REYNOLDS AMERICAN INC. LONG-TERM INCENTIVE PLAN PERFORMANCE UNIT AGREEMENT

Exhibit 10.1

Performance Units
Three-Year Vest

REYNOLDS AMERICAN INC.
LONG-TERM INCENTIVE PLAN

PERFORMANCE UNIT AGREEMENT

DATE OF GRANT: MARCH 2, 2005

W I T N E S S E T H:

     1. Grant. Pursuant to the provisions of the Long-Term Incentive Plan (collectively, the “Plan”), Reynolds American Inc. (the “Company”) on the above date has granted to

«FirstName» «LastName» (the “Grantee”),

subject to the terms and conditions which follow and the terms and conditions of the Plan, a target of

«Number» Performance Units.

A copy of the Plan is attached and made a part of this Agreement with the same effect as if set forth in the Agreement itself. The initial grant value of each Performance Unit shall be $1.00 (the “Initial Grant Value”). All capitalized terms used in this Agreement shall have the meaning set forth in the Plan, unless the context requires a different meaning.

     2. Vesting. (a) The Performance Units shall have a three-year performance period, consisting of the Company’s fiscal years 2005, 2006 and 2007 (the “Performance Period”), at the end of which the Performance Units will be valued and paid, if they vest, or cancelled, if they do not vest. For the Performance Units to vest, the Company must pay to its shareholders a dividend of at least $0.95 per share in each fiscal quarter during the period commencing on the Date of Grant and ending on December 31, 2007 (the “Threshold Requirement”), unless the Company’s Board of Directors specifically approves the noncancellation of the Performance Units upon the declaration of a quarterly dividend of less than $0.95 per share. In the event the Company fails to pay its shareholders a dividend of at least $0.95 per share in any fiscal quarter during the period from the Date of Grant and ending on December 31, 2007, and the Company’s Board of Directors does not approve the noncancellation of the Performance Units, the Performance Units shall be cancelled.

     (b) Notwithstanding anything in Section 2(a) to the contrary, in the event of (i) the Grantee’s death, (ii) the Grantee’s Permanent Disability (as defined in the Company’s Long-Term Disability Plan), (iii) the Grantee’s Retirement (as such term is defined below), or (iv) the Grantee’s involuntary Termination of Employment without Cause (as such terms are defined in Section 5 of this Agreement), the number of Performance Units which shall vest, if not previously cancelled due to the Company’s failure to meet the Threshold Requirement,

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shall be equal to product of (x) the original number of Performance Units granted to the Grantee under this Agreement and (y) a fraction, the numerator of which shall be the number of whole or partial months between January 1, 2005 and the date of the Grantee’s Termination of Employment, and the denominator of which shall be 36. Such prorated award shall be paid as soon as practicable following the close of the Company’s books at the end of the Performance Period, and in any event no later than March 15, 2008, and each Performance Unit shall have a Payment Value as defined in Section 3 of this Agreement. For purposes of this Agreement, the term “Retirement” shall mean an employee’s voluntary Termination of Employment on or after his or her 65^th birthday, or on or after his or her 55^th birthday with 10 or more years of service with the Company or a subsidiary of the Company.

     (c) Notwithstanding anything in Section 2(a) to the contrary, in the event of a Change of Control (as defined in the Plan), the number of Performance Units which shall vest, if not previously cancelled due to the Company’s failure to meet the Threshold Requirement, shall be equal to the product of (i) the original number of Performance Units granted to the Grantee under this Agreement and (ii) a fraction, the numerator of which shall be the number of whole or partial months in the Performance Period before the date of the Change of Control, and the denominator of which shall be 36. Such prorated award shall be paid as soon as practicable after the Change of Control, and in any event no later than March 15 after the end of the year in which the Change of Control occurs. The value of each Performance Unit shall be equal to the greater of (x) the Initial Grant Value or (y) the Initial Grant Value multiplied by the average of the total weighted Annual Incentive Award Plan (“AIAP”) scores for each of the years 2005, 2006 and 2007 completed prior to the Change of Control.

     (d) Upon the Grantee’s voluntary Termination of Employment or Termination of Employment for Cause (as such terms are defined in Section 5 of this Agreement) prior to the end of a Performance Period, all of the Grantee’s Performance Units shall be cancelled, except to the extent that at the time of Termination of Employment, the Grantee has an employment or termination agreement with the Company or one of its subsidiaries which includes non-cancellation of some or all of the Performance Units.

     3. Valuation of Performance Units. At the end of the Performance Period, if the Threshold Requirement is met or otherwise waived by the Company’s Board of Directors, the value of each Performance Unit shall be determined by multiplying the Initial Grant Value by the average of the total weighted AIAP scores for each of 2005, 2006 and 2007 (the “Payment Value”).

     4. Payment. (a) Payment of Performance Units shall be made only in cash. Except with respect to a Change of Control as described in Section 2(c) of this Agreement, or except under such other circumstances as the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) deems appropriate, no payment shall be made to the Grantee prior to the end of the Performance Period. Except as otherwise provided by this Agreement, payment of vested Performance Units shall be made in the amount of the Payment Value as soon as practicable following the close of the Company books at the end of the Performance Period, and in any event no later than March 15, 2008.

     (b) In the event of the death of a Grantee, any payment to which such Grantee is entitled under the Plan shall be made to the beneficiary designated by the Grantee to receive the proceeds of any noncontributory group life insurance coverage provided for the Grantee by the Company or a subsidiary of the Company (“Group Life Insurance Coverage”). If the Grantee has not designated such beneficiary, or desires to designate a different beneficiary,

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the Grantee may file with the Company a written designation of a beneficiary under the Plan, which designation may be changed or revoked only by the Grantee, in writing. If no designation of beneficiary has been made by a Grantee under the Group Life Insurance Coverage or filed with the Company under the Plan, distribution upon such Grantee’s death shall be made in accordance with the provisions of the Group Life Insurance Coverage. If a Grantee is no longer an employee of the Company at the time of death, no longer has any Group Life Insurance Coverage and has not filed a designation of beneficiary with the Company under the Plan, distribution upon such Grantee’s death shall be made to the Grantee’s estate.

     5. Termination of Employment. (a) For purposes of this Agreement, the term “Termination of Employment” shall mean termination from active employment with the Company or a subsidiary of the Company; it does not mean the termination of pay and benefits at the end of a period of salary continuation (or other form of severance pay or pay in lieu of salary).

     (b) For purposes of this Agreement, if the Grantee has an employment or severance agreement, employment shall be deemed to have been terminated for “Cause