Correct and Replace: R.J. Reynolds receives favorable rulings from arbitration panel

Correct and Replace: R.J. Reynolds receives favorable rulings from arbitration

A press release issued by R.J. Reynolds Tobacco Company on Sept. 11, 2013,
contained inaccurate information regarding the amount of money the company
expects to recover with respect to rulings from an arbitration panel and an
earlier settlement agreement reached between the company and certain states.
Both the panel's ruling and the settlement are related to the Master
Settlement Agreement between states and certain cigarette manufacturers.

The original press release also contained an inaccurate dollar value for
disputed payments between the states and manufacturers that have yet to be

PR Newswire

WINSTON-SALEM, N.C., Sept. 13, 2013

WINSTON-SALEM, N.C., Sept. 13, 2013 /PRNewswire/ --An arbitration panel has
determined that R.J. Reynolds Tobacco Company is entitled to approximately
$266 million in disputed payments the company made under the terms of an
agreement, known as the Master Settlement Agreement (MSA), between cigarette
manufacturers and state governments and certain territories.

The jurisdictions found not to have upheld the enforcement requirement were:
Indiana, Kentucky, Maryland, Missouri, New Mexico and Pennsylvania.

"We are pleased that the arbitration panel found that six jurisdictions failed
to meet their diligent enforcement obligations under the MSA," said Martin L.
Holton III, executive vice president and general counsel for R.J. Reynolds.
"Between today's rulings and a settlement reached with 22 jurisdictions
earlier this year, R.J. Reynolds should recover nearly $400 million with
respect to its 2003 NPM Adjustment claim."

The panel's award is the maximum remaining amount to which the company is
entitled with respect to the 2003 adjustment.

The 2003 arbitration proceedings have been underway since July 2010. They
involved a series of hearings focused on whether a given contested
jurisdiction failed to "diligently enforce" certain statutes that required
each jurisdiction to confirm that tobacco manufacturers that are not
signatories to the MSA, known as Non-Participating Manufacturers (NPMs), made
escrow payments on cigarette sales in their jurisdiction. Any jurisdiction
that failed to diligently enforce its escrow statute would be exposed to a
downward payment adjustment, known as the NPM Adjustment, provided for in the

Earlier in 2013, R.J. Reynolds and certain other tobacco manufacturers entered
into a partial settlement of their NPM Adjustment claims relating to 2003
through 2014 with 22 jurisdictions. The amounts resulting from today's rulings
are in addition to the more than $1 billion in credits already available to
R.J. Reynolds by virtue of that earlier partial settlement, which was entered
as a stipulated award by the arbitration panel on March 12, 2013.

The jurisdictions that lost in today's rulings, as well as all of the other
jurisdictions that did not join the earlier partial settlement, remain subject
to more than $3.7 billion in additional claims from the cigarette
manufacturers relating to their enforcement efforts in 2004 and subsequent
years. These additional claims will be the subject of future arbitration

Holton added, "Our focus will now shift to pursuing arbitration of the
company's 2004 NPM Adjustment claim against those jurisdictions that did not
join the settlement."

Several jurisdictions have filed actions in their state courts seeking to
vacate and/or modify the earlier settlement. One or more of the non-settling
jurisdictions may now also file actions seeking to challenge the rulings
issued today by the arbitration panel.

R.J. Reynolds Tobacco Company, an indirect subsidiary of Reynolds American
Inc. (NYSE: RAI), is the second-largest tobacco company in the United States.
To learn more about how Reynolds American and its operating companies are
transforming the tobacco industry, visit

SOURCE R.J. Reynolds Tobacco Company

Contact: David Howard, (336) 741-3489
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