UST: Parting More Sweet Than Sorrowful for UST’s Former CFO

By William Trent, CFA of Stock Market Beat

We have noted several times over the last week that the departure of a Chief Financial Officer tends to raise alarm bells. And while Mid Cap Watch List and Large Cap Watch List member UST Corp.’s (UST) CFO departure in March was billed at the time as a retirement after 26 years of service with the company, an SEC filing that just happened to occur on the Good Friday market holiday appears to suggest otherwise:

On April 6, 2007, upon the recommendation of its Compensation Committee, the Company entered into an agreement with Mr. D’Alessandro to set forth the mutual agreement of the Company and Mr. D’Alessandro as to the rights and obligations of the parties in connection with his retirement from the Company, all as contemplated by the agreement entered into by the Company and Mr. D’Alessandro on June 23, 2006 (the “Employment Agreement”). The new agreement is referred to herein as the “Non-Competition and Release Agreement.”

Under the “Non-Competition and Release Agreement,” D’Alessandro will collect nearly $100,000 per month for the next 24 months, a pro-rata portion of the annual bonus he would have received, and continue to receive health care coverage. In addition, he “will also become a participant in the Company’s Officers’ Supplemental Retirement Plan (the “SOP”). His separation from service, therefore, constitutes retirement under the terms of the SOP and for purposes of all outstanding equity awards.”

Note the wording: by letting him participate in the plan his departure therefore constitutes retirement. And it sounded so nice when the press release came out last month.
Still, we wouldn’t mind being in D’Alessandro’s shoes. Although the benefits come with strings attached they don’t appear to be particularly binding.  “Mr. D’Alessandro has agreed not to compete with the Company for a period of two years from the date of separation by engaging or participating in any business or industry which is then in direct or indirect competition with any businesses in which the Company participates wherever located in the world.”

As we noted when we reviewed the 10K, “UST is a leading provider of smokeless tobacco products, which it markets under the Copenhagen, Skoal and other brand names. It also produces Washington State wines.” Barring both direct and indirect competitors, by our reckoning, limits D’Alessandro to offering his talents to only about 7,000 publicly traded companies in the U.S.

The other restriction we thought was interesting was the agreement to “release the Company and its affiliates from all liabilities and claims that he may have against them arising prior to March 31, 2007.” We have no idea whether that is a standard clause in a “non-competition and release agreement” or whether it related to something specific. However, it was fun to speculate that he might have been a claimant in one of the tobacco class-action suits or something equally ironic.

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