Item 5.01
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Changes in Control of Registrant.
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As a result of the closing of the Merger, a change in
control of RAI occurred when Merger Sub merged with and into RAI, with RAI surviving as an indirect, wholly owned subsidiary of BAT.
BAT
financed the cash portion of the Merger Considerationtotaling approximately $24.0 billionand related fees and expenses in connection with the transactions contemplated by the Merger Agreement with drawings under the acquisition facility,
pursuant to the term loan facilities agreement, dated as of January 16, 2017, among B.A.T. International Finance p.l.c., referred to as BATIF, and B.A.T Capital Corporation, referred to as BATCAP, as original borrowers, BAT, as guarantor, HSBC
Bank plc, as agent, HSBC Bank USA, National Association, as U.S. agent and the lenders and financial institutions party thereto. It is currently expected that the funded acquisition facility will be refinanced by bond issuances in due course.
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Pursuant to Section 6.17 of the Merger Agreement, the BAT board of directors appointed Luc
Jobin, Holly Keller Koeppel and Lionel L. Nowell, III to the BAT board of directors as of the Effective Time.
The information set forth
in Item 2.01 and Item 5.02 of this Current Report on Form
8-K
is incorporated by reference herein.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Directors and Officers
In connection with the Merger and pursuant to the Merger Agreement, each member of the RAI board of directors resigned as of the Effective
Time. The members of RAIs board of directors immediately prior to the Effective Time were: Jerome B. Abelman, John A. Boehner, Susan M. Cameron, Debra A. Crew, Martin D. Feinstein, Luc Jobin, Murray S. Kessler, Holly K. Koeppel, Jean-Mark
Lévy, Nana Mensah, Lionel L. Nowell, III, Ricardo Oberlander, Ronald S. Rolfe and John J. Zillmer. In connection with the Merger and pursuant to Section 1.07 of the Merger Agreement, as of the Effective Time, the following individuals,
who were the directors of Merger Sub immediately prior to the Effective Time, became the directors of RAI: L. Brent Cotton and Michael J. Walter. Following the closing of the Merger, Debra A. Crew, McDara P. Folan, III, and Martin L. Holton III were
appointed to the RAI board of directors effective as of 11:59 p.m. New York City time on the Closing Date. L. Brent Cotton and Michael J. Walter have each submitted a letter providing for their resignations as directors of RAI effective as of 11:59
p.m. New York City time on the Closing Date.
Andrew D. Gilchrist, as Executive Vice President and Chief Financial Officer of RAI and as a
Named Executive Officer and Principal Financial Officer of RAI, has indicated that he intends to resign from his positions on August 4, 2017.
Transition Agreements
On
July 24, 2017, in connection with and contingent upon the closing of the Merger, RAI entered into a transition agreement, each referred to as a Transition Agreement and collectively the Transition Agreements, with each of Andrew D. Gilchrist,
RAIs Executive Vice President and Chief Financial Officer, and Martin L. Holton III, RAIs Executive Vice President, General Counsel and Assistant Secretary. The Transition Agreements modify certain terms of Mr. Gilchrists and
Mr. Holtons letter agreements with RAI, each dated November 12, 2007, regarding special severance benefits and change of control protections. These two original letter agreements are referred to as the 2/3 Agreements. Similar
transition agreements were entered into with certain of RAIs other executive officers.
The Transition Agreements provide that,
following the closing of the Merger, RAI or an affiliate or successor of RAI, collectively referred to as the Company throughout this Item 5.02, will continue Mr. Gilchrists or Mr. Holtons, as applicable, service until
August 4, 2017 or December 31, 2018, respectively, each referred to as the Departure Date. The Transition Agreements provide that the applicable Departure Date can be deferred to a later date if mutually
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agreed to by the Company and Mr. Gilchrist or Mr. Holton, as applicable. The period beginning on the Closing Date, and ending on the applicable Departure Date is referred to as the
Transition Period.
In addition to certain
non-material
clarification and consistency changes, the
modifications to the 2/3 Agreements contained in the Transition Agreements are as described below. Prior to the modifications described below, each 2/3 Agreement provided that, in general, a termination of employment entitling Mr. Gilchrist or
Mr. Holton, as applicable, to Special Severance Benefits (as defined in the 2/3 Agreements) would occur only upon, as applicable, a termination of Mr. Gilchrists or Mr. Holtons employment by RAI without
Cause (as defined in the 2/3 Agreements), by Mr. Gilchrist or Mr. Holton for General Good Reason (as defined in the 2/3 Agreements), or, within the
24-month
period following a
change of control such as the Merger, by Mr. Gilchrist or Mr. Holton for Change of Control Good Reason (as defined in the 2/3 Agreements and which Mr. Gilchrist and Mr. Holton could claim as of the Effective Time).
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The Transition Agreements provide that any termination of Mr. Gilchrists or Mr. Holtons employment, as applicable, other than for Cause, during the applicable Transition Period, will be a
termination of employment entitling Mr. Gilchrist or Mr. Holton (or, in the event of Mr. Gilchrists or Mr. Holtons death, Mr. Gilchrists or Mr. Holtons estate or Pension Beneficiaries (as defined
in the Transition Agreements)), as applicable, to Special Severance Benefits under the 2/3 Agreements.
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The Transition Agreements provide that upon a termination of employment entitling Mr. Gilchrist or Mr. Holton, as applicable, to Special Severance Benefits under the 2/3 Agreements, subject to the execution of
a release of claims, the Company will provide the following payments and benefits to Mr. Gilchrist or Mr. Holton (or, in the event of Mr. Gilchrists or Mr. Holtons death, Mr. Gilchrists or
Mr. Holtons estate or Pension Beneficiary), as applicable (subject to applicable withholding):
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A
lump-sum
cash payment equal to two times base salary plus target bonus at the time of such termination, referred to as the Base Severance Amount;
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Continued coverage of Mr. Gilchrist or Mr. Holton, and each of his eligible dependents, as applicable, under the Companys medical, life, dental and vision insurance benefit plans during the three-year
period following the date of such termination, referred to as the Post-Termination Period, at the same cost structure as for active employees;
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A
lump-sum
cash payment equal to the matching contributions and/or retirement enhancement contributions (if any) that would have been contributed by the Company under any RAI
qualified defined contribution plan and nonqualified defined contribution plan if Mr. Gilchrist or Mr. Holton, as applicable, had continued employment with the Company during the Post-Termination Period, calculated based on the Base
Severance Amount and as if Mr. Gilchrist or Mr. Holton, as applicable, would have been entitled to the maximum matching contributions during the Post-Termination Period;
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An additional defined benefit pension plan benefit determined as if Mr. Gilchrist or Mr. Holton, as applicable, had continued employment during the Post-Termination Period, calculated based on the Base
Severance Amount;
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If eligible as of the date of such termination, additional age and service credit towards eligibility for retiree health and life insurance coverage determined as if Mr. Gilchrist or Mr. Holton, as applicable,
had continued employment during the Post-Termination Period;
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A
lump-sum
cash payment equal to the annual executive supplemental payment that would have been made to Mr. Gilchrist or Mr. Holton, as applicable, during the
Post-Termination Period;
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A
lump-sum
cash payment equal to the maximum contributions the Company would have made to Mr. Gilchrists or Mr. Holtons notional account, as applicable,
under the Companys MedSave plan during the Post-Termination Period; and
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Continued participation during the Post-Termination Period in any of the Companys voluntary, employee
pay-all
plans or programs that Mr. Gilchrist or Mr. Holton,
as applicable, participate in on the date of such termination.
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The Transition Agreements provide that any termination of employment entitling Mr. Gilchrist or Mr. Holton, as applicable, to Special Severance Benefits under the 2/3 Agreements would be considered a
termination of employment entitling Mr. Gilchrist or Mr. Holton, 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 Transition Agreements provide that the Company will pay to Mr. Gilchrist or Mr. Holton, or Mr. Gilchrists or Mr. Holtons eligible dependents, estate, or Pension Beneficiary, as
applicable, all legal and accounting fees as incurred in seeking to obtain or enforce any right or benefit under the Transition Agreement, unless the claim is determined to be frivolous.
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As a condition to entering into each of their 2/3 Agreements, each of Mr. Gilchrist and Mr. Holton executed a restrictive covenants agreement, covering
non-competition,
non-disclosure
and cooperation matters, that will apply for a three-year period following a termination of Mr. Gilchrists or Mr. Holtons employment, as applicable. Payments under the Transition
Agreements are subject to a reaffirmation of such restrictive covenant obligations following a termination of employment.
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The foregoing description of the Transition Agreements does not purport to be a complete description of the terms of the Transition
Agreements, and is qualified in all respects by reference to the complete text of the form Transition Agreement, a copy of which is being filed as Exhibit 10.1 hereto and is incorporated by reference herein.
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Item 5.03
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Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
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At the
Effective Time, RAI filed with the Secretary of State of the State of North Carolina the articles of merger relating to the Merger. At the Effective Time, the Restated Articles of Incorporation of Reynolds American Inc., as amended, as in effect
immediately prior to the Effective Time, referred to as the Restated Articles of Incorporation of RAI, remained the articles of incorporation of RAI as the surviving corporation in the Merger, except that the Restated Articles of Incorporation were
amended to provide for a minimum of one director instead of a minimum of nine directors. In addition, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, became the bylaws of RAI as the surviving corporation in the
Merger, except that all references to Merger Sub were replaced with the name of RAI.
After the Effective Time on the Closing Date, RAI
further amended the Restated Articles of Incorporation of RAI, referred to as the Amended and Restated Articles of Incorporation of RAI, and the bylaws of RAI, referred to as the Second Amended and Restated Bylaws of RAI.
A copy of the Amended and Restated Articles of Incorporation of RAI is filed as Exhibit 3.1 to this Current Report on Form
8-K
and is incorporated by reference herein, and a copy of the Second Amended and Restated Bylaws of RAI is filed as Exhibit 3.2 to this Current Report on Form
8-K
and is
incorporated by reference herein.
The information regarding the Merger and the Merger Agreement set forth in Item 2.01 of this Current
Report on
8-K
is incorporated by reference herein.