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 inter
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