(Continued)
Employment Contracts, Termination of Employment and Change of Control Arrangements
We do not have change of control agreements with any of the named executive officers. Under the terms of our stockholder-approved equity and incentive compensation plans that apply to all participants in those plans, however, a change of control of Altria Group, Inc. would have the following consequences:
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any options or stock appreciation rights would become vested and exercisable;
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the restrictions on outstanding restricted stock or deferred stock would lapse;
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unless otherwise determined by the Compensation Committee, awards of the types described in the above two bullets would be cashed out at the change in control price;
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fully earned but unpaid incentive awards would become payable; and
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annual and long-term incentive awards for performance cycles not yet completed as of the change of control date would become payable based on a proration (the number of full or partial completed months divided by the total number of months in the performance cycle) of the maximum award opportunity for the cycle.
For these purposes, a change in control occurs: (i) upon an acquisition of 20% or more of either our common stock or the voting power of our voting securities, excluding certain acquisitions involving us or our affiliates or where our beneficial owners continue to meet certain ownership thresholds; (ii) when members of our Board as of the effective date of the 2005 Altria Performance Incentive Plan, or thereafter nominated or elected by such members, cease to constitute a majority of our Board; (iii) upon certain reorganizations, mergers, share exchanges and consolidations involving us; or (iv) upon our liquidation or dissolution, or sale of substantially all of our assets, with limited exceptions. The amounts that would have become payable on a change of control of Altria, calculated as if a change of control occurred on December 31, 2007, are as follows: 
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(1) |
Assumes the change of control price is equal to the closing market price of Altria of $75.58 and Kraft of $32.63 on December 31, 2007. |
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(2) |
Assumes maximum award payable under the Annual Incentive Award program in accordance with the Section 162(m) formula described above. |
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(3) |
Assumes maximum award payable under the Long-Term Incentive Plan in accordance with the Section 162(m) formula described above. |
Benefits payable under our retirement plans and the non-qualified deferred compensation plan are discussed above. None of those plans nor any other related agreements provide our executive officers, including our named executive officers, with an additional enhancement, early vesting or other benefit in the event of a change in control or termination of employment, except for certain plan provisions applicable to all plan participants that in the event of a change in control ensure vesting and continuation of profit-sharing contributions for the year of a change in control and the following two years. All named executive officers were already fully vested. Similarly, no special provisions apply to named executive officers with respect to continued medical, life insurance or other insurance coverage following termination of employment whether or not in connection with a change in control.
- Involuntary Separation Without Cause - Retirement Provision for Mr. Szymanczyk - Retirement of Messrs. Devitre and Parrish
Involuntary Separation Without Cause
In the event of involuntary separation without cause, our salaried employees, including all of our named executive officers, are eligible to receive severance. The amount of severance paid varies based on a number of factors including the circumstances of the termination and the number of years of service provided to us by the executive. Salaried employees, including our named executive officers, are entitled to severance of up to 12 months of base salary based on years of service with us. Any amounts in excess of that, including cash in lieu of restricted or deferred stock or pro-rated incentive plan payments, are paid contingent upon execution of a non-compete/non-solicitation agreement or general release of claims. Periods for which employees are entitled to regular severance payments and, in some circumstances, additional severance periods agreed to in connection with non-compete/ non-solicitation or general release agreements, may be counted toward vesting and eligibility for early retirement under our pension plans and for purposes of our post-retirement medical plans. In addition, for executive officers employed in jurisdictions outside of the U.S., the laws of those jurisdictions could have required us to provide severance pay and/or benefits upon an involuntary separation. After the spin-off, we no longer have employees in jurisdictions outside of the U.S. and therefore are not subject to such laws. 
Retirement Provision for Mr. Szymanczyk
We entered into an enhanced retirement agreement with Mr. Szymanczyk during 2002 which will remain in force for the duration of Mr. Szymanczyk’s employment with us subject to the limitation decided in January 2008 that is discussed above. The details of this agreement are discussed above.
Retirement of Messrs. Devitre and Parrish
In connection with the spin-off of PMI, Messrs. Devitre and Parrish elected to take early retirement. The benefits that they received upon their retirement are the same as those offered to all employees who were retirement-eligible and left or will be leaving us as a result of the spin-off, referred to as the “Enhanced Separation Package.” Most of the terms of the Enhanced Separation Package are similar to the benefits described in “Involuntary Separation Without Cause” described above and, contingent upon agreement to a general release of claims, are as follows:
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Severance payments of 3 weeks of base salary for each year of service (both received the maximum severance of 12 months of base salary);
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Pro-rated target annual incentive payment for 2008 for their service prior to the spin-off;
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Pro-rated payment in lieu of outstanding restricted or deferred stock granted prior to 2008;
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Pension enhancement recognizing an additional 5 years of age and vesting service for the purposes of calculating early retirement benefits under all of our retirement plans, subject to a minimum value of 6 months of base salary; and
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Completion bonus of 1 month of base salary for each year of service paid as a lump sum (both received the maximum completion bonus of 12 months of base salary).
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