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Section 1: 8-K (FORM 8-K)

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UNITED STATES
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
Date of Report (Date of earliest event reported): May 16, 2018
________________________________________________________________________________________________________________
ALTRIA GROUP, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________________________________________________
 
 
 
 
 
Virginia
 
1-08940
 
13-3260245
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)

 
 
6601 West Broad Street, Richmond, Virginia
23230
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code: (804) 274-2200
________________________________________________________________________________________________________________
(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:
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





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

Compensation of New Chairman and Chief Executive Officer

As previously reported, Howard A. Willard III was elected Chairman and Chief Executive Officer of Altria Group, Inc. (the “Company”) effective upon the conclusion of the Company’s Annual Meeting of Shareholders held on May 17, 2018 (the “Annual Meeting”). As a result of his election, Mr. Willard became a salary band A employee. On May 16, 2018, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) set his annual base salary at $1,250,000, which is consistent for salary band A employees. Also in connection with his election, the Compensation Committee approved for Mr. Willard a special grant of 48,825 restricted stock units (“RSUs”) and 37,106 performance stock units (“PSUs”) at target. The RSUs and any PSUs earned will vest on June 1, 2023. The actual number of PSUs that will be earned will range between 0% and 130% of target, depending on actual performance during the 2018-2020 performance period. Copies of the forms of RSU agreement and PSU agreement are attached as Exhibit 10.1 and Exhibit 10.2, respectively, and are incorporated by reference in Item 5.02 of this Current Report on Form 8-K.

Mr. Willard’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. Willard’s annual incentive award plan target is 150% of base salary, his LTIP award target is 250% of his cumulative year-end base salary over the three year performance cycle and his annual equity award target is $5.4 million.

Consistent with its past practice, the Compensation Committee approved an allowance of $150,000 for the period May 18, 2018 to December 31, 2018 for Mr. Willard’s personal use of Company aircraft and an annual allowance of $200,000 thereafter. The Compensation Committee considered the potential value of Mr. Willard’s personal aircraft usage in determining the other components of his total compensation.

In addition, the Company will provide home security system upgrades and monitoring for Mr. Willard. Mr. Willard will continue to be eligible to receive other perquisites consistent with those generally available to the Company’s named executive officers.

The Company’s annual incentive award plan, long-term incentives and other elements of its executive compensation program are more fully described under the “Compensation Discussion and Analysis” section of the Company’s Proxy Statement for the Annual Meeting filed on April 5, 2018.

Retirement Arrangements with Former Chairman, Chief Executive Officer and President

As previously reported, Martin J. Barrington retired as the Company’s Chairman, Chief Executive Officer and President effective upon the conclusion of the Annual Meeting. Mr. Barrington will remain eligible for cash payments under the Company’s (i) annual incentive award plan and (ii) 2017-2019 LTIP for his service as Chairman, Chief Executive Officer and President, in each case, pro-rated through the date of the Annual Meeting. The pro-rated payment under the annual incentive award plan will be $833,300, reflecting individual and Company performance ratings at target. The pro-rated payment under the 2017-2019 LTIP will be based on an individual performance rating at target and a Company performance rating using actual Company business performance. His award target for the annual incentive award plan is 150% of his base salary, and his award target for the 2017-2019 LTIP is 250% of his cumulative year-end base salary over the three-year performance cycle. These targets are consistent with the pre-existing targets for salary band A. There is no guarantee of any payment under the LTIP. In addition, in light of Mr. Barrington’s efficient transition of responsibilities to Mr. Willard, the Compensation Committee agreed to vest Mr. Barrington’s outstanding stock awards (164,972 RSUs and 36,938 PSUs at target) effective May 17, 2018, upon termination of his employment. The awards otherwise would have fully vested approximately 60 days later, had Mr. Barrington’s employment terminated on his 65th birthday on July 16, 2018. Mr. Barrington will also be entitled to payments and benefits generally available to retirees under the terms of the Company’s benefit plans.

Mr. Barrington will remain subject to the restrictive covenants and other terms of the Executive Confidentiality and Non-Competition Agreement, dated February 2, 2011, between the Company and Mr. Barrington 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 10.3 to the Company’s Current Report on Form 8-K filed on January 27, 2011.

In addition, in connection with Mr. Barrington’s retirement, the Time Sharing Agreement between Mr. Barrington and Altria Client Services LLC, dated November 19, 2015, has been terminated effective May 18, 2018. A copy of the Time Sharing

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Agreement was filed previously as Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
Item 5.07.    Submission of Matters to a Vote of Security Holders.
On May 17, 2018, the Company held its Annual Meeting. There were 1,699,786,286 shares of the Company’s common stock represented in person or by proxy at the meeting, constituting 89.72% of outstanding shares on March 26, 2018, the record date for the Annual Meeting. The matters voted upon at the Annual Meeting and the final voting results are set forth below:
Proposal 1:    To Elect Eleven Directors of the Company.
 
Name                                     
 
For
 
Against
 
Abstain
 
Broker Non-Vote
John T. Casteen III

 
1,249,440,710
 
20,075,984
 
4,964,196
 
425,305,082
Dinyar S. Devitre

 
1,253,855,281
 
15,715,301
 
4,910,428
 
425,305,082
Thomas F. Farrell II

 
1,184,498,891
 
84,410,187
 
5,569,987
 
425,305,082
Debra J. Kelly-Ennis


 
1,260,471,349
 
8,959,965
 
5,047,546
 
425,305,082
W. Leo Kiely III

 
1,252,723,111
 
16,703,825
 
5,054,268
 
425,305,082
Kathryn B. McQuade

 
1,262,216,345
 
7,764,301
 
4,500,558
 
425,305,082
George Muñoz

 
1,223,937,285
 
45,742,433
 
4,801,486
 
425,305,082
Mark E. Newman

 
1,263,274,850
 
6,185,329
 
5,021,025
 
425,305,082
Nabil Y. Sakkab

 
1,258,074,798
 
11,527,146
 
4,879,260
 
425,305,082
Virginia E. Shanks

 
1,263,501,863
 
6,414,351
 
4,564,990
 
425,305,082
Howard A. Willard III

 
1,243,011,242
 
21,607,294
 
9,862,435
 
425,305,082

All director nominees were duly elected.
Proposal 2:
Ratification of the Selection of PricewaterhouseCoopers LLP as Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2018.
 
For
 
Against
 
Abstain
1,650,296,589
 
43,004,439
 
6,484,231
The selection of the Independent Registered Public Accounting Firm was ratified.
Proposal 3:
Non-Binding Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers.
 
For
 
Against
 
Abstain
 
Broker Non-Vote
1,192,511,030
 
71,548,681
 
10,421,466
 
425,305,082
The proposal was approved on an advisory basis.

Proposal 4:     Shareholder Proposal - Reducing and Disclosing Nicotine Levels in Cigarette Brands.

For
 
Against
 
Abstain
 
Broker Non-Vote
50,822,624
 
1,181,270,876
 
42,387,404
 
425,305,082
The proposal was defeated.



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Item 7.01.    Regulation FD Disclosure.
In connection with the Annual Meeting, the Company issued a press release on May 17, 2018, in which the Company, among other things, reaffirmed its adjusted diluted earnings per share guidance for 2018 and announced the expansion of the Company’s share repurchase program from $1 billion to $2 billion. A copy of the press release is attached as Exhibit 99.1 and is incorporated by reference in Item 7.01 of this Current Report on Form 8-K.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 7.01 shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
Item 8.01.    Other Events.
On May 17, 2018, the Company’s Board of Directors (the “Board of Directors”) authorized an expansion of the Company’s existing share repurchase program from $1 billion to $2 billion. The Company expects to complete the program by the end of June 2019. The timing of share repurchases under this program depends upon marketplace conditions and other factors, and the program remains subject to the discretion of the Board of Directors.

Item 9.01.    Financial Statements and Exhibits.
 
(d)
Exhibits
 
 
10.1
 
10.2
 
99.1




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SIGNATURES
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.
 
 
 
 
 
ALTRIA GROUP, INC.
 
 
 
 
By:  
/s/ W. HILDEBRANDT SURGNER, JR.
 
Name:  
W. Hildebrandt Surgner, Jr.
 
Title:  
Vice President, Corporate Secretary and
Associate General Counsel
DATE: May 17, 2018


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Section 2: EX-10.1 (FORM OF RESTRICTED STOCK UNIT AGREEMENT, DATED AS OF MAY 17, 2018)

Exhibit
Exhibit 10.1


THE ALTRIA GROUP, INC.
2015 PERFORMANCE INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT
FOR ALTRIA GROUP, INC. COMMON STOCK
(May 17, 2018)

ALTRIA GROUP, INC. (the “Company”), a Virginia corporation, hereby grants to the employee identified in the 2018 Stock Award section of the Award Statement (the “Employee”) under the Altria Group, Inc. 2015 Performance Incentive Plan (the “Plan”) a Restricted Stock Unit Award (the “Award”) dated May 17, 2018 (the “Award Date”), with respect to the number of shares of the Common Stock of the Company (the “Common Stock”) set forth in the 2018 Stock Award section of the Award Statement (the “RSUs”), all in accordance with and subject to the following terms and conditions of this Restricted Stock Unit Agreement (the “Agreement”):

1.    Condition to Award. As applicable and in the sole discretion of the Company or its delegate, this Award may be contingent on, and in consideration of, the execution of a Confidentiality and Non-Competition Agreement by the Employee. In the event the Employee is required to execute a Confidentiality and Non-Competition Agreement, the Company or its delegate will so notify the Employee as soon as practicable after the Award Date. If the Employee does not execute the Confidentiality and Non-Competition Agreement within a reasonable time frame established by the Company or its delegate, but no later than 90 days after the Confidentiality and Non-Competition Agreement is provided to the Employee, this Agreement will be null and void with respect to the Employee and the Employee will forfeit any and all rights to the Award.

2.    Normal Vesting. Subject to Section 1 above and Section 3 below, the RSUs shall become fully vested on the vesting date set forth in the 2018 Stock Award section of the Award Statement (the “Vesting Date”), provided that the Employee remains an employee of the Company (or a subsidiary or affiliate) during the entire period commencing on the Award Date and ending on the Vesting Date.

3.    Accelerated Vesting and Forfeiture. In the event of the termination of the Employee’s employment with the Company (and with all subsidiaries and affiliates of the Company) prior to the Vesting Date due to death, Disability or Normal Retirement, the RSUs shall become fully vested on the date of such termination of employment.

If the Employee’s employment with the Company (and with all subsidiaries and affiliates of the Company) is terminated for any reason other than death, Disability or Normal Retirement prior to the Vesting Date, the Employee shall forfeit all rights to the RSUs immediately after termination of employment. For this purpose, a termination of employment shall include the sale of a subsidiary that employs the Employee. Notwithstanding the foregoing, upon a termination of employment described in this paragraph, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) may, in its sole discretion, vest some or all of the RSUs.

In addition, in the event of a “Change in Control” within the meaning of the Plan, the RSUs shall become vested and payable in the circumstances and in the manner specified in section 6(a) of the Plan and Section 9 below.

4.     Voting and Dividend Rights. The Employee does not have the right to vote the RSUs or receive dividends prior to the date, if any, that the shares of Common Stock underlying the RSUs are paid to the Employee pursuant to the terms hereof. However, unless otherwise determined by the Compensation Committee, the Employee shall receive cash payments (less applicable withholding taxes) in lieu of dividends otherwise payable with respect to shares of Common Stock equal in number to the RSUs that have not been forfeited, as such dividends are paid.

5.    Transfer Restrictions. This Award and the RSUs are non-transferable and may not be assigned, hypothecated or otherwise pledged and shall not be subject to execution, attachment or similar process.



Upon any attempt to effect any such disposition, or upon the levy of any such process, the Award shall immediately become null and void and the RSUs shall be forfeited. These restrictions shall not apply, however, to any payments received pursuant to Section 8 below. If the Employee is a resident of Canada, the Employee acknowledges that the shares of Common Stock that the Employee receives pursuant to Section 8 are subject to a restriction on the first trade under Canadian securities laws.  As a result, the Employee acknowledges that any first trade of such shares of Common Stock must be made (a) through an exchange, or a market, outside of Canada, (b) to a person or company outside of Canada or (c) otherwise in compliance with applicable Canadian securities laws.

6.     Withholding Taxes. The Company is authorized to satisfy any withholding taxes arising in connection with this Award by (a) deducting the number of RSUs having an aggregate value equal to the amount of withholding taxes due, or (b) the remittance of the required amounts from any proceeds realized upon the open-market sale of the Common Stock received in payment of vested RSUs by the Employee. The Company is authorized to satisfy any withholding taxes arising from the payment of cash in lieu of dividends pursuant to Section 4 by withholding the required amounts from such cash payment. The Company is also authorized to satisfy any withholding taxes referred to in this paragraph by requiring a cash payment from the Employee or by withholding from other payments due to the Employee. If the Employee is covered by a Company tax equalization policy, the Employee also agrees to pay to the Company any additional hypothetical tax obligation calculated and paid under the terms and conditions of such tax equalization policy.

7.     Death of Employee. If any of the RSUs shall vest upon the death of the Employee, any Common Stock received in payment of the vested RSUs shall be registered in the name of the estate of the Employee except that, to the extent permitted by the Compensation Committee, if the Company shall have received in writing a beneficiary designation, the Common Stock shall be registered in the name of the designated beneficiary.

8.     Payment of RSUs. The RSUs granted pursuant to this Award represent an unfunded and unsecured promise of the Company, subject to the vesting and other terms of this Agreement, to issue to the Employee the number of shares of the Common Stock underlying the vested RSUs. Except as otherwise expressly provided in the 2018 Stock Award section of the Award Statement, this Agreement and the Plan, such issuance shall be made to the Employee (or, in the event of his or her death to the Employee’s estate or beneficiary as provided above) as soon as practicable following the vesting of the RSUs pursuant to Section 2 or 3 and by the later of December 31 of the year of such vesting or two and a half months after such vesting. Notwithstanding the foregoing, the RSUs shall be settled in the form of cash rather than shares of Common Stock if such form of settlement is specified in the Award Statement.

9.     Special Payment Provisions. This Agreement shall be construed in a manner consistent with section 409A of the Internal Revenue Code and the regulations thereunder (“Code section 409A”). If the Employee will become eligible for Retirement (a) for RSUs with a Vesting Date between January 1 and March 15, before the calendar year preceding the Vesting Date and (b) for RSUs with a Vesting Date after March 15, before the calendar year in which such Vesting Date occurs, then notwithstanding anything in this Agreement to the contrary, the following provisions shall apply:

(i) If the Employee is a “specified employee” within the meaning of Code section 409A, any payment of RSUs under Section 8 that is on account of his or her separation from service shall be delayed until the earlier of six months following such separation from service or the Employee’s death.

(ii) In the event of a “Change in Control” under section 6(b) of the Plan that is not also a “change in control event” with the meaning of Treas. Reg. §1.409A-3(i)(5)(i), any RSUs that would otherwise become vested and paid pursuant to section 6(a) of the Plan upon such Change in Control shall become vested, but shall not be paid upon such Change in Control, and shall instead be paid at the time the RSUs would otherwise be paid pursuant to this Agreement.



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(iii) In the event of a sale of a subsidiary that is treated under Section 3 as a termination of the Employee’s employment but that is not a “separation from service” within the meaning of Code section 409A, any RSUs that become vested pursuant to Section 3 shall not be paid upon such accelerated vesting, but shall instead be paid at the time the RSUs would otherwise be paid pursuant to this Agreement.

10.     Board Authorization in the Event of Restatement. Notwithstanding anything in this Agreement to the contrary, if the Board of Directors of the Company or an appropriate Committee of the Board determines that, as a result of a restatement of the Company’s financial statements, the Employee has received greater compensation in connection with the Award than would been received absent the incorrect financial statements, the Board or Committee, in its discretion, may take such action with respect to this Award as it deems necessary or appropriate to address the events that gave rise to the restatement and to prevent its recurrence. Such action may include, to the extent permitted by applicable law, causing the full or partial cancellation of this Award and, with respect to RSUs that have vested, requiring the Employee to repay to the Company the full or partial Fair Market Value of the Award determined at the time of vesting, and the Employee agrees by accepting this Award that the Board or Committee may make such a cancellation, impose such a repayment obligation, or take other necessary or appropriate actions in such circumstances.

11.     Other Terms and Definitions. The terms and provisions of the Plan (a copy of which will be furnished to the Employee upon written request to the Office of the Corporate Secretary, Altria Group, Inc., 6601 West Broad Street, Richmond, Virginia 23230) are incorporated herein by reference. To the extent any provision of this Award is inconsistent or in conflict with any term or provision of the Plan, the Plan shall govern. Capitalized terms not otherwise defined herein have the meaning set forth in the Plan.

For purposes of this Agreement, (a) the term “Disability” means a disability that entitles the Employee to benefits under the applicable long-term disability insurance program of the Company or any subsidiary or affiliate of the Company, (b) the term “Normal Retirement” means retirement from active employment with the Company and any subsidiary or affiliate of the Company following both attainment of age 65 and completion of five years of service with the Company, its subsidiaries, and its affiliates, (c) the term “Retirement” means retirement from active employment with the Company and any subsidiary or affiliate of the Company following both attainment of age 55 and completion of five years of service with the Company, its subsidiaries, and its affiliates, and (d) the terms “termination of employment,” “separation from service,” and similar references mean a separation from service within the meaning of Code section 409A with the Company and all of its subsidiaries and affiliates, which includes circumstances in which the Employee is reasonably anticipated not to perform further services with the Company and its affiliates or subsidiaries. Generally, for purposes of this Agreement, (x) a “subsidiary” includes only any company in which the Company, directly or indirectly, has a beneficial ownership interest of greater than 50 percent and (y) an “affiliate” includes only any company that (i) has a beneficial ownership interest, directly or indirectly, in the Company of greater than 50 percent or (ii) is under common control with the Company through a parent company that, directly or indirectly, has a beneficial ownership interest of greater than 50 percent in both the Company and the affiliate.

IN WITNESS WHEREOF, this Restricted Stock Unit Agreement has been duly executed as of May 17, 2018.


 
ALTRIA GROUP, INC.
 
 
 
 
 
/s/ W. HILDEBRANDT SURGNER, JR.
 
By:
W. Hildebrandt Surgner, Jr.
 
 
Corporate Secretary
 
 
 


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Section 3: EX-10.2 (FORM OF PERFORMANCE STOCK UNIT AGREEMENT, DATED AS OF MAY 17, 2018)

Exhibit


Exhibit 10.2
THE ALTRIA GROUP, INC.
2015 PERFORMANCE INCENTIVE PLAN

PERFORMANCE STOCK UNIT AGREEMENT
FOR ALTRIA GROUP, INC. COMMON STOCK
(May 17, 2018)

ALTRIA GROUP, INC. (the “Company”), a Virginia corporation, hereby grants to the employee identified in the 2018 Stock Award section of the Award Statement (the “Employee”) under the Altria Group, Inc. 2015 Performance Incentive Plan (the “Plan”) a Performance Stock Unit Award (the “Award”) dated May 17, 2018 (the “Award Date”), with respect to the target number of shares of the Common Stock of the Company (the “Common Stock”) set forth in the 2018 Stock Award section of the Award Statement (the “PSUs”), all in accordance with and subject to the following terms and conditions of this Performance Stock Unit Agreement (the “Agreement”):

1.Condition to Award. As applicable and in the sole discretion of the Company or its delegate, this Award may be contingent on, and in consideration of, the execution of a Confidentiality and Non-Competition Agreement by the Employee. In the event the Employee is required to execute a Confidentiality and Non-Competition Agreement, the Company or its delegate will so notify the Employee as soon as practicable after the Award Date. If the Employee does not execute the Confidentiality and Non-Competition Agreement within a reasonable time frame established by the Company or its delegate, but no later than 90 days after the Confidentiality and Non-Competition Agreement is provided to the Employee, this Agreement will be null and void with respect to the Employee and the Employee will forfeit any and all rights to the Award.
    
2.Normal Vesting.

(a)    Subject to Section 1 above and Section 3 below, a number of PSUs shall become vested on the vesting date set forth in the 2018 Stock Award section of the Award Statement (the “Vesting Date”), provided that the Employee remains an employee of the Company (or a subsidiary or affiliate) during the entire period commencing on the Award Date and ending on the Vesting Date.

(b)    The number of PSUs that become vested on the Vesting Date shall be equal to the target number of PSUs multiplied by a percentage (the “Performance Percentage”) that is determined based on the Company’s performance during the applicable performance period. The performance measures, performance period, and Performance Percentage shall be established and determined by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”). Notwithstanding the foregoing, if the date on which the Compensation Committee makes a final determination of the Performance Percentage is after the Vesting Date, then the date of the final determination shall be treated as the Vesting Date for purposes of determining the number of PSUs that become vested and for purposes of Sections 4 and 8. The Compensation Committee shall make a final determination of the Performance Percentage no later than July 1 of the year in which the Vesting Date occurs.

3.Accelerated Vesting and Forfeiture. In the event of the termination of the Employee’s employment with the Company (and with all subsidiaries and affiliates of the Company) prior to the Committee’s final determination of the Performance Percentage and prior to the Vesting Date due to death, Disability or Normal Retirement, the target number of PSUs shall become fully vested on the date of such termination of employment. In the event of the termination of the Employee’s employment with the Company (and with all subsidiaries and affiliates of the Company) after the Committee’s final





determination of the Performance Percentage and prior to the Vesting Date due to death, Disability or Normal Retirement, the PSUs shall become fully vested on the date of such termination of employment based on such finally determined Performance Percentage.

If the Employee’s employment with the Company (and with all subsidiaries and affiliates of the Company) is terminated for any reason other than death, Disability or Normal Retirement prior to the Vesting Date, the Employee shall forfeit all rights to the PSUs immediately after termination of employment. For this purpose, a termination of employment shall include the sale of a subsidiary that employs the Employee. Notwithstanding the foregoing, upon a termination of employment described in this paragraph, the Compensation Committee may, in its sole discretion, vest some or all of the PSUs and specify the manner in which the Performance Percentage is determined.

In addition, in the event of a “Change in Control” within the meaning of the Plan, the PSUs shall become vested and payable in the circumstances and in the manner specified in section 6(a) of the Plan and Section 9 below.

4.Voting and Dividend Rights. The Employee does not have the right to vote the PSUs or receive dividends prior to the date, if any, that the shares of Common Stock underlying the PSUs are paid to the Employee pursuant to the terms hereof. However, unless otherwise determined by the Compensation Committee, the Employee shall accrue a cash amount in lieu of dividends that would have been paid had the Employee held the number of shares of Common Stock that become issuable pursuant to Sections 2(b), 3, and 8 from the Award Date through the date of payment under Section 8. Such accrued cash amount shall be calculated without interest and paid (less applicable withholding taxes) in accordance with this Agreement.

5.Transfer Restrictions. This Award and the PSUs are non-transferable and may not be assigned, hypothecated or otherwise pledged and shall not be subject to execution, attachment or similar process. Upon any attempt to effect any such disposition, or upon the levy of any such process, the Award shall immediately become null and void and the PSUs shall be forfeited. These restrictions shall not apply, however, to any payments received pursuant to Section 8 below. If the Employee is a resident of Canada, the Employee acknowledges that the shares of Common Stock that the Employee receives pursuant to Section 8 are subject to a restriction on the first trade under Canadian securities laws.  As a result, the Employee acknowledges that any first trade of such shares of Common Stock must be made (a) through an exchange, or a market, outside of Canada, (b) to a person or company outside of Canada or (c) otherwise in compliance with applicable Canadian securities laws.

6.Withholding Taxes. The Company is authorized to satisfy any withholding taxes arising in connection with this Award by (a) deducting the number of PSUs having an aggregate value equal to the amount of withholding taxes due, or (b) the remittance of the required amounts from any proceeds realized upon the open-market sale of the Common Stock received in payment of vested PSUs by the Employee. The Company is authorized to satisfy any withholding taxes arising from the payment of cash in lieu of dividends pursuant to Section 4 by withholding the required amounts from such cash payment. The Company is also authorized to satisfy any withholding taxes referred to in this paragraph by requiring a cash payment from the Employee or by withholding from other payments due to the Employee. If the Employee is covered by a Company tax equalization policy, the Employee also agrees to pay to the Company any additional hypothetical tax obligation calculated and paid under the terms and conditions of such tax equalization policy.

7.Death of Employee. If any of the PSUs shall vest upon the death of the Employee, any Common Stock received in payment of the vested PSUs shall be registered in the name of the estate of the Employee and any cash amount accrued with respect to dividends shall be paid to the estate of the

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Employee except that, to the extent permitted by the Compensation Committee, if the Company shall have received in writing a beneficiary designation, the Common Stock shall be registered in the name of the designated beneficiary and the cash amount shall be paid to the designated beneficiary.

8.Payment of PSUs. The PSUs granted pursuant to this Award represent an unfunded and unsecured promise of the Company, subject to the vesting, performance conditions and other terms of this Agreement, to issue to the Employee the number of shares of the Common Stock underlying the vested PSUs and to pay to the Employee in a single lump sum any cash amount accrued with respect to dividends. Except as otherwise expressly provided in the 2018 Stock Award section of the Award Statement, this Agreement and the Plan, such issuance and lump sum payment shall be made to the Employee (or, in the event of his or her death to the Employee’s estate or beneficiary as provided above) as soon as practicable following the vesting of the PSUs pursuant to Section 2 or 3 and by the later of December 31 of the year of such vesting or two and a half months after such vesting. Notwithstanding the foregoing, the PSUs shall be settled in the form of cash rather than shares of Common Stock if such form of settlement is specified in the Award Statement.

9.Special Payment Provisions. This Agreement shall be construed in a manner consistent with section 409A of the Internal Revenue Code and the regulations thereunder (“Code section 409A”). If the Employee will become eligible for Retirement (a) for PSUs with a Vesting Date between January 1 and March 15, before the calendar year preceding the Vesting Date and (b) for PSUs with a Vesting Date after March 15, before the calendar year in which such Vesting Date occurs, then notwithstanding anything in this Agreement to the contrary, the following provisions shall apply:

(i) If the Employee is a “specified employee” within the meaning of Code section 409A, any payment of PSUs under Section 8 that is on account of his or her separation from service shall be delayed until the earlier of six months following such separation from service or the Employee’s death.

(ii) In the event of a “Change in Control” under section 6(b) of the Plan that is not also a “change in control event” with the meaning of Treas. Reg. §1.409A-3(i)(5)(i), any PSUs that would otherwise become vested and paid pursuant to section 6(a) of the Plan upon such Change in Control shall become vested, but shall not be paid upon such Change in Control, and shall instead be paid at the time the PSUs would otherwise be paid pursuant to this Agreement.

(iii) In the event of a sale of a subsidiary that is treated under Section 3 as a termination of the Employee’s employment but that is not a “separation from service” within the meaning of Code section 409A, any PSUs that become vested pursuant to Section 3 shall not be paid upon such accelerated vesting, but shall instead be paid at the time the PSUs would otherwise be paid pursuant to this Agreement.

10.Board Authorization in the Event of Restatement. Notwithstanding anything in this Agreement to the contrary, if the Board of Directors of the Company or an appropriate Committee of the Board determines that, as a result of a restatement of the Company’s financial statements, the Employee has received greater compensation in connection with the Award than would been received absent the incorrect financial statements, the Board or Committee, in its discretion, may take such action with respect to this Award as it deems necessary or appropriate to address the events that gave rise to the restatement and to prevent its recurrence. Such action may include, to the extent permitted by applicable law, causing the full or partial cancellation of this Award and, with respect to PSUs that have vested, requiring the Employee to repay to the Company the full or partial Fair Market Value of the Award determined at the time of vesting, and the Employee agrees by accepting this Award that the Board or Committee may make such a cancellation, impose such a repayment obligation, or take other necessary or

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appropriate actions in such circumstances.

11.Other Terms and Definitions. The terms and provisions of the Plan (a copy of which will be furnished to the Employee upon written request to the Office of the Corporate Secretary, Altria Group, Inc., 6601 West Broad Street, Richmond, Virginia 23230) are incorporated herein by reference. To the extent any provision of this Award is inconsistent or in conflict with any term or provision of the Plan, the Plan shall govern. Capitalized terms not otherwise defined herein have the meaning set forth in the Plan.

For purposes of this Agreement, (a) the term “Disability” means a disability that entitles the Employee to benefits under the applicable long-term disability insurance program of the Company or any subsidiary or affiliate of the Company, (b) the term “Normal Retirement” means retirement from active employment with the Company and any subsidiary or affiliate of the Company following both attainment of age 65 and completion of five years of service with the Company, its subsidiaries, and its affiliates, (c) the term “Retirement” means retirement from active employment with the Company and any subsidiary or affiliate of the Company following both attainment of age 55 and completion of five years of service with the Company, its subsidiaries, and its affiliates, and (d) the terms “termination of employment,” “separation from service,” and similar references mean a separation from service within the meaning of Code section 409A with the Company and all of its subsidiaries and affiliates, which includes circumstances in which the Employee is reasonably anticipated not to perform further services with the Company and its affiliates or subsidiaries. Generally, for purposes of this Agreement, (x) a “subsidiary” includes only any company in which the Company, directly or indirectly, has a beneficial ownership interest of greater than 50 percent and (y) an “affiliate” includes only any company that (i) has a beneficial ownership interest, directly or indirectly, in the Company of greater than 50 percent or (ii) is under common control with the Company through a parent company that, directly or indirectly, has a beneficial ownership interest of greater than 50 percent in both the Company and the affiliate.


IN WITNESS WHEREOF, this Performance Stock Unit Agreement has been duly executed as of May 17, 2018.

 
ALTRIA GROUP, INC.
 
 
 
 
 
/s/ W. HILDEBRANDT SURGNER, JR.
 
By:
W. Hildebrandt Surgner, Jr.
 
 
Corporate Secretary
 
 
 


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Section 4: EX-99.1 (ALTRIA GROUP INC. PRESS RELEASE, DATED MAY 17, 2018)

Exhibit
Exhibit 99.1

394250635_altriamosaica08.jpg

ALTRIA HOLDS 2018 ANNUAL MEETING OF SHAREHOLDERS

Howard Willard succeeds Marty Barrington as Altria’s Chairman and CEO, following Mr. Barrington’s retirement
Altria announces Annual Meeting voting results.
Altria reaffirms full-year 2018 earnings guidance.
Altria declares regular quarterly dividend of $0.70 per share.
Altria announces the expansion of its $1 billion share repurchase program to $2 billion, to be completed by the end of the second quarter of 2019.

RICHMOND, Va. -- May 17, 2018 -- Altria Group, Inc. (Altria) (NYSE: MO) held its 2018 Annual Meeting of Shareholders (Annual Meeting) today. Altria’s Chairman, Chief Executive Officer (CEO) and President, Marty Barrington, summarized Altria’s full-year 2017 and first-quarter 2018 operating and financial results, discussed Altria’s corporate responsibility initiatives and reaffirmed Altria’s guidance for 2018 full-year adjusted diluted earnings per share (EPS). A copy of Mr. Barrington’s prepared remarks and business presentation and a replay of the audio webcast of the Annual Meeting are available on altria.com and via the Altria Investor app.

Appointment of Chairman and CEO
Following today’s Annual Meeting, Howard Willard succeeded Mr. Barrington as Altria’s Chairman and CEO. Earlier this year, Mr. Barrington announced his decision to retire after 25 years of distinguished service.
“Howard is immensely qualified to lead Altria, having served in numerous leadership positions during his 25 year career with us, including as Chief Operating Officer and Chief Financial Officer,” said Mr. Barrington.

Voting Results for Altria’s Annual Meeting
At the Annual Meeting, Altria’s shareholders elected to a one-year term each of the 11 nominees for director named in Altria’s proxy statement; ratified the selection of PricewaterhouseCoopers LLP as Altria’s independent registered public accounting firm for the fiscal year ending December 31, 2018; approved, on an advisory basis, the compensation of Altria’s named executive officers; and defeated one shareholder proposal. Final voting results will be reported in a Current Report on Form 8-K filed with the Securities and Exchange Commission.

2018 Full-Year Guidance
During his remarks, Mr. Barrington reaffirmed Altria’s guidance for 2018 full-year adjusted diluted EPS to be in a range of $3.90 to $4.03, representing a growth rate of 15% to 19% from an adjusted diluted EPS base of $3.39 in 2017, as shown in Schedule 1. This guidance range excludes special items for the first quarter of 2018 shown in Schedule 1 and an additional $0.07 of tax expense resulting from the Tax Cuts and Jobs Act. This tax expense is related to a tax basis adjustment to Altria’s AB InBev investment.

Altria’s full-year adjusted diluted EPS guidance excludes the impact of certain income and expense items that management believes are not part of underlying operations. These items may include, for example, loss on early


6601 West Broad Street, Richmond, VA 23230


extinguishment of debt, restructuring charges, gain/loss on AB InBev/SABMiller plc (SABMiller) business combination, AB InBev special items, certain tax items, charges associated with tobacco and health litigation items,
and resolutions of certain non-participating manufacturer (NPM) adjustment disputes under the Master Settlement Agreement (such dispute resolutions are referred to as NPM Adjustment Items).
  
Altria’s management cannot estimate on a forward-looking basis the impact of certain income and expense items, including those items noted in the preceding paragraph, on its reported diluted EPS because these items, which could be significant, may be infrequent, are difficult to predict and may be highly variable. As a result, Altria does not provide a corresponding U.S. generally accepted accounting principles (GAAP) measure for, or reconciliation to, its adjusted diluted EPS guidance.

The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to Altria’s forecast.
  
Regular Quarterly Dividend
Following the Annual Meeting, Altria’s Board of Directors (Board) declared a regular quarterly dividend of $0.70 per share, payable on July 10, 2018, to shareholders of record as of June 15, 2018. The ex-dividend date is June 14, 2018.

Expanded and Extended Share Repurchase Program
Altria’s Board also authorized a $1 billion expansion to the existing $1 billion share repurchase program. Altria now expects to complete the expanded $2 billion share repurchase program by the end of the second quarter of 2019. The timing of share repurchases depends upon marketplace conditions and other factors. This program remains subject to the discretion of the Board.

Altria’s Profile
Altria’s wholly-owned subsidiaries include Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC), John Middleton Co. (Middleton), Sherman Group Holdings, LLC and its subsidiaries (Nat Sherman), Nu Mark LLC (Nu Mark), Ste. Michelle Wine Estates Ltd. (Ste. Michelle) and Philip Morris Capital Corporation (PMCC). Altria holds an equity investment in Anheuser-Busch InBev SA/NV (AB InBev).

The brand portfolios of Altria’s tobacco operating companies include Marlboro®, Black & Mild®, Copenhagen®, Skoal®, MarkTen® and Green Smoke®. Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle®, Columbia Crest®, 14 Hands® and Stag’s Leap Wine Cellars, and it imports and markets Antinori®, Champagne Nicolas Feuillatte, Torres® and Villa Maria Estate products in the United States. Trademarks and service marks related to Altria referenced in this release are the property of Altria or its subsidiaries or are used with permission. More information about Altria is available at altria.com and on the Altria Investor app.

Forward-Looking and Cautionary Statements
This release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Important factors that may cause actual results and outcomes to differ materially from those contained in the projections and forward-looking statements included in this release are described in Altria’s publicly filed reports, including its Annual Report on Form 10-K for the year ended December 31, 2017 and its Quarterly Report on Form 10-Q for the period ended March 31, 2018.

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These factors include the following: significant competition; changes in adult consumer preferences and demand for Altria’s operating companies’ products; fluctuations in raw material availability, quality and price; reliance on key facilities and suppliers; reliance on critical information systems, many of which are managed by third-party service providers; fluctuations in levels of customer inventories; the effects of global, national and local economic and market conditions; changes to income tax laws; federal, state and local legislative activity, including actual and potential federal and state excise tax increases; increasing marketing and regulatory restrictions; the effects of price increases related to excise tax increases and concluded tobacco litigation settlements, consumption rates and consumer preferences within price segments; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; privately imposed smoking restrictions; and, from time to time, governmental investigations.
  
Furthermore, the results of Altria’s tobacco businesses are dependent upon their continued ability to promote brand equity successfully; to anticipate and respond to evolving adult consumer preferences; to develop, manufacture, market and distribute products that appeal to adult tobacco consumers (including, where appropriate, through arrangements with, and investments in, third parties); to improve productivity; and to protect or enhance margins through cost savings and price increases.

Altria and its tobacco businesses are also subject to federal, state and local government regulation, including by the U.S. Food and Drug Administration. Altria and its subsidiaries continue to be subject to litigation, including risks associated with adverse jury and judicial determinations, courts reaching conclusions at variance with the companies’ understanding of applicable law, bonding requirements in the limited number of jurisdictions that do not limit the dollar amount of appeal bonds and certain challenges to bond cap statutes.
  
In addition, the factors related to Altria’s investment in AB InBev include the following: the risk that Altria’s equity securities in AB InBev are subject to restrictions on transfer until October 10, 2021; the risk that Altria’s reported earnings from and carrying value of its equity investment in AB InBev and the dividends paid by AB InBev on shares owned by Altria may be adversely affected by unfavorable foreign currency exchange rates and other factors, including the risks encountered by AB InBev in its business; the risk that the tax treatment of Altria’s transaction consideration from the AB InBev/SABMiller business combination and the accounting treatment of its equity investment are not guaranteed; and the risk that the tax treatment of Altria’s investment in AB InBev may not be as favorable as Altria anticipates.

Altria cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statements that it may make except as required by applicable law. All subsequent written and oral forward-looking statements attributable to Altria or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements referenced above.

Source: Altria Group, Inc.
Altria Client Services
 
Altria Client Services
 
Investor Relations
 
Media Relations
 
804-484-8222    
 
804-484-8897
 

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Schedule 1
ALTRIA GROUP, INC.
and Subsidiaries
Reconciliation of GAAP and non-GAAP Measures
(dollars in millions, except per share data)
(Unaudited)

Reconciliation of Altria’s First Quarter 2018 Adjusted Results
 
 
 
 
 
 
 
Earnings before Income Taxes
Provision for Income Taxes
Net Earnings
Net Earnings Attributable to Altria Group, Inc.
Diluted EPS
For the quarter ended March 31, 2018
 
 
 
 
 
2018 Reported
$
2,466

$
571

$
1,895

$
1,894

$
1.00

NPM Adjustment Items
(68
)
(17
)
(51
)
(51
)
(0.03
)
AB InBev special items
(117
)
(25
)
(92
)
(92
)
(0.04
)
Asset impairment, exit and implementation costs
3

1

2

2


Tobacco and health litigation items
28

8

20

20

0.01

Loss on AB InBev/SABMiller business
combination
33

7

26

26

0.01

Tax items

(1
)
1

1


2018 Adjusted for Special Items
$
2,345

$
544

$
1,801

$
1,800

$
0.95

Reconciliation of Altria’s Full Year 2017 Adjusted Results
 
 
 
 
 
 
 
Earnings before Income Taxes
(Benefit) Provision for Income Taxes
Net Earnings
Net Earnings Attributable to Altria Group, Inc.
Diluted EPS
For the year ended December 31, 2017
 
 
 
 
 
2017 Reported
$
9,828

$
(399
)
$
10,227

$
10,222

$
5.31

NPM Adjustment Items
4

2

2

2


Tobacco and health litigation items
80

30

50

50

0.03

AB InBev special items
160

55

105

105

0.05

Asset impairment, exit, implementation and
acquisition-related costs
89

34

55

55

0.03

Gain on AB InBev/SABMiller business
combination
(445
)
(156
)
(289
)
(289
)
(0.15
)
Settlement charge for lump sum pension
payments
81

32

49

49

0.03

Tax items

3,674

(3,674
)
(3,674
)
(1.91
)
2017 Adjusted for Special Items
$
9,797

$
3,272

$
6,525

$
6,520

$
3.39


Altria reports its financial results in accordance with GAAP. Altria’s management reviews certain financial results, including diluted EPS, on an adjusted basis, which excludes certain income and expense items, including those items noted under “2018 Full-Year Guidance”. Altria’s management does not view any of these special items to be part of Altria’s underlying results as they may be highly variable, may be infrequent, are difficult to predict and can distort underlying business trends and results. Altria’s management believes that adjusted financial measures provide useful additional insight into underlying business trends and results and provide a more meaningful comparison of year-over-year results. Altria’s management uses adjusted financial measures for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. These adjusted financial measures are not consistent with GAAP and may not be calculated the same as similarly titled measures used by other companies. These adjusted financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

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