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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