<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
/X/ Definitive Proxy Statement Commission Only (as
/ / Definitive Additional Materials permitted by Rule
/ / Soliciting Material Pursuant to 14a-6(e)(2))
Section 240.14a-11(c) or Section
240.14a-12
RALCORP HOLDINGS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
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(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
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(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE FILING
FEE IS CALCULATED AND STATE HOW IT WAS DETERMINED):
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(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
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(5) TOTAL FEE PAID:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[RALCORP LOGO] RALCORP HOLDINGS, INC.
800 MARKET STREET
ST. LOUIS, MISSOURI 63101
December 15, 1997
DEAR RALCORP SHAREHOLDER:
It is our pleasure to invite you to the 1998 Annual Meeting of
Shareholders of Ralcorp Holdings, Inc. on Thursday, January 29,
1998, at 10:00 a.m. at Gateway Center, One Gateway Drive,
Collinsville, Illinois.
The enclosed notice and proxy statement contain information
relating to matters that will be brought before the meeting.
Whether you plan to attend the meeting or not, we urge you to be
represented by proxy. For this purpose, please sign, date and
return the enclosed proxy as soon as possible in the envelope
provided. This will ensure representation of your shares in the
event that you are unable to attend the meeting.
On behalf of the Board of Directors, we hope you will attend
this meeting in person. If you plan to do so, please mark the
appropriate box on your proxy card.
We look forward to seeing you on January 29.
/s/ Joe R. Micheletto
JOE R. MICHELETTO
Chief Executive Officer
and President
<PAGE> 3
RALCORP HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 15, 1997
TO THE SHAREHOLDERS OF RALCORP HOLDINGS, INC.:
The 1998 Annual Meeting of Shareholders of Ralcorp Holdings,
Inc. will be held at Gateway Center, One Gateway Drive,
Collinsville, Illinois on Thursday, January 29, 1998, at 10:00
a.m., for the following purposes:
1. To elect two directors to serve three-year terms
expiring at the Annual Meeting of Shareholders to be
held in 2001, or until their successors are elected and
qualified;
2. To approve the Company's Incentive Stock Plan; and,
3. To transact such other business as may properly come
before the meeting and any adjournments thereof.
Only shareholders of record at the close of business on
November 21, 1997, will be entitled to notice of and to vote at
the meeting and any adjournments thereof.
By Order of the Board of Directors,
/s/ Robert W. Lockwood
ROBERT W. LOCKWOOD
Secretary
<PAGE> 4
RALCORP HOLDINGS, INC.
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Ralcorp Holdings,
Inc. (the "Company") in connection with the solicitation of proxies by the
Board of Directors of the Company for use at the 1998 Annual Meeting of
Shareholders to be held at the time and place and for the purposes set forth
in the foregoing Notice of Annual Meeting of Shareholders. This Proxy
Statement and the Company's 1997 Annual Report to Shareholders are being
mailed to shareholders on or about December 15, 1997.
On January 19, 1994, a company named Ralcorp Holdings, Inc. ("Old
Ralcorp") was incorporated in the State of Missouri. Old Ralcorp became a
public company when it was spun-off from its former parent, Ralston Purina
Company on March 31, 1994. Old Ralcorp was engaged in several businesses
including ski resorts, private label crackers and cookies and branded baby
food, but its principal business was branded and private label ready-to-eat
cereal. In early 1996, wholesale price discounting by major branded
manufacturers in the ready-to-eat cereal category substantially reduced the
profitability of Old Ralcorp's combined branded and private label ready-to-eat
cereal business. This competitive activity together with Old Ralcorp's debt
structure led Old Ralcorp to undertake a number of cost cutting measures and
ultimately led Old Ralcorp's management and Board of Directors to approve a
restructuring of the Company. This restructuring was ultimately effected and
included the following steps:
* The sale of Old Ralcorp's ski resorts business to Vail Resorts, Inc.
on January 3, 1997 in a transaction which included receipt of a
minority interest in Vail Resorts, Inc.
* The transfer of the private label cereal business, private label
cracker and cookie business, branded baby food business and ski
resort investment into a new company also called Ralcorp Holdings,
Inc., which was spun-off to Old Ralcorp shareholders on January 31,
1997. (THIS PROXY STATEMENT RELATES TO THIS NEW COMPANY WHICH IS
REFERRED TO IN THIS DOCUMENT AS "NEW RALCORP" OR "THE COMPANY".)
* The acquisition by General Mills, Inc. of Old Ralcorp on January 31,
1997. At the time of this acquisition, Old Ralcorp contained only the
branded cereal business.
Because of this restructuring, certain information contained in this Proxy
Statement, particularly information on compensation of executives who served
both Old Ralcorp and New Ralcorp, relates to periods when some or all of the
relevant businesses were owned and operated by Old Ralcorp.
VOTING AND REVOCABILITY OF PROXY
The voting securities of the Company presently consist of its $.01 par
value Common Stock ("Common Stock"). As of November 21, 1997, the Company
had 33,011,317 shares of Common Stock issued and outstanding. No shares of
Common Stock were held in the Company's treasury as of November 21, 1997.
The persons named as proxies on the proxy card accompanying this Proxy
Statement were designated by the Company's Board of Directors (the "Board").
The shares represented by each such proxy will be voted in accordance with the
terms of the proxy. Proxies also authorize such persons to vote the shares
represented thereby on any matters not known at the time this Proxy Statement
was printed that may properly be presented for action at the meeting. Any
shareholder giving a proxy has the right to revoke it by notifying the
Secretary of the Company in writing at any time before its exercise. Execution
of the proxy will not affect a shareholder's right to attend the meeting and
vote in person.
RECORD DATE AND VOTING RIGHTS
Only shareholders of record at the close of business on November 21, 1997,
are entitled to vote at the meeting. Each share of Common Stock outstanding on
the record date will be entitled to one vote. The Company's shareholders do
not have the right to vote cumulatively in electing directors.
A majority of the outstanding shares entitled to vote at this meeting
represented in person or by proxy will constitute a quorum. The affirmative
vote of a majority of the shares entitled to vote on the subject matter and
present
1
<PAGE> 5
in person or by proxy at a meeting at which a quorum is present is required to
elect directors, approve the Incentive Stock Plan (the "Plan") and act on
other matters properly brought before the meeting. Shares represented by
proxies that are marked "withheld" with respect to the election of any one
or more of the nominees for election as directors, proxies that are marked
"abstain" on Proposal 2, and proxies that are marked to deny discretionary
authority on any other matters will be counted as shares present for purposes
of determining the presence of a quorum; such shares will also be treated as
shares present and entitled to vote, which will have the same effect as a vote
against such nominee or nominees, approval of the Plan and any such other
matters, respectively. If a broker indicates on the proxy that it does not
have discretionary authority to vote on a particular matter, the related
shares will not be considered as present and entitled to vote with respect to
that matter.
PROXY STATEMENT PROPOSALS
ELECTION OF DIRECTORS
(PROPOSAL 1 ON PROXY CARD)
Under the Company's Restated Articles of Incorporation (the "Articles"),
Bylaws and a Board resolution adopted pursuant thereto, the Board consists of
six members organized into three classes, with each class consisting of two
members and with each director elected to serve for a three-year term.
At this meeting, the Board proposes the election of two directors to serve
three-year terms ending with the 2001 Annual Meeting of Shareholders, or until
their successors are elected and qualified. In accordance with the
recommendation of its Nominating and Compensation Committee, the Board has
nominated William D. George, Jr. and William P. Stiritz for election as
directors at this meeting. Each nominee is currently serving as a director and
has consented to serve for a new term. If either nominee should be unable to
serve as a director, an unanticipated event, proxies denying discretionary
authority may be voted in favor of the election of such other person as the
Board may nominate, unless the Board reduces the number of directors.
INFORMATION ABOUT NOMINEES AND DIRECTORS
Biographical information regarding Nominees for Director and Directors
Continuing in Office is set forth below. Directors' ages are as of December
31, 1997. Board service includes service as a director of Old Ralcorp.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
<C> <S>
WILLIAM H. DANFORTH
(Continuing in office -- Term Expiring 1999)
[PHOTO]
Dr. Danforth, 71, has been a director since March, 1994. He is Chairman of the Board
of Trustees of Washington University and has served in that capacity since July, 1995.
He retired as Chancellor of Washington University in June, 1995, a position he held
since 1971. He is also a director of Ralston Purina Company.
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WILLIAM D. GEORGE, JR.
(Standing for election at this meeting for a term expiring 2001)
[PHOTO]
Mr. George, 65, has been a director since March, 1994. He retired as President and
Chief Executive Officer and as a member of the Board of Directors of S.C. Johnson &
Son, Inc. in January, 1997, a position he held since 1993. He served as S.C. Johnson's
President and Chief Operating Officer, Worldwide Consumer Products, from 1990 to 1993.
He is also a director of Arvin Industries, Inc. and Moorman Manufacturing Company.
- -----------------------------------------------------------------------------------------------------------------
JACK W. GOODALL
(Continuing in office -- Term Expiring 2000)
[PHOTO]
Mr. Goodall, 59, has been a director since March, 1994. He is Chairman of the Board of
Foodmaker, Inc. and has served in that capacity since April, 1996. He served as
Chairman, President and Chief Executive Officer of Foodmaker, Inc. from 1985 to 1996.
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2
<PAGE> 6
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DAVID W. KEMPER
(Continuing in office -- Term Expiring 1999)
[PHOTO]
Mr. Kemper, 47, has been a director since October, 1994. He is Chairman, President and
Chief Executive Officer of Commerce Bancshares, Inc. and has served in that capacity
since 1991. He is also a director of SLH Corporation, Tower Properties Company and
Wave Technologies International, Inc.
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JOE R. MICHELETTO
(Continuing in office -- Term Expiring 2000)
[PHOTO]
Mr. Micheletto, 61, has been a director since January, 1994. He is Chief Executive
Officer and President of Ralcorp Holdings, Inc. and has served in that capacity since
September, 1996. He served as Co-Chief Executive Officer and Chief Financial Officer
of Ralcorp Holdings, Inc. from 1994 to 1996. He served as Vice President and
Controller of Ralston Purina Company from 1985 to 1994, and as Chief Executive Officer
of Ralston Resorts from 1991 to 1997. He is also a director of Vail Resorts, Inc.
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WILLIAM P. STIRITZ, CHAIRMAN OF THE BOARD
(Standing for election at this meeting for a term expiring 2001)
[PHOTO]
Mr. Stiritz, 63, has been a director since January, 1994. He is Chairman of the Board
of Ralston Purina Company and has served in that capacity since October, 1997. He
served as Chairman of the Board, Chief Executive Officer and President of Ralston
Purina Company from 1982 to 1997. He is also a director of Angelica Corporation, Ball
Corporation, The May Department Stores Company, Reinsurance Group of America,
Incorporated and Vail Resorts, Inc.
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</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MESSRS. GEORGE AND STIRITZ.
---
OWNERSHIP OF THE COMPANY'S SECURITIES
Table I below sets forth information regarding persons known by the
Company to beneficially own (as defined by Securities and Exchange Commission
("SEC") Rule 13d-3) more than 5% of the Company's Common Stock as of
November 21, 1997.
<TABLE>
TABLE I
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY % OF SHARES EXPLANATORY
OF BENEFICIAL OWNER OWNED OUTSTANDING NOTES
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<S> <C> <C> <C>
First Manhattan Co. 2,600,839 7.9% <FA>
437 Madison Avenue
New York, NY 10022
Harris Associates L.P. 3,050,000 9.2% <FB>
Two North LaSalle Street
Chicago, IL 60602
<FN>
- --------
<FA> Of these shares, First Manhattan Co. has voting and investment
powers as follows: sole voting--69,000 shares; shared
voting--2,498,189 shares; sole investment--69,000 shares; and shared
investment--2,531,839 shares. First Manhattan Co. disclaims
beneficial ownership as to 109,200 shares held by family members
of general partners of First Manhattan Co.
<FB> Harris Associates L.P. has shared voting and investment powers with
respect to all these shares.
</TABLE>
3
<PAGE> 7
Table II sets forth information regarding beneficial ownership (as defined
by SEC Rule 13d-3) of Common Stock by Directors, Nominees for Director,
Executive Officers named in the Summary Compensation Table on page 10 (the
"Named Executive Officers"), and all Directors and Executive Officers as a
group, as of November 21, 1997. Except as noted, all such persons possess sole
voting and investment powers with respect to the shares listed. An asterisk in
the column listing the percentage of shares beneficially owned indicates the
person owns less than 1% of the Common Stock as of November 21, 1997.
<TABLE>
TABLE II
<CAPTION>
DIRECTORS, NUMBER OF SHARES
NOMINEES AND BENEFICIALLY % OF SHARES EXPLANATORY
EXECUTIVE OFFICERS OWNED OUTSTANDING NOTES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William H. Danforth 306,967 <F*> <FA><FB>
William D. George, Jr. 1,000 <F*>
Jack W. Goodall 30,900 <F*>
David W. Kemper 9,000 <F*>
Joe R. Micheletto 60,007 <F*> <FC><FJ>
William P. Stiritz 876,459 2.7% <FD>
Robert W. Lockwood 17,598 <F*> <FE><FJ>
James A. Nichols 66,705 <F*> <FF><FJ>
David P. Skarie 11,287 <F*> <FG><FJ>
Susan P. Widham 7,093 <F*> <FH><FJ>
All Directors and Executive Officers
as a Group (12 persons) 1,400,836 4.2% <FI><FJ>
<FN>
- --------
<FA> Excludes 336,900 shares, or 1% of the outstanding Common Stock held
by The Danforth Foundation, St. Louis, Missouri. Dr. Danforth is
one of ten trustees of the Foundation. Dr. Danforth disclaims
beneficial ownership of such shares.
<FB> Dr. Danforth has sole voting and investment powers respecting
22,648 shares and shares voting and investment powers respecting
284,319 shares. Dr. Danforth disclaims beneficial ownership of
29,397 shares.
<FC> Includes 17,917 shares of Common Stock held under the Company's
Savings Investment Plan. Mr. Micheletto has only voting power with
respect to 1,372 of these shares.
<FD> Includes 18,333 shares of Common Stock owned by Mr. Stiritz's wife.
<FE> Includes 12,535 shares of Common Stock as to which he shares voting
and investment powers. Also includes 5,063 shares of Common Stock
held under the Company's Savings Investment Plan. Mr. Lockwood
has only voting power with respect to 2,699 of these shares.
<FF> Includes 16,419 shares of Common Stock held under the Company's
Savings Investment Plan. Mr. Nichols has only voting power with
respect to 2,377 of these shares.
<FG> Includes 2,800 shares of Common Stock held under the Company's
Savings Investment Plan. Mr. Skarie has only voting power with
respect to 1,807 of these shares.
<FH> Includes 5,015 shares of Common Stock held under the Company's
Savings Investment Plan. Ms. Widham has only voting power with
respect to 2,402 of these shares.
<FI> With respect to all Executive Officers except those named in the
above Table: includes 5,776 shares of Common Stock held under the
Company's Savings Investment Plan (the Executive Officers have only
voting power with respect to 3,014 of these shares).
<FJ> Shares of Common Stock that are held in the Company's Savings
Investment Plan are not directly allocated to individual
participants but instead are held in a separate fund in which
participants acquire units. Such fund also holds varying amounts of
cash and short-term investments. The number of shares of Common
Stock reported herein as being held in the Savings Investment Plan
with respect to the Executive Officers is an approximation of the
number of such shares in the fund allocable to each of the
the Executive Officers. The number of shares allocable to a
participant in the fund will vary on a daily basis based upon the
cash position of the fund and the market price of the Common Stock.
</TABLE>
4
<PAGE> 8
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than ten
percent of the Company's Common Stock, to file initial statements of
beneficial ownership (Form 3), and statements of changes in beneficial
ownership (Forms 4 or 5), of the Common Stock with the SEC and the New York
Stock Exchange, Inc. Directors, officers and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all such forms they file.
The Company's Chief Executive Officer and President, J. R. Micheletto,
inadvertently filed a Form 4 relating to a purchase of the Company's Common
Stock late. The transaction was reported on a Form 4 which was due on June 10,
1997, but which was filed with the SEC on June 17, 1997. The Company believes
that during fiscal year 1997 in all other respects its directors and officers
complied with all filing requirements applicable to them, based solely on the
Company's review of the copies of forms received by it, or written
representations from certain reporting persons that no additional forms were
required for those persons.
DIRECTORS' MEETINGS, COMMITTEES AND FEES
The Board currently has four regular meetings scheduled per year, and
holds such special meetings as deemed advisable, to review significant matters
affecting the Company and to act upon matters requiring Board approval. During
fiscal year 1997, there were three regular meetings, four special telephonic
meetings and one consent of Board of Directors in lieu of a special meeting.
Non-management directors receive an annual retainer of $20,000. They are also
paid $1,000 for attending each regular or special Board meeting, standing
committee meeting, telephonic meeting and consent to action without a meeting.
The Company also pays the premiums on Directors' and Officers' liability and
travel accident insurance policies insuring directors. Mr. Micheletto receives
no remuneration for his services as a director. During the year the
non-management Directors also received non-qualified stock options with an
exercise price of $12.00 per share, the market price of a share of Common
Stock on the date of the grant. Each Director received options on 10,000
shares except Mr. Stiritz who, in light of his important service as Chairman
of the Board, received options on 150,000 shares. The options are exercisable
upon the Director's retirement from the Board and remain exercisable for
various periods of time depending on the circumstances (three years in the
case of retirement at, or after, attaining age 70).
The Company has a Deferred Compensation Plan for Non-Management Directors.
Under this plan, any non-management director may elect to defer, with certain
limitations, all retainers and fees until retirement or other termination of
his or her directorship. Deferrals may be made in Common Stock equivalents in
an Equity Option (stock equivalents) or may be made in cash under a Variable
Interest Option (interest at prime rate). Deferrals in the Equity Option
receive a 33-1/3% Company matching contribution. All Directors have elected to
defer their retainer and fees.
To assist the Board in the discharge of its responsibilities, it has an
Audit Committee and a Nominating and Compensation Committee. A description of
each of these standing committees and their membership as of the date of this
Proxy Statement follows:
--------------------------
AUDIT COMMITTEE Members: D. W. Kemper,
Chairman; W. H. Danforth,
W. D. George, Jr., J. W. Goodall and
W. P. Stiritz
The Audit Committee consists of five non-management directors and is
responsible for matters relating to accounting policies and practices,
financial reporting and internal controls. Each year it recommends to the
Board the appointment of a firm of independent accountants to examine the
financial statements of the Company. It reviews with representatives of the
independent accountants the scope of the examination of the Company's
financial statements, results of audits, audit costs and recommendations with
respect to internal controls and financial matters. The Audit Committee also
reviews nonaudit services rendered by the Company's independent accountants
and periodically meets with or receives reports from principal officers. The
Audit Committee met three times in fiscal year 1997.
--------------------------
5
<PAGE> 9
NOMINATING AND Members: J. W. Goodall,
COMPENSATION COMMITTEE Chairman; W. H. Danforth,
W. D. George, Jr.,
D. W. Kemper and
W. P. Stiritz
The Nominating and Compensation Committee consists of five non-management
directors. It recommends to the Board nominees for election as directors and
executive officers of the Company. Additionally, it makes recommendations to
the Board regarding election of directors to positions on committees of the
Board and compensation and benefits for directors. The Nominating and
Compensation Committee also sets the compensation of all executive officers
and administers the Company's Deferred Compensation Plan for Key Employees and
Incentive Stock Plan, including the granting of awards under the latter plan.
It also reviews the competitiveness of management compensation and benefit
programs and principal employee relations policies and procedures. The
Nominating and Compensation Committee met three times in fiscal year 1997.
The Committee will consider suggestions from shareholders regarding
possible director candidates. Such suggestions, together with appropriate
biographical information, should be submitted to the Secretary of the Company.
During fiscal year 1997, all Directors attended 75% or more of the
aggregate of the meetings of the Board and of the Board committees to which
they were appointed.
APPROVAL OF INCENTIVE STOCK PLAN
(PROPOSAL 2 ON PROXY CARD)
DESCRIPTION OF PLAN
The Incentive Stock Plan (the "Plan") provides for the granting of stock
options, restricted stock awards and other awards payable in Common Stock or
cash to Company employees, including Named Executive Officers. A copy of the
Plan as proposed to be approved is contained in Appendix A to this Proxy
Statement. The purpose of the Plan is to enhance the profitability and value
of the Company for the benefit of its shareholders by providing stock awards
to attract, retain and motivate officers and other key employees who make
important contributions to the success of the Company. The Plan will be
administered by the Nominating and Compensation Committee of the Board of
Directors (the "Committee") although the Board also has the authority to
perform certain administrative functions and to grant awards. Terms and
conditions of awards will be set forth in written agreements. The Plan will
continue until January 31, 2007. The Plan provides that 2,900,000 shares of
Common Stock will be available for the granting of awards under the Plan. The
closing price of the Common Stock on November 21, 1997 was $17.44.
The Plan is intended to replace the Old Ralcorp Incentive Stock Plan under
which new stock awards could no longer be granted following the spin-off of
the Company on January 31, 1997. The Plan was approved by the Board on
December 18, 1996 shortly after the incorporation of the Company and certain
awards (as described in the table on page 8) were granted under it. However,
regulations issued by the Internal Revenue Service under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), provide that, in
order for an award to a Named Executive Officer under a qualified
performance-based compensation plan to be deductible by the Company in the
event total compensation for such Executive for the year exceeds $1 million,
shareholders must approve the terms of such plan no later than the first
shareholder meeting following the spin-off. Consequently, the Plan is being
submitted to shareholders for approval at this meeting.
Any employee or director of the Company or any of its subsidiaries will be
eligible for any award under the Plan if selected by the Board or the
Committee. There are approximately 2,500 persons employed by the Company and
its subsidiaries. Subject to the provisions of the Plan, the Committee will
have full authority and discretion to determine the individuals to whom awards
will be granted and the amount and form of such awards. No determination has
been made by the Board or the Committee with respect to the specific
recipients or the amount or nature of any future awards under the Plan except
with respect to awards already granted as noted above. Shares that may be
granted to a single individual by the Committee are limited to 1.5 million.
6
<PAGE> 10
Under the Plan, the Committee will be authorized (i) to grant stock
options that qualify as "Incentive Stock Options" ("ISOs") under Section
422 of the Code, and (ii) to grant stock options that do not so qualify.
Within the discretion of the Board or the Committee, stock options can be
granted at an option price less than, equal to, or more than the fair market
value of the Common Stock at the time of grant. No stock option can be
exercised more than ten years after the date such option is granted. In the
case of ISOs, the aggregate fair market value of the Common Stock with respect
to which options are exercisable for the first time by any recipient during
any calendar year cannot, under present tax rules, exceed $100,000.
The Committee will also be authorized to grant Other Stock Awards
including, but not limited to, restricted stock awards and deferrals of an
employee's cash bonus or other compensation in the form of stock equivalents
under such terms and conditions as the Committee may prescribe. The shares of
Common Stock that may be granted pursuant to a restricted stock award will be
restricted and will not be able to be sold, pledged, transferred or otherwise
disposed of until such restrictions lapse. Shares of Common Stock issued
pursuant to a restricted stock award will be issued for no monetary
consideration.
The Committee has determined that the deferral of cash bonuses and other
compensation under the Plan will be made in accordance with the provisions of
the Deferred Compensation Plan for Key Employees. Pursuant to that plan, the
Committee may, in its discretion, permit an eligible employee to defer payment
of a cash bonus or other cash consideration under the Equity Option of that
plan. Upon such deferral, an unfunded account in the employee's name will be
credited with an appropriate number of stock equivalents. Also, an additional
matching deferral (currently 25%) may be credited with respect to all employee
deferrals in any specific fiscal year, subject to forfeiture if the employee
leaves employment with the Company (as a result of normal retirement) prior to
five years following such crediting. Such employee's account will be credited
from time to time with dividend equivalents if dividends are paid by the
Company. Distributions under the Equity Option may be made only upon the
employee's retirement or other termination of employment. Upon distribution,
the employee will receive shares of Common Stock equal to the number of
equivalents in such employee's vested balance account or, at the Committee's
discretion, may receive the value of such shares in cash.
The Plan provides that it may be amended by the Board, except that no such
amendment can increase the number of shares of stock reserved for awards,
withdraw the authority of the Committee to administer the Plan, change the
class of individuals who may be eligible for awards, or change the term of
awards granted prior to the amendment without the consent of the recipient.
Appropriate adjustments will be made to the number of shares available for
awards and the terms of outstanding awards under the Plan to reflect any
issuance by the Company of another class of common, preferred, or otherwise
targeted stock, any stock split-up, spin-off, issuance of targeted stock,
stock dividend, combination or reclassification with respect to any
outstanding series or class of stock of the Company, the consolidation or
merger of the Company with any other entity or the sale of all or
substantially all of the assets of the Company.
Under the Company's current accounting practices, stock options which
contain no specific performance criterion and are granted with an option price
at least equal to the market price of the Common Stock on the date of grant
would not result in any charge against earnings of the Company either at the
time of grant or upon exercise. Stock options with a performance component
will result in a charge to earnings if the performance criterion is met. If
the options are exercised, the proceeds received will be credited to the
Common Stock account and to the capital in excess of par account and the
shares issued would be added to the total Common Stock outstanding. Other
Stock Awards will result in a charge against earnings.
7
<PAGE> 11
NEW PLAN BENEFITS
The Committee and the Board have the discretion to grant awards under the
Plan and, as noted, no determination has been made as to specific recipients
or the amount or nature of future awards to be made under the Plan. However,
the following table reflects benefits granted or credited during fiscal year
1997. Since benefits granted in any particular year are solely in the
discretion of the Committee, amounts shown in this table should not be assumed
to predict any awards that may be granted in future years under the Plan. The
awards shown below for the Named Executive Officers have also been reported in
the Summary Compensation Table on page 10 of this Proxy Statement.
<TABLE>
<CAPTION>
STOCK EQUIVALENTS
STOCK DOLLAR VALUE($)<F2>
DOLLAR VALUE OPTIONS (AS OF DATE NUMBER OF
NAME AND PRINCIPAL POSITION OF OPTIONS<F1> GRANTED<F1> OF CREDITING) STOCK EQUIVALENTS<F2>
--------------------------- -------------- ----------- ------------------- ---------------------
<S> <C> <C> <C> <C>
J. R. Micheletto $ 642,000 96,000 $37,500 2,035.278
Chief Executive Officer and President
R. W. Lockwood $ 234,063 35,000 $16,250 881.954
Vice President, General Counsel and Secretary
J. A. Nichols $ 287,563 43,000 $10,000 542.741
Vice President; and President, Ralston Foods
D. P. Skarie $ 234,063 35,000 $ 8,750 474.898
Vice President and Director of Customer Development
S. P. Widham $ 287,563 43,000 $17,500 949.796
Vice President; and President, Beech-Nut Nutrition
Corporation
Executive Officer Group $2,206,875 330,000 $99,375 5,393.487
Non-Executive Director Group $1,270,625 190,000 0 0
Non-Executive Officer Employee Group $2,206,875 330,000 $59,670 3,238.521
<FN>
- --------
<F1> The exercise price, expiration date and other conditions of option
grants to the Named Executive Officers are provided in the Option Grant
Table on page 11 of this Proxy Statement. All options granted were
granted at an option price of $12.00 per share which is equal to the fair
market value of the Common Stock on the date of grant. Dollar value
reflects value at September 30, 1997.
<F2> The amount shown reflects only the 25% Company match on amounts deferred
during the last fiscal year under the Equity Option of the Deferred
Compensation Plan for Key Employees.
</TABLE>
INCOME TAX CONSEQUENCES
Stock options to be issued under the Plan as ISOs will satisfy the
requirements of Section 422 of the Code. Under the provisions of that section,
the optionee will not be deemed to receive any income at the time an ISO is
granted or exercised. If the optionee disposes of the shares of Common Stock
acquired more than two years after the grant and one year after the exercise
of the ISO, the gain, if any (i.e., the excess of the amount realized for the
shares over the option price) will be long-term capital gain. If the optionee
disposes of the shares acquired on exercise of an ISO within two years after
the date of grant or within one year after the exercise of the ISO, the
disposition will constitute a "disqualifying disposition" and the optionee
will have ordinary income in the year of the disqualifying disposition equal
to the fair market value of the stock on the date of exercise minus the option
price. The excess of the amount received for the shares over the fair market
value at the time of exercise will be short-term capital gain if the shares
are disposed of within one year after the ISO is exercised, or long-term
capital gain if the shares are disposed of more than one year after the ISO is
exercised. If the optionee disposes of the shares in a disqualifying
disposition, and such disposition is a sale or exchange which would result in
a loss to the optionee, then the amount treated as ordinary income shall not
exceed the excess (if any) of the amount realized on such sale or exchange
over the adjusted basis of such shares.
8
<PAGE> 12
The Company is not entitled to a deduction as a result of the grant or
exercise of an ISO. If the optionee has ordinary income as a result of a
disqualifying disposition, the Company will have a corresponding deductible
expense in an equivalent amount in the taxable year of the Company in which
the disqualifying disposition occurs.
The difference between the fair market value of the option at the time of
exercise and the option price is a tax preference item for alternative minimum
tax purposes. The basis in stock acquired upon exercise of an ISO for
alternative minimum tax purposes is increased by the amount of the preference.
Stock options issued under the Plan which do not satisfy the requirements
of Section 422 of the Code will have the following tax consequences:
1. the optionee will have ordinary income at the time the option is
exercised in an amount equal to the excess of the fair market value
of the Common Stock acquired at the date of exercise over the
option price;
2. the Company will have a deductible expense in an amount equal to
the ordinary income of the optionee;
3. no amount other than the price paid upon exercise of the option
shall be considered as received by the Company for shares so
transferred; and,
4. any gain from subsequent sale of the shares of Common Stock
acquired upon exercise for an amount in excess of fair market value
on the date the option is exercised will be capital gain and any
loss will be capital loss.
In general, a recipient of Other Stock Awards, including stock equivalents
pursuant to the Deferred Compensation Plan for Key Employees, but excluding
restricted stock awards (see below), will have ordinary income equal to the
cash or fair market value of the Common Stock on the date received in the year
in which the award is actually paid. The Company will have a corresponding
deductible expense in an amount equal to that reported by the recipient as
ordinary income in the same year so reported. The recipient's basis in the
stock received will be equal to the fair market value of the Common Stock when
received and his or her holding period will begin on that date.
With respect to restricted stock awards, such awards do not constitute
taxable income under existing Federal tax law until such time as restrictions
lapse with respect to any installment. When any installment of shares are
released from restriction, the market value of such shares of Common Stock on
the date the restrictions lapse constitutes income to the recipient in that
year and is taxable at ordinary income rates.
The Code, however, permits a recipient of a restricted stock award to
elect to have the award treated as taxable income in the year of the award and
to pay tax at ordinary income tax rates on the fair market value of all of the
shares awarded based on the price of the shares on the date the recipient
receives a beneficial interest in such shares. The election must be made
promptly within time limits prescribed by the Code and the regulations
thereunder. Any appreciation in value thereafter would be taxed at capital
gain rates when the restrictions lapse and the stock is subsequently sold.
However, should the market value of the stock, at the time the restrictions
lapse and the stock is sold, be lower than at the date acquired, the recipient
would have a capital loss, to the extent of the difference. In addition, if,
after electing to pay tax on the award in the year received, the recipient
subsequently forfeits the award for any reason, the tax previously paid is not
recoverable. Since the lapse of restrictions on restricted stock awards is
accelerated in the event of a change in control of the Company, such an
acceleration may result in an excess parachute payment, as defined in Section
280G of the Code. In such event, the Company's deduction with respect to such
excess parachute payment is denied and the recipient is subject to a
nondeductible 20% excise tax on such excess parachute payment.
VOTE REQUIRED
The affirmative vote of a majority of the shares entitled to vote and
present in person or by proxy is required for approval.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2, APPROVAL OF THE
---
INCENTIVE STOCK PLAN.
9
<PAGE> 13
OTHER BUSINESS
The Board knows of no business that will be presented for consideration at
the 1998 Annual Meeting of Shareholders other than that stated above. Should
any such matter properly come before the meeting, votes may be cast pursuant
to proxies with respect to any such matter in the best judgment of the person
or persons acting under the proxies.
SELECTION OF AUDITORS
The Company's Board, upon the recommendation of the Audit Committee,
appointed Price Waterhouse as independent accountants for the current fiscal
year. Price Waterhouse was the Company's independent accountant for fiscal
year 1997 and has served in this capacity since 1994. Representatives of that
firm will be present at the 1998 Annual Meeting of Shareholders, will have an
opportunity to make a statement, if they desire, and will be available to
respond to appropriate questions.
EXECUTIVE COMPENSATION
INTRODUCTION AND SUMMARY
The following tables and narrative text discuss the compensation paid in
fiscal year 1997 to the Named Executive Officers, i.e., the Company's Chief
Executive Officer and President and to the Company's four other most highly
compensated executive officers.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
(AWARDS)
ANNUAL COMPENSATION ----------------------------
------------------------------------- SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPENSATION STOCK AWARD(S) OPTIONS COMPENSATION
NAME & PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) ($)<F1> (#) ($)<F2>
------------------------- ---- --------- -------- ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. R. Micheletto 1997 $300,000 $150,000 $14,068 0 96,000 $80,466
Chief Executive Officer 1996 $210,000 $100,000 $19,481 0 0 $46,733
and President 1995 $210,000 $100,000 $13,169 0 20,000 $41,497
R. W. Lockwood 1997 $182,000 $ 65,000 $ 0 0 35,000 $24,468
Vice President, General 1996 $182,000 $ 43,000 $ 0 0 0 $21,863
Counsel and Secretary 1995 $165,000 $ 43,000 $12,815 0 12,000 $20,900
J. A. Nichols 1997 $180,000 $ 80,000 $ 0 0 43,000 $39,075
Vice President; and President, 1996 $157,000 $ 60,000 $ 596 0 0 $42,080
Ralston Foods 1995 $140,000 $ 60,000 $12,286 0 15,000 $38,904
D. P. Skarie 1997 $152,000 $ 65,000 $ 0 0 35,000 $16,870
Vice President and Director 1996 $152,000 $ 55,000 $ 0 0 0 $18,931
of Customer Development 1995 $135,000 $ 55,000 $12,000 0 15,000 $16,510
S. P. Widham 1997 $150,000 $ 70,000 $ 0 0 43,000 $24,250
Vice President; and President, 1996 $103,700 $ 36,000 $ 0 0 0 $ 8,382
Beech-Nut Nutrition Corporation 1995 $ 90,000 $ 32,000 $ 0 0 4,500 $12,295
<FN>
- --------
<F1> Vesting of all Old Ralcorp Restricted Stock was accelerated to
January 31, 1997. (See Nominating and Compensation Committee Report on
Executive Compensation on page 13.) No Restricted Stock was held at the
end of the 1997 fiscal year.
<F2> The amounts shown in this column consist of the following: (i) Company
matching contributions or accruals to the Company's Savings Investment
Plan and Executive Savings Investment Plan. Such amounts are $14,250,
$8,218, $9,600, $8,120, and $6,750, respectively, for Messrs. Micheletto,
Lockwood, Nichols and Skarie and Ms. Widham; (ii) Amounts attributable
to the portion of split-dollar life insurance premiums paid by the
Company. These amounts will be repaid on a specified future date. Amounts
included are equal to the premiums outstanding during fiscal year 1997
multiplied by the Company's approximate borrowing rate for money
borrowed for comparable periods. Such amounts are $28,716 and $19,475
respectively, for Messrs. Micheletto and Nichols; and, (iii) Company 25%
matching contributions on deferrals under the Equity Option of the
Deferred Compensation Plan for Key Employees. Such amounts are $37,500,
$16,250, $10,000, $8,750, and $17,500, respectively, for Messrs.
Micheletto, Lockwood, Nichols and Skarie and Ms. Widham.
</TABLE>
10
<PAGE> 14
STOCK OPTIONS
The following table sets forth stock option grants to the Named Executive
Officers during fiscal year 1997.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------------- ----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#)<F1> IN FISCAL YEAR ($/SH) DATE VALUE$<F2>
---- -------------- -------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
J. R. Micheletto 96,000 14.5% $12.00 5/19/2007 $665,390
R. W. Lockwood 35,000 5.3% $12.00 5/19/2007 $242,590
J. A. Nichols 43,000 6.5% $12.00 5/19/2007 $298,039
D. P. Skarie 35,000 5.3% $12.00 5/19/2007 $242,590
S. P. Widham 43,000 6.5% $12.00 5/19/2007 $298,039
<FN>
- --------
<F1> 40% of the total shares become exercisable on May 20, 2002 and the
remaining 60% of the total shares become exercisable on May 20, 2006.
<F2> Grant date valuation amounts were determined by application of the
Black-Scholes valuation method. Assumptions used were as follows: (i)
interest rate equals the interpolated Treasury rate for the applicable
maturity on the grant date; (ii) dividend yield continues as 0%;
(iii) expected volatility at grant date equals 30%; and, (iv) exercise
period equals period until expiration.
</TABLE>
The following table sets forth fiscal year-end option values. The Company
has never granted Stock Appreciation Rights.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
SHARES ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE(#)<F1> REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. R. Micheletto 176,746 $853,301 0 96,000 $0 $642,000
R. W. Lockwood 44,256 $200,832 0 35,000 $0 $234,063
J. A. Nichols 127,781 $820,916 0 43,000 $0 $287,563
D. P. Skarie 42,695 $151,665 0 35,000 $0 $234,063
S. P. Widham 10,539 $ 30,337 0 43,000 $0 $287,563
<FN>
- --------
<F1> As a condition to the grants of Employment Agreements described on
page 12, the Named Executive Officers were required to either exercise
all of their Old Ralcorp stock options (the vesting of which, in the case
of certain awards, was accelerated) prior to the spin-off of New Ralcorp
or to accept a cash payment equal to the difference between the exercise
price and the average of the closing prices of Old Ralcorp stock for the
ten days prior to January 31, 1997. Options that were not "in-the-money"
were paid off at 50 cents per share. Amounts in this column reflect the
exercise by Mr. Nichols of options on 20,416 shares and, for all other
shares listed in the column, the number of shares with respect to which a
cash payment was made.
</TABLE>
COMPENSATION PURSUANT TO PLANS
During fiscal year 1997, the Company maintained certain plans that
provided benefits to executive officers and other employees of the Company.
Descriptions of some of those plans follow. The descriptions provided are in
summary form and are contained in this Proxy Statement solely in order to meet
SEC requirements regarding disclosure of the compensation of the Named
Executive Officers and should not be used for any other purpose.
11
<PAGE> 15
EMPLOYMENT/SEVERANCE AGREEMENTS
The Company has Employment Agreements with the Named Executive Officers. The
term of these Employment Agreements is three years beginning February 1, 1997
and ending January 31, 2000. The Employment Agreements provide for payment of a
minimum monthly salary and minimum bonus each year during the term of the
Agreement. Minimum monthly salaries are as follows: Mr. Micheletto--$25,000;
Mr. Lockwood--$15,167; Mr. Nichols--$15,000; Mr. Skarie--$12,667; and
Ms. Widham--$12,500. Minimum bonuses are as follows: Mr. Micheletto--$150,000;
Mr. Lockwood--$21,500; Mr. Nichols--$45,000; Mr. Skarie--$27,500; and
Ms. Widham--$37,500.
Actual monthly salaries and bonuses may be higher within the discretion of
the Committee. The Employment Agreements also provide that the Named Executive
Officers shall receive an executive level benefit program as determined by the
Board.
Any Named Executive Officer may be terminated at any time without
"cause" but if such termination occurs prior to the end of the term of the
Employment Agreement, such Named Executive Officer will be entitled to receive
monthly base salary, minimum bonus and employee benefits through the end of
the term. Notwithstanding these provisions, the Company can terminate the
Employment Agreement immediately and without notice if the Named Executive
Officer engages in certain specified conduct, including the refusal without
cause, to perform his assigned duties, the open criticism in the media of the
Company and the participation in any conduct that the Board determines to be
contrary to the best interests of the Company ("Termination for Cause").
Upon Termination for Cause, the Company will be obligated to pay the Named
Executive Officer such officer's monthly base salary prorated to the date of
the termination event.
In addition, the Company has Management Continuity Agreements with the
Named Executive Officers. The purpose of the agreements is to provide
severance compensation to each covered executive officer in the event of the
officer's voluntary or involuntary termination after a change in control of
the Company. The compensation provided would be in the form of a lump sum
payment equal to the present value of continuing the executive officer's
salary and bonus for a specified period following the executive officer's
termination of employment, the continuation of other executive benefits for
the same applicable period and certain pension bridging payments. The initial
applicable period is two years (three years in the case of the Chief Executive
Officer) in the event of an involuntary termination of employment (including a
constructive termination) and one year, in the event of a voluntary
termination of employment, which periods are subject to reduction for each
complete year the executive officer remains employed following the change in
control. No payments would be made in the event the executive officer's
termination is due to death, disability or normal retirement, or is for cause,
nor would any payments continue beyond the executive officer's normal
retirement date. If a payment obligation under a Management Continuity
Agreement is triggered in connection with the termination of a Named Executive
Officer during the term of such officer's Employment Agreement, then payments
due under the Management Continuity Agreement shall be reduced by payments
made under the Employment Agreement.
Contracts governing stock options provide that upon a change in control of
the Company all terms, conditions, restrictions and limitations in effect with
respect to any unexercised award lapse and no other terms and conditions will
be applied and any unexercised, unvested, unearned or unpaid shares become
100% vested.
RETIREMENT PLAN
The Ralcorp Holdings, Inc. Retirement Plan (the "Retirement Plan") may
provide pension benefits in the future to the Named Executive Officers.
Substantially all regular U.S. employees having one year of service with the
Company or certain of its majority-owned subsidiaries are eligible to
participate in the Retirement Plan. Employees become vested after five years
of service. Normal retirement is at age 65; however, employees who work beyond
age 65 may continue to accrue benefits.
Annual benefits are computed by multiplying the participant's Final
Average Earnings (average of participant's five highest consecutive annual
earnings during ten years prior to retirement or earlier termination) by the
product of 1.5% times the participant's years of service (to a maximum of 40
years) and by subtracting from that amount up to one-half of the participant's
primary social security benefit at retirement (with the actual amount of
offset determined by age and years of service at retirement).
12
<PAGE> 16
The following table shows the estimated annual retirement benefits that
would be payable from the Retirement Plan to salaried employees, including the
Named Executive Officers, assuming age 65 retirement. To the extent an
employee's compensation or benefits exceed certain limits imposed by the
Internal Revenue Code of 1986, as amended, the table also includes benefits
payable from an unfunded supplemental retirement plan. The table reflects
benefits prior to the subtraction of social security benefits as described
above.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
REMUNERATION YEARS OF SERVICE
(FINAL AVERAGE --------------------------------------------------------------------------------------
EARNINGS) 10 15 20 25 30 35 40
-------------- ---------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000
$200,000 $30,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $105,000 $120,000
$300,000 $45,000 $ 67,500 $ 90,000 $112,500 $135,000 $157,500 $180,000
$400,000 $60,000 $ 90,000 $120,000 $150,000 $180,000 $210,000 $240,000
$500,000 $75,000 $112,500 $150,000 $187,500 $225,000 $262,500 $300,000
$600,000 $90,000 $135,000 $180,000 $225,000 $270,000 $315,000 $360,000
</TABLE>
For the purpose of calculating retirement benefits, the Named Executive
Officers had, as of September 30, 1997, the following years of credited
service, calculated to the nearest year: Mr. Micheletto--35 years;
Mr. Lockwood--21 years; Mr. Nichols--22 years; Mr. Skarie--12 years and
Ms. Widham--12 years. Credited service includes service with Ralston, the
Company's former parent corporation. Earnings used in calculating benefits under
the Retirement Plan and any unfunded supplemental retirement plan previously
described are approximately equal to amounts included in the Salary and Bonus
columns in the Summary Compensation Table on page 10.
OTHER BENEFIT PLANS
Beneficiaries of eligible retired executive officers will be provided a
death benefit in an amount equal to 50% of the earnings recognized under the
Company's benefit plans for the executive officer during the last full year of
employment. This benefit is not presently insured or funded.
In addition, the Executive Long-Term Disability Plan would provide
benefits to the Named Executive Officers, including certain executive
officers, in the event they become disabled. The Long-Term Disability Plan,
which is available to certain regular employees of the Company and in which
officers must participate at their own expense in order to be eligible for the
Executive Long-Term Disability Plan, imposes a limit of $5,000 per month (60%
of a maximum annual salary of $100,000) on the amount paid to a disabled
employee. The Executive Long-Term Disability Plan will provide a supplemental
benefit equal to 60% of the difference between the executive officer's
previous year's earnings recognized under the Company's benefit plans and
$100,000, with appropriate taxes withheld.
NOMINATING AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
THE COMMITTEE
The Nominating and Compensation Committee (the "Committee") is comprised
of non-management directors. It approves all direct and indirect compensation
of all executive officers, including base salary, bonuses and long-term
stock-based awards. Presently, long-term stock-based awards consist of stock
options.
Stock options entitle the recipient to purchase a specified number of
shares of the Company's Common Stock after a specified period of time at an
option price which is ordinarily equal to the fair market value of the Common
Stock at the time of grant. They provide executives with an opportunity to buy
and maintain an equity interest in the Company while linking the executive's
compensation directly to shareholder value since the executive receives no
benefit from the option unless all shareholders have benefited from an
appreciation in the value of the Common Stock. In addition, since the options
"vest" serially over a period of time after the date of grant, they enhance
the ability of the Company to retain the executive while encouraging the
executive to take a longer-term view on decisions impacting the Company.
13
<PAGE> 17
BACKGROUND
The Company was spun-off from Old Ralcorp on January 31, 1997. This
spin-off was the culmination of a strategic plan which arose from an upheaval
in the competitive environment in the cereal industry and which resulted in a
dramatic change in the operations, debt structure, cost structure and staffing
of what had been the Old Ralcorp businesses. For more information on the
restructuring that took place during the fiscal year, see page 1.
Although the relevant corporate entity changed during the fiscal year,
there was a degree of continuity throughout the year with regard to executive
compensation: the Old Ralcorp and New Ralcorp fiscal years remained the same;
most of the executive officers of Old Ralcorp became the executive officers of
New Ralcorp; and, the membership of the Boards of Directors and their
Nominating and Compensation Committees was the same for both companies.
Consequently, certain actions taken by the undersigned as members of the Board
of Directors or the Nominating and Compensation Committee of Old Ralcorp with
regard to executive compensation were ratified and confirmed by the
undersigned as members of the Nominating and Compensation Committee of New
Ralcorp after that Company was organized and that committee was appointed.
For purposes of this report no distinction will be made between actions of
the undersigned as members of the Board of Directors or the Nominating and
Compensation Committee of Old Ralcorp or of New Ralcorp and the term
"Committee" shall refer to either or both, as appropriate.
COMPENSATION DECISIONS
In October of 1996, the Committee met to determine salaries for the 1997
fiscal year and bonuses for the 1996 fiscal year. At the time of this meeting,
there was substantial uncertainty regarding the prospects for the Company.
Definitive agreements to sell the ski resorts business and the branded cereal
business had been signed, but these transactions were being reviewed for
anti-trust implications by the U.S. Department of Justice and Federal Trade
Commission, respectively. If the results of those reviews were favorable and
the two transactions were completed, the remaining company would have much
smaller sales and earnings than its predecessor and its success would depend
on major cost-cutting and reorganization initiatives which would be
challenging to conceive and to implement. Under the circumstances, the
Committee felt that it was imperative that certain members of senior
management and other selected employees be retained.
In view of the foregoing, the Committee took the following steps in
October, 1996:
* Approved salaries for the executive officers, including the Named
Executive Officers, for the 1997 fiscal year. For several officers, their
salaries remained the same as for the 1996 fiscal year. For several other
officers, including the Chief Executive Officer, the Committee approved
increases based on the Committee's subjective assessment of such
officers' anticipated increases in responsibilities. In the case of the
Chief Executive Officer, such increase in responsibilities resulted from
his assumption, at the beginning of the fiscal year, of responsibilities
relating to the Company's food businesses and his designation as sole
Chief Executive Officer (he was formerly Co-Chief Executive Officer). In
the case of the other executive officers, the Committee also considered
and relied upon the recommendations of the Chief Executive Officer who in
turn relied to a limited degree on peer group compensation data.
* Approved bonuses equal to those paid at the end of the 1995 fiscal year.
The Committee felt that notwithstanding the significant decline in the
Company's profitability, any action which would result in a significant
reduction in the executive officers' cash compensation would conflict
with the Company's goal of retaining management in order to increase the
likelihood of success of the restructuring effort.
* Approved Employment Agreements for the executive officers for a
three-year period beginning February 1, 1997 and ending January 31, 2000.
These agreements specify monthly salary and bonus minimums to be paid
during the term of the agreements (actual monthly salaries and bonuses
can be higher at the Committee's discretion) and are more fully described
on page 12. In essence, minimum monthly salaries were set at actual 1997
fiscal year salary levels and minimum bonuses were set at approximately
one-half of potential 1997 fiscal year bonuses.
14
<PAGE> 18
* Approved the acceleration and vesting of outstanding restricted stock
awards and payment in cash of the value (difference between market price
and exercise price) of outstanding stock options, in each case effective
immediately before the spin-off of New Ralcorp. The Committee took these
steps for two reasons:
* As required by outstanding agreements, restricted stock was vested and
option values paid out for those employees terminated in connection
with the restructuring of the Company. The Committee felt that
employees who were retained should be treated no less favorably in
this regard.
* Since the number of stock awards held by executive officers of Old
Ralcorp was in part a function of awards held by them at Ralston prior
to the spin-off of Old Ralcorp, the awards were not necessarily
reflective of each executive officer's relative responsibilities at
Old Ralcorp. If the stock awards had been rolled-over into New
Ralcorp stock (the only other reasonable alternative), this problem
would have been exacerbated since the executive officers'
responsibilities had changed further.
The Committee's intent had been in the past and is expected to be in the
future to provide overall cash compensation packages that have a greater "at
risk" element than competitive norms, i.e., salaries below industry medians
and performance-based bonuses which may permit recipients to achieve total
cash compensation packages exceeding medians. However, due to the unusual
circumstances which presented themselves during the 1997 fiscal year, the
foregoing actions by the Committee were taken primarily to ensure continuity
of key management during this critical period of transition for the Company.
Subsequent to the spin-off of New Ralcorp, the Committee took three
additional steps:
* On May 20, 1997, the Committee increased Mr. Micheletto's minimum bonus
under his Employment Agreement from $75,000 to $150,000.
* On May 20, 1997, the Committee granted stock options to the Named
Executive Officers as set forth in the table on page 11. These options
together with options granted to other key employees represent in the
aggregate approximately 2% of the Company's outstanding Common Stock, an
amount considered by the Committee to be appropriate based on stock
awards held by executive officers of Old Ralcorp and by executives of
other companies in the food industry. Options were allocated among the
executive officers, including the Chief Executive Officer, based on the
Committee's assessment of the relative potential contributions of each of
the executive officers and, to a lesser extent, competitive norms. In the
case of executive officers other than the Chief Executive Officer, the
Committee also considered the recommendations of the Chief Executive
Officer. Pursuant to a delegation by the Committee, the Chief Executive
Officer also designated a group of key employees as recipients of the
stock awards. The Committee did not grant restricted stock awards during
the fiscal year.
* On September 18, 1997, the Committee approved bonuses for the executive
officers including the Named Executive Officers. The amounts of the
bonuses were based on historical levels of the officer's salary and bonus
at Old Ralcorp; the officer's individual performance (including the
quality of strategic plans, organizational and management development,
special project leadership and similar manifestations of individual
performance); the financial performance of the officer's business unit
relative to the business plan (including such areas as sales volume,
revenues, costs, cash flow and operating profit); and, Company financial
performance (including the measures of business unit performance listed
above and, in addition, earnings per share, return on equity and total
return to the shareholders). Although the foregoing factors were
considered by the Committee, bonuses were not based on application of a
numerical formula developed prior to the fiscal year. The bonus of the
Chief Executive Officer was based on the Committee's general assessment
of the factors described above and, in particular, on the Chief Executive
Officer's leadership in the sale of the resort business and in the
restructuring of the Company.
J. W. Goodall--Chairman D. W. Kemper
W. H. Danforth W. P. Stiritz
W. D. George, Jr.
DEDUCTIBILITY OF CERTAIN EXECUTIVE COMPENSATION
A feature of the Omnibus Budget Reconciliation Act of 1993 sets a limit on
deductible compensation of $1,000,000 per person, per year for the Chief
Executive Officer and the next four highest-paid executives. The
15
<PAGE> 19
Committee has directed the Company's management to review executive
compensation arrangements, fringe benefits and employee benefit plans in light
of this provision. Since income derived from the exercise of stock options
granted under a shareholder approved plan is deductible by the Company, the
Committee has directed that the Company's Incentive Stock Plan be submitted to
the shareholders for approval at this meeting. It is not anticipated that any
portion of other forms of compensation to be received during the 1998 fiscal
year by the Named Executive Officers would exceed the limit on deductibility
by the Company.
With respect to future years, while it is the general intention of the
Committee to meet the requirements for deductibility, the Committee may, in
the exercise of its judgment, approve payment of compensation from time to
time that may not be fully deductible. The Committee believes this flexibility
will enable it to respond to changing business conditions, or to an
executive's exceptional individual performance. The Committee will continue to
review and monitor its policy with respect to the deductibility of
compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Stiritz is on the Company's Nominating and Compensation Committee and
is Chairman of the Board of Ralston Purina Company. During the fiscal year,
the Company paid Ralston approximately $1.62 million for advertising,
research, quality assurance and insurance services. These arrangements were,
and for any services continuing in fiscal year 1998 will be, conducted in the
ordinary course of business at competitive prices and terms. In addition, as
of September 30, 1997, Ralston purchased approximately $9.08 million of
Ralcorp products for distribution outside the United States. The arrangement
under which these sales were made was, and if continued will be, conducted in
the ordinary course of business at competitive prices and terms.
PERFORMANCE GRAPH
The graph displayed below is presented in accordance with SEC
requirements. The graph begins on February 3, 1997, the first day of trading
for New Ralcorp Common Stock. Shareholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not
necessarily indicative of future performance. This graph in no way reflects
the Company's forecast of future financial performance.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act, that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following Performance Graph and the Nominating and
Compensation Committee Report on Executive Compensation set forth above shall
not be incorporated by reference into any such filings.
Set forth below is a line graph comparing the cumulative total shareholder
return for the Company's Common Stock with the cumulative total return of the
stocks in the Russell 2000 and Russell 2000 Consumer Staples Indices.
[GRAPH]
Comparison of Total Return on $100.00 Invested in Ralcorp Holdings, Inc.
Common Stock on February 3, 1997 vs. Russell 2000 and Russell 2000
Consumer Staples Indices
The Graph depicts the following returns:
<TABLE>
<CAPTION>
Russell Russell 2000
2000 Consumer
Ralcorp Index Staples Index
------- ------- -------------
<S> <C> <C> <C>
2/3/97 100.00 100.00 100.00
9/30/97 151.01 123.85 132.38
</TABLE>
16
<PAGE> 20
INDEBTEDNESS OF MANAGEMENT
Immediately prior to the original spin-off of Old Ralcorp, Ralston Purina
Company loaned money to certain executive officers of the Company to pay
income taxes on the vesting of Ralston restricted stock awards. The vesting of
such awards was accelerated and such executive officers were required to
exchange the Ralston stock for Old Ralcorp Common Stock immediately prior to
the spin-off. Pursuant to certain securities regulations and the IRS ruling
concerning the federal tax treatment of the spin-off, such executive officers
were prohibited from selling the Common Stock received pursuant to such
exchange to pay taxes until certain events took place. Ralston assigned the
promissory notes governing the loans to the Company. Subsequent to the
spin-off, it was determined that the amounts of the loans were inadequate to
cover the taxes and additional loans were made by the Company. Interest on the
loans has been forgiven. The loans were repaid on April 30, 1997. The highest
principal amounts outstanding under the loans for such Named Executive
Officers during the 1997 fiscal year were: Micheletto--$236,760 and
Lockwood--$18,769. Amounts attributable to the forgiven interest are not
included in the Summary Compensation Table on page 10 because the loans were
not intended to be compensatory.
SOLICITATION STATEMENT
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, solicitations may be made by regular
employees of the Company, by telephone or personal contact. Georgeson &
Company Inc. has been retained to assist in the solicitation of proxies for a
fee of $7,500, plus expenses. The Company will reimburse banks, brokerage
firms and other custodians, nominees and fiduciaries for costs reasonably
incurred by them in sending proxy materials to the beneficial owners of the
Company's Common Stock.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any shareholder proposal intended to be included in the Company's Proxy
Statement and Notice of Meeting for the 1999 Annual Meeting of Shareholders
must be received by the Secretary of the Company no later than August 14, 1998
and must also comply in all respects with the rules and regulations of the
Securities and Exchange Commission. Additionally, under the Company's Bylaws,
shareholders who desire to nominate a director or present any other business
at an Annual Meeting of Shareholders but do not wish such nomination or
proposal to be included in the Company's Proxy Statement and Notice of Meeting
must follow certain procedures. Generally, to be considered at the 1999 Annual
Meeting of Shareholders, a shareholder nomination or proposal not to be
included in the Proxy Statement and Notice of Meeting must be received by the
Company's Secretary between October 31, 1998 and November 30, 1998. A copy of
the Bylaws will be furnished to any shareholder without charge upon written
request to the Company's Secretary.
By Order of the Board of Directors,
/s/ Robert W. Lockwood
ROBERT W. LOCKWOOD
Secretary
December 15, 1997
17
<PAGE> 21
APPENDIX A
RALCORP HOLDINGS, INC. INCENTIVE STOCK PLAN
SECTION I. GENERAL PROVISIONS
A. PURPOSE OF PLAN
The purpose of the Ralcorp Incentive Stock Plan (the "Plan") is to
enhance the profitability and value of the Company for the benefit of its
shareholders by providing for stock options and other stock awards to attract,
retain and motivate directors, officers and other key employees who make
important contributions to the success of the Company.
B. DEFINITIONS OF TERMS AS USED IN THE PLAN
1. "Affiliate" means any subsidiary, whether directly or indirectly
owned, or parent of the Company, or any other entity designated by the
Committee.
2. "Award" means a Stock Option granted under Section II of the Plan or
Other Stock Award granted under Section III of the Plan.
3. "Board" means the Board of Directors of Ralcorp Holdings, Inc.
4. "Committee" means the Nominating and Compensation Committee of the
Board of Directors of the Company or any successor committee the Board of
Directors may designate to administer the Plan.
5. "Company" means Ralcorp Holdings, Inc.
6. "Employee" means any person who is employed by the Company or an
Affiliate.
7. "Fair Market Value" of any class or series of Stock means the fair
and reasonable value thereof as determined by the Committee according to
prices in trades as reported on the New York Stock Exchange-Composite
Transactions. If there are no prices so reported or if, in the opinion of the
Committee, such reported prices do not represent the fair and reasonable value
of the Stock, then the Committee shall determine Fair Market Value by any
means it deems reasonable under the circumstances.
8. "Stock" means the Ralcorp Common Stock or any other authorized class
or series of common stock or any such other security outstanding upon the
reclassification of any of such classes or series of common stock, including,
without limitation, any stock split-up, stock dividend, creation of targeted
stock, spin-off or other distributions of stock in respect of stock, or any
reverse stock split-up, or recapitalization of the Company or any merger or
consolidation of the Company with any Affiliate.
C. SCOPE OF PLAN AND ELIGIBILITY
Any Employee or director selected by the Board or Committee shall be
eligible for any Award contemplated under the Plan.
D. AUTHORIZATION AND RESERVATION
There shall be established a reserve of 2,900,000 authorized shares of
Stock, which shall be the total number of shares of Stock that may be
presently issued pursuant to Awards. (Subject to adjustments pursuant to other
provisions of the Plan.) The reserves may consist of authorized but unissued
shares of Stock or of reacquired shares, or both. Upon the cancellation or
expiration of an Award, all shares of Stock not issued thereunder shall become
available for the granting of additional Awards. The total number of shares of
Stock that may be issued to any one participant during the term of the Plan
shall not exceed 1,500,000 shares of Stock.
A-1
<PAGE> 22
E. ADMINISTRATION OF THE PLAN
1. The Committee shall administer the Plan and, in connection therewith,
it shall have full power to grant Awards, construe and interpret the Plan,
establish rules and regulations and perform all other acts it believes
reasonable and proper, including the power to delegate responsibility to
others to assist it in administering the Plan.
2. The Committee shall include three or more members of the Board of
Directors of the Company. Its members shall be appointed by and serve at the
pleasure of the Board of Directors.
3. The determination of those eligible to receive Awards, and the amount
and type of each Award shall rest in the sole discretion of the Committee or
the Board, subject to the provisions of the Plan.
SECTION II. STOCK OPTIONS
A. DESCRIPTION
The Committee or the Board may grant options with respect to any class or
series of Stock ("Stock Options") that qualify as "Incentive Stock
Options" under Section 422A of the Internal Revenue Code of 1986, as amended,
and it may grant Stock Options that do not so qualify.
B. TERMS AND CONDITIONS
1. Each Stock Option shall be set forth in a written agreement containing
such terms and conditions as the Committee or the Board may determine, subject
to the provisions of the Plan.
2. The purchase price of any shares exercised under any Stock Option must
be paid in full upon such exercise. The payment shall be made in such form,
which may be cash or Stock, as the Committee or the Board may determine.
3. No Incentive Stock Option may be exercised after the expiration of ten
(10) years from the date such option is granted.
4. The option price of shares subject to any Stock Option may be any price
determined by the Committee or the Board.
5. In the case of an Incentive Stock Option, the aggregate Fair Market
Value (determined as of the time the option is granted) of the appropriate
class or series of Stock with respect to which options are exercisable for the
first time by any Employee during any calendar year (under all such plans of
his employer corporation and its parent and subsidiary corporations) shall not
exceed $100,000.
SECTION III. OTHER STOCK AWARDS
In addition to Stock Options, the Committee or the Board may grant Other
Stock Awards payable in any class or series of Stock upon such terms and
conditions as the Committee or the Board may determine, subject to the
provisions of the Plan. Other Stock Awards may include, but are not limited
to, the following types of Awards:
1. Restricted Stock Awards. The Committee or the Board may grant
Restricted Stock Awards, each of which consists of a grant of shares of any
class or series of Stock subject to terms and conditions determined by the
Committee or the Board in each entity's discretion, subject to the provisions
of the Plan. Such terms and conditions shall be set forth in written
agreements. The shares of Stock granted will be restricted and may not be
sold, pledged, transferred or otherwise disposed of until the lapse or release
of restrictions in accordance with the terms of the agreement and the Plan.
Prior to the lapse or release of restrictions, all shares of Stock are subject
to forfeiture in accordance with Section IV of the Plan. Shares of Stock
issued pursuant to a Restricted Stock Award will be issued for no monetary
consideration.
2. Stock Related Deferred Compensation. The Committee or the Board may, in
its discretion, permit the deferral of payment of an Employee's cash bonus or
other cash compensation in the form of either cash or any class or series of
Stock (or Stock equivalents, each corresponding to a share of such Stock)
under such terms and conditions as the Committee or the Board may prescribe.
Payment of such compensation may be deferred for such period or until the
occurrence of such event as the Committee or the Board may determine. The
Committee or the Board may, in each entity's discretion, determine whether any
deferral, whether made in cash or such class or series of Stock (or Stock
A-2
<PAGE> 23
equivalents) shall be paid on distribution in cash or in Stock. If a deferral
is permitted in the form of Stock or Stock equivalents, the number of shares
of Stock or number of Stock equivalents deferred will be determined by
dividing the amount of the Employee's bonus or other cash compensation being
deferred by the average of the closing prices of the appropriate class or
series of Stock, as reported by the New York Stock Exchange-Composite
Transactions, during the ten trading days preceding the effective date of the
Committee's or the Board's decision to defer. If the Committee or the Board
directs the payments in any class or series of Stock of any portion of amounts
deferred in cash, the number of shares of such Stock paid will be determined
based on the average of the closing prices of such Stock, as reported by the
New York Stock Exchange-Composite Transactions, during the ten trading days
before the payment is due. The Committee, or the Board in its discretion, may
permit the conversion of deferrals in any class or series of Stock or Stock
equivalents into deferrals in cash, or the conversion of deferrals in cash
into deferrals in any class or series of Stock or Stock equivalents. In the
event such conversion is permitted, the conversion price of the appropriate
class or series of Stock shall be based on the Fair Market Value of such
Stock. Additional rights or restrictions may apply in the event of a change in
control of the Company.
SECTION IV. FORFEITURE OF AWARDS
A. Unless the Committee or the Board shall have determined otherwise, the
recipient of an Award shall forfeit all amounts not payable or rights not
exercisable upon the occurrence of any of the following events:
1. The recipient is discharged for cause.
2. The recipient voluntarily terminates his employment other than by
retirement after attainment of age 62, or such other age as may be
provided for in the Award.
3. The recipient engages in competition with the Company or any Affiliate.
4. The recipient engages in any activity or conduct contrary to the best
interests of the Company or any Affiliate.
B. The Committee or the Board may include in any Award any additional or
different conditions of forfeiture it may deem appropriate. The Committee or
the Board also, after taking into account the relevant circumstances, may
waive any condition of forfeiture stated above or in the Award contract.
C. In the event of forfeiture, the recipient shall lose all rights in and
to the Award. Except in the case of Restricted Stock Awards as to which the
restrictions have not lapsed, this provision, however, shall not be invoked to
force any recipient to return any Stock already received under an Award.
D. Such determinations as may be necessary for application of this
Section, including any grant of authority to others to make determinations
under this Section, shall be at the sole discretion of the Committee or the
Board, and its determinations shall be conclusive.
SECTION V. DEATH OF AWARDEE
Except as otherwise set forth in the terms of an Award, upon the death of
an Award recipient, the following rules apply:
1. A Stock Option, to the extent exercisable on the date of his death, may
be exercised at any time within six (6) months, or such longer period
not exceeding three years as the Committee or the Board may determine,
after the recipient's death, but not after the expiration of the term
of the Option, by the recipient's designated beneficiary or personal
representative or the person or persons entitled thereto by will or in
accordance with the laws of descent and distribution.
2. In the case of any other Award, the Stock due shall be determined as of
the date of the recipient's death, and the Company shall issue the
appropriate number of shares of the appropriate class or series of
Stock or pay cash equal to the Fair Market Value thereof or such other
value as the Committee or the Board may in its sole discretion
determine. Such issuance of shares of such Stock or payment of cash
shall be made to recipient's designated beneficiary or personal
representative or the person or persons entitled thereto by will or in
accordance with the laws of descent and distribution.
An Award recipient may file with the Committee a written designation of a
beneficiary or beneficiaries (subject to such limitations as to the classes
and number of beneficiaries and contingent beneficiaries as the Committee and
the
A-3
<PAGE> 24
Board may from time to time prescribe) to exercise, in the event of the death
of the recipient, a Stock Option, or to receive, in such event, any Other
Stock Awards. The Committee and the Board reserve the right to review and
approve beneficiary designations. A recipient may from time to time revoke or
change any such designation or beneficiary and any designation of beneficiary
under the Plan shall be controlling over any other disposition, testamentary
or otherwise; provided, however, that if the Committee or the Board shall be
in doubt as to the right of any such beneficiary to exercise any Stock Option
or to receive any Other Stock Award, the Committee or the Board, as the case
may be, may determine to recognize only an exercise by the legal
representative of the recipient, in which case the Company and the Committee
and the Board and the members thereof shall not be under any further liability
to anyone.
SECTION VI. OTHER GOVERNING PROVISIONS
A. TRANSFERABILITY
Except as otherwise noted herein or as approved by the Committee, no award
shall be transferable other than by beneficiary designation, will or the laws
of descent and distribution, and any right granted under an Award may be
exercised during the lifetime of the holder thereof only by him or by his
guardian or legal representative.
B. RIGHTS AS A SHAREHOLDER
A recipient of an Award shall, unless the terms of the Award provide
otherwise, have no rights as a shareholder, with respect to any options or
shares which may be issued in connection with the Award until the issuance of
a Stock certificate for such shares, and no adjustment other than as stated
herein shall be made for dividends or other rights for which the record date
is prior to the issuance of such Stock certificate.
C. GENERAL CONDITIONS OF AWARDS
No Employee or other person shall have any right with respect to this
Plan, the shares reserved or in any Award, contingent or otherwise, until
written evidence of the Award shall have been delivered to the recipient and
all the terms, conditions and provisions of the Plan applicable to such
recipient have been met.
D. RESERVATION OF RIGHTS OF COMPANY
The selection of an Employee for any Award shall not give such person any
right to continue as an Employee and the right to discharge any Employee is
specifically reserved.
E. ACCELERATION
The Committee or the Board may, in its sole discretion, accelerate the
date of exercise of any Award.
F. ADJUSTMENTS
Upon any stock split-up, spin-off, stock dividend, issuance of any
targeted stock, combination or reclassification with respect to any
outstanding class or series of Stock, or consolidation, merger or sale of all
or substantially all of the assets of the Company, appropriate adjustments
shall be made to the shares reserved under Section I.D. of the Plan and the
terms of all outstanding Awards.
G. WITHHOLDING OF TAXES
The Company shall deduct from any payment, or otherwise collect from the
recipient, any taxes required to be withheld by federal, state or local
governments in connection with any Award. The recipient may elect, subject to
approval by the Committee or the Board, to have shares withheld by the Company
in satisfaction of such taxes, or to deliver other shares of Stock owned by
the recipient in satisfaction of such taxes. Provided, however, that no such
election may be made within six months of the date of grant of the relevant
award, with respect to Awards of recipients subject to Section 16 of the
Securities Exchange Act of 1934 ("Section 16"). The number of shares to be
withheld or delivered shall be calculated by reference to the Fair Market
Value of the appropriate class or series of Stock on the date that such taxes
are determined.
A-4
<PAGE> 25
H. NO WARRANTY OF TAX EFFECT
Except as may be contained in the terms of any Award, no opinion is
expressed nor warranties made as to the effect for federal, state, or local
tax purposes of any Award.
I. AMENDMENT OF PLAN
The Board of Directors of the Company may, from time to time, amend,
suspend or terminate the Plan in whole or in part, and if terminated may
reinstate any or all of the provisions of the Plan, except that no amendment,
suspension or termination may apply to the terms of any Award (contingent or
otherwise) granted prior to the effective date of such amendment, suspension
or termination without the recipient's consent.
J. CONSTRUCTION OF PLAN
The place of administration of the Plan shall be in the State of Missouri,
and the validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely in accordance with the laws of the State of
Missouri.
K. ELECTIONS OF CORPORATE OFFICERS
Notwithstanding anything to the contrary stated herein, any election or
other action with respect to an Award of a recipient subject to Section 16
will be null and void if any such election or other action would cause said
recipient to be subject to short-swing profit recovery under Section 16.
SECTION VII. EFFECTIVE DATE AND TERM
This Plan shall be effective upon approval by the shareholders of the
Company. The Plan shall continue in effect until January 31, 2007, when it
shall terminate. Upon termination, any balances in the share reserve shall be
canceled, and no Awards shall be granted under the Plan thereafter. The Plan
shall continue in effect, however, insofar as is necessary to complete all of
the Company's obligations under outstanding Awards to conclude the
administration of the Plan.
A-5
<PAGE> 26
RALCORP HOLDINGS, INC.
----------------------
[RALCORP LOGO]
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 29, 1998
AT 10:00 A.M.
R GATEWAY CENTER, ONE GATEWAY DRIVE, COLLINSVILLE, ILLINOIS
O The undersigned appoints Joe R. Micheletto and Robert W. Lockwood, and each
of them, lawful attorneys and proxies of the undersigned, with power of
X substitution, to represent the undersigned at the Annual Meeting of
Shareholders of Ralcorp Holdings, Inc. to be held on January 29, 1998, and
Y at any adjournments thereof, and to vote in accordance with the instructions
on the reverse side all shares of Common Stock of the Company which the
undersigned is entitled to vote.
TRUSTEE'S AUTHORIZATION. The undersigned also authorizes Vanguard
Fiduciary Trust Company to vote any shares of Common Stock of the Company
credited to the undersigned's account under the Ralcorp Holdings, Inc.
Savings Investment Plan at the Annual Meeting of Shareholders in accordance
with the instructions on the reverse side.
IMPORTANT -- PLEASE SIGN AND DATE ON BACK OF CARD.
RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE;
NO POSTAGE NECESSARY.
*************
SEE REVERSE
SIDE
*************
- -------------------------------------------------------------------------------
* DETACH AND RETURN PROXY CARD *
IMPORTANT
PLEASE VOTE THE ABOVE PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS.
IF YOU REQUIRE SPECIAL ARRANGEMENTS TO PARTICIPATE AT THIS MEETING,
PLEASE CONTACT THE COMPANY'S SHAREHOLDER SERVICES DEPARTMENT
AT (314) 877-7046 PRIOR TO THE MEETING.
IF YOUR ADDRESS HAS CHANGED, PLEASE BE SURE TO NOTIFY
SHAREHOLDER SERVICES PROMPTLY.
* RETAIN ADMISSION TICKET BELOW *
- -------------------------------------------------------------------------------
ADMISSION TICKET
FOR PRE-REGISTRATION, PLEASE SIGN BELOW.
PRESENT THIS CARD AT THE ENTRANCE TO THE MEETING ROOM.
RALCORP HOLDINGS, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
GATEWAY CENTER
ONE GATEWAY DRIVE, COLLINSVILLE, ILLINOIS
THURSDAY, JANUARY 29, 1998
10:00 A.M.
SIGNATURE___________________________________________________
<PAGE> 27
2146
/ X / Please mark your
votes as in this
example.
The proxies are directed to vote as specified below and in their discretion
on all other matters coming before the meeting. If no direction is made,
the proxies will vote FOR all nominees listed below and FOR Proposal 2.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees for election as
directors and FOR Proposal 2.
- -------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Directors: / / / /
William D. George, Jr.
William P. Stiritz
For, except vote withheld from the following nominee:
---------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of / / / / / /
Incentive
Stock Plan
ANNUAL REPORT / /
Mark here to discontinue annual report mailing for this
account (for multiple-account holders only).
ANNUAL MEETING / /
Mark here if you plan to attend the annual meeting.
- -------------------------------------------------------------------------------
Please sign exactly as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such.
---------------------------------------------
---------------------------------------------
SIGNATURE(S) DATE
- -------------------------------------------------------------------------------
* DETACH AND RETURN PROXY CARD *
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING,
WHETHER OR NOT YOU ATTEND THE MEETING IN PERSON.
TO MAKE SURE YOUR SHARES ARE REPRESENTED,
WE URGE YOU TO COMPLETE AND MAIL THE PROXY CARD ABOVE.
IF YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE MARK THE "ANNUAL MEETING" BOX ON THE PROXY CARD ABOVE.
* RETAIN ADMISSION TICKET BELOW *
- -------------------------------------------------------------------------------
ADMISSION TICKET
[MAP]
FREE PARKING AVAILABLE
<PAGE> 28
APPENDIX
Page 16 of the printed proxy contains a Performance Graph comparing
cumulative total shareholder return from February 3, 1997 to September 30,
1997. The information contained in said graph is depicted in the table
;mmediately following the graph.
