RAI Reynolds American (delisted)

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As filed with the Securities and Exchange Commission on November 4, 2015

Registration No. 333-

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

REYNOLDS AMERICAN INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

North Carolina		2111		20-0546644
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(IRS Employer Identification No.)

401 North Main Street

Winston-Salem, North Carolina 27101

(336) 741-2000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

SEE TABLE OF ADDITIONAL REGISTRANTS

 

 

McDara P. Folan, III, Esq.

Senior Vice President, Deputy General Counsel and Secretary

Reynolds American Inc.

401 North Main Street

Winston-Salem, NC 27101

(336) 741-2000

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

 

Copies to:

David M. Eaton, Esq.

Kilpatrick Townsend & Stockton LLP

Suite 2800, 1100 Peachtree Street

Atlanta, GA, 30309-4528

(404) 815-6500

 

 

Approximate date of commencement of proposed sale of securities to the public: As soon as practicable after this registration statement becomes effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.    ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		x		Accelerated filer		¨
Non-accelerated filer		¨  (Do not check if a smaller reporting company)		Smaller reporting company		¨

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)    ¨

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)    ¨

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered		Amount to be Registered		Proposed Maximum Offering Price Per Unit(1)		Proposed Maximum Aggregate Offering Price(1)		Amount of Registration Fee
3.500% Senior Notes due 2016		$414,793,000		100%		$414,793,000		$41,769.66
Guarantees of 3.500% Senior Notes due 2016		—		—		—		(2)
2.300% Senior Notes due 2017		$447,092,000		100%		$447,092,000		$45,022.16
Guarantees of 2.300% Senior Notes due 2017		—		—		—		(2)
8.125% Senior Notes due 2019		$668,689,000		100%		$668,689,000		$67,336.98
Guarantees of 8.125% Senior Notes due 2019		—		—		—		(2)
6.875% Senior Notes due 2020		$641,462,000		100%		$641,462,000		$64,595.22
Guarantees of 6.875% Senior Notes due 2020		—		—		—		(2)
3.750% Senior Notes due 2023		$473,689,000		100%		$473,689,000		$47,700.48
Guarantees of 3.750% Senior Notes due 2023		—		—		—		(2)
8.125% Senior Notes due 2040		$236,748,000		100%		$236,748,000		$23,840.52
Guarantees of 8.125% Senior Notes due 2040		—		—		—		(2)
7.000% Senior Notes due 2041		$240,197,000		100%		$240,197,000		$24,187.84
Guarantees of 7.000% Senior Notes due 2041		—		—		—		(2)
Total		$3,122,670,000						$314,452.87

(1)	Estimated solely for the purposes of calculating the registration fee in accordance with Rule 457(f) under the Securities Act of 1933, as amended.

(2)	Pursuant to Rule 457(n), no additional registration fee is required for the guarantees of the notes registered hereby.

 

 

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

 

 

 

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TABLE OF ADDITIONAL REGISTRANTS

 

Exact Name of Additional Registrant as Specified in its Charter		State or Other Jurisdiction of Incorporation or Organization		Primary Standard Industrial Classification Code Number		I.R.S. Employer Identification Number		Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices
American Snuff Company, LLC		Delaware		2111		62-1691028		5106 Tradeport Drive Memphis, TN 38141 (901) 761-2050
Conwood Holdings, Inc.		Delaware		2111		20-4771396		401 North Main Street Winston-Salem, NC 27101 (336) 741-2000
Lorillard Licensing Company LLC		North Carolina		2111		56-2169594		401 North Main Street Winston-Salem, NC 27101 (336) 741-5000
Reynolds Finance Company		Delaware		2111		51-0380116		Farmers Bank Building Suite 1402 301 N. Market Street Wilmington, DE 19801 (302) 425-3550
Reynolds Innovations Inc.		North Carolina		2111		56-1972826		401 North Main Street Winston-Salem, NC 27101 (336) 741-5700
R. J. Reynolds Global Products, Inc.		Delaware		2111		04-3625474		401 North Main Street Winston-Salem, NC 27101 (336) 741-5500
R.J. Reynolds Tobacco Co.		Delaware		2111		66-0285918		401 North Main Street Winston-Salem, NC 27101 (336) 741-5000
R. J. Reynolds Tobacco Company		North Carolina		2111		73-1695305		401 North Main Street Winston-Salem, NC 27101 (336) 741-5000
R.J. Reynolds Tobacco Holdings, Inc.		Delaware		2111		56-0950247		401 North Main Street Winston-Salem, NC 27101 (336) 741-5500
RAI Services Company		North Carolina		2111		38-3792301		401 North Main Street Winston Salem, NC 27101 (336) 741-4500
Rosswil LLC		Delaware		2111		36-4348321		401 North Main Street Winston-Salem, NC 27101 (336) 741-2000
Santa Fe Natural Tobacco Company, Inc.		New Mexico		2111		85-0394268		1 Plaza La Prensa Santa Fe, NM 87507 (505) 982-4257

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED NOVEMBER 4, 2015

PROSPECTUS

 

OFFERS TO EXCHANGE

All Outstanding Notes of the Series Specified Below

THE EXCHANGE OFFERS WILL EXPIRE AT          P.M., NEW YORK CITY TIME,

ON                     , 2015, UNLESS EXTENDED

 

Old Notes to be Exchanged		CUSIP Nos.				Outstanding Principal Amount
3.500% Senior Notes due 2016		761713 BH8		U8001F AL9		$414,793,000
2.300% Senior Notes due 2017		761713 BJ4		U8001F AM7		$447,092,000
8.125% Senior Notes due 2019		761713 BK1		U8001F AN5		$668,689,000
6.875% Senior Notes due 2020		761713 BL9		U8001F AP0		$641,462,000
3.750% Senior Notes due 2023		761713 BM7		U8001F AQ8		$473,689,000
8.125% Senior Notes due 2040		761713 BN5		U8001F AR6		$236,748,000
7.000% Senior Notes due 2041		761713 BP0		U8001F AS4		$240,197,000

We are offering to exchange any and all of each series of our outstanding notes listed above, referred to as the old notes, for a series of our newly issued notes, referred to as the new notes, having the same interest payment and maturity dates and interest rate provisions (other than with respect to certain rights to additional interest, as described herein) as the corresponding series of old notes and the related guarantees of certain of our subsidiaries described herein, referred to as an Exchange Offer and collectively, the Exchange Offers, upon the terms and conditions set forth in this prospectus. We refer to the old notes and new notes collectively as the notes. The form and terms of each series of new notes will be substantially the same as the form and terms of the corresponding series of old notes, except that the offer and sale of the new notes have been registered under the Securities Act of 1933, as amended, referred to as the Securities Act, and will not have transfer restrictions, registration rights or certain rights to additional interest that the old notes have. Each new note will be issued in the same principal amount as the old note for which it is exchanged. The new notes will be issued under the same indenture as the old notes. The old notes were issued in private offerings on July 15, 2015 in exchange for certain outstanding senior notes originally issued by Lorillard Tobacco Company LLC (f/k/a Lorillard Tobacco Company).

We may redeem the new notes in whole or in part at any time after the issuance on the terms and conditions set forth in such notes and the RAI indenture, as described herein. See “Description of the New Notes—Optional Redemption.” Like the old notes, the new notes will be our senior unsecured obligations ranking equally in right of payment with all of our other senior indebtedness from time to time outstanding.

Material Terms of the Exchange Offers

 

•

We will exchange all old notes validly tendered and not properly withdrawn prior to the expiration of the Exchange Offers for an equal principal amount of new notes. You may withdraw tenders of the old notes at any time prior to the expiration of the Exchange Offers.

 

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The Exchange Offers are not conditioned upon any minimum principal amount of old notes being tendered for exchange. The Exchange Offers are subject to certain conditions. For more information, see “The Exchange Offers—Conditions.”

 

•

An exchange of old notes for new notes will not be a taxable transaction for U.S. federal income tax purposes.

 

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We will not receive any cash proceeds from the Exchange Offers.

 

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There is no existing market for the new notes, and we do not intend to apply for their listing on any securities exchange or arrange for them to be quoted on any quotation system. An active trading market for the new notes may not develop, which could make selling the new notes difficult.

You should carefully consider the risk factors beginning on page 19 of this prospectus before participating in the Exchange Offers.

Each broker-dealer that receives new notes for its own account pursuant to the Exchange Offers must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. See “Plan of Distribution.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is                     , 2015.

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TABLE OF CONTENTS

 

		Page
GLOSSARY			i
SUMMARY			1
RISK FACTORS			19
FORWARD-LOOKING STATEMENTS			31
INDUSTRY DATA			35
THE EXCHANGE OFFERS			36
RATIO OF EARNINGS TO FIXED CHARGES			49
USE OF PROCEEDS			50
CAPITALIZATION			50
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME			52
DESCRIPTION OF MATERIAL INDEBTEDNESS			59
DESCRIPTION OF THE NEW NOTES			60
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES			80
PLAN OF DISTRIBUTION			85
LEGAL MATTERS			86
EXPERTS			86
WHERE YOU CAN FIND MORE INFORMATION			87
INCORPORATION BY REFERENCE			87

No dealer, salesperson or other person has been authorized to give any information or to make any representations in connection with the Exchange Offers other than those contained or incorporated by reference in this prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by us. You should assume that the information contained or incorporated by reference in this prospectus is accurate only as of the date of this prospectus or the date of the document incorporated by reference. Neither the delivery of this prospectus nor any exchanges or sales made hereunder shall under any circumstances create an implication that there has been no change in our affairs or that of our subsidiaries since then.

This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the securities to which it relates, nor does it constitute an offer to sell or the solicitation of an offer to buy such securities, in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such an offer or solicitation.

 

 

This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. We will provide without charge to each person to whom this prospectus is delivered, upon written or oral request, a copy of any such information. Requests for such information should be directed to: Office of the Secretary, P.O. Box 2990, Winston-Salem, North Carolina 27102-2990; telephone number (336) 741-5162. To obtain timely delivery, you must request the information no later than five business days before the expiration of the Exchange Offers, or no later than                     , 2015.

 

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GLOSSARY

Unless otherwise indicated, references to “RAI,” “we,” “us” and “our” refer to Reynolds American Inc., a North Carolina corporation, and not to any of its existing or future subsidiaries. In addition, references to:

 

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“2019 new notes” means RAI’s 8.125% Senior Notes due 2019 to be issued in the Exchange Offer for the 2019 old notes;

 

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“2019 old notes” means RAI’s outstanding 8.125% Senior Notes due 2019;

 

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“2023 new notes” means RAI’s 3.750% Senior Notes due 2023 to be issued in the Exchange Offer for the 2023 old notes;

 

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“2023 old notes” means RAI’s outstanding 3.750% Senior Notes due 2023;

 

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“American Snuff” means the RAI reportable operating segment comprised of the primary operations of American Snuff Company, LLC, a Delaware limited liability company;

 

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“asset purchase agreement” means the Asset Purchase Agreement, dated as of July 15, 2014, as amended, among RAI, Imperial Sub and Imperial;

 

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“ATOP” means DTC’s Automated Tender Offer Program;

 

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“B&W” means Brown & Williamson Holdings, Inc., a Delaware corporation and wholly owned subsidiary of BAT and RAI’s largest shareholder;

 

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“BAT share purchase” means the subscription and purchase simultaneously with the closing of the Lorillard merger on June 12, 2015 by BAT, indirectly through its wholly owned subsidiary, Louisville Securities Limited, of approximately 77.7 million shares of RAI common stock (prior to giving effect to the two-for-one stock split of RAI’s common stock on August 31, 2015) for an aggregate purchase price of approximately $4.7 billion such that BAT, directly or indirectly through its affiliates, maintained its approximately 42% beneficial ownership interest in RAI immediately following completion of the Lorillard merger;

 

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“BAT” means British American Tobacco p.l.c., a public limited company incorporated under the laws of England and Wales and B&W’s parent;

 

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“Code” means the Internal Revenue Code of 1986, as amended;

 

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“DTC” means The Depository Trust Company;

 

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“divestiture” means the transactions contemplated by the asset purchase agreement and the transfer agreement pursuant to which the transferred assets were acquired by Imperial Sub on June 12, 2015;

 

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“FDA” means the U.S. Food and Drug Administration;

 

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“Imperial Sub” means ITG Brands, LLC, a Texas limited liability company and wholly owned subsidiary of Imperial (formerly known as Lignum-2, L.L.C.);

 

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“Imperial” means Imperial Tobacco Group PLC, a public limited company incorporated under the laws of England and Wales;

 

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“international NAS business” means the operations of Santa Fe’s NATURAL AMERICAN SPIRIT brand outside of the United States;

 

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“IRI/Capstone” means SymphonyIRI Group, Inc. and Capstone Research Inc.

 

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“IRS” means the U.S. Internal Revenue Service;

 

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“Japan Tobacco” means Japan Tobacco Inc., a Japanese corporation (kabushiki kaisha) and the parent of JTIH;

 

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“JTIH” means JT International Holding BV, a Dutch private company with limited liability;

 

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“Japan Tobacco purchase agreement” means the purchase agreement, dated as of September 28, 2015, and entered into by and among JTIH, SFNTC, R. J. Reynolds Global Products, Inc. and R. J. Reynolds Tobacco B.V, and, for certain provisions of the agreement and as guarantors, Japan Tobacco and RAI, related to the proposed sale to JTIH;

 

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“Lorillard” means Lorillard, LLC (f/k/a Lorillard, Inc.), a Delaware limited liability company, and its successors;

 

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“Lorillard merger” means the merger of merger sub with and into Lorillard on June 12, 2015, with Lorillard surviving as a wholly owned subsidiary of RAI, pursuant to the merger agreement;

 

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“Lorillard Tobacco” means Lorillard Tobacco Company LLC (f/k/a Lorillard Tobacco Company), a Delaware limited liability company, and its successors (including RJR Tobacco pursuant to the Lorillard Tobacco merger);

 

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“Lorillard Tobacco indenture” means the indenture, dated June 23, 2009, as supplemented, pursuant to which the Lorillard Tobacco notes were issued; references to provisions of the Lorillard Tobacco indenture shall be deemed to include references to the supplemental indentures to the Lorillard Tobacco indenture, including those pursuant to which individual series of Lorillard Tobacco notes were established;

 

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“Lorillard Tobacco merger” means the merger of Lorillard Tobacco with and into RJR Tobacco, with RJR Tobacco surviving as a direct, wholly owned subsidiary of RJR, which occurred shortly after the completion of the Lorillard merger;

 

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“Lorillard Tobacco notes” means the seven series of senior unsecured notes originally issued by Lorillard Tobacco, guaranteed by Lorillard, in the aggregate outstanding principal amount of $3.5 billion that were subject to the private exchange offers;

 

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“Lorillard transactions” means the Lorillard merger and the other transactions contemplated by the merger agreement, including the divestiture and the BAT share purchase, which closed on June 12, 2015;

 

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“Lorillard transferred assets” means certain assets that were owned by Lorillard subsidiaries immediately prior to the Lorillard transactions, related to the electronic cigarette brands blu eCIGS and SKYCIG and the cigarette brand MAVERICK, as well as Lorillard’s owned and leased real property, including its manufacturing, research and development facilities and headquarters in Greensboro, North Carolina and the tobacco receiving and storage facilities in Danville, Virginia, and certain transferred employees;

 

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“master settlement agreement” means the Master Settlement Agreement, dated as of November 23, 1998, among 46 U.S. states, the District of Columbia and five U.S. territories and various tobacco manufacturers, including RJR Tobacco, B&W and Lorillard Tobacco, resolving various state health-care cost recovery claims;

 

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“merger agreement” means the Agreement and Plan of Merger, dated as of July 15, 2014, among RAI, Lorillard and merger sub;

 

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“merger consideration” means the consideration, per share of Lorillard common stock, paid by RAI to the Lorillard shareholders in the Lorillard merger, consisting of:

 

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0.2909 of a fully paid and nonassessable share of RAI common stock (prior to giving effect to the two-for-one stock split of RAI’s common stock on August 31, 2015), plus

 

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$50.50 in cash;

 

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•

“merger sub” means RAI’s direct, wholly owned subsidiary, Lantern Acquisition Co., a Delaware corporation, that merged with and into Lorillard pursuant to the Lorillard merger;

 

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“MSAi” means Management Science Associates, Inc.

 

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“Moody’s” means Moody’s Investors Service Inc., and any successor to its credit ratings business;

 

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“private exchange offers” means the prior exchange offers and consent solicitations commenced by RAI in a private offering exempt from the registration and prospectus delivery requirements of the Securities Act on June 11, 2015 that expired on July 10, 2015. Upon settlement of the exchange offers on July 15, 2015, RAI issued $3,122,670,000 aggregate principal amount of old notes in exchange for Lorillard Tobacco notes;

 

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“proposed sale to JTIH” means the proposed sale of the international NAS business to JTIH pursuant to the Japan Tobacco purchase agreement;

 

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“RAI indenture” means RAI’s indenture dated May 31, 2006, as supplemented, pursuant to which the new notes offered hereby will be issued, and pursuant to which RAI’s existing notes, including the old notes, have been issued;

 

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“RAI transferred assets” means certain assets owned by RAI subsidiaries immediately prior to the Lorillard transactions related to the cigarette brands WINSTON, KOOL and SALEM;

 

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“registration rights agreement” means the registration rights agreement, dated as of July 15, 2015, by and among RAI, certain of RAI’s subsidiaries that guarantee the old notes and Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, who served as dealer managers for the private exchange offers;

 

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“revolving credit facility” means the Credit Agreement, dated as of December 18, 2014, among RAI, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Syndication Agent, and the various Documentation Agents, Joint Lead Arrangers, Joint Bookrunners and lending institutions party thereto, as amended, providing for a six-year, $2.0 billion unsecured senior revolving credit facility;

 

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“RJR Tobacco” means RAI’s indirect, wholly owned subsidiary, R. J. Reynolds Tobacco Company, a North Carolina corporation, or, from time to time as the context requires, the RAI reportable operating segment that consists principally of the primary operations of R. J. Reynolds Tobacco Company;

 

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“RJR” means RAI’s direct, wholly owned subsidiary, R.J. Reynolds Tobacco Holdings, Inc., a Delaware corporation;

 

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“S&P” means Standard & Poor’s Ratings Services, a division of Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., and any successor to its credit ratings business;

 

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“Santa Fe” means the RAI reportable operating segment comprised of the domestic operations of SFNTC.

 

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“SFNTC” means Santa Fe Natural Tobacco Company, Inc., a New Mexico corporation;

 

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“SEC” means the U.S. Securities and Exchange Commission;

 

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“Securities Act” means the U.S. Securities Act of 1933, as amended;

 

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“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended;

 

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“state settlement agreements” means (1) the master settlement agreement and (2) the other settlement agreements entered into prior to the master settlement agreement between major U.S. cigarette manufacturers and the states of Mississippi, Florida, Texas and Minnesota, resolving various state health-care cost recovery claims;

 

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“subscription agreement” means the subscription and support agreement, dated as of July 15, 2014, among BAT, RAI and B&W, as amended;

 

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“transfer agreement” means the transfer agreement, dated as of July 15, 2014, between Lorillard and Imperial Sub, as amended;

 

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“transferred assets” means the RAI transferred assets and the Lorillard transferred assets; and

 

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“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.

Other terms used herein and not included in the above glossary are defined elsewhere in this prospectus.

 

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RISK FACTORS

You should carefully consider each of the following risks and all of the other information included or incorporated by reference in this prospectus before deciding to participate in the Exchange Offers described in this prospectus. Some of the following risks relate principally to your participation or failure to participate in the Exchange Offers and ownership of the new notes. Many of the risks related to your ownership of the new notes are similar to the risks related to ownership of the old notes. Other risks relate principally to our business in general and the industries in which we operate, which we will face whether or not you participate in the Exchange Offers. Any of the following risks could materially adversely affect our business, financial condition or results of operations, which could in turn adversely affect our ability to pay the new notes.

You should particularly consider the risks set forth under the caption “—Risks Related to the Business” in conjunction with the risk factors set forth in Item 1A of RAI’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 10, 2015 and Item 1A of RAI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 filed with the SEC on October 27, 2015, which are incorporated by reference herein.

Risks Related to the Business

On June 12, 2015, RAI, through its subsidiaries, acquired Lorillard’s NEWPORT brand, the leading U.S. menthol cigarette brand, resulting in a substantial portion of RAI’s consolidated sales being attributable to products that contain menthol. Any action by the FDA or any other governmental authority that could have the effect of banning or materially restricting the use of menthol in tobacco products could have an adverse effect on the results of operations, cash flows and financial position of RAI and its subsidiaries.

As a result of the Lorillard merger, RAI, through its subsidiaries, acquired Lorillard’s NEWPORT brand, the leading U.S. menthol cigarette brand. NEWPORT menthol cigarette styles, which accounted for approximately 80% of Lorillard’s total consolidated net sales in fiscal year 2014, was added to the brand portfolio of RAI’s operating companies. On a pro forma basis, assuming the Lorillard transactions had occurred on January 1, 2014, RAI estimates that approximately 50% of the combined company’s total net sales through December 31, 2014 would have been attributable to menthol cigarettes.

In 2013, the FDA issued its preliminary scientific evaluation regarding menthol cigarettes, concluding that menthol cigarettes adversely affect initiation, addiction and cessation compared to non-menthol cigarettes. In 2013, the FDA also issued an Advance Notice of Proposed Rulemaking, seeking comments on various issues relating to the potential regulation of menthol cigarettes. The FDA has the authority to require the reduction of nicotine levels and may also require reduction or elimination of other constituents. Although it is not possible to predict whether or when the FDA will take actions, if the FDA or any other governmental authority were to adopt regulations banning or severely restricting the use of menthol in tobacco products or the sale of menthol cigarettes, those regulations could have a material adverse effect on sales of the NEWPORT brand, which could have an adverse effect on the results of operations, cash flows and financial position of RAI and its subsidiaries.

Adverse litigation outcomes, including, as a result of the Lorillard merger, stemming from the business and operations of Lorillard and its subsidiaries, could have an adverse effect on the consolidated results of operations, cash flows and financial position of RAI. Additionally, RAI’s operating subsidiaries could be subject to substantial liabilities and bonding difficulties from litigation related to cigarette products or smokeless tobacco products, which could also have an adverse effect on their results of operations, cash flows and financial position.

RAI’s operating subsidiaries and their affiliates, including Lorillard, and indemnitees, including B&W, have been named in a large number of tobacco-related legal actions, proceedings or claims. The claimants seek recovery on a variety of legal theories, including negligence, strict liability in tort, design defect, failure to warn, fraud, misrepresentation, unfair trade practices, conspiracy, medical monitoring and violations of state and

 

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federal antitrust laws. Various forms of relief are sought, including compensatory and, where available, punitive damages in amounts ranging in some cases into the hundreds of millions or even billions of dollars. The tobacco-related legal actions range from individual lawsuits to class actions and other aggregate claim lawsuits.

It is likely that legal actions, proceedings and claims arising out of the sale, distribution, manufacture, development, advertising, marketing and claimed health effects of cigarettes and smokeless tobacco products will continue to be filed against RAI’s operating subsidiaries or their affiliates and indemnitees and other tobacco companies for the foreseeable future. Under the asset purchase agreement, RAI has agreed to indemnify Imperial Sub for specified matters and retain certain liabilities related to the transferred assets. See “—RAI is obligated to indemnify Imperial Sub for specified matters and to retain certain liabilities related to the divested brands and other assets” for additional information regarding risks relating to RAI’s indemnification obligations pursuant to the asset purchase agreement. In addition, under the Japan Tobacco purchase agreement, RAI has agreed to indemnify Japan Tobacco for specified matters and to retain certain liabilities related to the international NAS business.

Victories by plaintiffs in highly publicized cases against RJR Tobacco, Lorillard and other tobacco companies regarding the health effects of smoking may stimulate further claims. A material increase in the number of pending claims could significantly increase defense costs. In addition, adverse outcomes in pending cases could have adverse effects on the ability of RJR Tobacco and its indemnitees, including B&W, to prevail in other smoking and health litigation.

Any or all of the events described above could impose substantial monetary obligations on RAI and its operating subsidiaries and could have an adverse effect on the results of operations, cash flows and financial position of these companies and RAI.

For a more complete description of the significant litigation involving RAI and its operating subsidiaries see “—Litigation Affecting the Cigarette Industry” and “—Smokeless Tobacco Litigation” in note 13 to the condensed consolidated financial statements (unaudited) included in RAI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, incorporated by reference in this prospectus.

RAI has substantial long-term debt, which could adversely affect its financial position and its ability to obtain financing in the future and react to changes in its business.

As of the date hereof, RAI has outstanding notes in the aggregate principal amount of $17.2 billion. Following completion of the Lorillard merger, RAI substantially increased its consolidated indebtedness compared to its recent historical indebtedness. RAI incurred or assumed approximately $12.5 billion of additional indebtedness in connection with the Lorillard merger, as a result of financing to complete the Lorillard merger and $3.5 billion of Lorillard Tobacco notes assumed in the Lorillard merger.

Because of this increased level of debt as a result of the Lorillard merger:

 

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RAI’s ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes, and its ability to satisfy its obligations with respect to its indebtedness, may be impaired in the future;

 

•

a substantial portion of RAI’s cash flow from operations must be dedicated to the payment of principal and interest on its indebtedness, thereby reducing the funds available to it for other purposes;

 

•

RAI may be at a disadvantage compared to its competitors with less debt or comparable debt at more favorable interest rates; and

 

•

RAI’s flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited, and it may be more vulnerable to a downturn in general economic conditions or its business, or be unable to carry out capital spending that is necessary or important to its growth strategy and its efforts to improve operating margins.

 

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The ability of RAI to access the debt capital markets could be impaired if the credit ratings of its debt securities fall. Borrowing costs under RAI’s revolving credit facility could increase as the credit ratings of RAI’s long-term debt falls.

RAI’s credit ratings impact the cost and availability of future borrowings and, accordingly, RAI’s cost of capital. As of the date hereof, the outstanding notes issued by RAI are rated investment grade. Following announcement of the Lorillard merger, S&P reaffirmed all of its ratings on RAI, including its BBB- corporate credit ratings. On June 9, 2015, Moody’s downgraded RAI’s Baa2 senior unsecured debt rating by one notch, to Baa3. If RAI’s credit ratings fall, RAI may not be able to sell additional debt securities or borrow money in such amounts, at the times, at the lower interest rates or upon the more favorable terms and conditions that might be available if its debt maintained its current or higher ratings. Future debt security issuances or other borrowings may be subject to further negative terms, including provisions for collateral or limitations on indebtedness or more restrictive covenants, if RAI’s credit ratings decline.

RAI’s credit ratings are influenced by some important factors not entirely within the control of RAI or its affiliates, such as tobacco litigation, the regulatory environment and the performance of suppliers to RAI’s operating subsidiaries. Moreover, because the kinds of events and contingencies that may impair RAI’s credit ratings and the ability of RAI and its affiliates to access the debt capital markets are often the same kinds of events and contingencies that could cause RAI and its affiliates to seek to raise additional capital on an urgent basis, RAI and its affiliates may not be able to issue debt securities or borrow money with acceptable terms, or at all, at the times at which they may most need additional capital.

In addition, the interest rate RAI pays on borrowings under its revolving credit facility is equal to an underlying interest rate plus an applicable margin, which margin is based on the ratings of RAI’s senior, unsecured, long-term indebtedness. If these ratings decline, the applicable margin RAI is required to pay would increase. RAI pays a fee on commitments under its revolving credit facility based on the ratings of RAI’s senior, unsecured, long-term indebtedness. As a result, although the revolving credit facility provides RAI with a source of liquidity, the cost of borrowing under, and of maintaining, that facility could be at a higher rate at a time when RAI most needs to utilize that facility.

RAI may have to reduce its indebtedness in order to remain in compliance with a covenant under its revolving credit facility. There is no guarantee RAI will be able to reduce its indebtedness in the amount or at the times needed to maintain compliance, which could result in a default under the revolving credit facility.

Under the revolving credit facility, RAI’s consolidated leverage ratio (as defined therein) may not exceed:

 

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4.50 to 1.00 for the reference periods ending on the last day of each of RAI’s fiscal quarters ending on June 30, September 30, and December 31, 2015;

 

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4.25 to 1.00 for the reference periods ending on the last day of each of RAI’s fiscal quarters ending on March 31, June 30, and September 30, 2016;

 

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3.75 to 1.00 for the reference periods ending on the last day of each of RAI’s fiscal quarters ending on December 31, 2016, and March 31, and June 30, 2017; and

 

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3.50 to 1.00 thereafter.

Since the leverage ratio becomes more restrictive as time passes after the completion of the Lorillard merger, RAI may need to reduce its indebtedness in order to remain in compliance with the covenant. There is no guarantee that RAI will be able to reduce its indebtedness in the amount or at the times needed, which could result in RAI defaulting under the revolving credit facility. In such event, the agents or lenders under the revolving credit facility could exercise remedies, including acceleration of any amounts outstanding under the

revolving credit facility or termination of the facility, which could have a material negative effect on RAI’s financial position.

 

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If the proposed sale to JTIH is completed, RAI will have an additional estimated $3.2 billion, after taxes, in available cash. However, the proposed sale to JTIH has not been completed yet, and the completion of that transaction is subject to certain conditions. There is no guarantee that the proposed sale to JTIH will be completed.

RJR Tobacco will be reliant on Imperial Sub to manufacture NEWPORT on RJR Tobacco’s behalf for a period of time, and RJR Tobacco will manufacture WINSTON, KOOL and SALEM on Imperial Sub’s behalf. RJR Tobacco’s reliance on Imperial Sub for the manufacture of NEWPORT subjects RAI and RJR Tobacco to risks and uncertainties to which it would not otherwise be subject, and Imperial Sub’s inability to manufacture NEWPORT as contemplated could materially adversely affect RAI and RJR Tobacco’s results of operations, cash flows, financial position and ability to realize any or all of the synergies expected as a result of the Lorillard merger and divestiture.

RJR Tobacco and Imperial Sub entered into a reciprocal manufacturing agreement in connection with the closing of the Lorillard merger and the divestiture, pursuant to which for a period of up to two years, subject to extension as provided therein, Imperial Sub will manufacture NEWPORT (and KENT, TRUE, and OLD GOLD) on RJR Tobacco’s behalf and RJR Tobacco will manufacture WINSTON, KOOL and SALEM on Imperial Sub’s behalf. Reliance on Imperial Sub for the manufacture of NEWPORT subjects RAI and RJR Tobacco to risks and uncertainties to which it would not be subject if RJR Tobacco manufactured NEWPORT itself, including, among others:

 

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reduced control over the manufacturing process and quality control;

 

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disruptions to Imperial Sub’s operations and the production of NEWPORT caused by conditions unrelated to RAI’s and its subsidiaries’ businesses or operations, including disputes under collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements, strikes or other work stoppages at the Imperial Sub plant that manufactures NEWPORT or the occurrence of a catastrophic event affecting Imperial Sub; and

 

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loss of market share and reputational harm to RAI and RJR Tobacco in the event a disruption of the production of NEWPORT by Imperial Sub results in insufficient supply.

In addition, Imperial Sub may not transition the manufacturing of WINSTON, KOOL and SALEM to the Greensboro plant acquired by Imperial Sub in the divestiture as quickly as currently contemplated.

If Imperial Sub fails to or is unable to perform under the reciprocal manufacturing agreement, RAI’s and RJR Tobacco’s results of operations, cash flows and financial position could be materially adversely affected, and there could be a delay to RAI and RJR Tobacco’s ability to realize any or all of the synergies expected as a result of the Lorillard merger and divestiture.

The business relationships of RAI and Lorillard and their respective subsidiaries may be subject to disruption due to uncertainty associated with the Lorillard merger, which could have an adverse effect on the results of operations, cash flows and financial position of RAI and Lorillard.

Parties with which RAI or Lorillard, or their respective subsidiaries, do business may experience uncertainty associated with the Lorillard merger and related transactions, including with respect to current or future business relationships with RAI, Lorillard, their respective subsidiaries or the combined business. RAI’s and Lorillard’s business relationships may be subject to disruption as customers, distributors, suppliers, vendors and others may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than RAI, Lorillard, their respective affiliates or subsidiaries or the combined business. These disruptions could have an adverse effect on the results of operations, cash flows and financial position of RAI following the closing of the Lorillard merger, including an adverse effect on RAI’s ability to realize the expected synergies and other benefits of the Lorillard merger.

 

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RAI may fail to realize the expected synergies and other benefits of the Lorillard merger, which could have an adverse effect on RAI’s consolidated results of operations, cash flows and financial position.

The success of the Lorillard merger will depend, in part, on RAI’s ability to realize the expected synergies and other benefits from combining the businesses of RAI and Lorillard and their respective subsidiaries and affiliates. RAI’s ability to realize these anticipated benefits and cost savings is subject to certain risks, including the following:

 

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the ability to successfully combine and integrate the businesses of RAI, Lorillard and their respective subsidiaries;

 

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RAI’s ability to reduce its level of indebtedness in a timely manner following the completed Lorillard merger; and

 

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the ability to successfully transition manufacturing of NEWPORT from Lorillard’s manufacturing facility to RJR Tobacco’s manufacturing facility when and as expected.

If RAI is not able to successfully combine the businesses of RAI, Lorillard and their respective subsidiaries within the anticipated time frame, or at all, the expected synergies and other benefits, including cost savings, of the Lorillard merger may not be realized fully or at all or may take longer to realize than expected and the combined businesses may not perform as expected. In addition, if RAI is unable to timely reduce its level of indebtedness following the completed Lorillard merger, RAI will be subject to increased demands on its cash resources and tightening financial covenants under its revolving credit facility, which could result in a breach of the covenants or otherwise adversely affect the business and financial results of the combined company.

Further, RAI and Lorillard and their respective subsidiaries and affiliates operated independently until completion of the Lorillard merger on June 12, 2015, and there can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key employees or customers of RAI or Lorillard or their respective subsidiaries, the disruption of the companies’ ongoing businesses or in unexpected integration issues, higher than expected integration costs and an overall post-Lorillard merger integration process that takes longer than originally anticipated. RAI will be required to devote significant management attention and resources to integrating the business practices and operations of RAI and Lorillard. It is possible that the integration process could result in:

 

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diversion of the attention of management;

 

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the lack of personnel or other resources to pursue other potential business opportunities, such as possible acquisition opportunities; and

 

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the disruption of, or the loss of momentum in, the combined company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies,

any of which could adversely affect the combined company’s ability to maintain relationships with customers, suppliers, employees and other constituencies or its ability to achieve the anticipated benefits of the Lorillard merger or could reduce the combined company’s earnings or otherwise adversely affect the business and financial results of the combined company.

Accordingly, the contemplated benefits of the Lorillard merger may not be realized fully, or at all, or may take longer to realize than expected.

RAI will incur transaction fees and costs related to formulating and implementing integration plans with respect to the two companies, including facilities and systems consolidation costs. Furthermore, the transaction fees and costs associated with the divestiture could deviate from RAI’s current expectations, particularly if Imperial Sub fails to or is unable to perform under the reciprocal manufacturing agreement. RAI continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the integration of the

two companies’ businesses. The expected net benefits associated with these costs may not be achieved in the near term, or at all.

 

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RAI, through its subsidiaries, is dependent on the U.S. cigarette market, which is expected to continue to decline. In addition, RAI is dependent on premium and super premium cigarette brands. The continued decline in U.S. cigarette consumption, or the transition of consumers away from premium cigarette brands, could have an adverse effect on the consolidated results of operations, cash flows and financial position of RAI.

RAI’s subsidiaries are dependent on the U.S. cigarette market. In connection with the Lorillard merger, RAI did not acquire any brands outside of the United States and the assets of Lorillard’s subsidiaries related to the electronic cigarette brands blu eCIGS and SKYCIG were included in the divestiture. Lorillard, like RAI, previously divested its international cigarette business.

Furthermore, if the proposed sale to JTIH is completed, the international NAS business will be sold to JTIH, which will exacerbate the reliance of RAI’s operating subsidiaries on the U.S. cigarette market. In addition, pursuant to the Japan Tobacco purchase agreement, RAI has agreed not to, and agreed to cause its controlled affiliates not to, engage in the business of producing, selling, distributing and developing natural, organic and additive-free combustible tobacco cigarettes and roll your own or make your own tobacco products outside of the United States for a period of five years after the closing of the proposed sale to JTIH.

RAI’s subsidiaries’ U.S. combustible cigarette brands include, among others, NEWPORT, CAMEL, PALL MALL and NATURAL AMERICAN SPIRIT. RAI estimates that its sales in the United States attributable to combustible cigarettes would have represented approximately 90% of RAI’s pro forma 2014 net sales, assuming the merger and the divestiture had occurred on January 1, 2014. U.S. cigarette consumption has declined since 1981 for a variety of factors including, for example, price increases, restrictions on advertising and promotions, smoking prevention campaigns, increases in regulation and excise taxes, health concerns, a decline in the social acceptability of smoking, increased pressure from anti-tobacco groups, and migration to smoke-free products. U.S. cigarette consumption is expected to continue to decline.

In addition, RAI’s subsidiaries’ brands are subject to consumer price sensitivities, with certain brands subject to greater price sensitivities than others or competitors’ brands. Some consumers may switch to a lower priced brand than the brands offered by RAI’s subsidiaries. As a result of the acquisition of Lorillard’s subsidiaries’ brands, which principally consist of NEWPORT, RAI’s subsidiaries’ concentration of premium brands increased significantly. As a result, RAI’s subsidiaries are more susceptible to consumer price sensitivities following the Lorillard merger. A downturn in the economy or other adverse financial or economic conditions could increase the number of consumers switching to a lower priced brand than any of those offered by RAI’s subsidiaries.

The continued decline in U.S. cigarette consumption, or the transition of consumers away from premium cigarette brands, could have an adverse effect on the consolidated results of operations, cash flows and financial position of RAI.

RAI and its subsidiaries may have to make additional contributions to fund its pension and other post-retirement benefit plans or any such plans of Lorillard.

RAI and its subsidiaries currently maintain and contribute to defined benefit pension plans and other post-retirement benefit plans that cover various categories of employees and retirees. The obligation to make contributions to fund benefit obligations under these pension and other post-retirement benefit plans is based on actuarial valuations, which are based on certain assumptions, including the long-term return on plan assets and discount rate. RAI may have to make additional contributions beyond what is currently contemplated to fund its

 

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pension and other post-retirement benefit plans or any such plans of Lorillard. Additional contributions could have an adverse effect on the results of operations, cash flows and financial position of RAI.

RAI is obligated to indemnify Imperial Sub for specified matters and to retain certain liabilities related to the divested brands and other assets.

Under the asset purchase agreement, RAI has agreed to indemnify Imperial Sub against losses arising from, among other things, breaches of representations and warranties, breaches of covenants, assets excluded from the transaction, excluded liabilities, certain specific tobacco liabilities, certain assumed plaintiff fees, certain employment related obligations, and liabilities in connection with certain tobacco litigation, settlement and regulatory matters related to the divested brands. The asset purchase agreement does not cap RAI’s indemnification obligations, except with respect to any indemnification arising from breaches of certain representations and warranties or pre-closing covenants. Accordingly, these indemnification obligations could be substantial and could have an adverse effect on RAI’s results of operations, cash flows and financial position.

Risks Related to the New Notes

All of RAI’s operations are conducted through its subsidiaries, and this structure may impair RAI’s ability to make payments on the new notes. In addition, the new notes and related guarantees will be structurally subordinated to creditors (including trade creditors) of non-guarantor subsidiaries of each of RAI and the guarantors.

The new notes will be the direct obligations of RAI. Certain of RAI’s subsidiaries, including its material domestic subsidiaries, will guarantee RAI’s obligations under the new notes. Because RAI’s operations are conducted through its subsidiaries, RAI’s cash flow and its ability to service its debt, including the new notes, depends upon the earnings of its subsidiaries and their loans, dividends, distributions or other payments to or for the benefit of RAI. This structure may impair RAI’s ability to make payments on the new notes. The ability of RAI’s subsidiaries to pay dividends and make other distributions is subject to applicable law. Claims of creditors of non-guarantor subsidiaries, including trade creditors, secured creditors and creditors holding debt and guarantees issued by those non-guarantor subsidiaries generally will have priority with respect to the assets and earnings of those non-guarantor subsidiaries over the claims of creditors of RAI and the guarantors, including holders of the new notes. This lack of priority over claims of creditors of non-guarantor subsidiaries is referred to as structural subordination.

Your right to receive payments on the new notes may be effectively subordinated to those lenders who may have a security interest in the assets of RAI and the guarantor subsidiaries in the future.

The new notes and the related guarantees are unsecured. In the future, RAI and its guarantor subsidiaries may incur indebtedness that is secured by their respective tangible and intangible assets, including the equity interests of certain subsidiaries. The RAI indenture contains a “negative pledge” covenant that requires RAI and certain of its subsidiaries, including some of the guarantors, to pledge equally and ratably as security for the new notes offered hereby certain collateral it may pledge for certain other indebtedness. That covenant, however, is subject to exceptions, as described in more detail in “Description of the New Notes.” If RAI or any of its guarantor subsidiaries were unable to repay any indebtedness secured by collateral that does not also secure the new notes offered hereby and related guarantees on an equal and ratable basis, the creditors of such obligations could foreclose on the pledged assets to the exclusion of holders of the new notes, even if an event of default exists under the RAI indenture. Because the new notes are unsecured, it is possible in such a case that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to fully satisfy your claims.

 

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The guarantees will be terminated without the consent of the holders of the new notes if the guarantors of the new notes are released as guarantors under the revolving credit facility.

RAI’s obligations under the new notes will be guaranteed by certain of RAI’s subsidiaries, including its material domestic subsidiaries. These subsidiaries guarantee the obligations of RAI under its existing notes and revolving credit facility. Under the terms of the RAI indenture, if any guarantor of the new notes ceases to be a guarantor under the revolving credit facility (or any replacement or financing thereof), that guarantor will be released automatically from all of its obligations under both the RAI indenture and its guarantee of the new notes, and, as a result, that guarantee will terminate. No consent from holders of new notes is required in this event.

Some or all of the guarantees under the revolving credit facility may be released in accordance with the provisions of such facility, or such facility may be terminated, and any replacements or refinancings thereof may not require guarantees of RAI’s obligations thereunder.

Not all of the current guarantors of the revolving credit facility are required to continue to guarantee such facility and could be released as guarantors thereunder, which would result in their being released as guarantors of the new notes.

The revolving credit facility generally only requires that “material subsidiaries,” as defined in the revolving credit facility, guarantee the revolving credit facility. Not all of the RAI subsidiaries that currently guarantee the revolving credit facility are material subsidiaries under the revolving credit facility. The revolving credit facility authorizes the administrative agent thereunder to take any action requested by RAI to release the guarantee of a subsidiary guarantor if, among other circumstances, the subsidiary ceases to be a material subsidiary as defined in the revolving credit facility. Therefore, the new notes may not continue to be guaranteed to the same extent as they will be upon issuance, or at all, because, as described above, any guarantor of the new notes that ceases to be a guarantor under the revolving credit facility will be automatically released from its obligations under the guarantee of the new notes.

Your right to be repaid would be adversely affected if a court determined that any of the guarantors of the new notes made any guarantee for inadequate consideration or with the intent to defraud creditors.

Under the federal bankruptcy laws and comparable provisions of state fraudulent transfer or conveyance laws, a guarantee made by any of the guarantors of the new notes could be voided, or claims on the guarantees made by any of the guarantors could be subordinated to all other obligations of any such guarantor, if the guarantor, at the time it incurred the obligations under any guarantee:

 

•

incurred the obligations with the intent to hinder, delay or defraud creditors;

 

•

received less than reasonably equivalent value in exchange for incurring those obligations, and was insolvent or rendered insolvent by reason of that incurrence;

 

•

was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or

 

•

intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature.

In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor.

 

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The measures of insolvency for purposes of the fraudulent transfer laws vary depending on the law applied in the proceeding to determine whether a fraudulent transfer has occurred. Generally, however, an entity would be considered insolvent if:

 

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the sum of its debts, including contingent liabilities, is greater than the fair saleable value of all of its assets;

 

•

the present fair saleable value of its assets is less than the amount that would be required to pay its probable liabilities on its existing debts, including contingent liabilities, as they become absolute and mature; or

 

•

it cannot pay its debts as they become due.

Many of the foregoing terms are defined in or interpreted under those fraudulent transfer statutes. RAI cannot be certain what standard a court would apply to determine whether a guarantor was “insolvent” as of the date it guarantees the new notes, and cannot assure you that, regardless of the method of valuation, a court would not determine that such guarantor was insolvent on that date. Nor can RAI assure you that a court would not determine, regardless of whether such guarantor was insolvent on the date of such guarantee of the new notes, that the payments constituted fraudulent transfers on another ground.

The liability of each guarantor under the RAI indenture will be limited to the amount that will result in its guarantee not constituting a fraudulent conveyance or improper corporate distribution, and we cannot assure you as to what standard a court would apply in making a determination as to what would be the maximum liability of each guarantor.

Since there are no cross-default or cross-acceleration provisions in the RAI indenture related to the new notes, a default or an acceleration event under the revolving credit facility, or any other indebtedness of RAI, including any other series of debt securities issued under the RAI indenture, will not permit the holders of the new notes to declare a default or accelerate repayment under the notes unless independent grounds exist.

A payment default with respect to, or a default that could accelerate the repayment of, any “material indebtedness” of RAI, as such term is defined under the revolving credit facility, constitutes an event of default under the revolving credit facility. It is anticipated that each series of new notes offered hereby will constitute “material indebtedness” under such facility.

However, unless a default has independently occurred with respect to the new notes, a default under RAI’s revolving credit facility, or any other indebtedness, will not cause a default under the RAI indenture, or give the holders of the debt securities thereunder, including the new notes, a right to accelerate such debt securities. Furthermore, a default or an acceleration event under one series of debt securities issued pursuant to the RAI indenture (including any series of new notes offered hereby) will not cause a default or change of control repurchase event with respect to a separate series.

As a result, if RAI defaults in its obligations under the revolving credit facility or other indebtedness, including any other series of debt securities issued under the RAI indenture, but does not default in its obligations under the new notes offered hereby, the agents or lenders under such facility or other holders of such indebtedness of RAI can exercise their remedies at a time when the holders of the new notes offered hereby would have no similar rights. If RAI was required to repay in full significant outstanding sums upon such a default, it could jeopardize its ability to make regularly scheduled interest or principal payments on the new notes.

 

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Certain changes of control that constitute an event of default under the revolving credit facility, or that would require RAI to offer to repurchase certain series of its existing notes, would not require RAI to offer to repurchase the new notes offered hereby.

Certain of the changes of control that constitute events of default under RAI’s revolving credit facility will not obligate RAI to offer to repurchase the new notes. For example, and without limitation, a change of control must be combined with a certain credit rating downgrade of a series of the new notes offered hereby in order for RAI to be required to offer to repurchase that series of notes, whereas a change of control need not be combined with a credit rating downgrade in order to constitute an event of default under the revolving credit facility.

Moreover, certain changes of control which would require RAI to offer to repurchase certain series of its existing notes would not require it to offer to repurchase the new notes offered hereby. For example, under certain series of RAI’s existing notes, more varieties of credit rating downgrades will, when combined with a change of control, require RAI to offer to repurchase such series than is the case with any series of new notes offered hereby.

As a result, RAI may be in default under the revolving credit facility in connection with a change of control, or may be required to offer to repurchase certain series of existing notes, at a time when it is not required to repurchase any series of the new notes offered hereby. Because the RAI indenture does not contain any cross-default provisions, such an event of default under the revolving credit facility, or repurchase event under certain series of existing notes, would not constitute an event of default under, or require RAI to repurchase, any series of the new notes offered hereby. If RAI was required to repay in full significant outstanding sums under the revolving credit facility upon such a default, or repurchase any series of existing notes, it could jeopardize its ability to make regularly scheduled interest or principal payments on the new notes offered hereby.

RAI may not have sufficient cash to repurchase the new notes upon a change of control if required to do so.

RAI’s ability to pay cash to the holders of new notes following the occurrence of a change of control requiring such repurchase under the terms of the new notes may be limited by its then-existing financial resources. Certain changes of control, as well as certain events accelerating other indebtedness, constitute events of default under the revolving credit facility; therefore, borrowings under the revolving credit facility may not be available to fund repurchases of the new notes. If RAI was required to repay in full significant outstanding sums under the revolving credit facility upon such a change of control, or repurchase any or all series of its other notes, including the new notes offered hereby, it could jeopardize its ability to repay or repurchase all such obligations. Consequently, there can be no assurance that RAI will have sufficient funds available when necessary to make any required repurchases.

The Lorillard Tobacco notes not exchanged in the private exchange offers contain similar provisions obligating RJR Tobacco (as successor to Lorillard Tobacco) to repurchase the Lorillard Tobacco notes upon certain changes of control combined with adverse credit rating events. RAI’s ability to repurchase the new notes offered hereby upon a change of control may also be negatively affected if its subsidiary RJR Tobacco must also offer to repurchase the Lorillard Tobacco notes due to the same event.

You may find it difficult to sell the new notes or to sell them at a price you deem sufficient because there is no established trading market for the new notes and the new notes will not be listed on any securities exchange.

The new notes will be new securities for which no established trading market currently exists. The liquidity of any market for the new notes and pricing for the new notes will depend upon various factors, including:

 

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the number of holders of the new notes;

 

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the interest of securities dealers in making a market for the new notes;

 

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•

the overall market for similar debt securities;

 

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RAI’s financial performance and prospects;

 

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the prospects for companies in the tobacco industry generally; and

 

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prevailing interest rates.

None of the new notes offered hereby will be listed on any securities exchange. This may further restrict any trading market for the new notes.

Our credit ratings may not reflect all risks of your investment in the new notes.

The credit ratings assigned to the new notes are limited in scope and do not address all material risks relating to an investment in the new notes, but rather reflect only the view of each rating agency at the time the rating is issued. There can be no assurance that such credit ratings will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn entirely by the applicable rating agency, if, in such rating agency’s judgment, circumstances so warrant.

Credit ratings are not a recommendation to buy, sell or hold any security. Each agency’s rating should be evaluated independently of any other agency’s rating. Actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, could affect the market value of the new notes and increase our borrowing costs.

Risks Related to the Exchange Offers

There is a limited trading market for the old notes; that market may be limited further as a result of the Exchange Offers.

To the extent that the old notes are tendered and accepted for exchange in the Exchange Offers, any existing trading market for the old notes that are not so tendered and accepted will become more limited. A debt security with a smaller outstanding principal amount available for trading (a smaller “float”) may command a lower price than would a comparable debt security with a greater float. Consequently, the liquidity, market value and price volatility of old notes that remain outstanding following consummation of the Exchange Offers may be adversely affected. Holders of the old notes may attempt to obtain quotations for the old notes from their brokers. However, there can be no assurance that any trading market will exist for the old notes following consummation of the Exchange Offers. The extent of the public market for the old notes following consummation of the Exchange Offers will depend upon the number of holders remaining at such time, the interest in maintaining a market in the old notes on the part of securities firms and other factors.

If you do not exchange your old notes for new notes in the Exchange Offers, your old notes will continue to be subject to restrictions on transfer.

If you do not exchange your old notes for new notes in the Exchange Offers, you will continue to be subject to the restrictions on transfer described in the legend on your old notes, and in the offer to exchange and consent solicitation statement related to the private exchange offers. The restrictions on transfer of your old notes arise because we issued the old notes in private offerings in reliance on exemptions from the registration and prospectus delivery requirements of the Securities Act, or in transactions not subject to them. In general, you may only offer or sell the old notes if they are registered under the Securities Act or are offered and sold under an exemption from these requirements. Except as required by the registration rights agreement, we do not intend to register sales of the old notes under the Securities Act. For further information regarding the consequences of failing to tender your old notes in the Exchange Offers, see the discussions below under the caption “The Exchange Offers—Consequences of Failure to Exchange.”

 

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In some instances, you may be obligated to deliver a prospectus in connection with resales of the new notes.

Based on certain no-action letters issued by the staff of the SEC to third parties unrelated to us, we believe that you may offer for resale, resell or otherwise transfer the new notes without compliance with the registration and prospectus delivery requirements of the Securities Act, except in the instances described in this prospectus under “The Exchange Offers—Resale of the New Notes.” For example, if you exchange your old notes in the Exchange Offers for the purpose of participating in a distribution of the new notes, you may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

You must comply with the procedures of the Exchange Offers in order to receive freely tradable new notes.

We will not accept your old notes for exchange if you do not follow the procedures of the Exchange Offers. Delivery of new notes in exchange for old notes tendered and accepted for exchange pursuant to the Exchange Offers will be made only after timely receipt by the exchange agent of the following:

Assuming you hold old notes through DTC in the form of book-entry interests, and wish to participate in one or more Exchange Offers, then by the expiration of the Exchange Offers, you (or your broker, bank or similar nominee) must cause the book-entry transfer of your old notes to the exchange agent’s account at DTC, and the exchange agent must receive:

 

•

a confirmation of book-entry transfer and

 

•

either:

 

•

an original or facsimile of the accompanying letter of transmittal, completed, signed and dated in accordance with the instructions contained in this prospectus and the letter of transmittal; or

 

•

an agent’s message transmitted pursuant to ATOP, by which each tendering holder will agree to be bound by, and to make the representations, warranties and agreements in, the letter of transmittal;

and any other required documentation.

Holders of old notes who would like to tender old notes in exchange for new notes should be sure to allow enough time to comply with the procedures of the Exchange Offers. Neither the exchange agent nor we are required to notify you of defects or irregularities in tenders of old notes for exchange. Old notes that are not tendered or that are tendered but we do not accept for exchange will, following completion of the Exchange Offers, continue to be subject to the existing transfer restrictions under the Securities Act and, upon completion of the Exchange Offers, certain registration and other rights under the registration rights agreement will terminate. See “The Exchange Offers—Procedures for Tendering Old Notes” and “The Exchange Offers—Consequences of Failure to Exchange.”

 

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FORWARD-LOOKING STATEMENTS

This prospectus and the documents incorporated by reference herein contain or incorporate by reference forward-looking statements. Such statements relate to future events or the future financial performance of RAI and its subsidiaries. Forward-looking statements include, without limitation, statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expenses, interest rates, outcome of litigation and other contingencies, potential increased regulation, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management and other matters. You can find many of these statements by looking for words like “believes,” “expects,” “anticipates,” “estimates,” “may,” “should,” “could,” “plan,” “intend” or similar expressions in this prospectus or in documents incorporated by reference in this prospectus.

These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by these forward-looking statements. You should understand that various factors, in addition to those discussed elsewhere in this prospectus and in the documents referred to and incorporated by reference in this prospectus, could affect the future results of RAI and its subsidiaries and could cause results to differ materially from those expressed in these forward-looking statements. These risks and uncertainties include:

 

•

the risk factors described under “Risk Factors” beginning on page 19 of this prospectus and the information appearing under the caption “Risk Factors” included in RAI’s most recent annual report on Form 10-K filed with the SEC and in any updates to the risk factors in any quarterly or other report RAI files subsequently to such annual report;

 

•

the substantial and increasing taxation and regulation of tobacco products, including the regulation of tobacco products by the FDA;

 

•

the effect of adverse governmental developments on RAI’s subsidiaries’ sales of products that contain menthol, including the possibility that the FDA will issue regulations prohibiting menthol, or restricting the use of menthol, in cigarettes;

 

•

the possibility that the FDA will require the reduction of nicotine levels or the reduction or elimination of other constituents in cigarettes;

 

•

the adverse effects (including decreased sales and recall costs) arising from an order of the FDA’s Center for Tobacco Products, referred to as the CTP, (1) finding that a provisional product sold by an RAI operating subsidiary is not substantially equivalent to a predicate product, and (2) as a result, requiring that the provisional product be removed from the market;

 

•

the possibility that the CTP fails to grant a marketing order allowing an RAI operating subsidiary to launch a new tobacco product or modify an existing product;

 

•

the adverse effects (including decreased sales, and the incurrence of fines and costs) arising from an FDA enforcement action against SFNTC for the company’s use of the terms “natural” and “additive free” in the product labeling and/or advertising for NATURAL AMERICAN SPIRIT cigarettes without a modified risk product authorization order from the agency;

 

•

the possibility that the FDA will issue regulations extending the FDA’s authority over tobacco products to e-cigarettes, subjecting e-cigarettes to restrictions on, among other things, the manufacturing, marketing and sale of such products;

 

•

decreased sales resulting from the future issuance of “corrective communications,” required by the order in United States v. Philip Morris USA, Inc. (brought by the U.S. Department of Justice against RJR Tobacco, B&W, Lorillard and other tobacco companies in 1999) on five subjects, including smoking and health, and addiction;

 

•

various legal actions, proceedings and claims relating to the sale, distribution, manufacture, development, advertising, marketing and claimed health effects of tobacco products (including

 

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smokeless tobacco products and electronic cigarettes) that are pending or may be instituted against RAI or its subsidiaries;

 

•

the possibility that reports from the U.S. Surgeon General regarding the negative health consequences associated with cigarette smoking and second-hand smoke may result in additional litigation and/or regulation;

 

•

the possibility of being required to pay various adverse judgments in the Engle v. R.J. Reynolds Tobacco Co. progeny cases and/or other litigation;

 

•

the substantial payment obligations with respect to cigarette sales, and the substantial limitations on the advertising and marketing of cigarettes (and of RJR Tobacco’s smoke-free tobacco products) under the state settlement agreements;

 

•

the possibility that the arbitration award reflecting the partial resolution of the NPM adjustment disputes will be vacated or otherwise modified;

 

•

the possibility that the arbitration award with respect to certain of the states found to be non-diligent in connection with the 2003 NPM adjustment will be vacated or otherwise modified;

 

•

the continuing decline in volume in the U.S. cigarette industry and RAI’s and its subsidiaries’ dependence on the U.S. cigarette industry and premium and super-premium brands, a dependence that will increase if the proposed sale to JTIH is completed;

 

•

concentration of a material amount of sales with a limited number of customers and potential loss of these customers;

 

•

competition from other manufacturers, including those resulting from industry consolidations or any new entrants in the marketplace;

 

•

increased promotional activities by competitors, including manufacturers of deep-discount cigarette brands;

 

•

the success or failure of new product innovations, including the digital vapor cigarette, VUSE;

 

•

the success or failure of acquisitions or dispositions, which RAI or its subsidiaries may engage in from time to time, including the Lorillard merger and the divestiture;

 

•

the responsiveness of both the trade and consumers to new products, marketing strategies and promotional programs;

 

•

the reliance on outside suppliers to manage certain non-core business processes;

 

•

the reliance on a limited number of suppliers for certain raw materials;

 

•

the cost of tobacco leaf, and other raw materials and commodities used in products;

 

•

the passage of new federal or state legislation or regulations;

 

•

the effect of market conditions on interest rate risk, foreign currency exchange rate risk and the return on corporate cash, or adverse changes in liquidity in the financial markets;

 

•

the impairment of goodwill and other intangible assets, including trademarks;

 

•

the effect of market conditions on the performance of pension assets or any adverse effects of any new legislation or regulations changing pension and postretirement benefits accounting or required pension funding levels;

 

•

the substantial amount of RAI debt, including the additional debt incurred and assumed in connection with the Lorillard merger;

 

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•

the possibility of decreases in the credit ratings assigned to RAI, and to the senior unsecured long-term debt of RAI;

 

•

the possibility of changes in RAI’s historical dividend policy;

 

•

the restrictive covenants imposed under RAI’s debt agreements;

 

•

the possibility of natural or man-made disasters or other disruptions, including disruptions in information technology systems or security breaches, that may adversely affect manufacturing or other operations and other facilities or data;

 

•

the loss of key personnel or difficulties recruiting and retaining qualified personnel;

 

•

the inability to adequately protect intellectual property rights;

 

•

the significant ownership interest in RAI of BAT and its subsidiaries, collectively RAI’s largest beneficial owner, and their rights under the governance agreement, dated as of July 30, 2004, as amended, among RAI, BAT and B&W, referred to as the governance agreement;

 

•

the potential consequences due to the expiration of the standstill provisions of the governance agreement, and the expiration of RAI’s shareholder rights plan, on July 30, 2014;

 

•

a termination of the governance agreement or certain of its provisions in accordance with its terms, including the limitations on B&W’s representation on the RAI board of directors and its committees;

 

•

the potential for increased competition between RAI and BAT and their respective subsidiaries due to the expiration of the non-competition agreement between RAI and BAT on July 30, 2014;

 

•

additional risks, contingencies and uncertainties associated with the Lorillard merger and the divestiture that could result in an adverse effect on the results of operations, cash flows and financial position of RAI and its subsidiaries and/or the failure to realize any anticipated benefits of the Lorillard merger and the divestiture to RAI shareholders, including:

 

•

the effect of the Lorillard merger and the divestiture on the ability to maintain business relationships, and on operating results and businesses generally;

 

•

the reliance of RJR Tobacco on Imperial Sub to manufacture NEWPORT on RJR Tobacco’s behalf for a period of time after the Lorillard merger and the divestiture;

 

•

RAI’s obligations to indemnify Imperial Sub for specified matters and to retain certain liabilities related to the transferred assets;

 

•

the failure to realize projected synergies and other benefits from the Lorillard merger and the divestiture; and

 

•

the incurrence of significant post-transaction related costs in connection with the Lorillard merger and the divestiture; and

 

•

additional risks, contingencies and uncertainties associated with the proposed sale to JTIH that could result in the failure of the proposed sale to JTIH to be consummated or, if consummated, could have an adverse effect on the results of operations, cash flows and financial position of RAI and its subsidiaries are the following:

 

•

the occurrence of any event, change or other circumstances giving rise to the right of a party to terminate the Japan Tobacco purchase agreement;

 

•

the failure to obtain the necessary regulatory approvals for the proposed sale to JTIH, or if obtained, the possibility of being subjected to conditions as a result of regulatory approval that could reduce the expected benefits of the proposed sale to JTIH, result in a material delay in, or the abandonment of, the proposed sale to JTIH or otherwise have an adverse effect on RAI;

 

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•

the failure to satisfy required closing conditions or complete the proposed sale to JTIH in a timely manner;

 

•

the effect of restrictions placed on RAI’s and its subsidiaries’ business activities, including restrictions associated with RAI’s agreement not to, and to cause its affiliates not to, engage in the business of producing, selling, distributing and developing natural, organic and additive-free combustible tobacco cigarettes and roll-your-own or make-your-own tobacco products outside of the United States for a period of five years after the closing, and the limitations put on RAI’s ability to pursue alternatives to the proposed sale to JTIH pursuant to the Japan Tobacco purchase agreement;

 

•

the possibility of delay or prevention of the proposed sale to JTIH if lawsuits challenging the proposed sale to JTIH are filed against RAI, the members of the RAI board of directors, Japan Tobacco and/or the members of the Japan Tobacco board of directors;

 

•

RAI’s obligation to indemnify Japan Tobacco for specified matters and to retain certain liabilities related to the acquired business;

 

•

the incurrence of significant pre-and post-sale transaction related costs in connection with the proposed sale to JTIH; and

 

•

the effect of the announcement of the proposed sale to JTIH on the ability of RAI and its subsidiaries to retain and hire key personnel, maintain business relationships, and on operating results and business generally; and

 

•

risks, contingencies and uncertainties associated with acquiring new notes in the Exchange Offers that could result in a loss to holders of new notes, including:

 

•

the structural subordination of the new notes and guarantees to claims of creditors of non-guarantor subsidiaries of RAI and the guarantors, as the case may be;

 

•

the effective subordination of the new notes and guarantees to any secured indebtedness;

 

•

the possibility of the termination of guarantees of the new notes without the consent of noteholders;

 

•

the possibility that the guarantees of the new notes would not be given effect by a court;

 

•

the lack of cross-default provisions in the RAI indenture;

 

•

differences in the change of control repurchase provisions of the new notes from provisions in RAI’s revolving credit facility, and certain series of existing notes, which may result in an acceleration of indebtedness or triggering of a repurchase obligation under such other indebtedness, but not under the new notes offered hereby;

 

•

the possibility that RAI might not have sufficient cash to repurchase the notes if the change of control repurchase provisions were triggered;

 

•

the lack of an existing trading market for the notes, and the fact that the new notes will not be listed on a securities exchange; and

 

•

the possibility that RAI credit ratings may not reflect all risks of an investment in new notes; and

 

•

risks, contingencies and uncertainties associated with participating, or declining to participate, in the Exchange Offers, including:

 

•

the limited trading market for the old notes, and any exacerbating effect of the Exchange Offers on such market for unexchanged old notes;

 

•

the continuing restrictions on transfer of unexchanged old notes;

 

•

possible prospectus delivery requirements in connection with sales of the new notes; and

 

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•

the responsibility of old noteholders who wish to participate in the Exchange Offers to comply with the procedures for tendering old notes.

Due to these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus or, in the case of documents referred to or incorporated by reference, the dates of those documents. Except as provided by federal securities laws, RAI is not required to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written or oral forward-looking statements attributable to RAI or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

INDUSTRY DATA

When we make statements in this prospectus and in the documents incorporated by reference herein regarding the industry position of our operating subsidiaries or market share (or the market share of their brands), we are making statements of our belief. This belief is based on: information regarding the market share of RAI’s operating subsidiaries’ products; estimates and assumptions that we have made based on that data; and our knowledge of the markets for the products of our operating subsidiaries. In this prospectus and documents incorporated by reference herein that were, or are, filed with the SEC commencing with RAI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, the shares of RAI’s operating subsidiaries’ products are reported as a percentage of total share of U.S. cigarette (or moist snuff, as applicable) shipments to retail, referred to as STR data. This STR data is based on information submitted by wholesale locations and processed and managed by MSAi. For documents incorporated by reference herein that were filed with the SEC prior to RAI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, the shares of RAI’s operating subsidiaries’ products were reported as a percentage of total share of U.S. retail cigarette (or moist snuff, as applicable) sales, referred to as retail scan data, based on data collected by IRI/Capstone, and processed and managed by MSAi. Management believes that STR data more accurately reflects marketplace performance across all channels of trade than retail scan data.

You should not rely, however, on the STR data reported by MSAi as being a precise measurement of actual market share as the shipments to retail do not reflect actual consumer sales and do not track all volume and trade channels. Similarly, market share data reported by IRI/Capstone should not be relied upon as being a precise measurement of actual market share because IRI/Capstone uses a sample methodology that does not track all volume and trade channels. Accordingly, the STR data or retail scan data for RAI’s operating subsidiaries’ brands may overstate or understate their actual market share. Moreover, you should be aware that in a market experiencing overall declining consumption, like the domestic cigarette market, a particular product can experience increasing market share relative to competing products, yet still be subject to declining consumption volumes. We have not independently verified either the STR data or the retail scan data. Accordingly, we cannot assure you that any of our assumptions based on such data are accurate or that our assumptions correctly reflect the position of our operating subsidiaries in their industries.

 

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THE EXCHANGE OFFERS

Purpose and Effect of the Exchange Offers

On July 15, 2015, RAI issued approximately $3.12 billion aggregate principal amount of old notes pursuant to the private exchange offers that was exempt from the registration and prospectus delivery requirements of the Securities Act. Accordingly, these old notes may not be transferred in the United States unless registered under the Securities Act or unless an exemption from the registration requirements of the Securities Act is available. In connection with the issuance and sale of the old notes, RAI and the guarantors entered into a registration rights agreement with the dealer managers for the private exchange offers pursuant to which RAI and the guarantors agreed, among other things, to use their reasonable best efforts to file with the SEC a registration statement relating to the old notes issued in the private exchange offers and to complete the Exchange Offers within 210 days after the date the old notes were originally issued.

The Exchange Offers are being conducted to satisfy the obligations of RAI and the guarantors under the registration rights agreement. RAI and the guarantors are registering the Exchange Offers in reliance on the position of the staff of the SEC set forth in the following no-action letters: Exxon Capital Holdings Corporation (available May 13, 1998), Morgan Stanley & Co., Inc. (available June 5, 1991), and Shearman & Stearling (available July 2, 1993).

RAI will be required to pay additional interest on the old notes at the rate of 0.25% per year for the first 90-day period and an additional 0.25% per year with respect to each subsequent 90-day period if the Exchange Offers have not been completed by February 10, 2016, up to a maximum increase of 0.50% per year. This additional interest will be payable until the Exchange Offers are completed.

Following the completion of the Exchange Offers, holders of the old notes who were eligible to participate in the Exchange Offers, but who do not tender their old notes, will have no further rights under the registration rights agreement. In that case, the old notes will continue to be subject to restrictions on transfer under the Securities Act.

Terms of the Exchange Offers

Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, RAI is offering to exchange any and all outstanding old notes of the series listed below for a like principal amount of our new notes. Old notes may be tendered only in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. As of the date of this prospectus, the following principal amounts of old notes are outstanding:

 

Title of Series of Old Notes to be Exchanged		Aggregate Principal Amount Outstanding
3.500% Senior Notes due 2016		$414,793,000
2.300% Senior Notes due 2017		$447,092,000
8.125% Senior Notes due 2019		$668,689,000
6.875% Senior Notes due 2020		$641,462,000
3.750% Senior Notes due 2023		$473,689,000
8.125% Senior Notes due 2040		$236,748,000
7.000% Senior Notes due 2041		$240,197,000

RAI will accept for exchange any and all old notes properly tendered and not validly withdrawn before the expiration of the Exchange Offers. For each old note exchanged pursuant to the Exchange Offers, the holder of the old note will receive a new note having a principal amount equal to that of the exchanged old note. The new notes will be issued and delivered promptly following the expiration of the Exchange Offers.

The Exchange Offers are being made in reliance upon interpretations by the staff of the SEC issued to unrelated third parties that the new notes issued in exchange for the old notes pursuant to the Exchange Offers

 

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may be offered for sale, resold and otherwise transferred by holders thereof (other than a broker-dealer who purchased such old notes directly from RAI for resale pursuant to any available exemption under the Securities Act or a holder that is an “affiliate” of RAI or the guarantors within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such new notes are acquired in the ordinary course of such holders’ businesses and such holders are not engaged in, do not intend to engage in, and have no arrangement or understanding with any person or entity to participate in, the distribution of such new notes. To participate in the Exchange Offers, you will be required to acknowledge and agree in the letter of transmittal that the SEC has not considered the Exchange Offers in the context of a no-action letter, and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offers as in other circumstances.

To participate in the Exchange Offers, you will be required to make the following representations to us in the letter of transmittal:

 

•

the new notes to be acquired pursuant to the Exchange Offers are being acquired in the ordinary course of your business or the business of any beneficial owner of the old notes tendered by such letter of transmittal;

 

•

neither you nor any beneficial owner of the old notes tendered by such letter of transmittal is engaged in, intends to engage in, or has any arrangement or understanding with any person or entity to participate in, a “distribution” of the new notes within the meaning of the Securities Act;

 

•

neither you nor any beneficial owner of the old notes tendered by such letter of transmittal is an “affiliate” of any of RAI or the guarantors within the meaning of Rule 405 promulgated under the Securities Act;

 

•

if you or any beneficial owner of the old notes tendered by such letter of transmittal is a broker-dealer, neither you nor any such beneficial owner purchased the old notes directly from RAI for resale pursuant to an exemption from registration under the Securities Act;

 

•

if you or any beneficial owner of the old notes tendered by such letter of transmittal is a broker-dealer, you further represent that you or such other beneficial owner (1) acquired the old notes as a result of market-making or other trading activities (and not directly from RAI for resale), (2) may be considered a statutory “underwriter” under the Securities Act and (3) will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes received in the Exchange Offers; provided, however, that, by acknowledging that you or such beneficial owner, as such a broker-dealer, will deliver, and by delivering, a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes, you or such beneficial owner will not be deemed to admit that you are an “underwriter” within the meaning of the Securities Act; and

 

•

you are not acting on behalf of any person or entity that could not truthfully make the foregoing representations, warranties and agreements.

If you cannot make all of the above representations, warranties and agreements, you cannot participate in the Exchange Offers. In such case, you cannot rely on the SEC staff position enunciated in the no-action letters issued to unrelated third parties and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. You acknowledge that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of the SEC’s Regulation S-K.

As described below under “—Resale of the New Notes,” the SEC has taken the position that broker-dealers who exchange old notes for their own account acquired as a result of market-making or other trading activities may fulfill their prospectus delivery requirements with respect to new notes with this prospectus. By signing the letter of transmittal, such broker-dealers will acknowledge that they will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the new notes.

 

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The form and terms of the new notes will be substantially identical to the form and terms of the old notes, except that the new notes will be registered under the Securities Act and hence will not bear legends restricting their transfer; holders of the new notes will not be entitled to most rights under the registration rights agreement; and holders of the new notes will not be entitled to additional interest in certain situations. The new notes will evidence the same debt as the old notes. The new notes will be issued under and entitled to the benefits of the same indenture under which the old notes were issued.

This prospectus and the letter of transmittal are being sent to all registered holders of the old notes. There will be no fixed record date for determining registered holders of the old notes entitled to participate in the Exchange Offers.

RAI intends to conduct the Exchange Offers in accordance with the applicable requirements of the Securities Act, the Securities Exchange Act and the rules and regulations of the SEC. Old notes that are not exchanged in the Exchange Offers will remain outstanding and continue to accrue interest, and will be entitled to the rights and benefits their holders have under the RAI indenture. Other than as set forth below under “—Shelf Registration,” we will have no further obligation to you to provide for the registration of the new notes and the exchange offer under the registration rights agreement.

Conditions

Notwithstanding any other provision of the Exchange Offers and subject to our obligations under the registration rights agreement, the Exchange Offers shall not be subject to any conditions, other than that:

 

•

there shall not have been adopted or enacted any law, statute, rule or regulation, or any interpretation of the staff of the SEC, which in our judgment, would materially impair our ability to proceed with the Exchange Offers;

 

•

no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offers, which, in RAI’s judgment, might impair RAI’s ability to proceed with the Exchange Offers; or

 

•

the SEC has issued an order or orders declaring that the trustee under the RAI indenture has been qualified under the Trust Indenture Act of 1939.

We expressly reserve the right to amend or terminate the Exchange Offers, and to reject for exchange any old notes not previously accepted for exchange, upon any occurrence that causes any of the foregoing conditions of the Exchange Offers not to be satisfied prior to the expiration of the Exchange Offers.

These conditions are for our sole benefit, and we may assert a condition regardless of the circumstances giving rise to it, subject to applicable law. We also may waive in whole or in part at any time before the expiration of the Exchange Offers any condition in our sole discretion. Our failure at any time to exercise the foregoing rights will not be deemed a waiver of these rights, and these rights will be deemed to be ongoing rights, which may be asserted at any time. Any waiver by us will be made by written notice or public announcement to the registered holders of the notes. If such waiver constitutes a material change in the Exchange Offers, we will extend the Exchange Offers period if necessary to ensure that at least five business days remain in the Exchange Offers following notice of the material change.

The conditions to the Exchange Offers must be satisfied or waived by us prior to the expiration of the Exchange Offers. In addition, we will not accept for exchange any old notes tendered, and no new notes will be issued in exchange for any old notes, if at that time any stop order shall be threatened or in effect with respect to the Exchange Offers to which this prospectus relates or the qualification of the RAI indenture under the Trust Indenture Act.

The Exchange Offers are not conditioned upon any minimum aggregate principal amount of old notes being tendered for exchange.

 

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Expiration Date; Extensions; Amendment; Termination

The Exchange Offers will expire at          p.m., New York City time on                     , 2015, or such later date and time to which we, in our sole discretion, extend any one or more Exchange Offer. In the case of any extension, we will notify the exchange agent orally (confirmed in writing) or in writing of any extension. We will also notify the registered holders of old notes by public announcement no later than          a.m., New York City time, on the business day after the previously scheduled expiration of the Exchange Offers.

To the extent we are permitted to do so by applicable law, regulation or interpretation of the staff of the SEC, subject to the registration rights agreement, we expressly reserve the right, in our sole discretion, to:

 

•

delay accepting any old note if we extend one or more Exchange Offers;

 

•

amend any Exchange Offer;

 

•

waive the conditions to any Exchange Offers; and

 

•

if the conditions described above under “—Conditions” have not been satisfied prior to the expiration of the Exchange Offers, to terminate any one or more Exchange Offers.

Any such delay in acceptance, amendment or termination will be followed as promptly as practicable by notice to the registered holders of old notes by public announcement thereof. If we consider an amendment to an Exchange Offer to be material, we will promptly inform the registered holders of old notes of such amendment in a reasonable manner. In addition, in the event of a material change to an Exchange Offer, including waiver of the condition, within five business days of the scheduled expiration date, we will extend such Exchange Offer period to ensure that there are at least five business days between the date we provide notice of such material change and the expiration of such Exchange Offer.

Without limiting the manner by which we may choose to make public announcements of any extension, delay in acceptance, amendment or termination of any one or more Exchange Offers, we will have no obligation to publish, advertise or otherwise communicate any public announcement, other than by making a timely release to a financial news service.

We acknowledge and undertake to comply with the provisions of Rule 14e-l(c) under the Securities Exchange Act, which requires us to return the old notes surrendered for exchange promptly after the termination or withdrawal of an Exchange Offer.

Interest on the New Notes

Interest on the new notes issued in exchange for old notes will accrue from the last interest payment date on which interest was paid on such old notes or, if no interest has been paid on such old notes, from the last interest payment date on which interest was paid on the Lorillard Tobacco notes for which the old notes were issued in exchange. Notwithstanding the foregoing, if new notes are issued in exchange for old notes between a record date for the payment of interest on such series of old notes and the interest payment date for such series of old notes following such record date, interest on the corresponding series of new notes will begin to accrue from such interest payment date. If your old notes are accepted for exchange, you will be deemed to have waived your right to receive any interest on the old notes (other than, in the event that new notes are issued in exchange for old notes between a record date for the payment of interest on such series of old notes and the interest payment date for such series of old notes following such record date, your right as a holder of old notes of such series on such record date to receive an interest payment on such old notes related to such record date). Consequently, holders of new notes will receive the same interest payments that they would have received had they not exchanged their old notes in the applicable Exchange Offer.

Resale of the New Notes

Based on interpretations by the staff of the SEC set forth in no-action letters issued to third parties unrelated to us and referred to above under “—Purpose and Effect of the Exchange Offers,” we believe that the new notes

 

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issued in the Exchange Offers may be offered for resale, resold and otherwise transferred by you, without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that you can make each of the representations set forth above under “—Terms of the Exchange Offers.” If you cannot make each of the representations set forth under “—Terms of the Exchange Offers,” you may not rely on the interpretations by the staff of the SEC. Under those circumstances, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a sale, transfer or other disposition of any new notes unless you are able to utilize an applicable exemption from all of those requirements. See “Plan of Distribution.”

Holders of old notes wishing to accept the Exchange Offers must submit the letter of transmittal or agree to the terms of the letter of transmittal pursuant to an agent’s message. The letter of transmittal contains the required representations described above and an agreement to comply with the agreements and covenants set forth in the registration rights agreement.

The SEC has not considered the Exchange Offers in the context of a no-action letter, and there can be no assurance that the staff of the SEC would make a similar determination with respect to these Exchange Offers as it made in the no-action letters to the unrelated persons.

Broker-dealers receiving new notes in exchange for old notes acquired for their own account through marketmaking or other trading activities may not rely on these SEC interpretations. Such broker-dealers may be deemed to be “underwriters” within the meaning of the Securities Act and must therefore acknowledge, by signing the letter of transmittal, that they will deliver a prospectus meeting the requirements of the Securities Act in connection with the resale of the new notes. The letter of transmittal states that by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

The SEC has taken the position that participating broker-dealers who exchange old notes for their own account acquired as a result of market-making or other trading activities may fulfill their prospectus delivery requirements with respect to the new notes with this prospectus. We have agreed to allow participating broker-dealers to use this prospectus in connection with the resale of the new notes, subject to RAI’s and the guarantors’ right to suspend use of the prospectus under the conditions described below under “—Shelf Registration.” RAI and the guarantors have also agreed to amend or supplement this prospectus for a period ending upon the earlier of (1) 180 days after the completion of the Exchange Offers and (2) the first day after the completion of the Exchange Offers when participating broker-dealers no longer have a prospectus delivery obligation, if requested by one or more participating broker-dealers, in order to expedite or facilitate the disposition of any new note by participating broker-dealers consistent with the positions of the staff of the SEC described above.

Broker-dealers who hold old notes as unsold allotments from the issuance of the old notes cannot rely on the interpretations of the staff of the SEC described above, and cannot participate in the Exchange Offers. See “Plan of Distribution.”

If you will not receive freely tradable new notes in the Exchange Offers or are not eligible to participate in the Exchange Offers, you can elect, by notifying RAI and providing additional necessary information, to have your old notes registered on the shelf registration statement described below under “—Shelf Registration.”

Procedures for Tendering Old Notes

Tenders by Beneficial Owners

Only a registered holder of the old notes may tender old notes of any series in the applicable Exchange Offer. If you are an eligible holder of old notes whose old notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender those old notes, you should contact the registered holder promptly and instruct the registered holder to tender your old notes on your behalf by the expiration of the Exchange Offer.

 

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Book-Entry Transfers; Tender of Old Notes Using DTC’s Automated Tender Offer Program

RAI understands that the old notes are held solely in book-entry form through DTC. RAI further understands that the exchange agent will make a request promptly after the date of this prospectus to establish accounts with respect to the old notes at DTC for the purpose of facilitating the Exchange Offers. Subject to the establishment of the accounts, any financial institution that is a participant in DTC’s system may tender old notes in any Exchange Offer through book-entry delivery of such old notes by causing DTC to transfer the old notes into the exchange agent’s account in accordance with DTC’s procedures for such transfer.

If you desire to tender old notes held in book-entry form with DTC, the exchange agent must receive, by the expiration of the applicable Exchange Offer:

 

•

a confirmation of book-entry transfer of old notes into the exchange agent’s account at DTC, and either:

 

•

a properly completed and validly executed letter of transmittal, or manually signed facsimile thereof, together with any signature guarantees and other documents required by the instructions in the letter of transmittal; or

 

•

an agent’s message transmitted through ATOP, and

 

•

any other required documentation.

DTC participants may electronically transmit their acceptance of an Exchange Offer by complying with DTC’s ATOP procedures. If a DTC participant participates in an Exchange Offer via ATOP, and also causes the transfer of book-entry old notes to the exchange agent’s account as described above, DTC is expected to send a book-entry confirmation, including an agent’s message, to the exchange agent. If you use ATOP procedures to tender old notes, you will not be required to deliver a letter of transmittal to the exchange agent, but you will be bound by its terms just as if you had signed it and be deemed to have made all the representations and warranties therein.

The term “agent’s message” means a message, transmitted by DTC and received by the exchange agent and forming part of the confirmation of a book-entry transfer, which states that DTC has received an express acknowledgment from a participant in DTC tendering old notes that such participant has received the letter of transmittal and agrees to be bound by the terms of the letter of transmittal, and RAI and the guarantors may enforce such agreement against the participant. Delivery of an agent’s message will also constitute an acknowledgment from the tendering DTC participant that the representations contained in the letter of transmittal are true and correct.

See “—Letter of Transmittal; Representations, Warranties and Agreements of Tendering Holders of Old Notes.”

Other Tenders

Although, as described above, RAI understands that all old notes are held solely in book-entry form through DTC, if old notes are subsequently issued in certificated form registered in the name of a holder, such holder wishing to participate in an Exchange Offer should send its certificated old notes with a properly completed and validly executed letter of transmittal, along with any other required documentation, by the expiration of the Exchange Offer, to the exchange agent. In this event, such holder should contact the exchange agent for further information, including if the letter of transmittal with respect to such old notes is not signed by the registered holder or does not correspond to the name written on the face of the old notes, using the contact information appearing in the letter of transmittal.

Proper Execution of a Letter of Transmittal

If a letter of transmittal is completed, signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the

 

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Financial Industry Regulatory Authority, Inc., a commercial bank or trust company having an office or correspondent in the United States or another “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Securities Exchange Act, unless the old notes surrendered for exchange are tendered:

 

•

by a registered holder who has not completed the box labeled “Special Issuance and Payment Instructions” or “Special Delivery Instructions” in the letter of transmittal; or

 

•

for the account of an eligible guarantor institution.

If a DTC participant signs the applicable letter of transmittal, the signature must correspond with the name as it appears on the security position listing as the holder of the old notes. If a person other than a DTC participant signs the letter of transmittal, the letter of transmittal must be accompanied by a properly completed bond power. The DTC participant must sign the bond power as it appears on the security position listing and an eligible institution must guarantee the signature on the bond power. If the letter of transmittal or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, these persons should so indicate when signing. Unless we waive this requirement, they should also submit evidence satisfactory to us of their authority to execute and deliver the letter of transmittal.

Effect of Tender

The valid tender by a holder of the old notes by the expiration of the applicable Exchange Offer, that is not validly withdrawn, and the subsequent acceptance of such tender by RAI will constitute a binding agreement between the holder of such old notes and RAI in accordance with the terms and subject to the conditions set forth in this prospectus and the letter of transmittal.

General

We will determine in our sole discretion all questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal or revocation of tendered old notes. Our determination will be final and binding. We reserve the absolute right to reject any and all old notes not validly tendered or any old notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects or irregularities in, or conditions of, any tenders as to particular old notes. Our interpretation of the terms and conditions of the Exchange Offers, including the instructions in the letter of transmittal, will be final and binding on all parties.

Unless waived, any defects or irregularities in connection with tenders of old notes must be cured by the expiration of the applicable Exchange Offer. Although we intend to notify holders of defects or irregularities with respect to tenders of old notes, none of RAI, the exchange agent or any other person will incur any liability for failure to give notification. Tenders of old notes will not be deemed made until those defects or irregularities have been cured or waived. Any old notes the exchange agent receives that are not validly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent without cost to the tendering holder, unless otherwise provided in the letter of transmittal, promptly following the expiration of the applicable Exchange Offer.

A holder of old notes whose notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee should instruct its nominee a sufficient time ahead of the expiration of the applicable Exchange Offer to permit its nominee to participate in such Exchange Offer on its behalf. Such holders should allow sufficient time ahead to comply with DTC’s ATOP procedures and procedures for book-entry transfer in order to participate in the Exchange Offers. The method of delivery of old notes, the letter of transmittal and all other required documents to the exchange agent is at the holder’s election and risk. Rather than mail these items, RAI recommends that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure delivery to the exchange agent by the expiration of the applicable Exchange Offer. Holders should not send the letter of transmittal or old notes to us.

 

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Guaranteed Delivery Procedures

If you desire to tender old notes pursuant to the Exchange Offers and (1) certificates representing such old notes are not immediately available, (2) time will not permit your letter of transmittal, certificates representing such old notes and all other required documents to reach the exchange agent on or prior to the expiration of the Exchange Offers or (3) the procedures for book-entry transfer (including delivery of an agent’s message) cannot be completed on or prior to the expiration of the Exchange Offers, you may nevertheless tender such notes with the effect that such tender will be deemed to have been received on or prior to the expiration of the Exchange Offers if all the following conditions are satisfied:

 

•

you must effect your tender through an “eligible guarantor institution;”

 

•

a properly completed and duly executed notice of guaranteed delivery, in the form provided by us herewith, or an agent’s message with respect to guaranteed delivery that is accepted by us, is received by the exchange agent on or prior to the expiration of the Exchange Offers as provided below; and

 

•

the certificates for the tendered notes, in proper form for transfer (or a book-entry confirmation of the transfer of such notes into the exchange agent account at DTC as described above), together with a letter of transmittal (or a manually signed facsimile of the letter of transmittal) properly completed and duly executed, with any signature guarantees and any other documents required by the letter of transmittal or a properly transmitted agent’s message, are received by the exchange agent within three trading days (on the New York Stock Exchange) after the date of execution of the notice of guaranteed delivery.

The notice of guaranteed delivery may be sent by hand delivery, facsimile transmission or mail to the exchange agent and must include a guarantee by an eligible guarantor institution in the form set forth in the notice of guaranteed delivery.

Acceptance of Tendered Old Notes; Settlement

Subject to the satisfaction or waiver of the conditions to the Exchange Offers, RAI will accept for exchange the old notes validly tendered and not validly withdrawn by the expiration of the Exchange Offers. RAI shall be deemed to have accepted validly tendered old notes when and if it has given written notice to the exchange agent of its acceptance.

RAI will issue and deliver the new notes promptly following the expiration of the applicable Exchange Offer. The exchange agent will act as agent for the holders of old notes who validly tender their old notes in an Exchange Offer for the purposes of receiving the old notes and delivering the new notes. All old notes exchanged will be cancelled.

If any tendered old notes are not accepted for any reason, such unaccepted or unexchanged old notes will be returned without expense to the tendering holder thereof promptly following the expiration of the applicable Exchange Offer. In the case of old notes tendered by book-entry transfer into the exchange agent’s account at DTC pursuant to the book-entry transfer procedures described above, any such unaccepted or unexchanged old notes will be credited to the account at DTC from which such old notes were tendered promptly following the expiration of the applicable Exchange Offer.

Withdrawal of Tenders

Except as otherwise provided in this prospectus, holders of old notes may withdraw their tenders at any time prior to the expiration of the applicable Exchange Offer. For a withdrawal to be effective:

 

•

the exchange agent must receive a written notice of withdrawal, or a facsimile thereof, at the address set forth in the letter of transmittal prior to the expiration of the applicable Exchange Offer; or

 

•

holders must comply with the appropriate procedures of DTC’s ATOP system prior to such expiration.

 

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Any notice of withdrawal must:

 

•

specify the name of the person who tendered the old notes to be withdrawn;

 

•

identify the old notes to be withdrawn, including the principal amount of the old notes to be withdrawn; and

 

•

be signed by the person who tendered the old notes in the same manner as the original signature on the letter of transmittal (if any), including any required signature guarantees.

If you are a holder of old notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to withdraw previously tendered old notes, you should contact the nominee promptly and instruct the nominee to withdraw your old notes on your behalf prior to the expiration of the applicable Exchange Offer. If old notes have been tendered pursuant to the procedure for book-entry transfer described under “—Procedures for Tendering Old Notes,” any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise comply with the procedures of DTC.

We will determine all questions as to the validity, form and eligibility, including time of receipt, of notices of withdrawal, and our determination shall be final and binding on all parties. We will deem any old notes so withdrawn not to have been validly tendered for exchange or purposes of the applicable Exchange Offer. Validly withdrawn old notes will be returned without expense to the tendering holder thereof promptly following the valid withdrawal thereof. In the case of old notes tendered by book-entry transfer into the exchange agent’s account at DTC pursuant to the book-entry transfer procedures described above, any such withdrawn old notes will be credited to the account at DTC from which such old notes were tendered promptly following a valid withdrawal.

You may re-tender validly withdrawn old notes by following one of the procedures described under the caption “—Procedures for Tendering Old Notes” above at any time by the expiration of the applicable Exchange Offer.

A holder may obtain a form of the notice of withdrawal from the exchange agent at its office listed in the letter of transmittal.

Consequences of Failure to Exchange

If you do not exchange your old notes for new notes in the Exchange Offers, your old notes will remain subject to the restrictions on transfer of such old notes:

 

•

as set forth in the legend printed on the old notes as a consequence of the issuance of the old notes pursuant to exemptions from the registration requirements of the Securities Act, or in transactions not subject to the Securities Act; and

 

•

as otherwise set forth in the offer to exchange and consent solicitation statement distributed in connection with the private exchange offers in which the old notes were issued.

In general, you may not offer or sell your old notes unless they are registered under the Securities Act or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the old notes under the Securities Act.

Letter of Transmittal; Representations, Warranties and Agreements of Tendering Holders of Old Notes

In addition to the representations set forth above under the caption “—Terms of the Exchange Offers,” upon the submission of the letter of transmittal, or the agreement to the terms of the letter of transmittal pursuant to an

 

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agent’s message, a holder of old notes will, subject to that holder’s ability to withdraw its tender, and subject to the terms and conditions set forth in this prospectus and the letter of transmittal generally, be deemed, among other things, to:

 

•

tender to RAI such holder’s old notes, and in doing so, irrevocably sell, assign and transfer to or upon RAI’s order or the order of its nominee all right, title and interest in and to, and any and all claims in respect of or arising or having arisen as a result of the holder’s status as a holder of, the old notes tendered, such that thereafter the holder shall have no contractual or other rights or claims in law or equity against RAI, the guarantors and their affiliates or any fiduciary, trustee, fiscal agent or other person connected with the old notes or RAI indenture arising under, from or in connection with the old notes;

 

•

waive any and all other rights with respect to such tendered old notes (including without limitation any existing or past defaults and their consequences with respect to such old notes under the RAI indenture and any rights under the registration rights agreement);

 

•

release and discharge RAI, the guarantors and their respective affiliates and the trustee under the RAI indenture from any and all claims that the holder may have, now or in the future, arising out of or related to the old notes tendered, including, without limitation, any claims that the holder is entitled to receive additional principal or interest payments with respect to the old notes tendered (other than as expressly provided in this prospectus or the letter of transmittal), or to participate in any redemption or defeasance of the old notes tendered; and

 

•

irrevocably constitute and appoint the exchange agent as its true and lawful agent and attorney-in-fact with respect to the tendered old notes (with full knowledge that the exchange agent also acts as the agent of RAI with respect to such old notes), with full powers of substitution and resubstitution, subject only to the right of withdrawal described in this prospectus, to cause the old notes tendered to be assigned, transferred and exchanged in the applicable Exchange Offer;

provided, in the event that new notes are issued in exchange for old notes between a record date for the payment of interest on such series of old notes and the interest payment date for such series of old notes following such record date, the holders of record of such old notes on such record date will not be deemed to have waived, released or discharged their right to receive an interest payment on such old notes related to such record date.

In addition, each holder of old notes whose old notes are validly tendered in the Exchange Offers upon the submission of the letter of transmittal or each such holder’s agreement to the terms of a letter of transmittal pursuant to an agent’s message, will be deemed to represent, warrant and agree that:

 

•

it has received the prospectus and the letter of transmittal;

 

•

it has full power and authority to execute or agree to be bound by the letter of transmittal and to tender, exchange, sell, assign and transfer the old notes tendered and to acquire the new notes issuable upon the exchange of such tendered old notes;

 

•

as of the date of delivery of the letter of transmittal or an agent’s message, the holders’ old notes were owned free and clear of all security interests, liens, restrictions, charges and encumbrances and were not subject to any adverse claim or right or proxy of any kind, and RAI will acquire good, indefeasible, marketable and unencumbered title to the tendered old notes, free and clear of all security interests, liens, restrictions, charges and encumbrances and not subject to any adverse claim or right or restriction or proxy of any kind, when the same are accepted for exchange by RAI;

 

•

it will not sell, pledge, hypothecate or otherwise encumber or transfer any old notes tendered from the date of the delivery of the letter of transmittal or an agent’s message, and any purported sale, pledge, hypothecation or other encumbrance or transfer will be void and of no effect;

 

•

it is not a person to whom it is unlawful to make an invitation pursuant to the Exchange Offers under applicable securities laws;

 

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•

it has observed (and will observe) the laws and regulations of all relevant jurisdictions, obtained all requisite governmental, regulatory, exchange or other required consents, complied with all requisite formalities, including, without limitation, any verifications and registrations, and paid (or will pay) any issue, transfer or other taxes or requisite payments due from the holder in each respect in connection with any offer or acceptance, in any jurisdiction and that the holder has not taken or omitted to take any action in breach of the representations or which will or may result in RAI or any other person acting in breach of the legal or regulatory requirements of any such jurisdiction in connection with the Exchange Offers or tender of old notes in connection therewith; and

 

•

it undertakes to execute any further documents and give any further assurances that may be required in connection with any of the foregoing, in each case on and subject to the terms and conditions described or referred to in this prospectus and letter of transmittal.

The representations, warranties and agreements of a holder tendering old notes will be deemed to be repeated and reconfirmed on and as of the expiration of the applicable Exchange Offer and as of the settlement thereof.

Exchange Agent

The Bank of New York Mellon Trust Company, N.A. has been appointed as exchange agent for the Exchange Offers and is receiving a customary fee therefor, as well as reimbursement for reasonable out-of-pocket expenses. You should direct questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for the notice of guaranteed delivery or the notice of withdrawal to the exchange agent addressed as follows:

 

By Mail, Overnight Courier or Hand Delivery: The Bank of New York Mellon Trust Company, N.A, as Exchange Agent c/o The Bank of New York Mellon Corporation Corporate Trust Operations- Reorganization Unit 111 Sanders Creek Parkway East Syracuse, NY 13057 Attn: Pamela Adamo Tel: 315-414-3317		By Facsimile: The Bank of New York Mellon Trust Company, N.A, as Exchange Agent c/o The Bank of New York Mellon Corporation Corporate Trust Operations- Reorganization Unit Attn: Pamela Adamo Fax: 732-667-9408

Delivery of the letter of transmittal to an address other than as shown above or transmission via facsimile other than as set forth above does not constitute a valid delivery of the letter of transmittal.

Shelf Registration

Pursuant to the registration rights agreement, we may be required to file one or more shelf registration statements to permit certain holders of “registrable securities” (as defined below), who were not eligible to participate in the Exchange Offers to resell the registrable securities periodically without being limited by the transfer restrictions.

We will only be required to file a shelf registration statement if:

 

•

we are not permitted by applicable law or by the staff of the SEC to effect the Exchange Offers as contemplated by the registration rights agreement;

 

•

the exchange offer is not completed by February 10, 2016, in the case of the old notes; or

 

•

such registration is requested by any participant in the private exchange offers in which the old notes were issued, not later than 60 days after the consummation of the Exchange Offers, if such requesting person holds old notes ineligible to be exchanged for new notes in the Exchange Offers.

If a shelf registration statement is required, we will use our reasonable best efforts to:

 

•

file the shelf registration statement with the SEC as soon as practicable after we are required to do so and cause the shelf registration statement to be declared effective by the SEC; and

 

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•

keep the shelf registration statement continuously effective until all the registrable securities covered by the shelf registration statement are sold thereunder, they cease to be outstanding or all registerable securities are exchanged in the Exchange Offers.

Notwithstanding the foregoing, we may, by notice to holders of registrable securities, suspend the availability of a shelf registration statement and the use of the related prospectus, if:

 

•

such action is required by the SEC or a state securities authority;

 

•

the happening of any event that makes any statement made in the shelf registration statement or the related prospectus untrue in any material respect or requires changes in order to make the statements made not misleading; or

 

•

we determine in our reasonable judgment that it is in the best interests of RAI and the guarantors not to disclose a possible acquisition or business combination or other transaction, business development or event involving RAI or the guarantors that might otherwise require disclosure in the registration statement, or if obtaining any financial statements relating to an acquisition or business combination required to be included in the registration statement would be impracticable.

The period for which we are obligated to keep the shelf registration statement continuously effective will be extended by the period of such suspension.

Each holder of registrable securities will be required to discontinue disposition of registrable securities pursuant to the shelf registration statement upon receipt from us of notice of any events described in the preceding paragraph or certain other events specified in the registration rights agreement.

A holder who sells registrable securities pursuant to the shelf registration statement will be required to furnish information about itself as we may reasonably require, be named as a selling securityholder in the prospectus and deliver a copy of the prospectus to purchasers. If we are required to file a shelf registration statement, we will provide to each holder of the registrable securities copies of the prospectus that is a part of the shelf registration statement and notify each of these holders when the shelf registration statement becomes effective. These holders will be subject to certain of the civil liability provisions under the Securities Act in connection with those sales and will be bound by the provisions of the registration rights agreement applicable to these holders (including certain indemnification obligations).

If we are required to file the shelf registration statement, we will be required to pay additional interest to each holder of registrable securities at a rate of 0.25% per year for the first 90-day period and an additional 0.25% per year with respect to each subsequent 90-day period, up to a maximum increase of 0.50% per year if:

 

•

the shelf registration statement is not declared effective by the SEC on or prior to the deadlines specified in the registration rights agreement; or

 

•

the shelf registration statement is declared effective, but thereafter ceases to be effective or usable in connection with resales of the registrable securities during the periods specified in the registration rights agreement, except during limited periods as a result of the exercise by us of our right to suspend use of the shelf registration statement and the related prospectus as described above.

“Registrable securities” means the old notes; provided, however, that any old notes shall cease to be registrable securities when:

 

•

such old notes shall have been exchanged for new notes pursuant to the Exchange Offers (or are eligible for exchange) or disposed of pursuant to the shelf registration statement;

 

•

such old notes shall have ceased to be outstanding; or

 

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•

when the Exchange Offers are consummated.

Fees and Expenses

We will bear the expenses incurred in connection with the Exchange Offers. We are mailing the principal solicitation. However, our officers and regular employees and those of our affiliates may make additional solicitation by facsimile transmission, telephone or in person.

We have not retained any dealer-manager in connection with the Exchange Offers. We will not make any payments to brokers, dealers or others soliciting tenders of old notes pursuant to the Exchange Offers. However, we will pay the exchange agent reasonable and customary fees for its services and reimburse it for its reasonable out-of-pocket expenses.

We will pay the cash expenses incurred in connection with the Exchange Offers. These expenses include fees and expenses of the exchange agent and trustee, accounting and legal fees and printing costs, among others.

Holders who tender their old notes for exchange will not be required to pay any transfer taxes, except that holders who instruct us to register new notes in the name of, or request that old notes not tendered or not accepted in the Exchange Offers be returned to, a person other than the registered tendering holder, will be responsible for paying any applicable transfer tax.

Accounting Treatment

For accounting purposes, we will recognize no gain or loss as a result of the Exchange Offers. The costs of the Exchange Offers will be expensed in the period incurred.

Other

 

•

Other than the federal securities laws, we are not aware of any governmental or regulatory approvals that are required in order to complete the Exchange Offers.

 

•

Participation in the Exchange Offers is voluntary.

 

•

Holders of old notes have no appraisal or dissenters’ rights in connection with the Exchange Offers.

 

•

Holders of the old notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. See “Material U.S. Federal Income Tax Consequences.”

 

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RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth the ratio of earnings to fixed charges of RAI and its subsidiaries for the periods indicated. Earnings consist of income from continuing operations before earnings from equity investments, income taxes and fixed charges. Fixed charges consist of interest on indebtedness, amortization of original debt issuance discount and expense and the interest portion of rental expense.

 

		Year Ended December 31,																				Nine Months Ended September 30,
		2010				2011				2012				2013				2014				2014				2015
Ratio of earnings to fixed charges			10.2x				10.6x				9.1x				11.3x				8.7x				11.1x				16.0x

 

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USE OF PROCEEDS

The Exchange Offers are intended to satisfy our obligations under the registration rights agreement relating to the old notes. We will not receive any cash proceeds from the issuance of the new notes. In consideration for issuing the new notes contemplated in this prospectus, we will receive outstanding securities in like principal amount, the form and terms of which are the same as the form and terms of the new notes, except as otherwise described in this prospectus. The old notes surrendered in exchange for new notes will be retired and canceled. Accordingly, no additional debt will result from the Exchange Offers. We have agreed to bear the expenses of the Exchange Offers.

CAPITALIZATION

The following table sets forth the cash and cash equivalents and total capitalization of RAI and its subsidiaries as of September 30, 2015. Any old notes that are properly tendered and exchanged for new notes pursuant to the Exchange Offers will be retired and cancelled. Accordingly, the issuance of the new notes will not result in any change to our capitalization.

This table should be read in conjunction with the consolidated financial statements of RAI and its subsidiaries and the notes thereto incorporated by reference herein. All dollar amounts are in millions.

 

		As of September 30, 2015
		(unaudited)
Cash and cash equivalents		$	2,920
Debt:
Revolving credit facility			0
Existing notes, including current maturities:
Existing notes of RAI
Old notes:
3.500% Senior Notes due 2016			422
2.300% Senior Notes due 2017			450
8.125% Senior Notes due 2019			799
6.875% Senior Notes due 2020			740
3.750% Senior Notes due 2023			461
8.125% Senior Notes due 2040			309
7.000% Senior Notes due 2041			287
Total old notes			3,468
Other existing notes of RAI			14,046
Total existing notes of RAI (1)			17,514
Lorillard Tobacco notes (2):
Total existing notes			416
Total debt			17,930
Shareholders’ equity:
Total capitalization		$	18,480

 

(1)

Actual amount reflects the $17.2 billion principal amount of RAI’s existing notes, net of unamortized discount of $39 million, unamortized gain on termination of hedge accounting of $42 million, and adjustments to fair value of $338 million. RAI’s existing 1.05% Senior Notes due 2015, in the outstanding principal amount of $450 million, were repaid on their maturity date of October 30, 2015.

 

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(2)

In connection with the Lorillard Tobacco merger, RJR Tobacco expressly assumed Lorillard Tobacco’s outstanding obligations, and RJR expressly assumed Lorillard’s guarantee obligations, under the Lorillard Tobacco notes and Lorillard Tobacco indenture. In addition, subsequent to the Lorillard Tobacco merger, RAI fully and unconditionally guaranteed the obligations of RJR Tobacco with respect to the Lorillard Tobacco notes. Actual amount reflects the $377 million principal amount, adjustments associated with interest rate swaps of $1 million and adjustments to fair value of $38 million.

 

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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

The following unaudited pro forma condensed combined statements of income reflect the impact of the Lorillard merger on RAI’s consolidated financial statements and present the pro forma consolidated results of operation after giving effect to the Lorillard merger and the divestiture. The unaudited pro forma condensed combined statements of income give effect to the Lorillard merger and the divestiture as if they had occurred on January 1, 2014, the beginning of the earliest period presented. The Lorillard merger and the divestiture were actually completed on June 12, 2015. The following unaudited pro forma financial information for the Lorillard merger is based on the historical financial statements of RAI and Lorillard, and the following unaudited pro forma financial information for the divestiture is based on the historical accounting records of RAI and Lorillard (in each case, with respect to Lorillard, through June 12, 2015, the date of the Lorillard merger).

The historical consolidated financial statements have been adjusted in the pro forma financial statements to give effect to pro forma events that are: (1) directly attributable to the Lorillard merger or the divestiture; (2) factually supportable; and (3) expected to have a continuing impact on the combined results of RAI and Lorillard. The unaudited pro forma financial information is provided for illustrative purposes only and is based on available information and assumptions that RAI and Lorillard believe are reasonable. It does not purport to represent what the actual consolidated results of operations of RAI would have been had the Lorillard merger or the divestiture occurred on January 1, 2014, nor is it necessarily indicative of future consolidated results of operations. The actual results of operations will differ, perhaps significantly, from the pro forma amounts reflected herein due to a variety of factors, including access to additional information and changes in operating results following the date of the pro forma financial information.

RAI anticipates that the Lorillard merger and the divestiture will result in significant annual cost savings and operating synergies that would be unachievable without completing the transactions. No assurance can be made that RAI will be able to achieve these cost savings and synergies or when they will be realized, and no such cost savings or synergies have been reflected in the unaudited pro forma financial information.

The unaudited pro forma condensed combined statements of income do not include any material nonrecurring charges that might arise as a result of the Lorillard merger or the divestiture.

In accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations, the Lorillard merger has been accounted for under the acquisition method with RAI as the acquirer of Lorillard. The purchase price will be allocated to the fair values of the assets acquired and liabilities assumed from Lorillard. Since the pro forma financial statements have been prepared based on preliminary estimates and assumptions, the final amounts recorded at the date of the Lorillard merger may differ materially from the information presented. All estimates reflected in the pro forma financial statements are subject to change pending additional review of the assets acquired and liabilities assumed and the final purchase price, and there can be no assurance that any revisions to estimates will not result in material changes to the information presented.

The following pro forma statements of income should be read in conjunction with:

 

•

the accompanying notes to the unaudited pro forma condensed combined statements of income;

 

•

the separate historical consolidated financial statements of RAI as of and for the year ended December 31, 2014, included in RAI’s Annual Report on Form 10-K filed with the SEC and incorporated by reference into this prospectus;

 

•

the separate historical unaudited condensed consolidated interim financial statements of RAI as of and for the quarterly period ended September 30, 2015, included in RAI’s Quarterly Report on Form 10-Q filed with the SEC and incorporated by reference into this prospectus;

 

•

the separate historical consolidated financial statements of Lorillard as of and for the year ended December 31, 2014, included as Exhibit 99.1 to RAI’s Current Report on Form 8-K filed with the SEC on June 9, 2015 and incorporated by reference into this prospectus; and

the other information contained in or incorporated by reference into this prospectus.

 

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Unaudited Pro Forma Condensed Combined Statement of Income

Giving Effect to the Lorillard Merger and the Divestiture

For the Nine Months Ended September 30, 2015

(Dollars in Millions, Except Per Share Amounts)

 

		RAI				Lorillard				Reclassifications Note 2a				Merger- Related Pro Forma Adjustments Note 2				Notes		Pro Forma for Merger Excluding Divestiture				Divestiture Note 3				Notes		Pro Forma for Merger Including Divestiture
Net sales		$	7,419			$	3,244			$	(888	)		$	—					$	9,775			$	(952	)		3a		$	8,823
Net sales, related party			202				—				—				—						202				—						202
Net sales			7,621				3,244				(888	)			—						9,977				(952	)					9,025
Costs and expenses:
Cost of products sold			3,338				1,968				(888	)			(45	)		2b, 2h			4,373				(452	)		3b			3,921
Selling, general and administrative expenses			1,415				534				(5	)			(296	)		2d, 2h			1,648				(146	)		3c			1,502
Amortization expense			12				—				5				7			2c			24				(5	)		3d			19
Asset impairment and exist charges			99				—				—				—						99				—						99
Gain on divestiture			(3,506	)			—				—				—						(3,506	)			3,506			3e			—
Operating income			6,263				742				—				334						7,339				(3,855	)					3,484
Interest and debt expense			385				82				—				100			2e, 2f			567				—						567
Interest income			(4	)			(2	)			—				—						(6	)			—						(6	)
Other expense, net			8				—				—				—						8				—						8
Income from continuing operations before income taxes			5,874				662				—				234						6,770				(3,855	)					2,915
Provision for income taxes			2,900				278				—				91			2g			3,269				(2,169	)		3f			1,100
Net income		$	2,974			$	384			$	—			$	143					$	3,501			$	(1,686	)				$	1,815
Earnings per share attributable to RAI shareholders:
Basic		$	2.46																											$	1.27				Note 4
Diluted		$	2.45																											$	1.27				Note 4
Weighted average shares outstanding, in thousands:
Basic			1,209,503																												1,429,094				Note 4
Diluted			1,212,933																												1,432,524				Note 4

See accompanying notes to unaudited pro forma condensed combined statements of income.

 

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Unaudited Pro Forma Condensed Combined Statement of Income

Giving Effect to the Lorillard Merger and the Divestiture

For the Year Ended December 31, 2014

(Dollars in Millions, Except Per Share Amounts)

 

		RAI				Lorillard				Reclassifications Note 2a				Merger- Related Pro Forma Adjustments Note 2				Notes		Pro Forma for Merger Excluding Divestiture				Divestiture Note 3				Notes		Pro Forma for Merger Including Divestiture
Net sales		$	8,160			$	6,990			$	(1,938	)		$	—					$	13,212			$	(2,248	)		3a		$	10,964
Net sales, related party			311				—				—				—						311				—						311
Net sales			8,471				6,990				(1,938	)			—						13,523				(2,248	)					11,275
Costs and expenses:
Cost of products sold			4,058				4,252				(1,938	)			(24	)		2b, 2h			6,348				(1,092	)		3b			5,256
Selling, general and administrative expenses			1,871				630				(23	)			(70	)		2d, 2h			2,408				(268	)		3c			2,140
Amortization expense			11				—				23				14			2c			48				(23	)		3d			25
Operating income			2,531				2,108				—				80						4,719				(865	)					3,854
Interest and debt expense			286				179				—				296			2e, 2f			761				—						761
Interest income			(3	)			(7	)			—				—						(10	)			—						(10	)
Other income, net			(14	)			—				—				—						(14	)			—						(14	)
Income from continuing operations before income taxes			2,262				1,936				—				(216	)					3,982				(865	)					3,117
Provision for income taxes			817				749				—				(84	)		2g			1,482				(337	)		3f			1,145
Income from continuing operations			1,445				1,187				—				(132	)					2,500				(528	)					1,972
Income from discontinued operations, net of tax			25				—				—				—						25				—						25
Net income		$	1,470			$	1,187			$	—			$	(132	)				$	2,525			$	(528	)				$	1,997
Earnings per share attributable to RAI shareholders:
Basic		$	1.38																											$	1.40				Note 4
Diluted		$	1.37																											$	1.39				Note 4
Weighted average shares outstanding, in thousands:
Basic			1,066,320																												1,431,094				Note 4
Diluted			1,069,940																												1,434,714				Note 4

See accompanying notes to unaudited pro forma condensed combined statements of income.

 

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Notes to Unaudited Pro Forma Condensed Combined Statements of Income

Note 1—Basis of Presentation

The accompanying unaudited pro forma statements of income are intended to reflect the impact of the Lorillard merger on RAI’s consolidated financial statements and presents the pro forma consolidated results of operations of RAI after giving effect to the Lorillard merger and divestiture. The accompanying unaudited pro forma financial information for the Lorillard merger is based on the historical financial statements of RAI and Lorillard, and the accompanying unaudited pro forma financial information for the divestiture is based on the historical accounting records of RAI and Lorillard (in each case, with respect to Lorillard, through June 12, 2015, the date of the Lorillard merger).

Merger-related pro forma adjustments are included only to the extent they are directly attributable to the Lorillard merger, factually supportable and expected to have a continuing impact on the results of the combined company. The accompanying unaudited pro forma financial information is presented for illustrative purposes only.

Immediately prior to or immediately after the closing of the Lorillard merger, as the case may be, and pursuant to the asset purchase agreement and the transfer agreement, RAI and Lorillard, directly or indirectly through one or more of their respective subsidiaries or affiliates, divested the transferred assets and certain liabilities to Imperial Sub in the divestiture. Divestiture-related pro forma adjustments are included only to the extent they are directly attributable to the divestiture, factually supportable, and expected to have a continuing impact on the results of the combined company.

The Lorillard merger and the divestiture were actually completed on June 12, 2015.

This unaudited pro forma condensed combined statements of income have been prepared using the acquisition method of accounting for business combinations and are based upon the historical financial statements of RAI and Lorillard, which have been prepared in accordance with Regulation S-X promulgated by the SEC. They are based on certain assumptions and adjustments as discussed in these accompanying notes. The combined condensed consolidated balance sheet (unaudited) as of September 30, 2015, is included in RAI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, incorporated by reference herein, with the purchase price allocated to certain assets acquired and liabilities assumed based on their fair values as of the acquisition date.

The adjustments in the unaudited pro forma condensed combined statements of income reflect adjustments necessary to account for the Lorillard merger and the divestiture as described herein. Further adjustments will be required pending allocation of the purchase price resulting from the determination of fair value of assets acquired and liabilities assumed. The final determination of the fair market value of the assets acquired and liabilities assumed and the final allocation of the consideration will be finalized when all information is received, but not later than one year from the date of the completion of the Lorillard merger.

The Unaudited Pro Forma Condensed Combined Statement of Income for the nine months ended September 30, 2015 and the year ended December 31, 2014 gives effect to the Lorillard merger and divestiture as if they had occurred on January 1, 2014, the beginning of the earliest period presented.

Other Merger-Related Adjustments

The unaudited pro forma statements of income reflect certain reclassifications of the Lorillard statement of income categories to conform to RAI presentation.

The unaudited pro forma statements of income do not reflect any adjustments to conform Lorillard’s accounting policies to those adopted by RAI, as no such adjustments have been identified that would have a material effect on the unaudited pro forma statements of income.

 

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Further review may identify additional reclassifications, intercompany transactions or differences between the accounting policies of the two companies that, when conformed, could have a material impact on the unaudited pro forma statements of income of the combined company. At this time, RAI is not aware of any reclassifications, intercompany transactions or accounting policy differences that would have a material impact on the unaudited pro forma statements of income that are not reflected in the pro forma adjustments.

Items Not Adjusted in the Unaudited Pro Forma Statements of Income

The unaudited pro forma statements of income do not include any adjustment for actual costs incurred related to or that may result from integration activities.

RAI anticipates that the Lorillard merger and divestiture will result in significant annual cost savings and operating synergies that would be unachievable without having completed the Lorillard transactions. No assurance can be made that RAI will be able to achieve these cost savings and synergies or when they will be realized, and no such cost savings or synergies have been reflected in the unaudited pro forma statements of income.

Note 2—Reclassifications and Merger-Related Pro Forma Adjustments

The unaudited pro forma statements of income reflect the following adjustments related to the Lorillard merger:

 

(a)

Reclassifications—Certain reclassifications have been made to amounts in the Lorillard statement of income to conform to RAI’s presentation, including reclassifying Lorillard’s federal excise taxes as a reduction in net sales and presenting Lorillard’s amortization expense within the amortization expense caption instead of selling, general and administrative expenses.

 

(b)

Inventory—Adjustment to reflect Lorillard’s inventories at fair value. Lorillard’s tobacco inventories historically have been stated on a last-in, first-out, referred to as LIFO basis, and the adjustment based on historical Lorillard financial information is to reverse the LIFO impact of $40 million and $19 million for the nine months ended September 30, 2015, and the year ended December 31, 2014, respectively. The pro forma results include a nonrecurring fair value adjustment to finished goods inventories associated with the acquisition of $159 million in the Unaudited Pro Forma Condensed Combined Statement of Income for the nine months ended September 30, 2015.

 

(c)

Intangible assets amortization—Adjustment to reflect the amortization associated with the preliminary fair value estimates of Lorillard’s identifiable intangible assets that are customer relationships and trademarks and the amortization for the customer relationships and trademarks with finite life. The adjustment to increase amortization expense of $7 million and $14 million for the nine months ended September 30, 2015, and the year ended December 31, 2014, respectively, is reflected in the unaudited pro forma condensed combined statements of income.

 

(d)

Transaction-related costs—An adjustment to eliminate nonrecurring transaction-related costs of $288 million ($54 million for RAI and $234 million for Lorillard) and $64 million ($38 million for RAI and $26 million for Lorillard) recorded in the Unaudited Pro Forma Condensed Combined Statement of Income for the nine months ended September 30, 2015, and the year ended December 31, 2014, respectively.

 

(e)

Long-term debt/Interest expense—Adjustments to record the Lorillard debt portfolio at fair value using quoted market values as of June 12, 2015. The pro forma adjustments are a result of the quoted market values of the Lorillard debt portfolio being higher than the face amount of the related debt. The quoted market value of a debt instrument is higher than the face amount of the debt when the market interest

 

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rates are lower than the stated interest rate of the debt. In acquisition accounting, this results in an increase in debt and a reduction in interest expense to reflect the lower market interest rate. The difference between the fair value of each borrowing, which was based on market interest rates and values as of June 12, 2015, based on each borrowing’s CUSIP bid price, and the face amount of each borrowing is amortized as a reduction in interest expense utilizing the effective interest method over the remaining term of each borrowing based on its maturity date. For the total debt portfolio, the adjustment is a reduction in interest expense of $33 million and $66 million for the nine months ended September 30, 2015, and the year ended December 31, 2014, respectively, resulting in interest expense that effectively reflects current market interest rates rather than the stated interest rate. Interest expense is further adjusted to reflect the elimination of amortization related to Lorillard’s previously deferred debt issuance costs of $2 million and $4 million for the nine months ended September 30, 2015 and the year ended December 31, 2014, respectively.

 

(f)

Bond issuance/Interest expense—Pro forma statement of income reflects that the proceeds from RAI’s senior notes issued on June 12, 2015 were used in lieu of any borrowings under the bridge credit facility described below. The adjustment reflects the issuance of the notes offering of $9 billion using a weighted average interest rate of approximately 4.50%.

In September 2014, RAI entered into a bridge credit agreement, referred to as the bridge credit facility, with a syndicate of lenders, providing for a 364-day senior unsecured term loan in the aggregate principal amount of up to $9 billion. The bridge credit facility was available for the purpose of financing a portion of the merger consideration. On June 12, 2015, the bridge credit facility terminated in accordance with its terms.

Given that the June 12, 2015 RAI notes offering was made in lieu of any borrowings under the bridge credit facility, there also was an adjustment to eliminate nonrecurring bridge credit facility financing costs of $48 million and $39 million recorded in the Unaudited Pro Forma Condensed Combined Statement of Income for the nine months ended September 30, 2015, and the year ended December 31, 2014, respectively.

 

(g)

Income taxes—Adjustment to record the deferred tax impact of acquisition accounting adjustments, primarily related to inventory, intangible assets and long-term debt. The pro forma adjustment to provision for (benefit from) income taxes represents the application of RAI’s estimated statutory tax rate of 39.0% to the pro forma adjustments.

 

(h)

Pension amortization—Adjustment to remove the amortization of the net actuarial losses and prior service costs for the Lorillard pension and postretirement plans of $13 million ($5 million removed from cost of products sold and $8 million removed from selling, general and administrative expenses) and $11 million ($5 million removed from cost of products sold and $6 million removed from selling, general and administrative expenses) for the nine months ended September 30, 2015, and the year ended December 31, 2014, respectively.

Note 3—The Divestiture

In connection with entry into the merger agreement, on July 15, 2014, RAI entered into the asset purchase agreement with Imperial Sub, and for certain limited purposes, Imperial, pursuant to which, on June 12, 2015, at the satisfaction of the conditions to the closing of the Lorillard merger, Imperial Sub acquired the transferred assets from RAI, indirectly through one or more of its affiliates or subsidiaries, consisting of (1) certain assets owned by RAI subsidiaries, related to the cigarette brands WINSTON, KOOL and SALEM and (2) certain assets currently owned by Lorillard subsidiaries, related to the electronic cigarette brand blu eCIGS (including SKYCIG) and the cigarette brand MAVERICK, as well as Lorillard’s owned and leased real property, including its manufacturing, research and development facilities and headquarters in Greensboro, North Carolina and the tobacco receiving and storage facilities in Danville, Virginia, and the transferred employees, together with certain associated liabilities. Although most of the transferred assets were transferred immediately after the closing of the Lorillard merger by RAI directly or indirectly through its affiliates and subsidiaries, pursuant to the transfer

 

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agreement, certain of the Lorillard transferred assets were transferred immediately prior to the closing of the Lorillard merger. The unaudited pro forma statements of income include the effects of the sale of these brands, plus assets and liabilities associated with the transfer agreement.

The purchase price for the transferred assets and certain related liabilities divested in the divestiture was $7.056 billion. The unaudited pro forma statements of income reflect the allocations of revenues and expenses directly attributable to the brands sold to Imperial Sub in the divestiture, as well as certain other allocations deemed reasonable by management to present the unaudited pro forma statements of income. The allocation methodologies developed for the purposes of these pro forma amounts are considered reasonable by management. The costs do not include costs associated with certain shared functions, and accordingly the financial information does not reflect the results of operations as if these brands and assets were stand-alone entities for the periods presented.

The unaudited pro forma statements of income reflect the following adjustments related to the divestiture:

 

(a)

Net sales—Adjustment to reflect the net sales of the cigarette brands WINSTON, KOOL and SALEM from RAI’s historical financial information and net sales of the cigarette brand MAVERICK and the electronic cigarette brand blu eCIGS from Lorillard’s historical financial information.

 

(b)

Cost of products sold—Adjustment to reflect the cost of products sold for the divested brands.

 

(c)

Selling, general and administrative expenses—Adjustment to reflect the estimated costs of these expenses for the divested brands.

 

(d)

Amortization expense—Adjustment to reflect the elimination of amortization of these trademarks of $5 million and $23 million for the nine months ended September 30, 2015, and the year ended December 31, 2014, respectively.

 

(e)

Gain on divestiture—Adjustment to reflect the gain on divestiture related to the asset purchase agreement with Imperial Sub.

 

(f)

Income taxes—The pro forma adjustment to provision for (benefit from) income taxes represents the application of RAI’s estimated statutory tax rate of 39.0% to the pro forma adjustments and the applicable income taxes associated with the gain on divestiture.

Note 4—Earnings per share

On July 27, 2015, RAI announced that its board of directors had declared a two-for-one stock split, in the form of a special 100% stock dividend, to shareholders of record on August 17, 2015. The stock dividend was distributed to shareholders on August 31, 2015. Except as otherwise noted in this prospectus, all share and per share amounts have been adjusted to reflect this stock split. The pro forma combined basic and diluted earnings per share for the nine months ended September 30, 2015, and the year ended December 31, 2014, are calculated as follows, after giving effect to the stock split.

 

		Pro Forma Nine Months Ended September 30, 2015				Pro Forma Year Ended December 31, 2014
		(dollars in millions  except per share data)
Pro forma net income		$	1,815			$	1,997
Pro forma basic weighted average shares outstanding			1,429,094				1,431,094
Dilutive effect of securities:
RAI restricted stock units			3,430				3,620
Pro forma diluted weighted average shares outstanding, in thousands			1,432,524				1,434,714
Pro forma basic earnings per share		$	1.27			$	1.40
Pro forma diluted earnings per share		$	1.27			$	1.39

 

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DESCRIPTION OF MATERIAL INDEBTEDNESS

Revolving Credit Facility

On December 18, 2014, RAI entered into the revolving credit facility with a syndicate of lenders, providing for a five-year $2 billion senior unsecured revolving credit facility, which may be increased to $2.35 billion at the discretion of the lenders upon the request of RAI. The original maturity date of the revolving credit facility was December 18, 2019. Pursuant to the maturity date extension provision of the revolving credit facility, the requisite lenders agreed, in October 2015 and upon RAI’s request, to extend the maturity date of the revolving credit facility by 12 months, to December 18, 2020. Subject to the terms and conditions stated therein, the maturity date of the revolving credit facility may be extended further, upon the request of RAI and with the consent of the requisite lenders, an additional 12 months to December 18, 2021.

Certain of RAI’s subsidiaries, including its material subsidiaries, as such term is defined in the revolving credit facility, have guaranteed, on an unsecured basis, RAI’s obligations under the revolving credit facility.

As of September 30, 2015, there were no outstanding borrowings and $8 million of letters of credit outstanding under the revolving credit facility.

RAI Notes

As of September 30, 2015, the principal amount of RAI’s outstanding notes was $17.2 billion, including the old notes, with maturity dates ranging from 2015 to 2045. RAI, at its option, may redeem any or all of its outstanding notes, in whole or in part at any time, subject to the payment of an applicable premium. RAI’s outstanding notes include $9.0 billion aggregate principal amount of RAI senior notes that were issued on June 12, 2015, to fund part of the cash portion of the merger consideration. Interest on the notes is payable semi-annually.

RAI’s obligations under its existing notes are unsecured and are guaranteed, on an unsecured basis, by the same subsidiaries that guarantee its obligations under the revolving credit facility, and that will guarantee the new notes issued in the Exchange Offers.

At September 30, 2015, RAI had $872 million of current maturities of long-term debt. RAI repaid $450 million of notes on their maturity date of October 30, 2015. See note 12 to the condensed consolidated financial statements (unaudited) included in RAI’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2015, for additional information.

Lorillard Tobacco Notes

On June 11, 2015, RAI commenced offers to exchange any and all (to the extent held by eligible holders) of the $3.5 billion aggregate principal amount of the then outstanding Lorillard Tobacco notes for the old notes. RAI completed the private exchange offers on July 15, 2015. Approximately $3.1 billion, representing 89%, of the Lorillard Tobacco notes were exchanged for the old notes.

As of September 30, 2015, the principal amount of the Lorillard Tobacco notes was $377 million, with maturity dates ranging from 2016 to 2041. Such notes represent the unexchanged Lorillard Tobacco notes, originally issued by Lorillard Tobacco, as to which RJR Tobacco became the principal obligor in connection with the closing of the Lorillard Tobacco merger. RAI and RJR are the guarantors of the Lorillard Tobacco notes. Interest on the notes is payable semi-annually.

At September 30, 2015, RJR Tobacco had $86 million of current maturities of long-term debt. See note 12 to the condensed consolidated financial statements (unaudited) included in RAI’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2015, for additional information relating to the Lorillard Tobacco notes.

 

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DESCRIPTION OF THE NEW NOTES

General

The new notes will be the direct obligations of RAI and will consist of seven series of debt securities to be issued under the RAI indenture. The following summary highlights selected provisions of the RAI indenture (which includes the guarantees) and the new notes and may not contain all the information that is important to you. For a complete description of the RAI indenture and new notes, you should read carefully all of their provisions. We have previously filed with the SEC a copy of the RAI indenture, as supplemented to date. A copy of the RAI indenture and new notes are also available upon request to the Office of the Secretary, Reynolds American Inc., P.O. Box 2990, Winston-Salem, North Carolina 27102-2990. In addition, this summary is qualified in its entirety by reference to the Trust Indenture Act. The maximum aggregate principal amount of each series of new notes is also set forth in the table below.

The form and terms of each series of new notes will be the same as the form and terms of the corresponding series of old notes, except that the offer and sale of the new notes have been registered under the Securities Act, and the new notes will not have transfer restrictions, registration rights or certain rights to additional interest that the old notes have. The new notes will represent the same debt as the corresponding old notes, and will be issued under the same indenture as the old notes.

References to “debt securities” in this section refer to debt securities issued under the RAI indenture, including the new notes, unless the context requires otherwise.

Up to $3,122,670,000 aggregate principal amount of new notes, consisting of:

 

1.

Up to $414,793,000 aggregate principal amount of 3.500% Senior Notes due 2016;

 

2.

Up to $447,092,000 aggregate principal amount of 2.300% Senior Notes due 2017;

 

3.

Up to $668,689,000 aggregate principal amount of 8.125% Senior Notes due 2019;

 

4.

Up to $641,462,000 aggregate principal amount of 6.875% Senior Notes due 2020;

 

5.

Up to $473,689,000 aggregate principal amount of 3.750% Senior Notes due 2023;

 

6.

Up to $236,748,000 aggregate principal amount of 8.125% Senior Notes due 2040; and

 

7.

Up to $240,197,000 aggregate principal amount of 7.000% Senior Notes due 2041

are being offered in exchange for the seven corresponding series of old notes with identical interest rate provisions, interest payment dates, and maturity dates.

The RAI indenture does not limit the aggregate principal amount of debt securities that may be issued thereunder and provides that debt securities may be issued thereunder from time to time in one or more additional series. We may “reopen” a previous issue of a series of debt securities and issue additional debt securities of that issue without the consent of the noteholders of the relevant series. The offered new notes and any additional notes of RAI subsequently issued under the RAI indenture will rank equally with each other and RAI’s existing notes and will be treated as a single class for certain purposes under the RAI indenture, including with respect to amendments of the RAI indenture and defaults affecting all series of notes issued under the RAI indenture. The RAI indenture contains covenants that:

 

•

restrict the ability of RAI and certain of its subsidiaries to:

 

•

mortgage or pledge certain of their assets to secure indebtedness,

 

•

engage in sale/leaseback transactions, or

 

•

consolidate, merge or transfer all or substantially all of their property and assets; and

 

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•

prohibit RJR, at any time in the future that it does not guarantee the obligations of RAI under the new notes, from creating, incurring, issuing, assuming, guaranteeing or otherwise becoming directly or indirectly liable, contingently or otherwise, with respect to any indebtedness to persons other than RAI or any of the guarantors (excluding accounts payable), other than debt securities issued under the RAI indenture, including the new notes offered hereby and the existing notes of RAI, and the revolving credit facility (and any replacements or refinancings thereof).

The RAI indenture does not contain any cross-default or cross-acceleration provisions, and does not limit the ability of RAI or any of its subsidiaries (other than RJR, as described above) to incur additional indebtedness.

Upon a payment default with respect to any series of notes, however, or in other circumstances causing indebtedness under any series of notes to be accelerated, an event of default will exist under the revolving credit facility.

The new notes will be issued in fully registered form, without coupons, only in minimum denominations of $2,000, and integral multiples of $1,000 in excess of $2,000. The new notes are redeemable at the option of RAI as described under “—Optional Redemption.” The new notes will not be subject to any sinking fund.

Maturity and Interest

Each new note matures on the same date as the corresponding tendered old note. Interest on the new notes issued in exchange for old notes will accrue from the last interest payment date on which interest was paid on such old notes or, if no interest has been paid on such old notes, from the last interest payment date on which interest was paid on the Lorillard Tobacco notes for which the old notes were issued in exchange. Notwithstanding the foregoing, if new notes are issued in exchange for old notes between a record date for the payment of interest on such series of old notes and the interest payment date for such series of old notes following such record date, interest on the corresponding series of new notes will begin to accrue from such interest payment date. If your old notes are accepted for exchange, you will be deemed to have waived your right to receive any interest on the old notes accrued since your last interest payment date (other than, in the event that new notes are issued in exchange for old notes between a record date for the payment of interest on such series of old notes and the interest payment date for such series of old notes following such record date, your right as a holder of old notes of such series on such record date to receive an interest payment on such old notes related to such record date). Consequently, holders of old notes whose old notes are accepted for exchange will receive the same interest payments on the new notes that they would have received on the old notes had they not exchanged their old notes in the Exchange Offers.

The interest rates, maturity dates and interest payment dates for the seven series of new notes offered in the Exchange Offers are set forth in the table below. Interest is payable semi-annually, in arrears, on the interest payment dates to the persons in whose names the new notes are registered at the close of business on the preceding interest payment record date, except that interest payable at maturity of the new notes shall be paid to the same persons to whom principal of such new notes is payable. Interest will be computed on the new notes on the basis of a 360-day year of twelve 30-day months.

 

Interest Rates and Maturity Dates		Interest Payment Dates
3.500% Senior Notes due August 4, 2016		February 4 and August 4
2.300% Senior Notes due August 21, 2017		February 21 and August 21
8.125% Senior Notes due June 23, 2019*		June 23 and December 23
6.875% Senior Notes due May 1, 2020		May 1 and November 1
3.750% Senior Notes due May 20, 2023		May 20 and November 20
8.125% Senior Notes due May 1, 2040		May 1 and November 1
7.000% Senior Notes due August 4, 2041		February 4 and August 4

 

*	The interest rate on the 2019 new notes is subject to adjustment as described below under “—Interest Rate Adjustment on the 2019 New Notes.”

 

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If an interest payment date (other than the maturity date) falls on a day that is not a business day, the interest payment date shall be postponed to the next succeeding business day. If the maturity date of the new notes falls on a day that is not a business day, we will make the required payment of principal and interest on the immediately succeeding business day, as if it were made on the date the payment was due. Interest will not accrue as a result of any postponed or delayed payment in accordance with this paragraph.

Interest Payment Record Dates

The interest payment record dates for each series of new notes are set forth in the table below:

 

Series		Interest Payment Record Dates
3.500% Senior Notes due 2016		January 20 and July 20
2.300% Senior Notes due 2017		February 6 and August 6
8.125% Senior Notes due 2019		June 8 and December 8
6.875% Senior Notes due 2020		April 15 and October 15
3.750% Senior Notes due 2023		May 5 and November 5
8.125% Senior Notes due 2040		April 15 and October 15
7.000% Senior Notes due 2041		January 20 and July 20

Interest Rate Adjustment on the 2019 New Notes

The interest rate payable on the 2019 new notes will be subject to adjustments from time to time if either Moody’s or S&P or, in either case, any substitute rating agency thereof downgrades (or subsequently upgrades) the debt rating assigned to the 2019 new notes, in the manner described below.

If the rating from Moody’s (or any substitute rating agency thereof) of the 2019 new notes is decreased to a rating set forth in the immediately following table, the interest rate on the 2019 new notes will increase such that it will equal the interest rate payable on the 2019 new notes on the date of their issuance plus the percentage set forth opposite the ratings from the table below:

 

Moody’s Rating*		Percentage Points
Ba1			0.25
Ba2			0.50
Ba3			0.75
B1 or below			1.00

 

*	Including the equivalent ratings of any substitute rating agency.

In addition, if the rating from S&P (or any substitute rating agency thereof) of the 2019 new notes is decreased to a rating set forth in the immediately following table, the interest rate on the 2019 new notes will increase such that it will equal the interest rate payable on the 2019 new notes on the date of their issuance plus the percentage set forth opposite the ratings from the table below:

 

S&P Rating*		Percentage Points
BB+			0.25
BB			0.50
BB-			0.75
B+ or below			1.00

 

*	Including the equivalent ratings of any substitute rating agency.

 

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If at any time the interest rate on the 2019 new notes has been adjusted upward and either Moody’s or S&P (or, in either case, a substitute rating agency thereof), as the case may be, subsequently increases its rating of the 2019 new notes to any of the threshold ratings set forth above, the interest rate on the 2019 new notes will be decreased such that the interest rate for the 2019 new notes equals the interest rate payable on the 2019 new notes on the date of their issuance plus the percentages set forth opposite the ratings from the tables above in effect immediately following the increase. If Moody’s (or any substitute rating agency thereof) subsequently increases its rating of the 2019 new notes to Baa3 (or its equivalent, in the case of a substitute rating agency) or higher, and S&P (or any substitute rating agency thereof) increases its rating to BBB- (or its equivalent, in the case of a substitute rating agency) or higher, the interest rate on the 2019 new notes will be decreased to 8.125%. In addition, the interest rate on the 2019 new notes will permanently cease to be subject to any adjustment described above (notwithstanding any subsequent decrease in the ratings by either or both rating agencies) if the 2019 new notes become rated A3 and A- (or the equivalent of either such rating, in the case of a substitute rating agency) or higher by Moody’s and S&P (or, in either case, a substitute rating agency thereof), respectively (or one of these ratings if the 2019 new notes are only rated by one rating agency).

Each adjustment required by any decrease or increase in a rating set forth above, whether occasioned by the action of Moody’s or S&P (or, in either case, a substitute rating agency thereof), shall be made independent of any and all other adjustments. In no event shall (1) the interest rate for the 2019 new notes be reduced to below 8.125% or (2) the total increase in the interest rate on the 2019 new notes exceed 2.00% above 8.125%.

No adjustments in the interest rate of the 2019 new notes shall be made solely as a result of a rating agency ceasing to provide a rating of the 2019 new notes. If at any time fewer than two rating agencies provide a rating of the 2019 new notes for a reason beyond our control, we will use our commercially reasonable efforts to obtain a rating of the 2019 new notes from a substitute rating agency, to the extent one exists, and if a substitute rating agency exists, for purposes of determining any increase or decrease in the interest rate on the 2019 new notes pursuant to the tables above:

 

•

such substitute rating agency will be substituted for the last rating agency to provide a rating of the 2019 new notes but which has since ceased to provide such rating,

 

•

the relative rating scale used by such substitute rating agency to assign ratings to senior unsecured debt will be determined in good faith by an independent investment banking institution of national standing appointed by us and, for purposes of determining the applicable ratings included in the applicable table above with respect to such substitute rating agency, such ratings will be deemed to be the equivalent ratings used by Moody’s or S&P, as applicable, in such table, and

 

•

the interest rate on the 2019 new notes will increase or decrease, as the case may be, such that the interest rate equals the interest rate payable on the 2019 new notes on the date of their issuance plus the appropriate percentage, if any, set forth opposite the rating from such substitute rating agency in the applicable table above (taking into account the provisions of the second clause above) (plus any applicable percentage resulting from a decreased rating by the other rating agency).

For so long as only one rating agency provides a rating of the 2019 new notes, any subsequent increase or decrease in the interest rate of the 2019 new notes necessitated by a reduction or increase in the rating by the rating agency providing the rating shall be twice the percentage set forth in the applicable table above. For so long as none of Moody’s, S&P or a substitute rating agency provides a rating of the 2019 new notes for reasons within our control, the interest rate on the 2019 new notes will increase to, or remain at, as the case may be, 2.00% above the interest rate payable on the 2019 new notes on the date of their issuance.

Any interest rate increase or decrease described above will take effect from the first day of the interest period during which a rating change requires an adjustment in the interest rate. If Moody’s or S&P (or, in either case, a substitute rating agency thereof) changes its rating of the 2019 new notes more than once during any particular interest period, the last change by such agency will control for purposes of any interest rate increase or decrease with respect to the 2019 new notes described above relating to such rating agency’s action.

 

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If the interest rate payable on the 2019 new notes is increased as described above, the term “interest,” as used with respect to the 2019 new notes, will be deemed to include any such additional interest unless the context otherwise requires.

The Guarantees

Upon issuance, certain of RAI’s direct and indirect subsidiaries, collectively referred to as the guarantors, will fully, unconditionally and irrevocably guarantee, on a joint and several basis, the full and prompt payment of the principal of, premium, if any, and interest on the new notes on an unsubordinated basis. The entities that will initially guarantee the new notes are RAI’s direct subsidiaries, RAI Services Company, Conwood Holdings, Inc., RJR and Santa Fe Natural Tobacco Company, Inc., and RAI’s indirect subsidiaries, American Snuff Company, LLC, Rosswil LLC, R. J. Reynolds Global Products, Inc., R. J. Reynolds Tobacco Company, Reynolds Finance Company, Reynolds Innovations Inc., R. J. Reynolds Tobacco Co. and Lorillard Licensing Company LLC. These same entities guarantee RAI’s obligations under the revolving credit facility and RAI’s existing notes.

Each subsidiary of RAI that, in the future, guarantees RAI’s obligations under its revolving credit facility, or any replacement or refinancing thereof, will guarantee RAI’s obligations under the new notes. Under the revolving credit facility, only “material subsidiaries” of RAI (within the meaning of the revolving credit facility) are required to become guarantors thereof.

If a guarantor of the new notes ceases to be a guarantor under the revolving credit facility (or any replacements or refinancings thereof), for any reason, such guarantor will be deemed released from all of its obligations under the RAI indenture and its guarantee of the new notes will terminate. Generally, a guarantor will be released from its obligations under such facility if it ceases to be a subsidiary of RAI in a transaction permitted by the facility or if it ceases to be a material subsidiary.

Ranking

The new notes will be the senior unsecured obligations of RAI, and will rank equally in right of payment with RAI’s existing and future senior obligations (except those obligations preferred by operation of law) and senior to any existing and future obligations from time to time of RAI that are, by their terms, expressly subordinated in right of payment to the new notes. The new notes will be structurally subordinated to the obligations of non-guarantor subsidiaries of RAI.

Each of the guarantees related to the new notes will be the senior unsecured obligations of the applicable guarantor, and will rank equally in right of payment with the existing and future senior obligations of such guarantor (except those obligations preferred by operation of law). Each of the guarantees related to the new notes will rank senior to any existing and future subordinated obligations from time to time of such guarantor that are, by their terms, expressly subordinated in right of payment to the guarantee. Each guarantee will be structurally subordinated to all of the obligations of any non-guarantor subsidiaries of the applicable guarantor.

Change of Control Repurchase Event

If a Change of Control Repurchase Event (as defined below) occurs with respect to a series of new notes offered hereby, unless we have exercised our right to redeem the new notes of that series as described below, we will make an offer to each holder of new notes of that series to repurchase all or any part (in excess of $2,000 and in integral multiples of $1,000) of that holder’s notes of that series at a repurchase price in cash equal to 101% of the aggregate principal amount of new notes repurchased plus any accrued and unpaid interest on the new notes repurchased to the date of repurchase. Within 30 days following any Change of Control Repurchase Event, we will mail a notice to each holder, with a copy to the trustee, describing the transaction or transactions that constitute the Change of Control Repurchase Event and offering to repurchase new notes on the payment date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed.

 

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We will comply with the requirements of Rule 14e-1 under the Securities Exchange Act and any other securities laws and regulations thereunder, to the extent those laws and regulations are applicable in connection with the repurchase of the new notes as a result of a Change of Control Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase Event provisions of the new notes, we will comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations under the Change of Control Repurchase Event provisions of the new notes by virtue of such conflict.

On the Change of Control Repurchase Event payment date, we will, to the extent lawful:

 

•

accept for payment all new notes or portions of new notes (in excess of $2,000 and in integral multiples of $1,000) properly tendered pursuant to our offer;

 

•

deposit with RAI’s paying agent an amount equal to the aggregate repurchase price in respect of all new notes or portions of new notes properly tendered; and

 

•

deliver or cause to be delivered to the trustee the new notes properly accepted, together with an officers’ certificate stating the aggregate principal amount of new notes being purchased by us.

The paying agent will promptly mail to each holder of new notes properly tendered the repurchase price for the new notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each holder a new note equal in principal amount to any unpurchased portion of any new notes surrendered; provided that each new note will be in a principal amount of $2,000 or an integral multiple of $1,000.

We will not be required to make an offer to repurchase the new notes upon a Change of Control Repurchase Event if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by us, and such third party purchases all new notes properly tendered and not withdrawn under its offer.

We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we would decide to do so in the future. In addition, a Change of Control could occur with no action on our part. We could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control, but that could increase the amount of debt outstanding at such time or otherwise affect our capital structure or credit ratings.

Certain definitions relevant to Change of Control Repurchase Events are set forth below.

“Below Investment Grade Rating Event” means, with respect to each series of new notes, the new notes of that series are downgraded by each of the Rating Agencies on any date from the date of the public notice of an arrangement that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of Control (which period shall be extended so long as the rating of the new notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) from a rating that is Investment Grade to a rating that is below Investment Grade.

“Change of Control” means the occurrence of any of the following:

 

•

the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of RAI and its subsidiaries taken as a whole to any person other than RAI or one of its wholly owned subsidiaries;

 

•

the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any person other than RAI or one of its wholly owned subsidiaries becomes the beneficial owner, directly or indirectly, of more than 50% of the then outstanding number of shares of Voting Stock of RAI or other Voting Stock into which RAI’s Voting Stock is reclassified, consolidated, exchanged or changed, measured by voting power rather than number of shares;

 

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•

the consolidation of RAI with, or merger of RAI with or into, any person, or the consolidation of any person with, or merger with or into, RAI, in any such event pursuant to a transaction in which any of RAI’s outstanding Voting Stock or the Voting Stock of such other person is converted into or exchanged for cash, securities or other property, other than any such transaction where the shares of RAI’s Voting Stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the Voting Stock of the surviving person or any direct or indirect parent company of the surviving person immediately after giving effect to such transaction; and

 

•

the adoption of a plan relating to RAI’s liquidation or dissolution (other than its liquidation into a holding company newly formed in accordance with the following paragraph, provided that all claims and obligations of RAI are assumed by, and all assets are transferred to such holding company).

Notwithstanding the foregoing, a transaction will not be deemed to involve a Change of Control under the second clause above if (1) we become a direct or indirect wholly owned subsidiary of a holding company and (2) (a) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of our Voting Stock immediately prior to that transaction or (b) immediately following that transaction no person (other than a holding company satisfying the requirements of this sentence) is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company. As used in this paragraph and the definition of “Change of Control,” the term “person” has the meaning given thereto in Section 13(d)(3) of the Securities Exchange Act and the term “beneficial owner” has the meaning given thereto in Rules 13d-3 and 13d-5 promulgated under the Securities Exchange Act.

“Change of Control Repurchase Event” means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.

“Investment Grade” means a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s); a rating of BBB- or better by S&P (or its equivalent under any successor rating categories of S&P); or the equivalent investment grade credit rating from any additional Rating Agency or Rating Agencies selected by us pursuant to the second clause of the definition of Rating Agency.

“Rating Agency” means (1) each of Moody’s and S&P; and (2) if either of Moody’s or S&P ceases to rate the new notes or fails to make a rating of the new notes publicly available for reasons outside of our control, a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act, selected by us as a replacement agency for Moody’s or S&P, as the case may be.

“Voting Stock” means, with respect to any specified “person” (as that term is used in Section 13(d)(3) of the Securities Exchange Act) as of any date, the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.

The first clause of the definition of Change of Control includes a phrase relating to the direct or indirect sale, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of RAI and its subsidiaries, taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of new notes to require RAI to repurchase its new notes as a result of a sale, transfer, conveyance or other disposition of less than all of the properties or assets of RAI and its subsidiaries, taken as a whole, to another person or group may be uncertain.

 

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Optional Redemption

Series Other Than 2023 New Notes

Each series of new notes (other than the 2023 new notes) are redeemable, in whole at any time or in part from time to time, at any time after their issuance, at the option of RAI, at a redemption price equal to the greater of:

 

•

100% of the principal amount of new notes being redeemed, and

 

•

the sum of the present values of the remaining scheduled payments of principal and interest on the new notes being redeemed discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a yield equal to (1) the applicable Treasury Rate (as defined below), plus (2) 10 basis points,

plus accrued and unpaid interest on the principal amount of the applicable series of new notes being redeemed to the redemption date.

2023 New Notes

The 2023 new notes are redeemable, in whole at any time or in part from time to time, at any time after their issuance and prior to February 20, 2023, at the option of RAI, at a redemption price equal to the greater of:

 

•

100% of the principal amount of the 2023 new notes being redeemed, and

 

•

the sum of the present values of the remaining scheduled payments of principal and interest on the 2023 new notes being redeemed discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a yield equal to (1) the applicable Treasury Rate, plus (2) 10 basis points,

plus accrued and unpaid interest on the principal amount of the 2023 new notes being redeemed to the redemption date.

On or after February 20, 2023, the 2023 new notes are redeemable at the option of RAI, at any time or from time to time, either in whole or in part, at a redemption price equal to 100% of the principal amount of the 2023 new notes being redeemed, plus accrued and unpaid interest on the principal amount of the 2023 new notes being redeemed at such redemption date.

Definitions

Certain definitions relevant to determining the Treasury Rate are set forth below.

“Treasury Rate” means, with respect to any redemption date:

 

•

the yield, under the heading which represents the average for the immediate preceding week, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue will be determined and the Treasury Rate will be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or

 

•

if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to

 

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maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Price for such redemption date. The Treasury Rate will be calculated on the third business day preceding the redemption date.

“Comparable Treasury Issue” means the U.S. Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the relevant series of new notes to be redeemed (“Remaining Life”) that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the Remaining Life.

“Independent Investment Banker” means any of Citigroup Global Markets Inc. or J.P. Morgan Securities LLC, or, if all such firms are unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing appointed by RAI.

“Comparable Treasury Price” means:

 

•

the average of five Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations; or

 

•

if the Independent Investment Banker obtains fewer than five such Reference Treasury Dealer Quotations, the average of all such quotations.

“Reference Treasury Dealer” means:

 

•

Citigroup Global Markets Inc. or J.P. Morgan Securities LLC, and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a “Primary Treasury Dealer”), RAI will substitute for such firm another Primary Treasury Dealer; and

 

•

any other Primary Treasury Dealer selected by the Independent Investment Banker after consultation with RAI.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York City time, on the third business day preceding such redemption date.

Holders of new notes to be redeemed will receive notice thereof by first-class mail at least 30 and not more than 60 days prior to the date fixed for redemption. If fewer than all of the new notes of a series are to be redeemed, the trustee will select in accordance with applicable depository procedures, to the extent applicable, not more than 60 days prior to the redemption date, the particular new notes of that series or portions thereof for redemption from the outstanding and not previously called new notes of that series by such method as the trustee under the RAI indenture deems fair and appropriate.

Covenants

The following covenants apply to the new notes.

Restrictions on Liens

The RAI indenture provides that RAI will not, and will not permit any Restricted Subsidiary, as defined below, to:

 

•

mortgage or pledge as security for any indebtedness any Principal Property, as defined below, of RAI or a Restricted Subsidiary, whether such Principal Property is owned at the date of the RAI indenture

 

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or thereafter acquired, unless RAI secures or causes such Restricted Subsidiary to secure the debt securities equally and ratably with all indebtedness secured by such mortgage or pledge, so long as such indebtedness shall be so secured;

 

•

mortgage or pledge as security for any indebtedness any shares of stock, indebtedness or other obligations of RJR Tobacco, unless RAI pledges or secures or causes such Restricted Subsidiary to pledge or secure (1) such shares of stock, indebtedness or other obligations of RJR Tobacco to RAI equally and ratably with all indebtedness secured by such mortgage or pledge, so long as such indebtedness shall be so secured, and assign RAI’s security interest in such assets to the collateral agent to secure the debt securities equally and ratably with all indebtedness secured by such mortgage or pledge, so long as such indebtedness shall be so secured, or (2) the debt securities equally and ratably with all indebtedness secured with such mortgage or pledge, so long as such indebtedness shall be so secured; or

 

•

mortgage or pledge as security for any public bonds or notes any shares of stock, indebtedness or other obligations of a subsidiary (other than that of RJR Tobacco) held by or owed to any of RAI or such Restricted Subsidiary, whether such shares of stock, indebtedness or other obligations are owned at the date of the RAI indenture or thereafter acquired, unless RAI secures or causes such Restricted Subsidiary to secure the debt securities equally and ratably with all such public bonds or notes secured by such mortgage or pledge, so long as such public bonds or notes shall be so secured.

These covenants regarding liens do not apply in the case of:

 

•

the creation of any mortgage, pledge or other lien on any shares of stock, indebtedness or other obligations of a subsidiary or any Principal Property acquired after the date of the RAI indenture (including acquisitions by way of merger or consolidation) by RAI or a Restricted Subsidiary contemporaneously with such acquisition, or within 120 days thereafter, to secure or provide for the payment or financing of any part of the purchase price thereof, or the assumption of any mortgage, pledge or other lien upon any shares of stock, indebtedness or other obligations of a subsidiary or any Principal Property acquired after the date of the RAI indenture existing at the time of such acquisition, or the acquisition of any shares of stock, indebtedness or other obligations of a subsidiary or any Principal Property subject to any mortgage, pledge or other lien without the assumption thereof; provided, that every such mortgage, pledge or lien referred to in this clause shall attach only to the shares of stock, indebtedness or other obligations of a subsidiary or any Principal Property so acquired and fixed improvements thereon;

 

•

any mortgage, pledge or other lien on any shares of stock, indebtedness or other obligations of a subsidiary or any Principal Property existing at the date of the RAI indenture;

 

•

any mortgage, pledge or other lien on any shares of stock, indebtedness or other obligations of a subsidiary or any Principal Property in favor of RAI or any Restricted Subsidiary;

 

•

any mortgage, pledge or other lien on Principal Property being constructed or improved securing loans to finance such construction or improvements;

 

•

any mortgage, pledge or other lien on shares of stock, indebtedness or other obligations of a subsidiary or any Principal Property incurred in connection with the issuance of tax exempt governmental obligations; and

 

•

any renewal of or substitution for any mortgage, pledge or other lien permitted by any of the preceding clauses; provided, that in the case of a mortgage, pledge or other lien permitted under the second, third or fifth clauses above, the debt secured is not increased nor the lien extended to any additional assets.

Notwithstanding the foregoing, RAI or any Restricted Subsidiary may create or assume liens in addition to the permitted liens described above, and renew, extend or replace such liens, provided that at the time of such creation, assumption, renewal, extension or replacement, and after giving effect thereto, Exempted Debt, as defined below, does not exceed 10% of Consolidated Net Worth, as defined below.

 

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Restrictions on Sale and Leaseback Transactions

The RAI indenture provides that RAI will not, and will not permit any Restricted Subsidiary to, sell or transfer, directly or indirectly, except to RAI or a Restricted Subsidiary, any Principal Property as an entirety, or any substantial portion thereof, with the intention of taking back a lease of such property, except a lease for a period of three years or less at the end of which it is intended that the use of such property by the lessee will be discontinued; provided, that RAI or any Restricted Subsidiary may sell any such Principal Property and lease it back for a longer period if:

 

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RAI or such Restricted Subsidiary would be entitled, pursuant to the provisions of the RAI indenture described above under “—Restrictions on Liens,” to create a mortgage on the property to be leased securing Funded Debt, as defined below, in an amount equal to the Attributable Debt, as defined below, with respect to such sale and leaseback transaction without equally and ratably securing the outstanding debt securities issued under the RAI indenture; or

 

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RAI promptly informs the trustee of such transaction, the net proceeds of such transaction are at least equal to the fair value (as determined by resolution of the board of directors of RAI) of such property and RAI causes an amount equal to the net proceeds of the sale to be applied to the retirement, within 120 days after receipt of such proceeds, of Funded Debt incurred or assumed by RAI or a Restricted Subsidiary (including the debt securities);

provided, further, that in lieu of applying all of or any part of such net proceeds to such retirement, RAI may, within 75 days after such sale, deliver or cause to be delivered to the applicable trustee for cancellation either debentures or notes evidencing Funded Debt of RAI (which may include outstanding debt securities) or of a Restricted Subsidiary previously authenticated and delivered by the applicable trustee, and not theretofore tendered for sinking fund purposes or called for a sinking fund or otherwise applied as a credit against an obligation to redeem or retire such notes or debentures. If RAI so delivers debentures or notes to the applicable trustee with an officers’ certificate, the amount of cash which RAI will be required to apply to the retirement of Funded Debt will be reduced by an amount equal to the aggregate of the then applicable optional redemption prices (not including any optional sinking fund redemption prices) of such debentures or notes, or if there are no such redemption prices, the principal amount of such debentures or notes; provided, that in the case of debentures or notes which provide for an amount less than the principal amount thereof to be due and payable upon a declaration of the maturity thereof, such amount of cash shall be reduced by the amount of principal of such debentures or notes that would be due and payable as of the date of such application upon a declaration of acceleration of the maturity thereof pursuant to the terms of the indenture pursuant to which such debentures or notes were issued.

Notwithstanding the foregoing, RAI or any Restricted Subsidiary may enter into sale and leaseback transactions in addition to those permitted in the foregoing paragraph and without any obligation to retire any outstanding debt securities or other Funded Debt, provided that at the time of entering into such sale and leaseback transactions and after giving effect thereto, Exempted Debt does not exceed 10% of Consolidated Net Worth.

Restrictions on Mergers and Sales of Assets

Nothing contained in the RAI indenture will prevent any consolidation or merger of RAI into any other corporation or corporations (whether or not affiliated with RAI), or successive consolidations or mergers to which RAI or its successor will be a party, or will prevent any sale, lease or conveyance of the property of RAI, as an entirety or substantially as an entirety, provided that upon any such consolidation, merger, sale, lease or conveyance to which RAI is a party and in which RAI is not the surviving corporation, the due and punctual performance and observance of all of the covenants and conditions of the RAI indenture to be performed or observed by RAI and the due and punctual payment of the principal of and interest on all of the debt securities and the guarantees, according to their tenor, shall be expressly assumed by supplemental indenture satisfactory in

 

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form to the trustee, executed and delivered to the trustee, by the corporation formed by such consolidation, or into which RAI shall have been merged, or which shall have acquired such property.

Unless otherwise provided with respect to a particular series, holders of debt securities are not afforded any protection in the event of a decline in RAI’s credit quality resulting from a change of control transaction, a highly leveraged transaction or other similar transactions involving RAI or any of the Restricted Subsidiaries.

Restrictions on Incurrence of Indebtedness by RJR

The RAI indenture prohibits RJR, at any time it does not guarantee the obligations of RAI under the debt securities, from creating, incurring, issuing, assuming, guaranteeing or otherwise becoming directly or indirectly liable, contingently or otherwise, with respect to any indebtedness to persons other than RAI or any of the guarantors (excluding accounts payable) other than debt securities issued under the RAI indenture, outstanding notes of RJR and the revolving credit facility.

Events of Default

The RAI indenture provides that any of the following events will be events of default with respect to the debt securities of a series, including the new notes:

 

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default in payment of any principal of such series when the same shall become due and payable, either at maturity, upon any redemption, by declaration or otherwise;

 

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default for 30 days in payment of any interest on the debt securities of such series;

 

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default for 90 days after written notice in the observance or performance of any other covenant or agreement in respect of the debt securities of such series;

 

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certain events of bankruptcy, insolvency or reorganization;

 

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any guarantee ceasing to be in full force and effect (except as contemplated by the terms of the RAI indenture) or any guarantor denying or disaffirming in writing its obligations under the RAI indenture or its guarantee; and

 

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at any time as such security is required under the RAI indenture, any security document ceasing to be in full force and effect or ceasing to give the collateral agent the liens or any of the material rights, powers and privileges purported to be created thereby in favor of the collateral agent and such default continuing unremedied for a period of at least 30 days after written notice to RAI by the collateral agent.

The RAI indenture provides that:

 

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if an event of default due to the default in payment of principal of, premium, if any, or any interest on, the debt securities of any series or due to the default in the performance, or breach of any other covenant or warranty of RAI applicable to the debt securities of such series but not applicable to other outstanding debt securities issued under the RAI indenture shall have occurred and be continuing, either the trustee or the holders of not less than 25% in principal amount of the debt securities of each series affected by the default issued under the RAI indenture then outstanding (voting as a single class) by notice in writing may then declare the principal of all debt securities of all such affected series and interest accrued thereon to be due and payable immediately; and

 

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if an event of default due to a default in the performance of any of the other covenants or agreements in the RAI indenture applicable to all outstanding debt securities or due to certain events of bankruptcy, insolvency and reorganization of RAI or any other event of default provided in a supplemental indenture or board resolution relating to the debt securities shall have occurred and be continuing, either the trustee or the holders of not less than 25% in principal amount of all debt securities issued

 

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under the RAI indenture then outstanding (treated as one class) by notice in writing may declare the principal of all such debt securities and interest accrued thereon to be due and payable immediately,

but upon certain conditions such declarations may be annulled and past defaults may be waived (except a continuing default in payment of principal of, premium, if any, or any interest on such debt securities) by the holders of a majority in principal amount of the debt securities of all affected series then outstanding.

The RAI indenture contains a provision entitling the trustee, subject to the duty of the trustee during a default to act with the required standard of care, to be indemnified by the holders of debt securities before proceeding to exercise any right or power under the RAI indenture at the request of such holders. Subject to such provisions in the RAI indenture for the indemnification of the trustee and certain other limitations, the holders of a majority in aggregate principal amount of the debt securities of each affected series then outstanding (with each such series voting as a separate class) may direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee.

The RAI indenture provides that no holder of debt securities may institute any action against RAI under the RAI indenture (except actions for payment of overdue principal or interest) unless such holder previously shall have given to the trustee written notice of default and continuance thereof and unless the holders of not less than 25% in aggregate principal amount of the debt securities of each affected series then outstanding (treated as a single class) shall have requested the trustee to institute such action and shall have offered the trustee indemnity reasonably satisfactory to it, the trustee shall not have instituted such action within 60 days of such request and the trustee shall not have received direction inconsistent with such written request by the holders of a majority in principal amount of the debt securities of each affected series (treated as one class). The RAI indenture contains a covenant that RAI will file quarterly with the trustee a certificate that to the signers’ knowledge no default existed or a certificate specifying any default that existed.

Modification of the RAI Indenture

The RAI indenture provides that RAI, any guarantors (each when authorized by a board resolution) and the trustee may enter into supplemental indentures without the consent of the holders of debt securities issued under the RAI indenture, including the new notes, to:

 

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add security in respect of debt securities;

 

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evidence the assumption by a successor corporation of the obligations of RAI and any guarantors;

 

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add covenants for the protection of the holders of debt securities or to add events of default;

 

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cure any ambiguity or correct any inconsistency in the RAI indenture or to make other changes not materially adverse to the interest of holders of the debt securities;

 

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establish the forms or terms of additional series of debt securities;

 

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provide for uncertificated debt securities;

 

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evidence the acceptance of appointment by a successor trustee;

 

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add an additional guarantor; or

 

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comply with the Trust Indenture Act.

The RAI indenture also contains provisions permitting RAI, the guarantors (each when authorized by a board resolution) and the trustee, with the consent of the holders of not less than a majority in aggregate principal amount of debt securities of all series then outstanding and affected (voting as one class), to add any provisions to, or change in any manner or eliminate any of the provisions of, the RAI indenture or modify in any manner the

 

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rights of the holders of the debt securities of each series so affected; provided, that RAI and the trustee may not, without the consent of the holder of each outstanding debt security affected thereby:

 

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extend the final maturity of any debt security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on the redemption thereof or change the currency in which the principal thereof, premium, if any (including any amount in respect of original issue discount), or any interest thereon is payable, or reduce the amount of the principal of any original issue discount security payable upon acceleration or provable in bankruptcy, or alter certain provisions of the RAI indenture relating to debt securities issued thereunder not denominated in U.S. dollars or impair the right to institute suit for the enforcement of any payment on any debt security when due or any right of repayment at the option of the holder of a debt security; or

 

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reduce the aforesaid percentage in principal amount of debt securities of any series, the consents of the holders of which is required for any such modification.

Satisfaction and Discharge

The RAI indenture will be discharged and will cease to be of further effect as to all outstanding debt securities of any series under the RAI indenture, including the new notes (except for the obligations to register the transfer or exchange of the debt securities of such series and RAI’s rights of optional redemption, if any, to replace mutilated, destroyed, lost or stolen debt securities of such series, rights of holders of debt securities to receive payments of principal thereof, premium, if any, and interest thereon, upon the original stated due dates therefor (but not upon acceleration), to maintain an office or agency in respect of the debt securities of such series and to hold moneys for payment in trust) when:

 

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RAI or any guarantor has paid all amounts payable with respect to the debt securities of that series when due;

 

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all outstanding debt securities of that series have been delivered to the trustee for cancellation (except mutilated, defaced, destroyed, lost or stolen debt securities which have been replaced or paid); or

 

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all outstanding debt securities of that series not delivered to the trustee for cancellation:

 

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have become due and payable,

 

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will become due and payable at their stated maturity within one year, or

 

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are to be called for redemption within one year; and

 

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RAI or any guarantor has deposited with the trustee, in trust for such purpose, cash or, in the case of debt securities payable only in U.S. dollars, U.S. government obligations which through the payment of principal and interest in accordance with their terms will insure the availability of cash, or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent accountants, to pay the principal of, premium, if any, and any interest on the debt securities of such series, and any mandatory sinking fund thereon, on the due date thereof.

Defeasance

The RAI indenture provides with respect to each series of debt securities, including the new notes, that RAI and the guarantors, if any, as applicable, may elect:

 

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to be released from any and all obligations (except for the obligations to register the transfer or exchange of the debt securities of such series and RAI’s rights of optional redemption, if any, to replace mutilated, destroyed, lost or stolen debt securities of such series, rights of holders of debt securities to receive payments of principal thereof, premium, if any, and interest thereon, upon the original stated due dates therefor (but not upon acceleration), to maintain an office or agency in respect of the debt securities of such series and to hold moneys for payment in trust) with respect to debt

 

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securities of any series for which the exact amount of principal and interest due can be determined at the time of the deposit with the trustee as described below, and all the debt securities of such series are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the trustee for the giving of notice of redemption (the foregoing referred to as one-year defeasance);

 

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to defease and be discharged from any and all obligations with respect to the debt securities of such series on the 91st day after the deposit with the trustee as described below (except for the obligations set forth as exceptions in the preceding clause) (the foregoing referred to as legal defeasance); or

 

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to be released from their obligations with respect to the debt securities of such series (except for the obligations set forth as exceptions in the first clause and the obligations to compensate and indemnify the trustee, to appoint a successor trustee, to repay certain moneys held by the paying agent and to return certain unclaimed moneys held by the trustee and to comply with the Trust Indenture Act) (the foregoing referred to as covenant defeasance),

upon the deposit with the trustee, in trust for such purpose, cash or, in the case of debt securities payable only in U.S. dollars, U.S. government obligations which through the payment of principal and interest in accordance with their terms will insure the availability of cash, or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent accountants, to pay the principal of, premium, if any, and any interest on the debt securities of such series, and any mandatory sinking fund thereon, on the due date thereof. Such a trust only may (except with respect to one-year defeasance or to the extent the terms of the debt securities of such series otherwise provide) be established, if among other things, RAI has delivered to the trustee an opinion of counsel that the holders of the debt securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such legal defeasance or covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same time as would have been the case if such legal defeasance or covenant defeasance had not occurred. Such opinion, in the case of legal defeasance, must (except to the extent the terms of the debt securities of the relevant series otherwise provide) refer to and be based upon a ruling of the IRS or a change in applicable federal income tax law occurring after the date of the RAI indenture. If RAI exercises its legal defeasance or covenant defeasance option, the guarantees in effect at such time will terminate.

Same-Day Settlement and Payment

Unless otherwise provided with respect to a particular series, the debt securities, including the new notes, will trade in the same-day funds settlement system of DTC until maturity or until RAI issues the debt securities in definitive form. DTC will therefore require secondary market trading activity in the debt securities to settle in immediately available funds. RAI and the Trustee can give no assurance as to the effect, if any, of settlement in immediately available funds on trading activity in the debt securities.

Transfer and Exchange

A holder may transfer or exchange new notes in accordance with the RAI indenture. Upon any transfer or exchange, the registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents, and RAI may require a holder to pay any taxes required by law or permitted by the RAI indenture, including any transfer tax or other similar governmental charge payable in connection therewith. RAI is not required to transfer or exchange any new note for a period of 15 days prior to a selection of debt securities to be redeemed or to transfer or exchange any new note selected for redemption, except the unredeemed portion of any new note being redeemed in part. The new notes will be issued in registered form and the registered holder of a new note will be treated as the owner of such new note for all purposes.

 

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Book-Entry System; Delivery and Form

The following description of the operations and procedures of DTC, Clearstream Banking, société anonyme, referred to as Clearstream, and Euroclear Bank SA/NV, referred to as Euroclear, is provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. RAI takes no responsibility for these operations and procedures and urges investors to contact the system or their participants directly to discuss these matters.

New notes of each series will be in book-entry form and will be represented by one or more permanent global certificates in fully registered form without interest coupons, which we refer to as the Global Notes, and will be deposited with the trustee as custodian for DTC and registered in the name of Cede & Co., as nominee of DTC, or another nominee designated by DTC (such nominee referred to as a Global Note Holder).

Except as set forth below, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for new notes in certificated form except in the limited circumstances described below. In addition, transfers of beneficial interests in the Global Notes will be subject to the applicable rules and procedures of DTC and its direct or indirect participants, which may change from time to time.

Prospective purchasers are advised that the laws of some jurisdictions require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such persons will be limited to such extent.

Investors may elect to hold interests in the Global Notes through either DTC (in the United States) or Clearstream or Euroclear (in Europe) if they are participants in those systems, or indirectly through organizations which are participants in those systems. Clearstream and Euroclear will hold interests on behalf of their participants through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries, which in turn will hold such interests in customers’ securities accounts in the depositaries’ names on the books of DTC. At the present time, Citibank, N.A. acts as U.S. depositary for Clearstream and JPMorgan Chase Bank, N.A. acts as U.S. depositary for Euroclear, collectively referred to as the U.S. Depositaries.

DTC advises that it is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act. DTC holds securities that its participants, referred to herein as the Direct Participants, deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation, referred to herein as DTCC. DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to DTC’s system is also available to others such as U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly, which we refer to as Indirect Participants. The DTC rules applicable to its Direct and Indirect Participants are on file with the SEC.

Clearstream advises that it is incorporated under the laws of Luxembourg as a professional depositary. Clearstream holds securities for its participating organizations, referred to as Clearstream Participants, and facilitates the clearance and settlement of securities transactions between Clearstream Participants through

 

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electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to Clearstream Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. As a professional depositary, Clearstream is subject to regulation by the Luxembourg Commission for the Supervision of the Financial Sector, also known as the Commission de Surveillance du Secteur Financier. Clearstream Participants are recognized financial institutions around the world, including securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include the dealer managers for the private exchange offers. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream Participant, either directly or indirectly.

Distributions with respect to interests in the new notes held beneficially through Clearstream will be credited to cash accounts of Clearstream Participants in accordance with its rules and procedures, to the extent received by the U.S. Depositary for Clearstream.

Euroclear advises that it was created in 1968 to hold securities for its participants, referred to herein as Euroclear Participants, and to clear and settle transactions between Euroclear Participants and between Euroclear Participants and participants of certain other securities intermediaries through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear provides other services, including securities lending and borrowing and interfaces with domestic markets in several countries. Euroclear is operated by Euroclear Bank SA/NV, referred to as the Euroclear operator. All operations are conducted by the Euroclear operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear operator. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include the dealer managers for the private exchange offers. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. The Euroclear operator is regulated and examined by the Belgian Banking and Finance Commission.

Securities clearance accounts and cash accounts with the Euroclear operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of Euroclear System, and applicable Belgian law, collectively referred to as the Terms and Conditions. The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no records of or relationship with persons holding through Euroclear Participants.

Distributions with respect to the new notes held beneficially through Euroclear will be credited to the cash accounts of Euroclear Participants in accordance with the Terms and Conditions, to the extent received by the U.S. Depositary for Euroclear.

As long as DTC or its nominee is the registered owner of the Global Notes, DTC or its nominee, as the case may be, will be considered the sole owner and holder of the Global Notes and all notes represented by the Global Notes for all purposes under the new notes and the RAI indenture, including with respect to the giving of any directions, instructions or approvals to the trustee thereunder. Except in the limited circumstances referred to below, owners of beneficial interests in the Global Notes:

 

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will not be entitled to have the new notes represented by the Global Notes registered in their names; and

 

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will not be considered to be owners or “Holders” of the Global Notes or any new notes represented by the Global Notes for any purpose under the new notes or the RAI indenture.

 

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All payments on the new notes represented by the Global Notes and all transfers and deliveries of related new notes will be made to the depositary or its nominee, as the case may be, as the holder of the securities.

Ownership of beneficial interests in the Global Notes will be limited to participants or persons that may hold beneficial interests through institutions that have accounts with DTC or its nominee. Ownership of beneficial interests in the Global Notes will be shown only on, and the transfer of those ownership interests will be effected only through, records maintained by DTC or its nominee, with respect to participants’ interests, or any participant, with respect to interests of persons held by the participant on their behalf. Payments, transfers, deliveries, exchanges and other matters relating to beneficial interests in the Global Notes may be subject to various policies and procedures adopted by DTC from time to time. Neither the trustee nor we will have any responsibility or liability for any aspect of DTC’s or any participant’s records relating to, or for payments made on account of, beneficial interests in the Global Notes, or for maintaining, supervising or reviewing any of DTC’s records or any participant’s records relating to these beneficial ownership interests.

Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among participants, DTC is under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. We will not have any responsibility for the performance by DTC or its direct participants or indirect participants under the rules and procedures governing DTC.

If DTC notifies us that it is unwilling or unable to continue to act, and a successor clearing agency is not appointed by us within 90 days, we will issue securities in definitive form in exchange for the Global Note that had been held by the depository. In addition, RAI at any time and in its sole discretion may decide not to have the new notes represented by one or more Global Notes. Any new notes issued in definitive form in exchange for the Global Notes will be registered in the name or names that the depository gives to the trustee or other relevant agent of theirs or ours. It is expected that the depository’s instructions will be based upon directions received by the depository from participants with respect to ownership of beneficial interests in the Global Note that had been held by the depository.

Global Clearance and Settlement Procedures

Initial settlement for the new notes will be made in immediately available funds. Secondary market trading between Direct Participants will occur in the ordinary way in accordance with DTC rules and will be settled in immediately available funds using DTC’s Same-Day Funds Settlement System. Secondary market trading between Clearstream Participants and/or Euroclear Participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream and Euroclear, as applicable.

Cross-market transfers between persons holding directly or indirectly through DTC on the one hand, and directly or indirectly through Clearstream Participants or Euroclear Participants, on the other, will be effected through DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its U.S. Depositary; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its U.S. Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver instructions directly to their respective U.S. Depositaries.

Because of time-zone differences, credits of new notes received in Clearstream or Euroclear as a result of a transaction with a Direct Participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. The credits or any transactions in the new notes settled during the processing will be reported to the relevant Euroclear Participant or Clearstream Participant on that

 

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business day. Cash received in Clearstream or Euroclear as a result of sales of the new notes by or through a Clearstream Participant or a Euroclear Participant to a Direct Participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.

Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of beneficial interests in the Global Notes among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued or changed at any time.

Governing Law

The RAI indenture, the new notes and the related guarantees will be governed by the laws of the State of New York.

Concerning the Trustee

The Bank of New York Mellon Trust Company, N.A. is the trustee under the RAI indenture. The trustee or its affiliates participate in RAI’s revolving credit facility and serve as transfer agent for RAI’s common stock. From time to time, RAI or its subsidiaries may enter into other relationships with the trustee or its affiliates.

Certain Definitions

Set forth below are certain of the defined terms used in the RAI indenture.

“Attributable Debt” means, when used in connection with a sale and leaseback transaction, at any date as of which the amount thereof is to be determined, the product of:

 

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the net proceeds from such sale and leaseback transaction, multiplied by

 

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a fraction, the numerator of which is the number of full years of the term of the lease relating to the property involved in such sale and leaseback transaction (without regard to any options to renew or extend such term) remaining at the date of the making of such computation, and the denominator of which is the number of full years of the term of such lease measured from the first day of such term.

“Consolidated Net Worth” means, at any date of determination, the consolidated shareholders’ equity of RAI, as set forth on the then most recently available consolidated balance sheet of RAI and its consolidated Subsidiaries.

“Exempted Debt” means the sum, without duplication, of the following items outstanding as of the date Exempted Debt is being determined:

 

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indebtedness of RAI and the Restricted Subsidiaries incurred after the date of the RAI indenture and secured by liens created, assumed or otherwise incurred or permitted to exist pursuant to the RAI indenture described above under “—Covenants—Restrictions on Liens;” and

 

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Attributable Debt of RAI and the Restricted Subsidiaries in respect of all sale and leaseback transactions with regard to any Principal Property entered into pursuant to the RAI indenture described above under “—Covenants—Restrictions on Sale and Leaseback Transactions.”

“Funded Debt” means all indebtedness for money borrowed, including purchase money indebtedness, having a maturity of more than one year from the date of its creation or having a maturity of less than one year but by its terms being renewable or extendible, at the option of the obligor in respect thereof, beyond one year from its creation.

 

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“guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person:

 

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to purchase or pay (or advance or supply funds for the purchase or payment of) such indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise); or

 

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entered into for purposes of assuring in any other manner the obligee of such indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);

provided, however, that the term “guarantee” will not include endorsements for collection or deposit in the ordinary course of business. The term “guarantee” used as a verb has a corresponding meaning.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Principal Property” means land, land improvements, buildings and associated factory and laboratory equipment owned or leased pursuant to a capital lease and used by RAI or a Restricted Subsidiary primarily for processing, producing, packaging or storing its products, raw materials, inventories, or other materials and supplies and located within the United States and having an acquisition cost plus capitalized improvements in excess of 2% of Consolidated Net Worth, as of the date of such determination, but not including any such property financed through the issuance of tax exempt governmental obligations, or any such property that has been determined by resolution of the board of directors of RAI not to be of material importance to the respective businesses conducted by RAI or such Restricted Subsidiary effective as of the date such resolution is adopted; provided, that “Principal Property” shall not include any property owned by Santa Fe Natural Tobacco Company, Inc.

“Restricted Subsidiary” means:

 

•

any Subsidiary (other than Santa Fe Natural Tobacco Company, Inc. and its subsidiaries) organized and existing under the laws of the United States and the principal business of which is carried on within the United States, which owns or is a lessee pursuant to a capital lease of any Principal Property, and in which the investment of RAI and all of its Subsidiaries exceeds 5% of Consolidated Net Worth as of the date of such determination other than:

 

•

each Subsidiary the major part of whose business consists of finance, banking, credit, leasing, insurance, financial services or other similar operations, or any combination thereof;

 

•

each Subsidiary formed or acquired after the date of the RAI indenture for the purpose of acquiring the business or assets of another person and which does not acquire all or any substantial part of the business or assets of RAI or any Restricted Subsidiary; and

 

•

RJR and Conwood Holdings, Inc.

However, the board of directors of RAI may declare any such Subsidiary to be a Restricted Subsidiary.

“Subsidiary” means any corporation of which at least a majority of all outstanding stock having by the terms thereof ordinary voting power in the election of directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation has or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned by RAI, or by one or more Subsidiaries of RAI or by RAI and one or more Subsidiaries.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material U.S. federal income tax considerations relating to the exchange of old notes for new notes, and of the ownership and disposition of the new notes by holders that have held the old notes, and that will hold the new notes, as capital assets generally for investment purposes. This summary does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, and applicable tax regulations, rulings, and judicial decisions, all as in effect on the date hereof. These authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. RAI has not sought any ruling from the Internal Revenue Service, or IRS, or an opinion of counsel with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions.

This summary also does not address the tax considerations arising under the laws of any foreign, state, or local jurisdiction. In addition, this discussion does not address tax considerations applicable to a holder’s particular circumstances or to holders that may be subject to special tax rules, including, without limitation:

 

•

holders subject to the alternative minimum tax;

 

•

banks;

 

•

tax-exempt organizations;

 

•

insurance companies;

 

•

dealers in securities or currencies;

 

•

traders in securities or commodities or dealers in commodities that elect to use a mark-to-market method of accounting;

 

•

financial institutions;

 

•

holders whose “functional currency” is not the U.S. dollar; or

 

•

persons that will hold the new notes as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction.

If a partnership holds new notes, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our new notes, you should consult your tax advisor.

This summary of material U.S. federal income tax considerations is for general information only. You are urged to consult your tax advisor with respect to the application of U.S. federal income tax laws to your particular situation as well as any tax consequences arising under the U.S. federal estate or gift tax rules or under the laws of any state, local, foreign or other taxing jurisdiction or under any applicable tax treaty.

Exchange Offers

The exchange of an old note for a new note pursuant to the Exchange Offers will not be taxable to the exchanging holder for U.S. federal income tax purposes. As a result, an exchanging holder:

 

•

will not recognize any gain or loss on the exchange;

 

•

will have a holding period for the new note that includes the holding period for the old note exchanged; and

 

•

will have an adjusted tax basis in the new note immediately after the exchange equal to its adjusted tax basis in the old note exchanged immediately prior to the exchange.

 

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The Exchange Offers are not expected to result in any U.S. federal income tax consequences to a non-exchanging holder.

Ownership and Disposition of New Notes

Consequences to U.S. Holders

The following is a summary of the U.S. federal tax consequences that will apply to the ownership and disposition of the new notes by you if you are a U.S. Holder of the notes. Certain consequences to “non-U.S. Holders” of the notes are described under “—Consequences to Non-U.S. Holders” below. “U.S. Holder” means a beneficial owner of a note that is:

 

•

a citizen or resident of the United States;

 

•

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any political subdivision of the United States; or

 

•

a trust (1) if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) that has a valid election in effect under applicable regulations to be treated as a U.S. person.

Payment of Interest. Stated interest on the new notes will generally be taxable to you as ordinary income at the time it is paid or at the time it accrues in accordance with your method of accounting for U.S. federal income tax purposes.

Market Discount and Premium. Subject to a statutory de minimis exception, if the issue price of a new note at the time of the exchange is less than its stated principal amount, the new note will have original issue discount for U.S. federal income tax purposes. The issue price of the new notes generally will be their fair market value, provided that the old notes or the new notes are treated as “publicly traded” within the meaning of the applicable Treasury regulations. Original issue discount generally must be included in your gross income on a constant yield basis, in advance of the receipt of cash attributable to the discount. Any amount included in income as original issue discount will increase your tax basis in the new note. If your tax basis in a new note is greater than the issue price of the new note, you generally will be considered to have acquisition premium, which will reduce the amount of original issue discount required to be included in income. If your tax basis in a new note is greater than the principal amount of the new note, you generally will be considered to have bond premium, and will not be required to include any original issue discount in income. You may elect to amortize the bond premium against interest payable on the new note and any bond premium in excess of the original issue discount and interest may be deductible over the term of the new notes. Any amount of amortized bond premium will decrease your tax basis in the new note, so that some or all of the market discount on the old notes may be required to be included on a current basis as original issue discount on the new notes.

Subject to a de minimis exception, if you hold old notes that were acquired (other than at original issue) at a discount from the principal amount of such old notes (i.e., a “market discount”), and did not elect to include such market discount in income on a current basis, any accrued market discount on the old notes generally will carry over to the new notes. If the new notes are issued with original issue discount, then the new notes will be treated as having market discount only to the extent that the issue price of the new notes exceeds your tax basis in the new notes.

Sale, Exchange or Disposition of New Notes. You generally will recognize gain or loss upon the sale, exchange, redemption, retirement or other taxable disposition of a new note equal to the difference between the amount realized upon the sale, exchange, redemption, retirement or other taxable disposition (less an amount attributable to any accrued stated interest not previously included in income, which will be taxable as interest income) and your adjusted tax basis in the new note. Your adjusted tax basis in a new note will generally equal

 

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the amount you paid for the new note, increased by any original issue discount and/or market discount previously included in gross income and reduced by any amortizable bond premium previously deducted by you in respect of the new note. Any gain or loss recognized on a disposition of the new note will be capital gain or loss and will be long-term capital gain or loss if your holding period for the new note is more than one year. The ability to deduct capital losses is subject to limitation under U.S. federal income tax laws.

Medicare Surtax. Certain individuals, estates and trusts must pay a 3.8% surtax, commonly referred to as the Medicare tax, on “net investment income,” which includes, among other things, interest and proceeds of sale in respect of securities like the new notes, subject to certain exceptions. Holders should consult with their own tax advisors regarding the effect, if any, of the Medicare tax on their ownership and disposition of the new notes.

Information Reporting and Backup Withholding. In general, information reporting requirements will apply to certain payments of principal and interest on the new notes and the proceeds of sale of a new note unless you are an exempt recipient (such as a corporation). A backup withholding tax at the rate of 28% will apply to such payments if you fail to provide your taxpayer identification number or certification of exempt status or have been notified by the IRS that you are subject to backup withholding.

Any amounts withheld under the backup withholding rules will generally be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the IRS.

Consequences to Non-U.S. Holders

The following is a summary of the U.S. federal income tax consequences that will apply to you if you are a non-U.S. Holder of new notes. The term “non-U.S. Holder” means a beneficial owner of a note that is not a U.S. Holder. Special rules may apply to certain non-U.S. Holders such as “controlled foreign corporations” and “passive foreign investment companies.” Such entities should consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them.

Payment of Interest. The U.S. federal withholding tax will not apply to any payment to you of interest on a new note because of the “portfolio interest exemption” provided that:

 

•

you do not actually or constructively own 10% or more of the total combined voting power of all classes of our stock that are entitled to vote;

 

•

you are not a controlled foreign corporation that is related to us through stock ownership; and

 

•

you provide to RAI your name and address, and certify, under penalties of perjury, that you are the beneficial owner of the new notes and that you are not a U.S. person (which certification may be made on an IRS Form W-8BEN or W-8BEN-E or applicable substitute form); or a securities clearing organization, bank or other financial institution that holds customers’ securities in the ordinary course of its business and holds the new note on your behalf certifies, under penalties of perjury, that it has received IRS Form W-8BEN or W-8BEN-E from you or from another qualifying financial institution intermediary, and provides a copy of the IRS Form W-8BEN or Form W-8BEN-E.

If you hold your new notes through certain foreign intermediaries or certain foreign partnerships, such foreign intermediaries or partnerships must also satisfy the certification requirements of applicable regulations.

If you are engaged in a trade or business in the United States and interest on a new note is effectively connected with the conduct of that trade or business, you will be exempt from withholding tax if you provide us with a properly executed IRS Form W-8ECI, but you will be required to pay U.S. federal income tax on that interest on a net income basis in the same manner as if you were a U.S. person as defined under the Internal Revenue Code. In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30% (or lower applicable treaty rate) of your earnings and profits for the taxable year, subject to adjustments, that

 

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are effectively connected with your conduct of a trade or business in the United States. For this purpose, interest will be included in the earnings and profits of such foreign corporation.

In the event any additional interest we may be required to pay on the old notes under the circumstances described in “The Exchange Offers—Purpose and Effect of the Exchange Offers” and “—Shelf Registration” is treated as interest, the tax treatment of such payments should be the same as other interest payments received by you.

Sale, Exchange or Disposition of Notes. Any gain realized upon the sale, exchange or other disposition of a new note (except with respect to accrued and unpaid interest, which would be taxable as described above) generally will not be subject to U.S. federal income tax unless:

 

•

subject to an applicable tax treaty providing otherwise, that gain is effectively connected with your conduct of a trade or business in the United States; or

 

•

you are an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met.

A holder described in the first bullet point above will be required to pay U.S. federal income tax on the net gain derived from the sale, and if such holder is a foreign corporation, it may also be required to pay a branch profits tax at a 30% rate or a lower rate if so specified by an applicable income tax treaty. A holder described in the second bullet point above will be subject to a flat 30% U.S. federal income tax on the gain derived from the sale, which may be offset by U.S. source capital losses, even though the holder is not considered a resident of the United States.

Information Reporting and Backup Withholding. Information returns will be filed with the IRS in connection with payments on the new notes. Unless the non-U.S. Holder complies with certification procedures to establish that it is not a U.S person, information returns may be filed with the IRS in connection with the proceeds from a sale or other disposition and the non-U.S. Holder may be subject to United States backup withholding tax on payments on the notes or on the proceeds from a sale or other disposition of the new notes. The certification procedures required to claim the exemption from withholding tax on interest described above will satisfy the certification requirements necessary to avoid the backup withholding tax as well. The amount of any backup withholding from a payment to a non-U.S. Holder will be allowed as a credit against the non-U.S. Holder’s U.S. federal income tax liability and may entitle the non-U.S. Holder to a refund, provided that the required information is furnished to the IRS.

Non-U.S. holders should consult their tax advisors concerning the information reporting and backup withholding rules applicable to any particular non-U.S. holder’s situation, the availability of an exemption therefrom, and the procedure for obtaining such an exemption, if available.

FATCA Withholding Tax

Under the Foreign Account Tax Compliance Act, generally referred to as FATCA, and administrative guidance, unless an exception applies, withholding taxes may be imposed on certain types of payments made to “foreign financial institutions” (as specifically defined in the Code) and certain other non-United States entities (including financial intermediaries). A 30% withholding tax is imposed on “withholdable payments” to a foreign financial institution or to a foreign non-financial entity, unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the foreign non-financial entity either certifies it does not have any substantial United States owners or furnishes identifying information regarding each substantial United States owner, or (3) the foreign entity otherwise is excepted under FATCA. For these purposes, the term “withholdable payment” includes any interest paid with respect to a note and, with respect to gross proceeds paid on or after January 1, 2017, the gross proceeds from a disposition of a new note.

 

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Different rules than those described above may apply to non-U.S. holders resident in jurisdictions that have entered into inter-governmental agreements with the United States regarding FATCA.

If withholding is required under FATCA on a payment related to the new notes investors that otherwise would not be subject to withholding (or that otherwise would be entitled to a reduced rate of withholding) generally will be required to seek a refund or credit from the IRS to obtain the benefit of such exemption or reduction (provided that such benefit is available).

Non-U.S. holders of the new notes offered hereby should consult their tax advisors regarding the effect of FATCA in their particular circumstances.

RAI will not pay any additional amounts with respect to any withholding tax.

 

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PLAN OF DISTRIBUTION

Each broker-dealer that receives new notes for its own account pursuant to the Exchange Offers must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. A broker-dealer may use this prospectus, as it may be amended or supplemented from time to time, in connection with resales of new notes received in exchange for old notes where such old notes were acquired as a result of market-making activities or other trading activities. We have agreed, for a period ending upon the earlier of (1) 180 days after the completion of the Exchange Offers and (2) the first day after the completion of the Exchange Offers when participating broker-dealers no longer have a prospectus delivery obligation, to amend or supplement this prospectus as may be required, at the request of any such broker-dealer, and have authorized them to deliver such prospectus in connection with any such resale, subject to certain limitations.

We will not receive any proceeds from any sale of new notes by any broker-dealer. New notes received by broker-dealers for their own account pursuant to the Exchange Offers may be sold from time to time in one or more transactions in the following manners:

 

•

in the over-the-counter market;

 

•

in negotiated transactions;

 

•

through the writing of options on the new notes; or

 

•

through a combination of such methods of resale.

The sales may be at any of the following prices:

 

•

market prices prevailing at the time of resale;

 

•

prices related to such prevailing market prices; or

 

•

negotiated prices.

Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such new notes.

Any broker-dealer that resells new notes that were received by it for its own account pursuant to the Exchange Offers as a result of market-making or other trading activities and any broker or dealer that participates in a distribution of such new notes may be deemed to be an “underwriter” within the meaning of the Securities Act. Any profit on any such resale of new notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging or performing its obligation to deliver a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. The letter of transmittal also states that any holder participating in the Exchange Offers will represent that it has no arrangements or understanding with any person to participate with the distribution of the new notes within the meaning of the Securities Act.

We have agreed to pay all expenses incident to the Exchange Offers other than commissions or concessions of any brokers or dealers, and will indemnify the holders of the old notes, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act.

We have not entered into any arrangements or understandings with any person to distribute the new notes to be received in the Exchange Offers.

There is no existing market for the new notes, and there can be no assurance as to the liquidity of any market that may develop for the new notes, the ability of the holders of the new notes to sell their new notes or the price at which holders would be able to sell their new notes. We do not presently intend to apply for listing of the new notes on any securities exchange.

 

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This prospectus does not constitute an offer to purchase or a solicitation of an offer to sell any of the new notes in any jurisdiction in which such an offer or a solicitation is unlawful.

LEGAL MATTERS

The enforceability of the new notes and related guarantees offered hereby is being passed upon for RAI by Kilpatrick Townsend & Stockton LLP, Atlanta, GA. Matters of New Mexico law are being passed upon for RAI by Betzer, Roybal & Eisenberg P.C., Albuquerque, NM.

EXPERTS

The consolidated financial statements of RAI and subsidiaries as of December 31, 2014 and 2013, and for each of the years in the three-year period ended December 31, 2014, and management’s assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Report on Internal Control over Financial Reporting) as of December 31, 2014, have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements and the related financial statement schedule of Lorillard as of December 31, 2014 and 2013, and for each of the three years in the period ended December 31, 2014, incorporated in this prospectus by reference from RAI’s Current Report on Form 8-K dated June 9, 2015, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is incorporated herein by reference. Such consolidated financial statements and the related financial statement schedule have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

 

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WHERE YOU CAN FIND MORE INFORMATION

RAI is subject to the informational requirements of the Securities Exchange Act, and, in accordance with the requirements thereof, files reports, proxy statements and other information with the SEC. You may read or obtain copies of this information at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain the documents that RAI files electronically from the SEC’s web site at http://www.sec.gov.

RAI and its subsidiary guarantors under the RAI indenture have filed with the SEC a registration statement on Form S-4, of which this prospectus forms a part, under the Securities Act in connection with their offering of the securities covered by this prospectus. This prospectus does not contain all of the information in the registration statement. You will find additional information about RAI, the other registrants and the securities covered hereby in the registration statement. Any statements made in this prospectus concerning the provisions of legal documents are not necessarily complete, and you should read the documents that are filed as exhibits to the registration statement. You may read and copy the registration statement, including its exhibits, at the SEC’s Public Reference Room or at the SEC’s web site as described above.

RAI’s SEC filings are also available at its web site at http://www.reynoldsamerican.com. Information with respect to RAI may also be obtained by writing or calling the Office of the Secretary, P.O. Box 2990, Winston-Salem, North Carolina 27102-2990; telephone number (336) 741-5162.

INCORPORATION BY REFERENCE

The SEC allows RAI to “incorporate by reference” into this prospectus information that RAI (SEC file number 1-32258) files with the SEC, which means that important information can be disclosed to you by referring you to those documents and those documents will be considered part of this prospectus. The information incorporated by reference is an important part of this prospectus. Certain information that is subsequently filed with the SEC will automatically update and supersede information in this prospectus and in earlier filings with the SEC. The information and documents listed below, which RAI has filed with the SEC are incorporated by reference into this prospectus:

 

•

RAI’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 10, 2015;

 

•

RAI’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on April 20, 2015;

 

•

RAI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed with the SEC on August 6, 2015;

 

•

RAI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed with the SEC on October 27, 2015; and

 

•

RAI’s Current Reports on Form 8-K, filed with the SEC on January 20, 2015, January 28, 2015, February 6, 2015, May 7, 2015, May 27, 2015, May 28, 2015, June 5, 2015, June 8, 2015, June 9, 2015, June 11, 2015, June 12, 2015, June 25, 2015, June 29, 2015, July 13, 2015, July 15, 2015, July 28, 2015, July 29, 2015, September 2, 2015, September 14, 2015, September 29, 2015, October 20, 2015 and October 26, 2015.

In addition, all documents filed with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and before the termination of the Exchange Offers shall be deemed to be incorporated by reference in this prospectus and made a part of this prospectus from the respective dates of filing;

 

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provided, however, RAI is not incorporating any information furnished under Items 2.02 or 7.01 of any Current Report on Form 8-K unless specifically stated otherwise.

Each person to whom a copy of this prospectus is delivered, upon the oral or written request of such person, will be provided, without charge, a copy of any or all of the documents that are incorporated by reference herein, other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents. Requests should be directed to the Office of the Secretary, P.O. Box 2990, Winston-Salem, North Carolina 27102-2990; telephone number (336) 741-5162.

 

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.

North Carolina Corporations

The following registrants are corporations incorporated under the laws of the State of North Carolina: RAI; R. J. Reynolds Tobacco Company; Reynolds Innovations Inc.; and RAI Services Company.

Section 55-8-51 of the North Carolina Business Corporation Act, referred to as the NCBCA, authorizes a corporation to indemnify an individual made a party to a proceeding because he is or was a director against liability incurred in the proceeding if: (1) the director conducted himself or herself in good faith; and (2) the director reasonably believed (i) in the case of conduct in his or her official capacity with the corporation, that his or her conduct was in the corporation’s best interests; and (ii) in all other cases, that his or her conduct was at least not opposed to the corporation’s best interests; and (3) in the case of any criminal proceeding, the director had no reasonable cause to believe his or her conduct was unlawful.

Sections 55-8-52 and 55-8-56 of the NCBCA require a corporation, unless its articles of incorporation provide otherwise, to indemnify a director or officer who has been wholly successful, on the merits or otherwise, in the defense of any proceeding to which such director or officer was made a party because he was or is a director or officer of the corporation against reasonable expenses actually incurred by the director or officer in connection with the proceeding. Unless prohibited by the articles of incorporation, a director or officer also may make application and obtain court-ordered indemnification if the court determines that such director or officer is fairly and reasonably entitled to such indemnification as provided in Sections 55-8-54 and 55-8-56 of the NCBCA.

Section 55-8-57 of the NCBCA permits a corporation, in its articles of incorporation or bylaws or by contract or resolution, to indemnify, or agree to indemnify, its directors, officers, employees or agents against liability and expenses (including attorneys’ fees) in any proceeding (including proceedings brought by or on behalf of the corporation) arising out of their status as such or their activities in such capacities, except for any liabilities or expenses incurred on account of activities that were, at the time taken, known or believed by the person to be clearly in conflict with the best interests of the corporation.

Section 55-8-57 of the NCBCA also authorizes a corporation to purchase and maintain insurance on behalf of an individual who was or is a director, officer, employee or agent of the corporation against certain liabilities incurred by such a person, whether or not the corporation is otherwise authorized by the NCBCA to indemnify that person.

Section 55-2-02 of the NCBCA enables a corporation in its articles of incorporation to eliminate or limit, with certain exceptions, the personal liability of directors for monetary damages for breach of their duties as directors. No such provision is effective to eliminate or limit a director’s liability for: (1) acts or omissions that the director at the time of the breach knew or believed to be clearly in conflict with the best interests of the corporation; (2) improper distributions as described in Section 55-8-33 of the NCBCA; (3) any transaction from which the director derived an improper personal benefit; or (4) acts or omissions occurring prior to the date the exculpatory provision became effective.

The articles of incorporation of RAI provide that RAI will indemnify, to the fullest extent permitted by the NCBCA, any person who was or is a director or officer of RAI who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, because such person was or is a director or officer of RAI or, while a director or officer of RAI, was or is serving at the request of RAI as a director, officer, partner, trustee, employee or agent of any other enterprise, plan or trust. RAI’s articles of incorporation also provide that RAI shall pay expenses incurred in connection with any such action, suit or proceeding in advance provided the director or officer agrees in writing

 

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to repay such amount if such person is ultimately determined not entitled to be indemnified against such expenses. The indemnification rights pursuant to RAI’s articles of incorporation are not exclusive.

RAI has entered into separate indemnification agreements with its directors and executive officers. Pursuant to these agreements, RAI will generally indemnify, defend and hold harmless an indemnitee to the fullest extent permitted or required by the laws of North Carolina in effect on July 30, 2004, or as such laws may thereafter be amended to increase the scope of permitted indemnification, against all losses based upon, arising out of or resulting from any actual, alleged or suspected act or failure to act by an indemnitee in his or her capacity as a current or former, director, officer, employee or agent of RAI or as a director, officer, employee, member, manager, trustee or agent of any other entity or enterprise as to which an indemnitee is or was serving at the request of RAI, or in respect of any action or failure to act by an indemnitee in any business or other activity of RAI.

An indemnitee generally is not entitled to indemnification pursuant to the agreements to the extent that any loss is determined to have resulted from the indemnitee’s knowing misconduct from which he or she derived a direct improper personal benefit. In the event an indemnitee is not wholly successful on the merits in a proceeding, the indemnitee generally only is entitled to indemnification if it is determined that at the time of the indemnitee’s conduct, the indemnitee did not know or believe such conduct to be clearly in conflict with the best interests of RAI.

The agreements entitle an indemnitee to obtain advances of expenses from RAI, subject to conditions such as the indemnitee undertaking to repay RAI any advances he or she is not ultimately entitled to.

The agreements also generally require RAI to use commercially reasonably efforts to maintain, for as long as an indemnitee is a director or officer of RAI and through the sixth anniversary of the indemnitee terminating such status, directors’ and officers’ liability insurance covering the indemnitee that is at least substantially comparable in scope and amount to that provided by RAI’s directors’ and officers’ coverage in effect at the time of execution of the indemnitee’s agreement.

RAI’s articles of incorporation provide that, to the fullest extent permitted by the NCBCA, no person who is serving or who has served as a director of the corporation shall be personally liable to the corporation or any of its shareholders for monetary damages for breach of duty as a director.

RAI’s articles of incorporation also provide that neither British American Tobacco p.l.c., referred to as BAT, or any of its subsidiaries or affiliates nor any director of RAI who is affiliated with, or employed by, BAT or any of its subsidiaries or affiliates shall have any obligation, duty or responsibility to present any transaction, relationship, arrangement or other opportunity not primarily relating to the United States to RAI, its board of directors or any RAI officer or employee. The articles further state that RAI renounces any expectancy or interest of RAI in, or in being offered an opportunity to participate in, any such business opportunity, and BAT and its subsidiaries and affiliates are entitled to act upon any such business opportunity and will not be liable to RAI or any of its shareholders for taking any such action or not presenting such business opportunity to RAI.

The provisions in the articles of incorporation of R. J. Reynolds Tobacco Company and RAI Services Company with respect to indemnification of officers and directors and elimination of personal liability of directors (other than with respect to the provisions in RAI’s articles concerning BAT and business opportunities) are identical to those contained in RAI’s articles of incorporation.

The articles of incorporation of Reynolds Innovations Inc. provide that the corporation will, to the fullest extent permitted by the NCBCA, indemnify all persons it shall have the power to indemnify under the provisions of the NCBCA from and against any and all expenses and liabilities covered by such provisions. The articles of incorporation of Reynolds Innovations Inc. also provide for the elimination of the personal liability of directors to the fullest extent permitted by the NCBCA.

 

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North Carolina Limited Liability Company

Lorillard Licensing Company LLC, referred to as Lorillard Licensing, is a limited liability company formed in the State of North Carolina.

Section 57D-3-31 of the North Carolina Limited Liability Company Act provides that, with certain exceptions, (1) a limited liability company shall indemnify a person who is wholly successful on the merits or otherwise in the defense of any proceeding to which the person was a party because the person is or was a member, a manager, or other company official if the person also is or was an interest owner at the time to which the claim relates, acting within the person’s scope of authority as a manager, member, or other company official against expenses incurred by the person in connection with the proceeding and (2) a limited liability company shall reimburse a person who is or was a member for any payment made and indemnify the person for any obligation, including any judgment, settlement, penalty, fine, or other cost, incurred or borne in the authorized conduct of the company’s business or preservation of the company’s business or property, whether acting in the capacity of a manager, member, or other company official, if, in making the payment or incurring the obligation, the person complied with the duties and standards of conduct (i) under Section 57D-3-21 of the North Carolina Limited Liability Company Act, as modified or eliminated by the operating agreement, or (ii) otherwise imposed by the North Carolina Limited Liability Company Act or other applicable law. Section 57D-3-21 of the North Carolina Limited Liability Company Act provides that each manager shall discharge that person’s duties (1) in good faith, (2) with the care an ordinary prudent person in a like position would exercise under similar circumstances, and (3) subject to the operating agreement, in a manner the manager believes to be in the best interests of the limited liability company. A manager is not liable to the limited liability company for any act or omission as a manager if the manager acts in compliance with Section 57D-3-21 of the North Carolina Limited Liability Company Act.

The operating agreement of Lorillard Licensing provides that its managers shall not be liable for the obligations of Lorillard Licensing, and the duties prescribed by Section 57D-3-21 of the North Carolina Limited Liability Company Act are eliminated. The operating agreement further provides that, Lorillard Licensing shall indemnify, defend and hold the managers harmless from, against, and in respect of any obligation, including any expenses incurred or borne in the conduct of Lorillard Licensing’s business or preservation of Lorillard Licensing’s business or property, if in making the payment or incurring the obligation, such manager did not know at the time of the act or omission that the act or omission was clearly in conflict with the best interests of Lorillard Licensing, and such manager did not derive an improper personal benefit. In addition, Lorillard Licensing shall indemnify any manager who is wholly successful on the merits or otherwise in the defense of any proceeding to which the person is a party because the person is or was a manager if the person also is or was acting within the person’s scope of authority as a manager against expenses incurred by such manager in connection with the proceeding.

Delaware Corporations

The following registrants are corporations incorporated in the State of Delaware: R.J. Reynolds Tobacco Holdings, Inc., referred to as RJR; Conwood Holdings, Inc., referred to as Conwood Holdings; R. J. Reynolds Tobacco Co., referred to as RJR Tobacco Co.; R. J. Reynolds Global Products, Inc., referred to as GPI; and Reynolds Finance Company.

Section 145 of the Delaware General Corporation Law, referred to as the DGCL, provides that a corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by

 

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the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, against expenses actually and reasonably incurred in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation. No indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

The DGCL further authorizes a Delaware corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against such person and incurred by such person in any such capacity, arising out of such person’s status as such, whether or not the corporation would otherwise have the power to indemnify such person under Section 145.

Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for any breach of the director’s duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for payments of unlawful dividends or unlawful stock repurchases or redemptions or for any transaction from which the director derived an improper personal benefit.

The certificate of incorporation of RJR provides that RJR will indemnify, to the fullest extent permitted by the DGCL, any person who was or is a director or officer of RJR (including the heirs, executors or administrators of such person) who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding (including an action, suit or proceeding by or in the right of RJR), whether civil, criminal, administrative or investigative, because such person was or is a director or officer of RJR or, while a director or officer of RJR, was serving at the request of RJR as a director, officer, partner, trustee, employee or agent of any other enterprise. RJR’s certificate of incorporation also provides that RJR shall pay expenses incurred in connection with any such action, suit or proceeding in advance provided the director or officer agrees in writing to repay such amount if such person is ultimately determined not entitled to be indemnified against such expenses. RJR’s certificate of incorporation further provides that, to the fullest extent permitted by the DGCL, no person who is serving or who has served as a director of the corporation shall be personally liable to the corporation or any of its shareholders for monetary damages for breach of duty as a director.

The certificate of incorporation of Conwood Holdings provides that Conwood Holdings will indemnify, to the fullest extent permitted under the DGCL or any other applicable laws, any person who is or was or has agreed to become a director or officer of the corporation, or each person who is or was serving or who has agreed to serve at the request of the board of directors of the corporation as an officer of the corporation or as an employee or agent of the corporation or as a director, officer, employee or agent of another corporation, partnership, joint venture or other enterprise (including the heirs, executors, administrators or estate of such person). The certificate of incorporation of Conwood Holdings also provides that Conwood Holdings may enter into one or more agreements with any person to provide for indemnification greater or different than that provided in its certificate of incorporation.

 

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The certificate of incorporation of GPI provides that GPI shall indemnify its directors and officers to the fullest extent permitted by law. The certificate further provides that GPI’s directors shall incur no personal liability to GPI or its stockholders for monetary damages for any breach of fiduciary duty as a director; provided, however, that GPI’s directors continue to be subject to liability for any breach of their duty of loyalty, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for liability under Section 174 of the DGCL (payment of dividends) and for transactions from which the director derived an improper personal benefit. In addition, the personal liability of directors shall further be limited or eliminated to the fullest extent permitted by any future amendments to Delaware law.

GPI’s bylaws provide that GPI shall indemnify any director, officer, other employee or agent, who was or is a party to, or is threatened to be made a party to or who is called as a witness in connection with any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of GPI by reason of the fact that such person is or was serving at the request of a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another enterprise, unless the act or the failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. GPI shall pay expenses incurred by an officer, director or other employee or agent, in defending a civil or criminal action, suit or proceeding in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by GPI. The indemnification and advancement of expenses provided by the bylaws are not exclusive of other rights. Effective immediately upon any modification of the DGCL which expands or enlarges the power or obligation of Delaware corporations to indemnify, or advance expenses to, directors, officers, employees and other agents of the corporation, GPI’s bylaws are deemed to have been amended for the benefit of its directors, officers, employees and other agents.

The certificate of incorporation of Reynolds Finance Company provides for the indemnification of the corporation’s directors and officers to the fullest extent permitted by law and eliminates the personal liability of its directors to the corporation or its stockholders for any breach of fiduciary duty as a director other than any breach of the duty of loyalty, for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, for acts or omissions arising under Section 174 of the DGCL (payment of dividends) or for any transaction from which the directors derived an improper personal benefit.

The bylaws of Reynolds Finance Company provide that its officers and directors shall be indemnified against any reasonable expense and any liability paid or incurred in connection with any actual or threatened claim, action, suit or proceeding, whether brought by or in the right of the corporation or otherwise, by reason of serving or having served as an officer or director of the corporation or an officer, director, employee, fiduciary or other representative of another entity at the request of Reynolds Finance Company, so long as such indemnification does not contravene the DGCL or other applicable law and provided such officer or director acted in good faith and in a manner reasonably believed was in or not opposed to the best interest of the corporation and with respect to any criminal action or proceeding had no reasonable cause to believe his conduct was unlawful. The bylaws of Reynolds Finance Company also provide that the indemnification provided for therein shall include the right to have expenses incurred by such person in connection with an action paid in advance of a final disposition of such action, subject to subsequent determination of the right to be so indemnified.

Delaware Limited Liability Companies

The following registrants are limited liability companies formed in the State of Delaware: American Snuff Company, LLC, referred to as American Snuff Co.; and Rosswil LLC, referred to as Rosswil.

Section 18-108 of the Delaware Limited Liability Company Act grants a Delaware limited liability company the power, subject to such standards and restrictions, if any, as are set forth in its limited liability company

 

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agreement, to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever.

The limited liability company agreement of American Snuff Co. provides that it will, to the full extent permitted by the Delaware Limited Liability Company Act or other applicable law, indemnify any of its managers, officers or members for any loss, damage or claim incurred by such person in good faith on behalf of American Snuff Co. and in a manner reasonably believed to be within the scope of the authority conferred on such person under the entity’s limited liability company agreement, other than for any loss, damage or claim incurred by such person by reason of gross negligence or willful misconduct. The limited liability company agreement further provides that none of such persons shall be liable to American Snuff Co. or its members for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such person in good faith on behalf of American Snuff Co. and in a manner reasonably believed to be within the scope of the authority conferred on such person, other than for any such loss, damage or claim incurred by reason of such person’s gross negligence or willful misconduct. The limited liability company agreement further provides that, to the fullest extent permitted by law, expenses incurred by managers, officers or members in defending any action, demand, claim, suit or proceeding shall be advanced upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified.

The limited liability company agreement of Rosswil provides that no manager shall have any liability to Rosswil or any member for monetary damages for breach of fiduciary duty as a manager other than for any breach of such manager’s duty of loyalty to the entity or its members, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law or for any transactions from which such manager derived an improper personal benefit. The agreement also provides that Rosswil will, except as discussed below, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of Rosswil because such a person is or was a member, manager or officer, or is or was serving at the request of Rosswil as a manager, director, officer or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of Rosswil, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. No indemnification shall be made in respect of any claim, issue or matter as to which a member, manager or officer shall have been adjudged to be liable to the entity unless and to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine that such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. The limited liability company agreement of Rosswil also provides that expenses (including attorneys’ fees) incurred by a member, manager or officer shall be paid by Rosswil in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified.

New Mexico Corporation

Santa Fe Natural Tobacco Company, Inc., referred to as SFNTC, is a corporation incorporated under the laws of the State of New Mexico.

Section 53-11-4.1 of the New Mexico Business Corporation Act, referred to as the NMBCA, empowers a corporation to indemnify any officer or director against judgments, penalties, fines, settlements and reasonable expenses actually incurred by the person in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, if the person acted in good faith and the person reasonably believed that, in the case of conduct in the person’s official capacity with the corporation, the

 

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person’s conduct was in the best interests of the corporation and in all other cases, that the person’s conduct was at least not opposed to its best interests, and with respect to a criminal proceeding, had no reasonable cause to believe the person’s conduct was unlawful; except that if the proceeding was by or in the right of the corporation, indemnification may be made only against such reasonable expenses and shall not be made in respect of any proceeding in which the person shall have been adjudged to be liable to the corporation. A director or officer shall not be indemnified under this section in respect of any proceeding charging improper personal benefit to such person, whether or not involving action in the person’s official capacity, in which the person shall have been adjudged to be liable on the basis that personal benefit was improperly received by such person. This section empowers a corporation to maintain insurance or furnish similar protection, including, but not limited to, providing a trust fund, a letter of credit, or self-insurance on behalf of any officer or director against any liability asserted against and incurred by the person in such capacity whether or not the corporation would have the power to indemnify the person against such liability under the provisions of this section. Reasonable expenses incurred by a director or officer who is a party to a proceeding may be paid or reimbursed by the corporation in advance of the final disposition of such proceeding if such person furnishes the corporation a written affirmation of his good faith belief that the person has met the standard of conduct necessary for indemnification by the corporation as authorized in this section; such person furnishes the corporation a written undertaking to repay such amount if it shall ultimately be determined that the person has not met such standards of conduct; and a determination is made that the facts then known to those making the determination would not preclude indemnification under this section. The indemnification authorized by Section 53-11-4.1 is not exclusive of any other rights to which an officer or director may be entitled under the articles of incorporation, the bylaws, an agreement, a resolution of shareholders or directors or otherwise.

The restated articles of incorporation of SFNTC provide for the indemnification of each of the corporation’s directors, officers and/or employees or any former director, officer and/or employee, or any person who has served at the request of the corporation as a director or officer of another corporation in which the corporation owns shares of stock or of which it is a creditor, and the personal representative of any such persons, against costs and expenses actually and necessarily incurred by such person in connection with the defense of any action or proceeding in which such person is made a party by reason of being or having been a director, officer and/or employee, except in relation to matters as to which such person is adjudged in such action or proceeding to be liable for actual fraud in the performance of his or her duties. The right to indemnification also includes the right to be paid immediately the costs and expenses of any such action or proceeding upon the incurrence of any such cost or expense. If such director, officer and/or employee or former director, officer and/or employee is adjudged in any action or proceeding to be liable of actual fraud in the performance of his or her duties, such person shall be liable to repay the corporation for any such costs or expenses incurred and paid by the corporation.

The bylaws of SFNTC provide that SFNTC shall indemnify its past, present and future directors and officers (and their executors, administrators or other legal representatives) and hold them harmless to the fullest extent of SFNTC’s power to do so under the NMBCA and applicable law, from and against judgments, penalties, fines, settlements and reasonable expenses actually incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to the extent that any such director or officer is made a party to such proceeding by reason of the fact that the person is or was a director or officer of SFNTC (or served at the request of SFNTC as a director, officer, partner, trustee, employee or agent of another corporation or of a partnership, joint venture, trust or other incorporated or unincorporated enterprise, including service with respect to employee benefit plans or trusts), except in relation to matters as to which any such officer or director shall be adjudged in such action, suit or proceeding to be liable for gross negligence or willful misconduct in the performance of his or her duties. The bylaws of SFNTC further provide that SFNTC shall indemnify its past, present and future directors and officers (and their executors, administrators or other legal representatives) from and against all reasonable expense incurred by any such person in defending claims made or suits or proceedings brought against him or her as a director or officer. SFNTC shall pay and reimburse such expenses incurred by any such director or officer in advance of the final disposition of such proceeding if such person furnishes SFNTC a written affirmation of such person’s good faith belief that the person has met the standard of conduct necessary for indemnification by SFNTC; such person furnishes SFNTC a written

 

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undertaking to repay such amount if it shall ultimately be determined that the person has not met such standards of conduct; and a determination is made, if required by the NMBCA, that the facts then known to those making the determination would not preclude indemnification.

Directors’ and Officers’ Insurance

Under insurance policies maintained by RAI, the directors and officers of RAI and the other registrants are insured, within the limits and subject to the limitations of the policies, against certain expenses in connection with the defense of actions, suits or proceedings, and certain liabilities which might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been such directors or officers, including liabilities under the Securities Act of 1933, as amended. These insurance policies are designed to make payments on behalf of RAI and the other registrants to their directors and officers pursuant to the indemnification provisions described above as well as with respect to non-indemnifiable claims. These insurance policies maintained by RAI satisfy its obligations under its indemnification agreements with directors and officers.

The merger agreement also requires RAI to maintain for six years following the Lorillard merger directors’ and officers’ liability insurance with respect to facts, events, acts or omissions that occurred prior to the Lorillard merger on terms and conditions not less favorable to the insured persons than the directors’ and officers’ liability insurance coverage maintained by Lorillard at the time the merger agreement was executed and at an annual cost not to exceed 250% of Lorillard’s 2013 aggregate annual premium for such insurance policy.

Item 21. Exhibits and Financial Statement Schedules

 

(a)

Exhibits.

 

Exhibit No.		Description of Document
4.1		Rule 144A Form of Reynolds American Inc. old 3.500% Senior Notes due 2016 (incorporated by reference to Exhibit 4.1 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.2		Regulation S Form of Reynolds American Inc. old 3.500% Senior Notes due 2016 (incorporated by reference to Exhibit 4.2 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.3		Rule 144A Form of Reynolds American Inc. old 2.300% Senior Notes due 2017 (incorporated by reference to Exhibit 4.3 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.4		Regulation S Form of Reynolds American Inc. old 2.300% Senior Notes due 2017 (incorporated by reference to Exhibit 4.4 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.5		Rule 144A Form of Reynolds American Inc. old 8.125% Senior Notes due 2019 (incorporated by reference to Exhibit 4.5 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.6		Regulation S Form of Reynolds American Inc. old 8.125% Senior Notes due 2019 (incorporated by reference to Exhibit 4.6 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.7		Rule 144A Form of Reynolds American Inc. old 6.875% Senior Notes due 2020 (incorporated by reference to Exhibit 4.7 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.8		Regulation S Form of Reynolds American Inc. old 6.875% Senior Notes due 2020 (incorporated by reference to Exhibit 4.8 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.9		Rule 144A Form of Reynolds American Inc. old 3.750% Senior Notes due 2023 (incorporated by reference to Exhibit 4.9 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.10		Regulation S Form of Reynolds American Inc. old 3.750% Senior Notes due 2023 (incorporated by reference to Exhibit 4.10 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).

 

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Exhibit No.		Description of Document
4.11		Rule 144A Form of Reynolds American Inc. old 8.125% Senior Notes due 2040 (incorporated by reference to Exhibit 4.11 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.12		Regulation S Form of Reynolds American Inc. old 8.125% Senior Notes due 2040 (incorporated by reference to Exhibit 4.12 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.13		Rule 144A Form of Reynolds American Inc. old 7.000% Senior Notes due 2041 (incorporated by reference to Exhibit 4.13 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.14		Regulation S Form of Reynolds American Inc. old 7.000% Senior Notes due 2041 (incorporated by reference to Exhibit 4.14 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.15		Form of Reynolds American Inc. new 3.500% Senior Notes due 2016, 2.300% Senior Notes due 2017, 8.125% Senior Notes due 2019, 6.875% Senior Notes due 2020, 3.750% Senior Notes due 2023, 8.125% Senior Notes due 2040, and 7.000% Senior Notes due 2041.
4.16		Indenture, dated May 31, 2006, among Reynolds American Inc. and certain of its subsidiaries as guarantors and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to Reynolds American Inc.’s Form 8-K dated May 31, 2006).
4.17		First Supplemental Indenture, dated September 30, 2006, to Indenture, dated May 31, 2006, among Reynolds American Inc. and certain of its subsidiaries as guarantors, and The Bank of New York Trust Company, N.A., as successor to The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to Reynolds American Inc.’s Form 8-K dated September 30, 2006).
4.18		Second Supplemental Indenture, dated February 6, 2009, to Indenture, dated May 31, 2006, as supplemented by the First Supplemental Indenture, dated September 30, 2006, among Reynolds American Inc. and certain of its subsidiaries, as guarantors, and The Bank of New York Mellon Trust Company, N.A., f/k/a The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.21 to Reynolds American Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed February 23, 2009).
4.19		Third Supplemental Indenture, dated September 17, 2013, to Indenture, dated May 31, 2006, by and among Reynolds American Inc., as issuer, and certain of its subsidiaries as guarantors, and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.3 to Reynolds American Inc.’s Form 8-K, dated September 12, 2013).
4.20		Fourth Supplemental Indenture, dated September 2, 2015, to Indenture dated May 31, 2006, among Reynolds American Inc. and certain of its subsidiaries as guarantors and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to Reynolds American Inc.’s Form 8-K, dated August 31, 2015).
5.1		Opinion of Kilpatrick Townsend & Stockton LLP.
5.2		Opinion of Betzer, Roybal & Eisenberg P.C.
12.1		Computation of Ratio of Earnings to Fixed Charges.
23.1		Consent of Kilpatrick Townsend & Stockton LLP (included in Exhibit 5.1).
23.2		Consent of Betzer, Roybal & Eisenberg, P.C. (included in Exhibit 5.2).
23.3		Consent of KPMG LLP.
23.4		Consent of Deloitte & Touche LLP.
24.2		Powers of Attorney of the Registrants (contained on the signature pages).

 

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Exhibit No.		Description of Document
25.1		Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York Mellon Trust Company, N.A., as trustee under Reynolds American Inc.’s Indenture dated May 31, 2006.
99.1		Form of Letter of Transmittal.
99.2		Form of Notice of Guaranteed Delivery.
99.3		Form of Notice to Investors.
99.4		Form of Notice to Broker Dealers.

Item 22. Undertakings.

 

(a)

The undersigned registrants hereby undertake:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end or the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

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purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrants will be sellers to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(i)

Any preliminary prospectus or prospectus of the undersigned registrants relating to the offering required to be filed pursuant to Rule 424;

 

(ii)

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrants or used or referred to by the undersigned registrants;

 

(iii)

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrants or their securities provided by or on behalf of the undersigned registrants; and

 

(iv)

Any other communication that is an offer in the offering made by the undersigned registrants to the purchaser.

(b) The undersigned registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the annual report of Reynolds American Inc. pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

(d) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(e) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ Susan M. Cameron Susan M. Cameron		President, Chief Executive Officer and Director (Principal Executive Officer)
/s/ Andrew D. Gilchrist Andrew D. Gilchrist		Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/ Frederick W. Smothers Frederick W. Smothers		Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)
/s/ Thomas C. Wajnert Thomas C. Wajnert		Chairman of the Board and Director
/s/ John P. Daly John P. Daly		Director

 

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Signature		Title
/s/ Martin D. Feinstein Martin D. Feinstein		Director
/s/ Luc Jobin Luc Jobin		Director
/s/ Murray S. Kessler Murray S. Kessler		Director
/s/ Holly Keller Koeppel Holly Keller Koeppel		Director
/s/ Robert Lerwill Robert Lerwill		Director
/s/ Nana Mensah Nana Mensah		Director
/s/ Lionel L. Nowell III Lionel L. Nowell III		Director
/s/ Ricardo Oberlander Ricardo Oberlander		Director
/s/ Ronald S. Rolfe Ronald S. Rolfe		Director
/s/ Richard E. Thornburgh Richard E. Thornburgh		Director
/s/ John J. Zillmer John J. Zillmer		Director

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ Debra A. Crew Debra A. Crew		President, Chief Operating Officer and Director (Principal Executive Officer)
/s/ Mark A. Peters Mark A. Peters		Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer)
/s/ Daniel J. Herko Daniel J. Herko		Director

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ McDara P. Folan, III McDara P. Folan, III		President and Director (Principal Executive Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer)

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wilmington, State of Delaware, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ Caroline M. Price Caroline M. Price		President and Director (Principal Executive Officer)
/s/ Dale L. Orrell Dale L. Orrell		Treasurer and Director (Principal Financial Officer)
/s/ Barbara J. Aldridge Barbara J. Aldridge		Vice President and Director (Principal Accounting Officer)
/s/ Donald J. Puglisi Donald J. Puglisi		Director
/s/ Gordon W. Stewart Gordon W. Stewart		Director

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ David A. Shirlen David A. Shirlen		President and Director (Principal Executive Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Treasurer (Principal Financial Officer and Principal Accounting Officer)
/s/ McDara P. Folan, III McDara P. Folan, III		Director
/s/ William M. Bryner William M. Bryner		Director

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Oxford, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ Michael A. Little Michael A. Little		President and Director (Principal Executive Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer)
/s/ Robert A. Emken, Jr. Robert A. Emken, Jr.		Director
/s/ Brent M. Sabo Brent M. Sabo		Director

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ McDara P. Folan, III McDara P. Folan, III		President and Manager (Principal Executive Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Vice President, Treasurer and Manager (Principal Financial Officer and Principal Accounting Officer)

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Memphis, State of Tennessee, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ Randall M. Spach Randall M. Spach		President and Manager (Principal Executive Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer)
/s/ Daniel A. Range Daniel A. Range		Manager
/s/ William Paul Scott William Paul Scott		Manager
/s/ David T. Turfler David T. Turfler		Manager

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ McDara P. Folan, III McDara P. Folan, III		President and Director (Principal Executive Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Vice President, Treasurer and Director (Principal Financial Officer and Principal Accounting Officer)

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ Andrew D. Gilchrist Andrew D. Gilchrist		President (Principal Executive Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Senior Vice President, Treasurer and Director (Principal Financial Officer and Principal Accounting Officer)
/s/ McDara P. Folan, III McDara P. Folan, III		Director

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ Debra A. Crew Debra A. Crew		President and Director (Principal Executive Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Vice President, Treasurer and Director (Principal Financial Officer and Principal Accounting Officer)
/s/ McDara P. Folan, III McDara P. Folan, III		Director

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ Susan M. Cameron Susan M. Cameron		President (Principal Executive Officer)
/s/ Andrew D. Gilchrist Andrew D. Gilchrist		Executive Vice President, Chief Financial Officer, Chief Information Officer and Director (Principal Financial Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Senior Vice President and Treasurer (Principal Accounting Officer)
/s/ Lisa J. Caldwell Lisa J. Caldwell		Director
/s/ Martin L. Holton III Martin L. Holton III		Director

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winston-Salem, State of North Carolina, on November 4, 2015.

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints McDara P. Folan, III, Robert A. Emken, Jr. and Constantine E. Tsipis, and each of them (with full power to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions which may be necessary or appropriate in connection therewith, granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated as of November 4, 2015.

 

Signature		Title
/s/ David A. Shirlen David A. Shirlen		President and Manager (Principal Executive Officer)
/s/ Daniel A. Fawley Daniel A. Fawley		Treasurer (Principal Financial Officer and Principal Accounting Officer)
/s/ William M. Bryner William M. Bryner		Manager
/s/ McDara P. Folan, III McDara P. Folan, III		Manager

 

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EXHIBIT INDEX

 

Exhibit No.		Description of Document
4.1		Rule 144A Form of Reynolds American Inc. old 3.500% Senior Notes due 2016 (incorporated by reference to Exhibit 4.1 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.2		Regulation S Form of Reynolds American Inc. old 3.500% Senior Notes due 2016 (incorporated by reference to Exhibit 4.2 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.3		Rule 144A Form of Reynolds American Inc. old 2.300% Senior Notes due 2017 (incorporated by reference to Exhibit 4.3 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.4		Regulation S Form of Reynolds American Inc. old 2.300% Senior Notes due 2017 (incorporated by reference to Exhibit 4.4 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.5		Rule 144A Form of Reynolds American Inc. old 8.125% Senior Notes due 2019 (incorporated by reference to Exhibit 4.5 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.6		Regulation S Form of Reynolds American Inc. old 8.125% Senior Notes due 2019 (incorporated by reference to Exhibit 4.6 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.7		Rule 144A Form of Reynolds American Inc. old 6.875% Senior Notes due 2020 (incorporated by reference to Exhibit 4.7 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.8		Regulation S Form of Reynolds American Inc. old 6.875% Senior Notes due 2020 (incorporated by reference to Exhibit 4.8 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.9		Rule 144A Form of Reynolds American Inc. old 3.750% Senior Notes due 2023 (incorporated by reference to Exhibit 4.9 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.10		Regulation S Form of Reynolds American Inc. old 3.750% Senior Notes due 2023 (incorporated by reference to Exhibit 4.10 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.11		Rule 144A Form of Reynolds American Inc. old 8.125% Senior Notes due 2040 (incorporated by reference to Exhibit 4.11 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.12		Regulation S Form of Reynolds American Inc. old 8.125% Senior Notes due 2040 (incorporated by reference to Exhibit 4.12 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.13		Rule 144A Form of Reynolds American Inc. old 7.000% Senior Notes due 2041 (incorporated by reference to Exhibit 4.13 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.14		Regulation S Form of Reynolds American Inc. old 7.000% Senior Notes due 2041 (incorporated by reference to Exhibit 4.14 to Reynolds American Inc.’s Form 8-K dated July 15, 2015).
4.15		Form of Reynolds American Inc. new 3.500% Senior Notes due 2016, 2.300% Senior Notes due 2017, 8.125% Senior Notes due 2019, 6.875% Senior Notes due 2020, 3.750% Senior Notes due 2023, 8.125% Senior Notes due 2040, and 7.000% Senior Notes due 2041.
4.16		Indenture, dated May 31, 2006, among Reynolds American Inc. and certain of its subsidiaries as guarantors and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to Reynolds American Inc.’s Form 8-K dated May 31, 2006).
4.17		First Supplemental Indenture, dated September 30, 2006, to Indenture, dated May 31, 2006, among Reynolds American Inc. and certain of its subsidiaries as guarantors, and The Bank of New York Trust Company, N.A., as successor to The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to Reynolds American Inc.’s Form 8-K dated September 30, 2006).

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Table of Contents

Exhibit No.		Description of Document
4.18		Second Supplemental Indenture, dated February 6, 2009, to Indenture, dated May 31, 2006, as supplemented by the First Supplemental Indenture, dated September 30, 2006, among Reynolds American Inc. and certain of its subsidiaries, as guarantors, and The Bank of New York Mellon Trust Company, N.A., f/k/a The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.21 to Reynolds American Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed February 23, 2009).
4.19		Third Supplemental Indenture, dated September 17, 2013, to Indenture, dated May 31, 2006, by and among Reynolds American Inc., as issuer, and certain of its subsidiaries as guarantors, and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.3 to Reynolds American Inc.’s Form 8-K, dated September 12, 2013).
4.20		Fourth Supplemental Indenture, dated September 2, 2015, to Indenture dated May 31, 2006, among Reynolds American Inc. and certain of its subsidiaries as guarantors and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to Reynolds American Inc.’s Form 8-K, dated August 31, 2015).
5.1		Opinion of Kilpatrick Townsend & Stockton LLP.
5.2		Opinion of Betzer, Roybal & Eisenberg P.C.
12.1		Computation of Ratio of Earnings to Fixed Charges.
23.1		Consent of Kilpatrick Townsend & Stockton LLP (included in Exhibit 5.1).
23.2		Consent of Betzer, Roybal & Eisenberg, P.C. (included in Exhibit 5.2).
23.3		Consent of KPMG LLP.
23.4		Consent of Deloitte & Touche LLP.
24.2		Powers of Attorney of the Registrants (contained on the signature pages).
25.1		Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York Mellon Trust Company, N.A., as trustee under Reynolds American Inc.’s Indenture dated May 31, 2006.
99.1		Form of Letter of Transmittal.
99.2		Form of Notice of Guaranteed Delivery.
99.3		Form of Notice to Investors.
99.4		Form of Notice to Broker Dealers.

 

Exhibit 4.15

[FORMS OF REGISTERED 3.500% SENIOR NOTES DUE 2016, 2.300% SENIOR NOTES DUE 2017, 8.125% SENIOR NOTES DUE 2019, 6.875% SENIOR NOTES DUE 2020, 3.750% SENIOR NOTES DUE 2023, 8.125% SENIOR NOTES DUE 2040 AND 7.000% SENIOR NOTES DUE 2041]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

REYNOLDS AMERICAN INC.

[3.500% Senior Notes due 2016]

[2.300% Senior Notes due 2017]

[8.125% Senior Notes due 2019]

[6.875% Senior Notes due 2020]

[3.750% Senior Notes due 2023]

[8.125% Senior Notes due 2040]

[7.000% Senior Notes due 2041]

 

Certificate No.		$
Dated:             , 2015 (the “Issue Date”)		CUSIP No.

Reynolds American Inc., a North Carolina corporation (the “Company,” which term includes any successor corporation under the Indenture hereinafter referred to), for value received, promises to pay to Cede & Co., or its registered assigns, the principal sum of                      ($            ) on [August 4, 2016] [August 21, 2017] [June 23, 2019] [May 1, 2020] [May 20, 2023] [May 1, 2040] [August 4, 2041].

 

Interest Payment Dates:		[February 4 and August 4, commencing February 4, 2016.]
		[February 21 and August 21, commencing February 21, 2016.]
		[June 23 and December 23, commencing December 23, 2015.]
		[May 1 and November 1, commencing May 1, 2016.]
		[May 20 and November 20, commencing May 20, 2016.]
		[May 1 and November 1, commencing May 1, 2016.]
		[February 4 and August 4, commencing February 4, 2016.]

 

Record Dates:		[January 20 and July 20.]
		[February 6 and August 6.]
		[June 8 and December 8.]
		[April 15 and October 15.]
		[May 5 and November 5.]
		[April 15 and October 15.]
		[January 20 and July 20.]

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Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall have the same effect for all purposes as if set forth at this place.

Unless the certificate of authentication hereof has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.

Dated:             , 20    

 

Each of the undersigned hereby acknowledges its obligation as a Guarantor under the Indenture.

 

SANTA FE NATURAL TOBACCO COMPANY, INC.,
as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Vice President and Treasurer
R. J. REYNOLDS TOBACCO COMPANY, as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Treasurer

 

[2016][2017][2019][2020][2023][2040][2041] Note Signature Page

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R. J. REYNOLDS TOBACCO CO.,
as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Vice President and Treasurer
REYNOLDS INNOVATIONS INC., as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Treasurer
CONWOOD HOLDINGS, INC., as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Vice President and Treasurer
AMERICAN SNUFF COMPANY, LLC, as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Vice President and Treasurer

 

[2016][2017][2019][2020][2023][2040][2041] Note Signature Page

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ROSSWIL LLC,
as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Vice President and Treasurer
R.J. REYNOLDS TOBACCO HOLDINGS, INC., as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Senior Vice President and Treasurer
R. J. REYNOLDS GLOBAL PRODUCTS, INC., as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Vice President and Treasurer
RAI SERVICES COMPANY, as Guarantor
By:
Name:		Daniel A. Fawley
Title:		Senior Vice President and Treasurer

 

[2016][2017][2019][2020][2023][2040][2041] Note Signature Page

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REYNOLDS FINANCE COMPANY,
as Guarantor
By:
Name:		Caroline M. Price
Title:		President
LORILLARD LICENSING COMPANY LLC, as Guarantor
By:
Name:		David A. Shirlen
Title:		President

 

[2016][2017][2019][2020][2023][2040][2041] Note Signature Page

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(Trustee’s Certificate of Authentication)

This is one of the Notes of the series designated herein and referred to in the within-mentioned Indenture.

Dated:             , 20    

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Trustee
By:
Name:
Title:

 

[2016][2017][2019][2020][2023][2040][2041] Note Signature Page

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[REVERSE OF NOTE]

[3.500% Senior Notes due 2016]

[2.300% Senior Notes due 2017]

[8.125% Senior Notes due 2019]

[6.875% Senior Notes due 2020]

[3.750% Senior Notes due 2023]

[8.125% Senior Notes due 2040]

[7.000% Senior Notes due 2041]

References herein to the “Notes” mean the Company’s [3.500% Senior Notes due 2016] [2.300% Senior Notes due 2017] [8.125% Senior Notes due 2019] [6.875% Senior Notes due 2020] [3.750% Senior Notes due 2023] [8.125% Senior Notes due 2040] [7.000% Senior Notes due 2041] and not to any other series. Other capitalized terms used, but not defined, herein shall have the meanings assigned to them in the Indenture and Schedule I attached hereto unless otherwise indicated.

1. Interest. [(a)] The Company promises to pay interest on the principal amount of this Note at [3.500%] [2.300%] [8.125%] [6.875%] [3.750%] [8.125%] [7.000%] per annum from the date provided below until maturity. The Company shall pay interest semi-annually, in arrears, on [February 4 and August 4] [February 21 and August 21] [June 23 and December 23] [May 1 and November 1] [May 20 and November 20] [May 1 and November 1] [February 4 and August 4] of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an “Interest Payment Date”), except that, if the maturity date of the Note falls on a day that is not a Business Day, the Company will make the required payment of interest and principal on the immediately succeeding Business Day, as if it were made on the date the payment was due. This Note has been issued in exchange for a like aggregate principal amount of the Company’s [3.500% Senior Notes due 2016] [2.300% Senior Notes due 2017] [8.125% Senior Notes due June 23, 2019] [6.875% Senior Notes due 2020] [3.750% Senior Notes due 2023] [8.125% Senior Notes due 2040] [7.000% Senior Notes due 2041], which have not been registered under the Securities Act of 1933, as amended (the “old notes”). The old notes were issued in exchange for a like aggregate principal amount of the [3.500% Senior Notes due 2016] [2.300% Senior Notes due 2017] [8.125% Senior Notes due 2019] [6.875% Senior Notes due 2020] [3.750% Senior Notes due 2023] [8.125% Senior Notes due 2040] [7.000% Senior Notes due 2041] issued by Lorillard Tobacco Company, a Delaware corporation (the “LTC Notes”). Interest on the Notes shall accrue from the most recent date on which interest has been paid on the corresponding series of old notes or, if no interest has been paid on such series, from the most recent date on which interest has been paid on the corresponding series of LTC Notes; provided, that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. The first Interest Payment Date shall be [February 4, 2016] [February 21, 2016] [December 23, 2015] [May 1, 2016] [May 20, 2016] [May 1, 2016] [February 4, 2016]. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Interest will not accrue as a result of any postponed or delayed payment in accordance with this paragraph.

 

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[IF 2019 NOTES, ADD:]

[(b) The interest rate payable on the Notes shall be subject to adjustments from time to time if either Moody’s or S&P or, in either case, any Substitute Rating Agency thereof downgrades (or subsequently upgrades) the debt rating assigned to the Notes, in the manner described in this Section 1.

(c) If the rating from Moody’s (or any Substitute Rating Agency thereof) of the Notes is decreased to a rating set forth in the immediately following table, the interest rate on the Notes shall increase such that it shall equal the interest rate payable on the Notes on their Issue Date plus the percentage set forth opposite the ratings from the table below:

 

Moody’s Rating*		Percentage Points
Ba1			0.25
Ba2			0.50
Ba3			0.75
B1 or below			1.00

 

*	Including the equivalent ratings of any Substitute Rating Agency.

(d) If the rating from S&P (or any Substitute Rating Agency thereof) of the Notes is decreased to a rating set forth in the immediately following table, the interest rate on the Notes shall increase such that it shall equal the interest rate payable on the Notes on their Issue Date plus the percentage set forth opposite the ratings from the table below:

 

S&P Rating*		Percentage Points
BB+			0.25
BB			0.50
BB-			0.75
B+ or below			1.00

 

*	Including the equivalent ratings of any Substitute Rating Agency.

(e) If at any time the interest rate on the Notes has been adjusted upward and either Moody’s or S&P (or, in either case, a Substitute Rating Agency thereof), as the case may be, subsequently increases its rating of the Notes to any of the threshold ratings set forth above, the interest rate on the Notes shall be decreased such that the interest rate for the Notes equals the interest rate payable on the Notes on their Issue Date plus the percentages set forth opposite the ratings from the tables above in effect immediately following the increase. If Moody’s (or any Substitute Rating Agency thereof) subsequently increases its rating of the Notes to Baa3 (or its equivalent, in the case of a Substitute Rating Agency) or higher, and S&P (or any Substitute Rating Agency thereof) increases its rating to BBB- (or its equivalent, in the case of a Substitute Rating Agency) or higher the interest rate on the Notes shall be decreased to the interest rate payable on the Notes on their Issue Date. In addition, the interest rates on the Notes shall permanently cease to be subject to any adjustment described in subsections (c) and (d) above (notwithstanding any subsequent decrease in the ratings by either or both Rating Agencies) if the Notes become rated A3 and A- (or the equivalent of either such rating, in the case of a Substitute Rating Agency) or higher by Moody’s and S&P (or, in either case, a Substitute Rating Agency thereof), respectively (or one of these ratings if the Notes are only rated by one Rating Agency).

 

2

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(f) Each adjustment required by any decrease or increase in a rating set forth above, whether occasioned by the action of Moody’s or S&P (or, in either case, a Substitute Rating Agency thereof), shall be made independent of any and all other adjustments. In no event shall (1) the interest rate for the Notes be reduced to below the interest rate payable on their Issue Date or (2) the total increase in the interest rate on the Notes exceed 2.00% above the interest rate payable on the Notes on their Issue Date.

(g) No adjustments in the interest rate of the Notes shall be made solely as a result of a Rating Agency ceasing to provide a rating of the Notes. If at any time fewer than two Rating Agencies provide a rating of the Notes for a reason beyond the Company’s control, the Company shall use its commercially reasonable efforts to obtain a rating of the Notes from a Substitute Rating Agency, to the extent one exists, and if a Substitute Rating Agency exists, for purposes of determining any increase or decrease in the interest rate on the Notes pursuant to the tables in subsections (c) and (d) above (1) such Substitute Rating Agency shall be substituted for the last Rating Agency to provide a rating of the Notes but which has since ceased to provide such rating, (2) the relative rating scale used by such Substitute Rating Agency to assign ratings to senior unsecured debt shall be determined in good faith by an independent investment banking institution of national standing appointed by the Company and, for purposes of determining the applicable ratings included in the applicable table in subsection (c) or (d) above with respect to such Substitute Rating Agency, such ratings shall be deemed to be the equivalent ratings used by Moody’s or S&P, as applicable, in such table and (3) the interest rate on the Notes shall increase or decrease, as the case may be, such that the interest rate equals the interest rate payable on the Notes on their Issue Date plus the appropriate percentage, if any, set forth opposite the rating from such Substitute Rating Agency in the applicable table in subsection (c) or (d) above (taking into account the provisions of clause (2) of this subsection) (plus any applicable percentage resulting from a decreased rating by the other Rating Agency). For so long as only one Rating Agency provides a rating of the Notes, any subsequent increase or decrease in the interest rate of the Notes necessitated by a reduction or increase in the rating by the Rating Agency providing the rating shall be twice the percentage set forth in the applicable table in subsection (c) or (d) above. For so long as none of Moody’s, S&P or a Substitute Rating Agency provides a rating of the Notes for reasons within the Company’s control, the interest rate on the Notes shall increase to, or remain at, as the case may be, 2.00% above the interest rate payable on the Notes on their Issue Date.

(h) Any interest rate increase or decrease described above shall take effect from the first day of the interest period during which a rating change requires an adjustment in the interest rate. If Moody’s or S&P (or, in either case, a Substitute Rating Agency thereof) changes its rating of the Notes more than once during any particular interest period, the last change by such agency shall control for purposes of any interest rate increase or decrease with respect to the Notes described above relating to such rating agency’s action.

(i) Promptly after any change in the interest rate payable on the Notes as provided in this Section 1, the Company shall provide the Trustee an Officers’ Certificate to the effect that the interest rate payable on the Notes has changed in accordance with this provision and setting forth the amount of the related increase or decrease and the new interest rate payable on the Notes and setting forth the

 

3

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effective date of any change in the interest rate payable on the Notes and shall provide notice of the same to Holders. The Trustee shall not be responsible for monitoring the ratings of the Notes to determine whether there has been any increase or decrease in such rating or for calculating the new interest rate payable on the Notes in the event of any increase or decrease in the ratings of the Notes.

(j) If the interest rate payable on the Notes is increased as described above, the term “interest,” as used with respect to the Notes, shall be deemed to include any such increased interest unless the context otherwise requires.]

2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the [January 20 and July 20] [February 6 and August 6] [June 8 and December 8] [April 15 and October 15] [May 5 and November 5] [April 15 and October 15] [January 20 and July 20] (whether or not a Business Day) immediately preceding the Interest Payment Date (except that interest payable at maturity of the Notes shall be paid to the same persons to whom principal of such Notes is payable), except as provided in Section 2.13 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium, if any, and interest, at the office or agency of the Company maintained for such purpose within the Borough of Manhattan of the City of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and, premium, if any, and interest on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

3. Paying Agent and Registrar. Initially, The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity.

4. Indenture. The Company issued the Notes under an Indenture dated as of May 31, 2006, as amended and supplemented, among the Company, as issuer, certain direct and indirect subsidiaries of the Company, as guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Indenture”). The terms of the Notes include those stated in the Indenture, those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the “TIA”), and those set forth in Schedule I attached hereto. The Notes are subject to all such terms, and Holders are referred to the Indenture, the TIA and Schedule I for a statement of such terms.

5. Redemption at the Company’s Option. [IF 2023 NOTES ADD: Prior to February 20, 2023, t][T]he Company may redeem all or a part of the Notes from time to time in accordance with Article 5 of the Indenture at a redemption price equal to the greater of:

(a) 100% of the principal amount of such Notes being redeemed, and

(b) the sum of the present values of the remaining scheduled payments of principal and interest on such Notes being redeemed discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a yield equal to (1) the applicable Treasury Rate, plus (2) 10 basis points,

 

4

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plus, in each of case (a) and (b), accrued and unpaid interest on the principal amount being redeemed to the date of redemption.

[IF 2023 NOTES ADD: On or after February 20, 2023, the Company may redeem all or a part of the Notes from time to time in accordance with Article 5 of the Indenture at a redemption price equal to 100% of the principal amount of the Notes being redeemed, plus accrued and unpaid interest on the principal amount being redeemed to the date of redemption.]

Notice of such optional redemption shall be mailed, by first class mail, at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations equal to or larger than $2,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date, interest ceases to accrue on Notes or portions thereof called for redemption (unless the Company shall default in the payment of the redemption price and accrued interest). All redemptions shall be effected pursuant to applicable depositary procedures.

6. Repurchase upon Change of Control Repurchase Event. If a Change of Control Repurchase Event occurs with respect to the Notes, unless the Company has exercised its right to redeem the Notes, the Company will make an offer to each Holder of Notes to repurchase all or any part (in excess of $2,000 and in integral multiples of $1,000) of that Holder’s Notes at a repurchase price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus any accrued and unpaid interest on the Notes repurchased to the date of repurchase. Within 30 days following any Change of Control Repurchase Event, the Company will mail a notice to each Holder, with a copy to the Trustee, describing the transaction or transactions that constitute the Change of Control Repurchase Event and offering to repurchase Notes on the payment date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder, to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase Event provisions of the Notes, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations hereunder by virtue of such conflict. On the Change of Control Repurchase Event payment date, the Company will, to the extent lawful (i) accept for payment all Notes or portions of Notes (in excess of $2,000 and in integral multiples of $1,000) properly tendered pursuant to the Company’s offer; (ii) deposit with the Paying Agent an amount equal to the aggregate repurchase price in respect of all Notes or portions of Notes properly tendered; and (iii) deliver or cause to be delivered to the Trustee the Notes properly accepted, together with an Officers’ Certificate stating the aggregate principal amount of Notes being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes properly tendered the repurchase price for the Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each Holder a new Note equal in principal amount to any unpurchased

 

5

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portion of any Notes surrendered; provided that each new Note will be in a principal amount of $2,000 or an integral multiple of $1,000. The Company will not be required to make an offer to repurchase the notes upon a Change of Control Repurchase Event if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Company, and such third party purchases all Notes properly tendered and not withdrawn under its offer.

7. No Sinking Fund. The Company shall not be required to make sinking fund payments with respect to the Notes.

8. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in minimum denominations of $2,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture, including any transfer tax or other similar governmental charge payable in connection therewith. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Note for a period of 15 days before a selection of Notes to be redeemed.

9. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes.

10. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented by the Company and Guarantors, each when authorized by a Board Resolution, with the consent of the Holders of at least a majority in aggregate principal amount of the Securities at the time outstanding of all series affected by such amendment or supplement, voting as a single class, and any existing Default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time outstanding of all series affected by such Default or waiver of compliance, voting as a single class. Without the consent of any Holder of a Note, the Company and the Guarantors, when authorized by a Board Resolution, and the Trustee may supplement the Indenture or the Notes: (a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Notes any property or assets; (b) to evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Company; (c) to add to the covenants of the Company such further covenants, restrictions, conditions or provisions as its Board of Directors and the Trustee shall consider to be for the protection or benefit of the Holders of the Notes, and to make the occurrence, or the occurrence and continuance, of a Default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in the Indenture as therein set forth; provided, that in respect of any such additional covenant, restriction, condition or provision such amendment or supplement may provide for a particular period of grace after Default (which period may be shorter or longer than that allowed in the case of other Defaults) or may provide for an immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may

 

6

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limit the right of the Holders of a majority in aggregate principal amount of the Notes to waive such an Event of Default; (d) to cure any ambiguity or to correct or supplement any provision contained in the Indenture or in any indenture supplemental thereto which may be defective or inconsistent with any other provision contained in the Indenture or in any indenture supplemental thereto; (e) to make such other provisions in regard to matters or questions arising under the Indenture or under any indenture supplemental thereto as the Board of Directors may deem necessary or desirable and which shall not adversely affect the interests of the Holders of the Notes in any material respect; (f) to establish the form or forms or terms of Securities of any series as permitted by the Indenture; (g) to evidence and provide for the acceptance of appointment under the Indenture by a successor trustee with respect to the Notes and to add to or change any of the provisions of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts thereunder by more than one trustee; (h) to provide for uncertificated Securities and to make all appropriate changes for such purpose; (i) to comply with the requirements of the TIA; and (j) to add additional Guarantors with respect to the Notes.

The Trustee is hereby authorized to join with the Company and the Guarantors in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

11. Defaults and Remedies. Any of the following events which shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) constitutes an “Event of Default” under the Indenture: (a) default in the payment of any installment of interest upon Securities of any series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (b) default in the payment of all or any part of the principal on Securities of any series as and when the same shall become due and payable either at maturity, upon any redemption, by declaration or otherwise; or (c) default in the payment of any sinking fund installment as and when the same shall become due and payable by the terms of Securities of any series; or (d) default in the performance, or breach, of any covenant or agreement of the Company or the Guarantors in respect of Securities of any series (other than a covenant or agreement in respect of such Securities a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by first class mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the outstanding Securities of all series affected thereby, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or (e) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company or the Guarantors in an involuntary case under any

 

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applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or for any substantial part of its property or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (f) the Company or any Restricted Subsidiary shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or for any substantial part of its property, or make any general assignment for the benefit of creditors; or (g) any Guarantee ceases to be in full force and effect (except as contemplated by the terms of the Indenture), or any Guarantee is declared in a judicial proceeding to be null and void, or any Guarantor denies or disaffirms in writing its obligations under the terms of the Indenture or its Guarantee; or (h) at any time as such security is required by the terms of the Indenture, any Security Document shall cease to be in full force and effect or shall cease to give the Collateral Agent the liens or any of the material rights, powers and privileges purported to be created thereby in favor of the Collateral Agent and such default shall continue unremedied for a period of at least 30 days after written notice to the Company by the Collateral Agent; or (i) any other Event of Default provided in Schedule I or in this Note.

If an Event of Default described in clauses (a), (b), (c), (d) or (i) above (if the Event of Default under clause (d) or (i) is with respect to less than all series of Securities then outstanding) occurs and is continuing, then, and in each and every such case, except for any series of Securities the principal of which shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of each such affected series then outstanding under the Indenture (voting as a single class) by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of all Securities of all such affected series, and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default described in clause (d) or (i) (if the Event of Default under clauses (d) or (i), as the case may be, is with respect to all series of Securities then outstanding), (e), (f), (g) or (h) occurs and is continuing, then and in each and every such case, unless the principal of all the Securities shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of all the Securities then outstanding under the Indenture (treated as one class), by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of all the Securities then outstanding and interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable.

The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Securities of any series (or of all the Securities, as the case may be) shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company or any Guarantor shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Securities of each such series (or of all the Securities, as the case may be) and the principal of any and all Securities of each such series (or of all the Securities, as the case may be) which shall have become due otherwise than by acceleration (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, at the same rate as the rate of interest specified in the Securities of each such series to the date of such payment or deposit) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the

 

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Trustee and each predecessor Trustee except as a result of gross negligence or willful misconduct, and if any and all Events of Default under the Indenture, other than the non-payment of the principal of Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein, then and in every such case the Holders of a majority in aggregate principal amount of all the Securities of each such series, or of all the Securities, in each case voting as a single class, then outstanding, by written notice to the Company and to the Trustee, may waive all defaults with respect to each such series (or with respect to all the Securities, as the case may be) and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.

12. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities, and may otherwise deal with the Company, as if it were not the Trustee.

13. No Recourse Against Others. No director, officer, employee, incorporator or shareholder or controlling person of the Company or the Trustee, as such, shall have any liability for any obligations of the Company or the Trustee, respectively, under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Securities and Exchange Commission that such a waiver is against public policy.

14. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent and in accordance with the Indenture.

15. Guarantees. This Note will be entitled to the benefits of certain Guarantees made for the benefit of the Holders. Subject to the terms of the Indenture, each Guarantor of the Indenture fully, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, jointly and severally, to each Holder of the Notes and the Trustee the full and punctual payment when due, whether at maturity, by acceleration, by redemption, by repurchase, or otherwise, of the principal of, premium, if any, and interest on the Notes and all other obligations of the Company under the Indenture, as provided in the Indenture. Reference is made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders, and of the circumstances under which the Guarantees may be released.

16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=Uniform Gifts to Minors Act).

17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers or both numbers in notices to the Holders of the Notes as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice to the Holders of the Notes and reliance may be placed only on the other identification numbers placed thereon.

 

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18. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.

 

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The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

Reynolds American Inc.

401 North Main Street

Winston-Salem, North Carolina 27101

Facsimile: 336-741-5000

Attention: Treasurer

 

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SCHEDULE I

REYNOLDS AMERICAN INC.

TERMS OF 3.500% SENIOR NOTES DUE 2016

2.300% SENIOR NOTES DUE 2017

8.125% SENIOR NOTES DUE 2019

6.875% SENIOR NOTES DUE 2020

3.750% SENIOR NOTES DUE 2023

8.125% SENIOR NOTES DUE 2040

7.000% SENIOR NOTES DUE 2041

Section 1.01 Designation of Notes. (a) The terms set forth in this Schedule I pertain to notes to be issued pursuant to that certain Indenture dated May 31, 2006, as amended and supplemented, by and among Reynolds American Inc. (the “Company”) as Issuer, The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), as Trustee, and certain Subsidiaries of the Company who have executed such Indenture or a supplement thereto as Guarantors (as so supplemented, the “Indenture”). The notes subject to these terms are (i) the Company’s 3.500% Senior Notes due 2016 in the original principal amount of $        (CUSIP Number             ) (the “2016 Notes”), (ii) the Company’s 2.300% Senior Notes due 2017 in the original principal amount of $        (CUSIP Number             ) (the “2017 Notes”), (iii) the Company’s 8.125% Senior Notes due 2019 in the original principal amount of $        (CUSIP Number             ) (the “2019 Notes”), (iv) the Company’s 6.875% Senior Notes due 2020 in the original principal amount of $        (CUSIP Number             ) (the “2020 Notes”), (v) the Company’s 3.750% Senior Notes due 2023 in the original principal amount of $        (CUSIP Number             ) (the “2023 Notes”), (vi) the Company’s 8.125% Senior Notes due 2040 in the original principal amount of $        (CUSIP Number             ) (the “2040 Notes”) and (vii) the Company’s 7.000% Senior Notes due 2041 in the original principal amount of $        (CUSIP Number             ) (the “2041 Notes,” and collectively with the 2016 Notes, 2017 Notes, 2019 Notes, the 2020 Notes, the 2023 Notes and the 2040 Notes, the “Notes”).

(b) The 2016 Notes, 2017 Notes, 2019 Notes, the 2020 Notes, the 2023 Notes, the 2040 Notes and the 2041 Notes shall each be considered a separate series for all purposes of the Indenture.

Section 1.02 Initial Issuance. (a) The Notes are being issued in exchange for a like aggregate principal amount of the Company’s 3.500% Senior Notes due 2016, 2.300% Senior Notes due 2017, 8.125% Senior Notes due June 23, 2019, 6.875% Senior Notes due 2020, 3.750% Senior Notes due 2023, 8.125% Senior Notes due 2040 and 7.000% Senior Notes due 2041. Each series of Notes shall be issued in the form of a permanent global note, with each such global note to be deposited with the Trustee, as Custodian for the Depository, duly executed by the Company, and authenticated by the Trustee as hereinafter provided. Each such global note may be represented by more than one certificate, if so required by the Depository’s rules regarding the maximum principal amount to be represented by a single certificate. The global notes representing the Notes are sometimes collectively herein referred to as the “Global Notes.” The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company and the Trustee shall approve the forms of the Notes and any notation, endorsement or legend on them.

(b) Denominations. The Notes shall be issuable only in fully registered form, without interest coupons, and only in denominations of $2,000 and any integral multiples of $1,000 in excess thereof.

 

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Section 1.03. Depository; Custodian. The Company initially appoints The Depository Trust Company (“DTC”) to act as Depository with respect to the Global Notes. The Company initially appoints the Trustee to act as Custodian with respect to the Global Notes.

Section 1.04. Transfer and Exchange of Global Notes. Transfers of a Global Note shall be limited to transfers in whole, but not in part, to the Depository, to a nominee of the Depository or to a successor Depository or such successor Depository’s nominee.

Section 1.05 Definitions. (a) Capitalized terms not defined in this Schedule I shall have the meanings set forth in the Indenture.

(b) As used herein and in the Notes, the following terms shall have the meanings set forth below:

“Below Investment Grade Rating Event” means, with respect to each series of Notes, the Notes of that series are downgraded by each of the Rating Agencies on any date from the date of the public notice of an arrangement that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) from a rating that is Investment Grade to a rating that is below Investment Grade.

“Change of Control” means the occurrence of any of the following:

(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries taken as a whole to any person other than the Company or one of its wholly owned subsidiaries;

(2) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any person other than the Company or one of its wholly owned subsidiaries becomes the beneficial owner, directly or indirectly, of more than 50% of the then outstanding number of shares of Voting Stock of the Company or other Voting Stock into which the Company’s Voting Stock is reclassified, consolidated, exchanged or changed, measured by voting power rather than number of shares;

(3) the consolidation of the Company with, or merger of the Company with or into, any person, or the consolidation of any person with, or merger with or into, the Company, in any such event pursuant to a transaction in which any of the Company’s outstanding Voting Stock or the Voting Stock of such other person is converted into or exchanged for cash, securities or other property, other than any such transaction where the shares of the Company’s Voting Stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the Voting Stock of the surviving person or any direct or indirect parent company of the surviving person immediately after giving effect to such transaction; and

(4) the adoption of a plan relating to the Company’s liquidation or dissolution (other than its liquidation into a holding company newly formed in accordance with the following paragraph, provided that all claims and obligations of the Company are assumed by, and all assets are transferred to such holding company).

 

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Notwithstanding the foregoing, a transaction will not be deemed to involve a change of control under clause (2) above if (1) the Company becomes a direct or indirect wholly owned subsidiary of a holding company and (2) (a) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of the Company’s Voting Stock immediately prior to that transaction or (b) immediately following that transaction no person (other than a holding company satisfying the requirements of this sentence) is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company. As used in this paragraph and the definition of “Change of Control,” the term “person” has the meaning given thereto in Section 13(d)(3) of the Exchange Act and the term “beneficial owner” has the meaning given thereto in Rules 13d-3 and 13d-5 promulgated under the Exchange Act.

“Change of Control Repurchase Event” means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.

“Comparable Treasury Issue” means the U.S. Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“Remaining Life”) of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes.

“Comparable Treasury Price” means: (1) the average of five Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations; or (2) if the Independent Investment Banker obtains fewer than five such Reference Treasury Dealer Quotations, the average of all such quotations.

“Custodian” means the Trustee, as custodian with respect to the Global Notes, or any successor entity thereto.

“Depository” means, with respect to the Notes issued in the form of one or more Global Notes, DTC as the Person appointed hereby as the Depository with respect to the Notes, or another Person appointed as Depository by the Company, which Person must be a clearing agency registered under the Exchange Act, and any and all successors thereto appointed as Depository hereunder and having become such pursuant to the applicable provision of the Indenture.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Independent Investment Banker” means any of Citigroup Global Markets Inc. or J.P. Morgan Securities LLC, or, if both such firms are unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing appointed by the Company.

 

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“Investment Grade” means a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s); a rating of BBB- or better by S&P (or its equivalent under any successor rating categories of S&P); or the equivalent investment grade credit rating from any additional Rating Agency or Rating Agencies selected by the Company pursuant to clause (2) of the definition of Rating Agency.

“Moody’s” means Moody’s Investors Service, Inc., and any successor to its credit ratings business.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Rating Agency” means (1) each of Moody’s and S&P; and (2) if either of Moody’s or S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the control of the Company, a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by us as a replacement agency for Moody’s or S&P, as the case may be.

“Reference Treasury Dealer” means: (1) Citigroup Global Markets Inc. or J.P. Morgan Securities LLC, and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a “Primary Treasury Dealer”), the Company will substitute for such firm another Primary Treasury Dealer; and (2) any other Primary Treasury Dealer selected by the Independent Investment Banker after consultation with the Company.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York City time, on the third business day preceding such redemption date.

“S&P” means Standard & Poor’s Ratings Services, a division of Standard & Poor’s Financial Services LLC, a subsidiary of McGraw-Hill Financial, Inc., and any successor to its credit ratings business.

[IF 2019 NOTES, ADD:]

[”Substitute Rating Agency” means a “nationally recognized statistical rating organization” registered under Section 15E of the Exchange Act for the classes of credit ratings described in clauses (i) through (v) of Section 3(a)(62)(B) of the Exchange Act selected by the Company (as certified by its Chief Executive Officer, Chief Financial Officer or Treasurer) as a replacement agency for Moody’s or S&P, or both of them, as the case may be.]

“Securities Act” means the Securities Act of 1933, as amended.

“Treasury Rate” means, with respect to any redemption date: (1) the yield, under the heading which represents the average for the immediate preceding week, appearing in the most

 

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recently published statistical release designated “H.15(519)” or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue will be determined and the Treasury Rate will be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Price for such redemption date. The Treasury Rate will be calculated on the third business day preceding the redemption date.

“Voting Stock” means, with respect to any specified “person” (as that term is used in Section 13(d)(3) of the Exchange Act) as of any date, the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.

 

I-5

Exhibit 5.1

 

Suite 2800, 1100 Peachtree Street NE

Atlanta, GA 30309-4528

t 404 815 6500 f 404 815 6555

November 4, 2015

Reynolds American Inc.

401 North Main Street

Winston-Salem, North Carolina 27102

and the Guarantors Listed on Schedule I hereto

 

Re:

Offering Pursuant to Registration Statement on Form S-4

Ladies and Gentlemen:

We have acted as special counsel to Reynolds American Inc., a North Carolina corporation (“RAI”), and the subsidiaries of RAI listed on Schedule I hereto (collectively, the “Guarantors”), in connection with the preparation and filing under the Securities Act of 1933, as amended (the “Securities Act”), of a registration statement on Form S-4 (the “Registration Statement”) relating to the public offering by RAI of up to (i) $414,793,000 aggregate principal amount of RAI’s 3.500% Senior Notes due 2016, (ii) $447,092,000 aggregate principal amount of RAI’s 2.300% Senior Notes due 2017, (iii) $668,689,000 aggregate principal amount of RAI’s 8.125% Senior Notes due 2019, (iv) $641,462,000 aggregate principal amount of RAI’s 6.875% Senior Notes due 2020, (v) $473,689,000 aggregate principal amount of RAI’s 3.750% Senior Notes due 2023, (vi) $236,748,000 aggregate principal amount of RAI’s 8.125% Senior Notes due 2040, and (vii) $240,197,000 aggregate principal amount of RAI’s 7.000% Senior Notes due 2041 (collectively, the “new notes”) and the related guarantee thereof by each of the Guarantors (the “RAI Subsidiary Guarantees”). The new notes will be issued pursuant to an indenture dated as of May 31, 2006 (as amended through the date hereof, the “2006 Indenture”), among RAI, as issuer, the Guarantors, as guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The RAI Subsidiary Guarantees are guarantees contained in the Indenture and in the forms of new notes. The new notes and RAI Subsidiary Guarantees are to be issued in exchange for a like principal amount of RAI’s currently outstanding 3.500% Senior Notes due 2016, 2.300% Senior Notes due 2017, 8.125% Senior Notes due 2019, 6.875% Senior Notes due 2020, 3.750% Senior Notes due 2023, 8.125% Senior Notes due 2040, and 7.000% Senior Notes due 2041 (collectively, the “old notes”).

In connection with this opinion, we have examined originals or copies certified or otherwise identified to our satisfaction of such records, certificates of corporate officers and government officials, instruments and other documents, as we have deemed necessary or appropriate for purposes of this opinion. As to any facts material to the opinions expressed herein, we have relied upon statements and representations of officers and other representatives of RAI, the Guarantors and others, without independent verification of their accuracy.

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Reynolds American Inc. and the Guarantors on Schedule I

November 4, 2015

Page 2

 

In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as certified, conformed, facsimile, electronic or photostatic copies. In making our examination of documents executed or to be executed, we have assumed that the parties thereto (other than RAI and the Guarantors) had or will have the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by such parties of such documents and the validity and binding effect thereof on such parties.

In rendering our opinions below, we have also assumed that: (i) the Trustee is and has been duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is duly qualified to engage in the activities contemplated by the 2006 Indenture; (ii) the 2006 Indenture has been duly authorized, executed and delivered by, and constitutes the legal, valid and binding obligation of, the Trustee, enforceable against the Trustee in accordance with its terms; (iii) the Trustee is in compliance, generally and with respect to acting as a trustee under the 2006 Indenture, with all applicable laws and regulations; (iv) the Trustee had and has the requisite organizational and legal power and authority to perform its obligations under the 2006 Indenture; and (v) the new notes will be duly authenticated by the Trustee in the manner provided in the 2006 Indenture.

Subject to the foregoing and other matters set forth herein, it is our opinion that as of the date hereof:

1. The new notes have been authorized by all necessary corporate action of RAI and, when (a) the Registration Statement is declared effective under the Securities Act, (b) the 2006 Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended, and (c) the new notes are executed by RAI and authenticated by the Trustee in accordance with the provisions of the 2006 Indenture and issued and delivered in exchange for the old notes in the manner described in the Registration Statement, they will be legal, valid and binding obligations of RAI, enforceable against RAI in accordance with their terms.

2. The RAI Subsidiary Guarantee of each Guarantor has been authorized by all necessary corporate action, or limited liability company action, as the case may be, of such Guarantor and, when (a) the Registration Statement is declared effective under the Securities Act, (b) the 2006 Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended, and (c) the new notes are executed by RAI and authenticated by the Trustee in accordance with the provisions of the 2006 Indenture and issued and delivered in exchange for the old notes in the manner described in the Registration Statement, the RAI Subsidiary Guarantee of each Guarantor will be the legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms.

We are opining herein as to the effect on the subject transaction only of the federal laws of the United States, the General Corporation Law of the State of Delaware (and the applicable provisions of the Delaware Constitution and reported judicial decisions interpreting the Delaware General Corporation Law), the Delaware Limited Liability Company Act, the laws of the State of North Carolina and the laws of the State of New York. We express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction.

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Reynolds American Inc. and the Guarantors on Schedule I

November 4, 2015

Page 3

 

For purposes of the opinion expressed in paragraph 2 above, we have relied upon the opinion of counsel for Santa Fe Natural Tobacco Company, Inc., with respect to matters governed by the laws of the State of New Mexico, a copy of which has been filed as Exhibit 5.2 to the Registration Statement.

Our opinions set forth above are subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and transfer, moratorium or other laws now or hereafter in effect relating to or affecting the rights or remedies of creditors generally and (ii) general principles of equity (whether applied in a proceeding at law or in equity) including, without limitation, standards of materiality, good faith, fair dealing and reasonableness in the interpretation and enforcement of contracts and the discretion of the court before which any proceeding may be brought, and the application of such principles to limit the availability of equitable remedies such as specific performance.

This opinion has been prepared for your use in connection with the Registration Statement and may not be relied upon for any other purpose. We assume no obligation to advise you of any change in the foregoing subsequent to the effectiveness of the Registration Statement even though the change may affect the legal analysis or a legal conclusion or other matters in this opinion letter.

We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading “Legal Matters” in the prospectus included therein. In giving this consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations thereunder.

 

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SCHEDULE I

 

American Snuff Company, LLC		R. J. Reynolds Global Products, Inc.
5106 Tradeport Drive		401 North Main Street
Memphis, TN 38141		Winston-Salem, NC 27101
Conwood Holdings, Inc.		R.J. Reynolds Tobacco Co.
401 North Main Street		401 North Main Street
Winston-Salem, NC 27101		Winston-Salem, NC 27101
Lorillard Licensing Company LLC		R. J. Reynolds Tobacco Company
401 North Main Street		401 North Main Street
Winston-Salem, NC 27101		Winston-Salem, NC 27101
Reynolds Finance Company		R.J. Reynolds Tobacco Holdings, Inc.
Farmers Bank Building, Suite 1402		401 North Main Street
301 N. Market Street		Winston-Salem, NC 27101
Wilmington, DE 19801
		Rosswil LLC
Reynolds Innovations Inc.		401 North Main Street
401 North Main Street		Winston-Salem, NC 27101
Winston-Salem, NC 27101
		Santa Fe Natural Tobacco Company, Inc.
RAI Services Company		One Plaza La Prensa
401 North Main Street		Santa Fe, NM 87507
Winston-Salem, NC 27101

Exhibit 5.2

BETZER, ROYBAL & EISENBERG P.C.

ATTORNEYS AT LAW

4900 Lang Avenue NE, Suite 202

Albuquerque, New Mexico 87109

Phone: (505) 797-0105

Fax: (505) 797-0170

November 4, 2015

Reynolds American Inc.

401 North Main Street

Winston-Salem, North Carolina 27102

 

Re:

Registration Statement on Form S-4

Ladies and Gentlemen:

We have acted as special counsel to Santa Fe Natural Tobacco Company, Inc., a New Mexico corporation (“SFNTC”), in connection with the preparation and filing under the Securities Act of 1933, as amended (the “Securities Act”), of a registration statement on Form S-4 (the “Registration Statement”) relating to the public offering by Reynolds American Inc., a North Carolina corporation (“RAI”), of up to $3,122,670,000 aggregate principal amount in seven series due 2016 through 2041 of RAI’s Senior Notes (collectively, the “New Notes”) and the related guarantee thereof (the “New Guarantees”) by SFNTC and certain other RAI subsidiaries (SFNTC and each such other subsidiary guarantor, a “Guarantor”). The New Notes will be issued pursuant to an indenture dated as of May 31, 2006, among RAI, as issuer, the Guarantors, as guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee (“Trustee”), as supplemented by a first supplemental indenture dated as of September 30, 2006, the second supplemental indenture dated as of February 6, 2009, the third supplemental indenture dated as of September 17, 2013, and the fourth supplemental indenture, dated as of September 2, 2015 (as supplemented, the “2006 Indenture”). The New Guarantees are guarantees contained in the 2006 Indenture and in the forms of New Notes. The New Notes and New Guarantees are to be issued in exchange for a like principal amount of RAI’s currently outstanding 3.500% Senior Notes due 2016, 2.300% Senior Notes due 2017, 8.125% Senior Notes due 2019, 6.875% Senior Notes due 2020, 3.750% Senior Notes due 2023, 8.125% Senior Notes due 2040, and 7.000% Senior Notes due 2041 (collectively, the “Outstanding Notes”) as contemplated by the Registration Rights

---

Reynolds American, Inc.

November 4, 2015

Page 2

 

Agreement dated July 15, 2015 by and among RAI, certain Guarantors, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

In our capacity as special counsel, we are familiar with the proceedings taken and proposed to be taken by SFNTC in connection with the authorization and issuance of the New Guarantee of SFNTC. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, records and instruments as we have deemed necessary or appropriate for purposes of this opinion. As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of SFNTC, RAI, the other Guarantors and others.

In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed, facsimile, electronic or photostatic copies and the authenticity of the originals of such copies. In making our examination of documents executed or to be executed, we have assumed that the parties thereto (other than SFNTC) had or will have the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by such parties (other than SFNTC) of such documents and the validity and binding effect thereof on such parties (other than SFNTC).

In rendering our opinions below, we have assumed that: (i) the Trustee is and has been duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is duly qualified to engage in the activities contemplated by the 2006 Indenture; (ii) the 2006 Indenture has been duly authorized, executed and delivered by, and constitutes the legal, valid and binding obligation of, the Trustee, enforceable against the Trustee in accordance with its terms; (iii) the Trustee is in compliance, generally and with respect to acting as a trustee under the 2006 Indenture, with all applicable laws and regulations; (iv) the Trustee had and has the requisite organizational and legal power and authority to perform its obligations under the 2006 Indenture; and (v) the New Notes will be duly authenticated by the Trustee in the manner provided in the 2006 Indenture.

Subject to the foregoing and other matters set forth herein, it is our opinion that as of the date hereof:

 

1.

The New Guarantee of SFNTC has been duly authorized and executed by SFNTC, and, when (a) the Registration Statement is declared effective under the Securities

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Reynolds American, Inc.

November 4, 2015

Page 3

 

Act, (b) the 2006 Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended, and (c) the New Notes are duly executed by RAI and authenticated by the Trustee in accordance with the provisions of the 2006 Indenture and issued and delivered in exchange for the Outstanding Notes in the manner described in the Registration Statement, the New Guarantee of SFNTC will have been duly delivered by SFNTC.

In rendering the foregoing opinions, our examination of matters of law has been limited to the laws of the State of New Mexico.

This opinion has been prepared for your use in connection with the Registration Statement and may be relied upon by Kilpatrick Townsend & Stockton LLP, counsel for RAI and the Guarantors, in connection with its opinion to RAI filed as an exhibit to the Registration Statement. We assume no obligation to advise you of any change in the foregoing subsequent to the effectiveness of the Registration Statement even though the change may affect the legal analysis or a legal conclusion or other matters in this opinion letter.

We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading “Legal Matters” in the prospectus included therein. In giving this consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations thereunder.

 

EXHIBIT 12.1

REYNOLDS AMERICAN INC.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(Dollars in Millions)

(Unaudited)

 

		For the Nine Months Ended September 30,								For The Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
Earnings before fixed charges:
Income from continuing operations before income taxes		$	5,874			$	2,053			$	2,262			$	2,741			$	1,953			$	2,186			$	2,205
Interest and debt expense (1)			385				197				286				259				234				221				232
Interest portion of rental expense (2)			6				6				8				8				6				6				7
Earnings before fixed charges		$	6,265			$	2,256			$	2,556			$	3,008			$	2,193			$	2,413			$	2,444
Fixed charges:
Interest and debt expense (1)		$	385			$	197			$	286			$	259			$	234			$	221			$	232
Interest portion of rental expense (2)			6				6				8				8				6				6				7
Total fixed charges		$	391			$	203			$	294			$	267			$	240			$	227			$	239
Ratio of earnings to fixed charges (3)			16.0				11.1				8.7				11.3				9.1				10.6				10.2

 

(1)	Interest and debt expense includes interest on indebtedness, amortization of debt discount and expenses, and excludes interest related to reserves for income taxes, as such interest is included in provision for income taxes.

(2)	One-third of rent expense is the portion deemed representative of the interest factor.

(3)	Based on unrounded amounts.

Exhibit 23.3

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Reynolds American Inc.:

We consent to the use of our reports dated February 10, 2015, with respect to the consolidated balance sheets of Reynolds American Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three year period ended December 31, 2014, and the effectiveness of internal control over financial reporting as of December 31, 2014, incorporated herein by reference and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

Greensboro, North Carolina

November 2, 2015

Exhibit 23.4

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Registration Statement on Form S-4 of Reynolds American Inc. of our report dated February 11, 2015, relating to the consolidated financial statements and financial statement schedule of Lorillard, Inc. as of December 31, 2014 and 2013, and for each of the years in the three-year period ended December 31, 2014, appearing in Reynolds American Inc.’s Current Report on Form 8-K dated June 9, 2015.

We also consent to the reference to us under the heading “Experts” in the Prospectus, which is part of this Registration Statement.

 

Raleigh, North Carolina

November 4, 2015

Exhibit 25.1

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM T-1

 

 

STATEMENT OF ELIGIBILITY

UNDER THE TRUST INDENTURE ACT OF 1939 OF A

CORPORATION DESIGNATED TO ACT AS TRUSTEE

 

¨	CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)

 

 

THE BANK OF NEW YORK MELLON

TRUST COMPANY, N.A.

(Exact name of trustee as specified in its charter)

 

 

 

		95-3571558
(Jurisdiction of incorporation if not a U.S. national bank)		(I.R.S. employer identification no.)
400 South Hope Street Suite 400 Los Angeles, California		90071
(Address of principal executive offices)		(Zip code)

 

 

REYNOLDS AMERICAN INC.

(Exact name of obligor as specified in its charter)

 

 

 

North Carolina		0546644
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)
401 North Main Street Winston-Salem, North Carolina		27101
(Address of principal executive offices)		(Zip code)

TABLE OF ADDITIONAL REGISTRANTS

 

Exact Name of Additional Registrant as Specified in its Charter		State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification Number		Address of Registrant’s Principal Executive Offices
American Snuff Company, LLC		Delaware		62-1691028		5106 Tradeport Drive Memphis, TN 38141
Conwood Holdings, Inc.		Delaware		20-4771396		401 North Main Street Winston-Salem, NC 27101
Lorillard Licensing Company LLC		North Carolina		56-2169594		401 North Main Street Winston-Salem, NC 27101
Reynolds Finance Company		Delaware		51-0380116		Farmers Bank Building Suite 1402 301 N. Market Street Wilmington, DE 19801
Reynolds Innovations Inc.		North Carolina		56-1972826		401 North Main Street Winston-Salem, NC 27101
R. J. Reynolds Global Products, Inc.		Delaware		04-3625474		401 North Main Street Winston-Salem, NC 27101
R.J. Reynolds Tobacco Co.		Delaware		66-0285918		401 North Main Street Winston-Salem, NC 27101
R. J. Reynolds Tobacco Company		North Carolina		73-1695305		401 North Main Street Winston-Salem, NC 27101
R.J. Reynolds Tobacco Holdings, Inc.		Delaware		56-0950247		401 North Main Street Winston-Salem, NC 27101
RAI Services Company		North Carolina		38-3792301		401 North Main Street Winston Salem, NC 27101
Rosswil LLC		Delaware		36-4348321		401 North Main Street Winston-Salem, NC 27101
Santa Fe Natural Tobacco Company, Inc.		New Mexico		85-0394268		1 Plaza La Prensa Santa Fe, NM 87507

 

 

3.500% Senior Notes due 2016

2.300% Senior Notes due 2017

8.125% Senior Notes due 2019

6.875% Senior Notes due 2020

3.750% Senior Notes due 2023

8.125% Senior Notes due 2040

7.000% Senior Notes due 2041

Guarantees of 3.500% Senior Notes due 2016

Guarantees of 2.300% Senior Notes due 2017

Guarantees of 8.125% Senior Notes due 2019

Guarantees of 6.875% Senior Notes due 2020

Guarantees of 3.750% Senior Notes due 2023

Guarantees of 8.125% Senior Notes due 2040

and Guarantees of 7.000% Senior Notes due 2041

(Title of the indenture securities)

 

 

 

---

1.	General information. Furnish the following information as to the trustee:

 

(a)

Name and address of each examining or supervising authority to which it is subject.

 

Name		Address
Comptroller of the Currency United States Department of the Treasury		Washington, DC 20219
Federal Reserve Bank		San Francisco, CA 94105
Federal Deposit Insurance Corporation		Washington, DC 20429

 

(b)

Whether it is authorized to exercise corporate trust powers.

Yes.

 

2.	Affiliations with Obligor.

If the obligor is an affiliate of the trustee, describe each such affiliation.

None.

 

16.	List of Exhibits.

Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the “Act”) and 17 C.F.R. 229.10(d).

 

1.

A copy of the articles of association of The Bank of New York Mellon Trust Company, N.A., formerly known as The Bank of New York Trust Company, N.A. (Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121948 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-152875).

 

2.

A copy of certificate of authority of the trustee to commence business. (Exhibit 2 to Form T-1 filed with Registration Statement No. 333-121948).

 

3.

A copy of the authorization of the trustee to exercise corporate trust powers (Exhibit 3 to Form T-1 filed with Registration Statement No. 333-152875).

 

4.

A copy of the existing by-laws of the trustee (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-162713).

 

6.

The consent of the trustee required by Section 321(b) of the Act (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-152875).

 

7.

A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.

 

- 2 -

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SIGNATURE

Pursuant to the requirements of the Act, the trustee, The Bank of New York Mellon Trust Company, N.A., a banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, and State of Illinois, on the 27th day of October, 2015.

 

 

- 3 -

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EXHIBIT 7

Consolidated Report of Condition of

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

of 400 South Hope Street, Suite 400, Los Angeles, CA 90071

At the close of business June 30, 2015, published in accordance with Federal regulatory authority instructions.

 

		Dollar amounts
		in thousands
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin			25,706
Interest-bearing balances			215,394
Securities:
Held-to-maturity securities			0
Available-for-sale securities			661,987
Federal funds sold and securitiespurchased under agreements to resell:
Federal funds sold			0
Securities purchased under agreements to resell			0
Loans and lease financing receivables:
Loans and leases held for sale			0
Loans and leases, net of unearned income			0
LESS: Allowance for loan and lease losses			0
Loans and leases, net of unearned income and allowance			0
Trading assets			0
Premises and fixed assets (including capitalized leases)			12,228
Other real estate owned			0
Investments in unconsolidated subsidiaries and associated companies			0
Direct and indirect investments in real estate ventures			0
Intangible assets:
Goodwill			856,313
Other intangible assets			90,615
Other assets			126,234
Total assets		$	1,988,477
LIABILITIES
Deposits:
In domestic offices			520
Noninterest-bearing			520
Interest-bearing			0
Not applicable
Federal funds purchased and securities sold under agreements to repurchase:
Federal funds purchased			0
Securities sold under agreements to repurchase			0
Trading liabilities			0
Other borrowed money:
(includes mortgage indebtedness and obligations under capitalized leases)			0
Not applicable
Not applicable
Subordinated notes and debentures			0
Other liabilities			279,598

 

1

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		Dollar amounts
		in thousands
Total liabilities			280,118
Not applicable
EQUITY CAPITAL
Perpetual preferred stock and related surplus			0
Common stock			1,000
Surplus (exclude all surplus related to preferred stock)			1,122,352
Not available
Retained earnings			584,561
Accumulated other comprehensive income			446
Other equity capital components			0
Not available
Total bank equity capital			1,708,359
Noncontrolling (minority) interests in consolidated subsidiaries			0
Total equity capital			1,708,359
Total liabilities and equity capital			1,988,477

I, Matthew J. McNulty, CFO of the above-named bank do hereby declare that the Reports of Condition and Income (including the supporting schedules) for this report date have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and are true to the best of my knowledge and belief.

 

Matthew J. McNulty		)		CFO

We, the undersigned directors (trustees), attest to the correctness of the Report of Condition (including the supporting schedules) for this report date and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct.

 

Antonio I. Portuondo, President		)
William D. Lindelof, Director		)		Directors (Trustees)
Alphonse J. Briand, Director		)

 

2

EXHIBIT 99.1

LETTER OF TRANSMITTAL

REYNOLDS AMERICAN INC.

OFFERS TO EXCHANGE

All Outstanding Notes of the Series Specified Below

THE EXCHANGE OFFERS WILL EXPIRE AT             P.M., NEW YORK CITY TIME,

ON                     , 2015, UNLESS EXTENDED (SUCH DATE, AS IT MAY BE EXTENDED, THE “EXPIRATION DATE”). TENDERS MAY BE WITHDRAWN PRIOR TO             P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

 

Old Notes to be Exchanged		CUSIP Nos.				Outstanding Principal Amount
3.500% Senior Notes due 2016		761713 BH8		U8001F AL9		$	414,793,000
2.300% Senior Notes due 2017		761713 BJ4		U8001F AM7		$	447,092,000
8.125% Senior Notes due 2019		761713 BK1		U8001F AN5		$	668,689,000
6.875% Senior Notes due 2020		761713 BL9		U8001F AP0		$	641,462,000
3.750% Senior Notes due 2023		761713 BM7		U8001F AQ8		$	473,689,000
8.125% Senior Notes due 2040		761713 BN5		U8001F AR6		$	236,748,000
7.000% Senior Notes due 2041		761713 BP0		U8001F AS4		$	240,197,000

The Exchange Agent for the Exchange Offers is:

The Bank of New York Mellon

Trust Company, N.A.

By Mail, Hand or Overnight

Courier:

The Bank of New York Mellon Trust Company, N.A, as Exchange Agent

c/o The Bank of New York Mellon Corporation

Corporate Trust Operations - Reorganization Unit

111 Sanders Creek Parkway

East Syracuse, NY 13057

Attn: Pamela Adamo

Tel: 315-414-3317

By Facsimile (for Eligible Institutions only):

The Bank of New York Mellon Trust Company, N.A, as Exchange Agent

c/o The Bank of New York Mellon Corporation

Corporate Trust Operations - Reorganization Unit

Attn: Pamela Adamo

Fax: 732-667-9408

Delivery of this Letter of Transmittal to an address, or transmission of this Letter of Transmittal via facsimile to a number, other than as listed above, will not constitute a valid delivery. The instructions contained herein should be read carefully before this Letter of Transmittal is completed. This Letter of Transmittal need not be completed by

 

1

---

eligible noteholders tendering through The Depository Trust Company’s (“DTC”) Automated Tender Offer Program (“ATOP”).

The undersigned acknowledges that he, she or it has received and reviewed the Prospectus, dated                     , 2015 (the “Prospectus”), of Reynolds American Inc. (“RAI” or the “Company”), and this Letter of Transmittal (as amended or supplemented from time to time, the “Letter of Transmittal” and, together with the Prospectus, the “Exchange Offer Documents”), which together constitute the Company’s offers to exchange, upon the terms and conditions set forth in the Exchange Offer Documents, any and all of each series of RAI’s outstanding notes listed above (the “old notes”) for a series of RAI’s newly issued notes (the “new notes”) having the same interest payment and maturity dates and interest rate provisions (other than with respect to certain rights to additional interest, as described in the Prospectus) as in the corresponding series of old notes and the related guarantees of certain subsidiaries of RAI as described in the Prospectus (each, an “Exchange Offer” and collectively, the “Exchange Offers”). The form and terms of each series of new notes will be substantially the same as the form and terms of the corresponding series of old notes, except that the offer and sale of the new notes have been registered under the Securities Act of 1933, as amended (the “Securities Act”), and will not have transfer restrictions, registration rights or certain rights to additional interest that the old notes have. Each new note will be issued in the same principal amount as the old note for which it is exchanged. The new notes will be issued under the same indenture as the old notes. In general, defined terms used herein have the respective meanings assigned to them under the heading “Glossary” in the Prospectus.

A holder may not withdraw tendered old notes after the Expiration Date, unless the Expiration Date is extended or such withdrawal or revocation is required by law or applicable interpretation of the staff of the U.S. Securities & Exchange Commissions (the “SEC”).

Only a registered holder of the old notes may tender the old notes of any series in the applicable Exchange Offer. Eligible holders of old notes whose old notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wish to tender those old notes should contact the registered holder promptly and instruct the registered holder to tender their old notes by the Expiration Date.

This Letter of Transmittal is to be used if:

 

•

delivery of old notes is to be made by book-entry transfer to an account maintained by The Bank of New York Mellon Trust Company, N.A. (the “Exchange Agent”) at DTC pursuant to procedures set forth in the Prospectus under the heading “The Exchange Offers—Procedures for Tendering Old Notes—Book-Entry Transfers; Tender of Old Notes Using DTC’s Automated Tender Offer Program”;

and

 

•

instructions are not being transmitted through ATOP.

If an eligible holder of old notes desires to tender old notes held in book-entry form with DTC, the Exchange Agent must receive by the Expiration Date if such holder wishes to be eligible to participate in the Exchange Offers:

 

•

a confirmation of book-entry transfer of such holder’s old notes into the Exchange Agent’s account at DTC, and either:

 

•

a properly completed and validly executed Letter of Transmittal (or a manually signed facsimile hereof), together with any signature guarantees and other documents required by the instructions in this Letter of Transmittal; or

 

•

an agent’s message transmitted through ATOP; and

 

•

any other required documentation.

 

2

---

DTC participants may electronically transmit their acceptance of an Exchange Offer by complying with DTC’s ATOP procedures. If a DTC participant participates in an Exchange Offer via ATOP, and also causes the transfer of book-entry old notes to the Exchange Agent’s account as described above, DTC is expected to send a book-entry confirmation, including an agent’s message, to the Exchange Agent. If an eligible holder of old notes uses ATOP procedures to tender old notes, such holder will not be required to deliver this Letter of Transmittal to the Exchange Agent, but will be bound by its terms just as if the holder had signed it and be deemed to have made all the representations, warranties and agreements herein. See “The Exchange Offers—Procedures for Tendering Old Notes—Book-Entry Transfers; Tender of Old Notes Using DTC’s Automated Tender Offer Program” in the Prospectus.

The term “agent’s message” means a message, transmitted by DTC and received by the Exchange Agent and forming part of the confirmation of a book-entry transfer, which states that DTC has received an express acknowledgment from a participant in DTC tendering old notes that such participant has received this Letter of Transmittal and agrees to be bound by the terms of this Letter of Transmittal, and the Company and the guarantors may enforce such agreement against the participant. Delivery of an agent’s message will also constitute an acknowledgment from the tendering DTC participant that the representations contained in this Letter of Transmittal are true and correct.

In addition, although the Company understands that all old notes are held solely in book-entry form through DTC, if old notes are subsequently issued in certificated form registered in the name of an eligible holder of old notes, such holder wishing to participate in an Exchange Offer should send its certificated old notes with a properly completed and validly executed Letter of Transmittal, along with any other required documentation, by the Expiration Date to the Exchange Agent. In this event, such holder should contact the Exchange Agent for further information, including if the Letter of Transmittal with respect to such old notes is not signed by the registered holder or does not correspond to the name written on the face of the old notes, using the contact information appearing on the last page of this Letter of Transmittal.

Holders of old notes whose old notes are not immediately available, or who are unable to deliver their old notes and all other documents required by this Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date, or who are unable to complete the procedure for book-entry transfer (including delivery of an agent’s message) on a timely basis, must tender their old notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption “The Exchange Offers—Guaranteed Delivery Procedures.” Delivery of documents to the book-entry transfer facility does not constitute delivery to the Exchange Agent.

The method of delivery of old notes, the Letter of Transmittal and all other required documents to the Exchange Agent is at the holder’s election and risk. Rather than mail these items, the Company recommends that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure delivery to the Exchange Agent by the Expiration Date. Holders should not send the Letter of Transmittal or old notes to RAI.

Holders who do not validly tender their old notes by the Expiration Date (or who properly withdraw previously tendered old notes prior to the Expiration Date and do not validly re-tender their old notes), or whose old notes are not accepted for exchange will continue to hold their old notes after the Exchange Offers. In this case, the old notes will continue to be subject to restrictions on transfer under the Securities Act.

To properly complete this Letter of Transmittal, holders who wish to tender their old notes using this Letter of Transmittal must:

 

•

complete all boxes below under “Description of Old Notes Tendered”; and

 

•

sign the Letter of Transmittal by completing the box entitled “Please Complete and Sign Below.”

Delivery of this Letter of Transmittal and any other required documents must be made to the Exchange Agent. Delivery of documents to DTC or to the Company does not constitute delivery to the Exchange Agent.

 

3

---

The undersigned has provided the information requested, checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offers. If the undersigned cannot make all of the representations, warranties and agreements set forth in this Letter of Transmittal, and the additional representations, warranties and agreements in the Prospectus, the undersigned may not participate in the Exchange Offers.

Please read the entire Letter of Transmittal and the Prospectus carefully before checking any box below. Your bank or broker may be able to assist you in completing this form. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance may be directed to the Exchange Agent, at the addresses and telephone numbers indicated on the last page of this Letter of Transmittal.

List below the old notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the information should be listed on a separate signed schedule affixed hereto.

 

DESCRIPTION OF OLD NOTES TENDERED
Names(s) and Address(es) of Registered Holder(s)/Name of DTC Participant and Participant’s DTC Account Number in which Old Notes are Held (Please fill in if blank)		Series of Old Notes to be Tendered		Certificate Number(s)*		Aggregate Principal Amount Represented		Principal Amount Tendered**
		3.500% Senior Notes due 2016 CUSIP Nos. 761713 BH8 and U8001F AL9
		2.300% Senior Notes due 2017 CUSIP Nos. 761713 BJ4 and U8001F AM7
		8.125% Senior Notes due 2019 CUSIP Nos. 761713 BK1 and U8001F AN5
		6.875% Senior Notes due 2020 CUSIP Nos. 761713 BL9 and U8001F AP0
		3.750% Senior Notes due 2023 CUSIP Nos. 761713 BM7 and U8001F AQ8
		8.125% Senior Notes due 2040 CUSIP Nos. 761713 BN5 and U8001F AR6
		7.000% Senior Notes due 2041 CUSIP Nos. 761713 BP0 and U8001F AS4
				Total:
*      Need not be completed if old notes are being tendered by book-entry transfer. **    Unless otherwise indicated, the undersigned will be deemed to have tendered the full aggregate principal amount represented by such old notes. Each series of old notes must be tendered in minimum principal amounts of $2,000 and integral multiples of $1,000 in excess thereof. A tender of old notes will be accepted only if such tender would result in the issuance of at least $2,000 in principal amount of new notes or an integral multiple of $1,000 in excess thereof. See Instruction 4.

 

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METHOD OF DELIVERY

 

¨	Check here if tendered old notes are being delivered by book-entry transfer made to an account maintained by the Exchange Agent with DTC and complete the following (ONLY PARTICIPANTS IN DTC MAY DELIVER NOTES BY BOOK-ENTRY TRANSFER):

 

 

¨	Check here if certificates representing tendered old notes are enclosed herewith.

 

¨	Check here if tendered old notes are being delivered pursuant to a Notice of Guaranteed Delivery previously sent to the Exchange Agent and complete the following (for use by Eligible Institutions only):

 

 

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SIGNATURES MUST BE PROVIDED BELOW.

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

1. Subject to, and effective upon, the acceptance for exchange of the old notes tendered hereby and payment therefor and the other terms and conditions set forth in the Exchange Offer Documents, the undersigned hereby:

 

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tenders to the Company the old notes indicated above in the box labeled “Description of Old Notes Tendered,” and in doing so irrevocably sells, assigns and transfers to or upon the Company’s order or the order of the Company’s nominee all right, title and interest in and to, and any and all claims in respect of or arising or having arisen as a result of the undersigned’s status as a holder of, the old notes tendered hereby, such that hereafter the undersigned shall have no contractual or other rights or claims in law or equity against RAI, the guarantors and their affiliates or any fiduciary, trustee, fiscal agent or other person connected with the old notes or the RAI indenture arising under, from or in connection with those old notes;

 

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waives any and all other rights with respect to such tendered old notes (including, without limitation, any existing or past defaults and their consequences with respect to such old notes under the RAI indenture and any rights under the registration rights agreement described in note 12); and

 

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releases and discharges RAI, the guarantors and their affiliates and the trustee under the RAI indenture from any and all claims that the undersigned may have, now or in the future, arising out of or related to the old notes tendered hereby, including, without limitation, any claims that the undersigned is entitled to receive additional principal or interest payments with respect to the old notes tendered hereby (other than as expressly provided in the Exchange Offer Documents), or to participate in any redemption or defeasance of the old notes tendered hereby;

provided, in the event that new notes are issued in exchange for old notes between a record date for the payment of interest on such series of old notes and the interest payment date for such series of old notes following such record date, the holders of record of such old notes on such record date will not be deemed to have waived, released or discharged their right to receive an interest payment on such old notes related to such record date.

In addition, the undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact with respect to the tendered old notes (with full knowledge that the Exchange Agent also acts as the agent of the Company with respect to such old notes), with full powers of substitution and resubstitution, subject only to the right of withdrawal described in the Prospectus, to cause the old notes tendered to be assigned, transferred and exchanged in the applicable Exchange Offer, including the power to, without limitation:

 

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deliver certificates representing such old notes to, or to the order of, the Company, or transfer ownership of such old notes on the account books maintained by DTC, together, in any such case, with all accompanying evidence of transfer and authenticity to, or upon the order of, the Company upon receipt by the Exchange Agent, as the undersigned’s agent, of the new notes to be issued in exchange for such old notes;

 

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present such old notes for transfer, and transfer such old notes, on the security register;

 

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receive all benefits and otherwise exercise all rights of beneficial ownership of such old notes (except that the Exchange Agent will have no rights to, or control over, funds from the Company, except as agent of the Company, for consideration for any old notes accepted for exchange and paid for pursuant to the Exchange Offers); and

 

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deliver to the Company and the RAI indenture trustee, The Bank of New York Mellon Trust Company, N.A., this Letter of Transmittal.

The power of attorney granted above shall be deemed irrevocable and coupled with an interest.

2. The undersigned acknowledges and agrees that the Exchange Offers are being made in reliance upon interpretations by the staff of the SEC issued to unrelated third parties that the new notes issued in exchange for

 

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the old notes pursuant to the Exchange Offers may be offered for sale, resold and otherwise transferred by holders thereof (other than a broker-dealer who purchased such old notes directly from RAI for resale pursuant to any available exemption under the Securities Act or a holder that is an “affiliate” of RAI or the guarantors within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such new notes are acquired in the ordinary course of such holders’ businesses and such holders are not engaged in, do not intend to engage in, and have no arrangement or understanding with any person or entity to participate in, the distribution of such new notes. However, the undersigned acknowledges and agrees that the SEC has not considered the Exchange Offers in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offers as in other circumstances.

The undersigned holder hereby represents, warrants and agrees that:

 

•

the new notes acquired pursuant to the Exchange Offers are being acquired in the ordinary course of business of the undersigned or any beneficial owner of the old notes tendered hereby;

 

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neither the undersigned holder nor any beneficial owner of the old notes tendered hereby is engaged in, intends to engage in, or has any arrangement or understanding with any person or entity to participate in, a “distribution” of the new notes within the meaning of the Securities Act;

 

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neither the undersigned holder nor any beneficial owner of the old notes tendered hereby is an “affiliate” of any of RAI or the guarantors within the meaning of Rule 405 promulgated under the Securities Act;

 

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if the undersigned or any beneficial owner of the old notes tendered hereby is a broker-dealer, neither the undersigned nor any such beneficial owner purchased the old notes directly from RAI for resale pursuant to an exemption from registration under the Securities Act;

 

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if the undersigned or any beneficial owner of the old notes tendered hereby is a broker-dealer, the undersigned further represents, warrants and agrees that it or such other beneficial owner (a) acquired its old notes as a result of market-making or other trading activities (and not directly from RAI for resale), (b) may be considered a statutory “underwriter” under the Securities Act and (c) will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes received in the Exchange Offers (which prospectus may be the Prospectus); provided, however, that, by acknowledging that you or such beneficial owner, as such a broker-dealer, will deliver, and by delivering, a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes, you or such beneficial owner will not be deemed to admit that you are an “underwriter” within the meaning of the Securities Act; and

 

•

the undersigned holder is not acting on behalf of any person or entity that could not truthfully make the foregoing representations, warranties and agreements.

If you cannot make all of the above representations, warranties and agreements, you cannot participate in the Exchange Offers. In such case, you cannot rely on the SEC staff position enunciated in the no-action letters issued to unrelated third parties and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. You acknowledge that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of the SEC’s Regulation S-K.

3. The undersigned hereby further represents, warrants and agrees that:

 

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it has received the Exchange Offer Documents;

 

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it has full power and authority to execute or agree to be bound by this Letter of Transmittal and to tender, exchange, sell, assign and transfer the old notes tendered hereby and to acquire the new notes issuable upon the exchange of such tendered old notes;

 

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as of the date of delivery of this Letter of Transmittal or an agent’s message through ATOP, the holders’ old notes were owned free and clear of all security interests, liens, restrictions, charges and

 

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encumbrances and were not subject to any adverse claim or right or proxy of any kind, and RAI will acquire good, indefeasible, marketable and unencumbered title to the tendered old notes, free and clear of all security interests, liens, restrictions, charges and encumbrances and not subject to any adverse claim or right or restriction or proxy of any kind, when the same are accepted for exchange by RAI;

 

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it will not sell, pledge, hypothecate or otherwise encumber or transfer any old notes tendered from the date of the delivery of this Letter of Transmittal or an agent’s message through ATOP, and any purported sale, pledge, hypothecation or other encumbrance or transfer will be void and of no effect;

 

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it is not a person to whom it is unlawful to make an invitation pursuant to the Exchange Offers under applicable securities laws;

 

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it has observed (and will observe) the laws and regulations of all relevant jurisdictions, obtained all requisite governmental, regulatory, exchange or other required consents, complied with all requisite formalities, including, without limitation, any verifications and registrations, and paid (or will pay) any issue, transfer or other taxes or requisite payments due from the undersigned in each respect in connection with any offer or acceptance, in any jurisdiction and that the undersigned has not taken or omitted to take any action in breach of the representations or which will or may result in the Company or any other person acting in breach of the legal or regulatory requirements of any such jurisdiction in connection with the Exchange Offers or tender of old notes in connection therewith; and

 

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it undertakes to execute any further documents and give any further assurances that may be required in connection with any of the foregoing, in each case on and subject to the terms and conditions described or referred to in the Exchange Offer Documents.

4. The Exchange Offers are subject to the conditions set forth under the heading “The Exchange Offers—Conditions” in the Prospectus. The undersigned recognizes that, as a result of these conditions (which may be waived if permitted by law, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to accept for exchange any of the old notes tendered by this Letter of Transmittal. The undersigned acknowledges and agrees that the tender of old notes may not be withdrawn after the Expiration Date, except to the extent required by law or as set forth in the Prospectus.

5. The undersigned understands that delivery of old notes is not effective, and the risk of loss of old notes does not pass to the Exchange Agent, until receipt by the Exchange Agent of this properly completed and duly executed Letter of Transmittal (or a properly completed and duly executed facsimile thereof), together with all accompanying evidences of authority and any other required documents in form satisfactory to the Company, or receipt of an agent’s message. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal or revocation of tendered old notes will be determined by the Company in its sole discretion, which determination will be final and binding on all parties.

6. For purposes of the Exchange Offers, the Company shall be deemed to have accepted validly tendered old notes when, as and if the Company has given written notice thereof to the Exchange Agent. If any tendered old notes are not accepted pursuant to the Exchange Offers for any reason, such unaccepted or unexchanged old notes will be returned to the address shown below the signature of the undersigned or at a different address as may be indicated in the box labeled “Special Delivery Instructions” below (or, in the case of tender by book-entry transfer into the Exchange Agent’s account at DTC pursuant to the book-entry transfer procedures described under the heading “The Exchange Offers—Procedures for Tendering Old Notes” in the Prospectus, such unaccepted or unexchanged old notes will be returned to the tendering holder by credit thereof to the account at DTC from which such old notes were tendered unless otherwise indicated under the heading “Special Issuance and Payment Instructions”) promptly after termination or withdrawal of the applicable Exchange Offer or the Expiration Date, as the case may be.

7. The undersigned acknowledges that, to the extent any old notes remain outstanding following the completion of the Exchange Offers, the Company may, from time to time in the future, seek to acquire outstanding old notes

 

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of any series through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and conditions and at such prices as the Company may determine, which may involve the payment of more or less consideration than is contemplated by the Exchange Offers and may involve cash or other consideration. Furthermore, as set forth under the heading “The Exchange Offers—Expiration Date; Extensions; Amendment; Termination” in the Prospectus, the Company may terminate the Exchange Offers and, to the extent permitted by applicable law, pursue any of the actions outlined in the preceding sentence.

8. The undersigned understands that tenders of old notes pursuant to any one of the procedures described under the heading “The Exchange Offers—Procedures for Tendering Old Notes” in the Prospectus and herein will, upon the Company’s acceptance of the validly tendered and not validly withdrawn old notes, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offers. The undersigned also agrees that the issuance of new notes by the Company in exchange for validly tendered and not validly withdrawn old notes shall constitute performance in full by the Company of its obligations under the Exchange Offers and that, upon the issuance of the new notes, the Company will have no further obligations or liabilities under the Exchange Offers.

9. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity, bankruptcy or dissolution of the undersigned and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned’s heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives.

10. The undersigned’s tender of old notes may be withdrawn only in accordance with the procedures set forth in the Prospectus and in this Letter of Transmittal. See the procedures described under the heading “The Exchange Offers—Withdrawal of Tenders” in the Prospectus.

11. Unless otherwise indicated in the box labeled “Special Issuance and Payment Instructions” below, the new notes issued in exchange for the old notes accepted for exchange and any old notes tendered via book-entry transfer not accepted for exchange will be credited to the DTC account indicated above under “Method of Delivery.”

12. The undersigned may, if and only if, it would not receive freely tradable new notes in the Exchange Offers or is not eligible to participate in the Exchange Offers, notify RAI that it is electing to have its old notes registered in the shelf registration described in the registration rights agreement, dated as of July 15, 2015, by and among RAI, certain of RAI’s subsidiaries that guarantee the old notes and the dealer managers who served as the dealer managers for the private exchange offers (the “registration rights agreement”) in the form filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 15, 2015. Capitalized terms used in this paragraph 12 but not otherwise defined herein shall have the meanings given to them in the registration rights agreement. By notifying RAI and making such election, the undersigned agrees, as a holder of old notes participating in a shelf registration, to comply with the registration rights agreement (including, without limitation, by delivering a notice and questionnaire as described in the registration rights agreement) and to, severally and not jointly, indemnify and hold harmless the Company, the Guarantors, the dealer managers for the private exchange offers and the other selling holders, their respective affiliates, the directors of the Company and the Guarantors, each officer of the Company and the Guarantors who signed the Registration Statement and each person, if any, who controls the Company, the Guarantors, any dealer managers for the private exchange offers, and any other selling holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such holder furnished to the Company in writing by such holder expressly for use in any Registration Statement, any Prospectus and any Free Writing Prospectus. Any such indemnification shall be governed by the terms of and subject to the conditions set forth in the registration rights agreement, including, without limitation, the provisions regarding notice, retention of counsel, contribution and payment of expenses set forth therein. The above summary of the indemnification provisions of the registration rights agreement is not intended to be exhaustive and is qualified in its entirety by the registration rights agreement.

 

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The undersigned acknowledges that the Exchange Offers are subject to the more detailed terms set forth in the Prospectus and, in case of any conflict between the terms of the Prospectus and this Letter of Transmittal, the terms of the Prospectus shall prevail.

By completing, executing and delivering this Letter of Transmittal, the undersigned hereby tenders the principal amount of the old notes listed in the box above labeled “Description of Old Notes Tendered” under the column heading “Principal Amount Tendered” (or, if nothing is indicated therein, with respect to the entire aggregate principal amount of old notes held by such holder).

The undersigned agrees that it will, upon request, execute and deliver any additional documents or give any further assurances deemed by the Exchange Agent or the Company to be necessary or desirable to complete the sale, exchange, assignment and transfer of the old notes tendered hereby, or to transfer ownership of such old notes on the account books maintained by DTC.

TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES, UNLESS AN AGENT’S MESSAGE IS DELIVERED IN CONNECTION WITH A BOOK-ENTRY TRANSFER OF SUCH NOTES.

 

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If different Special Issuance and Special Delivery instructions are desired for different series of old notes held by an eligible holder of old notes, such holder should submit a duplicate page(s) with the instructions for the other series thereon. In such case, holders should indicate on the submitted Issuance/Delivery instruction pages which series the instructions on such page(s) apply to.

 

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INSTRUCTIONS

Forming part of the Terms and Conditions of the Exchange Offers

 

1.	Delivery of Letter of Transmittal and Old Notes.

This Letter of Transmittal is to be completed by holders of old notes either if:

 

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tenders of old notes are to be made pursuant to the procedures for delivery by book-entry transfer set forth in the Prospectus under the heading “The Exchange Offers—Book-Entry Transfers; Tender of Old Notes Using DTC’s Automated Tender Offer Program” and instructions are not being transmitted through ATOP; or

 

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certificates representing tendered old notes are enclosed herewith.

Timely confirmation of a book-entry transfer, or certificates for all physically tendered old notes, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at the address, set forth on the first page of this Letter of Transmittal by the Expiration Date.

An agent’s message must be sent by DTC to the Exchange Agent by the Expiration Date for tenders of old notes through ATOP. Holders tendering through ATOP need not complete and deliver this Letter of Transmittal, but by tendering through ATOP, such holders will have agreed to be bound by all the terms and conditions of this Letter of Transmittal and will be deemed to have made the acknowledgments, agreements, representations and warranties contained in this Letter of Transmittal, as if such holders had completed and delivered it.

The method of delivery of this Letter of Transmittal, the old notes and all other required documents is at the election and sole risk of the tendering holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to assure delivery to the Exchange Agent by the Expiration Date. No Letter of Transmittal or old notes should be sent to the Company.

Each tendering holder, by execution of this Letter of Transmittal (or facsimile hereof) or by submitting an agent’s message through ATOP, waives any right to receive any notice of the acceptance of such tender and delivery.

 

2.	Guaranteed Delivery Procedures.

Holders who wish to tender their old notes and whose old notes are not immediately available or who cannot deliver their old notes, this Letter of Transmittal, or any other documents required hereby to the Exchange Agent prior to the Expiration date or who cannot complete the procedure for book-entry transfer (including delivery of an agent’s message) on a timely basis, must tender their old notes according to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedures:

 

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such tender must be made by or through an Eligible Institution;

 

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prior to the Expiration Date, the Exchange Agent must have received a properly completed and duly executed notice of guaranteed delivery, in the form provided by the Company, or an agent’s message with respect to guaranteed delivery that is accepted by the Company; and

 

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the certificates for the tendered notes, in proper form for transfer (or a book-entry confirmation of the transfer of such notes into the Exchange Agent account at DTC as described above), together with a Letter of Transmittal (or a manually signed facsimile of the Letter of Transmittal) properly completed and duly executed, with any signature guarantees and other documents required hereby or a properly transmitted agent’s message must be received by the Exchange Agent three New York Stock Exchange trading days after the Expiration Date.

 

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Any holder of old notes who wishes to tender old notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their old notes according to the guaranteed delivery procedures set forth above. See “The Exchange Offers—Guaranteed Delivery Procedures” section of the Prospectus.

 

3.	Delivery of New Notes.

New notes to be issued for old notes that are accepted for exchange will be delivered in book-entry form to DTC to the participant and account information provided in the box above labeled “Method of Delivery.” Holders that anticipate participating in the Exchange Offers other than through DTC are urged to contact promptly a bank, broker, dealer, trust company or other intermediary that has the capability to hold securities custodially through DTC to arrange for receipt of any new notes to be delivered pursuant to any of the Exchange Offers and to obtain the information necessary to complete the box labeled “Method of Delivery.”

 

4.	Minimum Tender Amounts; Minimum Denominations of New Notes; Partial Tenders.

Each series of old notes may be tendered only in minimum principal amounts equal to minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.

The new notes to be issued in the Exchange Offers will be issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. No tender of old notes will be accepted for exchange if such tender would result in the issuance of less than $2,000 principal amount of new notes. If the principal amount of new notes that would otherwise be required to be delivered in exchange for a tender of old notes would not equal $2,000 or an integral multiple of $1,000 in excess thereof, the principal amount of such new notes will be rounded down to $2,000 or the nearest integral multiple of $1,000 in excess thereof.

If less than all of the old notes represented by any submitted physical certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of old notes to be tendered in the box above labeled “Description of Old Notes Tendered” under “Principal Amount Tendered.” A reissued certificate representing the balance of old notes not tendered will be sent to such tendering holder, unless otherwise provided in the appropriate boxes in this Letter of Transmittal, promptly after the Expiration Date. All of the old notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated.

 

5.	Signatures on this Letter of Transmittal; Bond Powers and Endorsements; Guarantee of Signatures.

If this Letter of Transmittal is signed by the registered holder of the old notes tendered hereby, the signature must correspond exactly with the name as written on DTC’s security position listing, or as written on the face of the certificates, without any change whatsoever.

If any tendered old notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.

If any tendered old notes are registered in different names, it will be necessary to complete, sign and submit as many separate Letters of Transmittal, or facsimiles thereof, as there are different registrations of certificates.

When this Letter of Transmittal is signed by the registered holder(s) of the old notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the new notes are to be issued, or any old notes not exchanged are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) or bond powers must be guaranteed by an Eligible Institution.

 

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If this Letter of Transmittal is signed by a person other than the registered holder(s) of any certificates specified herein, such certificates must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder(s) appear(s) on DTC’s security position listing or the certificates, and signatures on such certificates or bond powers must be guaranteed by an Eligible Institution. Signatures on such certificates or bond powers must be accompanied by such opinions of counsel, certifications and other information as the Company may require.

If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal.

Signatures on the Letter of Transmittal need not be guaranteed by an Eligible Institution if the old notes are tendered (a) by a registered holder of old notes (which term, for purposes of the Exchange Offers, includes any participant in DTC whose name appears on a security position listing as the holder of such old notes) who has not completed the box labeled “Special Issuance and Payment Instructions” or “Special Delivery Instructions” in this Letter of Transmittal, or (b) for the account of an Eligible Institution.

As used herein and in the Prospectus, “Eligible Institution” means a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, as “an eligible guarantor institution,” including (as such terms are defined therein) (a) a bank; (b) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (c) a credit union; (d) a national securities exchange, registered securities association or clearing agency; or (e) a savings association that is a participant in a Securities Transfer Association.

 

6.	Special Issuance and Payment Instructions and Special Delivery Instructions.

Tendering holders of old notes should indicate in the applicable box the name and address or the DTC participant account name and number to which new notes issued pursuant to the Exchange Offers, and/or substitute certificates evidencing, or principal amounts of, old notes not exchanged are to be issued or sent, if different from the name or address or the DTC participant account name and number of the registered holder signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification (“TIN”) or Social Security number of the person named must also be indicated and such person named must properly complete a Substitute Form W-9, a Form W-8BEN, a Form W-8BEN-E, a Form W-8ECI or a Form W-8IMY. Holders tendering old notes by book-entry transfer may request that old notes not exchanged be credited to such account maintained at DTC as such holder may designate in the box above labeled “Special Issuance and Payment Instructions.” If no such instructions are given, such old notes not exchanged will be returned to the name and address or the DTC participant account name and number of the registered holder signing this Letter of Transmittal.

 

7.	Transfer Taxes.

Tendering holders of old notes will not be obligated to pay any transfer taxes in connection with a tender of their old notes for exchange unless a holder instructs the Company to issue new notes in the name of, or requests that old notes not accepted in the Exchange Offers be returned to, a person other than the registered holder tendering, in which event the registered holder tendering will be responsible for the payment of any applicable transfer tax. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such registered holder.

 

8.	Information Reporting and Backup Withholding.

Each tendering holder (or other recipient of any new notes specified in the box above labeled “Special Issuance and Payment Instructions”) is required to provide the Exchange Agent with a correct TIN, generally the

 

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holder’s Social Security or Federal Employer Identification Number for U.S. holders, and with certain other information, on Substitute Form W-9, which is provided below, and to certify that the holder (or other person) is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering holder (or other person) to a $50 penalty imposed by the Internal Revenue Service and federal income tax backup withholding. The box in Part 2 of the Substitute Form W-9 may be checked if the tendering holder (or other person) has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 2 is checked and the Exchange Agent is not provided with a TIN by the time of payment, the Exchange Agent will withhold federal income tax on all reportable payments at the prescribed rate, if any, until a TIN is provided to the Exchange Agent. If the old notes are registered in more than one name or are not in the name of the actual owner, see the section of this Letter of Transmittal under the heading “Guidelines for Request for Taxpayer Identification Number on Substitute Form W-9” for information on which TIN to report. Non-U.S. holders must complete and submit an IRS Form W-8BEN, or other applicable IRS Form, signed under penalties of perjury, attesting to the holder’s non-U.S. status. The Company reserves the right in its sole discretion to take whatever steps are necessary to comply with the Company’s obligations regarding backup withholding.

 

9.	Waiver of Conditions.

The Company reserves the absolute right to waive satisfaction of the conditions described in the Prospectus to the extent legally permitted. See the information under the heading “The Exchange Offers—Conditions” in the Prospectus.

 

10.	No Conditional Tenders.

No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of old notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their old notes.

Although the Company intends to notify holders of defects or irregularities with respect to tenders of old notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give any such notice.

 

11.	Mutilated, Lost, Stolen or Destroyed Old Notes.

Any holder whose old notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instructions.

 

12.	Withdrawal of Tenders.

Tenders of old notes may be withdrawn at any time prior to the Expiration Date, but not thereafter, unless the Expiration Date is extended by the Company or otherwise required by law, and only in accordance with the procedures set forth under the heading “The Exchange Offers—Withdrawal of Tenders” in the Prospectus. Contact the Exchange Agent for a form of withdrawal and revocation.

 

13.	Validity of Tenders.

All questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal or revocation of tendered old notes will be determined by the Company in its sole discretion, which determination will be final and binding on all parties. The Company reserves the absolute right to reject any and all old notes not properly tendered, or any old notes the Company’s acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects or irregularities in, or conditions of, any tenders as to particular old notes. The Company’s interpretation of the terms and conditions of the Exchange Offers (including this Letter of Transmittal) will be final and binding on all parties.

 

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14.	Requests for Assistance.

Questions and requests for assistance relating to the procedure for tendering may be directed to the Exchange Agent, at the addresses and telephone numbers indicated on the last page of this Letter of Transmittal.

 

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SUBSTITUTE   FORM W-9 Department of the Treasury Internal Revenue Service		REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION		Give form to the requester. Do not send to the IRS.

Name (as shown on your income tax return)
Business name, if different from above
Check appropriate box:  ¨  Individual  ¨  Corporation  ¨  Partnership  ¨  Other		¨  Exempt from backup withholding
City, state, and ZIP code

Part I		Taxpayer Identification Number (TIN)

Enter your TIN on the appropriate line. The TIN provided must match the name given on the top line to avoid backup withholding. For individuals, this is your social security number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see “What Number to Give the Requester” in the attached Guidelines For Certification of Taxpayer Identification Number on Substitute Form W-9. For other entities, it is your employer identification number (EIN). If you do not have a number, see “Obtaining a Number” in the attached Guidelines.   Note. If the account is in more than one name, see “What Number to Give the Requester” in the attached Guidelines for instructions on whose number to enter.
		Social Security Number
		or
		Employer Identification Number

Part II		Certification
Under penalties of perjury, I certify that:   1.     The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and   2.     I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and   3.     I am a U.S. person (including a U.S. resident alien).   Certification Instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return.

Sign Here		Signature of    g U.S. person		Date  g

FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 28% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFERS.

 

18

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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

WHAT NUMBER TO GIVE THE REQUESTER.—A social security number (SSN) has nine digits separated by two hyphens (i.e. 000-00-0000). An employer identification number (EIN) has nine digits separated by only one hyphen (i.e. 00-0000000). The table will help determine the proper number to give the payer.

(1)	List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that person’s number must be furnished.

(2)	Circle the minor’s name and furnish the minor’s SSN.

(3)	You must show your individual name and you may also enter your business or “DBA” name on the second name line. You may use either your SSN or EIN (if you have one), but the Internal Revenue Service (“IRS”) encourages you to use your SSN.

(4)	List first and circle the name of the legal trust, estate or pension trust. (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)

 

NOTE:

If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed.

 

19

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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

(Page 2)

 

 

20

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The Exchange Agent for the Exchange Offers is:

The Bank of New York Mellon Trust Company, N.A.

By Mail, Hand or Overnight

Courier:

The Bank of New York Mellon Trust Company, N.A, as Exchange Agent

c/o The Bank of New York Mellon Corporation

Corporate Trust Operations - Reorganization Unit

111 Sanders Creek Parkway

East Syracuse, NY 13057

Attn: Pamela Adamo

Tel: 315-414-3317

By Facsimile (for Eligible Institutions only):

The Bank of New York Mellon Trust Company, N.A, as Exchange Agent

c/o The Bank of New York Mellon Corporation

Corporate Trust Operations - Reorganization Unit

Attn: Pamela Adamo

Fax: 732-667-9408

Any questions or requests for assistance or additional copies of this Letter of Transmittal or the Prospectus may be directed to the Exchange Agent at its telephone numbers or addresses set forth above.

 

 

 

21

EXHIBIT 99.2

NOTICE OF GUARANTEED DELIVERY

Reynolds American Inc.

Offers to Exchange Up to the Aggregate Principal Amounts of the Series of Notes

Issued by Reynolds American Inc. Shown Below

 

Old Notes to be Exchanged		CUSIP Nos.				Outstanding Principal Amount
3.500% Senior Notes due 2016		761713 BH8		U8001F AL9		$414,793,000
2.300% Senior Notes due 2017		761713 BJ4		U8001F AM7		$447,092,000
8.125% Senior Notes due 2019		761713 BK1		U8001F AN5		$668,689,000
6.875% Senior Notes due 2020		761713 BL9		U8001F AP0		$641,462,000
3.750% Senior Notes due 2023		761713 BM7		U8001F AQ8		$473,689,000
8.125% Senior Notes due 2040		761713 BN5		U8001F AR6		$236,748,000
7.000% Senior Notes due 2041		761713 BP0		U8001F AS4		$240,197,000

Pursuant to the Prospectus dated          , 2015

 

This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be used to accept the Exchange Offers (as defined below) if (i) certificates representing any series of notes (the “old notes”) of Reynolds American Inc. (“RAI” or the “Company”) listed in the table above are not immediately available, (ii) the old notes, the Letter of Transmittal and any other documents required by the Letter of Transmittal cannot be delivered to The Bank of New York Mellon Trust Company, N.A. (the “Exchange Agent”) on or prior to the Expiration Date or (iii) the procedures for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery or one substantially equivalent to this form may be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent, and must be received by the Exchange Agent on or prior to the Expiration Date. See “The Exchange Offers—Guaranteed Delivery Procedures”. In general, defined terms used herein have the respective meanings assigned to them under the heading “Glossary” in the Prospectus.

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The Exchange Agent for the Exchange Offers is:

The Bank of New York Mellon Trust Company, N.A.

By Mail, Hand or Overnight

Courier:

The Bank of New York Mellon Trust Company, N.A, as Exchange Agent

c/o The Bank of New York Mellon Corporation

Corporate Trust Operations—Reorganization Unit

111 Sanders Creek Parkway

East Syracuse, NY 13057

Attn: Pamela Adamo

Tel: 315-414-3317

By Facsimile (for Eligible Institutions only):

The Bank of New York Mellon Trust Company, N.A, as Exchange Agent

c/o The Bank of New York Mellon Corporation

Corporate Trust Operations—Reorganization Unit

Attn: Pamela Adamo

Fax: 732-667-9408

Delivery of this Notice of Guaranteed Delivery to an address, or transmission of instructions via a fax number, other than as listed above, will not constitute a valid delivery.

This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an “eligible guarantor institution” under the instructions thereto, such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for guarantee of signatures.

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Ladies and Gentlemen:

The undersigned hereby tenders to Reynolds American Inc., upon the terms and subject to the conditions set forth in the Prospectus dated                     , 2015 (as the same may be amended or supplemented from time to time, the “Prospectus”) and the related Letter of Transmittal (which together with the Prospectus constitute the “Exchange Offers”), receipt of which the undersigned hereby acknowledges, the aggregate principal amount of old notes indicated below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption “The Exchange Offers—Guaranteed Delivery Procedures.”

 

DESCRIPTION OF OLD NOTES TENDERED
Name(s) and Address(es) of Registered Holder(s)		Certificate Number(s) (if available)*		Principal Amount Tendered**
		Total:
*     Need not be completed if old notes are being tendered by book-entry transfer. **     Tenders of old notes will be accepted only in minimum principal amounts of $2,000 and integral multiples of $1,000 in excess thereof.

Name of eligible guarantor institution guaranteeing delivery:

 

 

 

¨	Check here if tendered old notes will be delivered by book-entry transfer and complete the following:

 

The Depository Trust Company Account Number:

All authority conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death, incapacity, bankruptcy or dissolution of the undersigned and every obligation of the undersigned hereunder shall be binding upon the undersigned’s heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives.

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Do not send physical certificates representing old notes with this form. Old notes should be sent to the Exchange Agent, together with a properly completed and duly executed Letter of Transmittal and any other required documents.

EXHIBIT 99.3

NOTICE TO INVESTORS

Reynolds American Inc.

Offers to Exchange Up to the Aggregate Principal Amounts of the Series of Notes

Issued by Reynolds American Inc. Shown Below

 

Old Notes to be Exchanged		CUSIP Nos.				Outstanding Principal Amount
3.500% Senior Notes due 2016		761713 BH8		U8001F AL9		$414,793,000
2.300% Senior Notes due 2017		761713 BJ4		U8001F AM7		$447,092,000
8.125% Senior Notes due 2019		761713 BK1		U8001F AN5		$668,689,000
6.875% Senior Notes due 2020		761713 BL9		U8001F AP0		$641,462,000
3.750% Senior Notes due 2023		761713 BM7		U8001F AQ8		$473,689,000
8.125% Senior Notes due 2040		761713 BN5		U8001F AR6		$236,748,000
7.000% Senior Notes due 2041		761713 BP0		U8001F AS4		$240,197,000

Pursuant to the Prospectus dated                     , 2015

 

                    , 2015

To Our Clients:

Enclosed for your consideration is a Prospectus, dated                     , 2015 (as the same may be amended or supplemented from time to time, the “Prospectus”) and a form of Letter of Transmittal (the “Letter of Transmittal”) relating to the offers by Reynolds American Inc. (“RAI” or the “Company”) to exchange up to the aggregate principal amounts of each series of notes (the “old notes”) of the Company listed in the table above for newly issued notes issued by the Company (the “new notes”), which have been registered under the Securities Act of 1933, as amended, pursuant to a registration statement of which the Prospectus is a part, upon the terms and subject to the conditions set forth in the Prospectus and Letter of Transmittal (which together constitute the “Exchange Offers”). As set forth in the Prospectus, the terms of the new notes are identical in all material respects to those of the old notes, except for transfer restrictions, registration rights and rights to additional interest that do not apply to the new notes. Old notes may only be tendered in minimum principal amounts of $2,000 and integral multiples of $1,000 in excess thereof.

We have forwarded this material to you as the beneficial owner of the old notes held by us for your account but not registered in your name. A tender of such old notes may only be made by us as the registered holder and pursuant to your instructions.

We request instructions as to whether you wish us to tender any or all such old notes held by us for your account or benefit, pursuant to the terms and conditions set forth in the Exchange Offers. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to exchange your old notes. We also request that you confirm that we may, on your behalf, make the representations, warranties, and agreements contained in the Letter of Transmittal.

Your instructions to us should be forwarded as promptly as possible in order to permit us to tender the old notes on your behalf in accordance with the provisions of the Exchange Offers. The Exchange Offers expire at                     p.m., New York City time on the Expiration Date, unless extended. Tenders of old notes may be withdrawn at any time prior to                     p.m., New York City time, on the Expiration Date.

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Your attention is directed to the following:

1. The Exchange Offers are for the exchange of any and all outstanding old notes of the series listed above for a like principal amount of new notes, in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. The form and terms of each series of new notes are identical in all material respects to those of the old notes, except for transfer restrictions, registration rights and rights to additional interest that do not apply to the new notes.

2. The Company has agreed to pay the expenses of the Exchange Offers.

3. Holders who tender their old notes for exchange will not be required to pay any transfer taxes, except that holders who instruct us to register new notes in the name of, or request that old notes not tendered or not accepted in the Exchange Offers be returned to, a person other than the registered tendering holder, will be responsible for paying any applicable transfer tax.

The Exchange Offers are not being made to (nor will tenders be accepted from or on behalf of) holders who tender their old notes residing in any jurisdiction in which the making of the Exchange Offers or acceptance thereof would not be in compliance with the laws of such jurisdiction.

If you wish to exchange any or all of your old notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to exchange old notes held by us and registered in our name for your account or benefit.

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INSTRUCTIONS FROM CLIENT:

The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offers made by Reynolds American Inc. Certain terms used but not defined herein have the meanings ascribed to them in the Prospectus.

THIS WILL INSTRUCT YOU TO EXCHANGE THE AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES INDICATED BELOW (OR, IF NO AGGREGATE PRINCIPAL AMOUNT IS INDICATED BELOW, ALL OLD NOTES) HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED, PURSUANT TO THE TERMS AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.

¨  Please tender my old notes held by you for the account or benefit of the undersigned. I have identified on a signed schedule attached hereto the principal amount of old notes to be tendered if I wish to tender less than all of my old notes.

¨  Please do not tender my old notes held by you for the account of the undersigned.

If the undersigned instructs you to tender the old notes held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned by its signature below, hereby makes to you), the representations contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that:

 

•

the new notes acquired pursuant to the Exchange Offers are being acquired in the ordinary course of business of the undersigned or any beneficial owner of the old notes tendered hereby;

 

•

neither the undersigned holder nor any beneficial owner of the old notes tendered hereby is engaged in, intends to engage in, or has any arrangement or understanding with any person or entity to participate in, a “distribution” of the new notes within the meaning of the Securities Act;

 

•

neither the undersigned holder nor any beneficial owner of the old notes tendered hereby is an “affiliate” of any of RAI or the guarantors within the meaning of Rule 405 promulgated under the Securities Act;

 

•

if the undersigned or any beneficial owner of the old notes tendered hereby is a broker-dealer, neither the undersigned nor any such beneficial owner purchased the old notes directly from RAI for resale pursuant to an exemption from registration under the Securities Act;

 

•

if the undersigned or any beneficial owner of the old notes tendered hereby is a broker-dealer, the undersigned further represents, warrants and agrees that it or such other beneficial owner (a) acquired its old notes as a result of market-making or other trading activities (and not directly from RAI for resale), (b) may be considered a statutory “underwriter” under the Securities Act and (c) will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes received in the Exchange Offers (which prospectus may be the Prospectus); provided, however, that, by acknowledging that you or such beneficial owner, as such a broker-dealer, will deliver, and by delivering, a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes, you or such beneficial owner will not be deemed to admit that you are an “underwriter” within the meaning of the Securities Act; and

 

•

the undersigned holder is not acting on behalf of any person or entity that could not truthfully make the foregoing representations, warranties and agreements.

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Signature:

 

Print Name here:

 

Address(es):

 

Telephone Number(s):

 

Taxpayer Identification or Social Security Number(s):

 

Date:

None of the old notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature hereon shall constitute an instruction to us to tender all of the old notes held by us for your account.

EXHIBIT 99.4

NOTICE TO BROKER DEALERS

Reynolds American Inc.

Offers to Exchange Up to the Aggregate Principal Amounts of the Series of Notes

Issued by Reynolds American Inc. Shown Below

 

Old Notes to be Exchanged		CUSIP Nos.				Outstanding Principal Amount
3.500% Senior Notes due 2016		761713 BH8		U8001F AL9		$	414,793,000
2.300% Senior Notes due 2017		761713 BJ4		U8001F AM7		$	447,092,000
8.125% Senior Notes due 2019		761713 BK1		U8001F AN5		$	668,689,000
6.875% Senior Notes due 2020		761713 BL9		U8001F AP0		$	641,462,000
3.750% Senior Notes due 2023		761713 BM7		U8001F AQ8		$	473,689,000
8.125% Senior Notes due 2040		761713 BN5		U8001F AR6		$	236,748,000
7.000% Senior Notes due 2041		761713 BP0		U8001F AS4		$	240,197,000

Pursuant to the Prospectus dated                     , 2015

                    , 2015

To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:

Enclosed for your consideration is a Prospectus, dated                     , 2015 (as the same may be amended or supplemented from time to time, the “Prospectus”) and a form of Letter of Transmittal (the “Letter of Transmittal”) relating to the offers by Reynolds American Inc. (“RAI” or the “Company”) to exchange up to the aggregate principal amounts of each series of notes (the “old notes”) of the Company listed in the table above for newly issued notes issued by the Company (the “new notes”), which have been registered under the Securities Act of 1933, as amended, pursuant to a registration statement of which the Prospectus is a part, upon the terms and subject to the conditions set forth in the Prospectus and Letter of Transmittal (which together constitute the “Exchange Offers”). As set forth in the Prospectus, the terms of the new notes are identical in all material respects to those of the old notes, except for transfer restrictions, registration rights and rights to additional interest that do not apply to the new notes. Old notes may only be tendered in minimum principal amounts of $2,000 and integral multiples of $1,000 in excess thereof.

We are asking you to contact your clients for whom you hold old notes registered in your name or in the name of your nominee. In addition, we ask you to contact your clients who, to your knowledge, hold old notes registered in their own name. The Company will not pay any fees or commissions to brokers, dealers or other persons for soliciting exchanges of the old notes pursuant to the Exchange Offers. You will, however, be reimbursed by the Company for customary mailing and handling expenses incurred by you for forwarding any of the enclosed materials to your clients. Holders who tender their old notes for exchange will not be required to pay any transfer taxes, except that holders who instruct the Company to register new notes in the name of, or request that old notes not tendered or not accepted in the Exchange Offers be returned to, a person other than the registered tendering holder, will be responsible for paying any applicable transfer tax.

Enclosed herewith for your information and forwarding to your clients are copies of the following documents:

 

1.

the Prospectus, dated                     , 2015;

 

2.

a Letter of Transmittal for your use in the exchange of old notes and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to exchange the old notes;

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3.

a form of letter which may be sent to your clients for whose accounts you hold old notes registered in your name or in the name of your nominee, with space provided for obtaining such client’s instructions with regard to the Exchange Offers; and

 

4.

a Notice of Guaranteed Delivery.

Your prompt attention is requested. We urge you to contact your clients as promptly as possible. Please note the Exchange Offers will expire at          p.m., New York City time, on                     , 2015, unless extended. Please furnish copies of the enclosed materials to those of your clients for whom you hold old notes registered in your name or your nominee as quickly as possible.

Pursuant to the Letter of Transmittal, each holder of old notes will represent to the Company that:

 

•

the new notes acquired pursuant to the Exchange Offers are being acquired in the ordinary course of business of the undersigned or any beneficial owner of the old notes tendered hereby;

 

•

neither the undersigned holder nor any beneficial owner of the old notes tendered hereby is engaged in, intends to engage in, or has any arrangement or understanding with any person or entity to participate in, a “distribution” of the new notes within the meaning of the Securities Act;

 

•

neither the undersigned holder nor any beneficial owner of the old notes tendered hereby is an “affiliate” of any of RAI or the guarantors within the meaning of Rule 405 promulgated under the Securities Act;

 

•

if the undersigned or any beneficial owner of the old notes tendered hereby is a broker-dealer, neither the undersigned nor any such beneficial owner purchased the old notes directly from RAI for resale pursuant to an exemption from registration under the Securities Act;

 

•

if the undersigned or any beneficial owner of the old notes tendered hereby is a broker-dealer, the undersigned further represents, warrants and agrees that it or such other beneficial owner (a) acquired its old notes as a result of market-making or other trading activities (and not directly from RAI for resale), (b) may be considered a statutory “underwriter” under the Securities Act and (c) will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes received in the Exchange Offers (which prospectus may be the Prospectus); provided, however, that, by acknowledging that you or such beneficial owner, as such a broker-dealer, will deliver, and by delivering, a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes, you or such beneficial owner will not be deemed to admit that you are an “underwriter” within the meaning of the Securities Act; and

 

•

the undersigned holder is not acting on behalf of any person or entity that could not truthfully make the foregoing representations, warranties and agreements.

The enclosed form of letter to clients contains an authorization by the beneficial owners of the old notes for you to make the foregoing representations.

In most cases, exchanges of old notes accepted for exchange pursuant to the Exchange Offers will be made only after timely receipt by the Exchange Agent of (a) certificates representing such old notes, (b) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees, and (c) any other documents required by the Letter of Transmittal.

If holders of old notes wish to tender, but it is impracticable for them to forward their certificates for old notes prior to the expiration of the Exchange Offers or to comply with the book-entry transfer procedures on a timely basis, a tender may be made according to the guaranteed delivery procedures set forth in the Prospectus under the caption “The Exchange Offers—Guaranteed Delivery Procedures.”

 

2

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The Exchange Offers are not being made to (nor will tenders be accepted from or on behalf of) holders of old notes residing in any jurisdiction in which the making of the Exchange Offers or the acceptance thereof would not be in compliance with the laws of such jurisdiction.

Questions and requests for assistance with respect to the Exchange Offers or for copies of the Prospectus and Letter of Transmittal may be directed to the Exchange Agent at its address set forth in the Prospectus.

Very truly yours,

Reynolds American Inc.

 

 

Nothing contained herein or in the enclosed documents shall constitute you or any other person to be deemed to be an agent of the Company, or any affiliate thereof, or of the Exchange Agent, or any affiliate thereof, or authorize you or any other person to give any information or make any representation on behalf of any of them with respect to the Exchange Offers other than the enclosed documents and the statements contained therein.

Enclosures

 

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