EXHIBIT 10.18
AMENDED AND RESTATED
MANAGEMENT CONTINUITY AGREEMENT
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AGREEMENT between Ralcorp Holdings, Inc., a Missouri corporation
("Ralcorp"), and Xxx X. Xxxxxxxxxx (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; and
WHEREAS, the Board has decided to remove the restrictions on payments made
after the executive attains the age of 65 and to address certain tax matters.
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
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have the meanings set forth below:
a. "Accounting Firm" as defined in Section 7.
b. "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.
c. "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.
(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 the Company).
d. "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.
e. "Code" shall mean the Internal Revenue Code of 1986, as amended.
f. "Company" shall mean Ralcorp Holdings, Inc. and its wholly owned
subsidiaries.
g. "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.
h. "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 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.
i. "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.
j. "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.
k. "Excise Tax" as defined in Section 7.
l. "Gross-Up Payment" as defined in Section 7.
m. "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 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.
n. "Normal Retirement Date" shall be the date on which the Executive
attains age 65.
o. "Payment" as defined in Section 7.
p. The "Payment Period" shall be the following period commencing with the
first day of the month following that in which a Qualifying Termination occurs:
(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 -- 36 months;
(ii) if the Qualifying Termination is an Involuntary Termination that
occurs at any time during the third year following the Change in Control --
24 months; or
(iii) if the Qualifying Termination is a Voluntary Termination that
occurs at any time during the three years following the Change in Control
-- 12 months.
q. "Qualifying Termination" shall be the Executive's Voluntary Termination
or Involuntary Termination of employment with the Company except any termination
because of the Executive's death, retirement at or after the Executive's Normal
Retirement Date or Termination for Cause. "Qualifying Termination" shall not
include any change in the Executive's employment status due to Disability.
r. "Retirement Plan" means the Ralcorp Holdings, Inc. Retirement Plan or
any successor qualified plan, as amended from time to time.
s. "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.
t. "Supplemental Plan" means the Ralcorp Holdings, Inc. Supplemental
Retirement Plan as amended from time to time.
u. "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
(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 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; 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).
v. "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
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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
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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
Qualifying 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 Discount Rate;
b. Continuation during the Payment Period 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 Change
in Control, 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 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 subsequent 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 Executive'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 calculation 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.
The Executive may file with the Secretary or any Assistant Secretary of
Ralcorp a written designation of a beneficiary 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 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 described in subparagraphs (a) and (c).
4. Successors to Company; Binding Effect; Assignment. This Agreement shall
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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
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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
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discharged unless such modification, waiver or discharge is agreed to in 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.
7. Certain Additional Payments by the Company.
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a. Anything in this Agreement to the contrary notwithstanding and except as
set forth below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement, any Stock based award or otherwise, but determined without regard to
any additional payments required under this Section 7) (collectively, a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
b. Subject to the provisions of Section 7(c), all determinations required
to be made under this Section 7, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers LLP or such other certified public accounting firm as may
be designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 7, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
c. The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim.
Provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 7(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
d. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 7(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 7(c) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
8. Taxes; Set-off. All payments to be made to the Executive under this
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Agreement will be subject to required withholding of federal, state and local
income and employment taxes. The foregoing, however, shall not be construed as
limiting the Company's obligations to make payments under Section 7. 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 or anyone else.
9. Severability. The invalidity and unenforceability of any particular
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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 unenforceable provision were omitted.
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
on the 15th day of March, 2001.
RALCORP HOLDINGS, INC.
By:
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Executive X. X. Xxxxxxxx
Secretary
