RALCORP HOLDINGS INC /MO

On November 26, 2012, concurrently with our execution of an Agreement and Plan of Merger with ConAgra Foods, Inc., pursuant to which ConAgra Foods has agreed to acquire Ralcorp subject to the terms and conditions set forth in the Agreement and Plan of Merger, the corporate officers named in this report were, as part of a larger retention program for our employees, granted long-term incentive cash retention awards, which they received in lieu of equity and equity-based compensation awards that would have been granted to them in November 2012 in the ordinary course had we not entered into the Agreement and Plan of Merger with ConAgra Foods. The retention award amount for each corporate officer named in this report is as follows: Kevin J. Hunt – $2,500,000; Scott Monette – $1,000,000; Richard R. Koulouris – $900,000; and Charles G. Huber, Jr. – $900,000. These retention awards generally will vest and be paid one-third upon the completion of the merger, one-third six months after the completion of the merger and one-third one year after the completion of the merger. The retention awards are subject to continued employment through the applicable vesting date, except if the corporate officer’s employment is terminated at any time without cause (as defined in the severance plan in which the officer is a participant) or, upon or after a change of control, the officer resigns for “good reason,” prior to payment of any portion of the retention award, he shall, subject to a release of employment-related claims, be entitled to receive any unpaid installments of the award generally within 30 days after the date of termination.

Annual Incentive Awards. Historically, we have provided the corporate officers the opportunity to earn additional cash compensation through an annual cash bonus. Our corporate governance and compensation committee has exercised its judgment and discretion in determining whether to pay or award a cash bonus to a corporate officer. In determining the amount of each bonus, the committee has evaluated a variety of factors, including the financial performance of the corporate officer’s business unit relative to the business plan (including such measures as sales volume, revenues, costs, cash flow and operating profit); our overall financial performance (including the quality of strategic plans, organizational and management development, participation in evaluations of potential acquisitions and similar manifestations of individual performance); the corporate officer’s total compensation package; and the business environment for the corporate officer’s business unit. For fiscal 2012, the bonus target for our chief executive officer was equal to 100% of his base salary, and for each of the other officers named in this report the bonus target was equal to 60% of his base salary.

At the beginning of fiscal 2013, we adopted a program that provides our corporate officers with an opportunity to earn an annual incentive award that is paid in cash. For our chief executive officer, the annual incentive award target is equal to 120% of his base salary, and for each of the other officers named in this report the annual incentive award target is equal to 80% of his base salary. Potential payouts under the program range from 50% to 150% of the targeted awards depending upon the achievement of certain performance conditions. The annual incentive awards contain a threshold performance equal to 90% of targeted performance and a maximum performance equal to 110% of targeted performance. The committee has determined that the payout ranges and threshold and maximum performance levels are relatively consistent with a majority of the companies within our peer group and appropriately align our performance expectations with potential payouts.

Annual benefits are computed by multiplying the participant’s final average earnings (average of the participant’s five highest consecutive annual earnings during ten years prior to retirement or earlier termination) by the product of 1.5% times the participant’s years of service (to a maximum of 40 years) and by subtracting from that amount up to one-half of the participant’s primary social security benefit at retirement (with the actual amount of offset determined by age and years of service at retirement). To the extent an officer’s frozen annual retirement income benefit under the plan exceeds limits imposed by the Internal Revenue Code, the amount in excess will be payable under our non-qualified, unfunded, non-contributory supplemental retirement plan. The formula used is the same formula described above. See the table below for amounts payable upon retirement to the corporate officers named in this report. Credited service includes service with Ralston Purina Company, our former parent corporation.

The agreements provide severance compensation to each corporate officer in the event of the officer’s voluntary or involuntary termination after a change in control. A change in control occurs upon (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, of beneficial ownership of (x) 50% or more of the aggregate voting power of the then outstanding shares of our common stock, other than acquisitions by us or any of our subsidiaries or any of our employee benefit plans or any entity holding stock for or pursuant to the terms of any such plan, or (y) all, or substantially all, of our assets, taken as a whole; or (ii) individuals who would have qualified as continuing directors shall have ceased for any reason to constitute at least a majority of our board of directors. A change in control does not include a transaction pursuant to which a third party acquires one or more of our businesses by acquiring all of our common stock while leaving our remaining businesses in a separate public company, commonly known as a Morris Trust transaction, unless the businesses so acquired constitute all or substantially all of our businesses.

Mr. Kemper is Chairman, President and Chief Executive Officer of Commerce Bancshares, Inc., which is one of seventeen banks that participated in our committed credit facility and term loan dated July 27, 2010, one of fifteen banks that participated in our committed term loan dated October 3, 2011, and one of sixteen banks that participate in our committed credit facility dated May 1, 2012. Commerce Bancshares’ lending commitment under the 2010 facility was limited to $6 million out of a total syndicate commitment of $300 million and its commitment under the 2010 term loan was limited to $4 million out of a total syndicate commitment of $200 million, its lending commitment under the 2011 facility was limited to $15 million out of a total syndicate commitment of $550 million, and its lending commitment under the 2012 facility is limited to $7.5 million out of a total syndicate commitment of $300 million. During the fiscal year, we paid approximately $116,000 in interest and $17,000 in fees to Commerce Bancshares, Inc. The board of directors and the audit committee do not believe Mr. Kemper has a material interest in the transactions between us and Commerce Bancshares, Inc.