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EXHIBIT 10.3
MANAGEMENT CONTINUITY AGREEMENT
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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
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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.
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(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 "Xxxxxx 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
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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
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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:
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(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
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(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
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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
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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
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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.
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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 Xxxxx-
xxxx 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.
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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
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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
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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.
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7. Taxes; Set-off. All payments to be made to the
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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
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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. Xxxxxxxxxx
Chief Executive Officer
and President
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