8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) April 29, 2008

Reynolds American Inc.

(Exact Name of Registrant as Specified in its Charter)

North Carolina	1-32258	20-0546644
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)

401 North Main Street,
Winston-Salem, NC 27101
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: 336-741-2000

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Exhibit 10.1

Exhibit 10.2

Exhibit 99.1

ITEM 1.01 Entry into a Material Definitive Agreement.

     On April 30, 2008, Reynolds American Inc., referred to as RAI, announced that its Board of Directors had authorized RAI to repurchase, on or before April 30, 2009, up to $350 million of outstanding RAI shares, in open market or privately negotiated transactions or pursuant to the SRA described below under “Share Repurchase Agreement” (such share repurchase is referred to as the Repurchase Program). The execution of the Repurchase Program is subject to prevailing market and business conditions and may be terminated or suspended at any time. The Repurchase Program supersedes the $30 million share repurchase program that RAI’s Board had authorized in February 2008, the purpose of which had been to offset the dilutive effect of shares issued under certain benefit plans.

     Share Repurchase Agreement

     In connection with the Repurchase Program, RAI and Brown & Williamson Holdings, Inc., referred to as B&W, a wholly owned subsidiary of British American Tobacco p.l.c., referred to as BAT, entered into a Share Repurchase Agreement, dated April 29, 2008, referred to as the SRA. The material terms of the SRA are summarized below, with this summary qualified in its entirety by the full text of the SRA, a copy of which is attached to this report as Exhibit 10.1.

     As of April 29, 2008, B&W was the record and beneficial owner of 123,905,524 shares of RAI’s outstanding common stock, or approximately 42% of RAI’s outstanding common stock. Subject to the terms of the SRA, B&W will participate in the Repurchase Program on a basis approximately proportionate with B&W’s percentage ownership of RAI’s equity, and in a manner designed to treat B&W’s proceeds from its sales of RAI common stock pursuant to the Repurchase Program as dividends for tax purposes, such treatment referred to as the Intended Tax Treatment.

     Under the SRA, at the end of each week, referred to as a Buyback Week, during which RAI purchases shares of its common stock under the Repurchase Program from shareholders other than B&W, RAI will purchase from B&W shares of RAI common stock in an amount that is equal to the lowest of:

     (1) the number of shares such that, after giving effect to the purchase, the net total number of shares sold by B&W to RAI under the SRA will be equal to the total number of shares purchased by RAI from shareholders other than B&W for all periods through such Buyback Week pursuant to the Repurchase Program multiplied by the ratio, which is subject to certain adjustments as set forth in the SRA, of (x) B&W’s percentage ownership of the equity of RAI on April 29, 2008, to (y) 1.0 minus B&W’s percentage ownership of the equity of RAI on April 29, 2008;

     (2) the maximum number of shares that B&W can sell to RAI without decreasing B&W’s percentage ownership of the equity of RAI from April 29, 2008 to the end of such Buyback Week; and

     (3) the maximum number of shares that B&W reasonably determines it can sell to RAI without putting at risk the Intended Tax Treatment.

     The per share price to be paid by RAI with respect to any such purchase of RAI common stock from B&W will be equal to the volume weighted average price paid by RAI for shares of RAI common stock purchased from shareholders other than B&W during the Buyback Week.

     The SRA provides that B&W may reduce the number of shares otherwise determined to be sold to RAI pursuant to clause (2) of the preceding paragraph in order to obtain the Intended Tax Treatment, to assure itself that its percentage ownership of RAI’s equity will not decrease as a result of certain transactions (such as the exercise of employee stock options). Further, under the SRA, if B&W

reasonably determines that (1) there is a reasonable risk of it not obtaining the Intended Tax Treatment because of equity issued or to be issued by RAI which reduces B&W’s percentage ownership of RAI’s equity, and (2) such risk cannot be avoided by reducing the number of shares to be sold to RAI in future Buyback Weeks, then B&W may elect to repurchase from RAI a number of shares of RAI common stock (up to the number of shares B&W had already sold to RAI under the Repurchase Program) sufficient to eliminate such risk. B&W may not exercise the foregoing reduction right or purchase right to the extent such exercise would cause B&W’s percentage ownership of the voting stock of RAI to exceed 43.1783% (the Standstill Percentage, as defined in the Governance Agreement discussed below, plus 1%). In calculating B&W’s percentage ownership of RAI in the preceding sentence, certain shares that are expected to be issued by RAI are treated as already outstanding. If B&W has exercised the foregoing reduction right or purchase right due to an expected issuance by RAI of additional shares of common stock and RAI subsequently determines that such issuance will not take place, or if B&W has reduced the number of shares to be sold to RAI in reliance upon certain facts or assumptions and RAI or B&W subsequently determines that such facts or assumptions are no longer correct or applicable, then RAI will in certain circumstances purchase from B&W a certain number of shares of RAI common stock as a result of such canceled issuance or subsequent determination, all as set forth in, and otherwise subject to the terms of, the SRA.

     RAI has agreed under the SRA, in certain circumstances, to indemnify B&W from loss or liability arising from B&W’s failure to obtain the Intended Tax Treatment resulting from the inaccuracy of any information provided to B&W by RAI in certain periodic certificates delivered to B&W under the SRA.

     Subject to earlier termination by either party as set forth therein, the SRA will terminate on the earlier of April 29, 2009, and the expenditure of $350,000,000 pursuant to the Repurchase Program, including pursuant to the SRA.

     In connection with its approval of the SRA, RAI’s Board of Directors determined, pursuant to the terms of RAI’s shareholder rights plan adopted on July 30, 2004, that for the avoidance of doubt, neither BAT nor any of its subsidiaries will be deemed to be an “Acquiring Person” under the rights plan, no “Distribution Date” (as such term is defined in the rights plan) will be deemed to occur, and the rights thereunder will not become triggered or exercisable, in each case solely by reason of the execution or performance of the SRA or any increased ownership of RAI common stock by BAT or any of its subsidiaries pursuant to the SRA.

     Amendment to Governance Agreement

     In connection with the business combination transactions consummated on July 30, 2004, pursuant to which, among other things, the U.S. cigarette and tobacco business of B&W was combined with the business of R. J. Reynolds Tobacco Company (an indirect, wholly owned subsidiary of RAI), B&W, BAT and RAI entered into a Governance Agreement, dated July 30, 2004, which, as amended on November 18, 2004, is referred to as the Governance Agreement. Subject to certain exceptions (none of which would apply to B&W’s exercise of the purchase right under the SRA described above under “Share Repurchase Agreement”), the Governance Agreement prohibits BAT and its subsidiaries from acquiring beneficial ownership of additional shares of RAI common stock until the earliest of July 30, 2014, the date on which a significant transaction, as defined therein, is consummated and the date on which the Governance Agreement otherwise terminates. In connection with the entry into the SRA, RAI, BAT and B&W entered into Amendment No. 2, dated as of April 29, 2008, to the Governance Agreement, modifying the Governance Agreement so as to permit B&W’s acquisition of shares of RAI common stock pursuant to and as contemplated by the SRA and to disregard the dispositions of shares of RAI common stock by B&W to RAI pursuant to the SRA in determining whether BAT and its subsidiaries are

permitted to acquire beneficial ownership of additional shares of RAI common stock; a copy of such amendment is attached to this report as Exhibit 10.2.

ITEM 2.02 Results of Operations and Financial Condition.

     The information in Item 2.02 of this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subjected to the liabilities of that Section. The information in Item 2.02 of this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

     On April 30, 2008, Reynolds American Inc. issued an earnings release announcing its financial results for the first quarter ended March 31, 2008. A copy of the earnings release is attached as Exhibit 99.1.

ITEM 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following are filed as Exhibits to this Report.

Number	Exhibit
10.1	Share Repurchase Agreement, dated April 29, 2008, by and between Reynolds American Inc. and Brown & Williamson Holdings, Inc.
10.2	Amendment No. 2, dated April 29, 2008, to the Governance Agreement, dated as of July 30, 2004, by and among British American Tobacco p.l.c., Brown & Williamson Holdings, Inc. and Reynolds American Inc.
99.1	Earnings Release of Reynolds American Inc., dated April 30, 2008.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

REYNOLDS AMERICAN INC.
By:	/s/ McDara P. Folan, III
	Name:	McDara P. Folan, III
	Title:	Senior Vice President, Deputy General Counsel and
		Corporate Secretary

Date: April 30, 2008

INDEX TO EXHIBITS

Number	Exhibit
10.1	Share Repurchase Agreement, dated April 29, 2008, by and between Reynolds American Inc. and Brown & Williamson Holdings, Inc.
10.2	Amendment No. 2, dated April 29, 2008, to the Governance Agreement, dated as of July 30, 2004, by and among British American Tobacco p.l.c., Brown & Williamson Holdings, Inc. and Reynolds American Inc.
99.1	Earnings Release of Reynolds American Inc., dated April 30, 2008.

EX-10.1

Exhibit 10.1

EXECUTION COPY

SHARE REPURCHASE AGREEMENT

          THIS SHARE REPURCHASE AGREEMENT (this “Agreement”), is entered into on April 29, 2008 by REYNOLDS AMERICAN INC. (the “Company”) and BROWN & WILLIAMSON HOLDINGS, INC. (f/k/a Brown & Williamson Tobacco Corporation) (“B&W”).

RECITALS

I.	The Company’s Board of Directors has authorized a share repurchase program (the “Share Repurchase Program”) for the purchase of outstanding shares of common stock of the Company, par value $0.0001 per share (the “Shares”), pursuant to which the Company may spend up to $350,000,000 over one year to repurchase Shares.
II.	Pursuant to the Governance Agreement dated as of July 30, 2004, as amended (the “Governance Agreement”), the parties hereto and British American Tobacco p.l.c. established certain terms and conditions concerning the corporate governance of the Company, the acquisition and disposition of securities of the Company by British American Tobacco p.l.c., B&W and its affiliates and other matters. All capitalized terms used but not defined herein shall have the meanings set forth in the Governance Agreement.
III.	The purpose of this Agreement is to permit and require B&W to participate in the Share Repurchase Program, subject to the conditions herein, on a basis approximately proportionate with B&W’s percentage ownership of the equity of the Company and in a manner in which the repurchases from B&W shall qualify for the Intended Tax Treatment (as defined below). IV. This Agreement is being entered into in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “1934 Act”).

          IN CONSIDERATION OF the mutual promises contained in this Agreement, the Company and B&W hereby agree:

A. Calculations; Purchase and Sale.

1. For purposes of this Agreement,

     (i) a “Buyback Week” means a Calendar Week (as defined below) during which the Company repurchases any Shares pursuant to the Share Repurchase Program from any Person other than B&W;

     (ii) a “Calculation Period” means a period that begins on the day immediately after the end of the preceding Calculation Period (or in the case of the first Calculation Period, on the first day of the month that includes the date of this Agreement) and ends on the earlier of (i) the next Friday that is the last day of a Buyback Week or (ii) the next Friday that is the last Friday of a calendar month; and

     (iii) “Calendar Week” means each seven-day period ending on a Friday.

2.

The Company will promptly notify B&W if a Calendar Week is or is expected to be a Buyback Week.

3.

On or before the third business day following the end of each Calculation Period, the Company will deliver to B&W a certificate (a “Calculation Certificate”), signed on behalf of the Company by any of its Chief Financial Officer, Chief Accounting Officer, Treasurer or Secretary, substantially in the form attached hereto as Exhibit A, as the same may hereafter be amended by the mutual agreement of the parties hereto. If the Calculation Period includes a Buyback Week,

	then the Calculation Certificate shall set forth the number of Shares that the Company proposes to buy back from B&W with respect to such Buyback Week (the “B&W Buyback Number”). The B&W Buyback Number shall be calculated in the Calculation Certificate based on the principles referred to in Paragraphs A.5 and A.6.
4.	B&W, on or before the third business day following receipt of a Calculation Certificate with respect to a Calculation Period which includes a Buyback Week, shall deliver a notice (the “B&W Notice”) to the Company substantially in the form attached hereto as Exhibit B. The B&W Notice shall state whether B&W agrees with the Company’s calculation of the applicable B&W Buyback Number, and if not, it shall state B&W’s proposal for the B&W Buyback Number and its calculation thereof. If the Company does not agree with B&W’s proposal, then B&W and the Company will negotiate in good faith, taking into account the advice of their respective outside tax counsel, to determine the appropriate B&W Buyback Number. However, if the parties cannot agree on the B&W Buyback Number within two business days following delivery of the B&W Notice to the Company, then the B&W Buyback Number proposed by B&W, as it may have been amended by B&W in connection with the negotiation between the parties, shall be the number of Shares the Company will repurchase from B&W with respect to the relevant Buyback Week.
5.	The B&W Buyback Number with respect to a Buyback Week shall be the lowest of:

     (i) the number of Shares such that, after the purchase of such Shares from B&W by the Company, the net total number of Shares sold by B&W to the Company under this Agreement shall be equal to the total number of Shares purchased by the Company from shareholders other than B&W for all periods through such Buyback Week pursuant to the Share Repurchase Program multiplied by the ratio of (x) B&W’s percentage ownership of the equity of the Company on the date of this Agreement, to (y) 1.0 minus B&W’s percentage ownership of the equity of the Company on the date of this Agreement, provided that such ratio shall be appropriately adjusted to reflect changes from time to time in B&W’s Percentage Interest that do not occur as part of the same plan as the purchases under the Share Repurchase Program or this Agreement;

     (ii) the maximum number of Shares that B&W can sell to the Company without decreasing B&W’s percentage ownership of the equity of the Company from the date of this Agreement to the end of such Buyback Week; and

     (iii) the maximum number of Shares, reasonably determined by B&W upon advice of its outside tax counsel after consultation with the Company, that B&W can sell to the Company without putting at risk the Intended Tax Treatment.

6. The following rules shall apply for purposes of Paragraph A.5(ii) but shall not limit the discretion of B&W under Paragraph 
A.5(iii):

     (i) any Sale (as defined below) of Shares to the Company under this Agreement with respect to any Buyback Week (current or prior) shall be treated as having occurred or as occurring on the last day of such Buyback Week,

     (ii) unless reasonably determined otherwise by B&W upon advice of its outside tax counsel and after consultation with the Company, such calculation shall take into account any increase or decrease in the outstanding equity of the Company since the date of this Agreement for any reason, and

     (iii) B&W shall be entitled to provide itself with assurance of the Intended Tax Treatment, based on advice of its outside tax counsel and after prior consultation with the Company, by reducing the number of Shares otherwise determined under Paragraph A.5(ii) so as to permit B&W to assure itself that B&W’s percentage ownership of the equity of the Company does not decrease as a result of future events that may be considered to occur as part of the same plan as the purchases under the Share Repurchase Program or this Agreement, including, without

-2-

limitation, issuances of new equity by the Company pursuant to the exercise of stock options, the issuance or vesting of restricted stock, or the issuance of any other equity to any third party reasonably expected to occur after the end of the applicable Buyback Week.

7.	For purposes of this Agreement other than Paragraph K, the determination of the number of outstanding Shares or other equity of the Company shall be based on Shares or equity considered outstanding for U.S. federal income tax purposes. Without limiting the generality of the foregoing, (i) restricted stock for which an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, (the “Code”) has been made shall be considered outstanding, (ii) other restricted stock shall not be considered outstanding prior to its vesting date and shall be considered outstanding beginning on the vesting date, and (iii) outstanding stock options, and outstanding awards of stock that have not yet been transferred to employees or directors for tax purposes, shall be disregarded. Any assumptions made for the purposes of determining the number of outstanding Shares shall be described in the Calculation Certificate.
8.	B&W shall deliver and sell to the Company, and the Company shall buy from B&W (each such transaction, a “Sale”), at or before 12:00 p.m. Eastern Time on the second business day following the date the B&W Buyback Number for the applicable Buyback Week becomes final (a “Closing Date”) a number of Shares (the “Sale Shares”) equal to such B&W Buyback Number. On each Closing Date, (a) B&W shall deliver to the Company’s transfer agent instructions to transfer the Sale Shares to the Company, together with such stock powers and other instruments as may be necessary to give effect to such instructions, and (b) upon confirmation from the Company’s transfer agent of receipt of such instructions, the Company shall pay the purchase price specified in Paragraph A.9 for the Sale Shares in immediately available funds to such account as B&W has designated in writing.
9.	The price per Share to be paid by the Company under a Sale with respect to a Buyback Week shall be the volume weighted average price (“VWAP”) paid by the Company for the Shares purchased from shareholders other than B&W (the “Prior Period Shares”) with respect to such Buyback Week. For purposes of this Agreement, VWAP is calculated by dividing the total consideration paid, without taking commissions into account, for the Prior Period Shares by the aggregate number of Prior Period Shares.
10.	The Company shall not be obligated to deliver a proposed B&W Buyback Number and neither the Company nor B&W shall be required to effect a Sale if the performance of their respective obligations would violate applicable law. Other than for the purposes of correcting any error, only one Calculation Certificate may be delivered and one Sale may be effected with respect to each Buyback Week.
11.	Any fractional amounts of Shares required to be sold to the Company under any B&W Notice, as the same may be amended, shall be rounded down to the nearest whole number.
12.	For purposes of this agreement, “business day” means a day which is not a Federal Reserve Bank holiday and on which the New York Stock Exchange is open for trading.
13.	If at any time the Company becomes aware that any statement previously made in a Calculation Certificate is wrong or misleading, or if the Company decides to issue equity not contemplated by the assumptions set forth in a Calculation Certificate, it shall promptly notify B&W in writing. If at any time B&W becomes aware that any statement previously made in a Calculation Certificate or B&W Notice is wrong or misleading, it shall promptly notify the Company in writing.
14.	In the event Paragraph A.13 applies, or if B&W reasonably determines based upon the advice of its outside tax counsel after prior consultation with the Company that its calculation of a B&W Buyback Number was incorrect, then the Company shall take remedial steps reasonably requested by B&W in order to permit B&W to assure itself of the Intended Tax Treatment, including if necessary, rescinding prior Sales under this Agreement.

-3-

B.	Term. The term of this Agreement shall commence on April 29, 2008 and shall terminate as of the earlier of April 29, 2009 and the expenditure of an aggregate of $350,000,000 pursuant to this Share Repurchase Agreement and the Share Repurchase Program, collectively. In addition: (a) B&W may terminate this Agreement at any time upon written notice to the Company, if B&W determines in good faith, upon advice of its outside tax counsel and after consultation with the Company, that based on the facts existing at such time, there is a reasonable risk that it is not possible to achieve the Intended Tax Treatment for sales of Shares to the Company pursuant to this Agreement (including through the exercise by B&W of its rights under paragraph J of this Agreement) and (b) the Company may terminate this Agreement, upon written notice to B&W, following public announcement by the Company of the termination of the Share Repurchase Program by the Board of Directors of the Company, provided that (i) no such termination shall be effective with respect to any Buyback Week, and (ii) paragraphs A.13, A.14, I, J and L shall survive such termination. If B&W determines in good faith, upon advice of its outside tax counsel and after consultation with the Company, that any circumstance has arisen that could reasonably be expected to cause it in the future to invoke its right to terminate the Agreement under clause (a) of the preceding sentence, it shall promptly notify the Company, and the parties shall use their reasonable best efforts to avoid the need for such termination.
C.	Intended Tax Treatment. The parties intend for the proceeds of any Sales pursuant to this Agreement paid to B&W from the Company in exchange for the Shares to be treated as a dividend pursuant to Sections 302(d) and 301(c)(1) of the Code and be eligible for Section 243(c) of the Code (such treatment the “Intended Tax Treatment”). For the avoidance of doubt, it shall be consistent with the Intended Tax Treatment if Section 1059(a)(1) of the Code applies, but not if Section 1059(a)(2) of the Code applies.
D.	Representations and Warranties.

1.

B&W represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement have been duly authorized by the Board of Directors of B&W, (ii) no Sale will contravene, or require any consent, notice or filing which has not been obtained, given or made, under (a) any law applicable to B&W, (b) the organizational documents of B&W or (c) any judgment, order or decree or any contract or agreement to which B&W is subject, (iii) B&W has or will have valid title to the Shares to be sold to the Company and the legal right and power to sell, transfer and deliver such Shares, (iv) the delivery of the Shares under each Sale will, upon payment of the purchase price therefor, pass valid title to the Company to such Shares free and clear of any security interests, claims, liens, equities, and other encumbrances, and (v) any B&W Notice delivered under this Agreement will be accurate in all material respects.

2.

The Company represents and warrants to B&W that (i) the execution, delivery and performance of this Agreement have been duly authorized by the Board of Directors of the Company, (ii) no Sale will contravene, or require any consent, notice or filing which has not been obtained, given or made, under (a) any law applicable to the Company, (b) the organizational documents of the Company or (c) any judgment, order or decree or any contract or agreement to which the Company is subject, (iii) any Calculation Certificate delivered under this Agreement will be accurate in all material respects, (iv) the Company has sufficient earnings and profits for the gross proceeds of all Sales under this Agreement to be treated as dividends within the meaning of Section 316 of the Code, and (v) the Company has delivered to B&W a certificate signed on behalf of the Company by the Chief Financial Officer, Chief Accounting Officer, Treasurer or Secretary of the Company setting forth the applicable information otherwise required pursuant to Exhibit A, treating for the purposes of this D.2(v) the calendar month ending prior to the date of this Agreement as the Calculation Period thereunder.

E. Assignment; Third-Party Beneficiaries. This Agreement is intended solely for the benefit of the Company and B&W and may not be assigned, in whole or in part, except that B&W shall assign, any or all of its rights, interests and obligations under this Agreement to any Investor Party to which it transfers Shares, provided that such assignment shall not relieve B&W of its obligations hereunder and, provided, further that any Investor Party transferee agrees in writing to be bound by the provisions hereof. B&W may not assign its rights, or its obligations to deliver Shares, under this Agreement to any entity that is not a United

-4-

	States domestic corporation for U.S. tax purposes during the term of this Agreement. This Agreement, except for Paragraph I, is not intended to confer any rights or remedies upon any Person other than the Company, B&W or any Investor Party referred to in the first sentence of this Section E.
F.	Sales Plan. It is the intent of the parties that this Agreement comply with the requirements of Rule 10b5-1(c) under the 1934 Act and this Agreement shall be interpreted to comply with the requirements of Rule 10b5-1(c) under the 1934 Act.
G.	Complete Agreement. This Agreement constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior agreements, oral or written, with respect to such subject matter.
H.	Governing Law; Jurisdiction. Except to the extent specifically required by the North Carolina Business Corporation Act, this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. The parties declare that it is their intention that this Agreement be regarded as made under the laws of the State of Delaware and that the laws of the State of Delaware be applied in interpreting its provisions in all cases where interpretation shall be required, except to the extent the North Carolina Business Corporation Act is specifically required by such act to govern the interpretation of this Agreement.
	The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Federal court located in the State of Delaware or in the Chancery Court of the State of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or Chancery Court of the State of Delaware in the event any dispute arises out of this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) irrevocably and unconditionally waives (and agrees not to plead or claim) any objection to the laying of venue in Delaware of any action, suit or proceeding arising out of this Agreement, (d) agrees that it will not bring any action relating to this Agreement in any court other than any Federal court sitting in the State of Delaware or Chancery Court of the State of Delaware, (e) waives any right to trial by jury with respect to any action related to or arising out of this Agreement, and (f) agrees that this Agreement involves at least $100,000 and has been entered into by the parties in express reliance upon 6 Del. C. § 2708. Without limiting the agreement of the parties set forth in this Section H, in the event that any dispute arising under this Agreement is subject to, or adjudicated by, the courts of the State of North Carolina, the parties agree that any such dispute will be adjudicated by the North Carolina Business Court (with any references in this Section H to Delaware courts being deemed to be references to North Carolina courts and any references in this Section H to the Chancery Court of the State of Delaware being deemed to be references to the North Carolina Business Court).
I.	Indemnity. The Company agrees to indemnify and hold B&W and its affiliates harmless, on an after-tax basis, from and against any loss, liability, claim, cost, damage or expense (including reasonable legal fees and expenses) suffered or incurred by B&W or any of its affiliates arising from or relating to the failure of B&W or any of its affiliates to obtain the Intended Tax Treatment resulting from the inaccuracy in any respect of information set forth in any Calculation Certificate delivered pursuant to this Agreement including but not limited to any increase in tax liability resulting from the Sales and arising from or relating to any such inaccuracy. Notwithstanding the foregoing, B&W shall not be entitled to indemnification hereunder to the extent its remedies under Paragraph B or J are adequate to assure the Intended Tax Treatment and the Company (a) confirms that B&W is entitled to exercise its remedies under such Paragraph B or J, as applicable, and (b) complies with such Paragraph B or J, as applicable.
J.	B&W Purchase Right.

-5-

1.

If B&W reasonably determines, based on advice of its outside tax counsel and after consultation with the Company, that there is a reasonable risk that it is not possible to achieve the Intended Tax Treatment for the Sale of any Shares to the Company because of equity issued or to be issued (in each case, for tax purposes) by the Company after the date hereof which reduces B&W’s percentage ownership of the equity of the Company, and such risk cannot be avoided by reducing the B&W Buyback Number for future Buyback Weeks, then B&W may deliver to the Company a written notice (a “Primary Purchase Notice”) stating that B&W wishes to repurchase from the Company (a “Primary Purchase”) a stated number of Shares (the “Purchase Number”) that it previously sold to the Company pursuant to this Agreement. The Purchase Number shall be reasonably determined by B&W, upon advice of its outside tax counsel after consultation with the Company, and shall not exceed the number of Shares that, if purchased, would eliminate the identified risk. B&W shall provide the Company with the method of calculation of the Purchase Number. The prices per Share (the “Purchase Price”) for such a purchase shall be the prices previously paid by the Company to B&W to purchase the equivalent number of Shares from B&W, determined on a “last in first out” basis.

2.

If B&W properly delivers a Primary Purchase Notice, the Company will be obligated to sell, and B&W shall be obligated to buy, a number of Shares equal to the Purchase Number for the Purchase Price at or before 12:00 p.m. Eastern Time on the second business day after the delivery of the Primary Purchase Notice.

K.

Governance Agreement. B&W shall not reduce, pursuant to Paragraph A.6(iii), the amount determined under Paragraph A.5(ii), and shall not purchase Shares from the Company under Paragraph J, to the extent such reduction or purchase would cause B&W’s Percentage Interest (after all purchases by the Company with respect to a Buyback Week) to exceed the Standstill Percentage plus 1.0%; provided, however, that solely for purposes of the calculation of B&W’s Percentage Interest under this Paragraph K, at any point in time, B&W’s Percentage Interest will be calculated by treating as already outstanding any Shares or other equity of the Company if (a) the future issuance of such Shares or other equity of the Company has been publicly announced or approved by the Board of Directors of the Company or (b) the Board of Directors of the Company has been informed of the possibility of the future issuance of such Shares or other equity of the Company.

L.

Company Repurchases of Shares.

1.

The parties understand that certain expected future issuances of Shares to third parties by the Company could reduce the number of Shares purchased by the Company from B&W under this Agreement, that such reduction may result in B&W’s Percentage Interest exceeding the Standstill Percentage to the extent permitted by Paragraph K, and that the actual issuance of such Shares by the Company would be expected to reduce B&W’s Percentage Interest below the Standstill Percentage. If, contrary to such expectations, the Company determines in good faith that such expected issuance will not take place and if the operation of Paragraph A.5(i) would not otherwise result in putting the parties in a position similar to the position they would be in if there had never been an expectation that the Company would issue the additional Shares, then the parties agree to comply with the procedures set forth in this Paragraph L in order to put the parties in such similar position.

2.

(i) If (a) the Company determines in good faith that such expected issuance of additional Shares will not take place, (b) the operation of Paragraph A.5(i) would not otherwise result in putting the parties in a position similar to the position they would be in if there had never been an expectation that the Company would issue the additional Shares, and (c) B&W had previously reduced, pursuant to Paragraph A.6(iii), the amount determined under Paragraph A.5(ii) or purchased Shares from the Company under Paragraph J to permit B&W to assure itself that B&W’s percentage ownership of the equity of the Company did not decrease as a result of such expected issuance of additional Shares, then the Company shall deliver to B&W a certificate (a “Purchase Certificate”) identifying the expected issuance which will not take place (a “Canceled Issuance”) and setting forth the number of Shares (the “Repurchase Number”) that the Company

-6-

shall purchase from B&W as a result of such Canceled Issuance. The Repurchase Number in respect of a Canceled Issuance shall be equal to the lesser of (a) the sum of (i) the number of additional Shares that B&W would have sold to the Company under this Agreement previously if there had never been an expectation to issue additional Shares in such Canceled Issuance, and (ii) the number of Shares that B&W purchased from the Company under Paragraph J on the account of such Canceled Issuance, and (b) the maximum number of Shares that B&W may sell to the Company consistent with Paragraphs A.5(i), A.5(ii) and A.5(iii) as if such Shares were being sold to the Company for a Buyback Week. The price per Share (the “Repurchase Price”) for a purchase in respect of a Canceled Issuance shall be the volume weighted average price paid by the Company for the Shares purchased from shareholders other than B&W in all prior Buyback Weeks pursuant to the Share Repurchase Program. If B&W does not agree with the Company’s calculation of the Repurchase Number or Repurchase Price, then B&W and the Company will negotiate in good faith to determine the appropriate Repurchase Number or Repurchase Price, as applicable.

(ii) If the Company properly delivers a Purchase Certificate, then B&W will be obligated to sell, and the Company shall be obligated to buy, a number of Shares equal to such Repurchase Number for such Repurchase Price at or before 12:00 p.m. Eastern Time on the second business day after the determination of the Repurchase Number and Repurchase Price in accordance with Paragraph L.2(i) above.

3. (i) If (a) B&W has previously reduced, pursuant to Paragraph A.5(iii), the number of shares to be sold to the Company, (b) the Company or B&W determines in good faith that any facts or assumptions relied upon by B&W in making the determination under Paragraph A.5(iii) are no longer correct or applicable, and (c) the operation of Paragraph A.5(i) would not otherwise result in putting the parties in a position similar to the position they would be in if such facts or assumptions had not been relied upon, then either the Company or B&W may deliver to the other party a certificate (a “Modification Certificate”) identifying the facts or assumptions that such party reasonably believes are no longer correct or applicable and setting forth the number of Shares (the “Additional Number”) that such party believes the Company can purchase from B&W consistent with such subsequent determination, Paragraphs A.5(i) and (ii), and the Intended Tax Treatment. If B&W provides the Modification Certificate, and the Company reasonably agrees with the calculations therein, then B&W shall sell the Additional Number to the Company. If the Company provides the Modification Certificate, then B&W shall reasonably consider, based on the advice of its outside tax counsel after consultation with the Company, whether it agrees with the calculations therein and whether selling such Additional Number to the Company would put the Intended Tax Treatment at risk. If the reasonable determination of B&W in accordance with the preceding sentence is that such calculations are incorrect or such a purchase would put the Intended Tax Treatment at risk, then to such extent B&W will have no obligation to sell such Shares to the Company. If, however, B&W reasonably determines that the calculations are correct and the sale of the Additional Number or an adjusted Additional Number would not put the Intended Tax Treatment at risk, then B&W will consummate the sale contemplated by the Modification Certificate, as so adjusted. The price per Share for a purchase under this Paragraph L.3 shall be the volume weighted average price paid by the Company for the Shares purchased from shareholders other than B&W in all prior Buyback Weeks pursuant to the Share Repurchase Program (the “Modification Repurchase Price”).

(ii)  If either the Company or B&W properly delivers a Modification Certificate, then B&W will be obligated to sell, and the Company shall be obligated to buy, a number of Shares equal to such Additional Number for such Modification Repurchase Price at or before 12:00 p.m. Eastern Time on the second business day after such determination of the Additional Number, if any, and Modification Repurchase Price in accordance with Paragraph L.3(i) above.

M. Amendments; Waivers. No provision of this Agreement may be amended or waived unless such amendment or waiver is in writing and signed, in the case of an amendment, by the parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. The failure of any party to this

-7-

	Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights nor shall any single or partial exercise by any party to this Agreement of any of its rights under this Agreement preclude any other or further exercise of such rights or any other rights under this Agreement.
N.	Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

if to B&W, to
	103 Foulk Road, Suite 117
	Wilmington, DE 19803
	Fax: (302) 658-4269
	Attention: Corporate Secretary
	with copies to:
	Divisional Vice President, Tax and Treasury
	Louisville Corporate Services, Inc.
	401 South 4th Street, Suite 1200
	Louisville, KY 40202
	Fax: (502) 371-1795
	Cravath, Swaine & Moore LLP
	825 Eighth Avenue
	New York, NY 10019
	Fax: 212-474-3700
	Phone: 212-474-1000
	Attention: Philip A. Gelston, Esq.
	Sarkis Jebejian, Esq.
if to the Company, to
	401 North Main Street
	Winston-Salem, NC 27192
	Fax: (336) 741-2998
	Attention: General Counsel
	with a copy to:
	Jones Day
	222 East 41st Street
	New York, NY 10017
	Fax: 212-755-7306
	Phone: 212-326-3939
	Attention: Jere R. Thomson, Esq.
	Randi C. Lesnick, Esq.

-8-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

BROWN & WILLIAMSON HOLDINGS, INC.,
by
	/s/ Timothy J. Hazlett
	Name: Timothy J. Hazlett
	Title: President
REYNOLDS AMERICAN INC.,
by
	/s/ Daniel A. Fawley
	Name: Daniel A. Fawley
	Title: Senior Vice President and Treasurer

[Signature Page to the Share Repurchase Agreement]

-9-

EXHIBIT A¹

REYNOLDS AMERICAN INC. CALCULATION CERTIFICATE

Date: ________________

Calculation Period: beginning date___ending date___

Note: Unless otherwise indicated, all statements of outstanding shares, shares issued, shares acquired, percentage interest, etc. are to be based on the meaning of those terms for U.S. federal income tax purposes and otherwise will be calculated in accordance with the Share Repurchase Agreement.

Part A: Schedules

The following schedules are attached hereto (as applicable).

Schedule 1: General information and calculation of B&W Buyback Number.

Schedule 2: Schedule of all outstanding restricted stock and employee stock options including grant, vesting and expiration dates as of the end of the Calculation Period.

Schedule 3: Details of purchases made under the Program from parties other than B&W during the Calculation Period.

[Other]

Part B: Assumptions and Additional Information

Item 1.	State any assumptions made in arriving at the numbers provided in this exhibit and schedules hereto other than those explicitly mentioned in the Share Repurchase Agreement including, without limitation, treatment and number of shares held by corporate affiliates.
Item 2.	Describe any issuance of or reacquisition by the Company of equity of the Company (including but not limited to Shares) during the Calculation Period that has been made except made with respect to restricted stock or employee stock options.
Item 3.	Explanation of line items B3, C5, D6, D7, D11 and E3 on Schedule 1 (not otherwise described in Item 2).
Item 4.	Response to any additional information requested by tax counsel to B&W for purposes of its determinations pursuant to this Agreement.

¹ Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Share Repurchase Agreement between Reynolds American Inc. and Brown & Williamson Holdings, Inc., dated April 29, 2008 (the “Share Repurchase Agreement”).

Part C: Representations

          The Company represents that, except as otherwise expressly noted below or elsewhere in this Exhibit A, (i) the Board of Directors of the Company has not been informed of and has not publicly announced or approved any intent, plan or arrangement directly or indirectly to issue or acquire any of its equity, other than the purchase of Shares pursuant to the Share Repurchase Program or pursuant to employee stock option or restricted stock plans, (ii) previously issued Calculation Certificates remain true, correct and complete as of their dates of issuance, (iii) if the Calculation Period includes a Buyback Week, it will have sufficient earnings and profits to permit the entire purchase price of all the Shares to be purchased pursuant to this Certificate to be treated as a dividend within the meaning of Section 316 of the Code and (iv) it does not have a Rabbi Trust or a similar arrangement holding shares.

Exceptions:

          The undersigned hereby certifies on behalf of Reynolds American Inc. that the statements contained herein and on schedules attached hereto are true, correct and complete.

REYNOLDS AMERICAN INC.,
by
	Name:
	Title:

-2-

          Schedule 1: General Information and Calculation of B&W Buyback Number

	General
	Calculation Period (“period”)
	Includes Buyback Week (Y/N)
A	Date of Agreement—April 29, 2008
A1	Shares owned by B&W
A2	Total outstanding shares (SEC)
A3	Restricted Shares outstanding—no 83(b) election
A4	Total outstanding Shares (tax)	A2-A3
A5	B&W percentage ownership (tax)	A1/A4
A6	B&W percentage ownership (SEC)	A1/A2
A7	Governance cap percentage (SEC)
A8	Governance cap percentage (SEC) plus 1%
B	Beginning of Period
B1	Total outstanding Shares (SEC)
B2	Restricted Shares outstanding — no 83(b) election
B3	SEC Shares not outstanding for tax purposes (other than B2)
B4	Shares to be purchased by RAI from third parties for prior periods
B5	Shares to be purchased by RAI from B&W for prior periods
B6	Shares to be purchased by RAI from third parties & B&W for prior periods	B4+B5
B7	Total net outstanding Shares (tax)	B1-B2-B3-B6
B8	Shares owned by B&W
B9	Net Shares owned by B&W	B8-B5
B10	B&W percentage interest (tax)	B9/B7
C	Events During Period
C1	Restricted Shares becoming vested (net of Tax Shares cancelled) (tax)
C2	Vested EIAP shares issued
C3	Options exercised (net of Tax Shares cancelled)
C4	Shares bought or to be bought under buyback plan from third parties for current period
C5	Net issuances or reacquisitions* by RAI of Shares (tax) except C1, C2, C3, C4
C6	Net Shares outstanding (tax) on last day of period before buyback from B&W	B7+C1+C2+C3-C4+C5
C7	Restricted Shares (including Tax Shares) forfeited or cancelled (SEC)
C8	Net issuances or reacquisitions* by RAI of Shares (SEC) except C2, C3, C4, C7
C9	Net Shares outstanding (SEC) on last day of period before buyback from B&W	B1-B6+C2+C3-C4-C7+C8
*	Use positive number for net issuances and negative number for net reacquisitions
	Calculation of Buyback Number
D	Calculation Pursuant to Section A.5(ii) of the Agreement
D1	B&W shares owned on last day of period (B9 adjusted for any unrelated purchases/sales)
D2	Shares to be purchased by RAI from B&W from prior periods	B5
D3	Net Shares owned by B&W on last day of period	D1-D2
D4	Net Shares outstanding (tax) on last day of period before buyback from B&W	C6
D5	Assumed future issuance used for immediately preceding period
D6	Increases in assumed issuances for this period
D7	Decreases in assumed issuances for this period
D8	Assumed future issuance to be used for current period	D5+D6-D7
D9	Shares outstanding (tax) on last day of period including assumed future issuances	D4+D8
D10	Tentative Buyback Number based on (D3-D10)/(D9-D10)=A5	(D3-A5*D9)/(1-A5)
D11	Proposed reduction to tentative Buyback Number, if any
D12	B&W Buyback Number under A.5(ii)	D10-D11
E	Calculation Pursuant to Section A.5(i) of the Agreement
E1	Sum of all buybacks from third parties (including for current period)
E2	B&W percentage ownership on first day of Agreement (tax)	A5
E3	Adjustment to B&W percentage ownership pursuant to A.5(i), If any
E4	Adjusted B&W percentage ownership pursuant to A.5(i)	E2+E3
E5	Cumulative limit on proposed purchases from B&W	E1*E4/(1-E4)
E6	All purchases from B&W for prior periods (even if not yet made)
E7	B&W Buyback Number under A.5(i)	E5-E6
F	Proposed B&W Buyback Number
F1	Proposed B&W Buyback Number (lower of D12 & E7, rounded down to nearest whole share)
G	B&W Status At End of Period Under Proposed B&W Buyback
G1	Shares outstanding on last day of period after all buybacks (SEC)	C9-F1
G2	Same as G1 but including assumed issuances (SEC)	G1+D8
G3	Shares outstanding on last day of period after all buybacks (tax)	C6-F1
G4	Same as G3 but including assumed issuances (tax)	G3+D8
G5	B&W Shares owned end of period after buyback (assuming no other purchase/sale during period)	B9-F1
G6	B&W percentage ownership after buyback (actual) (tax)	G5/G3
G7	B&W percentage ownership after buyback (including assumed issuances) (tax)	G5/G4
G8	B&W percentage ownership after buyback (actual) (SEC)	G5/G1
G9	B&W percentage ownership after buyback (including assumed issuances) (SEC)	G5/G2
G10	B&W portion of total shares bought back for period	F1/(C4+F1)
H	Payment to B&W
H1	Total dollars paid to third parties (before commission) for purchases for this period
H2	Volume weighted average price per Share	H1/C4
H3	Settlement Date
H4	Amount to be paid to B&W	H2*F1
I1	Total dollars buyback for period	H1+H4
I2	Total dollars of buyback (cumulative)	H1+H4 (cumulative)

EXHIBIT B²

B&W NOTICE

Date: ________________

Calculation Period ending: ___

Date of Calculation Certificate___

___We agree with the B&W Buyback Number stated in such Calculation Certificate

___We DO NOT agree with the B&W Buyback Number stated in such Calculation Certificate.

     B&W Buyback Number proposed by B&W:

     [Explanation]

² Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Share Repurchase Agreement between Reynolds American Inc. and Brown & Williamson Holdings, Inc., dated April 29, 2008 (the “Share Repurchase Agreement”).

EX-10.2

Exhibit 10.2

EXECUTION COPY

     AMENDMENT No. 2, dated as of April 29, 2008, (this “Amendment”) to the GOVERNANCE AGREEMENT, dated as of July 30, 2004 (the “Agreement”), among BRITISH AMERICAN TOBACCO p.l.c., a public limited company incorporated under the laws of England and Wales (“BAT”), BROWN & WILLIAMSON HOLDINGS, INC. (f/k/a Brown & Williamson Tobacco Corporation), a Delaware corporation (“B&W”), and REYNOLDS AMERICAN INC., a North Carolina corporation (“Reynolds American”).

          WHEREAS, the Board of Directors of Reynolds American has authorized a share repurchase program (the “Share Repurchase Program”) for the purchase of outstanding shares of common stock of Reynolds American, par value $0.0001 per share, pursuant to which Reynolds American may spend up to $350,000,000 over one year to repurchase shares;

          WHEREAS, B&W and Reynolds American have entered into a share repurchase agreement dated as of April 29, 2008 pursuant to which B&W shall participate in the Share Repurchase Program subject to the terms and conditions set forth therein;

          WHEREAS, the parties desire to enter into this Amendment in order to amend Sections 1.01, 4.01 and 4.03(a) of the Agreement;

          NOW, THEREFORE, the parties hereto agree as follows:

          SECTION 1. Amendment to the Agreement.

          (a) Section 4.01 of the Agreement is hereby amended by replacing such 4.01 in its entirety with the following new Section 4.01:

          “Purchases of Equity Securities. Except for the acquisition of shares of Common Stock pursuant to the Combination Agreement or pursuant to or as contemplated by the Share Repurchase Agreement and subject to the exceptions set forth in Section 4.03, during the Standstill Period, the Investor Parties shall not, directly or indirectly, acquire, agree to acquire or make a proposal to acquire beneficial ownership of any shares of Equity Securities. Equity Securities acquired pursuant to this Article IV shall be subject to all of the terms, covenants and conditions of this Agreement.”

          (b) Section 4.03(a) of the Agreement is hereby amended by replacing such Section 4.03(a) in its entirety with the following new Section 4.03(a):

     “(a) during the Standstill Period, the Investor Parties may acquire beneficial ownership of additional Equity Securities if, after giving effect to any such acquisition (other than any acquisition pursuant to or as contemplated by the

Share Repurchase Agreement), B&W’s Percentage Interest would not exceed the Standstill Percentage less the percentage of Voting Power (calculated as of the date of disposition) associated with any Equity Securities disposed of by any Investor Party (other than to another Investor Party or to Reynolds American pursuant to the Share Repurchase Agreement) following the date of this Agreement;

     (c) Section 1.01 of the Agreement is hereby amended by inserting the following definitions in the appropriate alphabetical order:

          “Share Repurchase Program” means the share repurchase program for the repurchase of outstanding shares of common stock of Reynolds American, par value $0.0001 per share, pursuant to which Reynolds American may spend up to $350,000,000 over one year to repurchase shares;

          “Share Repurchase Agreement” means the Share Repurchase Agreement, dated as of April 29, 2008, between B&W and Reynolds American, pursuant to which B&W shall participate in the Share Repurchase Program subject to the terms and conditions set forth therein, and any other agreement entered into by B&W and Reynolds American which by its terms provides that it shall constitute a “Share Repurchase Agreement” within the meaning of this Agreement;

          SECTION 2. Amendment Part of the Agreement. This Amendment shall be considered to be a part of the Agreement and shall be subject to the provisions thereof, including Article VI thereof (but excluding Section 6.10 thereof). Except as expressly set forth herein, the Agreement shall continue in full force and effect without waiver, modification or amendment.

          IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto as of the date first above written.

BRITISH AMERICAN TOBACCO P.L.C.,
by
	/s/ Nicola Snook
	Name: Nicola Snook
	Title: Company Secretary
BROWN & WILLIAMSON HOLDINGS, INC.,
By
	/s/ Timothy J. Hazlett
	Name: Timothy J. Hazlett
	Title: President
REYNOLDS AMERICAN INC.,
by
	/s/ Daniel A. Fawley
	Name: Daniel A. Fawley
	Title: Senior Vice President and Treasurer

[Signature Page to the Amendment No. 2 to the Governance Agreement]

EX-99.1

Exhibit 99.1

Reynolds American Inc.
P.O. Box 2990
Winston-Salem, NC 27102-2990

Contact	Investor Relations:	Media:	RAI 2008-11
	Morris Moore	Seth Moskowitz
	(336) 741-3116	(336) 741-7698

RAI CEO:

‘Returning Value in a Challenging Time’

First Quarter 2008 Reported EPS up 54.1%; Adjusted EPS down 9.9%
Company Lowers Forecast; Announces Share Repurchase Program

WINSTON-SALEM, N.C. — April 30, 2008

First Quarter 2008 — At a Glance

• Reported EPS up 54.1 percent at $1.71

• Adjusted EPS down 9.9 percent at $1.00

• RAI announces $350 million share repurchase program

• R.J. Reynolds continues to build total growth-brand share

• Conwood continues to lead moist-snuff category growth

• Joint-venture termination yields $328 million pre-tax gain

• Revised 2008 guidance: excluding JV gain, earnings consistent with prior year

All references in this release to “reported” numbers refer to GAAP measurements; all “adjusted” numbers are non-GAAP, as defined in schedule 2 of this release, which reconciles reported to adjusted results for the first quarter.

-more-

-2-

Reynolds American Inc. (NYSE: RAI) today announced a 54.1 percent increase in reported EPS for the first quarter of 2008, driven by a $328 million pre-tax gain related to the termination of the Gallaher Joint Venture. Excluding that gain, first-quarter adjusted EPS was down 9.9 percent, as higher cigarette pricing was more than offset by a number of factors that lowered R.J. Reynolds’ volume. Conwood continued to deliver strong moist-snuff volume and share gains. Continuing its focus on returning shareholder value, RAI also announced a $350 million share repurchase program. In light of a weaker-than-expected first quarter, RAI revised its full-year forecast and now expects 2008 earnings, excluding the JV gain, to be consistent with the prior year.

First Quarter 2008 Financial Results — Highlights

(unaudited)
(all dollars in millions, except per share amounts;
for reconciliations, including GAAP to non-GAAP, see schedule 2)

	For the Three Months
	Ended March 31,
					%
	2008		2007		Change
Net sales	$	2,057	$	2,148		(4.2	)%
Operating income
Reported (GAAP)	$	506	$	574		(11.8	)%
Adjusted (Non-GAAP)		506		574		(11.8	)%
Net income
Reported (GAAP)	$	505	$	328		54.0	%
Adjusted (Non-GAAP)		295		328		(10.1	)%
Net income per diluted share
Reported (GAAP)	$	1.71	$	1.11		54.1	%
Adjusted (Non-GAAP)		1.00		1.11		(9.9	)%

-3-

MANAGEMENT’S PERSPECTIVE

Overview

“Reynolds American’s operating companies continued to post gains on key cigarette and smokeless tobacco brands in the first quarter, with R.J. Reynolds’ growth brands gaining half a share point and Conwood continuing to post double-digit volume growth,” said Susan M. Ivey, RAI’s chairman and chief executive officer.

“However,” she said, “above-average cigarette declines on R.J. Reynolds’ non-growth brands and an adjustment to settlement expense were among the factors that drove first-quarter adjusted earnings lower than the prior-year period.”

While adjusted earnings were down about 10 percent, reported EPS was about 54 percent higher, due to a $328 million pre-tax gain from the successful termination of the Gallaher Joint Venture. The payments from that transaction will provide a cash stream over the next several years.

Ivey also noted that the RAI board of directors has approved a share repurchase program of $350 million during the next 12 months. “This share repurchase reflects our commitment to our shareholders, and it demonstrates our continuing confidence in the long-term strength of our businesses,” she said.

“As we work through the challenges of the current environment,” Ivey said, “Reynolds American remains committed to returning value to our shareholders, and our operating companies remain focused on growth strategies to deliver long-term success.

“Reynolds American’s operating companies manufacture and market a broad range of tobacco products,” she said. “That product diversification provides flexibility to take advantage of shifting consumer preferences — as well as other emerging opportunities.”

R.J. Reynolds

R.J. Reynolds’ first-quarter operating income of $415 million fell 15.0 percent from the prior-year quarter as an 11.8 percent decline in the company’s shipment volume and an adjustment to MSA expense more than offset the impact of higher pricing.

Total cigarette industry shipment volume was down 3.3 percent from the prior-year quarter when excess wholesale inventory resulted in lower industry shipments. Based on shipments to retail through traditional channels, it appears that cigarette consumption declined by about 5 percent. R.J. Reynolds believes that some of that consumption decline reflected shifts to other cigarette channels and other tobacco products.

R.J. Reynolds’ growth-brand shipment volume was down 5.6 percent. Based on retail shipments, growth-brand consumption was down about 4 percent, in line with total industry performance. The company’s first-quarter volume decline was primarily driven by a 16.3 percent decline in the company’s lower-margin, non-growth brands.

-4-

R.J. Reynolds’ growth brands continued to deliver market-share gains, with a combined first-quarter increase of 0.5 share points. Due to declines on non-growth brands, the company’s total market share of 28.0 percent was down 1.4 share points from the prior-year quarter.

Several factors contributed to the company’s overall share and volume declines.

R.J. Reynolds’ older, more price-sensitive consumers were disproportionately affected by ongoing economic pressures that included higher cigarette prices. That contributed to higher-than-normal cigarette volume declines in the first quarter.

R.J. Reynolds’ volume and share were also affected by:

• a significant increase in competitive discounting and promotion at a time when R.J. Reynolds tested programs to increase the company’s promotional efficiencies;

• higher-than-industry-average price increases the company took on certain brands;

• a lower level of wholesale inventory compared with the prior-year quarter; and

• the company discontinuing a number of lower-priced, low-margin brands.

“It’s obvious that our first-quarter performance was weaker than expected and that our efforts to improve promotional efficiency and increase margins were not in sync with the economic and competitive environment,” said Daniel M. Delen, R.J. Reynolds’ president and chief executive officer.

“We are adjusting our programs to make sure that our brands are competitive in the marketplace,” he said. “We will, however, continue to look for opportunities to increase promotional efficiencies going forward.”

R.J. Reynolds’ growth brands — Camel, Kool and Pall Mall — represented about 45 percent of the company’s first-quarter volume. These brands posted a combined share gain of 0.5 percentage points from the prior-year period, with a first-quarter share of 13.2 percent. That performance was driven by continued growth of Camel and Pall Mall, and a slight decline on Kool.

During the first quarter, Camel launched updated packaging and smoother blends for its core styles. Camel’s ongoing focus on providing adult smokers with relevant innovations like Camel No. 9 and Camel Signature continued to enhance the brand’s marketplace performance. Camel gained 0.5 share points from the prior-year quarter.

Camel’s latest innovation, Camel Crush, was introduced in test market in the first quarter. Camel Crush is a unique cigarette that uses R.J. Reynolds’ technology to provide adult smokers with the option of changing each cigarette from regular to menthol by crushing a capsule in the filter. This technology has already been introduced in the Japanese market, where it has strong appeal.

Camel Snus, R.J. Reynolds’ first effort to broaden Camel’s appeal beyond cigarettes, is on track for a second-quarter expansion to nine additional major markets across the United States. Camel Snus, a smoke-free, spitless tobacco product that comes in a small pouch, is currently being tested in eight markets. With continued learning from this test, the company remains optimistic about the potential for this new product.

-5-

Kool, the company’s second premium-priced growth brand, has remained relatively stable in the highly competitive menthol marketplace. Kool’s first-quarter share of market was 3.1 percent.

Pall Mall, a value-priced brand, continued to benefit from its position as a great product that lasts longer. Pall Mall’s first-quarter share was up 0.2 percentage points from the prior-year quarter. In the second quarter, Pall Mall plans to introduce more stylish, round-cornered packs.

During the first quarter, R.J. Reynolds’ premium-to-value price mix was 63.2 percent, an improvement of 1.2 points from the prior-year period.

R.J. Reynolds’ first-quarter operating margin of 23.2 percent was 2.4 percentage points lower than the year-ago quarter, when the timing of promotional expense resulted in an unusually high margin.

Delen said that R.J. Reynolds is intensely focused on getting its performance back on track. “It’s clear that we had a difficult first quarter,” he said, “and we’re already taking steps to improve our marketplace results.”

Conwood

Moist-snuff category growth continued in the first quarter with a total industry volume increase of 5.5 percent — or about 7 percent after adjusting for one less shipping day in the current-year quarter. Conwood grew at about twice the industry rate, with the company’s Grizzly brand continuing to capture more than 40 percent of total category growth.

Gains on Grizzly, and Kodiak’s improved performance, drove Conwood’s total moist-snuff shipments up 1.2 share points to a first-quarter share of 26.9 percent. Grizzly’s continued growth further strengthened the brand’s position as the industry’s third-largest and fastest-growing moist-snuff brand.

Introduced as a value brand in 2001, Grizzly posted a first-quarter share of 22.1 percent, up 1.6 share points from the prior-year period. That performance was aided by the recent launch of two new Grizzly styles — Snuff and Wintergreen Pouch — which are both being expanded nationally this year. Grizzly Snuff will be available nationwide in the second quarter, and Grizzly Wintergreen Pouch is scheduled to be national in the third quarter.

“We’re exceptionally pleased with the performance of these new Grizzly styles,” said William M. Rosson, Conwood’s president and chief executive officer. “Their results to date confirm our belief that these products will further add to Grizzly’s growth.”

Rosson said he was also pleased with the performance of Kodiak, the company’s leading premium brand.

-6-

“We’ve taken steps to make Kodiak more competitive in the marketplace, and that translated into volume growth of almost 2 percent compared with last year’s first quarter,” he said. “And upgrades to the packaging and blends of Kodiak’s mint and straight styles that we rolled out last month should also enhance the brand’s performance. We also began to distribute Kodiak Pouch, to extend the brand’s appeal among competitive pouch consumers.”

Even with one less shipping day than the prior-year period, Conwood’s net sales were up 7.7 percent at $167 million. And after significant first-quarter investments to launch new styles and further drive Conwood’s growth, the company’s operating income of $81 million was up 1.9 percent from the year-ago quarter. Operating margins of 48.8 percent were down from the prior-year quarter, due to these investments.

“Our brands and our business continue to perform well,” Rosson said. “With the continuing growth of Grizzly and the new styles we’re launching nationally, we expect Conwood to post another year of strong growth.”

FINANCIAL UPDATE

“Clearly, the first quarter was marked by a number of challenges that hurt our performance and have caused us to reassess our outlook for the year,” said Thomas R. Adams, Reynolds American’s chief financial officer. “Given our results to date, we’re reducing our full-year forecast. Excluding the gain from the joint venture, we now expect to deliver earnings in line with our 2007 adjusted results.”

Adams said that R.J. Reynolds is taking steps to address factors that contributed to its weak volume in the first quarter and expects to improve its performance through the balance of the year. “R.J. Reynolds is making adjustments to ensure that its brands are more competitive, while also remaining focused on improving profits through increased efficiency,” he said.

“The investments that Conwood is making to further strengthen brand performance are already beginning to pay off and position the company well for another year of solid growth,” Adams said. “Conwood is a strong company with strong brands, and these investments will reinforce the company’s ability to consistently deliver volume and earnings gains moving forward.”

Resulting from the termination of the Gallaher Joint Venture, in April, the company received 40 percent of the total payment of €265 million. That payment was €106 million — or about $166 million. The balance will be paid in annual installments over the next six years.

Adams said that RAI’s confidence in the future is evidenced by the $350 million share repurchase that the board has approved. He said the company plans to use cash generated from operations to opportunistically repurchase shares during the next 12 months. “This approach allows us to maintain financial flexibility while returning value to shareholders,” he said.

“In the current economic environment,” Adams said, “our strong balance sheet and financial flexibility position us well to take advantage of opportunities to further increase shareholder value.”

-7-

CONFERENCE CALL WEBCAST TODAY

Reynolds American will webcast a conference call to discuss first-quarter 2008 results at 9:30 a.m. Eastern Time on Wednesday, April 30, 2008. The call will be available live online on a listen-only basis. To register for the call, please visit the “Investors” section of www.ReynoldsAmerican.com. A replay of the call will be available on the site until May 30 at 5 p.m. Investors, analysts and members of the news media can also listen to the live call by phone, by dialing 888-715-1397. Remarks made during the conference call will be current at the time of the call and will not be updated to reflect subsequent material developments. Although news media representatives will not be permitted to ask questions during the call, they are welcome to monitor the remarks on a listen-only basis. Following the call, media representatives may direct inquiries to Seth Moskowitz at (336) 741-7698.

RISK FACTORS

Statements included in this news release that are not historical in nature are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements regarding RAI’s future performance and financial results inherently are subject to a variety of risks and uncertainties, described in the forward-looking statements. These risks and uncertainties include:

• the substantial and increasing regulation and taxation of tobacco products;

• various legal actions, proceedings and claims relating to the sale, distribution, manufacture, development, advertising, marketing and claimed health effects of tobacco products that are pending or may be instituted against RAI or its subsidiaries;

• the possibility of bonding issues as a result of litigation outcomes;

• the substantial payment obligations and limitations on the advertising and marketing of cigarettes under the MSA;

• the continuing decline in volume in the domestic cigarette industry and RAI’s dependence on the U.S. cigarette industry;

• concentration of a material amount of sales with a single customer or distributor;

• competition from other manufacturers, including any new entrants in the marketplace;

• increased promotional activities by competitors, including deep-discount cigarette brands;

• the success or failure of new product innovations and acquisitions;

• the responsiveness of both the trade and consumers to new products, marketing strategies and promotional programs;

• the ability to achieve efficiencies in manufacturing and distribution operations, including outsourcing functions, without negatively affecting sales;

• the reliance on a limited number of suppliers for certain raw materials;

-8-

• the cost of tobacco leaf and other raw materials and other commodities used in products, including future market pricing of tobacco leaf which could adversely impact inventory valuations;

• the effect of market conditions on foreign currency exchange rate risk, interest rate risk and the return on corporate cash;

• declining liquidity in the financial markets;

• the impairment of goodwill and other intangible assets, including trademarks;

• the effect of market conditions on the performance of pension assets or any adverse effects of any new legislation or regulations changing pension expense accounting or required pension funding levels;

• the substantial amount of RAI debt;

• the rating of RAI’s securities;

• any restrictive covenants imposed under RAI’s debt agreements;

• the possibility of fire, violent weather and other disasters that may adversely affect manufacturing and other facilities;

• the significant ownership interest of B&W, RAI’s largest shareholder, in RAI and the rights of B&W under the governance agreement;

• the expiration of the standstill provisions of the governance agreement; and

• the potential existence of significant deficiencies or material weaknesses in internal control over financial reporting that may be identified during the performance of testing required under Section 404 of the Sarbanes-Oxley Act of 2002.

Due to these uncertainties and risks, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release. Except as provided by federal securities laws, RAI is not required to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

ABOUT US

Reynolds American Inc. (NYSE: RAI) is the parent company of R.J. Reynolds Tobacco Company; Conwood Company, LLC; Santa Fe Natural Tobacco Company, Inc; and R.J. Reynolds Global Products, Inc.

• R.J. Reynolds Tobacco Company is the second-largest U.S. tobacco company. The company’s brands include five of the 10 best-selling cigarettes in the United States: Camel, Kool, Pall Mall, Winston and Doral.

• Conwood Company, LLC is the nation’s second-largest manufacturer of smokeless tobacco products. Its leading brands are Kodiak, Grizzly and Levi Garrett. Conwood also sells and distributes a variety of tobacco products manufactured by Lane, Limited, including Winchester and Captain Black little cigars, and Bugler roll-your-own tobacco.

• Santa Fe Natural Tobacco Company, Inc. manufactures Natural American Spirit cigarettes and other additive-free tobacco products, and manages and markets other super-premium brands.

-9-

• R.J. Reynolds Global Products, Inc., directly or through others, manufactures, sells and/or distributes American-blend cigarettes, including Natural American Spirit, and other tobacco products to a variety of customers in selected markets outside the United States.

Copies of RAI’s news releases, annual reports, SEC filings and other financial materials are available at www.ReynoldsAmerican.com.

(financial and volume tables follow)

Schedule 1

REYNOLDS AMERICAN INC.
Condensed Consolidated Statements of Income — GAAP
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

	Three Months Ended
	March 31,
	2008			2007
Net sales, external	$	1,944		$	2,018
Net sales, related party		113			130
Net sales		2,057			2,148
Cost of products sold		1,164			1,175
Selling, general and administrative expenses		382			393
Amortization expense		5			6
Operating income		506			574
Interest and debt expense		72			89
Interest income		(22	)		(38	)
Gain on termination of joint venture		(328	)		—
Other income, net		(12	)		(1	)
Income before income taxes		796			524
Provision for income taxes		291			196
Net income	$	505		$	328
Basic net income per share:	$	1.72		$	1.11
Diluted net income per share:	$	1.71		$	1.11
Basic weighted average shares, in thousands		294,206			295,038
Diluted weighted average shares, in thousands		294,864			295,458
Segment data:
Net sales:
RJR Tobacco (1)	$	1,787		$	1,907
Conwood		167			155
All Other (2)		103			86
	$	2,057		$	2,148
Operating income:
RJR Tobacco (1)	$	415		$	488
Conwood		81			80
All Other (2)		36			35
Corporate Expense		(26	)		(29	)
	$	506		$	574

(1)	Includes results of contract manufacturing business transferred January 1, 2008, into the RJR Tobacco segment from All Other.
(2)	Includes results of super premium brands, including DUNHILL and STATE EXPRESS 555 transferred January 1, 2008, into All Other from the RJR Tobacco segment.

Supplemental information:
Excise tax expense	$	437	$	494
Master settlement agreement and other state settlement expense	$	654	$	674
Federal tobacco buyout expense	$	63	$	70

Schedule 2

REYNOLDS AMERICAN INC.

Reconciliation of GAAP to Adjusted Results
(Dollars in Millions)
(Unaudited)

RAI management uses “adjusted” (non-GAAP) measurements to set performance goals and to measure the performance of the overall company, and believes that investors’ understanding of the underlying performance of the company’s continuing operations is enhanced through the disclosure of these metrics. “Adjusted” (non-GAAP) results are not, and should not be viewed as, substitutes for “reported” (GAAP) results.

	Three Months Ended March 31,
	2008								2007
	Operating		Net			Diluted			Operating		Net		Diluted
	Income		Income			EPS			Income		Income		EPS
GAAP results	$	506	$	505		$	1.71		$	574	$	328	$	1.11
The GAAP results include the following income:
Gain on termination of joint venture		—		(210	)		(0.71	)		—		—		—
Total adjustments		—		(210	)		(0.71	)		—		—		—
Adjusted results	$	506	$	295		$	1.00		$	574	$	328	$	1.11

Condensed Consolidated Balance Sheets

(Dollars in Millions)
(Unaudited)

	March 31,		December 31,
	2008		2007
Assets
Cash and cash equivalents	$	2,806	$	2,215
Short-term investments		330		377
Other current assets		2,531		2,400
Trademarks, net		3,405		3,407
Goodwill		8,174		8,174
Other noncurrent assets		2,364		2,056
	$	19,610	$	18,629
Liabilities and shareholders’ equity
Tobacco settlement accruals	$	3,088	$	2,449
Other current liabilities		1,339		1,454
Long-term debt		4,571		4,515
Deferred income taxes, net		1,326		1,184
Long-term retirement benefits (less current portion)		1,163		1,167
Other noncurrent liabilities		383		394
Shareholders’ equity		7,740		7,466
	$	19,610	$	18,629

Schedule 3

R.J. REYNOLDS VOLUMES AND SHARE OF MARKET

UNIT VOLUME (in billions):

	Three Months Ended
	March 31,						Change
	2008			2007			Units			%
Camel (filter styles)		5.3			5.6			(0.4	)		-6.4	%
Kool		2.5			2.7			(0.2	)		-6.3	%
Pall Mall		1.6			1.6			0.0			-1.6	%
Total growth brands		9.4			9.9			(0.6	)		-5.6	%
Total support brands		8.8			10.0			(1.3	)		-12.6	%
Total non-support brands		2.7			3.7			(1.0	)		-26.5	%
Total R.J. Reynolds domestic		20.8			23.6			(2.8	)		-11.8	%
Total premium		13.2			14.7			(1.5	)		-10.1	%
Total value		7.7			9.0			(1.3	)		-14.6	%
Premium/total mix		63.2	%		62.0	%		1.2	%
Industry		80.4			83.2			(2.8	)		-3.3	%
Premium		58.8			60.8			(2.0	)		-3.3	%
Value		21.6			22.4			(0.8	)		-3.6	%
Premium/total mix		73.1	%		73.1	%		0.1	%

RETAIL SHARE OF MARKET:

	Three Months Ended
	March 31,
	2008			2007			Change
Camel (filter styles)		7.9	%		7.4	%		0.5
Kool		3.1	%		3.2	%		(0.1	)
Pall Mall		2.2	%		2.0	%		0.2
Total growth brands		13.2	%		12.6	%		0.5
Total support brands		11.0	%		12.0	%		(1.0	)
Total non-support brands		3.8	%		4.8	%		(1.0	)
Total R.J. Reynolds domestic		28.0	%		29.4	%		(1.4	)

Amounts are rounded on an individual basis and, accordingly, may not sum in the aggregate.
R.J. Reynolds’ support brands include Winston, Salem, Doral, Capri and Misty.
Industry data based on information from Management Science Associates, Inc.
Retail shares of market are as reported by Information Resources Inc.

Schedule 4

CONWOOD VOLUMES AND SHARE OF SHIPMENTS

UNIT VOLUME (in millions of cans):

	Three Months Ended
	March 31,				Change
	2008		2007		Units			%
Kodiak		13.1		12.8		0.2			1.9	%
Other premium		0.6		0.8		(0.1	)		-16.0	%
Total premium		13.7		13.6		0.1			0.9	%
Grizzly		61.7		54.3		7.5			13.7	%
Other price-value		0.5		0.6		(0.2	)		-25.8	%
Total price-value		62.2		54.9		7.3			13.3	%
Total moist snuff cans		75.9		68.5		7.4			10.8	%

SHARE OF SHIPMENTS:

	Three Months Ended
	March 31,
	2008			2007			Change
Kodiak		4.4	%		4.5	%		(0.2	)
Total premium		4.6	%		4.8	%		(0.3	)
Grizzly		22.1	%		20.6	%		1.6
Total price-value		22.3	%		20.8	%		1.5
Total Conwood		26.9	%		25.6	%		1.2

Amounts are rounded on an individual basis and, accordingly, may not sum in the aggregate.
Share data for total moist snuff based on distributor reported data processed by Management Science Associates, Inc.