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) November 11, 2011

Reynolds American Inc.

(Exact Name of Registrant as Specified in its Charter)

North Carolina	1-32258	20-0546644
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer 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):

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

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

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

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

ITEM 1.01 Entry into a Material Definitive Agreement.

On November 14, 2011, Reynolds American Inc., referred to as RAI, announced that its Board of Directors had authorized RAI to repurchase, on or before May 31, 2014, up to $2.5 billion of outstanding shares of RAI common stock, in open market or privately negotiated transactions or pursuant to the share repurchase agreement 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.

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 November 11, 2011, 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 November 11, 2011, B&W was the record and beneficial owner of 245,036,858 shares of RAI 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 (except to the extent the purchases under the Repurchase Program are Excluded Compensation Buybacks, as such term is defined in the SRA) 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. B&W will not participate proportionately in Excluded Compensation Buybacks under the Repurchase Program because those share repurchases, which will satisfy the requirements of the Governance Agreement described below, offset increases in the number of outstanding shares of RAI common stock, and the net effect of such share issuances and share buybacks (without B&W participation) is to keep B&W’s percentage ownership in RAI unchanged.

Subject to this treatment of Excluded Compensation Buybacks, under the SRA, at the end of each week, referred to as a Buyback Week, during which RAI purchases shares of RAI 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 November 11, 2011, to (y) 1.0 minus B&W’s percentage ownership of the equity of RAI on November 11, 2011;

(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 November 11, 2011 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. 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 RAI 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 May 31, 2014, and the expenditure of $2.5 billion pursuant to the Repurchase Program, including pursuant to the SRA.

In connection with its approval of the SRA, RAI’s Board of Directors determined that under the existing terms of RAI’s shareholder rights plan adopted on July 30, 2004, neither BAT nor any of its subsidiaries will be deemed to be an “Acquiring Person” (as such term is defined in 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, as amended, which 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. 3, dated as of November 11, 2011, to the Governance Agreement, modifying the Governance Agreement to, among other things, (i) 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, and (ii) require RAI, if it issues RAI common stock upon certain transactions (such as the exercise of employee stock options or vesting of performance shares), to repurchase, within a reasonable period after such issuance, a number of shares of RAI common stock equal to the number of shares of RAI common stock issued by RAI so that the number of outstanding shares of RAI common stock is not increased, and B&W’s percentage ownership is not decreased, by such issuance after taking into account the repurchases. A copy of such amendment is attached to this report as Exhibit 10.2.

ITEM 2.02 Results of Operations and Financial Condition.

On November 14, 2011, RAI announced a change in its method of accounting for pension and postretirement benefits. A copy of the press release is attached as Exhibit 99.1.

Historically, RAI has recognized actuarial gains and losses outside of 10% of the greater of the pension and postretirement plan assets or benefit obligations, referred to as the corridor, as a component of shareholders’ equity in its consolidated balance sheets on an annual basis, amortizing them into operating results over the average future service period of active employees in these plans. During the fourth quarter of 2011, RAI elected to recognize actuarial gains and losses that are outside the corridor in its operating results in the year in which such gains and losses occur. This change is intended to improve the transparency of RAI’s operating results by more quickly recognizing the effects of current economic and interest rate trends on plan investments and assumptions. These

gains and losses are measured annually as of December 31 and, accordingly, are recorded during the fourth quarter. Additionally, for purposes of calculating the expected return on plan assets, RAI will no longer use an averaging technique permitted under generally accepted accounting principles for the market-related value of plan assets, but instead will use actual fair value of plan assets. RAI has applied this change retrospectively, adjusting prior periods.

ITEM 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Number	Exhibit
10.1	Share Repurchase Agreement, dated November 11, 2011, by and between Reynolds American Inc. and Brown & Williamson Holdings, Inc.
10.2	Amendment No. 3, dated November 11, 2011, to the Governance Agreement, dated as of July 30, 2004, as amended, by and among British American Tobacco p.l.c., Brown & Williamson Holdings, Inc. and Reynolds American Inc.
99.1*	Press Release of Reynolds American Inc., dated November 14, 2011.

* Exhibit is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subjected to the liabilities of that Section. This exhibit 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.

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/    Frederick W. Smothers
	Name:	Frederick W. Smothers
	Title:	Senior Vice President and Chief Accounting Officer

Date: November 14, 2011

INDEX TO EXHIBITS

Number	Exhibit
10.1	Share Repurchase Agreement, dated November 11, 2011, by and between Reynolds American Inc. and Brown & Williamson Holdings, Inc.
10.2	Amendment No. 3, dated November 11, 2011, to the Governance Agreement, dated as of July 30, 2004, as amended, by and among British American Tobacco p.l.c., Brown & Williamson Holdings, Inc. and Reynolds American Inc.
99.1	Press Release of Reynolds American Inc., dated November 14, 2011.

EX-10.1

Exhibit 10.1

EXECUTION COPY

SHARE REPURCHASE AGREEMENT

THIS SHARE REPURCHASE AGREEMENT (this “Agreement”), is entered into on November 11, 2011, 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 $2.5 billion by May 31, 2014, 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, except to the extent purchases under the Share Repurchase Program are Excluded Compensation Buybacks, 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;

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

(iv) “Excluded Compensation Buyback” means a buyback of Shares by the Company designated by the Company in a notice to B&W as being made pursuant to Section 2.04(d) of the Governance Agreement; and

(v) for purposes of the provisions of this Agreement relating to B&W’s participation in the Share Repurchase Program (including, for example, the definition of “Buyback Week” and the calculation of the B&W Buyback Number as defined below), any Excluded Compensation Buyback shall be treated as not made pursuant to the Share Repurchase Program (and B&W will not participate in any Excluded Compensation Buyback).

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.

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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 limitation, issuances of new equity by the Company pursuant to the exercise of stock options or the vesting of performance shares, 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.

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Without limiting the generality of the foregoing, for purposes of Paragraph A.5(ii), (i) B&W will take into account, in considering whether to take account of possible future issuances of Shares by the Company, the Company’s obligation pursuant to Section 2.04(d) of the Governance Agreement to make Excluded Compensation Buybacks, and (ii) B&W’s percentage ownership in the Company at any time shall be determined by treating as not outstanding the number of Shares with respect to which the Company then has an outstanding obligation to make Excluded Compensation Buybacks.

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, outstanding performance shares, and other 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.

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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.

15. During the term of this Agreement, the Company shall satisfy its obligations under Section 2.04(d) of the Governance Agreement by making Excluded Compensation Buybacks pursuant to the Share Repurchase Program, and to the extent there are unsatisfied obligations under such Section 2.04(d), purchases pursuant to the Share Repurchase Program shall be designated by the Company as Excluded Compensation Buybacks.

B. Term. The term of this Agreement shall commence on the date hereof and shall terminate as of the earlier of the date stated in the first Recital hereto and the date of the expenditure of the aggregate amount stated in the first Recital hereto 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

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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, in each case as such Sections are in effect on the date of this Agreement (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, in each case as such Sections are in effect on the date of this Agreement. B&W may, upon advice of its outside tax counsel and after consultation with the Company, reasonably determine that pending, proposed or enacted tax legislation would or will adversely affect the Intended Tax Treatment, even if (in the case of pending or proposed legislation) such legislation has not yet been enacted but might be enacted with a retroactive effective date, but (i) any such determination by B&W shall be effective only with respect to Buyback Weeks that begin after B&W has provided notice to the Company of such determination, and (ii) B&W may not rely on pending, proposed or enacted tax legislation as a basis for repurchasing Shares from the Company, pursuant to Paragraph J (or otherwise pursuant to this Agreement) that it previously sold to the Company pursuant to this Agreement.

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

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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 Paragraph 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 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 Paragraph 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

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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 Paragraph 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 Paragraph H to Delaware courts being deemed to be references to North Carolina courts and any references in this Paragraph 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.

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

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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

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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 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

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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) Without limiting the generality of Paragraph L.2(i), either B&W or the Company may invoke the procedures of that Paragraph immediately following the end of the Share Repurchase Program, to the extent that the number of Shares that have been purchased from B&W has been reduced on account of Paragraphs A.5(ii) and A.6(iii). If such procedures are invoked by the Company at such time, B&W shall reasonably consider, based on the advice of its outside tax counsel after consultation with the Company, the extent to which the prior reduction in sales of Shares to the Company pursuant to Paragraph A.6(iii) is still appropriate in order to not put the Intended Tax Treatment at risk, based on all the facts and circumstances existing at that time. To the extent that B&W determines that the sale of an additional number of Shares to the Company at that time, in order to offset all or part of the prior reduction in sales as a result of Paragraph A.6(iii), is consistent with Paragraphs A.5(i) and (ii) and would not put the Intended Tax Treatment at risk, then it shall accept a Modification Certificate from the Company providing an Additional Number equal to such additional number.

(iii) If either the Company or B&W properly delivers a Modification Certificate, then, subject to Paragraphs L.3(i) and (ii), 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 Paragraphs L.3(i) and (ii) 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 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.

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N. Notices. All notices, requests, claims, demands and other communications under this Agreement shall be given by email and shall be deemed given upon receipt by the parties at the following email addresses (or at such other email address for a party as shall be specified by like notice):

if to B&W, to

Corporate Secretary

Email: apanaccione@cscinfo.com

with copies to:

Divisional Vice President, Tax and Treasury

Louisville Corporate Services, Inc.

Email: mike_walter@bat.com

Cravath, Swaine & Moore LLP

Email: pgelston@cravath.com

    sjebejian@cravath.com

if to the Company, to

General Counsel

Email: holtonm@rjrt.com

with a copy to:

Jones Day

Email: jrthomson@jonesday.com

    rclesnick@jonesday.com

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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]

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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, employee stock options, performance shares and other deferred issuances of shares as compensation, including grant, vesting, expiration and issuance dates, all 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, including Excluded Compensation Buybacks.

[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 November 11, 2011 (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 (including Excluded Compensation Buybacks) 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:

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	Schedule 1: General Information and Calculation of B&W Buyback Number
	General Calculation Period (“period”) Includes Buyback Week (Y/N)
A	Date of Agreement - November 11, 2011
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	Share 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

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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 compensatory shares (e.g., EIAP/LTIP/Performance Shares) issued net of Tax Shares withheld
C3	Options exercised (net of Tax Shares cancelled)
C4	Shares bought or to be bought under buyback plan from third parties for current period other than pursuant to Section 2.04(d) of the Governance Agreement
C4A	Shares bought pursuant to Section 2.04(d) of Governance Agreement
C5	Net issuances or reacquisitions* by RAI of Shares (tax) except C1, C2, C3, C4, C4A
C6	Net Shares outstanding (tax) on last day of period before buyback from B&W	B7+C1+C2+C3-C4-C4A+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, C4A, C7	+ or -

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C9	Net Shares outstanding (SEC) on last day of period before buyback from B&W	B1-B6+C2+C3-C4-C4A-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

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D12	B&W Buyback Number A.5(ii)	D10-D11
D13	Excluded Compensation Buybacks pending at end of period
E	Calculation Pursuant to Section A.5(i) of the Agreement
E1	Sum of all buybacks from third parties (including for current period)	C4 Cumulative
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)	F1
E7	B&W Buyback Number 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-but not negative)
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

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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
G4A	Same as G4 but net of pending Excluded Compensation Buybacks	G4-D13
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
G7A	B&W percentage ownership after buyback (including assumed issuances and completion of all pending Excluded Compensation Buybacks)	G5/G4A
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

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H2	Volume Weighted Average price per share paid	H1/C4
H3	Settlement Date
H4	Amount to be paid to B&W	H2*F1
I1	Total dollars of buyback for period	H1+H4
I2	Total dollars of buyback (cumulative)	H1+H4 (cumulative)

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EXHIBIT B²

B&W NOTICE

Date:                             

To: REYNOLDS AMERICAN INC.

      Attn: Steven Holland

      Sent by email to: Hollans@rjrt.com

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]

BROWN & WILLIAMSON HOLDINGS, INC.,

Name: Andrew T. Panaccione

Title:   Secretary

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 November 11, 2011 (the “Share Repurchase Agreement”).

EX-10.2

Exhibit 10.2

EXECUTION COPY

AMENDMENT No. 3, dated as of November 11, 2011, (this “Amendment”) to the GOVERNANCE AGREEMENT, dated as of July 30, 2004 (the “Agreement”), as amended, 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 $2.5 billion by May 31, 2014, to repurchase shares;

WHEREAS, B&W and Reynolds American have entered into a share repurchase agreement, dated as of November 11, 2011, 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, 2.04(d), 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 1.01 of the Agreement is hereby amended by replacing the definition of “Share Repurchase Agreement” with the following:

“Share Repurchase Agreement” means (i) 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, (ii) the Share Repurchase Agreement, dated as of November 11, 2011, between B&W and Reynolds American, pursuant to which B&W shall participate in the Second Share Repurchase Program subject to the terms and conditions set forth therein, and (iii) 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.”

(b) Section 1.01 of the Agreement is hereby further amended by inserting the following definition in the appropriate alphabetical order:

“Second 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 $2.5 billion (including purchases required by Section 2.04(d) of this Agreement) by May 31, 2014 to repurchase shares.”

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(c) Section 2.04(d) of the Agreement is hereby amended by replacing such Section 2.04(d) in its entirety with the following new Section 2.04(d):

“(d) If, on or after November 11, 2011, Reynolds American issues Common Stock or any other Equity Security to any of its directors, officers, employees, consultants or independent contractors who provided services to Reynolds American or its subsidiaries (the “Designated Persons”) upon exercise of any option, warrant or other security relating to Common Stock or any other Equity Security or upon vesting of any performance shares or similar compensation award or otherwise issues Common Stock or any other Equity Security, restricted or otherwise, to any Designated Person then prior to or within a reasonable period after such issuance (but in any event not later than 20 Available Trading Days after such issuance occurs), Reynolds American will repurchase a number of shares of outstanding Common Stock so that the number of outstanding shares of Common Stock are not increased, and B&W’s Percentage Interest is not decreased, by such issuance after taking into account such repurchase; provided, however, that (i) Reynolds American will not be required to repurchase such shares, if, at the time of such issuance, B&W’s Percentage Interest has fallen below 25%, without giving effect to such issuance, and (ii) repurchases by Reynolds American pursuant to any share repurchase plan or program in which any Investor Party has participated or agreed to participate, including pursuant to any Share Repurchase Agreement (except Excluded Compensation Buybacks under the Second Share Repurchase Program), shall not satisfy Reynolds American’s obligation under this Section 2.04(d). For purposes of this Section 2.04(d), an “Available Trading Day” shall mean any day on which the New York Stock Exchange, Inc. is open for trading, except (x) any day during a “blackout period” that is included in Reynolds American’s insider trading policy and prohibits the buying or selling of Common Stock by executive officers of Reynolds American in connection with the release or prospective release of Reynolds American’s annual or quarterly financial earnings information, or (y) any day on which purchases of Common Stock by Reynolds American would (i) in the reasonable judgment of Reynolds American, based on the advice of its outside counsel and after consultation with B&W, violate applicable law or (ii) require Reynolds American to disclose a material financing, acquisition or other corporate development, and the proper officers of Reynolds American have determined in the good faith exercise of their reasonable business judgment, that such disclosure is not in the best interests of Reynolds American; provided, however, that the number of days excluded from the definition of Available Trading Days under clause (y) of this sentence shall not, without the prior written consent of BAT, which consent shall not be unreasonably withheld, delayed or conditioned (it being understood that withholding consent to avoid putting at risk the Intended Tax Treatment (as such term is defined in the Share Repurchase Agreement) shall be deemed reasonable), exceed 40 of such trading days for any specific issuance of Equity Securities or a total of 80 of such trading days in any twelve-month period. Reynolds American shall promptly give B&W written notice of any delay in the repurchase of shares of Common Stock required by this Section 2.04(d), which notice shall contain the anticipated length of such delay, and Reynolds American shall promptly notify B&W of the termination of each such delay.”

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(d) Section 4.01 of the Agreement is hereby further 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 any 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.”

(e) Section 4.03(a) of the Agreement is hereby further 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 any 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 any Share Repurchase Agreement) following the date 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.

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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 Amendment No. 3 to the Governance Agreement]

- 4 -

EX-99.1

Exhibit 99.1

Reynolds American Inc.

P.O. Box 2990

Winston-Salem, NC 27102-2990

Contact:	Investor Relations:	Morris Moore	Media:	Jane Seccombe	RAI 2011-21
		(336) 741-3116		(336) 741-5068

RAI announces $2.5 billion share repurchase program,

pension and postretirement accounting change

WINSTON-SALEM, N.C. – Nov. 14, 2011 – Reynolds American Inc. (NYSE: RAI) announced today that its board of directors had authorized the repurchase of up to $2.5 billion of the company’s outstanding common stock over the next two-and-a-half years.

RAI said that the new share repurchase program, which goes into effect immediately, would be completed by mid-2014. The program allows for shares to be purchased from time to time in the open market, depending on market conditions, or in privately negotiated transactions.

The company also announced that British American Tobacco p.l.c. will participate through its wholly owned subsidiary, Brown & Williamson Holdings, Inc., in the share repurchase program, except for repurchases to offset new equity compensation issuances, to maintain its ownership of approximately 42 percent of RAI’s outstanding common stock.

“The share repurchase program clearly demonstrates our continuing commitment to returning value to our shareholders,” said Daniel M. Delen, RAI’s president and chief executive officer. “This announcement comes on top of two dividend increases announced earlier this year, which brought the total dividend increase to 14.3 percent for the year.”

In addition, the company said it is changing the way in which it accounts for pension and postretirement plans, adopting the mark-to-market methodology of accounting that recognizes actuarial gains and losses in the period during which they were incurred.

“The new policy increases transparency at the operating company level by reflecting current market returns, interest rates and health-care costs,” said Thomas R. Adams, RAI’s chief financial officer.

An analysis of pension and postretirement plan performance is generally performed annually as of December 31. Any actuarial gains or losses that fall outside a 10 percent corridor (10 percent of the greater of plan assets or benefit obligations) will be recognized during the fourth quarter as a mark-to-market adjustment included in pension and postretirement expense.

The change in accounting will be applied retrospectively to prior periods. The GAAP and adjusted EPS impact is highlighted in the following table, and is detailed on both a GAAP and adjusted basis in the attached schedules.

- more -

			Full		Full
	Nine Months		Year		Year
GAAP EPS	2011		2010		2009
Previously Reported	$	1.75	$	1.90	$	1.65
Net Accounting Change Impact		.13		.02		(.01	)
Revised GAAP EPS	$	1.88	$	1.92	$	1.64

			Full		Full
	Nine Months		Year		Year
Adjusted EPS	2011		2010		2009
Previously Reported	$	1.96	$	2.49	$	2.32
Net Accounting Change Impact		.13		.14		.04
Revised Adjusted EPS	$	2.09	$	2.63	$	2.36

“The change will not impact cash flow or funding requirements,” Adams said. “The company will adjust prior-years’ financials to be consistent with the new policy. We continue to monitor our pension plans closely to ensure that they remain well funded,” he said.

As a result of the pension and postretirement accounting change, RAI is revising its adjusted full-year EPS guidance to $2.77 to $2.82. This guidance excludes the effect of any potential mark-to-market adjustments for the pension and postretirement plans, as well as the impact of the Engle progeny lawsuits, the Scott lawsuit, implementation and integration costs, and tax items.

Web Disclosure

RAI’s website, www.reynoldsamerican.com, is the primary source of publicly disclosed news about RAI and its operating companies. We use the website as our primary means of distributing quarterly earnings and other company news. We encourage investors and others to register at www.reynoldsamerican.com to receive alerts when news about the company has been posted.

About Us

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

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

• American Snuff Company, LLC is the nation’s second-largest manufacturer of smokeless tobacco products. Its leading brands are Grizzly, Kodiak and Levi Garrett.

• 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.

• Niconovum AB markets innovative nicotine replacement therapy products in Sweden and Denmark under the Zonnic brand name.

Copies of RAI's news releases, annual reports, SEC filings and other financial materials, including risk factors containing forward-looking information, are available at www.reynoldsamerican.com.

(financial schedules follow)

Schedule 1

REYNOLDS AMERICAN INC.

Historical and MTM Pension/Postretirement Accounting

(Dollars in Millions, Except Per Share Amounts)

(Unaudited)

	Nine Months			Full Year
	2011			2010			2009
Historical Accounting
Pension
Amortization of net loss	$	105		$	121		$	99
Other pension expense (income)		(29	)		(7	)		26
Pension expense	$	76		$	114		$	125
Postretirement
Amortization of net loss	$	22		$	19		$	15
Other postretirement expense		23			42			40
Postretirement expense	$	45		$	61		$	55
Operating income	$	1,753		$	2,419		$	1,775
Income from continuing operations before income taxes	$	1,595		$	2,192		$	1,534
Provision for income taxes		571			863			572
Income from continuing operations		1,024			1,329			962
Losses from discontinued operations, net of tax		—			(216	)		—
Net income	$	1,024		$	1,113		$	962
Diluted net income per share	$	1.75		$	1.90		$	1.65
MTM Accounting
Pension
MTM adjustment (1)	$	—		$	3		$	14
Other pension expense (income)		(32	)		9			99
Pension expense (income)	$	(32	)	$	12		$	113
Postretirement
MTM adjustment (1)	$	—		$	107		$	35
Other postretirement expense		23			43			44
Postretirement expense	$	23		$	150		$	79
Operating income	$	1,883		$	2,432		$	1,763
Income from continuing operations before income taxes	$	1,725		$	2,205		$	1,522
Provision for income taxes		623			868			567
Income from continuing operations		1,102		$	1,337		$	955
Losses from discontinued operations, net of tax		—			(216	)		—
Net income	$	1,102		$	1,121		$	955
Diluted net income per share	$	1.88		$	1.92		$	1.64
Diluted weighted average shares, in thousands		585,868			584,854			583,652

(1) Actuarial gains and losses outside a 10% corridor are generally recognized annually as of December 31, and accordingly, are recorded in the fourth quarter.

Schedule 2

REYNOLDS AMERICAN INC.

Historical and MTM Pension/Postretirement Accounting by Quarter

(Dollars in Millions, Except Per Share Amounts)

(Unaudited)

	2011									2010
	Q1			Q2			Q3			Q1			Q2			Q3			Q4
Historical Accounting
Pension
Amortization of net loss	$	35		$	35		$	35		$	30		$	30		$	30		$	31
Other pension income		(9	)		(13	)		(7	)		(1	)		(2	)		(2	)		(2	)
Pension expense	$	26		$	22		$	28		$	29		$	28		$	28		$	29
Postretirement
Amortization of net loss	$	7		$	8		$	7		$	5		$	4		$	5		$	5
Other postretirement expense		9			6			8			11			10			11			10
Postretirement expense	$	16		$	14		$	15		$	16		$	14		$	16		$	15
Operating income	$	577		$	541		$	635		$	570		$	620		$	662		$	567
Income from continuing operations before income taxes	$	525		$	489		$	581		$	512		$	551		$	618		$	511
Provision for income taxes		172			185			214			214			210			237			202
Income from continuing operations		353			304			367			298			341			381			309
Losses from discontinued operations, net of tax		—			—			—			(216	)		—			—			—
Net income	$	353		$	304		$	367		$	82		$	341		$	381		$	309
Diluted net income per share	$	0.60		$	0.52		$	0.63		$	0.14		$	0.58		$	0.65		$	0.53
MTM Accounting
Pension
MTM adjustment	$	—		$	—		$	—		$	—		$	—		$	—		$	3
Other pension expense (income)		(11	)		(11	)		(10	)		3			2			2			2
Pension expense (income)	$	(11	)	$	(11	)	$	(10	)	$	3		$	2		$	2		$	5
Postretirement
MTM adjustment	$	—		$	—		$	—		$	—		$	—		$	—		$	107
Other postretirement expense		7			8			8			12			9			11			11
Postretirement expense	$	7		$	8		$	8		$	12		$	9		$	11		$	118
Operating income	$	623		$	580		$	680		$	600		$	651		$	693		$	488
Income from continuing operations before income taxes	$	571		$	528		$	626		$	542		$	582		$	649		$	432
Provision for income taxes		190			201			232			226			223			249			170
Income from continuing operations	$	381		$	327		$	394		$	316		$	359		$	400		$	262
Losses from discontinued operations, net of tax		—			—			—			(216	)		—			—			—
Net income	$	381		$	327		$	394		$	100		$	359		$	400		$	262
Diluted net income per share	$	0.65		$	0.56		$	0.67		$	0.17		$	0.61		$	0.68		$	0.45
Diluted weighted average shares, in thousands		585,647			585,874			586,082			584,339			584,565			585,011			585,501

Schedule 3

REYNOLDS AMERICAN INC.

Reconciliation of GAAP to Adjusted Results

(Dollars in Millions, Except Per Share Amounts)

(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.

	Nine Months			Full Year
	2011			2010		2009
Revised GAAP operating income	$	1,883		$	2,432	$	1,763
Implementation costs		23			60		—
Scott lawsuit		139			—		—
Engle Progeny lawsuits		63			—		—
Asset impairment and exit charges		—			38		—
Goodwill and trademark impairment charges		—			32		567
Restructuring charges		—			—		56
Historical adjustments		225			130		623
MTM adjustment		—			110		49
Revised adjusted operating income	$	2,108		$	2,672	$	2,435
Revised GAAP net income	$	1,102		$	1,121	$	955
Implementation costs		14			37		—
Tax items		(16	)		—		—
Scott lawsuit		88			—		—
Engle Progeny lawsuits		39			—		—
Health-care subsidy tax charge		—			27		—
Asset impairment and exit charges		—			33		—
Goodwill and trademark impairment charges		—			30		356
Restructuring charges		—			—		35
Losses from discontinued operations		—			216		—
Historical adjustments		125			343		391
MTM adjustment		—			69		31
Revised adjusted net income	$	1,227		$	1,533	$	1,377
Revised GAAP net income per diluted share	$	1.88		$	1.92	$	1.64
Implementation costs		0.02			0.06		—
Tax items		(0.03	)		—		—
Scott lawsuit		0.15			—		—
Engle Progeny lawsuits		0.07			—		—
Health-care subsidy tax charge		—			0.05		—
Asset impairment and exit charges		—			0.06		—
Goodwill and trademark impairment charges		—			0.05		0.61
Restructuring charges		—			—		0.06
Losses from discontinued operations		—			0.37		—
Historical adjustments per diluted share		0.21			0.59		0.67
MTM adjustment		—			0.12		0.05
Revised adjusted net income per diluted share	$	2.09		$	2.63	$	2.36

Schedule 4

REYNOLDS AMERICAN INC.

Reconciliation of GAAP to Adjusted Results by Quarter

(Dollars in Millions, Except Per Share Amounts)

(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.

	2011							2010
	Q1			Q2		Q3		Q1		Q2		Q3		Q4
Revised GAAP operating income	$	623		$	580	$	680	$	600	$	651	$	693	$	488
Implementation costs		12			3		8		—		17		24		19
Scott lawsuit		—			139		—		—		—		—		—
Engle Progeny lawsuits		—			—		63		—		—		—		—
Asset impairment and exit charges		—			—		—		—		38		—		—
Goodwill and trademark impairment charges		—			—		—		—		—		—		32
Restructuring charges		—			—		—		—		—		—		—
Historical adjustments		12			142		71		—		55		24		51
MTM adjustment		—			—		—		—		—		—		110
Revised adjusted operating income	$	635		$	722	$	751	$	600	$	706	$	717	$	649
Revised GAAP net income	$	381		$	327	$	394	$	100	$	359	$	400	$	262
Implementation costs		7			2		5		—		11		15		11
Tax items		(16	)		—		—		—		—		—		—
Scott lawsuit		—			88		—		—		—		—		—
Engle Progeny lawsuits		—			—		39		—		—		—		—
Health-care subsidy tax charge		—			—		—		27		—		—		—
Asset impairment and exit charges		—			—		—		—		33		—		—
Goodwill and trademark impairment charges		—			—		—		—		—		—		30
Restructuring charges		—			—		—		—		—		—		—
Losses from discontinued operations		—			—		—		216		—		—		—
Historical adjustments		(9	)		90		44		243		44		15		41
MTM adjustment		—			—		—		—		—		—		69
Revised adjusted net income	$	372		$	417	$	438	$	343	$	403	$	415	$	372
Revised GAAP net income per diluted share	$	0.65		$	0.56	$	0.67	$	0.17	$	0.61	$	0.68	$	0.45
Implementation costs		0.01			—		0.01		—		0.02		0.03		0.02
Tax items		(0.02	)		—		—		—		—		—		—
Scott lawsuit		—			0.15		—		—		—		—		—
Engle Progeny lawsuits		—			—		0.06		—		—		—		—
Health-care subsidy tax charge		—			—		—		0.05		—		—		—
Asset impairment and exit charges		—			—		—		—		0.06		—		—
Goodwill and trademark impairment charges		—			—		—		—		—		—		0.05
Restructuring charges		—			—		—		—		—		—		—
Losses from discontinued operations		—			—		—		0.37		—		—		—
Historical adjustments per diluted share		(0.01	)		0.15		0.07		0.42		0.08		0.03		0.07
MTM adjustment		—			—		—		—		—		—		0.12
Revised adjusted net income per diluted share	$	0.64		$	0.71	$	0.74	$	0.59	$	0.69	$	0.71	$	0.64

Schedule 5

REYNOLDS AMERICAN INC.

Reconciliation of GAAP to Adjusted Operating Income by Segment

The R.J. Reynolds segment consists of the primary operations of R. J. Reynolds Tobacco Company, the second-largest tobacco company in the United States and which also manages a contract manufacturing business.

The American Snuff segment consists of the primary operations of American Snuff Company, LLC, the second-largest smokeless tobacco products manufacturer in the United States, and Lane, Limited until its sale on February 28, 2011.

Management uses “adjusted” (non-GAAP) measurements to set performance goals and to measure the performance of the company, and believes that investors’ understanding of the underlying performance of the company’s continuing operations is enhanced through the disclosure of these metrics.

					Full Year
	Nine Months 2011				2010				2009
	R.J.		American		R.J.		American		R.J.		American
	Reynolds		Snuff		Reynolds		Snuff		Reynolds		Snuff
GAAP revised operating income	$	1,523	$	255	$	2,084	$	320	$	1,481	$	276
The GAAP results include the following:
Implementation costs included in cost of products sold and selling, general and administrative expenses		16		3		26		20		—		—
Scott lawsuit		139		—		—		—		—		—
Engle Progeny lawsuits		63		—		—		—
Asset impairment and exit charges		—		—		24		—		—		—
Goodwill and trademark impairment charges		—		—		—		32		491		76
Restructuring charges		—		—		—		—		56		—
Historical adjustments		218		3		50		52		547		76
MTM adjustment		—		—		105		2		39		—
Adjusted revised operating income	$	1,741	$	258	$	2,239	$	374	$	2,067	$	352

Schedule 6

REYNOLDS AMERICAN INC.

Reconciliation of GAAP to Adjusted Operating Income by Segment by Quarter

The R.J. Reynolds segment consists of the primary operations of R. J. Reynolds Tobacco Company, the second-largest tobacco company in the United States and which also manages a contract manufacturing business.

The American Snuff segment consists of the primary operations of American Snuff Company, LLC, the second-largest smokeless tobacco products manufacturer in the United States, and Lane, Limited until its sale on February 28, 2011.

Management uses “adjusted” (non-GAAP) measurements to set performance goals and to measure the performance of the company, and believes that investors’ understanding of the underlying performance of the company’s continuing operations is enhanced through the disclosure of these metrics.

		$0.0		$0.0		$0.0		$0.0		$0.0		$0.0
	2011
	Q1				Q2				Q3
	R.J.		American		R.J.		American		R.J.		American
	Reynolds		Snuff		Reynolds		Snuff		Reynolds		Snuff
GAAP revised operating income	$	506	$	86	$	457	$	80	$	560	$	89
The GAAP results include the following:
Implementation costs		8		2		3		—		5		1
Scott lawsuit		—		—		139		—		—		—
Engle Progeny lawsuits		—		—		—		—		63		—
Historical adjustments		8		2		142		—		68		1
Adjusted revised operating income	$	514	$	88	$	599	$	80	$	628	$	90

		$0.00.0		$0.00.0		$0.00.0		$0.00.0		$0.00.0		$0.00.0		$0.00.0		$0.00.0
	2010
	Q1				Q2				Q3				Q4
	R.J.		American		R.J.		American		R.J.		American		R.J.		American
	Reynolds		Snuff		Reynolds		Snuff		Reynolds		Snuff		Reynolds		Snuff
GAAP revised operating income	$	498	$	84	$	570	$	75	$	589	$	94	$	427	$	67
The GAAP results include the following:
Implementation costs		—		—		3		11		11		7		12		2
Asset impairment and exit charges		—		—		—		—		—		—		—		32
Goodwill and trademark impairment charges		—		—		24		—		—		—		—		—
Historical adjustments		—		—		27		11		11		7		12		34
MTM adjustment		—		—		—		—		—		—		105		2
Adjusted revised operating income	$	498	$	84	$	597	$	86	$	600	$	101	$	544	$	103