Deferral Election Letter for 2000 Leveraged Incentive Plan Awards – Ralston Purina Merger with Nestle

Summary

This letter allows participants in Ralston Purina’s 2000 Leveraged Incentive Plan to elect to defer their potential pro-rata incentive award, which may become payable due to the proposed merger with Nestle. Participants must submit their deferral election by April 30, 2001, and the company must approve the deferral. Deferred awards are subject to Medicare taxes and can be allocated among various investment options. If the merger does not occur, new deferral instructions will be provided. The election is irrevocable, and no company match will be provided for deferred amounts.

EX-10.11 14 y49240ex10-11.txt FORM OF LETTER OF DEFERRAL 1 April 20, 2001 Exhibit 10(xi) HIGHLY CONFIDENTIAL - ------------------- Leveraged Incentive Plan Participants DEFERRAL OF POTENTIAL PRO-RATA 2000 LEVERAGED INCENTIVE PLAN AWARD As a participant in the 2000 Leveraged Incentive Plan (LIP), you may elect at this time to defer, with the approval of the Company, any pro-rata 2000 LIP award which may be payable to you immediately prior to the effective time of the proposed merger with Nestle. While the full performance period of the 2000 LIP extended through September 30, 2003, the 2000 LIP will terminate upon the closing of the proposed merger. This pro-rata payment will be based upon performance during the period starting October 1, 2000, through the date the merger transaction is finalized. This deferral election shall apply only to any pro-rata 2000 LIP payment made as a result of the merger with Nestle. In the event that the merger with Nestle should not occur, new deferral election materials will be distributed to address the deferral of the payment which may be payable at the close of the Plan's three-year performance period, on September 30, 2003, or earlier in accordance with its terms. Elections to defer must be made in advance of the determination of the amount of the pro-rata LIP award in order to effect the deferral for Federal and State income tax purposes. (PLEASE NOTE THAT DEFERRED LIP AWARDS WILL BE SUBJECT TO MEDICARE HI TAXES.) Deferrals of LIP awards can be made into any of the fund options available in the Deferred Compensation Plan for Key Employees at the time of the deferral. Please note that deferrals into the Ralston Purina Equity Option will convert to the Prime Rate Option upon the occurrence of certain types of change in control of the Company, including the proposed merger with Nestle. See the enclosed Deferred Compensation Plan Prospectus and Prospectus Supplements which detail the provisions of those fund options. You should also review Attachment 2, Factors to Consider, for additional information. If the peer group performance described in the Plan is met during the determination period ending on the date of the closing of the proposed merger, the Peer Group Award becomes payable. The deferral of the Peer Group Award will be mandated for all Plan participants into the Equity Option. A Peer Group Award will be determined based on aggregate salary for the performance period ending on the date of the closing of the proposed merger with Nestle. In making your election, please carefully review the attached Deferred Compensation Plan Prospectus, Prospectus Supplements and the Factors to Consider. Keep in mind that YOUR ELECTION TO DEFER MAY NOT BE CHANGED even if circumstances, such as your personal financial situation, interest rates, or the price of dividends on Ralston Common Stock change in the future. 2 Deferral Of 2000 LIP Award April 20, 2001 Page Two NO COMPANY MATCH IN THE DEFERRED COMPENSATION PLAN WILL BE PROVIDED FOR ANY LIP AWARD DEFERRAL. - --------------- REQUEST FOR DEFERRAL - -------------------- PLEASE RETURN ONE COPY OF THE ELECTION FORM (ATTACHMENT 3) BY APRIL 30, 2001, WHETHER OR NOT YOU WISH TO REQUEST A DEFERRAL. A duplicate form is attached for your records. Your election must be received by the Compensation Department no later than April 30, 2001 or you will not be eligible to defer any pro-rata 2000 Leveraged Incentive Plan award. The deferral of the pro-rata 2000 LIP award is at the discretion of the Company and is subject to its approval. Please note that if you choose to defer your potential award to retirement, it will be paid out in a lump sum unless you have filed a timely election to receive payments under the Deferred Compensation Plan in the form of five or ten year installments. If you have any questions, please call me at ###-###-#### or Pat Robbins at ###-###-####. Ron Sheban - 1A Enclosures 3 April 20, 2001 FACTORS TO CONSIDER Attachment 2 Under current Federal and State income tax laws, you will not be taxed on any deferral amounts or any earnings on those deferral amounts until you actually receive payments of cash. At that time, amounts received will be taxed as ordinary income in the year received. If you are subject to the income tax laws of a foreign country, you should consult your personal tax advisor regarding the proper tax treatment. The IRS may challenge a deferral of income if the timing of the deferral election does not satisfy certain IRS criteria. In such event, the IRS may deem the entire LIP Award to have been constructively received and subject to income taxes at the time the award became payable. All wages, without limit, and whether or not deferred, are subject to the Medicare Hospital Insurance (HI) Tax of 1.45% (a component of FICA). Since deferred compensation is subject to the HI Tax, THE HI TAX ATTRIBUTABLE TO ANY PORTION OF THE LIP AWARD YOU ELECT TO DEFER WILL BE WITHHELD FROM THE PAYCHECK NEXT FOLLOWING THE DATE OF THE CREDITING OF YOUR DEFERRAL. (A deferred LIP award is also subject to Social Security withholding to the extent the Social Security taxable wage base has not been satisfied at the time the award is earned). The Purina Retirement Plan definition of "final average earnings" includes deferred compensation. Therefore, under the terms of that plan, your pension will be calculated to include both deferred and non-deferred LIP awards, subject to the overall IRS plan compensation limit of $170,000 and other IRS limits. Both deferred and non-deferred LIP awards are also included in the definition of "final average earnings" for purposes of the Supplemental Retirement Plan (SERP), if you are eligible to participate in that plan. Additionally, under the terms of the SERP, any LIP awards paid or deferred during a short calendar year in which occurs your termination of employment or retirement, will be credited for purpose of the definition of "final average earnings", as though the award were earned during the immediately preceding completed calendar year of employment. If you are a participant in the Savings Investment Plan (SIP) or the Executive SIP (EXSIP), LIP awards voluntarily deferred will not be included in your compensation for purposes of computing your SIP or EXSIP contribution or the Company matching contribution. Please note, however, that SIP contributions are deducted from the Short-Term Prime Rate cash payment of short-term deferrals made in January to active participants. The EXSIP takes into account any compensation that is subject to a MANDATED deferral by the Company. In evaluating the Ralston Purina Equity Option, consider the length of time your investment in stock equivalents subjects your deferral to market risks. Also consider long-range economic and political conditions, the prospects of the business underlying the stock, and whether the Company will be willing and able to declare and pay dividends to create dividend equivalents. DEFERRALS INTO THE RALSTON PURINA EQUITY OPTION WILL CONVERT TO THE PRIME RATE OPTION UPON THE OCCURRENCE OF A CHANGE IN CONTROL OF THE COMPANY, AS DEFINED IN THE DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES. THE NESTLE MERGER, AS PROPOSED, CONSTITUTES A CHANGE IN CONTROL UNDER THE TERMS OF THE PLAN. The Prime Rate Option will credit interest equivalents on your deferred amounts daily based on the average of the close of business prime rates. These equivalents may vary substantially depending on changes in interest rates. 4 FACTORS TO CONSIDER PAGE 2 APRIL 20, 2001 The Vanguard measurement funds offer flexibility and generally mirror the SIP funds. For the Measurement Fund options, deferred amounts will earn returns (which may be positive or negative) as if they had invested at the net asset value (net of investment advisory fees) of the investment funds on which the measurement is based. These funds are used for measurement purposes only. Your account will be credited with investment returns based on these funds but will be reflected as a bookkeeping entry only and will not represent an actual investment made on your behalf. Again, consider all the factors above before selecting a deferral into one of these funds. Any Peer Group award will be mandatorily deferred into the Equity Option, which will then be transferred to the Prime Rate Option at the time of the merger with Nestle or upon certain other types of change in control. Transfers are available to any of the funds (other than Peer Group award deferrals until after a change in control). Transfers can be made by contacting Clark/Bardes Consulting, Compensation Resource Group (CRG) at ###-###-####. Benefits under The Deferred Compensation Plan for Key Employees are unfunded. In considering the options, you should note that your right to receive distributions from the Plan is that of a general creditor of Ralston Purina Company. The Pension Source Act prohibits a state from taxing installment payments made over a ten-year period to a former resident who is residing in a non-income tax bearing state at the time the installment payments are made. Consider your deferral participation carefully and consult your personal advisor if you have any questions. Please refer to the enclosed Deferred Compensation Plan Prospectus and Prospectus Supplements dated December 1, 2000, January 30, 2001 and March 30, 2001 for more details. YOUR ELECTION TO DEFER MAY NOT BE CHANGED FOR ANY REASON. - --------------------------------------------------------- 5 LEVERAGED INCENTIVE PLAN (LIP) 2000 PRO-RATA AWARD APRIL 20, 2001 DEFERRAL ELECTION ATTACHMENT 3 Please submit my request as follows with respect to the pro-rata 2000 Leveraged Incentive Plan (LIP) award which may become payable to me as a result of the closing of the proposed merger with Nestle: CHECK ONE BOX BELOW: [ ] NO DEFERRAL Check here if you do not wish to defer any portion of any pro-rata 2000 LIP cash incentive award. Ignore items 1) 2) and 3) and proceed to bottom section. [ ] DEFERRAL Check here if you wish to defer any portion of any pro-rata 2000 LIP cash incentive award. Complete items 1) 2) and 3) and the bottom section. 1) FILL IN ONE BLANK ONLY: Defer % OR --------- Defer all up to $ OR ------------------- Defer all in excess of $ ------------------------- 2) I elect to receive ______% of my LIP deferral amount as a short-term payout in January of the first calendar year following the effective date of the deferral (e.g. January, 2002 if the pro-rata payment is awarded in calendar year 2001) with interest calculated under the terms of the Prime Rate Option, PAYABLE IN LUMP SUM. IF YOU CHOOSE TO DEFER 100% OF YOUR ELIGIBLE LIP AWARD SHORT-TERM, DO NOT COMPLETE ITEM #3. I elect to receive _____% of my LIP deferral amount as an intermediate-term payout in January following, _____ years (minimum of 3) from the date the deferral is effected. For example, if the merger with Nestle occurs by December 31, 2001, you may receive payment as early as January, 2005. Such amount shall be PAYABLE IN LUMP SUM ONLY. I elect to receive _____% of my LIP deferral amount as a retirement payment. 3) Please allocate the amount indicated in item 1) above to the following account(s):

*NOTE: DEFERRALS INTO THE RALSTON PURINA EQUITY OPTION WILL CONVERT TO THE PRIME RATE OPTION UPON THE OCCURRENCE OF A CHANGE IN CONTROL OF THE COMPANY, AS DEFINED IN THE DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES. THE PROPOSED MERGER WITH NESTLE WOULD CONSTITUTE SUCH A CHANGE IN CONTROL. THERE IS NO COMPANY MATCH IN THE DEFERRED COMPENSATION PLAN ON ANY LIP DEFERRALS I UNDERSTAND THAT ANY DECISION REGARDING ANY PRO-RATA 2000 LIP CASH INCENTIVE AWARD RESULTING FROM THE PROPOSED MERGER THAT MAY BE PAID TO ME OR DEFERRED FOR FUTURE PAYMENT IS AT THE DISCRETION OF THE COMPANY. I FURTHER UNDERSTAND THAT AN ELECTION TO DEFER, ONCE MADE, IS IRREVOCABLE. - ---------------------- ----------------------------------------- Social Security Number Signature - ---------------------- ----------------------------------------- Today's Date Name (Type or Print) - ---------------------- ----------------------------------------- Department Office Location Extension - ---------------------- ----------------------------------------- Home Street Address City State Zip Code RETURN TO COMPENSATION DEPARTMENT - 1A, ST. LOUIS, MO NO LATER THAN APRIL 30, 2001