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PERSONNEL PRACTICES SALARY ADMINISTRATION: Policy It is the policy of The Tobacco Institute to maintain a sound salary administration program with which to administer salaries in an equitable manner. The Institute will recruit, select, train, promote, compensate, transfer, discipline and release employees, and take any and all other personnel actions without regard to employee race, color, age, creed, sex, nationality, religion, marital status or handicap. The objectives of the salary administration program are: (1) to compensate employees according to the value of their job relative to all others in the organization; and (2) to reward individual employee performance. These objectives are accomplished through the use of: a. A formal job evaluation system to establish and maintain equitable relationships among jobs; b. A competitive salary structure utilizing salary grades de- veloped from job evaluation and market value of each job; c. A formal employee performance evaluation program; d. A salary increase program to reward individual employee performance. Salient Features of the Salary Administration Program 1. The salary structure utilizes multiple salary grades. Each salary grade has its own salary range made up of the following: ao Minimum - the lowest salary paid for a job in a specified salary grade. Typically, the minimum is the starting salary paid a new employee. T103760018

bo Second Quartile. Represents the value halfway between the minimum and the midpoint. Employees with significant rele- vant experience and education may be hired within the second quartile. Go Midpoint . The salary rate between the minimum and the maximum of the salary range. The midpoint represents the average salary paid to experienced employees. d. Fourth auarti/e. Represents the value halfway between the midpeint and the maximum. e. Maximum The highest salary paid for a job within a specified salary grade. The salary structure will be reviewed every two years to determine competitiveness in the market place. Employees will have their salaries reviewed on the basis of per- formance in accordance with the following schedule. QUARTILE PLACEMENT REVIEW Below minimum 6 months First, second, third Annual Fourth 15 months Above minimum 18 months Generally, employees will not be paid salaries above the maximum for their salary grade. Exceptions must be approved by the President of The Institute and will be based upon the unique contribution of the individual to The Institute and the industry. 5. Salary increases are granted on the basis of individual employee performance. -2- PERSONNEL PRACTICES 1/1/83 T103760019

6. The salaries of new employees will be reviewed on the basis of performance annually at the anniversary of their employment. 7. Salary adjustments as the result of performance review are effective the first day of the anniversary month. Promotiona//ncreases An employee is eligible for a promotional increase when he/she is placed in a different job in a higher salary grade. Promotional increases may occur at any time during the year and will establish a new anni- versary date for future salary reviews. Transfers A transfer occurs when an employee is placed into a different position within the same salary grade. Normally, a transfer does not involve a salary increase. PER FORMANCE EVALUATION : Performance evaluation serves as the cornerstone of The Institute's salary administrbtion program as well as the basis of any employee development effort. It provides employees as well as management the opportunity to develop a better understanding of what is expected and what is achieved. Each staff member will receive an annual formal performance appraisal, which will be completed by each employee's immediate supervisor. The timing of the evaluation coincides with The Institute's merit increase process. The annual evaluation, however, does not preclude continuous informal evaluation and feedback of employee job performance throughout the year. PERSONNEL PRACTICES 1/1/83 -3- T~03760020

PERSONNEL RECORDS: The Personnel Department is responsible for the management of the personnel records for all Institute staff. While the information contained in the records is considered confidential, each employee may inspect his/her file at any time. Supervisors or other Institute personnel may review employees' records on a need-to-know basis. This information will not be made available to outside agencies without consent of the employee concerned. The information contained in personnel records varies with each employee, but the following information is required as a minimum: (1) Index card with vital statistics (2) Application for employment and/or resume (3) Test scores if applicable (4) Copies of personnel action forms (5) Insurance enrollment forms (6) Federal and state withholding statements (7) Vacation and sick/personal leave records (8) Annual performance appraisal. Any additional memoranda regarding an employee's performance may also be placed in the personnel file if signed by both the supervisor and the employee. RECRUITMENT OF PERSONNEL: In order to provide the staff at The Tobacco Institute with opportunities for career advancement, the following procedures have been developed for hiring personnel. (1) Each division director secures approval to fill a new position or vacancy from the Personnel Office, and the President. PERSONNEL PRACTICES 1/1/83 T103760021

(2) A position description is prepared by the hiring department and presented to the Personnel Office. The Personnel Office will conduct a careful search of all personnel records to determine an appropriate match of the requirements of the position and an individual's experience, qualifications and performance. (4) The Personnel Office will make recommendations of any quali- fied internal candidate(s) to the division head. (5) The hiring department will notify Personnel of its intent to interview any internal candidates and the results of such interviews. (6) An external search will be conducted only after internal candi- dates have been carefully reviewed. (7) If it is determined that no internal candidates are qualified for the position, Personnel will conduct an outside search. PROBATIONARY PERIOD: During the first 3 months of employment, non-supervisory personnel are considered to be in a training or probationary period with The Institute. Supervisory and management employees have a 6-month training or probationary period, During the training-probationary period, managers will review and evaluate the progress of their employees to determine mastery of job fundamentals and eligibility for permanent status. The employment of any new employee may be terminated at any time during the training-probationary period. PERSONNEL PRACTICES 1/1[83 °5- T103760022.

TERMINATING EMPLOYMENT: Formal exit interviews will be conducted by the Personnel Depart- ment for all terminating employees, if practical. EMPLOYEE ADVANCES AND PERSONAL CHARGES: All advances issued to employees must be approved in writing by their Division Manager and the Vice President-Administration of The Institute. Listed below are the policies and procedures relating to specific types of advances: Temporary Travel Advances Temporary travel advances will be issued to employees and will be limited to the amount of cash required to meet out,of-pocket expenses while traveling on Institute business. The advance should be deducted from the expenses reported on the Time and Expense Report for that period. Any portion of the advance not used should be reimbursed to The Institute by check at the end of the pay period in which the travel occurs. Checks should be made payable to The Tobacco Institute and sent to the Accounting Office. Permanent Travel Advance Field office employees and headquarters office employees who are often required to travel on Institute business may request permanent travel advances. The purpose of such advances is to provide a cash flow to cover out-of-pocket expenses during the time lapse required to process travel expense reimbursements. -6- PERSONNEL PRACTICES 1/1/83 T103760023