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--&gt; &lt;html&gt; &lt;head&gt;&lt;/head&gt; &lt;body&gt; &lt;!-- Begin Block
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&lt;div style="font-family: 'Times New Roman',Times,serif"&gt; &lt;div align="left"
style="font-size: 10pt; margin-top: 12pt"&gt;&lt;b&gt;Note 4 &amp;#8212; Restructuring
Charges&lt;/b&gt; &lt;/div&gt; &lt;div align="left" style="font-size: 10pt;
margin-top: 6pt"&gt;&lt;i&gt;2008 Restructuring Charge&lt;/i&gt; &lt;/div&gt;
&lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;In
2008, RAI and RJR Tobacco announced changes in their organizational structures
to streamline non-core business processes and programs in order to allocate
additional resources to strategic growth initiatives. The reorganizations
will result in the elimination of approximately 600 full-time jobs, expected
to be substantially completed by December&amp;#160;31, 2009. &lt;/div&gt;
&lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;Under
existing benefit plans, $83&amp;#160;million of severance-related cash benefits
and $7&amp;#160;million of non-cash pension-related benefits comprised a restructuring
charge of $90&amp;#160;million in 2008. Of this charge, $81&amp;#160;million
was recorded in the RJR Tobacco segment. Of the cash portion of the charge,
$23&amp;#160;million was paid as of June&amp;#160;30, 2009. Accordingly, in
the condensed consolidated balance sheet (unaudited)&amp;#160;as of June&amp;#160;30,
2009, $41&amp;#160;million was included in other current liabilities, and
$19&amp;#160;million was included in other noncurrent liabilities. The cash
benefits are expected to be substantially paid by December&amp;#160;31, 2010.
&lt;/div&gt; &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;The
component of the restructuring charge accrued and utilized was as follows:
&lt;/div&gt; &lt;div align="center"&gt; &lt;table style="font-size: 10pt;
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