Exhibit 10.1
DIRECTOR AND OFFICER
INDEMNIFICATION AGREEMENT
This Director and Officer
Indemnification Agreement, dated as of July 30, 2004, as
amended on February 2, 2005 (this “
Agreement ”), is made by and between Reynolds
American Inc., a North Carolina corporation (the “
Company ”), and the person whose name is set
forth on the signature page hereto under the caption
“Indemnitee” (“ Indemnitee
”).
RECITALS :
A. Section 55-8-01 of the
North Carolina Business Corporation Act (“
NCBCA ”) provides that the business and affairs
of a North Carolina corporation shall be managed by or under the
direction of its board of directors.
B. Pursuant to
Section 55-8-41 of the NCBCA, significant authority with
respect to the management of the Company may be delegated to the
officers of the Company.
C. By virtue of the managerial
prerogatives vested in the directors and officers of a North
Carolina corporation, directors and officers act as fiduciaries of
the corporation and its shareholders.
D. It is critically important to
the Company and its shareholders that the Company be able to
attract and retain the most capable persons reasonably available to
serve as directors and officers of the Company.
E. In recognition of the need
for corporations to be able to induce capable and responsible
persons to accept positions in corporate management,
Sections 55-8-50, 55-8-52 and 55-8-57 of the NCBCA authorizes
(and, in some instances, requires) corporations to indemnify their
directors and officers, and further authorizes corporations to
purchase and maintain insurance for the benefit of their directors,
officers, employees and agents.
F. The number of lawsuits
challenging the judgment and actions of directors and officers of
North Carolina corporations, the costs of defending those lawsuits
and the threat to directors’ and officers’ personal
assets have all materially increased over the past several years,
chilling the willingness of capable persons to undertake the
responsibilities imposed on corporate directors and officers.
G. Recent federal legislation
and rules adopted by the Securities and Exchange Commission and the
national securities exchanges have imposed additional disclosure
and corporate governance obligations on directors and officers of
public companies and have exposed such directors and officers to
new and substantially broadened civil liabilities.
H. These legislative and
regulatory initiatives have also exposed directors and officers of
public companies to a greater risk of criminal proceedings, with
attendant defense costs and potential criminal fines and
penalties.
I. Under North Carolina law, a
director’s or officer’s right to be reimbursed for the
costs of defense of certain actions, whether such claims are
asserted under state or federal law, does not depend upon the
merits of the claims asserted against the director or officer and
is separate and distinct from any right to indemnification the
director or officer may be able to establish, and indemnification
of the director and officer against criminal fines and penalties is
permitted if the director or officer has satisfied the applicable
standard of conduct.
J. Indemnitee is or will be a
director or officer of the Company and possibly one or more of its
subsidiaries and his/her willingness to serve in such capacity is
predicated, in substantial part, upon the Company’s
willingness to indemnify him/her in accordance with the principles
reflected above, to the fullest extent permitted by the laws of the
State of North Carolina.
K. Therefore, in recognition of
the need to provide Indemnitee with the maximum legally permitted
protection against personal liability, in order to procure
Indemnitee’s continued service as a director or officer of
the Company and to enhance Indemnitee’s ability to serve the
Company in an effective manner, and in order to provide such
protection pursuant to express contract rights (intended to be
enforceable irrespective of, among other things, any amendment to
the Company’s articles of incorporation or bylaws
(collectively, the “ Constituent Documents
”), any change in the composition of the Company’s
Board of Directors (the “ Board ”), or
any Change in Control or Business Combination), the Company wishes
to provide in this Agreement for the indemnification of and the
advancement of Expenses to Indemnitee as set forth in this
Agreement and for the continued coverage of Indemnitee under the
Company’s directors’ and officers’ liability
insurance policies.
L. In light of the
considerations referred to in the preceding recitals, it is the
Company’s intention and desire that the provisions of this
Agreement be construed liberally to provide protections to the
Indemnitee to the fullest extent now available by law or hereafter
not prohibited by law as set forth in this Agreement.
NOW, THEREFORE, the parties hereby
agree as follows:
1. Certain Definitions.
In addition to terms defined elsewhere herein, the following terms
have the following meanings when used in this Agreement with
initial capital letters:
(a)
“Change in Control” means the occurrence
after July 30, 2004 of any of the following events:
(i) the
acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
“Person” ) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act)
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( “Beneficial
Ownership” ) of 30% or more of the combined voting
power of the then-outstanding Voting Shares of the Company;
provided , however , that:
(A) for
purposes of this Section 1(a)(i), the following acquisitions
(“ Exempt Transactions ”) will not
constitute a Change in Control: (1) any acquisition of Voting
Shares of the Company directly from the Company that is approved by
at least 3/4 of the members of the Board (rounded up to the nearest
whole number) then in office; (2) any acquisition of Voting
Shares of the Company by the Company or any Subsidiary;
(3) any acquisition of Voting Shares of the Company by any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any Subsidiary; (4) any acquisition of Voting
Shares of the Company by any Person pursuant to a Business
Combination that complies with clauses (A), (B) and
(C) of Section 1(a)(iii) below, and (5) any
acquisition of Voting Shares of the Company that is expressly
permitted pursuant to the Governance Agreement, dated as of
July 30, 2004, by and among British American Tobacco p.l.c.,
Brown & Williamson Tobacco Corporation and the Company (the
“ Governance Agreement ”);
(B) if
any Person acquires Beneficial Ownership of 30% or more of the
combined voting power of the then-outstanding Voting Shares of the
Company as a result of a transaction described in clause (A)(1) of
Section 1(a)(i) and such Person thereafter becomes the
Beneficial Owner of any additional shares of Voting Shares of the
Company representing 1% or more of the combined voting power of the
then-outstanding Voting Shares of the Company, other than in an
Exempt Transaction or other than as a result of a stock dividend,
stock split or similar transaction effected by the Company in which
all holders of Voting Shares are treated equally, such subsequent
acquisition shall be deemed to constitute a Change in Control;
(C) a
Change in Control will not be deemed to have occurred if a Person
acquires Beneficial Ownership of 30% or more of the Voting Shares
of the Company as a result of a reduction in the number of shares
of Voting Shares of the Company outstanding unless and until such
Person thereafter becomes the Beneficial Owner of any additional
shares of Voting Shares of the Company representing 1% or more of
the combined voting power of the then-outstanding Voting Shares of
the Company, other than in an Exempt Transaction or other than as a
result of a stock dividend, stock split or similar transaction
effected by the Company in which all holders of Voting Shares are
treated equally; and
(D) if
at least 3/4 of the members of the Board (rounded up to the nearest
whole number) then in office determines in good faith that a Person
has acquired Beneficial Ownership of 30% or more of the combined
voting power of the then-outstanding Voting Shares of the Company
(or an additional 1% or more of the combined voting power of the
then-outstanding Voting Shares of the Company in the circumstances
described in Section 1(a)(i)(B) or 1(a)(i)(C)) inadvertently,
and (1) such Person divests as promptly as practicable a sufficient
number of shares so that such Person Beneficially Owns less than
30% of the combined voting power of the then-outstanding Voting
Shares of the
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Company (or such additional
1% or more of the combined voting power of the then-outstanding
Voting Shares of the Company in the circumstances described in
Section 1(a)(i)(B) or 1(a)(i)(C)) and (2) during the
period beginning 365 days prior to such acquisition of shares,
such Person shall not have proposed any individual as a nominee to
be elected as a Director (other than in accordance with the terms
of any agreement between the Company and such Person that was
entered into in connection with a transaction that had been
approved by the Board in the manner described in clause (A)(1) of
Section 1(a)(i)), then no Change in Control shall have
occurred as a result of such Person’s acquisition; or
(ii) the
Incumbent Directors cease to constitute a majority of the Directors
then in office; or
(iii) the
consummation of a reorganization, merger or consolidation, or sale
or other disposition of all or substantially all of the assets of
the Company or the acquisition of assets of another corporation, or
other transaction (each, a “Business
Combination” ), unless, in each case, immediately
following such Business Combination (A) all or substantially
all of the Persons who were the Beneficial Owners of Voting Shares
of the Company immediately prior to such Business Combination
Beneficially Own, directly or indirectly, more than 55% of the
combined voting power of the then-outstanding shares of Voting
Shares of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more
subsidiaries), (B) no Person (other than the Company, such
entity resulting from such Business Combination or any employee
benefit plan (or related trust) sponsored or maintained by the
Company, any Subsidiary, any Person who acquired Beneficial
Ownership of 30% or more of the combined voting power of the
then-outstanding Voting Shares of the Company prior to the
consummation of such Business Combination, or such entity resulting
from such Business Combination) Beneficially Owns 30% or more of
the combined voting power of the then outstanding shares of Voting
Shares of the entity resulting from such Business Combination, and
(C) a majority of the members of the Board of Directors of the
entity resulting from such Business Combination were Incumbent
Directors at the time of the execution of the initial agreement or
of the action of the Board providing for such Business
Combination;
(iv) approval
by the shareholders of the Company of a complete liquidation or
dissolution of the Company, except pursuant to a Business
Combination that complies with clauses (A), (B) and
(C) of Section 1(a)(iii); or
(v) there
occurs any other event of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Exchange Act,
whether or not the Company is then subject to such reporting
requirement.
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(vi) For
purposes of this Section 1(a) and as used elsewhere in this
Agreement, the following terms will have the following meanings
when used herein with initial capital letters:
(A) “
Exchange Act ” means the Securities Exchange
Act of 1934, as amended.
(B)
“Incumbent Directors” means the
individuals who, as of July 30, 2004, are directors of the
Company (or who have been designated as directors in accordance
with Section 1.09 of the Business Combination Agreement, dated
as of October 27, 2003, between R.J. Reynolds Tobacco
Holdings, Inc. and Brown & Williamson Tobacco Corporation, as
amended), together with any individual becoming a director
subsequent to July 30, 2004 (including other Incumbent
Directors who first became directors after July 30, 2004)
whose election, nomination for election by the Company’s
shareholders or appointment was (i) approved by a vote of at
least two-thirds of the then Incumbent Directors on the Board or a
duly authorized directorate committee (either by a specific vote or
by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to
such nomination) or (ii) made in accordance with Section 2.01
of the Governance Agreement; provided , however ,
that an individual will not be an Incumbent Director if such
individual’s election or appointment to the Board occurs as a
result of an actual or threatened election contest (as described in
Rule 14a-12(c) of the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board.
(C)
“Subsidiary” means an entity in which the
Company directly or indirectly Beneficially Owns 50% or more of the
combined voting power of the then-outstanding Voting Shares.
(D)
“Voting Shares” means securities entitled
to vote generally in the election of directors (or similar
governing bodies).
(b)
“ Claim ” means
(i) any threatened, asserted, pending or completed claim,
demand, action, suit or proceeding, whether civil, criminal,
administrative, arbitrative, investigative or other, and whether
made pursuant to federal, state or other law, and (ii) any
inquiry or investigation, whether threatened, asserted, pending or
completed, by the Company or any other Person, including without
limitation any federal, state or other governmental entity, that
Indemnitee determines might lead to the institution of any such
claim, demand, action, suit or proceeding. For the avoidance of
doubt, the Company intends indemnity to be provided hereunder in
respect of acts or failure to act prior to, on or after
July 30, 2004 and to apply to any act or failure to act, or
claim related thereto, in whole or in part prior to, on or after
July 30, 2004.
(c)
“Controlled Affiliate” means any
corporation, limited liability company, partnership, joint venture,
trust or other entity or enterprise, whether or not for profit,
that is
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directly or indirectly
controlled by the Company. For purposes of this definition,
“control” means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or
policies of an entity or enterprise, whether through the ownership
of Voting Shares, through other voting rights, by contract or
otherwise; provided, however, that direct or indirect
Beneficial Ownership of capital stock or other interests in an
entity or enterprise entitling the holder to cast 30% or more of
the total number of votes generally entitled to be cast in the
election of directors (or persons performing comparable functions)
of such entity or enterprise will be deemed to constitute control
for purposes of this definition.
(d) “
Disinterested Director ” means a director of
the Company who is not and was not a party to the Claim in respect
of which indemnification is sought by Indemnitee.
(e)
“ Expenses ” means any and
all reasonable fees, costs and expenses (including attorneys’
and experts fees) paid or payable in connection with investigating,
defending, being a witness in or participating in (including on
appeal), or preparing to investigate, defend, be a witness in or
participate in (including on appeal), any Claim.
(f)
“ Indemnifiable Claim ”
means any Claim based upon, arising out of or resulting from
(i) any actual, alleged or suspected act or failure to act by
Indemnitee in his or her capacity as a director, officer, employee
or agent of the Company or as a director, officer, employee,
member, manager, trustee or agent of any other corporation, limited
liability company, partnership, joint venture, trust or other
entity or enterprise, whether or not for profit, as to which
Indemnitee is or was serving at the request of the Company as a
director, officer, employee, member, manager, trustee or agent,
including, without limitation, any Controlled Affiliate of the
Company, (ii) any actual, alleged or suspected act or failure
to act by Indemnitee in respect of any business, transaction,
communication, filing, disclosure or other activity of the Company
or any other entity or enterprise, whether or not for profit, as to
which Indemnitee is or was serving at the request of the Company as
a director, officer, employee, member, manager, trustee or agent,
including, without limitation, any Controlled Affiliate of the
Company, or (iii) Indemnitee’s status as a current or former
director, officer, employee or agent of the Company or as a current
or former director, officer, employee, member, manager, trustee or
agent of the Company or any other entity or enterprise, whether or
not for profit, as to which Indemnitee is or was serving at the
request of the Company as a director, officer, employee, member,
manager, trustee or agent, including, without limitation, any
Controlled Affiliate of the Company or any actual, alleged or
suspected act or failure to act by Indemnitee in connection with
any obligation or restriction imposed upon Indemnitee by reason of
such status. In addition to any service at the actual request of
the Company, for purposes of this Agreement, Indemnitee will be
deemed to be serving or to have served at the request of the
Company as a director, officer, employee, member, manager, trustee
or agent of another entity or enterprise if Indemnitee is or was
serving as a director, officer, employee, member, manager, trustee
or agent of such entity or enterprise and (i) such entity or
enterprise is or at the time of such service was a Controlled
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Affiliate, (ii) such
entity or enterprise is or at the time of such service was an
employee benefit plan (or related trust) sponsored or maintained by
the Company or a Controlled Affiliate, or (iii) the Company or
a Controlled Affiliate (by action of the Board, any committee
thereof or the Company’s Chief Executive Officer (“
CEO ”) (other than as the CEO himself or
herself) caused or authorized Indemnitee to be nominated, elected,
appointed, designated, employed, engaged or selected to serve in
such capacity.
(g)
“ Indemnifiable Losses” means any
and all Losses relating to, arising out of or resulting from any
Indemnifiable Claim.
(h) “
Independent Counsel ” means a law firm, or a
member of a law firm, that is experienced in matters of corporation
law and neither presently is, nor in the past three years has been,
retained to represent: (i) the Company (or any Subsidiary), a
Controlled Affiliate or Indemnitee in any matter material to either
such party (other than with respect to matters concerning the
Indemnitee under this Agreement, or of other indemnitees under
similar indemnification agreements) or (ii) any other named
(or, as to a threatened matter, reasonably likely to be named)
party to the Indemnifiable Claim giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term
“Independent Counsel” will not include any person who,
under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.
(i) “
Losses ” means any and all Expenses,
damages, losses, liabilities, judgments, fines, penalties (whether
civil, criminal or other) and amounts paid or payable in settlement
(if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld), and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result
of the actual or deemed receipt of any payments under this
Agreement, including without limitation all interest, assessments
and other charges paid or payable in connection with or in respect
of any of the foregoing.
2. Indemnification
Obligation. Subject only to Section 7 and to the proviso
in this Section, the Company will indemnify, defend and hold
harmless Indemnitee, to the fullest extent permitted or required by
the laws of the State of North Carolina in effect on July 30,
2004 or as such laws may from time to time hereafter be amended to
increase the scope of such permitted indemnification, against any
and all Indemnifiable Claims and Indemnifiable Losses;
provided , however , that (i) except as provided
in Sections 4 and 20, Indemnitee will not be entitled to
indemnification pursuant to this Agreement in connection with any
Claim initiated by Indemnitee against the Company or any director
or officer of the Company (other than by defense, counterclaim or
crossclaim) unless the Company has joined in or consented to the
initiation of such Claim and (ii) Indemnitee will not be
entitled to indemnification pursuant to this Agreement to the
extent that any Indemnifiable Loss is determined in a final
judicial determination (as to which all rights of appeal therefrom
have been exhausted or lapsed) to have resulted from knowing
misconduct by such Person from which such Person derived a direct
improper personal benefit (clause (i) and (ii) shall
be
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referred to herein together
as the “ Indemnification Limitations ”). The
Company acknowledges that the foregoing obligation may be
substantially broader than that now provided by applicable law and
the Company’s Constituent Documents and intends that it be
interpreted consistently with this Section and the recitals to this
Agreement. Indemnitee agrees not to assert any right to
indemnification under the Company’s Constituent Documents in
respect of any Loss for which indemnification would not be
available pursuant to this Section 2.
3. Advancement of
Expenses. Indemnitee will have the right to advancement by the
Company, prior to the final disposition of any Indemnifiable Claim,
of any and all Expenses relating to, arising out of or resulting
from any Indemnifiable Claim paid or incurred by Indemnitee or
which Indemnitee determines are reasonably likely to be paid or
incurred by Indemnitee. Without limiting the generality or effect
of any other provision hereof, Indemnitee’s right to such
advancement is not subject to the satisfaction of any standard of
conduct. Without limiting the generality or effect of the
foregoing, within five business days after any request by
Indemnitee, the Company will, in accordance with such request (but
without duplication), (a) pay such Expenses on behalf of
Indemnitee, (b) advance to Indemnitee funds in an amount
sufficient to pay such Expenses or (c) reimburse Indemnitee
for such Expenses; provided, however, that Indemnitee will
repay, without interest, any amounts actually advanced to
Indemnitee that, at the final disposition of the Indemnifia
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