Reynolds American Inc. (NYSE:RAI) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item5.02.
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On January16, 2017, Reynolds American Inc., referred to as RAI,
British American Tobacco p.l.c., referred to as BAT, BATUS
Holdings Inc., a wholly owned subsidiary of BAT, Flight
Acquisition Corporation, a wholly owned subsidiary of BAT and
referred to as Merger Sub, entered into an Agreement and Plan of
Merger, to which, subject to the satisfaction or waiver of
certain conditions, Merger Sub will merge with and into RAI,
referred to as the merger, with RAI surviving as a wholly owned
subsidiary of BAT.
Retention Agreements and Severance Modifications
On May26, 2017, in connection with and contingent upon the
completion of the merger, RAI entered into arrangements with each
of Debra A. Crew, RAIs President and Chief Executive Officer, and
Joseph P. Fragnito, President and Chief Commercial Officer of R.
J. Reynolds Tobacco Company, a wholly owned operating subsidiary
of RAI. These arrangements consist of a retention agreement with
each of Ms.Crew and Mr.Fragnito and certain modifications to the
Reynolds American Inc. Executive Severance Plan, as amended and
restated, referred to as the ESP, with respect to each of Ms.Crew
and Mr.Fragnito, both of which are described below.
Retention Agreements
On May26, 2017, in connection with and contingent upon the
completion of the merger, RAI entered into a retention agreement,
each referred to as a Retention Agreement and collectively the
Retention Agreements, with each of Ms.Crew and Mr.Fragnito. The
Retention Agreement with Ms.Crew provides for the payment of a
cash retention bonus in the amount of $1,500,000 (subject to
applicable withholding) to Ms.Crew if she remains an employee of
RAI or any affiliate of or successor to RAI, collectively
referred to as the Company, until December31, 2019. The Retention
Agreement with Mr.Fragnito provides for the payment of a cash
retention bonus in the amount of $900,000 (subject to applicable
withholding) to Mr.Fragnito if he remains an employee of the
Company until December31, 2020. In the event Ms.Crews or
Mr.Fragnitos employment with the Company is terminated for any
reason prior to December31, 2019 or December31, 2020,
respectively, the cash retention bonus will be forfeited. Similar
retention agreements were entered into with certain of RAIs other
executive officers.
The foregoing description of the Retention Agreements does not
purport to be a complete description of the terms of the
Retention Agreements, and is qualified in all respects by
reference to the complete text of the form Retention Agreement, a
copy of which is being filed as Exhibit 10.1 hereto, and the form
Retention Agreement is incorporated into this Item 5.02 by
reference.
Severance Modifications
Additionally, on May26, 2017, again in connection with and
contingent upon the completion of the merger, RAI entered into an
agreement with each of Ms.Crew and Mr.Fragnito, each referred to
as a Severance Agreement and collectively the Severance
Agreements, that modify, as to Ms.Crew and Mr.Fragnito, certain
terms of the ESP. Similar severance agreements were entered into
with certain of RAIs other executive officers. In addition to
certain non-material clarification and consistency changes, such
modifications are as described below:
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With respect to Ms.Crew, the Severance Agreement provides that any termination of Ms.Crews employment with the Company other than for Cause (as defined in the ESP) during the period beginning on the completion of the merger, referred to as the closing date, and ending on December31, 2020, will be a Qualifying Termination as to Ms.Crew under the ESP. |
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With respect to Mr.Fragnito, the Severance Agreement provides that any termination of Mr.Fragnitos employment with the Company other than for Cause during the period beginning on the closing date and ending on December31, 2022, will be a Qualifying Termination as to Mr.Fragnito under the ESP. |
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Prior to the modifications described above, the ESP had provided that, in general, after a change in control such as the merger, a Qualifying Termination would occur within the 24-month period following the change in control only upon, as applicable, a termination of Ms.Crew or Mr.Fragnitos employment by RAI or a Participating Company (as defined in the ESP) without Cause or by Ms.Crew or Mr.Fragnito for Change in Control Good Reason (as defined in the ESP). |
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The Severance Agreements provide that upon a Qualifying Termination, subject to the execution of a release of claims, the Company will pay Ms.Crew or Mr.Fragnito (or, in the event of Ms.Crews or Mr.Fragnitos death, Ms.Crews or Mr.Fragnitos estate), as applicable, the Change in Control Severance Benefits payable under the ESP, which in general provides for a cash payment equal to a multiple of base salary plus target annual bonus opportunity as of the date of termination (Ms.Crew has a three times multiple, and Mr.Fragnito has a two times multiple) and six months of subsidized coverage under RAIs medical plan. As modified by the Severance Agreements, the amount calculated as a multiple of base salary and annual bonus will be calculated as if such Qualifying Termination occurred on the closing date. |
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The Severance Agreements provide that any such Qualifying Termination under the Severance Agreements would be considered a termination of employment entitling Ms.Crew or Mr.Fragnito, as applicable, to severance benefits for purposes of any annual bonus or equity arrangements of the Company that provide special benefits upon such a termination. |
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The Severance Agreements provide that if Ms.Crew remains employed by the Company after December31, 2020, or Mr.Fragnito remains employed by the Company after December31, 2022, Ms.Crew or Mr.Fragnito, as applicable, will have a right to be covered by any severance arrangement the Company determines is appropriate, as long as the terms of such arrangement are at least as favorable to them as the terms of the Companys severance arrangements then in effect for similarly situated executives of the Company. |
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In connection with (and as a condition to) entering into the Severance Agreements, each of Ms.Crew and Mr.Fragnito executed a restrictive covenants agreement, covering non-competition, non-solicitation, non-disparagement and cooperation matters, that will apply for up to a three-year period following a termination of Ms.Crews or Mr.Fragnitos employment, as applicable. As a result, payments under the Severance Agreements are subject to repayment under certain conditions as described in the Severance Agreements. The restrictive covenants agreement is attached as Exhibit A to the form of Severance Agreement. In addition, payments under the Severance Agreements are subject to applicable withholding. |
The foregoing description of the Severance Agreements does not
purport to be a complete description of the terms of the
Severance Agreements, and is qualified in all respects by
reference to the complete text of the form Severance Agreement, a
copy of which is being filed as Exhibit 10.2 hereto, and the form
Severance Agreement is incorporated into this Item 5.02 by
reference.
Press Release
On May30, 2017, RAI issued a press release announcing, among
other things, that in the event of the completion of the merger,
Andrew D. Gilchrist has indicated that he intends to resign
shortly thereafter from his position as executive vice president
and chief financial officer of RAI. A copy of the press release
is attached to this Current Report on Form 8-K as Exhibit 99.1.
| Item8.01 | Other Events |
On May30, 2017, RAI issued a press release. A copy of the press
release is attached to this Current Report on Form 8-K as Exhibit
99.1.
Forward-Looking and Cautionary Statements
Statements included in this report that are not historical in
nature, including financial estimates and statements as to
regulatory approvals and the expected timing, completion and
effects of the proposed transaction, are forward-looking
statements made to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. When used in this
report and in documents incorporated by reference,
forward-looking statements include, without limitation,
statements regarding the benefits of the proposed transaction,
including future financial and operating results, financial
forecasts or projections, the combined companys plans,
expectations, beliefs, intentions and future strategies, and
other statements that are not historical facts, and other
statements that are signified by the words anticipate, believe,
estimate, expect, intend, may, objective, outlook, plan, project,
predict, possible, potential, could, should and similar
expressions. These statements regarding future events or the
future performance or results of RAI and its subsidiaries or the
combined company inherently are subject to a variety of risks,
contingencies and other uncertainties that could cause actual
results, performance or achievements to differ materially from
those described in or implied by the forward-looking statements.
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Among the risks, contingencies and uncertainties that could cause
actual results to differ from those described in the
forward-looking statements or could result in the failure of the
proposed transaction to be consummated, or if consummated, could
have an adverse effect on the results of operations, cash flows
and financial position of RAI or the combined company,
respectively, are the following: the failure to obtain necessary
shareholder approvals for the proposed transaction; the failure
to obtain other necessary approvals for the proposed transaction,
or if obtained, the possibility of being subjected to conditions
that could reduce the expected synergies and other benefits of
the proposed transaction, result in a material delay in, or the
abandonment of, the proposed transaction or otherwise have an
adverse effect on RAI or the combined company; the failure to
satisfy required closing conditions or complete the proposed
transaction in a timely manner or at all; the effect of
restrictions placed on RAIs and its subsidiaries business
activities and the limitations put on RAIs ability to pursue
alternatives to the proposed transaction to the merger agreement;
risks related to disruption of management time from ongoing
business operations due to the proposed transaction; the failure
to realize projected synergies and other benefits from the
proposed transaction; failure to promptly and effectively
integrate RAI into BAT; the uncertainty of the value of the
proposed transaction consideration that RAI shareholders will
receive in the proposed transaction due to a fixed exchange ratio
and a potential fluctuation in the market price of BAT common
stock; the difference in rights provided to RAI shareholders
under North Carolina law, the RAI articles of incorporation and
the RAI bylaws, as compared to the rights RAI shareholders will
obtain as BAT shareholders under the laws of England and Wales
and BATs governing documents; the possibility of RAIs directors
and officers having interests in the proposed transaction that
are different from, or in addition to, the interests of RAI
shareholders generally; the effect of the announcement of the
proposed transaction on the ability to retain and hire key
personnel, maintain business relationships, and on operating
results and businesses generally; the incurrence of significant
pre- and post-transaction related costs in connection with the
proposed transaction; evolving legal, regulatory and tax regimes;
and the occurrence of any event giving rise to the right of a
party to terminate the merger agreement. Discussions of
additional risks, contingencies and uncertainties are contained
in RAIs filings with the U.S. Securities and Exchange Commission
(the SEC). Due to these risks, contingencies and other
uncertainties, you are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
of this report. Except as provided by federal securities laws,
RAI is not under any obligation to, and expressly disclaims any
obligation, to update, alter or otherwise revise any
forward-looking statements, whether written or oral, that may be
made from time to time, whether as a result of new information,
future events or otherwise.
Additional Information
This report may be deemed to be solicitation material in respect
of the proposed transaction involving RAI and BAT. In connection
with the proposed transaction, BAT has filed with the SEC a
registration statement on Form F-4 that includes the proxy
statement of RAI that also constitutes a prospectus of BAT. The
registration statement has not yet become effective and the proxy
statement included therein is in preliminary form. RAI plans to
mail the definitive proxy statement/prospectus to its
shareholders in connection with the proposed transaction.
INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED OR TO BE
FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY
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CONTAIN IMPORTANT INFORMATION ABOUT BAT, RAI, THE PROPOSED
TRANSACTION AND RELATED MATTERS. Investors and shareholders may
obtain free copies of the proxy statement/prospectus and other
documents filed with the SEC by RAI and BAT through the SECs
website at http://www.sec.gov. In addition, investors and
shareholders may obtain free copies of the proxy
statement/prospectus and other documents filed with the SEC by
RAI by contacting RAI Investor Relations at
[email protected] or by calling (336)
741-5165 or at RAIs website at www.reynoldsamerican.com, and may
obtain free copies of the proxy statement/prospectus and other
documents filed with the SEC by BAT by contacting BAT Investor
Relations at [email protected] or by calling 44 (0) 20 7845 1000 or
at BATS website at www.bat.com.
RAI, BAT and their respective directors and executive officers
and other persons may be deemed to be participants in the
solicitation of proxies from RAI shareholders in respect of the
proposed transaction that will be described in the proxy
statement/prospectus. Information regarding the persons who may,
under the rules of the SEC, be deemed participants in the
solicitation of proxies from RAI shareholders in connection with
the proposed transaction, including a description of their direct
or indirect interests, by security holdings or otherwise, are set
forth in the proxy statement/prospectus filed with the SEC. You
may also obtain the documents that RAI files electronically from
the SECs website at http://www.sec.gov. Information regarding
RAIs directors and executive officers is contained in RAIs Annual
Report on Form 10-K for the year ended December31, 2016, which
was filed with the SEC on February9, 2017, and its Form 10-K/A,
which was filed with the SEC on March20, 2017. Information
regarding BATs directors and executive officers is contained in
BATs Annual Reports, which may be obtained free of charge from
BATs website at www.bat.com.
This report is not intended to and does not constitute an offer
to sell or the solicitation of an offer to subscribe for or buy
or an invitation to purchase or subscribe for any securities in
any jurisdiction to the acquisition, the merger or otherwise, nor
shall there be any sale, issuance or transfer of securities in
any jurisdiction in contravention of applicable law. No offer of
securities shall be made except by means of a prospectus meeting
the requirements of Section10 of the Securities Act of 1933, as
amended.
| Item9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
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ExhibitNo. |
Description |
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| 10.1 |
Form of Retention Agreement between Reynolds American Inc. and the executive officer named therein. |
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| 10.2 |
Form of Severance Agreement between Reynolds American Inc. and the executive officer named therein. |
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| 99.1 | Press Release of Reynolds American Inc., dated May30, 2017. |
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About Reynolds American Inc. (NYSE:RAI)
Reynolds American Inc. (RAI) is a holding company. The Company’s segments include RJR Tobacco, which consists of the primary operations of its subsidiary, R. J. Reynolds Tobacco Company; Santa Fe, which consists of the primary operations of its subsidiary, Santa Fe Natural Tobacco Company, Inc., and American Snuff, which consists of the primary operations of its subsidiary, American Snuff Company, LLC. The RJR Tobacco segment manages contract manufacturing of cigarettes and tobacco products through arrangements with British American Tobacco p.l.c. affiliates, and manages the export of tobacco products to certain United States territories, the United States duty-free shops and the United States overseas military bases. The American Snuff segment offers adult tobacco consumers a range of segregated smokeless tobacco products, primarily moist snuff. The Santa Fe segment manufactures and markets super-premium cigarettes and other tobacco products under the NATURAL AMERICAN SPIRIT brand. Reynolds American Inc. (NYSE:RAI) Recent Trading Information
Reynolds American Inc. (NYSE:RAI) closed its last trading session down -0.31 at 66.67 with 5,718,218 shares trading hands.
