<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ------ TO -------.
Commission file number: 1-12619
RALCORP HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Missouri 43-1766315
(State of Incorporation) (I.R.S. Employer
Identification No.)
800 Market Street, Suite 2900
St. Louis, MO 63101
(Address of principal (Zip Code)
executive offices)
(314) 877-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (x) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding Shares at
par value $.01 per share August 11, 1997
33,011,317
<PAGE> 2
<TABLE>
RALCORP HOLDINGS, INC.
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Consolidated Statement of Earnings 1
Condensed Consolidated Balance Sheet 2
Condensed Consolidated Statement of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Unaudited Pro Forma Combined Financial Information 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 19
PART II. OTHER INFORMATION
Other Information 20
Exhibits and Reports on Form 8-K 20
</TABLE>
(i)
<PAGE> 3
PART I - FINANCIAL INFORMATION
<TABLE>
RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in millions except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $140.7 $230.1 $ 595.0 $802.8
------ ------ ------- ------
Costs and Expenses
Cost of products sold 92.9 126.6 328.4 408.3
Selling, general and administrative 24.6 44.6 101.8 132.5
Advertising and promotion 15.7 58.1 125.0 189.2
Interest expense, net .2 6.8 8.1 20.2
Gain on Branded Sale - - (516.5)
Restructuring charges - 20.7 23.0 20.7
Equity (earnings) loss in Vail Resorts 2.6 - (7.9)
------ ------ ------- ------
136.0 256.8 61.9 770.9
------ ------ ------- ------
Earnings (Loss) before Income Taxes 4.7 (26.7) 533.1 31.9
Income Taxes 1.6 (10.4) 6.5 12.3
------ ------ ------- ------
Net Earnings (Loss) $ 3.1 $(16.3) $ 526.6 $ 19.6
====== ====== ======= ======
Earnings (Loss) per Common Share $ .09 $ (.50) $ 15.98 $ .59
====== ====== ======= ======
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
1
<PAGE> 4
<TABLE>
RALCORP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Condensed)
(Dollars in millions)
<CAPTION>
June 30, Sept. 30,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash $ 7.4 $ --
Receivables, less allowance for doubtful
accounts of $1.2 and $1.0, respectively 54.3 75.5
Inventories -
Raw materials and supplies 20.3 26.5
Finished products 52.9 76.8
Prepaid expenses 11.0 14.2
------ ------
Total Current Assets 145.9 193.0
------ ------
Investments and Other Assets 75.4 88.1
------ ------
Deferred Income Taxes 35.9 23.4
------ ------
Property at Cost 273.5 537.0
Accumulated depreciation 118.2 214.4
------ ------
155.3 322.6
------ ------
Total $412.5 $627.1
------ ------
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt $ -- $ 1.8
Accounts payable 31.5 54.7
Income taxes payable 2.6
Other current liabilities 44.4 45.9
------ ------
Total Current Liabilities 78.5 102.4
------ ------
Long-Term Debt 14.4 376.6
------ ------
Other Liabilities 38.2 40.7
------ ------
Shareholders' Equity
Common stock .3 .3
Capital in excess of par value 109.7 130.9
Retained earnings 171.4 (0.2)
Common stock in treasury, at cost (22.7)
Unearned portion of restricted stock (.9)
------ ------
Total Shareholders' Equity 281.4 107.4
------ ------
Total $412.5 $627.1
------ ------
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
2
<PAGE> 5
<TABLE>
RALCORP HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Dollars in millions)
<CAPTION>
Nine Months Ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Cash Flow from Operations
Net earnings $ 526.6 $ 19.6
Restructuring charges ($23.0 less payments of $17.0) 6.0
Restructuring charge 20.7
Gain on sale of Branded Business (516.5)
Non-cash items included in income 21.9 34.4
Changes in assets and liabilities used in operations 21.2 (1.2)
Other, net (0.7) 7.7
------- ------
Net cash flow from operations 58.5 81.2
------- ------
Cash Flow from Investing Activities
Acquisition of business (41.4)
Property additions, net (17.9) (46.5)
Other, net (3.1) (4.6)
------- ------
Net cash used by investing activities (62.4) (51.1)
------- ------
Cash Flow from Financing Activities
Net proceeds from (payments on) long-term borrowings 11.3 (21.6)
Repurchases of common stock (8.5)
------- ------
Net cash provided (used) by financing activities 11.3 (30.1)
------- ------
Net Increase in Cash and Cash Equivalents 7.4 -
Cash and Cash Equivalents, Beginning of Year
------- ------
Cash and Cash Equivalents, End of Period $ 7.4 $ -
======= ======
See Accompanying Notes to Condensed Financial Statements.
</TABLE>
3
<PAGE> 6
RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Dollars in millions except per share data)
NOTE 1 - SALE TRANSACTIONS
On January 3, 1997, the United States Department of Justice approved
the sale of Ralcorp's ski resort holdings to Vail Resorts, Inc.
Effective on this date, the sale transaction, pending since first
announced in July 1996, was closed. Ralcorp sold its three Colorado
ski resort properties of Keystone, Breckenridge and Arapahoe Basin to
Vail Resorts, Inc. in exchange for the assumption of $165 million in
Ralcorp debt and a 22.7% post-IPO equity interest in the combined Vail
Resorts. Vail stock began trading on the New York Stock Exchange on
February 4, 1997.
On January 31, 1997, the original Ralcorp Holdings, Inc. (Old Ralcorp)
was merged with a subsidiary of General Mills, Inc. (the Merger).
Immediately prior to the Merger, Old Ralcorp spun-off its private
label cereal, branded baby food and private label cracker and cookie
businesses and its ownership interest in Vail (the Spin-Off) by
distributing one share of New Ralcorp Holdings, Inc. Common Stock for
each share of Old Ralcorp Common Stock owned as of the close of
business on January 31, 1997. Immediately prior to the Spin-Off, New
Ralcorp Holdings, Inc. (Ralcorp) changed its name to Ralcorp Holdings,
Inc. and in the Merger, Old Ralcorp changed its name to General Mills
Missouri, Inc. This completed the $570 transaction with General Mills
that was first announced in August 1996. The $570 value was reached
by General Mills assuming $215 in Ralcorp debt and funding the
remaining $355 through the distribution of General Mills stock to
Ralcorp shareholders of record on January 31, 1997.
For financial reporting purposes, Ralcorp is a "successor registrant"
to Old Ralcorp and, as such, the accompanying Ralcorp financial
statements represent the historical financial position and results of
operations of Old Ralcorp, for periods prior to January 31, 1997, and
Ralcorp, for subsequent periods. Therefore, references to the
"Company", for periods prior to January 31, 1997, are references to
Old Ralcorp, without giving effect to the Merger or the Spin-Off.
NOTE 2 - PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The accompanying unaudited historical financial statements of the
Company have been prepared in accordance with the instructions for
Form 10-Q and do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments considered necessary
for a fair presentation, have been included. Operating results for
any quarter are not necessarily indicative of the results for any
other quarter or for the full year. These statements should be read
in connection with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the year ended September 30,
1996.
4
<PAGE> 7
RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Dollars in millions except per share data)
NOTE 3 - GAIN ON SALE OF THE BRANDED BUSINESS
Subsequent to the Merger, the Company has recorded a $516.5 tax-free
gain related to the sale of its branded cereal and snack business
(Branded Business) to General Mills, Inc. on January 31, 1997. This
is, however, only a preliminary amount as certain provisions contained
in the sale contract with General Mills have yet to be finalized. It
is expected that all outstanding issues will be addressed by the end
of the Company's current fiscal year, at which time the final gain on
sale amount can be recorded.
NOTE 4 - SALE OF RESORT OPERATIONS
In accordance with Accounting Principles Board Opinion No. 29 -
"Accounting for Nonmonetary Transactions" (APB 29), the Resort
Operations sale transaction with Vail Resorts, Inc. has been treated
as a nonmonetary exchange. The assumption of debt and the issuance of
equity qualifies this transaction as being nonmonetary in nature.
Therefore, by meeting the provisions of APB 29, the initial equity
investment in Vail has been recorded at Ralcorp's net book value of
assets contributed, or $40.2. This initial equity investment is then
increased by the pre-tax amount of the Company's equity interest in
the earnings of Vail, which through June 30, 1997 was $7.9. Included
as a component of the Company's equity earnings is approximately $1.0
of amortization income. This amortization income is the result of the
basis difference between the net book value of the net assets
contributed to Vail and the Company's 22.7% equity interest in the
Vail net assets. The basis difference, which can not be finalized
until all appropriate purchase price allocations have taken place, is
being amortized over twenty years.
NOTE 5 - ACQUISITION
On April 21, 1997, the Company completed the purchase of the Wortz
Company, a private label cracker and cookie operation. Wortz, which
will be operated as part of the Company's Bremner operation, is
headquartered in Poteau, OK, and had sales in its latest fiscal year
of approximately $65. The acquisition was financed by a combination
of available cash and debt under the Company's credit facility and
accounted for using the purchase method of accounting, whereby, the
results of operations are included in the consolidated statement of
earnings from the date of acquisition.
The cost of this acquisition was approximately $41.4. Several post-
closing issues relative to this acquistion remain unresolved and
resolution of the issues may lead to minor purchase price adjustments.
The Company's management expects to have all outstanding issues
completed by the end of the current fiscal year. The required
purchase price allocations will be finalized upon determination of the
final purchase price. Goodwill associated with this acquisition has
been estimated based on the current status of the transaction and is
included on the "Investments and Other Assets" line of the
accompanying Consolidated Balance Sheet at June 30, 1997.
5
<PAGE> 8
RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Dollars in millions except per share data)
NOTE 6 - RESTRUCTURING CHARGES
During the quarter ended March 31, 1997, the Company recorded a
pre-tax restructuring charge of $18.4 ($11.6 after taxes or $.35 per
common share) to cover costs associated with the sale of the Company's
Branded Business, including severance payments to employees whose jobs
were eliminated and financial penalties related to the early
termination of information systems contracts. The level of systems
support included in these contracts was no longer warranted after the
Branded Business sale.
In the quarter ended December 31, 1996, the Company recorded a pre-tax
restructuring charge of $4.6 ($2.9 after taxes or $.09 per common
share). This charge covered severance costs for certain employees
whose jobs were eliminated in downsizing initiatives.
During the quarter ended June 30, 1996, the Company recorded a pre-tax
charge of $20.7 ($12.7 after taxes or $.39 per common share) to
recognize the costs related to restructuring its ready-to-eat cereal
business. As a result of this restructuring plan, certain positions
were eliminated from the Ralston Foods subsidiary and corporate
support groups, primarily at the Company's headquarters in St. Louis,
MO. In addition, the restructuring plan included the partial closing
of the Ralston Foods production facility in Battle Creek, MI.
The restructuring charges and their utilization are summarized in the
following table.
<TABLE>
<CAPTION>
Nine months Utilized in
FY 1996 Utilized in FY 1997 Nine months Balance of
Charges<F*> FY 1996 Charges FY 1997 Reserve
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Salaries, severance and
benefits $ 8.0 $ (5.0) $10.6 $(10.9) $2.7
Asset writedowns 7.3 (7.3) 3.2 (1.8) 1.4
Contract penalties 6.2 (6.2) -
Other 1.2 (.5) 3.0 (.5) 3.2
---------------------------------------------------------
Total restructuring charge $16.5 $(12.8) $23.0 $(19.4) $7.3
=========================================================
<FN>
<F*> Total restructuring charge of $16.5 reflects the $4.2 fourth quarter fiscal
1996 adjustment to the $20.7 third quarter fiscal 1996 charge referred to above.
</TABLE>
NOTE 7 - EARNINGS PER SHARE
Earnings per common share for the quarter and nine month periods ended
June 30, 1997 and 1996 are computed by using the weighted average
number of shares of Ralcorp Common Stock outstanding for the periods
then ended. Earnings per common share is computed independently for
all of the periods presented, therefore, the sum of earnings per
common share amounts for the quarters may not total the year-to-date.
The weighted average numbers of common shares used for all periods are
as follows:
6
<PAGE> 9
<TABLE>
RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Dollars in millions except per share data)
<S> <C>
Quarter ended June 30, 1997.............................33,011,000
Quarter ended June 30, 1996.............................32,933,000
Nine months Ended June 30, 1997.........................32,962,000
Nine months Ended June 30, 1996.........................33,022,000
</TABLE>
Actual outstanding shares of Ralcorp Common Stock at June 30, 1997 were
33,011,000.
NOTE 8 - RECEIVABLES Consists of the following:
<TABLE>
<CAPTION>
June 30, Sept. 30,
1997 1996
-------- ---------
<S> <C> <C>
Trade receivables $42.0 $63.3
Other 13.5 13.2
Allowance for doubtful accounts (1.2) (1.0)
----- -----
$54.3 $75.5
===== =====
</TABLE>
NOTE 9 - INVESTMENTS AND OTHER ASSETS Consists of the following:
<TABLE>
<CAPTION>
June 30, Sept. 30,
1997 1996
-------- ---------
<S> <C> <C>
Intangible assets $26.2 $43.2
Property held for development - 12.4
Investments in affiliated companies 48.1 29.1
Deferred charges and other assets 1.1 3.4
----- -----
$75.4 $88.1
===== =====
</TABLE>
NOTE 10 - OTHER CURRENT LIABILITIES consists of the following:
<TABLE>
<CAPTION>
June 30, Sept. 30,
1997 1996
-------- ---------
<S> <C> <C>
Accrued advertising and promotion $15.0 $ 9.6
Restructuring and shutdown reserves 10.2 7.6
Other items 19.2 28.7
----- -----
$44.4 $45.9
===== =====
</TABLE>
7
<PAGE> 10
RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Dollars in millions except per share data)
NOTE 11 - CHANGE IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
in Treasury, Unearned
Common Stock Capital in at Cost Portion of
---------------- Excess of ------------------- Retained Restricted
Shares Amount Par Value Shares Amount Earnings Stock
------ ------ --------- ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPT. 30, 1996 33,925 $.3 $130.9 (1,008) $(22.7) $ (.2) $(.9)
Net earnings 526.6
Activity under stock plans (52) (1.1) 146 2.6
Amortization of restricted
stock .1
Accelerated vesting of
restricted stock .8
Distribution of GMI Stock (355.0)
Retire treasury stock (862) (20.1) 862 20.1
----------------------------------------------------------------------------
BALANCE, JUNE 30, 1997 33,011 $.3 $109.7 - $ - $ 171.4 $ -
============================================================================
</TABLE>
NOTE 12 - LONG-TERM DEBT
As of June 30, 1997, the Company had $14.4 of outstanding long-term
debt remaining on its Consolidated Balance Sheet. Original proceeds
of this debt issuance were used primarily to help fund the purchase of
the Wortz Company, see "Note 5 - Acquisition".
As discussed in "Note 1 - Sale Transactions" of this Form 10-Q, terms
of the respective individual sale agreements provided that Vail
Resorts, Inc. assume $165 of Company debt as partial consideration for
the Company's ski resort operations and General Mills, Inc. assume the
balance of outstanding Company debt as partial consideration for the
Company's branded cereal and snack business.
8
<PAGE> 11
RALCORP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Dollars in millions except per share data)
At June 30, 1997 and September 30, 1996, long-term debt associated
with the Company's businesses consisted of the following:
<TABLE>
<CAPTION>
June 30, Sept. 30,
1997 1996
-------- ---------
<S> <C> <C>
8.75% Notes due 2004 $150.0
Bank Credit Agreements $14.4 200.1
10.85% and 11.15% Notes due 9/30/97
and 9/30/98 3.0
Refunding Revenue Bonds Series 90
7.20%-7.875% due 9/2/98, 9/1/06 and 9/1/08 20.4
Refunding Revenue Bonds Series 91
7.125%-7.375% due 9/1/02 and 9/1/10 3.0
Other 1.9
----- ------
14.4 378.4
Less Current Portion (1.8)
----- ------
$14.4 $376.6
===== ======
</TABLE>
Included in the Bank Credit Agreements line item, at September 30,
1996, is $140.0 of bank debt that had been borrowed directly by the
Company's Resort Operations and fully guaranteed by the Company.
The Company has a $50 working capital credit facility. The proceeds
of the facility may be used to fund Ralcorp's working capital needs,
capital expenditures, and other general corporate purposes.
Provisions of the $50 credit facility require the Company to maintain
certain financial ratios and a minimum level of shareholders' equity.
9
<PAGE> 12
RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Ralcorp was organized for the purpose of effecting the Spin-Off and the Merger
and has operated as an independent company only since January 31, 1997. The
Ralcorp historical financial statements presented in the "Ralcorp Historical"
column of the unaudited pro forma combined statement of earnings for the nine
months ended June 30, 1997, reflects four months, October 1, 1996 through
January 31, 1997, during which the various spun-off businesses operated as
divisions or subsidiaries of Old Ralcorp. Likewise, the "Ralcorp Historical"
column of the unaudited pro forma combined statement of earnings for the year
ended September 30, 1996 reflects an entire year during which the various
spun-off businesses were divisions or subsidiaries of Old Ralcorp. These
historical financial statements include the results of operations of the
branded cereal and snack businesses (the Branded Business), which Ralcorp sold
to General Mills on January 31, 1997 and the Resort Operations, which Ralcorp
sold to Vail Resorts, Inc. on January 3, 1997. Therefore, the historical
financial statements do not reflect the combined results of operations that
would have existed had Ralcorp been an independent company. Since Ralcorp did
not operate independently during the entire periods shown, the unaudited pro
forma information may not necessarily reflect future results of operations or
what the results of operations would have been had the formation of Ralcorp
and its related businesses occurred at the beginning of the periods shown.
The pro forma combined statement of earnings for the nine months ended June
30, 1997 presents the combined results of Ralcorp's operations assuming that
the sale of the Branded Business and the sale of the Resort Operations had
occurred as of October 1, 1996. The pro forma combined statement of earnings
for the year ended September 30, 1996 presents the combined results of
Ralcorp's operations assuming that both sale transactions had occurred as of
October 1, 1995. Both statements of earnings have been prepared by adjusting
the historical statements of earnings for the effect of costs and expenses and
the recapitalization which might have occurred had the Spin-Off and the sale
of the Resort Operations occurred at the beginning of each respective period.
The "Branded Business" and "Resort Operations" columns in the pro forma
combined statements of earnings represent the combined historical results of
operations of the Branded Business and the consolidated historical results of
operations of the Resort Operations, respectively.
Please read the Notes to the Unaudited Pro Forma Combined Financial
Information for a discussion of adjustments made to the historical financial
information in order to calculate the Ralcorp pro forma financial information.
10
<PAGE> 13
<TABLE>
RALCORP HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
Nine Months Ended June 30, 1997
<CAPTION>
Pro Forma
Adjustments
Ralcorp Branded Resort ------------------- Pro Forma
Historical Business Operations Debit Credit Ralcorp
---------- -------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 595.0 $(172.5) $(33.1) $389.4
------- ------- ------ ------
Costs and Expenses
Cost of products sold 328.4 (43.4) (27.5) 1.4 <Fa> 258.9
Selling, general and
administrative 101.8 (20.9) (3.5) 6.1 <Fa> 3.3 <Fg> 80.2
Advertising and promotion 125.0 (78.1) (1.8) 45.1
Gain on Branded Sale (516.5) 516.5 <Ff> -
Equity earnings in
Vail Resorts (7.9) 2.3 <Fb> (10.2)
Interest expense, net 8.1 (1.4) (2.8) 4.0 <Fc> (.1)
Restructuring charge 23.0 - 18.4 <Fh> 4.6
------- ------- ------ ------- ------ ------
61.9 (143.8) (35.6) 524.0 28.0 378.5
------- ------- ------ ------- ------ ------
Earnings before
Income Taxes 533.1 (28.7) 2.5 (524.0) (28.0) 10.9
Income Taxes 6.5 (11.2) 1.0 (7.7)<Fd> 4.0
------- ------- ------ ------- ------ ------
Net Earnings $ 526.6 $ (17.5) $ 1.5 $(524.0) $(20.3) $ 6.9
------- ------- ------ ------- ------ ------
Earnings per common share <Fe> $ 15.98 $ .21
------- ------
Outstanding shares of common stock <Fe> 33.0 33.0
------- ------
</TABLE>
11
<PAGE> 14
<TABLE>
RALCORP HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(in millions except per share data)
Year Ended September 30, 1996
<CAPTION>
Pro Forma
Adjustments
Ralcorp Branded Resort ------------------- Pro Forma
Historical Business Operations Debit Credit Ralcorp
---------- -------- ---------- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,027.4 $(386.7) $(135.4) $ 505.3
-------- ------- ------- -------
Costs and Expenses
Cost of products sold 536.8 (114.1) (91.7) 5.7 <Fa> 336.7
Selling, general and
administrative 177.6 (52.5) (14.6) 15.3 <Fa> 125.8
Advertising and promotion 233.3 (162.5) (6.1) 64.7
Equity earnings in
Vail Resorts 4.5 <Fb> (4.5)
Interest expense 26.8 (4.2) (10.5) 11.1 <Fc> 1.0
Nonrecurring charge 109.5 109.5
Restructuring charge 16.5 (2.5) 14.0
-------- ------- ------- ------ ------ -------
1,100.5 (335.8) (122.9) 21.0 15.6 647.2
-------- ------- ------- ------ ------ -------
Earnings before
Income Taxes (73.1) (50.9) (12.5) (21.0) (15.6) (141.9)
Income Taxes (26.3) (19.3) (5.3) 2.1 <Fd> (53.0)
-------- ------- ------- ------ ------ -------
Net Earnings $ (46.8) $ (31.6) $ (7.2) $(21.0) $(17.7) $ (88.9)
-------- ------- ------- ------ ------ -------
Earnings per common share <Fe> $ (1.42) $ (2.69)
-------- -------
Outstanding shares of common stock <Fe> 33.0 33.0
-------- -------
12
<PAGE> 15
<FN>
RALCORP HOLDINGS, INC.
Notes to Unaudited Pro Forma Combined Financial Information
<Fa> To reflect the fixed costs (i.e., fixed manufacturing, information
systems, general administrative and corporate overhead) included in the
combined historical results of operations of the Branded Business that
will be absorbed by Ralcorp with the sale of the Branded Business.
<Fb> To reflect Ralcorp's equity earnings in Vail Resorts. The equity
earnings include $1.0 million for the nine months ended June 30, 1997,
and $1.9 million for the fiscal year ended September 30, 1996, of
amortization income. The amortization income is the result of the basis
difference between the net book value of the Resort Operations' net
assets contributed to Vail Resorts and Ralcorp's approximate 22.7%
equity interest in Vail Resorts' net assets. This basis difference is
being amortized ratably over 20 years.
<Fc> To reduce interest expense due to General Mills assuming $215.0
million of Ralcorp debt upon the sale of the Branded Business. Interest
income shown of $.1 million for the nine months ended June 30, 1997,
reflects residual interest earned on short term investments, net of
interest expense. Residual interest expense shown of $1.0 million for
the fiscal year ended September 30, 1996, is related to estimated
revolving credit facility debt needed to finance working capital.
<Fd> To reflect the tax effect of the pro forma adjustments shown at an
effective rate of 38%.
<Fe> The weighted average number of shares used to compute Ralcorp
earnings per share is based on the weighted average number of Ralcorp
common shares outstanding during the nine months ended June 30, 1997
and during the fiscal year ended September 30, 1996.
<Ff> To eliminate the tax-free gain on sale of the Branded Business
reflected in the historical statement of earnings.
<Fg> To eliminate certain expenses incurred directly as a result of the
two sales transactions.
<Fh> To eliminate the amount of the fiscal 1997 second quarter
restructuring charge that was specifically related to the sale of the
Branded Business.
</TABLE>
13
<PAGE> 16
RALCORP HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For financial reporting purposes, Ralcorp is a "successor registrant" to the
Ralcorp Holdings, Inc. that was acquired by General Mills, Inc. on January 31,
1997 (Old Ralcorp) and, as such, all financial information of Ralcorp included
in this discussion and the accompanying financial statements represent the
historical financial information of Old Ralcorp, for periods prior to January
31, 1997, and Ralcorp, for subsequent periods. Therefore, references to the
"Company", as they relate to financial information for periods prior to
January 31, 1997, are references to Old Ralcorp.
HIGHLIGHTS
The Company's fiscal third quarter ended June 30, 1997, represents its first
full quarter of operation since the sale of the branded cereal and snack
business (Branded Business) and ski resort operations.
For the quarter ended June 30, 1997, sales and net earnings, were $140.7
million and $3.1 million compared to $230.1 million and a net loss of $3.6
million for the same prior year period, which excludes a $20.7 million charge
($12.7 million or $.39 after taxes) related to restructuring of the Company's
cereal operations. Earnings per share were $.09 for the three months ended
June 30, 1997 compared to an $.11 loss per share in the prior year's third
quarter, again excluding the previously mentioned restructuring charge.
Through the nine months ended June 30, 1997 the Company recorded two pre-tax
restructuring charges totaling $23.0 million ($14.5 million after-tax or $.44
per share). The first of these charges, taken during the quarter ended
December 31, 1996, was for $4.6 million, pre-tax, and related to the severance
packages received by certain separated employees. The remaining pre-tax
charge of $18.4 million recorded in the quarter ended March 31, 1997 covered
costs associated with the sale of the Company's Branded Business on January
31, 1997, including severance payments to employees whose jobs were eliminated
and certain penalties related to the early termination of information systems
contracts. Also, in the second quarter of fiscal 1997, the Company recorded a
tax-free gain of $516.5 million or $15.67 per share for the initial nine
months of fiscal 1997 related to the sale of its Branded Business to General
Mills, Inc.
For the nine months of fiscal 1997 ended June 30, 1997, the Company recorded
sales of $595.0 million and net earnings and earnings per share of $24.6
million and $.75, respectively, excluding the first and second quarter fiscal
1997 restructuring charges and tax-free gain on sale of the Branded Business.
For the nine-month period ended June 30, 1996, the Company had sales, net
earnings and earnings per share of $802.8 million, $32.3 million and $.98,
respectively, excluding the previously mentioned third quarter fiscal 1996
charge. For comparison purposes, however, it must be noted that the nine
month period of the current fiscal year includes only four months of results
from the Branded Business and three months and three days of Ralston Resorts
operations, while the same period of the prior fiscal year includes nine
months of results for both operations.
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<PAGE> 17
Including all restructuring charges and the gain on sale as they apply to
particular nine month periods, net earnings and earnings per share were $526.6
million and $15.98, respectively, for the nine months ended June 30, 1997,
compared to $19.6 million and $.59 per share for the same prior year period.
The Unaudited Pro Forma Combined Financial Information included elsewhere in
this document, reflects the pro forma results of operations of the Ralcorp
businesses assuming the sales of the Company's Branded Business and Resort
Operations were completed as of the beginning of the periods presented, for
combined statements of earnings purposes. The sale of Resort Operations to
Vail Resorts, Inc. was completed on January 3, 1997 and the sale of the
Branded Business to General Mills, Inc. was completed on January 31, 1997.
On a pro forma basis, excluding the restructuring charge taken in the first
quarter of fiscal 1997, sales, net earnings and earnings per share for the
nine months ended June 30, 1997 were $389.4 million, $9.8 million and $.30,
respectively. On a pro forma basis, including the first quarter fiscal 1997
restructuring charge, operations for the nine months ended June 30, 1997
resulted in net earnings of $6.9 million, or $.21 per share. The unaudited
pro forma information may not necessarily reflect future results of operations
or what the results of operations would have been had the formation of Ralcorp
and its related businesses occurred at the beginning of the periods shown.
DISCUSSION OF BUSINESSES
With the sale of its Resort Operations on January 3, 1997 to Vail Resorts,
Inc., the Company operates solely in the Consumer Foods segment, while
maintaining an equity interest in Vail Resorts, Inc.
CONSUMER FOODS
Comparisons of operating results in the Consumer Foods segment on a historical
basis are complicated by the fact that the operations of the Company's Branded
Business are included only through January 31, 1997, the date of the Branded
Business sale to General Mills.
Consumer Foods sales of $140.7 million for the third quarter of fiscal 1997
represents a decrease of 33.8% or $71.8 million when comparing to the third
quarter of fiscal 1996. Sales in the Consumer Foods segment for the nine
months ended June 30, 1997 fell $119.4 million, or 17.5%, to $561.9 million
compared to the nine months ended June 30, 1996. These period to period
declines were primarily due to the inclusion of the Branded Business results
of operations only through January 1997. For the current fiscal year's third
quarter, the cereal subsidiary's first as a private label only operation,
private label volume increased two percent over volume levels for the same
prior year period. This volume improvement marks the first such improvement
experienced by the Company's private label cereal business in over one year.
Beech-Nut baby food sales improved on a quarter-to-quarter basis due to
favorable volume increases and the benefit realized from slightly higher
pricing. A key component to the increase in volume was the grocery trade's
accelerated buy-in of baby food product ahead of a planned price increase on
July 1, 1997. The third fiscal quarter ended June 30, 1997, represented the
second best sales quarter in Beech-Nut's history. For the comparative
nine-month periods baby food sales were up slightly due primarily to favorable
pricing related to a price increase, taken earlier in the fiscal year, and
higher volume.
15
<PAGE> 18
Bremner cracker and cookie sales continued to post favorable increases in both
the quarter and nine-month periods of the current fiscal year compared to the
same periods of the prior year on favorable volume growth and an improved
product mix. Bremner cracker and cookie sales also benefited from the
addition of the Wortz Company's (Wortz) cracker and cookie business. Those
operations were folded into Bremner effective with the Wortz acquisition on
April 21, 1997.
Consumer Foods operating profit, for the current quarter ended June 30, 1997,
improved $1.3 million compared to the same quarter of the prior fiscal year,
excluding the third quarter fiscal 1996 restructuring charge. This operating
profit improvement in the quarter is primarily due to significant increases by
the Bremner and Beech-Nut operations. Bremner continued to experience strong
volume gains and also benefited from a more favorable product mix. The
inclusion of approximately two months of activity of the Wortz Company was
also additive to Bremner's overall operating profit. Beech-Nut baby food
recorded positive volume gains, aided by the grocery trade's product buy-in,
partially offset by increased advertising and promotion spending in defense of
its market position.
For the nine months, Consumer Foods operating profit, excluding the $23.0
million pre-tax restructuring charges, increased $4.2 million. Again, the
prior year comparative operating profit excludes the third quarter pre-tax
restructuring charge. This operating profit increase was due primarily to the
improved performance of the branded cereal and snack business and the cost
reductions in the private label cereal operations that have been implemented
to date. Operating profit of the Bremner cracker and cookie operation
increased significantly between nine-month periods as favorable product mix
and improved volumes were partially offset by higher costs. Also, as with the
quarter-to-quarter increase, Bremner operating profit benefited from the
addition of Wortz. Beech-Nut baby food operating profit for the first nine
months of fiscal 1997 was down slightly compared to the prior year, as the
benefit of improved pricing was unable to completely offset higher advertising
and promotion spending and increased ingredient costs.
EQUITY EARNINGS IN VAIL RESORTS, INC.
On January 3, 1997, Ralcorp sold its three ski resort operations to Vail
Resorts, Inc. in exchange for the assumption of $165 million in Ralcorp debt
and a 22.7% post-IPO equity interest in the combined Vail Resorts. Through
this transaction, the Company directly holds 7.55 million shares of Vail
Resorts, Inc. stock. As a result of its 22.7% ownership interest in Vail,
Ralcorp recorded in the third quarter of fiscal 1997, a $2.6 million pre-tax
equity loss, or a $.05 per share loss after taxes. On a year-to-date basis,
the Company's equity interest in Vail Resorts has contributed $7.9 million of
pre-tax equity earnings, or $.15 per share, after taxes. Typically, the
Company will record more than 100 percent of its annual equity earnings
related to Vail in the second fiscal quarter, which comprises the popular ski
months of January through March.
16
<PAGE> 19
RESULTS OF OPERATIONS
Cost of products sold as a percentage of sales was 66.0% for the current year
third quarter compared to 55.0% for the same quarter of the prior year, and
for the nine months ended June 30, 1997, increased to 55.2% of sales from
50.9% in the same prior year period. Selling, general and administrative
expense as a percent of sales decreased to 17.5% for the current year quarter
compared to 19.4% for the same quarter of the prior year and was basically
flat in a comparison of nine month periods. The decline in selling, general
and administrative expense as a percent of sales on a quarter-to-quarter
comparison, as well as the flat comparison between nine month periods, are
both indications of how the Company has been able to remove significant
portions of a cost structure, namely information systems, that was
historically in place to support a larger corporation. The increase in costs
of products sold as a percentage of sales, however, reflects the fact that
many of the Company's higher margin products were eliminated through the sale
of the Branded Business. Advertising and promotion expense as a percentage of
sales has declined significantly in a quarter-to-quarter comparison,
reflecting the reduced level of advertising and promotional support necessary
for a primarily private label company. Income taxes were 38.5% of pre-tax
earnings, before restructuring charges and equity earnings, in the first nine
months of the current year, which represents a slight decline from 38.7% for
the same period one year ago.
FINANCIAL CONDITION
The Company's primary source of liquidity is cash flow from operations, which
decreased to $58.5 million for the nine months ended June 30, 1997 compared to
$81.2 million for the same period in the prior year, primarily due to the
reduced level of earnings before non-cash items such as depreciation,
amortization, non-cash portions of restructuring reserves and the tax-free
gain on sale of the Branded Business. The elimination of two earnings streams
through the sales transactions completed in the current year's second quarter
contributed to the decline in net earnings. Partially offsetting the earnings
decrease, was the favorable cash flow impact of reduced operating assets,
primarily inventories and accounts receivable. Net working capital, excluding
cash and current maturities of long-term debt, was $60.0 million at June 30,
1997 compared to $92.4 million at September 30, 1996.
On April 21, 1997, Ralcorp acquired the Wortz Company, a private label cracker
and cookie operation headquartered in Poteau, OK, for approximately $41.4
million. Several post-closing issues relative to this acquisition remain
unresolved and resolution of the issues may lead to minor purchase price
adjustments. Company management expects to have all outstanding issues
finalized by the end of the current fiscal year.
Property additions decreased to $17.9 million for the first nine months of
fiscal 1997 compared to $46.5 million in the prior year nine month period.
During the nine month period ended June 30, 1996 the Company repurchased $8.5
million of its Common Stock. The Company transacted no stock repurchases
during the same period of fiscal 1997. As a result of the Branded Business
and Resort Operations sales in January 1997, Ralcorp emerged debt free. At
June 30, 1997, however, the Company had $14.4 million of outstanding debt, the
proceeds of which were used as partial consideration for the purchase of the
Wortz Company, compared to total debt of $378.4 million at September 30, 1996.
17
<PAGE> 20
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued two new
Statements of Financial Accounting Standards. The first, Statement of
Financial Accounting Standards No. 130 - "Reporting Comprehensive Income" (FAS
130), establishes standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. FAS
130 is effective for fiscal years beginning after December 15, 1997 and any
reclassification of financial statements for earlier periods provided for
comparative purposes is required. Also issued in June 1997 was Statement of
Financial Accounting Standards No. 131 - "Disclosures about Segments of an
Enterprise and Related Information" (FAS 131), which establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. FAS 131 also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. FAS 131 is effective for financial statements for periods
beginning after December 15, 1997. Company management is in the process of
evaluating what impact, if any, FAS 130 and FAS 131 will have on its
consolidated financial statements.
OUTLOOK
Ralcorp continues to operate in the competitive environment that exists in the
ready-to-eat cereal category. To be successful, Ralcorp must maintain an
effective price gap between its private label cereal products and those
products of top branded cereal competitors. Ralcorp management has, to date,
been somewhat successful at removing excess costs from its cereal operations
in order to attain a cost basis that will allow it to maintain an adequate
price gap and still provide a quality alternative to branded cereals. It is
management's intention to continue to focus on cost elimination where
appropriate. In the third fiscal quarter, Ralcorp's cereal subsidiary posted
an operating profit, further demonstrating the success of its cost cutting
plan to date. Despite the return to profitability, it must be cautioned that
this does not guarantee consistent future profitability.
In baby foods, Beech-Nut recorded its second most profitable quarter in its
history. The grocery trade buy-in of product ahead of Beech-Nut's July 1,
1997 price increase influenced a portion of that success and is likely to have
a conversely negative effect on fourth quarter results. Significant
competitive pressures in the category and a continuing decline in the United
States birth rate are important concerns for the management of Beech-Nut.
Beech-Nut continues to focus on the production of high quality products,
maintaining its presence in key regional markets and emphasizing cost
reductions and controls. With regard to the Bremner cracker and cookie
business, the addition of the Wortz Company, acquired on April 21, 1997, had
an immediate and positive effect on sales, operating profit and customer base.
The existing Bremner business continued to achieve good results for the
recently completed quarter on improved volume, sales and product mix. Despite
the present positive performance and favorable results from the Wortz
acquisition, Bremner still faces significant competition from large branded
and regional private label producers.
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<PAGE> 21
Company management realizes that in addition to improved operations and
enhanced efficiencies, a key growth opportunity may exist through strategic
acquisitions. The recently completed transaction with the Wortz Company
serves as an example. It is management's intention to explore those
acquisition opportunities that strategically fit with the Company's current
mix of businesses. Ralcorp's low level of outstanding debt provides the
Company with greater flexibility to act upon any such opportunities.
RALCORP LIQUIDITY
To meet its on-going working capital needs Ralcorp has a $50 million working
capital credit facility. The proceeds of the facility may be used to fund
Ralcorp's working capital needs, capital expenditures, and other general
corporate purposes. Provisions of the $50 million credit facility require
Ralcorp to maintain certain financial ratios and a minimum level of
shareholders' equity.
Management believes that Ralcorp will be able to generate positive operating
cash flows through its mix of businesses and expects that future liquidity
requirements will be met through a combination of existing cash balances,
operating cash flow and, as necessary, use of borrowings available under its
working capital credit facility.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis. The Company's results of operations and liquidity
status may differ materially from those in the forward-looking statements.
Such statements are based on management's current views and assumptions, and
involve risks and uncertainties that could affect expected results. For
example any of the following factors cumulatively or individually may impact
expected results:
(i) If the Company is unable to maintain a meaningful price gap between
its private label cereal products and the branded products of its competitors,
then the Company's cereal business could incur significant operating losses;
(ii) If the Company's cereal business incurs losses more than
offsetting the combined profits of its other businesses and equity earnings
from the Vail investment, then the Company will be unable to borrow under its
credit facility and the repayment of outstanding borrowings, if any, at that
time could be accelerated by the lenders;
(iii) In light of its significant ownership in Vail Resorts, Inc., the
Company's non-cash earnings can be adversely affected by Vail's unfavorable
performance; and
(iv) The Company's businesses compete in mature segments with
competitors having large percentages of segment sales. The Company's profit
growth depends largely on the ability to successfully introduce new products
and aggressively manage costs across all parts of the Company.
Item 3.
QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
19
<PAGE> 22
PART II. OTHER INFORMATION
There is no information required to be reported under any items except those
indicated below.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4 First Amendment to Rights Agreement
10.1 Form of 1997 Non-Qualified Stock Option Agreement
10.2 Form of 1997 Non-Qualified Stock Option Agreement for
Non-Management Directors
10.3 Form of Management Continuity Agreement
10.4 Employment Agreement for J. R. Micheletto
10.5 Employment Agreement for K. J. Hunt
10.6 Employment Agreement for R. W. Lockwood
10.7 Employment Agreement for J. A. Nichols
10.8 Employment Agreement for D. P. Skarie
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RALCORP HOLDINGS, INC.
By: /s/ T. G. Granneman
--------------------------------
Duly Authorized Signatory and
Chief Accounting Officer
August 14, 1997
20
<PAGE> 23
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Numbers
-------
<C> <S>
4 First Amendment to Rights Agreement
10.1 Form of 1997 Non-Qualified Stock Option Agreement
10.2 Form of 1997 Non-Qualified Stock Option Agreement for
Non-Management Directors
10.3 Form of Management Continuity Agreement
10.4 Employment Agreement for J. R. Micheletto
10.5 Employment Agreement for K. J. Hunt
10.6 Employment Agreement for R. W. Lockwood
10.7 Employment Agreement for J. A. Nichols
10.8 Employment Agreement for D. P. Skarie
27 Financial Data Schedule
</TABLE>
21
<PAGE> 1
EXHIBIT 4
FIRST AMENDMENT TO RIGHTS AGREEMENT
-----------------------------------
This First Amendment, dated as of July 1, 1997, (the
"Amendment") is by and among Ralcorp Holdings, Inc. (the
"Company"), a corporation organized under the laws of the State of
Missouri, Boatmen's Trust Company, a corporation organized under
the laws of the State of Missouri ("Boatmen's Trust"), and First
Chicago Trust Company of New York, a corporation organized under
the laws of the State of New York ("First Chicago") and amends the
Rights Agreement dated as of December 27, 1996, (the "Rights
Agreement") between the Company and Boatmen's Trust.
WHEREAS, the Company and Boatmen's Trust are currently parties
to the Rights Agreement, pursuant to which Boatmen's Trust serves
as Rights Agent;
WHEREAS, the Company intends to appoint First Chicago to
succeed Boatmen's Trust as Rights Agent, and Boatmen's Trust
intends to resign as Rights Agent; and
WHEREAS, First Chicago wishes to accept the appointment as
successor Rights Agent and the parties hereto wish to make certain
changes to the Rights Agreement to facilitate this succession.
NOW, THEREFORE, the Company, Boatmen's Trust and First Chicago
agree as follows:
1. REMOVAL OF BOATMEN'S TRUST AS RIGHTS AGENT. Pursuant to
------------------------------------------
Section 21 of the Rights Agreement, the Company does hereby remove
and Boatmen's Trust hereby acknowledges that it has been notified
of its removal as Rights Agent under the Rights Agreement, such
removal to be effective as of 12:01 a.m., eastern daylight time,
August 1, 1997.
2. APPOINTMENT OF FIRST CHICAGO AS SUCCESSOR RIGHTS AGENT.
------------------------------------------------------
The Company hereby appoints First Chicago as successor Rights Agent
under the Rights Agreement, effective as of 12:01 a.m., eastern
daylight time, August 1, 1997, and First Chicago hereby accepts
such appointment, subject to all the terms and conditions of the
Rights Agreement as amended hereby.
3. AMENDMENTS TO RIGHTS AGREEMENT. The parties hereto agree
------------------------------
that the Rights Agreement shall be amended as provided below,
effective as of the date of this Agreement except as may otherwise
be provided below:
(a) From and after the time that the appointment of
First Chicago as successor Rights Agent is effective all references
in the Rights Agreement (including all exhibits thereto) to
Boatmen's Trust as Rights Agent shall be deemed to refer to First
Chicago as successor Rights Agent. From and after the effective
date of this Amendment, all references in the Rights Agreement to
the Rights Agreement shall be deemed to refer to the Rights
Agreement as amended by this Amendment.
<PAGE> 2
- 2 -
(b) Section 3(c) of the Rights Agreement shall be
amended as of the effective time of the appointment of First
Chicago as successor Rights Agent by adding a sentence,
substantially in the form of the following sentence, immediately
after the last sentence of the legend set forth therein:
Effective as of 12:01 a.m., eastern daylight
time, August 1, 1997, First Chicago Trust
Company of New York succeeded Boatmen's Trust
as Rights Agent.
The following legend, or a legend substantially similar
thereto, may, in the alternative be affixed.
This certificate also evidences and entitles
the holder hereof to certain Rights as set
forth in a Rights Agreement between Ralcorp
Holdings, Inc. (the "Company") and First
Chicago Trust Company of New York (the "Rights
Agreement"), as it may from time to time be
supplemented or amended, the terms of which
are incorporated herein by reference and a
copy of which is on file at the principal
executive offices of the Company. Under
certain circumstances, as set forth in the
Rights Agreement, such Rights may expire or
may be redeemed, exchanged or be evidenced by
separate certificates and no longer be
evidenced by this certificate. The Company
will mail to the holder of this certificate a
copy of the Rights Agreement without charge
promptly after receipt of a written request
therefor. Under certain circumstances, Rights
issued to or held by Acquiring Persons or
their Affiliates or Associates (as defined in
the Rights Agreement) and any subsequent
holder of such Rights may become null and
void.
(c) Section 26 of the Rights Agreement shall be amended as of
the effective time of the appointment of First Chicago as successor
Rights Agent by deleting the name and address of Boatmen's Trust
and substituting the following therefor:
First Chicago Trust Company of New York
1 North State Street
Chicago, Illinois 60670
Attention: John H. Ruocco
(d) The name of the Company shall be changed from New Ralcorp
Holdings, Inc. to Ralcorp Holdings, Inc., wherever it appears.
<PAGE> 3
- 3 -
4. MISCELLANEOUS
-------------
(a) Except as otherwise expressly provided, or unless
the context otherwise requires, all terms herein have the meanings
assigned to them in the Rights Agreement.
(b) Each party hereto waives any requirement under the
Rights Agreement that any additional notice be provided to it
pertaining to the matters covered by this Amendment.
(c) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which counterparts shall together constitute but one and the same
document.
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed and their respective corporate seals, if any, to
be hereunto affixed and attested, all as of the day and year first
written above.
ATTEST: RALCORP HOLDINGS, INC.
By:------------------------- By:--------------------------
J. E. Neiger R. W. Lockwood
Assistant Secretary Vice President, General Counsel
and Secretary
ATTEST: FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By:------------------------- By:--------------------------
ATTEST: BOATMEN'S TRUST COMPANY
By:------------------------- By:--------------------------
<PAGE> 1
EXHIBIT 10.1
1997 NON-QUALIFIED STOCK OPTION AGREEMENT
-----------------------------------------
Ralcorp Holdings, Inc. (the "Company"), effective May 20,
1997, grants this Non-Qualified Stock Option to ----------------
("Optionee") to purchase a total of -------shares of its $.01 par
value Common Stock (the "Common Stock") at a price of $12.00 per
share pursuant to the Ralcorp Holdings, Inc. Incentive Stock Plan
(the "Plan"). Subject to the provisions of the Plan and the
following terms, Optionee may exercise this option from time to
time by tendering to the Company written notice of exercise
together with the purchase price in either cash, or in shares of
Common Stock of the Company at their fair market value as
determined by the Nominating and Compensation Committee of the
Company's Board of Directors (the "Committee"), or in both cash and
such shares.
NOW THEREFORE, the Company and Optionee agree, for and in
consideration of the terms hereof, as follows:
1. Normal Exercise - This Option becomes exercisable at the rate
---------------
of 40% of the total shares on May 20, 2002, and the remaining
60% of the total shares on May 20, 2006. This Option remains
exercisable through May 19, 2007, unless Optionee is no longer
employed by the Company, in which case the Option is
exercisable only if permitted by, and in accordance with, the
provisions of paragraph 2 below.
2. Accelerated Exercise - Notwithstanding the above, this Option
--------------------
shall become exercisable before the normal exercise dates set
forth in paragraph 1 above upon the occurrence of any of the
events set forth below while Optionee is employed by the
Company. This Option shall become exercisable in full on the
date of such event and shall remain exercisable for the
periods set forth below or until May 19, 2007, whichever
occurs first. Thereafter, the unexercised portion of this
Option is forfeited and may not be exercised.
a. Death of Optionee (exercisable for three
years).
b. Declaration of Optionee's total and permanent
disability (exercisable for three years).
c. Voluntary termination of Optionee's employment
at or after attainment of age 62 (exercisable
for three years).
d. Involuntary termination of employment of
Optionee, other than a Termination for Cause
(exercisable for six months).
e. Occurrence of a Change in Control (exercisable
for six months after the Optionee's voluntary
or involuntary termination of employment
following the Change in Control).
<PAGE> 2
-2-
3. Forfeiture - This Option is subject to forfeiture in
----------
accordance with Section IV of the Plan except that there shall
be no forfeiture in the event of Optionee's voluntary
termination at or after attainment of age 62 whether or not
such termination constitutes a "retirement". Only the portion
of this Option which is not exercisable at the time of the
declaration of a forfeiture can be forfeited. Any portion of
this Option exercisable (either in accordance with the normal
exercise dates set forth in paragraph 1 or pursuant to an
acceleration of exercisability under paragraph 2) at the time
of a declaration of forfeiture shall remain exercisable for
seven days following such declaration of forfeiture.
Thereafter, such portion of this Option is forfeited and may
not be exercised.
4. Change in Control - In the case of a Change in Control (other
-----------------
than a transaction in which the Company is the continuing or
surviving corporation and which does not result in the
outstanding shares of Common Stock being converted into or
exchanged for different securities, cash or other property, or
any combination thereof), Optionee shall have the right
(subject to the provisions of the Plan and any limitation
applicable to the Option contained herein) thereafter and
during the term of the Option, to receive upon exercise
thereof the Acquisition Consideration (as defined below)
receivable upon the Change in Control by a holder of the
number of shares of Common Stock which would have been
obtained upon exercise of the Option or portion thereof, as
the case may be, immediately prior to the Change in Control.
5. Definitions - For purposes of this Agreement, the following
-----------
terms have the meanings as set forth below:
a. "Acquisition Consideration" - Shall mean the kind and
---------------------------
amount of shares of the surviving or new corporation, cash,
securities, evidence of indebtedness, other property or any
combination thereof receivable in respect of one share of
the Common Stock upon consummation of a Change in Control.
In the case of a Change in Control resulting from the event
set forth in paragraph 5(b)(i), the value of the
Acquisition Consideration shall be equal to the highest
price paid by such person for a share of the Company's
Common Stock during the two-year period preceding the date
on which such person became the beneficial owner of more
than 50% of the Company's Common Stock. If such price is
paid in the form of non-cash consideration, the value of
the Acquisition Consideration shall be equal to the fair
market value of such consideration at the time of the
purchase of such share.
b. "Change in Control" - Shall mean when (i) a person, as
-------------------
defined under the securities laws of the United States,
acquires beneficial ownership of more than 50% of the
outstanding voting securities of the Company; or (ii) the
directors of the Company, immediately before a business
combination between the Company and another entity, or a
proxy contest for the election of directors, shall as a
result of such business combination or proxy contest, cease
to constitute a majority of the Board of Directors of the
Company or any successor to the Company.
<PAGE> 3
-3-
c. "Termination for Cause" - Shall mean the Optionee's
----------------------
termination of employment with the Company because of the
willful engaging by the Optionee in gross misconduct;
provided, however, that a termination for cause shall not
include termination attributable to (i) poor work
performance, bad judgment or negligence on the part of the
Optionee, (ii) an act or omission believed by the Optionee
in good faith to have been in or not opposed to the best
interests of the Company and reasonably believed by the
Optionee to be lawful, or (iii) the good faith conduct of
the Optionee in connection with a Change in Control
(including opposition to or support of such Change in
Control).
6. This Agreement shall be governed by the laws of the State of
Missouri without reference to the conflict of laws provisions
thereof.
7. No amendment or modification of this Option shall be valid
unless the same shall be in writing and signed by the Company
and Optionee. The foregoing, however, shall not prevent the
Company from amending or modifying the Plan except that no
such amendment or modification shall adversely affect the
Optionee's rights under this Option Agreement.
ACKNOWLEDGED RALCORP HOLDINGS, INC.
AND ACCEPTED:
- ---------------------------- BY: ------------------------
Optionee R. W. Lockwood
Secretary
- ----------------------------
Date
- ----------------------------
Location
- ----------------------------
S.S.#
<PAGE> 1
EXHIBIT 10.2
1997 NON-QUALIFIED STOCK OPTION AGREEMENT
-----------------------------------------
Ralcorp Holdings, Inc. (the "Company"), effective May 20,
1997, grants this Non-Qualified Stock Option to
-----------------
("Optionee") to purchase a total of shares of its $.01
----------
par value Common Stock (the "Common Stock") at a price of $12.00
per share pursuant to the Ralcorp Holdings, Inc. Incentive Stock
Plan (the "Plan"). Subject to the provisions of the Plan and the
following terms, Optionee may exercise this option as set forth
below by tendering to the Company written notice of exercise
together with the purchase price in either cash, or in shares of
Common Stock of the Company at their fair market value as
determined by the Company's Board of Directors (the "Board"), or in
both cash and such shares.
NOW THEREFORE, the Company and Optionee agree, for and in
consideration of the terms hereof, as follows:
1. Exercise - This Option shall become exercisable upon the
--------
occurrence of any of the events set forth below. This Option
shall become exercisable in full on the date of such event and
shall remain exercisable for the periods set forth below.
Thereafter, the unexercised portion of this Option is
forfeited and may not be exercised.
a. Optionee's death (exercisable for three
years).
b. Optionee's voluntary termination or retirement
(whether pursuant to any mandatory retirement
provision of the Company's Articles of
Incorporation, Bylaws or Board resolution, or
otherwise) at or after attainment of age 70
(exercisable for three years).
c. Optionee's voluntary termination due to mental
or physical impairment resulting in his
inability to serve as a Director (exercisable
for three years).
d. Optionee's voluntary termination, or
termination due to expiration of Optionee's
term without re-election to a subsequent term
in connection with or following a Change-in-
Control (exercisable for six months).
e. Optionee's voluntary termination, or
termination due to expiration of Optionee's
term without re-election to a subsequent term
other than under circumstances set forth in
paragraphs 1.b., 1.c., or 1.d. (exercisable
for 90 days).
<PAGE> 2
-2-
2. Forfeiture - Notwithstanding anything to the contrary
----------
contained in the Plan, this Option is subject to forfeiture if
Optionee is removed from his position as a Director for cause
in accordance with the Company's Articles and Bylaws and the
corporation laws of the State of Missouri or if Optionee fails
to exercise this Option within the appropriate period set
forth in paragraph 1, but shall not be subject to forfeiture
for any other reason. Following forfeiture, no portion of
this Option may be exercised.
3. Change in Control - In the case of a Change in Control (other
-----------------
than a transaction in which the Company is the continuing or
surviving corporation and which does not result in the
outstanding shares of Common Stock being converted into or
exchanged for different securities, cash or other property, or
any combination thereof), Optionee shall have the right
(subject to the provisions of the Plan and any limitation
applicable to the Option contained herein) thereafter and
during the term of the Option, to receive upon exercise
thereof the Acquisition Consideration (as defined below)
receivable upon the Change in Control by a holder of the
number of shares of Common Stock which would have been
obtained upon exercise of the Option or portion thereof, as
the case may be, immediately prior to the Change in Control.
4. Definitions - For purposes of this Agreement, the following
-----------
terms have the meanings set forth below:
a. "Acquisition Consideration" - Shall mean the kind and
--------------------------
amount of shares of the surviving or new corporation, cash,
securities, evidence of indebtedness, other property or any
combination thereof receivable in respect of one share of
the Common Stock upon consummation of a Change in Control.
In the case of a Change in Control resulting from the event
set forth in paragraph 5(b)(i), the value of the
Acquisition Consideration shall be equal to the highest
price paid by such person for a share of the Company's
Common Stock during the two-year period preceding the date
on which such person became the beneficial owner of more
than 50% of the Company's Common Stock. If such price is
paid in the form of non-cash consideration, the value of
the Acquisition Consideration shall be equal to the fair
market value of such consideration at the time of the
purchase of such share.
b. "Change in Control" - Shall mean when (i) a person, as
------------------
defined under the securities laws of the United States,
acquires beneficial ownership of more than 50% of the
outstanding voting securities of the Company; or (ii) the
directors of the Company, immediately before a business
combination between the Company and another entity, or a
proxy contest for the election of directors, shall as a
result of such business combination or proxy contest, cease
to constitute a majority of the Board of Directors of the
Company or any successor to the Company.
5. This Agreement shall be governed by the laws of the State of
Missouri without reference to the conflict of laws provisions
thereof.
<PAGE> 3
-3-
6. No amendment or modification of this Option shall be valid
unless the same shall be in writing and signed by the Company
and Optionee. The foregoing, however, shall not prevent the
Company from amending or modifying the Plan except that no
such amendment or modification shall adversely affect the
Optionee's rights under this Option Agreement.
ACKNOWLEDGED RALCORP HOLDINGS, INC.
AND ACCEPTED:
- ------------------------ By:
Optionee -----------------------
R. W. Lockwood
Secretary
- ------------------------
Date
<PAGE> 1
EXHIBIT 10.3
MANAGEMENT CONTINUITY AGREEMENT
-------------------------------
AGREEMENT between Ralcorp Holdings, Inc., a Missouri
corporation ("Ralcorp"), and (the "Executive"), WITNESSETH:
WHEREAS, the Board of Directors (the "Board") has
authorized Ralcorp to enter into Management Continuity
Agreements with certain key executives of Ralcorp; and
WHEREAS, the Executive is a key executive of Ralcorp and
has been selected by the Board to be offered this Management
Continuity Agreement; and
WHEREAS, should a third person take steps which might lead
to a Change in Control of Ralcorp (as defined herein), the
Board believes it imperative that Ralcorp be able to rely upon
the Executive to continue in the Executive's position, and
that Ralcorp be able to receive and rely upon the Executive's
advice, if it is requested, as to the best interests of
Ralcorp and its shareholders without concern that the
Executive might be distracted by the personal uncertainties
and risks created by such a Change in Control or influenced by
conflicting interests;
NOW, THEREFORE, for and in consideration of the premises
and other good and valuable consideration, Ralcorp and the
Executive agree as follows:
1. Definitions. For purposes of this Agreement, the
-----------
following terms shall have the meanings set forth below:
a. "Base Amount" shall be the Executive's Base
Amount as defined and determined pursuant to
Section 280G of the Code and regulations
applicable at the time of the Executive's
Qualifying Termination.
b. "Base Compensation" shall consist of:
(i) The Executive's monthly gross salary for
the last full month preceding the
Executive's Qualifying Termination or for
the last full month preceding the Change in
Control, whichever is higher. If Executive
has elected to accelerate or defer salary
(including the Executive's pre-tax
contributions under the Ralcorp Holdings,
Inc. Savings Investment Plan and under any
benefit plan complying with Section 125 of
the Code and deferrals pursuant to the
Executive Savings Investment Plan, and any
successor plans thereto), said monthly
gross salary shall be calculated as if
there had been no acceleration or deferral.
<PAGE> 2
(ii) one-twelfth of the Executive's last annual
bonus, whether paid or deferred, preceding
the Executive's Qualifying Termination or
the Change in Control, whichever is higher
(or if the Executive has not been awarded
an annual bonus by Ralcorp prior to the
Change in Control, then the Executive's
last annual bonus awarded by old Ralcorp
Holdings, Inc., Ralcorp's former parent
company).
c. "Change in Control" means (i) the acquisition by
any person, entity or "group" within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"), of
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50%
or more of the aggregate voting power of the then
outstanding shares of Stock, other than
acquisitions by Ralcorp or any of its
subsidiaries or any employee benefit plan of
Ralcorp (or any Trust created to hold or invest
in issues thereof) or any entity holding Stock
for or pursuant to the terms of any such plan; or
(ii) individuals who shall qualify as Continuing
Directors shall have ceased for any reason to
constitute at least a majority of the Board of
Directors of Ralcorp. Notwithstanding the
foregoing, a Change-in-Control shall not include
a transaction (commonly known as a "Morris Trust"
transaction) pursuant to which a third party
acquires one or more businesses of the Company by
acquiring all of the common stock of the Company
while leaving the Company's remaining businesses
in a separate public company, unless the
businesses so acquired constitute all or
substantially all of the Company's businesses.
d. "Code" shall mean the Internal Revenue Code of
1986, as amended.
e. "Company" shall mean Ralcorp Holdings, Inc. and
its wholly owned subsidiaries.
f. "Continuing Director" means any member of the
Board of Directors of Ralcorp, as of February 1,
1997 while such person is a member of the Board,
and any other director, while such other director
is a member of the Board, who is recommended or
elected to succeed the Continuing Director by at
least two-thirds (2/3) of the Continuing
Directors then in office.
g. "Disability" shall exist when the Executive
suffers a complete and permanent inability to
perform any and every material duty of the
Executive's regular occupation because of injury
or sickness.
To determine whether the Executive is Disabled,
the Executive shall undergo examination by a
licensed physician and other experts (including
other physicians) as determined by such
physician, and the Executive shall cooperate in
providing relevant medical records as requested.
The Company and Executive shall jointly select
such physician. If they are unable to agree on
the selection, each shall designate one physician
and the two physicians shall designate a third
physician so that a determination
2
<PAGE> 3
of disability may be made by the three physicians. Fees and
expenses of the physicians and other experts and costs of
examinations of the Executive shall be shared equally by the
Company and the Executive. The decision as to the Executive's
Disability made by such physician or physicians shall be
binding on the Company and the Executive.
h. "Discount Rate" means 120% of the applicable
Federal rate determined under Section 1274(d) of
the Code and the regulations thereunder at the
time the relevant payments are made.
i. "Employment Agreement" shall mean an agreement so
styled providing for continuation of salary and
bonus payments under certain circumstances and
entered into between Ralcorp and Executive
contemporaneously with the execution of this
Agreement.
j. "Employment Agreement Termination Payments" shall
mean the aggregate of any payments made to
Executive pursuant to the Employment Agreement
respecting periods following Executive's
termination of employment contemporaneous with or
subsequent to a Change-in-Control.
k. "Involuntary Termination" shall be any
termination of the Executive's employment with
the Company (a) to which the Executive objects
orally or in writing or (b) which follows any of
the following:
(i) without the express written consent of
the Executive, (a) the assignment of the
Executive to any duties materially
inconsistent with the Executive's
positions, duties, responsibilities and
status immediately prior to the Change
in Control or (b) a material change in
the Executive's titles, offices, or
reporting responsibilities as in effect
immediately prior to the Change in
Control and with respect to either (a)
or (b) the situation is not remedied
within thirty (30) days after the
receipt by the Company of written notice
by the Executive; provided, however, (a)
and (b) herein shall not constitute an
"Involuntary Termination" if either
situation is in connection with the
Executive's death or disability.
(ii) without the express written consent of
the Executive, a reduction in the
Executive's annual salary or opportunity
for total annual compensation in effect
immediately prior to the Change in
Control which is not remedied within
thirty (30) days after receipt by the
Company of written notice by the
Executive.
(iii) without the express written consent of
the Executive, the Executive is required
to be based anywhere other than the
Executive's office location immediately
preceding the Change in Control, except
for required travel on business
3
<PAGE> 4
to an extent substantially consistent
with the business travel obligations of
the Executive immediately preceding the
occurrence of the Change in Control.
(iv) without the express written consent of
the Executive, following the Change in
Control (a) failure by the Company to
continue in effect any material benefit
or compensation plan, stock ownership
plan, stock purchase plan, stock option
plan, defined benefit pension plan,
defined contribution pension plan, life
insurance plan, health and accident
plan, or disability plan in which the
Executive is participating or entitled
to participate at the time of the Change
in Control (or plans providing
substantially similar benefits); or (b)
the taking of any action by the Company
that would (1) adversely affect the
participation in or materially reduce
the benefits under any of such plans
either in terms of the amount of
benefits provided or the level of the
Executive's participation relative to
other participants; (2) deprive the
Executive of any material fringe benefit
enjoyed by the Executive at the time of
the Change in Control; or (3) cause a
failure to provide the number of paid
vacation days to which the Executive was
then entitled in accordance with
Ralcorp's normal vacation policy in
effect immediately prior to the Change
in Control, which in either situation
(a) or (b) is not remedied within thirty
(30) days after receipt by the Company
of written notice by the Executive.
(v) the liquidation, dissolution,
consolidation, or merger of the Company
or transfer of all or substantially all
of its assets, unless a successor or
successors (by merger, consolidation, or
otherwise) to which all or a significant
portion of its assets have been
transferred expressly assumes in writing
all duties and obligations of the
Company as here set forth.
The Executive's continued employment shall not
constitute consent to, or a waiver of rights with
respect to any circumstances set forth above.
l. "Normal Retirement Date" shall be the date on
which the Executive attains age 65.
m. "Parachute Payment" shall mean a parachute
payment as defined and determined pursuant to
Section 280G of the Code and regulations
applicable at the time of the Executive's
Qualifying Termination.
n. The "Payment Period" shall be the following
period commencing with the first day of the month
following that in which a Qualifying Termination
occurs:
4
<PAGE> 5
(i) if the Qualifying Termination is an
Involuntary Termination that occurs at
any time during the first or second
year following the Change in Control --
24 months;
(ii) if the Qualifying Termination is an
Involuntary Termination that occurs at
any time during the third year
following the Change in Control -- 12
months; or
(iii) if the Qualifying Termination is a
Voluntary Termination that occurs at
any time during the three years follow-
ing the Change in Control -- 12 months,
but in no event shall the Payment Period extend
beyond the Executive's Normal Retirement Date.
o. "Qualifying Termination" shall be the Executive's
Voluntary Termination or Involuntary Termination
of employment with the Company except any termi-
nation because of the Executive's death, retire-
ment at or after the Executive's Normal Retire-
ment Date or Termination for Cause. "Qualifying
Termination" shall not include any change in the
Executive's employment status due to Disability.
p. "Retirement Plan" means the Ralcorp Holdings,
Inc. Retirement Plan or any successor qualified
plan, as amended from time to time.
q. "Stock" means the common stock of Ralcorp or such
other security entitling the holder to vote at
the election of Ralcorp's directors or any other
security outstanding upon its reclassification,
including, without limitation, any stock split-
up, stock dividend or other recapitalization of
Ralcorp or any merger or consolidation of Ralcorp
with any of its Affiliates.
r. "Supplemental Plan" means the Ralcorp Holdings,
Inc. Supplemental Retirement Plan as amended from
time to time.
s. "Termination for Cause" shall be a termination
because of:
(i) the continued failure by the Executive
to devote reasonable time and effort to
the performance of the Executive's
duties (other than any such failure
resulting from the Executive's incapac-
ity due to physical or mental illness)
after written demand therefor has been
delivered to the Executive by the Com-
pany that specifically identifies how
the Executive has not devoted reason-
able time and effort to the performance
of the Executive's duties; or
(ii) the willful engaging by the Executive
in misconduct which is materially inju-
rious to the Company, monetarily or
otherwise; or
5
<PAGE> 6
(iii) the Executive's conviction of a felony
or a crime involving moral turpitude;
in any case as determined by the Board upon the
good faith vote of not less than a majority of
the directors then in office, after reasonable
notice to the Executive specifying in writing the
basis or bases for the proposed Termination for
Cause and after the Executive has been provided
an opportunity to be heard before a meeting of
the Board held upon reasonable notice to all
directors; provided, however, that a Termination
for Cause shall not include a termination attrib-
utable to:
(i) bad judgment or negligence on the part
of the Executive other than habitual
negligence; or
(ii) an act or omission believed by the
Executive in good faith to have been in
or not opposed to the best interests of
the Company and reasonably believed by
the Executive to be lawful; or
(iii) the good faith conduct of the Executive
in connection with a Change in Control
(including the Executive's opposition
to or support thereof).
t. "Voluntary Termination" shall be any termination
of the Executive's employment with the Company
other than an Involuntary Termination or a
Termination for Cause.
2. Operation of Agreement. This Agreement shall not
----------------------
create any obligation on the part of the Company or the
Executive to continue their employment relationship. Anything
in this Agreement to the contrary notwithstanding, no payments
shall be made hereunder unless and until there has been a
Change in Control of the Company. This Agreement is not
exclusive with regard to benefits to be provided to the
Executive on the Executive's termination of employment with
the Company and shall not affect any other agreement or
arrangement providing for such benefits.
3. Severance Benefits. Provided that the Executive
------------------
remains in the employ of the Company until a Change in Control
has occurred, then upon the Executive's Qualifying Termination
within three years after that Change in Control, the Executive
shall be entitled to the following "Severance Benefits":
a. Payment in a lump sum in cash, within 60 days
after the Executive's Qualifying Termination, of
the present value as of the date of the Qualify-
ing Termination of an income stream equal to the
Executive's Base Compensation payable each month
throughout the applicable Payment Period. For
purposes of this subparagraph, present value
shall be calculated by application of the Dis-
count Rate;
b. Continuation during the Payment Period of the
Executive's participation in each life, health,
accident and disability plan in which the Execu-
tive was entitled to participate immediately
prior to the Change in Control, upon the same
terms and conditions, including those with
respect to spouses and dependents, applicable
6
<PAGE> 7
at such time; provided, however, that if the terms
of any such benefit plan do not permit continued
participation by the Executive, then the Company
will arrange, at the Company's sole cost and
expense, to provide the Executive a benefit
substantially similar to, and no less favorable
than, on an after-tax basis, the benefit the
Executive was entitled to receive under such plan
immediately prior to the Change in Control;
provided further, however, that the benefit to be
provided or payments to be made hereunder may be
reduced by the benefits provided or payments made
(in either case on an after-tax basis) by subse-
quent employer for the same occurrence or event;
c. Payment in a lump sum in cash, within 60 days
after the Executive's Qualifying Termination, of
the difference between the present values as of
the date of the Qualifying Termination of (a) the
benefits under the Retirement Plan and the
Supplemental Plan which the Executive and the
Executive's beneficiary, if applicable, would
have been entitled to receive had the Executive
remained employed by Ralcorp at a compensation
level equal to the Executive's Base Compensation
for the entirety of the applicable Payment
Period, and (b) the Executive's actual benefit,
if any, to which the Executive and the Exe-
cutive's beneficiary are entitled under the
Retirement Plan and the Supplemental Plan. For
purposes of this subparagraph, present value
shall be calculated in accordance with Section
417(e)(3) of the Code; no reduction factors for
early retirement shall be applied in the calcula-
tion of benefits; and
d. Payment, on a current basis, of any actual costs
and expenses of litigation incurred by the
Executive, including costs of investigation and
reasonable attorney's fees, in the event the
Executive is a party to any legal action to
enforce or to recover damages for breach of this
Agreement, or to recover or recoup from the
Executive or the Executive's legal representative
or beneficiary any amounts paid under or pursuant
to this Agreement, regardless of the outcome of
such litigation, plus interest at the applicable
Federal rate provided for in Section 7872(f)(2)
of the Code.
Notwithstanding anything to the contrary contained in this
Agreement, the Executive may, but is not required to, elect to
reduce the Severance Benefits to be provided under this para-
graph three of this Agreement so that the present value of such
Severance Benefits, calculated by application of the Discount
Rate, if they constitute Parachute Payments, together with the
present value of all Parachute Payments made by Company to the
Executive, are less than three times the Employee's Base Amount.
Whether or not such Severance Payments shall be reduced and the
identity of the Severance Benefits to be reduced and the amount
by which each benefit shall be reduced shall be within the sole
discretion of the Executive. Any such election, if made, shall
be made by the Executive's written notice to Company sent by
regular U.S. mail, postage paid, not later than 45 days follow-
ing such Executive's Qualifying Termination.
7
<PAGE> 8
Notwithstanding anything to the contrary contained herein
payments hereunder will be reduced by the amount of any Employ-
ment Agreement Termination Payments.
The Executive may file with the Secretary or any Assis-
tant Secretary of Ralcorp a written designation of a benefi-
ciary or contingent beneficiaries to receive the payments
described in subparagraphs (a) and (c) above in the event of
the Executive's death following the Executive's Qualifying
Termination but prior to payment by the Company. The Execu-
tive may from time to time revoke or change any such designa-
tion of beneficiary and any designation of beneficiary
pursuant to this Agreement shall be controlling over any other
disposition, testamentary or otherwise; provided, however,
that if the Company shall be in doubt as to the right of any
such beneficiary to receive such payments, it may determine to
pay such amounts to the legal representative of the Executive,
in which case the Company shall not be under any further
liability to anyone. In the event that such designated
beneficiary or legal representative becomes a party to a legal
action to enforce or to recover damages for breach of this
Agreement, or to recover or recoup from the Executive or the
Executive's estate, legal representative or beneficiary any
amounts paid under or pursuant to this Agreement, regardless
of the outcome of such litigation, the Company shall pay their
actual costs and expenses of such litigation, including costs
of investigation and reasonable attorneys' fees, plus interest
at the applicable Federal rate provided for in Section
7872(f)(2) of the Code; provided, however, that the Company
shall not be required to pay such costs and expenses in
connection with litigation to determine the proper payee,
among two or more claimants, of the payments described in
subparagraphs (a) and (c).
4. Successors to Company; Binding Effect; Assignment.
-------------------------------------------------
This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company will require
any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. The Company may
not assign this Agreement other than to a successor to all or
substantially all of the business and/or assets of the
Company. The Executive shall have no right to transfer or
assign the right to receive any severance benefit under this
Agreement except as noted in paragraph three above.
5. Missouri Law to Govern. This Agreement shall be
----------------------
governed by the laws of the State of Missouri without giving
effect to the conflict of laws provisions thereof.
6. Miscellaneous. No provision of this Agreement may be
-------------
modified, waived or discharged unless such modification,
waiver or discharge is agreed to in a writing signed by the
Executive and a duly authorized officer of the Company. No
waiver by a party hereto at any time of any breach by the
other party hereto of, or of compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not
expressly set forth in this Agreement.
8
<PAGE> 9
7. Taxes; Set-off. All payments to be made to the
--------------
Executive under this Agreement will be subject to required
withholding of federal, state and local income and employment
taxes. The right of the Executive to receive benefits under
this Agreement, however, shall be absolute and shall not be
subject to any set-off, counter-claim, recoupment, defense,
duty to mitigate or other rights the Company may have against
the Executive's or anyone else.
8. Severability. The invalidity and unenforceability of
------------
any particular provision of this Agreement shall not affect
any other provision of this Agreement, and the Agreement shall
be construed in all respects as if the invalid or unenforce-
able provision were omitted.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement this ------ day of April, 1997.
RALCORP HOLDINGS, INC.
___________________________ By: ---------------------------
Executive J. R. Micheletto
Chief Executive Officer
and President
9
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") made between Joe R.
Micheletto (the "Executive") and Ralcorp Holdings, Inc., a corporation
with its principal place of business at 800 Market Street, St. Louis,
Missouri, and its subsidiaries and affiliates (the "Company"),
WITNESSETH THAT:
RECITALS
--------
WHEREAS, the Company was incorporated on October 23, 1996; and
WHEREAS, the Company was spun-off from its former parent company,
Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and
WHEREAS, Executive is presently employed by the Company and has
substantial experience as an executive level manager for the Company;
and
WHEREAS, the Company desires to secure Executive's employment for
a definite period of time; and
WHEREAS, Executive desires to be employed by the Company in the
executive capacity described in SECTION TWO of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the Company and Executive hereby agree as
follows:
SECTION ONE
DEFINITIONS
-----------
The following terms shall have the meanings set forth below:
A. "Involuntary Termination" shall be any termination of the
-----------------------
Executive's employment with the Company, other than a
Termination for Cause, (a) to which the Executive objects orally
or in writing or (b) which follows any of the following:
(i) without the express written consent of the Executive,
(a) the assignment of the Executive to any duties
materially inconsistent with the Executive's positions,
duties, responsibilities and status on the effective
date of this Agreement or (b) a material change in the
Executive's titles, offices, or reporting
responsibilities as in effect on the effective date of
this Agreement and with respect to either (a) or (b) the
situation is not remedied within thirty (30) days after
receipt by the Company of written notice by the
Executive; provided, however, (a) and (b) herein shall
not constitute an "Involuntary Termination" if either
situation is in connection with the Executive's death or
disability; or
<PAGE> 2
(ii) without the express written consent of the Executive, a
reduction in the Executive's annual salary or
opportunity for total annual compensation, in effect on
the effective date of this Agreement which is not
remedied within thirty (30) days after receipt by the
Company of written notice by the Executive; or
(iii) without the express written consent of the Executive,
the Executive is required to be based more than 100
miles from Executive's office location on the effective
date of this Agreement, except for required travel on
business to an extent substantially consistent with the
business travel obligations of the Executive on the
effective date of this Agreement; or
(iv) without the express written consent of the Executive,
(a) failure by the Company to continue in effect benefit
and compensation plans which may include a stock
ownership plan, a stock purchase plan, a stock option
plan, a defined benefit pension plan, a defined
contribution pension plan, a life insurance plan, a
health and accident plan, and/or a disability plan which
are, in the aggregate, substantially equivalent in value
to those in which the Executive is participating or
entitled to participate on the effective date of this
Agreement; or (b) the taking of any action by the
Company that would (1) adversely affect the
participation in or materially reduce the aggregate
value to the Executive of benefits under such plans
either in terms of the amount of benefits provided or
the level of the Executive's participation relative to
other participants; or (2) cause a failure to provide
the number of paid vacation days to which the Executive
was then entitled in accordance with the Company's
normal vacation policy in effect on the effective date
of this Agreement, which in either situation (a) or (b)
is not remedied within thirty (30) days after receipt by
the Company of written notice by the Executive; or
(v) the liquidation, dissolution, consolidation, or merger
of the Company or transfer of all or substantially all
of its assets, unless a successor or successors (by
merger, consolidation, or otherwise) to which all or a
significant portion of its assets have been transferred
expressly assumes in writing all duties and obligations
of the Company as here set forth.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to any
circumstances set forth above.
B. "Termination for Cause" shall be a termination because of:
---------------------
(i) the continued failure by the Executive to devote
reasonable time and effort to the performance of the
Executive's duties (other than any such failure
resulting from the Executive's incapacity due to
physical or mental illness) after written demand
therefor has been delivered to the Executive by the
Company that specifically identifies how the Executive
has not devoted reasonable time and effort to the
performance of the Executive's duties; or
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<PAGE> 3
(ii) the willful engaging by the Executive in misconduct
which is materially injurious to the Company, monetarily
or otherwise; or
(iii) the Executive's conviction of a felony or a crime
involving moral turpitude;
in any case as determined by the Board of Directors of the
Company (the "Board") upon the good faith vote of not less than
a majority of the Directors then in office, after reasonable
notice to the Executive specifying in writing the basis or bases
for the proposed Termination for Cause and after the Executive
has been provided an opportunity to be heard before a meeting of
the Board held upon reasonable notice to all Directors;
provided, however, that a Termination for Cause shall not
include a termination attributable to:
(i) bad judgment or negligence on the part of the Executive
other than habitual negligence; or
(ii) an act or omission believed by the Executive in good faith
to have been in or not opposed to the best interests of
the Company and reasonably believed by the Executive to be
lawful.
C. "Voluntary Termination" shall be any termination of the
---------------------
Executive's employment with the Company other than an
Involuntary Termination or a Termination for Cause.
SECTION TWO
EMPLOYMENT
----------
The Company hereby employs Executive as its Chief Executive
Officer and President. Executive's reporting responsibilities shall be
to the Company's Board of Directors. Subject to SECTION EIGHT, the
Company may modify or realign Executive's duties and responsibilities
as it deems necessary during the term of this Agreement.
SECTION THREE
BEST EFFORTS OF EXECUTIVE
-------------------------
Executive agrees that the Executive will at all times faithfully
and to the best of the Executive's ability, experience and talent,
perform all of the duties that may be required of or from the Executive
pursuant to the express and implicit terms hereof. Executive
acknowledges that the Executive is obligated to manage the business of
the Company in a sound and businesslike manner and in material
conformity with all laws and regulations governing the conduct of the
business of the Company.
3
<PAGE> 4
SECTION FOUR
TERM
----
The term of this Agreement shall be three years beginning on
February 1, 1997 and ending on January 31, 2000 (the "Term"). This
Agreement may be extended for additional periods upon the mutual
written agreement of the parties.
SECTION FIVE
COMPENSATION
------------
During the Term of this Agreement, Executive shall be entitled to
the following:
A. The Company shall pay Executive a minimum monthly base salary
of $25,000.00, payable on the last day of each month. The base salary
may be increased by the Company at any time during the Term of this
Agreement; provided, however, that until January 31, 2000, Executive's
monthly base salary shall not be less than the amount set forth above.
B. The Company shall pay Executive a minimum annual bonus of
$75,000.00, payable in October of each year. The annual bonus may be
increased by the Company at any time during the Term of this Agreement;
provided, however, that until January 31, 2000, Executive's annual
bonus shall not be less than the amount set forth above.
C. Executive shall be provided with an executive level benefit
program including stock options and/or stock grants as determined by
the Company. Any such stock options shall become immediately
exercisable, and such stock grants shall vest immediately, upon
Executive's Involuntary Termination during the Term of this Agreement.
D. Executive shall be eligible for coverage under such pension
plan, group health insurance plan, 401(k) plan, vacation, holiday and
other programs or policies in effect from time to time for salaried
Executives of the Company.
SECTION SIX
OLD RALCORP STOCK OPTIONS
-------------------------
It is understood that Old Ralcorp previously granted Executive
certain Non-Qualified Stock Options. It is further understood and
agreed that Old Ralcorp paid Executive a lump sum payment that
represents fair compensation for these Non-Qualified Stock Options.
Executive understands and agrees that Executive received this lump sum
payment in lieu of these options and that Executive forfeits all Old
Ralcorp Non-Qualified Stock Options, and rights thereunder, which
Executive had not exercised at the time Executive received the lump sum
payment.
4
<PAGE> 5
SECTION SEVEN
CHANGE OF CONTROL
-----------------
Contemporaneously with the execution of this Agreement, the
Executive and the Company will enter into a Management Continuity
Agreement providing benefits under certain circumstances in the event
of a Change-in-Control of the Company, as defined in such Management
Continuity Agreement. Such benefits will be in addition to those
provided under this Agreement; provided, however, that any benefits
paid under said Management Continuity Agreement shall be reduced by
amounts paid hereunder in respect of periods after Executive's
termination of employment following a Change-in-Control. Executive
agrees that the previous Management Continuity Agreement entered into
by Executive with Old Ralcorp is null and void and Executive releases
any claims to benefits under the previous Management Continuity
Agreement.
SECTION EIGHT
TERMINATION
-----------
A. The Company reserves the right to terminate the employment of
Executive at any time with or without cause. However, in the event of
Executive's Involuntary Termination prior to January 31, 2000,
Executive shall be entitled to the following:
(i) payment within sixty (60) days after Executive's
Involuntary Termination of Executive's minimum base salary
under this Agreement for the remainder of the three-year
term, in cash in a lump sum without discount or pro-
ration; and
(ii) payment within sixty (60) days after Executive's
Involuntary Termination of the minimum annual bonuses
which Executive would have been entitled to receive under
this Agreement during the remainder of the three-year
term, in cash in a lump sum without discount or pro-
ration; and
(iii) continuation for the remainder of the three-year term of
the Executive's participation in each life, health,
accident and disability plan in which the Executive was
entitled to participate immediately prior to the
Executive's termination, upon the same terms and
conditions, including those with respect to spouses and
dependents, applicable at such time; provided, however,
that if the terms of any such benefit plan do not permit
continued participation by the Executive, then the Company
will arrange, at the Company's sole cost and expense, to
provide the Executive a benefit substantially similar to,
and no less favorable than, on an after-tax basis, the
benefit the Executive was entitled to receive under such
plan immediately prior the Executive's termination;
provided further, however, that the benefit to be provided
or payments to be made hereunder may be reduced by the
benefits provided or payments made (in either case on an
after-tax basis) by a subsequent employer for the same
occurrence or event; and
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<PAGE> 6
(iv) payment in cash in a lump sum, within sixty (60) days
after the Executive's termination, of the difference
between the present values as of the date of the
termination of (a) the benefits under the Company's
Retirement Plan and Supplemental Retirement Plan which the
Executive and the Executive's beneficiary, if applicable,
would have been entitled to receive had the Executive
remained employed by the Company at a compensation level
equal to that provided in this Agreement for the entirety
of the three-year term, and (b) the actual benefit, if
any, to which the Executive and the Executive's
beneficiary are entitled under the Retirement Plan and the
Supplemental Retirement Plan. For purposes of this
subparagraph, present value shall be calculated in
accordance with Section 417(e)(3) of the Internal Revenue
Code of 1986, as amended (the "Code"); no reduction
factors for early retirement shall be applied in the
calculation of benefits; and
(v) payment, on a current basis, of any actual costs and
expenses of litigation incurred by the Executive,
including costs of investigation and reasonable attorney's
fees, in the event the Executive is a party to any legal
action to enforce or to recover damages for breach of this
Agreement, or to recover or recoup from the Executive or
the Executive's legal representative or beneficiary any
amounts paid under or pursuant to this Agreement,
regardless of the outcome of such litigation, plus
interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code.
B. The Executive may file with the Secretary or any Assistant
Secretary of the Company a written designation of a beneficiary or
contingent beneficiaries to receive the payments described above in the
event of the Executive's death following the Executive's Involuntary
Termination but prior to payment by the Company. The Executive may
from time to time revoke or change any such designation of beneficiary
and any designation of beneficiary pursuant to this Agreement shall be
controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Company shall be in doubt as to the
right of any such beneficiary to receive such payments, it may
determine to pay such amounts to the legal representative of the
Executive, in which case the Company shall not be under any further
liability to anyone. In the event that such designated beneficiary or
legal representative becomes a party to a legal action to enforce or to
recover damages for breach of this Agreement, or to recover or recoup
from the Executive or the Executive's estate, legal representative or
beneficiary any amounts paid under or pursuant to this Agreement,
regardless of the outcome of such litigation, the Company shall pay
their actual costs and expenses of such litigation, including costs of
investigation and reasonable attorneys' fees, plus interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that the Company shall not be required to pay such
costs and expenses in connection with litigation to determine the
proper payee, among two or more claimants, of the payments pursuant to
this Agreement.
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<PAGE> 7
C. In the event of Executive's Voluntary Termination or
Termination for Cause, Executive shall not be entitled to receive any
of the pay or benefits that would have been provided pursuant to this
Agreement except for pay already earned and benefits already vested at
the time of such termination.
D. In the event that Executive's employment is terminated for
any reason during the Term of this Agreement, Executive shall not be
eligible to participate in any other severance pay plan established by
the Company for its Executives unless such severance pay plan provides
benefits of greater value in the aggregate than those available under
this Agreement, in which case Executive shall be entitled to benefits
under such severance pay plan but not under this Agreement.
SECTION NINE
CONFIDENTIALITY
---------------
Executive agrees that, in addition to any other limitations
contained in this Agreement, regardless of the circumstances of
Executive's termination of employment, Executive will not take, or
communicate or disclose to any person, firm, corporation or other
entity, any information relating to the Company's customer lists,
prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Executive might from time to
time acquire with respect to the business of the Company or any of its
affiliates or subsidiaries, unless Executive obtains written consent of
the Company. Executive also specifically acknowledges the continued
validity and effect of any Agreement as to Confidentiality and
Inventions previously signed by Executive and that the terms of any
such agreement are incorporated into this Agreement by this reference.
SECTION TEN
NON-COMPETITION
---------------
In the event Executive's employment terminates pursuant to SECTION
EIGHT, Executive will not, for the duration of this Agreement, on
Executive's own behalf, or on behalf of any other person, firm,
partnership or corporation, engage in the business of selling or
marketing or engage in the design, manufacture and/or sale of any item
or product handled from time-to-time prior to January 31, 2000 by the
Company; nor will the Executive directly or indirectly, on Executive's
own behalf, or on behalf of, or in conjunction with, any other person,
firm, partnership or corporation, solicit or attempt to solicit the
business or patronage of any person, firm, corporation or partnership
for the purposes of selling or marketing products manufactured by the
Company or other products similar to those manufactured by the Company
or perform such other incidental business and service in which the
Company engages prior to January 31, 2000.
7
<PAGE> 8
SECTION ELEVEN
ARBITRATION
-----------
As additional consideration for this Agreement, Executive agrees
that any differences, claims, or matters in dispute arising between the
Company and Executive out of or in connection with the Executive's
employment or the termination of the Executive's employment by the
Company including, but not limited to the terms and conditions of this
Agreement, allegations of wrongful termination, allegations of
employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination
law shall be submitted by them to arbitration by the American
Arbitration Association, or its successor, and the determination of the
American Arbitration Association, or its successor, shall be final and
absolute. The arbitrator shall be governed by the duly promulgated
rules and regulations of the American Arbitration Association, or its
successor, and the pertinent provisions of the laws of the State of
Missouri relating to arbitration. The decision of the arbitrator may
be entered as a judgment in any court of the State of Missouri or
elsewhere.
SECTION TWELVE
MISCELLANEOUS PROVISIONS
------------------------
A. The Company shall be entitled to withhold from any payments
made pursuant to this Agreement, including SECTION EIGHT hereof, any
federal, state or local taxes required to be withheld by law or
regulation.
B. This Agreement represents the entire agreement between the
parties and any prior understandings or representations of any kind
preceding the effective date of this Agreement shall not be binding on
either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in
writing signed by an authorized officer of the Company and by the
Executive.
C. This Agreement shall be binding upon and shall inure to the
benefit of the assigns, heirs, legatees or personal representatives of
Executive and the successors or assigns of the Company.
D. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. The Company may not assign this
Agreement other than to a successor to all or substantially all of the
business and/or assets of the Company. Neither this Agreement nor any
right or
8
<PAGE> 9
interest hereunder shall be assignable or transferable by Executive,
the Executive's beneficiaries or Executive's legal representatives
without the Company's prior written consent; provided, however, that
nothing in this Section shall preclude (i) Executive from designating
a beneficiary to receive any benefit payable hereunder upon the
Executive's death, or (ii) the executors, administrators, or other
legal representatives of the Executive's estate from assigning or
transferring any rights hereunder to the person or persons entitled
thereunto.
E. The headings of sections are included solely for convenience
of reference and shall not control the meaning or interpretation of any
of the provisions of this Agreement.
F. This Agreement shall be construed according to the laws of
the State of Missouri without giving effect to the conflict of laws
provisions thereof.
G. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a wavier of
such term or condition for the future or of any act other than that
specifically waived.
H. If, for any reason, any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of the
Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
The parties have entered into this Agreement based solely upon the
terms and conditions set forth herein. THIS AGREEMENT CONTAINS A
BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the --------- day of April, 1997.
RALCORP HOLDINGS, INC.
- ---------------------------- By:-------------------------
Executive R. W. Lockwood
Secretary
9
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") made between Kevin J.
Hunt, (the "Executive") and Ralcorp Holdings, Inc., a corporation with
its principal place of business at 800 Market Street, St. Louis,
Missouri, and its subsidiaries and affiliates (the "Company"),
WITNESSETH THAT:
RECITALS
--------
WHEREAS, the Company was incorporated on October 23, 1996; and
WHEREAS, the Company was spun-off from its former parent company,
Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and
WHEREAS, Executive is presently employed by the Company and has
substantial experience as an executive level manager for the Company;
and
WHEREAS, the Company desires to secure Executive's employment for
a definite period of time; and
WHEREAS, Executive desires to be employed by the Company in the
executive capacity described in SECTION TWO of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the Company and Executive hereby agree as
follows:
SECTION ONE
DEFINITIONS
-----------
The following terms shall have the meanings set forth below:
A. "Involuntary Termination" shall be any termination of the
-----------------------
Executive's employment with the Company, other than a
Termination for Cause, (a) to which the Executive objects orally
or in writing or (b) which follows any of the following:
(i) without the express written consent of the Executive,
(a) the assignment of the Executive to any duties
materially inconsistent with the Executive's positions,
duties, responsibilities and status on the effective
date of this Agreement or (b) a material change in the
Executive's titles, offices, or reporting
responsibilities as in effect on the effective date of
this Agreement and with respect to either (a) or (b) the
situation is not remedied within thirty (30) days after
receipt by the Company of written notice by the
Executive; provided, however, (a) and (b) herein shall
not constitute an "Involuntary Termination" if either
situation is in connection with the Executive's death or
disability; or
<PAGE> 2
(ii) without the express written consent of the Executive, a
reduction in the Executive's annual salary or
opportunity for total annual compensation, in effect on
the effective date of this Agreement which is not
remedied within thirty (30) days after receipt by the
Company of written notice by the Executive; or
(iii) without the express written consent of the Executive,
the Executive is required to be based more than 100
miles from Executive's office location on the effective
date of this Agreement, except for required travel on
business to an extent substantially consistent with the
business travel obligations of the Executive on the
effective date of this Agreement; or
(iv) without the express written consent of the Executive,
(a) failure by the Company to continue in effect benefit
and compensation plans which may include a stock
ownership plan, a stock purchase plan, a stock option
plan, a defined benefit pension plan, a defined
contribution pension plan, a life insurance plan, a
health and accident plan, and/or a disability plan which
are, in the aggregate, substantially equivalent in value
to those in which the Executive is participating or
entitled to participate on the effective date of this
Agreement; or (b) the taking of any action by the
Company that would (1) adversely affect the
participation in or materially reduce the aggregate
value to the Executive of benefits under such plans
either in terms of the amount of benefits provided or
the level of the Executive's participation relative to
other participants; or (2) cause a failure to provide
the number of paid vacation days to which the Executive
was then entitled in accordance with the Company's
normal vacation policy in effect on the effective date
of this Agreement, which in either situation (a) or (b)
is not remedied within thirty (30) days after receipt by
the Company of written notice by the Executive; or
(v) the liquidation, dissolution, consolidation, or merger
of the Company or transfer of all or substantially all
of its assets, unless a successor or successors (by
merger, consolidation, or otherwise) to which all or a
significant portion of its assets have been transferred
expressly assumes in writing all duties and obligations
of the Company as here set forth.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to any
circumstances set forth above.
B. "Termination for Cause" shall be a termination because of:
---------------------
(i) the continued failure by the Executive to devote
reasonable time and effort to the performance of the
Executive's duties (other than any such failure
resulting from the Executive's incapacity due to
physical or mental illness) after written demand
therefor has been delivered to the Executive by the
Company that specifically identifies how the Executive
has not devoted reasonable time and effort to the
performance of the Executive's duties; or
2
<PAGE> 3
(ii) the willful engaging by the Executive in misconduct
which is materially injurious to the Company, monetarily
or otherwise; or
(iii) the Executive's conviction of a felony or a crime
involving moral turpitude;
in any case as determined by the Board of Directors of the
Company (the "Board") upon the good faith vote of not less than
a majority of the Directors then in office, after reasonable
notice to the Executive specifying in writing the basis or bases
for the proposed Termination for Cause and after the Executive
has been provided an opportunity to be heard before a meeting of
the Board held upon reasonable notice to all Directors;
provided, however, that a Termination for Cause shall not
include a termination attributable to:
(i) bad judgment or negligence on the part of the Executive
other than habitual negligence; or
(ii) an act or omission believed by the Executive in good
faith to have been in, or not opposed to, the best
interests of the Company and reasonably believed by the
Executive to be lawful.
C. "Voluntary Termination" shall be any termination of the
---------------------
Executive's employment with the Company other than an
Involuntary Termination or a Termination for Cause.
SECTION TWO
EMPLOYMENT
----------
The Company hereby employs Executive as its Corporate Vice
President and President, Bremner. Executive's day-to-day reporting
responsibilities shall be to the Company's Chief Executive Officer.
Subject to SECTION EIGHT, the Company may modify or realign Executive's
duties and responsibilities as it deems necessary during the term of
this Agreement.
SECTION THREE
BEST EFFORTS OF EXECUTIVE
-------------------------
Executive agrees that the Executive will at all times faithfully
and to the best of the Executive's ability, experience and talent,
perform all of the duties that may be required of or from the Executive
pursuant to the express and implicit terms hereof. Executive
acknowledges that the Executive is obligated to manage the business of
the Company in a sound and businesslike manner and in material
conformity with all laws and regulations governing the conduct of the
business of the Company.
3
<PAGE> 4
SECTION FOUR
TERM
----
The term of this Agreement shall be three years beginning on
February 1, 1997 and ending on January 31, 2000 (the "Term"). This
Agreement may be extended for additional periods upon the mutual
written agreement of the parties.
SECTION FIVE
COMPENSATION
------------
During the Term of this Agreement, Executive shall be entitled to
the following:
A. The Company shall pay Executive a minimum monthly base salary
of $11,667.00, payable on the last day of each month. The base salary
may be increased by the Company at any time during the Term of this
Agreement; provided, however, that until January 31, 2000, Executive's
monthly base salary shall not be less than the amount set forth above.
B. The Company shall pay Executive a minimum annual bonus of
$35,000.00, payable in October of each year. The annual bonus may be
increased by the Company at any time during the Term of this Agreement;
provided, however, that until January 31, 2000, Executive's annual
bonus shall not be less than the amount set forth above.
C. Executive shall be provided with an executive level benefit
program including stock options and/or stock grants as determined by
the Company. Any such stock options shall become immediately
exercisable, and such stock grants shall vest immediately, upon
Executive's Involuntary Termination during the Term of this Agreement.
D. Executive shall be eligible for coverage under such pension
plan, group health insurance plan, 401(k) plan, vacation, holiday and
other programs or policies in effect from time to time for salaried
Executives of the Company.
SECTION SIX
OLD RALCORP STOCK OPTIONS
-------------------------
It is understood that Old Ralcorp previously granted Executive
certain Non-Qualified Stock Options. It is further understood and
agreed that Old Ralcorp paid Executive a lump sum payment that
represents fair compensation for these Non-Qualified Stock Options.
Executive understands and agrees that Executive received this lump sum
payment in lieu of these options and that Executive forfeits all Old
Ralcorp Non-Qualified Stock Options, and rights thereunder, which
Executive had not exercised at the time Executive received the lump sum
payment.
4
<PAGE> 5
SECTION SEVEN
CHANGE OF CONTROL
-----------------
Contemporaneously with the execution of this Agreement, the
Executive and the Company will enter into a Management Continuity
Agreement providing benefits under certain circumstances in the event
of a Change-in-Control of the Company, as defined in such Management
Continuity Agreement. Such benefits will be in addition to those
provided under this Agreement; provided, however, that any benefits
paid under said Management Continuity Agreement shall be reduced by
amounts paid hereunder in respect of periods after Executive's
termination of employment following a Change-in-Control. Executive
agrees that the previous Management Continuity Agreement entered into
by Executive with Old Ralcorp is null and void and Executive releases
any claims to benefits under the previous Management Continuity
Agreement.
SECTION EIGHT
TERMINATION
-----------
A. The Company reserves the right to terminate the employment of
Executive at any time with or without cause. However, in the event of
Executive's Involuntary Termination prior to January 31, 2000,
Executive shall be entitled to the following:
(i) payment within sixty (60) days after Executive's
Involuntary Termination of Executive's minimum base
salary under this Agreement for the remainder of the
three-year term, in cash in a lump sum without discount
or pro-ration; and
(ii) payment within sixty (60) days after Executive's
Involuntary Termination of the minimum annual bonuses
which Executive would have been entitled to receive
under this Agreement during the remainder of the three-
year term, in cash in a lump sum without discount or
pro-ration; and
(iii) continuation for the remainder of the three-year term of
the Executive's participation in each life, health,
accident and disability plan in which the Executive was
entitled to participate immediately prior to the
Executive's termination, upon the same terms and
conditions, including those with respect to spouses and
dependents, applicable at such time; provided, however,
that if the terms of any such benefit plan do not permit
continued participation by the Executive, then the
Company will arrange, at the Company's sole cost and
expense, to provide the Executive a benefit
substantially similar to, and no less favorable than, on
an after-tax basis, the benefit the Executive was
entitled to receive under such plan immediately prior
the Executive's termination; provided further, however,
that the benefit to be provided or payments to be made
hereunder may be reduced by the benefits provided or
payments made (in either case on an after-tax basis) by
a subsequent employer for the same occurrence or event;
and
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<PAGE> 6
(iv) payment in cash in a lump sum, within sixty (60) days
after the Executive's termination, of the difference
between the present values as of the date of the
termination of (a) the benefits under the Company's
Retirement Plan and Supplemental Retirement Plan which
the Executive and the Executive's beneficiary, if
applicable, would have been entitled to receive had the
Executive remained employed by the Company at a
compensation level equal to that provided in this
Agreement for the entirety of the three-year term, and
(b) the actual benefit, if any, to which the Executive
and the Executive's beneficiary are entitled under the
Retirement Plan and the Supplemental Retirement Plan.
For purposes of this subparagraph, present value shall
be calculated in accordance with Section 417(e)(3) of
the Internal Revenue Code of 1986, as amended (the
"Code"); no reduction factors for early retirement shall
be applied in the calculation of benefits; and
(v) payment, on a current basis, of any actual costs and
expenses of litigation incurred by the Executive,
including costs of investigation and reasonable
attorney's fees, in the event the Executive is a party
to any legal action to enforce or to recover damages for
breach of this Agreement, or to recover or recoup from
the Executive or the Executive's legal representative or
beneficiary any amounts paid under or pursuant to this
Agreement, regardless of the outcome of such litigation,
plus interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
B. The Executive may file with the Secretary or any Assistant
Secretary of the Company a written designation of a beneficiary or
contingent beneficiaries to receive the payments described above in the
event of the Executive's death following the Executive's Involuntary
Termination but prior to payment by the Company. The Executive may
from time to time revoke or change any such designation of beneficiary
and any designation of beneficiary pursuant to this Agreement shall be
controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Company shall be in doubt as to the
right of any such beneficiary to receive such payments, it may
determine to pay such amounts to the legal representative of the
Executive, in which case the Company shall not be under any further
liability to anyone. In the event that such designated beneficiary or
legal representative becomes a party to a legal action to enforce or to
recover damages for breach of this Agreement, or to recover or recoup
from the Executive or the Executive's estate, legal representative or
beneficiary any amounts paid under or pursuant to this Agreement,
regardless of the outcome of such litigation, the Company shall pay
their actual costs and expenses of such litigation, including costs of
investigation and reasonable attorneys' fees, plus interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that the Company shall not be required to pay such
costs and expenses in connection with litigation to determine the
proper payee, among two or more claimants, of the payments pursuant to
this Agreement.
6
<PAGE> 7
C. In the event of Executive's Voluntary Termination or
Termination for Cause, Executive shall not be entitled to receive any
of the pay or benefits that would have been provided pursuant to this
Agreement except for pay already earned and benefits already vested at
the time of such termination.
D. In the event that Executive's employment is terminated for
any reason during the Term of this Agreement, Executive shall not be
eligible to participate in any other severance pay plan established by
the Company for its Executives unless such severance pay plan provides
benefits of greater value in the aggregate than those available under
this Agreement, in which case Executive shall be entitled to benefits
under such severance pay plan but not under this Agreement.
SECTION NINE
CONFIDENTIALITY
---------------
Executive agrees that, in addition to any other limitations
contained in this Agreement, regardless of the circumstances of
Executive's termination of employment, Executive will not take, or
communicate or disclose to any person, firm, corporation or other
entity, any information relating to the Company's customer lists,
prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Executive might from time to
time acquire with respect to the business of the Company or any of its
affiliates or subsidiaries, unless Executive obtains written consent of
the Company. Executive also specifically acknowledges the continued
validity and effect of any Agreement as to Confidentiality and
Inventions previously signed by Executive and that the terms of any
such agreement are incorporated into this Agreement by this reference.
SECTION TEN
NON-COMPETITION
---------------
In the event Executive's employment terminates pursuant to SECTION
EIGHT, Executive will not, for the duration of this Agreement, on
Executive's own behalf, or on behalf of any other person, firm,
partnership or corporation, engage in the private label biscuit
(cracker or cookie) business as either a proprietor, officer, director,
partner, employee or consultant.
7
<PAGE> 8
SECTION ELEVEN
ARBITRATION
-----------
As additional consideration for this Agreement, Executive agrees
that any differences, claims, or matters in dispute arising between the
Company and Executive out of or in connection with the Executive's
employment or the termination of the Executive's employment by the
Company including, but not limited to the terms and conditions of this
Agreement, allegations of wrongful termination, allegations of
employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination
law shall be submitted by them to arbitration by the American
Arbitration Association, or its successor, and the determination of the
American Arbitration Association, or its successor, shall be final and
absolute. The arbitrator shall be governed by the duly promulgated
rules and regulations of the American Arbitration Association, or its
successor, and the pertinent provisions of the laws of the State of
Missouri relating to arbitration. The decision of the arbitrator may
be entered as a judgment in any court of the State of Missouri or
elsewhere.
SECTION TWELVE
MISCELLANEOUS PROVISIONS
------------------------
A. The Company shall be entitled to withhold from any payments
made pursuant to this Agreement, including SECTION EIGHT hereof, any
federal, state or local taxes required to be withheld by law or
regulation.
B. This Agreement represents the entire agreement between the
parties and any prior understandings or representations of any kind
preceding the effective date of this Agreement shall not be binding on
either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in
writing signed by the Chief Executive Officer of the Company and by the
Executive.
C. This Agreement shall be binding upon and shall inure to the
benefit of the assigns, heirs, legatees or personal representatives of
Executive and the successors or assigns of the Company.
D. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. The Company may not assign this
Agreement other than to a successor to all or substantially all of the
business and/or assets of the Company. Neither this Agreement nor any
right or
8
<PAGE> 9
interest hereunder shall be assignable or transferable by Executive,
the Executive's beneficiaries or Executive's legal representatives
without the Company's prior written consent; provided, however, that
nothing in this Section shall preclude (i) Executive from designating
a beneficiary to receive any benefit payable hereunder upon the
Executive's death, or (ii) the executors, administrators, or other
legal representatives of the Executive's estate from assigning or
transferring any rights hereunder to the person or persons entitled
thereunto.
E. The headings of sections are included solely for convenience
of reference and shall not control the meaning or interpretation of any
of the provisions of this Agreement.
F. This Agreement shall be construed according to the laws of
the State of Missouri without giving effect to the conflict of laws
provisions thereof.
G. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a wavier of
such term or condition for the future or of any act other than that
specifically waived.
H. If, for any reason, any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of the
Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
The parties have entered into this Agreement based solely upon the
terms and conditions set forth herein. THIS AGREEMENT CONTAINS A
BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the --------- day of May, 1997.
RALCORP HOLDINGS, INC.
- ---------------------------- By:-------------------------
Executive J. R. Micheletto
Chief Executive Officer
and President
9
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") made between Robert W.
Lockwood (the "Executive") and Ralcorp Holdings, Inc., a corporation
with its principal place of business at 800 Market Street, St. Louis,
Missouri, and its subsidiaries and affiliates (the "Company"),
WITNESSETH THAT:
RECITALS
--------
WHEREAS, the Company was incorporated on October 23, 1996; and
WHEREAS, the Company was spun-off from its former parent company,
Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and
WHEREAS, Executive is presently employed by the Company and has
substantial experience as an executive level manager for the Company;
and
WHEREAS, the Company desires to secure Executive's employment for
a definite period of time; and
WHEREAS, Executive desires to be employed by the Company in the
executive capacity described in SECTION TWO of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the Company and Executive hereby agree as
follows:
SECTION ONE
DEFINITIONS
-----------
The following terms shall have the meanings set forth below:
A. "Involuntary Termination" shall be any termination of the
-----------------------
Executive's employment with the Company, other than a
Termination for Cause, (a) to which the Executive objects orally
or in writing or (b) which follows any of the following:
(i) without the express written consent of the Executive,
(a) the assignment of the Executive to any duties
materially inconsistent with the Executive's positions,
duties, responsibilities and status on the effective
date of this Agreement or (b) a material change in the
Executive's titles, offices, or reporting
responsibilities as in effect on the effective date of
this Agreement and with respect to either (a) or (b) the
situation is not remedied within thirty (30) days after
receipt by the Company of written notice by the
Executive; provided, however, (a) and (b) herein shall
not constitute an "Involuntary Termination" if either
situation is in connection with the Executive's death or
disability; or
<PAGE> 2
(ii) without the express written consent of the Executive, a
reduction in the Executive's annual salary or
opportunity for total annual compensation, in effect on
the effective date of this Agreement which is not
remedied within thirty (30) days after receipt by the
Company of written notice by the Executive; or
(iii) without the express written consent of the Executive,
the Executive is required to be based more than 100
miles from Executive's office location on the effective
date of this Agreement, except for required travel on
business to an extent substantially consistent with the
business travel obligations of the Executive on the
effective date of this Agreement; or
(iv) without the express written consent of the Executive,
(a) failure by the Company to continue in effect benefit
and compensation plans which may include a stock
ownership plan, a stock purchase plan, a stock option
plan, a defined benefit pension plan, a defined
contribution pension plan, a life insurance plan, a
health and accident plan, and/or a disability plan which
are, in the aggregate, substantially equivalent in value
to those in which the Executive is participating or
entitled to participate on the effective date of this
Agreement; or (b) the taking of any action by the
Company that would (1) adversely affect the
participation in or materially reduce the aggregate
value to the Executive of benefits under such plans
either in terms of the amount of benefits provided or
the level of the Executive's participation relative to
other participants; or (2) cause a failure to provide
the number of paid vacation days to which the Executive
was then entitled in accordance with the Company's
normal vacation policy in effect on the effective date
of this Agreement, which in either situation (a) or (b)
is not remedied within thirty (30) days after receipt by
the Company of written notice by the Executive; or
(v) the liquidation, dissolution, consolidation, or merger
of the Company or transfer of all or substantially all
of its assets, unless a successor or successors (by
merger, consolidation, or otherwise) to which all or a
significant portion of its assets have been transferred
expressly assumes in writing all duties and obligations
of the Company as here set forth.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to any
circumstances set forth above.
B. "Termination for Cause" shall be a termination because of:
---------------------
(i) the continued failure by the Executive to devote
reasonable time and effort to the performance of the
Executive's duties (other than any such failure
resulting from the Executive's incapacity due to
physical or mental illness) after written demand
therefor has been delivered to the Executive by the
Company that specifically identifies how the Executive
has not devoted reasonable time and effort to the
performance of the Executive's duties; or
2
<PAGE> 3
(ii) the willful engaging by the Executive in misconduct
which is materially injurious to the Company, monetarily
or otherwise; or
(iii) the Executive's conviction of a felony or a crime
involving moral turpitude;
in any case as determined by the Board of Directors of the
Company (the "Board") upon the good faith vote of not less than
a majority of the Directors then in office, after reasonable
notice to the Executive specifying in writing the basis or bases
for the proposed Termination for Cause and after the Executive
has been provided an opportunity to be heard before a meeting of
the Board held upon reasonable notice to all Directors;
provided, however, that a Termination for Cause shall not
include a termination attributable to:
(i) bad judgment or negligence on the part of the Executive
other than habitual negligence; or
(ii) an act or omission believed by the Executive in good faith
to have been in, or not opposed to, the best interests of
the Company and reasonably believed by the Executive to be
lawful.
C. "Voluntary Termination" shall be any termination of the
---------------------
Executive's employment with the Company other than an
Involuntary Termination or a Termination for Cause.
SECTION TWO
EMPLOYMENT
----------
The Company hereby employs Executive as its Corporate Vice
President, General Counsel and Secretary. Executive's day-to-day
reporting responsibilities shall be to the Company's Chief Executive
Officer. Subject to SECTION EIGHT, the Company may modify or realign
Executive's duties and responsibilities as it deems necessary during
the term of this Agreement.
SECTION THREE
BEST EFFORTS OF EXECUTIVE
-------------------------
Executive agrees that the Executive will at all times faithfully
and to the best of the Executive's ability, experience and talent,
perform all of the duties that may be required of or from the Executive
pursuant to the express and implicit terms hereof. Executive
acknowledges that the Executive is obligated to manage the business of
the Company in a sound and businesslike manner and in material
conformity with all laws and regulations governing the conduct of the
business of the Company.
3
<PAGE> 4
SECTION FOUR
TERM
----
The term of this Agreement shall be three years beginning on
February 1, 1997 and ending on January 31, 2000 (the "Term"). This
Agreement may be extended for additional periods upon the mutual
written agreement of the parties.
SECTION FIVE
COMPENSATION
------------
During the Term of this Agreement, Executive shall be entitled to
the following:
A. The Company shall pay Executive a minimum monthly base salary
of $15,167.00, payable on the last day of each month. The base salary
may be increased by the Company at any time during the Term of this
Agreement; provided, however, that until January 31, 2000, Executive's
monthly base salary shall not be less than the amount set forth above.
B. The Company shall pay Executive a minimum annual bonus of
$21,500.00, payable in October of each year. The annual bonus may be
increased by the Company at any time during the Term of this Agreement;
provided, however, that until January 31, 2000, Executive's annual
bonus shall not be less than the amount set forth above.
C. Executive shall be provided with an executive level benefit
program including stock options and/or stock grants as determined by
the Company. Any such stock options shall become immediately
exercisable, and such stock grants shall vest immediately, upon
Executive's Involuntary Termination during the Term of this Agreement.
D. Executive shall be eligible for coverage under such pension
plan, group health insurance plan, 401(k) plan, vacation, holiday and
other programs or policies in effect from time to time for salaried
Executives of the Company.
SECTION SIX
OLD RALCORP STOCK OPTIONS
-------------------------
It is understood that Old Ralcorp previously granted Executive
certain Non-Qualified Stock Options. It is further understood and
agreed that Old Ralcorp paid Executive a lump sum payment that
represents fair compensation for these Non-Qualified Stock Options.
Executive understands and agrees that Executive received this lump sum
payment in lieu of these options and that Executive forfeits all Old
Ralcorp Non-Qualified Stock Options, and rights thereunder, which
Executive had not exercised at the time Executive received the lump sum
payment.
4
<PAGE> 5
SECTION SEVEN
CHANGE OF CONTROL
-----------------
Contemporaneously with the execution of this Agreement, the
Executive and the Company will enter into a Management Continuity
Agreement providing benefits under certain circumstances in the event
of a Change-in-Control of the Company, as defined in such Management
Continuity Agreement. Such benefits will be in addition to those
provided under this Agreement; provided, however, that any benefits
paid under said Management Continuity Agreement shall be reduced by
amounts paid hereunder in respect of periods after Executive's
termination of employment following a Change-in-Control. Executive
agrees that the previous Management Continuity Agreement entered into
by Executive with Old Ralcorp is null and void and Executive releases
any claims to benefits under the previous Management Continuity
Agreement.
SECTION EIGHT
TERMINATION
-----------
A. The Company reserves the right to terminate the employment of
Executive at any time with or without cause. However, in the event of
Executive's Involuntary Termination prior to January 31, 2000,
Executive shall be entitled to the following:
(i) payment within sixty (60) days after Executive's
Involuntary Termination of Executive's minimum base
salary under this Agreement for the remainder of the
three-year term, in cash in a lump sum without discount
or pro-ration; and
(ii) payment within sixty (60) days after Executive's
Involuntary Termination of the minimum annual bonuses
which Executive would have been entitled to receive
under this Agreement during the remainder of the three-
year term, in cash in a lump sum without discount or
pro-ration; and
(iii) continuation for the remainder of the three-year term of
the Executive's participation in each life, health,
accident and disability plan in which the Executive was
entitled to participate immediately prior to the
Executive's termination, upon the same terms and
conditions, including those with respect to spouses and
dependents, applicable at such time; provided, however,
that if the terms of any such benefit plan do not permit
continued participation by the Executive, then the
Company will arrange, at the Company's sole cost and
expense, to provide the Executive a benefit
substantially similar to, and no less favorable than, on
an after-tax basis, the benefit the Executive was
entitled to receive under such plan immediately prior
the Executive's termination; provided further, however,
that the benefit to be provided or payments to be made
hereunder may be reduced by the benefits provided or
payments made (in either case on an after-tax basis) by
a subsequent employer for the same occurrence or event;
and
5
<PAGE> 6
(iv) payment in cash in a lump sum, within sixty (60) days
after the Executive's termination, of the difference
between the present values as of the date of the
termination of (a) the benefits under the Company's
Retirement Plan and Supplemental Retirement Plan which
the Executive and the Executive's beneficiary, if
applicable, would have been entitled to receive had the
Executive remained employed by the Company at a
compensation level equal to that provided in this
Agreement for the entirety of the three-year term, and
(b) the actual benefit, if any, to which the Executive
and the Executive's beneficiary are entitled under the
Retirement Plan and the Supplemental Retirement Plan.
For purposes of this subparagraph, present value shall
be calculated in accordance with Section 417(e)(3) of
the Internal Revenue Code of 1986, as amended (the
"Code"); no reduction factors for early retirement shall
be applied in the calculation of benefits; and
(v) payment, on a current basis, of any actual costs and
expenses of litigation incurred by the Executive,
including costs of investigation and reasonable
attorney's fees, in the event the Executive is a party
to any legal action to enforce or to recover damages for
breach of this Agreement, or to recover or recoup from
the Executive or the Executive's legal representative or
beneficiary any amounts paid under or pursuant to this
Agreement, regardless of the outcome of such litigation,
plus interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
B. The Executive may file with the Secretary or any Assistant
Secretary of the Company a written designation of a beneficiary or
contingent beneficiaries to receive the payments described above in the
event of the Executive's death following the Executive's Involuntary
Termination but prior to payment by the Company. The Executive may
from time to time revoke or change any such designation of beneficiary
and any designation of beneficiary pursuant to this Agreement shall be
controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Company shall be in doubt as to the
right of any such beneficiary to receive such payments, it may
determine to pay such amounts to the legal representative of the
Executive, in which case the Company shall not be under any further
liability to anyone. In the event that such designated beneficiary or
legal representative becomes a party to a legal action to enforce or to
recover damages for breach of this Agreement, or to recover or recoup
from the Executive or the Executive's estate, legal representative or
beneficiary any amounts paid under or pursuant to this Agreement,
regardless of the outcome of such litigation, the Company shall pay
their actual costs and expenses of such litigation, including costs of
investigation and reasonable attorneys' fees, plus interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that the Company shall not be required to pay such
costs and expenses in connection with litigation to determine the
proper payee, among two or more claimants, of the payments pursuant to
this Agreement.
6
<PAGE> 7
C. In the event of Executive's Voluntary Termination or
Termination for Cause, Executive shall not be entitled to receive any
of the pay or benefits that would have been provided pursuant to this
Agreement except for pay already earned and benefits already vested at
the time of such termination.
D. In the event that Executive's employment is terminated for
any reason during the Term of this Agreement, Executive shall not be
eligible to participate in any other severance pay plan established by
the Company for its Executives unless such severance pay plan provides
benefits of greater value in the aggregate than those available under
this Agreement, in which case Executive shall be entitled to benefits
under such severance pay plan but not under this Agreement.
SECTION NINE
CONFIDENTIALITY
---------------
Executive agrees that, in addition to any other limitations
contained in this Agreement, regardless of the circumstances of
Executive's termination of employment, Executive will not take, or
communicate or disclose to any person, firm, corporation or other
entity, any information relating to the Company's customer lists,
prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Executive might from time to
time acquire with respect to the business of the Company or any of its
affiliates or subsidiaries, unless Executive obtains written consent of
the Company. Executive also specifically acknowledges the continued
validity and effect of any Agreement as to Confidentiality and
Inventions previously signed by Executive and that the terms of any
such agreement are incorporated into this Agreement by this reference.
SECTION TEN
NON-COMPETITION
---------------
In the event Executive's employment terminates pursuant to SECTION
EIGHT, Executive will not, for the duration of this Agreement, on
Executive's own behalf, or on behalf of any other person, firm,
partnership or corporation, engage in the branded baby food business as
either a proprietor, officer, director, partner, employee or
consultant.
7
<PAGE> 8
SECTION ELEVEN
ARBITRATION
-----------
As additional consideration for this Agreement, Executive agrees
that any differences, claims, or matters in dispute arising between the
Company and Executive out of or in connection with the Executive's
employment or the termination of the Executive's employment by the
Company including, but not limited to the terms and conditions of this
Agreement, allegations of wrongful termination, allegations of
employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination
law shall be submitted by them to arbitration by the American
Arbitration Association, or its successor, and the determination of the
American Arbitration Association, or its successor, shall be final and
absolute. The arbitrator shall be governed by the duly promulgated
rules and regulations of the American Arbitration Association, or its
successor, and the pertinent provisions of the laws of the State of
Missouri relating to arbitration. The decision of the arbitrator may
be entered as a judgment in any court of the State of Missouri or
elsewhere.
SECTION TWELVE
MISCELLANEOUS PROVISIONS
------------------------
A. The Company shall be entitled to withhold from any payments
made pursuant to this Agreement, including SECTION EIGHT hereof, any
federal, state or local taxes required to be withheld by law or
regulation.
B. This Agreement represents the entire agreement between the
parties and any prior understandings or representations of any kind
preceding the effective date of this Agreement shall not be binding on
either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in
writing signed by the Chief Executive Officer of the Company and by the
Executive.
C. This Agreement shall be binding upon and shall inure to the
benefit of the assigns, heirs, legatees or personal representatives of
Executive and the successors or assigns of the Company.
D. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. The Company may not assign this
Agreement other than to a successor to all or substantially all of the
business and/or assets of the Company. Neither this Agreement nor any
right or
8
<PAGE> 9
interest hereunder shall be assignable or transferable by Executive,
the Executive's beneficiaries or Executive's legal representatives
without the Company's prior written consent; provided, however, that
nothing in this Section shall preclude (i) Executive from designating
a beneficiary to receive any benefit payable hereunder upon the
Executive's death, or (ii) the executors, administrators, or other
legal representatives of the Executive's estate from assigning or
transferring any rights hereunder to the person or persons entitled
thereunto.
E. The headings of sections are included solely for convenience
of reference and shall not control the meaning or interpretation of any
of the provisions of this Agreement.
F. This Agreement shall be construed according to the laws of
the State of Missouri without giving effect to the conflict of laws
provisions thereof.
G. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a wavier of
such term or condition for the future or of any act other than that
specifically waived.
H. If, for any reason, any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of the
Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
The parties have entered into this Agreement based solely upon the
terms and conditions set forth herein. THIS AGREEMENT CONTAINS A
BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the --------- day of April, 1997.
RALCORP HOLDINGS, INC.
By:
- ---------------------------- -------------------------
Executive J. R. Micheletto
Chief Executive Officer
and President
9
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") made between James A.
Nichols, (the "Executive") and Ralcorp Holdings, Inc., a corporation
with its principal place of business at 800 Market Street, St. Louis,
Missouri, and its subsidiaries and affiliates (the "Company"),
WITNESSETH THAT:
RECITALS
--------
WHEREAS, the Company was incorporated on October 23, 1996; and
WHEREAS, the Company was spun-off from its former parent company,
Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and
WHEREAS, Executive is presently employed by the Company and has
substantial experience as an executive level manager for the Company;
and
WHEREAS, the Company desires to secure Executive's employment for
a definite period of time; and
WHEREAS, Executive desires to be employed by the Company in the
executive capacity described in SECTION TWO of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the Company and Executive hereby agree as
follows:
SECTION ONE
DEFINITIONS
-----------
The following terms shall have the meanings set forth below:
A. "Involuntary Termination" shall be any termination of the
-----------------------
Executive's employment with the Company, other than a
Termination for Cause, (a) to which the Executive objects orally
or in writing or (b) which follows any of the following:
(i) without the express written consent of the Executive,
(a) the assignment of the Executive to any duties
materially inconsistent with the Executive's positions,
duties, responsibilities and status on the effective
date of this Agreement or (b) a material change in the
Executive's titles, offices, or reporting
responsibilities as in effect on the effective date of
this Agreement and with respect to either (a) or (b) the
situation is not remedied within thirty (30) days after
receipt by the Company of written notice by the
Executive; provided, however, (a) and (b) herein shall
not constitute an "Involuntary Termination" if either
situation is in connection with the Executive's death or
disability; or
<PAGE> 2
(ii) without the express written consent of the Executive, a
reduction in the Executive's annual salary or
opportunity for total annual compensation, in effect on
the effective date of this Agreement which is not
remedied within thirty (30) days after receipt by the
Company of written notice by the Executive; or
(iii) without the express written consent of the Executive,
the Executive is required to be based more than 100
miles from Executive's office location on the effective
date of this Agreement, except for required travel on
business to an extent substantially consistent with the
business travel obligations of the Executive on the
effective date of this Agreement; or
(iv) without the express written consent of the Executive,
(a) failure by the Company to continue in effect benefit
and compensation plans which may include a stock
ownership plan, a stock purchase plan, a stock option
plan, a defined benefit pension plan, a defined
contribution pension plan, a life insurance plan, a
health and accident plan, and/or a disability plan which
are, in the aggregate, substantially equivalent in value
to those in which the Executive is participating or
entitled to participate on the effective date of this
Agreement; or (b) the taking of any action by the
Company that would (1) adversely affect the
participation in or materially reduce the aggregate
value to the Executive of benefits under such plans
either in terms of the amount of benefits provided or
the level of the Executive's participation relative to
other participants; or (2) cause a failure to provide
the number of paid vacation days to which the Executive
was then entitled in accordance with the Company's
normal vacation policy in effect on the effective date
of this Agreement, which in either situation (a) or (b)
is not remedied within thirty (30) days after receipt by
the Company of written notice by the Executive; or
(v) the liquidation, dissolution, consolidation, or merger
of the Company or transfer of all or substantially all
of its assets, unless a successor or successors (by
merger, consolidation, or otherwise) to which all or a
significant portion of its assets have been transferred
expressly assumes in writing all duties and obligations
of the Company as here set forth.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to any
circumstances set forth above.
B. "Termination for Cause" shall be a termination because of:
---------------------
(i) the continued failure by the Executive to devote
reasonable time and effort to the performance of the
Executive's duties (other than any such failure
resulting from the Executive's incapacity due to
physical or mental illness) after written demand
therefor has been delivered to the Executive by the
Company that specifically identifies how the Executive
has not devoted reasonable time and effort to the
performance of the Executive's duties; or
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<PAGE> 3
(ii) the willful engaging by the Executive in misconduct
which is materially injurious to the Company, monetarily
or otherwise; or
(iii) the Executive's conviction of a felony or a crime
involving moral turpitude;
in any case as determined by the Board of Directors of the
Company (the "Board") upon the good faith vote of not less than
a majority of the Directors then in office, after reasonable
notice to the Executive specifying in writing the basis or bases
for the proposed Termination for Cause and after the Executive
has been provided an opportunity to be heard before a meeting of
the Board held upon reasonable notice to all Directors;
provided, however, that a Termination for Cause shall not
include a termination attributable to:
(i) bad judgment or negligence on the part of the Executive
other than habitual negligence; or
(ii) an act or omission believed by the Executive in good faith
to have been in, or not opposed to, the best interests of
the Company and reasonably believed by the Executive to be
lawful.
C. "Voluntary Termination" shall be any termination of the
---------------------
Executive's employment with the Company other than an
Involuntary Termination or a Termination for Cause.
SECTION TWO
EMPLOYMENT
----------
The Company hereby employs Executive as its Corporate Vice
President and President of Ralston Foods. Executive's day-to-day
reporting responsibilities shall be to the Company's Chief Executive
Officer. Subject to SECTION EIGHT, the Company may modify or realign
Executive's duties and responsibilities as it deems necessary during
the term of this Agreement.
SECTION THREE
BEST EFFORTS OF EXECUTIVE
-------------------------
Executive agrees that the Executive will at all times faithfully
and to the best of the Executive's ability, experience and talent,
perform all of the duties that may be required of or from the Executive
pursuant to the express and implicit terms hereof. Executive
acknowledges that the Executive is obligated to manage the business of
the Company in a sound and businesslike manner and in material
conformity with all laws and regulations governing the conduct of the
business of the Company.
3
<PAGE> 4
SECTION FOUR
TERM
----
The term of this Agreement shall be three years beginning on
February 1, 1997 and ending on January 31, 2000 (the "Term"). This
Agreement may be extended for additional periods upon the mutual
written agreement of the parties.
SECTION FIVE
COMPENSATION
------------
During the Term of this Agreement, Executive shall be entitled to
the following:
A. The Company shall pay Executive a minimum monthly base salary
of $15,000.00, payable on the last day of each month. The base salary
may be increased by the Company at any time during the Term of this
Agreement; provided, however, that until January 31, 2000, Executive's
monthly base salary shall not be less than the amount set forth above.
B. The Company shall pay Executive a minimum annual bonus of
$45,000.00, payable in October of each year. The annual bonus may be
increased by the Company at any time during the Term of this Agreement;
provided, however, that until January 31, 2000, Executive's annual
bonus shall not be less than the amount set forth above.
C. Executive shall be provided with an executive level benefit
program including stock options and/or stock grants as determined by
the Company. Any such stock options shall become immediately
exercisable, and such stock grants shall vest immediately, upon
Executive's Involuntary Termination during the Term of this Agreement.
D. Executive shall be eligible for coverage under such pension
plan, group health insurance plan, 401(k) plan, vacation, holiday and
other programs or policies in effect from time to time for salaried
Executives of the Company.
SECTION SIX
OLD RALCORP STOCK OPTIONS
-------------------------
It is understood that Old Ralcorp previously granted Executive
certain Non-Qualified Stock Options. It is further understood and
agreed that Old Ralcorp paid Executive a lump sum payment that
represents fair compensation for these Non-Qualified Stock Options.
Executive understands and agrees that Executive received this lump sum
payment in lieu of these options and that Executive forfeits all Old
Ralcorp Non-Qualified Stock Options, and rights thereunder, which
Executive had not exercised at the time Executive received the lump sum
payment.
4
<PAGE> 5
SECTION SEVEN
CHANGE OF CONTROL
-----------------
Contemporaneously with the execution of this Agreement, the
Executive and the Company will enter into a Management Continuity
Agreement providing benefits under certain circumstances in the event
of a Change-in-Control of the Company, as defined in such Management
Continuity Agreement. Such benefits will be in addition to those
provided under this Agreement; provided, however, that any benefits
paid under said Management Continuity Agreement shall be reduced by
amounts paid hereunder in respect of periods after Executive's
termination of employment following a Change-in-Control. Executive
agrees that the previous Management Continuity Agreement entered into
by Executive with Old Ralcorp is null and void and Executive releases
any claims to benefits under the previous Management Continuity
Agreement.
SECTION EIGHT
TERMINATION
-----------
A. The Company reserves the right to terminate the employment of
Executive at any time with or without cause. However, in the event of
Executive's Involuntary Termination prior to January 31, 2000,
Executive shall be entitled to the following:
(i) payment within sixty (60) days after Executive's
Involuntary Termination of Executive's minimum base
salary under this Agreement for the remainder of the
three-year term, in cash in a lump sum without discount
or pro-ration; and
(ii) payment within sixty (60) days after Executive's
Involuntary Termination of the minimum annual bonuses
which Executive would have been entitled to receive
under this Agreement during the remainder of the three-
year term, in cash in a lump sum without discount or
pro-ration; and
(iii) continuation for the remainder of the three-year term of
the Executive's participation in each life, health,
accident and disability plan in which the Executive was
entitled to participate immediately prior to the
Executive's termination, upon the same terms and
conditions, including those with respect to spouses and
dependents, applicable at such time; provided, however,
that if the terms of any such benefit plan do not permit
continued participation by the Executive, then the
Company will arrange, at the Company's sole cost and
expense, to provide the Executive a benefit
substantially similar to, and no less favorable than, on
an after-tax basis, the benefit the Executive was
entitled to receive under such plan immediately prior
the Executive's termination; provided further, however,
that the benefit to be provided or payments to be made
hereunder may be reduced by the benefits provided or
payments made (in either case on an after-tax basis) by
a subsequent employer for the same occurrence or event;
and
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<PAGE> 6
(iv) payment in cash in a lump sum, within sixty (60) days
after the Executive's termination, of the difference
between the present values as of the date of the
termination of (a) the benefits under the Company's
Retirement Plan and Supplemental Retirement Plan which
the Executive and the Executive's beneficiary, if
applicable, would have been entitled to receive had the
Executive remained employed by the Company at a
compensation level equal to that provided in this
Agreement for the entirety of the three-year term, and
(b) the actual benefit, if any, to which the Executive
and the Executive's beneficiary are entitled under the
Retirement Plan and the Supplemental Retirement Plan.
For purposes of this subparagraph, present value shall
be calculated in accordance with Section 417(e)(3) of
the Internal Revenue Code of 1986, as amended (the
"Code"); no reduction factors for early retirement shall
be applied in the calculation of benefits; and
(v) payment, on a current basis, of any actual costs and
expenses of litigation incurred by the Executive,
including costs of investigation and reasonable
attorney's fees, in the event the Executive is a party
to any legal action to enforce or to recover damages for
breach of this Agreement, or to recover or recoup from
the Executive or the Executive's legal representative or
beneficiary any amounts paid under or pursuant to this
Agreement, regardless of the outcome of such litigation,
plus interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
B. The Executive may file with the Secretary or any Assistant
Secretary of the Company a written designation of a beneficiary or
contingent beneficiaries to receive the payments described above in the
event of the Executive's death following the Executive's Involuntary
Termination but prior to payment by the Company. The Executive may
from time to time revoke or change any such designation of beneficiary
and any designation of beneficiary pursuant to this Agreement shall be
controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Company shall be in doubt as to the
right of any such beneficiary to receive such payments, it may
determine to pay such amounts to the legal representative of the
Executive, in which case the Company shall not be under any further
liability to anyone. In the event that such designated beneficiary or
legal representative becomes a party to a legal action to enforce or to
recover damages for breach of this Agreement, or to recover or recoup
from the Executive or the Executive's estate, legal representative or
beneficiary any amounts paid under or pursuant to this Agreement,
regardless of the outcome of such litigation, the Company shall pay
their actual costs and expenses of such litigation, including costs of
investigation and reasonable attorneys' fees, plus interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that the Company shall not be required to pay such
costs and expenses in connection with litigation to determine the
proper payee, among two or more claimants, of the payments pursuant to
this Agreement.
6
<PAGE> 7
C. In the event of Executive's Voluntary Termination or
Termination for Cause, Executive shall not be entitled to receive any
of the pay or benefits that would have been provided pursuant to this
Agreement except for pay already earned and benefits already vested at
the time of such termination.
D. In the event that Executive's employment is terminated for
any reason during the Term of this Agreement, Executive shall not be
eligible to participate in any other severance pay plan established by
the Company for its Executives unless such severance pay plan provides
benefits of greater value in the aggregate than those available under
this Agreement, in which case Executive shall be entitled to benefits
under such severance pay plan but not under this Agreement.
SECTION NINE
CONFIDENTIALITY
---------------
Executive agrees that, in addition to any other limitations
contained in this Agreement, regardless of the circumstances of
Executive's termination of employment, Executive will not take, or
communicate or disclose to any person, firm, corporation or other
entity, any information relating to the Company's customer lists,
prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Executive might from time to
time acquire with respect to the business of the Company or any of its
affiliates or subsidiaries, unless Executive obtains written consent of
the Company. Executive also specifically acknowledges the continued
validity and effect of any Agreement as to Confidentiality and
Inventions previously signed by Executive and that the terms of any
such agreement are incorporated into this Agreement by this reference.
SECTION TEN
NON-COMPETITION
---------------
In the event Executive's employment terminates pursuant to SECTION
EIGHT, Executive will not, for the duration of this Agreement, on
Executive's own behalf, or on behalf of any other person, firm,
partnership or corporation, engage in the private label cereal or
branded baby food businesses as either a proprietor, officer, director,
partner, employee or consultant.
7
<PAGE> 8
SECTION ELEVEN
ARBITRATION
-----------
As additional consideration for this Agreement, Executive agrees
that any differences, claims, or matters in dispute arising between the
Company and Executive out of or in connection with the Executive's
employment or the termination of the Executive's employment by the
Company including, but not limited to the terms and conditions of this
Agreement, allegations of wrongful termination, allegations of
employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination
law shall be submitted by them to arbitration by the American
Arbitration Association, or its successor, and the determination of the
American Arbitration Association, or its successor, shall be final and
absolute. The arbitrator shall be governed by the duly promulgated
rules and regulations of the American Arbitration Association, or its
successor, and the pertinent provisions of the laws of the State of
Missouri relating to arbitration. The decision of the arbitrator may
be entered as a judgment in any court of the State of Missouri or
elsewhere.
SECTION TWELVE
MISCELLANEOUS PROVISIONS
------------------------
A. The Company shall be entitled to withhold from any payments
made pursuant to this Agreement, including SECTION EIGHT hereof, any
federal, state or local taxes required to be withheld by law or
regulation.
B. This Agreement represents the entire agreement between the
parties and any prior understandings or representations of any kind
preceding the effective date of this Agreement shall not be binding on
either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in
writing signed by the Chief Executive Officer of the Company and by the
Executive.
C. This Agreement shall be binding upon and shall inure to the
benefit of the assigns, heirs, legatees or personal representatives of
Executive and the successors or assigns of the Company.
D. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. The Company may not assign this
Agreement other than to a successor to all or substantially all of the
business and/or assets of the Company. Neither this Agreement nor any
right or
8
<PAGE> 9
interest hereunder shall be assignable or transferable by Executive,
the Executive's beneficiaries or Executive's legal representatives
without the Company's prior written consent; provided, however, that
nothing in this Section shall preclude (i) Executive from designating
a beneficiary to receive any benefit payable hereunder upon the
Executive's death, or (ii) the executors, administrators, or other
legal representatives of the Executive's estate from assigning or
transferring any rights hereunder to the person or persons entitled
thereunto.
E. The headings of sections are included solely for convenience
of reference and shall not control the meaning or interpretation of any
of the provisions of this Agreement.
F. This Agreement shall be construed according to the laws of
the State of Missouri without giving effect to the conflict of laws
provisions thereof.
G. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a wavier of
such term or condition for the future or of any act other than that
specifically waived.
H. If, for any reason, any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of the
Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
The parties have entered into this Agreement based solely upon the
terms and conditions set forth herein. THIS AGREEMENT CONTAINS A
BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the --------- day of May, 1997.
RALCORP HOLDINGS, INC.
- ---------------------------- By:-------------------------
Executive J. R. Micheletto
Chief Executive Officer
and President
9
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") made between David P.
Skarie, (the "Executive") and Ralcorp Holdings, Inc., a corporation
with its principal place of business at 800 Market Street, St. Louis,
Missouri, and its subsidiaries and affiliates (the "Company"),
WITNESSETH THAT:
RECITALS
--------
WHEREAS, the Company was incorporated on October 23, 1996; and
WHEREAS, the Company was spun-off from its former parent company,
Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and
WHEREAS, Executive is presently employed by the Company and has
substantial experience as an executive level manager for the Company;
and
WHEREAS, the Company desires to secure Executive's employment for
a definite period of time; and
WHEREAS, Executive desires to be employed by the Company in the
executive capacity described in SECTION TWO of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the Company and Executive hereby agree as
follows:
SECTION ONE
DEFINITIONS
-----------
The following terms shall have the meanings set forth below:
A. "Involuntary Termination" shall be any termination of the
-----------------------
Executive's employment with the Company, other than a
Termination for Cause, (a) to which the Executive objects orally
or in writing or (b) which follows any of the following:
(i) without the express written consent of the Executive,
(a) the assignment of the Executive to any duties
materially inconsistent with the Executive's positions,
duties, responsibilities and status on the effective
date of this Agreement or (b) a material change in the
Executive's titles, offices, or reporting
responsibilities as in effect on the effective date of
this Agreement and with respect to either (a) or (b) the
situation is not remedied within thirty (30) days after
receipt by the Company of written notice by the
Executive; provided, however, (a) and (b) herein shall
not constitute an "Involuntary Termination" if either
situation is in connection with the Executive's death or
disability; or
<PAGE> 2
(ii) without the express written consent of the Executive, a
reduction in the Executive's annual salary or
opportunity for total annual compensation, in effect on
the effective date of this Agreement which is not
remedied within thirty (30) days after receipt by the
Company of written notice by the Executive; or
(iii) without the express written consent of the Executive,
the Executive is required to be based more than 100
miles from Executive's office location on the effective
date of this Agreement, except for required travel on
business to an extent substantially consistent with the
business travel obligations of the Executive on the
effective date of this Agreement; or
(iv) without the express written consent of the Executive,
(a) failure by the Company to continue in effect benefit
and compensation plans which may include a stock
ownership plan, a stock purchase plan, a stock option
plan, a defined benefit pension plan, a defined
contribution pension plan, a life insurance plan, a
health and accident plan, and/or a disability plan which
are, in the aggregate, substantially equivalent in value
to those in which the Executive is participating or
entitled to participate on the effective date of this
Agreement; or (b) the taking of any action by the
Company that would (1) adversely affect the
participation in or materially reduce the aggregate
value to the Executive of benefits under such plans
either in terms of the amount of benefits provided or
the level of the Executive's participation relative to
other participants; or (2) cause a failure to provide
the number of paid vacation days to which the Executive
was then entitled in accordance with the Company's
normal vacation policy in effect on the effective date
of this Agreement, which in either situation (a) or (b)
is not remedied within thirty (30) days after receipt by
the Company of written notice by the Executive; or
(v) the liquidation, dissolution, consolidation, or merger
of the Company or transfer of all or substantially all
of its assets, unless a successor or successors (by
merger, consolidation, or otherwise) to which all or a
significant portion of its assets have been transferred
expressly assumes in writing all duties and obligations
of the Company as here set forth.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to any
circumstances set forth above.
B. "Termination for Cause" shall be a termination because of:
---------------------
(i) the continued failure by the Executive to devote
reasonable time and effort to the performance of the
Executive's duties (other than any such failure
resulting from the Executive's incapacity due to
physical or mental illness) after written demand
therefor has been delivered to the Executive by the
Company that specifically identifies how the Executive
has not devoted reasonable time and effort to the
performance of the Executive's duties; or
2
<PAGE> 3
(ii) the willful engaging by the Executive in misconduct
which is materially injurious to the Company, monetarily
or otherwise; or
(iii) the Executive's conviction of a felony or a crime
involving moral turpitude;
in any case as determined by the Board of Directors of the
Company (the "Board") upon the good faith vote of not less than
a majority of the Directors then in office, after reasonable
notice to the Executive specifying in writing the basis or bases
for the proposed Termination for Cause and after the Executive
has been provided an opportunity to be heard before a meeting of
the Board held upon reasonable notice to all Directors;
provided, however, that a Termination for Cause shall not
include a termination attributable to:
(i) bad judgment or negligence on the part of the Executive
other than habitual negligence; or
(ii) an act or omission believed by the Executive in good faith
to have been in, or not opposed to, the best interests of
the Company and reasonably believed by the Executive to be
lawful.
C. "Voluntary Termination" shall be any termination of the
---------------------
Executive's employment with the Company other than an
Involuntary Termination or a Termination for Cause.
SECTION TWO
EMPLOYMENT
----------
The Company hereby employs Executive as its Corporate Vice
President and Director of Customer Development. Executive's day-to-day
reporting responsibilities shall be to the Company's Chief Executive
Officer. Subject to SECTION EIGHT, the Company may modify or realign
Executive's duties and responsibilities as it deems necessary during
the term of this Agreement.
SECTION THREE
BEST EFFORTS OF EXECUTIVE
-------------------------
Executive agrees that the Executive will at all times faithfully
and to the best of the Executive's ability, experience and talent,
perform all of the duties that may be required of or from the Executive
pursuant to the express and implicit terms hereof. Executive
acknowledges that the Executive is obligated to manage the business of
the Company in a sound and businesslike manner and in material
conformity with all laws and regulations governing the conduct of the
business of the Company.
3
<PAGE> 4
SECTION FOUR
TERM
----
The term of this Agreement shall be three years beginning on
February 1, 1997 and ending on January 31, 2000 (the "Term"). This
Agreement may be extended for additional periods upon the mutual
written agreement of the parties.
SECTION FIVE
COMPENSATION
------------
During the Term of this Agreement, Executive shall be entitled to
the following:
A. The Company shall pay Executive a minimum monthly base salary
of $12,667.00, payable on the last day of each month. The base salary
may be increased by the Company at any time during the Term of this
Agreement; provided, however, that until January 31, 2000, Executive's
monthly base salary shall not be less than the amount set forth above.
B. The Company shall pay Executive a minimum annual bonus of
$27,500.00, payable in October of each year. The annual bonus may be
increased by the Company at any time during the Term of this Agreement;
provided, however, that until January 31, 2000, Executive's annual
bonus shall not be less than the amount set forth above.
C. Executive shall be provided with an executive level benefit
program including stock options and/or stock grants as determined by
the Company. Any such stock options shall become immediately
exercisable, and such stock grants shall vest immediately, upon
Executive's Involuntary Termination during the Term of this Agreement.
D. Executive shall be eligible for coverage under such pension
plan, group health insurance plan, 401(k) plan, vacation, holiday and
other programs or policies in effect from time to time for salaried
Executives of the Company.
SECTION SIX
OLD RALCORP STOCK OPTIONS
-------------------------
It is understood that Old Ralcorp previously granted Executive
certain Non-Qualified Stock Options. It is further understood and
agreed that Old Ralcorp paid Executive a lump sum payment that
represents fair compensation for these Non-Qualified Stock Options.
Executive understands and agrees that Executive received this lump sum
payment in lieu of these options and that Executive forfeits all Old
Ralcorp Non-Qualified Stock Options, and rights thereunder, which
Executive had not exercised at the time Executive received the lump sum
payment.
4
<PAGE> 5
SECTION SEVEN
CHANGE OF CONTROL
-----------------
Contemporaneously with the execution of this Agreement, the
Executive and the Company will enter into a Management Continuity
Agreement providing benefits under certain circumstances in the event
of a Change-in-Control of the Company, as defined in such Management
Continuity Agreement. Such benefits will be in addition to those
provided under this Agreement; provided, however, that any benefits
paid under said Management Continuity Agreement shall be reduced by
amounts paid hereunder in respect of periods after Executive's
termination of employment following a Change-in-Control. Executive
agrees that the previous Management Continuity Agreement entered into
by Executive with Old Ralcorp is null and void and Executive releases
any claims to benefits under the previous Management Continuity
Agreement.
SECTION EIGHT
TERMINATION
-----------
A. The Company reserves the right to terminate the employment of
Executive at any time with or without cause. However, in the event of
Executive's Involuntary Termination prior to January 31, 2000,
Executive shall be entitled to the following:
(i) payment within sixty (60) days after Executive's
Involuntary Termination of Executive's minimum
base salary under this Agreement for the remainder
of the three-year term, in cash in a lump sum
without discount or pro-ration; and
(ii) payment within sixty (60) days after Executive's
Involuntary Termination of the minimum annual
bonuses which Executive would have been entitled
to receive under this Agreement during the
remainder of the three-year term, in cash in a
lump sum without discount or pro-ration; and
(iii) continuation for the remainder of the three-year
term of the Executive's participation in each
life, health, accident and disability plan in
which the Executive was entitled to participate
immediately prior to the Executive's termination,
upon the same terms and conditions, including
those with respect to spouses and dependents,
applicable at such time; provided, however, that
if the terms of any such benefit plan do not
permit continued participation by the Executive,
then the Company will arrange, at the Company's
sole cost and expense, to provide the Executive a
benefit substantially similar to, and no less
favorable than, on an after-tax basis, the benefit
the Executive was entitled to receive under such
plan immediately prior the Executive's
termination; provided further, however, that the
benefit to be provided or payments to be made
hereunder may be reduced by the benefits provided
or payments made (in either case on an after-tax
basis) by a subsequent employer for the same
occurrence or event; and
5
<PAGE> 6
(iv) payment in cash in a lump sum, within sixty (60)
days after the Executive's termination, of the
difference between the present values as of the
date of the termination of (a) the benefits under
the Company's Retirement Plan and Supplemental
Retirement Plan which the Executive and the
Executive's beneficiary, if applicable, would have
been entitled to receive had the Executive
remained employed by the Company at a compensation
level equal to that provided in this Agreement for
the entirety of the three-year term, and (b) the
actual benefit, if any, to which the Executive and
the Executive's beneficiary are entitled under the
Retirement Plan and the Supplemental Retirement
Plan. For purposes of this subparagraph, present
value shall be calculated in accordance with
Section 417(e)(3) of the Internal Revenue Code of
1986, as amended (the "Code"); no reduction
factors for early retirement shall be applied in
the calculation of benefits; and
(v) payment, on a current basis, of any actual costs
and expenses of litigation incurred by the
Executive, including costs of investigation and
reasonable attorney's fees, in the event the
Executive is a party to any legal action to
enforce or to recover damages for breach of this
Agreement, or to recover or recoup from the
Executive or the Executive's legal representative
or beneficiary any amounts paid under or pursuant
to this Agreement, regardless of the outcome of
such litigation, plus interest at the applicable
federal rate provided for in Section 7872(f)(2) of
the Code.
B. The Executive may file with the Secretary or any Assistant
Secretary of the Company a written designation of a beneficiary or
contingent beneficiaries to receive the payments described above in the
event of the Executive's death following the Executive's Involuntary
Termination but prior to payment by the Company. The Executive may
from time to time revoke or change any such designation of beneficiary
and any designation of beneficiary pursuant to this Agreement shall be
controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Company shall be in doubt as to the
right of any such beneficiary to receive such payments, it may
determine to pay such amounts to the legal representative of the
Executive, in which case the Company shall not be under any further
liability to anyone. In the event that such designated beneficiary or
legal representative becomes a party to a legal action to enforce or to
recover damages for breach of this Agreement, or to recover or recoup
from the Executive or the Executive's estate, legal representative or
beneficiary any amounts paid under or pursuant to this Agreement,
regardless of the outcome of such litigation, the Company shall pay
their actual costs and expenses of such litigation, including costs of
investigation and reasonable attorneys' fees, plus interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that the Company shall not be required to pay such
costs and expenses in connection with litigation to determine the
proper payee, among two or more claimants, of the payments pursuant to
this Agreement.
6
<PAGE> 7
C. In the event of Executive's Voluntary Termination or
Termination for Cause, Executive shall not be entitled to receive any
of the pay or benefits that would have been provided pursuant to this
Agreement except for pay already earned and benefits already vested at
the time of such termination.
D. In the event that Executive's employment is terminated for
any reason during the Term of this Agreement, Executive shall not be
eligible to participate in any other severance pay plan established by
the Company for its Executives unless such severance pay plan provides
benefits of greater value in the aggregate than those available under
this Agreement, in which case Executive shall be entitled to benefits
under such severance pay plan but not under this Agreement.
SECTION NINE
CONFIDENTIALITY
---------------
Executive agrees that, in addition to any other limitations
contained in this Agreement, regardless of the circumstances of
Executive's termination of employment, Executive will not take, or
communicate or disclose to any person, firm, corporation or other
entity, any information relating to the Company's customer lists,
prices, trade secrets, methods, systems, advertising, or any other
confidential knowledge or secrets that Executive might from time to
time acquire with respect to the business of the Company or any of its
affiliates or subsidiaries, unless Executive obtains written consent of
the Company. Executive also specifically acknowledges the continued
validity and effect of any Agreement as to Confidentiality and
Inventions previously signed by Executive and that the terms of any
such agreement are incorporated into this Agreement by this reference.
SECTION TEN
NON-COMPETITION
---------------
In the event Executive's employment terminates pursuant to SECTION
EIGHT, Executive will not, for the duration of this Agreement, on
Executive's own behalf, or on behalf of any other person, firm,
partnership or corporation, engage in the private label cereal business
as either a proprietor, officer, director, partner, employee or
consultant.
7
<PAGE> 8
SECTION ELEVEN
ARBITRATION
-----------
As additional consideration for this Agreement, Executive agrees
that any differences, claims, or matters in dispute arising between the
Company and Executive out of or in connection with the Executive's
employment or the termination of the Executive's employment by the
Company including, but not limited to the terms and conditions of this
Agreement, allegations of wrongful termination, allegations of
employment discrimination or allegations of discriminatory or
retaliatory discharge under any federal, state or local discrimination
law shall be submitted by them to arbitration by the American
Arbitration Association, or its successor, and the determination of the
American Arbitration Association, or its successor, shall be final and
absolute. The arbitrator shall be governed by the duly promulgated
rules and regulations of the American Arbitration Association, or its
successor, and the pertinent provisions of the laws of the State of
Missouri relating to arbitration. The decision of the arbitrator may
be entered as a judgment in any court of the State of Missouri or
elsewhere.
SECTION TWELVE
MISCELLANEOUS PROVISIONS
------------------------
A. The Company shall be entitled to withhold from any payments
made pursuant to this Agreement, including SECTION EIGHT hereof, any
federal, state or local taxes required to be withheld by law or
regulation.
B. This Agreement represents the entire agreement between the
parties and any prior understandings or representations of any kind
preceding the effective date of this Agreement shall not be binding on
either party except to the extent incorporated into this Agreement.
This Agreement shall not be altered, amended or modified except in
writing signed by the Chief Executive Officer of the Company and by the
Executive.
C. This Agreement shall be binding upon and shall inure to the
benefit of the assigns, heirs, legatees or personal representatives of
Executive and the successors or assigns of the Company.
D. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. The Company may not assign this
Agreement other than to a successor to all or substantially all of the
business and/or assets of the Company. Neither this Agreement nor any
right or
8
<PAGE> 9
interest hereunder shall be assignable or transferable by Executive,
the Executive's beneficiaries or Executive's legal representatives
without the Company's prior written consent; provided, however, that
nothing in this Section shall preclude (i) Executive from designating
a beneficiary to receive any benefit payable hereunder upon the
Executive's death, or (ii) the executors, administrators, or other
legal representatives of the Executive's estate from assigning or
transferring any rights hereunder to the person or persons entitled
thereunto.
E. The headings of sections are included solely for convenience
of reference and shall not control the meaning or interpretation of any
of the provisions of this Agreement.
F. This Agreement shall be construed according to the laws of
the State of Missouri without giving effect to the conflict of laws
provisions thereof.
G. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a wavier of
such term or condition for the future or of any act other than that
specifically waived.
H. If, for any reason, any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of the
Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
The parties have entered into this Agreement based solely upon the
terms and conditions set forth herein. THIS AGREEMENT CONTAINS A
BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the --------- day of May, 1997.
RALCORP HOLDINGS, INC.
By:
- ---------------------------- -------------------------
Executive J. R. Micheletto
Chief Executive Officer
and President
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 55
<ALLOWANCES> 1
<INVENTORY> 73
<CURRENT-ASSETS> 146
<PP&E> 274
<DEPRECIATION> 118
<TOTAL-ASSETS> 413
<CURRENT-LIABILITIES> 79
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 281
<TOTAL-LIABILITY-AND-EQUITY> 413
<SALES> 595
<TOTAL-REVENUES> 595
<CGS> 328
<TOTAL-COSTS> 328
<OTHER-EXPENSES> 227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 533
<INCOME-TAX> 6
<INCOME-CONTINUING> 527
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 527
<EPS-PRIMARY> 15.98
<EPS-DILUTED> 15.98
<FN>
EXCLUDED FROM THE ABOVE COST/EXPENSE INFORMATION ARE
RESTRUCTURING CHARGES OF $23, PRE-TAX.
EXCLUDED FROM THE ABOVE REVENUES ARE A TAX-FREE GAIN ON
SALE OF $517 AND EQUITY EARNINGS OF $8, PRE-TAX.
</TABLE>
