SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1999
Commission File No. 1-4582
RALSTON PURINA COMPANY
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(Exact name of registrant as specified in its charter)
MISSOURI 43-0470580
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(State of Incorporation) (I.R.S. Employer Identification No.)
CHECKERBOARD SQUARE, ST. LOUIS MISSOURI 63164
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(Address of principal executive offices) (Zip Code)
(314) 982-1000
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(Registrant's telephone number, including area code)
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, and (2)
has been subject to such filing requirements for the past 90 days.
YES: X NO: _____
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Number of shares of Ralston Purina common stock, $.10 par value, outstanding as
of the close of business on August 9, 1999:
323,420,569
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PART I - FINANCIAL INFORMATION
RALSTON PURINA COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL INFORMATION
(dollars in millions except per share data)
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OPERATING RESULTS
Net earnings for the nine months ended June 30, 1999 were $341.2, or $1.10 and
$1.08 per share on a basic and diluted basis, respectively. Included in net
earnings for the current nine months are several unusual items which, in total,
increased net earnings by $31.2, or $.10 per basic and diluted share. The first
unusual item is an after-tax unrealized gain of $84.6, or $.27 per basic and
diluted share, representing a market value adjustment of the Company's stock
appreciation income linked securities (SAILS) debt. Net earnings also include
an after-tax gain of $8.4, or $.03 per basic and diluted share, on the sale of
shares of the Company's investment in E.I. du Pont de Nemours and Company
(DuPont) common stock. These increases were partially offset by after-tax
restructuring charges of $61.8, or $.20 per basic and diluted share, primarily
representing asset impairment write-downs associated with the Company's
continuing efforts to exit its Original Equipment Manufacturers' (OEM)
rechargeable battery business.
The fiscal 1998 nine-month net earnings of $1,000.9, or $3.24 and $3.04 per
basic and diluted share, respectively, included three unusual items which
decreased net earnings by $10.3, an after-tax gain on the sale of the Soy
Protein Products business of $705.1 (pre-tax gain of $1.1 billion) and net
earnings from discontinued operations of $10.0. The Soy Protein Products
business was sold to DuPont on December 3, 1997. Discontinued operations
consist of the operating results of the Soy Protein Products business, through
the sale date, and the Agricultural Products business, which was spun off on
April 1, 1998. Also included in discontinued operations is a gain on the
settlement of a claim related to a previously disposed business, partially
offset by transaction costs associated with the spin-off.
The unusual items included in the prior year nine-month results are as follows:
an after-tax gain of $9.5, or $.03 per basic and diluted share, on the sale of
shares of Interstate Bakeries Corporation (IBC) common stock; a capital loss tax
benefit of $41.5, or $.14 and $.13 per basic and diluted share, respectively,
associated with past restructuring actions; and after-tax restructuring charges
of $61.3, or $.20 and $.19 per share on a basic and diluted basis. These
restructuring charges primarily related to the Company's rechargeable battery
business but also included charges for a voluntary early retirement option
offered to most U.S. Battery Products' employees meeting certain age and service
requirements, reduced by the reversal of prior period restructuring charges.
Earnings before the unusual items described above were $310.0 for the current
nine months compared to earnings from continuing operations before unusual items
of $296.1 in the same period in the prior year, an increase of $13.9 or 4.7%.
This increase is primarily attributable to higher Pet Products' operating
earnings and an additional quarter's dividend income from the Company's
investment in DuPont common stock, partially offset by lower Battery Products'
operating earnings. Earnings per share before unusual items for the nine months
ended June 30, 1999 were $1.00 and $.98 on a basic and diluted basis,
respectively, compared to earnings from continuing operations before unusual
items of $.94 and $.90 in the prior year.
For the quarter ended June 30, 1999, net earnings were $57.2, or $.18 per basic
and diluted share, compared to $60.5, or $.19 and $.18 per basic and diluted
share, respectively, for the same quarter in 1998. Net earnings for the current
quarter include the aforementioned $8.4 gain on the sale of DuPont common stock;
an unrealized after-tax loss of $8.7 representing a market value adjustment of
the Company's SAILS debt; and after-tax restructuring charges of $26.8,
primarily related to the OEM rechargeable battery business. Net earnings for
the prior year third quarter include after-tax restructuring charges of $17.6
and earnings from discontinued operations of $0.9. Earnings from continuing
operations before unusual items increased $7.1, or 9.2%, to $84.3 for the
current quarter, compared to earnings from continuing operations before unusual
items of $77.2 in the prior year third quarter. Basic and diluted earnings per
share, before unusual items, were $.27 in the current quarter compared to basic
and diluted earnings per share from continuing operations before unusual items
of $.24 and $.23, respectively, in the prior year.
The earnings increase in the quarter resulted primarily from higher Pet
Products' operating earnings, partially offset by lower Battery Products'
operating earnings.
RESULTS OF CONTINUING OPERATIONS
Net sales were flat in the nine months ended June 30, 1999 and increased 1.5% in
the quarter on increased Pet Products' sales which were offset in the nine
months, and partially offset in the quarter, by decreases in Battery Products'
sales. See the following section for comments on sales changes by business
segment.
Gross profit as a percentage of sales was 51.4% and 51.8% for the current year
nine months and quarter, respectively, compared to 50.7% for both the prior year
quarter and nine months. The increased percentage in both current year periods
reflects margin improvements in Pet Products and increased sales in the higher
margin Pet Products segment, partially offset by decreased margins in Battery
Products.
Selling, general and administrative expenses decreased 1.6% in the current nine
months and quarter. Selling, general and administrative expenses decreased to
19.8% and 21.5% of sales in the current nine-month period and quarter,
respectively, from 20.2% and 22.2% in the same periods a year ago.
Advertising and promotion expense increased 3.1% in the current nine months and
4.7% in the current quarter due to increased promotional spending and
advertising support in Pet Products, partially offset by lower spending in
Battery Products. As a percentage of sales, advertising and promotion expense
was 15.5% and 16.0% in the current nine months and quarter, respectively,
compared to 15.1% and 15.5% in the same periods a year ago.
Other income/expense, net, was $3.9 favorable for the nine months. This
favorable variance was due to an additional quarter's dividend income from the
Company's investment in DuPont common stock and lower current year translation
and exchange losses, partially offset by lower returns on other investments in
the current year.
Income taxes, which include federal, state and foreign taxes, were 35.2% and
32.7% of pre-tax earnings before equity earnings for the current nine months and
quarter, respectively. The income tax percentage was favorably impacted in the
current quarter, and to a lesser extent in the nine months, by the state tax
benefit recorded on U.S. restructuring reserves. The income tax percentage was
also favorably impacted by the reversal of prior period restructuring charges
for which no tax benefit had been recorded. Excluding unusual items, income
taxes were 36% of pre-tax earnings before equity earnings for the current year
nine months and quarter.
Income taxes for the prior year nine-month period include the recognition of a
capital loss tax benefit of $41.5 and the favorable impact of the reversal of
prior period restructuring charges for which no tax benefit had been recorded.
In the prior year third quarter, the income tax percentage was unfavorably
impacted by pre-tax restructuring charges which did not result in tax benefits
due to tax loss situations or particular statutes of a country. Excluding
unusual items, income taxes were 35.2% and 34.2% of pre-tax earnings before
equity earnings for the prior year nine months and third quarter, respectively.
BUSINESS SEGMENTS
Sales for the Pet Products segment increased 5.3% in the nine months and 4.0%
in the quarter primarily on higher volumes, and additionally in the nine months
on the inclusion of sales from the Company's December 1997 acquisition of Edward
Baker Petfoods, based in the United Kingdom. Operating profit, excluding
unusual items, increased 21% in the nine months and 20% in the quarter due to
the sales increase coupled with lower ingredient costs, partially offset by
increased promotional spending and advertising support. In the nine months,
results were also impacted by an unfavorable package size mix.
Sales for the Battery Products segment decreased 5.8% in the nine months and
2.3% in the quarter from the same periods in the prior year. In the nine months,
sales improved in North America due to increased volumes, partially offset by
lower average selling prices. The increase in North American sales was more
than offset by declines in international volumes, lower European selling prices
and decreased rechargeable battery sales, particularly to the OEM market. In
the quarter, sales declined in Europe and South America on lower volumes and, in
Europe, on lower selling prices. Excluding sales of the OEM rechargeable battery
business and the unfavorable impact of foreign exchange rates, sales declined
3.1% in the nine months and 1.6% in the quarter.
Operating profit before unusual items for Battery Products decreased 24% in the
nine months on declines in the OEM rechargeable battery business, impacts of
foreign exchange, primarily in the first quarter, and the volume decline in the
international markets. North American results declined slightly with volume
improvements in alkaline more than offset by unfavorable net pricing and carbon
zinc volume declines. Operating profit before unusual items decreased 16% in
the quarter, primarily attributable to the OEM rechargeable business and the
South American sales decline. In North America, the impact of significant
volume improvements in branded alkaline were offset by lower average selling
prices.
As previously announced, the Company is continuing its efforts to exit its
worldwide OEM rechargeable battery business by fiscal year end. As a result of
the ongoing auction process, the full realization of the recorded asset values
is unlikely, and therefore the Company has taken an additional after-tax charge
of $24.6 in the current quarter. Additional after-tax charges related to the
exit from this business may range up to $20.0.
This business contributed sales of $97.6 and $33.4 in the current nine months
and quarter, respectively, compared to $116.9 and $31.8 in the comparable
periods of the prior year. Pre-tax operating losses, before impairment charges,
for this business were $14.7 and $5.7 for the current year nine-month period and
quarter, respectively, compared to pre-tax earnings, before impairment charges,
of $2.5 and a pre-tax loss of $3.2 for the same periods a year ago.
FINANCIAL CONDITION
The Company's primary source of liquidity is cash flow generated from
operations. The Company's investments in DuPont and IBC provide additional
sources of liquidity. For the nine months ended June 30, 1999, cash flow from
operations was $481.6 compared to cash flow from continuing operations of $418.2
for the nine months ended June 30, 1998. This increase is primarily
attributable to changes in working capital items, including decreased accounts
receivable and inventories, partially offset by decreased accounts payable.
Working capital was $130.1 at June 30, 1999 while current liabilities exceeded
current assets by $54.5 at September 30, 1998. This significant improvement in
working capital for the current nine months resulted primarily from a decrease
in notes payable, partially offset by decreases in accounts receivable and
inventories.
Cash used by investing activities - continuing operations was $2.3 for the
current nine months compared to $319.2 for the same period last year. This
significant decrease was primarily due to current year proceeds from the sale of
DuPont common stock of $124.5 and the acquisition of Edward Baker Petfoods in
the prior year for $182.5, funded primarily by the issuance of short-term debt.
In December 1997, the Company sold its Soy Protein Products operations to DuPont
for $1,554.2, comprised of 22.5 million shares of DuPont common stock (which
stock was valued at $1,399.2 at purchase date) and the assumption of certain
liabilities. This non-cash transaction resulted in an after-tax gain of $705.1.
On February 3, 1999, the Company's Board of Directors authorized the purchase
of up to eight million shares of Ralston Purina Company common stock (RAL
stock). As of August 10, 1999, approximately 1,875,000 shares remained under
this authorization for the purchase of RAL stock. This authorization is in
addition to a continuing authorization permitting the Company to acquire from
time to time, at prevailing market prices, shares of RAL stock that may be
offered for sale by the trustee of the Company's Savings Investment Plan as a
result of investment directions from participants in the plan.
RESTRUCTURING ACTIVITIES
During the nine months ended June 30, 1999, the Company recorded after-tax
provisions for restructuring of $61.8. These charges are primarily related to
the Company's OEM rechargeable battery business, which the Company has announced
it expects to exit by the end of the current fiscal year. In addition to the
after-tax charge of $24.6 recorded in the current quarter related to this
business, the Company also recorded after-tax impairment write-downs of $35.0 in
the second quarter of the current fiscal year. The current quarter charge also
includes additional rationalization of Battery Products' production capacity,
which provides for the termination of approximately 210 employees and the
closure of one plant, partially offset by the reversal of prior period Pet
Products' restructuring charges. On a pre-tax basis, current year charges were
$102.4 and consisted of cash costs of $43.9 and non-cash charges of $58.5. The
total pre-tax charge and non-cash component are net of a $3.2 reversal of prior
period restructuring charges.
In addition to the current year's asset impairment writedown related to the OEM
business, the Company recorded after-tax impairment write-downs of $40.5 related
to lithium ion rechargeable battery manufacturing assets of this business during
the nine months ended June 30, 1998. Fixed assets of the rechargeable business,
which are currently being held for sale, have a carrying value of $15.2 at June
30, 1999.
For the nine months ended June 30, 1998, the Company recorded after-tax
restructuring provisions of $61.3. Included in this charge is the lithium ion
asset impairment write-down discussed above, charges related to a voluntary
early retirement option offered to most U.S. Battery Products' employees meeting
certain age and service requirements, and other charges related to the Company's
European battery and international pet food operations. On a pre-tax basis,
these charges were $96.4 and consisted of cash costs of $37.7 and non-cash
charges of $58.7. The total charge and the non-cash component are net of an
$11.9 reversal of prior period restructuring charges.
During the current nine months, approximately 650 employees were terminated in
connection with restructuring accruals established in prior years. These
provisions were primarily related to the voluntary early retirement option, the
continued rationalization of Battery Products' production capacity and business
structure and restructuring of the Company's international pet food operations.
Activities impacting the restructuring reserve during the nine months ended June
30, 1999 were as follows:
Reserve balance at September 30, 1998 $57.3
Provision recorded, net of reversal of prior
period reserves of $3.2 102.4
Portion of current period provision classified
as property write-downs, net of reversal (58.5)
Termination benefits paid (31.3)
Other cash exit costs incurred (5.1)
Decrease due to translation (2.0)
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Reserve balance at June 30, 1999 $62.8
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SAILS MARK-TO-MARKET ADJUSTMENT
Results for the current nine months include an unrealized after-tax gain of
$84.6, or $.27 per basic and diluted share, representing a market value
adjustment of the Company's SAILS debt. On a pre-tax basis, this gain was
$132.2, which represents the difference between the debt's value at issuance, or
$480.0, and the current cash settlement value of the debt based on 15.5 million
shares of IBC common stock and an IBC stock price of $22.4375 at June 30, 1999.
For the current quarter, an unrealized loss of $8.7, after tax, or $13.6,
pre-tax, was recorded.
At maturity on August 1, 2000, the SAILS are mandatorily exchangeable into a
number of shares of IBC common stock owned by the Company, or cash, at the
Company's option. The number of shares or the amount of cash will be based on
the average market price of IBC stock on the 20 trading days prior to maturity
(the IBC Maturity Price). If the IBC Maturity Price is greater than or equal to
$37.7819, the SAILS will be exchangeable at maturity into 12.70 million shares
of IBC stock. If the IBC Maturity Price is $30.96875 or less, the SAILS will be
exchangeable into 15.50 million shares of IBC stock. If the IBC Maturity Price
is between $30.96875 and $37.7819, the SAILS will be exchangeable into a number
of shares of IBC stock between 15.50 million and 12.70 million, respectively,
based on an exchange ratio.
For accounting purposes, terms of the SAILS require them to be marked to the
cash value of the underlying IBC common shares into which they may be exchanged.
Accordingly, a market value adjustment is required for the SAILS debt when the
IBC stock price is outside the range of $30.96875 and $37.7819. If the IBC
stock price is greater than $37.7819, the Company records a cumulative
unrealized loss on the SAILS debt, and if the IBC stock price is less than
$30.96875, the Company records a cumulative unrealized gain.
The Company's investment in IBC is included in Investments and Other Assets and
is accounted for using the equity method of accounting, which results in a
carrying value different from the current market value of the investment.
ESOP CONVERSION
At the end of December 1998, the Company converted all of the outstanding shares
of Series A 6.75% Preferred Stock (Redeemable Preferred Stock) into RAL stock in
accordance with terms of the Redeemable Preferred Stock. To effect this
conversion, the Company issued 13,505,609 shares held in Treasury and 2,209,192
authorized but previously unissued shares of RAL stock.
YEAR 2000 UPDATE
The Company has substantially completed its plans and active projects to achieve
100% Year 2000 readiness in its key application systems software, computer
hardware and operating systems software, and various other systems containing
embedded chip technology before the turn of the millennium.
The Company estimates that more than 95% of its application systems software has
been modified or replaced and tested for Year 2000 readiness, which includes a
higher level of remediation in the United States than in other world areas. The
remaining application systems software is in the process of being modified or
replaced and tested.
Approximately 95% of the Company's computer hardware and operating systems
software have been modified or replaced and tested for Year 2000 readiness.
Upgrade/replacement and Year 2000 readiness testing of all computer hardware and
operating systems software is targeted for September 1999.
Systems that contain embedded chip technology are in the process of being
verified for Year 2000 readiness. Testing and upgrade/replacement of all
impacted systems containing embedded chip technology is targeted for completion
in September 1999.
The estimated total cost for the Company to achieve Year 2000 readiness is
approximately $36, of which $32 has been expended through June 30, 1999.
The Company has developed a base contingency plan to address Year 2000 risks;
however, contingency planning efforts are ongoing and will continue to evolve as
new information becomes available. Contingency plans to address specifically
identified Year 2000 risks include increasing raw material, packaging material
and inventory levels in key manufacturing locations, securing alternate sources
of supply, distribution and warehousing, developing manual workarounds and other
appropriate measures. The Company's critical suppliers and major customers have
been contacted regarding Year 2000 issues. Because of the uncertainties
associated with assessing the ability of major suppliers and customers to
complete the remediation of their systems in time to prevent operational
difficulties, the Company will continue to contact and/or visit these business
partners to gain assurances that no significant adverse consequences will result
due to failure to complete remediation of their systems.
SPIN-OFF OF EVEREADY BATTERY COMPANY, INC.
On June 10, 1999, the Company announced its intention to separate its Eveready
Battery Company, Inc. subsidiary in a tax-free spin-off to shareholders.
Completion of the spin-off is expected to take seven to 10 months and is
contingent upon a favorable tax ruling from the Internal Revenue Service,
effectiveness of a registration statement relating to the spin-off and final
approval by the Ralston Purina Board of Directors.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 133 provides standards on accounting and
disclosure for derivative instruments, and requires that all derivatives be
measured at fair value and reported as either assets or liabilities in the
statement of financial position. In accordance with the issuance of SFAS No.
137, the Company will be required to adopt the provisions of SFAS No. 133 no
later than the beginning of fiscal year 2001. The Company has not completed its
evaluation to determine the impact of SFAS No. 133 on its consolidated financial
statements.
FORWARD-LOOKING STATEMENTS
Statements in this document that are not historical are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made.
The Company advises readers that various risks and uncertainties could affect
its financial performance and could cause the Company's actual results for
future periods to differ materially from those anticipated or projected. These
risks and uncertainties include, but are not limited to: the effect of general
economic conditions; fluctuations in supply and demand for the Company's
products; competition and competitive pricing pressures in the battery products
and pet products industries, both domestically and internationally; significant
increases in operating expenses, including the cost of raw materials; increased
charges related to the exit of the OEM rechargeable business; fluctuations in
the value of the Company's investments in DuPont and IBC common stock; the Year
2000 readiness of critical suppliers, customers and governmental agencies, as
well as the difficulty of evaluating and remediating certain systems and
technologies utilized in the operation of the Company's businesses, and
incremental costs associated with evaluation and remediation; and other risks
detailed from time to time in the Company's publicly-filed documents, including
its Annual Report on Form 10-K for the period ended September 30, 1998, and its
current report on Form 8-K dated January 26, 1999.
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
QUARTER ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-----------------------------------------
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . . . . . $1,088.5 $1,072.9 $3,510.5 $3,500.8
--------- --------- --------- ---------
Costs and Expenses
Cost of products sold . . . . . . . . . . . . 524.4 529.0 1,705.7 1,726.1
Selling, general and administrative . . . . . 233.8 237.7 695.9 707.1
Advertising and promotion . . . . . . . . . . 174.2 166.4 545.3 528.7
Interest expense. . . . . . . . . . . . . . . 45.5 47.1 140.4 142.7
Provisions for restructuring. . . . . . . . . 45.7 21.6 102.4 96.4
Unrealized (gain)/loss on SAILS debt. . . . . 13.6 - (132.2) -
Gain on sale of DuPont stock. . . . . . . . . (13.1) - (13.1) -
Gain on sale of IBC stock . . . . . . . . . . - - - (14.7)
Other income/(expense), net . . . . . . . . . (7.8) (10.6) (20.9) (17.0)
--------- --------- --------- ---------
1,016.3 991.2 3,023.5 3,169.3
--------- --------- --------- ---------
Earnings from Continuing Operations before
Income Taxes and Equity Earnings. . . . . . . 72.2 81.7 487.0 331.5
Income Tax Provision. . . . . . . . . . . . . . (23.6) (31.3) (171.6) (73.3)
Equity Earnings, Net of Taxes . . . . . . . . . 8.6 9.2 25.8 27.6
--------- --------- --------- ---------
Earnings from Continuing Operations . . . . . . 57.2 59.6 341.2 285.8
Net Earnings from Discontinued Operations . . . - 0.9 - 10.0
Gain on Sale of Discontinued Operations . . . . - - - 705.1
--------- --------- --------- ---------
Net Earnings. . . . . . . . . . . . . . . . . . 57.2 60.5 341.2 1,000.9
Preferred Stock Dividend, Net of Taxes. . . . . - (2.8) (2.6) (8.8)
--------- --------- --------- ---------
Earnings Available to Common Shareholders . . . $ 57.2 $ 57.7 $ 338.6 $ 992.1
========= ========= ========= =========
Cash Dividends Declared per Common Share. . . . $ 0.10 $ 0.10 $ 0.30 $ 0.30
========= ========= ========= =========
Earnings Per Share
Basic
Earnings from continuing operations . . . $ 0.18 $ 0.19 $ 1.10 $ 0.91
Net earnings from discontinued operations - - - 0.03
Gain on sale of discontinued operations . - - - 2.30
--------- --------- --------- ---------
Net Earnings. . . . . . . . . . . . . . . $ 0.18 $ 0.19 $ 1.10 $ 3.24
========= ========= ========= =========
Diluted
Earnings from continuing operations . . . $ 0.18 $ 0.18 $ 1.08 $ 0.87
Net earnings from discontinued operations - - - 0.03
Gain on sale of discontinued operations . - - - 2.14
--------- --------- --------- ---------
Net Earnings. . . . . . . . . . . . . . . $ 0.18 $ 0.18 $ 1.08 $ 3.04
========= ========= ========= =========
</TABLE>
See Accompanying Notes to Condensed Financial Statements.
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(CONDENSED AND UNAUDITED)
(DOLLARS IN MILLIONS)
JUNE 30, SEPTEMBER 30,
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<S> <C> <C>
1999 1998
---------- ---------------
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 90.6 $ 89.8
Receivables, less allowance for doubtful accounts
of $24.6 and $24.5, respectively. . . . . . . . . . . . . . . . . . 664.0 717.2
Inventories
Raw materials and supplies. . . . . . . . . . . . . . . . . . . . . 118.3 134.7
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . 133.9 124.1
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . 308.2 341.6
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . 126.0 120.1
---------- ---------------
Total Current Assets. . . . . . . . . . . . . . . . . . . . . . . . 1,441.0 1,527.5
Investments and Other Assets. . . . . . . . . . . . . . . . . . . . . . 3,072.5 2,908.2
Property at Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,187.4 2,212.9
Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . 1,132.2 1,096.9
---------- ---------------
1,055.2 1,116.0
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Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,568.7 $ 5,551.7
========== ===============
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Current maturities of long-term debt. . . . . . . . . . . . . . . . . $ 74.3 $ 37.1
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492.4 772.4
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 231.0 286.2
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . 513.2 486.3
---------- ---------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . 1,310.9 1,582.0
Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,599.7 1,794.8
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 452.3 309.3
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 541.9 533.6
Redeemable Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . - 256.1
Unearned ESOP Compensation. . . . . . . . . . . . . . . . . . . . . . . - (13.2)
Shareholders Equity
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.9 32.6
Capital in excess of par value. . . . . . . . . . . . . . . . . . . . 172.1 127.7
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 1,738.8 2,067.0
Common stock in treasury, at cost . . . . . . . . . . . . . . . . . . (59.4) (766.3)
Unearned portion of restricted stock. . . . . . . . . . . . . . . . . (3.2) (4.2)
Value of common stock held in Grantor Trust . . . . . . . . . . . . . (198.1) (191.5)
Cumulative translation adjustment . . . . . . . . . . . . . . . . . (96.5) (87.3)
Net unrealized holding gain/(loss) on available-for-sale securities 77.3 (88.9)
---------- ---------------
Accumulated other comprehensive income. . . . . . . . . . . . . . . . (19.2) (176.2)
---------- ---------------
Total Shareholders Equity . . . . . . . . . . . . . . . . . . . . . 1,663.9 1,089.1
---------- ---------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,568.7 $ 5,551.7
========== ===============
</TABLE>
See Accompanying Notes to Condensed Financial Statements.
<TABLE>
<CAPTION>
RALSTON PURINA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(CONDENSED AND UNAUDITED)
(DOLLARS IN MILLIONS)
NINE MONTHS ENDED JUNE 30,
--------------------------
1999 1998
-------- ---------
<S> <C> <C>
Cash Flow from Operations
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . $ 341.2 $1,000.9
Unrealized gain on SAILS debt . . . . . . . . . . . . . . . . (132.2) -
Gain on sale of DuPont stock. . . . . . . . . . . . . . . . . (13.1) -
Gain on sale of IBC stock . . . . . . . . . . . . . . . . . . - (14.7)
Gain on sale of discontinued operations . . . . . . . . . . . - (705.1)
Net earnings from discontinued operations . . . . . . . . . . - (10.0)
Non-cash items included in income . . . . . . . . . . . . . . 240.2 169.8
Changes in assets and liabilities used in operations. . . . . 92.2 (8.4)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . (46.7) (14.3)
-------- ---------
Cash flow from continuing operations. . . . . . . . . . . . 481.6 418.2
Cash flow from discontinued operations. . . . . . . . . . . - (76.3)
-------- ---------
Net cash flow from operations . . . . . . . . . . . . . . 481.6 341.9
-------- ---------
Cash Flow from Investing Activities
Property additions, net . . . . . . . . . . . . . . . . . . . (120.4) (165.6)
Proceeds from sale of DuPont stock. . . . . . . . . . . . . . 124.5 -
Acquisition of business . . . . . . . . . . . . . . . . . . . - (182.5)
Proceeds from sale of IBC stock . . . . . . . . . . . . . . . - 27.1
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . (6.4) 1.8
-------- ---------
Cash used by investing activities - continuing operations . (2.3) (319.2)
Cash used by investing activities - discontinued operations - (195.1)
-------- ---------
Net cash used by investing activities . . . . . . . . . . (2.3) (514.3)
-------- ---------
Cash Flow from Financing Activities
Net cash proceeds from (payment of) debt. . . . . . . . . . (290.4) 491.4
Dividends paid. . . . . . . . . . . . . . . . . . . . . . . (101.1) (111.2)
Treasury stock purchases. . . . . . . . . . . . . . . . . . (115.6) (235.2)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . 28.6 10.2
-------- ---------
Net cash provided (used) by financing activities. . . . . (478.5) 155.2
-------- ---------
Effect of Exchange Rate Changes on Cash . . . . . . . . . . . . - (11.3)
-------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents. . . . . . 0.8 (28.5)
Cash and Cash Equivalents, Beginning of Period. . . . . . . . . 89.8 109.1
-------- ---------
Cash and Cash Equivalents, End of Period. . . . . . . . . . . . $ 90.6 $ 80.6
======== =========
</TABLE>
See Accompanying Notes to Condensed Financial Statements.
RALSTON PURINA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1999
(Dollars in millions except per share data)
Note 1 - The accompanying unaudited financial statements 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 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
conjunction with the financial statements and notes thereto included in the
Ralston Purina Company (the Company) Annual Report to Shareholders for the year
ended September 30, 1998.
Note 2 - During the quarter and nine-month period ended June 30, 1999, the
Company recorded after-tax provisions for restructuring of $26.8 and $61.8,
respectively. On a per share basis, these charges were $.09 per basic and
diluted share for the quarter and $.20 per basic and diluted share for the nine
months. On a pre-tax basis, charges for restructuring were $45.7 and $102.4 for
the quarter and nine months, respectively. Pre-tax charges for the nine months
consisted of cash costs of $43.9 and non-cash charges of $58.5. The total
pre-tax charge and non-cash component are net of a $3.2 reversal of prior period
restructuring charges.
As previously announced, the Company is continuing its efforts to exit its
Original Equipment Manufacturers' (OEM) rechargeable battery business by fiscal
year end. As a result of the ongoing auction process, the full realization of
the recorded OEM asset values is unlikely, and therefore the Company has taken
an additional after-tax charge of $24.6 in the current quarter. The current
quarter charge also includes additional rationalization of Battery Products'
production capacity, partially offset by the reversal of prior period Pet
Products' restructuring charges. Additionally, an after-tax charge of $35.0 was
recorded in the second quarter of the current year, representing an impairment
write-down of assets of the OEM business.
During the quarter and nine months ended June 30, 1998, the Company recorded
after-tax provisions for restructuring of $17.6 and $61.3, respectively. On a
per share basis, these charges were $.05 per basic and diluted share for the
quarter and $.20 and $.19 per basic and diluted share, respectively, for the
nine months. For the prior year quarter, restructuring provisions consisted
primarily of charges related to a voluntary early retirement option offered to
most U.S. Battery Products' employees meeting certain age and service
requirements and other charges related to the Company's European battery and
international pet food operations. In addition to these charges, the prior year
nine months also included an after-tax charge of $40.5 representing an
impairment write-down of lithium ion rechargeable battery manufacturing assets
of the OEM business.
On a pre-tax basis, restructuring provisions for the prior year quarter and nine
months were $21.6 and $96.4, respectively. The nine-month charge consisted of
cash costs of $37.7 and non-cash charges of $58.7. The total charge and
non-cash component are net of an $11.9 reversal of prior period restructuring
charges.
Note 3 - During the nine months ended June 30, 1999, the Company recorded an
after-tax, unrealized gain of $84.6, or $0.27 per basic and diluted share,
representing a market value adjustment of the Company's stock appreciation
income linked securities (SAILS) debt. On a pre-tax basis, this gain was
$132.2, which represents the difference between the debt's value at issuance, or
$480.0, and the current cash settlement value of the debt based on 15.50 million
shares of Interstate Bakeries Corporation (IBC) common stock and an IBC stock
price of $22.4375 per share at June 30, 1999. For the quarter ended June 30,
1999, an unrealized after-tax loss of $8.7 was recorded, or $.03 per basic and
diluted share. On a pre-tax basis, the loss for the quarter was $13.6.
At maturity on August 1, 2000, the SAILS are mandatorily exchangeable into a
number of shares of IBC common stock owned by the Company, or cash, at the
Company's option. The number of shares or the amount of cash will be based on
the average market price of IBC stock on the 20 trading days prior to maturity
(the IBC Maturity Price). If the IBC Maturity Price is greater than or equal to
$37.7819 per share, the SAILS will be exchangeable at maturity into 12.70
million shares of IBC stock. If the IBC Maturity Price is $30.96875 per share
or less, the SAILS will be exchangeable into 15.50 million shares of IBC stock.
If the IBC Maturity Price is between $30.96875 and $37.7819 per share, the SAILS
will be exchangeable into a number of shares of IBC stock between 15.50 million
and 12.70 million, respectively, based on an exchange ratio.
For accounting purposes, terms of the SAILS require them to be marked to the
cash value of the underlying IBC common shares into which they may be exchanged.
Accordingly, a market value adjustment is required for the SAILS debt when the
IBC stock price is outside the range of $30.96875 and $37.7819 per share. If
the IBC stock price is greater than $37.7819 per share, the Company records a
cumulative unrealized loss on the SAILS debt, and if the IBC stock price is less
than $30.96875 per share, the Company records a cumulative unrealized gain.
The Company's investment in IBC is included in Investments and Other Assets and
is accounted for using the equity method of accounting, which results in a
carrying value different from the current market value of the investment.
Note 4 - During the quarter and nine months ended June 30, 1999, the Company
sold shares of its investment in E.I. du Pont de Nemours and Company (DuPont)
common stock for $124.5 and recorded a $13.1, pre-tax, or $8.4, after-tax, gain
on this sale. The cost basis of these shares was determined using the average
cost method. On a per share basis, this gain was $.03 per basic and diluted
share, for both the quarter and nine-month periods.
Note 5 - During the nine-month period ended June 30, 1998, the Company sold
shares of its investment in IBC common stock for $27.1 and recognized an
after-tax gain of $9.5, or $.03 per basic and diluted share. On a pre-tax
basis, this gain was $14.7.
Note 6 - During the nine-month period ended June 30, 1998, the Company
recognized a capital loss tax benefit of $41.5, or $.14 and $.13 per basic and
diluted share, respectively. This tax benefit was related to past restructuring
actions.
Note 7 - On December 3, 1997, the Company completed the sale of its Soy Protein
Products business to DuPont for $1,554.2, comprised of 22.5 million shares of
DuPont common stock (which stock was valued at $1,399.2 at the date of purchase)
and the assumption of certain liabilities. The Company recorded a pre-tax gain
on the sale of the Soy Protein Products business of $1.1 billion and an
after-tax gain of $705.1, or $2.30 and $2.14 per basic and diluted share,
respectively.
Note 8 - Discontinued operations consist of the operating results of the Soy
Protein Products business, through the sale date (see Note 7), and the
Agricultural Products business, which was spun off on April 1, 1998. Also
included in discontinued operations is a gain of $5.3, after taxes, on the
settlement of a claim related to a previously disposed business, partially
offset by transaction costs associated with the spin-off.
Note 9 - In the first quarter of the current year, the Company adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The
Company has restated its balance sheet at September 30, 1998 to reflect
"Accumulated Other Comprehensive Income," in accordance with this statement.
The components of total comprehensive income for the quarter and nine-month
periods ended June 30, 1999 and 1998 are shown in the following table. A
portion of the unrealized losses on DuPont common stock have been reclassified
in the current periods from Accumulated Other Comprehensive Income to Net
Earnings as a result of the sale of shares of DuPont common stock. (see Note
4).
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------- -----------------
6/30/99 6/30/98 6/30/99 6/30/98
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Net Earnings . . . . . . . . . . . . . . . $ 57.2 $ 60.5 $ 341.2 $ 1,000.9
Other Comprehensive Income, Net of Tax
Foreign currency translation adjustments 1.4 90.1 (9.2) 40.0
Unrealized gains on available-for-sale
securities. . . . . . . . . . . 136.2 95.8 159.4 181.5
Reclassification adjustment. . . . . . . 4.7 6.8
-------- -------- --------- --------
Total Other Comprehensive Income . . . . . 142.3 185.9 157.0 221.5
-------- -------- --------- --------
Total Comprehensive Income. . . . . . . $ 199.5 $ 246.4 $ 498.2 $1,222.4
======== ======== ========= ========
</TABLE>
Note 10 - The following table sets forth the computation of basic and diluted
earnings per share for the quarters and nine-month periods ended June 30, 1999
and 1998.
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
June 30, June 30,
---------- ------------------
1999 1998 1999 1998
------ ------- ------- -------
<S> <C> <C> <C> <C>
Numerator:
Earnings from continuing operations. . . . . . $ 57.2 $ 59.6 $341.2 $285.8
Preferred stock dividends. . . . . . . . . . . - (2.8) (2.6) (8.8)
------ ------- ------- -------
Numerator for basic earnings per share -
Earnings from continuing operations
available to common shareholders. . . . $ 57.2 $ 56.8 $338.6 $277.0
Effect of dilutive securities:
ESOP stock. . . . . . . . . . . . . . . . - 2.6 2.4 7.6
------ ------- ------- -------
Numerator for diluted earnings per share -
Earnings from continuing operations
available to common shareholders. . . . $ 57.2 $ 59.4 $341.0 $284.6
------ ------- ------- -------
Net earnings from discontinued operations $ - $ 0.9 $ - $ 10.0
------ ------- ------- -------
Gain on sale of discontinued operations . $ - $ - $ - $705.1
------ ------- ------- -------
Denominator:
Denominator for basic earnings per share -
weighted average shares * . . . . . . . 312.3 304.4 308.6 306.6
Effect of dilutive securities:
ESOP stock. . . . . . . . . . . . . . . - 17.2 5.4 18.0
Stock options . . . . . . . . . . . . . 2.9 5.3 3.1 4.6
Deferred Compensation . . . . . . . . . - - - -
------ ------- ------- -------
Dilutive potential common shares . . . . . . . 2.9 22.5 8.5 22.6
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions. . . . . 315.2 326.9 317.1 329.2
====== ======= ======= =======
Basic earnings per share:
Earnings from continuing operations. . . . . . $ 0.18 $ 0.19 $ 1.10 $ 0.91
Net earnings from discontinued operations. . . - - - 0.03
Gain on sale of discontinued operations. . . . - - - 2.30
------ ------- ------- -------
Net earnings . . . . . . . . . . . . . . . . . $ 0.18 $ 0.19 $ 1.10 $ 3.24
====== ======= ======= =======
Diluted earnings per share:
Earnings from continuing operations. . . . . . $ 0.18 $ 0.18 $ 1.08 $ 0.87
Net earnings from discontinued operations. . . - - - 0.03
Gain on sale of discontinued operations. . . . - - - 2.14
------ ------- ------- -------
Net earnings . . . . . . . . . . . . . . . . . $ 0.18 $ 0.18 $ 1.08 $ 3.04
====== ======= ======= =======
</TABLE>
* Weighted average shares used for the computation of basic earnings per
share excludes 13,683,000 and 13,423,000 shares of common stock held by the
Company's Grantor Trust at June 30, 1999 and 1998, respectively.
Note 11 - Other (income)/expense, net, for the nine months ended June 30, 1999
and 1998 consists of the following:
<TABLE>
<CAPTION>
June 30,
1999 1998
------- -------
<S> <C> <C>
Net translation and exchange loss $ 6.2 $ 10.7
Dividends on DuPont common stock. (23.2) (15.0)
Other investment income . . . . . (4.4) (4.0)
Return on other investments . . . (0.8) (8.4)
Miscellaneous (income)/expense. . 1.3 (0.3)
------- -------
$(20.9) $(17.0)
======= =======
</TABLE>
Note 12 - At the end of December 1998, the Company converted all of the
outstanding shares of Series A 6.75% Preferred Stock (Redeemable Preferred
Stock) into Ralston Purina Company common stock (RAL Stock), in accordance with
terms of the Redeemable Preferred Stock. To effect this conversion, the Company
issued 13,505,609 Treasury shares and 2,209,192 authorized but previously
unissued shares of RAL Stock.
Note 13 - In December 1997, the Company acquired Edward Baker Petfoods, a United
Kingdom manufacturer of extruded complete pet foods and a supplier of branded
and private label products to the European market, for $182.5.
Note 14 - On June 30, 1999, there were 312,689,000 shares of common stock
outstanding, exclusive of 2,181,000 shares held in treasury and 13,683,000
Grantor Trust shares. At September 30, 1998, there were 298,958,000 shares of
common stock outstanding, exclusive of 13,875,000 shares held in treasury and
13,470,000 Grantor Trust shares.
Note 15 - Investments and Other Assets consist of the following:
<TABLE>
<CAPTION>
June 30, Sept. 30,
1999 1998
-------- --------
<S> <C> <C>
Goodwill. . . . . . . . . . . . . . $ 513.9 $ 545.9
Other intangible assets . . . . . . 220.7 231.2
Investments in affiliated companies 350.2 319.3
Available-for-sale securities . . . 1,431.5 1,281.2
Deferred charges and other assets . 556.2 530.6
-------- --------
$3,072.5 $2,908.2
======== ========
</TABLE>
Note 16 - Available-for-sale securities at June 30, 1999 and September 30, 1998
consist primarily of shares of DuPont common stock obtained in connection with
the sale of the Company's Soy Protein Products business (see Note 7).
Available-for-sale securities are carried at fair value, based on quoted market
prices. The difference between fair value and cost basis of these securities,
net of tax, is shown as a separate component within Accumulated Other
Comprehensive Income in the shareholders equity section of the Consolidated
Balance Sheet. The table below shows the aggregate fair value, gross unrealized
holding gain/(loss), tax (provision)/benefit, and net unrealized holding
gain/(loss) for these securities as of June 30, 1999 and September 30, 1998.
The changes in net unrealized holding gain/(loss) for the quarters and
nine-month periods ended June 30, 1999 and 1998 are included as a component of
Other Comprehensive Income as shown in Note 9, above.
<TABLE>
<CAPTION>
Gross Net
Unrealized Tax Unrealized
Aggregate Holding (Provision)/ Holding
Fair Value Gain/(Loss) Benefit Gain/(Loss)
----------- ------------ --------- ------------
<S> <C> <C> <C> <C>
June 30, 1999. . . $ 1,431.5 $ 120.8 ($43.5) $ 77.3
September 30, 1998 $ 1,281.2 ($138.9) $ 50.0 ($88.9)
</TABLE>
Note 17 - In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133." SFAS No. 133 provides standards on accounting and
disclosure for derivative instruments, and requires that all derivatives be
measured at fair value and reported as either assets or liabilities in the
statement of financial position. In accordance with the issuance of SFAS No.
137, the Company will be required to adopt the provisions of SFAS No. 133 no
later than the beginning of fiscal year 2001. The Company has not completed its
evaluation to determine the impact of SFAS No. 133 on its consolidated financial
statements.
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 filed with this Report:
10(i) Form of Management Continuity Agreement with Chief Executive Officer
10(ii) Form of Management Continuity Agreement with Corporate Officer
10(iii) Form of Management Continuity Agreement with Corporate Vice
President
10(iv) Form of Management Continuity Agreement with Corporate Officer
(27) Financial Data Schedule
(b) Reports on Form 8-K
Registrant filed its Current Report on Form 8-K dated June 10, 1999, to disclose
that its board had approved in principle a plan to spin off the Eveready Battery
business to Ralston shareholders.
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.
RALSTON PURINA COMPANY
-----------------------------------------
Registrant
By:/s/ James R. Elsesser
James R. Elsesser
Vice President and Chief
Financial Officer
Date: August 10, 1999
<PAGE>
EXHIBIT INDEX
- -------------
Exhibits
- --------
EX-27 Financial data schedule for 3rd Quarter 1999
(provided electronically)
(Document prepared on Edgar)
EX-10 Material Contracts
10(i) Form of Management Continuity Agreement with
Chief Executive Officer
10(ii) Form of Management Continuity Agreement with
Corporate Officer
10(iii) Form of Management Continuity Agreement with
Corporate Vice President
10(iv) Form of Management Continuity Agreement with
Corporate Officer
MANAGEMENT CONTINUITY AGREEMENT
-------------------------------
MANAGEMENT CONTINUITY AGREEMENT by and between Ralston Purina Company
("Ralston"), a Missouri corporation, and _______________, (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors has authorized Ralston to enter into a
Management Continuity Agreement (the "Agreement") with certain key executives of
Ralston; and
WHEREAS, the Board of Directors believes it is imperative, in the event of an
attempted Change in Control, that key executives continue employment with
Ralston or one of its Affiliates, and that Ralston be able to receive and rely
upon the advice from such executives as to the best interests of Ralston and its
shareholders, without concern that the executives may be distracted by personal
employment uncertainties or influenced by conflicting interests; and
WHEREAS, the Executive is a key executive of Ralston and has been selected by
the Board of Directors to be offered this Agreement; and
WHEREAS, the Board of Directors believes that the payments which may be made
under this Agreement constitute additional reasonable compensation for services
to be rendered by the Executive in connection with a Change in Control;
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, Ralston and the Executive agree as follows:
ARTICLE 1. DEFINITIONS: For purposes of this Agreement, the following terms
-----------
shall have the meanings set forth below:
a. AFFILIATE: An Affiliate shall mean any Person who, directly or
indirectly or through one or more intermediaries, Controls another Person, is
Controlled by another Person, or is under common Control with another Person.
b. BASE AMOUNT: The Base Amount shall mean the "base amount" as defined and
determined pursuant to Section 280G of the Code applicable at the time of the
Executive's Qualifying Termination.
c. BASE COMPENSATION: The Base Compensation shall mean:
(i) the Executive's monthly gross salary, whether paid or
deferred, 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; and
(ii) one-twelfth (1/12th) 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; and
(iii) the higher of the following:
(A) one-thirty-sixth (1/36th) of the Executive's bonus payment (base
--
and peer group award, if applicable) most recently earned, whether paid or
deferred, prior to a Change in Control under a completed Incentive Plan; or
(B) a one (1) month pro rata portion of any amounts earned by the Executive
under any of the Incentive Plans in effect at the time of the Change in Control,
calculated for the last full month preceding the Change in Control or, if
applicable, preceding the Executive's Qualifying Termination, whichever is
greater.
d. BENEFICIAL OWNERSHIP: Beneficial Ownership shall mean "beneficial
ownership" as defined in Rule 13d-3 promulgated under Section 13(d) of the
Exchange Act.
e. BOARD OF DIRECTORS: The Board of Directors shall mean the Board of
Directors of Ralston.
f. BUYER: A Person which purchased business operations and assets which
previously were conducted or owned by Ralston or its Affiliates during the term
of this Agreement.
g. CHANGE IN CONTROL: A Change in Control shall mean an occurrence set
forth in Article 2.
h. CONTROL: Control (including the terms "controlling," "controlled by" and
"under common control with") shall mean the possession of a power, directly or
indirectly, whether through ownership of securities, by contract or otherwise:
(i) to elect a majority of the Board of Directors of a Person; or
(ii) to direct the business, management and policies of a Person
or direct the sale of a substantial portion of its assets.
i. CODE: The Code shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
j. COMMON STOCK: Common Stock shall mean the $.10 par value common stock of
Ralston, and such other Ralston voting stock that may be issued in lieu of, or
in addition to, the Common Stock as a result of a merger or consolidation of
Ralston, the creation of a class or classes of tracking stock, or the
reclassification of any of the foregoing.
k. CONTINUING DIRECTOR: A Continuing Director shall mean a member of the
Board of Directors as of the date hereof, and any other director who was
appointed or nominated for election to the Board of Directors by a majority of
the Continuing Directors then in office.
l. DISABILITY: A Disability shall mean a condition where the Executive
suffers a complete inability to perform the Executive's work assignments because
of injury or sickness, and such inability is expected to continue indefinitely.
To determine Disability, Ralston shall rely on a determination with respect to
disability of the Executive made under the Purina Benefit Association Long Term
Disability Plan or any successor disability plan. If no such determination has
been made within seven (7) months after the Executive's last day worked, or if
the Executive is not enrolled in the Long Term Disability Plan, the
determination shall be made by a licensed physician jointly selected by Ralston
and the Executive. Fees and expenses of any physician, and all costs of
examinations of the Executive, shall be paid by Ralston.
m. DISCOUNT RATE: The Discount Rate shall mean the "applicable interest
rate" (and the mortality tables, if applicable) prescribed under Section
417(e)(3) of the Code at the time of the Executive's Qualifying Termination.
n. EXCHANGE ACT: The Exchange Act shall mean the Securities Exchange Act of
1934, as amended.
o. FORMER RALSTON AFFILIATE: A Person which is no longer an Affiliate of
Ralston but which owns (directly or indirectly) business operations and assets
which were conducted or owned by Ralston or a Ralston Affiliate during the term
of this Agreement.
p. INCENTIVE PLAN: An Incentive Plan shall mean any cash bonus plan with a
term of more than two (2) years but less than five (5) years, including the
1994, 1996 and 1998 Leveraged Incentive Plans and all similar plans adopted
during the term of this Agreement.
q. PARACHUTE PAYMENT: Parachute Payment shall mean a "parachute payment" as
defined and determined pursuant to Section 280G of the Code applicable at the
time of the Executive's Qualifying Termination.
r. PAYMENT PERIOD: The Payment Period shall mean the period commencing with
the first day of the month following the month in which a Qualifying Termination
occurs and continuing:
(i) for thirty-six (36) months if the Qualifying Termination
occurs at any time during the first year following the Change in Control; or
(ii) for twenty-four (24) months if the Qualifying Termination
occurs at any time during the second year following the Change in Control; or
(iii) for twelve (12) months if the Qualifying Termination occurs
at any time during the third year following the Change in Control.
s. PERSON: Person shall mean any natural person, firm, individual, company,
corporation, partnership, joint venture, joint stock company, limited liability
company, business trust, trust, association or any other business organization
or entity, whether incorporated or unincorporated.
t. QUALIFYING TERMINATION: A Qualifying Termination shall mean the
Executive's voluntary or involuntary termination of employment within three (3)
years after a Change in Control under the following circumstances:
(i) upon or after a Change in Control as described in Article 2(a) or
2(b), the Executive's termination of employment from Ralston, its Successor, or
an Affiliate of either.
(ii) upon or after a Change in Control as described in Article 2(c),
the Executive's termination of employment from Ralston, its Successor, or an
Affiliate of either; or the Executive's being employed by a Buyer or Former
Ralston Affiliate, or an Affiliate of either, and ceasing to be employed by
Ralston, its Successor or an Affiliate of either.
Notwithstanding the foregoing, in no event shall a Qualifying Termination be
deemed to occur on account of the Executive's transfer of employment, at any
time during the term of this Agreement, between any two Persons within a group
of Persons comprised of Ralston or its Successor, and any of their Affiliates;
or because of the Executive's death.
u. RETIREMENT PLAN: The Retirement Plan shall mean the Ralston Purina
Retirement Plan, as amended, or any successor retirement plan adopted by
Ralston.
v. SPIN-OFF: A Spin-off shall mean a spin-off, reverse spin-off or
similar type of transaction, including a management-led leveraged buyout,
resulting in the disposition to Ralston's shareholders, or to a management-led
leveraged buyout group, of all or substantially all of the stock and/or assets
of a business conducted by Ralston and/or its Affiliates.
w. SUCCESSOR: A Successor shall mean the continuing, surviving or
successor Person which is created, or remains in existence, upon the merger or
consolidation of two Persons.
x. SUPPLEMENTAL PLAN: The Supplemental Plan shall mean the Ralston Purina
Supplemental Retirement Plan, as amended, or any successor supplemental
retirement plan adopted by Ralston.
ARTICLE 2. CHANGE IN CONTROL: A Change in Control will occur if there is:
-------------------
a. A change in the membership of the Board of Directors such that
Continuing Directors shall have ceased (for any reason) to constitute at least a
majority of the Board of Directors; or
b. An acquisition by any Person and its Affiliates of the Beneficial
Ownership of fifty percent (50%) or more of the then outstanding Common Stock of
Ralston (other than acquisitions by Ralston, a Ralston Affiliate, any Person
acting on behalf of Ralston as an underwriter pursuant to an offering, or any
trustee or other fiduciary holding Ralston Common Stock pursuant to the terms of
any Ralston benefit plan); or
c. A sale of all or substantially all of the pet products business of
Ralston and its Affiliates, to a Person which is not an Affiliate of Ralston.
In no event shall a Spin-off, including, but not limited to, a management-led
buyout, be deemed to constitute a Change in Control.
ARTICLE 3. OPERATION OF AGREEMENT: This Agreement shall not create any
------------------------
obligation on the part of Ralston or its subsidiaries, or the Executive, to
continue the Executive's employment relationship. Anything in this Agreement to
the contrary notwithstanding, the Executive shall not be entitled to Severance
Benefits, as defined below, under this Agreement unless and until there has been
a Change in Control and the Executive has had a Qualifying Termination. Except
as hereinafter provided, this Agreement shall not affect any other benefit
program (as such programs may be amended) applicable to the Executive; provided,
that, by execution of this Agreement, the Executive hereby waives any and all
claims to benefits under any termination or severance plan or similar severance
arrangement offered by Ralston or its Affiliates to all or some of their
employees during the term of this Agreement, that would otherwise be payable to
the Executive on account of, or coincident with, a Change in Control.
ARTICLE 4. SEVERANCE BENEFITS: If the Executive remains in the employ of
-------------------
Ralston or one of its Affiliates until a Change in Control has occurred, then
upon the Executive's Qualifying Termination within three (3) years after a
Change in Control, the Executive shall be entitled to the following benefits
("Severance Benefits"), subject to withholding of any federal, state or local
taxes which, in the opinion of counsel for the payor of the Severance Benefits,
are required to be withheld:
a. Payment in a lump sum in cash, within sixty (60) days of the Executive's
Qualifying Termination, of the present value, calculated using the Discount
Rate, of an income stream equal to the Executive's Base Compensation as if it
were to be paid each month throughout the applicable Payment Period; and
b. Continuation during the Payment Period of life, health, accident and
disability benefits no less favorable than those provided to the Executive under
life, health, accident and disability plans and programs in effect immediately
prior to the Change in Control, subject to all terms and conditions of such
plans immediately prior to such Change in Control including, but not limited to,
provisions regarding the extent and duration of spouse and dependent coverage,
and subject to payment of premiums, if any, charged at rates no greater than
those rates in effect immediately prior to the Change in Control; and
c. Payment in a lump sum in cash, within sixty (60) days of the Executive's
Qualifying Termination, of the present value (calculated using the Discount
Rate) of the difference as of the date of the Qualifying Termination between the
actual benefits, if any, to which the Executive, or the Executive's beneficiary,
is entitled under the Retirement Plan and the Supplemental Plan (excluding
amounts accrued in the PensionPlus Match Account in the Retirement Plan) and the
benefits, if any, under the Retirement Plan and the Supplemental Plan (excluding
amounts accrued in the aforesaid PensionPlus Match Account) which the Executive,
or the Executive's beneficiary, would have been entitled to receive if the
Executive had remained employed by Ralston or one of its Affiliates during the
applicable Payment Period at a compensation level equal to the Executive's Base
Compensation; and
d. If the Executive, at the time of the Qualifying Termination, is at least
48 years old but not yet age 55, monthly payments equal in amount to those the
Executive would be entitled to receive pursuant to the Retirement Plan and the
Supplemental Plan (excluding amounts accrued in the PensionPlus Match Account)
if paid in the form of a single life annuity. The payments shall be calculated
as if the Executive were age 55 but with years of service equal to the
Executive's "credited service" (as defined in the Retirement Plan) as of the
Qualifying Termination. Such payments shall commence upon the first day of the
month following the later to occur of the Qualifying Termination or the
attainment of age 50, and shall be paid to the Executive (or his or her
beneficiary designated under Article 6) until the date the Executive attains or
would have attained age 55. If the Executive dies without having designated a
beneficiary, amounts payable under this Article 4(d) shall be paid to the
Executive's estate in a lump sum equal to the present value of such amounts as
of the date of death, calculated using the Discount Rate.
ARTICLE 5. PARACHUTE PAYMENTS: Notwithstanding anything to the contrary
-------------------
contained in this Agreement, the Executive may elect to reduce the Severance
Benefits under Article 4 so that the present value of such Severance Benefits,
if they constitute Parachute Payments, together with the present value of all
Parachute Payments paid to the Executive, are less than three (3) times the
Employee's Base Amount. For purposes of this Article 5, present value shall be
determined by application of a discount rate equal to 120% of the applicable
Federal rate (determined under Section 1274(d) of the Code), compounded
semi-annually. Whether or not such Severance Benefits shall be reduced (and the
identity of the Severance Benefits to be reduced), and the amount by which each
Severance 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 Ralston, in accordance with Article 11 hereof, not later than
forty-five (45) days following such Executive's Qualifying Termination.
ARTICLE 6. DESIGNATED BENEFICIARY: The Executive, by notice in accordance with
----------------------
Article 11 hereof, may designate a beneficiary or contingent beneficiaries to
receive the Severance Benefits described in Article 4 in the event of the
Executive's death following the Executive's Qualifying Termination but prior to
payment in full by Ralston, its Successor or assigns. The Executive may, from
time to time, revoke or change any such designation of beneficiary. Any
designation of beneficiary made pursuant to this Agreement shall be controlling
over any other designation made by the Executive, testamentary or otherwise;
provided, that if Ralston shall be in doubt as to the right of a beneficiary to
receive payments, it may determine in its sole discretion to pay such amounts to
the legal representative of the Executive's estate.
ARTICLE 7. EARLY SEPARATION: In the event that, prior to a Change in Control,
----------------
the Executive executes a separation agreement with Ralston or any of its
Affiliates during the term of this Agreement which, by its terms, specifically
addresses issues related to the Executive's termination of employment and
benefits to be paid upon such termination, all of the Executive's rights, claims
and entitlements under this Agreement shall terminate even if, under the terms
of such separation agreement, the Executive remains employed by Ralston or one
of its Affiliates for a period of time after execution of such separation
agreement.
ARTICLE 8. SUCCESSORS AND ASSIGNS: This Agreement shall inure to the benefit
----------------------
of, and be binding upon, Ralston and its Successors. Ralston may not assign
this Agreement without the Executive's prior written consent. Ralston will
require any Person to which it assigns this Agreement to assume expressly the
Agreement and agree to perform this Agreement in the same manner and to the same
extent that Ralston would be required to perform it if no such assignment had
taken place. No assignment of this Agreement shall relieve Ralston from
liability for any of its obligations hereunder, and in the event of any such
assignment, Ralston shall continue to remain primarily liable for payment of the
Severance Benefits promised under Article 4 and for the performance and
observance of the agreements provided herein to be performed and observed by
Ralston. The Executive shall have no right to transfer or assign the right to
receive any Severance Benefits under Article 4 of this Agreement, except as
permitted under Article 6.
ARTICLE 9. COSTS: Irrespective of the success of the Executive's claim, Ralston
-----
will reimburse the Executive, or the legal representative of the Executive's
estate, for reasonable attorney's fees and costs in the event that the Executive
brings legal action to enforce payment by Ralston, its Affiliates or assigns, or
Successors to any of the foregoing, of the Severance Benefits promised under
Article 4 (plus interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code on payments of Severance Benefits due but not timely
made) after the Executive's Qualifying Termination.
ARTICLE 10. TERM OF AGREEMENT: This Agreement shall expire upon the earliest
-----------------
of the following to occur:
(i) five (5) years from its effective date, unless extended by the Board of
Directors on or before such expiration date;
(ii) if a determination of the Executive's Disability is made before a
Change in Control while this Agreement is in effect, the day following such
determination;
(iii) if the Executive ceases to be employed with Ralston and any of its
Affiliates prior to a Change in Control, the last day of such employment;
provided that, if the Executive and Ralston or one of its Affiliates enters into
a separation agreement as described in Article 7 while this Agreement is in
effect, the effective date of such separation agreement; or
(iv) the effective date of a Spin-off of all or substantially all of the pet
products business of Ralston and its Affiliates.
After the expiration of this Agreement, the Executive shall have no rights to
any Severance Benefits under Article 4, provided, if a Change in Control occurs
prior to the expiration or termination of this Agreement, then upon a subsequent
Qualifying Termination, the Executive shall be entitled to the Severance
Benefits under Article 4, and the term of this Agreement shall be extended until
the later of the expiration of the applicable Payment Period or, if the
Executive is eligible for monthly payments pursuant to Article 4(d), the date of
the final payment thereunder.
ARTICLE 11. NOTICE: Any notice or other communication required or permitted
------
hereunder is deemed delivered when delivered in person; on the next business day
when sent by an overnight delivery service; or on the third business day when
sent by U.S. mail service, as follows:
<PAGE>
TO RALSTON: Corporate Secretary
Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
TO THE EXECUTIVE: ________________________
________________________
________________________
ARTICLE 12. VENUE: ANY ACTION OR LEGAL PROCEEDING TO ENFORCE PAYMENT OF
-----
SEVERANCE BENEFITS UNDER ARTICLE 4 OF THIS AGREEMENT SHALL BE BROUGHT IN A
FEDERAL OR STATE COURT LOCATED WITHIN THE EASTERN DISTRICT OF MISSOURI, AND THE
PARTIES TO THIS AGREEMENT CONSENT TO THE JURISDICTION AND VENUE OF SUCH COURT.
ARTICLE 13. MISSOURI LAW TO GOVERN: This Agreement shall be governed by the
----------------------
laws of the State of Missouri without regard to its conflict of laws provisions.
ARTICLE 14. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
----------------
between the parties hereto with respect to the subject matter hereof, and
supersedes and replaces any previous management continuity agreement or any
employment contract (oral or written) between Ralston and the Executive relating
to severance payments after a Change in Control, and upon the execution of this
Agreement, both parties agree that any prior agreement or employment contract
covering severance payments (or other severance-type payments) after a Change in
Control shall be considered null and void and of no further effect.
IN WITNESS WHEREOF, Ralston and the Executive have executed this Agreement
effective as of the __________ day of _______, 1999.
ATTEST: RALSTON PURINA COMPANY
Nancy E. Hamilton J. P. Mulcahy
VP & Corporate Secretary Co-Chief Executive Officer
WITNESS:
________________________
Executive
MANAGEMENT CONTINUITY AGREEMENT
-------------------------------
MANAGEMENT CONTINUITY AGREEMENT by and between Ralston Purina Company
("Ralston"), a Missouri corporation, and _______________, (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors has authorized Ralston to enter into a
Management Continuity Agreement (the "Agreement") with certain key executives of
Ralston; and
WHEREAS, the Board of Directors believes it is imperative, in the event of an
attempted Change in Control, that key executives continue employment with
Ralston or one of its Affiliates, and that Ralston be able to receive and rely
upon the advice from such executives as to the best interests of Ralston and its
shareholders, without concern that the executives may be distracted by personal
employment uncertainties or influenced by conflicting interests; and
WHEREAS, the Executive is a key executive of Ralston and has been selected by
the Board of Directors to be offered this Agreement; and
WHEREAS, the Board of Directors believes that the payments which may be made
under this Agreement constitute additional reasonable compensation for services
to be rendered by the Executive in connection with a Change in Control;
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, Ralston and the Executive agree as follows:
ARTICLE 1. DEFINITIONS: For purposes of this Agreement, the following terms
-----------
shall have the meanings set forth below:
a. AFFILIATE: An Affiliate shall mean any Person who, directly or
indirectly or through one or more intermediaries, Controls another Person, is
Controlled by another Person, or is under common Control with another Person.
b. BASE AMOUNT: The Base Amount shall mean the "base amount" as defined and
determined pursuant to Section 280G of the Code applicable at the time of the
Executive's Qualifying Termination.
c. BASE COMPENSATION: The Base Compensation shall mean:
(i) the Executive's monthly gross salary, whether paid or
deferred, 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; and
(ii) one-twelfth (1/12th) 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; and
(iii) the higher of the following:
(A) one-thirty-sixth (1/36th) of the Executive's bonus payment (base and peer
--
group award, if applicable) most recently earned, whether paid or deferred,
prior to a Change in Control under a completed Incentive Plan; or
(B) a one (1) month pro rata portion of any amounts earned by the Executive
under any of the Incentive Plans in effect at the time of the Change in Control,
calculated for the last full month preceding the Change in Control or, if
applicable, preceding the Executive's Qualifying Termination, whichever is
greater.
d. BENEFICIAL OWNERSHIP: Beneficial Ownership shall mean "beneficial
ownership" as defined in Rule 13d-3 promulgated under Section 13(d) of the
Exchange Act.
e. BOARD OF DIRECTORS: The Board of Directors shall mean the Board of
Directors of Ralston.
f. BUYER: A Person which purchased business operations and assets which
previously were conducted or owned by Ralston or its Affiliates during the term
of this Agreement.
g. CHANGE IN CONTROL: A Change in Control shall mean an occurrence set
forth in Article 2.
h. CONTROL: Control (including the terms "controlling," "controlled by" and
"under common control with") shall mean the possession of a power, directly or
indirectly, whether through ownership of securities, by contract or otherwise:
(i) to elect a majority of the Board of Directors of a Person; or
(ii) to direct the business, management and policies of a Person
or direct the sale of a substantial portion of its assets.
i. CODE: The Code shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
j. COMMON STOCK: Common Stock shall mean the $.10 par value common stock of
Ralston, and such other Ralston voting stock that may be issued in lieu of, or
in addition to, the Common Stock as a result of a merger or consolidation of
Ralston, the creation of a class or classes of tracking stock, or the
reclassification of any of the foregoing.
k. CONTINUING DIRECTOR: A Continuing Director shall mean a member of the
Board of Directors as of the date hereof, and any other director who was
appointed or nominated for election to the Board of Directors by a majority of
the Continuing Directors then in office.
l. DISABILITY: A Disability shall mean a condition where the Executive
suffers a complete inability to perform the Executive's work assignments because
of injury or sickness, and such inability is expected to continue indefinitely.
To determine Disability, Ralston shall rely on a determination with respect to
disability of the Executive made under the Purina Benefit Association Long Term
Disability Plan or any successor disability plan. If no such determination has
been made within seven (7) months after the Executive's last day worked, or if
the Executive is not enrolled in the Long Term Disability Plan, the
determination shall be made by a licensed physician jointly selected by Ralston
and the Executive. Fees and expenses of any physician, and all costs of
examinations of the Executive, shall be paid by Ralston.
m. DISCOUNT RATE: The Discount Rate shall mean the "applicable interest
rate" (and the mortality tables, if applicable) prescribed under Section
417(e)(3) of the Code at the time of the Executive's Qualifying Termination.
n. EXCHANGE ACT: The Exchange Act shall mean the Securities Exchange Act of
1934, as amended.
o. FORMER RALSTON AFFILIATE: A Person which is no longer an Affiliate of
Ralston but which owns (directly or indirectly) business operations and assets
which were conducted or owned by Ralston or a Ralston Affiliate during the term
of this Agreement.
p. INCENTIVE PLAN: An Incentive Plan shall mean any cash bonus plan with a
term of more than two (2) years but less than five (5) years, including the
1994, 1996 and 1998 Leveraged Incentive Plans and all similar plans adopted
during the term of this Agreement.
q. PARACHUTE PAYMENT: Parachute Payment shall mean a "parachute payment" as
defined and determined pursuant to Section 280G of the Code applicable at the
time of the Executive's Qualifying Termination.
r. PAYMENT PERIOD: The Payment Period shall mean the period commencing with
the first day of the month following the month in which a Qualifying Termination
occurs and continuing:
(i) for thirty-six (36) months if the Qualifying Termination
occurs at any time during the first year following the Change in Control; or
(ii) for twenty-four (24) months if the Qualifying Termination
occurs at any time during the second year following the Change in Control; or
(iii) for twelve (12) months if the Qualifying Termination occurs
at any time during the third year following the Change in Control.
s. PERSON: Person shall mean any natural person, firm, individual, company,
corporation, partnership, joint venture, joint stock company, limited liability
company, business trust, trust, association or any other business organization
or entity, whether incorporated or unincorporated.
t. QUALIFYING TERMINATION: A Qualifying Termination shall mean the
Executive's voluntary or involuntary termination of employment within three (3)
years after a Change in Control under the following circumstances:
(i) upon or after a Change in Control as described in Article 2(a) or
2(b), the Executive's termination of employment from Ralston, its Successor, or
an Affiliate of either.
(ii) upon or after a Change in Control as described in Article 2(c),
the Executive's termination of employment from Ralston, its Successor or an
Affiliate of either; or the Executive's being employed by a Buyer or Former
Ralston Affiliate, or an Affiliate of either, and ceasing to be employed by
Ralston, its Successor or an Affiliate of either.
Notwithstanding the foregoing, in no event shall a Qualifying Termination be
deemed to occur on account of the Executive's transfer of employment, at any
time during the term of this Agreement, between any two Persons within a group
of Persons comprised of Ralston or its Successor, and any of their Affiliates;
or because of the Executive's death.
u. RETIREMENT PLAN: The Retirement Plan shall mean the Ralston Purina
Retirement Plan, as amended, or any successor retirement plan adopted by
Ralston.
v. SPIN-OFF: A Spin-off shall mean a spin-off, reverse spin-off or
similar type of transaction, including a management-led leveraged buyout,
resulting in the disposition to Ralston's shareholders, or to a management-led
leveraged buyout group, of all or substantially all of the stock and/or assets
of a business conducted by Ralston and/or its Affiliates.
w. SUCCESSOR: A Successor shall mean the continuing, surviving or
successor Person which is created, or remains in existence, upon the merger or
consolidation of two Persons.
x. SUPPLEMENTAL PLAN: The Supplemental Plan shall mean the Ralston Purina
Supplemental Retirement Plan, as amended, or any successor supplemental
retirement plan adopted by Ralston.
ARTICLE 2. CHANGE IN CONTROL: A Change in Control will occur if there is:
-------------------
a. A change in the membership of the Board of Directors such that
Continuing Directors shall have ceased (for any reason) to constitute at least a
majority of the Board of Directors; or
b. An acquisition by any Person and its Affiliates of the Beneficial
Ownership of fifty percent (50%) or more of the then outstanding Common Stock of
Ralston (other than acquisitions by Ralston, a Ralston Affiliate, any Person
acting on behalf of Ralston as an underwriter pursuant to an offering, or any
trustee or other fiduciary holding Ralston Common Stock pursuant to the terms of
any Ralston benefit plan); or
c. A sale of all or substantially all of the battery products business of
Ralston and its Affiliates to a Person which is not an Affiliate of Ralston.
In no event shall a Spin-off, including, but not limited to, a management-led
buyout, be deemed to constitute a Change in Control.
ARTICLE 3. OPERATION OF AGREEMENT: This Agreement shall not create any
------------------------
obligation on the part of Ralston or its subsidiaries, or the Executive, to
continue the Executive's employment relationship. Anything in this Agreement to
the contrary notwithstanding, the Executive shall not be entitled to Severance
Benefits, as defined below, under this Agreement unless and until there has been
a Change in Control and the Executive has had a Qualifying Termination. Except
as hereinafter provided, this Agreement shall not affect any other benefit
program (as such programs may be amended) applicable to the Executive; provided,
that, by execution of this Agreement, the Executive hereby waives any and all
claims to benefits under any termination or severance plan or similar severance
arrangement offered by Ralston or its Affiliates to all or some of their
employees during the term of this Agreement, that would otherwise be payable to
the Executive on account of, or coincident with, a Change in Control.
ARTICLE 4. SEVERANCE BENEFITS: If the Executive remains in the employ of
-------------------
Ralston or one of its Affiliates until a Change in Control has occurred, then
upon the Executive's Qualifying Termination within three (3) years after a
Change in Control, the Executive shall be entitled to the following benefits
("Severance Benefits"), subject to withholding of any federal, state or local
taxes which, in the opinion of counsel for the payor of the Severance Benefits,
are required to be withheld:
a. Payment in a lump sum in cash, within sixty (60) days of the Executive's
Qualifying Termination, of the present value, calculated using the Discount
Rate, of an income stream equal to the Executive's Base Compensation as if it
were to be paid each month throughout the applicable Payment Period; and
b. Continuation during the Payment Period of life, health, accident and
disability benefits no less favorable than those provided to the Executive under
life, health, accident and disability plans and programs in effect immediately
prior to the Change in Control, subject to all terms and conditions of such
plans immediately prior to such Change in Control including, but not limited to,
provisions regarding the extent and duration of spouse and dependent coverage,
and subject to payment of premiums, if any, charged at rates no greater than
those rates in effect immediately prior to the Change in Control; and
c. Payment in a lump sum in cash, within sixty (60) days of the Executive's
Qualifying Termination, of the present value (calculated using the Discount
Rate) of the difference as of the date of the Qualifying Termination between the
actual benefits, if any, to which the Executive, or the Executive's beneficiary,
is entitled under the Retirement Plan and the Supplemental Plan (excluding
amounts accrued in the PensionPlus Match Account in the Retirement Plan) and the
benefits, if any, under the Retirement Plan and the Supplemental Plan (excluding
amounts accrued in the aforesaid PensionPlus Match Account) which the Executive,
or the Executive's beneficiary, would have been entitled to receive if the
Executive had remained employed by Ralston or one of its Affiliates during the
applicable Payment Period at a compensation level equal to the Executive's Base
Compensation.
ARTICLE 5. PARACHUTE PAYMENTS: Notwithstanding anything to the contrary
-------------------
contained in this Agreement, the Executive may elect to reduce the Severance
Benefits under Article 4 so that the present value of such Severance Benefits,
if they constitute Parachute Payments, together with the present value of all
Parachute Payments paid to the Executive, are less than three (3) times the
Employee's Base Amount. For purposes of this Article 5, present value shall be
determined by application of a discount rate equal to 120% of the applicable
Federal rate (determined under Section 1274(d) of the code), compounded
semi-annually. Whether or not such Severance Benefits shall be reduced (and the
identity of the Severance Benefits to be reduced), and the amount by which each
Severance 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 Ralston, in accordance with Article 11 hereof, not later than
forty-five (45) days following such Executive's Qualifying Termination.
ARTICLE 6. DESIGNATED BENEFICIARY: The Executive, by notice in accordance with
----------------------
Article 11 hereof, may designate a beneficiary or contingent beneficiaries to
receive the Severance Benefits described in Article 4 in the event of the
Executive's death following the Executive's Qualifying Termination but prior to
payment in full by Ralston, its Successor or assigns. The Executive may, from
time to time, revoke or change any such designation of beneficiary. Any
designation of beneficiary made pursuant to this Agreement shall be controlling
over any other designation made by the Executive, testamentary or otherwise;
provided, that if Ralston shall be in doubt as to the right of a beneficiary to
receive payments, it may determine, in its sole discretion, to pay such amounts
to the legal representative of the Executive's estate.
ARTICLE 7. EARLY SEPARATION: In the event that, prior to a Change in Control,
----------------
the Executive executes a separation agreement with Ralston or any of its
Affiliates during the term of this Agreement which, by its terms, specifically
addresses issues related to the Executive's termination of employment and
benefits to be paid upon such termination, all of the Executive's rights, claims
and entitlements under this Agreement shall terminate even if, under the terms
of such separation agreement, the Executive remains employed by Ralston or one
of its Affiliates for a period of time after execution of such separation
agreement.
ARTICLE 8. SUCCESSORS AND ASSIGNS: This Agreement shall inure to the benefit
----------------------
of, and be binding upon, Ralston and its Successors. Ralston may not assign
this Agreement without the Executive's prior written consent. Ralston will
require any Person to which it assigns this Agreement to assume expressly the
Agreement and agree to perform this Agreement in the same manner and to the same
extent that Ralston would be required to perform it if no such assignment had
taken place. No assignment of this Agreement shall relieve Ralston from
liability for any of its obligations hereunder, and in the event of any such
assignment, Ralston shall continue to remain primarily liable for payment of the
Severance Benefits promised under Article 4 and for the performance and
observance of the agreements provided herein to be performed and observed by
Ralston. The Executive shall have no right to transfer or assign the right to
receive any Severance Benefits under Article 4 of this Agreement, except as
permitted under Article 6.
ARTICLE 9. COSTS: Irrespective of the success of the Executive's claim,
-----
Ralston will reimburse the Executive, or the legal representative of the
Executive's estate, for reasonable attorney's fees and costs in the event that
the Executive brings legal action to enforce payment by Ralston, its Affiliates
or assigns, or Successors to any of the foregoing, of the Severance Benefits
promised under Article 4 (plus interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code on payments of Severance Benefits due but
not timely made) after the Executive's Qualifying Termination.
ARTICLE 10. TERM OF AGREEMENT: This Agreement shall expire upon the earliest
-----------------
of the following to occur:
(i) five (5) years from its effective date, unless extended by the Board of
Directors on or before such expiration date;
(ii) if a determination of the Executive's Disability is made before a
Change in Control while this Agreement is in effect, the day following such
determination;
(iii) if the Executive ceases to be employed with Ralston and any of its
Affiliates prior to a Change in Control, the last day of such employment;
provided that, if the Executive and Ralston or one of its Affiliates enters into
a separation agreement as described in Article 7 while this Agreement is in
effect, the effective date of such separation agreement; or
(iv) the effective date of a Spin-off of all or substantially all of the
battery products business of Ralston and its Affiliates.
After the expiration of this Agreement, the Executive shall have no rights to
any Severance Benefits under Article 4, provided, if a Change in Control occurs
prior to the expiration or termination of this Agreement, then upon a subsequent
Qualifying Termination, the Executive shall be entitled to the Severance
Benefits under Article 4, and the term of this Agreement shall be extended until
the expiration of the applicable Payment Period.
ARTICLE 11. NOTICE: Any notice or other communication required or permitted
------
hereunder is deemed delivered when delivered in person; on the next business day
when sent by an overnight delivery service; or on the third business day when
sent by U.S. mail service, as follows:
TO RALSTON: Corporate Secretary
Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
TO THE EXECUTIVE: ________________________
________________________
________________________
ARTICLE 12. VENUE: ANY ACTION OR LEGAL PROCEEDING TO ENFORCE PAYMENT OF
-----
SEVERANCE BENEFITS UNDER ARTICLE 4 OF THIS AGREEMENT SHALL BE BROUGHT IN A
FEDERAL OR STATE COURT LOCATED WITHIN THE EASTERN DISTRICT OF MISSOURI, AND THE
PARTIES TO THIS AGREEMENT CONSENT TO THE JURISDICTION AND VENUE OF SUCH COURT.
ARTICLE 13. MISSOURI LAW TO GOVERN: This Agreement shall be governed by the
----------------------
laws of the State of Missouri without regard to its conflict of laws provisions.
ARTICLE 14. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
----------------
between the parties hereto with respect to the subject matter hereof, and
supersedes and replaces any previous management continuity agreement or any
employment contract (oral or written) between Ralston and the Executive relating
to severance payments after a Change in Control, and upon the execution of this
Agreement, both parties agree that any prior agreement or employment contract
covering severance payments (or other severance-type payments) after a Change in
Control shall be considered null and void and of no further effect.
IN WITNESS WHEREOF, Ralston and the Executive have executed this Agreement
effective as of the __________ day of _______, 1999.
ATTEST: RALSTON PURINA COMPANY
Nancy E. Hamilton W. P. McGinnis
VP & Corporate Secretary Co-Chief Executive Officer
WITNESS:
________________________
Executive
MANAGEMENT CONTINUITY AGREEMENT
-------------------------------
MANAGEMENT CONTINUITY AGREEMENT by and between Ralston Purina Company
("Ralston"), a Missouri corporation, and ______________, (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors has authorized Ralston to enter into a
Management Continuity Agreement (the "Agreement") with certain key executives of
Ralston; and
WHEREAS, the Board of Directors believes it is imperative, in the event of an
attempted Change in Control, that key executives continue employment with
Ralston or one of its Affiliates, and that Ralston be able to receive and rely
upon the advice from such executives as to the best interests of Ralston and its
shareholders, without concern that the executives may be distracted by personal
employment uncertainties or influenced by conflicting interests; and
WHEREAS, the Executive is a key executive of Ralston and has been selected by
the Board of Directors to be offered this Agreement; and
WHEREAS, the Board of Directors believes that the payments which may be made
under this Agreement constitute additional reasonable compensation for services
to be rendered by the Executive in connection with a Change in Control;
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, Ralston and the Executive agree as follows:
ARTICLE 1. DEFINITIONS: For purposes of this Agreement, the following terms
-----------
shall have the meanings set forth below:
a. AFFILIATE: An Affiliate shall mean any Person who, directly or
indirectly or through one or more intermediaries, Controls another Person, is
Controlled by another Person, or is under common Control with another Person.
b. BASE AMOUNT: The Base Amount shall mean the "base amount" as defined and
determined pursuant to Section 280G of the Code applicable at the time of the
Executive's Qualifying Termination.
c. BASE COMPENSATION: The Base Compensation shall mean:
(i) the Executive's monthly gross salary, whether paid or
deferred, 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; and
(ii) one-twelfth (1/12th) 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; and
(iii) the higher of the following:
(A) one-thirty-sixth (1/36th) of the Executive's bonus
--
payment (base and peer group award, if applicable) most recently earned, whether
paid or deferred, prior to a Change in Control under a completed Incentive Plan;
or
(B) a one (1) month pro rata portion of any amounts earned by the
Executive under any of the Incentive Plans in effect at the time of the Change
in Control, calculated for the last full month preceding the Change in Control
or, if applicable, preceding the Executive's Qualifying Termination, whichever
is greater.
d. BENEFICIAL OWNERSHIP: Beneficial Ownership shall mean "beneficial
ownership" as defined in Rule 13d-3 promulgated under Section 13(d) of the
Exchange Act.
e. BOARD OF DIRECTORS: The Board of Directors shall mean the Board of
Directors of Ralston.
f. BUYER: A Person which purchased business operations and assets which
previously were conducted or owned by Ralston or its Affiliates during the term
of this Agreement.
g. CHANGE IN CONTROL: A Change in Control shall mean an occurrence set
forth in Article 2.
h. CONTROL: Control (including the terms "controlling," "controlled by" and
"under common control with") shall mean the possession of a power, directly or
indirectly, whether through ownership of securities, by contract or otherwise:
(i) to elect a majority of the Board of Directors of a Person; or
(ii) to direct the business, management and policies of a Person or direct
the sale of a substantial portion of its assets.
i. CODE: The Code shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
j. COMMON STOCK: Common Stock shall mean the $.10 par value common stock of
Ralston, and such other Ralston voting stock that may be issued in lieu of, or
in addition to, the Common Stock as a result of a merger or consolidation of
Ralston, the creation of a class or classes of tracking stock, or the
reclassification of any of the foregoing.
k. CONTINUING DIRECTOR: A Continuing Director shall mean a member of the
Board of Directors as of the date hereof, and any other director who was
appointed or nominated for election to the Board of Directors by a majority of
the Continuing Directors then in office.
l. DISABILITY: A Disability shall mean a condition where the Executive
suffers a complete inability to perform the Executive's work assignments because
of injury or sickness, and such inability is expected to continue indefinitely.
To determine Disability, Ralston shall rely on a determination with respect to
disability of the Executive made under the Purina Benefit Association Long Term
Disability Plan or any successor disability plan. If no such determination has
been made within seven (7) months after the Executive's last day worked, or if
the Executive is not enrolled in the Long Term Disability Plan, the
determination shall be made by a licensed physician jointly selected by Ralston
and the Executive. Fees and expenses of any physician, and all costs of
examinations of the Executive, shall be paid by Ralston.
m. DISCOUNT RATE: The Discount Rate shall mean the "applicable interest
rate" (and the mortality tables, if applicable) prescribed under Section
417(e)(3) of the Code at the time of the Executive's Qualifying Termination.
n. EXCHANGE ACT: The Exchange Act shall mean the Securities Exchange Act of
1934, as amended.
o. FORMER RALSTON AFFILIATE: A Person which, after a Split-up of Ralston,
is no longer an Affiliate of Ralston but which owns (directly or indirectly)
business operations and assets which before the Split-up were conducted or owned
by Ralston or a Ralston Affiliate.
p. INCENTIVE PLAN: An Incentive Plan shall mean any cash bonus plan with a
term of more than two (2) years but less than five (5) years, including the
1994, 1996 and 1998 Leveraged Incentive Plans and all similar plans adopted
during the term of this Agreement.
q. PARACHUTE PAYMENT: Parachute Payment shall mean a "parachute payment" as
defined and determined pursuant to Section 280G of the Code applicable at the
time of the Executive's Qualifying Termination.
r. PAYMENT PERIOD: The Payment Period shall mean the period commencing with
the first day of the month following the month in which a Qualifying Termination
occurs and continuing:
(i) for thirty-six (36) months if the Qualifying Termination
occurs at any time during the first year following the Change in Control; or
(ii) for twenty-four (24) months if the Qualifying Termination
occurs at any time during the second year following the Change in Control; or
(iii) for twelve (12) months if the Qualifying Termination occurs
at any time during the third year following the Change in Control.
s. PERSON: Person shall mean any natural person, firm, individual, company,
corporation, partnership, joint venture, joint stock company, limited liability
company, business trust, trust, association or any other business organization
or entity, whether incorporated or unincorporated.
t. QUALIFYING TERMINATION: A Qualifying Termination shall mean the
Executive's voluntary or involuntary termination of employment within three (3)
years after a Change in Control under the following circumstances:
(i) upon or after a Change in Control as described in Article 2(a) or
2(b), the Executive's termination of employment from Ralston, its Successor, or
an Affiliate of either.
(ii) upon or after a Change in Control as described in Article 2(c),
the Executive's termination of employment from Ralston, a Former Ralston
Affiliate or a Buyer, or a Successor or an Affiliate of Ralston, a Former
Ralston Affiliate or a Buyer.
Notwithstanding the foregoing, in no event shall a Qualifying Termination be
deemed to occur on account of:
(A) the Executive's transfer of employment at any time during the term of this
Agreement between two Persons within any of the following groups of Persons:
Ralston and any of its Affiliates; or a Former Ralston Affiliate and any of its
Affiliates; or a Buyer and any of its Affiliates (and including Successors to
any of the foregoing Persons); or
(B) the Executive's being employed by a Former Ralston Affiliate or Buyer, or
any Affiliate or Successor of either of the foregoing, in connection with a
Change in Control described in Article 2(c); or
(C) the Executive's death.
u. RETIREMENT PLAN: The Retirement Plan shall mean the Ralston Purina
Retirement Plan, as amended, or any successor retirement plan adopted by
Ralston.
v. SPLIT-UP: A Split-up shall mean an event described in Article 2(c).
w. SUCCESSOR: A Successor shall mean the continuing, surviving or successor
Person which is created, or remains in existence, upon the merger or
consolidation of two Persons.
x. SUPPLEMENTAL PLAN: The Supplemental Plan shall mean the Ralston Purina
Supplemental Retirement Plan, as amended, or any successor supplemental
retirement plan adopted by Ralston.
ARTICLE 2. CHANGE IN CONTROL: A Change in Control will occur if there is:
-------------------
a. A change in the membership of the Board of Directors such that
Continuing Directors shall have ceased (for any reason) to constitute at least a
majority of the Board of Directors; or
b. An acquisition by any Person and its Affiliates of the Beneficial
Ownership of fifty percent (50%) or more of the then outstanding Common Stock of
Ralston (other than acquisitions by Ralston, a Ralston Affiliate, any Person
acting on behalf of Ralston as an underwriter pursuant to an offering, or any
trustee or other fiduciary holding Ralston Common Stock pursuant to the terms of
any Ralston benefit plan); or
c. A Split-up of Ralston or its Successor, which shall include the sale,
spin-off, reverse spin-off or similar types of transactions, including a
management-led leveraged buyout, resulting in the disposition of businesses of
Ralston and its Affiliates during a twelve (12) month period which, in the
aggregate, accounted for more than one-third (33-1/3%) of the net consolidated
earnings or represented more than one-third (33-1/3%) of net assets (at fair
market value) of Ralston and its Affiliates, calculated as of the end of the
fiscal quarter immediately preceding the start of such twelve (12) month period.
ARTICLE 3. OPERATION OF AGREEMENT: This Agreement shall not create any
------------------------
obligation on the part of Ralston or its Affiliates, or the Executive, to
continue the Executive's employment relationship. Anything in this Agreement to
the contrary notwithstanding, the Executive shall not be entitled to Severance
Benefits, as defined below, under this Agreement unless and until there has been
a Change in Control and the Executive has had a Qualifying Termination. Except
as hereinafter provided, this Agreement shall not affect any other benefit
program (as such programs may be amended) applicable to the Executive; provided,
that, by execution of this Agreement, the Executive hereby waives any and all
claims to benefits under any termination or severance plan or similar severance
arrangement offered by Ralston or its Affiliates to all or some of their
employees during the term of this Agreement, that would otherwise be payable to
the Executive on account of, or coincident with, a Change in Control.
ARTICLE 4. SEVERANCE BENEFITS: If the Executive remains in the employ of
-------------------
Ralston or one of its Affiliates until a Change in Control has occurred, then
upon the Executive's Qualifying Termination within three (3) years after a
Change in Control, the Executive shall be entitled to the following benefits
("Severance Benefits"), subject to withholding of any federal, state or local
taxes which, in the opinion of counsel for the payor of the Severance Benefits,
are required to be withheld:
a. Payment in a lump sum in cash, within sixty (60) days of the Executive's
Qualifying Termination, of the present value, calculated using the Discount
Rate, of an income stream equal to the Executive's Base Compensation as if it
were to be paid each month throughout the applicable Payment Period; and
b. Continuation during the Payment Period of life, health, accident and
disability benefits no less favorable than those provided to the Executive under
life, health, accident and disability plans and programs in effect immediately
prior to the Change in Control, subject to all terms and conditions of such
plans immediately prior to such Change in Control including, but not limited to,
provisions regarding the extent and duration of spouse and dependent coverage,
and subject to payment of premiums, if any, charged at rates no greater than
those rates in effect immediately prior to the Change in Control; and
c. Payment in a lump sum in cash, within sixty (60) days of the Executive's
Qualifying Termination, of the present value (calculated using the Discount
Rate) of the difference as of the date of the Qualifying Termination between the
actual benefits, if any, to which the Executive, or the Executive's beneficiary,
is entitled under the Retirement Plan and the Supplemental Plan (excluding
amounts accrued in the PensionPlus Match Account in the Retirement Plan) and the
benefits, if any, under the Retirement Plan and the Supplemental Plan (excluding
amounts accrued in the aforesaid PensionPlus Match Account) which the Executive,
or the Executive's beneficiary, would have been entitled to receive if the
Executive had remained employed by Ralston or one of its Affiliates during the
applicable Payment Period at a compensation level equal to the Executive's Base
Compensation; and
d. If the Executive, at the time of the Qualifying Termination, is at least
48 years old but not yet age 55, monthly payments equal in amount to those the
Executive would be entitled to receive pursuant to the Retirement Plan and the
Supplemental Plan (excluding amounts accrued in the PensionPlus Match Account)
if paid in the form of a single life annuity. The payments shall be calculated
as if the Executive were age 55 but with years of service equal to the
Executive's "credited service" (as defined in the Retirement Plan) as of the
Qualifying Termination. Such payments shall commence upon the first day of the
month following the later to occur of the Qualifying Termination or the
attainment of age 50, and shall be paid to the Executive (or his or her
beneficiary designated under Article 6) until the date the Executive attains or
would have attained age 55. If the Executive dies without having designated a
beneficiary, amounts payable under this Article 4(d) shall be paid to the
Executive's estate in a lump sum equal to the present value of such amounts as
of the date of death, calculated using the Discount Rate.
ARTICLE 5. PARACHUTE PAYMENTS: Notwithstanding anything to the contrary
-------------------
contained in this Agreement, the Executive may elect to reduce the Severance
Benefits under Article 4 so that the present value of such Severance Benefits,
if they constitute Parachute Payments, together with the present value of all
Parachute Payments paid to the Executive, are less than three (3) times the
Employee's Base Amount. For purposes of this Article 5, present value shall be
determined by application of a discount rate equal to 120% of the applicable
Federal rate (determined under Section 1274(d) of the Code), compounded
semi-annually. Whether or not such Severance Benefits shall be reduced (and the
identity of the Severance Benefits to be reduced), and the amount by which each
Severance 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 Ralston, in accordance with Article 11 hereof, not later than
forty-five (45) days following such Executive's Qualifying Termination.
ARTICLE 6. DESIGNATED BENEFICIARY: The Executive, by notice in accordance with
----------------------
Article 11 hereof, may designate a beneficiary or contingent beneficiaries to
receive the Severance Benefits described in Article 4 in the event of the
Executive's death following the Executive's Qualifying Termination but prior to
payment in full by Ralston, its Successor or assigns. The Executive may, from
time to time, revoke or change any such designation of beneficiary. Any
designation of beneficiary made pursuant to this Agreement shall be controlling
over any other designation made by the Executive, testamentary or otherwise;
provided, that if Ralston shall be in doubt as to the right of a beneficiary to
receive payments, it may determine in its sole discretion to pay such amounts to
the legal representative of the Executive's estate.
ARTICLE 7. EARLY SEPARATION: In the event that, prior to a Change in Control,
----------------
the Executive executes a separation agreement with Ralston or any of its
Affiliates during the term of this Agreement which, by its terms, specifically
addresses issues related to the Executive's termination of employment and
benefits to be paid upon such termination, all of the Executive's rights, claims
and entitlements under this Agreement shall terminate even if, under the terms
of such separation agreement, the Executive remains employed by Ralston or one
of its Affiliates for a period of time after execution of such separation
agreement.
ARTICLE 8. SUCCESSORS AND ASSIGNS: This Agreement shall inure to the benefit
----------------------
of, and be binding upon, Ralston and its Successors. Ralston may not assign
this Agreement without the Executive's prior written consent. Ralston will
require any Person to which it assigns this Agreement to assume expressly the
Agreement and agree to perform this Agreement in the same manner and to the same
extent that Ralston would be required to perform it if no such assignment had
taken place. No assignment of this Agreement shall relieve Ralston from
liability for any of its obligations hereunder, and in the event of any such
assignment, Ralston shall continue to remain primarily liable for payment of the
Severance Benefits promised under Article 4 and for the performance and
observance of the agreements provided herein to be performed and observed by
Ralston. The Executive shall have no right to transfer or assign the right to
receive any Severance Benefits under Article 4 of this Agreement, except as
permitted under Article 6.
ARTICLE 9. COSTS: Irrespective of the success of the Executive's claim,
------
Ralston will reimburse the Executive, or the legal representative of the
Executive's estate, for reasonable attorney's fees and costs in the event that
the Executive brings legal action to enforce payment by Ralston, its Affiliates
or assigns, or Successors to any of the foregoing, of the Severance Benefits
promised under Article 4 (plus interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code on payments of Severance Benefits due but
not timely made) after the Executive's Qualifying Termination.
ARTICLE 10. TERM OF AGREEMENT: This Agreement shall expire upon the earliest
-----------------
of the following to occur:
(i) five (5) years from its effective date, unless extended by the Board of
Directors on or before such expiration date;
(ii) if a determination of the Executive's Disability is made before a
Change in Control while this Agreement is in effect, the day following such
determination; or
(iii) if the Executive ceases to be employed with Ralston and any of its
Affiliates prior to a Change in Control, the last day of such employment;
provided that, if the Executive and Ralston or one of its Affiliates enters into
a separation agreement as described in Article 7 while this Agreement is in
effect, the effective date of such separation agreement.
After the expiration of this Agreement, the Executive shall have no rights to
any Severance Benefits under Article 4, provided, if a Change in Control occurs
prior to the expiration or termination of this Agreement, then upon a subsequent
Qualifying Termination, the Executive shall be entitled to the Severance
Benefits under Article 4, and the term of this Agreement shall be extended until
the later of the expiration of the applicable Payment Period or, if the
Executive is eligible for monthly payments pursuant to Article 4(d), the date of
the final payment thereunder.
ARTICLE 11. NOTICE: Any notice or other communication required or permitted
------
hereunder is deemed delivered when delivered in person; on the next business day
when sent by an overnight delivery service; or on the third business day when
sent by U.S. mail service, as follows:
TO RALSTON: Corporate Secretary
Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
TO THE EXECUTIVE: ________________________
________________________
________________________
ARTICLE 12. VENUE: ANY ACTION OR LEGAL PROCEEDING TO ENFORCE PAYMENT OF
-----
SEVERANCE BENEFITS UNDER ARTICLE 4 OF THIS AGREEMENT SHALL BE BROUGHT IN A
FEDERAL OR STATE COURT LOCATED WITHIN THE EASTERN DISTRICT OF MISSOURI, AND THE
PARTIES TO THIS AGREEMENT CONSENT TO THE JURISDICTION AND VENUE OF SUCH COURT.
ARTICLE 13. MISSOURI LAW TO GOVERN: This Agreement shall be governed by the
----------------------
laws of the State of Missouri without regard to its conflict of laws provisions.
ARTICLE 14. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
----------------
between the parties hereto with respect to the subject matter hereof, and
supersedes and replaces any previous management continuity agreement or any
employment contract (oral or written) between Ralston and the Executive relating
to severance payments after a Change in Control, and upon the execution of this
Agreement, both parties agree that any prior agreement or employment contract
covering severance payments (or other severance-type payments) after a Change in
Control shall be considered null and void and of no further effect.
<PAGE>
IN WITNESS WHEREOF, Ralston and the Executive have executed this Agreement
effective as of the __________ day of _______, 1999.
ATTEST: RALSTON PURINA COMPANY
Nancy E. Hamilton W. Patrick McGinnis
VP & Corporate Secretary Co-Chief Executive Officer
WITNESS:
________________________
Executive
MANAGEMENT CONTINUITY AGREEMENT
-------------------------------
MANAGEMENT CONTINUITY AGREEMENT by and between Ralston Purina Company
("Ralston"), a Missouri corporation, and ______________, (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors has authorized Ralston to enter into a
Management Continuity Agreement (the "Agreement") with certain key executives of
Ralston; and
WHEREAS, the Board of Directors believes it is imperative, in the event of an
attempted Change in Control, that key executives continue employment with
Ralston or one of its Affiliates, and that Ralston be able to receive and rely
upon the advice from such executives as to the best interests of Ralston and its
shareholders, without concern that the executives may be distracted by personal
employment uncertainties or influenced by conflicting interests; and
WHEREAS, the Executive is a key executive of Ralston and has been selected by
the Board of Directors to be offered this Agreement; and
WHEREAS, the Board of Directors believes that the payments which may be made
under this Agreement constitute additional reasonable compensation for services
to be rendered by the Executive in connection with a Change in Control;
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, Ralston and the Executive agree as follows:
ARTICLE 1. DEFINITIONS: For purposes of this Agreement, the following terms
-----------
shall have the meanings set forth below:
a. AFFILIATE: An Affiliate shall mean any Person who, directly or
indirectly or through one or more intermediaries, Controls another Person, is
Controlled by another Person, or is under common Control with another Person.
b. BASE AMOUNT: The Base Amount shall mean the "base amount" as defined and
determined pursuant to Section 280G of the Code applicable at the time of the
Executive's Qualifying Termination.
c. BASE COMPENSATION: The Base Compensation shall mean:
(i) the Executive's monthly gross salary, whether paid or deferred, 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; and
(ii) one-twelfth (1/12th) 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; and
(iii) the higher of the following:
(A) one-thirty-sixth (1/36th) of the Executive's bonus payment (base and
--
peer group award, if applicable) most recently earned, whether paid or deferred,
prior to a Change in Control under a completed Incentive Plan; or
(B) a one (1) month pro rata portion of any amounts earned by the Executive
under any of the Incentive Plans in effect at the time of the Change in Control,
calculated for the last full month preceding the Change in Control or, if
applicable, preceding the Executive's Qualifying Termination, whichever is
greater.
d. BENEFICIAL OWNERSHIP: Beneficial Ownership shall mean "beneficial
ownership" as defined in Rule 13d-3 promulgated under Section 13(d) of the
Exchange Act.
e. BOARD OF DIRECTORS: The Board of Directors shall mean the Board of
Directors of Ralston.
f. BUYER: A Person which purchased business operations and assets which
previously were conducted or owned by Ralston or its Affiliates during the term
of this Agreement.
g. CHANGE IN CONTROL: A Change in Control shall mean an occurrence set
forth in Article 2.
h. CONTROL: Control (including the terms "controlling," "controlled by" and
"under common control with") shall mean the possession of a power, directly or
indirectly, whether through ownership of securities, by contract or otherwise:
(i) to elect a majority of the Board of Directors of a Person; or
(ii) to direct the business, management and policies of a Person or direct
the sale of a substantial portion of its assets.
i. CODE: The Code shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
j. COMMON STOCK: Common Stock shall mean the $.10 par value common stock of
Ralston, and such other Ralston voting stock that may be issued in lieu of, or
in addition to, the Common Stock as a result of a merger or consolidation of
Ralston, the creation of a class or classes of tracking stock, or the
reclassification of any of the foregoing.
k. CONTINUING DIRECTOR: A Continuing Director shall mean a member of the
Board of Directors as of the date hereof, and any other director who was
appointed or nominated for election to the Board of Directors by a majority of
the Continuing Directors then in office.
l. DISABILITY: A Disability shall mean a condition where the Executive
suffers a complete inability to perform the Executive's work assignments because
of injury or sickness, and such inability is expected to continue indefinitely.
To determine Disability, Ralston shall rely on a determination with respect to
disability of the Executive made under the Purina Benefit Association Long Term
Disability Plan or any successor disability plan. If no such determination has
been made within seven (7) months after the Executive's last day worked, or if
the Executive is not enrolled in the Long Term Disability Plan, the
determination shall be made by a licensed physician jointly selected by Ralston
and the Executive. Fees and expenses of any physician, and all costs of
examinations of the Executive, shall be paid by Ralston.
m. DISCOUNT RATE: The Discount Rate shall mean the "applicable interest
rate" (and the mortality tables, if applicable) prescribed under Section
417(e)(3) of the Code at the time of the Executive's Qualifying Termination.
n. EXCHANGE ACT: The Exchange Act shall mean the Securities Exchange Act of
1934, as amended.
o. FORMER RALSTON AFFILIATE: A Person which is no longer an Affiliate of
Ralston but which owns (directly or indirectly) business operations and assets
which were conducted or owned by Ralston or a Ralston Affiliate during the term
of this Agreement.
p. INCENTIVE PLAN: An Incentive Plan shall mean any cash bonus plan with a
term of more than two (2) years but less than five (5) years, including the
1994, 1996 and 1998 Leveraged Incentive Plans and all similar plans adopted
during the term of this Agreement.
q. PARACHUTE PAYMENT: Parachute Payment shall mean a "parachute payment" as
defined and determined pursuant to Section 280G of the Code applicable at the
time of the Executive's Qualifying Termination.
r. PAYMENT PERIOD: The Payment Period shall mean the period commencing with
the first day of the month following the month in which a Qualifying Termination
occurs and continuing:
(i) for thirty-six (36) months if the Qualifying Termination occurs at any
time during the first year following the Change in Control; or
(ii) for twenty-four (24) months if the Qualifying Termination occurs at any
time during the second year following the Change in Control; or
(iii) for twelve (12) months if the Qualifying Termination occurs at any
time during the third year following the Change in Control.
s. PERSON: Person shall mean any natural person, firm, individual, company,
corporation, partnership, joint venture, joint stock company, limited liability
company, business trust, trust, association or any other business organization
or entity, whether incorporated or unincorporated.
t. QUALIFYING TERMINATION: A Qualifying Termination shall mean the
Executive's voluntary or involuntary termination of employment within three (3)
years after a Change in Control under the following circumstances:
(i) upon or after a Change in Control as described in Article 2(a) or 2(b),
the Executive's termination of employment from Ralston, its Successor, or an
Affiliate of either.
(ii) upon or after a Change in Control as described in Article 2(c), the
Executive's termination of employment from Ralston, a Former Ralston Affiliate,
a Buyer, or a Successor or Affiliate of Ralston, a Former Ralston Affiliate or a
Buyer.
Notwithstanding the foregoing, in no event shall a Qualifying Termination be
deemed to occur on account of:
(A) the Executive's transfer of employment at any time during the term of
this Agreement between any two Persons within any of the following groups of
Persons: Ralston and any of its Affiliates; or a Former Ralston Affiliate and
any of its Affiliates; or a Buyer and any of its Affiliates (and including
Successors to any of the foregoing Persons); or
(B) the Executive's being employed by a Former Ralston Affiliate or Buyer,
or any Affiliate or Successor of either of the foregoing, in connection with a
Change in Control described in Article 2(c); or
(C) the Executive's death; or
(D) after a Change in Control as described in Article 2(c), the Executive's
voluntary termination of employment with Ralston, a Former Ralston Affiliate, or
a Buyer, or any Affiliates or Successors to the foregoing, if the Executive has
Substantially the Same Employment at the time of such termination as immediately
prior to the Change in Control.
u. RETIREMENT PLAN: The Retirement Plan shall mean the Ralston Purina
Retirement Plan, as amended, or any successor retirement plan adopted by
Ralston.
v. SPIN-OFF: A Spin-off shall mean a spin-off, reverse spin-off or
similar type of transaction, including a management-led leveraged buyout,
resulting in the disposition to Ralston's shareholders, or to a management-led
leveraged buyout group, of all or substantially all of the stock and/or assets
of any business conducted by Ralston and/or its Affiliates.
w. SUBSTANTIALLY THE SAME EMPLOYMENT: Substantially the Same Employment
shall mean employment where there is:
(i) no reduction in the Executive's base salary; and
(ii) no reduction in the annual bonus award opportunity below the
performance target, for both personal and company performance, applicable to the
Executive, except to the extent alternative forms of incentive pay with
comparable compensation opportunity for the Executive are substituted for such a
reduction; and
(iii) no substantial reduction in employee pension and welfare benefits
applicable to the Executive, so that the benefit programs for which the
Executive is eligible are, in the aggregate, substantially equivalent; and
(iv) no reduction of a substantial nature in the Executive's duties or
responsibilities, or assignment of new duties inconsistent with the Executive's
skills, education and experience, other than a reduction in the Executive's
duties or responsibilities due solely to a change in the size, scope or focus of
the employer's business as a result of the Change in Control described in
Article 2(c); and
(v) no substantial reduction in the Executive's access to administrative
support services; and
(vi) no requirement that the Executive's office be located more than fifty
(50) miles from its location.
x. SUCCESSOR: A Successor shall mean the continuing, surviving or
successor Person which is created, or remains in existence, upon the merger or
consolidation of two Persons.
y. SUPPLEMENTAL PLAN: The Supplemental Plan shall mean the Ralston Purina
Supplemental Retirement Plan, as amended, or any successor supplemental
retirement plan adopted by Ralston.
ARTICLE 2. CHANGE IN CONTROL: A Change in Control will occur if there is:
-------------------
a. A change in the membership of the Board of Directors such that
Continuing Directors shall have ceased (for any reason) to constitute at least a
majority of the Board of Directors; or
b. An acquisition by any Person and its Affiliates of the Beneficial
Ownership of fifty percent (50%) or more of the then outstanding Common Stock of
Ralston (other than acquisitions by Ralston, a Ralston Affiliate, any Person
acting on behalf of Ralston as an underwriter pursuant to an offering, or any
trustee or other fiduciary holding Ralston Common Stock pursuant to the terms of
any Ralston benefit plan); or
c. A sale of all or substantially all of the battery products business of
Ralston and its Affiliates to a Person which is not an Affiliate of Ralston.
In no event shall a Spin-off, including, but not limited to, a management-led
buyout, be deemed to constitute a Change in Control.
ARTICLE 3. OPERATION OF AGREEMENT: This Agreement shall not create any
------------------------
obligation on the part of Ralston or its Affiliates, or the Executive, to
continue the Executive's employment relationship. Anything in this Agreement to
the contrary notwithstanding, the Executive shall not be entitled to Severance
Benefits, as defined below, under this Agreement unless and until there has been
a Change in Control and the Executive has had a Qualifying Termination. Except
as hereinafter provided, this Agreement shall not affect any other benefit
program (as such programs may be amended) applicable to the Executive; provided,
that, by execution of this Agreement, the Executive hereby waives any and all
claims to benefits under any termination or severance plan or similar severance
arrangement offered by Ralston or its Affiliates to all or some of their
employees during the term of this Agreement, that would otherwise be payable to
the Executive on account of, or coincident with, a Change in Control.
ARTICLE 4. SEVERANCE BENEFITS: If the Executive remains in the employ of
-------------------
Ralston or one of its Affiliates until a Change in Control has occurred, then
upon the Executive's Qualifying Termination within three (3) years after a
Change in Control, the Executive shall be entitled to the following benefits
("Severance Benefits"), subject to withholding of any federal, state or local
taxes which, in the opinion of counsel for the payor of the Severance Benefits,
are required to be withheld:
a. Payment in a lump sum in cash, within sixty (60) days of the Executive's
Qualifying Termination, of the present value, calculated using the Discount
Rate, of an income stream equal to the Executive's Base Compensation as if it
were to be paid each month throughout the applicable Payment Period; and
b. Continuation during the Payment Period of life, health, accident and
disability benefits no less favorable than those provided to the Executive under
life, health, accident and disability plans and programs in effect immediately
prior to the Change in Control, subject to all terms and conditions of such
plans immediately prior to such Change in Control including, but not limited to,
provisions regarding the extent and duration of spouse and dependent coverage,
and subject to payment of premiums, if any, charged at rates no greater than
those rates in effect immediately prior to the Change in Control; and
c. Payment in a lump sum in cash, within sixty (60) days of the Executive's
Qualifying Termination, of the present value (calculated using the Discount
Rate) of the difference as of the date of the Qualifying Termination between the
actual benefits, if any, to which the Executive, or the Executive's beneficiary,
is entitled under the Retirement Plan and the Supplemental Plan (excluding
amounts accrued in the PensionPlus Match Account in the Retirement Plan) and the
benefits, if any, under the Retirement Plan and the Supplemental Plan (excluding
amounts accrued in the aforesaid PensionPlus Match Account) which the Executive,
or the Executive's beneficiary, would have been entitled to receive if the
Executive had remained employed by Ralston or one of its Affiliates during the
applicable Payment Period at a compensation level equal to the Executive's Base
Compensation; and
d. If the Executive, at the time of the Qualifying Termination, is at least
48 years old but not yet age 55, monthly payments equal in amount to those the
Executive would be entitled to receive pursuant to the Retirement Plan and the
Supplemental Plan (excluding amounts accrued in the PensionPlus Match Account)
if paid in the form of a single life annuity. The payments shall be calculated
as if the Executive were age 55 but with years of service equal to the
Executive's "credited service" (as defined in the Retirement Plan) as of the
Qualifying Termination. Such payments shall commence upon the first day of the
month following the later to occur of the Qualifying Termination or the
attainment of age 50, and shall be paid to the Executive (or his or her
beneficiary designated under Article 6) until the date the Executive attains or
would have attained age 55. If the Executive dies without having designated a
beneficiary, amounts payable under this Article 4(d) shall be paid to the
Executive's estate in a lump sum equal to the present value of such amounts as
of the date of death, calculated using the Discount Rate.
ARTICLE 5. PARACHUTE PAYMENTS: Notwithstanding anything to the contrary
-------------------
contained in this Agreement, the Executive may elect to reduce the Severance
Benefits under Article 4 so that the present value of such Severance Benefits,
if they constitute Parachute Payments, together with the present value of all
Parachute Payments paid to the Executive, are less than three (3) times the
Employee's Base Amount. For purposes of this Article 5, present value shall be
determined by application of a discount rate equal to 120% of the applicable
Federal rate (determined under Section 1274(d) of the Code), compounded
semi-annually. Whether or not such Severance Benefits shall be reduced (and the
identity of the Severance Benefits to be reduced), and the amount by which each
Severance 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 Ralston, in accordance with Article 11 hereof, not later than
forty-five (45) days following such Executive's Qualifying Termination.
ARTICLE 6. DESIGNATED BENEFICIARY: The Executive, by notice in accordance with
----------------------
Article 11 hereof, may designate a beneficiary or contingent beneficiaries to
receive the Severance Benefits described in Article 4 in the event of the
Executive's death following the Executive's Qualifying Termination but prior to
payment in full by Ralston, its Successor or assigns. The Executive may, from
time to time, revoke or change any such designation of beneficiary. Any
designation of beneficiary made pursuant to this Agreement shall be controlling
over any other designation made by the Executive, testamentary or otherwise;
provided, that if Ralston shall be in doubt as to the right of a beneficiary to
receive payments, it may determine in its sole discretion to pay such amounts to
the legal representative of the Executive's estate.
ARTICLE 7. EARLY SEPARATION: In the event that, prior to a Change in Control,
----------------
the Executive executes a separation agreement with Ralston or any of its
Affiliates during the term of this Agreement which, by its terms, specifically
addresses issues related to the Executive's termination of employment and
benefits to be paid upon such termination, all of the Executive's rights, claims
and entitlements under this Agreement shall terminate even if, under the terms
of such separation agreement, the Executive remains employed by Ralston or one
of its Affiliates for a period of time after execution of such separation
agreement.
ARTICLE 8. SUCCESSORS AND ASSIGNS: This Agreement shall inure to the benefit
----------------------
of, and be binding upon, Ralston and its Successors. Ralston may not assign
this Agreement without the Executive's prior written consent. Ralston will
require any Person to which it assigns this Agreement to assume expressly the
Agreement and agree to perform this Agreement in the same manner and to the same
extent that Ralston would be required to perform it if no such assignment had
taken place. No assignment of this Agreement shall relieve Ralston from
liability for any of its obligations hereunder, and in the event of any such
assignment, Ralston or its Successor shall continue to remain primarily liable
for payment of the Severance Benefits promised under Article 4 and for the
performance and observance of the agreements provided herein to be performed and
observed by Ralston. The Executive shall have no right to transfer or assign the
right to receive any Severance Benefits under Article 4 of this Agreement,
except as permitted under Article 6.
ARTICLE 9. COSTS: Irrespective of the success of the Executive's claim,
-----
Ralston will reimburse the Executive, or the legal representative of the
Executive's estate, for reasonable attorney's fees and costs in the event that
the Executive brings legal action to enforce payment by Ralston, its Affiliates
or assigns, or any Successors to any of the foregoing, of the Severance Benefits
promised under Article 4 (plus interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code on payments of Severance Benefits due but
not timely made) after the Executive's Qualifying Termination. Notwithstanding
the foregoing, in the event Ralston has denied a claim for Severance Benefits on
the basis that the Executive had Substantially the Same Employment after a
Change in Control as before such Change in Control, the Executive shall not be
entitled to reimbursement of any fees and costs related to a claim by the
Executive for Severance Benefits under this Agreement.
ARTICLE 10. TERM OF AGREEMENT: This Agreement shall expire upon the earliest
-----------------
of the following to occur:
(i) five (5) years from its effective date, unless extended by the Board of
Directors on or before such expiration date;
(ii) if a determination of the Executive's Disability is made before a
Change in Control while this Agreement is in effect, the day following such
determination;
(iii) if the Executive ceases to be employed with Ralston and any of its
Affiliates prior to a Change in Control, the last day of such employment;
provided that, if the Executive and Ralston or one of its Affiliates enters into
a separation agreement as described in Article 7 while this Agreement is in
effect, the effective date of such separation agreement;
(iv) the Spin-off of all or substantially all of the battery products
business of Ralston and its Affiliates; or
(v) the voluntary transfer by the Executive of his or her employment from
the battery products business of Ralston to another business unit of Ralston.
After the expiration of this Agreement, the Executive shall have no rights to
any Severance Benefits under Article 4, provided, if a Change in Control occurs
prior to the expiration or termination of this Agreement, then upon a subsequent
Qualifying Termination, the Executive shall be entitled to the Severance
Benefits under Article 4, and the term of this Agreement shall be extended until
the later of the expiration of the applicable Payment Period or, if the
Executive is eligible for monthly payments pursuant to Article 4(d), the date of
the final payment thereunder.
ARTICLE 11. NOTICE: Any notice or other communication required or permitted
------
hereunder is deemed delivered when delivered in person; on the next business day
when sent by an overnight delivery service; or on the third business day when
sent by U.S. mail service, as follows:
<PAGE>
TO RALSTON: Corporate Secretary
Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
TO THE EXECUTIVE: ________________________
________________________
________________________
ARTICLE 12. VENUE: ANY ACTION OR LEGAL PROCEEDING TO ENFORCE PAYMENT OF
-----
SEVERANCE BENEFITS UNDER ARTICLE 4 OF THIS AGREEMENT SHALL BE BROUGHT IN A
FEDERAL OR STATE COURT LOCATED WITHIN THE EASTERN DISTRICT OF MISSOURI, AND THE
PARTIES TO THIS AGREEMENT CONSENT TO THE JURISDICTION AND VENUE OF SUCH COURT.
ARTICLE 13. MISSOURI LAW TO GOVERN: This Agreement shall be governed by the
----------------------
laws of the State of Missouri without regard to its conflict of laws provisions.
ARTICLE 14. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
----------------
between the parties hereto with respect to the subject matter hereof, and
supersedes and replaces any previous management continuity agreement or any
employment contract (oral or written) between Ralston and the Executive relating
to severance payments after a Change in Control, and upon the execution of this
Agreement, both parties agree that any prior agreement or employment contract
covering severance payments (or other severance-type payments) after a Change in
Control shall be considered null and void and of no further effect.
IN WITNESS WHEREOF, Ralston and the Executive have executed this Agreement
effective as of the __________ day of _______, 1999.
ATTEST: RALSTON PURINA COMPANY
Nancy E. Hamilton J. P. Mulcahy
VP & Corporate Secretary Co-Chief Executive Officer
WITNESS:
________________________
Executive
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 6/30/99
RALSTON PURINA COMPANY BALANCE SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 90,600
<SECURITIES> 0
<RECEIVABLES> 688,600
<ALLOWANCES> 24,600
<INVENTORY> 560,400
<CURRENT-ASSETS> 1,441,000
<PP&E> 2,187,400
<DEPRECIATION> 1,132,200
<TOTAL-ASSETS> 5,568,700
<CURRENT-LIABILITIES> 1,310,900
<BONDS> 1,599,700
0
0
<COMMON> 32,900
<OTHER-SE> 1,631,000
<TOTAL-LIABILITY-AND-EQUITY> 5,568,700
<SALES> 3,510,500
<TOTAL-REVENUES> 3,510,500
<CGS> 1,705,700
<TOTAL-COSTS> 1,705,700
<OTHER-EXPENSES> 1,177,400
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 140,400
<INCOME-PRETAX> 487,000
<INCOME-TAX> 171,600
<INCOME-CONTINUING> 341,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 341,200
<EPS-BASIC> 1.10
<EPS-DILUTED> 1.08
<FN>
<F1>LOSS-PROVISION INCLUDED IN OTHER-EXPENSES ABOVE
</FN>
</TABLE>
