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. Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
At a meeting held on February2, 2017, the members of the Board of
Directors, referred to as the Board, of Reynolds American Inc.,
referred to as RAI, who are Outside Directors (as defined by
Section 162(m) of the Internal Revenue Code, referred to as the
Outside Directors), based upon a recommendation from the
Compensation and Leadership Development Committee of the Board,
referred to as the Compensation Committee, approved (1)the
performance period of January1, 2017 through December31, 2017 for
the 2017 annual incentive awards to be made under the Reynolds
American Inc. Amended and Restated 2009 Omnibus Incentive
Compensation Plan, referred to as the Omnibus Plan, for certain
executive officers, and (2)the performance formula for
determining the award pool for the annual incentive awards under
the Omnibus Plan for such one-year performance period for each of
these executive officers. Under the formula, the award pool for
the annual incentive awards for each of the following executive
officers will be determined based on the following percentages of
RAIs cash net income for the performance period: Debra A. Crew,
0.60%; Andrew D. Gilchrist, 0.25%; and Martin L. Holton III,
0.25%. Jeffery S. Gentry, a named executive officer listed in
RAIs 2016 definitive proxy statement, retired as Executive Vice
President of R. J. Reynolds Tobacco Company April30, 2016. Thomas
R. Adams, a named executive officer listed in RAIs 2016
definitive proxy statement, retired as Executive Vice President
of RAI on September30, 2015. Susan M. Cameron, a named executive
officer listed in RAIs 2016 definitive proxy statement currently
serving as Executive Chairman of the Board, resigned as President
and Chief Executive Officer of RAI on December31, 2016. For
purposes of determining the award pools referenced above, cash
net income is defined as net income from continuing operations in
RAIs consolidated statement of income adjusted for the impact of
non-cash items, such as depreciation, amortization, unrealized
gains and losses, intangible asset impairments and other non-cash
gains/losses included in net income, as reported in RAIs 2017
audited financial statements that would be contained in its
Annual Report on Form 10-K for the fiscal year ending December31,
2017.
On February2, 2017, upon recommendation of the Compensation
Committee, the Outside Directors also approved the following
target award values, expressed as a percentage of each executive
officers base salary as of April1, 2017, for the 2017 annual
incentive awards under the Omnibus Plan for the following
executive officers: Ms.Crew 160%; Mr.Gilchrist, 105%; and
Mr.Holton, 50%. The maximum amount of the 2017 annual incentive
award for each of the listed executive officers is limited to the
percentage of RAIs cash net income approved as the annual
incentive award pool for such executive officer by the Outside
Directors, as described above, and the shareholder approved award
limitations in the Omnibus Plan. The Outside Directors may reduce
the amount of the 2017 annual incentive award for each such
listed executive officer under such formula using negative
discretion after consideration of the 2017 performance of RAI and
its operating companies. Generally, such awards are eligible to
vest on December31, 2017, and the payment of awards will be made
in cash on or prior to March 15th of the next year. In addition,
the annual incentive awards may be paid out partially or fully in
connection with certain other events, such as the listed
executive officers death, disability, retirement or involuntary
termination of employment without cause.
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On February2, 2017, upon recommendation of the Compensation
Committee, the Outside Directors also approved (1)the three-year
performance period of January1, 2017 through December31, 2019 for
the 2017 performance share awards granted under the Omnibus Plan
for certain executive officers, and (2)the performance formula
for determining the award pool of performance shares under the
Omnibus Plan for such three-year performance period for each of
these executive officers. Under the formula, the award pool of
performance shares for each of the following executive officers
will be determined based on the following percentages of RAIs
cumulative cash net income for the three-year performance period:
Ms.Crew 1.00%; Mr.Gilchrist, 0.40%; and Mr.Holton, .40%. For
purposes of determining such award pools, cash net income is
defined as set forth above, except as would be reported in RAIs
Annual Reports on Form 10-K for RAIs 2017, 2018 and 2019 fiscal
years, respectively. The maximum amount of performance shares and
associated dividend equivalent payments that any of the listed
executive officers may receive at the end of the three-year
performance period for the 2017 performance share grant is
limited to the award pool for the performance shares determined
by the formula based on RAIs cash net income approved for such
executive officer by the Outside Directors, as described above,
and the shareholder approved award limitations in the Omnibus
Plan.
On February2, 2017, upon recommendation of the Compensation
Committee, the Outside Directors also approved long-term
incentive grants under the Omnibus Plan, to be effective on
March1, 2017, to Ms.Crew and Messrs. Gilchrist and Holton for the
January1, 2017 to December31, 2019 performance period. The 2017
long-term incentive grants under the Omnibus Plan to such
executive officers will be entirely in the form of performance
shares, granted to a performance share agreement. The number of
performance shares such executive officers actually will receive,
if any, will be determined at the end of the three-year
performance period based first on the maximum payout limitation
provided by the performance share award pools generated under the
pre-established cash net income formula described above. Then the
Outside Directors may use negative discretion to reduce the
number of performance shares actually earned by such executive
officers by taking into account factors such as the average of
RAIs scores under the annual incentive award program for each of
the three years of the performance period, but no higher than
150% of target. In addition, if RAI fails to pay cumulative
dividends of at least an amount equal to the per share quarterly
dividend paid for the first quarter of the performance period
times 12 quarterly dividends for the three-year performance
period ending December31, 2019, then the number of performance
shares earned will be reduced by an amount equal to three times
the percentage of the dividend underpayment for the three-year
performance period, up to a maximum performance share reduction
of 50%; provided that the foregoing potential reduction based on
dividend underpayment will not apply if the performance shares
are assumed in connection with a change of control of RAI.
Subject to the foregoing, and except as described below, the
performance shares generally will vest on March1, 2020, and will
be paid in the form of shares of RAI common stock as soon as
practical thereafter. At the time the performance shares vest,
each of such listed executive officers will receive a single cash
dividend equivalent payment equal to the aggregate amount of the
dividends per share paid during the period from the beginning of
the three-year performance period through the payment of the
performance shares, multiplied by the number of performance
shares actually earned by such executive officer after the
performance adjustments.
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In addition, the performance shares may be paid out partially or
fully upon certain other events, such as the listed executive
officers death, disability, retirement, involuntary termination
of employment without cause, a change of control (other than a
BAT change of control, as referenced below), or certain
terminations of employment following the consummation of the
transactions contemplated by the Agreement and Plan of Merger,
referred to as the Merger Agreement, among BAT, BATUS Holdings
Inc., Flight Acquisition Corporation and RAI, dated as of
January16, 2017, referred to as a BAT change of control. Upon the
occurrence of a BAT change of control, subject to the other terms
of the performance share agreement, the target number of
performance shares subject to a performance share agreement will
be converted into a target number of BAT American depositary
shares as provided in the Merger Agreement. The foregoing
description of the performance share agreement does not purport
to be a complete description of its terms and is qualified in all
respects by reference to the complete text of the performance
share agreement, a copy of which is being filed as Exhibit 10.1
hereto and is incorporated into this Item 5.02 by reference.
Although the target value of the performance shares Ms.Crew and
Messrs. Gilchrist and Holton will receive on March1, 2017 is
known as of the date of this report, the actual number of
performance shares each of them will be granted on March1, 2017
will not be determinable until such date. For each of these
executive officers, the number of performance shares granted will
be equal to the target long-term incentive opportunity (expressed
as a multiple of base salary as of January1, 2017) for such
executive officer set forth below, divided by the average closing
price of a share of RAI common stock for the 20 trading days
prior to the March1, 2017 grant date: Ms.Crew, 6.0X;
Mr.Gilchrist, 3.25X; and Mr.Holton, 2.5X. The grant date fair
value of the performance shares granted to each such executive
officer will equal the product of the per share closing price of
RAI common stock on the grant date multiplied by the number of
performance shares granted to each executive officer.
Item9.01 Financial Statements and Exhibits.
The following is being filed as an Exhibit to this Current Report
on Form 8-K.
(d)Exhibits.
|
ExhibitNo. |
Description |
|
| 10.1 |
Form of Performance Share Agreement (three-year vesting) between Reynolds American Inc. and the grantee named therein. |
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About Reynolds American Inc. (NYSE:RAI)
Reynolds American Inc. (RAI) is a holding company. The Company’s segments are RJR Tobacco, Santa Fe and American Snuff. The RJR Tobacco segment consists principally of the primary operations of R. J. Reynolds Tobacco Company. The Santa Fe segment consists of the domestic operations of Santa Fe Natural Tobacco Company, Inc. (SFNTC). The American Snuff segment consists of the primary operations of American Snuff Company, LLC. Its RJR Tobacco segment manages contract manufacturing of cigarettes and tobacco products through arrangements with British American Tobacco p.l.c. (BAT) 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. Its Santa Fe segment manufactures and markets super-premium cigarettes and other tobacco products. Reynolds American Inc. (NYSE:RAI) Recent Trading Information
Reynolds American Inc. (NYSE:RAI) closed its last trading session down -0.09 at 60.50 with 7,176,036 shares trading hands.