning of Section 409A of the Code and the
regulations promulgated thereunder.
	 
	 	(e)  	       Involuntary termination of your employment without Cause will be deemed to have
occurred if you voluntarily terminate your employment after the occurrence of one (1)
or more of the following events:

	 	(i)  	       the total amount of your base salary and targeted awards under
the LTIP and the Company’s Annual Incentive Award Plan (the “AIAP”), or
successor plans, is at any time reduced by more than twenty percent (20%)
without your consent; provided, however, that nothing herein
will be construed to guarantee your target award if performance is below
target;
	 
	 	(ii)  	       your responsibilities are substantially reduced in importance
without your consent; or
	 
	 	(iii)  	       you are at any time required as a condition of continued
employment to become based at any office or location more than the minimum
number of miles required by the Internal Revenue Service for you to claim a
moving expense deduction, from your then current place of employment without
your consent, except for travel reasonably required in the performance of your
responsibilities.
	 
	 	   	Unless you provide written notification of your non-consent to any of the
events described in (i), (ii) or (iii) above within ninety (90) days after
the occurrence of any such event, you will be deemed to have consented to
the occurrence of such event or events and no deemed involuntary termination
will occur. If you provide written notice of your non-consent to any of the
events described in (i), (ii) or (iii) above within ninety (90) days after
the occurrence of any such events, your employment by the Company or any of
its affiliates will be deemed to have been involuntarily terminated ninety
(90) days after receipt of such written notice by the Company or any of its
affiliates.

	 	(f)  	       For the purpose of calculating benefits under the Company’s non-qualified
defined benefit pension plans, you will be deemed to be paid throughout the three-year
special severance pay period at a rate equal to your base pay and target bonus
immediately prior to the involuntary termination of your employment. For purposes of
life insurance and disability, benefits will be based on your base pay in effect
immediately prior to the involuntary termination of your employment.

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	2.  	       Change of Control. In the event of a Change of Control of the Company (as such
Change of Control is defined in the LTIP), or any successor plan, the following will occur:

	 	(a)  	       The Company will hold you harmless from any golden parachute tax imposed by any
federal, state or local taxing authority as a result of any payments made by the
Company or any of its affiliates. In the event that it is determined that any payment
or distribution by the Company or any of its affiliates to or for you (a “Payment”)
would be subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the “Excise Tax”),
then you will be entitled to receive from the Company or any of its affiliates an
additional payment (an “Excise Tax Adjustment Payment”) in an amount such that after
payment by you of all applicable federal, state and local taxes (computed at the
maximum marginal rates and including any interest or penalties imposed with respect to
such taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment Payment,
you retain an amount of the Excise Tax Adjustment Payment equal to the Excise Tax
imposed upon the Payments. You agree to cooperate fully with the Company and its
affiliates in any protester appeal by the Company or any of its affiliates in the event
of the imposition of any golden parachute tax.
	 
	 	(b)  	       If your employment is terminated without Cause following such Change of
Control, the Company or any of its affiliates will pay to you as incurred all legal and
accounting fees and expenses incurred by you as a result of such termination (including
all such fees and expenses, if any, in seeking to obtain or enforce any right or
benefit provided by any compensation-related plan, agreement or arrangement of the
Company or any of its affiliates), unless your claim is found by an arbitral tribunal
of competent jurisdiction to have been frivolous.
	 
	 	(c)  	       During the 24-month period following a Change of Control, you will be entitled
to terminate your employment for Good Reason and receive the severance benefits set
forth in Section 1 of this agreement as if you had been involuntarily terminated by the
Company or any of its affiliates without Cause.
	 
	 	(d)  	       For purposes of this agreement, “Good Reason” means, without your express
written consent, any of the following events occurring after a Change of Control:

	 	(i)  	       a material reduction in your duties, a material diminution in
your position or a material adverse change in your reporting relationship from
those in effect immediately prior to the Change of Control;
	 
	 	(ii)  	       a reduction in your pay grade or bonus opportunity as in effect
immediately prior to the Change of Control or as the same may thereafter be
increased from time to time during the term of this agreement;

- 3 -

 

	 	(iii)  	       the failure to continue in effect any compensation plan in
which you participate at the time of the Change of Control, including but not
limited to the LTIP and AIAP, or any substitute plans adopted prior to the
Change of Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan providing you with substantially similar
benefits) has been made with respect to such plan in connection with the Change
of Control, or the failure to continue your participation therein on
substantially the same basis, both in terms of the amount of benefits provided
and the level of your participation relative to other participants, as existed
at the time of the Change of Control;
	 
	 	(iv)  	       the taking of any action which would directly or indirectly
materially reduce any of the benefits to be provided to you under the
retirement or savings plans of the Company or any of its affiliates (unless
such reduction is required by law) or deprive you of any material fringe
benefit enjoyed by you at the time of the Change of Control, or the failure to
provide you with the number of paid vacation days to which you are entitled on
the basis of your employer’s practice with respect to you as in effect at the
time of the Change of Control;
	 
	 	(v)  	       any material breach by the Company or its affiliates of any
provision of this agreement or any other of your contractual arrangements with
the Company or its affiliates; or
	 
	 	(vi)  	       requiring you to be become based at any office or location more
than the minimum number of miles required by the Code for you to claim a moving
expense deduction, from the office or location at which you were based
immediately prior to such Change of Control, except for travel reasonably
required in the performance of your responsibilities.

	3.  	   Miscellaneous.

	 	(a)  	       In further consideration for these special severance and change of control
benefits, and should an involuntary termination of your employment ever occur, the
Company will expect your cooperation in transitioning your responsibilities, and, prior
to the payment of any benefits under this agreement, you will execute a letter
containing a release of claims and a reaffirmation of your Non-Competition,
Non-Disclosure of Confidential Information and Commitment to Provide Assistance
Agreement each in a form reasonably satisfactory to the Company with all period for
revocation expired.
	 
	 	(b)  	       You acknowledge and agree that nothing contained in this agreement obligates
the Company or any one of its affiliates (i) to employ you for any specific term or
(ii) to grant you any short-term or long-term incentive awards under the plans and
programs of the Company or any of its affiliates.
	 
	 	(c)  	       This agreement is intended to comply with Section 409A of the Code and will be
construed and interpreted in accordance with such intent. This agreement

- 4 -

 

	 	   	may be amended from time to time by the Company to effect required compliance under
Section 409A of the Code as additional guidance is issued.
	 
	 	(d)  	       Except as provided in Section 3(c), this agreement may not be modified, amended
or waived in any manner other than by an instrument in writing signed by you and the
Company.
	 
	 	(e)  	       This agreement shall be governed, controlled and determined in accordance with
the applicable provisions of federal law and, to the extent not preempted by federal
law, the laws of the State of North Carolina, without regard to the conflicts of law
rules of such state.

          Please indicate your acceptance of the terms of this agreement by signing this agreement below
and returning it to the Company. A copy will be provided to you.

	 	 	 
	

	 	REYNOLDS AMERICAN INC.
	 
	 	 
	

	 	By:                                                             
	 
	 	 
	

	 	Its:                                                             

Accepted and agreed to as of this                    day

of                                         , 200  

                                                                                

[Employee]

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Exhibit A

Non-Competition,

Non-Disclosure of Confidential Information,

And

Commitment to Provide Assistance Agreement

I, [Name], acknowledging the special severance benefits and certain change of control protections
made available to me as consideration for entering into this Non-Competition, Non-Disclosure of
Confidential Information and Commitment to Provide Assistance Agreement, do hereby agree to each of
the following:

	 	•  	       I will not, without the prior written consent of Reynolds American
Inc. (“RAI”), use, divulge, disclose or make accessible to any other
person, firm, partnership or corporation or other entity any
confidential information pertaining to the businesses of RAI, R. J.
Reynolds Tobacco Company, and/or any of their affiliates (collectively,
the “Companies”), except (a) while employed by any of the Companies in
the businesses of and for the benefit of the Companies or (b) when
required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the businesses of
the Companies, or by any administrative body or legislative body
(including a committee thereof) with jurisdiction to order me to
divulge, disclose or make accessible such information. For purposes of
this agreement, “Confidential Information” shall mean non-public
information concerning any of the Companies’ data, strategic business
plans, product development data (or other proprietary product data),
customer lists, marketing plans and other proprietary information,
except for specific items which have become publicly available
information (other than such items which I know have become publicly
available through a breach of fiduciary duty or any confidentiality
agreement).
	 
	 	•  	       During the period commencing on the first date of my employment with
any one (1) of the Companies and ending three (3) years after the date
of the termination of my employment for any reason from any of the
Companies, I covenant and agree that:

	 	(a)  	       I will not directly or indirectly (whether as owner, partner, consultant,
employee, or otherwise), engage in any of the “Major Businesses” (as defined below) in
which any of the Companies are engaged; and
	 
	 	(b)  	       I will not, on my own behalf or on behalf of any person, firm or company,
directly or indirectly for a period of twelve (12) months following the termination of
my employment, offer employment to any person who was, at the time of the termination
of my employment, employed by any of the Companies.

 

 

	 	(c)  	       For purposes of this agreement, “Major Businesses” means the major business
segments of any of the Companies dealing in the manufacture, sale or marketing of
tobacco and smoking products or products deemed to be in competition with smoking
products, including but not limited to those developed, marketed or intended to be used
as part of smoking cessation programs, or as tobacco or smoking substitutes.

	 	 I and the Companies agree that this covenant not to compete is a reasonable covenant under
the circumstances, and further agree that if in the opinion of any court of competent
jurisdiction, such restraint is not reasonable in any respect, such court shall have the
right, power and authority to excise or modify such provision or provisions of this covenant
as to the court shall appear not reasonable and to enforce the remainder of the covenant as
so amended.

	 	•  	I agree that:

	 	(a)  	I will personally provide
reasonable assistance and cooperation to the Companies in
activities related to the prosecution or defense of any pending
or future lawsuits or claims involving any of the Companies.
	 
	 	(b)  	I will promptly notify RAI if I
receive any requests from anyone other than an employee or agent
of one of the Companies for information regarding any of the
Companies which could reasonably be construed as being
proprietary, non-public or confidential or if I become aware of
any potential claim or proposed litigation against any of the
Companies.
	 
	 	(c)  	I will refrain from providing any
information related to any claim or potential litigation against
any of the Companies to any non-Company representatives without
RAI’s written permission or being required to provide
information pursuant to legal process.
	 
	 	(d)  	If required by law to provide
sworn testimony regarding any matter related to any of the
Companies, I will consult with and have legal counsel designated
by RAI present for such testimony. RAI will be responsible for
the costs of such designated counsel, and I will bear no cost
for same.
	 
	 	(e)  	If I am required by law to
provide sworn testimony regarding any matter related to any of
the Companies, and if I require legal counsel to represent and
protect my interests (in addition to RAI’s designated legal
counsel provided for under subparagraph (d) herein), RAI will
reimburse me for any legal expenses (including, but not

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	 	   	limited to, the costs of any attorney reasonably acceptable
to me and RAI, which acceptance by RAI shall not be
unreasonably withheld) and other out-of-pocket expenses I may
incur in relation to such testimony.
	 
	 	(f)  	I will cooperate with the
Companies’ attorneys to assist in their efforts, especially on
matters I have been privy to, holding all privileged
attorney-client matters in strictest confidence unless ordered
to do otherwise by a court of competent jurisdiction or a
committee of the Congress of the United States or of a state
legislature. I understand that I will be reimbursed for travel,
food, lodging or similar out-of-pocket expense incurred at the
request of any of the Companies in discharging any of my
obligations under this agreement.

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	 	•  	I agree that any breach of the covenants contained in this agreement
would irreparably injure the Companies. Accordingly, the Companies
may, in addition to pursuing any other remedies that they may have in
law or in equity, obtain an injunction against me from any court having
jurisdiction over the matter, restraining any further violation of this
agreement by me.

Accepted and agreed to:

	 	 	 
	 

	 	 
	Employee Name

	 	Date

- 4 -

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