What do you do when you are an insider and want to diversify your holdings but not sell your shares and give investors a bad signal? One alternative is to enter a Variable Forward contract. That is what William P. Stiritz, Ralcorp's Chairman.
"The VFC transaction provides the ability to benefit from future upside appreciation, up to an agreed upon amount, in the Company's share price over the next seven and a half years. The VFC also provides protection against declines in share value exceeding an agreed upon downside floor (set initially below the current market price) over the same period. Under certain circumstances, Mr. Stiritz can elect to retain the shares of Ralcorp stock involved in the VFC transaction, and settle the agreement with cash."
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