EX-10.1



 




Exhibit 10.1






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



 









 





	 	 	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
	

	 	 	 	
 
	

	 	 	 	Ann A. Johnston
	

	 	 	 	Executive Vice President
	

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








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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



 









 




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
	
 

	 	 	 	
 
	EMPLOYEE (Signature)

	 	 	 	(Signature)
	 
	 	 	 	 
	Susan M. Ivey

	 	 	 	Executive Vice President Human Resources
	
 

	 	 	 	
 
	(Print name)

	 	 	 	(Title)






	 	 	 	 	 
	Date:
	 	October 7, 2004
	 	 








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