UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported) February 1, 2010
Reynolds American Inc.
(Exact Name of Registrant as Specified in its Charter)
North Carolina (State or Other Jurisdiction of Incorporation) |
1-32258 (Commission File Number) |
20-0546644 (IRS Employer Identification No.) |
401 North Main Street,
Winston-Salem, NC 27101
(Address of Principal Executive Offices) (Zip Code)
Winston-Salem, NC 27101
(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code: 336-741-2000
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
(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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o 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 February 2, 2010, the independent members of the Board of Directors,
referred to as the Board, of Reynolds American Inc., referred to as RAI, based upon a
recommendation from its Compensation and Leadership Development Committee, referred to as the
Compensation Committee, approved (1) the performance period of January 1, 2010 through December 31,
2010 for the 2010 annual incentive awards to be made under the Reynolds American Inc. 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: Susan M. Ivey, 0.40%; Thomas R. Adams, 0.15%; Daniel M. Delen, 0.20%; E. Julia
Lambeth, 0.15%; and Tommy J. Payne, 0.15%. For purposes of determining such award pools, 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 RAIs 2010 audited financial statements contained in its Annual Report on Form 10-K for
the fiscal year ending December 31, 2010).
On February 2, 2010, upon recommendation of the Compensation Committee, the Board approved the
following target award values (expressed as a percentage of base salary as of April 1, 2010) for
the 2010 annual incentive awards under the Omnibus Plan for the following executive officers: Ms.
Ivey, 130%; Mr. Adams, 75%; Mr. Delen, 85%; and Ms. Lambeth, 75%. On February 1, 2010, the
Compensation Committee approved a target award value of 65% for Mr. Paynes 2010 annual incentive
award under the Omnibus Plan. The maximum amount of the 2010 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 non-employee directors of 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 2010 annual incentive award for each of the
listed executive officers under such formula using negative discretion after consideration of the
2010 performance of RAI and its operating companies. Generally, such awards are eligible to vest
on December 31, 2010, 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 upon certain other events, such as the listed executive officers death,
disability, retirement, involuntary termination of employment without cause or a change of control
of RAI.
On February 2, 2010, upon recommendation of the Compensation Committee, the Board approved (1)
the three-year performance period of January 1, 2010 through December 31, 2012 for the 2010
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. Ivey, 0.80%; Mr. Adams, 0.20%; Mr. Delen, 0.30%; Ms. Lambeth, 0.20%; and
Mr. Payne, 0.20%. For purposes of determining such award pools, cash net income is defined as set
forth above, except as reported in RAIs Annual Reports on Form 10-K for the 2010, 2011 and 2012
fiscal years, respectively. The maximum amount of performance shares that any of the listed
executive officers may receive at the end of the three-year performance period for the 2010
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 non-employee
directors of 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 2010 award for
each of the listed officers under such formula using negative discretion after consideration
of the performance of RAI and its operating companies.
On February 2, 2010, upon recommendation of the Compensation Committee, the Board approved
long-term incentive grants under the Omnibus Plan, to be effective on March 1, 2010, to Mmes. Ivey
and Lambeth, and Messrs. Adams and Delen. On February 1, 2010, the Compensation Committee approved
a long-term incentive grant under the Omnibus Plan, also to be effective on March 1, 2010, to Mr.
Payne. The long-term incentive grants under the Omnibus Plan to such executive officers will be
entirely in the form of performance shares. At the end of the three-year performance period, the
Compensation Committee intends to adjust the number of performance shares earned by such executive
officers, in a manner similar to the other recipients of the 2010 performance share grants, subject
to the maximum award amounts described above, including adjustments based on (1) the average of
RAIs scores under the annual incentive award program for each of the three years of the
performance period, subject to a cap of 150% on such average score, and (2) the cumulative amount
of quarterly dividends paid by RAI over the three-year performance period. If RAI fails to pay
cumulative dividends of at least $10.80 per share (an amount equal to the $.90 per share quarterly
dividend declared by RAIs Board of Directors at its February 2, 2010 meeting times 12 quarterly
dividends) for the three-year performance period ending December 31, 2012, 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 percent.
Subject to the foregoing, the performance shares generally will vest on March 1, 2013, and
will be paid in the form of shares of RAI common stock on or prior to March 15, 2014. At the time
the performance shares vest, each of the listed executive officers will receive a single cash
dividend equivalent 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 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. 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 or a change of control of RAI.
Although the dollar value of the performance shares Mmes. Ivey and Lambeth, and Messrs. Adams,
Delen and Payne, will receive on March 1, 2010 is known as of the date of this report, the actual
number of performance shares each of them will be granted on March 1, 2010 will not be determinable
until such date. For each of these executive officers, the number of performance shares granted
will be equal to the grant date value (expressed as a multiple of base salary as of January 1,
2010) for such executive officer set forth below, divided by the average per share closing price of
a share of RAI common stock for the 20 trading days prior to the March 1, 2010 grant date: Ms.
Ivey, 6X; Mr. Adams, 2.5X; Mr. Delen, 3X; Ms. Lambeth, 2.5X; and Mr. Payne, 2X.
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. |
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By: | /s/ McDara P. Folan, III | |||
Name: | McDara P. Folan, III | |||
Title: | Senior Vice President, Deputy General Counsel and Secretary | |||
Date: February 5, 2010