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REYNOLDS AMERICAN INC.
COMPENSATION COMMITTEE CHARTER

Purposes

     The primary purposes of the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Reynolds American Inc. (“RAI”) shall be to oversee and administer policies, programs, plans and arrangements for compensating the executive management of RAI and its operating subsidiaries. Such compensatory policies, programs, plans and arrangements shall be designed to:

1. enable RAI and its operating subsidiaries to attract and retain executive management with the high caliber of talent and skills critical to the success of such companies, and to reward such managers for contributing to the companies’ success;
   
   
2. provide an overall compensation package that is competitive with companies that RAI and its operating subsidiaries are most likely to compete against for executive management talent (with the Committee, in appropriate circumstances, putting in place one or more post-employment covenants, such as non-compete and confidentiality covenants); and
   
   
3. enhance shareholder value by having a significant portion of each executive’s total compensation based on performance metrics, such as RAI’s stock price, the market share of RAI’s operating subsidiaries or other financial or operating performance metrics of RAI and/or its operating subsidiaries.
   
   

Composition of the Compensation Committee

     Number. The Committee shall consist of no fewer than three members, the exact number of which shall be determined from time to time by the Board, subject to the terms of the Governance Agreement, dated as of July 30, 2004, as amended, by and among British American Tobacco p.l.c., Brown & Williamson Tobacco Corporation (n/k/a Brown & Williamson Holdings, Inc.) and RAI.

     Qualifications. The Committee shall consist entirely of directors whom the Board determines (i) are “independent” in accordance with New York Stock Exchange listing standards and RAI’s Corporate Governance Guidelines, (ii) are “non-employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and (iii) satisfy the requirements of an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

     Appointment and Removal. The Board shall appoint the members and the Chair of the Committee based on nominations made by the Board’s Corporate Governance, Nominating and Leadership Development Committee (the “Governance Committee”). Each Committee member shall serve at the pleasure of the Board for such term or terms as the Board may determine or until such Committee member is no longer a member of the Board.

Specific Powers, Duties and Responsibilities of the Compensation Committee

     The Compensation Committee shall have the following specific powers, duties and responsibilities:

1. establish the overall compensation and benefits philosophy, which shall include meaningful performance-based components, applicable to employees of RAI and its subsidiaries (e.g., a policy with respect to the proper apportionment of pay among base salary and short-term and long-term incentive compensation, and other policies relating to the fundamental goals and objectives of the compensation and benefit programs of RAI and its subsidiaries);
   
   
2. approve, adopt, amend, terminate and administer, without further approval or action by the Board, all plans or programs relating to the compensation, benefits, or other incentives (including employment contracts) of employees of RAI and its subsidiaries in job level 11 and above, and, to the extent they are not within any such job level, the employees who are “officers” within the meaning of Rule 16a-1(f) under the 1934 Act (such employees, collectively, the “Executive Officers”); except as otherwise provided below in paragraphs (4) and (5); and, except further, that the Committee shall not be permitted to take any of the following actions, but instead the Committee shall make recommendations regarding such matters to the independent members of the Board for their approval:
   
   
1. any adjustment in or to the amount of the base salary, annual cash incentive award, or severance or change in control arrangement for any Executive Officer in job level 13, 14 or 15, or the initial determination of the amount of the base salary, annual cash incentive award, or severance or change in control arrangement for any such person upon being hired or promoted into such job level; or
   
   
2. the grant of any equity-based award to an Executive Officer in job level 13, 14 or 15;
   
   
3. at the beginning of each fiscal year, review and approve the corporate goals and objectives against which the performance of RAI’s Chief Executive Officer (the “CEO”) for such year will be measured;
   
   
4. review the Governance Committee’s evaluation of the CEO’s performance for RAI’s most recently completed fiscal year, and based upon such review, either as a committee or together with the other independent Board members (as directed by the Board), determine and approve the compensation level of the CEO, taking into consideration the following factors in determining the CEO’s long-term incentive compensation – (a) RAI’s performance and shareholder return relative to a peer group of companies selected by the Committee, (b) the value of similar incentive awards to the chief executive officers at such peer group companies, and (c) the awards given to the CEO in past years;
   
   
5. notwithstanding anything to the contrary contained herein, review and recommend to the independent members of the Board for their approval:
   
1. the adoption of any new benefit plan or program covering employees of RAI or any of its subsidiaries, or the amendment of such an existing benefit plan or program, if the impact of such adoption or amendment would be to decrease net income by more than $20,000,000 per year;
   
   
2. the adoption of a new benefit plan or program, or the material amendment of an existing benefit plan or program, afforded principally to executive management; and
   
   
3. the adoption or amendment (including any adoption or amendment made subject to shareholder approval) of any RAI sponsored incentive compensation and equity-based plans covering employees of RAI or any of its subsidiaries, including restricted stock, stock option and deferred compensation plans, except that in designating the Committee as an administrator of any plan, the Board may authorize the Committee to amend such plan;
   
   
6. establish, amend and monitor compliance with executive stock ownership guidelines;
   
   
7. appoint the members of each of the Reynolds American Inc. Pension Investment Committee (the “PIC”) and the RAI Employee Benefits Committee (the “EBC”), which committees shall have such powers, duties and responsibilities with respect to the retirement, savings and welfare benefit plans of RAI and its affiliated companies as the Committee may determine from time to time;
   
   
8. in consultation with senior management of RAI, oversee regulatory compliance with respect to executive compensation matters, including overseeing RAI’s policies on structuring compensation programs to preserve tax deductibility (including, as and when required, for compliance with Section 162(m) of the Code, establishing performance goals and certifying that such performance goals and any other material terms have been attained);
   
   
9. report periodically to the Board on material actions taken by the Committee and review with the Board such other information as either the Chair of the Committee or the Chairman of the Board deems appropriate;
   
   
10. report through its Chair to the Board following the meetings of the Committee or any subcommittee; and
    
    
11. perform any other duties or responsibilities delegated to the Committee by the Board from time to time, including such duties and responsibilities as may be delegated to the Committee as the administrator of any plan;
    
    

       provided, however, that if the independent members of the Board, rather than the Committee, act pursuant to foregoing clause (2), (4) or (5), then only those independent Board members who are also non-employee directors within the meaning of Rule 16b-3 under the 1934 Act (and who shall in any event number two or more) shall approve any transaction, involving an equity-based award, with a person subject to the 1934 Act’s Section 16 reporting requirements, and only those independent Board members who are also outside directors within the meaning of Section 162(m) of the Code (and who shall in any event number two or more) shall approve any awards designed to be performance-based compensation under such Code section.

     Notwithstanding anything to the contrary contained herein, (1) the Committee shall not be required to determine the compensation and benefits of Executive Officers under non-executive plans and programs generally applicable to the employees of RAI and its subsidiaries, unless such plans and programs provide special benefits and compensation to any Executive Officer that are not available to employees generally; and (2) the Committee’s responsibilities hereunder shall exclude the powers and duties granted by the Committee to the PIC and EBC.

Delegation

     The Committee (1) shall have a subcommittee consisting of the Chair of the Committee with the power and authority to approve compensation for individuals in job level 12 or below when deemed appropriate and when the Committee is not otherwise in session, and (2) may from time to time, in its discretion and as it deems appropriate, delegate such of its powers, duties and responsibilities to other subcommittees, or to committees comprised of officers or employees of RAI and its subsidiaries, except that only a subcommittee consisting solely of two or more non-employee directors within the meaning of Rule 16b-3 under the 1934 shall approve any transaction, involving an equity-based award, with a person subject to the 1934 Act’s Section 16 reporting requirements, and only a subcommittee consisting solely of two or more outside directors within the meaning of Section 162(m) of the Code shall approve any awards designed to be performance-based under such Code section.

Meetings of the Compensation Committee

     The Committee shall meet in person or telephonically as frequently as necessary to comply with its responsibilities as set forth in this Charter. The Chair of the Committee shall, in consultation with the other members of the Committee and appropriate officers of RAI, be responsible for calling regular and special meetings of the Committee, and establishing agendas for, and supervising the conduct of, such meetings. Notice and conduct of Committee meetings shall be in accordance with RAI’s Bylaws. A majority of the number of Committee members shall constitute a quorum for conducting business at a meeting of the Committee. The act of a majority of the Committee members present at a Committee meeting at which a quorum is in attendance shall be the act of the Committee, unless a greater number is required by law or by RAI’s Articles of Incorporation or Bylaws. The Committee also may take any action under this Charter by unanimous written consent in lieu of action taken at a meeting, which consent may be in electronic form and delivered by electronic means.

     At the beginning of each year, the Committee shall create a calendar for the work of the Committee for the ensuing year. The Committee shall maintain minutes or other records of meetings and activities of the Committee.

     The Committee may request any officer or employee of RAI or its subsidiaries, or RAI’s outside legal counsel or other advisors, to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

Resources and Authority of the Compensation Committee

     The Committee shall have appropriate resources and authority to discharge its responsibilities, including, without limitation, appropriate funding, in such amounts as the Committee deems necessary, to compensate any consultants or any other advisors retained by the Committee. The Committee shall have the sole authority to retain and terminate compensation consultants to assist in the evaluation of executive officer compensation and the sole authority to approve the fees and other retention terms of such compensation consultants. The Committee also may retain independent legal counsel and other independent advisors to assist it in carrying out its responsibilities. The Committee may establish such rules as it deems appropriate limiting the ability of management of RAI and its subsidiaries to use the same compensation consultant, legal counsel or other advisors that the Committee retains.

Compensation Discussion and Analysis; Compensation Committee Report

     The Committee shall review and discuss with senior management of RAI the Compensation Discussion and Analysis. Based on such review and discussion, the Committee shall determine whether to recommend to the Board that the Compensation Discussion and Analysis be included in RAI’s annual report or proxy statement for the annual meeting of shareholders.

     The Committee shall provide, over the names of the members of the Committee, the Compensation Committee Report for inclusion in RAI’s annual report or proxy statement for the annual meeting of shareholders.

Review/Amendment of Charter

     The Committee shall review and evaluate, at least annually, this Charter and, after consultation with the Governance Committee, recommend to the Board for approval any changes to the Charter as the Committee, in its business judgment, deems necessary or appropriate.

Annual Performance Evaluation

     The Committee shall conduct and review with the Board annually an evaluation of the Committee’s performance with respect to the requirements of this Charter. This evaluation also shall set forth the goals and objectives of the Committee for the upcoming year. The Committee may conduct this performance evaluation in such manner as the Committee, in its business judgment, deems necessary or appropriate.

Adopted: July 28, 2004
Last Revised: November 30, 2007