THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Reynolds American Inc. (RAI)

3/29/2006 Proxy Information

The Company paid BAT an aggregate of $340,000 during 2005 in consideration for the services of Messrs. Monteiro de Castro and Withington as directors of the Company. For further information on this arrangement, see “The Board of Directors — Director Compensation — Payment to BAT for Services of Certain Board Designees,” above.

Pursuant to the Governance Agreement, RAI was required under certain circumstances, until September 30, 2005, to repurchase shares of RAI common stock to maintain B&W’s ownership percentage of RAI common stock at 42%. During 2005, in satisfaction of its share repurchase obligations under the Governance Agreement, RAI repurchased 34,135 shares of RAI common stock in various open market transactions for an aggregate purchase price of approximately $3 million. For a discussion of other provisions of the Governance Agreement, see “The Board of Directors — Governance Agreement,” “The Board of Directors — Committees and Meetings of the Board of Directors” and “Security Ownership of Certain Beneficial Owners and Management — Standstill Provisions; Transfer Restrictions,” above.

In connection with the consummation of the Business Combination on July 30, 2004, RJR Tobacco entered into contract manufacturing agreements with two subsidiaries of BAT (BAT and its subsidiaries, including B&W, are collectively referred to in this proxy statement as the “BAT Group”), pursuant to which RJR Tobacco manufactures certain of BAT’s U.S.-sourced cigarettes and other tobacco products for export outside of the U.S. Unless extended or earlier terminated as provided therein, each such contract manufacturing agreement will expire on December 31, 2014. Sales by RJR Tobacco to the BAT Group pursuant to such contract manufacturing agreements during 2005 were $425 million. In addition to sales pursuant to the above contract manufacturing agreements, RJR Tobacco sold a variety of fixed assets to the BAT Group during 2005 in the approximate amount of $1 million. Also, during 2005, the BAT Group purchased from Lane Limited, a wholly owned indirect subsidiary of RAI, little cigars and semi-cut tobacco filler in the approximate amount of $11 million.

During 2005, the BAT Group purchased tobacco leaf from RJR Tobacco in the approximate amount of $30 million. Also during 2005, the BAT Group agreed to purchase additional tobacco leaf from RJR Tobacco in the approximate amount of $68 million. In accordance with generally accepted accounting principles, none of the $68 million (including that portion of the purchase price that was paid by the BAT Group in 2005) was recorded as sales in RAI’s 2005 financial statements, but will be recognized as sales when the product is shipped to the BAT Group. In addition, during 2005, the BAT Group (1) prepaid RJR Tobacco the amount of $3 million in connection with leaf to be provided by RJR Tobacco during 2006 and (2) purchased from RJR Tobacco expanded tobacco and re-constituted tobacco in the approximate amount of $6 million.

B&W and RAI also entered into a leaf purchase agreement upon the consummation of the Business Combination. Such agreement relates to certain leaf purchase commitments of RAI and its operating subsidiaries (collectively referred to in this proxy statement as the “RAI Group”), commitments B&W had previously agreed to in connection with the settlement of third party litigation and that the RAI Group had assumed pursuant to the Business Combination. If such leaf commitments exceed certain manufacturing needs of the RAI Group, then B&W is required either to make a cash payment to the RAI Group directly based upon the amount of the excess leaf purchased, or otherwise take such action so that the RAI Group has no liability for such excess. During 2005, B&W made no payments to the RAI Group under the above leaf purchase agreement.

RJR Tobacco and a member of the BAT Group are also parties to a technology sharing and development services agreement, which was entered into on July 30, 2004. Pursuant to this agreement, each party may license or otherwise transfer rights to the other in its respective technologies, and may pursue joint technology projects with the other party. Each party or its respective affiliates may also provide certain contract services to the other party or its affiliates. Unless extended or earlier terminated as provided therein, the technology sharing and development services agreement will expire on December 31, 2009. During 2005, the RAI Group billed the BAT Group approximately $4 million pursuant to such agreement. In addition, during 2005, the BAT Group prepaid RJR Tobacco approximately $1 million in connection with certain research and development related services to be provided in 2006 by RJR Tobacco under the foregoing agreement.

The RAI Group and the BAT Group entered into a transition services arrangement on July 30, 2004, pursuant to which the RAI Group and the BAT Group provide the other with services relating to, among other things, information technology, tax and human resource matters arising from or in connection with the consummation of the Business Combination. The period over which services are to be provided under this arrangement varies depending upon the particular type of service involved, but in any case is not expected to extend beyond December 2006. During 2005, the RAI Group paid the BAT Group approximately $63,000, and the BAT Group paid the RAI Group approximately $116,000, pursuant to the transition services arrangement.

The RAI Group also purchases from the BAT Group tobacco leaf and cigarettes, pays royalties to the BAT Group relating to the sale by the RAI Group of certain cigarette brands outside of the U.S. and pays commissions to the BAT Group in connection with certain leaf purchases. The parties entered into the agreements evidencing such arrangements, which have various expiration dates, following the consummation of the Business Combination. During 2005, the RAI Group paid the BAT Group approximately $13 million pursuant to the foregoing arrangements. In addition, as of the end of 2005, the RAI Group had approximately $6 million in accounts payable to the BAT Group under such arrangements.

In connection with the Business Combination, RJR Tobacco agreed to indemnify B&W and its affiliates against, among other things, any litigation liabilities, costs and expenses incurred by B&W or its affiliates arising out of the U.S. cigarette and tobacco business of B&W. As a result of this indemnity, RJR Tobacco has assumed the defense of pending B&W-specific tobacco-related litigation, has paid the judgments and costs related to certain pre-Business Combination tobacco-related litigation of B&W, and has posted bonds on behalf of B&W, where necessary, in connection with cases decided since the Business Combination. In addition, during the fourth quarter of 2005, pursuant to this indemnity, RJR Tobacco recorded $22 million in expenses for funds to be reimbursed to BAT for costs and expenses incurred arising out of tobacco-related litigation.

As part of the Business Combination, B&W transferred to RJR Tobacco, along with its U.S. operations, cash of $604 million, an amount equal to its estimated pre-closing accrued liabilities under the Master Settlement Agreement (the “MSA”) and related state litigation settlement agreements (such liabilities, the “MSA Liability Amount”). B&W agreed to indemnify RAI and its subsidiaries to the extent the actual pre-closing MSA liabilities paid by RJR Tobacco exceeded, and RJR Tobacco agreed to indemnify B&W to the extent the actual pre-closing MSA liabilities paid by RJR Tobacco were less than, the MSA Liability Amount. In February 2005, RJR Tobacco received a formal notice from B&W claiming that B&W was entitled to a return of approximately $53 million of the MSA Liability Amount resulting from the offset of B&W’s pre-closing MSA Phase II obligations against certain of RJR Tobacco’s tobacco quota obligations as a result of the tobacco buyout legislation passed by the U.S. Congress in 2004. As a result of negotiations over this matter, in the fourth quarter of 2005, RJR Tobacco paid B&W approximately $14 million in settlement of this claim.

As part of the Business Combination, B&W also agreed to fund the retiree health-care costs of certain persons who had been employed by an affiliate of B&W prior to, and who became transitional employees of RAI after, the Business Combination. During 2005, B&W contributed approximately $3 million to a health-care trust, which trust was transferred to the RAI Group in the Business Combination, in satisfaction of such funding obligation. Under its agreement with RAI, B&W is required to make further contributions to a health-care trust if the original amount contributed is insufficient to pay the health-care claims of the covered employees.

Commencing in 2006, RJR Tobacco seconded two of its employees, including Frances V. Creighton, former Executive Vice President — Marketing of RJR Tobacco, to the BAT Group in connection with particular assignments. During their service with the BAT Group, the seconded employees will continue to be paid by RJR Tobacco and participate in employee benefit plans sponsored by the RAI Group. The BAT Group will reimburse members of the RAI Group certain costs of the seconded employees’ compensation and benefits during the secondment period. The Company estimates that the aggregate amount of such reimbursement will be approximately $417,000 (excluding any reimbursement related to tax equalization payments) for 2006.

In March 2006, Gavin D. Little joined RJR Tobacco as its Executive Vice President of consumer and trade marketing. Prior to that date, Mr. Little had served as BAT’s European marketing director. Mr. Little is a full-time employee of, and is paid by, RJR Tobacco, and he receives no compensation from BAT for his services on behalf of RJR Tobacco, nor will BAT reimburse RJR Tobacco for the costs of Mr. Little’s compensation.

The Audit Committee of RAI’s Board periodically reviews the terms of the various business arrangements between RAI and its subsidiaries, on the one hand, and BAT and its subsidiaries, on the other hand. In addition, the Governance Agreement provides that the independent directors of RAI (excluding any independent directors who have been designated by B&W) are required to approve any material contract or transaction involving RAI or any of its subsidiaries, on the one hand, and BAT or any of its subsidiaries, on the other hand, the terms of which are not governed by either an agreement existing on the date of the Business Combination or a provision of RAI’s articles of incorporation or Bylaws.

3/24/2005 Proxy Information

The Company paid BAT an aggregate of $141,666 during the 2004 fiscal year in consideration for the services of Messrs. Monteiro de Castro and Withington as directors of the Company. For further information on this arrangement, see “The Board of Directors — Director Compensation — Payment to BAT for Services of Certain Board Designees” above.

Pursuant to the Governance Agreement, RAI is required to repurchase shares of RAI common stock under certain circumstances. Specifically, if on or before September 30, 2005, (1) RAI issues common stock upon exercise of any option, warrant or other security relating to RAI common stock, or otherwise issues common stock, to any of its directors, officers, employees or consultants, and (2) following such issuance, the number of outstanding shares of RAI common stock exceeds 147,406,576, then prior to or within a reasonable period after such issuance, RAI is required to repurchase a number of shares of its outstanding common stock equal to the lesser of (a) the number of shares of RAI common stock so issued and (b) the difference between the number of shares of its common stock outstanding after such issuance and 147,406,576. RAI, however, is not required to repurchase shares if B&W’s ownership interest in RAI has fallen below 25 percent at the time of the issuance. During the 2004 fiscal year, in satisfaction of its share repurchase obligations under the Governance Agreement, RAI repurchased 485,000 shares of RAI common stock in various open market transactions for an aggregate purchase price of $34.6 million. For a discussion of other provisions of the Governance Agreement, see “The Board of Directors — Governance Agreement,” “The Board of Directors — Committees and Meetings of the Board of Directors” and “Security Ownership of Certain Beneficial Owners and Management — Standstill Provisions; Transfer Restrictions” above.

In connection with the consummation of the Business Combination on July 30, 2004, RJR Tobacco entered into contract manufacturing agreements with two subsidiaries of BAT (BAT and its subsidiaries, including B&W, are collectively referred to in this proxy statement as the “BAT Group”), pursuant to which RJR Tobacco manufactures certain of BAT’s U.S.-sourced cigarettes and other tobacco products for export outside of the U.S. Unless extended or earlier terminated as provided therein, each such contract manufacturing agreement will expire on December 31, 2014. Sales by RJR Tobacco to the BAT Group pursuant to such contract manufacturing agreements during the period from July 31, 2004 to December 31, 2004, were $179.7 million. In addition to sales pursuant to the above contract manufacturing agreements, RJR Tobacco and another operating subsidiary of RAI sold a variety of tobacco products to the BAT Group during the period from July 31, 2004 to December 31, 2004 in the aggregate amount of $61.5 million.

B&W and RAI also entered into a leaf purchase agreement upon the consummation of the Business Combination. Such agreement relates to certain leaf purchase commitments of RAI and its operating subsidiaries (collectively referred to in this proxy statement as the “RAI Group”), commitments B&W had previously agreed to in connection with the settlement of third party litigation and that the RAI Group had assumed pursuant to the Business Combination. If such leaf commitments exceed certain manufacturing needs of the RAI Group, then B&W is required either to make a cash payment to the RAI Group directly based upon the amount of the excess leaf purchased or otherwise take such action so that the RAI Group has no liability for such excess. During the 2004 fiscal year, B&W made no payments to the RAI Group under the above leaf purchase agreement.

RJR Tobacco and a member of the BAT Group are also parties to a technology sharing and development services agreement, which was entered into on July 30, 2004. Pursuant to this agreement, each party may license or otherwise transfer rights to the other in its respective technologies, and may pursue joint technology projects with the other party. Each party or its respective affiliates may also provide certain contract services to the other party or its affiliates. Unless extended or earlier terminated as provided therein, the technology sharing and development services agreement will expire on December 31, 2009. During the period from July 31, 2004 to December 31, 2004, the BAT Group paid the RAI Group $761,925 pursuant to such agreement.

The RAI Group and the BAT Group entered into a transition services arrangement on July 30, 2004, pursuant to which the RAI Group and the BAT Group provide the other with services relating to, among other things, information technology, tax and human resource matters arising from or in connection with the consummation of the Business Combination. The period over which services are to be provided under this arrangement varies depending upon the particular type of service involved, but in any case is not expected to extend beyond December 2006. During the 2004 fiscal year, the RAI Group paid the BAT Group $178,000, and the BAT Group paid the RAI Group $276,000, pursuant to the transition services arrangement.

The RAI Group also purchases from the BAT Group tobacco leaf and cigarettes, pays royalties to the BAT Group relating to the sale by the RAI Group of certain cigarette brands outside of the U.S. and pays commissions to the BAT Group in connection with certain leaf purchases. The agreements evidencing such arrangements, which have various expiration dates, were entered into by the parties following the consummation of the Business Combination. During the period from July 31, 2004 through December 31, 2004, the aggregate payments made by the RAI Group to the BAT Group pursuant to the foregoing arrangements were $11.2 million.

The Audit Committee of RAI’s Board periodically reviews the terms of the various business arrangements between RAI and its subsidiaries, on the one hand, and BAT and its subsidiaries, on the other hand.

In accordance with SEC rules requiring the disclosure of certain relationships with management, RAI makes the following disclosure. Joe Michalek, the son-in-law of Mr. Schindler, the Non-Executive Chairman of the Board, resigned from his position as Vice President — Marketing of RJR Tobacco on December 31, 2004. RJR Tobacco paid Mr. Michalek an aggregate of $381,948 in base salary, bonus and other compensation with respect to his service during the 2004 fiscal year. The compensation and benefits provided to Mr. Michalek are consistent with that provided to other employees with equivalent qualifications and responsibilities at RJR Tobacco. During 2004, in accordance with the terms of the Reynolds American Inc. Long-Term Incentive Plan applicable to all participants in the Plan, Mr. Michalek also vested in the following LTIP awards, which had been granted to him in prior years: performance units valued at $172,358, and 4,061 restricted shares of RJR common stock. A portion of these LTIP awards vested in accordance with their original vesting schedule. The balance of these awards vested in connection with the consummation of the Business Combination, pursuant to the LTIP’s provision accelerating vesting upon a change of control.

5/18/2004 S-4 Information

Andrew J. Schindler served as executive chairman of the Reynolds American board through Jan. 31, 2005, and non-executive chairman following that date.