Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Board and Executive Changes
On April 14, 2020, Howard A. Willard III informed the Board of Directors (the
"Board") of Altria Group, Inc. (the "Company") of his decision to retire as a
director of the Company and as Chairman and Chief Executive Officer after 28
years of distinguished service to the Company and its subsidiaries, effective on
April 14, 2020. Accordingly, Mr. Willard also will not stand for reelection to
the Board at the Company's 2020 Annual Meeting of Shareholders. The Company also
announced that on April 16, 2020, the Board elected William F. Gifford, Jr. to
become the Company's Chief Executive Officer effective April 16, 2020.
On April 16, 2020, the Board elected Salvatore Mancuso to become the Company's
Executive Vice President and Chief Financial Officer and Thomas F. Farrell II,
formerly independent Presiding Director of the Board, to be independent Chairman
of the Board, each effective April 16, 2020.
Mr. Gifford, age 49, previously served as the Company's Vice Chairman and Chief
Financial Officer and has been continuously employed by the Company or its
subsidiaries in various positions since 1994.
Mr. Mancuso, age 54, previously served as the Company's Senior Vice President,
Finance and Procurement and has been continuously employed by the Company or its
subsidiaries in various positions since 1990.
Retirement Arrangements with Former Chairman and Chief Executive Officer
Mr. Willard will receive a pro-rated payment of $537,900 under the Company's
2020 annual incentive award plan, reflecting individual and Company performance
ratings at target. In addition, in light of Mr. Willard's 28 years of
distinguished service, the Compensation and Talent Development Committee of the
Board ("Compensation Committee") agreed to pay Mr. Willard (i) an $8,775,291
cash payment in lieu of the outstanding stock awards granted in 2018 and 2019
(137,308 restricted stock units ("RSUs") and 97,451 performance stock units
("PSUs") at target) that he forfeited immediately after his retirement and (ii)
accrued dividends corresponding to the PSUs. Mr. Willard forfeited his 2020
stock awards and will not receive a cash payment in lieu of those awards. Mr.
Willard will also be entitled to payments and benefits generally available to
departing employees under the terms of the Company's benefit plans.
Mr. Willard will also receive 64 weeks of base salary continuation and 52 weeks
of service credit for purposes of the Company's defined benefit pension plans.
The foregoing payments will be contingent upon Mr. Willard signing a customary
Agreement and General Release.
The Company's annual incentive award program and other executive compensation
programs are more fully described in the " Compensation Discussion and
Analysis " section of the Company's proxy statement for its 2020 Annual Meeting
of Shareholders (filed with the Securities and Exchange Commission on April 2,
2020), which discussion is incorporated into this Item 5.02 by reference.
In addition, in connection with Mr. Willard's retirement, the Time Sharing
Agreement between Mr. Willard and Altria Client Services LLC will be terminated
effective April 14, 2020. A copy of the Time Sharing Agreement was filed
previously as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 2018.
Mr. Willard will remain subject to the restrictive covenants and other terms of
the Executive Confidentiality and Non-Competition Agreement between the Company
and Mr. Willard for the period set forth in that agreement. A copy of the form
of the Executive Confidentiality and Non-Competition Agreement was filed
previously as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the period ended March 31, 2019.
Compensation of New Chief Executive Officer and New Chief Financial Officer
As a result of Mr. Gifford's election as Chief Executive Officer, his new salary
band will be band A. On April 16, 2020, the Compensation Committee set his
annual base salary at $1,250,000, which is consistent for salary band A
employees. In connection with his appointment, Mr. Gifford received a special
grant of RSUs valued at $2,100,000 and PSUs valued at $1,400,000. The RSUs and
any PSUs earned will vest on April 16, 2025. The actual number of PSUs that will
be earned will range between 0% and 156% of target, depending on actual
performance during the 2020-2022 performance period.
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Mr. Gifford's annual incentive award plan, long-term incentive plan ("LTIP") and
annual equity award targets are consistent with current salary band A targets as
follows: Mr. Gifford's annual incentive award plan target is 150% of base salary
and his annual equity award target is $5.4 million. The Compensation Committee
approved in early 2020 the transition to an LTIP design resulting in overlapping
three-year plans starting in 2020 with a new three-year plan commencing each
year. Once this transition is complete (beginning with the 2022-2024 performance
period), the target for Mr. Gifford's LTIP award will be 250% of his base
salary. Prior to that time, his targets will be 183% of the 250% for the
2020-2022 performance period and 117% of the 250% for the 2021-2023 performance
period.
The Compensation Committee also approved an annual allowance of $125,000 for Mr.
Gifford's personal use of Company aircraft. The Compensation Committee
considered the potential value of Mr. Gifford's personal aircraft usage in
determining the other components of his total compensation.
As a result of Mr. Mancuso's election as Executive Vice President and Chief
Financial Officer, his new salary band will be band B. On April 16, 2020, the
Compensation Committee set his annual base salary at $650,000. Mr. Mancuso's
annual incentive award plan, LTIP and annual equity award targets are consistent
with current salary band B targets as follows: Mr. Mancuso's annual incentive
award plan target is 95% of base salary and his annual equity award target is
$1.75 million. Once the transition to the overlapping three-year LTIP plans is
complete, the target for Mr. Mancuso's LTIP award will be 140% of his base
salary. Prior to that time, his targets will be 183% of the 140% for the
2020-2022 performance period and 117% of the 140% for the 2021-2023 performance
period.
A copy of the press release that the Company issued in connection with the
matters described above is attached as Exhibit 99.1 and is incorporated by
reference in Item 5.02 of this Current Report on Form 8-K.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
In connection with the matters described in Item 5.02 of this Current Report on
Form 8-K, the Board approved, on April 16, 2020, amendments to the Company's
Amended and Restated By-Laws to reflect the Board's decision to split the roles
of Chairman of the Board and Chief Executive Officer and create the independent
Chairman position, along with various conforming changes. These amendments
became effective as of April 16, 2020. The Company made conforming changes to
its Corporate Governance Guidelines, which are available on the Company's
website.
A copy of the Company's Amended and Restated By-Laws reflecting these amendments
is attached as Exhibit 3.1 and is incorporated by reference in Item 5.03 of this
Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
3.1 Amended and Restated By-Laws of Altria Group, Inc. (effective as of
April 16, 2020)
99.1 Altria Group, Inc. Press Release, dated April 17, 2020
104 The cover page from this Current Report on Form 8-K, formatted in
Inline XBRL (included as Exhibit 101)
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