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TABLE OF CONTENTS Page General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I Item 1 - ELECTION OF DIRECTORS .............................. 2 Information Concerning the Board of Directors .............. 8 Remuneration . 9 ...... ....... . ..... Transactions with Management and Others ................. 11 Stock Option and Other Plans .................................... 11 Stock Option Table .......................................... 12 Phantom Share Accounts Table ................................ 14 Retirement Plans ............................................ :... 14 Ownership of the Company's Securities ............................. 16 Item 2-RATlFICATION OF APPOINTMENT OF AUDITORS ........... 17 Item 3-EMPLOYEES' SAVINGS AND INVESTMENT PLAN ........... 17 General . ...............:...................... 17 Member Contributions ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Company Contributions .................................. 18 Investment of Contributions .............................. 18 Withdrawals and Distributions ............................ 18 Termination and Amendment .................... . . . . . . . . . 18 Tax Consequences ....................................... 18 Stockholder Approval ................................... 19 Item 4-STOCK BONUS PLAN ................................... 19 General 19 Company Contributions .................................. 19 Allocation of Company Contributions ...................... 19 Investment of Contributions .............................. 20 Withdrawals and Distributions ............................ 20 Termination and Amendment ............................. 20 Tax Consequences ...................................... 20 Stockholder Approval ................................... 20 Item 5-1982 LONG TERM INCENTIVE PLAN ....................... 20 General ............................................... 21 Awards ................................................ 21 Participants ............................................ 22 Adjustments ........................................... 22 Termination and Amendment ............................. 22 Tax Consequences ...................................... 23 Stockholder Approval ................................... 24 Item 6- STOCKHOLDER PROPOSAL CONCERNING CUMULATIVE VOT- ING IN THE ELECTION OF DIRECTORS .................... 24 Item 7-STOCKHOLDER PROPOSAL CONCERNING PREEMPTIVE RIG HTS ............................................... 25 Item 8-STOCKHOLDER PROPOSAL CONCERNING CIGARETTE PRO- MOTIONS IN THIRD WORLD NATIONS .................... 26 Miscellaneous .................................................. 28 EXHIBIT A - Empioyees' Savings and Investment Plan .............. A-1 EXHIBIT B- Stock Bonus Plan ................................... B-1 EXHIBIT C -1982 Long Term Incentive Plan ....................... C-1

R.J.Reynolds Indus#ries, Inc. 'Pl~n :,cn-Salern,N.C 27102 March 17, 1982 PROXY STATEMENT GENERAL INFORMATION The accompanying proxy is solicited by the Board of Directors of the Company. All shares repre- sented by duly furnished proxies will be voted in accordance therewith. A stockholder furnishing the accompanying proxy may revoke it any time prior to the voting of the proxy. Solicitation may be made personally, by telephone, by telegraph or by mail by officers and employees of the Company who will not be additionally compensated therefor. The Company will request persons, such as brokers, nominees and fiduciaries, holding stock in their names for others, or holding stock for others who have the right to give voting instructions, to forward proxy material to their principals and request authority for the execution of the proxy and wi&eimburse such persons for their expenses In so doing. Georgeson & Co. has been retained to assist in7the solicitation of proxies at a cost not expected to exceed $14,500. The total cost of soliciting proxies will be borne by the Company. As of the close of business on March 3, 1982 there were outstanding and entitled to vote 104,381,024 shares of Common Stock, 274,969 shares of $2.25 Convertibie Preferred Stock and 7,053,478 shares of Series A Cumulative Preferred Stock. Holders of Common Stock, $2.25 Convertible Preferred Stock and Series A Cumulative Preferred Stock of record as of the close of business on March 3, 1982 will be entitled to vote on matters submitted to a vote at the meeting. Each share of Common Stock is entitled to one vote on all matters submitted at the meeting; each share of $2.25 Convertible Preferred Stock Is entitled to one-half vote on all matters submitted at the meeting; and each share of Series A Cumulative Preferred Stock is entitled to three-fourths vote on all matters submitted at the meeting. 1

VERNON E. JORDAN, JR., 46, Partner, Akin, Gump, Strauss, Hauer & Feld. Mr. Jordan joined the law firm of Akin, Gump, Strauss, Hauer & Feld of Washington, D. C., and Dallas, Texas, as a Partner on January 1, 1982. Prior to this association, he served for ten years as President of the National Urban League, inc., a non-profit community service organization. Mr. Jordan is a Director of American Express Company, Bankers Trust Company, Bankers Trust New York Corporation, Celanese Corporation, J. C. Penney Company, Inc., Xerox Corporation and Dow Jones & Co. He also serves on the Board of Directors of Atlanta University Center Corporation, Clark College, the John Hay Whitney Foundation, the Rockefeller Foundation and the Taconic Foundation. He has served as a member of the National Advisory Commission on Selective Service, the American Revolution Bi-Centennial Commission, the Presidential Clemency Board and the Advisory Council on Social Security. Mr. Jordan Is a graduate of DePauw University and Howard University Law School. He is a member of the bar of the States of Arkansas and Georgia and is a member of the American Bar Association and the National Bar Association. Member: Audit Committee First became a Director: 1980 Public Policy Committee Shares owned: Common, 100 JUANITA M. KREPS, 61, former Secretary of Commerce. Dr. Kreps, who served as Secretary of Commerce from January 1977 to October 1979, was elected a Director of the Company on November 15, 1979. She previously served as a Director of the Company from April 1975 to January 1977, when she resigned to join the President's Cabinet. Dr. Kreps was Vice President of Duke University from 1973 to 1977 and James B. Duke Professor of Economics at Duke University from 1972 to 1977. She is the author of several leading books and articles In the field of economics. Dr. Kreps serves on the Board of Directors of American Telephone & Telegraph Company, Armco, Inc., Citicorp, Eastman Kodak Company, J. C. Penney Company, Inc., and UAL, Inc. She also serves as a Trustee of_thq&uke Endowment. Dr. Kreps holds a Ph.D. degree from Duke University. Member: Executive Committee First became a Director: 1975 Public Policy Committee Shares owned: Common, 276 R. G. LANDIS, 61, President-Pacific, R. J. Reynolds Industries, Inc. Mr. Landis was elected to this position in 1981. Prior to that time he was Chairman and Chief Executive Officer of Del Monte Corporation. Mr. Landis joined Del Monte, the principal business of which Is food prod- ucts and related services, in 1942. Following a leave of absence for Air Force service and graduate school, he rose through a succession of management positions that led to his election as a Vice President in 1966, Group Executive Vice President-U.S. Operations In 1969, President- Chief Operations Officer in 1971, President-Chief Executive Officer in 1977, Chairman of the Board in 1978, and Chairman and Chief Executive Officer In 1980. He has been a Director of Del Monte since 1970. Mr. Landis also serves on the Board of Directors of Crocker National Corporation, Crocker National Bank, Kaiser Foundation Health Plan, Inc., and Potlatch Corporation. He Is a Director of SRI International, Inc. and the California Roundtable, and a Trustee of the Tax Foundation, Inc. and the San Francisco Bay Area Council. Mr. Landis is also a Regent of the University of the Pacific and a Trustee of his alma mater, the University of La Verne. He is a member of the Advisory Council of the University of California School of Business Administration. Member: Public Policy Committee First became a Director: 1979 Shares owneds. s: Common, 19,6342 5

ALBERT L. BUTLER, JR., 63, President, The Arista Company. Mr. Butler is also Treasurer and a member of the Board of Directors of The Arista Company which Is the holding company for Arista Information Systems, Inc., a Winston-Salem based data processing services bureau. He has been with The Arista Company (formerly Arista Mills Co.) since 1946. He is a member of the Board of Directors of The Wachovia Corporation, Wachovia Bank & Trust Company, N.A., Summit Communications, Inc., Standard Savings & Loan Association, Turnpike Properties, Inc., The Northwestern Mutual Life Insurance Co., Hayes-Albion Corporation and Wachovia Interna- tional Bank of New York. He Is a member of the Board of Visitors of the Medical Center of the Bowman Gray School of Medicine and a Director of the North Carolina Citizens Association. He Is also a Trustee of Wake Forest University. Mr. Butler is a graduate of Princeton University and holds an honorary Doctor of Laws degree from Wake Forest University. Member: Executive Committee First became a Director: 1976 Compensation Committee Shares owned: Common, 3,786 Finance Committee Nominating Committee HERSCHEL H. CUDD, 69, former Senior Vice President, Standard Oil Company (Indiana). From 1963 to 1974 Mr. Cudd served as President of Amoco Chemicals Corporation, a worldwide manu- facturer and marketer of chemicals and plastics and a subsidiary of Standard 011. He Is also a former Director of Standard Oil. Before joining Standard Oil In 1963, he was President of Avisun Corporation, then jointly owned by American Viscose Corporation and Sun Oil Company. From 1954 to 1960 he was a Vice President of American Viscose. Earlier he had been Director of the Engineering Experiment Station of Georgia Institute of Technology and a Division Manager for West Point Manufacturing Company, and held research management positions with Inter- national Minerals and Chemical Corporation and E. I. du Pont de Nemours & Company. Mr. Cudd is an Honorary Life Trustee of the Museum of Science and Industry in Chicago. He has served twice as a Director of the Manufacturing Chemists Association and hasperved on its executive committee. Mr. Cudd is a graduate of Texas A & I University and received master's and doctor's degrees in chemistry from the University of Texas. Member: Executive Committee First became a Director: 1974 Audit Committee Shares owned: Common, 1,176 Compensation Committee RONALD H. GRIERSON, 60, Director, The General Electric Company Ltd. (Great Britain). Mr. Grierson began his career on the editorial staff of "The Economist". After a short period of service in this position, he entered the private banking firm of S. G. Warburg & Co. Ltd. In 1948 and In 1958 became its Executive Director. He resigned that position in 1966 on being appointed Deputy Chairman and Managing Director of the government-sponsored Industrial Reorganization Corporation. In 1968 he became Vice Chairman of the General Electric Company, a British manufacturer of electrical products. In January 1973 Mr. Grierson gave up all business appoint- ments to assume the position of Director General for Industry and Technology at the European Commission in Brussels. In October 1974 he resumed his directorship of General Electric Company and subsequently became Chairman of its U.S. subsidiary, G.E.C. (America) Inc. He was appointed to the Company's International Advisory Board In 1975. Mr. Grierson is also a Director of S. G. Warburg & Co. Ltd. and a Director and Vice Chairman of Its U.S. associates, Warburg Paribas Becker Inc. and A. G. Becker & Co. Inc. He is also a Director of The Becker and Warburg-Paribas Group Incorporated, S. G. Warburg-North America Ltd. and Safic-Alcan & Cie (Paris). He is the Chairman of the Philharmonia Trust and of the European Foundation for Cancer Treatment Research and is a member of the Ernst von Siemens Music Foundation. Mr. Grierson holds a Master of Arts degree from Oxford University. Member: Finance Committee First became a Director: 1978 Audit Committee Shares owned: Common, 1,000 3

Item 1- ELECTION OF DIRECTORS A board of seventeen Directors, to hold office until their successors have been elected and qualified, is to be elected at the meeting. It is intended that, unless authorization to do so is withheld, the proxies will be voted for the election of the nominees named below. If any nominee shall become unable to stand for election as Director at the meeting, an event not now anticipated by the Board of Directors, the proxy will be voted for such substitute as shall be designated by the Board of Directors. The Board of Directors' nominees for election as Directors are listed on the following pages with brief statements of their principal occupations and other information. Where the year given in which a nominee first became a Director is prior to 1970, it is the year in -which the nominee first became a Director of R. J. Reynolds Tobacco Company, of which the Company became the parent in a reorganization in 1970. All of the Board of Directors' nominees were elected by the stockholders to their present terms at the annual meeting in 1981 except Mr. Hanley. Mr. Hanley is a nominee for the first time and became a Director on Juiy 16, 1981. Nominees for Directors' JOSEPH F. ABELY, JR., 53, Vice Chairman of the Board and Chairman of the Finance Committee, R. J. Reynolds tndustries, Inc. Mr. Abely joined the Company in 1977. Previously, he was Vice Chairman and a Director of General Foods Corporation and also served that company as Presi- dent of its Food Service Products Division. Prior to 1963, Mr. Abeiy held various operating and financial positions with W. R. Grace & Co. He currently serves on the Board of Directors of Burlington Industries, Inc., Stauffer Chemical Company, Richardson-Vicks Inc., NCNB Corpora- tion and North Carolina National Bank. Mr. Abely also serves as a Governor of the American Red Cross. He is a member of the Council on Foreign Relations and the Emergency Committee for American Trade. He is President of the Southeastern Center for Contemporary Art and a member of the national Business Committee for the Arts. Mr. Abely is a member of the Board of Visitors of the Fuqua School of Business at Duke University and a trustee of Boston College and The Summit School. He is a graduate of Boston College and holds a Master of Business Administration degree from Harvard Graduate School of Business Administration and a Juris Doctor from Harvard Law School. He Is a member of the bar of the Com- monwealth of Massachusetts. Member: Executive Committee First became a Director: 1977 Finance Committee Shares owned: Common, 3,7702 WILLIAM S. ANDERSON, 62, Chairman of the Board, NCR Corporation. Mr. Anderson has served since 1972 as a Director of NCR Corporation which Is primarily engaged In the development, manufacturing, marketing and servicing of business equipment. Mr. Anderson has had a long career with NCR, beginning as Manager of its Hong Kong operation in 1946. He was elected Corporate President in 1972, Chief Executive Officer in 1973, Chairman and President in 1974, and Chairman of the Board in 1976. He is a Director of Consolidated Natural Gas Co., Chairman of the National Foreign Trade Council, a member and past Chairman of the National Board of the Smithsonian Associates, and Vice Chairman of the Advisory Council on Japan-U.S. Economic Relations. He is a Trustee of The Conference Board, and a member of The Business Council and the SRI Council. He also serves on the International Council of Morgan Guaranty Trust Company. Mr. Anderson is a graduate of Public and Thomas Hanbury School, Shanghai. Member: Compensation Committee First became a Director: 1977 Finance Committee Shares owned: Common, 200 Ln Nominating Committee 0 J J 2

JOHN W. HANLEY, 60, Chairman of the Board and Chief Executive Officer, Monsanto Company. in 1972 Mr. Hanley was elected President, Chief Executive Officer and a Director of Monsanto Company, a multinational corporation engaged in the manufacture and sale of a widely diversified line of chemicals, plastics, fibers and other products. Prior to joining Monsanto, he served In The Procter & Gamble Company, rising to Executive Vice President and Director. Mr. Hanley is a Director of Citicorp, Citibank, N.A. and The May Department Stores Company. He is also a Trustee of the Conference Board and Washington University (St. Louis). He is a member of The Business Council and The Business Roundtable. Mr. Hanley is a graduate of Pennsylvania State University from which ha, received the Distinguished Alumnus Award. He also holds a masters degree from Harvard Graduate School of Business Administration and four honorary doctorates. First became a Director: 1981 Shares owned: Common, 400 EDWARD A. HORRIGAN, JR., 52, Executive Vice President, R. J. Reynolds Industries, Inc. and Chairman and Chief Executive Officer, R. J. Reynolds Tobacco Company. Mr. Horrigan joined the Company in July 1978 as Chairman and Chief Executive Officer of R. J. Reynolds Tobacco International, Inc. He was elected to the Board of Directors of R. J. Reynolds Tobacco Company In April 1979 and was elected President, Chairman and Chief Executive Officer of R. J. Reynolds Tobacco Company in February 1_980._Mr.:Horrigan was elected Executive Vice President of the Company in September 1981 Immediately prior to joinin nolds Tobacco International R J Re y,~ . g , . . y ~~ Inc he served as Chairman of the Board d Pr id t ki f B h ti idi C b ., an en es o uc ng am orpora on, a su ary s of Northwest Industries, Inc. He was associated with Thomas J. Lipton, Inc. from 1961 to 1973, where he rose to Division Vice President. Mr. Horrigan was General Manager of Ebonite Company from 1958 to 1961, having begun his career In 1954 as a Unit Sales Manager for The Procter & Gamble Company. Mr. Horrigan is a Director of the Northwest Region Board of Wachovia Bank & Trust Company, N.A. and the Tobacco institute and is a member of the Board of Visitors of the University of Connecticut's School of Business Administration. He serves on the International Committee on Smoking Issues. He also serves as a Trustee of Salem Academy and College and as a Director of the Winston-Salem Foundation. Mr. Horrigan Is a graduate of the University of Connecticut from which he received the Distinguished Alumnus Award. First became a Director: 1981 Shares owned: Common, 1,3302 JEROME W. HULL, 69, Retired Chairman of the Board, The Pacific Telephone and Telegraph Company. Mr. Hull began his career with The Pacific Telephone and Telegraph Company in 1935 in Los Angeles. He held various positions with Pacific Telephone and in 1959 became an Assistant Vice President of American Telephone and Telegraph Company in New York. He later returned to Pacific Telephone in San Francisco and in 1960 was appointed a Vice President and General Manager. He became Vice President-Operations in 1962; Executive Vice President In 1966; President In 1968 and Chairman of the Board in 1975. He retired in 1977 from his position as Chairman of the Board and in 1980 from his position as a Director of Pacific Telephone. Mr. Hull Is a Director of Ampex Corporation, Carter Hawley Hale Stores, Inc., Crocker National Bank, Crocker National Corporation, Del Monte Corporation, New York Life Insurance Company, Pacific Southwest Airlines and Wolff Manufacturing Company. He is a Director of the San Francisco Opera Association and a Trustee of Occidental College in Los Angeles, of which he Is a graduate. . Member: Audit Committee First became a Director: 1979 ut Finance Committee Shares owned: Common, 400 0 ~ v J UI 4 Ln w J

COLIN STOKES, 67, Retired Chairman of the Board, R. J. Reynolds industries, Inc. Mr. Stokes joined R. J. Reynolds Tobacco Company in 1935 where he rose through successive supervisory and management positions to the office of Chairman of the Board in 1970. He was elected President of the Company in 1972 and Chairman and Chief Executive Officer In 1973, serving in the latter position until 1978. Mr. Stokes retired as Chairman of the Board in 1979. Mr. Stokes is a Director of NCNB Corporation, North Carolina National Bank and Home Federal Savings and Loan Association. He is a senior member of The Conference Board. He is Vice Chairman of the North Carolina State Ports Authority. Mr. Stokes serves on the University of North Carolina at Chapel Hill Institutional Development Foundation, the Medical Foundation and Board of Visitors of the Medical Center of the Bowman Gray School of Medicine and the Tanglewood Park Board of Trustees. Mr. Stokes is a graduate of the University of North Carolina and holds an honorary Doctor of Laws degree from Wake Forest University. Member: Executive Committee First became a Director: 1957 Compensation Committee Shares owneds: Common, 46,1864 Public Policy Committee J. TYLEE WILSON, 50, President, R. J. Reynolds Industries, Inc. Mr. Wilson joined the Company in 1974 as President of RJR Foods, Inc. He was elected President of R. J. Reynolds Tobacco internationai, Inc. in January 1976 and became Chairmarl of the Board and Chief Executive Officer in May 1976, serving in that position until July 1978. Mr. Wilson was elected Executive Vice President of the Company in 1976 and was elected President in 1979. Before joining the Com- pany, Mr. Wilson was with Chesebrough-Pond's Inc. where he served in various management positions ultimately leading to his election as Group Vice President and Director. Before joining Chesebrough-Pond's, Mr. Wilson spent his professional career in sales management with The Procter & Gamble Company and Scott Paper Company. He is a Director of The Firestone Tire & Rubber Company, Sonoco Products Company, The Wachovia Corporation, Wachovia Bank & Trust Company, N.A., the Research Triangle Foundation of North Carolina, the Metropolitan YMCA of Winston-Salem and Forsyth County, and Reynolda House. He is a Trustee of the United States Coundoof the International Chamber of Commerce, Inc., a member of the Board of Visitors of Wake Forest University and Chairman of the Governor's Business Council on the Arts and Humanities. He is also Chairman of the International Trade Subcommittee and a member of the International Policy Committee of the Chamber of Commerce of the United States. Mr. Wilson is a Trustee of Lafayette College of which he is a graduate. Member: Executive Committee First became a Director: 1976 Finance Committee Shares owneds: Common, 8,6902 MARGARET S. WILSON, 51, Chairman and Chief Executive Officer, Scarbroughs Stores. Mrs. Wilson joined Scarbroughs. a department store group in Austin, Texas, in 1952 as a department manager. In 1965 she became President and Chief Executive Officer and assumed her current position in 1974. She is also a Director of Scarbroughs. She serves as a Director of the Federal Reserve Bank of Dallas, the National Retail Merchants Association, the American Retail Federa- tion and the National Committee of U.S: China Relations. She is a Board member of the United States Chamber of Commerce and is a senior member of The Conference Board. She is also a Trustee of the Committee for Economic Development and the Institute for Aerobics Research. Mrs. Wilson is a graduate of the University of Texas. Member: Audit Committee First became a Director: 1978 Shares owned: Common, 429 7

' Shareholdings given are the number of shares beneficially owned directly or indirectly by each nominee as of February 12, 1982. The number includes shares credited to an individual's account in trusts established under the Company's Employees' Stock Purchase Plan, Stock Bonus Plan, Employees' Savings and Investment Plan as well as the Del Monte Savings-Investment Plan and the Profit Sharing Incentive Plan of R. J. Reynolds Tobacco Company. Contributions to the last trust were discontinued after 1969. As of February 12, 1982, all officers and Directors owned beneficially 167,119 shares of Common Stock, 200 shares of $2.25 Convertible Preferred Stock and 3,339 shares of Series A Cumulative Preferred Stock, representing less than 1°lo of the. outstanding shares of each class, respectively. 2 The number of shares of Common Stock shown does not include shares subject to stock options granted by the Company which are exercisable currently or within 60 days. The following Is the number of options held by the listed nominee: Joseph F. Abely, Jr. - 24,274; Edward A. Horrigan, Jr. - 6,705; R. G. Landis - 4,118; H. C. Roemer - 13,420; J. Paul Sticht - 105,500; and J. Tylee Wilson -13,937. Directors and officers of the Company have the right to acquire 196,420 shares of Common Stock currently or within 60 days pursuant to options granted by the Company. 3 Includes 2,194 shares of Common Stock held in three trusts in which Mr. Sticht has a reversionary interest. 4 Excludes 9,230 shares of Common Stock in trusts of which Mr. Stokes is the income beneficiary and as to which he disclaims beneficial ownership. G The number of shares of Common Stock listed after the name of each of the following nominees was held in the name of the wife, minor children or other relatives sharing the home of such nominee: R. G. Landis, 1,000 shares; J. Paul Sticht, 3,000 shares; Colin Stokes, 2,660 shares; H. C. Roemer, 100 shares; and J. Tylee Wilson, 402 shares. In addition, 3,100 shares of Series A Cumulative Preferred Stock were held in the name of Mr. Landis' wife, minor children or other relatives sharing his home. Each of these nominees has advised the Company that he disclaims any beneficial ownership of such shares. 6 Mr. Landis also owns 239 shares of Series A Cumulative Preferred Stock and Mr. Roemer also owns 200 shares of $2.25 Convertible Preferred Stock. Certain Information Concerning the Board of Directors During 1981 twelve meetings of the Board of Directors were held. Each Director attended more than 75% of the meetings of the Board of Directors and the committees on which he or she served combined, except for two Directors. Mr. Hull attended 73% of the combined total of such meetings. Mr. Hanley, since his election in July, has attended 60% of the meetings of the Board of Directors. Among the standing committees of the Board of Directors of the Company are the Audit, Compensa- tion and Nominating Committees. The duties performed by the Audit Committee include recommending to the Board of Directors the independent auditors to be employed by the Company; conferring with the independent auditors and the internal auditors concerning the scope of their examination of the books and records of the Company and its subsidiaries; reviewing with the independent and internal auditors, on completion of their audits, their findings and recommendations; reviewing the range and cost of audit and non-audit services performed by the independent auditors; reviewing the independent auditors' opinion rendered with respect to the annual financial statements; reviewing the adequacy of the Company's system of internal accounting controls; reviewing and approving budgeted and actual audit costs of the independent 8

JOHN D. MACOMBER, 54, Chairman of the Board and Chief Executive Officer, Celanese Corpo- ration. In 1973 Mr. Macomber was elected President and Director of Celanese Corporation, a multinational producer of petrochemicals, fibers, plastics, coatings and specialty chemicals. He was named its Chief Executive Officer In 1977 and its Chairman of the Board In 1980. Before joining Celanese, Mr. Macomber had been associated for 20 years with McKinsey & Company, management consultants, serving as a Director from 1964 to 1973 and as a member of its Managing Committee. He is a Director of The Chase Manhattan Bank, N.A. and Bristol-Myers Company. He is Director and Vice Chairman of the New York Philharmonic Orchestra and a Director of Lincoln Center for the Performing Arts. He is a Trustee of the Carnegie Institution of Washington, the Economic Club, the New York Zoological Society and the United States Council of the International Chamber of Commerce. Mr. Macomber is Vli:e, Chairman of The Americas Society, the Center for Inter-American Relations and the Council of the Americas. He is a member of the Business Roundtable and the Council on Foreign Relations. Mr. Macomber is a graduate of Yale University and of Harvard Graduate School of Business Administration. Member: Compensation Committee First became a Director: 1975 Finance Committee Shares owned: Common, 626 Nominating Committee H. C. ROEMER, 57, Senior Vice President, General Counsel and Secretary, R. J. Reynolds Indus- tries, Inc. Mr. Roemer joined R. J. Reynolds Tobacco Company In 1958 as Associate Counsel. He was made Assistant General Counsel In 1968, and In 1970 he was elected Secretary and a Director. He was elected a Vice President and General Counsel of the Company In 1970 and Senior Vice President and Secretary In 1979. Prior to Joining R. J. Reynolds Tobacco Company, Mr. Roemer was associated with the law firm of Davis Polk & Wardweli of New York. He is a member of the Board of Governors of the North Carolina Bar Association and of Its Corporate '1 Counsei and Finance committees Mr Roemer is also a member of The American Law In titute . . s , _.~s~~ ~ ~ _ the Association of General Counsel, the American Bar Association, the Committee on Trans- a nationat Corporations of the World Association of Lawyers and( the Advisory Board of the International & Comparative Law Center of the Southwestern Legal Foundation. We serves on the Board of Visitors of Wake Forest University School of Law and is a Trustee of Salem Academy and College. Mr. Roemer is a graduate of Harvard College and Columbia University Law School. He Is a member of the bar of the States of New York and North Carolina. Member: Executive Committee First became a Director: 1970 Shares owneds. 6: Common, 1,5592 J. PAUL STICHT, 64, Chairman of the Board and Chief Executive Officer, R. J. Reynolds Indus- tries, Inc. Mr. Sticht became a Director of the Company in 1968 and was elected Chairman of the Executive Committee In 1972. In 1973 he became President and Chief Operating Officer and In 1978 he was elected Chief Executive Officer of the Company. Mr. Sticht was elected Chairman of the Board In April 1979. Before joining the Company, Mr. Sticht was President of Federated Department Stores, Inc. He joined Federated in 1960 as an Executive Vice President and Director and became President In 1967. Previously, he was a Vice President of Campbell Soup Company and President of Campbell's.Interrmational subsidiary. Earlier in his career he held various positions with United States Steel Corporation and Trans World Airlines, Inc. Mr. Sticht is a member of the Board of Directors of Celanese Corporation, The Wachovia Corporation, Wachovia Bank & Trust Company, N.A., Foremost-McKesson, Inc., S. C. Johnson & Son, Inc. and Chrysler Corporation. He is a member of the Rockefeller University Board of Trustees and a member of the Massachusetts Institute of Technology Corporation. Mr. Sticht is a member of the Board of Governors of the Corporate Fund for the Performing Arts at Kennedy Center, the Council on Foreign Relations, Chamber of Commerce of the United States and The Business Roundtable. He also serves as Chairman of the North Carolina Council of Management and Development. Mr. Sticht is a graduate of Grove City College, from which he also holds an honorary doctor's degree. He serves on the College's Board of Trustees. Member: Executive Committee First became a Director: 1968 Finance Committee Shares owned5: Common, 28,5242,3 N Nominating Committee QO) -4 -4 6 (n N W (D

auditors; and reviewing, when appropriate, investigations of matters within the scope of its duties. The Audit Committee held three meetings during 1981. The duties of the Compensation Committee include approving the salaries of officers of the Company and the Chairmen and Presidents of the Company's significant subsidiaries; reviewing the Company's wage and salary administration policies; reviewing, administering and interpreting executive incentive compensation plans and granting bonuses, options and benefits under such plans; approving individual transactions between the Company and executives or prospective executives which sig- nificantly affect the executive's benefits or remuneration; and reviewing and administering certain aspects of the Company's retirement and stock purchase plans. The Compensation Committee held seven meetings during 1981. The duties of the Nominating Committee include reviewing and recommending changes in the size and composition of the Company's Board of Directors and recommending candidates for election to the Board. The Nominating Committee considers recommendations from all sources, including stock- holders, regarding possible candidates. A stockholder, desiring to propose a candidate to the Nominating Committee, should submit a written recommendation, together with sufficient biographical information concerning the recommended individual, including age, employment and board memberships, if any, to the Secretary of the Company, R. J. Reynolds Industries, Inc., Reynolds Boulevard, Winston-Salem, North Carolina 27102. While letters of recommendation may be submitted for consideration at any time, recommendations must be received prior to December 15 in any. year for consideration in connection with the nomination and election of Directors at the Company's next annual meeting. The Nominating Committee held three meetings during 1981. Each Director who is not an employee of the Company or a subsidiary is compensated at the rate of $1,500 per month. In addition, each is paid a fee of $500 for a regular or annual meeting of the Board, $600 for a special meeting of the Board or for a committee meeting not held on the same day as a Board meeting, and $500 for a committee meeting held oethe same day as a Board meeting or for any stockholder meeting. Committee chairmen are paid 'an additional $200 for attendance at committee meetings. The Company pays no additional remuneration to employees of the Company or its subsidiaries who are Directors. The Company maintains a deferred compensation plan for Directors of the Company. This plan allows non-employee Directors to defer their fees under provisions substantially identical to the cash credit and stock credit deferral provisions of the Company's Management Incentive Plan described under "Stock Option and Other Plans" on page 13 of this proxy statement. The deferred amounts are credited with interest equivalents at a current long-term government bond rate. Accounts are distributed upon the participant's termination of service as a Director. The Company also maintains a retirement plan for Directors of the Company who are not and never have been employees of the Company. The plan provides each eligible Director who has served on the Board of Directors for five or more.years with a monthly allowance payable once his or her service as a Director ends. The amount of the allowance is equal to one-half of the basic monthly Director's fee in effect on the date the Director's service terminates. The allowance is payable until 120 monthly payments have been made, until the number of monthly payments made equals the number of months of service by the individual as a Director, or until the individual's death, whichever occurs first. Remuneration The following information is given as to the five most highly paid executive officers or Directors of the Company who received direct remuneration for 1981 from the Company and its subsidiaries of more than $50,000 and as to all officers and Directors of the Company as a group. 9

Aggregate Capacities contingent In which forms of Name of Individual remuneration Cash and cash-equivalent remu- or persons in group received forms of remuneration neration' Securities ^ or property Salaries, insurance fees, benefits or directors' reimburse- fees, commis- ment, and ? ' sions, and personal bonuses benefits Joseph F. Abeiy, Jr.2 .................... Vice Chairman of the Board $ 456,667 $ 5,521 $ 95,100 Edward A. Horrigan, Jr.2 ................. Executive Vice President since 396,667 12,762 78,820 September 17, 1981 and Chairman and Chief Executive Officer, R.J. Reynolds Tobacco Company R. G. Landis ............................ President - Pacific since 380,000 181,545 84,000 October 8, 1981; previously Chairman and Chief . Executive Officer, Del Monte Corporation J. Paul Stichtz .......................... Chairman of the 9oard 753,333 6,498 193,786 J. Tylee Wllson2 ......................... President 506,667 71,201 112,450 All Directors and officers $4,327,284 $323,076 $717,352 (25 In number) as a group ............. I The amounts shown Include any expense accrued for 1981 pursuant to the Company's Performance Unit Plan described on page 13 of this proxy statement. 2 Pursuant to an agreement with the Company, Mr. Sticht will receive, upon retirement on or after attaining age 65, an annual retirement allowance equal to 70% of his average final compensation, as such compensation is defined under the Company's retirement plan, less (i) any amount paid under the Company's retirement plan, (ii) 30% of his primary Social Security benefit and (iii) $50,000. If he retires before attaining age 65, this 70% retirement allowance is reduced by a lower percent of his primary Social Security benefit, by $50,000 and by 5% of the retirement allowance for each year or portion thereof remaining before he attains age 65. Upon his death while an employee or, at his election, after retire- ment, his wife during her lifetime may receive an allowance equal to one-half of the retirement allowance to which he was entitled at the time of his death actuarially reduced to recognize this survivorship benefit. The Company has also entered Into agreements with Messrs. Abely and Wilson. Under these agree- ments, each individual will receive upon retirement at age 65, an annual retirement allowance equal to 70% of his average final compensation, as such compensation is defined under the Company's retire• ment plan, less (i) any amount paid under the Company's retirement plan, (ii) 30% of his primary Social Security benefit and (iii) any retirement allowance from previous employers. In the event the individual retires prior to age 65, the 70% retirement allowance is reduced by a lower percent of his primary Social Security benefit, by any retirement allowance from any previous employers and by 5% for each year or portion thereof remaining before he attains age 65. Upon his death while an employee or, at his election, after retirement, the individual's wife during her lifetime may receive an allowance equal to one-half of the retirement allowance to which he was entitled at the time of his death actuarially reduced to recognize this survivorship benefit. The 70% retirement allowance does not take effect until the individual attains age 55. Before that date, the annual retirement allowance payable upon termination of employment is $50,000. The agreements also provide for a severance allowance equal to one year's current base salary, but not less than $275,000 in Mr. Abely's case and $290,000 in Mr. Wilson`s case, if the Company terminates their employment. The Company has entered into an agreement with Mr. Horrigan pursuant to which, if he remains an employee of the Company or its subsidiaries until July 1, 1988, he will receive upon retirement, benefits 10

The Wachovia Corporation, parent of Wachovia Bank & Trust Company, N.A., The Chase Manhattan Corporation, parent of The Chase Manhattan Bank, N.A., and The Chubb Corporation are publicly held corporations. General Electric Credit Corporation is a wholly owned subsidiary of General Electric Company, a publicly held corporation. The Company's business associations with Wachovia Bank & Trust Company, N.A. and The Chase Manhattan Bank, N.A. are described on page 11 of this proxy statement. Item 2- RATIFICATION OF APPOINTMENT OF AUDITORS Subject to stockholder ratification, the Board of Directors has appointed the firm of Ernst & Whinney as auditors for the year 1982 and until their successors are selected. The appointment was made upon the recommendation of the Audit Committee, which is composed of Directors who are not employees of the Company or its subsidiaries. Ernst & Whinney has served as auditors for the Company since 1970. From 1919 to 1970 Ernst & Ernst served as auditors for R. J. Reynolds Tobacco Company, which became a subsidiary of the Company in a reorganization in 1970. Representatives of Ernst & Whinney are expected to be present at the meeting with the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions. The Board of Directors considers Ernst & Whinney to be well-qualified and recommends that the stockholders vote "FOR" ratification. Item 3- EMPLOYEES' SAVINGS AND INVESTMENT PLAN The Board of Directors, upon the recommendation of the Compensation Committee, adopted and implemented the RJR Employees' Savings and Investment Plan (the "Plan") effective January 1, 1982 and authorized the submission of the Plan to the stockholders of the Company for their approval. The Plan is being submitted to stockholders for approval for the purpose of permitting employees who are officers of the Company to acquire the Company's Common Stock under the Plan on the same basis as other employees by exempting such acquisitions from the (aeration of Section 16(b) of the Securities Exchange Act of 1934. The vote on this item will have no effect on the Plan as presently implemented. Should the Plan fail to receive stockholder approval, it is anticipated that some officers may decide not to participate in the Plan. The Board of Directors believes that the Plan will attract and retain qualified employees by providing them with the opportunity to make regular savings from their current earnings through payroll deductions and by affording them an opportunity to acquire an equity interest in the Company. The benefits provided under the Plan are intended to supplement the retirement benefits provided under other plans of the Company and the Federal Social Security Act. The terms with initial capital letters in the following summary are defined in the Plan. The essential features of the Plan are outlined below. The full text of the Plan appears as Exhibit A to this Proxy Statement, and the following summary is qualified in its entirety by reference to such text. General Generally, any individual who is regularly employed by the Company or its participating subsidiaries is eligible to participate in the Plan on the date he or she is employed. Participation in the Plan is entirely voluntary. The Plan is administered by a Committee whose members are appointed by the Board of Directors. Interests in the Plan and shares of the Company's Common Stock subject to the Plan have been registered at the Company's expense pursuant to the Securities Act of 1933. Member Contributions A Member may elect to contribute from 1% to 15% of Compensation in 1% increments. Members may change the percentage of their contributions, suspend contributions, or have contributions resumed by giving 30 days' advance written notice to the Committee administering the Plan. Members are always 100% vested in their contributions. 17

equivalent to those he would receive under the Company's retirement plan had he been an employee of the Company since October 1, 1964. The benefits under this agreement will be reduced by benefits payable to Mr. Horrigan or his contingent annuitant under any retirement plans of the Company and its subsidiaries or under plans of Mr. Horrigan's previous employers. The agreement also provides for a severance allowance equal to one year's current base salary. Transactions with Management and Others In 1981 two of the Company's subsidiaries, in the ordinary course of their business, made purchases (principally of cigarette filter tow) from Celanese Corporation or its subsidiaries aggregating approxi- mately $25,610,000. These subsidiaries also made purchases (principally of cigarette filter tow) during 1981 from affiliates of Eastman Kodak Company aggregating approximately $59,200,000. Celanese and Eastman are the only domestic manufacturers of filter tow and such purchases were- made at prevailing market prices. Dr. Kreps is a Director of Eastman Kodak Company, Mr. Macomber is Chairman of the Board and a Director of Celanese Corporation, and Mr. Sticht and Mr. Jordan are Directors of Celanese Corporation. On December 31, 1981 Del Monte Corporation had notes outstanding aggregating $25,180,000 of which New York Life Insurance Company was the holder. The notes, which are due at periods ranging from 1988 to 1991, are at interest rates ranging from 43/a% to 83/a%. Mr. Hull is a Director of New York Life. During 1981 the Company or its subsidiaries borrowed amounts aggregating $17,200,000, $21,400,000, $18,800,000 and $11,300,000 from The Chase Manhattan Bank, N.A., Citibank, N.A., North Carolina National Bank, and Crocker National Bank, respectively, pursuant to credit facilities at commercially prevailing interest rates. Mr. Macomber is a Director of The Chase Manhattan Bank, N.A.; Dr. Kreps is a Director of Citicorp, parent of Citibank, N.A.; Mr.' Hanley is a Director of Citicorp and its subsidiary, Citibank, N.A.; Messrs. Abely and Stokes are Directors of NCNB Corporation and its subsidiary, North Carolina National Bank; and Messrs. Hull and Landis are Directors of Crocker National Corporation and its subsidiary, Crocker National Bank. ID Sea-Land Industries (Bermuda) Ltd., a subsidiary of Sea-Land Industries Investments, Inc., made payments of approximately $7,500,000 during 1981 to Paringer Investments, Ltd. and proposes to make payments of approximately $7,700,000 during 1982 pursuant to long-term charters of three vessels owned by Paringer. Mr. Cudd is Chairman of the Board of Directors of Paringer Investments, Ltd. The law firm of Akin, Gump, Strauss, Hauer & Feld of Washington, D. C., and Dallas, Texas, of which Mr. Jordan is a partner has been retained by one of the Company's subsidiaries to represent it in certain litigation. That subsidiary did not make any payments to the firm in 1981 and is unable to predict such expenditures foi 1982 because of the uncertainties associated with the litigation. During 1981 the Company borrowed $57,000,000 from Wachovia Bank & Trust Company, N.A. pur- suant to credit facilities at commercially prevailing interest rates. Wachovia serves as Trustee under various retirement plans and other employee benefit plans of the Company and its subsidiaries for which it received fees aggregating approximately $379,000 during 1981. Wachovia also served as inspectors of election at the Company's 1981 Annual Meeting of Stockholders and was paid approxi- mately $23,500 for this service. The Company expects to continue the services of Wachovia in such capacities and to make payments aggregating at least this amount for such services during 1982. Messrs. Butler, Sticht, and Wilson are Directors of Wachovia and its parent. During 1981 S. G. Warburg & Co. Ltd., of which Mr. Grierson is a Director, received fees in the amount of $533,000 for investment advisory services. Stock Option and Other Plans The Company has granted options to purchase shares of Common Stock at fair market value on the date of the grant to officers and other key employees of the Company and its subsidiaries under the Career Executive Stock Plan ("CESP") and the 1977 Stock Option Plan which were approved by its stock- holders in 1974 and 1977, respectively. The plans are administered by the Compensation Committee of 11

the Board of Directors. No optionee may be granted options to purchase more than 60,000 shares under the CESP and 100,000 shares under the 1977 Plan. The option price of Common Stock under both plans is the fair market value on the date of the grant. Upon exercise of an option, the option price must be paid in full. Options granted under the CESP and the 1977 Plan are not exercisable until one year after the date of the grant. The CESP permits the exercise of all options one year after the date of their grant. Options under the 1977 Plan are exercisable in successive installments of 25% of the number of option shares on the first through fourth anniversary date of the grant. No option may be exercisable more than ten years after the date of the grant. The Company has also granted stoc. k appreciation rights with respect to options granted under both plans. The stock appreciation rights are;exercisable only upon surrender of the related option and only to the extent that the related option is exercisable. The stock appreciation right terminates upon termi- nation of the related option. Upon exercise of the stock appreciation right, the holder is entitled to receive the excess of the fair market value of the shares for which the right is exercised over the option price under the related option. The Compensation Committee has the authority to determine whether the value of the stock appreciation right is paid in cash or shares of Common Stock or a combination of both. The Compensation Committee may at any time amend, suspend or terminate any stock apprecia- tion right. Employees are selected to receive options and stock appreciation rights on the basis of their responsibilities and present and potential contributions to the success of the Company, as indicated by management's evaluation of the position occupied. The table which follows shows, as to the individuals named under "Remuneration" and as to all Qirectors and officers as a group, the following information with respect to stock options and related stock appreciation rights: (i) the aggregate amount of Common Stock subject to options granted from January 1, 1977 through February 12, 1982, (ii) the average per share option exercise price thereof, (iii) the net value (market value less option exercise price) of shares of Common Stock or cash realized during such period upon the exercise of such options or related rights during such period, (iv) the sales of Common Stock from January 1, 1977 through February 12, 1982, (v) the aggregate amount of Common Stock subject to all such options or rights outstanding as of February 12, 1982, (vi) the potential (unre- alized) value (market value less option exercise price) of outstanding options and rights as of February 12, 1982, and (vii) the potential (unrealized) value (market value less option exercise price) of currently exercisable options and rights as of February 12, 1982. In addition, during the period employees were granted options with stock appreciation rights for a total of 2,468,303 shares at an average option or base price per share of $35.84. Granted-January 1, 1977 to February 12, 1982: Number of options granted with stock appreciation rights .............. Average per share option exercise price ........................... Exercised -January 1, 1977 to February 12, 1982: Net value (market value less option exercise price) realized in shares or cash .......................... Sales-January 1, 1977 to February 12, 1982: Number of shares ................ Outstanding at February 12, 1982: Number of options with stock appre- ciation rights ................... Potential (unrealized) value (market value less option exercise price) Potential (unrealized) value (market value less option exercise price) currently exercisable ............ Stock Options J. F. Abely E. A. Horrt an R. G. Landis J. P. Sticht J. T. Wilson All Directors and officers as a group 39,645 25,142 7,229 106,000 24,840 298,835 $33.89 $40.38 $38.59 $31.39 $33.62 $33.82 $109,156 -- -- $ 509,250 $303,172 $2,042,098 - - - -- - 5,925 31,645 25,142 7,229 124,000 22,340 289,585 $332,176 $148,290 $ 46,304 $1,729,562 $246,342 $3,384,358 $268,314 $144,078 $ 40,665 $1,460,734 $176,659 $2,656,217 12 ,

DEL MONTE CORPORATION . ESTIMATED ANNUAL RETIREMENT BENEFITS Five Year Average Years of Service Compensation 5 10 20 30 $200,000 .................. ............. $16,667 $ 33,334 $ 66,668 $100,000 $250,000 .................. ............. 20,834 41,667 83,335 125,000 $300,000 .................. ............. 25,000 50,000 100,000 150,000 $350,000 .................. ........... .. . . 29,167 58,334 116,669 175,000 $400,000 .................: .........?..-.' 33,334 66,668 133,336 200,000 $450,000 .................. .............. 32,500 25,000 150,000 225,000 $500,000 .................. ............. 41,667 83,334 166,668 250,000 $550,000 .................. ............. 45,834 91,668 183,336 275,000 $600,000 .................. ............. 50,000 100,000 200,000 300,000 $650,000 .................. ............. 54,168 108,336 216,672 325,000 The following are the approximate years of credited service (rounded to the nearest year) of the persons named in the remuneration table under the applicable retirement plan: Mr. Abely, 5; Mr. Horrigan, 3; Mr. Landis, 30; Mr. Sticht, 9; and Mr. Wilson, 8. With respect to Messrs. Wilson and Landis, the amount of compensation for the purpose of computing retirement benefits under the retirement plans was $470,417 and $300,000, respectively, for 1981. The Employee Retirement Income Security Act of 1974 places certain limitations on pensions which may be paid under the plans qualified under the Internal Revenue Code. The retirement benefits shown which exceed such limitations will be paid outside the qualified plan as an operating expense. Ownership of the Company's Securities The following table lists the stockholders known to the Company to be beneficial owners of more than five percent of any class of the Company's voting securities as of January 1, 1982: Title of Class Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percent of Class Common Stock ......................... Wachovia Bank & 5,688,213 shares 5.4% ommon Stock ......................... Trust Company, N.A. P.O. Box 3099 Winston-Salem, North Carolina The Chase Manhattan ,563,979 shares .3% Bank, N.A. One Chase Manhattan Plaza New York New York 1 , 0 Series A Cumulative Preferred Stock ....... General Electric Credit 388,200 shares 6.0% 0) eries A Cumulative Preferred Stock ....... Corporation 260 Long Ridge Road Stamford, Connecticut The Chubb Corporation 100 William Street 99,900 shares .7% v v Ut UI A t0 New York, New York See Notes on page 8 of this proxy statement for management's ownership of securities. U During 1981 the Company and its subsidiaries paid an aggregate of approximately $343,000 in insurance premiums to subsidiaries of The Chubb Corporation. The insurance purchased covered a broad range of risks and was acquired at prevailing market rates. The Company expects to continue such policies of insurance and to pay a similar amount in insurance premiums to subsidiaries of The Chubb Corporation during 1982. 16

the Company's Management Incentive Plan unless payment of the bonus Is deferred. Matching contribu- tions under the Company's Empioyees' Stock Purchase Plan and awards made pursuant to the Com- pany's Performance Unit Plan are not included. The amount determined by this formula is reduced by three-fourths percent of the employee's Social Security benefit multiplied by the number of years of credited service. The Del Monte Corporation Retirement Plan is a combination defined and unit benefit plan which, in the event the employee has thirty years of credited service, pays an annual retirement benefit of one- half of the employee's highest average earnings less one-half of the employee's Social Security benefit This amount is reduced proportionately in the event the employee retires with less than thirty years of service. Highest average earnings means the average of the employee's regular earnings for the period of five consecutive plan years in which his or her regular earnings were highest. Earnings include only base salary and wages. In addition, the plan pays a benefit attributable to a period during which the plan required contributions from employees in order to participate. This additional benefit is equal to one-tenth of one percent of the employee's annualized rate of earnings on October 1, 1973 multiplied by the number of years prior to October 1, 1968 in which the employee made the required contributions. Neither of the plans requires contributions from employees in order to participate. Both of the plans provide for reduced early retirement benefits. In addition, survivor's benefits may be available to the employee's spouse. Contributions to the plans are made on the basis of recommendations by the actuaries engaged by the Company to provide assistance in plan administration. During the five-year period beginning on January 1, 1977, the Company contributed approximately $17,500,000 to its plan. The tables which follow show the estimated annual benefits payable upon retirement under the Company's retirement plan and the retirement plan of Del Monte Corporation to persons in specified remuneration and years-of-service classifications. The retirement benefits shown are computed without regard to the Social Security offset and are based upon retirement at age 65 and the payment of a single-life annuity to the employees. _. a R. J. REYNOLDS INDUSTRIES, INC. ESTIMATED ANNUAL RETIREMENT BENEFITS Five Year Average Compensation 5 10 Years of Service 20 30 40 $150,000 ................. $13,125 $ 26,250 $ 52,500 $ 78,750 $105,000 $200,000 ................. 17,500 35,000 70,000 105,000 140,000 $250,000 ................. 21,875 43,750 87,500 131,250 175,000 $300,000 ................. 26,250 52,500 105,000 157,500 210,000 $350,000 ................. 30,625 61,250 122,500 183,750 245,000 $400,000 ................. 35,000 70,000 140,000 210,000 280,000 $450,000 ................. 39,375 78,750 157,500 236,250 315,000 $500,000 ................. 43,750 87,500 175,000 262,500 350,000 $550,000 ................. 48,125 96,250 192,500 288,750 385,000 $600,000 ................. 52,500 105,000 210,000 315,000 420,000 $650,000 ................. 56,875 113,750 227,500 341,250 455,000 $700,000 ................. 61,250 122,500 245,000 367,500 490,000 $750,000 ................. 65,625 131,250 262,500 393,750 525,000 $800,000 ................. 70,000 140,000 280,000 420,000 560,000 $850,000 ................. 74,375 148,750 297,500 446,250 595,000 $900,000 ................. 78,750 157,500 315,000 472,500 630,000 $950,000 ................. 83,125 166,250 332,500 498,750 665,000 15

Phantom Share Accounts R. G. Landis J. T. Wilson All Directors and officers as a group Acquired-January 1, 1977 to February 12, 1982: Number of phantom shares acquired' ...... 62,159 986 65,140 Average per share base priceZ ............ 0 0 0 Realized-January 1, 1977 to February 12, 1982: Net value (market value leas- base price) realized in shares or cash ......... - - $ 27,585 Outstanding at February 12, 1982: < Number of phantom shares ............... 72,578 986 74,946 Potential (unrealized) value (market value less base price) ....................... $3,266,010 $44,370 $3,372,570 ~ The number of phantom shares shown was determined by dividing the amount deferred by the fair market value of a share of the Company's Common Stock at the time that the phantom shares were acquired. 2 The average base price of phantom shares is shown as zero since the amount the individual will ultimately receive for his account depends solely on the market value of the Company's Common Stock and applicable regulations require disclosure of a zero base price under such circumstances. Prior to December 31, 1981 the Company made matching contributions under the Company's Employees' Stock Purchase Plan under which eligible employees of the Company and participating subsidiaries may have had up to 10% of their base pay withheld to purchase Common Stock. The Company or the participating subsidiary contributed an amount equal to 30% of the employee's contribu- tion. The plan was amended effective January 1, 1982 to eliminate Company contributions. During the five-year period commencing on January 1, 1977, the Company contributed $24,262,911 to such plan. The average annual contribution for the five-year period from January 1, 1977 to December 31, 1981 for the individuals named under "Remuneration" and for all Directors and officers as a group were as follows: Mr. Abely, $5,791; Mr. Horrigan, $4,150; Mr. Landis, none; Mr. Sticht, $1,884; Mr. Wilson, $6,510; all Directors and officers as a group, $14,441; and all eligible employees, $4,852,582. The.Company also contributes to the R. J. Reynolds Industries, Inc. Stock Bonus Plan under which eligible employees of the Company and participating subsidiaries receive an allocation of Common Stock purchased by the plan trustee with Company contributions. The allocation is based upon each partici- pant's compensation, but compensation in excess of $100,000 is not considered. A more complete description of the plan is found on page 19 of this Proxy Statement. Amounts contributed by the Company during 1981 for the 1980 plan year to the accounts of each of the individuals listed under "Remuneration" and for all Directors and officers as a group were as follows: Mr. Abely, $1,101; Mr. Horrigan, $1,101; Mr. Landis, $1,101; Mr. Sticht, $1,101; Mr. Wilson, $1,101; all Directors and officers as a group, $15,414; and all eligible employees, $6,685,069. In addition, Del Monte makes contributions under the Del Monte Savings-Investment Plan. Under the Del Monte Savings-Investment Plan, employee contributions to the plan are invested by the Trustee, in accordance with the employee's instructions, in shares of the Company's Common Stock, government obligations, or an equity fund. Del Monte, subject to certain limitations, contributes to the Trust Fund 1.5% of the average of profits for the two immediately preceding calendar years, but not more than 50% of employee contributions in any event. Del Monte contributions are invested in the Company's Common Stock. During the past five years, the amount contributed by Del Monte to the account of Mr. Landis was $29,806. Retirement Plans The Company's retirement plan is a unit benefit plan which pays an annual benefit at normal retire• ment of one and three-fourths percent of an employee's average final compensation multiplied by his number of years of credited service not exceeding 40. Generally, average final compensation is defined in the plan as the employee's highest average annual compensation in any five consecutive year period during his last ten years of credited service. Compensation includes base salary and bonus awards under 14

Company Contributions The Company will contribute to each Member's account an amount equal to 100% of the first 1% of Compensation that a Member contributes and 50% of the next 4% of Compensation that a Member contributes. The Company will make no contributions with respect to a Member's contributions in excess of 5% of such Member's Compensation. A Member becomes fully vested in the Company contributions made on his or her behalf on the earlier of five years' employment with the Company and its affiliates or two years consecutive participation in th~ Plan; provided, however, two years consecutive participation shall only vest a Member in Company contributions made since the Member's most recent date of enrollment in the Plan. = Investment of Contributions Contributions will be invested at a Member's direction in a Reynolds Common Stock Fund, which consists of the Company's Common Stock, an Equity Fund, or a Fixed Income Fund. Company contribu- tions will generally be invested entirely in the Reynolds Common Stock Fund. Members have the right under certain conditions to transfer all or any portion of their accounts In the Plan from one fund to another. However, no portion of a Member's account in the Reynolds Common Stock Fund resulting from Company contributions may be transferred unless such Member has attained 55 years of age. Withdrawals and Distributions Members have the right to withdraw various portions of their accounts under the Plan during employment. Certain withdrawals may be subject to a penalty. Withdrawals during employment may be made only in cash. Distributions from the Plan upon termination of employment may be in the form of a lump sum payment, a lump sum payment deferred for one year, an annuity purchased from a life insurance company, or payment in installments not exceeding fifteen years. Distributions on termination of employment from the Reynolds Common Stock Fund may be made in the form of cash or Common Stock, at the Member's election, while distributions from the other Funds are made only in cash. Assuming the Plan had been effective January 1, 1981 and that each eligible employee had elected to participate to the maximum extent possible and was fully vested, the amount of Company contributions which would have been distributable on December 31, 1981 to the individuals named under "Remuneration", to all Directors and officers as a group, and to all eligible employees would be as follows: Mr. Abely, $10,100; Mr. Horrigan, $8,300; Mr. Landis, $9,000; -Mr. Sticht, $13,599; Mr. Wilson, $10,850; all Directors and officers as a group, $80,059; and all eligible employees, $13,826,694. Termination and Amendment The Plan may be amended or terminated by the Company's Board of Directors at any time without stockholder approval, except that no amendment may reduce the benefits of any Member or Bene- ficiary accrued under the Plan prior to the date the amendment is adopted, nor divert any part of the assets of the Trust Fund to purposes other than the exclusive purposes of providing benefits to Members and Beneficiaries and defraying the reasonable expenses of administering the Plan. In the event of the termination or partial termination of the Plan, each Member or Beneficiary affected by such termination or partial termination will remain 100% vested in his or her accounts. No part of the assets of the Plan will at any time revert to the Company. Tax Consequences The Plan is intended to meet the requirements of Section 401 (a) and related sections of the Internal Revenue Code of 1954 as amended (the "Code"). Accordingly, the Trust Fund under the Plan should be exempt from taxation under Section 501 of the Code. The Federal income tax rules applicable to a plan which is qualified under Section 401 and related sections of the Code generally provide, among 18

other things, that Members will pay no income tax on Company contributions, dividends, interest or gains on the assets of the Trust Fund until such amounts are distributed. The Board of Directors recommends a vote "FOR" the following resolution which will be presented at the meeting: "RESOLVED that the RJR Employees' Savings and Investment Plan, the text of which is set forth in the Proxy Statement for this meeting as Exhibit A, is hereby approved." The affirmative vote of the shares representing a majority of the votes entitled to be cast by the holders of stock present at the meeting, in person or by proxy, will be required to approve this item proposed by the Board of Directors. Item 4- STOCK BONUS PLAN The Executive Committee of the Board of Directors adopted and implemented the R. J. Reynolds Industries, Inc. Stock Bonus Plan (the "Plan") effective January 1, 1980. The Plan is being submitted to stockholders for approval for the purpose of permitting employees who are officers of the Company to acquire the Company's Common Stock under the Plan on the same basis as other employees by exempt- ing such acquisitions from the operation of Section 16(b) of the Securities Exchange Act of 1934. The vote on this item will have no effect on the Plan as presently implemented. Should the Plan fail to receive stockholder approval, it is anticipated that some officers may decide not to participate In the Plan. The Board of Directors believes that because the Plan provides eligible employees with an oppor- tunity to acquire an equity interest in the Company, it will enhance the Company's relationships with its employees. Benefits provided under the Plan are intended to supplement the retirement benefits under other plans of the Company 'and the Federal Social Security Act. The terms with initial capital letters in the following summary are defined in the Plan. 0 The essential features of the Plan are outlined below. The full text of the Plan appears as Exhibit B to this Proxy Statement, and the following outline is qualified in its entirety by reference to such text. General Participation in the Plan is mandatory, but no contributions by Participants are required or allowed. Generally, all regularly employed employees of the Company or its Operating Companies are Partici- pants in the Plan. There were approximately 30,000 Participants for the 1980 Plan Year. The Plan is administered by a Committee whose members are appointed by the Board of Directors. Company Contributions For Plan years prior to 1983, the Company plans to contribute to the Plan an amount equal to the Company's "Basic Employee Plan Percentage". Generally, this amount is equal to 1% of the cost of the Company's investments during the year which qualify for an investment tax credit under Section 38 of the Internal Revenue Code. For Plan Years after 1982, the Company plans to amend the Plan to conform with laws scheduled to go into effect at that time so that the amount of the Company's contribution will be based upon a percentage of the Compensation of Participants. For Plan Years 1983 and 1984 this per- centage will be .5%; for Plan Years 1985 through 1987, it will be .75%. Participants are always fully vested in Company contributions, but in order to receive an allocation of Company contributions, a Par- ticipant must be employed on the last day of the Plan Year for which the contribution is made. Allocation of Company Contributions Each Participant employed on the last day of a Plan Year will receive a portion of the Company con- tribution for that year determined by multiplying the Company contribution by a fraction, the numerator of which is his or her Compensation, and the denominator of which is the Compensation of all Partici- pants; provided, however, a Participant's Compensation in excess of $100,000 is not considered. 19

The Company maintains a Management Incentive Plan for selected key employees. Under this plan, participants may be awarded bonuses based upon both individual and corporate performance during each year. The amount of the award is determined by an evaluation of performance in light of various financial and non-financial goals established annually. The maximum potential bonus award is limited on the basis of an individual's position. The bonus awards for officers and Directors of the Company are approved by the Compensation Committee of the Board of Directors. For the five-year period from January 1, 1977 to February 12, 1982, the average annual bonus awarded to the individuals named under "Remuneration" and for all Directors and officers as a group during such period were as follows: Mr. Abely, $96,760; Mr. Horrigan, $84,250; Mr. Landis, $80,220; Mr. Sticht, $245,400; Mr. Wilson, $114,580; all Directors and officers as a group, $70,378; and all eligible employees, $21,433. The Company also maintains a Performance Unit Plan for selected key employees of the Company and its subsidiaries. Under this plan, participants are granted performance units, the initial value of which is equal to the average market price of the Company's Common Stock during the month of December of the year prior to the year in which the performance units are granted. The Compensation Committee determines those employees who will participate in the plan and the number of performance units each participant is awarded. The number of performance units granted to an individual is based principally on his position. The ultimate value of the performance units awarded to a participant is determined at the end of an award cycle of not more than four years by reference to Company performance criteria estab- lished by the Compensation Committee at the beginning of the award cycle. Three four-year award cycles ending December 31, 1982, December 31, 1983, and December 31, 1984, respectively, are now in effect. The performance criterion used to determine the ultimate value of performance units awarded for all of the award cycles now in effect is compound growth in average earnings per share during the cycle. The ultimate value of performance units at the end of an award cycle may range from 0% to 120% of the initial value of the units granted, depending upon earnings rowth. The base earnings per share from which growth is measured is the average of the actual. nings per share for the three-year period immediately preceding the start of each award cycle. The average annual performance unit award, based upon initial value, made during the three-year period from January 1, 1979, the first year for which the plan was effective, to February 12, 1982, to the individuals named under "Remuneration" and for all Directors and officers as a group during such period were as follows: Mr. Abely, $106,200; Mr. Horrigan, $88,067; Mr. Landis, $140,000; Mr. Sticht, $216,417; Mr. Wilson, $125,600; all Directors and officers as a group, $88,856; and all eligible employees, $64,793. No awards have become payable under this plan since its adoption in 1979. Under both the Management Incentive Plan and the Performance Unit Plan, a participant may elect to defer payment of all or a portion of any award. Deferred amounts are credited to an account in the name of the participant on the books of the Company as a cash credit, a phantom Common Stock credit, or a combination as elected by the participant. In the case of cash credits, the account is credited quarterly with an interest equivalent at a rate based upon the yield on long-term U.S. government bonds, but not less than 6%. The phantom share account is credited with a Common Stock dividend equivalent at the time dividends are paid on Common Stock. The amounts deferred are distributed when a participant's employment terminates. The table which follows shows as to the individuals named under "Remuneration" who have phantom share accounts, and as to all Directors and officers as a group, the following information with respect to phantom share accounts under both of these plans: (i) the aggregate amount of phantom shares acquired from January 1, 1977 through February 12, 1982, (ii) the average base price per share thereof, (iii) the net value (market value less base price) of shares or cash realized during such period, (iv) the aggregate amount of phantom shares in the individual's account as of February 12, 1982, and (v) the potential (unrealized) value (market value less base price) of the phantom shares as of February 12, 1982. The table also includes phantom shares previously allocated to Mr. Landis while he was an active participant in deferred compensation plans of Del Monte Corporation similar to the Company's plans. 13

investment of Contributions All contributions to the Plan and earnings thereon are invested solely in the Company's Common Stock. Company contributions made in cash are converted to Common Stock as soon as practicable after they are made. Withdrawals and Distributions ? ,. Participants have the right to withdraw portions of their accounts under the Plan during employment. However, the Plan provides that only those amounts attributable to Company contributions made at least seven years prior to the date of withdrawal are eligible to be withdrawn. Distributions from the Plan are made in a lump sum upon termination of employment and, at the Participant's election, may be made in either cash or shares of the Company's Common Stock. The amount of Company contributions which would have been distributable upon termination of employment during 1981 to each Participant is equal to the Company contribution made for the 1980 Plan year. Such amounts are shown on page 14 of this proxy statement. The amount of Company contributions will be equal to the Federal corporate income tax credit generated by the contribution. in. effect, therefore, Company contributions have no financial effect on the Company. Termination and Amendment The Plan can be amended or terminated by the Company's Board of Directors at any time without stockholder approval, except that no amendment may reduce the benefits of any Participant accrued under the Plan prior to the date the amendment is adopted, nor divert any part of the assets of the Trust Fund to purposes other than the exclusive purposes of providing benefits to Participants and defraying reasonable expenses of administering the Pian. in the "event of the termination or partial termination of the Plan, each Participant affected by such termination or partial termination will remain 100% vested in his interests in the Plan. No part of the assets of the Plan will at any time revert to the Company. Tax Consequences The Plan is intended to meet the requirements of Section 409A, Section 401 (a), and reiatedd sections of the Intarnal Revenue Code of 1954 as amended (the "Code"). Accordingly, the Trust Fund under the Plan should be exempt from taxation under Section 501 of the Code. The Federal Income tax rules applicable to a plan which is qualified under Section 401 and related sections of the Code generally provide, among other things, that Participants will pay no income tax on Company contributions at the time they are paid to the Trustee, nor at the time dividends, interest or gains on the assets of the Trust Fund are received by the Trustee nor at the time any of such amounts are allocated to a Participant's account. Further, Participants generally will be taxed on distributions from the Plan only after such distributions are made. The Board of Directors recommends a vote "FOR" the following resoiution which will be presented at the meeting: . "RESOLVED that the R. J. Reynolds Industries, Inc. Stock Bonus Plan, the text of which is set forth in the Proxy Statement for this meeting as Exhibit B, is hereby approved." The affirmative vote of the shares representing a majority of the votes entitled to be cast by the holders of stock present at the meeting, in person or by proxy, will be required to approve this item proposed by the Board of Directors. Item 5 - 1982 LONG TERM INCENTIVE PLAN The Board of Directors has determined that the R. J. Reynolds Industries, Inc. 1982 Long Term Incentive Plan (the "Plan") should be established to provide the Company with an effective means to 20

attract, retain, and motivate key personnel of the Company and its Operating Companies and has adopted the Plan subject to stockholder approval. The Company's existing stock option plans, approved by the stockholders in 1974 and 1977, authorized the purchase of 3,700,000 shares of the Company's Common Stock upon the exercise of options granted under those plans. Options and related stock appreciation rights have been granted to 630 employees for the purchase of 3,195,697 shares of Common Stock under the plans, and the Board of Directors believes that the best interests of the Company will be served by the availability of additional shares to be used for awards granted under the terms and conditions of the proposed Plan. The Board of Directors believes that the existing stock option plans have enhanced the Company's position in the highly competitive market for managerial and executive talent, but to remain competitive, it is the judgment of the Board of Directors that a plan permitting the grant of long-term incentive awards, including options, should be adopted. The essential features of the Plan are outlined below. The full text of the Plan appears as Exhibit C to this Proxy Statement, and the following outline is qualified in its entirety by reference to such text. General The Plan provides for the granting of awards to key employees of the Company and its Operating Companies. The Company will bear the expense of any registration of interests in the Plan or Common Stock issuable thereunder required under the Securities Act of 1933. The Plan will be administered by the Compensation Committee. No member of the Compensation Committee will be eligible to receive or hold awards under the Plan while he or she is a member, and no person may become a member who, during the preceding year, has been eligible to receive awards under the Plan or any other plan of the Company which provides for awards in Common Stock. The Compensation Committee is authorized to establish rules and regulations for administration of the Plan, to make determinations and interpretations under the Plan and to make the awards granted pursuant toQt~he Plan. Awards Under the terms of the Plan, the Compensation Committee, in its sole discretion, may grant awards in such amounts and in such of the forms permitted by the Plan as it deems appropriate. In addition to officers of the Company, the Compensation Committee may grant awards to such other key employees of the Company and its Operating Companies as may be recommended to the Compensation Committee 'by the Chairman of the Board. The maximum number of shares of Common Stock which may be allo- cated pursuant to awards under the Plan is 5,000,000, but no individual may be allocated more than 250,000 shares. Both of these amounts are subject to adjustment in the event of a change of the Com- pany's capitalization. The permissible forms of awards are as follows: a. Incentive Stock Options - These are stock options which are granted pursuant to the restrictions of recently enacted legislation and are similar to "qualified" options granted previously under the Company's Career Executive Stock Plan. Generally, incentive stock options may not be exercised more than ten years after the date they are granted, may not have an option price less than the price of Common Stock on the date they are granted, and must be exercised in the order in which they were granted. In any given year, the value of Common Stock (determined at the time of each applicable grant) for which any individual may be granted incentive stock options may generally not exceed $100,000. b. Other Stock Options-These are options to purchase Common Stock under terms other than those applicable to incentive stock options; These options are similar to "non-qualified" options granted under the Company's 1977 Stock Option Plan, but under the proposed Plan, an individual may be granted an option which has an exercise price of up to 15% below the market price of Common Stock on the date of grant. 21

brands, and it markets those products not only in compliance with legal and other restrictions but also with deference to the various consumer demands of the countries and territories in which it operates. Over the past quarter century, governments, the tobacco industry and various research groups have expended millions of dollars on smoking-related research. The controversy over smoking and health is an old, and as yet unresolved, question. No ingredient or group of ingredients as found in tobacco smoke has been proven to produce disease in humans. Finally, the Company could not preparb the requested reports without expending considerable time and money and, contrary to the proponents' assertion, without disclosing information of a proprietary nature. The Board of Directors believes that such a report would be of no benefit to the Company or its stockholders. The affirmative vote of shares representing at least a majority of the votes cast on this item will be required to approve this proposal. MISCELLANEOUS The Board of Directors has no knowledge of any other matters to be acted upon pursuant to the proxy. If any other matters should properly come before the meeting, it Is the intention of the persons designated in the proxy to vote thereon according to their best judgment. A summary of the proceedings of the Annual Meeting will be sent to the stockholders. Proposals of stockholders intended to be presented at the next Annual Meeting must be received by the Secretary, R. J. Reynolds Industries, Inc., Reynolds Boulevard, Winston-Salem, North Carolina 27102, no later than December 17, 1982. Stockholders are urged to forward their proxies without delay. A prompt response will be greatly appreciated. R. J. REYNOLDS INDUSTRIES, INC. Winston-Salem, N. C. March 17,1982 28

c. Stock Appreciation Rights-These are rights to receive cash or Common Stock in an amount equal to the appreciation on shares of Common Stock subsequent to the date the stock appreciation rights are granted. These rights are similar to the stock appreciation rights which have been granted under the Company's 1977 Stock Option Plan. d. Restricted Shares -These are shares of Common Stock delivered to an individual without payment of consideration which are: subject to restrictions or conditions, typically including con- tinued employment for a specified 0enod, on the individual's right to transfer or sell the shares. e. Dividend Equivalent Rights-These are rights to receive cash payments at the same time and in the same amount as cash dividends paid on an equal number of shares of Common Stock. f. Performance Units-These are rights to receive cash payments at a future date based upon the Company's performance during the period between the date of grant and such future date. g. Performance Shares-These are similar to performance units, but the ultimate cash pay- ments are determined not only on the basis of Company performance during the interim period, but also upon the price of Common Stock at the end of the period. Participants It is Impossible at this time to determine who may be selected to receive awards under the Plan or the amount of Common Stock which will be allocated to individuals pursuant to such awards. It is expected, however, that these determinations will be made on the basis of the eligible employee's responsibilities, performance and potential contributions to the success of the Company and its Opera- ting Companies, as indicated by management's evaluation of the position he or she occupies. The Plan provides that no award may be granted to an employee within twelve months of his or her normal retire- ment date under any Company or Operating Company retirement plan in which he or she is participating. Nominees for election as Directors who may be eligible for awards under the Plan are Mr. Abely, Mr. Horrigan, Mr. Landis, Mr. Roemer, and Mr; Wilson. Adjustments The total number of shares of Common Stock which may be allocated pursuant to awards made under the Plan or which may be allocated to any one individual, the number of shares of Common Stock subject to outstanding options, the exercise price for such options, the number of outstanding stock appreciation rights, the base value of such rights, the number of outstanding dividend equivaient rights, and the number of outstanding performance shares will be adjusted in the event of changes in the Company's capital structure resulting from a stock dividend or a subdivision, combination or reclassifi- cation of shares. In the case of a merger or consolidation, or in the event of a tender offer for shares of the Company's Common Stock, the Compensation Committee has discretion to make such adjustments with respect to outstanding awards under the Plan as it deems necessary or desirable. Termination and Amendment The Board of Directors may terminate or amend the Plan; except that without stockholder approval, the Board of Directors may not: (i) increase the total number of shares of Common Stock available under the Plan in the aggregate or which may be allocated or delivered to any one individual; (ii) withdraw the administration of the Plan from the Compensation Committee; (iii) permit any person to participate in the Plan while a member of the Compensation Committee; (iv) materia)ly increase the cost of the Plan or the benefits accruing to Participants thereunder; or (v) materially modify the require- ments as to eligibility for participation in the Plan. No amendment or termination of the Plan may adversely affect any Participant's rights with respect• to previously granted awards without the consent of such Participant, but stock appreciation rights and dividend equivalent rights may be changed or cancelled without the holder's consent. 22

"WHEREAS some tobacco firms are using aggressive promotion tactics to create new markets, even in remote corners of the Third World, which have had little traditional consumption of cigarettes as well as little information about health-related effects of smoking; "WHEREAS many cigarettes in the Third World are relatively more expensive and carry up to 76% more grams of tar than those same brands sold in developed nations; "THEREFORE BE IT RESOLVED that the shareholders request the Board of Directors to make avail- able to requesting shareholders a report, produced at reasonable cost and excluding proprietary information, which shall cover the following: 1. A description of Third World regions of Africa, Asia, and Latin America where our Company manufactures and/or markets cigarettes. 2. A description of the market size and market share as well as advertising costs in these areas annually since 1976, including projects for the next five years. 3. A description of our Company's present policy related to: a. The World Health Organization's recommendation on banning promotion of tobacco, especially in Third World nations. b. A limitation of cigarette tar and nicotine levels in Third World nations equal to that in the United States. c. Informing consumers of the risks of tobacco use in countries where there may be little or no governmental regulations concerning health risks for smokers." SUPPORTING STATEOENT "While U.S. domestic cigarette sales have been increasing, signs of decline are being projected. Tobacco consumption in new Third World markets is increasing dramatically. This raises concern about future health prospects there. Heretofore, previously uncommon smoking-related diseases are now beginning to appear. "WHO warned in a recent report that smoking-related diseases will appear in developing nations before communicable diseases and malnutrition have been controlled. Its Committee on Smoking Control has recommended that all nations ban the promotion of tobacco and limit cigarette tar and nicotine content. We are concerned that some current practices of tobacco companies in developing nations may vitiate against such recommendations of WHO. "Tobacco consumption is growing fastest in countries with the greatest poverty, illiteracy, and food shortages. While tobacco can add to a nation's balance of payments, we believe people's health and welfare cannot be sacrificed for financial considerations alone." The Board of Directors recommends voting "AGAINST" adoption of this resolution. The Board of Directors' Objection to Proposed Resolution The Company continued to be the leader in the domestic cigarette market during 1981, increasing both its unit volume and share of market. Its commitment to the domestic cigarette industry has been demonstrated not only by its performance but also by its previously announced 10-year construction and modernization plan. Resources have not and will not be diverted to the detriment of our domestic com- mitment in order to take advantage of market opportunities in the Third World nations. The cigarette business is one of the most competitive businesses in the world. Throughout the world, smoking preferences vary as do the legal and economic environments in which cigarettes are marketed. In serving all its customers, the Company's offered products are positioned as superior to competitive 27

SUPPORTING STATEMENT "Last year 4,646 shareholders cast a total of 5,191,374.5 votes in favor of our similar resolution. The vote against included the unmarked proxies. "The importance of cumulative voting has been noted in the following words by Giant Portland Cement Corporation in their 1974 proxy statement: 'Cumulative voting is a form of proportional representation which permits minority shareholders to have representation on the Board of Directors. Under the existing by-laws a shareholder is entitled to one vote for each share of stock registered in his name. Thus, the holders of a majority of the shares may elect all of the directors, in which event the remaining shareholders may not elect any directors. The proposed Article Ninth provides for cumulative voting in the election of directors, in which case each stockholder is entitled to as many votes as he owns shares, multiplied by the number of directors to be elected, to be cast for one or distributed among two or more directors, as he sees fit. Therefore the proposed amendment would permit a person or a group of persons holding a significant block of shares to have representation on the Board of Directors.' "If you agree, please mark your proxy for this resolution; otherwise it is automatically cast against it, unless you have marked to abstain." The Board of Directors recommends voting "AGAINST" adoption of this resolution. The Board of Directors' Objection to Proposed Resolution This resolution was presented at the Annual Meeting~f R. J. Reynolds Tobacco Company in 1959, 1964 and 1965 and the Annual Meeting of the Company in 974, 1975, 1980 and 1981. At each of these meetings at least 94% of the votes cast were against the resolution. The Board of Directors believes that this proposed change in the voting rights of stockholders is neither appropriate nor in the best interests of the stockholders. In the opinion of the Board of Directors, it is important that each member of the Board of Directors have the responsibility of representing all stockholders of the Company. Directors elected through cumulative voting could regard themselves as representing only the special group of stockholders who elected them and this may well be contrary to the interests of the stockholders as a whole. Cumulative voting invites partisanship among directors which could interfere with their ability to work together, a requirement essential to the effective functioning of the Board. The Board of Directors is convinced that it would not be in the interests of the Company or its stockholders to change the existing method of electing directors, a method which has worked satis- factorily and successfully throughout the history of the Company and R. J. Reynolds Tobacco Company before it. The affirmative vote of shares representing at least a majority of the votes cast on this item will be required to approve the proposal. o 0) v v Item 7 - PREEMPTIVE RIGHTS Ln Ln The same stockholders have advised that they will introduce at the meeting the following resolution: oNo "RESOLVED: That the stockholders of R. J. Reynolds Industries, Inc., assembled in annual meeting in person and by proxy, hereby request that the Board of Directors take the steps necessary to restore limited pre-emptive rights to the shareholders." 25

SUPPORTING STATEMENT "In 1977 8,582 shareholders cast a total of 1,604,551.5 votes in favor of our similar resolution. The vote against included the unmarked proxies. "Charles J. Elia, a well known Wall Street writer has publicly stated: 'Putting out new shares tends to dilute the value of old shares because earnings and assets z are spread over more shares ... It i8 redressed by the issuance of rights to current owners ... There are advantages in being a sItockhoider entitled to rights . . . One is the avoidance of the usual brokerage commission in picking up the additional stock.' "If you agree,. please mark your proxy for this resolution; otherwise it is automatically cast against it, unless you have marked to abstain." The Board of Directors recommends voting "AGAINST" adoption of this resolution. The Board of Directors' Objection to Proposed Resofution The Board of Directors opposes this proposal because it believes adoptioh could seriously hamper the Company's ability to raise funds on the most favorable terms under any and all economic conditions which of course cannot now be foreseen. The Board of Directors must be in a position to act promptly and effectively in financing the Company's needs which it could not always do if it were necessary each time to offer shares and securities convertible into shares to the stockholders first. The question of whether rights to subscribe should be granted to stockholders should be left for determination at the time in the light of all the relevant circumstances. The Company should continue to be able to take prompt advantage of any financing opportunity or need with complete flexibility should the occasion arise. The Board of Directors is of the opinion that the interests of the Company and the stockholders will be best served by preservation of the freedom to consider in each instance the various factors affecting the desirability of a rights offering to stockholders. This resolution was rejected at the annual meeting in 1976 and 1977. At both of these meetings at least 93% of the votes cast were against the resolution. The affirmative vote of shares representing at least a majority of the votes cast on this item will be required to approve the proposal. Item 8- REPORT ON CIGARETTE PROMOTIONS IN THIRD WORLD NATIONS The Province of St. Joseph of the Capuchin Order, Office for Corporate Responsibility, 1016 N. Ninth Street, Milwaukee, Wisconsin 53233, The Premonstratensian Fathers, 1016 North Broadway, De Pere, Wisconsin 54115, and the Sisters of the Sorrowful Mother Finance Inc., 6618 N. Teutonia Avenue, Mil- waukee, Wisconsin 53209, who, on January 1, 1982, were the beneficial owners of 10 shares, 500 shares, and 100 shares, respectively, of the Company's Common Stock, have advised the Company that they will introduce the following resolution at the meeting: "WHEREAS the nature of business demands that our Company increase markets in the highly com- petitive cigarette industry; "WHEREAS cigarette industry executives estimate 'annual consumption for the next several years will slow to between a 0.3°'o decline and a 0.7% gain' (Business Week 12/15/80); "WHEREAS these facts make the relatively untapped market in developing nations a potential target for increased promotion of cigarettes; 26

deduction for the same amount. If no Section 83(b) election is made, the employee will generally recognize ordinary compensation income, and the Company will be entitled to a corresponding deduction, at the time the restrictions on the shares terminate in the amount, if any, that the fair market value of the shares at the time the restrictions expire exceeds the amount, if any, paid for such shares. In addition, where no Section 83(b) election is made, dividends paid on the restricted shares prior to termination of the restrictions will be taxed to the employee as ordinary compensa- tion income and deductibie by the Cqmpany. , e. The grant of dividend equivalent rights will not result in taxation to the employee and the Company will not receive a deduction at the time of grant. In general, payments under dividend equivalent rights will be taxable as ordinary compensation income to the recipient and the Company will receive a corresponding deduction at the time the payments are made. f. An employee will recognize no income upon the award of performance units nor will the Company receive a deduction upon such award. When the performance units mature and their value, if any, is paid to the employee and not deferred, he or she will generally recognize ordinary compensation Income to the extent of the value of the payments and the Company will receive a corresponding deduction. g. Payments for performance shares will be taxed in the same manner as payments for performance units. The Board of Directors recommends a vote "FOR" the following resolution which will be presented at the meeting: "RESOLVED that the R. J. Reynolds Industries, Inc. 1982 Long Term Incentive Plan, the text of which is set forth in the Proxy Statement for this meeting as Exhibit C, is hereby approved." The affirmative vote of the shares representing a majority of the votes entitled to be cast by the holders of stock present at the meeting, in person or by proxy, will be required to approve this item proposed by the Board of Directors. Item 6 - CUMULATIVE VOTING Lewis D. Gilbert and John J. Gilbert, 1165 Park Avenue, New York, New York 10028, who state that each of them is the registered owner of 120 shares of the Company's Common Stock and that they represent an additional family interest of 240 shares of the Company's Common Stock, have advised the Company that they will introduce the following resolution at the meeting: "RESOLVED: That the stockholders of R. J. Reynolds Industries, Inc., assembled in annual meeting in person and by proxy, hereby request the Board of Directors to take the steps necessary to provide for cumulative voting in the election of directors, which means each stockholder shall be entitled to as many votes as shall equal the number of shares he or she owns multiplied by the number of directors to be elected, and he or she may cast all of such votes for a single candidate, or any two or more of them as he or she may see fit." 24

Tax Consequences The Federal income tax consequences with respect to awards under the Plan differ depending on the form of the award. The Company is of the opinion that the following rules will apply: a. An employee receiving an incentive stock option under the Plan will not be in receipt of taxable income under the Internal Revenue Code of 1954 as amended (the "Code") and regulations thereunder upon the grant of the option, and in the event the exercise of the option is in accordance with Section 422A of the Code, will not recognize ordinary compensation income at the time of exercise of the option. The employee may, however, recognize income upon disposition of the shares that are received on the exercise of the option. The character of any gain, i.e., capital or ordinary compensation income, on the date of sale of the shares will depend upon the period of time the employee holds such shares after exercise of the option. The employee will be taxed generally at capital gains rates when he sells the shares if he holds the shares for at least two years from the date of option grant and at least one year after the shares were transferred to him. If the employee sells the shares before satisfying the above holding period requirements, the employee will recognize ordinary compensation income at the time of sale limited to the lesser of (1) the gain, if any, or, (2) the excess of the fair market value of the shares at the time the option was exercised over the option price. The Company will not be entitled to a deduction under the Code In connection with the exercise of an Incentive stock option or thereafter,~ unless the employee disposes of -the shares In a manner subjecting the employee to ordinary compensation Income on disposition of the shares. In such event, and at the time of such disposition, the Company will be entitled to a deduc- tion equal to any ordinary compensation income recognized by the employee. b. An employee receiving an option under the Plan which is not an incentive stock option will not be in receipt of taxable income under the Code and regulations thereunder on the date of grant of the option. An employee who is not subject to the ec-month restriction on sales of shares of stock under Section 16(b) of the Securities Exchange Act of 1934 will recognize ordinary compensation income at the time the option is exercised in the amount that the fair market value of the shares on the date of exercise exceeds the option price. An employee who is subject to the Section 16(b) restrictions will realize ordinary compensation income at the same time as other employees if such employee so elects in accordance with Section 83(b) of the Code. Employees who are subject to the Section 16(b) restrictions and who do not make a Section 83(b) election will recognize ordinary compensation Income at the time the Section 16(b) restrictions lapse in the amount by which the fair market value of the shares on the date the Section 16(b) restrictions lapse exceeds the option price. In addition, the dividends paid on the shares to employees who do not make an election under Section 83(b) of the Code will be taxed to such employees as ordinary compensation income until such time as the Section 16(b) restrictions lapse. The Company will be entitled to a deduction at the time and in the amount that ordinary compensation income is recognized by the employee. c. Under current Internal Revenue Service rulings, the grant of stock appreciation rights does not produce taxable income to the employee or a tax deduction to the Company. Upon exercise of such rights, however, the amount of any cash the employee receives and the fair market value on the exercise date (or in the case of employees who are subject to Section 16(b) of the Securities Exchange Act of 1934 and who do not make an election under Section 83(b) of the Code, on the date the Section 16(b) restrictions expire) of any stock received are taxable to the employee as ordinary compensation income and deductible by the Company. d. With respect to restricted shares that are subject to a substantial risk of forfeiture and are nontransferable, an employee, within certain limits, may elect under Section 83(b) of the Code to include the excess, if any, of the fair market value of the shares at the time of grant (determined without regard to any lapse restrictions) over the amount, if any, paid for such shares as ordinary compensation income. If this election is timely made, the Company will receive a corresponding 23

Exhibit A RJR EMPLOYEES' SAVINGS AND INVESTMENT PLAN ARTICLE 1 Definitions 1.01 "Accounts" shall mean, with respect to any Member, his Basic and Supplemental Investment Accounts and his Company Contribution Account. 1.02 "Affiliated Company" shall mean any Company more than 50% of the voting stock of which is directly or indirectly owned by R. J. Reynolds Industries, Inc. or by any successor, and each trade or business (whether or not incorporated) controlled by the Company or with which the Company is under common control. 1.03 "Basic Contributions" shall mean the contributions of a Member which are credited to his Basic Investment Account in accordance with Section 4.01. 1.04 "Basic Investment Account" shall mean that portion of the Trust Fund which, with respect to any Member, is attributable to his own Basic Contributions and any investment earnings and gains or losses thereon. 1.05 "Beneficiary" shall mean any person or persons (who may be designated contingently or successively and who may be an entity other than a natural person), designated by a Member, on a form supplied by the Committee, to receive benefits payable In the event of the death of the Member. Section 13.09 should be referred to for payments in the event of death v+cith no designated survivor or incom- pentency of a survivor. 1.06 "Board of Directors" shall mean the Board of Directors of R. J. Reynolds Industries, Inc. and any committee of directors authorized by such Board to act in its behalf with reference to the Plan. 1.07 "Break in Service" shall mean a period of at least one year from an Employee's Severance from Service Date to his date of reemployment by an Employer. 1.08 "Code" shall mean the Internal Revenue CodWf 1954 as amended from time to time. Refer- ence to any section or subsection of the Code includeV reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. 1.09 "Committee" shall mean the Committee as provided in Article 11. 1.10 "Common Stock" shall mean the Common Stock, without par value, of R. J. Reynolds Indus- tries, Inc. or any successor company thereto. 1.11 "Company" shall mean R. J. Reynolds Industries, Inc., a Delaware corporation, or any suc- cessor by merger, purchase or otherwise, with respect to its Employees; or any other Affiliated Company which is participating in the Plan as provided in Section 13.04 with respect to its Employees. 1.12 "Company Contribution Account" shall mean that portion of the Trust Fund which, with respect to any Member, is attributable to any contributions made in his behalf by the Company, and any invest- ment earnings and gains or losses thereon. 1.13 "Compensation" shall mean the basic compensation and such other forms of compensation paid for employment as the Committee has determined shall be included and which are listed in Schedule A which shall be attached hereto after adoption by the Committee and incorporated by reference. Schedule A shall be revised as the Committee from time to time modifies the forms of compensation which are to be included. 1.14 "Disability" shall mean, (i) being disabled within the meaning of any pension plan or long- term disability plan of an Employer under which a Member is entitled to receive benefits and which results in Termination of Employment or (ii), if (i) is not applicable, as provided in Internal Revenue Code § 72(m) (7), being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of a long continued and indefinite duration which results in a Termination of Employment. 1.15 "Effective Date" shall mean January 1, 1982, in respect of R. J. Reynolds Industries, Inc. and the date as of which the Plan is adopted by an Affiliated Company, in respect of such company. 1.16 "Eligible Employee" shall mean any person regularly employed by a Participating Unit, who is paid from a United States dollar payroll maintained in the United States, who receives a regular and A-1

ARTICLE 4 Contributions 4.01 Member Basic Contributions. Each Member may contribute a percentage of his Compensa- tion; such percentage shall be 1% to 5% of Compensation in 1% increments. The contributions of a Member shall be made through payroll deductions and will be paid to the Trustee as soon as practicable after the end of each month. 4.02 Member Supplemental Contributions. A Member who has authorized the maximum Basic Contribution rate of 5% may also make addHtional contributions under the Plan by authorizing additional payroll deductions of 1% to 10% of his Compensation in 1% increments which shall be paid to the Trustee as soon as practicable after the end of each month. 4.03 Change in Member Contributions. Subject to the provisions of Sections 4.01 and 4.02, and not more than once In any three month period, a Member may change the percentage of his authorized payroll deduction by giving 30 days' prior written notice to the Committee. Such changed percentage shall become effective beginning with the first payroll period as specified by the Member commencing after the expiration of the notice period. In addition, where Member contributions by payroll deduction are or may be prohibited by law, in the opinion of counsel to the Company, a Member, upon approval by the Committee, may make contributions directly to the Trustee for each payroll period by a method satisfactory to the Committee as long as such deposits are timely made on the same schedule as payroll deductions. The Trustee shall not accept direct contributions not timely made by a Member. 4.04 Suspenslon of Member Contributions. (a) A Member may suspend his contributions at any time by notifying the Committee in writing on a form supplied by it at least 30 days, or such shorter period as the Committee may approve, in advance of the date on which such a suspension shall become effective. The suspension shall become effective on the first day of the first payroll period commencing on or after the expiration of the notice period. During such a period of suspension no Company contri- butions on behalf of such a Member shall be made by the Company. (b) A Member who has suspended his contributions may apply to the Committee to have them resumed in accordance with Sections 4.01 and 4.02 on the first Entry Date next following at least 30 days' written notice of such intent. (c) A Member who has ceased to make contributions under Section 4.01 because he is on an unpaid absence from service shall again be eligible to resume making contributions on the date he returns to service as an Eligible Employee. No contributions may be made by a Member for any unpaid period of absence from service including, but not limited to, absence due to sickness, leave of absence, or service in the Armed Forces. (d) A Member who has ceased to make contributions under Section 4.01 because he has ceased to be an Eligible Employee but, nevertheless, continues to be an Employee shall again be eligible to resume making contributions on the date he again becomes an Eligible Employee and gives written notice to the Committee on the prescribed form. 4.05 Company Contributions. (a) With respect to each payroll period, the Company shall contrib- ute out of estimated current or accumulated earnings or profits on behalf of each Member an amount equal to 100% of such Member's first 1% of Basic Contributions and an amount equal to 50% of such Member's Basic Contributions in excess of 1% to the Plan for such payroll period. Company contribu- tions under this paragraph will be paid to the Trustee as soon as practicable after the end of each month. (b) Except as hereinafter provided, each company participating in the Plan shall for any Plan Year contribute a portion of the total Company contributions, made pursuant to subparagraphs (a) and (b) above, equal to the aggregate amounts which are credited for such Plan Year to the accounts of Mem- bers for periods while they are Employees of each such company subject to the provisions of Article 10. The amount which each such company is to so contribute will be paid by it only to the extent that the payment does not exceed the total of such company's current and accumulated earnings or profits before adjustment for such payment. If, however, such company is eligible under the Internal Revenue Code to be included in a consolidated Federal income tax return, as a member of the affiliated group including R. J. Reynolds Industries, Inc. and is prevented by insufficient earnings and profits from making the full contribution which it would otherwise make, the portion of the contribution which such deficit company is so prevented from making may be made up by additional payments from the other such companies which are eligible to join in filing such a consolidated return. If a company does not meet any of the foregoing criteria, its contributions shall be determined on such basis as the Committee may decide. A-4

1.36 "Valuation Date" shall mean the date or dates, as applicable, on which the Trust Fund is valued in accordance with Article 6. 1.37 "Vesting Service" shall mean service recognized for the purpose of determining eligibility for certain benefits under the Plan, determined as provided in Article 3. 1.38 "Withdrawal Valuation Date" shall mean, with respect to a Member, the last day of the calendar month coinciding with or immediately following the date on which his request for a withdrawal under the Plan is filed with the Company. ARTICLE 2 Membership 2.01 Eligibility. (a) Every Employee shall become eligible for membership in the Plan as of the first Entry Date, commencing with the Effective Date of the Plan, coincident with or next following the date he becomes an Eligible Employee. (b) All Eligible Employees of a Participating Unit who participate in this Plan shall participate under the terms and conditions herein stated. 2.02 Membership Application. An Eligible Employee may become a Member on any Entry Date by completing and submitting to the Committee an application form supplied by the Committee on which he designates the percentage of his Compensation he wishes to contribute to this Plan by means of deductions from his Compensation, he chooses one or more Investment Fund(s), and he names a Beneficiary. Participation in the Plan by an Eligible Employee is voluntary. ARTICLE 3 Vesting SerVice 3.01 Vest/ng Service. Except as hereinafter provided, an Employee's period of employment with an Employer shall be Vesting Service for the purposes of the Plan. Vesting Service shall terminate on an Employee's Severance from Service Date. If an Employee's Opioyment is terminated and he is sub- sequently reemployed by an Employer within 12 months from his Severance from Service Date, the period between his Severance from Service Date and the date of his reemployment by an Employer shall be included in his Vesting Service. 3.02 Absence in Military Service. If an Employee shall have been absent from the service of an Employer because of service in the Armed Forces of the United States and if he shall have returned to the service of an Employer within the period during which reemployment rights are extended by law, such absence shall not count as a period of severance. Any period of such absence which is not otherwise included in his Vesting Service determined in accordance with Section 3.01 shall, nevertheless, be considered as Vesting Service. 3.03 Approved Leave of Absence. A period during which an Employee is on a leave of absence approved by an Employer not otherwise recognized as Vesting Service shall, if the Committee so deter- mines, be considered as Vesting Service under rules established by the Committee uniformly applicable to all Employees similarly situated. 3.04 Break In Service. A Break in Service shall occur if an Employee is not reemployed within one year after a Severance from Service Date. 3.05 Return Without a Break In Service. If a former Member who has not incurred a Break in Service is restored to service as an Eligible Employee, he shall again be eligible to become a Member of the Plan on his date of reemployment and his Vesting Service recognized at the time of his previous Severance from Service Date shall be restored to him. 3.06 Return With a Break In Service. If a former Member is restored to service as an Eligible Employee after having incurred a Break in Service, he shall again be eligible to become a Member of the Plan on his date of reemployment, and his Vesting Service recognized at the time of his previous Sever- ance from Service Date shall be restored to him, but any portion of his Company Contribution Account at such time which forfeited pursuant to Section 10.01 shall remain forfeited and shall not be affected by any Vesting Service rendered after his restoration to service. A-3

stated compensation or retainer, and If applicable, who pays taxes in respect of his compensation imposed by the Federal Insurance Contributions Act; provided, that except as the Board of Directors or the Committee, pursuant to authority delegated to it by the Board of Directors, may otherwise provide on a basis uniformly applicable to all persons similarly situated, no person shall be an "Eligible Employee" for purposes of the Plan: (a) who is excepted by the Board of Directors or the Committee, or (b) whose terms and conditions of employment are determined by a collective bargaining agreement with the Company which does not make this Plan applicable to him. 1.17 "Employee" shall mean any person employed by an Employer. 1.18 "Employer" shall mean R. J. Reynolds Industries, Inc. or any Affiliated Company. 1.19 "Entry Date" shall mean with respect to an Eligible Employee the first day of any payroll period applicable to him commencing with the Effective Date of the Plan. 1.20 "Insurance Company" shall mean a legal reserve life insurance company. 1.21 "Investment Fund" or "Funds" shall mean the separate funds in which Member and Com- pany contributions to the Plan are invested in accordance with Article 5. 1.22 "Member" shall mean any person included in the membership of the Plan as provided In Article 2. 1.23 "Membership Service" shall mean service while a Member of the Plan. 1.24 "Participating Unit" shall mean any United States unit of employees of the Company which is approved by the Board of Directors or Its specifically authorized representative to participate in the Plan. The term shall not include any foreign corporations, or units thereof, or a corporation, or unit thereof, which is a Domestic International Sales Corporation within the meaning of § 992 of the Code. 1.25 "Plan" shall mean the RJR Employees' Savings and Investment Plan, as described herein or as hereafter amended. 1.26 "Plan Year" shall mean the calendar year. 1.27 "Prior Plan" shall mean any plan which is approved for transfer of all or a portion of Its assets and liabilities to this Plan as provided in Article 13. 1.28 "Retirement" means early or normal retirement under any other retirement plan of the Company unless otherwise specified by the Committee, provided such retirement results in the Mem- ber's termination. "Retirement" for Members not covered by such a plan shall mean Termination of Employment after attaining age 65. 1.29 "Severance from Service Date" shall mean the earlier of the date of an Employee's Retirement, death, resignation or discharge, or the first anniversary of the first day of a period in which he remains absent from service, with or without pay, with all Employers for any reason. 1.30 "Supplemental Contributions" shall mean the contributions of a Member which are credited to his Supplemental Investment Account In accordance with Section 4.02. 1.31 "Supplemental Investment Account" shall mean that portion of the Trust Fund which, with respect to any Member, is attributable to his own Supplemental Contributions, and any investment earnings and gains or losses thereon. 1.32 "Termination of Employment" shall mean separation from the employment of the Company for any reason, Including, but not limited to, Retirement, death, Disability, resignation or dismissal by the Company; provided, however, that transfer in employment between the Company and an Affiliated Company shall not be deemed to be "Termination of Employment." With respect to any leave of absence or any period of service in the Armed Forces of the United States ("Armed Forces"), Article 3 shall govern. 1.33 "Trustee" shall mean a trustee or trustees at any time acting as such under a trust agreement or agreements established for purposes of this Plan. 1.34 "Trust Fund" shall mean the cash and other properties arising from contributions made by members and by the Company in accordance with the provisions of this Plan and funds transferred from a Prior Plan which are held and administered by the Trustee pursuant to Article 5. 1.35 "Unit" shall mean the Unit referred to in Article 6. A-2

strict confidence of the Trustee. Any shares for which no such instructions are received by the Trustee shall be voted by the Trustee in the same proportion as the shares for which Instructions were received. Each Member (or in the event of his death, his Beneficiary) shall have the right to instruct the Trustee in writing as to the manner in which to respond to a tender or exchange offer for any or all shares of Common Stock credited to such Member's Account under the Trust Fund. The Company shall notify each Member (or Beneficiary) and utilize its best efforts to timely distribute or cause to be distributed to him such information as will be distributed to shareholders of the Company in connection with any such tender or exchange offer. Upon its receipt of such instructions, the Trustee shall tender such shares of Common Stock as and to the extent so instructed. If the Trustee shall not receive instructions from a Member (or Beneficiary) regarding any such tender or exchange offer for Common Stock, the Trustee shall have no discretion in such matter and shall take no action with respect thereto. ARTICLE 6 Valuation of Units and Credits to Members' Accounts 6.01 Units. At the end of the first month in which the Plan is in effect and operation, the amount or extent of each Members' interest in each of the Investment Funds (Section 5.04) shall be expressed and credited in "Units" at the rate of one Unit for each dollar of contributions by the Member and one Unit for each dollar of Company Contributions on behalf of the Member only for that first month in which the Plan is in operation. 6.02 Valuation of Assets. At the end of each month after the first month in which the Plan is in operation, the Trustee shall determine the total fair market value of all assets then held by it in each Fund. 6.03 Valuation of Units. At the end of each month when the value of all assets in each Fund has been determined pursuant to Section 6.02, the Trustee shall determine the value of each Unit in each of the Investment Funds credited to Members' Accounts in previous months by dividing (a) the total fair market value of all assets in each Fund as determined pursuant to Section 6.02 by (b) the total number of Units in that Fund credited to the Accounts of all Members immediately prior to the end of such month, not including Units to be credited for new contributions to that Fund at the end of that month for that month. C 6.04 Determination of Members' Additional Units forXach Monthly Contribution. As of the end of each month for which the Units of each Fund have beerK*aiued pursuant to Section 6.03, the Trustee shall determine the number of additional Units to be credited to the Accounts of each Member in each of the Investment Funds for the new contributions for that month by the following computations: (a) For each of the Investment Funds, separately, the amount of each Member's contribution to that Fund for that month shall be divided by the value of each Unit of such Fund prior to such contribution as determined pursuant to Section 6.03. (b) For each of the Investment Funds, separately, the amount of Company Contribution for that Member to that Fund for that month shall be divided by the value of each Unit of such Fund prior to such contribution as determined pursuant to Section 6.03. (c) The result of each computation shall be carried to the third decimal place and shall be the number of additional Units to be credited by the Trustee to the Account of that Member for that Fund for that month. 6.05 Statement of Accounts. Each Member shall be furnished at least annually a statement setting forth the value of his Accounts. ARTICLE 7 Vesting of Contributions 7.01 Vesting of Member's Contributions. Each Member's Basic Investment Account and Supple- mental Investment Account shall at all times be fully vested. 7.02 Vesting of Company Contributions. A Member shall become fully vested in his Company Con- tribution Account upon completion of the earlier of (1) 60 months of Vesting Service (Article 3) or (ii) 24 consecutive months of Membership Service (Article 1) or (iii) in the event of any one of the following: (a) attainment of age 65, (b) Retirement, (c) Disability, (d) death, A-7

If distribution is deferred, or made in installments as provided In (Ii) and (iii) above and the Member dies before payment is made or before all the installments are paid, the remaining value of his Accounts shall be paid to his Beneficiary at one time; provided, however, that a Member who elects installments as provided in (iii) above, may further elect that, should he die before all installments are paid, the remaining value of his Accounts shall continue to be paid to his Beneficiary in installments as provided in (iii) above. 8.03 Alternate Form of Distribution to a Beneficiary. Notwithstanding the foregoing, a Member may, prior to Retirement, elect to have the distribution of the amounts remaining in his Accounts upon his death payable after his death to his Beneficiary made in installments as provided in Section 9.02(iii), or in the form of a non-transferable annuity from a legal reserve life insurance company, or, with the written consent of the Committee, in any other manner approved by the Committee. Any such election may be revoked by the Member at any time. 8.04 Proof of Death and Right of Beneficiary or Other Person. The Committee may require and rely upon such proof of death and such evidence of the right of any Beneficiary or other person to receive the undistributed value of the Accounts of a deceased Member as the Committee may deem proper and its determination of death and of the right of such Beneficiary or other person to receive payment shall be conclusive. 8.05 Completion of Appropriate Forms. The Committee has prescribed forms providing written notice to the Company In order for a distribution to be made under the Plan. In the event a Member or a Beneficiary does not complete, execute and return such forms to the Company before the end of the calendar month following the date a distribution becomes payable under the terms of the Plan, such Member's or Beneficiary's Accounts may, at the option of the Committee (taking into account Section 13.09), be mailed after distribution, as provided in Section 8.02(a) (cash) and/or Section 8.02(b) (Common Stock), to the Address of Record as provided in Section 13.08. The Valuation Date for purposes of this Section 8.05 shall be the last day of the calendar month coincident with or next following the date of a member's termination. 8.06 Deferred Distribution. Any amounts being held for deferred distribution or in installments as provided in Sections 8.02(c) (ii) and (iii) will be segreged by the Trustee and invested in the Fixed Income Fund. Persons receiving a deferred distribution are former Members and shall not be credited with Company Contributions after Termination of Employment. 8.07 Minimum Value. Notwithstanding the foregoing provisions of Article 8, if the entire value of the Accounts of a Member amounts to less than $1,750, it shall, if the Committee so directs, be distributed in one lump sum payment. ARTICLE 9 Withdrawal Prior to Termination of Employment 9.01 Election to Withdraw from Accounts. As of any Withdrawal Valuation Date as defined in Arti- cle 1 and subject to Sections 9.02 and 9.03, a Member may elect to withdraw, in cash only and in a stated amount, all or a portion of the value of vested amounts in his Accounts. 9.02. Order of Withdrawal. Withdrawals as described in Section 9.01 and subject to the rules of Section 9.03 shall be applied by the Committee against a Member's Accounts in the order and classifi- cation as follows: First. The value of the Units, determined pursuant to Article 6 (Valuation of Assets), in his Supplemental Investment Account. Second. The value of the Units attributable to contributions made at least 24 months prior to the Withdrawal Valuation Date in both his Basic Investment Account and his Company Contribution Account. Third. The value of the Units in his Basic Investment Account attributable to contributions made within 24 months of the Withdrawal Valuation Date. Fourth. Provided that the Member has 60 or more cumulative months of Membership Service, the value of the Units in his Company Contribution Account attributable to contributions made within 24 months of the Withdrawal Valuation Date. A-9

9.03 Rules Applicable to Withdrawals Prior to Termination of Employment. The following rules shall apply to withdrawals under this Article 9: (a) Withdrawals may only be made on at least 30 days (or such shorter period as the Com- mittee, or a specific delegatee thereof, may approve) prior written notice to the Committee on a form approved by the Committee. (b) No more than one withdrawal may be made in any six-month period. (c) In no event may a Member m3ke'a withdrawal in an amount less than $100, unless such amount represents the total withdrawable from his Accounts. (d) In no event may a Member eiect an order of withdrawal other than set forth in Section 9.02, nor may a Member select the classification or Account from which his stated amount of withdrawal election will be withdrawn. (e) A Member making a withdrawal which necessarily results In an application beyond classi- fication "Second" in Section 9.02 shall be suspended from receiving Company Contributions for a period of six months from the instant Withdrawal Valuation Date. If for any reason more than one withdrawal is permitted or made during a single six-month period, each such withdrawal resulting in an application beyond classification "Second" shall separately incur a six-month suspension period, but such periods shall run concurrently (for example, a withdrawal two months after the start of a suspension period due to one prior withdrawal will result In a total concurrent suspension period for both withdrawals of eight months and not 12 months). (f) To the extent feasible, the Committee, upon receipt of a withdrawal application, will Inform a Member of any suspensions that will occur as result of the withdrawal. (g) Payments of withdrawal amounts will be made as soon as practicable after a Member's election to withdraw. (h) In no event may a Member with less than 60 cumulative months Membership Service make a withdrawal which results in an application to classification "Fourth" in Section 9.02. (i) Withdrawals from a Prior Plan of an Employer prior to the transfer of Its assets and liabilities to this Plan in accordance with Section 13.11 shall be treated as a withdrawal from this Plan and shall be subject to the suspension periods described herein; provided, however, that any such suspension period shall be measured from the date of withdrawal under the Prior Plan of an Employer. (j) Amounts received from any Prior Plan which are attributable to Company Contributions under such Prior Plan may not be withdrawn from this Plan within 24 months of the date such amounts are transferred to this Plan. 9.04 [Reserved] ARTICLE 10 Forfeitures 10.01 Forfeiture on Termination of Employment. If a Member's employment is terminated prior to attainment of age 65 for reasons other than Retirement, Disability, death or other Section 7.02(iii) event, the portion, if any, of his Company Contribution Account in which he is not vested pursuant to Article 7, shall be forfeited at the time he incurs a Break In Service. 10.02 Disposition of Forfeitures. All forfeitures arising out of the application of the provisions of Section 10.01 shall be used to reduce Company Contributions otherwise payable to the Plan. 10.03 Effect of Withdrawal Under Article 9. The non-vested Company Account of a Member who makes a withdrawal described in Article 9 shall not be forfeited by reason thereof. ARTICLE 11 Administration of Plan 11.01 Committee. (a) The general administration of the Plan and the responsibility for carrying out the provisions of the Plan shall be placed in a Committee of not less than three persons appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors. (b) Any person appointed a member of the Committee shall signify his acceptance by filinq written acceptance with the Secretary of the Committee. Any member of the Committee may resign by delivering A-10

(c) For purposes of this Section 4.05, current earnings or profits shall be computed as of the close of the calendar year without diminution by reason of any dividends during the year, and accumulated earnings or profits shall be computed as of the beginning of the calendar year. (d) In satisfaction of its obligation under Section 4.05, R. J. Reynolds Industries, Inc. may, at its option, either pay its contribution in cash or deliver shares of Common Stock held in the treasury, said stock to be valued at the closing price on the New York Stock Exchange - Composite Transactions as reported in The Wall Street Journal for the trading day next preceding the day of transmittal. (e) In the event that the Commissioner of Internal Revenue, on timely application made after the adoption or subsequent amendment of the Plan, determines that the Plan and the implementing trust do not qualify for tax-exempt status, or refuses, in writing, to issue a favorable determination with respect to the Plan and such trust, the Company's contributions made on or after the date on which such determination or refusal is applicable shall be returned to the Company without interest. In the event that a Company contribution to the Plan is made by a mistake of fact or all or part of the Company's deductions under Section 404 of the Internal Revenue Code for contributions to the Plan are disallowed by the Internal Revenue Service, the portion of the contributions attributable to such mistake of fact or to which such disallowance applies shall be returned to the Company without interest. Any such return shall be made within one year after the making of such contribution by mistake of fact or the denial of qualification or disallowance of deductions, as the case may be. 4.06 Llmitation of Contributions. Company and Member contributions shall be iimited,as described In Schedule B. ARTICLE 5 Trust Fund and Investment Funds 5.01 The Trust Agreement. The Company shall enter into a trust acireement which shall contain such provisions as shall render It impossible for any part of the corpus of the Trust or Income therefrom to be at any time used for, or diverted to, purposes other than for the exclusive benefit of Participants. Any or all rights or benefits accruing to,any person under the Plan with respect to any Company con- tributions deposited under the Trust Agreement shall be subject to all the terms and provisions of the Trust which shall specifically incorporate and be subject to the provisions of the Plan. 5.02 The Trustee. The Trustee will be a corporate tt`ustee appointed by the Board of Directors to serve at its pleasure. 5.03 Separate Funds. The Trustee will maintain three separate Investment Funds within the Trust Fund: the Fixed Income Fund, the Equity Fund and the Reynolds Common Stock Fund. Member contri- butions and Company contributions and the earnings thereon will be invested (I) by the Trustee alone, or (ii) pursuant to the instructions of an investment manager. Earnings or gains derived from the assets of any Investment Fund will be invested in that Fund. Appropriate Accounts for each Member shall be established and maintained in each Investment Fund in which a Member has an interest. 5.04 Investment Fund. (a) The Reynolds Common Stock Fund. The Reynolds Common Stock Fund shall consist of all Common Stock held by the Trustee hereunder and all cash held by the Trustee which is derived from dividends on Common Stock held hereunder, Company and Member contributions which are to be invested in Common Stock, and sales of Common Stock held hereunder. All dividends on Common Stock held hereunder, and all proceeds of sales of Common Stock held hereunder shall be invested In the Reynolds Common Stock Fund. Such Common Stock shall be purchased by the Trustee regularly on the open market, in accordance with a nondiscretionary purchase program, by the exercise of stock rights or private purchase; provided, however, that at the option and direction of R. J. Reynolds Industries, Inc. treasury stock or newly issued shares of Common Stock previously authorized and unissued may be contributed to, or purchased by, the Trustee and valued as described in Section 4.05(d). All shares of Common Stock held in the Trust Fund shall be held in the name of the Trustee or its nominee. (b) The Equity Fund. The Equity Fund shall consist of such capitai, common and preferred stocks, or other equity securities (including any common or commingled trust fund maintained by the Trustee which is invested primarily in eauity securities) as may be selected by the Trustee from time to time, cash derived from Member contributions which are to be invested in the Equity Fund, and from earnings on or sales of other assets in such Fund, and such interim investments (including, without limitation, certificates of deposit, bankers' acceptances and treasury bills) as may be selected by the Trustee from time to time. All earnings on assets held in the Equity Fund and all proceeds from the sale of such assets, shall be invested in the Equity Fund. All assets in the Equity Fund shall be held in the name of the Trustee or its nominee. (c) The Fixed Income Fund. The Fixed Income Fund shall consist of assets which are invested or held for investment intended to provide income on a fixed income basis, including, but not limited to, A-5

governmental, corporation or personal obligations, trust and participation certificates and mortgages. In addition, the Trustee will from time to time purchase or hold such property meeting the requirements for investments in the Fixed Income Fund as the Finance Committee of the Board of Directors directs, including without limitation one or more group annuity contracts providing for the accumulation of con- tributions thereunder at rates of interest which may be changed from time to time but which are guaranteed for a period of at least one year. As applicable, all assets in the Fixed Income Fund shall be held in the name of the Trustee or its nominee or in bearer form. 5.05 Temporary Investment. Pending permanent investment of the assets of any Investment Fund, the Trustee temporarily may hold cash or make short-term investments in obligations of the United States Government, commercial paper, an interin~ investment fund for tax qualified employee benefit plans established by the Trustee unless otherwise provided by applicable law, or other investments of a short- term nature. : 5.06 Investment of Member Contributions. (a) Election. All Member contributions will be invested at the election of the Member In multiples of 25% in the Reynolds Common Stock Fund, the Fixed Income Fund and/or the Equity Fund. A Member may make an election under this Section 5.06 or, once in any 12-month period, change a prior election, effective as to future contributions. Any such election or change of election will be effective only if the Committee is given prior written notice of 30 days or such shorter period as the Committee may approve. (b) Transfer of Investments. A Member may elect, by prior written notice to the Committee of 30 days to have all or any multiple of 25% of the value of his Account in the Reynolds Common Stock Fund, the Fixed Income Fund or the Equity Fund as of any future Valuation Date transferred to the Reynolds Common Stock Fund or the Equity Fund and/or the Fixed Income Fund, as the case may be, provided however, that a Member may make only one such election within any 24-month period. The amount removed from any.Investment Fund will be based upon values as of such future Valuation Date, and the change in investments shall be made as soon as reasonably possible thereafter. 5.07 Investment of Company Contributions. Except for the provisions of Section 5.08 Comoany contributions to the Company Contribution Account will be invested in the Reynolds Common Stock Fund. 5.08 Investment Option at Age 55. By giving to the Company 30 days prior written notice on a form approved by the Committee for such purpose, any Member of the age of 55 years or more, including a Member who is more than 55 years of age when he joins the Plan, shall have an option which may be exercised only once by such Member, to elect one or both of the following: (a) to have transferred to the Equity Fund and/or the Fixed Income Fund on any future Valuation Date all or part in multiples of 25% of his previously credited Company Contributions Account, and/or (b) to have invested in the Equity Fund or the Fixed Income on any Valuation Date all or part in multiples of 25% of the future Company contributions. 5.09 Investment Managers. The Company may, by action of the parties authorized under Article 11, enter into a written agreement with or direct the Trustee to enter into an agreement with one or more investment managers to manage the investments of one or more of the Investment Funds. Such investment managers may include one or more Insurance Companies which enter into group annuity contracts with the Trustee. The Company may, from time to time, remove any such investment manager or any successor investment manager, or direct the Trustee to do so, and any such investment manager may resign. The Company may, upon removal or resignation of an investment manager pro- vide for the appointment of a successor investment manager. 5.10 Member Responsibility For Selection of Funds. Each Member is solely responsible for the selection of his Investment Funds. Neither the Trustee, the Committee, the Company nor any of the officers or supervisors of the Company are empowered to advise a Member as to the manner in which his accounts shall be invested. The fact that a security is available to members for investment under the Plan shall not be construed as a recommendation for the purchase of that security, nor shall the designation of any Investment Fund impose any liability on the Company, Its directors, officers or employees, the Trustee, or the Committee. 5.11 Voting by Members. Each Member shall have the right and shall be afforded the opportunity to instruct the Trustee how to vote at any meeting of R. J. Reynolds Industries, Inc. shareholders that proportionate number of the total number of shares of Common Stock held in Reynolds Common Stock Fund which is the same proportion that the value of his interest in Reynolds Common Stock Fund bears to the total value of such Fund. Instructions by Members to the Trustee shall be in such form and pur- suant to such regulations as the Committee may prescribe. Any such instructions shall remain in the A-6

(e) termination of the Plan, or (f) complete discontinuance of Company contributions. Provided, however, that the provisions of (ii) above shall fully vest a Member in only Company Contributions made since his most recent date of enrollment in the Plan. 7.03 Vesting of Prior Plan Contributions. Contributions transferred from a Prior Plan pursuant to Section 13.11 shall at all times be fully vested. ~ ARTICLE 8 Distributions 8.01 General. (a) Upon the Termination of Employment of a Member at or after the attainment of age 65 or for reasons of Retirement, Disability, death or other Section 7.02(iii) event, the entire amount to the credit of all of his Accounts determined as of the Valuation Date of the calendar month in which such termination occurs shall be distributed as provided in Section 8.02 to the Member, if living, or to his Beneficiary in the event of his death, after a written notice on a form approved by the Committee for such purpose has been filed with the Company. (b) Upon the Termination of Employment of a Member prior to attaining age 65 for reasons other than Retirement, Disability, death or other Section 7.02(iii) event, the value of his Accounts with reference to Article 7 (Vesting of Contributions) shall be determined as of the Valuation Date of the calendar month in which such termination occurs and shall be distributed as provided in Section 8.02(a) or (b) only, after a written notice on a form approved by the Committee for such purpose has been filed with the Company. 8.02 Methods of Distribution. As soon as practicable after the Termination of Employment occurs, and subject to the approval of the Committee under rules established by the Committee uniformly appli- cable to all persons similarly situated, distributions provided under the Plan shall be made in the fol- lowing manner: (a) All distributions from the Equity Fund and the Fixed Income Fund shall be made in cash; (b) Unless the Member or his Beneficiary elects to take cash (or cash and Common Stock) for distributions from the Reynolds Common Stock Fund distributions from the Fund shall be in Common Stock, except that any fractional interest in a share of Common Stock shall be paid in cash; (c) All distributions of both cash or Common Stock shall be made as soon as practicable at one time but not later than 60 days after the latest of the close of the Plan Year in which occurs (A) the date on which the Member attains the earlier of age 65 or normal retirement age, or (B) the tenth anniversary of the year in which the Member commenced membership in the Plan, or (C) termination of the Member's service with the Company; except that, if the Member's Termination of Employment results from his Retirement or Disability, then, by written notice on a form approved by the Committee, for such purpose, delivered to the Company at least 30 days prior to his Ter- mination of Employment, and subject to the approval of the Committee, the Member may irrevocably elect to receive his distribution in any one of the following methods of payment: (i) By purchase of a non-transferable annuity from a legal reserve life insurance company. if such annuity contract provides for payment in the form of a life annuity and the Member is married on the date payments commence, the normal form of payment shall inciude a 50% 0) survivorship benefit in favor of the Member's spouse, unless the Member duly elects otherwise. ~ (ii) By payment at one time as soon as practicable after the last day of January of the in next succeeding calendar year based on the vaiue of his Accounts as of such date. N (iii) By payment in instaiiments over a period of up to fifteen years as follows: the amount ~ of each installment to be paid to each Member making such an election shall be based upon ~ the value of his assets as of the Valuation Date coinciding with or next following the date of Retirement or Disability and each anniversary thereof, and shall be determined by multiplying each such value by a fraction, the numerator of which shall be one and the denominator of which shall be the number of unpaid installments. However, the Committee In its absolute discretion may accelerate the payment of any installment or Installments if it determines the existence of undue financial hardship in the case of any Member or if any installment represents an amount less than a certain minimum determined by the Committee. If a Member's Beneficiary under any method of distribution is other than his spouse, the present value of payments to the Member shall not be less than 51 % of the value of the total payments to be made to the Member and his Beneficiary. A-8

his written resignation to the Secretary of the Committee and such resignation shall become effective upon the date specified therein. (c) The Committee shall elect from its members a Chairman, and shall also elect a Secretary who may be but need not be one of the members of the Committee. The Committee may appoint from its members such committees with such powers as it shall determine, and may authorize one or more of its members, or any agent, to execute or deliver any instrument or make any payment in its behalf. (d) The Committee shall hold meetings upon such notice, at such place or places, and at such time or times as it may from time to time determine. (e) A majority of the members of the Commitee shall constitute a quorum for the transaction of business. All resolutions or other action taken by the Committee shall be by the vote of a majority of the members of the Committee present at any meeting or without a meeting by an instrument in writing signed by a majority of the members of the Committee. (f) No member of the Committee shall receive any compensation for his service as such, and, except as may be required by applicable law, no bond or other security Is required of him in such capacity in any jurisdiction. 11.02 Authority and Duties of Various Fiduciaries. (a) Except as to matters required by the terms of the Plan or of the Trust to be decided by the Board of Directors, the Finance Commitee of the Board of Directors, the Chief Financial Officer (as defined in the Trust), or the Trustee or Trustees, the Com- mittee shall have the exclusive right to interpret the Plan and to decide any and all matters arising under the Plan or in connection with its administration, inciuding determination of eligibility for, and the amount of distributions and withdrawals. The Company shall have no power to direct or modify any Interpre- tations, determinations, or decisions of the Committee. The Committee may recommend amendments to the Board of Directors. The Committee may from time to time adopt rules for the administration of the Plan and the conduct of its business, which rules shall be consistent with the provisions of the Plan. (b) The Board of Directors, the Committee, and any other named fiduciary may each employ counsel, agents, and such clerical and accounting services as it may require in carrying out its responsi- bilities under the Plan. All fiduciaries shall be entitled to Leiy upon tables, valuations, certificates, opin- ions, and reports furnished by any actuary, accountant, or Wal counsel appointed under the provisions of the Plan. (c) The Committee shall keep in convenient form such personnel data as may be necessary for the Plan. The Committee shall prepare, distribute, and file such reports and notices as may be required by applicable law or regulation. (d) The Board of Directors shall control and manage the Plan assets if it has not delegated its power to do so. Such delegation of power may include the right to appoint and remove investment man- agers as such term is defined in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Trustees. Such delegation may be accomplished by a separate instrument or by appro- priate provisions in the Trust. (e) The members of the Committee shall use that degree of care, skill, prudence and diligence that a prudent man acting in a like capacity and familiar with such matters would use in his conduct of a similar situation. A member of the Committee shall not be liable for the breach of fiduciary responsibility of another fiduciary unless (i) he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach; or (ii) by his failure to discharge his duties solely in the interest of the Members and Beneficiaries for the exclusive purpose of providing their benefits and defraying reasonable expenses of administering the Plan not met by the Company, he has enabled such other fiduciary to commit a breach; or (iii) he has knowledge of a breach by such other fiduciary and does not make reasonable efforts to remedy the breach; or (iv) if the Com- mittee improperly allocates among themselves or delegates to others, or fails to properly review such allocation or delegation of fiduciary responsibilities. (f) The Company will indemnify and save harmless the members of the Committee and any person to whom fiduciary responsibilities are delegated under this Plan against any cost or expense (including attorneys' fees) or liability (including any sum paid in settlement of a claim with the approval of the Com- pany) arising out of any act or omission to act, except in the case of willful misconduct. (g) Each Trustee shall maintain accounts showing the fiscal transactions of the Trust established hereunder. The Board of Directors or the Committee, if delegated power, or both, shall keep in convenient form such financial data as may be necessary for the Plan, and shall annually cause to be prepared a balance sheet and statement of financial transactions of the Plan and the Trust. A-11

(h) Whenever, in the administration of the Plan, any discretionary action is required, the authorized party shall exercise his authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment. 11.03 Named Fiduciaries. (a) The Board of Directors, and the Committee, shall each constitute named fiduciaries as such term is defined in ERISA. (b) Any Committee of the Board of Directors or other fiduciary appointed as a named fiduciary by the Board of Directors by resolution or appointed by an appropriate instrument executed by an officer of the Company thereunto authorized by resolution of the Board of Directors, shall also constitute a named fiduciary in respect of the duties delegated to him or it in such resolution or instrument. 11.04 Delegation. Any named fiduciary designated herein or appointed as provided herein, unless precluded from doing so by the terms of such appointment, may by appropriate instrument designate any person (including any firm or corporation) to carry out part or all of such fiduciary's responsibilities and upon such designation the named fiduciary shall have no liability, except as imposed by applicable law, for any act or omission of such person. The foregoing does not preclude any other fiduciary to the extent allowed by ERISA and the terms of his appointment from delegating part or all of such fiduciary's responsibilities with respect to the Plan. 11.05 Multiple Capacities. Any fiduciary may serve in more than one fiduciary capacity with respect to the Plan. ARTICLE 12 Amendments, Termination, Permanent discontinuance of Contributions, Merger or Consolidation 12.01 Amendments. The Board of Directors reserves the right at any time and from time to time, both retroactively and prospectively, to modify or amend, in whole or in part, any or all of the provisions of the Plan, provided, however, that no such modification or amendment shall make it possible for any part of the funds of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of Members, spouses, former Members, retired Members or Beneficiaries under the Plan; and that no modification or amendment shall be made which has tht4effect of decreasing retroactively the Accounts of any Member or of reducing the nonforfeitable percenTage of the Company Contribution Account of a Member below the nonforfeitable percentage thereof computed under the Plan as in effect on the later of the date on which the amendment is adopted or becomes effective. 12.02 Termination or Permanent Discontinuance of Contributions. R. J. Reynolds Industries, Inc. may by action of its Board of Directors terminate the Plan with respect to all participating companies or any of them or direct complete discontinuance of contributions hereunder by all or any of the participating companies for any reason at any time. In case of such termination or complete discontinuance of con- tributions hereunder, there shall automatically vest in the appropriate Members nonforfeitable rights to the Company contributions credited to their Accounts and the total amount in each Member's Accounts shall be distributed, as the Committee shall direct, to him or for his benefit. 12.03 Partial Termination. In the event of a partial termination of the Plan, the provisions of Sec- tion 12.02 shall be applicable only to the Members affected by such partial termination. 12.04 Benefits in Case of Merger or Consolidation. The Plan may not be merged or consolidated with, nor may its assets or liabilities be transferred to, any other plan unless each Member, spouse, former Member, retired Member or Beneficiary under the Plan would, if the resulting plan were then terminated, receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer if the Plan had then terminated. ARTICLE 13 Miscellaneous 13.01 Benefits Payable from Trust Fund. All persons with. any interest in the Trust Fund shall look solely to the Trust Fund for any payments with respect to such interest. 13.02 Elections. Elections hereunder shall be made by a Member in writing by the completion and delivery to the Committee of forms prescribed by the Committee for such purposes, within the time limits set forth hereunder with respect to each such election or, if no time limit is set forth, such limit as may be established by the Committee. A-12

(d) Adjustments on Account of Excessive Credits. If it is determined at any time that the amount credited to a Participant's account for any Plan Year was in excess of the amount permitted under the limitations of (b) or (c) above, the Trustee will, in accordance with the instructions of the Plan Committee, charge against the Participant's account an amount (adjusted to reflect income, expenses, gain or loss of the Trust properly attributable to the excessive credit) sufficient to permit the remaining credits for such Plan Year to satisfy the foregoing limitations and make adjustments in the order provided below. To the extent the excess credit was an excessive Participant contribution, as determined by the Plan Committee, the Trustee will refund such portion, adjusted as aforesaid, to the Participant. To the extent the excessive credit was an excessive Company contribution, as determined by the Plan Committee, such excessive portion, adjusted as aforesaid, will be credited ratably to other Participants. J B-11

13.03 No Right to Continued Employment. Neither the establishment of the Plan nor the payment of any benefits thereunder nor any action of the Company, the Board of Directors, the Committee or the Trustee shall be held or construed to confer upon any person any legal right to be continued in the employ of the Company. 13.04 Inalienability of Benefits and Interests. No benefit payable under the Plan or interest in the Trust Fund shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such attempted action shall be void and no such benefit or interest shall be in any manner liable for or subject to debts, contracts, liabilities, engagements or torts of any Member or Beneficiary. If any Member or Beneficiary shall become bankrupt or shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any benefit payable under the Plan or interest in the Trust Fund, then to the extent permitted by law, the Committee in its discretion may hold or apply such benefit or interest or any part thereof to or for the benefit of such Member, or his Beneficiary, his spouse, children, blood relatives, or other dependents, or any of them, in such manner and in such proportions as the Committee may consider proper. Notwithstanding the foregoing, any Member may direct that benefits payable pursuant to Articles 8 or 9 from the Trust Fund shall be paid to the trustee of a trust created by him for his own benefit or for the benefit of his Immediate family. 13.05 Payments for Exclusive Benefits of Members. Payments of benefits in respect of the interest of a Member under the Plan to any person other than such Member In accordance with the provisions of the Plan shall be deemed to be for the exclusive benefit of such Member. 13.06 North Carolina Law to Govern. All questions pertaining to the construction, regulation, valid- ity and effect of the provisions of the Plan shall be determined in accordance with the laws of the State of North Carolina, except as provided in Section 514 of ERISA. 13.07 No Guarantee. Neither the Company nor the Trustee guarantees the Trust Fund in any man- i i ner against loss or depreciation. 13.08 Address of Record. Each individual or entity with an actual or potential interest in the Plan shall file and maintain a current record address with the Plan. Communications mailed by the Company, Trustee, or Committee to such record address fulfills all obligations to provide required Information to Members, including former employees and BeneficiW4e s, in regard to the Plan. If no record address is filed, it may be presumed that the address used by"th'd Company in forwarding statements of a Member's Account is the record address. . 13.09 Payments in the Event of Death with no Designated Survivor or Incompetency. In the event of (i) the death of a Member or Beneficiary not survived by a person designated to receive any payment then due, or (ii) the Committee finding that a Member or other person entitled to a benefit is unable to care for his affairs because of illness or accident or is a minor or has died, or (iii) no Beneficiary being designated, the Committee may direct that any benefit payment due him, unless claim shall have been made therefor by a duly appointed legal representative, be paid to his spouse, a child, a parent or other blood relative, or to a person with whom he resides, and any such payment so made shall be a complete discharge of the liabilities of the Plan therefor. 13.10 Participating Companies. The Board of Directors may include a designated unit of the employees of an Affiliated Company in the Plan as a Participating Unit upon appropriate action by such Affiliated Company necessary to adopt the Plan. In such event, or if any persons become Employees of the Company as the result of merger or consolidation or as the result of acquisition of all or part of the assets or business of another company, the Board of Directors shall determine to what extent, if any, previous service with such company shall be recognized as Vesting Service, but subject to the con- tinued qualification of the Trust for the Plan as tax exempt under the Code. Any such company may terminate its participation in the Plan with respect to a designated unit of its employees upon appropriate action by it, in which event the funds of the Plan held on account of Members in the employ of such company and any unpaid balances of the Accounts of Members who have separated from the employ of such company, shall be determined by the Committee and shall be distributed as provided in Section 12.02 in the event of termination of the Plan, or shall be segregated by the Trustee as a separate trust fund, pursuant to direction to the Trustee by the Committee, continuing the Plan as a separate plan for such employees of such company under which the board of directors of such company shall succeed to all the powers and duties of the Board of Directors, including the appointment of the members of the Committee. 13.11 Transfer of Prior Plan Assets and Liabilities to This Plan. Effective as of a date established by the Committee after receipt of Internal Revenue Service determinations that (I) this Plan meets the applicable requirements of Section 401 (a) of the Internal Revenue Code and (ii) the amendments to a Prior Plan made for the purpose do not adversely affect its qualification under Section 401 (a) of the A-13

R. J. REYNOLDS INDUSTRIES, INC. STOCK BONUS PLAN Exhibit B ARTICLE 1 Purpose 1.1 The purpose of the Plan Is to,provide participants with an opportunity to acquire ownership of Common Stock of R. J. Reynolds industries, Inc. substantially in proportion to compensation, without requiring any reduction in pay or other employee benefits, or the surrender of any other rights on the part of employees, thereby promoting employee interest in the business endeavors of the Company and Its subsidiaries, and enhancing the employees' welfare. The Plan is intended to qualify as an employee stock ownership plan as defined In IRC § 4975(e) (7) and under IRC §§ 401 (a) and 409A. The Plan consists of the Plan document and accompanying trust Instrument, copies of which are available for review by participants and their beneficiaries. The Company intends to claim additional tax credits for contributions to the Plan in accordance with §§ 46 and 48(n) of the Internal Revenue Code, or amendments thereto, or any successor statute of similar Import. ARTICLE 2 . . J Definitions 2.1 "Account" means an account established on the records of the Plan to allocate the Interest of each Plan Participant In the Trust Fund. 2.2 "Affiliated Company" means any Company more than 50% of the voting stock of which is directly or indirectiy owned by R. J. Reynolds Industries, Inc. or by any successor, and each trade or business (whether or not incorporated) controlled by the Company or with which the Company is under common control. 2.3 "Allocation Date" means the last day of the Plan Year for which an allocation Is made. 2.4 "Basic Employee Plan Credit" means that portion of the credit allowable by § 38 of the Code which is attributable to the Basic Employee Plan Percentage. 2.5 "Basic Employee Plan Percentage" means the "1 % employee plan percentage" set forth In § 46(a) (2) (E) (1) of the Code. 2.6 "Beneficiary" means such beneficiary or beneficiaries as may be designated from time to time by the Participant, on a form made available by the Plan Committee for such purpose, to receive in the event of the Participant's death the value of his Account at the time of his death. 2.7 "Board of Directors" means the Board of Directors of R. J. Reynolds Industries, Inc. and any committee of directors authorized by such Board to act on Its behalf with reference to the Plan. 2.8 "Code" means the Internal Revenue Code of 1954, as amended. 2.9 "Common Stock" means the Common Stock, without par value, of R. J. Reynolds Industries, Inc. or any successor company thereto which is readily tradable on an established securities exchange. 2.10 "Company" means R. J. Reynolds Industries, Inc. (a Delaware corporation) In respect of its employees, each Participating Company in respect of Its employees, and any successor to any of said companies. 2.11 "Compensation" means a Participant's compensation for the applicable Plan Year, as deter- mined pursuant to § 415(c) (3) of the Code, but not in excess of $100,000. 2.12 "Disability" means as provided in Internal Revenue Code § 72(m) (7) that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result In death or to be of a long continued and indefinite duration. 2.13 "Employee" shall mean any person regularly employed by the Company, who is paid from a United States dollar payroll maintained in the United States, who receives a regular and stated compensa- tion or retainer and who pays taxes in respect of his compensation imposed by the Federal Insurance Contributions Act; provided, that except as the Board of Directors or the Plan Committee, pursuant to B-1

SCHEDULE A LIMITATIONS TO COMPLY WITH SECTION 415 OF THE INTERNAL REVENUE CODE (a) The following definitions shall be applied in construing this Schedule A. (1) "Defined Benefit Plan" means any defined benefit plan (as defined in Section 415(k) of the Internal Revenue Code) maintained by the Company. (2) "Related Plan" means any Defined Contribution Plan (as defined in Section 415(k) of the Internal Revenue Code), other than the Plan, maintained by the Company or any individual account maintained for voluntary contributions made by a Participant under a Defined Benefit Plan. (3) "Total Compensation" shall have the meaning provided in Section 415 of the Internal Revenue Code. (4) "Annual Addition" means, in the case of any Participant, when used with respect to the Plan or a Related Plan, the sum for any Plan Year of (i) the amount of contributions made by the Company for a Participant's benefit under the Plan (or the Related Plan), (ii) the lesser of (A) the amount of the Participant's contributions for such Year under the Plan (or the Related Plan) in excess of 6% of his Total Compensation or (B) one-half of the Participant's contributions for such Year, and (iii) any forfeitures allocated to the Participant for such Year under the Plan (or the Related Plan). (,b) Limitations Applicable to Participants in Defined Contribution Plans Only. (I) The Annual Addition credited to a Participant's Account under the Plan for any Plan Year must not exceed the lesser of (A) $25,000 (or such larger amount as may be specified by the Secretary of the Treasury or his delegate on account of increases in the cost of living, as provided in Section 415(d) of the Internal Revenue Code) or (B) 25% of the Participant's Total Compensation for such Plan Year. (ii) In the case of any Participant who aW participates in a Related Plan, the sum of his Annual Addition under the Plan and his Annual 7Lddition under all Related Plans for any Plan Year must not exceed the lesser of (A) the amount set forth in (I) (A) above or (B) 25% of the sum of the Participant's Total Compensation for such Plan Year and his remuneration for such Plan Year from all employers maintaining such Related Plans. (iii) To the extent necessary to satisfy the limitations contained in (i) and (ii) above, the Plan Committee will reduce the amount of contributions which may be made with respect to the Par- ticipant under the provisions of the Plan for the applicable Plan Year. (c) Limitations Applicable to Participants Who Also Participate in a Defined Benefit Plan. In the case of any Participant who participates both in the Plan and in a Defined Benefit Plan, the following limitation will apply unless such Defined Benefit Plan provides that the Participant's benefit thereunder is to be limited for this purpose. The Participant's Annual Addition under the Plan for any Plan Year will be limited so that the sum of his Defined Benefit Plan fraction and his Defined Contribution Plan fraction for such Plan Year does not, subject to the restrictions and exceptions contained in Section 2004 of ERISA, exceed 1.4. For purposes of this limitation: a Participant's Defined Benefit Plan fraction for any Plan Year is a fraction (i) whose numerator is the Participant's projected annual benefit under all Defined Benefit Plans as a group (determined as of the close of the Plan Year and reflecting any limitation thereof required under the terms of any Defined Benefit Plan or Plans), and (ii) whose denominator is the projected annual benefit which the Participant would have under all Defined Benefit Plans (determined as of the close of the Plan Year) if the Defined Benefit Plans as a group provided the maximum benefit allowed under Section 415(b) of the Internal Revenue Code; and a Participant's Defined Contribution Plan fraction for any Plan Year is a fraction (A) whose numerator is the sum of the Participant's Annual Additions for all Plan Years under the Plan and all Related Plans determined as of the close of the Plan Year and (B) whose denominator is the sum of the maximum Annual Additions which could have been made for the Participant under the Plan and all Related Plans in accordance with the limitations of Section 415(c) of the Internal Revenue Code for such Plan Year and for each prior year of service with the Company. B-10

authority delegated to it by the Board of Directors, may otherwise provide on a basis uniformly applicable to all persons similarly situated, no person shall be an "Employee" for purposes of the Plan: (a) who is excepted by the Board of Directors or the Plan Committee, or (b) whose terms and conditions of employment are determined by a collective bargaining agreement with the Company which does not make this Plan applicable to him. 2.14 "Effective Date" means January 1, 1980. 2.15 "Participant" means any Employee included in the Plan as provided in Article 3. 2.16 "Participating Company" means any company, more than 50% of the voting stock of which Is directly or indirectiy owned by R. J. Reynolds Industries, Inc., which is included in the Plan by action of the Board of Directors. The term shall not include any corporation for •which an election under § 936 of the Code has been made, foreign corporations, or a corporation which is a Domestic International Sales Corporation within the meaning of § 992 of the Code. 2.17 "Plan" means the R. J. Reynolds Industries, Inc. Stock Bonus Plan as set forth herein or as hereafter amended. 2.18 "Plan Committee" means the members of the Stock Bonus Plan Committee appointed and acting in accordance with Article 13. ' 2.19 "Plan Year" means the calendar year. 2.20 "Retirement" means early or normal retirement under any other retirement plan of the Company unless otherwise specified by the Plan Committee, provided such retirement results in the Participant's Termination. "Retirement" for Participants not covered by such a plan shall mean termination after attaining age 65. 2.21 "Termination" means termination of employment resulting from death, Disability, Retirement, or voluntary or involuntary severance, but excludes transfers to an Affiliated Company or to employment by the Company other than as an Employee. 2.22 "Trust Fund"' means the funds and properties held pursuant to the provisions of the Trust for the use and benefit of the Participants, together with all income, profits and increments thereto. 2.23 "Trustee" means the trustee or trustees quA'fified and acting under the Trust at any time. 2.24 "Units" means units of measure used to account for interests in the Funds. 2.25 "Valuation Date" means each date as of which the Trustee makes a valuation of the Trust Fund assets. 2.26 "Value" means the average of the closing prices of • Common Stock for the 20 consecutive trading days immediately preceding the date on which the Company files its Federal income tax return as quoted by the New York Stock Exchange composite transactions report. ARTICLE 3 Eligibility and Participation 3.1 Eligibility. (a) An Employee shall, unless excepted by the Plan Committee, be eligible to par- ticipate in the Plan on his date of employment. (b) Employees shall only participate in the Plan under the terms and conditions herein stated. 3.2 Participation. An eligible Employee shall become a Participant on the first Allocation Date coincident with or next following his date of employment. A Participant shall cease to be a Participant on the date of total distribution of his Account pursuant to Article 11. ARTICLE 4 Company Contributions 4.1 Investment Credit Contributions. For each year, commencing with 1980, the Company shall contribute to the Trust cash or Common Stock of an aggregate value equal to the Basic Employee Plan Percentage. To the extent that a Company contribution is in cash, such cash shall be used by the B-2

{ SCHEDULE B LIMITATIONS TO COMPLY WITH SECTION 415 OF THE INTERNAL REVENUE CODE (a) The following definitions shall be applied in construing this Schedule B. (1) "Defined Benefit Plan" means any defined benefit plan (as defined in Section 415(k) of the Internal Revenue Code) maintained by the Company. (2) "Related Plan" means any Defined Contribution Plan (as defined in Section 415(k) of the Internal Revenue Code), other than the Plan, maintained by the Company or any individual account maintained for voluntary contributions made by a Member under a Defined Benefit Plan. (3) "Total Compensation" means all remuneration paid to an Employee by the Company. (4) "Annual Addition" means, in the case of any Member, when used with respect to the Plan or a Related Plan, the sum for any Plan Year of (i) the amount of contributions made by the Com- pany for a Member's benefit under the Plan (or the Related Plan), (ii) the lesser of (A) the amount of the Member's contributions for such Year under the Plan (or the Related Plan) in excess of 5% of his Total Compensation or (B) one-half of the Member's contributions for such Year, and (iii) any forfeitures allocated to the Member for such Year under the Plan (or the Related Plan). (b) Limitations Applicable to Participants in Defined Contribution Plans Only. (i) The Annual Addition credited to a Member's Account under the Plan for any Plan Year must not exceed the lesser of (A) $25,000 (or such larger amount as may be specified by the Secretary of the Treasury or his delegate on account of increases in the cost of living, as provided in Section 415(d) of the Internal Revenue Code) or (B) 25% of the Member's Total Compensation for such Plan Year. (ii) In the case of any Member who also participates in a Related Plan, the sum of his Annual Addition under the Plan and his Annual Addition under all Related Plans for any Plan Year must not exceed the lesser of (A) the amount set forth in (i) (A) above or (B) 25% of the sum of the Mem- ber's Total Compensation for such Plan Year and his remuneration for such Plan Year from all employers maintaining such Related Plans. (iii) To the extent necessary to satisfy the limitations contained in (i) and (ii) above, the Committee will reduce the amount of contributior#lwhich may be made with respect to the Member under the provisions of Articles 4 and 5 for the appT'fbable Plan Year. (c) Limitations Applicable to Members Who Also Participate in a Defined Benefit Plan. In the case of any Member who participates both in the Plan and in a Defined Benefit Plan, the following limitation will apply unless such Defined Benefit Plan provides that the Member's benefit thereunder is to be limited for this purpose. The Member's Annual Addition under the Plan for any Plan Year will be limited so that the sum of his Defined Benefit Plan fraction and his Defined Contribution Plan fraction for such Plan Year does not, subject to the restrictions and exceptions contained in Section 2004 of ERISA, exceed 1.4. For purposes of this limitation: a Member's Defined Benefit Plan fraction for any Plan Year is a fraction (i) whose numerator is the Member's projected annual benefit under all Defined Benefit Plans as a group (deter- mined as of the close of the Plan Year and reflecting any limitation thereof required under the terms of any Defined Benefit Plan or Plans), and (ii) whose denominator is the projected annual benefit which the Member would have under all Defined Benefit Plans (determined as of the close of the Plan Year) if the Defined Benefit Plans as a group provided the maximum benefit allowed under Section 415(b) of the Internal Revenue Code; and a Member's Defined Contribution Plan fraction for any Plan Year is a fraction (A) whose numerator is the sum of the Member's Annual Additions for all Plan Years under the Plan and all Related Plans determined as of the close of the Plan Year and (B) whose denominator is the sum of the maximum Annual Additions which could have been made for the Member under the Plan and all Related Plans in accordance with the limitations of Section 415(c) of the Internal Revenue Code for such Plan Year and for each prior year of service with the Company. (d) Adjustments on Account of Excessive Credits. If it is determined at any time that the amount credited to a Member's account for any Plan Year was in excess of the amount permitted under the limitations of (b) or (c) above, the Trustee will, in accordance with the instructions of the Committee, charge against the Member's account an amount (adjusted to reflect income, expenses, gain or loss of the Trust properly attributable to the excetsive credit) sufficient to permit the remaining credits for such Plan Year to satisfy the foregoing limitations and make adjustments in the order provided below. To the extent the excessive credit was an excessive Member contribution, as determined by the Committee, the Trustee will refund such portion, adjusted as aforesaid, to the Member. To the extent the excessive credit was an excessive Company contribution, as determined by the Committee, such excessive portion, adjusted as aforesaid, will be credited in the same manner as a forfeiture incurred. A-15

Internal Revenue Code, the assets in cash or Common Stock and liabilities (or only assets not in pay- out status and related liabilities if directed by the Committee) of a Prior Plan may be transferred to this Plan if the Committee so directs. Any such transfer shall take place only on a Valuation Date. In the absence of an applicable Member election, assets transferred from a Prior Plan shall be invested in the Investment Funds under this Plan corresponding most nearly in the judgment of the Committee to the investment funds in which such assets were invested under the Prior Plan; and the accounts of members and beneficiaries under the Prior Plan will become their Accounts as Members and Beneficiaries under this Plan, effective as of the transfer date. 13.12 Headings. Headings of Art'ples and Sections of the Plan are inserted for convenience of reference. They constitute no part of thelan. 13.13 Use of Masculine Pronoun. The masculine pronoun shall include the feminine wherever appropriate. 13.14 Payment of Expenses. (a) Direct charges and expenses arising out of the purchase or sale of securities, and taxes levied on or measured by such transactions shall be charged against the Invest- ment Fund or Funds for which the transactions took place. (b) The Company shall pay all other expenses reasonably Incurred in administering the Plan, including expenses of the Committee and the Trustee(s), such compensation to the Trustee(s) as from time to time may be agreed between the Committee and Trustee(s), fees for legal services, all taxes, if any, other than those charged to the Funds under (a), and the brokerage fees arising out of the purchase of Common Stock for the Reynolds Common, Stock Fund and the reinvestment of dividends on such Common Stock. ARTICLE 14 Claim Procedure 14.01 Initial Determination. The initial determination of a Member or Beneficiary's eligibility for, and the amount of, a benefit shall be made by the Committee which shall mail or deliver to each covered Individual who has filed an effective claim for a benefit a written statement of the amount of his benefit or a notice of denial of his claim on or before the 90th day following the Committee's receipt of such claim. If special circumstances require additional time for processing the claim, the Committee may delay issuing its statement or notice for an additional 90 days provided that the Member or Beneficiary Is notified of the circumstances necessitating the delay and the date the Committee expects to render Its final opinion. A claim for benefits is not effective unless filed on forms prescribed by the Committee. Each notice of whole or partial denial of claimed benefits shall set forth the specific reasons for the denial, the time within which an appeal must be made by the Member or Beneficiary or his duly authorized representative, and shall contain such other information as may be required by applicable law. If a statement or notice is not issued within the prescribed period, the claim shall be deemed denied. 14.02 Review. Each Member or Beneficiary whose claim for benefits has been wholly or partially denied shall have such rights to review documents and submit comments as applicable law and regula- tions of the Committee may provide, and shall also have the right to request the Committee to review such denial; such request to be made on forms prescribed by the Committee. A request for review shall be filed by the Member or Beneficiary or his duly authorized representative on or before the 60th day following the earlier of the Member or Beneficiary's receipt of notice of denial of his claim or the expiration of the prescribed period for issuing a statement of benefits or notice of denial. The Committee shall issue a written statement on or before the 60th day following its receipt of such request statinq the Committee's decision on review and the reasons therefor, including specific references to pertinent Plan provisions on which the decision is based, and any other information required by applicable law. If special circumstances require additional time for processing such review, the Committee may delay issuing its decision for an additional 60 days provided that the Member or Beneficiary is notified of such circumstances and the date the Committee expects to render its final decision. If the decision is not issued within the prescribed period, the appeal shall be deemed denied. A-14

Notice of Annual Meeting and Proxy Statement I Annual Meeting of Stockholders April 28, 1982

tions on the exercise of stock appreciation rights as it deems appropriate, and may terminate, amend, or suspend such stock appreciation rights at any time. No stock appreciation right granted under this Plan may be exercised less than one year or more than ten years after the date it is granted. (d) Restricted Shares - Restricted shares are shares of Common Stock delivered to a Partici- pant without payment of consideration with restrictions or conditions on the Participant's right to transfer or sell such shares. The number of restricted shares and the restrictions or conditions on such shares shall be as the Committee determines, and the certificate for the restricted shares shall bear evidence of the restrictions or conditions. (e) Dividend Equivalent Rights -These are rights to receive cash payments from the Company at the same time and in the same amount as any cash dividends paid on an equal number of shares of Common Stock to shareholders of record during the period such rights are effective. The Committee may impose such restrictions and conditions on the dividend equivalent rights, including the date such rights will terminate, as it deems appropriate, and may terminate, amend, or suspend such dividend equivalent rights at any time. (f) Performance Units - These are rights to receive at a specified future date, payment in cash of an amount equal to all or a portion of the value of a unit granted by the Committee. At the time of the grant, the Committee must determine the base value of the unit, the performance factors appli- cable to the determination of the ultimate payment value of the unit and the period over which Company performance will be measured. These factors must include a minimum performance standard for the Company below which no payment will be made and a maximum performance level above which no increased payment will be made. The term over which Company performance will be measured shall be not less than two nor more than four fiscal years of the Company. (g ) Performance Shares - These are rights to receive at a specified future date, payment in cash of an amount equal to all or a portion of the Fair Market Value of a specified number of shares of Common Stock at the end of a specified period based on Company performance during the period. At the time of the grant, the Committee will determine the factors which will govern the portion of Fair Market Value so payable and the period over which Company performance will be measured. The factors will be based on Company performance and must include a minimum performance standard for the Company below which no payment will be made and a maximum performance level above which no increased payment will be made. Theterm over which Company performance will be measured shall be not less than two nor more thar"our fiscal years of the Company. 4.2 Individual Agreements. After the Committee determines the form and amount of a Participant's award, it shall cause the Company to enter into a written agreement or agreements with the Participant. Any such agreement shall set forth the form and amount of the award along with the conditions and restrictions on the award imposed by both the Plan and the Committee. 4.3 Deferral of Certain Award Payments. The Committee may in its sole discretion allow any Participant who is awarded performance units, performance shares, or dividend equivalent rights under the Plan to elect to defer payment of such awards in accordance with such terms and conditions and in such manner, including by means of credits representing shares of Common Stock, as the Committee may prescribe; provided, however, that (a) in the event a Participant elects to defer payment of any award in credits representing shares of Common Stock, he or she must make such election at least twelve months prior to the date such award is granted or, in the event such election applies to perform- ance units or shares, at least twelve months prior to the end of the period over which Company perform- ance is being measured to determine the value of such units or shares, (b) such election must be irrevocable until six months after the Participant's Severance Date or, if later, six months after such Participant ceases to serve on the Board of Directors and (c) any election as to the time for delivery of stock or for payment of cash for such credits must be made at least six months prior to the date on which the first such delivery or payment may be made. ARTICLE V 5.1 Termination of Employment. Notwithstanding Sections 5.2 and 5.3, a Participant whose Severance Date is within twelve months of the date any award is granted to him or her under this Plan or any person claiming through such Participant shall have no right to receive any benefit or payment for such award after such Participant's Severance Date. A Participant whose employment terminates for reasons other than retirement with the consent of the Company, Disability or death shall have no right to receive any benefit or payment for existing awards under the Plan other than for awards previously made, the payment of which has been deferred under Section 4.3. C-3

shall be One Dollar ($1.00) and each Participant shall be credited as of December 31, 1980, with the number of Units, carried to three decimal places, equal to his proportionate allocation of the Company contributions determined under Article 6.2, for the Plan Year beginning on January 1, 1980. As of each subsequent Valuation Date, the value of a Unit, carried to three decimal places, shall be determined, prior to the allocation of any new Company contributions as of the Valuation Date, by dividing (i) the fair market value of property held In Trust by (ii) the total number of outstanding Units. The fair market of property held in Trust shall be the sum of uninvested cash, accrued income, and the fair market value of Common Stock or other property held in Trust, less expenses, losses and distributions incurred or made after the immediately preceding Valuation Date. The total number of outstanding Units on the prior Valuation Date shall be reduced by the number of Units for which distributions have been made under the Plan since such date. 6.2 Proportionate Allocation. The number of Units and fractional Units to be credited to a Par- ticipant's Account on any day on which the Company contributions are received shall be credited to Participants' Accounts as soon as practicable following the date the contribution Is made and shall be determined by dividing the Participant's proportionate allocation of the Company contributions for the Plan Year by the value of a Unit in the Trust Fund as of the close of the business day immediateiy preceding the day of contribution. The proportionate allocation of the Company contributions for a Plan Year shall be determined, for each individual who was an actively employed Participant on the Allocation Date for such Plan Year, in the ratio to which each Particioant's Compensation paid and taken into account for each Plan Year bears to. the Compensation paid and taken Into account for all such Participants during such Plan Year. 6.3 Limitations on Allocation. Allocations shall be limited as set forth In Schedule A. ARTICLE 7 Dividends 7.1 Reinvestment of Dividends. Except as may otherwise be directed by the Plan Committee, all dividends paid on Common Stock as defined in Article 2.9 held in the Trust Fund shall be used by the Trustee to purchase additional Common Stock. 0 ARTICLE 8 Voting Rights 8.1 Voting by Participants. Each Participant shall be entitled to direct the Trustee as to the manner in which any rights-inciuding but not limited to voting rights and conversion priviieges--with respect to any Common Stock (including fractional shares) attributable to such Participant's Account are to be exercised. For this purpose, the Plan Committee shall cause each Participant to be notified of each annual or special meeting of the shareholders of the Company and of any other occasion for the exercise of voting or other rights by such shareholders within the time prescribed by regulations promulgated by the Secretary of the Treasury. The notification shall include a copy of any proxy solicitation material and any other information which the Company distributes to shareholders regarding the exercise of voting or other rights, together with a form requesting instructions to the Trustee as to how the Paricipant's rights are to be exercised. In so doing, the Trustee shall cumulate fractional share votes and shall vote any of the combined fractional shares or rights to the extent possible to reflect the direction of the Participants on whose behalf said fractional shares are held. The Trustee shall exercise voting rights with respect to Common Stock only to the extent directed by Participants. Each Participant (or in the event of his death, his Beneficiary) shall have the right to instruct the Trustee in writing as to the manner in which to respond to a tender or exchange offer for any or all shares of Common Stock attributable to such Participant's Account under the Trust Fund. The Company shall notify each Participant (or Beneficiary) and utilize its best efforts to timely distribute or cause to be distributed to him such information as will be distributed to shareholders of the Company in connec- tion with any such tender or exchange offer. Upon its receipt of such instructions, the Trustee shall tender such shares of Common Stock as and to the extent so instructed. If the Trustee shall not receive instructions from a Participant (or Beneficiary) reqarding any such tender or exchange offer for Common Stock, the Trustee shall have no discretion in such matter and shall take no action with respect thereto. ARTICLE 9 Expenses 9.1 In General. Except as otherwise provided below, all expenses of establishing and administer- ing the Plan and Trust Fund shall be paid by the Company. ~ B-4

12.2 Management of Trust Fund. The Trustee shall have exclusive authority to manage and control the assets of the Trust Fund, except as otherwise provided herein. 12.3 Investment of Trust Fund. The Trustee Is hereby directed to invest the assets of the Trust Fund exclusively in Common Stock. While it is intended that the Trust Fund be invested exclusively in Common Stock, the Trustee is empowered to invest any cash received under this Plan for a reasonable period of time prior to acquiring Common Stock, or invest such cash as may be necessary to pay administrative expenses or distribute cash in lieu of fractional shares, in obligations issued or guaranteed by the U.S. Government or any instrumentality or agency thereof, or any other form of liquid investment earning interest, and including investment through the medium of any common, collective, or commingled trust fund maintained by the Trustee which is qualified under §§ 401 (a) and 501 (a) of the Code, pending application thereof to the purchase of Common Stock. ARTICLE 13 Administration of Plan 13.1 Plan Committee. (a) The general administration of the Plan and the responsibility for carry- ing out the provisions of the Plan shall be placed in a Plan Committee of not less than three persons appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors. (b) Any person appointed a member of the Plan Committee shall signify his acceptance by filing written acceptance with the Secretary of the Plan Committee. Any member of the Plan Committee may resign by delivering his written resignation to the Secretary of the Plan Committee and such resignation shall become effective upon the date specified therein. ` (c) The Plan Committee shall elect from its members a Chairman, and shall also elect a Secretary who may be but need not be one of the members of the Plan Committee. The Plan Committee may appoint from its members such committees with such powers as It shall determine, and may authorize one or more of its members, or any agent, to execute or deliver any instrument or make any payment In Its behalf. (d) The Plan Committee shall hold meetings upon such notice, at such place or -piaces, and at such time or times as it may from time to time determine. ._. Ift (e) A majority of the members of the Plan Committee shall constitute a quorum for the transaction of business. All resolutions or other action taken by the Plan Committee shall be by the vote of a majority of the members of the Plan Committee present at any meeting or without a meeting by an instrument in writing signed by a majority of the members of the Plan Committee. (f) No member of the Plan Committee shall receive any compensation for his service as such, and, except as may be required by applicable law, no bond or other security is required of him In such capacity in any jurisdiction. ° 13.2 Authority and Duties of Various Fiduciaries. (a) Except as to matters required by the terms of the Plan or of the Trust to be decided by the Board of Directors, the Finance Committee, the Chief Financial Officer (as defined in the Trust), or the Trustee or Trustees, the Plan Committee shall have the exclusive right to interpret the Plan and to decide any and all matters arising under the Plan or In connection with its administration, including determination of eligibility for, and the amount of distribu- tions and withdrawals. The Company shall have no power to direct or modify any interpretations, deter- minations, or decisions of the Plan Committee. The Plan Committee may recommend Plan amendments to the Board of Directors. The Plan Committee may from time to time adopt rules for the administration of the Plan and the conduct of its business, which rules shall be consistent with the provisions of the Plan. (b) The Board of Directors, the Plan Committee, and any other named fiduciary may each employ counsel, agents, and such clerical and accounting services as it may require in carrying out its responsibilities under the Plan. All fiduciaries shall be entitled to rely upon tables, valuations, certificates, opinions, and reports furnished by any actuary, accountant, or legal counsel appointed under the provisions of the Plan. (c) The Plan Committee shall keep in convenient form such personnel data as may be necessary for the Plan. The Plan Committee shall prepare, distribute, and file such reports and notices as may be required by applicable law or regulation. Annually, a copy of the Plan's financial report and information on the operation of the Plan during the past year shall be submitted to the Board of Directors and shall be filed in the office of the Secretary of the Plan Committee. B-6

15.5 Payments for Exclusive Benefits of Participants. Payments of benefits in respect of the inter- est of a Participant under the Plan to any person other than such Participant in accordance with the provisions of the Plan shall be deemed to be for the exclusive benefit of such Participant. 15.6 North Carolina Law to Govern. All questions pertaining to the construction, regulation, valid- ity and effect of the provisions of the Plan shall be determined in accordance with the laws of the State of North Carolina, except as provided in Section 514 of ERISA. 15.7 No Guarantee. Neither the Company nor the Trustee guarantees the Trust Fund in any manner against loss or depreciation. 15.8 Address of Record. Each individuai or entity with an actual or potential interest in the Plan shall file and maintain a current record address with the Plan. Communications mailed by the Company, Trustee, or Plan Committee to such record address fulfills all obligations to provide required information to Participants, including former employees and Beneficiaries, In regard to the Plan. If no record address is filed, It may be presumed that the address used by the Company in forwarding statements of a Participant's Account Is the record address. ARTICLE 16 Claim Procedure 16.1 Initial Determination. The Initial determination of a Participant or Beneficiary's eligibility for, and the amount of, a benefit shall be made by the Plan Committee which shall mail or deliver to each covered individual who has filed an effective claim for a benefit a written statement of the amount of his benefit or a notice of denial of his claim on or before the 90th day following the Plan Committee's receipt of such claim. If special circumstances require additional time for processing the claim, the Plan Committee may delay issuing its statement or notice for an additional 90 days provided that the Participant or Beneficiary Is notified of the circumstances necessitating the delay and the date the Plan Committee expects to render its final opinion. A claim for benefits Is not effective unless filed on forms prescribed by the Plan Committee. Each notice of whole or partial denial of claimed benefits shall set forth the specific reasons for the denial, the time within which an appeal must be made by the Participant or Beneficiary or his duly authorized representative, and shall contain such other information as may be required by applicable law. If a statement or notice is not issued within the prescribed period, the claim shall be deemed denied. 16.2 Review. Each Participant or Beneficiary whose claim for benefits has been wholly or partially denied shall have such rights to review documents and submit comments as applicable law and reguia- tions of the Plan Committee may provide, and shall also have the right to request the Plan Committee to review such denial; such request to be made on forms prescribed by the Plan Committee. A request for review shall be filed by the Participant or Beneficiary or his duly authorized representative on or before the 60th day following the earlier of the Participant or Beneficiary's receipt of notice of denial of his claim or the expiration of the prescribed period for Issuing a statement of benefits or notice of denial. The Plan Committee shall issue a written statement on or before the 60th day following its receipt of such request stating the Plan Committee's decision on review and the reasons therefor inciuding specific references to pertinent plan provisions on which the decision is based, and any other information required by appli- cable law. If special circumstances require additional time for processing such review, the Plan Com- mittee may delay issuing its decision for an additional 60 days provided that the Participant or Beneficiary is notified of such circumstances and the date the Plan Committee expects to render its final decision. If the decision is not issued within the prescribed period, the appeal shall be deemed denied. B-9

9.2 Expenses of Establishment. As reimbursement for the expenses of establishing the Plan, the Company may, at its option, withhold from the amount of its Company contribution for 1980 so much of the amounts paid or incurred in connection with the establishment of the Plan as does not excecd the sum of (i) 10% of the first $100,000 of such Company contribution for 1980 and (ii) 5% of any amount in excess of such first $100,000. 9.3 Expenses of Administration. As reimbursement for the expenses of administering the Plan and maintaining the Trust, the Company may, at its option withhold from the amount of its Company contribution for any year so much of the *rpounts paid or incurred during said year as expenses of admin- istering the Plan as does not exceed the lesser of (i) the sum of 10% of the first $100,000 and 5% of any amount in excess of $100,000 of the income from dividends paid to the Plan with respect to Common Stock during said year or (ii) $100,000. 9.4 Payment by Trust Fund. In lieu of withholding amounts from Company contributions, as speci- fied in Articles 9.2 and 9.3, the Plan Committee may direct that said specified amounts shall instead be paid in whole or in part directly from the Trust Fund. ARTICLE 10 Vesting 10.1 Full Vesting. Each Participant shall at all times have a nonforfeitable right to all Common Stock or other assets allocated or credited to his Account, except as provided in Article 9.4. ARTICLE 11 Distributions from the Trust Fund 11.1 Distribution of the Entire Account Balance After the Participant's Termination. Except as provided in Article 4.4 and subject to the restrictions of Code § 409A and the restrictions contained in the next sentence, a Participant who terminates service shall receive distribution of his entire Account and any future allocations to his Account under Article 6 attributable to periods prior to his date of Termination. If a Participant again becomes an Employee in the same Plan Year as his Termina- tion, no part of the allocation under Article 6.2 for such Plan Year shall be distributed until he subse- quently has a Termination. Distributions pursuant to this Article 11.1 shall be made as soon as practicable following the Valuation Date coincident with or next following the Participant's Termination. 11.2 Partial Distribution of Account Balance While Participant is in Service. Once in any 6 month period and upon 60 days written notice to the Plan Committee, a Participant may elect to withdraw all or any part of his Account which is attributable to Common Stock which was allocated to his Account on a date 85 months or more before the date of distribution, which distribution date shall be as soon as practicable following the Valuation Date coincident with or next following the Participant's election. 11.3 Form of Distribution. At the sole election of the Participant, he may receive his distribution in cash or in whole shares of Common Stock with cash for any fractional shares equal to the value of the Units held in the Participant's Account as of the Valuation Date which is coincident with or next follows the date of the Participant's election pursuant to Article 11.2 or Termination. 11.4 Distributees. All distributions made under this Article shall be made to the Participant except where the Participant has died prior to any distribution. In such event, the distribution shall be made to the Participant's Beneficiary as defined in Article 2.6, or if no Beneficiary has been designated at the date of death, such distribution shall be made to the Participant's legal representative. ARTICLE 12 The Trust Fund 12.1 The Trust Agreement. The Company shall enter into a trust agreement which shall contain such provisions as shall render it impossible for any part of the corpus of the Trust or income therefrom to be at any time used for, or diverted to, purposes other than for the exclusive benefit of Participants, except as provided in Article 9.4 of the Plan. Any or all rights or benefits accruing to any person under the Plan with respect to any Company contributions deposited under the Trust Agreement shall be subject to all the terms and provisions of the Trust which shall specifically incorporate and be subject to the provisions of the Plan. B-5

14.2 Suspension and Termination. The Company reserves the right any year, by action of the Board of Directors prior to the due date (including extensions) for filing the Company's Federal income tax return for such year, to suspend the operation of the Plan by omitting all Company contributions for such year. In the event the operation of the Plan is so suspended for any year or years, all the provi- sions of the Plan and Trust, other than those relating to Company contributions for such year or years, shall continue in effect. The Company further reserves the right, by action of its Board of Directors, to terminate the Plan at any time, but no termination may be made effective as of a prior year. In the event of termination of the Plan, the Board of Directors shall continue to maintain the Trust in effect until the end of the 85th month beginning after the month in which Common Stock contributed or purchased under Article 4 of the Plan were allocated to Participants' Accounts. Thereafter, the Board of Directors may terminate the Trust and if the Trust is terminated, all or any portion of the assets of the Trust Fund may be converted into cash and any Common Stock not converted into cash shall be, distributed among the Participants (with the interest of any Participant who has died being distributed to his designated Beneficiary or beneficiaries) in proportion to the respective interests in the Trust Fund of such Participants. 14.3 Merger, Consolidation or Transfer. In the event of any merger or consolidation with, or trans- fer in whole or in part of the assets and liabilities of the Trust Fund to, any other trust plan (the "New Plan") of deferred compensation maintained or to be established for the benefit of all or some of the Participants of this Plan, the assets and liabilities of the Trust Fund applicable to such Participants shall be transferred to the New Plan only if: (i) each Participant would receive a benefit immediately after the merger, consolidation or transfer (if both Plans had then terminated) which is equal to or greater than the benefit such Participant would have been entitled to receive immediately before the merger, consoiidation or transfer (if this Plan had then terminated); (ii) resolutions of the Board of Directors or of the board of directors of any new or successor employer of the affected Participants, shall authorize such transfer of assets; and, in the case of the new or successor employer of the affected Participants, its resolutions shall include an assumption of liabilities with respect to such Participants' inclusion in the New Plan; and (iii) The New Plan and Trust, if any, are qual~d under Code §§ 401 and 501. ARTICLE 15 Miscellaneous 15.1 Benefits Payable from Trust Fund. All persons with any interest in the Trust Fund shall look solely to the Trust Fund for any payments with respect to such interest. 15.2 Elections. Elections hereunder shall be made by a Participant in writing by the completion and delivery to the Plan Committee of forms prescribed by the Plan Committee for such purposes, within the time limits set forth hereunder with respect to each such election or, if no time limit is set forth, such limit as may be established by the Plan Committee. 15.3 No Right to Continued Employment. Neither the establishment of the Plan nor the payment of any benefits thereunder nor any action of the Company, the Board of Directors, the Plan Committee or the Trustee shall be held or construed to confer upon any person any legal right to be continued in the employ of the Company. 15.4 Inalienability of Benefits and Interests. No benefit payable under the Plan or interest in the Trust Fund shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such attempted action shall be void and no such benefit or interest shall be in any manner liable for or subject to debts, contracts, liabilities, engagements or torts of any Participant or Beneficiary. If any Participant or Beneficiary shall become bankrupt or shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any benefit payable under the Plan or interest in the Trust Fund, then to the extent provided by law, the Plan Committee in its discretion may hold or apply such benefit or interest or any part thereof to or for the benefit of such Participant, or his Beneficiary, his spouse, children, blood relatives, or other dependents, or any of them, in such manner and in such proportions as the Plan Committee may consider proper. Notwithstanding the fore- going, any Participant may direct that benefits payable pursuant to Article 11 from the Trust Fund shall be paid to the trustee of a trust created by him for his own benefit or for the benefit of his immediate family. ~ B-8

Exhibit C R. J. REYNOLDS INDUSTRIES, INC. 1982 LONG TERM INCENTIVE PLAN ARTICLE I 1.1 Name and Purpose. The name of this Plan is the "R. J. Reynolds Industries, Inc. 1982 Long Term Incentive Plan" (the "Plan"). Its purpose is to (a) provide incentive to key employees, including officers, of R. J. Reynolds Industries, Inc. and its Operating Companies to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for long term growth and profitability of the Company, (b) encourage stock ownership by such employees by providing them with a means to acquire a proprietary interest in the Company, (c) maintain continued service of such employees, and (d) provide a means of meeting the competitive needs of the Company in attracting, employing, and retaining highly qualified employees to fill key management positions within the Company. 1.2 Definitions. Whenever used in the Plan, the following terms shall have the meaning set forth below: (a) "Board of Directors" shall mean the Board of Directors of the Company and any committee of directors authorized by such Board to act on its behalf with reference to the Plan. (b) "Committee" shall mean a Committee of at least three members of the Board of Directors. No person shall become a member of the Committee who has an interest or deferred account under .the Plan or has been eligible to participate in the Plan within the previous twelve months or who has, within the previous twelve months, been eligible for selection as a person to'whom Common Stock or other equity of the Company may be allocated or to whom stock options or stock appreciation rights may be granted pursuant to any other plan of the Company or its Operating Companies entitling the participants therein to acquire Common Stock, other equity securities, stock options, or stock appreciation rights of the Company or its Operating Companies. (c) "Common Stock" shall mean the Common Stock of the Company identified as such on the most recent balance sheet of the Company. 'e (d) "Company" shall mean R. J. Reynolds Industries, Inc. or any successor corporation. (e) "Disability" shall mean a condition caused by an accident or illness which in the opinion of the Committee prevents an employee from carrying out his or her duties. (f) "Effective Date" shall mean the date the Plan is approved by the shareholders of the Company. (g) "Fair Market Value" shall mean the average of the highest price and the lowest price at which Common Stock shall have been sold on the applicable date as reflected on the consolidated tape of New York Stock Exchange issues and reported in The Wall Street Journal. (h) "Operating Company" means any corporation, all of the outstanding stock of which is owned directly or indirectly by the Company. (i) "Participant" shall mean any eligible employee selected to participate in the Plan pursuant to Section 3.2. (j) "Severance Date" shall mean, as determined by the Committee, the date on which an indi- vidual's employment with the Company or an Operating Company terminates for reasons other than transfer to employment by the Company or an Operating Company. Whether any leave of absence shall constitute termination of employment for the purposes of the Plan shall be determined in each case by the Committee in its sole discretion. 1.3 Plan Duration. The Plan shall remain in effect for ten years from the Effective Date or until termination by the Board of Directors, whichever occurs first. ARTICLE II 2.1 Plan Administration. The Plan shall be administered by the Committee. The Committee is authorized to establish such rules and regulations and to appoint such agents as it deems appropriate for the proper administration of the Plan and to make such determinations under and to take such steps in C-1

i Trustee to purchase Common Stock within 30 days of the date of receipt. No other Company contribu- tions to the Trust Fund shall be required. 4.2 Time of Contributions. Company contributions in Common Stock and/or Company contribu- tions in cash shall be transferred to the Trust Fund not later than 30 days following the due date (including extensions) for filing the Company's Federal income tax return for the year for which the Company contributions are made or at any other time as may be prescribed under regulations promulgated by the Secretary of the Treasury; provided, however, that for 1980 and later years, if the limitations of § 46(a) (3) of the Code are exceeded, additional Company contributions will be made in accordance with § 48(n) (1) (c) and (d). 4.3 Valuatlon of Common Stock ContNbutlons. For purposes of this Article 4, the value of Com- pany contributions in Common Stock shall be equal to the Value as defined in Article 2.26 on the date of contribution of each share of Common Stock contributed multplied by the number of shares so contributed. 4.4 Initial P/an Qualification. Notwithstanding anything contained herein to the contrary, if an application for a determination that the Plan satisfies the requirements of §§ 401 (a) and 409A of the Code Is filed with the Internal Revenue Service not later than 90 days following the date on which the Basic Employee Plan Credit for 1980 with respect to the Plan Is allowed, and if such determination is not issued, then all Company contributions made to the Trust Fund may be returned to the Company within one year after the date on which the Internal Revenue Service issues notice to the Company that the Plan does not satisfy the foregoing requirements or otherwise advises the Company that it refuses to issue a favorable determination. No distributions from the Plan shall be made pursuant to Article 11 until such favorabie determination Is received. 4.5 Investment Credit Recapture. (a) If the amount of any Basic Employee Plan Credit is recap- tured or redetermined in accordance with the provisions of the Code, then the Company contributions attributable, thereto which have been transferred to the Trust Fund shall remain in the Trust Fund and shall continue to be allocated to Participants in the Plan. (b) If any such credit Is so recaptured, then (i) the Company may reduce the amount of Its Company contribution for the year in which recapture occurs or any succeeding years by the portion of the amount so recaptured which is attributable to its respective Company contributions to the Trust Funds, or (li) the Company may deduct said portion for Federal income tax purposes, subject to the limitations of § 404 of the Code. (c) If the amount of the Basic Employee Plan Credit claimed by the Company for any year is reduced because of a final redetermination of Federal Income tax and Company contributions were made for such year, then the Company may either: (i) reduce the amount of its Company contribution fo'r the year in which such redetermination becomes final or any succeeding year by the amount of such reduction in the Basic Employee Plan Credit, or (ii) deduct such amount for Federal income tax purposes, subject to the limitations of §404 of the Code. (d) If the amount of the Basic Employee Plan Credit claimed by the Company for any year is increased because of a final redetermination of Federal income tax and Company contributions were made for such year, the Company will increase the amount of its Company contribution for the year in which such redetermination becomes final by the amount of such increase in the Basic Employee Plan Credit. ARTICLE 5 m 0 .1 mployee Contributions. Employee Contributions Employee contributions are neither required nor permitted. m J J Ln N .1 ARTICLE 6 Allocation of Shares and Income to Participants Accounts. A separate Account shall be maintained for each Participant and such Account shall J cD be credited with Units as defined in Article 2.24, pursuant to this Article. The initial Value of a Unit B-3

(d) The Board of Directors shall control and manage the Plan assets If it has not delegated its power to do so. Such delegation of power may include the right to appoint and remove investment managers (as such term is defined in ERISA) and trustees. Such delegation may be accomplished by a separate instrument or by appropriate provisions in the Trust. (e) The members of the Plan Committee shall use that degree of care, skill, prudence and diligence that a prudent man acting in a like capacity and familiar with such matters would use in his conduct of a similar situation. A member of the Plan Committee shall not be liable for the breach of fiduciary responsi- bility of another fiduciary unless (i) he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, krlpwing such act or omission is a breach; or (ii) by his failure to discharge his duties solely in the interest of the Participants and Beneficiaries for the exclusive purpose of providing their benefits and defraying reasonable expenses of administering the Plan not met by the Company, he has enabled such other fiduciary to commit a breach; or (iii) he has knowledge of a breach by such other fiduciary and does not make reasonable efforts to remedy the breach; or (iv) if the Plan Committee improperly allocates among themselves or delegates to others, or fails to properly review such allocation or delegation of fiduciary responsibilities. (f) The Company will indemnify and save harmless the members of the Plan Committee and any person to whom fiduciary responsibilities are delegated under this Plan against any cost or expense (including attorneys' fees) or liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act, except in the case of willful misconduct. (g) Each Trustee shall maintain accounts showing the fiscal transactions of the Trust established hereunder. The Board of Directors or the Committee, If delegated power, or both, shall keep In conven- ient form such financial data as may be necessary for the Plan, and shall annually cause to be prepared a balance sheet and statement of financial transctions of the Plan and the Trust. 13.3 Named Fiduciaries. (a) The Board of Directors, and the Plan Committee, shall each consti- tute named fiduciaries as such term is defined in ERISA. (b) Any Committee of the Board of Directors or other fiduciary appointed as a named fiduciary by the Board of Directors by resolution or appointed by an appropriate Instrument executed by an officer of the Company thereunto authorized by resolution of the Board of Directors, shall also constitute a named fiduciary in respect of the duties delegated to him or it In such resolution or Instrument. 13.4 Delegation. Any named fiduciary designated herein or appointed as provided herein, unless precluded from doing so by the terms of such appointment, may by appropriate instrument designate any person (including any firm or corporation) to carry out part or all of such fiduciary's responsibilities and upon such designation the named fiduciary shall have no liability, except as imposed by applicable law, for any act or omission of such person. The foregoing does not preclude any other fiduciary to the extent allowed by ERISA and the terms of his appointment from delegating part or all of such fiduciary's responsibilities with respect to the Plan. 13.5 Multiple Capacities. Any fiduciary may serve in more than one fiduciary capacity with respect to the Plan. ARTICLE 14 Amendment, Suspension and Termination, and Merger, Consolidation or Transfer 14.1 Amendment. (a) The provisions of the Plan mav be amended at any time and from time to time by the Board of Directors, but no such amendment shall have the effect of revesting in the Company any part of the Trust Fund or of diverting any part of the Trust Fund to any purpose other than for the exclusive benefit of the Participants or, subject to Article 14.1(b), of reducing any interest of any Partici- pant in the Trust Fund which has accrued prior to any such amendment. Without limiting the generality of the foregoing, any such amendment relating to the manner of determining the amount of the Company contributions may be made applicable to the computation of such contribution for the entire year in which the amendment is adopted by the Board of Directors, irrespective of the date on which such amendment is adopted. (b) Notwithstanding anything to the contrary herein contained, the Board of Directors may make any and all changes or modifications (retroactively, if necessary) which in the opinion of the Board of Directors are necessary or advisable in order to comply with the provisions of applicable laws pertaining to employee stock ownership plans. B-7

ARTICLE VIII 8.1 Withholding Taxes. The Company shall deduct from all payments and distributions under the Plan any taxes required to be withheld by federal, state, or local governments. In case distributions are made in shares of Common Stock, the Company shall have the right to retain the value of sufficient shares to equal the amount of the tax required to be withheld in respect of such distributions. In lieu of with- holding the value of shares, the Committee may require a recipient of a distribution in Common Stock to pay the Company for any such taxes required to be withheld upon such terms and conditions as the Committee may prescribe. ARTICLE IX 9.1 Charging Expenses of the Plan. The amounts of the awards for any employee of an Operating Company along with interest, dividend, and other expense accrued on deferred awards shall be charged to the Participant's employer during the period for which the award is made. If the Participant is employed by more than one Operating Company or by both the Company and an Operating Company during the period for which the award is made, the Participant's award and related expenses will be allocated between the companies employing the Participant in a manner prescribed by the Committee. ARTICLE X 10.1 Employment. The establishment of the Plan and awards hereunder shall not be construed as conferring on any Participant any right to continued employment, and the employment of any Partici- pant may be terminated without regard to the effect which such action might have upon him or her as a Participant. ARTICLE XI 11.1 Non-alienatlon of Benefits. Other than as specifically •provided with regard to the death of a Participant, no benefit under the Plan shall be subject In any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge; and any attempt to do so shall be void. No such benefit shall, prior to receipt thereof by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the Participant. 11.2 Non-alienatiornof Election or Exercise Rights. No election as to benefits or exercise of stock options, stock appreciation rights, or other rights may be made during a Participant's lifetime by anyone other than the Participant. ARTICt:AXil 12.1 Other Retirement Plans. Any award under this Plan shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or its Operating Companies other than to the extent required by the R. J. Reynolds Industries, Inc. Stock Bonus Plan, and except as to such Plan, shall not affect any benefits under any other benefit plan of any kind or subsequently in effect under which the availability or amount of benefits is related to level of compensation. ARTICLE XIII 13.1 Unfunded Plan. No benefit or promise under the Plan shall be secured by any specific assets of the Company, nor shall any assets of the Company be designated as attributable or allocated to the satisfaction of the Company's obligations under the Plan. ARTICLE XIV 14.1 Delegation of Administrative Duties. Administrative duties imposed by this Plan may be delegated by the Committee or the individual charged with such duties. 14.2 Governing Law. This Plan shall be governed by the laws of the State of Delaware. ARTICLE XV 15.1 Amendment, Modification, and Termination of the Plan. The Board of Directors of the Company, at any time may terminate and in any respect amend or modify the Plan; provided, however, that no such action by the Board of Directors, without approval of the Company's shareholders, may: (a) increase the total number of shares of Common Stock available under the Plan in the aggregate or which may be allocated to any one Participant; (b) withdraw the administration of the Plan from the Committee; (c) permit any person to participate in the Plan while a member of the Committee; (d) materially Increase the cost of the Plan or the benefits accruing to Participants thereunder; or (e) materially modify the requirements as to eligibility for participation in the Plan. Except as provided in paragraphs 4.1 (c), 4.1(e), and 7.1, no amendment, modification or termination of the Plan shall in any manner adversely affect the rights of any Participant under the Plan without the consent of such Participant. C-6

5.2 Death of a Participant. In the event of the death of a Participant, the following shall govern the disposition of his or her interest(s) in the Plan: (a) Stock Options and Stock Appreciation Rights-The administrator of a deceased Partici- pant's estate, the executor under his or her will, or the person or persons to whom stock options or stock appreciation rights shall have been validly transferred by such executor or administrator pursuant to the will or laws of intestate succession shall have the right, within twelve months from the date of such Participant's death, but not beyond the expiration date of the options or rights, to exercise such options or rights to. #het extent exercisable on such Participant's Severance Date. (b) Restricted Shares-Any rights of an individual claiming through a deceased Participant with respect to restricted shares shall be governed by the restrictions and conditions imposed on such shares at the time of the grant. (c) Dividend Equivalent Rights -Whether or not any individual claiming through a deceased Participant has any right to payment of dividend equivalent rights granted under the Plan shall be governed by the provisions of the written agreement between the Company and the Participant appiicable to such rights. (d) Performance Units and Performance Shares-If on the date of a Participant's death, the period or periods over which the value of performance shares or units was to be determined had not yet ended, any rights of an individual claiming through a deceased participant shall be governed by the terms and conditions of the grant. In such - case; the Committee may adjust the payment for such units or shares to reflect the actual time of •service of the deceased Participant during the performance period. (e) Deferred Accounts and Posthumous Payments-Amounts held pursuant to Section 4.3 in any deferred accounts for a deceased Participant together with any award, the value of which is determined after such Participant's death, shall be paid to such beneficiary as the Participant shall have designated in a written form filed with the Committee. Unless the written agreement or agree- ments between the Company and the Participant provide otherwise, such payment shall be made in a single cash payment. If no effective beneficiary designation is on file with the Committee, such payment shall be made to the executor under the Participant's will or if there is no properly probated will, to the administrator of the Participant's estate. 5.3 Retirement and Disability. In the event of the termination of a Participant's employment due to retirement with the consent of the Company or Disability, the following shall govern the disposition of his or her interest in the Plan: (a) Stock Options and Stock Appreciation Rights-As to stock options or stock appreciation rights, a Participant shall have the right, within twelve months of his or her Severance Date, but not beyond the expiration date of such options or rights, to exercise such options or rights to the extent exercisable on such Severance Date. (b) Restricted Shares -Any rights a Participant may have in any restricted shares subsequent to his or her termination of employment shall be governed by the restrictions and conditions imposed on such shares. (c) Dividend Equivalent Rights - Whether or not a Participant has any continued right to payment of dividend equivalent rights after his or her termination of employment due to retirement with the consent of the Company or Disability shall be governed by the provisions of the written agreement between the Company and the Participant applicable to such rights. (d) Performance Units and Performance Shares-If on a Participant's Severance Date, the period or periods over which the value of performance units or shares was to be determined had not yet ended, such Participant may, in the sole discretion of the Committee, be granted payment for such units or shares at the end of such period. In such case, the Committee may adjust the payment value of such units or shares to reflect the actual time of service of the Participant during the performance period. (e) Deferred Accounts and Payments after Termination -The payment of' deferred accounts and any award, the value of which is determined after a Participant's termination of employment, shall be made in accordance with the applicable written agreement or agreements between the Company and the Participant. 5.4 Termination of Employment; Effect on Deferred Awards. Nothing in this Articl.e V will be con- strued to forfeit or reduce any Participant's award, payment of which has been deferred pursuant to Section 4.3 and which, but for such Section 4.3, would have become payable to a Participant on or before his Severance Date. C-4 I

ARTICLE Vi 6.1 Limitation on Shares of Common Stock Available for or Allocated Under the Plan. in the aggregate, the total number of shares of Common Stock available to Participants under the Plan is 5,000,000. In addition, the maximum number of shares of Common Stock which may be allocated to any one Participant is 250,000. The following shall reduce the number of shares available in the manner specified: (a) Stock Options--The grant of a stock option under Section 4.1 (a) or 4.1 (b) shall reduce the available shares by the number of shares subjected to an option. (b) Stock Appreciation Rights-The grant of stock appreciation rights under Section 4.1(c) shall reduce the available shares by the number of stock appreciation rights granted; provided, however, if stock appreciation rights are granted in conjunction with a stock option under Section 4.1 (a) or (b) and the exercise of the option would cancel the stock appreciation rights and vice versa, then the grant of the stock appreciation rights will only reduce the amount available by the excess, if any, of the number of stock appreciation rights granted over the number of shares sub- jected to the related option. (c) Restricted Shares-The grant of restricted shares shall reduce the available shares by the number of restricted shares granted. (d) Performance Shares-The grant of performance shares shall reduce the available shares by the number of performance shares granted. . The following shall increase the number of shares available in the manner specified: • (e) Stock Options-The lapse or cancellation of a stock option granted under Section 4.1(a) or 4.1 (b) shall increase the available shares by the number of shares released from such option; provided, however, in the event the cancellation of a stock option is due to the exercise of stock appreciation rights related to such option, the cancellation of such option shall only Increase the amount available by the excess, if any, of the number of shares released from such option over the number of stock apprec ation rig ts exere se . .r:s (f ) Stock Appreciation Rights - The lapse ~r cancellation of stock appreciation rights shall increase the available shares by the number of stock appreciation rights which lapse or are can-, celled; provided, however, in the event the cancellation of such stock appreciation rights is due to the exercise of a stock option related to such stock appreciation rights, the cancellation of such stock appreciation rights shall only increase the available shares by the excess, If any, of the number of stock appreciation rights cancelled over the number of shares delivered on the exercise of such option. (g) Restricted Shares-The reversion of restricted shares to the Company due to the breach or occurrence of a restriction or condition on such shares shall Increase the available shares by the number of shares reverted. (h) Performance Shares-The termination or cancellation of any performance shares without payment by the Company thereon shall increase the available shares by the number of performance shares terminated or cancelled. ARTICLE VII 7.1 Adjustment Upon Changes in Capitalization. The total number of shares of Common Stock available for awards under the Plan or which may be allocated to any one Participant, the number of shares of Common Stock subject to outstanding options, the exercise price for such options, the number of outstanding stock appreciation rights, the base value of such rights, the number of outstanding divi- dend equivalent rights, and the number of outstanding performance shares shall be appropriately adjusted by the Committee for any increase or decrease in the number of outstanding shares of Common Stock resulting from a stock dividend, subdivision or combination of shares or reclassification. In the event of a merger or consolidation of the Company or a tender offer for shares of Common Stock, the Committee may make such adjustments with respect to awards and deferred accounts under the Plan and take such other action as it deems necessary or appropriate to reflect or in anticipation of such merger, consolidation, or tender offer including, without limitation, the substitution of new awards, the termination or adjustment of outstanding awards, the acceleration of awards or the removal of restric- tions on outstanding awards. C-5

connection with the Plan or the benefits provided hereunder as it deems necessary or advisable. The Committee shall enter into such agreements with Participants as it deems appropriate to reflect the Participants' interests hereunder. 2.2 Plan Interpretation. The Committee shall have exclusive authority to interpret the Plan. The decision of the Committee with respect to any question arising as to the employees selected to participate In the Plan, the amount, term, form and time of payment of benefits under the Plan or any other matter concerning the Plan shall be final, conclusive and binding on both the Company and the Participants. ARTICLE Ili 3.1 Eligibility. Only those salaried employees who are officers of or who are employed in a significant executive, administrative, operational, sales, or professionai capacity by the Company or an Operating Company or who have the potential to contribute to the future success of the Company or an Operating Company are eligible to participate in the Plan. 3.2 Participation. From time to time, the Chairman of the Board of Directors may recommend to the Committee that any eligible employee participate In the Plan. After reviewing such recommendations, and after considering the duties of each recommended employee, his or her present and potential contribution to the success of the Company or an Operating Company, his or her other compensation provided by the Company or an Operating Company and such other factors as It deems relevant, the Committee shall select from the recommended employees, those employees who will participate in the Plan. ARTICLE IV 4.1 Incentive Awards. From time to time, the Committee will determine the fornls and amounts of Incentive awards for Participants. However, no Incentive award under the Plan may be granted to a Participant within twelve months of his or her normal retirement date under a retirement plan for the Company or any Operating Company in which he or she is participating. Such awards may take the following forms, in the Committee's sole discretion: (a) Incentive Stock Options-These are stock options within the meaning of Section 422A of the Internal Revenue Code to purchase Common Stock. In addition to other restrictions contained in the Plan, an option granted under this Section 4.1(a), (i) may not be exercised more than ten years after the date it is granted, (ii) may not have an option price less than the Fair Market Value of Common Stock on the date the option is granted, (iii) may not be exercised where there is outstand- ing (within the meaning of Internal Revenue Code § 422A(c) (7) ) any other incentive stock option to purchase Common Stock (whether or not granted under this Plan) which was granted before the granting of such option to the Participant, (iv) must otherwise comply with Section 422A, and (v) must be designated as an "incentive stock option" by the Committee. The aggregate Fair Market Value of Common Stock determined at the time of each grant for which any Participant may be granted incentive stock options under this Plan for any calendar year is $100,000 plus any "unused credit carryover" within the meaning of Internal Revenue Code § 422A(b) (8) for such year, less the Fair Market Value of Common Stock determined at the time of each applicable grant subject to any incentive stock options granted to the Participant for such year under any other plans of the Com- pany or an Operating Company. (b) Other Stock Options-These are options to purchase Common Stock which are not designated by the Committee as "incentive stock options". At the time of the grant the Committee shall determine the option exercise period, the option price, and such other conditions or restrictions on the exercise of the option as the Committee deems appropriate. in addition to other restrictions contained in the Plan, an option granted under this Section 4.1(b), (i) may not be exercised more than ten years after the date it is granted, (ii) may not have an option exercise price less than 85% of the Fair Market Value of Common Stock on the date the option is granted, and (iii) may not be exercisable within twelve months of the date of grant. (c) Stock Appreciation Rights -These are rights that on exercise entitle the holder to receive the excess of (i) the Fair Market Value of a share of Common Stock on the date of exercise over (ii) the Fair Market Value on the date of grant (the "base value") multiplied by (iii) the number of rights exercised in cash, stock or a combination thereof as determined by the Committee. Stock appreciation rights granted under the Plan may, but need not be, granted in conjunction with an option under paragraphs 4.1(a) or 4.1(b). The Committee may impose such conditions or restric- C-2