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EX-10.1 - EX-10.1 - REYNOLDS AMERICAN INCd194193dex101.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) May 5, 2016

 

 

Reynolds American Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

North Carolina   1-32258   20-0546644

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

401 North Main Street,

Winston-Salem, NC 27101

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: 336-741-2000

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


ITEM 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

At a meeting held on May 5, 2016, the outside directors (as defined under Section 162(m) of the Internal Revenue Code of 1986, as amended) on the Board of Directors, referred to as the Board, of Reynolds American Inc., referred to as RAI, 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 May 1, 2016 through April 30, 2017, referred to as the 2016 annual incentive performance period, for the 2016 annual incentive award to be made to Susan M. Cameron, RAI’s President and Chief Executive Officer, under the Reynolds American Inc. Amended and Restated 2009 Omnibus Incentive Compensation Plan, referred to as the Omnibus Plan, and (2) the performance formula for determining the award pool for Ms. Cameron’s annual incentive award under the Omnibus Plan for such one-year performance period. Under the formula, the award pool for the annual incentive award for Ms. Cameron will be 1.0% of RAI’s cash net income for the period from April 1, 2016 through March 31, 2017. For purposes of determining the award pool referenced above, cash net income is defined as net income from continuing operations in the 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 RAI’s quarterly and annual reports for the period from April 1, 2016 to March 31, 2017.

On May 5, 2016, upon recommendation of the Compensation Committee, the outside directors on the Board approved a target annual incentive award value for Ms. Cameron equal to 160% of her base salary as of May 1, 2016, for her 2016 annual incentive award under the Omnibus Plan. The maximum amount of Ms. Cameron’s 2016 annual incentive award is limited to the percentage of RAI’s cash net income approved as the annual incentive award pool for Ms. Cameron by the outside directors on the Board, as described above, and the shareholder approved award limitations set forth in the Omnibus Plan. The Compensation Committee may reduce the amount of Ms. Cameron’s 2016 annual incentive award under such formula using negative discretion guided by its consideration of the performance of RAI and its operating companies against the underlying performance metrics for the 2016 annual incentive performance period and her achievement against other performance goals established by the Compensation Committee. Generally, such award is eligible to vest on the earlier of (1) April 30, 2017, and (2) the date the Board determines her assignment is complete and she ceases to be employed by RAI. The payment of the award will be made in cash as soon as practicable after the end of the 2016 annual incentive performance period based on actual performance, and in any event not later than March 15, 2018. In addition, Ms. Cameron’s annual incentive award may be paid out partially or fully upon certain other events, such as her death, disability, involuntary termination of employment without cause, or a change of control of RAI.

On May 5, 2016, upon recommendation of the Compensation Committee, the outside directors on the Board also approved (1) the one-year performance period of May 1, 2016 through April 30, 2017, referred to as the 2016 stock-based incentive performance period, for Ms. Cameron’s 2016 performance share awards granted under the Omnibus Plan, and (2) the performance formula for determining the award pool of performance shares under the Omnibus Plan for such performance period for Ms. Cameron. Under the formula, the award pool of performance shares for Ms. Cameron will be 5.0% of RAI’s cumulative cash net income for the period from April 1, 2016 through March 31, 2017. For purposes of determining such award pool, cash net income is defined as set forth above. The maximum amount of performance shares and associated dividend equivalent payment that Ms. Cameron may receive at the end of the 2016 stock-based incentive performance period for the 2016 performance share grant is limited to the award pool for the performance shares determined by the formula based on RAI’s cash net income approved for Ms. Cameron by the outside directors on the Board, as described above, and the shareholder approved award limitations set forth in the Omnibus Plan. The Compensation Committee may reduce the amount of the 2016 award for Ms. Cameron under such formula using negative discretion guided by its consideration of the performance of RAI and its subsidiaries over the 2016 stock-based incentive performance period and her achievement against other performance goals established by the Compensation Committee.

On May 5, 2016, upon recommendation of the Compensation Committee, the Board approved a stock-based incentive grant under the Omnibus Plan to Ms. Cameron for the 2016 stock-based incentive performance period. The 2016 stock-based incentive grant to Ms. Cameron consisted of 164,841 performance shares (based on her target stock-based incentive opportunity of 6.25 times her base salary as of May 1, 2016, divided by the average closing price of a share of RAI common stock for the 20 trading days prior to the grant date). The number of performance shares Ms. Cameron actually will receive, if any, will be determined at the end of the 2016 stock-based incentive performance period based first on the maximum payout limitation provided by the performance share award pool generated under the pre-established cash net income formula described above. Then the Compensation Committee may use negative discretion to reduce the number of performance shares actually earned by Ms. Cameron guided by its consideration of the performance of RAI and its subsidiaries over the 2016 stock-based incentive performance period against the 2016 underlying annual performance metrics, her progress on succession planning goals and her achievement against other performance goals established by the Compensation Committee, but no higher than 200% of target. In addition, if RAI fails to pay cumulative dividends of at least $1.68 per share (an amount equal to the $0.42 per share quarterly dividend declared by RAI’s Board at its May 5, 2016 meeting times the number of quarters in the performance period) for the 2016 stock-based incentive performance period, 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 performance period, up to a maximum performance share reduction of 50%.


Subject to the foregoing, the performance shares generally will vest on the earlier of: (1) May 1, 2017, and (2) the date the Board determines her assignment is complete and she ceases to be employed by RAI. The performance shares will be paid in the form of shares of RAI common stock as soon as practicable after the end of the 2016 stock-based incentive performance period based on actual performance, and in any event not later than March 15, 2018. At the time of the payment of any vested performance shares, Ms. Cameron will receive a single cash dividend equivalent payment equal to the aggregate amount of the dividends per share declared and paid to RAI shareholders on RAI common stock during the period from the beginning of the 2016 stock-based incentive performance period through the payment of the performance shares, multiplied by the number of performance shares actually earned by Ms. Cameron after the performance adjustments. In addition, the performance shares may be paid out partially or fully upon certain other events, such as Ms. Cameron’s death, disability, involuntary termination of employment without cause, or a change of control of RAI.

On May 5, 2016, upon the recommendation of the Compensation Committee, the Board also approved certain amendments to the Reynolds American Inc. Executive Severance Plan, as amended and restated, referred to as the ESP. Such amendments consist of (1) updates to the participating companies set forth on Appendix A thereto, (2) revisions to the plan administration language to allow future updates to Appendix A to be made by RAI’s Employee Benefits Committee, and (3) certain other non-material changes for clarification and consistency. A copy of the amended and restated ESP is attached to this Current Report on Form 8-K as Exhibit 10.1.

ITEM 5.07. Submission of Matters to a Vote of Security Holders.

The 2016 annual meeting of shareholders of RAI was held on May 5, 2016, in Winston-Salem, North Carolina. At that meeting, RAI’s shareholders considered and acted upon the following proposals:

Item 1: Election of Directors.

By the vote reflected below, RAI’s shareholders elected the following five individuals as Class III directors:

 

     For      Against      Abstentions      Broker Non-Votes  

Susan M. Cameron

     1,101,364,941         128,556,261         950,985         96,318,496   

Martin D. Feinstein

     1,068,279,794         161,464,268         1,128,125         96,318,496   

Murray S. Kessler

     1,079,795,464         149,979,957         1,096,766         96,318,496   

Lionel L. Nowell, III

     1,224,879,141         4,825,359         1,167,687         96,318,496   

Ricardo Oberlander

     1,084,110,179         145,603,776         1,158,232         96,318,496   

By the vote reflected below, RAI’s shareholders elected the following individuals as Class II directors:

 

     For      Against      Abstentions      Broker Non-Votes  

Jerome Abelman

     1,081,315,713         148,404,232         1,152,242         96,318,496   

Robert Lerwill

     1,065,169,760         164,536,083         1,166,344         96,318,496   

Item 2: Amendment to Articles of Incorporation to Declassify the Board of Directors.

By the vote reflected below, RAI’s shareholders approved the amendment to RAI’s Amended and Restated Articles of Incorporation declassifying the Board of Directors:

 

     For    Against      Abstentions      Broker Non-Votes  
   1,226,950,637          2,528,087         1,393,463         96,318,496   

Item 3: Amendment to Articles of Incorporation to Increase the Number of Authorized Shares of RAI Common Stock.

By the vote reflected below, RAI’s shareholders approved the amendment to RAI’s Amended and Restated Articles of Incorporation increasing the number of authorized number of shares of RAI common stock from 1,600,000,000 to 3,200,000,000:

 

     For    Against      Abstentions         
   1,235,039,764        88,745,748         3,405,171                                      

Item 4: Advisory Vote to Approve the Compensation of Named Executive Officers.

By the vote reflected below, RAI’s shareholders approved, on an advisory basis, the compensation of RAI’s named executive officers:

 

     For    Against      Abstentions      Broker Non-Votes  
   1,146,856,982        80,063,504         3,951,701         96,318,496   


Item 5: Ratification of the Appointment of KPMG LLP as Independent Registered Public Accounting Firm.

By the vote reflected below, RAI’s shareholders ratified the appointment of KPMG LLP as RAI’s independent registered public accounting firm for 2016:

 

     For    Against      Abstentions         
   1,317,801,324             7,856,913           1,532,446                                   

Item 6: Shareholder Proposal on Adoption of Payout Policy Preference for Share Repurchases.

By the vote reflected below, RAI’s shareholders defeated the shareholder proposal on Adoption of Payout Policy Preference for Share Repurchases:

 

    For    Against      Abstentions      Broker Non-Votes  
       11,571,725      1,216,135,356           3,165,106         96,318,496   

Item 7: Shareholder Proposal on Mediation of Alleged Human Rights Violations.

By the vote reflected below, RAI’s shareholders defeated the shareholder proposal on Mediation of Alleged Human Rights Violations:

 

    For    Against      Abstentions      Broker Non-Votes  
       35,269,171      1,121,086,887         74,516,129         96,318,496   

ITEM 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following is filed as an exhibit to this Current Report.

 

Number

  

Exhibits

10.1    Reynolds American Inc. Executive Severance Plan, as amended and restated effective May 5, 2016.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

REYNOLDS AMERICAN INC.
By:  

/s/ McDara P. Folan, III

  Name: McDara P. Folan, III
 

Title: Senior Vice President, Deputy General

          Counsel and Secretary

Date: May 9, 2016


INDEX TO EXHIBITS

 

Number

  

Exhibit

10.1    Reynolds American Inc. Executive Severance Plan, as amended and restated effective May 5, 2016.