8-KMaterial Agreements

ALTRIA GROUP, INC. 8-K Report, Material Agreement (Sep 7, 2006)

Filed September 7, 2006For Securities:MO

Summary

This 8-K filing from Altria Group, Inc. (MO) on September 7, 2006, details the separation agreement between its subsidiary, Kraft Foods Inc., and former CEO Roger K. Deromedi. The agreement, effective August 31, 2006, outlines the terms of Mr. Deromedi's departure following his announcement on June 26, 2006. Key financial implications for investors revolve around the payments and benefits Mr. Deromedi will receive, including salary continuation, pro-rated incentive awards, accelerated vesting of restricted stock, and continued benefits. The filing also specifies non-compete, non-solicitation, confidentiality, and cooperation clauses that protect Kraft's interests. Investors should note that these arrangements represent a cost to Kraft and potentially impact future financial performance, although the terms aim to mitigate risks associated with the executive's departure.

Key Highlights

  • 1Kraft Foods Inc. (a subsidiary of Altria Group, Inc.) finalized a Separation Agreement with its former CEO, Roger K. Deromedi, on August 31, 2006.
  • 2Mr. Deromedi will receive salary continuation payments through February 23, 2007, followed by a lump sum payment equivalent to his salary until June 26, 2008.
  • 3The agreement includes pro-rated payments for Mr. Deromedi's 2006 annual incentive award and his 2004-2006 Long-Term Incentive Plan (LTIP) award.
  • 4141,697 shares of restricted stock previously granted to Mr. Deromedi will become vested, while other unvested shares will be forfeited.
  • 5Mr. Deromedi retains the right to exercise vested stock options for Altria Group, Inc. and Kraft shares.
  • 6Kraft will provide Mr. Deromedi and his family with lifetime medical, dental, and life insurance benefits, which will be secondary to any coverage he obtains from other employers.
  • 7In exchange for these benefits, Mr. Deromedi has agreed to non-compete clauses (until June 26, 2007), non-solicitation of employees, confidentiality obligations, and cooperation with Kraft on certain legal matters.

Frequently Asked Questions

The primary purpose of this 8-K filing is to disclose the material terms of the Separation Agreement and General Release between Kraft Foods Inc. (a subsidiary of Altria Group) and its former CEO, Roger K. Deromedi, detailing the compensation and benefits provided to him upon his departure.

Altria (through Kraft) is committing to salary continuation payments, a significant lump sum payment in lieu of continued salary, pro-rated incentive awards for 2006 and the 2004-2006 LTIP, and accelerated vesting of a portion of his restricted stock. Additionally, lifetime medical, dental, and life insurance benefits are being provided.

Mr. Deromedi has agreed to a non-compete clause preventing him from working for specified competitors of Kraft until June 26, 2007. He also agreed not to solicit Kraft employees, maintain confidentiality, and assist Kraft with pending and future litigation where he was involved during his tenure.

These payments and benefits will be recognized as an expense by Kraft Foods Inc., impacting its operating income and net income. The accelerated vesting of stock and the continuation of benefits represent liabilities or expenses that will affect the company's financial reporting for the current and future periods.