Note 14 — Subsequent Event

On July 25, 2017, BAT acquired the remaining approximately 58% of RAI’s outstanding common stock not owned by BAT in a cash and stock transaction, valued at approximately $54.5 billion, pursuant to the Merger Agreement, wherein Merger Sub merged with and into RAI, with RAI surviving as an indirect, wholly owned subsidiary of BAT. At the effective time of the BAT Merger, each share of RAI common stock (other than any shares of RAI common stock owned by BAT or any of its subsidiaries, by RAI or any of its subsidiaries and by shareholders of RAI who properly asserted and did not lose or effectively withdraw appraisal rights) was converted into the right to receive 0.5260 of a BAT ADS, and $29.44 in cash, without interest, collectively referred to as the merger consideration.

BAT is subject to applicable SEC reporting obligations as a foreign private issuer. The BAT ADSs trade on the NYSE, under the symbol BTI.

Immediately upon the closing of the BAT Merger, certain change-of-control provisions contained in equity awards granted to RAI employees under the Omnibus Plan were met, which resulted in the accelerated vesting of those equity awards. With respect to the equity awards that accelerated in connection with the BAT Merger, such equity awards were converted into the right to receive merger consideration in accordance with the terms of the Omnibus Plan and the applicable equity award agreement. All remaining equity awards that were not eligible for accelerated vesting were assumed and replaced with equity awards issued by BAT.

In addition, certain deferred stock units granted to eligible directors of RAI under the Equity Incentive Award Plan for Directors of Reynolds American Inc., referred to as the EIAP, were settled in cash or merger consideration, as applicable, in accordance with the terms of the EIAP and the elections of each applicable director. Deferred stock units held by eligible directors of RAI under the Deferred Compensation Plan for Directors of Reynolds American Inc., referred to as the DCP, that tracked the value of shares of RAI common stock before the BAT Merger, were converted into deferred stock units tracking the value of BAT ADSs and remain outstanding in accordance with the terms of the DCP.

Also, upon completion of the BAT Merger:

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RAI terminated its Credit Agreement and, in doing so, the related subsidiary guarantees of the Credit Agreement also terminated and were released. The RAI indenture provides that a guarantor that is released from its guarantee of the Credit Agreement (or any successor) also will be released from its guarantee of the RAI notes. Accordingly, in connection with the termination of the Credit Agreement, all of the subsidiary guarantees of the RAI notes were released automatically at the same time. Although RJR’s guarantee of the RAI notes also was released automatically, it was replaced simultaneously by a new guarantee in order to comply with a covenant of the RAI indenture. The guarantees by RAI and RJR of the RJR Tobacco notes were not released.

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BAT extended separate guarantees of the outstanding senior notes of RAI and RJR Tobacco.

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The Share Repurchase Program, approved by the board of directors on July 25, 2016, terminated.

After completion of the BAT Merger, RAI notified the NYSE of its intent to remove the RAI common stock from listing on the NYSE and requested that the NYSE file with the SEC an application on Form 25 to report the delisting of the RAI common stock from the NYSE under Section 12(b) of the Exchange Act. On July 25, 2017, the NYSE filed with the SEC a Form 25 to delist and deregister the RAI common stock. As a result, shares of RAI common stock were suspended from trading on the NYSE as of 8:40 AM on July 25, 2017. RAI is in the process of deregistering its common stock with the SEC under Section 12(g) of the Exchange Act and suspending its reporting obligations under Sections 13(a) and 15(d) of the Exchange Act by filing a Form 15 with the SEC promptly after the Form 25 becomes effective. After the filing of this Quarterly Report on Form 10-Q, RAI will no longer file periodic reports under the Exchange Act, with the SEC, with respect to its common stock.

It is further expected that RAI will guarantee all debt securities outstanding, or which may be issued in the future, under BAT’s £25 billion Euro Medium Term Note Program issued by a finance subsidiary of BAT and guaranteed by BAT and certain of its other subsidiaries. In addition, RAI is expected to guarantee debt that certain BAT subsidiaries anticipate issuing to refinance a portion of the acquisition facility used to fund the cash portion of the merger consideration.