Exhibit 10.1

(Reynolds American Logo) [g91250g9125001.gif]

October 7, 2004

Susan M. Ivey

Re:      Special Severance Benefits and Change of Control Protections

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

1.     Special Severance Benefits.   (a)   If, during the course of your
employment with the Company or one of its affiliates, your employment is
involuntarily terminated for any reason other than Cause (as defined in the
Reynolds American Inc. Long Term Incentive Plan (LTIP)) you will receive three
years’ pay (defined as base pay and target bonus at the time of the termination
of your employment), payable over three years, and full employee benefits
coverage for three years, and if you participate in an executive perquisite plan
at the time of your termination of employment, coverage under the executive
perquisite plan according to its terms and conditions for three years. These
special severance benefits replace any compensation or benefits under the
Reynolds American Inc. Salary and Benefits Continuation Program (the “SBC”). It
is intended that you will not receive any less pay or benefits than the SBC
obligation would provide, and the rules that determine eligibility for payment
under the SBC apply to this program.   (b)   Involuntary termination of your
employment without Cause shall be deemed to have occurred if you voluntarily
terminate your employment after the occurrence of one or more of the following
events: (i) the total amount of your base salary and targeted awards under the
LTIP and the Company’s Annual Incentive Award Plan (the “AIAP”), or successor
plans, is at any time reduced by more than 20% without your consent; provided,
however, that nothing herein shall be construed to guarantee your target award
if performance is below target, or, (ii) your responsibilities are substantially
reduced in importance without your consent, or (iii) you are at any time
required as a condition of continued employment to become based at any office or
location more than the minimum number of miles required by the Internal Revenue
Service for you to claim a moving expense deduction, from your then current
place of employment without your consent, except for travel reasonably required
in the performance of your responsibilities. Unless you provide written
notification of your non-consent to any of the events described in (i), (ii) or
(iii) above within 90 days after the occurrence of any such event, you shall be
deemed to have consented to the occurrence of such event or events and no deemed
involuntary termination shall occur. If you provide written notice of your
non-consent to any of the events described in (i), (ii) or (iii) above within
90 days after the occurrence of any such events, your employment by the Company
or one of its affiliates shall

 

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    be deemed to have been involuntarily terminated 90 days after receipt of
such written notice by the Company or one of its affiliates.   (c)   For the
purpose of calculating benefits under the Company’s non-qualified defined
benefit pension plans, you will be deemed to be paid throughout the three-year
special severance pay period at a rate equal to your base pay and target bonus
immediately prior to the involuntary termination of your employment. For
purposes of life insurance and disability, benefits will be based on your base
pay in effect immediately prior to the involuntary termination of your
employment.   2.     Change of Control. In the event of a Change of Control of
the Company (as such Change of Control is defined in the LTIP), or any
succession plan, the following shall occur:   (a)   The Company shall hold you
harmless from any golden parachute tax imposed by any federal, state or local
taxing authority as a result of any payments made by the Company or any of its
affiliates. In the event that it is determined that any payment or distribution
by the Company or any of its affiliates to or for you (a “Payment”) would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
or any interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then you shall be entitled to receive from the
Company or any of its affiliates an additional payment (an “Excise Tax
Adjustment Payment”) in an amount such that after payment by you of all
applicable federal, state and local taxes (computed at the maximum marginal
rates and including any interest or penalties imposed with respect to such
taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment
Payment, you retain an amount of the Excise Tax Adjustment Payment equal to the
Excise Tax imposed upon the Payments. You agree to cooperate fully with the
Company and its affiliates in any protester appeal by the Company or any of its
affiliates in the event of the imposition of any golden parachute tax.   (b)  
If your employment is terminated without Cause following such Change of Control,
the Company or any of its affiliates shall pay to you as incurred all legal and
accounting fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, in seeking to obtain or enforce
any right or benefit provided by any compensation-related plan, agreement or
arrangement of the Company or any of its affiliates), unless your claim is found
by an arbitral tribunal of competent jurisdiction to have been frivolous.   (c)
  During the 24-month period following a Change of Control, you shall be
entitled to terminate your employment for Good Reason and receive the severance
benefits set forth in Section 1 of this agreement as if you had been
involuntarily terminated by the Company or any of its affiliates without Cause.
For purposes of this agreement, “Good Reason” shall mean, without your express
written consent, any of the following events occurring after a Change of
Control:

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

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

3.     Miscellaneous   (a)   In further consideration for these special
severance and change of control benefits, and should an involuntary termination
of your employment ever occur, the Company will expect your cooperation in
transitioning your responsibilities, and will ask you, prior to the payment of
any benefits, to sign a letter containing a release of claims and a
reaffirmation of the attached Non-Competition, Non-Disclosure of Confidential
Information and Commitment to Provide Assistance Agreement.   (b)   You
acknowledge and agree that nothing contained in this agreement obligates the
Company or any one of its affiliates (i) to employ you for any specific term or
(ii) to grant you any short-term or long-term incentive awards under the plans
and programs of the Company or any of its affiliates.   (c)   This agreement
shall be governed by and construed in accordance with the laws of the State of
North Carolina, without regard to the conflicts of law rules of such state.

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

         

  REYNOLDS AMERICAN INC.
 
       

  By:   /s/ Ann A. Johnston

     

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      Ann A. Johnston

      Executive Vice President

      Human Resources
 
       
Accepted and agreed to as of this 7th day
       
 
       
of           October      , 2004          
       
 
       
/s/ Susan M. Ivey
       

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Employee Name        

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(Reynolds American Logo) [g91250g9125001.gif]

NON-COMPETITION, CONFIDENTIALITY,
AND COMMITMENT TO PROVIDE ASSISTANCE AGREEMENT

     This Agreement (the “Agreement”) is made and entered into as of the date
set forth on the signature page hereto, between Reynolds American Inc., a North
Carolina corporation, together with its divisions, subsidiaries and affiliates,
and with an address of 401 North Main Street, Winston-Salem, North Carolina
27102-2990 (the “Company”), and the party designated as “Employee” on the
signature page hereto (“Employee”).

     Recognizing that the success of the Company’s business depends to a
considerable extent on the continuing good will of the Company, as well as the
protection of patents, inventions, discoveries and information held or used by
the Company, and recognizing that Employee may contribute to and/or have access
to such matters, and in consideration for your retention by the Company [and the
Company making certain severance and change of control protection benefits
available to Employee,] the Company and Employee hereby agree as follows:

1. (a) Employee will keep in strict confidence, and will not, directly or
indirectly, at any time during or after Employee’s employment with the Company,
disclose, furnish, disseminate, make available or, except in the course of
performing Employee’s duties of employment, use any trade secrets or
confidential business and technical information of the Company or its customers
or vendors, without limitation as to when or how Employee may have acquired such
information. Such confidential information shall include, without limitation,
the Company’s unique selling, manufacturing and servicing methods and business
techniques, strategic business plans, product development or other proprietary
product data, training, service and business manuals, promotional and marketing
materials, training courses and other training and instructional materials,
vendor and product information, customer and prospective customer lists, other
customer and prospective customer information and other business information.
Employee specifically acknowledges that all such confidential information,
whether reduced to writing, maintained on any form of electronic media, or
maintained in the mind or memory of Employee and whether compiled by the Company
and/or Employee, derives independent economic value from not being readily known
to or ascertainable by proper means by others who can obtain economic value from
its disclosure or use, that reasonable efforts have been made by the Company to
maintain the secrecy of such information, that such information is the sole
property of the Company and that any retention and use of such information by
Employee during his or her employment with the Company (except in the course of
performing his or her duties and obligations hereunder) or after the termination
of his or her employment shall constitute a misappropriation of the Company’s
trade secrets.

     (b) Employee agrees that upon termination of Employee’s employment with the
Company, for any reason, Employee shall return to the Company, in good
condition, all property of the Company, including without limitation, the
originals and all copies of any materials which contain, reflect, summarize,
describe, analyze or refer or relate to any items of information referred to in
this Section

 

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1. In the event that such items are not so returned, the Company will have the
right to withhold any severance and change of control protection benefits to
Employee.

2. At any time during or after the termination of Employee’s employment,
Employee will not directly or indirectly attempt to disrupt, damage, impair or
interfere with the Company’s business by raiding any of the Company’s employees
or soliciting any of them to resign from their employment with the Company, or
by disrupting the relationship between the Company and any of its consultants,
agents, representatives or vendors. Employee acknowledges that this covenant is
necessary to enable the Company to maintain a stable workforce and remain in
business.

3. Employee acknowledges and agrees that, in the performance of Employee’s
duties of employment, Employee will be brought into frequent contact with trade
secrets and confidential information of the Company, and that this information
has been developed by the Company through substantial expenditures of time,
effort and money and constitutes valuable and unique property of the Company.
Employee further understands and agrees that the foregoing makes it necessary
for the protection of the business of the Company that Employee not compete with
the Company during his or her employment and not compete with the Company for a
reasonable period thereafter, as further provided in this Agreement.

4. While employed by the Company, Employee will not compete with the Company
anywhere in the world. In accordance with this restriction, but without limiting
its terms, while employed by the Company, Employee will not:

     (a) enter into or engage in any business that competes with the business of
the Company;

     (b) solicit customers, business, patronage or orders for, or sell, any
products or services in competition with, or for any business that competes
with, the business of the Company;

     (c) divert, entice, or take away any customers, business, patronage or
orders of the Company or attempt to do so; or

     (d) promote or assist, financially or otherwise, any person, firm,
association, partnership, corporation or other entity engaged in any business
that competes with the business of the Company.

5. For a period of two years following the termination of Employee’s employment,
Employee will not:

     (a) enter into or engage in any business that competes with the Company’s
business within the Restricted Territory (as defined below);

     (b) solicit customers, business, patronage or orders for, or sell, any
products and services in competition with, or for any business, wherever
located, that competes with, the Company’s business within the Restricted
Territory;

     (c) divert, entice or otherwise take away any customers, business,
patronage or orders of the Company within the Restricted Territory, or attempt
to do so; or

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     (d) promote or assist, financially or otherwise, any person, firm,
association, partnership, corporation or other entity engaged in any business
that competes with the Company’s business within the Restricted Territory.

“Restricted Territory” shall be defined as and limited to (A) the United States
of America and its territories and possessions; and (B) all of the specific
customer accounts, whether within or outside of the Restricted Territory, with
which Employee had any contact or for which Employee had any responsibility
(either direct or supervisory) at the time of termination of his or her
employment and at any time during the two-year period prior to such termination.

6. For the purposes of Sections 4 and 5, inclusive, but without limitation
thereof, Employee will be in violation thereof if the Employee engages in any or
all of the activities set forth therein directly as an individual on the
Employee’s own account, or indirectly as a partner, joint venturer, employee,
agent, salesperson, consultant, officer and/or director of any firm,
association, partnership, corporation or other entity, or as a stockholder of
any corporation in which Employee or the Employee’s spouse, child or parent
owns, directly or indirectly, individually or in the aggregate, more than 5% of
the outstanding stock.

7. For the purposes of this Agreement, the Company shall include any and all
direct and indirect subsidiary, parent, affiliated, or related companies of the
Company for which Employee worked or had responsibility at the time of
termination of his or her employment and at any time during the two-year period
prior to such termination.

8. If it shall be judicially determined that Employee has violated any of
Employee’s obligations under Section 5, then the period applicable to each
obligation that Employee shall have been determined to have violated shall
automatically be extended by a period of time equal in length to the period
during which such violation(s) occurred.

9. Employee acknowledges that Employee’s obligations under this Agreement are
reasonable in the context of the nature of the Company’s business and the
competitive injuries likely to be sustained by the Company if Employee were to
violate such obligations.

10. (a) Employee will provide reasonable assistance and cooperation to the
Company in activities related to the prosecution or defense of any pending or
future lawsuits or claims involving the Company.

     (b) Employee will promptly notify the Company if Employee receives any
requests from anyone other than an employee or agent of the Company for
information regarding the Company which could reasonably be construed as being
proprietary, non-public or confidential or if Employee becomes aware of any
potential claim or proposed litigation against the Company.

     (c) Employee will refrain from providing any information related to any
claim or potential litigation against the Company to any non-Company
representatives without the Company’s written permission or being required to
provide information pursuant to a legal process.

     (d) If required by law to provide sworn testimony regarding any matter
related to the Company, Employee will consult with and have legal counsel
designated by the Company present for such testimony. The Company will be
responsible for the costs of such designated counsel, and Employee will bear no
cost for same.

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     (e) If Employee is required by law to provide sworn testimony regarding any
matter related to the Company, and if Employee requires legal counsel to
represent and protect Employee’s interests (in addition to the Company’s
designated legal counsel provided herein), the Company will reimburse Employee
for any reasonable legal expenses (including, but not limited to, the costs of
any attorney mutually acceptable to Employee and the Company, which acceptance
by the Company shall not be unreasonably withheld) and other reasonable
out-of-pocket expenses Employee may incur in relation to such testimony.

     (f) Employee will cooperate with the Company’s attorneys to assist in their
efforts, especially on matters Employee has been privy to, holding all
privileged attorney-client matters in strictest confidence unless ordered to do
otherwise by a court of competent jurisdiction or a committee of the Congress of
the United States or of a state legislature. Employee understands that he or she
will be reimbursed for travel, food, lodging or similar out-of-pocket expense
reasonably incurred at the request of the Company in discharging any of
Employee’s legal obligations under this Section 10.

11. Employee acknowledges and agrees that the remedy at law available to the
Company for breach of any of Employee’s obligations under this Agreement would
be inadequate. Employee therefore agrees that, in addition to any other rights
or remedies that the Company may have at law or in equity, temporary and
permanent injunctive relief may be granted in any proceeding which may be
brought to enforce any provision contained in this Agreement or refrain from
making any severance or change of control protection benefits available to
Employee, without the necessity of proof of actual damage.

12. No modification, waiver, amendment or addition to any of the terms of this
Agreement shall be effective unless set forth in a writing signed by Employee
and the Company. The failure of the Company to enforce any provision of this
Agreement shall not be construed to be a waiver of such provision or of the
right of the Company thereafter to enforce each and every provision hereof.

13. This Agreement is not assignable by either party without the prior written
consent of the other, except that the Company may assign it to any assignee of
or successor to substantially all of the business or assets of the Company or
any direct or indirect subsidiary thereof.

     IN WITNESS WHEREOF, Employee, having read and fully understood each of the
foregoing provisions, and the Company, have executed this Agreement as of the
date set forth below.

         

  REYNOLDS AMERICAN INC.
 
       
/s/ Susan M. Ivey
  By:   /s/ Ann A. Johnston

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EMPLOYEE (Signature)
      (Signature)
 
       
Susan M. Ivey
      Executive Vice President Human Resources

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(Print name)
      (Title)

         
Date:
  October 7, 2004

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