Exhibit 4.5
REYNOLDS AMERICAN INC.
2018 OMNIBUS INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of the Reynolds American Inc. 2018 Omnibus Incentive Compensation Plan is to attract to RAI and its Subsidiaries, motivate and retain exceptional talent, and to reward employees for performance and the successful execution of RAI’s business plans and strategies and those of the BAT group.
2. Definitions. As used in the Plan,
(za) “ADS” means an American Depositary Share representing a Share.
(a) “Affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person.
(b) “Aggregate Share Limit” means the aggregate maximum number of shares transferable under the Plan pursuant to Section 3(a)(i) of the Plan.
(c) “Annual Incentive Award” means a cash award granted pursuant to Section 8 of the Plan, where such award is based on Management Objectives and a Performance Period of one year or less.
(d) “Appreciation Right” means a right granted pursuant to Section 5 of the Plan.
(e) “Award” means any Annual Incentive Award, Option Right, Restricted Stock, Restricted Stock Unit, Appreciation Right, Performance Share, Performance Unit or Other Award granted pursuant to the terms of the Plan.
(f) “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of an Appreciation Right.
(g) “BAT” means, collectively, British American Tobacco p.l.c., a public limited company incorporated under the laws of England and Wales, and its Affiliates.
(h) “Beneficial Owner” or “Beneficial Ownership” has the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
(i) “Board” means the Board of Directors of BAT.
(j) “Change of Control” means the first to occur of the following events:
| (i) | a person obtaining Control of BAT as a result of making a general offer to acquire Shares; or |
| (ii) | a person, having obtained Control of BAT, making a general offer to acquire Shares; or |
| (iii) | a Court sanctioning a compromise or arrangement which, on becoming effective, would result in: |
| (1) | any person obtaining Control of BAT; |
| (2) | the undertaking, property and liabilities of BAT being transferred to another existing or new company; or |
| (3) | the undertaking, property and liabilities of BAT being divided among and transferred to two or more companies, whether existing or new; |
| (iv) | a competent authority approving a Cross-Border Merger, pursuant to which BAT shall cease to exist; |
| (v) | RAI is merged or consolidated or reorganized into or with another corporation or other legal person, or the shares of RAI are sold and, as a result of such merger, consolidation, reorganization or sale, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction is held in the aggregate by BAT and its Affiliates; or |
| (vi) | RAI sells or otherwise transfers all or substantially all of its assets to any other corporation or legal person, and less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by BAT and its Affiliates. |
(k) “Code” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, as such law and regulations may be amended from time to time.
(l) “Committee” means the Employee Share Schemes Committee of the Board (or its successor(s)), or any other committee of the Board designated by the Board to administer the Plan.
(m) “Company” means, collectively, RAI and its Subsidiaries.
(n) “Control” has the meaning given by Section 995 of the UK Income Tax Act 2007.
(na) “Cross-Border Merger” means a merger pursuant to the implementation in any relevant jurisdiction of Directive 2005/56/EC (on cross-border mergers of limited liability companies).
(o) “Date of Grant” means the date specified by the Board on which a grant of an Award will become effective (which date will not be earlier than the date on which the Board takes action with respect thereto).
(p) “Director” means a member of the Board.
(q) “EBIT” means earnings before interest and taxes.
(r) “EBITDA” means earnings before interest, taxes, depreciation and amortization.
(s) “EBT” means earnings before taxes.
(t) “Effective Date” means the date that the Plan is approved by the Board.
(u) “Evidence of Award” means an agreement, certificate, resolution, notification or other type or form of writing or other evidence approved by the Board that sets forth the terms and conditions of the Awards granted under the Plan. An Evidence of Award may be in an electronic medium, may be limited to notation on the books and records of BAT and, unless otherwise determined by the Board, need not be signed by a representative of BAT, RAI or a Participant.
(v) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.
(w) [intentionally blank]
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(x) “GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time.
(y) “Incentive Stock Options” means Option Rights that are intended to qualify as “incentive stock options” under Section 422 of the Code or any successor provision.
(z) “Management Objectives” means the measurable performance objective or objectives established pursuant to the Plan for Participants who have received grants of Annual Incentive Awards, Performance Shares or Performance Units or, when so determined by the Board, Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, dividend equivalents or Other Awards pursuant to the Plan. Management Objectives may be described in terms of BAT-wide objectives, RAI-wide objectives or objectives that are related to the performance of the individual Participant or of one or more of the Subsidiaries, divisions, departments, regions, functions or other organizational units within BAT, RAI or any Subsidiary. The Management Objectives may be made relative to the performance of other companies or subsidiaries, divisions, departments, regions, functions or other organizational units within such other companies, and may be made relative to an index or one or more of the performance objectives themselves. The Management Objectives applicable to any Performance-Based Award may be based on one or more, or a combination, of the following criteria and any other criteria determined by BAT in its discretion:
| (i) | Profits: (e.g., operating income, EBIT, EBT, net income, cash net income, earnings per share, residual or economic earnings or economic profit); |
| (ii) | Cash Flow: (e.g., EBITDA, free cash flow, free cash flow with or without specific capital expenditure targets or ranges, including or excluding divestments and/or acquisitions, total cash flow, cash flow in excess of cost of capital or residual cash flow or cash flow return on investment); |
| (iii) | Returns: (e.g., economic value added (EVA) or profits or cash flow returns on: sales, assets, invested capital, net capital employed or equity); |
| (iv) | Working Capital: (e.g., working capital divided by sales, days’ sales outstanding, days’ sales inventory or days’ sales in payables); |
| (v) | Profit Margins: (e.g., Profits divided by revenues or sales, gross margins divided by revenues or sales, or operating margin divided by revenues or sales); |
| (vi) | Liquidity Measures: (e.g., debt-to-capital ratios, debt-to-EBITDA ratios or total debt); |
| (vii) | Sales Growth, Margin Growth, Unit Growth, Cost Initiative and Stock Price Metrics: (e.g., revenues, revenue growth, sales, sales growth, gross margin, operating margin, shipment volume, unit growth, stock price appreciation, total return to shareholders, expense targets, productivity targets or ratios, sales and administrative expenses divided by sales, or sales and administrative expenses divided by profits); and |
| (viii) | Strategic Initiative Key Deliverable Metrics consisting of one or more of the following: product development or launch, strategic partnering, research and development, regulatory compliance or submissions, vitality or sustainability index, market share or penetration, geographic business expansion goals, customer satisfaction, employee satisfaction, management of employment practices and employee benefits, supervision of litigation and information technology, or goals relating to acquisitions or divestitures of subsidiaries, affiliates or joint ventures. |
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The Committee shall have the authority to make equitable adjustments to the Management Objectives (and to the related minimum, target and maximum levels of achievement or performance) in its discretion, including: in recognition of unusual or non-recurring events affecting BAT or any Subsidiary or Affiliate or the financial statements of BAT or any Subsidiary or Affiliate; in response to changes in applicable laws or regulations; to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles; or in recognition of any events or circumstances (including, without limitation, changes in the business, operations, corporate or capital structure of BAT, the Company or the manner in which either conducts its business) that render the Management Objectives unsuitable.
(aa) “Market Value per Share” means, as of any particular date, the closing price of an ADS as reported on The New York Stock Exchange or, if not listed on such exchange, on any other national securities exchange on which the ADSs are listed. If the ADSs are not traded as of any given date, the Market Value per Share means the closing price for the ADSs on the principal exchange on which the ADSs are traded for the immediately preceding date on which the ADSs were traded. If there is no regular public trading market for the ADSs, the Market Value per Share shall be the fair market value of a Share as determined in good faith by the Board. The Board is authorized to adopt another fair market value pricing method, provided such method is stated in the Evidence of Award and is in compliance with the fair market value pricing rules set forth in Section 409A of the Code.
(bb) “Optionee” means the optionee named in an Evidence of Award evidencing an outstanding Option Right.
(cc) “Option Price” means the purchase price payable on exercise of an Option Right.
(dd) “Option Right” means the right to purchase Shares upon exercise of an option granted pursuant to Section 4 of the Plan.
(ee) “Other Award” means an Award granted pursuant to Section 9 of the Plan.
(ff) “Participant” means a person who is selected by the Board to receive Awards under the Plan and who is at the time (or who has been, at any time in the previous 30 days) an employee of RAI or any one or more of its Subsidiaries. The term “Participant” shall also include any person selected by the Board who provides services to RAI or a Subsidiary, including any person providing services to any entity in which RAI or any of its Subsidiaries has an ownership interest of at least twenty (20) percent (provided that such person satisfies the Form S-8 definition of an “employee”).
(gg) “Performance Period” means, in respect of an Award, a period of time within which the Management Objectives relating to such Award are to be achieved.
(hh) “Performance Share” means an Award under the Plan equivalent to the right to receive one Share awarded pursuant to Section 8 of the Plan.
(ii) “Performance Unit” means a unit awarded pursuant to Section 8 of the Plan that is equivalent to $1.00 or such other value as is determined by the Board.
(jj) “Person” shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof and the rules thereunder, except that such term shall not include (i) BAT, RAI or any Subsidiary, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of BAT, RAI or any Subsidiary, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) an entity owned, directly or indirectly, by the shareholders of BAT in substantially the same proportions as their ownership of stock of BAT.
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(kk) “Plan” means this Reynolds American Inc. 2018 Omnibus Incentive Compensation Plan.
(ll) [intentionally blank]
(mm) “RAI” means Reynolds American Inc., a North Carolina corporation, and any successors thereto.
(nn) “Restricted Stock” means Shares granted pursuant to Section 6 of the Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers has expired.
(oo) “Restriction Period” means the period of time during which Restricted Stock or Restricted Stock Units may be subject to restrictions, as provided in Section 6 and Section 7 of the Plan.
(pp) “Restricted Stock Unit” means an Award made pursuant to Section 7 of the Plan.
(qq) “Secondary Committee” means one or more senior officers of RAI or BAT (who need not be members of the Board), acting as a committee established by the Board pursuant to Section 12(b) of the Plan, subject to such conditions and limitations as the Board shall prescribe.
(rr) “Shares” means the fully paid ordinary shares of BAT or, where the context requires, ADSs representing such shares, or any security into which such Shares may be changed by reason of any transaction or event of the type referred to in Section 11 of the Plan.
(ss) “Spread” means the excess of the Market Value per Share on the date when an Appreciation Right is exercised, or on the date when Option Rights are surrendered in payment of the Option Price of other Option Rights, over the Option Price or Base Price provided for in the related Option Right or Appreciation Right, respectively.
(tt) “Subsidiary” means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by BAT or RAI; except that, for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means any corporation in which at the time BAT or RAI owns or controls, directly or indirectly, more than 50 percent of the total combined voting power represented by all classes of stock issued by such corporation.
3. Shares Available Under the Plan.
| (a) | Maximum Shares Available Under Plan. |
| (i) | Subject to adjustment as provided in Section 11 of the Plan, the maximum number of Shares that may be transferred (A) upon the exercise of Option Rights or Appreciation Rights, (B) in payment or settlement of Restricted Stock and released from substantial risks of forfeiture thereof, (C) in payment or settlement of Restricted Stock Units, (D) in payment or settlement of Performance Shares or Performance Units that have been earned, (E) in payment or settlement of Other Awards, or (F) in payment of dividend equivalents paid with respect to Awards made under the Plan, in the aggregate, will not exceed 5,000,000 Shares (the “Aggregate Share Limit”). |
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| (ii) | Shares covered by an Award granted under the Plan shall not be counted against the Aggregate Share Limit unless and until they are actually delivered to a Participant and, therefore, the total number of Shares available under the Plan as of a given date shall not be reduced by any Shares relating to prior Awards that have expired or have been forfeited or cancelled, and to the extent of payment in cash of the benefit provided by any Award granted under the Plan, any Shares that were covered by that Award will be available for transfer hereunder. If, under the Plan, a Participant has elected to give up the right to receive compensation in exchange for Shares based on fair market value, such Shares will not count against the Aggregate Share Limit. |
| (iii) | Subject to adjustment as provided in Section 11 of the Plan, the aggregate number of Shares to be transferred by BAT (or as BAT may procure) upon the exercise of Incentive Stock Options will not exceed 5,000,000 Shares. |
4. Option Rights. The Board may, from time to time, authorize the granting to Participants of Option Rights upon such terms and conditions consistent with the following provisions as it may determine:
(a) Each grant will specify the number of Shares to which it pertains subject to the limitations set forth in Section 3 of the Plan.
(b) Each grant will specify an Option Price per Share, which (except with respect to awards under Section 20 of this Plan) may not be less than the Market Value per Share on the Date of Grant.
(c) Each grant will specify whether the Option Price will be payable (i) in cash or by check acceptable to BAT or by wire transfer of immediately available funds, (ii) by withholding by BAT from the Shares otherwise deliverable to the Optionee upon the exercise of such Option, a number of Shares having a value at the time of exercise equal to the total Option Price, (iii) by a combination of such methods of payment, or (iv) by such other methods as may be approved by the Board.
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(d) To the extent permitted by law, any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on a date satisfactory to BAT of some or all of the shares to which such exercise relates.
(e) Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised.
(f) Each grant will specify the period or periods of continuous service by the Optionee with BAT, RAI or any Subsidiary that is necessary before the Option Rights or installments thereof will become exercisable.
(g) Any grant of Option Rights may specify Management Objectives that must be achieved as a condition to the exercise of such rights.
(h) Option Rights granted under the Plan may be (i) options, including, without limitation, Incentive Stock Options, (ii) options that are not intended to qualify as Incentive Stock Options, or (iii) combinations of the foregoing. Notwithstanding the foregoing, Incentive Stock Options may only be granted to Participants who meet the definition of “employees” under Section 3401(c) of the Code and may only be granted to the extent BAT’s shareholders have approved the Plan.
(i) The Board may substitute, without receiving Participant permission, Appreciation Rights payable only in Shares (or Appreciation Rights payable in Shares or cash, or a combination of both, at the Board’s discretion) for outstanding Option Rights; provided, however, that the terms of the substituted Appreciation Rights are substantially the same as the terms for the Option Rights at the date of substitution and the difference between the Market Value per Share of the underlying Shares and the Base Price of the Appreciation Rights is equivalent to the difference between the Market Value per Share of the underlying Shares and the Option Price of the Option Rights; provided further that such substitution will not result in additional accounting expense for BAT or RAI.
(j) Option Rights granted under this Plan may not provide for any dividends or dividend equivalents thereon.
(k) No Option Right will be exercisable more than 10 years from the Date of Grant.
5. Appreciation Rights. The Board may, from time to time, authorize the granting to any Participant of Appreciation Rights upon such terms and conditions consistent with the following provisions as it may determine:
(a) An Appreciation Right will be a right of the Participant to receive from BAT an amount determined by the Board, which will be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise.
(b) Each grant will specify the Base Price, which (except with respect to awards under Section 20 of this Plan) may not be less than the Market Value per Share on the Date of Grant.
(c) Any grant may specify that the amount payable on exercise of an Appreciation Right may be paid by BAT in cash, in Shares or in any combination thereof and may either grant to the Participant or retain in the Board the right to elect among those alternatives.
(d) Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Board at the Date of Grant.
(e) Any grant may specify waiting periods before exercise and permissible exercise dates or periods.
(f) Each grant will specify the period or periods of continuous service by the Participant with BAT, RAI or any Subsidiary that is necessary before such Appreciation Right or installments thereof will become exercisable.
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(g) Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such Appreciation Rights.
(h) Successive grants may be made to the same Participant regardless of whether any Appreciation Rights previously granted to the Participant remain unexercised.
(i) Appreciation Rights granted under this Plan may not provide for any dividends or dividend equivalents thereon.
(j) No Appreciation Right granted under the Plan may be exercised more than 10 years from the Date of Grant.
6. Restricted Stock. The Board may, from time to time authorize the granting of Restricted Stock to Participants upon such terms and conditions consistent with the following provisions as it may determine:
(a) Each such grant will constitute an immediate transfer of the ownership of Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but such rights shall be subject to such restrictions and the fulfillment of such conditions (which may include the achievement of Management Objectives) during the Restriction Period as the Board may determine.
(b) Each such grant may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.
(c) Each such grant will provide that the Restricted Stock covered by such grant that vests upon the passage of time will be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period to be determined by the Board at the Date of Grant or until achievement of Management Objectives referred to in subparagraph (e) below.
(d) Each such grant will provide that during, and may provide that after, the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Stock will be prohibited or restricted in the manner and to the extent prescribed by the Board at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in BAT or provisions subjecting the Restricted Stock to a continuing substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Stock may specify Management Objectives that, if achieved, will result in termination or early termination of the restrictions applicable to such Restricted Stock.
(f) Notwithstanding anything to the contrary contained in the Plan, any grant of Restricted Stock may provide for the earlier termination of restrictions on such Restricted Stock in the event of the retirement, death or disability, or other termination of employment of a Participant, or a Change of Control.
(g) Any such grant of Restricted Stock may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and reinvested in additional shares of Restricted Stock or paid in cash, which may be subject to the same restrictions as the underlying Award; provided, however, that dividends or other distributions on Restricted Stock with restrictions that lapse as a result of the achievement of Management Objectives will be deferred until and paid contingent upon the achievement of the applicable Management Objectives.
(h) Unless otherwise directed by the Board, (i) all certificates representing shares of Restricted Stock will be held in custody by RAI until all restrictions thereon will have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such Shares, or (ii) all shares of Restricted Stock will be held at RAI’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such shares of Restricted Stock.
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7. Restricted Stock Units. The Board may, from time to time authorize the granting of Restricted Stock Units to Participants upon such terms and conditions consistent with the following provisions as it may determine:
(a) Each such grant will constitute the agreement by BAT to deliver (or procure the delivery of) Shares, cash or a combination thereof to the Participant in the future in consideration of the performance of services, but subject to such restrictions and the fulfillment of such conditions (which may include the achievement of Management Objectives) during the Restriction Period as the Board may specify.
(b) Each such grant may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.
(c) Notwithstanding anything to the contrary contained in the Plan, any grant of Restricted Stock Units may provide for the earlier lapse or modification of the Restriction Period in the event of the retirement, death or disability, or other termination of employment of a Participant, or a Change of Control; provided that, notwithstanding the foregoing, if any amount payable in respect of such Restricted Stock Units constitutes non-qualified deferred compensation within the meaning of Section 409A of the Code and the Change of Control does not qualify as an event described in Section 409A(a)(2)(A)(v) of the Code, then such amount may become vested as of the Change of Control, but shall not be paid until the earliest time permitted under Section 409A of the Code.
(d) During the Restriction Period, the Participant will have no right to transfer any rights under his or her Award and will have no rights of ownership in the Shares deliverable upon payment of the Restricted Stock Units and will have no right to vote them, but the Board may at the Date of Grant, authorize the payment of dividend equivalents on such Restricted Stock Units on a current, deferred or contingent basis, either in cash, additional Restricted Stock Units or in additional Shares; provided, however, that dividend equivalents or other distributions on Shares underlying Restricted Stock Units with restrictions that lapse as a result of the achievement of Management Objectives will be deferred until and paid contingent upon the achievement of the applicable Management Objectives.
(e) Each grant of Restricted Stock Units will specify the time and manner of payment of the Restricted Stock Units that have been earned.
8. Annual Incentive Awards, Performance Shares and Performance Units. The Board may, from time to time, authorize the granting of Annual Incentive Awards, Performance Shares and Performance Units that will become payable to a Participant upon achievement of specified Management Objectives during the Performance Period, upon such terms and conditions consistent with the following provisions as it may determine:
(a) Each grant will specify either the number of, or amount payable with respect to, Annual Incentive Awards, Performance Shares or Performance Units to which it pertains, which number or amount payable may be subject to adjustment to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Annual Incentive Award, Performance Share or Performance Unit will be such period of time (not less than one year in the case of each Performance Share and Performance Unit), as will be determined by the Board, which may be subject to earlier lapse or other modification in the event of the retirement, death or disability, or other termination of employment of a Participant, or a Change of Control. In such event, the Evidence of Award will specify the time and terms of delivery; provided that, notwithstanding the foregoing, if any amount payable in respect of any such Award constitutes non-qualified deferred compensation within the meaning of Section 409A of the Code and the Change of Control does not qualify as an event described in Section 409A(a)(2)(A)(v) of the Code, then such amount may become vested as of the Change of Control, but shall not be paid until the earliest time permitted under Section 409A of the Code.
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(c) Any grant of Annual Incentive Awards, Performance Shares or Performance Units will specify Management Objectives which, if achieved, will result in payment or early payment of the Award and may set forth a formula for determining the number of, or amount payable with respect to, Annual Incentive Awards, Performance Shares or Performance Units that will be earned if performance is at or above the minimum or threshold level or levels.
(d) Each grant will specify the time and manner of payment of Annual Incentive Awards, Performance Shares or Performance Units that have been earned. Any grant of Performance Shares or Performance Units may specify that the amount payable with respect thereto may be paid by BAT in cash, in Shares or in any combination thereof and may either grant to the Participant or retain in the Board the right to elect among those alternatives.
(e) Any grant of Annual Incentive Awards, Performance Shares or Performance Units may specify that the amount payable or the number of Shares issued with respect thereto may not exceed maximums specified by the Board at the Date of Grant.
(f) The Board may at the Date of Grant of Performance Shares, provide for the payment of dividend equivalents to the holder thereof either in cash or in additional Shares, subject in all cases to deferral and payment on a contingent basis based on the Participant’s earning of the Performance Shares with respect to which such dividend equivalents are paid.
9. Other Awards.
(a) The Board may, subject to limitations under applicable law, grant to any Participant such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of such Shares, including, without limitation, awards consisting of securities or other rights convertible or exchangeable into Shares, purchase rights for Shares, Awards with value and payment contingent upon performance of BAT, the Company or specified Subsidiaries, affiliates or other business units thereof or any other factors designated by the Board, and Awards valued by reference to the book value of Shares or the value of securities of, or the performance of specified Subsidiaries or affiliates or other business units of BAT and/or RAI. The Board shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 9 shall be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, cash, Shares, Other Awards, notes or other property, as the Board shall determine.
(b) Except as otherwise provided in Section 15(b), cash awards, as independent Awards or as an element of or supplement to any other Award granted under the Plan, may also be granted pursuant to this Section 9.
(c) The Board may grant Shares as a bonus, or may grant other Awards in lieu of obligations of RAI or a Subsidiary to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Board in a manner that complies with Section 409A of the Code.
10. Transferability.
(a) Except as otherwise determined by the Board, no Awards granted under the Plan shall be transferable by the Participant except by will or the laws of descent and distribution, and in no event shall any such Award granted under the Plan be transferred for value. Except as otherwise determined by the Board, Option Rights and Appreciation Rights will be exercisable during the Participant’s lifetime only by him or her or, in the event of the Participant’s legal incapacity to do so, by his or her guardian or legal representative acting on behalf of the Participant in a fiduciary capacity under state law and/or court supervision.
(b) The Board may specify at the Date of Grant that part or all of the Shares that are to be transferred by the BAT (or as BAT may procure) upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Restriction Period applicable to Restricted Stock or Restricted Stock Units or upon payment under any grant of Performance Shares, Performance Units or Other Awards will be subject to further restrictions on transfer.
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11. Adjustments. The Board shall make or provide for such adjustments in the numbers of Shares covered by outstanding Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units granted hereunder and, if applicable, in the number of Shares covered by Other Awards, in the Option Price and Base Price provided in outstanding Option Rights or Appreciation Rights, and in the kind of Shares covered thereby, as the Board, in its sole discretion, exercised in good faith, may determine is equitably required to prevent dilution or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of BAT, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event or in the event of a Change of Control, the Board, in its discretion, may provide in substitution for any or all outstanding Awards under the Plan such alternative consideration (including cash), if any, as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all Awards so replaced in a manner that complies with Section 409A of the Code. In addition, for each Option Right or Appreciation Right with an Option Price or Base Price greater than the consideration offered in connection with any such transaction or event or Change of Control, the Board may in its sole discretion elect to cancel such Option Right or Appreciation Right without any payment to the person holding such Option Right or Appreciation Right. The Board shall also make or provide for such adjustments in the numbers of shares specified in Section 3 of the Plan as the Board in its sole discretion, exercised in good faith, may determine is appropriate to reflect any transaction or event described in this Section 11; provided, however, that any such adjustment to the number specified in Section 3(a)(iii) will be made only if and to the extent that such adjustment would not cause any Option Right intended to qualify as an Incentive Stock Option to fail to so qualify.
12. Administration of the Plan.
(a) The Plan will be administered by the Board, which may from time to time delegate all or any part of its authority under the Plan to the Committee. To the extent of any such delegation, references in the Plan to the Board will be deemed to be references to such Committee. A majority of the Committee will constitute a quorum, and the action of the members of the Committee present at any meeting at which a quorum is present, or acts unanimously approved in writing, will be the acts of the Committee.
(b) To the extent permitted by applicable law, including any rule of the New York Stock Exchange, the Board or Committee may delegate its duties under the Plan to a Secondary Committee, subject to such conditions and limitations as the Board or Committee shall prescribe; provided, however, that: (i) no Secondary Committee may grant an Award to a Participant who is subject to Section 16 of the Exchange Act; (ii) no Secondary Committee may grant an Award to a member of such Secondary Committee; (iii) the resolution providing for such delegation sets forth the total number of Shares and/or the pool dollar value of the Awards such Secondary Committee may grant; and (iv) the Secondary Committee shall report periodically to the Board or the Committee, as the case may be, regarding the nature and scope of the Awards granted pursuant to the authority delegated. To the extent of any such delegation, references or deemed references in the Plan to the Committee will be deemed to be references to such Secondary Committee. A majority of the Secondary Committee will constitute a quorum, and the action of the members of the Secondary Committee present at any meeting at which a quorum is present, or acts unanimously approved in writing, will be the acts of the Secondary Committee.
(c) The Board shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Evidence of Award or other agreement or document ancillary to or in connection with this Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Board may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in an Evidence of Award, granting Awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, construing any ambiguous provision of the Plan or any Evidence of Award, and, subject to Sections 15 and 18, adopting modifications and amendments to this Plan or any Evidence of Award, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which BAT, RAI, their Affiliates, and/or Subsidiaries operate. The grant of any Award that specifies Management Objectives that must be achieved before such Award can be earned or paid will specify that, before such Award will be earned and paid, the Committee must certify that the Management Objectives have been satisfied.
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(d) The interpretation and construction by the Board of any provision of this Plan or of any Evidence of Award or other agreement or document ancillary to or in connection with this Plan and any determination by the Board pursuant to any provision of the Plan or of any such Evidence of Award or other agreement or document ancillary to or in connection with this Plan will be final and conclusive. No member of the Board will be liable for any such action or determination made in good faith.
13. Non U.S. Participants. In order to facilitate the making of any grant or combination of grants under the Plan, the Board may provide for such special terms for Awards to Participants who are foreign nationals or who are employed by RAI or any Subsidiary outside of the United States of America, as the Board may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Board may approve such supplements to or amendments, restatements or alternative versions of the Plan (including without limitation, sub-plans) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of the Plan as in effect for any other purpose, and the Secretary or other appropriate officer of BAT may certify any such document as having been approved and adopted in the same manner as the Plan. No such special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of the Plan as then in effect unless the Plan could have been amended to eliminate such inconsistency without approval by the shareholders of BAT.
14. Withholding Taxes. To the extent that the Company or any Affiliate is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under the Plan, and the amounts available to the Company or any Affiliate for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Board for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Board) may include relinquishment of a portion of such benefit. If a Participant’s benefit is to be received in the form of Shares, and such Participant fails to make arrangements for the payment of tax, then, unless otherwise determined by the Board, BAT shall withhold such Shares having a value that shall not exceed the statutory minimum amount required to be withheld. Notwithstanding the foregoing, when a Participant is required to pay the Company or any Affiliate an amount required to be withheld under applicable income and employment tax laws, the Participant may elect, unless otherwise determined by the Board, or the Board may require the Participant, to satisfy the obligation, in whole or in part, by electing to have withheld, from the Shares required to be delivered to the Participant, Shares having a value equal to the amount required to be withheld. The Shares used for tax withholding will be valued at an amount equal to the Market Value per Share of such Shares on the date the benefit is to be included in Participant’s income. In no event will the Market Value per Share of the Shares to be withheld pursuant to this Section 14 to satisfy applicable withholding taxes in connection with the benefit exceed the minimum amount of taxes required to be withheld. Participants shall also make such arrangements as the Board may require for the payment of any withholding tax obligation that may arise in connection with the disposition of Shares acquired upon the exercise of Option Rights.
15. Amendments, Etc.
(a) The Board may at any time and from time to time amend the Plan in whole or in part; provided, however, that if an amendment to the Plan must be approved by the shareholders of BAT in order to comply with applicable law or the rules of the New York Stock Exchange or, if the Shares are not traded on the New York Stock Exchange, the principal national securities exchange upon which the Shares are traded or quoted, then, such amendment will be subject to shareholder approval and will not be effective unless and until such approval has been obtained.
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(b) Except in connection with a corporate transaction or event described in Section 11 of the Plan, the terms of outstanding Awards may not be amended to reduce the Option Price of outstanding Option Rights or the Base Price of outstanding Appreciation Rights, or cancel outstanding Option Rights or Appreciation Rights in exchange for cash, other Awards, or Option Rights or Appreciation Rights with an Option Price or Base Price, as applicable, that is less than the Option Price of the original Option Rights or Base Price of the original Appreciation Rights, as applicable.
(c) If permitted by Section 409A of the Code, but subject to Section 15(d), in case of termination of employment by reason of death, disability or normal or early retirement, or in the case of unforeseeable emergency or other special circumstances, of a Participant who holds an Option Right or Appreciation Right not immediately exercisable in full, or any Shares of Restricted Stock or any Restricted Stock Units as to which the Restriction Period has not been completed, or any Annual Incentive Awards, Performance Shares or Performance Units which have not been fully earned, or any Other Awards subject to any vesting schedule or transfer restriction, or who holds Shares subject to any transfer restriction imposed pursuant to Section 10(b) of the Plan, or in the event of a Change of Control, the Board may, in its sole discretion, accelerate the time at which such Option Right, Appreciation Right or Other Award may be exercised or the time when such Restriction Period will end or the time at which such Annual Incentive Awards, Performance Shares or Performance Units will be deemed to have been fully earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such Award.
(d) Subject to Section 15(b) of the Plan, the Board may amend the terms of any award theretofore granted under the Plan prospectively or retroactively. Subject to Section 11 of the Plan, no such amendment shall impair the rights of any Participant without his or her consent, except as necessary to comply with changes in law or accounting rules applicable to BAT and/or RAI. The Board may, in its discretion, terminate the Plan at any time. Termination of the Plan will not affect the rights of Participants or their successors under any Awards outstanding hereunder on the date of termination.
16. Compliance with Section 409A of the Code.
(a) To the extent applicable, it is intended that the Plan and any grants made hereunder comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Participants. The Plan and any grants made hereunder shall be administered in a manner consistent with this intent. Any reference in the Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.
(b) Neither a Participant nor any of a Participant’s creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under the Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under the Plan and grants hereunder may not be reduced by, or offset against, any amount owing by a Participant to the Company or any of its Subsidiaries.
(c) If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant shall be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Board from time to time) and (ii) the Board makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then BAT shall not pay such amount on the otherwise scheduled payment date but shall instead pay it, without interest, on the tenth business day of the seventh month after such separation from service.
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(d) Notwithstanding any provision of the Plan and grants hereunder to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, BAT reserves the right to make amendments to the Plan and grants hereunder as the Board deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any case, a Participant shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a Participant or for a Participant’s account in connection with the Plan and grants hereunder (including any taxes and penalties under Section 409A of the Code), and neither BAT, the Company nor any of their Affiliates shall have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.
17. Governing Law. The Plan and all grants and Awards and actions taken thereunder shall be governed by and construed in accordance with the internal substantive laws of the State of North Carolina, without regard to principles of conflicts of laws.
18. Effective Date/Termination. The Reynolds American Inc. 2018 Omnibus Incentive Compensation Plan first became effective on February 20, 2018, the date it was approved by the Board. This Plan will be effective as of the Effective Date. No grant will be made under the Plan more than 10 years after the Effective Date, but all grants made on or prior to such date will continue in effect thereafter subject to the terms of the Evidence of Award conveying such grants and of the Plan.
19. Miscellaneous.
(a) Each grant of an Award will be evidenced by an Evidence of Award and will contain such terms and provisions, consistent with the Plan, as the Board may approve.
(b) The Board may provide for the elimination of fractional Shares or for the settlement of fractional Shares in cash.
(c) The Plan will not confer upon any Participant any right with respect to continuance of employment or other service with BAT or any Affiliate or RAI or any Subsidiary, nor will it interfere in any way with any right BAT or any Affiliate or RAI or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time.
(d) No person shall have any claim to be granted any Award under the Plan. Without limiting the generality of the foregoing, the fact that a target Award is established for the job value or level for an employee shall not entitle any employee to an Award hereunder. Except as provided specifically herein, a Participant or a transferee of an Award shall have no rights as a shareholder with respect to any Shares covered by any Award until the date as of which he or she is actually recorded as the holder of such Shares upon the stock records of BAT.
(e) Determinations by the Board or the Committee under the Plan relating to the form, amount and terms and conditions of grants and Awards need not be uniform, and may be made selectively among persons who receive or are eligible to receive grants and Awards under the Plan, whether or not such persons are similarly situated.
(f) Except with respect to Section 19(h), to the extent that any provision of the Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision will be null and void with respect to such Option Right. Such provision, however, will remain in effect for other Option Rights and there will be no further effect on any provision of the Plan.
(g) No Award under the Plan may be exercised by the holder thereof if such exercise, and the receipt of cash or stock thereunder, would be, in the opinion of counsel selected by the Board, contrary to law or the regulations of any duly constituted authority having jurisdiction over the Plan.
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(h) Absence or leave approved by a duly constituted officer of BAT, RAI or any of their Subsidiaries shall not be considered interruption or termination of service of any employee for any purposes of the Plan or Awards granted hereunder.
(i) The Board may condition the grant of any Award or combination of Awards authorized under the Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by BAT, RAI or a Subsidiary to the Participant.
(j) If any provision of the Plan is or becomes invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Board, such provision shall be construed or deemed amended or limited in scope to conform to applicable laws or, in the discretion of the Board, it shall be stricken and the remainder of the Plan shall remain in full force and effect.
(k) Any Evidence of Award may: (i) provide for recoupment by the Company of all or any portion of an Award upon such terms and conditions as the Board or Committee may specify in such Evidence of Award; or (ii) include restrictive covenants, including, without limitation, non-competition, non-disparagement and confidentiality conditions or restrictions, that the Participant must comply with during employment by BAT, RAI or any of their Subsidiaries and/or within a specified period after termination as a condition to the Participant’s receipt or retention of all or any portion of an Award. This Section 19(k) shall not be the Company’s exclusive remedy with respect to such matters. This Section 19(k) shall not apply after a Change of Control, unless otherwise specifically provided in the Evidence of Award.
(l) The delivery to the Participant of ADSs shall satisfy the obligations under this Plan to deliver Shares (and references to Shares shall be construed accordingly). BAT may procure the delivery of ADSs to the Participant under such arrangements as the Board may determine to be appropriate. Delivery of ADSs to the Participant through any such arrangements shall satisfy in full the obligations of BAT to deliver Shares and/or ADSs.
(m) No Shares may be issued nor Shares transferred from treasury pursuant to the Plan.
20. Stock-Based Awards in Substitution for Option Rights or Awards Granted by Other Company. Notwithstanding anything in this Plan to the contrary:
(a) Awards may be granted under this Plan in substitution for or in conversion of, or in connection with an assumption of, stock options, stock appreciation rights, restricted stock, restricted stock units or other stock or stock-based awards held by grantees of an entity engaging in a corporate acquisition or merger transaction with BAT, RAI or any Subsidiary. Any conversion, substitution or assumption will be effective as of the close of the merger or acquisition, and, to the extent applicable, will be conducted in a manner that complies with Section 409A of the Code.
(b) In the event that a company acquired by BAT, RAI or any Subsidiary or with which BAT, RAI or any Subsidiary merges has shares available under a pre-existing plan previously approved by stockholders and not adopted in contemplation of such acquisition or merger, the shares available for grant pursuant to the terms of such plan (as adjusted, to the extent appropriate, to reflect such acquisition or merger) may be used for Awards made after such acquisition or merger under the Plan; provided, however, that Awards using such available shares may not be made after the date awards or grants could have been made under the terms of the pre-existing plan absent the acquisition or merger, and may only be made to individuals who were not employees or directors of BAT, RAI or any Subsidiary prior to such acquisition or merger. The Awards so granted may reflect the original terms of the awards being assumed or substituted or converted for and need not comply with other specific terms of this Plan, and may account for Shares substituted for the securities covered by the original awards and the number of shares subject to the original awards, as well as any exercise or purchase prices applicable to the original awards, adjusted to account for differences in stock prices in connection with the transaction.
(c) Any Shares that are transferred by, or that are subject to any Awards that are granted by, or become obligations of, BAT under Sections 20(a) or 20(b) above will not reduce the Aggregate Share Limit available for transfer under this Plan or otherwise count against the limit contained in Section 3(a)(iii) of this Plan. In addition, no Shares that are transferred by, or that are subject to any Awards that are granted by, or become obligations of, BAT under Sections 20(a) or 20(b) above will be added to the Aggregate Share Limit contained in Section 3 of this Plan.
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