-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WtUCADqH7Wih677OkfWZAilpIebte9NpuThny17a+EKrLI+hPyCmk298LK0XzWEf 7ALaEFfrXyuJH4mzPThxuQ== 0000950114-97-000371.txt : 19970815 0000950114-97-000371.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950114-97-000371 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RALCORP HOLDINGS INC /MO CENTRAL INDEX KEY: 0001029506 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 431766315 STATE OF INCORPORATION: MO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12619 FILM NUMBER: 97661301 BUSINESS ADDRESS: STREET 1: 800 MARKET STREET STREET 2: SUITE 2900 CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3148777000 MAIL ADDRESS: STREET 1: 800 MARKET STREET STREET 2: SUITE 2900 CITY: ST LOUIS STATE: MO ZIP: 63101 FORMER COMPANY: FORMER CONFORMED NAME: NEW RALCORP HOLDINGS INC DATE OF NAME CHANGE: 19961223 10-Q 1 RALCORP HOLDINGS, INC. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997. ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ------ TO -------. Commission file number: 1-12619 RALCORP HOLDINGS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Missouri 43-1766315 (State of Incorporation) (I.R.S. Employer Identification No.) 800 Market Street, Suite 2900 St. Louis, MO 63101 (Address of principal (Zip Code) executive offices) (314) 877-7000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (x) No ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock Outstanding Shares at par value $.01 per share August 11, 1997 33,011,317 2 RALCORP HOLDINGS, INC.
INDEX PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Consolidated Statement of Earnings 1 Condensed Consolidated Balance Sheet 2 Condensed Consolidated Statement of Cash Flows 3 Notes to Condensed Consolidated Financial Statements 4 Unaudited Pro Forma Combined Financial Information 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 PART II. OTHER INFORMATION Other Information 20 Exhibits and Reports on Form 8-K 20
(i) 3 PART I - FINANCIAL INFORMATION RALCORP HOLDINGS, INC. CONSOLIDATED STATEMENT OF EARNINGS (Dollars in millions except per share data)
Three Months Ended Nine Months Ended June 30, June 30, 1997 1996 1997 1996 ---- ---- ---- ---- Net Sales $140.7 $230.1 $ 595.0 $802.8 ------ ------ ------- ------ Costs and Expenses Cost of products sold 92.9 126.6 328.4 408.3 Selling, general and administrative 24.6 44.6 101.8 132.5 Advertising and promotion 15.7 58.1 125.0 189.2 Interest expense, net .2 6.8 8.1 20.2 Gain on Branded Sale - - (516.5) Restructuring charges - 20.7 23.0 20.7 Equity (earnings) loss in Vail Resorts 2.6 - (7.9) ------ ------ ------- ------ 136.0 256.8 61.9 770.9 ------ ------ ------- ------ Earnings (Loss) before Income Taxes 4.7 (26.7) 533.1 31.9 Income Taxes 1.6 (10.4) 6.5 12.3 ------ ------ ------- ------ Net Earnings (Loss) $ 3.1 $(16.3) $ 526.6 $ 19.6 ====== ====== ======= ====== Earnings (Loss) per Common Share $ .09 $ (.50) $ 15.98 $ .59 ====== ====== ======= ====== See Accompanying Notes to Condensed Financial Statements.
1 4 RALCORP HOLDINGS, INC. CONSOLIDATED BALANCE SHEET (Condensed) (Dollars in millions)
June 30, Sept. 30, 1997 1996 ---- ---- ASSETS Current Assets Cash $ 7.4 $ -- Receivables, less allowance for doubtful accounts of $1.2 and $1.0, respectively 54.3 75.5 Inventories - Raw materials and supplies 20.3 26.5 Finished products 52.9 76.8 Prepaid expenses 11.0 14.2 ------ ------ Total Current Assets 145.9 193.0 ------ ------ Investments and Other Assets 75.4 88.1 ------ ------ Deferred Income Taxes 35.9 23.4 ------ ------ Property at Cost 273.5 537.0 Accumulated depreciation 118.2 214.4 ------ ------ 155.3 322.6 ------ ------ Total $412.5 $627.1 ------ ------ LIABILITIES AND SHAREHOLDERS EQUITY Current Liabilities Current maturities of long-term debt $ -- $ 1.8 Accounts payable 31.5 54.7 Income taxes payable 2.6 Other current liabilities 44.4 45.9 ------ ------ Total Current Liabilities 78.5 102.4 ------ ------ Long-Term Debt 14.4 376.6 ------ ------ Other Liabilities 38.2 40.7 ------ ------ Shareholders' Equity Common stock .3 .3 Capital in excess of par value 109.7 130.9 Retained earnings 171.4 (0.2) Common stock in treasury, at cost (22.7) Unearned portion of restricted stock (.9) ------ ------ Total Shareholders' Equity 281.4 107.4 ------ ------ Total $412.5 $627.1 ------ ------ See Accompanying Notes to Condensed Financial Statements.
2 5 RALCORP HOLDINGS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Condensed) (Dollars in millions)
Nine Months Ended June 30, 1997 1996 ---- ---- Cash Flow from Operations Net earnings $ 526.6 $ 19.6 Restructuring charges ($23.0 less payments of $17.0) 6.0 Restructuring charge 20.7 Gain on sale of Branded Business (516.5) Non-cash items included in income 21.9 34.4 Changes in assets and liabilities used in operations 21.2 (1.2) Other, net (0.7) 7.7 ------- ------ Net cash flow from operations 58.5 81.2 ------- ------ Cash Flow from Investing Activities Acquisition of business (41.4) Property additions, net (17.9) (46.5) Other, net (3.1) (4.6) ------- ------ Net cash used by investing activities (62.4) (51.1) ------- ------ Cash Flow from Financing Activities Net proceeds from (payments on) long-term borrowings 11.3 (21.6) Repurchases of common stock (8.5) ------- ------ Net cash provided (used) by financing activities 11.3 (30.1) ------- ------ Net Increase in Cash and Cash Equivalents 7.4 - Cash and Cash Equivalents, Beginning of Year ------- ------ Cash and Cash Equivalents, End of Period $ 7.4 $ - ======= ====== See Accompanying Notes to Condensed Financial Statements.
3 6 RALCORP HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Dollars in millions except per share data) NOTE 1 - SALE TRANSACTIONS On January 3, 1997, the United States Department of Justice approved the sale of Ralcorp's ski resort holdings to Vail Resorts, Inc. Effective on this date, the sale transaction, pending since first announced in July 1996, was closed. Ralcorp sold its three Colorado ski resort properties of Keystone, Breckenridge and Arapahoe Basin to Vail Resorts, Inc. in exchange for the assumption of $165 million in Ralcorp debt and a 22.7% post-IPO equity interest in the combined Vail Resorts. Vail stock began trading on the New York Stock Exchange on February 4, 1997. On January 31, 1997, the original Ralcorp Holdings, Inc. (Old Ralcorp) was merged with a subsidiary of General Mills, Inc. (the Merger). Immediately prior to the Merger, Old Ralcorp spun-off its private label cereal, branded baby food and private label cracker and cookie businesses and its ownership interest in Vail (the Spin-Off) by distributing one share of New Ralcorp Holdings, Inc. Common Stock for each share of Old Ralcorp Common Stock owned as of the close of business on January 31, 1997. Immediately prior to the Spin-Off, New Ralcorp Holdings, Inc. (Ralcorp) changed its name to Ralcorp Holdings, Inc. and in the Merger, Old Ralcorp changed its name to General Mills Missouri, Inc. This completed the $570 transaction with General Mills that was first announced in August 1996. The $570 value was reached by General Mills assuming $215 in Ralcorp debt and funding the remaining $355 through the distribution of General Mills stock to Ralcorp shareholders of record on January 31, 1997. For financial reporting purposes, Ralcorp is a "successor registrant" to Old Ralcorp and, as such, the accompanying Ralcorp financial statements represent the historical financial position and results of operations of Old Ralcorp, for periods prior to January 31, 1997, and Ralcorp, for subsequent periods. Therefore, references to the "Company", for periods prior to January 31, 1997, are references to Old Ralcorp, without giving effect to the Merger or the Spin-Off. NOTE 2 - PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited historical financial statements of the Company have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read in connection with the financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended September 30, 1996. 4 7 RALCORP HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Dollars in millions except per share data) NOTE 3 - GAIN ON SALE OF THE BRANDED BUSINESS Subsequent to the Merger, the Company has recorded a $516.5 tax-free gain related to the sale of its branded cereal and snack business (Branded Business) to General Mills, Inc. on January 31, 1997. This is, however, only a preliminary amount as certain provisions contained in the sale contract with General Mills have yet to be finalized. It is expected that all outstanding issues will be addressed by the end of the Company's current fiscal year, at which time the final gain on sale amount can be recorded. NOTE 4 - SALE OF RESORT OPERATIONS In accordance with Accounting Principles Board Opinion No. 29 - "Accounting for Nonmonetary Transactions" (APB 29), the Resort Operations sale transaction with Vail Resorts, Inc. has been treated as a nonmonetary exchange. The assumption of debt and the issuance of equity qualifies this transaction as being nonmonetary in nature. Therefore, by meeting the provisions of APB 29, the initial equity investment in Vail has been recorded at Ralcorp's net book value of assets contributed, or $40.2. This initial equity investment is then increased by the pre-tax amount of the Company's equity interest in the earnings of Vail, which through June 30, 1997 was $7.9. Included as a component of the Company's equity earnings is approximately $1.0 of amortization income. This amortization income is the result of the basis difference between the net book value of the net assets contributed to Vail and the Company's 22.7% equity interest in the Vail net assets. The basis difference, which can not be finalized until all appropriate purchase price allocations have taken place, is being amortized over twenty years. NOTE 5 - ACQUISITION On April 21, 1997, the Company completed the purchase of the Wortz Company, a private label cracker and cookie operation. Wortz, which will be operated as part of the Company's Bremner operation, is headquartered in Poteau, OK, and had sales in its latest fiscal year of approximately $65. The acquisition was financed by a combination of available cash and debt under the Company's credit facility and accounted for using the purchase method of accounting, whereby, the results of operations are included in the consolidated statement of earnings from the date of acquisition. The cost of this acquisition was approximately $41.4. Several post- closing issues relative to this acquistion remain unresolved and resolution of the issues may lead to minor purchase price adjustments. The Company's management expects to have all outstanding issues completed by the end of the current fiscal year. The required purchase price allocations will be finalized upon determination of the final purchase price. Goodwill associated with this acquisition has been estimated based on the current status of the transaction and is included on the "Investments and Other Assets" line of the accompanying Consolidated Balance Sheet at June 30, 1997. 5 8 RALCORP HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Dollars in millions except per share data) NOTE 6 - RESTRUCTURING CHARGES During the quarter ended March 31, 1997, the Company recorded a pre-tax restructuring charge of $18.4 ($11.6 after taxes or $.35 per common share) to cover costs associated with the sale of the Company's Branded Business, including severance payments to employees whose jobs were eliminated and financial penalties related to the early termination of information systems contracts. The level of systems support included in these contracts was no longer warranted after the Branded Business sale. In the quarter ended December 31, 1996, the Company recorded a pre-tax restructuring charge of $4.6 ($2.9 after taxes or $.09 per common share). This charge covered severance costs for certain employees whose jobs were eliminated in downsizing initiatives. During the quarter ended June 30, 1996, the Company recorded a pre-tax charge of $20.7 ($12.7 after taxes or $.39 per common share) to recognize the costs related to restructuring its ready-to-eat cereal business. As a result of this restructuring plan, certain positions were eliminated from the Ralston Foods subsidiary and corporate support groups, primarily at the Company's headquarters in St. Louis, MO. In addition, the restructuring plan included the partial closing of the Ralston Foods production facility in Battle Creek, MI. The restructuring charges and their utilization are summarized in the following table.
Nine months Utilized in FY 1996 Utilized in FY 1997 Nine months Balance of Charges FY 1996 Charges FY 1997 Reserve ----------- ----------- ----------- ----------- ---------- Salaries, severance and benefits $ 8.0 $ (5.0) $10.6 $(10.9) $2.7 Asset writedowns 7.3 (7.3) 3.2 (1.8) 1.4 Contract penalties 6.2 (6.2) - Other 1.2 (.5) 3.0 (.5) 3.2 --------------------------------------------------------- Total restructuring charge $16.5 $(12.8) $23.0 $(19.4) $7.3 ========================================================= Total restructuring charge of $16.5 reflects the $4.2 fourth quarter fiscal 1996 adjustment to the $20.7 third quarter fiscal 1996 charge referred to above.
NOTE 7 - EARNINGS PER SHARE Earnings per common share for the quarter and nine month periods ended June 30, 1997 and 1996 are computed by using the weighted average number of shares of Ralcorp Common Stock outstanding for the periods then ended. Earnings per common share is computed independently for all of the periods presented, therefore, the sum of earnings per common share amounts for the quarters may not total the year-to-date. The weighted average numbers of common shares used for all periods are as follows: 6 9 RALCORP HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Dollars in millions except per share data) Quarter ended June 30, 1997.............................33,011,000 Quarter ended June 30, 1996.............................32,933,000 Nine months Ended June 30, 1997.........................32,962,000 Nine months Ended June 30, 1996.........................33,022,000
Actual outstanding shares of Ralcorp Common Stock at June 30, 1997 were 33,011,000. NOTE 8 - RECEIVABLES Consists of the following:
June 30, Sept. 30, 1997 1996 -------- --------- Trade receivables $42.0 $63.3 Other 13.5 13.2 Allowance for doubtful accounts (1.2) (1.0) ----- ----- $54.3 $75.5 ===== =====
NOTE 9 - INVESTMENTS AND OTHER ASSETS Consists of the following:
June 30, Sept. 30, 1997 1996 -------- --------- Intangible assets $26.2 $43.2 Property held for development - 12.4 Investments in affiliated companies 48.1 29.1 Deferred charges and other assets 1.1 3.4 ----- ----- $75.4 $88.1 ===== =====
NOTE 10 - OTHER CURRENT LIABILITIES consists of the following:
June 30, Sept. 30, 1997 1996 -------- --------- Accrued advertising and promotion $15.0 $ 9.6 Restructuring and shutdown reserves 10.2 7.6 Other items 19.2 28.7 ----- ----- $44.4 $45.9 ===== =====
7 10 RALCORP HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Dollars in millions except per share data) NOTE 11 - CHANGE IN SHAREHOLDERS' EQUITY
Common Stock in Treasury, Unearned Common Stock Capital in at Cost Portion of ---------------- Excess of ------------------- Retained Restricted Shares Amount Par Value Shares Amount Earnings Stock ------ ------ --------- ------ ------ -------- ----- BALANCE, SEPT. 30, 1996 33,925 $.3 $130.9 (1,008) $(22.7) $ (.2) $(.9) Net earnings 526.6 Activity under stock plans (52) (1.1) 146 2.6 Amortization of restricted stock .1 Accelerated vesting of restricted stock .8 Distribution of GMI Stock (355.0) Retire treasury stock (862) (20.1) 862 20.1 ---------------------------------------------------------------------------- BALANCE, JUNE 30, 1997 33,011 $.3 $109.7 - $ - $ 171.4 $ - ============================================================================
NOTE 12 - LONG-TERM DEBT As of June 30, 1997, the Company had $14.4 of outstanding long-term debt remaining on its Consolidated Balance Sheet. Original proceeds of this debt issuance were used primarily to help fund the purchase of the Wortz Company, see "Note 5 - Acquisition". As discussed in "Note 1 - Sale Transactions" of this Form 10-Q, terms of the respective individual sale agreements provided that Vail Resorts, Inc. assume $165 of Company debt as partial consideration for the Company's ski resort operations and General Mills, Inc. assume the balance of outstanding Company debt as partial consideration for the Company's branded cereal and snack business. 8 11 RALCORP HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Dollars in millions except per share data) At June 30, 1997 and September 30, 1996, long-term debt associated with the Company's businesses consisted of the following:
June 30, Sept. 30, 1997 1996 -------- --------- 8.75% Notes due 2004 $150.0 Bank Credit Agreements $14.4 200.1 10.85% and 11.15% Notes due 9/30/97 and 9/30/98 3.0 Refunding Revenue Bonds Series 90 7.20%-7.875% due 9/2/98, 9/1/06 and 9/1/08 20.4 Refunding Revenue Bonds Series 91 7.125%-7.375% due 9/1/02 and 9/1/10 3.0 Other 1.9 ----- ------ 14.4 378.4 Less Current Portion (1.8) ----- ------ $14.4 $376.6 ===== ======
Included in the Bank Credit Agreements line item, at September 30, 1996, is $140.0 of bank debt that had been borrowed directly by the Company's Resort Operations and fully guaranteed by the Company. The Company has a $50 working capital credit facility. The proceeds of the facility may be used to fund Ralcorp's working capital needs, capital expenditures, and other general corporate purposes. Provisions of the $50 credit facility require the Company to maintain certain financial ratios and a minimum level of shareholders' equity. 9 12 RALCORP HOLDINGS, INC. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION Ralcorp was organized for the purpose of effecting the Spin-Off and the Merger and has operated as an independent company only since January 31, 1997. The Ralcorp historical financial statements presented in the "Ralcorp Historical" column of the unaudited pro forma combined statement of earnings for the nine months ended June 30, 1997, reflects four months, October 1, 1996 through January 31, 1997, during which the various spun-off businesses operated as divisions or subsidiaries of Old Ralcorp. Likewise, the "Ralcorp Historical" column of the unaudited pro forma combined statement of earnings for the year ended September 30, 1996 reflects an entire year during which the various spun-off businesses were divisions or subsidiaries of Old Ralcorp. These historical financial statements include the results of operations of the branded cereal and snack businesses (the Branded Business), which Ralcorp sold to General Mills on January 31, 1997 and the Resort Operations, which Ralcorp sold to Vail Resorts, Inc. on January 3, 1997. Therefore, the historical financial statements do not reflect the combined results of operations that would have existed had Ralcorp been an independent company. Since Ralcorp did not operate independently during the entire periods shown, the unaudited pro forma information may not necessarily reflect future results of operations or what the results of operations would have been had the formation of Ralcorp and its related businesses occurred at the beginning of the periods shown. The pro forma combined statement of earnings for the nine months ended June 30, 1997 presents the combined results of Ralcorp's operations assuming that the sale of the Branded Business and the sale of the Resort Operations had occurred as of October 1, 1996. The pro forma combined statement of earnings for the year ended September 30, 1996 presents the combined results of Ralcorp's operations assuming that both sale transactions had occurred as of October 1, 1995. Both statements of earnings have been prepared by adjusting the historical statements of earnings for the effect of costs and expenses and the recapitalization which might have occurred had the Spin-Off and the sale of the Resort Operations occurred at the beginning of each respective period. The "Branded Business" and "Resort Operations" columns in the pro forma combined statements of earnings represent the combined historical results of operations of the Branded Business and the consolidated historical results of operations of the Resort Operations, respectively. Please read the Notes to the Unaudited Pro Forma Combined Financial Information for a discussion of adjustments made to the historical financial information in order to calculate the Ralcorp pro forma financial information. 10 13 RALCORP HOLDINGS, INC. PRO FORMA COMBINED STATEMENT OF EARNINGS Nine Months Ended June 30, 1997
Pro Forma Adjustments Ralcorp Branded Resort ------------------- Pro Forma Historical Business Operations Debit Credit Ralcorp ---------- -------- ---------- ----- ------ --------- Net Sales $ 595.0 $(172.5) $(33.1) $389.4 ------- ------- ------ ------ Costs and Expenses Cost of products sold 328.4 (43.4) (27.5) 1.4 258.9 Selling, general and administrative 101.8 (20.9) (3.5) 6.1 3.3 80.2 Advertising and promotion 125.0 (78.1) (1.8) 45.1 Gain on Branded Sale (516.5) 516.5 - Equity earnings in Vail Resorts (7.9) 2.3 (10.2) Interest expense, net 8.1 (1.4) (2.8) 4.0 (.1) Restructuring charge 23.0 - 18.4 4.6 ------- ------- ------ ------- ------ ------ 61.9 (143.8) (35.6) 524.0 28.0 378.5 ------- ------- ------ ------- ------ ------ Earnings before Income Taxes 533.1 (28.7) 2.5 (524.0) (28.0) 10.9 Income Taxes 6.5 (11.2) 1.0 (7.7) 4.0 ------- ------- ------ ------- ------ ------ Net Earnings $ 526.6 $ (17.5) $ 1.5 $(524.0) $(20.3) $ 6.9 ------- ------- ------ ------- ------ ------ Earnings per common share $ 15.98 $ .21 ------- ------ Outstanding shares of common stock 33.0 33.0 ------- ------
11 14 RALCORP HOLDINGS, INC. PRO FORMA COMBINED STATEMENT OF EARNINGS (in millions except per share data) Year Ended September 30, 1996
Pro Forma Adjustments Ralcorp Branded Resort ------------------- Pro Forma Historical Business Operations Debit Credit Ralcorp ---------- -------- ---------- ----- ------ ------- Net Sales $1,027.4 $(386.7) $(135.4) $ 505.3 -------- ------- ------- ------- Costs and Expenses Cost of products sold 536.8 (114.1) (91.7) 5.7 336.7 Selling, general and administrative 177.6 (52.5) (14.6) 15.3 125.8 Advertising and promotion 233.3 (162.5) (6.1) 64.7 Equity earnings in Vail Resorts 4.5 (4.5) Interest expense 26.8 (4.2) (10.5) 11.1 1.0 Nonrecurring charge 109.5 109.5 Restructuring charge 16.5 (2.5) 14.0 -------- ------- ------- ------ ------ ------- 1,100.5 (335.8) (122.9) 21.0 15.6 647.2 -------- ------- ------- ------ ------ ------- Earnings before Income Taxes (73.1) (50.9) (12.5) (21.0) (15.6) (141.9) Income Taxes (26.3) (19.3) (5.3) 2.1 (53.0) -------- ------- ------- ------ ------ ------- Net Earnings $ (46.8) $ (31.6) $ (7.2) $(21.0) $(17.7) $ (88.9) -------- ------- ------- ------ ------ ------- Earnings per common share $ (1.42) $ (2.69) -------- ------- Outstanding shares of common stock 33.0 33.0 -------- ------- 12 15 RALCORP HOLDINGS, INC. Notes to Unaudited Pro Forma Combined Financial Information To reflect the fixed costs (i.e., fixed manufacturing, information systems, general administrative and corporate overhead) included in the combined historical results of operations of the Branded Business that will be absorbed by Ralcorp with the sale of the Branded Business. To reflect Ralcorp's equity earnings in Vail Resorts. The equity earnings include $1.0 million for the nine months ended June 30, 1997, and $1.9 million for the fiscal year ended September 30, 1996, of amortization income. The amortization income is the result of the basis difference between the net book value of the Resort Operations' net assets contributed to Vail Resorts and Ralcorp's approximate 22.7% equity interest in Vail Resorts' net assets. This basis difference is being amortized ratably over 20 years. To reduce interest expense due to General Mills assuming $215.0 million of Ralcorp debt upon the sale of the Branded Business. Interest income shown of $.1 million for the nine months ended June 30, 1997, reflects residual interest earned on short term investments, net of interest expense. Residual interest expense shown of $1.0 million for the fiscal year ended September 30, 1996, is related to estimated revolving credit facility debt needed to finance working capital. To reflect the tax effect of the pro forma adjustments shown at an effective rate of 38%. The weighted average number of shares used to compute Ralcorp earnings per share is based on the weighted average number of Ralcorp common shares outstanding during the nine months ended June 30, 1997 and during the fiscal year ended September 30, 1996. To eliminate the tax-free gain on sale of the Branded Business reflected in the historical statement of earnings. To eliminate certain expenses incurred directly as a result of the two sales transactions. To eliminate the amount of the fiscal 1997 second quarter restructuring charge that was specifically related to the sale of the Branded Business.
13 16 RALCORP HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For financial reporting purposes, Ralcorp is a "successor registrant" to the Ralcorp Holdings, Inc. that was acquired by General Mills, Inc. on January 31, 1997 (Old Ralcorp) and, as such, all financial information of Ralcorp included in this discussion and the accompanying financial statements represent the historical financial information of Old Ralcorp, for periods prior to January 31, 1997, and Ralcorp, for subsequent periods. Therefore, references to the "Company", as they relate to financial information for periods prior to January 31, 1997, are references to Old Ralcorp. HIGHLIGHTS The Company's fiscal third quarter ended June 30, 1997, represents its first full quarter of operation since the sale of the branded cereal and snack business (Branded Business) and ski resort operations. For the quarter ended June 30, 1997, sales and net earnings, were $140.7 million and $3.1 million compared to $230.1 million and a net loss of $3.6 million for the same prior year period, which excludes a $20.7 million charge ($12.7 million or $.39 after taxes) related to restructuring of the Company's cereal operations. Earnings per share were $.09 for the three months ended June 30, 1997 compared to an $.11 loss per share in the prior year's third quarter, again excluding the previously mentioned restructuring charge. Through the nine months ended June 30, 1997 the Company recorded two pre-tax restructuring charges totaling $23.0 million ($14.5 million after-tax or $.44 per share). The first of these charges, taken during the quarter ended December 31, 1996, was for $4.6 million, pre-tax, and related to the severance packages received by certain separated employees. The remaining pre-tax charge of $18.4 million recorded in the quarter ended March 31, 1997 covered costs associated with the sale of the Company's Branded Business on January 31, 1997, including severance payments to employees whose jobs were eliminated and certain penalties related to the early termination of information systems contracts. Also, in the second quarter of fiscal 1997, the Company recorded a tax-free gain of $516.5 million or $15.67 per share for the initial nine months of fiscal 1997 related to the sale of its Branded Business to General Mills, Inc. For the nine months of fiscal 1997 ended June 30, 1997, the Company recorded sales of $595.0 million and net earnings and earnings per share of $24.6 million and $.75, respectively, excluding the first and second quarter fiscal 1997 restructuring charges and tax-free gain on sale of the Branded Business. For the nine-month period ended June 30, 1996, the Company had sales, net earnings and earnings per share of $802.8 million, $32.3 million and $.98, respectively, excluding the previously mentioned third quarter fiscal 1996 charge. For comparison purposes, however, it must be noted that the nine month period of the current fiscal year includes only four months of results from the Branded Business and three months and three days of Ralston Resorts operations, while the same period of the prior fiscal year includes nine months of results for both operations. 14 17 Including all restructuring charges and the gain on sale as they apply to particular nine month periods, net earnings and earnings per share were $526.6 million and $15.98, respectively, for the nine months ended June 30, 1997, compared to $19.6 million and $.59 per share for the same prior year period. The Unaudited Pro Forma Combined Financial Information included elsewhere in this document, reflects the pro forma results of operations of the Ralcorp businesses assuming the sales of the Company's Branded Business and Resort Operations were completed as of the beginning of the periods presented, for combined statements of earnings purposes. The sale of Resort Operations to Vail Resorts, Inc. was completed on January 3, 1997 and the sale of the Branded Business to General Mills, Inc. was completed on January 31, 1997. On a pro forma basis, excluding the restructuring charge taken in the first quarter of fiscal 1997, sales, net earnings and earnings per share for the nine months ended June 30, 1997 were $389.4 million, $9.8 million and $.30, respectively. On a pro forma basis, including the first quarter fiscal 1997 restructuring charge, operations for the nine months ended June 30, 1997 resulted in net earnings of $6.9 million, or $.21 per share. The unaudited pro forma information may not necessarily reflect future results of operations or what the results of operations would have been had the formation of Ralcorp and its related businesses occurred at the beginning of the periods shown. DISCUSSION OF BUSINESSES With the sale of its Resort Operations on January 3, 1997 to Vail Resorts, Inc., the Company operates solely in the Consumer Foods segment, while maintaining an equity interest in Vail Resorts, Inc. CONSUMER FOODS Comparisons of operating results in the Consumer Foods segment on a historical basis are complicated by the fact that the operations of the Company's Branded Business are included only through January 31, 1997, the date of the Branded Business sale to General Mills. Consumer Foods sales of $140.7 million for the third quarter of fiscal 1997 represents a decrease of 33.8% or $71.8 million when comparing to the third quarter of fiscal 1996. Sales in the Consumer Foods segment for the nine months ended June 30, 1997 fell $119.4 million, or 17.5%, to $561.9 million compared to the nine months ended June 30, 1996. These period to period declines were primarily due to the inclusion of the Branded Business results of operations only through January 1997. For the current fiscal year's third quarter, the cereal subsidiary's first as a private label only operation, private label volume increased two percent over volume levels for the same prior year period. This volume improvement marks the first such improvement experienced by the Company's private label cereal business in over one year. Beech-Nut baby food sales improved on a quarter-to-quarter basis due to favorable volume increases and the benefit realized from slightly higher pricing. A key component to the increase in volume was the grocery trade's accelerated buy-in of baby food product ahead of a planned price increase on July 1, 1997. The third fiscal quarter ended June 30, 1997, represented the second best sales quarter in Beech-Nut's history. For the comparative nine-month periods baby food sales were up slightly due primarily to favorable pricing related to a price increase, taken earlier in the fiscal year, and higher volume. 15 18 Bremner cracker and cookie sales continued to post favorable increases in both the quarter and nine-month periods of the current fiscal year compared to the same periods of the prior year on favorable volume growth and an improved product mix. Bremner cracker and cookie sales also benefited from the addition of the Wortz Company's (Wortz) cracker and cookie business. Those operations were folded into Bremner effective with the Wortz acquisition on April 21, 1997. Consumer Foods operating profit, for the current quarter ended June 30, 1997, improved $1.3 million compared to the same quarter of the prior fiscal year, excluding the third quarter fiscal 1996 restructuring charge. This operating profit improvement in the quarter is primarily due to significant increases by the Bremner and Beech-Nut operations. Bremner continued to experience strong volume gains and also benefited from a more favorable product mix. The inclusion of approximately two months of activity of the Wortz Company was also additive to Bremner's overall operating profit. Beech-Nut baby food recorded positive volume gains, aided by the grocery trade's product buy-in, partially offset by increased advertising and promotion spending in defense of its market position. For the nine months, Consumer Foods operating profit, excluding the $23.0 million pre-tax restructuring charges, increased $4.2 million. Again, the prior year comparative operating profit excludes the third quarter pre-tax restructuring charge. This operating profit increase was due primarily to the improved performance of the branded cereal and snack business and the cost reductions in the private label cereal operations that have been implemented to date. Operating profit of the Bremner cracker and cookie operation increased significantly between nine-month periods as favorable product mix and improved volumes were partially offset by higher costs. Also, as with the quarter-to-quarter increase, Bremner operating profit benefited from the addition of Wortz. Beech-Nut baby food operating profit for the first nine months of fiscal 1997 was down slightly compared to the prior year, as the benefit of improved pricing was unable to completely offset higher advertising and promotion spending and increased ingredient costs. EQUITY EARNINGS IN VAIL RESORTS, INC. On January 3, 1997, Ralcorp sold its three ski resort operations to Vail Resorts, Inc. in exchange for the assumption of $165 million in Ralcorp debt and a 22.7% post-IPO equity interest in the combined Vail Resorts. Through this transaction, the Company directly holds 7.55 million shares of Vail Resorts, Inc. stock. As a result of its 22.7% ownership interest in Vail, Ralcorp recorded in the third quarter of fiscal 1997, a $2.6 million pre-tax equity loss, or a $.05 per share loss after taxes. On a year-to-date basis, the Company's equity interest in Vail Resorts has contributed $7.9 million of pre-tax equity earnings, or $.15 per share, after taxes. Typically, the Company will record more than 100 percent of its annual equity earnings related to Vail in the second fiscal quarter, which comprises the popular ski months of January through March. 16 19 RESULTS OF OPERATIONS Cost of products sold as a percentage of sales was 66.0% for the current year third quarter compared to 55.0% for the same quarter of the prior year, and for the nine months ended June 30, 1997, increased to 55.2% of sales from 50.9% in the same prior year period. Selling, general and administrative expense as a percent of sales decreased to 17.5% for the current year quarter compared to 19.4% for the same quarter of the prior year and was basically flat in a comparison of nine month periods. The decline in selling, general and administrative expense as a percent of sales on a quarter-to-quarter comparison, as well as the flat comparison between nine month periods, are both indications of how the Company has been able to remove significant portions of a cost structure, namely information systems, that was historically in place to support a larger corporation. The increase in costs of products sold as a percentage of sales, however, reflects the fact that many of the Company's higher margin products were eliminated through the sale of the Branded Business. Advertising and promotion expense as a percentage of sales has declined significantly in a quarter-to-quarter comparison, reflecting the reduced level of advertising and promotional support necessary for a primarily private label company. Income taxes were 38.5% of pre-tax earnings, before restructuring charges and equity earnings, in the first nine months of the current year, which represents a slight decline from 38.7% for the same period one year ago. FINANCIAL CONDITION The Company's primary source of liquidity is cash flow from operations, which decreased to $58.5 million for the nine months ended June 30, 1997 compared to $81.2 million for the same period in the prior year, primarily due to the reduced level of earnings before non-cash items such as depreciation, amortization, non-cash portions of restructuring reserves and the tax-free gain on sale of the Branded Business. The elimination of two earnings streams through the sales transactions completed in the current year's second quarter contributed to the decline in net earnings. Partially offsetting the earnings decrease, was the favorable cash flow impact of reduced operating assets, primarily inventories and accounts receivable. Net working capital, excluding cash and current maturities of long-term debt, was $60.0 million at June 30, 1997 compared to $92.4 million at September 30, 1996. On April 21, 1997, Ralcorp acquired the Wortz Company, a private label cracker and cookie operation headquartered in Poteau, OK, for approximately $41.4 million. Several post-closing issues relative to this acquisition remain unresolved and resolution of the issues may lead to minor purchase price adjustments. Company management expects to have all outstanding issues finalized by the end of the current fiscal year. Property additions decreased to $17.9 million for the first nine months of fiscal 1997 compared to $46.5 million in the prior year nine month period. During the nine month period ended June 30, 1996 the Company repurchased $8.5 million of its Common Stock. The Company transacted no stock repurchases during the same period of fiscal 1997. As a result of the Branded Business and Resort Operations sales in January 1997, Ralcorp emerged debt free. At June 30, 1997, however, the Company had $14.4 million of outstanding debt, the proceeds of which were used as partial consideration for the purchase of the Wortz Company, compared to total debt of $378.4 million at September 30, 1996. 17 20 ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board issued two new Statements of Financial Accounting Standards. The first, Statement of Financial Accounting Standards No. 130 - "Reporting Comprehensive Income" (FAS 130), establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. FAS 130 is effective for fiscal years beginning after December 15, 1997 and any reclassification of financial statements for earlier periods provided for comparative purposes is required. Also issued in June 1997 was Statement of Financial Accounting Standards No. 131 - "Disclosures about Segments of an Enterprise and Related Information" (FAS 131), which establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. FAS 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers. FAS 131 is effective for financial statements for periods beginning after December 15, 1997. Company management is in the process of evaluating what impact, if any, FAS 130 and FAS 131 will have on its consolidated financial statements. OUTLOOK Ralcorp continues to operate in the competitive environment that exists in the ready-to-eat cereal category. To be successful, Ralcorp must maintain an effective price gap between its private label cereal products and those products of top branded cereal competitors. Ralcorp management has, to date, been somewhat successful at removing excess costs from its cereal operations in order to attain a cost basis that will allow it to maintain an adequate price gap and still provide a quality alternative to branded cereals. It is management's intention to continue to focus on cost elimination where appropriate. In the third fiscal quarter, Ralcorp's cereal subsidiary posted an operating profit, further demonstrating the success of its cost cutting plan to date. Despite the return to profitability, it must be cautioned that this does not guarantee consistent future profitability. In baby foods, Beech-Nut recorded its second most profitable quarter in its history. The grocery trade buy-in of product ahead of Beech-Nut's July 1, 1997 price increase influenced a portion of that success and is likely to have a conversely negative effect on fourth quarter results. Significant competitive pressures in the category and a continuing decline in the United States birth rate are important concerns for the management of Beech-Nut. Beech-Nut continues to focus on the production of high quality products, maintaining its presence in key regional markets and emphasizing cost reductions and controls. With regard to the Bremner cracker and cookie business, the addition of the Wortz Company, acquired on April 21, 1997, had an immediate and positive effect on sales, operating profit and customer base. The existing Bremner business continued to achieve good results for the recently completed quarter on improved volume, sales and product mix. Despite the present positive performance and favorable results from the Wortz acquisition, Bremner still faces significant competition from large branded and regional private label producers. 18 21 Company management realizes that in addition to improved operations and enhanced efficiencies, a key growth opportunity may exist through strategic acquisitions. The recently completed transaction with the Wortz Company serves as an example. It is management's intention to explore those acquisition opportunities that strategically fit with the Company's current mix of businesses. Ralcorp's low level of outstanding debt provides the Company with greater flexibility to act upon any such opportunities. RALCORP LIQUIDITY To meet its on-going working capital needs Ralcorp has a $50 million working capital credit facility. The proceeds of the facility may be used to fund Ralcorp's working capital needs, capital expenditures, and other general corporate purposes. Provisions of the $50 million credit facility require Ralcorp to maintain certain financial ratios and a minimum level of shareholders' equity. Management believes that Ralcorp will be able to generate positive operating cash flows through its mix of businesses and expects that future liquidity requirements will be met through a combination of existing cash balances, operating cash flow and, as necessary, use of borrowings available under its working capital credit facility. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis. The Company's results of operations and liquidity status may differ materially from those in the forward-looking statements. Such statements are based on management's current views and assumptions, and involve risks and uncertainties that could affect expected results. For example any of the following factors cumulatively or individually may impact expected results: (i) If the Company is unable to maintain a meaningful price gap between its private label cereal products and the branded products of its competitors, then the Company's cereal business could incur significant operating losses; (ii) If the Company's cereal business incurs losses more than offsetting the combined profits of its other businesses and equity earnings from the Vail investment, then the Company will be unable to borrow under its credit facility and the repayment of outstanding borrowings, if any, at that time could be accelerated by the lenders; (iii) In light of its significant ownership in Vail Resorts, Inc., the Company's non-cash earnings can be adversely affected by Vail's unfavorable performance; and (iv) The Company's businesses compete in mature segments with competitors having large percentages of segment sales. The Company's profit growth depends largely on the ability to successfully introduce new products and aggressively manage costs across all parts of the Company. Item 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 19 22 PART II. OTHER INFORMATION There is no information required to be reported under any items except those indicated below. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4 First Amendment to Rights Agreement 10.1 Form of 1997 Non-Qualified Stock Option Agreement 10.2 Form of 1997 Non-Qualified Stock Option Agreement for Non-Management Directors 10.3 Form of Management Continuity Agreement 10.4 Employment Agreement for J. R. Micheletto 10.5 Employment Agreement for K. J. Hunt 10.6 Employment Agreement for R. W. Lockwood 10.7 Employment Agreement for J. A. Nichols 10.8 Employment Agreement for D. P. Skarie 27 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RALCORP HOLDINGS, INC. By: /s/ T. G. Granneman -------------------------------- Duly Authorized Signatory and Chief Accounting Officer August 14, 1997 20 23 EXHIBIT INDEX
Exhibit Numbers ------- 4 First Amendment to Rights Agreement 10.1 Form of 1997 Non-Qualified Stock Option Agreement 10.2 Form of 1997 Non-Qualified Stock Option Agreement for Non-Management Directors 10.3 Form of Management Continuity Agreement 10.4 Employment Agreement for J. R. Micheletto 10.5 Employment Agreement for K. J. Hunt 10.6 Employment Agreement for R. W. Lockwood 10.7 Employment Agreement for J. A. Nichols 10.8 Employment Agreement for D. P. Skarie 27 Financial Data Schedule
21 EX-4 2 FIRST AMENDMENT TO RIGHTS AGREEMENT 1 EXHIBIT 4 FIRST AMENDMENT TO RIGHTS AGREEMENT ----------------------------------- This First Amendment, dated as of July 1, 1997, (the "Amendment") is by and among Ralcorp Holdings, Inc. (the "Company"), a corporation organized under the laws of the State of Missouri, Boatmen's Trust Company, a corporation organized under the laws of the State of Missouri ("Boatmen's Trust"), and First Chicago Trust Company of New York, a corporation organized under the laws of the State of New York ("First Chicago") and amends the Rights Agreement dated as of December 27, 1996, (the "Rights Agreement") between the Company and Boatmen's Trust. WHEREAS, the Company and Boatmen's Trust are currently parties to the Rights Agreement, pursuant to which Boatmen's Trust serves as Rights Agent; WHEREAS, the Company intends to appoint First Chicago to succeed Boatmen's Trust as Rights Agent, and Boatmen's Trust intends to resign as Rights Agent; and WHEREAS, First Chicago wishes to accept the appointment as successor Rights Agent and the parties hereto wish to make certain changes to the Rights Agreement to facilitate this succession. NOW, THEREFORE, the Company, Boatmen's Trust and First Chicago agree as follows: 1. REMOVAL OF BOATMEN'S TRUST AS RIGHTS AGENT. Pursuant to ------------------------------------------ Section 21 of the Rights Agreement, the Company does hereby remove and Boatmen's Trust hereby acknowledges that it has been notified of its removal as Rights Agent under the Rights Agreement, such removal to be effective as of 12:01 a.m., eastern daylight time, August 1, 1997. 2. APPOINTMENT OF FIRST CHICAGO AS SUCCESSOR RIGHTS AGENT. ------------------------------------------------------ The Company hereby appoints First Chicago as successor Rights Agent under the Rights Agreement, effective as of 12:01 a.m., eastern daylight time, August 1, 1997, and First Chicago hereby accepts such appointment, subject to all the terms and conditions of the Rights Agreement as amended hereby. 3. AMENDMENTS TO RIGHTS AGREEMENT. The parties hereto agree ------------------------------ that the Rights Agreement shall be amended as provided below, effective as of the date of this Agreement except as may otherwise be provided below: (a) From and after the time that the appointment of First Chicago as successor Rights Agent is effective all references in the Rights Agreement (including all exhibits thereto) to Boatmen's Trust as Rights Agent shall be deemed to refer to First Chicago as successor Rights Agent. From and after the effective date of this Amendment, all references in the Rights Agreement to the Rights Agreement shall be deemed to refer to the Rights Agreement as amended by this Amendment. 2 - 2 - (b) Section 3(c) of the Rights Agreement shall be amended as of the effective time of the appointment of First Chicago as successor Rights Agent by adding a sentence, substantially in the form of the following sentence, immediately after the last sentence of the legend set forth therein: Effective as of 12:01 a.m., eastern daylight time, August 1, 1997, First Chicago Trust Company of New York succeeded Boatmen's Trust as Rights Agent. The following legend, or a legend substantially similar thereto, may, in the alternative be affixed. This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between Ralcorp Holdings, Inc. (the "Company") and First Chicago Trust Company of New York (the "Rights Agreement"), as it may from time to time be supplemented or amended, the terms of which are incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights may expire or may be redeemed, exchanged or be evidenced by separate certificates and no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge promptly after receipt of a written request therefor. Under certain circumstances, Rights issued to or held by Acquiring Persons or their Affiliates or Associates (as defined in the Rights Agreement) and any subsequent holder of such Rights may become null and void. (c) Section 26 of the Rights Agreement shall be amended as of the effective time of the appointment of First Chicago as successor Rights Agent by deleting the name and address of Boatmen's Trust and substituting the following therefor: First Chicago Trust Company of New York 1 North State Street Chicago, Illinois 60670 Attention: John H. Ruocco (d) The name of the Company shall be changed from New Ralcorp Holdings, Inc. to Ralcorp Holdings, Inc., wherever it appears. 3 - 3 - 4. MISCELLANEOUS ------------- (a) Except as otherwise expressly provided, or unless the context otherwise requires, all terms herein have the meanings assigned to them in the Rights Agreement. (b) Each party hereto waives any requirement under the Rights Agreement that any additional notice be provided to it pertaining to the matters covered by this Amendment. (c) This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which counterparts shall together constitute but one and the same document. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and their respective corporate seals, if any, to be hereunto affixed and attested, all as of the day and year first written above. ATTEST: RALCORP HOLDINGS, INC. By:------------------------- By:-------------------------- J. E. Neiger R. W. Lockwood Assistant Secretary Vice President, General Counsel and Secretary ATTEST: FIRST CHICAGO TRUST COMPANY OF NEW YORK By:------------------------- By:-------------------------- ATTEST: BOATMEN'S TRUST COMPANY By:------------------------- By:-------------------------- EX-10.1 3 1997 NON-QUALIFIED STOCK OPTION AGREEMENT 1 EXHIBIT 10.1 1997 NON-QUALIFIED STOCK OPTION AGREEMENT ----------------------------------------- Ralcorp Holdings, Inc. (the "Company"), effective May 20, 1997, grants this Non-Qualified Stock Option to ---------------- ("Optionee") to purchase a total of -------shares of its $.01 par value Common Stock (the "Common Stock") at a price of $12.00 per share pursuant to the Ralcorp Holdings, Inc. Incentive Stock Plan (the "Plan"). Subject to the provisions of the Plan and the following terms, Optionee may exercise this option from time to time by tendering to the Company written notice of exercise together with the purchase price in either cash, or in shares of Common Stock of the Company at their fair market value as determined by the Nominating and Compensation Committee of the Company's Board of Directors (the "Committee"), or in both cash and such shares. NOW THEREFORE, the Company and Optionee agree, for and in consideration of the terms hereof, as follows: 1. Normal Exercise - This Option becomes exercisable at the rate --------------- of 40% of the total shares on May 20, 2002, and the remaining 60% of the total shares on May 20, 2006. This Option remains exercisable through May 19, 2007, unless Optionee is no longer employed by the Company, in which case the Option is exercisable only if permitted by, and in accordance with, the provisions of paragraph 2 below. 2. Accelerated Exercise - Notwithstanding the above, this Option -------------------- shall become exercisable before the normal exercise dates set forth in paragraph 1 above upon the occurrence of any of the events set forth below while Optionee is employed by the Company. This Option shall become exercisable in full on the date of such event and shall remain exercisable for the periods set forth below or until May 19, 2007, whichever occurs first. Thereafter, the unexercised portion of this Option is forfeited and may not be exercised. a. Death of Optionee (exercisable for three years). b. Declaration of Optionee's total and permanent disability (exercisable for three years). c. Voluntary termination of Optionee's employment at or after attainment of age 62 (exercisable for three years). d. Involuntary termination of employment of Optionee, other than a Termination for Cause (exercisable for six months). e. Occurrence of a Change in Control (exercisable for six months after the Optionee's voluntary or involuntary termination of employment following the Change in Control). 2 -2- 3. Forfeiture - This Option is subject to forfeiture in ---------- accordance with Section IV of the Plan except that there shall be no forfeiture in the event of Optionee's voluntary termination at or after attainment of age 62 whether or not such termination constitutes a "retirement". Only the portion of this Option which is not exercisable at the time of the declaration of a forfeiture can be forfeited. Any portion of this Option exercisable (either in accordance with the normal exercise dates set forth in paragraph 1 or pursuant to an acceleration of exercisability under paragraph 2) at the time of a declaration of forfeiture shall remain exercisable for seven days following such declaration of forfeiture. Thereafter, such portion of this Option is forfeited and may not be exercised. 4. Change in Control - In the case of a Change in Control (other ----------------- than a transaction in which the Company is the continuing or surviving corporation and which does not result in the outstanding shares of Common Stock being converted into or exchanged for different securities, cash or other property, or any combination thereof), Optionee shall have the right (subject to the provisions of the Plan and any limitation applicable to the Option contained herein) thereafter and during the term of the Option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon the Change in Control by a holder of the number of shares of Common Stock which would have been obtained upon exercise of the Option or portion thereof, as the case may be, immediately prior to the Change in Control. 5. Definitions - For purposes of this Agreement, the following ----------- terms have the meanings as set forth below: a. "Acquisition Consideration" - Shall mean the kind and --------------------------- amount of shares of the surviving or new corporation, cash, securities, evidence of indebtedness, other property or any combination thereof receivable in respect of one share of the Common Stock upon consummation of a Change in Control. In the case of a Change in Control resulting from the event set forth in paragraph 5(b)(i), the value of the Acquisition Consideration shall be equal to the highest price paid by such person for a share of the Company's Common Stock during the two-year period preceding the date on which such person became the beneficial owner of more than 50% of the Company's Common Stock. If such price is paid in the form of non-cash consideration, the value of the Acquisition Consideration shall be equal to the fair market value of such consideration at the time of the purchase of such share. b. "Change in Control" - Shall mean when (i) a person, as ------------------- defined under the securities laws of the United States, acquires beneficial ownership of more than 50% of the outstanding voting securities of the Company; or (ii) the directors of the Company, immediately before a business combination between the Company and another entity, or a proxy contest for the election of directors, shall as a result of such business combination or proxy contest, cease to constitute a majority of the Board of Directors of the Company or any successor to the Company. 3 -3- c. "Termination for Cause" - Shall mean the Optionee's ---------------------- termination of employment with the Company because of the willful engaging by the Optionee in gross misconduct; provided, however, that a termination for cause shall not include termination attributable to (i) poor work performance, bad judgment or negligence on the part of the Optionee, (ii) an act or omission believed by the Optionee in good faith to have been in or not opposed to the best interests of the Company and reasonably believed by the Optionee to be lawful, or (iii) the good faith conduct of the Optionee in connection with a Change in Control (including opposition to or support of such Change in Control). 6. This Agreement shall be governed by the laws of the State of Missouri without reference to the conflict of laws provisions thereof. 7. No amendment or modification of this Option shall be valid unless the same shall be in writing and signed by the Company and Optionee. The foregoing, however, shall not prevent the Company from amending or modifying the Plan except that no such amendment or modification shall adversely affect the Optionee's rights under this Option Agreement. ACKNOWLEDGED RALCORP HOLDINGS, INC. AND ACCEPTED: - ---------------------------- BY: ------------------------ Optionee R. W. Lockwood Secretary - ---------------------------- Date - ---------------------------- Location - ---------------------------- S.S.# EX-10.2 4 1997 NON-QUALIFIED STOCK OPTION AGREEMENT 1 EXHIBIT 10.2 1997 NON-QUALIFIED STOCK OPTION AGREEMENT ----------------------------------------- Ralcorp Holdings, Inc. (the "Company"), effective May 20, 1997, grants this Non-Qualified Stock Option to ----------------- ("Optionee") to purchase a total of shares of its $.01 ---------- par value Common Stock (the "Common Stock") at a price of $12.00 per share pursuant to the Ralcorp Holdings, Inc. Incentive Stock Plan (the "Plan"). Subject to the provisions of the Plan and the following terms, Optionee may exercise this option as set forth below by tendering to the Company written notice of exercise together with the purchase price in either cash, or in shares of Common Stock of the Company at their fair market value as determined by the Company's Board of Directors (the "Board"), or in both cash and such shares. NOW THEREFORE, the Company and Optionee agree, for and in consideration of the terms hereof, as follows: 1. Exercise - This Option shall become exercisable upon the -------- occurrence of any of the events set forth below. This Option shall become exercisable in full on the date of such event and shall remain exercisable for the periods set forth below. Thereafter, the unexercised portion of this Option is forfeited and may not be exercised. a. Optionee's death (exercisable for three years). b. Optionee's voluntary termination or retirement (whether pursuant to any mandatory retirement provision of the Company's Articles of Incorporation, Bylaws or Board resolution, or otherwise) at or after attainment of age 70 (exercisable for three years). c. Optionee's voluntary termination due to mental or physical impairment resulting in his inability to serve as a Director (exercisable for three years). d. Optionee's voluntary termination, or termination due to expiration of Optionee's term without re-election to a subsequent term in connection with or following a Change-in- Control (exercisable for six months). e. Optionee's voluntary termination, or termination due to expiration of Optionee's term without re-election to a subsequent term other than under circumstances set forth in paragraphs 1.b., 1.c., or 1.d. (exercisable for 90 days). 2 -2- 2. Forfeiture - Notwithstanding anything to the contrary ---------- contained in the Plan, this Option is subject to forfeiture if Optionee is removed from his position as a Director for cause in accordance with the Company's Articles and Bylaws and the corporation laws of the State of Missouri or if Optionee fails to exercise this Option within the appropriate period set forth in paragraph 1, but shall not be subject to forfeiture for any other reason. Following forfeiture, no portion of this Option may be exercised. 3. Change in Control - In the case of a Change in Control (other ----------------- than a transaction in which the Company is the continuing or surviving corporation and which does not result in the outstanding shares of Common Stock being converted into or exchanged for different securities, cash or other property, or any combination thereof), Optionee shall have the right (subject to the provisions of the Plan and any limitation applicable to the Option contained herein) thereafter and during the term of the Option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon the Change in Control by a holder of the number of shares of Common Stock which would have been obtained upon exercise of the Option or portion thereof, as the case may be, immediately prior to the Change in Control. 4. Definitions - For purposes of this Agreement, the following ----------- terms have the meanings set forth below: a. "Acquisition Consideration" - Shall mean the kind and -------------------------- amount of shares of the surviving or new corporation, cash, securities, evidence of indebtedness, other property or any combination thereof receivable in respect of one share of the Common Stock upon consummation of a Change in Control. In the case of a Change in Control resulting from the event set forth in paragraph 5(b)(i), the value of the Acquisition Consideration shall be equal to the highest price paid by such person for a share of the Company's Common Stock during the two-year period preceding the date on which such person became the beneficial owner of more than 50% of the Company's Common Stock. If such price is paid in the form of non-cash consideration, the value of the Acquisition Consideration shall be equal to the fair market value of such consideration at the time of the purchase of such share. b. "Change in Control" - Shall mean when (i) a person, as ------------------ defined under the securities laws of the United States, acquires beneficial ownership of more than 50% of the outstanding voting securities of the Company; or (ii) the directors of the Company, immediately before a business combination between the Company and another entity, or a proxy contest for the election of directors, shall as a result of such business combination or proxy contest, cease to constitute a majority of the Board of Directors of the Company or any successor to the Company. 5. This Agreement shall be governed by the laws of the State of Missouri without reference to the conflict of laws provisions thereof. 3 -3- 6. No amendment or modification of this Option shall be valid unless the same shall be in writing and signed by the Company and Optionee. The foregoing, however, shall not prevent the Company from amending or modifying the Plan except that no such amendment or modification shall adversely affect the Optionee's rights under this Option Agreement. ACKNOWLEDGED RALCORP HOLDINGS, INC. AND ACCEPTED: - ------------------------ By: Optionee ----------------------- R. W. Lockwood Secretary - ------------------------ Date EX-10.3 5 MANAGEMENT CONTINUITY AGREEMENT 1 EXHIBIT 10.3 MANAGEMENT CONTINUITY AGREEMENT ------------------------------- AGREEMENT between Ralcorp Holdings, Inc., a Missouri corporation ("Ralcorp"), and (the "Executive"), WITNESSETH: WHEREAS, the Board of Directors (the "Board") has authorized Ralcorp to enter into Management Continuity Agreements with certain key executives of Ralcorp; and WHEREAS, the Executive is a key executive of Ralcorp and has been selected by the Board to be offered this Management Continuity Agreement; and WHEREAS, should a third person take steps which might lead to a Change in Control of Ralcorp (as defined herein), the Board believes it imperative that Ralcorp be able to rely upon the Executive to continue in the Executive's position, and that Ralcorp be able to receive and rely upon the Executive's advice, if it is requested, as to the best interests of Ralcorp and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by such a Change in Control or influenced by conflicting interests; NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, Ralcorp and the Executive agree as follows: 1. Definitions. For purposes of this Agreement, the ----------- following terms shall have the meanings set forth below: a. "Base Amount" shall be the Executive's Base Amount as defined and determined pursuant to Section 280G of the Code and regulations applicable at the time of the Executive's Qualifying Termination. b. "Base Compensation" shall consist of: (i) The Executive's monthly gross salary for the last full month preceding the Executive's Qualifying Termination or for the last full month preceding the Change in Control, whichever is higher. If Executive has elected to accelerate or defer salary (including the Executive's pre-tax contributions under the Ralcorp Holdings, Inc. Savings Investment Plan and under any benefit plan complying with Section 125 of the Code and deferrals pursuant to the Executive Savings Investment Plan, and any successor plans thereto), said monthly gross salary shall be calculated as if there had been no acceleration or deferral. 2 (ii) one-twelfth of the Executive's last annual bonus, whether paid or deferred, preceding the Executive's Qualifying Termination or the Change in Control, whichever is higher (or if the Executive has not been awarded an annual bonus by Ralcorp prior to the Change in Control, then the Executive's last annual bonus awarded by old Ralcorp Holdings, Inc., Ralcorp's former parent company). c. "Change in Control" means (i) the acquisition by any person, entity or "group" within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the aggregate voting power of the then outstanding shares of Stock, other than acquisitions by Ralcorp or any of its subsidiaries or any employee benefit plan of Ralcorp (or any Trust created to hold or invest in issues thereof) or any entity holding Stock for or pursuant to the terms of any such plan; or (ii) individuals who shall qualify as Continuing Directors shall have ceased for any reason to constitute at least a majority of the Board of Directors of Ralcorp. Notwithstanding the foregoing, a Change-in-Control shall not include a transaction (commonly known as a "Morris Trust" transaction) pursuant to which a third party acquires one or more businesses of the Company by acquiring all of the common stock of the Company while leaving the Company's remaining businesses in a separate public company, unless the businesses so acquired constitute all or substantially all of the Company's businesses. d. "Code" shall mean the Internal Revenue Code of 1986, as amended. e. "Company" shall mean Ralcorp Holdings, Inc. and its wholly owned subsidiaries. f. "Continuing Director" means any member of the Board of Directors of Ralcorp, as of February 1, 1997 while such person is a member of the Board, and any other director, while such other director is a member of the Board, who is recommended or elected to succeed the Continuing Director by at least two-thirds (2/3) of the Continuing Directors then in office. g. "Disability" shall exist when the Executive suffers a complete and permanent inability to perform any and every material duty of the Executive's regular occupation because of injury or sickness. To determine whether the Executive is Disabled, the Executive shall undergo examination by a licensed physician and other experts (including other physicians) as determined by such physician, and the Executive shall cooperate in providing relevant medical records as requested. The Company and Executive shall jointly select such physician. If they are unable to agree on the selection, each shall designate one physician and the two physicians shall designate a third physician so that a determination 2 3 of disability may be made by the three physicians. Fees and expenses of the physicians and other experts and costs of examinations of the Executive shall be shared equally by the Company and the Executive. The decision as to the Executive's Disability made by such physician or physicians shall be binding on the Company and the Executive. h. "Discount Rate" means 120% of the applicable Federal rate determined under Section 1274(d) of the Code and the regulations thereunder at the time the relevant payments are made. i. "Employment Agreement" shall mean an agreement so styled providing for continuation of salary and bonus payments under certain circumstances and entered into between Ralcorp and Executive contemporaneously with the execution of this Agreement. j. "Employment Agreement Termination Payments" shall mean the aggregate of any payments made to Executive pursuant to the Employment Agreement respecting periods following Executive's termination of employment contemporaneous with or subsequent to a Change-in-Control. k. "Involuntary Termination" shall be any termination of the Executive's employment with the Company (a) to which the Executive objects orally or in writing or (b) which follows any of the following: (i) without the express written consent of the Executive, (a) the assignment of the Executive to any duties materially inconsistent with the Executive's positions, duties, responsibilities and status immediately prior to the Change in Control or (b) a material change in the Executive's titles, offices, or reporting responsibilities as in effect immediately prior to the Change in Control and with respect to either (a) or (b) the situation is not remedied within thirty (30) days after the receipt by the Company of written notice by the Executive; provided, however, (a) and (b) herein shall not constitute an "Involuntary Termination" if either situation is in connection with the Executive's death or disability. (ii) without the express written consent of the Executive, a reduction in the Executive's annual salary or opportunity for total annual compensation in effect immediately prior to the Change in Control which is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive. (iii) without the express written consent of the Executive, the Executive is required to be based anywhere other than the Executive's office location immediately preceding the Change in Control, except for required travel on business 3 4 to an extent substantially consistent with the business travel obligations of the Executive immediately preceding the occurrence of the Change in Control. (iv) without the express written consent of the Executive, following the Change in Control (a) failure by the Company to continue in effect any material benefit or compensation plan, stock ownership plan, stock purchase plan, stock option plan, defined benefit pension plan, defined contribution pension plan, life insurance plan, health and accident plan, or disability plan in which the Executive is participating or entitled to participate at the time of the Change in Control (or plans providing substantially similar benefits); or (b) the taking of any action by the Company that would (1) adversely affect the participation in or materially reduce the benefits under any of such plans either in terms of the amount of benefits provided or the level of the Executive's participation relative to other participants; (2) deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control; or (3) cause a failure to provide the number of paid vacation days to which the Executive was then entitled in accordance with Ralcorp's normal vacation policy in effect immediately prior to the Change in Control, which in either situation (a) or (b) is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive. (v) the liquidation, dissolution, consolidation, or merger of the Company or transfer of all or substantially all of its assets, unless a successor or successors (by merger, consolidation, or otherwise) to which all or a significant portion of its assets have been transferred expressly assumes in writing all duties and obligations of the Company as here set forth. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to any circumstances set forth above. l. "Normal Retirement Date" shall be the date on which the Executive attains age 65. m. "Parachute Payment" shall mean a parachute payment as defined and determined pursuant to Section 280G of the Code and regulations applicable at the time of the Executive's Qualifying Termination. n. The "Payment Period" shall be the following period commencing with the first day of the month following that in which a Qualifying Termination occurs: 4 5 (i) if the Qualifying Termination is an Involuntary Termination that occurs at any time during the first or second year following the Change in Control -- 24 months; (ii) if the Qualifying Termination is an Involuntary Termination that occurs at any time during the third year following the Change in Control -- 12 months; or (iii) if the Qualifying Termination is a Voluntary Termination that occurs at any time during the three years follow- ing the Change in Control -- 12 months, but in no event shall the Payment Period extend beyond the Executive's Normal Retirement Date. o. "Qualifying Termination" shall be the Executive's Voluntary Termination or Involuntary Termination of employment with the Company except any termi- nation because of the Executive's death, retire- ment at or after the Executive's Normal Retire- ment Date or Termination for Cause. "Qualifying Termination" shall not include any change in the Executive's employment status due to Disability. p. "Retirement Plan" means the Ralcorp Holdings, Inc. Retirement Plan or any successor qualified plan, as amended from time to time. q. "Stock" means the common stock of Ralcorp or such other security entitling the holder to vote at the election of Ralcorp's directors or any other security outstanding upon its reclassification, including, without limitation, any stock split- up, stock dividend or other recapitalization of Ralcorp or any merger or consolidation of Ralcorp with any of its Affiliates. r. "Supplemental Plan" means the Ralcorp Holdings, Inc. Supplemental Retirement Plan as amended from time to time. s. "Termination for Cause" shall be a termination because of: (i) the continued failure by the Executive to devote reasonable time and effort to the performance of the Executive's duties (other than any such failure resulting from the Executive's incapac- ity due to physical or mental illness) after written demand therefor has been delivered to the Executive by the Com- pany that specifically identifies how the Executive has not devoted reason- able time and effort to the performance of the Executive's duties; or (ii) the willful engaging by the Executive in misconduct which is materially inju- rious to the Company, monetarily or otherwise; or 5 6 (iii) the Executive's conviction of a felony or a crime involving moral turpitude; in any case as determined by the Board upon the good faith vote of not less than a majority of the directors then in office, after reasonable notice to the Executive specifying in writing the basis or bases for the proposed Termination for Cause and after the Executive has been provided an opportunity to be heard before a meeting of the Board held upon reasonable notice to all directors; provided, however, that a Termination for Cause shall not include a termination attrib- utable to: (i) bad judgment or negligence on the part of the Executive other than habitual negligence; or (ii) an act or omission believed by the Executive in good faith to have been in or not opposed to the best interests of the Company and reasonably believed by the Executive to be lawful; or (iii) the good faith conduct of the Executive in connection with a Change in Control (including the Executive's opposition to or support thereof). t. "Voluntary Termination" shall be any termination of the Executive's employment with the Company other than an Involuntary Termination or a Termination for Cause. 2. Operation of Agreement. This Agreement shall not ---------------------- create any obligation on the part of the Company or the Executive to continue their employment relationship. Anything in this Agreement to the contrary notwithstanding, no payments shall be made hereunder unless and until there has been a Change in Control of the Company. This Agreement is not exclusive with regard to benefits to be provided to the Executive on the Executive's termination of employment with the Company and shall not affect any other agreement or arrangement providing for such benefits. 3. Severance Benefits. Provided that the Executive ------------------ remains in the employ of the Company until a Change in Control has occurred, then upon the Executive's Qualifying Termination within three years after that Change in Control, the Executive shall be entitled to the following "Severance Benefits": a. Payment in a lump sum in cash, within 60 days after the Executive's Qualifying Termination, of the present value as of the date of the Qualify- ing Termination of an income stream equal to the Executive's Base Compensation payable each month throughout the applicable Payment Period. For purposes of this subparagraph, present value shall be calculated by application of the Dis- count Rate; b. Continuation during the Payment Period of the Executive's participation in each life, health, accident and disability plan in which the Execu- tive was entitled to participate immediately prior to the Change in Control, upon the same terms and conditions, including those with respect to spouses and dependents, applicable 6 7 at such time; provided, however, that if the terms of any such benefit plan do not permit continued participation by the Executive, then the Company will arrange, at the Company's sole cost and expense, to provide the Executive a benefit substantially similar to, and no less favorable than, on an after-tax basis, the benefit the Executive was entitled to receive under such plan immediately prior to the Change in Control; provided further, however, that the benefit to be provided or payments to be made hereunder may be reduced by the benefits provided or payments made (in either case on an after-tax basis) by subse- quent employer for the same occurrence or event; c. Payment in a lump sum in cash, within 60 days after the Executive's Qualifying Termination, of the difference between the present values as of the date of the Qualifying Termination of (a) the benefits under the Retirement Plan and the Supplemental Plan which the Executive and the Executive's beneficiary, if applicable, would have been entitled to receive had the Executive remained employed by Ralcorp at a compensation level equal to the Executive's Base Compensation for the entirety of the applicable Payment Period, and (b) the Executive's actual benefit, if any, to which the Executive and the Exe- cutive's beneficiary are entitled under the Retirement Plan and the Supplemental Plan. For purposes of this subparagraph, present value shall be calculated in accordance with Section 417(e)(3) of the Code; no reduction factors for early retirement shall be applied in the calcula- tion of benefits; and d. Payment, on a current basis, of any actual costs and expenses of litigation incurred by the Executive, including costs of investigation and reasonable attorney's fees, in the event the Executive is a party to any legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, plus interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code. Notwithstanding anything to the contrary contained in this Agreement, the Executive may, but is not required to, elect to reduce the Severance Benefits to be provided under this para- graph three of this Agreement so that the present value of such Severance Benefits, calculated by application of the Discount Rate, if they constitute Parachute Payments, together with the present value of all Parachute Payments made by Company to the Executive, are less than three times the Employee's Base Amount. Whether or not such Severance Payments shall be reduced and the identity of the Severance Benefits to be reduced and the amount by which each benefit shall be reduced shall be within the sole discretion of the Executive. Any such election, if made, shall be made by the Executive's written notice to Company sent by regular U.S. mail, postage paid, not later than 45 days follow- ing such Executive's Qualifying Termination. 7 8 Notwithstanding anything to the contrary contained herein payments hereunder will be reduced by the amount of any Employ- ment Agreement Termination Payments. The Executive may file with the Secretary or any Assis- tant Secretary of Ralcorp a written designation of a benefi- ciary or contingent beneficiaries to receive the payments described in subparagraphs (a) and (c) above in the event of the Executive's death following the Executive's Qualifying Termination but prior to payment by the Company. The Execu- tive may from time to time revoke or change any such designa- tion of beneficiary and any designation of beneficiary pursuant to this Agreement shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Company shall be in doubt as to the right of any such beneficiary to receive such payments, it may determine to pay such amounts to the legal representative of the Executive, in which case the Company shall not be under any further liability to anyone. In the event that such designated beneficiary or legal representative becomes a party to a legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's estate, legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, the Company shall pay their actual costs and expenses of such litigation, including costs of investigation and reasonable attorneys' fees, plus interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that the Company shall not be required to pay such costs and expenses in connection with litigation to determine the proper payee, among two or more claimants, of the payments described in subparagraphs (a) and (c). 4. Successors to Company; Binding Effect; Assignment. ------------------------------------------------- This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. The Company may not assign this Agreement other than to a successor to all or substantially all of the business and/or assets of the Company. The Executive shall have no right to transfer or assign the right to receive any severance benefit under this Agreement except as noted in paragraph three above. 5. Missouri Law to Govern. This Agreement shall be ---------------------- governed by the laws of the State of Missouri without giving effect to the conflict of laws provisions thereof. 6. Miscellaneous. No provision of this Agreement may be ------------- modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by the Executive and a duly authorized officer of the Company. No waiver by a party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 8 9 7. Taxes; Set-off. All payments to be made to the -------------- Executive under this Agreement will be subject to required withholding of federal, state and local income and employment taxes. The right of the Executive to receive benefits under this Agreement, however, shall be absolute and shall not be subject to any set-off, counter-claim, recoupment, defense, duty to mitigate or other rights the Company may have against the Executive's or anyone else. 8. Severability. The invalidity and unenforceability of ------------ any particular provision of this Agreement shall not affect any other provision of this Agreement, and the Agreement shall be construed in all respects as if the invalid or unenforce- able provision were omitted. IN WITNESS WHEREOF, the undersigned have executed this Agreement this ------ day of April, 1997. RALCORP HOLDINGS, INC. ___________________________ By: --------------------------- Executive J. R. Micheletto Chief Executive Officer and President 9 EX-10.4 6 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.4 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement (the "Agreement") made between Joe R. Micheletto (the "Executive") and Ralcorp Holdings, Inc., a corporation with its principal place of business at 800 Market Street, St. Louis, Missouri, and its subsidiaries and affiliates (the "Company"), WITNESSETH THAT: RECITALS -------- WHEREAS, the Company was incorporated on October 23, 1996; and WHEREAS, the Company was spun-off from its former parent company, Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and WHEREAS, Executive is presently employed by the Company and has substantial experience as an executive level manager for the Company; and WHEREAS, the Company desires to secure Executive's employment for a definite period of time; and WHEREAS, Executive desires to be employed by the Company in the executive capacity described in SECTION TWO of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the Company and Executive hereby agree as follows: SECTION ONE DEFINITIONS ----------- The following terms shall have the meanings set forth below: A. "Involuntary Termination" shall be any termination of the ----------------------- Executive's employment with the Company, other than a Termination for Cause, (a) to which the Executive objects orally or in writing or (b) which follows any of the following: (i) without the express written consent of the Executive, (a) the assignment of the Executive to any duties materially inconsistent with the Executive's positions, duties, responsibilities and status on the effective date of this Agreement or (b) a material change in the Executive's titles, offices, or reporting responsibilities as in effect on the effective date of this Agreement and with respect to either (a) or (b) the situation is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; provided, however, (a) and (b) herein shall not constitute an "Involuntary Termination" if either situation is in connection with the Executive's death or disability; or 2 (ii) without the express written consent of the Executive, a reduction in the Executive's annual salary or opportunity for total annual compensation, in effect on the effective date of this Agreement which is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (iii) without the express written consent of the Executive, the Executive is required to be based more than 100 miles from Executive's office location on the effective date of this Agreement, except for required travel on business to an extent substantially consistent with the business travel obligations of the Executive on the effective date of this Agreement; or (iv) without the express written consent of the Executive, (a) failure by the Company to continue in effect benefit and compensation plans which may include a stock ownership plan, a stock purchase plan, a stock option plan, a defined benefit pension plan, a defined contribution pension plan, a life insurance plan, a health and accident plan, and/or a disability plan which are, in the aggregate, substantially equivalent in value to those in which the Executive is participating or entitled to participate on the effective date of this Agreement; or (b) the taking of any action by the Company that would (1) adversely affect the participation in or materially reduce the aggregate value to the Executive of benefits under such plans either in terms of the amount of benefits provided or the level of the Executive's participation relative to other participants; or (2) cause a failure to provide the number of paid vacation days to which the Executive was then entitled in accordance with the Company's normal vacation policy in effect on the effective date of this Agreement, which in either situation (a) or (b) is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (v) the liquidation, dissolution, consolidation, or merger of the Company or transfer of all or substantially all of its assets, unless a successor or successors (by merger, consolidation, or otherwise) to which all or a significant portion of its assets have been transferred expressly assumes in writing all duties and obligations of the Company as here set forth. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to any circumstances set forth above. B. "Termination for Cause" shall be a termination because of: --------------------- (i) the continued failure by the Executive to devote reasonable time and effort to the performance of the Executive's duties (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) after written demand therefor has been delivered to the Executive by the Company that specifically identifies how the Executive has not devoted reasonable time and effort to the performance of the Executive's duties; or 2 3 (ii) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise; or (iii) the Executive's conviction of a felony or a crime involving moral turpitude; in any case as determined by the Board of Directors of the Company (the "Board") upon the good faith vote of not less than a majority of the Directors then in office, after reasonable notice to the Executive specifying in writing the basis or bases for the proposed Termination for Cause and after the Executive has been provided an opportunity to be heard before a meeting of the Board held upon reasonable notice to all Directors; provided, however, that a Termination for Cause shall not include a termination attributable to: (i) bad judgment or negligence on the part of the Executive other than habitual negligence; or (ii) an act or omission believed by the Executive in good faith to have been in or not opposed to the best interests of the Company and reasonably believed by the Executive to be lawful. C. "Voluntary Termination" shall be any termination of the --------------------- Executive's employment with the Company other than an Involuntary Termination or a Termination for Cause. SECTION TWO EMPLOYMENT ---------- The Company hereby employs Executive as its Chief Executive Officer and President. Executive's reporting responsibilities shall be to the Company's Board of Directors. Subject to SECTION EIGHT, the Company may modify or realign Executive's duties and responsibilities as it deems necessary during the term of this Agreement. SECTION THREE BEST EFFORTS OF EXECUTIVE ------------------------- Executive agrees that the Executive will at all times faithfully and to the best of the Executive's ability, experience and talent, perform all of the duties that may be required of or from the Executive pursuant to the express and implicit terms hereof. Executive acknowledges that the Executive is obligated to manage the business of the Company in a sound and businesslike manner and in material conformity with all laws and regulations governing the conduct of the business of the Company. 3 4 SECTION FOUR TERM ---- The term of this Agreement shall be three years beginning on February 1, 1997 and ending on January 31, 2000 (the "Term"). This Agreement may be extended for additional periods upon the mutual written agreement of the parties. SECTION FIVE COMPENSATION ------------ During the Term of this Agreement, Executive shall be entitled to the following: A. The Company shall pay Executive a minimum monthly base salary of $25,000.00, payable on the last day of each month. The base salary may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's monthly base salary shall not be less than the amount set forth above. B. The Company shall pay Executive a minimum annual bonus of $75,000.00, payable in October of each year. The annual bonus may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's annual bonus shall not be less than the amount set forth above. C. Executive shall be provided with an executive level benefit program including stock options and/or stock grants as determined by the Company. Any such stock options shall become immediately exercisable, and such stock grants shall vest immediately, upon Executive's Involuntary Termination during the Term of this Agreement. D. Executive shall be eligible for coverage under such pension plan, group health insurance plan, 401(k) plan, vacation, holiday and other programs or policies in effect from time to time for salaried Executives of the Company. SECTION SIX OLD RALCORP STOCK OPTIONS ------------------------- It is understood that Old Ralcorp previously granted Executive certain Non-Qualified Stock Options. It is further understood and agreed that Old Ralcorp paid Executive a lump sum payment that represents fair compensation for these Non-Qualified Stock Options. Executive understands and agrees that Executive received this lump sum payment in lieu of these options and that Executive forfeits all Old Ralcorp Non-Qualified Stock Options, and rights thereunder, which Executive had not exercised at the time Executive received the lump sum payment. 4 5 SECTION SEVEN CHANGE OF CONTROL ----------------- Contemporaneously with the execution of this Agreement, the Executive and the Company will enter into a Management Continuity Agreement providing benefits under certain circumstances in the event of a Change-in-Control of the Company, as defined in such Management Continuity Agreement. Such benefits will be in addition to those provided under this Agreement; provided, however, that any benefits paid under said Management Continuity Agreement shall be reduced by amounts paid hereunder in respect of periods after Executive's termination of employment following a Change-in-Control. Executive agrees that the previous Management Continuity Agreement entered into by Executive with Old Ralcorp is null and void and Executive releases any claims to benefits under the previous Management Continuity Agreement. SECTION EIGHT TERMINATION ----------- A. The Company reserves the right to terminate the employment of Executive at any time with or without cause. However, in the event of Executive's Involuntary Termination prior to January 31, 2000, Executive shall be entitled to the following: (i) payment within sixty (60) days after Executive's Involuntary Termination of Executive's minimum base salary under this Agreement for the remainder of the three-year term, in cash in a lump sum without discount or pro- ration; and (ii) payment within sixty (60) days after Executive's Involuntary Termination of the minimum annual bonuses which Executive would have been entitled to receive under this Agreement during the remainder of the three-year term, in cash in a lump sum without discount or pro- ration; and (iii) continuation for the remainder of the three-year term of the Executive's participation in each life, health, accident and disability plan in which the Executive was entitled to participate immediately prior to the Executive's termination, upon the same terms and conditions, including those with respect to spouses and dependents, applicable at such time; provided, however, that if the terms of any such benefit plan do not permit continued participation by the Executive, then the Company will arrange, at the Company's sole cost and expense, to provide the Executive a benefit substantially similar to, and no less favorable than, on an after-tax basis, the benefit the Executive was entitled to receive under such plan immediately prior the Executive's termination; provided further, however, that the benefit to be provided or payments to be made hereunder may be reduced by the benefits provided or payments made (in either case on an after-tax basis) by a subsequent employer for the same occurrence or event; and 5 6 (iv) payment in cash in a lump sum, within sixty (60) days after the Executive's termination, of the difference between the present values as of the date of the termination of (a) the benefits under the Company's Retirement Plan and Supplemental Retirement Plan which the Executive and the Executive's beneficiary, if applicable, would have been entitled to receive had the Executive remained employed by the Company at a compensation level equal to that provided in this Agreement for the entirety of the three-year term, and (b) the actual benefit, if any, to which the Executive and the Executive's beneficiary are entitled under the Retirement Plan and the Supplemental Retirement Plan. For purposes of this subparagraph, present value shall be calculated in accordance with Section 417(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"); no reduction factors for early retirement shall be applied in the calculation of benefits; and (v) payment, on a current basis, of any actual costs and expenses of litigation incurred by the Executive, including costs of investigation and reasonable attorney's fees, in the event the Executive is a party to any legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. B. The Executive may file with the Secretary or any Assistant Secretary of the Company a written designation of a beneficiary or contingent beneficiaries to receive the payments described above in the event of the Executive's death following the Executive's Involuntary Termination but prior to payment by the Company. The Executive may from time to time revoke or change any such designation of beneficiary and any designation of beneficiary pursuant to this Agreement shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Company shall be in doubt as to the right of any such beneficiary to receive such payments, it may determine to pay such amounts to the legal representative of the Executive, in which case the Company shall not be under any further liability to anyone. In the event that such designated beneficiary or legal representative becomes a party to a legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's estate, legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, the Company shall pay their actual costs and expenses of such litigation, including costs of investigation and reasonable attorneys' fees, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that the Company shall not be required to pay such costs and expenses in connection with litigation to determine the proper payee, among two or more claimants, of the payments pursuant to this Agreement. 6 7 C. In the event of Executive's Voluntary Termination or Termination for Cause, Executive shall not be entitled to receive any of the pay or benefits that would have been provided pursuant to this Agreement except for pay already earned and benefits already vested at the time of such termination. D. In the event that Executive's employment is terminated for any reason during the Term of this Agreement, Executive shall not be eligible to participate in any other severance pay plan established by the Company for its Executives unless such severance pay plan provides benefits of greater value in the aggregate than those available under this Agreement, in which case Executive shall be entitled to benefits under such severance pay plan but not under this Agreement. SECTION NINE CONFIDENTIALITY --------------- Executive agrees that, in addition to any other limitations contained in this Agreement, regardless of the circumstances of Executive's termination of employment, Executive will not take, or communicate or disclose to any person, firm, corporation or other entity, any information relating to the Company's customer lists, prices, trade secrets, methods, systems, advertising, or any other confidential knowledge or secrets that Executive might from time to time acquire with respect to the business of the Company or any of its affiliates or subsidiaries, unless Executive obtains written consent of the Company. Executive also specifically acknowledges the continued validity and effect of any Agreement as to Confidentiality and Inventions previously signed by Executive and that the terms of any such agreement are incorporated into this Agreement by this reference. SECTION TEN NON-COMPETITION --------------- In the event Executive's employment terminates pursuant to SECTION EIGHT, Executive will not, for the duration of this Agreement, on Executive's own behalf, or on behalf of any other person, firm, partnership or corporation, engage in the business of selling or marketing or engage in the design, manufacture and/or sale of any item or product handled from time-to-time prior to January 31, 2000 by the Company; nor will the Executive directly or indirectly, on Executive's own behalf, or on behalf of, or in conjunction with, any other person, firm, partnership or corporation, solicit or attempt to solicit the business or patronage of any person, firm, corporation or partnership for the purposes of selling or marketing products manufactured by the Company or other products similar to those manufactured by the Company or perform such other incidental business and service in which the Company engages prior to January 31, 2000. 7 8 SECTION ELEVEN ARBITRATION ----------- As additional consideration for this Agreement, Executive agrees that any differences, claims, or matters in dispute arising between the Company and Executive out of or in connection with the Executive's employment or the termination of the Executive's employment by the Company including, but not limited to the terms and conditions of this Agreement, allegations of wrongful termination, allegations of employment discrimination or allegations of discriminatory or retaliatory discharge under any federal, state or local discrimination law shall be submitted by them to arbitration by the American Arbitration Association, or its successor, and the determination of the American Arbitration Association, or its successor, shall be final and absolute. The arbitrator shall be governed by the duly promulgated rules and regulations of the American Arbitration Association, or its successor, and the pertinent provisions of the laws of the State of Missouri relating to arbitration. The decision of the arbitrator may be entered as a judgment in any court of the State of Missouri or elsewhere. SECTION TWELVE MISCELLANEOUS PROVISIONS ------------------------ A. The Company shall be entitled to withhold from any payments made pursuant to this Agreement, including SECTION EIGHT hereof, any federal, state or local taxes required to be withheld by law or regulation. B. This Agreement represents the entire agreement between the parties and any prior understandings or representations of any kind preceding the effective date of this Agreement shall not be binding on either party except to the extent incorporated into this Agreement. This Agreement shall not be altered, amended or modified except in writing signed by an authorized officer of the Company and by the Executive. C. This Agreement shall be binding upon and shall inure to the benefit of the assigns, heirs, legatees or personal representatives of Executive and the successors or assigns of the Company. D. This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. The Company may not assign this Agreement other than to a successor to all or substantially all of the business and/or assets of the Company. Neither this Agreement nor any right or 8 9 interest hereunder shall be assignable or transferable by Executive, the Executive's beneficiaries or Executive's legal representatives without the Company's prior written consent; provided, however, that nothing in this Section shall preclude (i) Executive from designating a beneficiary to receive any benefit payable hereunder upon the Executive's death, or (ii) the executors, administrators, or other legal representatives of the Executive's estate from assigning or transferring any rights hereunder to the person or persons entitled thereunto. E. The headings of sections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. F. This Agreement shall be construed according to the laws of the State of Missouri without giving effect to the conflict of laws provisions thereof. G. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a wavier of such term or condition for the future or of any act other than that specifically waived. H. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of the Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. The parties have entered into this Agreement based solely upon the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have executed this Agreement on the --------- day of April, 1997. RALCORP HOLDINGS, INC. - ---------------------------- By:------------------------- Executive R. W. Lockwood Secretary 9 EX-10.5 7 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.5 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement (the "Agreement") made between Kevin J. Hunt, (the "Executive") and Ralcorp Holdings, Inc., a corporation with its principal place of business at 800 Market Street, St. Louis, Missouri, and its subsidiaries and affiliates (the "Company"), WITNESSETH THAT: RECITALS -------- WHEREAS, the Company was incorporated on October 23, 1996; and WHEREAS, the Company was spun-off from its former parent company, Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and WHEREAS, Executive is presently employed by the Company and has substantial experience as an executive level manager for the Company; and WHEREAS, the Company desires to secure Executive's employment for a definite period of time; and WHEREAS, Executive desires to be employed by the Company in the executive capacity described in SECTION TWO of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the Company and Executive hereby agree as follows: SECTION ONE DEFINITIONS ----------- The following terms shall have the meanings set forth below: A. "Involuntary Termination" shall be any termination of the ----------------------- Executive's employment with the Company, other than a Termination for Cause, (a) to which the Executive objects orally or in writing or (b) which follows any of the following: (i) without the express written consent of the Executive, (a) the assignment of the Executive to any duties materially inconsistent with the Executive's positions, duties, responsibilities and status on the effective date of this Agreement or (b) a material change in the Executive's titles, offices, or reporting responsibilities as in effect on the effective date of this Agreement and with respect to either (a) or (b) the situation is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; provided, however, (a) and (b) herein shall not constitute an "Involuntary Termination" if either situation is in connection with the Executive's death or disability; or 2 (ii) without the express written consent of the Executive, a reduction in the Executive's annual salary or opportunity for total annual compensation, in effect on the effective date of this Agreement which is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (iii) without the express written consent of the Executive, the Executive is required to be based more than 100 miles from Executive's office location on the effective date of this Agreement, except for required travel on business to an extent substantially consistent with the business travel obligations of the Executive on the effective date of this Agreement; or (iv) without the express written consent of the Executive, (a) failure by the Company to continue in effect benefit and compensation plans which may include a stock ownership plan, a stock purchase plan, a stock option plan, a defined benefit pension plan, a defined contribution pension plan, a life insurance plan, a health and accident plan, and/or a disability plan which are, in the aggregate, substantially equivalent in value to those in which the Executive is participating or entitled to participate on the effective date of this Agreement; or (b) the taking of any action by the Company that would (1) adversely affect the participation in or materially reduce the aggregate value to the Executive of benefits under such plans either in terms of the amount of benefits provided or the level of the Executive's participation relative to other participants; or (2) cause a failure to provide the number of paid vacation days to which the Executive was then entitled in accordance with the Company's normal vacation policy in effect on the effective date of this Agreement, which in either situation (a) or (b) is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (v) the liquidation, dissolution, consolidation, or merger of the Company or transfer of all or substantially all of its assets, unless a successor or successors (by merger, consolidation, or otherwise) to which all or a significant portion of its assets have been transferred expressly assumes in writing all duties and obligations of the Company as here set forth. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to any circumstances set forth above. B. "Termination for Cause" shall be a termination because of: --------------------- (i) the continued failure by the Executive to devote reasonable time and effort to the performance of the Executive's duties (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) after written demand therefor has been delivered to the Executive by the Company that specifically identifies how the Executive has not devoted reasonable time and effort to the performance of the Executive's duties; or 2 3 (ii) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise; or (iii) the Executive's conviction of a felony or a crime involving moral turpitude; in any case as determined by the Board of Directors of the Company (the "Board") upon the good faith vote of not less than a majority of the Directors then in office, after reasonable notice to the Executive specifying in writing the basis or bases for the proposed Termination for Cause and after the Executive has been provided an opportunity to be heard before a meeting of the Board held upon reasonable notice to all Directors; provided, however, that a Termination for Cause shall not include a termination attributable to: (i) bad judgment or negligence on the part of the Executive other than habitual negligence; or (ii) an act or omission believed by the Executive in good faith to have been in, or not opposed to, the best interests of the Company and reasonably believed by the Executive to be lawful. C. "Voluntary Termination" shall be any termination of the --------------------- Executive's employment with the Company other than an Involuntary Termination or a Termination for Cause. SECTION TWO EMPLOYMENT ---------- The Company hereby employs Executive as its Corporate Vice President and President, Bremner. Executive's day-to-day reporting responsibilities shall be to the Company's Chief Executive Officer. Subject to SECTION EIGHT, the Company may modify or realign Executive's duties and responsibilities as it deems necessary during the term of this Agreement. SECTION THREE BEST EFFORTS OF EXECUTIVE ------------------------- Executive agrees that the Executive will at all times faithfully and to the best of the Executive's ability, experience and talent, perform all of the duties that may be required of or from the Executive pursuant to the express and implicit terms hereof. Executive acknowledges that the Executive is obligated to manage the business of the Company in a sound and businesslike manner and in material conformity with all laws and regulations governing the conduct of the business of the Company. 3 4 SECTION FOUR TERM ---- The term of this Agreement shall be three years beginning on February 1, 1997 and ending on January 31, 2000 (the "Term"). This Agreement may be extended for additional periods upon the mutual written agreement of the parties. SECTION FIVE COMPENSATION ------------ During the Term of this Agreement, Executive shall be entitled to the following: A. The Company shall pay Executive a minimum monthly base salary of $11,667.00, payable on the last day of each month. The base salary may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's monthly base salary shall not be less than the amount set forth above. B. The Company shall pay Executive a minimum annual bonus of $35,000.00, payable in October of each year. The annual bonus may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's annual bonus shall not be less than the amount set forth above. C. Executive shall be provided with an executive level benefit program including stock options and/or stock grants as determined by the Company. Any such stock options shall become immediately exercisable, and such stock grants shall vest immediately, upon Executive's Involuntary Termination during the Term of this Agreement. D. Executive shall be eligible for coverage under such pension plan, group health insurance plan, 401(k) plan, vacation, holiday and other programs or policies in effect from time to time for salaried Executives of the Company. SECTION SIX OLD RALCORP STOCK OPTIONS ------------------------- It is understood that Old Ralcorp previously granted Executive certain Non-Qualified Stock Options. It is further understood and agreed that Old Ralcorp paid Executive a lump sum payment that represents fair compensation for these Non-Qualified Stock Options. Executive understands and agrees that Executive received this lump sum payment in lieu of these options and that Executive forfeits all Old Ralcorp Non-Qualified Stock Options, and rights thereunder, which Executive had not exercised at the time Executive received the lump sum payment. 4 5 SECTION SEVEN CHANGE OF CONTROL ----------------- Contemporaneously with the execution of this Agreement, the Executive and the Company will enter into a Management Continuity Agreement providing benefits under certain circumstances in the event of a Change-in-Control of the Company, as defined in such Management Continuity Agreement. Such benefits will be in addition to those provided under this Agreement; provided, however, that any benefits paid under said Management Continuity Agreement shall be reduced by amounts paid hereunder in respect of periods after Executive's termination of employment following a Change-in-Control. Executive agrees that the previous Management Continuity Agreement entered into by Executive with Old Ralcorp is null and void and Executive releases any claims to benefits under the previous Management Continuity Agreement. SECTION EIGHT TERMINATION ----------- A. The Company reserves the right to terminate the employment of Executive at any time with or without cause. However, in the event of Executive's Involuntary Termination prior to January 31, 2000, Executive shall be entitled to the following: (i) payment within sixty (60) days after Executive's Involuntary Termination of Executive's minimum base salary under this Agreement for the remainder of the three-year term, in cash in a lump sum without discount or pro-ration; and (ii) payment within sixty (60) days after Executive's Involuntary Termination of the minimum annual bonuses which Executive would have been entitled to receive under this Agreement during the remainder of the three- year term, in cash in a lump sum without discount or pro-ration; and (iii) continuation for the remainder of the three-year term of the Executive's participation in each life, health, accident and disability plan in which the Executive was entitled to participate immediately prior to the Executive's termination, upon the same terms and conditions, including those with respect to spouses and dependents, applicable at such time; provided, however, that if the terms of any such benefit plan do not permit continued participation by the Executive, then the Company will arrange, at the Company's sole cost and expense, to provide the Executive a benefit substantially similar to, and no less favorable than, on an after-tax basis, the benefit the Executive was entitled to receive under such plan immediately prior the Executive's termination; provided further, however, that the benefit to be provided or payments to be made hereunder may be reduced by the benefits provided or payments made (in either case on an after-tax basis) by a subsequent employer for the same occurrence or event; and 5 6 (iv) payment in cash in a lump sum, within sixty (60) days after the Executive's termination, of the difference between the present values as of the date of the termination of (a) the benefits under the Company's Retirement Plan and Supplemental Retirement Plan which the Executive and the Executive's beneficiary, if applicable, would have been entitled to receive had the Executive remained employed by the Company at a compensation level equal to that provided in this Agreement for the entirety of the three-year term, and (b) the actual benefit, if any, to which the Executive and the Executive's beneficiary are entitled under the Retirement Plan and the Supplemental Retirement Plan. For purposes of this subparagraph, present value shall be calculated in accordance with Section 417(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"); no reduction factors for early retirement shall be applied in the calculation of benefits; and (v) payment, on a current basis, of any actual costs and expenses of litigation incurred by the Executive, including costs of investigation and reasonable attorney's fees, in the event the Executive is a party to any legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. B. The Executive may file with the Secretary or any Assistant Secretary of the Company a written designation of a beneficiary or contingent beneficiaries to receive the payments described above in the event of the Executive's death following the Executive's Involuntary Termination but prior to payment by the Company. The Executive may from time to time revoke or change any such designation of beneficiary and any designation of beneficiary pursuant to this Agreement shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Company shall be in doubt as to the right of any such beneficiary to receive such payments, it may determine to pay such amounts to the legal representative of the Executive, in which case the Company shall not be under any further liability to anyone. In the event that such designated beneficiary or legal representative becomes a party to a legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's estate, legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, the Company shall pay their actual costs and expenses of such litigation, including costs of investigation and reasonable attorneys' fees, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that the Company shall not be required to pay such costs and expenses in connection with litigation to determine the proper payee, among two or more claimants, of the payments pursuant to this Agreement. 6 7 C. In the event of Executive's Voluntary Termination or Termination for Cause, Executive shall not be entitled to receive any of the pay or benefits that would have been provided pursuant to this Agreement except for pay already earned and benefits already vested at the time of such termination. D. In the event that Executive's employment is terminated for any reason during the Term of this Agreement, Executive shall not be eligible to participate in any other severance pay plan established by the Company for its Executives unless such severance pay plan provides benefits of greater value in the aggregate than those available under this Agreement, in which case Executive shall be entitled to benefits under such severance pay plan but not under this Agreement. SECTION NINE CONFIDENTIALITY --------------- Executive agrees that, in addition to any other limitations contained in this Agreement, regardless of the circumstances of Executive's termination of employment, Executive will not take, or communicate or disclose to any person, firm, corporation or other entity, any information relating to the Company's customer lists, prices, trade secrets, methods, systems, advertising, or any other confidential knowledge or secrets that Executive might from time to time acquire with respect to the business of the Company or any of its affiliates or subsidiaries, unless Executive obtains written consent of the Company. Executive also specifically acknowledges the continued validity and effect of any Agreement as to Confidentiality and Inventions previously signed by Executive and that the terms of any such agreement are incorporated into this Agreement by this reference. SECTION TEN NON-COMPETITION --------------- In the event Executive's employment terminates pursuant to SECTION EIGHT, Executive will not, for the duration of this Agreement, on Executive's own behalf, or on behalf of any other person, firm, partnership or corporation, engage in the private label biscuit (cracker or cookie) business as either a proprietor, officer, director, partner, employee or consultant. 7 8 SECTION ELEVEN ARBITRATION ----------- As additional consideration for this Agreement, Executive agrees that any differences, claims, or matters in dispute arising between the Company and Executive out of or in connection with the Executive's employment or the termination of the Executive's employment by the Company including, but not limited to the terms and conditions of this Agreement, allegations of wrongful termination, allegations of employment discrimination or allegations of discriminatory or retaliatory discharge under any federal, state or local discrimination law shall be submitted by them to arbitration by the American Arbitration Association, or its successor, and the determination of the American Arbitration Association, or its successor, shall be final and absolute. The arbitrator shall be governed by the duly promulgated rules and regulations of the American Arbitration Association, or its successor, and the pertinent provisions of the laws of the State of Missouri relating to arbitration. The decision of the arbitrator may be entered as a judgment in any court of the State of Missouri or elsewhere. SECTION TWELVE MISCELLANEOUS PROVISIONS ------------------------ A. The Company shall be entitled to withhold from any payments made pursuant to this Agreement, including SECTION EIGHT hereof, any federal, state or local taxes required to be withheld by law or regulation. B. This Agreement represents the entire agreement between the parties and any prior understandings or representations of any kind preceding the effective date of this Agreement shall not be binding on either party except to the extent incorporated into this Agreement. This Agreement shall not be altered, amended or modified except in writing signed by the Chief Executive Officer of the Company and by the Executive. C. This Agreement shall be binding upon and shall inure to the benefit of the assigns, heirs, legatees or personal representatives of Executive and the successors or assigns of the Company. D. This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. The Company may not assign this Agreement other than to a successor to all or substantially all of the business and/or assets of the Company. Neither this Agreement nor any right or 8 9 interest hereunder shall be assignable or transferable by Executive, the Executive's beneficiaries or Executive's legal representatives without the Company's prior written consent; provided, however, that nothing in this Section shall preclude (i) Executive from designating a beneficiary to receive any benefit payable hereunder upon the Executive's death, or (ii) the executors, administrators, or other legal representatives of the Executive's estate from assigning or transferring any rights hereunder to the person or persons entitled thereunto. E. The headings of sections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. F. This Agreement shall be construed according to the laws of the State of Missouri without giving effect to the conflict of laws provisions thereof. G. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a wavier of such term or condition for the future or of any act other than that specifically waived. H. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of the Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. The parties have entered into this Agreement based solely upon the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have executed this Agreement on the --------- day of May, 1997. RALCORP HOLDINGS, INC. - ---------------------------- By:------------------------- Executive J. R. Micheletto Chief Executive Officer and President 9 EX-10.6 8 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.6 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement (the "Agreement") made between Robert W. Lockwood (the "Executive") and Ralcorp Holdings, Inc., a corporation with its principal place of business at 800 Market Street, St. Louis, Missouri, and its subsidiaries and affiliates (the "Company"), WITNESSETH THAT: RECITALS -------- WHEREAS, the Company was incorporated on October 23, 1996; and WHEREAS, the Company was spun-off from its former parent company, Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and WHEREAS, Executive is presently employed by the Company and has substantial experience as an executive level manager for the Company; and WHEREAS, the Company desires to secure Executive's employment for a definite period of time; and WHEREAS, Executive desires to be employed by the Company in the executive capacity described in SECTION TWO of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the Company and Executive hereby agree as follows: SECTION ONE DEFINITIONS ----------- The following terms shall have the meanings set forth below: A. "Involuntary Termination" shall be any termination of the ----------------------- Executive's employment with the Company, other than a Termination for Cause, (a) to which the Executive objects orally or in writing or (b) which follows any of the following: (i) without the express written consent of the Executive, (a) the assignment of the Executive to any duties materially inconsistent with the Executive's positions, duties, responsibilities and status on the effective date of this Agreement or (b) a material change in the Executive's titles, offices, or reporting responsibilities as in effect on the effective date of this Agreement and with respect to either (a) or (b) the situation is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; provided, however, (a) and (b) herein shall not constitute an "Involuntary Termination" if either situation is in connection with the Executive's death or disability; or 2 (ii) without the express written consent of the Executive, a reduction in the Executive's annual salary or opportunity for total annual compensation, in effect on the effective date of this Agreement which is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (iii) without the express written consent of the Executive, the Executive is required to be based more than 100 miles from Executive's office location on the effective date of this Agreement, except for required travel on business to an extent substantially consistent with the business travel obligations of the Executive on the effective date of this Agreement; or (iv) without the express written consent of the Executive, (a) failure by the Company to continue in effect benefit and compensation plans which may include a stock ownership plan, a stock purchase plan, a stock option plan, a defined benefit pension plan, a defined contribution pension plan, a life insurance plan, a health and accident plan, and/or a disability plan which are, in the aggregate, substantially equivalent in value to those in which the Executive is participating or entitled to participate on the effective date of this Agreement; or (b) the taking of any action by the Company that would (1) adversely affect the participation in or materially reduce the aggregate value to the Executive of benefits under such plans either in terms of the amount of benefits provided or the level of the Executive's participation relative to other participants; or (2) cause a failure to provide the number of paid vacation days to which the Executive was then entitled in accordance with the Company's normal vacation policy in effect on the effective date of this Agreement, which in either situation (a) or (b) is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (v) the liquidation, dissolution, consolidation, or merger of the Company or transfer of all or substantially all of its assets, unless a successor or successors (by merger, consolidation, or otherwise) to which all or a significant portion of its assets have been transferred expressly assumes in writing all duties and obligations of the Company as here set forth. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to any circumstances set forth above. B. "Termination for Cause" shall be a termination because of: --------------------- (i) the continued failure by the Executive to devote reasonable time and effort to the performance of the Executive's duties (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) after written demand therefor has been delivered to the Executive by the Company that specifically identifies how the Executive has not devoted reasonable time and effort to the performance of the Executive's duties; or 2 3 (ii) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise; or (iii) the Executive's conviction of a felony or a crime involving moral turpitude; in any case as determined by the Board of Directors of the Company (the "Board") upon the good faith vote of not less than a majority of the Directors then in office, after reasonable notice to the Executive specifying in writing the basis or bases for the proposed Termination for Cause and after the Executive has been provided an opportunity to be heard before a meeting of the Board held upon reasonable notice to all Directors; provided, however, that a Termination for Cause shall not include a termination attributable to: (i) bad judgment or negligence on the part of the Executive other than habitual negligence; or (ii) an act or omission believed by the Executive in good faith to have been in, or not opposed to, the best interests of the Company and reasonably believed by the Executive to be lawful. C. "Voluntary Termination" shall be any termination of the --------------------- Executive's employment with the Company other than an Involuntary Termination or a Termination for Cause. SECTION TWO EMPLOYMENT ---------- The Company hereby employs Executive as its Corporate Vice President, General Counsel and Secretary. Executive's day-to-day reporting responsibilities shall be to the Company's Chief Executive Officer. Subject to SECTION EIGHT, the Company may modify or realign Executive's duties and responsibilities as it deems necessary during the term of this Agreement. SECTION THREE BEST EFFORTS OF EXECUTIVE ------------------------- Executive agrees that the Executive will at all times faithfully and to the best of the Executive's ability, experience and talent, perform all of the duties that may be required of or from the Executive pursuant to the express and implicit terms hereof. Executive acknowledges that the Executive is obligated to manage the business of the Company in a sound and businesslike manner and in material conformity with all laws and regulations governing the conduct of the business of the Company. 3 4 SECTION FOUR TERM ---- The term of this Agreement shall be three years beginning on February 1, 1997 and ending on January 31, 2000 (the "Term"). This Agreement may be extended for additional periods upon the mutual written agreement of the parties. SECTION FIVE COMPENSATION ------------ During the Term of this Agreement, Executive shall be entitled to the following: A. The Company shall pay Executive a minimum monthly base salary of $15,167.00, payable on the last day of each month. The base salary may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's monthly base salary shall not be less than the amount set forth above. B. The Company shall pay Executive a minimum annual bonus of $21,500.00, payable in October of each year. The annual bonus may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's annual bonus shall not be less than the amount set forth above. C. Executive shall be provided with an executive level benefit program including stock options and/or stock grants as determined by the Company. Any such stock options shall become immediately exercisable, and such stock grants shall vest immediately, upon Executive's Involuntary Termination during the Term of this Agreement. D. Executive shall be eligible for coverage under such pension plan, group health insurance plan, 401(k) plan, vacation, holiday and other programs or policies in effect from time to time for salaried Executives of the Company. SECTION SIX OLD RALCORP STOCK OPTIONS ------------------------- It is understood that Old Ralcorp previously granted Executive certain Non-Qualified Stock Options. It is further understood and agreed that Old Ralcorp paid Executive a lump sum payment that represents fair compensation for these Non-Qualified Stock Options. Executive understands and agrees that Executive received this lump sum payment in lieu of these options and that Executive forfeits all Old Ralcorp Non-Qualified Stock Options, and rights thereunder, which Executive had not exercised at the time Executive received the lump sum payment. 4 5 SECTION SEVEN CHANGE OF CONTROL ----------------- Contemporaneously with the execution of this Agreement, the Executive and the Company will enter into a Management Continuity Agreement providing benefits under certain circumstances in the event of a Change-in-Control of the Company, as defined in such Management Continuity Agreement. Such benefits will be in addition to those provided under this Agreement; provided, however, that any benefits paid under said Management Continuity Agreement shall be reduced by amounts paid hereunder in respect of periods after Executive's termination of employment following a Change-in-Control. Executive agrees that the previous Management Continuity Agreement entered into by Executive with Old Ralcorp is null and void and Executive releases any claims to benefits under the previous Management Continuity Agreement. SECTION EIGHT TERMINATION ----------- A. The Company reserves the right to terminate the employment of Executive at any time with or without cause. However, in the event of Executive's Involuntary Termination prior to January 31, 2000, Executive shall be entitled to the following: (i) payment within sixty (60) days after Executive's Involuntary Termination of Executive's minimum base salary under this Agreement for the remainder of the three-year term, in cash in a lump sum without discount or pro-ration; and (ii) payment within sixty (60) days after Executive's Involuntary Termination of the minimum annual bonuses which Executive would have been entitled to receive under this Agreement during the remainder of the three- year term, in cash in a lump sum without discount or pro-ration; and (iii) continuation for the remainder of the three-year term of the Executive's participation in each life, health, accident and disability plan in which the Executive was entitled to participate immediately prior to the Executive's termination, upon the same terms and conditions, including those with respect to spouses and dependents, applicable at such time; provided, however, that if the terms of any such benefit plan do not permit continued participation by the Executive, then the Company will arrange, at the Company's sole cost and expense, to provide the Executive a benefit substantially similar to, and no less favorable than, on an after-tax basis, the benefit the Executive was entitled to receive under such plan immediately prior the Executive's termination; provided further, however, that the benefit to be provided or payments to be made hereunder may be reduced by the benefits provided or payments made (in either case on an after-tax basis) by a subsequent employer for the same occurrence or event; and 5 6 (iv) payment in cash in a lump sum, within sixty (60) days after the Executive's termination, of the difference between the present values as of the date of the termination of (a) the benefits under the Company's Retirement Plan and Supplemental Retirement Plan which the Executive and the Executive's beneficiary, if applicable, would have been entitled to receive had the Executive remained employed by the Company at a compensation level equal to that provided in this Agreement for the entirety of the three-year term, and (b) the actual benefit, if any, to which the Executive and the Executive's beneficiary are entitled under the Retirement Plan and the Supplemental Retirement Plan. For purposes of this subparagraph, present value shall be calculated in accordance with Section 417(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"); no reduction factors for early retirement shall be applied in the calculation of benefits; and (v) payment, on a current basis, of any actual costs and expenses of litigation incurred by the Executive, including costs of investigation and reasonable attorney's fees, in the event the Executive is a party to any legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. B. The Executive may file with the Secretary or any Assistant Secretary of the Company a written designation of a beneficiary or contingent beneficiaries to receive the payments described above in the event of the Executive's death following the Executive's Involuntary Termination but prior to payment by the Company. The Executive may from time to time revoke or change any such designation of beneficiary and any designation of beneficiary pursuant to this Agreement shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Company shall be in doubt as to the right of any such beneficiary to receive such payments, it may determine to pay such amounts to the legal representative of the Executive, in which case the Company shall not be under any further liability to anyone. In the event that such designated beneficiary or legal representative becomes a party to a legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's estate, legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, the Company shall pay their actual costs and expenses of such litigation, including costs of investigation and reasonable attorneys' fees, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that the Company shall not be required to pay such costs and expenses in connection with litigation to determine the proper payee, among two or more claimants, of the payments pursuant to this Agreement. 6 7 C. In the event of Executive's Voluntary Termination or Termination for Cause, Executive shall not be entitled to receive any of the pay or benefits that would have been provided pursuant to this Agreement except for pay already earned and benefits already vested at the time of such termination. D. In the event that Executive's employment is terminated for any reason during the Term of this Agreement, Executive shall not be eligible to participate in any other severance pay plan established by the Company for its Executives unless such severance pay plan provides benefits of greater value in the aggregate than those available under this Agreement, in which case Executive shall be entitled to benefits under such severance pay plan but not under this Agreement. SECTION NINE CONFIDENTIALITY --------------- Executive agrees that, in addition to any other limitations contained in this Agreement, regardless of the circumstances of Executive's termination of employment, Executive will not take, or communicate or disclose to any person, firm, corporation or other entity, any information relating to the Company's customer lists, prices, trade secrets, methods, systems, advertising, or any other confidential knowledge or secrets that Executive might from time to time acquire with respect to the business of the Company or any of its affiliates or subsidiaries, unless Executive obtains written consent of the Company. Executive also specifically acknowledges the continued validity and effect of any Agreement as to Confidentiality and Inventions previously signed by Executive and that the terms of any such agreement are incorporated into this Agreement by this reference. SECTION TEN NON-COMPETITION --------------- In the event Executive's employment terminates pursuant to SECTION EIGHT, Executive will not, for the duration of this Agreement, on Executive's own behalf, or on behalf of any other person, firm, partnership or corporation, engage in the branded baby food business as either a proprietor, officer, director, partner, employee or consultant. 7 8 SECTION ELEVEN ARBITRATION ----------- As additional consideration for this Agreement, Executive agrees that any differences, claims, or matters in dispute arising between the Company and Executive out of or in connection with the Executive's employment or the termination of the Executive's employment by the Company including, but not limited to the terms and conditions of this Agreement, allegations of wrongful termination, allegations of employment discrimination or allegations of discriminatory or retaliatory discharge under any federal, state or local discrimination law shall be submitted by them to arbitration by the American Arbitration Association, or its successor, and the determination of the American Arbitration Association, or its successor, shall be final and absolute. The arbitrator shall be governed by the duly promulgated rules and regulations of the American Arbitration Association, or its successor, and the pertinent provisions of the laws of the State of Missouri relating to arbitration. The decision of the arbitrator may be entered as a judgment in any court of the State of Missouri or elsewhere. SECTION TWELVE MISCELLANEOUS PROVISIONS ------------------------ A. The Company shall be entitled to withhold from any payments made pursuant to this Agreement, including SECTION EIGHT hereof, any federal, state or local taxes required to be withheld by law or regulation. B. This Agreement represents the entire agreement between the parties and any prior understandings or representations of any kind preceding the effective date of this Agreement shall not be binding on either party except to the extent incorporated into this Agreement. This Agreement shall not be altered, amended or modified except in writing signed by the Chief Executive Officer of the Company and by the Executive. C. This Agreement shall be binding upon and shall inure to the benefit of the assigns, heirs, legatees or personal representatives of Executive and the successors or assigns of the Company. D. This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. The Company may not assign this Agreement other than to a successor to all or substantially all of the business and/or assets of the Company. Neither this Agreement nor any right or 8 9 interest hereunder shall be assignable or transferable by Executive, the Executive's beneficiaries or Executive's legal representatives without the Company's prior written consent; provided, however, that nothing in this Section shall preclude (i) Executive from designating a beneficiary to receive any benefit payable hereunder upon the Executive's death, or (ii) the executors, administrators, or other legal representatives of the Executive's estate from assigning or transferring any rights hereunder to the person or persons entitled thereunto. E. The headings of sections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. F. This Agreement shall be construed according to the laws of the State of Missouri without giving effect to the conflict of laws provisions thereof. G. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a wavier of such term or condition for the future or of any act other than that specifically waived. H. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of the Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. The parties have entered into this Agreement based solely upon the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have executed this Agreement on the --------- day of April, 1997. RALCORP HOLDINGS, INC. By: - ---------------------------- ------------------------- Executive J. R. Micheletto Chief Executive Officer and President 9 EX-10.7 9 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.7 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement (the "Agreement") made between James A. Nichols, (the "Executive") and Ralcorp Holdings, Inc., a corporation with its principal place of business at 800 Market Street, St. Louis, Missouri, and its subsidiaries and affiliates (the "Company"), WITNESSETH THAT: RECITALS -------- WHEREAS, the Company was incorporated on October 23, 1996; and WHEREAS, the Company was spun-off from its former parent company, Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and WHEREAS, Executive is presently employed by the Company and has substantial experience as an executive level manager for the Company; and WHEREAS, the Company desires to secure Executive's employment for a definite period of time; and WHEREAS, Executive desires to be employed by the Company in the executive capacity described in SECTION TWO of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the Company and Executive hereby agree as follows: SECTION ONE DEFINITIONS ----------- The following terms shall have the meanings set forth below: A. "Involuntary Termination" shall be any termination of the ----------------------- Executive's employment with the Company, other than a Termination for Cause, (a) to which the Executive objects orally or in writing or (b) which follows any of the following: (i) without the express written consent of the Executive, (a) the assignment of the Executive to any duties materially inconsistent with the Executive's positions, duties, responsibilities and status on the effective date of this Agreement or (b) a material change in the Executive's titles, offices, or reporting responsibilities as in effect on the effective date of this Agreement and with respect to either (a) or (b) the situation is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; provided, however, (a) and (b) herein shall not constitute an "Involuntary Termination" if either situation is in connection with the Executive's death or disability; or 2 (ii) without the express written consent of the Executive, a reduction in the Executive's annual salary or opportunity for total annual compensation, in effect on the effective date of this Agreement which is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (iii) without the express written consent of the Executive, the Executive is required to be based more than 100 miles from Executive's office location on the effective date of this Agreement, except for required travel on business to an extent substantially consistent with the business travel obligations of the Executive on the effective date of this Agreement; or (iv) without the express written consent of the Executive, (a) failure by the Company to continue in effect benefit and compensation plans which may include a stock ownership plan, a stock purchase plan, a stock option plan, a defined benefit pension plan, a defined contribution pension plan, a life insurance plan, a health and accident plan, and/or a disability plan which are, in the aggregate, substantially equivalent in value to those in which the Executive is participating or entitled to participate on the effective date of this Agreement; or (b) the taking of any action by the Company that would (1) adversely affect the participation in or materially reduce the aggregate value to the Executive of benefits under such plans either in terms of the amount of benefits provided or the level of the Executive's participation relative to other participants; or (2) cause a failure to provide the number of paid vacation days to which the Executive was then entitled in accordance with the Company's normal vacation policy in effect on the effective date of this Agreement, which in either situation (a) or (b) is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (v) the liquidation, dissolution, consolidation, or merger of the Company or transfer of all or substantially all of its assets, unless a successor or successors (by merger, consolidation, or otherwise) to which all or a significant portion of its assets have been transferred expressly assumes in writing all duties and obligations of the Company as here set forth. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to any circumstances set forth above. B. "Termination for Cause" shall be a termination because of: --------------------- (i) the continued failure by the Executive to devote reasonable time and effort to the performance of the Executive's duties (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) after written demand therefor has been delivered to the Executive by the Company that specifically identifies how the Executive has not devoted reasonable time and effort to the performance of the Executive's duties; or 2 3 (ii) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise; or (iii) the Executive's conviction of a felony or a crime involving moral turpitude; in any case as determined by the Board of Directors of the Company (the "Board") upon the good faith vote of not less than a majority of the Directors then in office, after reasonable notice to the Executive specifying in writing the basis or bases for the proposed Termination for Cause and after the Executive has been provided an opportunity to be heard before a meeting of the Board held upon reasonable notice to all Directors; provided, however, that a Termination for Cause shall not include a termination attributable to: (i) bad judgment or negligence on the part of the Executive other than habitual negligence; or (ii) an act or omission believed by the Executive in good faith to have been in, or not opposed to, the best interests of the Company and reasonably believed by the Executive to be lawful. C. "Voluntary Termination" shall be any termination of the --------------------- Executive's employment with the Company other than an Involuntary Termination or a Termination for Cause. SECTION TWO EMPLOYMENT ---------- The Company hereby employs Executive as its Corporate Vice President and President of Ralston Foods. Executive's day-to-day reporting responsibilities shall be to the Company's Chief Executive Officer. Subject to SECTION EIGHT, the Company may modify or realign Executive's duties and responsibilities as it deems necessary during the term of this Agreement. SECTION THREE BEST EFFORTS OF EXECUTIVE ------------------------- Executive agrees that the Executive will at all times faithfully and to the best of the Executive's ability, experience and talent, perform all of the duties that may be required of or from the Executive pursuant to the express and implicit terms hereof. Executive acknowledges that the Executive is obligated to manage the business of the Company in a sound and businesslike manner and in material conformity with all laws and regulations governing the conduct of the business of the Company. 3 4 SECTION FOUR TERM ---- The term of this Agreement shall be three years beginning on February 1, 1997 and ending on January 31, 2000 (the "Term"). This Agreement may be extended for additional periods upon the mutual written agreement of the parties. SECTION FIVE COMPENSATION ------------ During the Term of this Agreement, Executive shall be entitled to the following: A. The Company shall pay Executive a minimum monthly base salary of $15,000.00, payable on the last day of each month. The base salary may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's monthly base salary shall not be less than the amount set forth above. B. The Company shall pay Executive a minimum annual bonus of $45,000.00, payable in October of each year. The annual bonus may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's annual bonus shall not be less than the amount set forth above. C. Executive shall be provided with an executive level benefit program including stock options and/or stock grants as determined by the Company. Any such stock options shall become immediately exercisable, and such stock grants shall vest immediately, upon Executive's Involuntary Termination during the Term of this Agreement. D. Executive shall be eligible for coverage under such pension plan, group health insurance plan, 401(k) plan, vacation, holiday and other programs or policies in effect from time to time for salaried Executives of the Company. SECTION SIX OLD RALCORP STOCK OPTIONS ------------------------- It is understood that Old Ralcorp previously granted Executive certain Non-Qualified Stock Options. It is further understood and agreed that Old Ralcorp paid Executive a lump sum payment that represents fair compensation for these Non-Qualified Stock Options. Executive understands and agrees that Executive received this lump sum payment in lieu of these options and that Executive forfeits all Old Ralcorp Non-Qualified Stock Options, and rights thereunder, which Executive had not exercised at the time Executive received the lump sum payment. 4 5 SECTION SEVEN CHANGE OF CONTROL ----------------- Contemporaneously with the execution of this Agreement, the Executive and the Company will enter into a Management Continuity Agreement providing benefits under certain circumstances in the event of a Change-in-Control of the Company, as defined in such Management Continuity Agreement. Such benefits will be in addition to those provided under this Agreement; provided, however, that any benefits paid under said Management Continuity Agreement shall be reduced by amounts paid hereunder in respect of periods after Executive's termination of employment following a Change-in-Control. Executive agrees that the previous Management Continuity Agreement entered into by Executive with Old Ralcorp is null and void and Executive releases any claims to benefits under the previous Management Continuity Agreement. SECTION EIGHT TERMINATION ----------- A. The Company reserves the right to terminate the employment of Executive at any time with or without cause. However, in the event of Executive's Involuntary Termination prior to January 31, 2000, Executive shall be entitled to the following: (i) payment within sixty (60) days after Executive's Involuntary Termination of Executive's minimum base salary under this Agreement for the remainder of the three-year term, in cash in a lump sum without discount or pro-ration; and (ii) payment within sixty (60) days after Executive's Involuntary Termination of the minimum annual bonuses which Executive would have been entitled to receive under this Agreement during the remainder of the three- year term, in cash in a lump sum without discount or pro-ration; and (iii) continuation for the remainder of the three-year term of the Executive's participation in each life, health, accident and disability plan in which the Executive was entitled to participate immediately prior to the Executive's termination, upon the same terms and conditions, including those with respect to spouses and dependents, applicable at such time; provided, however, that if the terms of any such benefit plan do not permit continued participation by the Executive, then the Company will arrange, at the Company's sole cost and expense, to provide the Executive a benefit substantially similar to, and no less favorable than, on an after-tax basis, the benefit the Executive was entitled to receive under such plan immediately prior the Executive's termination; provided further, however, that the benefit to be provided or payments to be made hereunder may be reduced by the benefits provided or payments made (in either case on an after-tax basis) by a subsequent employer for the same occurrence or event; and 5 6 (iv) payment in cash in a lump sum, within sixty (60) days after the Executive's termination, of the difference between the present values as of the date of the termination of (a) the benefits under the Company's Retirement Plan and Supplemental Retirement Plan which the Executive and the Executive's beneficiary, if applicable, would have been entitled to receive had the Executive remained employed by the Company at a compensation level equal to that provided in this Agreement for the entirety of the three-year term, and (b) the actual benefit, if any, to which the Executive and the Executive's beneficiary are entitled under the Retirement Plan and the Supplemental Retirement Plan. For purposes of this subparagraph, present value shall be calculated in accordance with Section 417(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"); no reduction factors for early retirement shall be applied in the calculation of benefits; and (v) payment, on a current basis, of any actual costs and expenses of litigation incurred by the Executive, including costs of investigation and reasonable attorney's fees, in the event the Executive is a party to any legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. B. The Executive may file with the Secretary or any Assistant Secretary of the Company a written designation of a beneficiary or contingent beneficiaries to receive the payments described above in the event of the Executive's death following the Executive's Involuntary Termination but prior to payment by the Company. The Executive may from time to time revoke or change any such designation of beneficiary and any designation of beneficiary pursuant to this Agreement shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Company shall be in doubt as to the right of any such beneficiary to receive such payments, it may determine to pay such amounts to the legal representative of the Executive, in which case the Company shall not be under any further liability to anyone. In the event that such designated beneficiary or legal representative becomes a party to a legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's estate, legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, the Company shall pay their actual costs and expenses of such litigation, including costs of investigation and reasonable attorneys' fees, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that the Company shall not be required to pay such costs and expenses in connection with litigation to determine the proper payee, among two or more claimants, of the payments pursuant to this Agreement. 6 7 C. In the event of Executive's Voluntary Termination or Termination for Cause, Executive shall not be entitled to receive any of the pay or benefits that would have been provided pursuant to this Agreement except for pay already earned and benefits already vested at the time of such termination. D. In the event that Executive's employment is terminated for any reason during the Term of this Agreement, Executive shall not be eligible to participate in any other severance pay plan established by the Company for its Executives unless such severance pay plan provides benefits of greater value in the aggregate than those available under this Agreement, in which case Executive shall be entitled to benefits under such severance pay plan but not under this Agreement. SECTION NINE CONFIDENTIALITY --------------- Executive agrees that, in addition to any other limitations contained in this Agreement, regardless of the circumstances of Executive's termination of employment, Executive will not take, or communicate or disclose to any person, firm, corporation or other entity, any information relating to the Company's customer lists, prices, trade secrets, methods, systems, advertising, or any other confidential knowledge or secrets that Executive might from time to time acquire with respect to the business of the Company or any of its affiliates or subsidiaries, unless Executive obtains written consent of the Company. Executive also specifically acknowledges the continued validity and effect of any Agreement as to Confidentiality and Inventions previously signed by Executive and that the terms of any such agreement are incorporated into this Agreement by this reference. SECTION TEN NON-COMPETITION --------------- In the event Executive's employment terminates pursuant to SECTION EIGHT, Executive will not, for the duration of this Agreement, on Executive's own behalf, or on behalf of any other person, firm, partnership or corporation, engage in the private label cereal or branded baby food businesses as either a proprietor, officer, director, partner, employee or consultant. 7 8 SECTION ELEVEN ARBITRATION ----------- As additional consideration for this Agreement, Executive agrees that any differences, claims, or matters in dispute arising between the Company and Executive out of or in connection with the Executive's employment or the termination of the Executive's employment by the Company including, but not limited to the terms and conditions of this Agreement, allegations of wrongful termination, allegations of employment discrimination or allegations of discriminatory or retaliatory discharge under any federal, state or local discrimination law shall be submitted by them to arbitration by the American Arbitration Association, or its successor, and the determination of the American Arbitration Association, or its successor, shall be final and absolute. The arbitrator shall be governed by the duly promulgated rules and regulations of the American Arbitration Association, or its successor, and the pertinent provisions of the laws of the State of Missouri relating to arbitration. The decision of the arbitrator may be entered as a judgment in any court of the State of Missouri or elsewhere. SECTION TWELVE MISCELLANEOUS PROVISIONS ------------------------ A. The Company shall be entitled to withhold from any payments made pursuant to this Agreement, including SECTION EIGHT hereof, any federal, state or local taxes required to be withheld by law or regulation. B. This Agreement represents the entire agreement between the parties and any prior understandings or representations of any kind preceding the effective date of this Agreement shall not be binding on either party except to the extent incorporated into this Agreement. This Agreement shall not be altered, amended or modified except in writing signed by the Chief Executive Officer of the Company and by the Executive. C. This Agreement shall be binding upon and shall inure to the benefit of the assigns, heirs, legatees or personal representatives of Executive and the successors or assigns of the Company. D. This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. The Company may not assign this Agreement other than to a successor to all or substantially all of the business and/or assets of the Company. Neither this Agreement nor any right or 8 9 interest hereunder shall be assignable or transferable by Executive, the Executive's beneficiaries or Executive's legal representatives without the Company's prior written consent; provided, however, that nothing in this Section shall preclude (i) Executive from designating a beneficiary to receive any benefit payable hereunder upon the Executive's death, or (ii) the executors, administrators, or other legal representatives of the Executive's estate from assigning or transferring any rights hereunder to the person or persons entitled thereunto. E. The headings of sections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. F. This Agreement shall be construed according to the laws of the State of Missouri without giving effect to the conflict of laws provisions thereof. G. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a wavier of such term or condition for the future or of any act other than that specifically waived. H. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of the Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. The parties have entered into this Agreement based solely upon the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have executed this Agreement on the --------- day of May, 1997. RALCORP HOLDINGS, INC. - ---------------------------- By:------------------------- Executive J. R. Micheletto Chief Executive Officer and President 9 EX-10.8 10 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.8 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement (the "Agreement") made between David P. Skarie, (the "Executive") and Ralcorp Holdings, Inc., a corporation with its principal place of business at 800 Market Street, St. Louis, Missouri, and its subsidiaries and affiliates (the "Company"), WITNESSETH THAT: RECITALS -------- WHEREAS, the Company was incorporated on October 23, 1996; and WHEREAS, the Company was spun-off from its former parent company, Ralcorp Holdings, Inc. ("Old Ralcorp") on January 31, 1997; and WHEREAS, Executive is presently employed by the Company and has substantial experience as an executive level manager for the Company; and WHEREAS, the Company desires to secure Executive's employment for a definite period of time; and WHEREAS, Executive desires to be employed by the Company in the executive capacity described in SECTION TWO of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the Company and Executive hereby agree as follows: SECTION ONE DEFINITIONS ----------- The following terms shall have the meanings set forth below: A. "Involuntary Termination" shall be any termination of the ----------------------- Executive's employment with the Company, other than a Termination for Cause, (a) to which the Executive objects orally or in writing or (b) which follows any of the following: (i) without the express written consent of the Executive, (a) the assignment of the Executive to any duties materially inconsistent with the Executive's positions, duties, responsibilities and status on the effective date of this Agreement or (b) a material change in the Executive's titles, offices, or reporting responsibilities as in effect on the effective date of this Agreement and with respect to either (a) or (b) the situation is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; provided, however, (a) and (b) herein shall not constitute an "Involuntary Termination" if either situation is in connection with the Executive's death or disability; or 2 (ii) without the express written consent of the Executive, a reduction in the Executive's annual salary or opportunity for total annual compensation, in effect on the effective date of this Agreement which is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (iii) without the express written consent of the Executive, the Executive is required to be based more than 100 miles from Executive's office location on the effective date of this Agreement, except for required travel on business to an extent substantially consistent with the business travel obligations of the Executive on the effective date of this Agreement; or (iv) without the express written consent of the Executive, (a) failure by the Company to continue in effect benefit and compensation plans which may include a stock ownership plan, a stock purchase plan, a stock option plan, a defined benefit pension plan, a defined contribution pension plan, a life insurance plan, a health and accident plan, and/or a disability plan which are, in the aggregate, substantially equivalent in value to those in which the Executive is participating or entitled to participate on the effective date of this Agreement; or (b) the taking of any action by the Company that would (1) adversely affect the participation in or materially reduce the aggregate value to the Executive of benefits under such plans either in terms of the amount of benefits provided or the level of the Executive's participation relative to other participants; or (2) cause a failure to provide the number of paid vacation days to which the Executive was then entitled in accordance with the Company's normal vacation policy in effect on the effective date of this Agreement, which in either situation (a) or (b) is not remedied within thirty (30) days after receipt by the Company of written notice by the Executive; or (v) the liquidation, dissolution, consolidation, or merger of the Company or transfer of all or substantially all of its assets, unless a successor or successors (by merger, consolidation, or otherwise) to which all or a significant portion of its assets have been transferred expressly assumes in writing all duties and obligations of the Company as here set forth. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to any circumstances set forth above. B. "Termination for Cause" shall be a termination because of: --------------------- (i) the continued failure by the Executive to devote reasonable time and effort to the performance of the Executive's duties (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) after written demand therefor has been delivered to the Executive by the Company that specifically identifies how the Executive has not devoted reasonable time and effort to the performance of the Executive's duties; or 2 3 (ii) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise; or (iii) the Executive's conviction of a felony or a crime involving moral turpitude; in any case as determined by the Board of Directors of the Company (the "Board") upon the good faith vote of not less than a majority of the Directors then in office, after reasonable notice to the Executive specifying in writing the basis or bases for the proposed Termination for Cause and after the Executive has been provided an opportunity to be heard before a meeting of the Board held upon reasonable notice to all Directors; provided, however, that a Termination for Cause shall not include a termination attributable to: (i) bad judgment or negligence on the part of the Executive other than habitual negligence; or (ii) an act or omission believed by the Executive in good faith to have been in, or not opposed to, the best interests of the Company and reasonably believed by the Executive to be lawful. C. "Voluntary Termination" shall be any termination of the --------------------- Executive's employment with the Company other than an Involuntary Termination or a Termination for Cause. SECTION TWO EMPLOYMENT ---------- The Company hereby employs Executive as its Corporate Vice President and Director of Customer Development. Executive's day-to-day reporting responsibilities shall be to the Company's Chief Executive Officer. Subject to SECTION EIGHT, the Company may modify or realign Executive's duties and responsibilities as it deems necessary during the term of this Agreement. SECTION THREE BEST EFFORTS OF EXECUTIVE ------------------------- Executive agrees that the Executive will at all times faithfully and to the best of the Executive's ability, experience and talent, perform all of the duties that may be required of or from the Executive pursuant to the express and implicit terms hereof. Executive acknowledges that the Executive is obligated to manage the business of the Company in a sound and businesslike manner and in material conformity with all laws and regulations governing the conduct of the business of the Company. 3 4 SECTION FOUR TERM ---- The term of this Agreement shall be three years beginning on February 1, 1997 and ending on January 31, 2000 (the "Term"). This Agreement may be extended for additional periods upon the mutual written agreement of the parties. SECTION FIVE COMPENSATION ------------ During the Term of this Agreement, Executive shall be entitled to the following: A. The Company shall pay Executive a minimum monthly base salary of $12,667.00, payable on the last day of each month. The base salary may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's monthly base salary shall not be less than the amount set forth above. B. The Company shall pay Executive a minimum annual bonus of $27,500.00, payable in October of each year. The annual bonus may be increased by the Company at any time during the Term of this Agreement; provided, however, that until January 31, 2000, Executive's annual bonus shall not be less than the amount set forth above. C. Executive shall be provided with an executive level benefit program including stock options and/or stock grants as determined by the Company. Any such stock options shall become immediately exercisable, and such stock grants shall vest immediately, upon Executive's Involuntary Termination during the Term of this Agreement. D. Executive shall be eligible for coverage under such pension plan, group health insurance plan, 401(k) plan, vacation, holiday and other programs or policies in effect from time to time for salaried Executives of the Company. SECTION SIX OLD RALCORP STOCK OPTIONS ------------------------- It is understood that Old Ralcorp previously granted Executive certain Non-Qualified Stock Options. It is further understood and agreed that Old Ralcorp paid Executive a lump sum payment that represents fair compensation for these Non-Qualified Stock Options. Executive understands and agrees that Executive received this lump sum payment in lieu of these options and that Executive forfeits all Old Ralcorp Non-Qualified Stock Options, and rights thereunder, which Executive had not exercised at the time Executive received the lump sum payment. 4 5 SECTION SEVEN CHANGE OF CONTROL ----------------- Contemporaneously with the execution of this Agreement, the Executive and the Company will enter into a Management Continuity Agreement providing benefits under certain circumstances in the event of a Change-in-Control of the Company, as defined in such Management Continuity Agreement. Such benefits will be in addition to those provided under this Agreement; provided, however, that any benefits paid under said Management Continuity Agreement shall be reduced by amounts paid hereunder in respect of periods after Executive's termination of employment following a Change-in-Control. Executive agrees that the previous Management Continuity Agreement entered into by Executive with Old Ralcorp is null and void and Executive releases any claims to benefits under the previous Management Continuity Agreement. SECTION EIGHT TERMINATION ----------- A. The Company reserves the right to terminate the employment of Executive at any time with or without cause. However, in the event of Executive's Involuntary Termination prior to January 31, 2000, Executive shall be entitled to the following: (i) payment within sixty (60) days after Executive's Involuntary Termination of Executive's minimum base salary under this Agreement for the remainder of the three-year term, in cash in a lump sum without discount or pro-ration; and (ii) payment within sixty (60) days after Executive's Involuntary Termination of the minimum annual bonuses which Executive would have been entitled to receive under this Agreement during the remainder of the three-year term, in cash in a lump sum without discount or pro-ration; and (iii) continuation for the remainder of the three-year term of the Executive's participation in each life, health, accident and disability plan in which the Executive was entitled to participate immediately prior to the Executive's termination, upon the same terms and conditions, including those with respect to spouses and dependents, applicable at such time; provided, however, that if the terms of any such benefit plan do not permit continued participation by the Executive, then the Company will arrange, at the Company's sole cost and expense, to provide the Executive a benefit substantially similar to, and no less favorable than, on an after-tax basis, the benefit the Executive was entitled to receive under such plan immediately prior the Executive's termination; provided further, however, that the benefit to be provided or payments to be made hereunder may be reduced by the benefits provided or payments made (in either case on an after-tax basis) by a subsequent employer for the same occurrence or event; and 5 6 (iv) payment in cash in a lump sum, within sixty (60) days after the Executive's termination, of the difference between the present values as of the date of the termination of (a) the benefits under the Company's Retirement Plan and Supplemental Retirement Plan which the Executive and the Executive's beneficiary, if applicable, would have been entitled to receive had the Executive remained employed by the Company at a compensation level equal to that provided in this Agreement for the entirety of the three-year term, and (b) the actual benefit, if any, to which the Executive and the Executive's beneficiary are entitled under the Retirement Plan and the Supplemental Retirement Plan. For purposes of this subparagraph, present value shall be calculated in accordance with Section 417(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"); no reduction factors for early retirement shall be applied in the calculation of benefits; and (v) payment, on a current basis, of any actual costs and expenses of litigation incurred by the Executive, including costs of investigation and reasonable attorney's fees, in the event the Executive is a party to any legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. B. The Executive may file with the Secretary or any Assistant Secretary of the Company a written designation of a beneficiary or contingent beneficiaries to receive the payments described above in the event of the Executive's death following the Executive's Involuntary Termination but prior to payment by the Company. The Executive may from time to time revoke or change any such designation of beneficiary and any designation of beneficiary pursuant to this Agreement shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Company shall be in doubt as to the right of any such beneficiary to receive such payments, it may determine to pay such amounts to the legal representative of the Executive, in which case the Company shall not be under any further liability to anyone. In the event that such designated beneficiary or legal representative becomes a party to a legal action to enforce or to recover damages for breach of this Agreement, or to recover or recoup from the Executive or the Executive's estate, legal representative or beneficiary any amounts paid under or pursuant to this Agreement, regardless of the outcome of such litigation, the Company shall pay their actual costs and expenses of such litigation, including costs of investigation and reasonable attorneys' fees, plus interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that the Company shall not be required to pay such costs and expenses in connection with litigation to determine the proper payee, among two or more claimants, of the payments pursuant to this Agreement. 6 7 C. In the event of Executive's Voluntary Termination or Termination for Cause, Executive shall not be entitled to receive any of the pay or benefits that would have been provided pursuant to this Agreement except for pay already earned and benefits already vested at the time of such termination. D. In the event that Executive's employment is terminated for any reason during the Term of this Agreement, Executive shall not be eligible to participate in any other severance pay plan established by the Company for its Executives unless such severance pay plan provides benefits of greater value in the aggregate than those available under this Agreement, in which case Executive shall be entitled to benefits under such severance pay plan but not under this Agreement. SECTION NINE CONFIDENTIALITY --------------- Executive agrees that, in addition to any other limitations contained in this Agreement, regardless of the circumstances of Executive's termination of employment, Executive will not take, or communicate or disclose to any person, firm, corporation or other entity, any information relating to the Company's customer lists, prices, trade secrets, methods, systems, advertising, or any other confidential knowledge or secrets that Executive might from time to time acquire with respect to the business of the Company or any of its affiliates or subsidiaries, unless Executive obtains written consent of the Company. Executive also specifically acknowledges the continued validity and effect of any Agreement as to Confidentiality and Inventions previously signed by Executive and that the terms of any such agreement are incorporated into this Agreement by this reference. SECTION TEN NON-COMPETITION --------------- In the event Executive's employment terminates pursuant to SECTION EIGHT, Executive will not, for the duration of this Agreement, on Executive's own behalf, or on behalf of any other person, firm, partnership or corporation, engage in the private label cereal business as either a proprietor, officer, director, partner, employee or consultant. 7 8 SECTION ELEVEN ARBITRATION ----------- As additional consideration for this Agreement, Executive agrees that any differences, claims, or matters in dispute arising between the Company and Executive out of or in connection with the Executive's employment or the termination of the Executive's employment by the Company including, but not limited to the terms and conditions of this Agreement, allegations of wrongful termination, allegations of employment discrimination or allegations of discriminatory or retaliatory discharge under any federal, state or local discrimination law shall be submitted by them to arbitration by the American Arbitration Association, or its successor, and the determination of the American Arbitration Association, or its successor, shall be final and absolute. The arbitrator shall be governed by the duly promulgated rules and regulations of the American Arbitration Association, or its successor, and the pertinent provisions of the laws of the State of Missouri relating to arbitration. The decision of the arbitrator may be entered as a judgment in any court of the State of Missouri or elsewhere. SECTION TWELVE MISCELLANEOUS PROVISIONS ------------------------ A. The Company shall be entitled to withhold from any payments made pursuant to this Agreement, including SECTION EIGHT hereof, any federal, state or local taxes required to be withheld by law or regulation. B. This Agreement represents the entire agreement between the parties and any prior understandings or representations of any kind preceding the effective date of this Agreement shall not be binding on either party except to the extent incorporated into this Agreement. This Agreement shall not be altered, amended or modified except in writing signed by the Chief Executive Officer of the Company and by the Executive. C. This Agreement shall be binding upon and shall inure to the benefit of the assigns, heirs, legatees or personal representatives of Executive and the successors or assigns of the Company. D. This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. The Company may not assign this Agreement other than to a successor to all or substantially all of the business and/or assets of the Company. Neither this Agreement nor any right or 8 9 interest hereunder shall be assignable or transferable by Executive, the Executive's beneficiaries or Executive's legal representatives without the Company's prior written consent; provided, however, that nothing in this Section shall preclude (i) Executive from designating a beneficiary to receive any benefit payable hereunder upon the Executive's death, or (ii) the executors, administrators, or other legal representatives of the Executive's estate from assigning or transferring any rights hereunder to the person or persons entitled thereunto. E. The headings of sections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. F. This Agreement shall be construed according to the laws of the State of Missouri without giving effect to the conflict of laws provisions thereof. G. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a wavier of such term or condition for the future or of any act other than that specifically waived. H. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of the Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. The parties have entered into this Agreement based solely upon the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have executed this Agreement on the --------- day of May, 1997. RALCORP HOLDINGS, INC. By: - ---------------------------- ------------------------- Executive J. R. Micheletto Chief Executive Officer and President 9 EX-27 11 FINANCIAL DATA SCHEDULE
5 1,000,000 9-MOS SEP-30-1997 OCT-01-1996 JUN-30-1997 7 0 55 1 73 146 274 118 413 79 0 0 0 0 281 413 595 595 328 328 227 0 8 533 6 527 0 0 0 527 15.98 15.98 EXCLUDED FROM THE ABOVE COST/EXPENSE INFORMATION ARE RESTRUCTURING CHARGES OF $23, PRE-TAX. EXCLUDED FROM THE ABOVE REVENUES ARE A TAX-FREE GAIN ON SALE OF $517 AND EQUITY EARNINGS OF $8, PRE-TAX.
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