REYNOLDS AMERICAN INC.
COMPENSATION COMMITTEE CHARTER

Purposes

     The purposes and responsibilities of the Compensation Committee of the Board of Directors of Reynolds American Inc. (“RAI”) shall be to:

1.       establish and administer the policies, programs and procedures for compensating the senior management of RAI and its subsidiaries; and

2.       have direct responsibility to:

a.       review and approve corporate goals and objectives relevant to compensation of the Chief Executive Officer (“CEO”), evaluate the CEO’s performance in light of these goals and objectives and, either as a committee or together with the other independent directors (as directed by the Board of Directors), determine and approve the CEO’s compensation level based on this evaluation;

b.       determine, or make recommendations to the Board of Directors with respect to, non-CEO compensation, incentive compensation plans and equity-based plans; and

c.       prepare the Compensation Committee’s report on executive compensation, made pursuant to the Securities Act of 1934, to be included in RAI’s annual proxy statement (the “Compensation Committee Report”).

Composition of the Compensation Committee

     Number. The Compensation Committee shall consist of no fewer than three members, the exact number of which will be determined from time to time by the Board of Directors.

     Qualifications. Each Compensation Committee member shall meet the independence criteria of the rules of the New York Stock Exchange, Inc., as such requirements are interpreted by the Board of Directors in its business judgment and as set forth in RAI’s Current Board of Directors Practices on Certain Corporate Governance Issues.

     Appointment and Removal. The Board of Directors will appoint the members and the Chair of the Compensation Committee based on nominations made by the Nominating and Corporate Governance Committee of the Board of Directors of RAI. Each Compensation Committee member shall serve at the pleasure of the Board of Directors for such term or terms as the Board of Directors may determine or until such Compensation Committee member is no longer a member of the Board of Directors.

Specific Powers, Duties and Responsibilities of the Compensation Committee

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

1.       hold such regular meetings as may be necessary and such special meetings as may be called by the Chair of the Compensation Committee or at the request of management;

2.       create an agenda for the work of the Compensation Committee for the ensuing year;

3.       establish, and periodically review, a general compensation philosophy for RAI;

4.       approve, adopt, amend, terminate and administer all plans or programs relating to employee benefits, incentives or compensation, including employment contracts, except that the Compensation Committee shall not have the power or authority to:

a.       adjust the salaries or determine annual incentive awards for the employees in salary grade “A”; or

b.       approve the adoption of or changes to plans or programs if the impact of such adoption or change would be to (i) decrease net income by more than $20,000,000 per year; (ii) affect generally the terms and conditions under which management participates in the ownership of the common stock of RAI; or (iii) significantly change a plan or program afforded principally to executive management;

5.       review and make recommendations to the Board of Directors with respect to the adoption (or submission to shareholders for approval) or amendment of incentive compensation and equity-based plans for RAI, including restricted stock, stock option and deferred compensation plans;

6.       review and make recommendations to the Board of Directors with respect to, or approve, all awards of shares or share options pursuant to RAI’s equity-based plans;

7.       initiate and oversee annually the evaluation of the performance of the CEO with input from all of the members of the Board of Directors, and review and report to the Board of Directors on succession planning for the CEO and other top executive management positions;

8.       review and approve corporate goals and objectives relevant to compensation of the Chairman of the Board and CEO, evaluate the performance of the Chairman of the Board and CEO in light of these goals and objectives, and, either as a committee or together with the other independent directors (as directed by the Board of Directors), (a) determine and approve the compensation level of the Chairman of the Board and CEO based on this evaluation, and (b) determine the long term incentive components of compensation of the Chairman of the Board, CEO and other executive officers of RAI, concerning RAI’s performance and relative shareholder return, the value of similar incentive awards to the Chairman of the Board and CEO at comparable companies and the awards given to the Chairman of the board and CEO in past years;

9.       in consultation with senior management of RAI, oversee regulatory compliance with respect to 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 Internal Revenue Code of 1986, as amended, establishing performance goals and certifying that such performance goals and any other material terms have been attained);

10.   report periodically to the Board of Directors on Compensation Committee activity, advise the Board of Directors with respect to the execution or amendment of any employment contract with one of the five most highly salaried members of management and review with the Board of Directors such other information as either the Chair of the Compensation Committee or the Chairman of the Board deems appropriate;

11.   report through its Chair to the Board of Directors following the meetings of the Compensation Committee;

12.   maintain minutes or other records of meetings and activities of the Compensation Committee; and

13.   perform any other duties or responsibilities delegated to the Compensation Committee by the Board of Directors from time to time.

Delegation

     The Compensation Committee shall have a subcommittee consisting of the Chair of the Compensation Committee with the power and authority to approve salary adjustments or annual incentive awards for individuals in salary grade “B” or below when necessary for expediency and when the Compensation Committee is not otherwise in session.

     The Compensation Committee also may, in its discretion, delegate such of its powers, duties and responsibilities as it deems appropriate to other subcommittees it establishes.

Meetings of the Compensation Committee

     The Compensation 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 Compensation Committee shall, in consultation with the other members of the Compensation Committee and appropriate officers of RAI, be responsible for calling meetings of the Compensation Committee, establishing agendas therefor and supervising the conduct thereof. A majority of the number of Compensation Committee members will constitute a quorum for conducting business at a meeting of the Compensation Committee. The act of a majority of the Compensation Committee members present at a Compensation Committee meeting at which a quorum is in attendance will be the act of the Compensation Committee, unless a greater number is required by law or by RAI’s Articles of Incorporation or By-Laws. The Compensation Committee also may take any action permitted under this Charter by unanimous written consent.

     The Compensation 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 Compensation Committee or to meet with any members of, or consultants to, the Compensation Committee.

Resources and Authority of the Compensation Committee

     The Compensation Committee shall have appropriate resources and authority to discharge its responsibilities, including, without limitation, appropriate funding, in such amounts as the Compensation Committee deems necessary, to compensate any consultants or any other advisors retained by the Compensation Committee. The Compensation Committee will 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 Compensation Committee also may retain independent legal counsel and other independent advisors to assist it in carrying out its responsibilities.

Compensation Committee Report

     The Compensation Committee shall prepare, with the assistance of management and legal counsel, the Compensation Committee Report.

Annual Review of Charter

     The Compensation Committee shall conduct and review with the Board of Directors annually an evaluation of this Charter and recommend any changes to the Board of Directors. The Compensation Committee may conduct this Charter evaluation in such manner as the Compensation Committee, in its business judgment, deems appropriate.

Annual Performance Evaluation

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